>> we are moments away from the closing bell. this is bloomberg market day. i am alix steel. alix: you are looking at stocks snapping a two-day losing streak. the dow settling up by about 29 points. at one time, the dow was up by 95 points at its session high. finishing off the high of the session, but still relatively higher on the day.

one big story was the u.s. dollar hitting a 12 year high against the yen. while treasury is having their worst day in two weeks, money going into stocks. i am joined by bloomberg markets managing editor joe weisenthal. they do not call it merger monday for nothing. that was definitely part of the driver. joe: snapping the losing streak. was not as green a day as it could have been. alix: 1.5 trillion dollars m&a activity so far this year, up 21% versus last year. $500 billion of deals on the sidelines that have not gone through. joe: i was excited about the construction spending number four april. a big 2.2% surge, much bigger than expected. we also got a nice upward revision to march. that week gdp number from q1 might be better than expected. maybeg a few signs that there is some sort of slow recovery happening. alix: we want to see what is

happening in retail. julie hyman is looking at earnings. julie: we were just talking about the maker of calvin klein and tony hilfiger. earnings coming in better that estimated. -- was affected by currencies, as we talked about. revenue on a constant currency basis up 3%. a lot of the gains came from calvin klein products in particular. the company is raising its forecast for full-year earnings. it is looking for second quarter $1.52 --per share of to $1.30. $1.25 the full year is what is going higher. the company approved a $500 million share buyback. we were seeing the shares move higher initially in the after-hours session in reaction to all of this.

alix: vivax, the word of the day. we are definitely going to talk about buybacks later on. note from market field asset management, talking about the core cpi and core cpe, core inflationary measures. they are diverting. what gives? how do you deal with that? the pce retreats from the 2% level. wrote a post for the website today on inflation. he said his favorite measure is the cleveland fed inflation measure, so everyone should check that out. alix: shout out to tom keene. i think he is taking a nap right now. joe: the other big data point this morning was income to spending. the story is weird. income is solid. you would think things would be fine. but spending was mediocre, totally flat.

are waiting and seeing. we get tons more data this week. the first week of the month is always fun. construction data, manufacturing data, auto sales. friday, we get the nonfarm payrolls report, which is the best day of every month. we will learn more about the economy over the days ahead. alix: for now, we talk about the biggest topic of the day. i want to bring in mike o'rourke. he is chief market strategist at jones trading. things for being here, michael. look into the crazy. what we were digging today was the goldman sachs report that talked about bubbles. the takeaway is, are we in a bubble? if so, so what? and should you actually be invested? michael: they talk to all these they talk to all these people and got a great quote that says, i fear crashes, but i worry about stocks and bonds rationally offering less.

are the ages of great returns coming to an end? achael: i agree this is bubble, totally unsustainable. it is telling when you have jeremy siegel, the quintessential buy and hold advocate, saying he only sees 10% upside. that makes a statement as to how stressed we are, someone who has spent a career telling people to be invested in the stock market. adkins's quote, the one you highlight -- term bubble some rationalis reason behind this behavior, some reason people are acting this way. valuations are expensive. he said you would need to see assets at 30% increase in valuations before he would get worried. michael: if you have a guy like siegel saying it needs 10% more, after the market goes up 250%, are you going to hang on for

that last 10%? valuations are in the 98 percentile. that is like going to las vegas and betting on green, you know? the odds are not in your favor. alix: in terms of how to diversify, he likes u.s. bonds, european stocks being cheaper versus u.s. stocks. what you think about that call? michael: personally, i would head toward cash. alix: do you mind gold? michael: i think gold is ok. gold has gone down for four straight years, because it had a little bubble in 2011. but as the dollar depreciated over the past 10 months, gold has held in. that is an asset class that should be hurting with the dollar being so strong. we talk about interest rates being so low and stocks being cheap relative to interest rates. this dollar move -- if you see the hit, it was because of the dollar and currency. the fed may or may not raise rates.

but this is definitely a tighter environment going forward. one last point, on the interest rate. interest rates are going up in the future. they are not going down. i cannot understand people making the argument that stocks are cheap relative to interest rates. alix: you sound like robert shiller. i am not sure that the current situation is a classic bubble. the current environment may be driven more by fear. is there something to that? we might see a bubble, but there is something different going on. michael: it is a fear of missing out. i think it is people feeling the need -- this market has been mark of the resilient. we had almost an economic disaster. you had the fed step in and do great things to prevent that. recovered, they did not take their traditional role of removing the liquidity and tightening policy. we have had six years of zero interest rates. it has been nine years since we have had an interest rate hike. we are still at zero interest

rate. we have a long way to go. stocks areer says, really expensive, but that does not tell you anything about what stocks are about to do. it could be several years before a correction or crash. you are in the bubble camp. what is the timing? when do we see the correction? michael: i do not have a crystal ball. but you have to position yourself so you can digest these environments. i always take it from the perspective of risk versus opportunity. the end of 2008 and early 2009, there was tons of opportunity, tons of potential for things to work out, for the economy to recover. right here, there is a lot of risk, a lot of things that can go wrong. we see a headline every week that they are about to go bust, but they don't. we don't know what is going to happen. but for 10%, is it worth playing? speaking directly to your point, a 20 p ratio is

