cameron's campaign. the bank of england is staying on the sideline. and the numbers did not add up. drugmaker valiant said it will restate some of its past earnings after a board review. ♪ >> a warm welcome to our best to you all, this is "bloomberg go." stephanie: a big morning, lots of great people we are speaking to. like our next guest, jurrien timmer. welcome. we have a lot to cover with you this morning. but first, we, have to get some first word news in. here's nejra cehic. nejra: another controversy in the presidential race, just

hours before nevada republicans vote in their caucuses. ted cruz has fired his medications director for tweeting out a story alleging that marco rubio disparage the bible. the rubio campaign wasn't mollified, it said the culture in the campaign says an ally is too big and no trick is to dirty. today, president obama will send congress is planned for those in the prison at one time away. the white house doesn't have they call fore, transferring prisoners in cuba to a navy base in the u.s.. xi jinping has a new policy, the countries newsagency exists to serve the communist follows -- communist policy. he also wants to curb the presence of foreign media in china. news, 24 hours a day, powered by 2400 journalists in with an 150 news bureaus around the world. i'm nejra cehic. matt: let's take a look at the

markets. futures are down across the board, not much change across the s&p and dow jones. in europe, it would like we could get our cues from the continent today and london, which may soon not be a part of europe. and the cacown .8%, down .45%. down into600 broken extra groups. a deeper look into what's actually going on over there. the interesting thing, guys, is that you mentioned the standard chartered story. it's a bad deal for banks, and yet banks are one of the only gainers of all of the stoxx 600. the losers we see utility, homeance, personal and goods, really, the very defensive sectors are what's losing.

even though standard chartered is down right now, we see other banks that are putting up big games -- big games. -- big gains. the losers are household names like unilever. stephanie: one to put into context, the banks of gotten beaten up so hard that one of the reasons we could look out and say they are gaining today is for a trade. investors look and say at that level, i want to be in there at least for the next few points. matt: that's the same thing we saw yesterday. hsbc came out with a surprise loss, today's standard chartered with a surprise loss. it wouldof weeks ago have killed the banks, now the other banks are actually gaining right now. take a look at the minors right now, php billiton down. billiton was up 9% yesterday. it isn't a huge loss if you were long on friday. the reason they cut their dividend, for the first time in

15 years, they cut it by 75%. a big story on minors today. both ina drop in oil crude and nymex crude. the contract rollover yesterday. look on gipt's up, and you will see it's actually down. the april contract is down. finally, check out home depot in the premarket, the company gained on free much every measure. eps as well as sales. we talk about home depot earnings starting to rev up today as we get macy's out a later. jonathan: i want to take it back to the standard chartered story. early this morning, the stock down as much as 12%, sinking around 5% this morning after the bank reported a surprise loss. very a british bank, but much an asian story, write down from operations in the reason -- in the region. joined by bloomberg's stephen morris from london.

the analysts poured over that and said standard chartered is going to be just as ugly. was it that much worse than hsbc yesterday? stephen: sometimes you struggle to find this. the just reported their first annual loss since 1989, and they reported loan impairments specifically in asia, that are higher than ever else in their history. really, if anything, the hsb is been look -- has been made to look good. under aput the new ceo lot of pressure to explain just whether he can actually fix this bank. jonathan: what does he do now? fromised over $5 billion investors, he announced a 15,000 job cuts, what is next? stephen: if you do just back of the envelope calculations, he raised $5.1 billion from investors, the already posted billion in3 -- $2.3

repairs. you exit struggle to see where the additional money is going to come from for investment and growth in this bank. they really are relying on a recovery market in order to provide them with investment to jumpstart profit growth again. jerian -- i want to bring you into the conversation. you want to the commodity story, but 90% of its revenue from asia, africa, that's the place to avoid now, isn't it? jurrien: the way i see it is the debt super cycle really started to unravel in the u.s. in 2008. subprime,ut housing, and that it morphed to europe in 2011, 2012, with greece, portugal, spain, italy, and now it is squarely on china. there are these three perfect storms going on. you have this policy diversions between the u.s. fed wants to raise rates, and everyone else

that is easing. that puts upward pressure on the dollar. at the same time, china's economy has been slowing pretty dramatically. the the yuan tied to dollar, the yuan got overvalued. it went up in somebody with the dollar. now the you want a sliding -- now the yuan is sliding. then you have the whole oil thing which also hurts. as you see with asian oriented banks, a lot of that growth model in china was based on credit. when he turns the other way and oil goes from 100 to 30, ecb's sections of bond market and the banking sector as well. david: i wonder when we will know the bottom in terms of bad loans to banks? and energy.s hsbc today we have another loan impairment charge, they're talking about $100 billion perhaps in risky assets. when does an investor know they have it all off their books, they have taken account for it? stephanie: never. jurrien: in japan, you have

zombie banks. loans just got rolled from one to another. china is doing the same thing. i've usually, these are not chinese banks, these are outside. i think this is probably the lagging indicator. at first, when things go sour, it becomes an earnings problem. problem had in earnings for years. and in the end, it becomes a credit problem. country start to default. that's the stage we are in. the good news is it does mean we are getting further towards the end. personally, as a strategist, i kind of like the e.m./commodity side of the market. including also the value cyclical side. they have been beaten down so much over the last couple of years that it is kind of interesting place. stephanie: is the name of the game risk management? they are paying no significant contagion in oil and gas exposure. is this a time where we are going to look at a true bifurcated market?

those who truly are investors -- macro investors will be the winners, and others will be the losers because just based on the headlines crossing out, that kind of seems to be the story. jurrien: it has been an energy story until recently. over the past six weeks or so, something happened. the market started really rereading what they think is going on. we went from a fed funds future curve pricing in 200 basis points with those rate hikes over the next two years, to basically none. it happened very suddenly. if you look at the earnings estimates, if you go on bloomberg, you see for the s&p index energy, until recently, it was really just an energy story. 2015 arearnings for looking to be down 2%. x energy still up 5%. that is the trendline growth for earnings. over the last four weeks to six weeks, the x energy numbers have been coming down very strong.

there is something going on. economically, if there's no contagion because export in the u.s. are 13% of gdp in china is only a small part of that, but markets wise through the dollar and the credit markets, and the , it is a moreergy systemic thing. jonathan: i find it fascinating when people come on this program and say there is no contagion. global manufacturing is in a recession. can we really expected to be no bleed across for manufacturing into services with the rest of the global economy? seemsn: the u.s. consumer to be fine, but the u.s. economy is 71% consumption. there's clearly a global trade recession going on and china is sort of at the center of the storm. i think economically, for the u.s., which is a relatively closed economy, there's not a lot of contagion. for the markets, with the s&p and get 40 plus percent of its revenues in earnings overseas, it's all the same thing. when the dollar goes up, financial conditions tighten.

it puts the chinese in a bind it is a creates overvaluation of the yuan, and the chinese have to sell down their fx reserves. fx reserves are down $1 trillion from the highs. that's a form of tightening. that's like the opposite of qe. money that was invested in assets leaving the markets. that is an oversupply. that brings prices down. stephanie: we have to take a quick commercial break. a lot more to cover with jurrien timmer. than 30,000 u.k. based ceos of signed a letter endorsing britain to stay in the eu. we talk about the implications of grexit next at the top of the hour. a very special interview with bill and millon negates and the gates foundation. -- bill and melinda gates. ♪

nejra: a big acquisition in the ministry -- in the memory chip that is -- industry. after a chinese company pulled out of a deal to become western digital's biggest shareholder. u.s. regular leaders will go to investigate the transaction. you can add time to the list of those interested in buying out whose core business. yahoo!'s core business. time magazine would be competing with companies such as verizon and at&t for yahoo!. the so-called london whale has resurfaced. tradermer jpmorgan generated more than $6 billion in losses in 2012. he said it wasn't his fault, he says he was told by his jpmorgan bosses to execute the strategy that prove disastrous.

the bank is not commenting. david? david: now to global go. we are four months away on britain's referendum on u.k. membership. 36 of the uk's 100 biggest companies signed a letter endorsing cameron's campaign to keep britain in the eu. governor mark carney has come out and said the bank of england is making no judgment on this point that grexit. >> our approach to forecasting events around the referendum is to take developments in markets and confidence indicator surveys as given, and to feed those through into the forecast. we're not making a judgment. but the potential outcome of the referendum, in other words, which side will win, or an assessment of the potential consequences of a leave vote. david: as you look at investment in europe, how do you assess the risks of a grexit?

jurrien: it seems the odds are relatively low, 30% or so this will happen. we saw in canada there was a secession movement a while back. to me, as i like france is looking to leave the eurozone. and created them in the currency again. there's not really a currency aspect to this. i don't the gets really that systemically important. it's important to britain's economy, of course, and shows that countries, when the growth tied receives, countries start really thinking about themselves, which they always do, of course. but especially of these times, when europe is barely growing and practically and deflation mode. politically, this is a region is already fragmented. againsthey did exit that kind of fragmented political backdrop, all of a sudden you have precedence. you can leave the european

union. the next logical step is can i leave the eurozone. the u.k. left, this is a huge economy leaving a trade block. i could renegotiate some trade relationships in the same with one has. this is a precedent that did not exist, and all of a sudden comments on the table. we do not be concerned at all? jurrien: i think it speaks to the times. we saudis kind of headlines a few years ago, not for britain, but italy. -- of italy wants to leave what if italy wants to leave so they can grow their way back into prosperity? this is the issue around the world. the old playbook, if you have too much debt and too little growth, you do value currency and inflate your way out. in the eurozone, everyone is stuck in the same currency. that's why there is no quick fix for greece. greece couldn't just devalue the drop on by 60%. it shows you that countries are sort of tied, and it becomes a vice. david: you mentioned the currency.

