on the fate of greece. which way america is a global economy struggles? searching for any kind of landing. can america go it alone? and struggle or not, america needs a new set of wheels. 17 million units signals boom times for jeep and detroit. good morning, everyone. this is "bloomberg surveillance " live from our world headquarters in new york. it is tuesday, june 2. i'm tom keene. joining me, brendan greeley. i do not know where to begin. it is like a movie in berlin. brendan: are we talking about berlin? i cannot believe what happened. for me, it is the troika finally meeting. mario draghi, lagarde, all meeting together. tom: the other rumor we will start here this morning on "bloomberg surveillance" is christine lagarde is meeting

with sepp blatter. let's put that on twitter. top headlines this morning. vonnie: are they going to intensify talks? as you mentioned, in germany, there was talk about how to avoid a greek default. francois hollande was there along with christine lagarde and the heads of the ecb and the european commission. talks went past midnight. they were trying to hammer out an offer that greece would consider. the head of the organization for economic cooperation and development projects the two sides will reach an agreement. >> when you have so many people, so intelligent and smart and important and influential trying to get a deal, my experience is you normally get a deal. it may be at the 11th hour. it is human nature to expand this to the bare limit, but there will be a deal. funny co european lenders --

vonnie: test every field -- tests have revealed a shakeup -- there are reports undercover agents were able to smuggle through items like guns -- fake guns or bombs in 60 out of 70 events. the former head of the tsa says the problems are a real threat. >> they do watch and go to school on how they can learn from possible vulnerabilities. vonnie: abc news reports one undercover agent was stopped when he set off an alarm, but a fake bomb tapes to his bag was not discovered. in central china, hundreds of people may have died when a cruise ship capsized late monday, carrying 400 people when it overturned. rescue crews were able to rescue several passengers trapped inside the ship. most of the passengers were

elderly. apple is getting ready to go head-to-head with streaming services like spotify. apple will launch a $10,000 streaming service as early as next week. the market is shrinking. more people are choosing to stream rather than buy. there is a new turn in the soccer corruption scandal. the number two official under fifa president sepp blatter authorized a $10 million payment that prosecutors in the u.s. have called a bribe. according to an indictment the payment was in return for a vote for south africa being hosts to the world cup three. tom: we go to brendan greeley for a translation. what is the difference between a bride and a payment?

brendan: let's talk about who this is. he is the second in command. he is the joe biden of fifa. when they were voting on friday he was a man calling out the names of the countries, calling them down to the front to vote on paper. tom: did any of this money go to the head guy, sepp blatter? brendan: i cannot even speculate. i can make a speculation on the -- off the air, but not on. tom: we will wait for a speculation behind closed doors. let's look at the facts with a data check right now. we use the bloomberg terminal for that. equities, bonds, currencies commodities. nymex crude has come back to dollars in the last few days, up to $61 on american oil. we have to get to greece with serious news in the last hour. the greek bond was below 24% the two-year yield, 24 point 20

-- 24.20%. can you believe you have to pay switzerland to take your money for 10 years? that is how distorted things are. let's go to some of that distortion in the bloomberg terminal. real simple, quickly brandon -- quickly, brendan -- oil down, off it goes, more volatile. greenspan would say core pce, below 2% stays below 2% and for the deflation crew. forget about it, say the optimists. the cleveland fed -- thank you lebron, for bringing this to my attention -- the cleveland fed takes out outliers on both sides . it trims it, and it is nicely above 2%. there is a little more inflation out there, a b. vonnie: --

tom: san francisco and st. louis -- that is different. dallas has a measure as well. brendan: you take out the east german judge the u.s. judged and -- vonnie: more volatile judges. tom: we have seen headlines across bloomberg in the last hour. the greek drama reads like a movie script in the depths of midnight. "they met. merkel was host in berlin." a special gift from washington, madame lagarde in from washington. hans nichols brings the drama forward from our offices in london. what do i need to know about christine lagarde's role in these midnight meetings? hans: all five lead individuals want a unified front. that is in part with the meeting

was about, and they are in the process, we believe come of drafting something to send to the greeks. is it an ultimatum or a last-debt proposal? what is an ultimatum, and what is the last best proposal. alexis tsipras has said this morning he will not receive anything. we have fiery lang which out of him this morning. tom: you are going to full fifa into greece and make brendan greeley -- brendan: you do not propose to me, i propose to you. the heads of the troika plus merkel and francois hollande. is this the most important meeting on the subject in four years? hans: maybe not four years, but certainly in the last six months. certainly since citrus and -- since alexis tsipras and syriza

came to power. this was crucially important, and if there is a resolution or a complete breakdown in talks, i suspect we will all be writing tick-tock pieces, and crucially, how late they stayed. tom: spreads were up a little bit, a little bit better after the great headlines. vonnie: i want to ask hans -- how can these individuals convince a 50 --year-old -- a 50-year-old in greece that he cannot retire when for generations the public sector has been able to retire at 50? on scope you are -- hans: you're getting to the fundamental challenge. how much fatigue is there among greek voters, and how much does alexis tsipras have to convince them to take this deal? when -- what we heard from him 40 minutes ago is the negotiations are hard and they

will drive a hard bargain. he did not seem to be in a compromising mood. i am surprised we have seen bond yields move the way they have, after what seemed to be defiance from alexis tsipras. tom: let's move this discussion forward. geraldo rodriguez is head of the emerging market at blackrock. lawrence frank at block rock -- you are serious? this is the problem that a lot of people see, including americans, our different cultures and societies, saying we will play by a different rule book than modern capitalism. can greece get away with that? >> i think not, and the government knows that. it is a game in which they know they have two d lever -- two d lever, but at the same time they have to do delever in parts.

during the month of june something has to happen. they have to agree on something. the agreement has to go through parliament, both in greece and in some european countries. that requires some time. we are getting to crunch time and that is the driver of the additional activity that we are seeing. brendan: one indication we are getting closer to crunch time is an increasing sign that people are willing to contemplate the possibility of a greek exit. you have leaks from the german government, christine lagarde refusing to rule it out. how serious are the negotiating tactics? gerardo: people in greece are very supportive overstaying in the eurozone, so the greek government is plain with that.

