alix: we are moments away from the closing bell. this is bloomberg market day. ♪ 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. i joined by j weisehal. one stock that caught my eye was built the -- delta. they had passenger revenue, and the reason why a cop my eye was it was part of the transportation sector. we have seen 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. i don't own a car, but it is great to see people buying cars. real estate, the numbers have in solid.

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 now for the 2% gdp forecast. 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. merkel and others met in germany, they thought this is the final age, they will make the push to get the deal. and then a twist this morning or they are putting together a deal and 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. this is how much grease those -- 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. we are joined by carl, a chief 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 members -- weak 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. it would be a less weak euro, so i think most smart people do not think that this grexit what happened. they think they will come up with a deal.

there is a decent chance that people in charge will say, this 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 >> there is value to watchful waiting. while additional data clarifies 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? >> governor 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. alix: 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 that would be -- and when you talk about the economy, we are getting right now indications of things like the jpmorgan thing you talked about. there have been 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. the 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. >> the latest from pimco for the 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. all of this, other managers took 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. alix: 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. reelections are expected to take place between september and march. and disregard sell in may and go away. managers who traded stocks,

larry robbins had his stock jumped last month. and david 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 pocket, since texting is -- is a key form of communication. and movies turn big-box heroes into money at the box office. in 2009, captain sullenberger

saved passengers on board a u.s. 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 he guided the lane -- plane 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 cut staff, and we are hearing more numbers on top of that, why are banks -- how are banks making money? >> jpmorgan cut 17,000, but they have hired lawyers. with all kinds 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. with that reality, they have to 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? >> i think it is rare, with the exception of the late .com boom, the chinese market was in a

bubble in 2007. they in 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. >> the big debate over 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 records is now in the hands of 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. ♪

alix: welcome back to bloomberg market day. goldman sachs asked an economist 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. >> i agree 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 or where do you think the funds will peak once the federal reserve is at the apex of the tightening cycle? >> my belief is, and here, one 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 neutral fed funds rate at 2%, and my own populations confirmed that. that the average fund rate over 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, certainly the fed rates could peak above 2%. but it will not be the 4% that we know the fed has in its dock, that it puts out every quarter in protection. >> in terms of valuation, is there a range that has you concerned? >> my feeling is if we get beyond 20, 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. even i was bearish in 2000. those levels were not justified. i can certainly see 18-20 as the 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 bit above 2%, it could go to 3.5 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. alix: that was a very passionate professor spiegel. have a good day everybody. ♪ >> from our studios in new york

city, this is "charlie rose." is one ofally mann america's prominent photographers. it she has captured images that are disturbing, hunting, and romantic all at once. a strikinglyed beautiful photo that outrage some for the composition and nudity. it should write about that moment come as well as her life and work in a new called "hold still: a memoir with photographs ."