the w crs function on bloomberg, you can look at currencies in a number of ways. to which is to see how options forecast the currency to result against its trading partners. any time limit down. i'm looking at six-month down, and you see that if you look at options here, the volatility , a gain of the yen 5%. the dollar a gain of 3% against the pound. all of these currencies are forecast to gain against the pound six-month out. even though we are at lowe's from 2009, if you pull a chart out, it looks like we are at lowe's from the 80's and cable. it's very interesting what you can do with debbie crs here. wcrs. david: the essence of the eu has been balance of power. now you have the u.k.. if you take the u.k. out, germany become so dominant, i think it's no coincidence that angela merkel is one of the people arguing strongest keep england in.

when you upset that balance, good really upset the trade union. jurrien: the whole political stories have been very adjusting to watch in europe, all of these fragmented fringe parties. we saw the same thing in greece happen, and now portugal. it is a political story. it's this axis of germany and france, france is the weaker, and certainly having britain in your corner would be nice for germany to have. the onus is not entirely on them. they're always little considerations. jonathan: matt miller, taking us to the markets, the euro sterling, 78 pounds, cable, 141. this is exactly what governor carney wanted, a weaker pound. concerned, youe would expect them to say nothing, because he has to stay neutral. i'm closed doors, surely the best option is to do nothing and wait. jurrien: nobody wants a strong currency. nobody. if you look at the last two years, it's been competitors devaluation.

the u.s. started with kiwi and zero rates, that brought the dollar down. and in the bank of japan entered the fray in 2013, that brought the yen down. the ecb joined in 2014, 2015, that brought the euro down. now the dollar's back up, and i go back to china. that the pressure on the chinese yuan. wants a strong currency or a collapsing currency. everyone is trying to -- when there is little growth around the world, everyone is trying to steal market share from the other guy. julie's get their exports going and the pie is not getting bigger. turnss why you have these in terms of getting currencies down. i'm sure in england, having a weaker pound is part of the mass. timmer is whenen you stay with us. we look at valeant plan to revise past earnings. we bring that to you. 7:20 in new york city, the european exit market looking

mower -- lower. futures are dead flat in the united states. baking 110 on the back of a week. ♪

stephanie: you are watching "bloomberg go." we are talking valeant. thiss are down yet again morning after the company said it will restate past earnings, which comes after the drugmaker board reviewed its relationship with the mail-order pharmacy. drew armstrong joins us now. this is a tsonga never seems to end. just a week ago, more and more hedge funds were starting to circle valeant again, saying maybe it's time to step back in. what changed? drew: this investigation that

the board had appointed and called for started six months ago about what was their relationship with this pharmacy? at the time of the investigation they were looking at, they were saying did we own it then, should we have been consolidating its financial statements? operating this thing, we were selling them stuff in it was going on and we are recording revenue at the wrong time. they're going to take about $58 million adjustment and restate some earnings. when they do finally get around to reporting, they're going to do a call in about a week. but it's been one thing after another with this company. dribs and drabs of bad news. we will see now where it ends. walk use: can you through -- jim chanos put out a note saying the issue is weighty bm's work. how does the system work for payers, and why is it a flawed system? we saw deutsche bank download -- downgrade express scripts.

the big issue is not necessarily this relatively small adjustment in earnings, is the fact that the rest of the health care system is ticking a look at these guys and saying we are going to scrutiny every single thing you do right now. and i give very hard for you to sell your products in a lot of cases. david: this is what i don't understand. they had a lot of problems. buytill have 60% rating of . it's the most amazing price spread, he goes from $80 to over $200. drew: there's a lot of optimism out there. if you look at the last couple of days, there's a guy named david marist operating on wells fargo who put out a note saying i don't believe in this company's strategy, i think they have tons of risk coming out. he laid out a big, big case. i think he put a price target of around $66, which friendly, he's closer to that of the $200 price tag are. ever since he put that down,

stock was down 10%. monday, 10% more. we will see what happens today. i bet there's going to be a lot of fighting over if this is good news or bad news with this restatement. people look at this as a blank slate. stephanie: even 60/40 is a drop. in september, it was something like 99% of analysts were positive. matt: you still have a majority of analyst with buys. very few a sell rating, even though the price target has come down and super underperformed the target. david: they can't even tell us what they are going to have their next earnings. drew armstrong, great to have you here. coming up, we go to a conference in berlin, next on "bloomberg go." ♪

when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. david: u.s. equity futures are essentially flat this morning here in new york, at the same time, a slight downtick in europe. tom keene has made his pilgrimage over from radio.

thanks for joining us. we want to get to first word with nejra cehic in london. groups and syria have until friday to sign onto a partial cease-fire the u.s. and russia agreed on the truce yesterday. it will start saturday. terrorist groups such as the islamic front are excluded as fight against them will continue. a new report says the bigger chinese threat in the south is a high-frequency radar station on one of those disputed islands it claims. that's according to the center for strategic and international studies. the report says the radar would help china established long-term effective control over the area. and oceans are rising at the ,astest rate in 28 centuries largely because of greenhouse gases from human activity. that's the conclusion of a study published in the national academy of sciences. expert warned that eventually,

rising oceans could lead to many coastal cities being abandoned. global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. i'm nejra cehic. jonathan: tom keene brings his morning must watch. i think he was from the supply side, still some uncertainty where prices will come down. it just takes a little more time probably then people would hope or expect. jonathan: this is a huge, huge problem. tom: one of the most extreme mary ceo interviews i've done. this is a company that's beleaguered with all of their legacy, australia -- it's brilliant the strategy they hope, hope, hope to do. and john, hope is everything. i know it's much more followed in london, but the basic idea is

-- they are going to fix oil and then copper, and then they are going to fix base metals, and then they are finally going to get to potash. plan int is a business crisis of complexity. and that is what everyone is watching. david: they are not playing by themselves. there are other players in this business. don't they need others to exit? or at least curtail capacity substantially in order for their business plan to work? notethere's a brilliant over this overnight, he totally agrees with you that some form of consolidation does it. what's great in this powerpoint is peter bevans did earnings before interest and taxes analysis. and it is overwhelming how commodity price is the elephant in the room. all the other stuff doesn't matter. jurrien: i do a lot of client events for our investors at fidelity. the number one question people

have is why is everything correlated to oil? it hasn't been because u.s. consumers have been paying down debt rather than spending the royal dividends. on the corporate side, this is no different from housing in 2006, 2007. you have a rising asset, you borrow a lot of money against it. the unconventional producers, if they can get costs at 50 and sell at 100, they just love her up. you see that in the high-yield bond market. the high-yield energy spreads are 2100 basis points over. these companies need $50 oil to breakeven. earnings0 it became an problem, below 35, you have a credit problem. you have downgrades, the whole fall angel thing. everyone needs 50, no one makes money below it. stephanie: if we don't see it in the foreseeable future, then what we do? falsen: then we get to and downgrades and follow angels in the high-yield market. and then the question is, how much of that is priced in?

energy stocks are way down, it's always a question of are you going to compensate? how much of this is in the price? it we get a half ago, you could buy the high-yield interest at 10%. that's a pretty good yield. even if you have to wait a year or two to get paid, you are earning a 10% kerry while you are waiting. i think it's really just a question of timing and the complexity around the saudi's kind of putting the unconventional businesses, trying to put them out of business at the risk of putting themselves out of business. and now iran coming up in them being archenemies, it's a very congregated story. hope, in i see the word circle it. what definitely fantastic here is when peter bevans interviewed with the hpn, with others as well, there's an idea if you just wait, and we all know if you just wait -- david: it strikes me there's an

oakland to the irrational exuberance. there's a rational optimism. they won't shut down. tom: we are not there. jurrien: production is being cut, but a lot of these copies are waiting for the other guy to cut. they want to be the last company standing. of course, doesn't work that way. but we do have a credit system, and we have bank lines they can get pulled and we have companies that can default on their junk bonds. so there is a natural darwinism there. you can't wait it out. eventually, someone is not what america coupon payment and they're going to go out of business. and then you have sort of organic demand growth and the depletion factor that will ultimately put the supply and demand back in balance. but everyone sees the math that we are going to be back at $50 or safety dollars a few years from now, no one wants to take the hit now. if everyone is waiting for the other guy, it's up to the credit

markets to punish the losers. jonathan: the big story in the last 24 hours is that they slashed the dividend. i had a conversation with the analyst in the city who is brutal about the leadership of these mining mergers. the arrogance to think you can maintain a progressive dividend through a highly cyclical business, when the reality of the, oddity market is come across the board, we're finally starting to see the dividends. tom: how you correlate in what we seeing, whether in charter, ceiling --what we're with 111, seeing sterling will get to 139. i'm sorry, there's a correlation. here's the mining majors, they went after the commodity story, they went after the china story. here's the banks, standard chartered, hsbc, and the high-yield market that said ok, we will fund that. have to's wide they boost volume and keep volume. a lot of this production is funded by debt, not equity.