how can they give something to deliver but at the same time stay in the eurozone? brendan: so staying in is a bargaining chip, not a plan? tom: what is the opportunity for investors? for the average person watching or listening, and how do they play greece? gerardo: actually, markets are assuming that a deal is going to happen, so the price has not been that dramatic. unfortunately, in past episodes of european crisis, it has been relatively hard price action. the one that has been driving authorities to make a deal. that has not been the case right now, so what is driving the

additional activity that we have seen right now, say, outside of greece there are some interesting spots, especially eastern europe. rates have come down significantly but they are significantly higher in some of the emergency -- and some of the emerging markets like poland. tom: the german stock market down 11% in a year in u.s. markets. there is some risk in the peripheral equities if you get them wrong. how about a twitter question today, @bsurveillance? is europe finally getting serious about greece yet go stay with us. vonnie quinn, brendan greeley. this is "bloomberg surveillance ." good morning. ♪

tom: good tuesday morning everyone. we are watching greece. here is vonnie quinn. vonnie: john kerry is in boston to have his broken leg treated. he arrived last night on a military flight from switzerland. he broke his leg sunday while cycling in france. there is no word yet whether he will need surgery. he will probably have to limit travel, which could complicate efforts to reach a compromise on a ramp's nuclear -- on iran's nuclear program at the end of the month. the yen has fallen 30% since 2012. can's central-bank -- herbalife has gone on the offensive against its nemesis, bill lachman. the nutritional supplement company called bill lachman -- bill -- has called the

company a pyramid scheme. herbalife denies the allegations. i'm afraid i can never do herbalife stores without thinking -- is it harerbalife or "erbalife"? tom: let's stagger forward for "bloomberg surveillance." we are going to rajan cutting interest rates. we will get mobile users, a continuing theme of mary meeker and her smart power points that she gave to us last week. then we take a serious look at mexico. it has been great, and now it is not so much great. we will look at mexico with the weaker peso as well. brendan: i'm going to attempt to

describe this market in three words. monsters truck -- monster truck rally. the real story is jeep. jeep may be the best positioned auto brand in the next three to five mans. matt miller is the man i turned to to understand cars. give us an overview. what do we expect today? matt: we expect auto sales to increase as far as the seasonally adjusted pace is concerned. 17.3 million is the survey we have got from analysts. because there was one fewer selling day in may this year than last year, we expect actual unit sales to be lower. it is not a bleak picture at all. automakers are doing very well. more -- brendan: more important than the top line number is the distribution between cars and trucks. people are not buying little cars. matt: it always surprises me

that trucks are outpacing car sales. americans buy more trucks and car sales because you say, they are americans. it is actually the norm that americans buy more trucks than cars. it is a very big country. you cannot drive very fast because our speed limits are low, so why not get a land cruiser and go across the country with your family. that is what we have been doing in 20 years. during the recession, it dipped down. when gas prices go up, obviously you turn to the honda accord or the to your -- or the toyota camry. but a lot of pickups are now getting 30 miles per gallon. both ford and chevy are approaching the number. tom: when do stocks move? 17 million is a booming economy? matt: ford is down about 5%, gm is up only 5%.

tom: are they such slaves to factory building, designing cars that they cannot do that? matt: they are slaves also to factory demand. they have been ordered to pay cash to the shareholders. they are meeting demands. but the question is how can they move their stock prices? only fiat chrysler has been able to do that. brendan: the same report says "sergio urgency." why is sergio so urgent? matt: because they are all competing with each other, margins are razor thin. they cannot make her cost of capital. it makes sense they would all get together since they are all developing eight-speed automatic transmission four-wheel-drive systems. they might as but share the --

they might as well share the cost of capital. brendan: thank you. tom: coming up in the next hour tony dwyer. he will reaffirm a bull call. tony dwyer on waiting and waiting and waiting and waiting. we will continue to wait here. stay with us. "bloomberg surveillance." good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." tom keene, brendan greeley, vonnie quinn. right now we are going to look at the morning must -- brendan: the morning must listen. sitting down with surgeon lavrov

-- with sir j -- with sergei lavrov off today. >> president putin from time to time talked to president obama over the phone. they are very pragmatic. they discuss specific areas of cooperation where both countries could benefit, and we do the same with john kerry on a much more detailed level. i would call it the realization of the need for normalcy. brendan: just two heads of state talking to each other, hammering things out, totally normal relationship. tom: i have a problem with it. it is totally protectable. it is nobody's fault, it is just the way it is. brendan: i am looking at the interview. he also said a realistic approach is getting the upper hand, which also says that not just diplomatic relationships have normalized or are becoming

more static -- let's say not normal but static -- but economic relationships are more static as well. we had gerardo rodriguez with us from black rock. we talked about the crisis from earlier this year and last fall, it has really abated. gerardo: russia has been a top performer from an equity and economic perspective. how is it that russia is the story that some people were predicting, and russia falling off the cliff has not happened he echo one way to explain that has to do with a large extent because of the lack of use of labor inside the country, lack of external imbalances, and that has operated in a direction which the capacity of the country to self equilibrate with the depreciation of exchange has been quite remarkable. this equation that we are left

with is one in which russia if we continue to underperform from an economic perspective, that is different from a country experiencing a major financial crisis. brendan: from the catastrophe that was projected, of course. we are moving in the next block to india. rajon rondo cuts race -- rajan ratnam cuts rates. it is june the second. good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." markets on the move. let's show you what is going on. this is euro-dollar, the major currency, paired through 109.