-- p/e ratio is justified by the current level of interest rates, but it takes a year or two to reach that level. do you think the argument that stocks are still a goodbye because of low rates is nonsense? michael: you have stock markets at all-time highs. if you are using interest-rate says your rationale to buy stocks, you are late. if you are in cash, wouldn't you miss out on the rally we have seen in the last year or so? michael: you missed out on a move. it has been a great move. but to sit there and say, you are not investing for today, you are investing for six months from now, 10 years from now -- the interest rate environment is going to change. alix: you brought up the u.s. equity strategist for goldman sachs and how he was talking about high valuations in the note. it seems to imply you want to buy stocks anyway in the medium-term. part of that story is about

buybacks, saying buybacks are going to search 18% this year, exceeding $600 billion, looking at about 30% of the cash band. who cares? it is going to go higher. michael: that has been a big theme through the recovery. years, if ank 10 individual company was to do what ibm does and buy back stock happens earnings, what is, investors put a lower multiple on that environment. we have yet to see that materialize with the broad market. but on a single stock races, we call these low-quality earnings growth. obviously, the market has not done that yet. i do not know when the market will do that, but that is a risk to playing that strategy. you are pretty negative. you like cash, some gold. are their equity markets around the world that look interesting? brought upe point is that there are small pockets of value. but honestly, there is nothing i

would sit here and say, that is what you have to pounce on. the u.s. treasury bond versus european sovereign debt -- they are a more attractive bargain. everything is expensive. i think relative value earned is dangerous and gets people in trouble. alix: if you are sitting in cash, how do you make money when we have low interest rates? they are not going to go 10%? michael: the good news is, you will not lose money when asset classes correct. that is forgoing the short-term to protect yourself for the long-term. alix: thanks for joining us. that was a fun debate. joe: we do not get enough people saying, this is a bubble. everyone of these people," yeah, we can call it a bubble." alix: you may be the new goldbug now. i may have to call you jim rogers. inc. you for joining us. good to talk to you as always.

diseases are the leading cause of disability in the u.s. we discuss one company to take advantage. ♪

alix: welcome back. for a look at the top stories crossing the terminal at this hour -- top level talks dealing with greece are reportedly underway in berlin. the meetings are designed to hammer out a proposal that would give greece it's only realistic chance of avoiding default. creditntatives of institutions are meeting with angela merkel, christine lagarde, and mario draghi. greece faces a debt repayment to the imf friday. secretary of state john kerry is on his way home from geneva to get treatment for his broken leg. also on his flight, an

orthopedic surgeon and additional medical personnel. it happened in a cycling accident in france over the weekend that will limit his ability to travel just as talks with iran enter a crucial stretch. the u.s. and other world powers want to curb iran's nuclear program. in exchange, they would agree to ease economic sanctions. the supreme court has bolstered the religious rights of workers. the justices revived a lawsuit claiming abercrombie & fitch illegally denied a job to a muslim teenager because she wore a headscarf. the ruling will require businesses to be more careful about religious dissemination when the interview job applicants. those are some of your top stories at this hour. the leadingases are causes of disability in the u.s., and account for 70% of all deaths. think of things like depression, addiction, schizophrenia. millions do not get treatment, and one biotech company is trying to change that. they use technology to make drugs longer-lasting.

take one pill once a week instead of one pill every day. a currently gets 80% of its revenue from licensing this drug delivery technology to big companies like johnson & johnson. its ownis focusing on pipeline of drugs. how big could this market be? running me now is the chairman and ceo. theoining me now is chairman and ceo. when you take a look at the big guys like bio jim, who deal with how bigike biogen, could mental illness be? is one: mental illness of the biggest problems of human suffering not just in the u.s., but across the world. things like depression, schizophrenia, and addiction in particular. just 10 years ago, those were small companies. you can get so big so quickly, you can make new medicines that do something that has not been done before for patients. cancer patients want