you have to make the repayments. jurrien: if the housing bubble in the form of oil. you have an asset that's coming up in value, so ok, i can double my money if i drill it 15 and seller 100. it's the best game in town until the essay goes down. and then they are underwater. stephanie: way to end on a high note. as the housing bubble, but replace it with oil. we send tom keene back to radio, the "surveillance," crowd is calling for you. jurrien timmer, thank you. kelly is at the event, where earlier he held a keynote session with al gore. he joins us now with john caddell. couple of days here in berlin. you have about 2000 people, 450 of the world's biggest investors in private equity, trying to figure out what is next, and especially what is next in this market.

turn and say what is next? is this a private equity out of market? >> berlin is buzzing. it's not quite the consumer electronic show waiting for a new release, but there is a lot of interest and a lot of energy. volatility fuels private equity in a way that a little different than most other markets. it's a terrible time if you are a seller, but private equity has had five terrific years of monetizing investments that we made in the previous five years, so it was a great period. $900 billion return to investors over the past 24 months. so that part is good. jason: and now you have a lot of money is an industry to put to work. of cd in our, you are one the longest any names and private equity, founded back in 1978.

what are you looking at specifically? there's always a time for different industries to come in and out of favor. downdraft, it don't want to call it a recession or even a bear market, although it could well be. i think there are opportunities across a number of sectors. we come historically, have focused on a handful of industries, industrials, which have been buffeted of it. i think you are going to see is active they are. health care has probably had the biggest percentage correction. it's a big part of the economy technology is enabling a lot going on in health care. we are likely to be seeing some interesting things there. business services, i will use the word technology again because technology enabled business services are throwing up good opportunities. they require investment and hard work, certainly. but that's fine.

consumer retail is probably lagging for a bit. a surprise to some, myself included, that the dividend of lower energy prices hasn't put enough money in consumers pockets and engender the kind of confidence that you might expect. so it may be a little bit of a lagging there. i expect, and i think most of my colleagues in the industry expect this to be a better year for buying in private equity, even though we are going to see disruption. in terms of who is selling, you guys have long specialized in carveouts, going to a bigger company and taking out an unwanted unit. our big companies willing to sell at this point? back to how these things run in cycles. almost inevitably after companies making a lot of big acquisitions, there are some smaller domestic tours that follow. had beenow, m&a levels extraordinary among corporate scum of the strategic acquisitions over the last several years, there is a lag of euro or two, people look at

their portfolios, shareholder activists say why is that there, why are you spreads of our cross? -- spread so far across? inevitably, ceos look at that portfolio and say it is time to sell some things. yes, i think corporate in the united states and europe, particularly those that have unrelated business units, are likely to be selling this year. jason: given what you set about it being a buyers market, how competitive is it out there with your fellow private equity firms? some of whom are gathered here, others of whom you're seeing i'm guessing in auctions and other sort of deal exercises out there. alwaysivate equity has been a very competitive business. there are more firms perhaps now than ever. there are some counts as a there are 6000 from private equity firms. 6000 people facing the same as that would cause a fair amount of price inflation. it never works that way.

we tend to come in the private equity industry, like almost all of our competitors, to find paths that are not as well trodden, and find opportunities that are not perhaps as obvious to everyone else. the best firms are always able to do that. for us, that often means good assets, good companies, but then if somehow lost their way. maybe losing market share. some sort of shrinkage in their margins, maybe lagging a product cycle or two in terms of new product introduction. we think we have the management expertise to try and reinvigorate those businesses. and for that, this should be a very good time. jason: how about strategic buyers? our companies competing with you at all? i would say last year in particular, we found more competition from strategic buyers that we had a long time. i will give you an interesting statistic. until september of last year, the average acquirers saw an increase in stock price the day

they announced an acquisition. starting in september of last year, that seem to reverse. that continues now, obviously, there are exceptions. on average, acquirers stock is dropping. so the confidence in making acquisitions and seeing your stock price go up, not so much. that will certainly slow down strategic acquirers. in addition to which, a lot was done in the last couple of years. i think we will see a digestion parade for some of the serial acquirers. i think the balance will return more sellers, to company selling rather than buying. jason: the credit markets, given the volatility, is there money coming from the banks to finance leveraged buyouts? don: at the senior level, there has been and will continue to be. in the high-yield market, there's been a lot of outflows. a lot imbalances. and so big deals will not be financed today in the united states. europe has been a bit stronger.

but there have been big jumps in interest rates required to get deals done in the united states. there's probably no market at all low double be in high-yield. that's good for a buyer. it means that banks are not going off for six or seven times leverage to any buyer that comes along. they will be settling in prices in multiples. that's good. it's a nationals were of correction. last year, the average pe purchased company in a buyout form, not a venture deal, broached 10. it was 10.3. the previous year was 9.7. the year before was probably the low nines. there's a sort of cresting evaluations. -- of valuations. not a crash, but i expect to see those multiples dropping this year, certainly by the second half of the year. jason: as you visit with investors and/or around the world, what is of biggest concern to them, when they think

about their private equity portfolios themselves? visibility over the next year is probably as cloudy as we have seen in a long time. ilking to investors, and liken these conferences to talk to wrigley to investors and see what they are seeing in their portfolios, i see an enormous range of activities. of sentiment. much more than i have ever seen. can'teen it from i believe how bad it is, it's going to get worse, to the worst is over, it's going to get better. if you were actually trying to find a consensus, it would be deceptive, because you wouldn't see the details on those distributions of opinion. , it's great to be with you. york, we'rein new going to get back to work here in berlin. jonathan: that is our new york -- futuresf around are dead flat as we approach the

open. dow futures up at near eight points despite a drop and european equity across the board in the mainland. i want to take you across to the fx market. panic, down by .3%. the euro-dollar down to 110, back to the february 2 low. by .02.er euro down high yields support it. good morning. ♪

david: i'm in the hp greenroom a. at the top of the hour, bill and to talkgates join us

about their philanthropic properties for the year. ♪ nejra: this is the bloomberg business flash, i'm nejra cehic. awayd technologies walks for merger talks with honeywell for concerns the government would scrap the deal. united technologies said accommodation of the to aerospace companies would face regulator he obstacles. honeywell's and commenting. google will -- honeywell's and commenting. google will shut down the comparison site for insurance. the site opened three years ago and began in the u.s. in march. with the site never really caught on with consumers. gatesoft cofounder bill is backing the government in that dispute with apple over a terrorist iphone. industry leaders and gates his own company are generally siding with apple which is refusing a court order to help the fbi

break into the device. the government order is no different than asking for banks telephone records. we talked to bill and melinda geisha's a few minutes from now at 8:00 a.m. eastern time on bloomberg go. that's your bloomberg business flash. david: thank you, nejra cehic. jpmorgan holds annual investment conference today. the bank's ceo, jamie dimon, and other top executive's will be speaking. bloomberg's laura keller joins us now. tell us what they are saying. laura: this is a big event for jpmorgan. they're not changing a lot of things this morning. they are saying we are still going to do all the targets we had before, we are not changing our return on equity, we're not changing our predictions for net interest revenue. what they are saying is we are generate $30o million in the next couple of years, from $22 billion. that's the environment changing from what they said last year. jpmorgan and put

them in a broader context. from a we have heard out of banks like standard chartered, is aia, -- deutsche bank, very different picture, jpmorgan standing strong. the fact that they are staying the course compared to others, isn't that a massive positive? laura: that's the message they're trying to get out to investors. this is a full-day meeting, they are saying we're still going to do all these things. little,ubt that back a we think if you are still going to get to the $30 billion over the next couple of years, does that mean you are cutting expenses? that's pretty much what you have to be doing, otherwise you think this is a short-term problem and even whether it through just by doing little tweaks. it's going to be either one of the other. i think that's what people are so focused on expense cutting, the cousin we are going to have this environment to change, you have to cut expenses in order to get to those targets that you set out. jonathan: just to pick up on stephanie's point, and the broader context, and the numbers we've seen from standard charter in a number of banks, the read across in the commodity story,

from energy to mining, we're going back. do we see that in jpmorgan as much? laura: they are giving us a little bit more, that's what investors are looking for. jpmorgan is saying we are going to have to reserve more. we are to have to put aside more money for bad loans and energy companies. you guys were talking a lot about mining this morning, they are saying that as well. if oil is going to between five dollars or below before 18 months, jpmorgan is going to have to triple the amount of extra money they are putting aside for these bad loans and oil and gas. stephanie: it's important to put in perspective, they would need to put $1.5 billion if oil prices hold, at $25 a barrel. if you think about this in the broader spectrum, jpmorgan have got that dough. what is that mean for the rest of the banking sector? jonathan: you take the winters a standard charter. year.sed $5 billion last as story is going to get a whole lot worse for jpmorgan, they need an extra $1.5 billion.

where do they get that money from? laura, thank you very much. tonight at 8:30 this morning to hear jamie dimon live from the j.p. morgan investment bank. we bring you that live here on bloomberg tv. winner stocks considered cheap -- when are stocks considered cheap? that's next on "bloomberg go." ♪

matt: welcome back to "bloomberg go." i'm matt miller, with a chart i've been looking at for the past 44 hours. how much is too much when it comes to price-earnings ratios, and what is considered cheap? oppenheimer came out with a note yesterday that kind of rock to the market. it instantly spiked in our readership goals. he says when he gets to between 16.5 and 17 times earnings, that is too cheap to ignore. that's a direct quote.