stronger euro, nicely through 110. let's go to top headlines this morning. here is vonnie quinn. vonnie: .9% stronger versus the euro, because we are getting headlines that representatives from greece's headed errors -- greece's creditors met. there was an important meeting last night on greece which could have led to a rate through. greece's creditors wrapping up that proposal, and they also had representatives from the ecb and chancellor angela merkel hosting that meeting. the ecb and also the european commission, jean-claude juncker as well. the senate is voting on five programs today, looking at a house bill that would reauthorize surveillance. president obama asked the house

version. she will appeal her loss. there were -- ellen [sp claims she was subjected to a sexually charged atmosphere and was fired when she complained. thousands of jobs and capacity will be cut from malaysia air. malaysia's ceo says there were problems before. >> we are technically bankrupt and this decline of performance occurred before they try to give ensign of 2014. vonnie: the company says it has currently 20,000 employees. do you want to eat of the

world's best restaurants? you have to go to spain for that. "restaurant" magazine has named the spanish restaurant number one in the world. one french chef says he has not eaten -- brendan: they voted on name alone. tom: do you think there were bribes involved? brendan: india's central bank chief announced a rate cut today pretty he said he was going to frontload a rate cut and then wait on more data. right john said he was going to wait to see the effects of a monsoon. what does that mean?

>> it has been scorching hot in india here. that is what the governor is waiting for as well. you have industrial production low. all indicators have been low, so governor rightrajan was able to cut by 25 basis points. the markets were able to support it because they were expecting the cut to be much larger. he is watching for monsoons and monsoons which would affect agriculture. that is not good news. second is oil prices. india has benefited from oil prices falling globally. but rebounding oil prices, more importantly, is what he calls volatility. brendan: i am looking at the one-day's tory since the announcement, and it is only one

story. -- at the one-day story since the announcement, and it is only one story. what do you think about this? >> what most corporate leaders say is that the biggest challenge india faces is lack of investment, lack of corporate economics kicking off. there could have been a substantial rate cut. it has been gradual. this is exactly the view that new delhi has. the government believes that interest rates could be much lower than they are today, and rajan needs to keep them happy today. brendan: harsha, thank you. we have at the desk with us geraldo rodriguez of black rock.

when you look at india, who do you see driving the economy? is it modi or rajan? gerardo: you have a strong leadership both at the government and the central bank, but you have a lot of -- we are seeing the benefits of lower commodities prices which need to benefit the world. so clearly you have now monetary policy action created by a more benign inflation environment with low oil prices. but then you have some reform momentum a composition of congress, which should favor strong leadership. and a culmination of the two elements, making a very attractive investment proposition, both from an equity

and fixed income perspective. tom: is the 7% growth i china he ? gerardo: it is really hard to china, but ultimately in a low nominal growth environment which is going to occur for the years to come -- tom: do you need the investor? gerardo: both equities and fixed income. brendan: i feel like that india-china comparison is almost reflexive. is it useful to compare them, or should we be looking at them on their own merits? gerardo: you want to them because of the scale and the size that they

now have. the story of emerging markets is now that individual countries are getting, to a certain scale it will be harder to talk about them as a group. they are very different in nature politically and economically. because of that, it makes more and more sense to talk about the possibilities of domestic driven growth, especially on the back of reform momentum, in the case of india. that is dominating the narrative in emerging economies. brendan: that was the smartest answer to that question that we have had. it is good to get a sense of that comparison. coming up, mary meeker has a new prediction on where the next generation of internet users will come from. she is talking about the coming surge in smart phones. we will look at the singer best chart after the break. this is "bloomberg surveillance ." good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." we are so excited about the single best chart. there is a fog wafting over new york city. that is called rangers gloom, the new color of that gray over manhattan. we have the single best chart on mobile on watches, on smartphones, right? brendan: someday they will just

let me grab the new york skyline in the morning, but i am not there yet. all week are single best that our single best chart -- our single best chart -- one area has been highlighted. messaging platforms will drive the next generation -- we are not talking about our children we are talking about global growth. we are looking at selected emerging markets, and this is smart phone percentage of total mobile users, the highest in china and brazil. those are very chatty countries. what i really mean is use of social media. where mary meeker says the real growth is is in the facebook messenger. tom: do you use messenger? vonnie: i do. facebook knows your location anyway knows everything about you, so what is the difference as far as knowing your location?

brendan: i will leave you alone. tom: i admit you, i use what's app to talk to a child. brendan: everywhere outside of the u.s., they use only what's app. i think the is something's we will eventually get to 100% of smart phone usage. smart phones are getting cheaper and cheaper. we have gerardo rodriguez with us from blackrock. i spoke to telefonica two years ago, and they talk about how smart phones are different in the emerging world. they think about it -- they think about it differently, and therefore there needs to be design differently. gerardo: in the emerging world

it takes a while to get to the office. suddenly you have these apps like what's app or the blackberry messenger, which you get directly to the one you want to talk. that has been driving a lot of the use of direct conversations through messaging. tom: let's do a shameless plug right now. victor, come on in here and take a look at gerardo here, a pro in the market with black rock, with his i watch looking at the bloomberg app. here is where he gets his market data. brendan: are you kidding me? do you actually do that, or is that just a stupid computer trick? gerardo: instead of pulling out your phone, pulling out the app, it is just a quick reference -- the s&p right here. brendan: what about the rate cut in india straight or watch?

gerardo: that you cannot do. tom: can you watch "bloomberg surveillance" on your watch? gerardo: not yet. tom: shameless plugs this morning on bloomberg coming to the eyewatch. -- coming to the iwatch. vonnie: number three, the top three filters we are looking at today -- authorities are removing padlocks to a bridge the [ pont des arts. they will be replaced with plexiglas panels instead. brendan: it is a relatively new phenomenon. this was inspired by, i think an italian movie, and then it

moved to paris. tom: we would just get a wire cutter and the guy would be out there every day. plexiglas? vonnie: let's move on per number does, from the international space station, an astronaut tweeted a photo of hurricane anders' eye. it strengthened into a category -4 storm over mexico. brendan: it is always amazing to see a hurricane from space. i have been outside of one. i see -- i have been where you see the swells coming. they are massive coming from the wrong direction, and the water gets really confused. tom: so you go the other way. brendan: that is what we did. we went the other way.

