alix: choppy session, the stocks finishing lower today, closing lower for the third time in four sessions. but the dow did end up off session lows, up at one point. a did climb their way back by about 30. the real story, the dollar suffering the worst drop in two years as the euro killed it. by joe weisenthal. one stock that caught my eye was built the -- delta. revenue, andenger the reason why a cop my eye was

it was part of the transportation sector. the transports not being able to keep up with the record rally we have seen. >> it also seems like a classic cycle of overcapacity, cutting capacity, with airlines. i love car sales, best number in years. , but it is a car great to see people buying cars. real estate, the numbers have in solid. maybe we are getting signs of an economic rebound. alix: factory orders down in april, but it was the inventory that it out. jpmorgan had a note out saying that there is a downside risk forecast.e 2% gdp there were better manufacturing signs, but this report made them rethink it and think that the trends are weaker, if we are not

reducing inventory. >> we can talk about -- we can't go any day without talking about greece. and others met in germany, they thought this is the final age, they will make the push to get the deal. then a twist this morning or they are putting together a deal greece sends over a proposal. we don't know anything. we are at the stage where everyone is hunkered down and about to push for a deal. i am shy and nervous about saying this is it. we have had falls deadlines. so even though the big names are involved, i am not convinced we are about to see a solution. alix: greece has the power. i have a chart that will try to back that up.

take a look at the greece national bank and all the money that they oh, we are looking at 99 billion euros. that is not the chart their. -- there. that chart is how much we have seen -- this is the chart. those --ow much grease owes creditors. a majority goes to germany. they could make that argument, if you do not bail out greece, you do not get paid back germany. >> obviously, that is a big concern, if greece default people lose money. but their armor cards -- more cards to play. if you default on a bank, then you start to get a contagion

effect. germany does not want to lose the money it has lent, but it could take the hit. ultimately, this will be a political decision. it won't be about the money, it will be about merkel and other leaders saying, do we want to take a move that would peel back the project that they have been working on so long? i would guess the answer is no. but ultimately, it is about politics. alix: and now this other chart. this is 2012. this is all over and mainstream media, 350 mentioned in may alone. , a chiefined by carl u.s. economist. and michael.

your thoughts go back and forth, can germany take the hit, i'm thinking greece has the power. do you guys think -- what do you guys think? >> it is germany's benefit in the long run to have these week eak members. if they need to relax rules, it is well worth it. here is the reason. imagine the strength of the deutsche mark if germany was on their own. they have low budget deficits and a strong position. they would be in the same boat as switzerland with strong currency. they do not like, politically it is not a popular thing for them to help these smaller members, it gives them a weaker matters in export powerhouse like germany. >> it is the cost of membership in a club.

alix: where you laughing at carl -- were you laughing at carl? >> no, my response is similar. germany does not have to go to the deutsche mark. weak euro, soless i think most smart people do not t whatthat this grexi happened. they think they will come up with a deal. there is a decent chance that , this in charge will say may not be the right thing to do. it is possible that greece could exit. >> so greece and the overall world economy is something that someone brought up in a speech today. value to watchful waiting. clarifiestional data

the underlining momentum in the face of headwinds from abroad, the labor market, is it strengthens, and inflation readings improved, -- could come before the end of the year. >> what do you make of this, someone from the fed talking about global data and the headwinds it poses for the u.s. economy? brainard, i had a neutral rating on her. there is not in illusion of midyear, that was day, it could be july, june, now she is saying by year end. that is surprising to me, given to me that she is a neutral person, she moved with the broader committee. i will be tuning in on friday after the job report win dudley

-- when dudley gives remarks and he will have the benefit of the report. -- seeing that report. michael, you had to put money to work. how do you deal with that when we have a fed speak, this is what makes carl crazy? >> or every half-hour a greece headline. you have this back and the the real impact of whether trees stays or leaves. -- greece stays or leaves. for real-world people come up you up and the markets are prepared for it. i think you would end up with a market reaction, but not one -- would be and when you talk about the economy, we are getting right now indications of things like

the jpmorgan thing you talked about. people who said that the economy was not low enough. people have them prepared for crummy earnings in the next quarter. these may not be the fellow. we might be surprised to the upside in the next quarter, because pessimism is rampant. fed just said that it may be september when they do it, if they go ahead and do that the market will probably say one and done makes sense. the market has been a lot of little kids in respect to the fed, not listening to the adult in the room. they say we will do it, but not do anything after that. i think that will happen in september. alix: we actually have breaking

news. for theatest from pimco month of may. bad news, investors pulled money out of their fund in may. it is not as much as the $5.6 billion that they took out in april or what they took out in march. overall, their stocks are down from their peak in april 2013. managers tookther over after their manager left. the flagship fund is performing better, the total return fund is better and of this year, by about 1.3%. it has outperformed its peers and its performance has improved since gross the party. it now compares with what is the largest fund?