here you can see that we have charted this. or dave wilson has been the stoxx team. and circle the bottoms and pointed out that if you bought in at the bottom of february 13, you were up 6%. october 15, 9.5%. september 28, 11.1%. anytime the s&p 500 gets to between 60 and .5 and 17 -- 16.5% and 17%, that's too low. you can access this on bloomberg. we will be back in a couple of minutes here on "bloomberg go." we have two very special guests, bill and melinda gates join us to discuss their philanthropic priorities for the year. don't miss that. ♪

david: the largest private foundation in the world. though them indicates here on how they would tackle global poverty. -- blackrock warns, to

not underestimate the fed. why they may have an interest rate hike this year. and the top performing hedge funds. we will tell you who is number one. welcome to the second hour of "bloomberg ." i am david westin. jonathanferro: i am ferro. european equities pulling back slightly throughout the morning and futures in the u.s. are pretty much dead flat on the session. lots going on in the fx market. a break of 110 earlier, off the back for germans business confidence. calling for a third straight month. i want to check in on the other classes. with a stronger japanese

yen. you saw it in treasuries yesterday. this morning, slightly higher and crude after a big top yesterday. david? david: thank you. we will go to stephanie ruhle who has two special guest is. arehanie: joining us bloomberg radio listeners, though them indicates, releasing their annual letter. the question this year, if you could cap a superpower, what would it be? write, poverty is not about the lack of money but the absence of resources and the poor to realize the potential. are time andones energy. i don't think i have either. joining us now, bill and melinda gates and john the closely. no pressure on me right now. welcome. every year, we read your letters and they are positive and optimistic.

this year is no different, but it comes when so many influential royces are warning us of a global perfect storm. why is it you continue to be optimistic? what do you see that others don't? melinda: received the decline in childhood death and we have seen life getting better. a rising middle class, so much potential and ingenuity in the world and the headlines your negative, but when you read what is going on and look at specifics, life is getting better for most people around the world. not everywhere and all the time, but in general, it is getting better. john cowan you use the thomas edison example. since inventing the light bulb, but when you look at africa, you see only darkness because there are not many electricity lights there. you talk about the idea that this could be the message to teenagers that you have to come up with an answer to solve that

energy problem. i wondered, which of the particular energies you would put the most amount to? got 80% of the world using electricity and almost taking for granted that you flip the switch in the light goes on or you set the temperature and networks. we went to get that to everyone, bygetting the price down better science, innovation, and now with this constraints, as we add to the energy system, we cannot admit greenhouse gases, so the old waves -- john: you talk about needing a miracle. a miracle like the personal computer, the internet or the mobile phone. we need young people to think, this is the science that will make a big difference and we need r&d money that drives support. amazingly, for all the money spent on the demand side and

clean energy and the supply of innovation, that is the r&d increase people are beginning to talk about. we want them to follow through. stephanie: you want to bring electricity to one billion people. kind of like an electrical bringing power to the people. let's say the lights go on around the world. what does the world like in developing countries? is there an education, health system, jobs for the people to have? bill: there is no doubt their labor has value. health is our biggest area of expertise. that is what the foundation puts the most money in. they, we see improving nutrition, reduced child to death rates, and uplifting a country to be a middle income health, education, infrastructure, good governance, those really go together, so we africa so to make that the right things happen to get this for elements.

you traveled to ethiopia one decade ago, the second-largest country in africa, you would not recognize it. people are moving to the city, starting to use more tools and tanzania,e kenya and you have digital money at scale. people are saving small amounts on their phone and the nabel to pay. in some ways, they are leapfrogging because they did not have hard-line phones reading to cell phones and that has huge power if they can get digital money in their hands. john: do you think the gospel of free trade in capitalism works as a way? melinda: i think if you have good governance in the countries and consistently good governance, you start to see that rising middle class because they make the right economic and infrastructure improvements in the country and it builds from there. stephanie: it's that capitalism -- it is bad- capitalism and that governance

that has made headlines here. what is the message to students when they say, why not improve our education system? why not help us get jobs? bill: the school we were interviewed in is a good example of a school that has reformed. it is called betsey lane and we could not have been more impressed with the way the teachers use the new curriculum, the way the teachers are learning from each other. focus forg potion -- our foundation. our money spent in the united states almost entirely goes to improving the education system. we are seeing strong points of light like kentucky. they started four years ago with these reforms. stephanie: does it not surprising that in the presidential race there are outliers that have gained so much popularity because we have a disenfranchised country? i think they are disenfranchised with what is going on capitol hill. when you are on the ground and you talk to teachers, students

about what is going on in their school and they see progress, they feel better about what is happening locally. john: you are actually not america's leading business person. that is a man called donald trump. [laughter] bill: he is certainly in the news. he generates a lot of talk, interest, you know -- john: he doesn't look like he will get your vote. bill: our foundation has done a good job working with republican and democratic presidents. did the huge hiv program. president obama has been very good about foreign aid and being supportive. in the 2008 campaign, both candidates committed to a generous foreign aid and making sure that things like malaria would get lots of resources. we have not gotten into specifics yet. thing, the area you focus on is the area to do

with unpaid work in a vast , the one obvious thing, i found it shocking that the biggest thing out of all is what is the solution? a good policyed nationwide. we have it in three states of paid family medical leave, california, new jersey, rhode island. the tech sector sees it as an edge. both sides of the iolite talking about it and i think there are different ways to get there, but we are behind. let's look at western europe with amazing paid family medical leave for men and women. it says, you can take time off to care for a child or the elderly and that makes a difference in terms of keeping women in the work wars. we want women to balance time .nd work there is all this unpaid work

that happens at home that we don't call work around the world but it is. that is one policy that would help the united states. stephanie: if we are really headed in the u.s. into a recession, the r&d spending say is necessary, the policy changes, could that fall by the wayside kind of common companies need to survive? bill: that is a more negative view of the u.s. economy than i have. stephanie: what is your view? bill: i see in the tech sector amazing innovation. i see in the health sector, fantastic innovation. whether it is stem cells, synthetic editing, and i see in the energy and materials sector real opportunities for breakthroughs. we are able to understand the basic physics of catalysts and materials. it is interesting you say that. john: you and i have argued about this for a long time. you look at energy and you hope for this to come through. one reason you called for a

miracle is because everything we keep hoping will change have not yet come through in energy. energy seems to be an exception. ironically, for the climate challenge -- phil: ironically, for the climate challenge in the carbon area has been the most innovative. now that you have slackening demand, the cost reduction work they are doing about all the inputs they have makes the bar tougher for the clean solution to come along. energy is cheaper. bs tose i see so many ca get an energy solution, i think the chance that we did get the breakthrough in the next 15 years is high. that is an optimistic view, but it is based on my view of the science. stephanie: you have long-term views and you take long-term action. are you concerned that more and more of the rest of the world has fallen into this short-term mindset and business practice?

melinda: one reason we keep trying to push and really promote the idea that you have to go long-term is that if you do not, you will have these crises. what you are seeing in europe with the refugee crises. that is not just because of conflict but because they cannot find economic opportunity in their area so they get up and move. when you make the right long-term investments, people want to stay where they are to be healthy, get their kids in the great education system and get the job. we feel like you have to always focus on the long-term and we come back to that message because it is important. stephanie: you to live your lives that way. how do you make this a call to action for others? cannot because they have shareholders and activists banging on their door and americans do not necessarily have the money to make long-term decisions and politicians do not. bill: best governance is when you look down the road 10 years or 20 years and you build the institutions. the united states is the envy of

the world because our national laboratories and all the key change,at are driving they are long-term. ofotics, i.t., biology, any those specific areas, so continuing to drive that forward , that is why the u.s. economy is somewhat better off than most of the others. john: but less enthusiastic about china? bill: china was always going to have a challenge as they reached this middle income status. every country that has gone that level of wealth has had to restructure what the demand looks like in the economy, and they have been so manufacturing oriented that their services would be a dip in what would that mean of the confidence in the regime? because you cannot have a new election the way they are currently structured, so everybody is hoping they get

through without some drastic contraction having to take place. stephanie: and you believe that they will? bill: overall, when i think is happening in china is quite fantastic. i think the are quite sophisticated economically. they have had some missteps recently and they had to change and rethink some things, but i morepeful they will have continuity than other economies at that level. they are now a major factor in lessl demand, so materials, or services. they are really shifty what economic priorities look like. stephanie: we are joined by bill and melinda gates. viewers and listeners, quite a conversation. melinda, i want to talk about women and girls. you have partnered with hillary clinton's group in terms of data collection. all the data you collect, what

is it telling us and what are the action steps? we continue to see women not there. all of these changes on corporate boards, again, it is men taking the seats. is it because women do not yet have the qualifications for the jobs? melinda: no, women have the qualifications. we are graduating women at huge rates in the united states, but we are not focusing on the second shift at home. if they choose to have a family, they go home and they are the ceo at home. until we recognize in society that women working in the workforce, like men, and they have families at home, someone has to take care of the children and that is part of society. all the chores at home, dishes, carrying water, words in developing worlds, we have to recognize that as work. let's put a value on it. gdp does not capture that unpaid labor. it, about a price on