you have to move the right direction so you're going with the wind around the hurricane and not against the wind around the hurricane. vonnie: number one has to be former olympian bruce jenner now transitioning to caitlyn jenner. the profile broke a new record. she broke president obama's -- tom: across our media floor when this broke yesterday, you could hear the response. this is an impact announcement. brendan: it is an amazing moment that changes the way america things about these things. it is very difficult to come out as a transgender woman or man. vonnie: there was a big interview on "60 minutes" originally, and now -- and then

not getting paid for this photo shoot. brendan: i agree. given the reality programming frenzy that was bruce jenner's life, caitlyn jenner seems to have managed this with tact and grace. vonnie: but there is going to be a reality show. brendan: -- coming up, we move south. can mexico break out of those code years of cyclical weakness the growth trajectory of latin america's second-largest economy, next. "bloomberg surveillance." good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." let's go to top headlines with vonnie quinn. vonnie: a congressional hearing today on last month's fatal amtrak crash in philadelphia will focus on safety spending. the train was traveling more than twice the posted speed

limit when it derailed. eight passengers were killed. next week hsbc reportedly will announce plans to cut thousands of jobs. europe's largest bank could fire as many as 20,000 workers. the report says the ceo will go over the targets when he speaks to shareholders a week from now. it is a california style backyard -- neighbors are at odds with the developer who obtained the rights to their property and extracted the -- the developer says mark zuckerberg reneged on a promise as part of their deal for the land. is this crazier than fifa or what? tom: it is. it is i guess what you do when you have millions. vonnie: they are all unhinged. tom: i wonder what the cheapest

house in the neighborhood costs. brendan: i think there is a market to be billed to express those property rights. alvin roth could solve mark zuckerberg's problem. tom: we are looking to the ongoing story of greece, important news in the last two hours. nations meeting in berlin go back and forth to alexis tsipras in athens. alvin roth of stanford on game theory and his wonderful new book on market design. and how to navigate the ups and downs of the markets. there was an entourage that went down the stairs and down the floor. this is what you have -- this what happens when you get to bull markets. a glorious success story -- mexico, often maligned, has done better than good in the last decade. their stock market has outperformed the u.s. stock

market, set in u.s. dollars. the challenge of the peso depreciating. geraldo rodriguez joins us from blackrock. -- gerardo rodriguez joins us from blackrock. converting to u.s. dollars, it has actually beaten the s&p. few people know that. gerardo: for the next 10 or 15 years, the reform agenda, they have been able to pass through congress on a competition, on energy come on telecom. they actually are changing the landscape. tom: what kind of markets are mexico, reaching a velocity on an emerging market, to a less emerging-market, to a developing economy? gerardo: mexico has been dealing with economic realities.

it is a story for the next 10 or 15 years. then there is the cyclical story, which has not been that positive for mexico because mexico, given its conductivity through trade to the rest of the world, the lack of export growth momentum has hurt mexico. so a growth projection provides down for three years in a row. right now it looks like we are at the bottom of the cycle, and the next set of news hopefully will -- tom: it looks like the story of resilience. -- the story of brazil. brendan: in the last year manufacturing output overtake oil exports. i think i have that chart right. but i am serious -- what do they need to do policy wise to stay on that trend? gerardo: mexico is a very good story on the manufacturing space, related to auto and auto parts.

the challenge is moving up the value added chain in manufacturing space. you need to add some additional elements to the growth, that an amex on top of manufacturing -- the growth the dynamics on top of manufacturing. that is where the infrastructure will be in play for the next five to 10 years in the economy. vonnie: there was an emerging market tantrum about five years ago when that became more of the reality. where is blackrock positioning itself for any kind of tantrum that might occur, and where might it occur in an emerging market? gerardo: if you look at what can happen when the fed starts raising rates in the emerging world, markets are already doing some of the anticipation in that, starting in 2013 with the temper tantrum. currencies are more at and appreciated growth. interest rates have gone down.

there is plenty of space for emerging economies to accommodate to a tighter financial condition environment, led by the fed. there is no significant alignment of prices or any bubbles that would be addressed once the fed starts raising rates. we are going to have to look at what happens with the elongating of the curve in the u.s. but more importantly, what is the underlying growth momentum in the u.s., around which the fed decides to raise rates? 's export start to pick up, that will benefit the story as well. tom: gerardo, thank you so much. he is with blackrock. let me look at the foreign exchange. vonnie started at with the greece story, single handedly moving greece higher at one point 1020.

stay with us across bloomberg television and radio, and bloomberg news through the morning. with the news out of greece. we have another hour of "bloomberg surveillance" next. ♪

>> this is "bloomberg surveillance"."

tom keene: headlines in the recent hour. the markets are far apart and where we will be come 2016 in the stock market foxhole. we are all data dependent and who gets what and why do they get what they get? we look at the game. of your everyday life. good morning, everyone. this is "bloomberg surveillance" ." what an interesting hour. brendan greeley: one of the things we've been watching in greece is seeing who is playing good cop and bad cop. merkel is the good cop. i think we're going to find with the negotiating strategies are. tom keene: if you love mohamed el-erian it, you will be in for a treat. let's get to the game. where top headlines. brendan greeley: there is

another twist in the standoff over greece are in --. vonnie quinn: they have submitted up proposal aimed at breaking the stalemate. that happened just as european creditors were about to finalize of their proposal. the duly -- dueling ideas came late last night. angela merkel hosted the french president as the heads of the imf and the ecb. talks when on past midnight. the euro is trading above 110. the two sides will reach an agreement. >> when you have somebody people , so intelligent and so smart and influential trying to get a deal, you normally get a deal. it may be extended to the 11th hour. that is always the case. human nature will ask then this to the minute -- final minute. vonnie quinn: there will not be