so, it is interesting. we have been monitoring with strong numbers at pimco, especially since gross's departure. michael, i will make you stay with me. carl, thank you for being here. much more coming up on bloomberg market day. we will talk about apple, china, and the fed. ♪

alix: welcome back to bloomberg market day. now for a look at the top stories. sepp blatter says he will resign

as president in the wake of a corruption scandal that has rocked fifa saying that it needs restructuring. the sports minister in russia says that they are not worried about losing the right to the 2018 world cup. coca-cola says that the resignation will help fifa reform. are expected to take place between september and march. sell in may and go away. managers who traded stocks, larry robbins had his stock jumped last month. einhorn's hedge fund also jumped. jpmorgan chase has a message for employees, don't leave a message

at the town, there is no more voice now. they are eliminating a voicemail for employees as a push to cut $2 billion in annual expenses. jpmorgan says the alternative could be found in anyone's is at, since texting is -- key form of communication. heroesies turn big-box into money at the box office. in 2009, captain sullenberger u.s. passengers on board a airways flight and made an emergency landing on the head the river. now he will be immortalized on film, says -- so everyone can see his calm under pressure as laneuided the lane -- p

and now more on markets. apple is an obvious one, they will earn next year. they are about to come out with interesting stuff next week. we will hear about music streaming and some other stuff. cory johnson is able to give you the details, but as a shareholder, i could not be happier with what they are doing. alix: do you own it for value or growth? >> it has 13 times earnings and with a mountain of cash that they have, it is a value stock. but they are trading in a growth custom, they grow faster than others. it is a good deal. alix: what about banks, we have heard talk about potential layoffs. just in the last year, jpmorgan and we are hearing

more numbers on top of that, why are banks -- how are banks making money? cut 17,000, but they have hired lawyers. of pressure on these institutions, they have margins coming down, because they have to hold more capital. some of these things are good, some silly, but it is reality. toh that reality, they have screw down the expense structure and that is what they are doing. when rates go up, maybe in september, they will make more money. right now, they are probably trying to make money a few years out when rates go up. alix: we are talking about 25

basis points. >> they will make what they are making. that is pretty probable. alix: what about china, a lot of talk about if they are in a bubble, do you still play it? think it is rare, with the exception of the late .com boom, the chinese market was in a bubble in 2007. fact had a five-year bear market, one of the worst in the world. the last year they have actually moved forward, doubled, but they are still at 60 times earnings, but now they are 18 times earnings.

double, i don't think so. alix: ok, good to see you as always. we do have breaking news for you. peter cook is only not. overe big debate surveillance programs coming to an end at capitol hill. the senate has just passed the house bill that deals with these issues. it would allow provisions to be reinstated and most importantly, collecting american phone hands ofs now in the the private sector. the government can try to access those through court order. the debate is effectively over now. the president indicate he will sign it. alix: much more coming up. ♪

♪ welcome back to bloomberg market day. economistchs asked an whether we have reason to worry

about potential stock market -- a potential stock market bubble? some are confident that the bull market will run on. that the ratio is higher than the historical average, but i think that a higher pe ratio is fully justified in a world of record low interest rates. even when the fed raises them, they will remain low on the historical standard. in my estimation and my colleagues at wharton, a lower discount rate means a higher average valuation for the stock market, so i certainly don't believe that this is overvalued at current levels. >> that is a key point, at what fundsre do you think the

will peak once the federal reserve is at the apex of the tightening cycle? , one belief is, and here of the rare times i agree with the bill gross, we haven't disagreed over the last 5-6 years, but he named the new at 2%, fed funds rate and my own populations confirmed that. rate oververage fund the next decade will remain at 2%. it does not mean that at the peak of tightening it will not be above 2%, it could get to 3-4%. but then it will be brought down below 2%. that is when the economy softens. we will have a lower average level of interest rates, rates coulde fed peak above 2%. but it will not be the 4% that dock,w the fed has in its

that it puts out every quarter in protection. valuation, is there a range that has you concerned? >> my feeling is if we get , 22 or 23, we are at a rich valuation. in perspective, the stock market got to 30 price-to-earnings ratio in 2000 and that was a. of higher interest rates. that was a clear overvaluation in the market. in 2000.s bearish those levels were not justified. 18-20 as thely see new normal valuation in the market, rather than 15-16, which has been the valuation during most of the postwar. . professor, goldman sachs has

quoted you in the past years and have looked at different asset and came to the conclusion that on a percentile basis, stocks look overvalued, but other things look more overvalued, like 10 year chad -- treasuries, volatility, would you agree with that? >> the question is on bond. interest rates will rise. with the 10 year, now a little 3.5above 2%, it could go to and probably that is the new normal for 10 years. that corresponds to about a 1.5 point above bonds, and has been a term spread there, historically. bonds are much more expensive than stocks, but my feeling is,

my cancellation say that the 10 gets to 3.5, that will impose losses on bondholders, but stopped at that level should be valued at 18-20, 3.5% over the 10 year treasury rate. bonds are more overvalued than stocks, i don't think that stocks are overvalued, they are fairly valued within the new reality of lower growth and slower inflation that the u.s. economy will experience in the next 10 years. that was a very passionate professor spiegel. have a good day everybody. ♪ .

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toly: pinterest allows users access directly through the wrap. what does it mean for e-commerce? i am emily chang and welcome to a special edition of "bloomberg west." from lasg to you live vegas where hewlett-packard is holding his discover conference. martin will be joined by fink and i will also be speaking with the hp ceo meg whitman.