$10 trillion. our economies are laid on the backs of this unpaid work and we need to recognize it, have the right policies, balance things at home so women can participate in the workforce cannot be pulled out. if we have the child and we have to assume it will take the doctor -- our child to the doctor, it is probably not the two of you. stephanie: that is true in my house. we are asking about policy changes in terms of women, but let's look at technology. there is so much noise about tim cook and apple and the government. whether it is this apple situation or broader, half technology moved so quickly that the government cannot keep pace enough to regulate it in a smart and effective way? challenge to update the policies, including the issues of when does the government have a right to know. having a really good debate about when is that the appropriate? the extreme view that the

government always gets everything, nobody supports that and having the government be blind, nobody supports that. whether it is this case or a few others -- john: were you blindsided by the headline that says bill gates backs fbi? bill: i was disappointed because that does not state my view. i do believe with the wright state guards -- the right safeguards, i think there are where it isents viable on our behalf, but striking that balance -- certainly, the government has taken information historically and used it in ways that we do not expect going all the way back to the fbi and j edgar hoover. i am hoping now that we can have the discussion. i do believe there are sets of safeguards or the government should not have to be completely blind. stephanie: what should be done in this case because you were blindsided? going to courts are

decide this, and i think apple said whatever the court decision is, they will abide by. in the meantime, this gives us the opportunity to get the discussion. these issues will be decided in congress. the patriot act, how that gets involved. you don't want to just take the minute after a terrorist event and sing in that direction, nor do you want to sing away from government access when you get abuse team reviewed. you want to strike that balance that the united states leads in setting examples. john: it is in the same stage now as environmentalism was when you were younger, one of the issues that people come to work at microsoft, apple, and it is becoming fundamental to them and how it was greener to a previous generation. bill: everybody wants to feel information is

kept private, particularly, because more and more of your activities are there. stephanie: we put it all out there, though. till: when people are powered by technology in terrorist activities, it is not just that they can kill a few people but it is through nuclear biological that they can kill a lot, so we do want the government trying to stop those from happening. it is not completely in one direction that you have to look. john: if you look at the early liberals, the 19th-century liberals, they refused to open people's letters because they were frightened that would be somehow a liberal. you have generally seen yourself as liberal and changing. governmentsk that have been there to try to maintain order, and having some awareness of what is going on, u.k. extracts the balance differently than the u.s. the cars there was some degree of

terrorist activity. -- because there was some degree of terrorist activity. i do think that will happen in the u.s. i think the u.s. will always want to make sure the government does not overreach more than most laces. stephanie: you have used technology to help connect and empowered the developing world. there are fears that that kind of connection does lead to terrorist-type the hager. how do we manage and control that in a positive way and use technology for good? you said at one point when you are 14 or 16, that you did a little hacking. melinda: we are so focused on one little -- i mean it is a tragedy when these things happen but it is a small number of people. look at the amazing stuff technology does. when i look at the scale of technology in the philippines, tanzania, and they are saving two dollars a day and saying,

during the drought susan, i still have the funds in my phone to paper my child's school, and that has a profoundly different effect on society. you have women saying for the first time, i have access to a bank account. i have my own money and i don't have to renegotiate over how some finances. that is hugely a move forward in positive momentum. instead of focusing only on the negative, we have to say where is technology enhancing the world in the united states and worldwide? stephanie: to counteract that, what you say when the women from flint, michigan, write you a letter and say, you are making extraordinary advancements in tanzania, but what about me? i lost my job four years ago, i don't have the skills for the job they replaced it with mi home is fired at zero dollars. what do we say to that woman and it will help her? melinda: we say that we do care about people in the united

states and we are trying to rebuild the country in those ways. that is why we also put money into the u.s. system and work with governments to help retrain people through community college. we make sure kids get a college education. you have to do both delly feel like with our philanthropy, we are focused on the part of the world where most people don't focus but we do focus in the u.s., too. stephanie: are you sure you don't want to run for president? melinda: definitely not. stephanie: thank you so much. bill and melinda gates of the bill gates foundation. john, thank you. we are going to take a quick break. thank you to bloomberg listeners and viewers. you are watching "bloomberg ." next, a look at the markets. ♪

john: good morning.

this session is going to cash open. futures are open and s&p 500 futures down. -- byabout one point about 1/10. a big headline, german business confidence falling for a third straight day. it is a risk in the fx market and a stronger japanese yen the yuan falling after china's central bank cut the rate by the most in some six weeks. to help us and everyone else make sense of what this means, it is robin. robin, the analysts are employed basically almost to just follow is going toc takes did the next day. it is struggling to find out where they're going. how do you make sense of this? robin: i think what they are trying to do is raise their hand and tell people that we will do what we want to do and when we want to do it. i think that the aim is to avoid speculators from being able to

predict day-to-day moves in the currency. it is easier to remember the turmoil and earlier in january, the second week of january, that was to try and reduce the gap between the onshore and offshore yuan rates, which the pboc has succeeded in doing. at this point, people are expecting widely that the central bank will keep the currency study for the meeting, as they have in the past and several years before every important meeting, but they decided not to do that. to put things in perspective, and that is% shaking world markets, so this is the pboc saying, do not that one way or the other that currency can move both ways. david: as you point out, on the eve of meeting with the g-20, they basically said, we care a lot more about dealing with speculators and that you want then world markets because

everyone we talked to says that the volatility of the you want is really a headwind in markets around the world. robin: absolutely, so like i said earlier, what we are concerned about is trying to .void hot money flows either way, they do not want this kind of speculation in the currency. they basically want unified currency rates, so the offshore and onshore rate should be almost that part. if you remember a few months ago in october 26 -- 2015, the yuan gained entry. jon: robin, we will leave it there. thank you. ♪

welcome back. joining us now is very, bloomberg bucolic this. for now -- bloomberg view

columnist. kim jong-un's regime is threatening to launch preemptive strikes against south korea and the u.s.. conductme warned not to military exercises. donald trump goes after his third win in a row. donald trump's favored in the nevada caucuses, but low turnout could diminish the size of victory. the battle for second place may be close. onco rubio is counting support from mainstream republicans to give him the edge over ted cruz. today, president obama will send congress his plan for closing the prison at guantanamo bay. the white house does not have much confidence congress will approve. it calls for transferring dozens to -- from cuba to the u.s. i am julie hyman. now, to markets and matt miller. matt: thank you.

turningve the dow briefly positive but now we are back down. two losses but not huge. we are up about five points on the s&p 500 and futures down about 21 points. take a look at the s&p 500 index or futures. you can see that we popped up in the s&p 500, so we are basically treading water as far as the major indexes are concerned. if you take a look at my bloomberg, i have a screen that we were showed earlier which is a technical analysis of the s&p 500 and non-weighted index. if you look over at the tax, in the past year, we have formed a technical analyst term ahead and shoulders and we briefed what they call the , this is the fibonacci retracement. i do not personally by into this analysis. david: it is great. matt: it doesn't matter what i think.

a lot of investors pay attention to this. barry, and i wrong? barry: the only wrong in that is calling it had an shoulders. matt: you don't like the double bottom? barry: a double bottom is something different but that is not the head and shoulders bond and it is barely double. close, but some people would call that a white spring. you could get lost in the weeds with the technical terminology. matt: i will set you up with a beer after the program to discuss this. we are o movie largely with of 1% and the.6 tax down about .5 of 1%. it would be interesting to see if they exited the euro. i don't know what i would term the board. let's look at the premarket. a couple of big retailers beating big on earnings and sales. home depot and macy's -- macy's

share ouroint $09 a looking for one point $88. home depot was looking for $1.10. pretty decent moves. also take a look at valeant in the premarket. gaining right now. we also have a couple of -- fitbit at with projected earnings that actually miss what analysts were looking for. we have a deal, western digital to buy sandisk in a $50 million down 7%.western is sandisk doing worse than last time i looked, so a lot of movers today to continue following. trends in transportation 10 to be leading indicators to the u.s. economy strength and we want to talk about this in a morning meeting. we talked to morgan stanley robbie, thank you for joining us. there has been a lot more talk about the trend lately and the market seems to be upgrading

their view. what you think about transportation sector? robbie: sure, i think there is a fair bit of uncertainty out there as to what the data points indicate. data,k if you look at the and is tracking pretty weak. in some areas, there have been improvements in the secondary derivatives, but i think it is important to keep in mind that the data can be lumpy. givenis a complexity strikes lost, so we are not quite ready to extrapolate any improvement to the data point just yet. in the manage a comment to that we track, they seem to be pretty cautious. i have to ravi, interrupt you because jamie dimon is starting to speak. thank you. let's go over to the jpmorgan conference and listen to president and ceo jamie dimon.