any bailout money unless greece comes up with new deals. there is a shakeup by the transportation security administration. undercover agents smuggled through items like guns and bombs in 67 out of 70 attempts. the tsa has been reassigned. officers will be retrained and procedures will be changed. a former tsa had says the threats are real. >> they do watch and go to school on how they can learn from possible vulnerabilities. vonnie quinn: one undercover agent set off an alarm, the screener did not discover it. hundreds of people in china may have died after a cruise ship capsized monday. the ship was carrying a 400 people when it overturned in a storm on the etsy river. crews are able to rescue several people step -- trapped inside the ship, most of the passengers were elderly. apple is getting ready to get

into the music streaming business. apple will launch a $10 a month service next week. they already sell 85% of music downloads worldwide. that market is shrinking as more people choose to stream. more pushback from a fee for -- fifa. the number two official authorized a $10 million payment that is a bribe. it contained -- the governing body says the payment was approved by a former finance person who died last year. those are your top headlines. tom keene: we follow a fifa free hour. brendan greeley: it's not chump change. it were talking about the smaller organizations like the caribbean one seems to be at the heart of all of this corruption.

i am watching the caribbean right now. that seems where with the scandal is focused. tom keene: the euro is on the move. we go through 1092 110. we have some confidence that we may be to a resolution. there is great drama. lonnie has kept up with the goings-on. christine lagarde has some immediately -- immediate headlines. hans nichols is dizzy in london it. hans, where do the elites of berlin want to be, wednesday or friday or in the weekend? hans: there potentially is a segment in the german finance ministry that wants certainty, even if it looks like they will default on the imf. there is another part in the german business industry that

was to see the union stay intact. this quest for certainty is driving a lot of things in germany. there isn't an official german position other than merkel should do what it takes to remain in the euro. that could be a nonstarter for them. it's diffuse. brendan greeley: who is making the decision right now? we assume that merkel is the proxy for all of europe. last nights meeting, should we read something about that? hans: she needs the imf on board. she needs the other finance ministers. we have not heard from jerome in a while. the contact group the eurogroup that is in charge of this, that is where the decision is going to be made. that is according to the creditors. what greece is always wanted is some grand political barton --

bargain. it's unclear that merkel will let that happen. tom keene: thank you so much and that gets to the moving parts. there is a lot of complexity. let's rip up the script during the simple statement is it's a game of chicken. we are in need of a more sophisticated analysis. it goes back to the classic hawk and dove. now we go back to the undergraduate lectures. how far -- greece berlin. how does a pro like you look at that game of chicken that we talk about? guest: the game of chicken was made famous in a movie in which people drove cars had long at each other and the one who loses gets out of the way at the last moment.

if neither swerves, they both lose. tom keene: is that what's going to happen in europe? guest: people are hoping that it won't, that someone will swerve. tom keene: the keyword is how you hold that word hope into our analysis of economics. what does he hope for with christine lagarde? guest: when you look at the two drivers heading towards each other, they hope the other will turn away. they also must be prepared to turn themselves. bargaining often goes to deadlines. brendan greeley: what of the things we are seeing now is you have to convince the other participant that you would be willing to run off the cliff. that is what we are seeing right now. germany and greece are saying we could leave. let's see what happens. that is part of a successful strategy. guest: i think that's exactly

right. you would like to throw your steering wheel out the window. tom keene: tony blair has done that three or four times. guest: there are three parties. you have three different parties coming from three different angles. you get the ecb and the imf and you have greece. that complicates an already complicated situation much further. what i fall back to on the stock market is when you look back to the 1996, the asian economic crisis. it accelerated u.s. economic activity and multiple expansion. clearly, our view is that germany once this deal done. that keeps their currency. imagine the deutsche mark without greece or portugal or spain and italy. they need them to stay in. brendan greeley: game theory

deals with cooperative and noncooperative games. cooperative games have rules. attention. take notes. non-cooperative games have no rules. war is a non-cooperative game. how do you turn this into a cooperative game? guest: they have strategies and things that players can do. some of those things are cooperative. others are less cooperative. in most games, people try to employ all of this. tom keene: i have you sitting down with a wonderful colleague of john nash. what would be the art of strategy for a beleaguered greece right now? what card it could they play in this bargaining? alvin: their weakness. they can say don't push us to hard or we will die.

tom keene: that is the single smartest thing i have heard in weeks. tony: they seem to want to make a strong statement. they were elected on a mandate and they are not going to change that mandate. that is the only card they have. i'll them: even their mandate as part of their weakness. tom keene: alvin roth of stanford is with us and tony dwyer. we will be -- continue. our twitter question is europe finally getting serious about greece? there it is. good morning. ♪

tom keene: good morning. "bloomberg surveillance"." i had to go to this. it's a princeton show today. writing in the wall street journal, a must-read. this is really important. it comes from our great thinker on equities. yellen is no stock market sage. an overleveraged economy is a

legitimate concern for the fed. gratuitous statements about equity do nothing to achieve the goals of sound financial markets since ready growth. greenspan nailed this. he did not get a crystal ball. tony dwyer: he did that in 1996. you had that many meltdown aced in his valuation call. tom keene: are we doing it again? to of course we are. we are on the positive side of a credit bubble. credit is flowing freely. the credit, that segment of growth is terrific. the other side is very bad. we are still on the good side. we have noted this. the answer was 2008, you had an inverted u curve. tom keene: brendan, jump in here. brendan greeley: this is a quote.

sound financial markets and economic growth are the feds to goals. that's not true at all. price controls and controlling inflation and employment are the feds mandates. i feel like with this quote is doing is reading into janet yellen a mandate she does not and should not have. tony dwyer: our way of analyzing the market is if you cannot show it in the picture, you are making it up. when i see quotes about what could be or should be, i don't believe them. i look at the history of the marketplace. what the current environment is like today and does that correlate to a good environment. the good environment correlates to a good environment. there are points that go at this quote. the market correlates to earnings. the rest is noise. earnings are positive in the market is going up. the direction of earning is driven by economic activity. accomack gamma -- activity is driven by the u curve. that is driven by fed policy and

that is driven by inflation. as long as we have inflation between 1% and 3%, the market should trade at at least 19 times. you have an outlet for better equities. tom keene: this is a exclusive this point. brendan greeley: we are going back to our roth in just a moment. he is going to answer questions after the break. this is "bloomberg surveillance" on bloomberg television. good morning. ♪

tom keene: good morning, everyone. we have had three days of rain in new york. it has not shown up yet. let's get to our top headlines are in --. vonnie quinn: there is a run on wall street. details out on the plan to have an ipo.