treatment. if you have hepatitis c, you want treatment. there is a stigma about mental health. c dole who are schizophreni not even know they have it. richard: these are some of the biggest markets in the world today. the treatments can get much, much better. but you are right. example,enia, for developing once a month formulation so patients do not have to make a decision each day to take their medication or not. with opiate addiction, it is the law -- wrong conundrum for a patient to say, should i take the medication today or abuse a substance? a once a month injection is a great solution. figureeal have a dollar to have big this part of the industry could be for you? richard: for us, it is measured in large numbers. the goal for us is really not to focus so much on the revenue side, because that almost takes care of itself, because there is so many patients. our job is to make the

medicines. because there are large markets with many generic players, our job is to make medicines that are truly better than the medicines that precede them. that is what we are up to with schizophrenia in particular. alix: you still have the likes of johnson and johnson. do you cannibalize your current partnerships to make these drugs? richard: we made a decision years ago that we would walk before we run. first, we build these technologies and license them to the johnson & johnson's of the world. that allowed us to develop sustainable cash flows that fund r&d. for the last six years, we have focused on our own medicine in diseases where there is still need, so we will not cannibalize existing drugs. alix: what is the revenue mix? 85% of that royalty partnership with j&j -- what is that going to be like in 10 years? when is this boom of medicine to treat mental diseases going to take off? richard: for us, it starts this

year. we have our second proprietary measure soon -- medicine in front of the fda for approval in august this year, and once a month formulation of a drug for a treatment of schizophrenia that should launch in september if we get approval. we are in phase three of a trial stage of a new antidepression medicine we call under the exciting name of 5461. alix: hot name. richard: it modulates the opioid system in the brain and has shown beautiful results in clinical trials. alix: we have seen a lot of m&a in this space. richard: we have to keep the valuation moving. the way you avoid that happening in the pharmaceutical industry is by keeping the evaluation moving. often the street is willing to pay higher prices for these companies then big pharma. big pharma is prone to wait. we are making so much progress so fast. we have so many medicines near the end of their development. shareholders know the valuation of the company can change, so we

need to keep going. alix: fascinating story. really appreciate it. richard potts, chairman and ceo. still coming up, the intel ceo fresh off of a merger monday. we have him live. ♪

alix: welcome back to the bloomberg market day. of our big stories of the day, intel buying altera for nearly $70 million on the acquisition of broadcom, the largest ever in the semiconductor space. cory johnson is live with intel 's ceo right now. i will send it over to you. brian, huge deal. biggest deal in the history of intel in terms of acquisitions. why do this deal now? why not a year ago or a year from now?

brian: what really drove this timing was actually our customers. our customers have been asking for products that combine a programmable device along with our cpu in areas like the data .enter, driving assisted cars so our customers have been driving a need for this. in order to get them to market in a timely way, we needed to do this acquisition. cory: so basically the notion of the altera chips next to an intel chip can drive fantastic performance. isn't power of issue when you are talking about the internet of things uses, or automobile usage? power may be a bigger deal there than in the data center, yes? brian: power is an issue almost in every product we build now. but you have to take a look at the total system power.

so what happens when you put the fpga, right sized to the workload, and the right size of processor? you are going to use more of a smaller processor. power endsal system up being decreased, especially if you can get them on the same piece of silicon. either putting that workload out into the memory, in storage, in nan, or on aam and separate fpga board. the performance goes way up. as we said in the data center, performance can go up better that is a big improvement in data center economics. cory: indeed it would be. i wonder what it is about your manufacturing capacity. in prior mergers, there has been criticism that sometimes when you try to run things through the intel way of doing things, the output is not as fantastic

as when it is intel-design from beginning to end. are the things you have learned in the past that may be better applied to create altera chips with the efficacy you may have gotten out of intel chips? brian: there absolutely is. there is a couple of things. we have been doing a lot of acquisitions over the last few years. i earlier in my career ran one of the acquisitions for a wild. we are taking a lot of those learnings and carrying those into this acquisition. altera has been a partner for almost two years now. they have been working inside our design tools, our silicon libraries. they know how to build on our technology so that the team -- the integration of the engineering teams has been much more quick than if we bought somebody that was not part of that foundry business already. what about the sales force? how is the sales force different ?rom altera

where are opportunities for you to reduce costs? said was that most of the synergies or cost reductions are going to come from the gna side. the unique thing about the engineering and the sales side is, they were specific to these technologies. what is different is, our sales tend to be more general-purpose cpu or logic sales. they have somebody going in and --ling a court to build selling a core. in fpga, you are selling a specific capability. closely withork the architecture and the software implementation, to size it right, to scale it right, to get the right part in there. it is a much more technical sale. cory: sounds like you need both teams. the biggest deals ever in

semiconductors. we appreciate your time. thank you very much. alix: thank you so much. for theps it up bloomberg market day. thank you for watching. have a wonderful afternoon.

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