jamie dimon: some of the big losers are oil companies in brazil and oil exporters. the u.s. consumer is a huge winner. the only thing about oil and gas, it does float around the world a little bit, but people usually getting the money to not have it so we have sovereign wealth funds selling stocks. we actually see them buying stocks. you have obviously qe and qe, such as negative rates with the hoopla at the moment, but the unwinding and how this'll theen, etc., and some of emerging markets. a lot of you have up to your odds of a recession from 10% to 30%. i think you have to put in mind that those of the financial markets of you see in disarray. sometimes, they act rationally and sometimes they don't. the u.s. economy is 7% to the consumer's

balance sheet has never been in better shape almost. and has lower debt to consumer and 35han it has had years. household information is going up. we added millions of jobs last year. home prices are going up. we think they are spending their money and we actually see the gas money and actual data about what they are doing if they are saving on gas. i am talking about middle markets, the actual charge that has never been better. they have never been better. alan says are in good shape. corporate earnings are not, and because only talk about manufacturing been about 12% of the economy, it is over 16% of the s&p 500 so they have been hurt a little bit more. there are pretty good odds, in my opinion, that the noise will sort out and we will be ok. we don't know, but i think the most important part is we don't

run the company guessing about the quarter. i am not been facetious. to dos not have anything if you have a better or worse franchise. we want to build a company and focus on the long run. what is important, and these are numbers we look at, we do country by country and area by area and jpmorgan and chase institute, they have billions of and theof revenues, amount of assets under management of the next 10 years to 15 years will double. the amount of infrastructure spending, the amount of needs of corporations, private banking clients will double. that is the game we are playing. we try to manage it in the meantime in a way that makes sense. some of you have heard me say before, in china, for example, the lightly outcome is that in 20 years, china will be a developed nation that houses tight 5% of the global future 2000. in the meantime, we try to say

that even if the worst case happens in china, you can stay here until we are fine. we did not have a great quarter or great year, but we will be fine. .nother example is the ficc we are investing in it. there are great charts about it and we are investing more in the technology side. people need execution, services, pricing, ideas and we are building the system's to do that successfully over time. i did not get the number, but are trading losses, amazing kind of, if you take the last three think inbined, i august and the worst parts of this year, they were zero. we seem to have a real is this of flow. that was president and ceo of j.p. morgan chase jamie dimon speaking to investors. christine harper, welcome back. as well as their he. christine, what struck you about what you heard?

presenting a is bullish economy on the u.s. economy, talking about the consumer doing well and a shift of money from oil producing nations and sovereign wealth funds and having to sell and u.s. consumers using their gas savings to buy. if you are sitting in the u.s. as a bank, that is a positive story. he is also qualifying it, saying he does not run the business on the assumption that things are going to be rosy. he is aware there are problems and they announced earlier this morning that if oil stays at $25 a barrel, they will have to raise their loan-loss reserves $1.5 billion. they see potential issues. obviously, they are exposed to other countries, but in contrast to the u.k. banks this week who have really big problems and what is happening around the world, he is saying in the u.s., things are pretty good and recession risk may be overdone and the market may be more

bearish than it needs to be. jon: technology and to some extent that the market is different in the makeup of the economy and market, so he also talked about doubling. this is a sign he once in. is that your takeaway as well, bury? barry: the thing that stuck out to my ear was the number of companies with $1 billion in either assets and revenues overseas and that will also double. that is a huge bit of positivity. he is saying, there is a lot of growth and we want to partake in that. david: that doubling is over 10 years to 15 years. he also said in the middle market of corporate credit, he has never seen it this strong. so much for secular stagnation according to jamie dimon. what is us from larry summers -- woe is us from larry summers and others, but we got an upside

surprise from macy's and home depot before jamie dimon started speaking, both of them on the revenue and income of the gas of the american consumer being greatly exaggerated. jon: you put together his bullish nature on the economy and markets, but we can bring up a great chart. it is a federal fund futures, so the probability of said rate this year. january 1, we come into the year with a rate hike expected in march and all the way up to december of 93%. look at that radical change in just eight weeks with an 8% hike to december, 45.8%. barry, push back against that because blackrock is this morning. you had future expectations from bedroom tags be absolutely dead wrong for about five years or six years now. , thethey are hiking futures are forecasting they are not, and for a long time when they were at zero, they were

forecasting, we could be lifting off any day now and that went on for years and years. i don't put a lot of weight in them because they have been about as long as just about anybody, except for the gold ones out there who have been dead long since 2011. david: i'm sure it is too soon, but people are talking about inflation. : we sell wage growth and the question is, there was a lot of talk a few years ago about decoupling and can the u.s. survive and thrive apart from the rest of the world? we see the growth forecast for the world, but the issues in the oil-producing economy is that the u.s., however, seems to be doing pretty well. the question is, how much does this drive from other places and how does it affect us? we areie: seeing that facing this volatility and banks need financial cushions, this could be the moment you want to

be the biggest. the jpmorgan of the world has been slapped with so many regulations that jamie dimon has said, i cannot take the government going after me this month. and ever cores have been doing well, but now here's this moment where it could pay to be the jpmorgan with all of that cushion. christine: i would add they are shrinking. if you look at some of the elements, they will be closing branches, cutting down there risk-weighted assets, and their carefully conserving or trying to focus the bank on areas where they can make the return where it is profitable. i think it is more reasonable for shareholders than regulators. seen bond debts close, plus, there is no money , capital there is risk commitment and not a lot of profit. aren't they going to wear business is the best? christine: exactly. david: also, the government said they would change them.

christine: the economics of those returns are very different, so they are having to revalue everything they do. we are seeing that in the presentation. actually, one of the things that seems to be a strong element of the investor day today will be the investment in technology and how much they will try to offer different solutions so they don't get interrupted. stephanie: the chief officer of goldman is one of the most senior people, tell me who the ceo is at any other bank? has a higheravez profile than others, but every bank recognizes if you do not have a strong i.t. department, you will not have a future. jon: christine, thank you for joining us. barry will stay with us. coming up, the top performing hedge funds. ♪

i am in the hp greenroom. coming up, battle of the charts. anyway to hide in the next market? we will give you clues. stick with us on "bloomberg ." ♪ thed: a few years ago, capital was seen as a stain on a resume. the tories are returning money to investors after a series of wire fraud, but today, capital traders have started their own hedge funds, one of which stands out. they gained 2.9% in january this year, even as the market was down and they were turned 47% in

2015. let's bring in simon foxman. what is the magic? reallyit seems like strong stockpicking. he has had experience managing money for a long time. he was at fac and then .70 two cents 2006. stephanie: same place. simon: but went to start his own firm, so it is impressive. ofs is the first year managing money, so right off the bat, not only did he raise quite a bit of money, but we came out with incredible performances and in the top. stephanie: isn't that similar to steve cohen's style? he has always been a fundamental equity guy and not the macro guy. his guthe is known for feeling an instant. this guy is not like that. stephanie: he is about

fundamental research. simone: he is devoted to models. being perhapss less flashy, a family man, really devoted to data. stephanie: this is not the only standout. we have seen other funds that have done extraordinary and well. macro traders are different from their model. simone: we have a big hedge fund ranking coming out today this morning. one of the other standout funds is the exceptional value fund, up aboutb 30% last year, a macro trader. you get that picked up went the market is down 7% or 8%? is he really -- market is down 7% or 8%? busy making leveraged and concentrated bets? answerie: before you that, breaking news. i want to bring in matt miller. matt: looks like london stock

exchange is in talks with on a possible merger. we have the stock of the stock exchange trading over in london and you can see the massive spike. by reuters anded details are coming across the ticker of bloomberg news. they are in talks on a possible merger and that is not to boost so stock by 322 tenths, three pounds and 22. stephanie: we will be watching that. the answer, he owned amazon and skechers last year. simone, great story. you don't want to miss this. workntrated bets did not out for everyone last year, naming the bill ackman and valeant down. up next, battle of the charts. bloomberg --ers of what will are masters of bloomberg cap for us today?

matt miller is getting warmed up. david: masters? wow. ♪

k welcome -- jon: welcome back. it is time for battle of the charts. this morning, i have barry alongside me to help me judge. us off.ton will start the returning champ. mark: a few things yesterday, the 1.8 decline yesterday with the dollar big. let's look back on history because in 1981 from january to july, sterling struck against the dollar. you remember in 1992 around that time, sterling stacked 25% in another five month timeframe frame. 2008, in the heights of the global recession, sterling sticking by 25%. it is up 325% over the last 30 years and it has done 15%

decline six times over the half year timeframe since 1975. will fall the eu, it to one dollar 1520. that is another follow 20%, -- matt: how much coffee does this guy drink? before he comes on, it is like coffee, amphetamine. stephanie: he does excellent. yesterday, mark was talking about the anniversary of jonathan ferro and i am looking at the crisis here. in march, it will be the seven year anniversary for us for market lows. if you look at the bat -- the last investment banks in the world over a decade, and i have the lehman brothers line marked in whites, only to deb of the dozen -- only two of the dozen are above what they were at the time that we have the market

lows. only jpmorgan and goldman sachs, muchlked a lot about how money jamie dimon is making an when he is doing, well, looks like he has earned it for shareholders. all of the other banks are dead and shut down or so below what they were at their market low seven years ago. the questionrry, is -- which is better? stephanie: mark or matt? barry: matt. mark: -- jon: i have to go with mark barton. david: i am going with matt, too. mark, your's is great, but he made that point earlier in the program. matt: can i plug it? you can access this chart on your terminal. share it with your friends. they will think you are cool. mark, i am not saying your chart was a loser. how do we axis your chart on the terminal? mark: thank you. stephanie: how to access the

chart? mark: always do it miller says. gbtv304 go. stephanie: let's recap. what is your take away? matt: i wanted to show that only two banks are above the lows of the bottom of the market. the other 10, if they still exist, are still below or have returned nothing to shareholders. stephanie: looks like jpmorgan is the winner, too. thank you for playing. we will be back with more. ♪

julie: investors having into havens for the yen than gold. renewed concern over china and u.s. futures paring back. stephanie: macy's beat estimates after holiday sales to less than

predicted, but the retailer remains under pressure. another company that is feeling the heat, yahoo! they are interested in pursuing their core business. we are 29 minutes from the opening bell. welcome to "bloomberg ." i am stephanie will. david: i am david weston. jon: i am jonathan ferro. wealth us, see eo management. let's cross over to matt miller with breaking news. fell top 500 index 182.75 from 183.07. year take a look at that

over year number parried it was a growth of 5.74%. they were looking for 5.8%, so missing by a tiny bit and flipping from 5.83% in the past pricesttom line, housing are rising at a pace of about 6% and they continue to do so. let's take a look at markets with smb futures unchanged. -- with s&p 500 futures unchanged. dow futures have risen up about 24 points. if we take a look at what the s&p 500 futures have done, it looks similar, so we went positive, came up, down and now we are batting around between unchanged gains on s&p 500 futures. the rest of the morning, we have been taking cues of europe and we are no longer doing that and they were covered as well. the ftse down .33 of 1%. everyone will start saying cable all the time since jon is back.