30 million shares in a price range of $14 $16. they will trade on wall street. john kerry is in boston to have his broken leg treated. he arrived on a military flight from switzerland. he broke his leg sunday bicycling in france. he will probably have to limit his travel. that could complicate a deal with the iranian nuclear program by the end of the month. herbalife is going on the offensive against bill ackman. the nutritional supplement company called him and irresponsible opportunist. they have launched a website called the real the lachman.com. -- bill ackman.com. i pulled up to show you. there is a collection of articles are in brendan greeley: you don't short me. i short you.

some markets clear with price. those are the easy ones. then there are all the other markets that clear with values like marriage and organ donation. dr. alvin roth won the nobel prize for economics. he tells his story in this book who gets what and why. this is his first interview on the book. i recommend you read it. even if you watch this show and are not an economist. you watch -- talk about organ donation. what i was struck by in the book is the first and you have to do when you are creating a market like that where there is no price is it participants over the moral hurdle of realizing that they are in a market. the first you have to do is convince people you are in a market. how do you do that? alvin roth: we don't allow people to pay for organs of the

united states. the market you are talking about his kidney exchange. lots of organ transplants for kidneys come from live donors because you have to kidneys and if you are healthy enough you can remain healthy with one and save the life of someone you love. sometimes your healthy enough but you can't give it to the person you love because they are incompatible. that's what rings up the possibility of exchange. maybe you are in that situation where you can give a kidney. that exchange saves to lives. it is called kidney exchange. it is a marketplace that uses no money. it involves exchange that makes people better off. brendan greeley: you wrote an algorithm for this market area in order to make it work you had to recognize there was an extra market participant not just people making exchanges but the hospitals that were doing the surgery. that complicated the market. alvin roth: the hospitals are

partners and make it easier to make a market. you need transplant surgeons before you can think about transplant surgery. you need databases of patients and donors. in new england, we start with a program for kidney exchange working with the organ bank. together with other economists i helped our surgical colleagues create this marketplace. tom keene: you are acclaimed for your work. there was a certain speed to figuring out where your kid was going to go. you address beautifully the change from mad men to google about the auction speed that don draper lives in radically different than the auction speed we live in today. are we aware of how the process has changed? alvin roth: markets now are computerized. that does change the speed and how they work. and financial

markets, there is interested how high-speed trading is changing read tom keene: are we slaves to the rest of them? we were slaves with don draper to magazine ads in a slower time. alvin roth: markets are tools. markets are human artifacts. if they are not working the way it we want, we should change the way they work. vonnie quinn: you talk about market design. is the market of the shared economy a good design? alvin roth: there are a lot of different designs. think about airbnb where people are acting as hotel keepers. they had a big market design problem to solve. you can imagine that if you wanted to get a room at hilton hotels, you could only talk about one room at a time. that would make it harder to resolve -- reserve a hotel room. that is the problem that airbnb

had to overcome. many of their proprietors are just dealing with one property. brendan greeley: you write about the influence of culture on markets. holding a market for fellowship for gastroenterologist is different than orthopedic surgeons. you would not expect that reading it. what do economists not understand about the importance of culture in market western mark --? alvin roth: they are legion. markets are social institutions. they work by rules. the rules of the market are its design. some of the rules are written and some are unwritten. some of the unwritten rules can be as important as the written ones. that is what we found a militant the difference between gastroenterologists and orthopedic surgeons. brendan greeley: you cannot go against the wishes of your chief surgeon. alvin roth: that was the unwritten rule. we said in the market for new law graduates who want to be clerks for appellate judges.

brendan greeley: please read the book. i put a question for the day, is europe finally getting serious about greece? this is "bloomberg surveillance"" good morning. ♪

tom keene: good morning. let's go to the bloomberg terminal and take a look at what we look at yesterday. it is with us today. that is the raging debate over inflation. the red line is easy, that is inflation. we go down over here with lower

oil prices are this chart goes back to 2000 and seven other beginning of the crisis. there is huge volatility on that line. this is a pce core, below the 2% line. this is that worry about subdued inflation below 2%. a lot of people say maybe not. they are looking at any other series. the cleveland fed the cleveland fed is smoother and it does not take out oil and energy. it takes out the excesses every 30 days and you get this beautifully stable inflation rate. it is above 2%. this shows the debate. yellen is clearly with the optimists. brendan greeley: if you use that measurement technique, you missed the point where an

outlier becomes a driver. it's a more hopeful measure. with hope comes consequences. tom keene: the consequences can be there but there has been a lot of math done on this by todd clark and many other fed phd's in cleveland. dallas has a series. i am waiting for richmond to have a series. this is more stable and it presents what all of our viewers and listeners know every single viewer is going right. vonnie quinn: when you think of core inflation, i get a lot of feedback on how can you exclude food and energy. those are the things that go up enough -- the most. my mortgage payment has lowered $1000 a month since 1996 when i bought my house.

my household has deflationary forces over the course of that time. brendan greeley: you but your house in 1996, that is all that matters. tom keene: your hallway is bigger than my apartment. there we are this morning on inflation. cleveland is the one that i look at. let's go to vonnie quinn with our top headlines. vonnie quinn: a rapid stream of developments this morning on futures. according to bloomberg, they have reached a deal on the terms of the bailout aid. the dueling proposals that follows a late-night meeting in berlin. angela merkel hosted the french president and the heads of the imf, ecb, and european commission.