david: i am not. matt: that is the slang term for the u.s. dollar. when they started it, it was transatlantic cable to transmit prices. over two days, an amazing story, down more than 2%. it seems like all because doris johnson, the mayor of london, he says they think they should exit the eu, and he is also a member of parliament and more important, but it is pretty much his comments alone that sent the pound down. am i off on that? i have not talked to a single fx person who thinks it was worth three figures on the pound against the dollar yesterday, but there is uncertainty and it drove down the pound. you cannot argue that. matt: it was a news event before but maybe it is not really the cause of the drop, which is the biggest drop that we have seen in over one year. let's take a look at oil.

it is a dry market. oil has been bouncing between gains and losses. this is west texas intermediate. off 10 cents. keep in mind, we are in a new contract. we are looking at the april contract and yesterday was the march contract, that is why it looks like we jumped two dollars. the contract rolled over yesterday. let's take a look at oil year to date. still down 10% year to date, but gold up solid, 15%. interesting to watch the commodities trade. let's get to julie. wase: bill gates says he blindsided by reports he backed the fbi in the fight with apple of trying to unlock the iphone of one of the san bernardino killers. he spoke to "bloomberg " and he was asked if he that apple should be required to assist the government. was disappointed because

that does not state my view on this. i do believe that was the right safeguards, there are cases where the government, on our behalf, like stopping terrorism, which could get worse in the future, that that is valuable. there arel gates said many cases where the government ink information and used it unexpected ways. president obama will send congress has planned for closing the u.s. prison at guantanamo bay, cuba, but the white house does not have much confidence congress will approve the proposal calling for transferring dozens of day team use to a location in the u.s. republican presidential donald -- presidential front-runner donald trump shows that polls are favored but low turnout could diminish the size of a victory. the battle for second place is close with marco rubio counting on support from mainstream republicans to give them an edge over texas senator ted cruz. global news powered by our journalist and news bureaus around the world.

i am julie hyman. jon: thank you. we are about 25 minutes ahead of the open. there is a risk off the field fx market. one, the yuan cut the most in the six weeks and the japanese yen really off the back of innovation, falling again. october 2014 low. upd getting a bit as well, .7 of 1% and we have been talking about the pound. going back to the march 2009 low. at the dollark and yen specifically and the strengthening of the japanese yen, 111, 112. how much of the problem is that for the boj? like the weekend because it has helped him on the export side. the super qe from the japanese

has been to drive us toward parity. they did not quite get there, but no trend could go in one direction forever. bit of a is a little countertrend rally until the next bazooka comes out. it is slashing back-and-forth between risk and no risk. you see huge capital flows from equities, to the yen and gold. theory: -- issue,on the japanese the boj is not happy to see the yen strengthening this way, but it goes much deeper. they spend too much time trying to manipulate this exchange rate. they introduced negative interest rates to keep the exchange rate week. it had the opposite effect. they have long-term supply issues and we have got to get there labor force growing. they have to get productivity growing. to get a is hard

growing when it is getting that old. david: they have a demographic problem. it is certainly something on migration would be good if they can find a way to get people to come to japan, but also, from a societal perspective, they need to have a higher e-mail per dissipation rate to grow faster. david: number two, more signs of the global slowdown with prices weighing on earnings. they cut the dividend for the first time in 15 years by 75%. standard chartered also hit low posting theices, first annual loss since 1989 with $4 billion. the highest ever for the bank. jpmorgan said it $25 oil continues, they will have to put $1.5 billion in reserves against loans. david, commodity is weighing on earnings, thanks, everyone else. david kelly: yes, and u.s. corporate earnings were hurt last year by lower oil prices,

but we should remember that the developed country economies are ultimately benefited by low commodity prices. problem forreally a the european economy or the u.s. economy or the japanese economy, so the paint is very visible and the benefit is more diffused. i do think that the low commodity prices and the oil prices will help consumers increased spending in japan, europe and united states this year. that will be part of better global growth. jon: do not have to change the way we think about the u.s. economy? just the rate of change over the last five years to seven years, it has think year to a lot toward the commodity spending. david kelly: you are seeing a little bit of that and if you are in alaska, north dakota, oklahoma, you feel the pain, but if you look at the state like texas which was known as so goes oil, so does texas, that has changed dramatically and they have revamped their economic next. low oil prices are good for

u.s., japan and europe and we see that in home depot, macy's. there was a long lag before you see the fx. not a coincidence that the amount of miles driven are now above the high said before the prices. atn you see record profit gm, that is a big change. people are buying bigger, more expensive and more profitable suv, cars and trucks. stephanie: is there a price of oil that hurts the u.s. economy?when we get you have5 a barrel and all these companies super levered and they cannot meet the cost and facing default, when jpmorgan has to put 1.5 billion dollars in reserve, is there a price where you say the healthy economy of oil is cheaper but how cheap? barry: you have to keep in mind two things, first, when oil goes in the case of a recession, this is a supply and not the

demand issue. 18 months ago, before the price of oil began the collapse, 11% of the s&p 500 earnings or from the energy sector. you take those profits practically to zero, you just lacked 10% of the s&p 500. that is why earnings were so bad last year, the dollar and oil. if you properly calculate the effect of the dollar and oil of get everything else, american companies are still learning money. there will be a bounce back even if the oil and american dollar does not move. if the dollar comes down from an overvalued position and oil comes up from an undervalued one, you will see that come back. the that drastic move from hp to slash the dividend, you said we had the conversation and we have got to get yield in the market, but the yield was there from the energy class, the miners, because the price had adjusted. are we going to see much more of the bhb bulletin move in the

year to come? barry: i have to imagine it is coming. if you look at the was highly dependent and not hedge on the price of oil and commodities, look at what is happening with copper, aluminum, you cannot basically keep your dividend at a level far above your cash flow. they have to get cut unless there is a huge increase in any of the commodity prices or drop in the dollar. neither of which looks imminent. david kelly: most are being paid by not commodity companies. 2.5%, wellvesting above treasury rates, so you are getting basically from all the long-term stock market growth for free. i think the dividend paying stocks is a good investment, even with overseas risks in the commodity area. stephanie: blackrock, warning on traders of underestimating the fed. blackrock's chief investment strategist said that inflation has strengthened, suggesting

that central banks may not be as dovish as the market expects. what is your take? have beenhink people paying attention to the futures for too long because they have been wrong. you have to read the speeches that come out of the federal reserve, and they make it pretty clear. we are data dependent and trying to normalize rates. it does not mean we are going to the percent of 4%, but 1% or 1.5 percent is not unthinkable over the next 18 months. volatility in chinese stock markets is not part of the dual mandate for the federal reserve. david: 12 minutes ago, we heard that housing prices in this country are going up 6% and that sounds like inflation. david kelly: home prices are going much higher than other costs, so it is one of the things being said by this low interest-rate policy. i agree that we should not look at futures markets the way we used to because this futures

market is distorted. derivatives are anchored to cash markets. the cash market is distorted by tempered banks pushing down long-term rates around the world. you cannot torture the suspect and expect them to tell the truth. stephanie: clearly, you are not married. jon: if it cannot be a guide, and the treasury market the a guide because of the treasury market has been inaccurate forecast, much better than the fed over the last years? barry: sure, if you get the yield curve and the 10 year and that is a problem. out,hing i would point housing has an interesting issue, not just price the limited supply. there are a lot of people who are either upside down in their mortgages or have limited equity or no equity, and they are stuck in place. if you talk to folks like jonathan miller, they will play a that prices are being driven due to the lack of free

availability of supply, not necessarily the demand. stephanie: gentlemen, those at the stories that matter to markets now. barry, thank you. david kelly, you are with us for the hour. we will be back with much more. we are about 17 minutes away from the market. , we take a look at the premarket movers. what is up and down. looking for green on the screen. ♪

julie: you are watching "bloomberg ." jamie dimonh speaking this one at the j.p. morgan chase and best two-day event in new york city. jamie dimon says the u.s. consumer is a big winner from lower oil prices and says people are spending their gas savings.