the talks when on past midnight. the head of the organization for economic development thinks they will reach an agreement. >> so many smart people with so much influence trying to get a deal, my experiences you normally get a deal. it may be extended to the 11th hour. at is always the case. -- that is always the case. vonnie quinn: they will not release bailout funds unless greece comes up with economic reform. the senate will vote on those -- that house bill that would reauthorize surveillance. it would take away the ability to store the phone records. ellen powell, a jury rejected her claims that she was discriminated against. she claims she was subjected to a sexually charged atmosphere

and was fired when she complained. she is the interim ceo of reddit. if you would need it the best restaurants, you will have to go to spain. brendan greeley: as we all know. that is announced in spanish. we do now. vonnie quinn: it won the same award two years ago. you are going to have to take me. tom keene: there it is. i like to talk about -- to peter elliott about this area how rigged is this? that was my first reaction. brendan greeley: who knows. it was widely recognized by people who are experts and voting. i am willing to trust the data on this more than i would for fifa. tom keene: let's get to the data check. we are focused on the euro. 11033 as stronger.

the yield's are breaking out. tony dwyer is here. crude is up. brendan greeley: i am brendan greeley with tom keene. tom keene: let's a the equity markets. tony dwyer is here. he is optimistic. market enthusiasm is not there. it's an enthusiasm. there is no greater signal than that from the fed. we have seen this before. is it the waiting time? what are we waiting for? vonnie quinn: there are two reasons fundamentally. tony dwyer: it's based on positive earnings. this is a bull market.

you don't want to get really negative. similar to 1997 when you were in a time of a strong dollar and weaken emerging markets and lower commodity prices, you had a fed rate hike. janet yellen has made it clear that they plan to raise rates a couple of times. it stuns me that people like me rub reports about what a couple means. it means two. our call is different right now. we have expected a june or july rate hike. any economic series i can point to, the unemployment rate, the consumer confidence the reason is you are already past the point where historically the fed has raised interest rates by a lot. tom keene: i remember the fear on the beach in 1998. how are we going to have a mild tantrum when we get that seachange decision.

tony dwyer: back when it was alan greenspan, there was a two and a half month lead in when you found out what they actually said. there was not a press conference and in 15 minutes you did not have a fed heaven or. tom keene: a gap down 6%? brendan greeley: here is the problem. tony dwyer: the professor and i were talking about this. you have a lack of liquidity in the market. futures were down 12 and then 20 minutes later they are down $.75 area there is no liquidity. trying to analyze the day-to-day activity of the market is absolutely insane. it's like trading off the economic data as it comes out. it is so hugely revised. you have to lift the trend of the data and the trend of the market. both of those are positive. vonnie quinn: you are not recommending loading up on u.s. equities. tony dwyer: correct.

we are in the 10% correction range. the majority of stocks have done that. you have a lot of stocks that have already corrected. if you match that 1997 rate hike scenario with current data going on, you get a 10% correction. it went 30% higher in the next seven or eight months. that's our plan. vonnie quinn: you think they will move 30%? tony dwyer: i think number two on the street. that assumes 123 and earnings. brendan greeley: i want to talk mood. i remember in the 90's there was a sense that this was a bubble that is going to crash at some point. there was a cover that red crash. it doesn't feel like what's going on. until that the conversation is not when is this going to and but is this a bubble? are we there yet?

tony dwyer: the last thing you ever want to do is when credit is positive, when banks are easing loaning standards, when the millenial's are starting to buy houses, the last thing you want to do is be negative. tom keene: alpine roth is with us. i think about frank ramsey. do we have too much media today? do we have too much information? alvin roth: we don't have too much information. we do have a data overload. there is a difference between data and information. tom keene: that's the best thing i've ever heard. you could put that on your tombstone. tony dwyer: there is such a lack of proper information. tom keene: this is brilliant.

brilliant today. i've got to go to break. the quiet. our twitter question today, is europe finally getting serious about greece? good morning. ♪

tom keene: good morning, everyone up. we are here with futures down

-14. we have a most interesting debate going on. the laureate from el, mr. schiller they are squaring off. there is a historical outlook. the idea of valuation and the confidence and the bubble that is out there. let's go to tony dwyer. academics love to do this. they love to talk about a bigger, potter theme, -- broader theme. is this an after-the-fact discussion? tony dwyer: it has to be. how could you be in a bubble as alan greenspan found out. he knew it, but it did not matter. tom keene: by definition, a

moving average is an after-the-fact look at a market. it's no different than what persists or -- professor shiller is doing. tony dwyer: if you look at the trend of valuations, it's up. it doesn't matter if it's two times or if it should be. you would not fight that trend. tom keene: this goes back to the heart of the matter, the guys in the trenches and the academics look at the bigger picture. brendan greeley: that's what i'm learning to do on the show. i started writing about academics and talking to the. i discovered they don't matter. we have dr. alvin roth right here with us. every time we talk about robert shiller when you get that nobel prize what happens? how does your opinion become more valuable? how do people treat you differently? alvin roth: journalists seem to

think that you know everything. of course, we only know what we know. part of being elevated to being a nobel laureate means being more careful about what you say. brendan greeley: does that help at home as well? is that the nobel laureate asking for this? tom keene: when you look at the phrases of the moment the things we hear from the professors or from others, how much can we dovetail the world of academics into the world of mr. dwyer? alvin roth: it takes us a long time to know anything. the difference between journalists and historians is the difference between journalists and academics. we don't study the news. we study what is available to study. this is longer-term data and trends and institutions.

tom keene: i think he's blaming the media for this. brendan greeley: it is generally our fault. this is how economists see themselves academically. we are going to get back into the bubble question coming up next to --. this is still "bloomberg surveillance" on bloomberg television and radio. good morning. ♪

tom keene: good morning, everyone. we have a busy day here. the euro is on the move and it is stronger. let's get to the top headlines. vonnie quinn: a hearing today on the fatal amtrak crash in philadelphia will focus on safety spending. lawmakers want to know why amtrak did not spend the money it made on the root for automatic speed controls. the train was traveling twice the posted speed limit and eight people were killed. hsa see will announce plans to cut thousands of jobs. the bank could fire as many as 20,000 workers.

they will have a target when they speak to shareholders. they employed to hunt it's easy thousand people at the end of last year. it's a act yard brawl mark zuckerberg's former neighbors are at odds with the developer who distracted -- got his old property. the former neighbors are suing the developer. the developer says zucker berg went back on a promise to introduce him to the silicon valley tech elite. those are your top headlines. i can introduce you to a lot of people. tom keene: and at no. it's a bunch of reach people screaming about their backyards. brendan greeley: they are figuring out a market and property rights. tom keene: that is a nobel laureate. we have a little bit of environment theory thrown in. let's look at another academic pursuit. we have our roth on her set. game.

. there is little more controversial than the study of what we do in our gable he -- daily gameplaying. when you forgot that you took it in school? we know something about nash equilibrium named after john mash of -- nash of princeton who was tragically killed last week in a terrific car accident. all of economics mourns him. it's a land of mathematics in serious analysis. it's a land of shapley mechanisms. i mentioned frank ramsey ever. -- earlier. our guest is not a macro economics us -- macro economic -- macro economist. if you were to explain not the undergraduate prisoners dilemma course but when you get to grad

school, what is your single emphasis of game. two people striving to be smarter at it question mark --? alvin roth: it's to think about how information moves around what signals you send and what you infer about what you might do in the future. tom keene: this comes out of george soros. there is stuff we can observe, there is so much that we can't. there is a set of information that we don't know is out there. how humble should we be about what we don't know? alvin roth: we have to be very humble about what we don't know. tom keene: we learned the hard way every six or seven years. alvin roth: markets allow people to aggregate their information and figure out what should happen instead of making a planner who does not have the necessary information try to figure out who should get what. tom keene: what of the great practices of this is mohamed el-erian.

this is a quote from him on game. . players coordinate to achieve that are outcomes than what would prevail in the absence of coordination. if the game is uncooperative everybody is miserable. he is talking about the late john nash. brendan greeley: i brought up cooperative games. i did not know i was capable. tom keene: he is from the united kingdom. this is a cottage industry over in england versus what it is in america. brendan greeley: we are seeing in greece a cooperative game with rules and agreements. it's turning into a non-cooperative game. greece is using a different strategy. want to ask about something different. you talk about regulation. regulation has to adapt to the market. it is a way of designing rules for markets.

do we talk about the writ -- word regulation in the right way? alvin roth: the rules can be provided by government or by private dividers. the new york stock exchange has lots of rules. some are provided i the exchange and some are laws. markets need good rules. regulations can be part of it. brendan greeley: tony dwyer was to jump in. tony dwyer: we were talking earlier about a derivative effect. after the 1987 crash, they created the execution system that guaranteed that if you were a bitter you had to be good on 1000 shares. that was the first software program that i can find where it was designed to pick off that trader that was guaranteeing 100 -- 1000 shares. that fast forwarded two height frequency trading.

-- high-frequency trading. we have to be careful. brendan greeley: when we talked about the rules of the game in this world, they are a consequence of the wrath of legislation that was passed after the financial crash. do successful markets work with simple rules instead of large complex sets of rules? tom keene: we go back to occam's razor. alvin roth: rules need to change to environments. simple rules are simple when you can manage with them. markets can suffer from too much or too little regulation. regulations can be instituted to slowly or a candidate to slowly. tom keene: let me look at your to do list. can you get dodd-frank down to 42 pages? that would be a good thing. not even professor roth can do that. tony dwyer: let's look at the

volcker rule. that comes out of pain. you never change things when things are good. you create a normal case scenario off that. the problem is there is no liquidity in the bond market. anarchy becomes 18% of a high-yield market and there is no other side of the trail. tom keene: there you are, getting gloomy again. brendan greeley: it's a rule of incredible complexity. tom keene: i am leaving. i am off to radio. vonnie quinn: you'll have to ask john. it's time to answer our question of the day. is europe finally getting serious about greece? we cannot resolve greece without resolving the real problem. brendan greeley: you can't have monetary without physical and they're not going to get physical. vonnie quinn: it will be a sad day when greece defaults or leaves the euro.

pain and sports -- portugal will be -- spain and portugal will be looking to leave later. brendan greeley: there is no reason that they will necessarily follow. it looks like the disease is contained. vonnie quinn: we have seen much better goals in the last couple of quarters. brendan greeley: those two countries have been the most frustrated with the greek negotiating strategy. vonnie quinn: they played by the rules. third answer, nero fiddled as rome burns. history should teach. there is some truth to that. brendan greeley: you know what happens in europe? everybody settles until they cut a deal at midnight. i think that's what is going to happen. i am going to look at greece for my agenda today. the meeting of the troika is extraordinary in terms of the last six months. something is really happening.

today we have dueling proposals. we will find out who wins today. vonnie quinn: i am not going to answer that in song. i am going to take a look at a hearing in the senate. this is interesting. it has faded to the background. congress is looking at the issue. a lot of people say you would give an advantage to other countries if it expires. brendan greeley: the tea party has made this a big part of their platform. i am looking at auto sales today. the numbers from a bunch of manufacturers. you'll find out if we get better truck sales then car sales. i want to thank tony dwyer for a great conversation. alvin roth and his book again we are going to tell you to read it. this is "bloomberg surveillance"

and we will continue on radio. that i pronounce that right? i hope so. bloomberg continues with "market makers" on bloomberg television. it's june 2. good morning. ♪

ruhle. erik: ahead for you this hour the greek standoff. the high cost and perceived value in nba. and you will hear from the publisher of vanity fair about what caitlin jeter passes -- cover means for their bottom line. stephanie: 8 million hits in the last day. the youtube behind-the-scenes video, massive views as well. erik: bloomberg news has wrapped up their banned substance -- it becomes after a late-night meeting in