he said corporate earnings are not in great shape. shares on the london stock exchange, shares of the london stock exchange up 17%. updatef deutsche boerse percent after they confirmed they aren't detailed talks about the merger of equals. they are considering an option merger if it goes through and it would create the world's biggest exchange and would rival the intercontinental exchange. that is a bloomberg business flash. now, to markets and matt miller. matt: first, i want to highlight what is going on in crude oil. i have the day trade graph your. at the aprilg contracts. we didn't have a roll over, so it might look like a jump from the closing price of 31 and change yesterday, but you just saw a drop after the iranian oil minister came out with comments that they see the saudi-russian agreement to freeze oil production as, quote, "ridiculous."

that is why you seek to turn down in oil and oil markets have been heavily correlated the stock markets, so expect to see possible moves in the major markets on that news. let's check out some of the retailers that have put out earnings today. they beat estimates. macy's really was up a lot more, up 6% earlier and now only up 2.25% as they peru's the report, but it did be the top and bottom line. the problem is, it does not cut mustard. home depot beating on pretty much every measure, still up .33 3%.-- 3.3 we will talk about this later in the program. jpmorgan comes out. we have been talking about it all morning. they came out with another $1.5 billion in reserves because of the low oil price. those shares down 1.1%. it is interesting to note that

jpmorgan says they are not seeing the default or potential defaults and energy loans spilling over to other sectors. otherl prices may help sectors. let's take a look at some of those other sectors. steel and freeport knocked down today after a big bump in commodity prices. markets are coming down from that. fitbit, a much smaller stock, only like 3.5 billion dollars stock, but they came out with earnings or an outlook that really missed the street estimate. maker is downhe 15%. next, when fear moves markets. we will have more when jpmorgan chief global strategist david kelly "bloomberg on "bloomberg ." ♪

stephanie: you are watching we areerg ," and

watching headlines. a conference call happening right now. david einhorn's reinsurance company is based in bermuda. what are some things we have seen? he is seeing an end to the commodity super cycle and rebound in natural gas per 2016. two years ago, he came out negative on fracking at the conference. remember, why fracking is wack, and he is still short in that space and he says the slowdown in china has hurt companies like apple and gm. to announce that he is short fracas, following the headlines, david einhorn had a tough 2015, a slight comeback from january and we are seeing what he is doing in february. we will turn to david kelly, chief global strategist at j.p. morgan. david: thank you. i think it is fair to say there is a fair amount of fear and uncertainty in the marketplace. let's talk about some headwinds and how you rank them. we have oil, earnings, how about

the presidential election and uncertainty? david kelley: i think that is contributing to it. right now, it is out of folks to say establishment. i actually like the establishment and it is the economy and what we have, but the anti-establishment rhetoric on both sides scares people that we could see no pod out regularly radical change. i don't think we will in the end. in november, i think we will end up with a much more muddled environments, probably close to what we have right now. i think that fear of radical change is probably hurting the markets. david: we talk about volatility in the market place, but you could say this is a pretty powerful collection with people we never thought would be on both sides, nobody thought of bernie sanders donald trump. do you think that is hurting the markets? david kelley: i think it is hurting global markets. you can see this worry about

europe, getting out of the european union, probably not in their interest, but you can see governing parties being test out across europe. i think this general anti-establishment trend -- the problem is you know why people are angry after years of slow economic growth and frederick about it, but the chances of those who are harnessing that anger have solutions to move the ball forward. i think those chances are little and that is at the market is scared of. david: we talk about china, and the issue of china growth is slowing down but there is also the uncertainty on what they are doing and how they are regulating and what they are doing with the yuan. david kelly: to be fair on the issue of the yuan, or the chinese authorities are trying to do is manage to a basket of goods. lastwe have seen in the days is the dollar strengthening again and the pboc is saying, we are not going to get hauled into

the strategy every time the dollar goes up. if the dollar goes up, we will try to focus on a basket of currency and stick to that. i do not think that is very inconsistent, but i do think there is a lot of uncertainty from #china and the problem i think is the numbers themselves. -- uncertainty is from the numbers in china and the problem i think is the numbers themselves. thatyou have uncertainty, causes people to hold back. the biggest thing that has happened is in beijing -- individual investors have not been invested. there's no money moving in and that is generally a negative environment. david: you come back to the united states, and what do you project? 2.5% higher next year? kelly: my models are showing 2.8% in the following year so we will average about that is fine.d

that is above the long-term capacity. we believed the economy can grow 1% in the long run, so 2% will push it to something like the .6% by the end of 2017, which will be the lowest since the 1960's. david: david kelly, you are staying with us. jon: let's bring up the u.s. futures board for you. futures ahead of the opening new york city. s&p 500 futures down by three points and the dow jones futures up by one. switching to the board, in europe, it is negative. the dax is off by 58 points and you switch up the board. a breakup 110 this morning. the new york city stock open is next. ♪

>> welcome back. just moments away from the opening bell here in new york. stable throughout the morning the -- despite the drop off in european markets.

yen, one 29. breakthrough 112, strong japanese yen is the story. one -- 2014 low. that is a problem for the boj. gold, a little bit higher this morning. you see the move in european equities lower across the board. joining us now to discuss what is happening in markets, the chief investment officer at any and in welsh. about markets. why do you think that? this will be the story of 2016, the year marked by great volatility and a lot of intermittent starts and stops in the stock market. once we get to a time where the oil and stock market the couple one another, we will start looking into the underlying economy and realize it is not that had. the u.s. economy is expected to grow between 2% and 2.5% this

year. jobless claims are picking up, the housing market isn't that bad. stabilize,et oil to they will start finding attractive valuation. there will be more days like this to take advantage. until we get to the point where we can see positives in the economy, how does one invest? you can make the most money or lose the most money. andn: performed thus far 2016, telecom, utilities, i do not see any of those becoming less valuable. yielding about 4.5% on average. of the year, maybe it is two and a quarter. do these utilities look any less attractive against the 10 year? i do not think so.

investors are trying to find safe haven and the u.s. dollar could be an attractive alternative. perhaps even looking overseas if and when drug he does become more accommodative, maybe we'll see a spike in the eurozone. investors just have to look outside. >> i think the catalyst will be a recognition that u.s. simmers bending is good here look at the sales numbers, the early reports are very good, somewhere in the high 17's again. you see the report from home depot this morning. if it is doing fine despite all of this, it could be something of a turning point. in terms of investment strategy, we're in the midst of volatility and we always say, let's look at what protects us from volatility. dealing with volatility is a little like buying insurance. the best time to buy it is when

you do not need it. markets do not settle down. they settle up. at that point, people need to think about, was i positioned to handle the volatility? am i too risky in terms of my portfolio? that is the time to think about it, not now. stephanie: matt miller, where have things opened up? matt: the markets opened down and continue to slip and little lower as oil does as well. take a look and you can the oil is down by two and one third percent. remember this is the april contract where you roll over from yesterday but after i ran him out and said saudi's and the russians agreement is we saw a turn down. equities down as well and they continue to notch lower in the first couple minutes of this action. the s&p up 10 points, the doubt 63 points and the nasdaq down about 5%.

-- about .5%. to see who is winning and who is gaining as far as different in -- industry groups here. we see all of them are red. energy.est losers are oil is dragging markets down. financials as well after that loss we had out of europe and after j.p. morgan came out today and said not only does the earnings season look weak, but they have taken another $1.5 billion in reserves because of the low oil price. let's go to some of the movers we have today. lng, energy gaining because goldman sachs raised the stock to a buy today from neutral, saying it is undervalued if you look at the full year chart. has fallen 66%, but also because of the launch contracts, investors will see the genius in that and value it going forward.

that has so far only happened by 6%. a look at motorola solution today as well as norwegian cruise line. motorola with an outlook for a full year that those away the estimate for adjusted eps. norwegian cruise lines gives 385,a band of 360 52 looking for 377. the market likes both of those earnings reports so go ahead and check them out. finally, maker of instruments used for led panels, solar panels, data storage, down 18% after it came out the industry to not like the outlooks at all. abigail: solar city shares are slightly lower this morning. it was downgraded from a neutral.

cut pretty sharply by 34%. he thinks solar city is still undervalued over the long haul. important to remember he is a big bearish interest suggesting solar city could just take another leg lower on top of this year's already stunning more than 60% decline. before we look at where the markets work, we were talking about 2016 and what to expect out of it. you mentioned consumer utilities. where do you think there are organs? you talked about volatility. that iarea of the market think is oversold is natural gas. i look at the driving factors of alternative source energy as a whole, that has a lot of upside

potential. the u.s., saudi arabia of willal gas production, we continue to export natural gas and oil now, natural gas is the biggest burning off you'll that we saw in france of december of last year. i think there will be more global demand. this will be the year when the baton is passed from u.s. markets and international markets in terms of total potential. volatility is not behind us and you need to build insurance and protection now. insurance andife you don't die, -- of course not. if you build it into the portfolio and it does not benefit you, at least you are -- >> it is harder and harder to do that. we are coming off years where momentum is on the side of notstors and hedge funds returning north of 5% not in a

position where they are spending any ancillary dollars to ensure themselves here they are looking for alpha. how do we get them to make that kind of action at a time as when they do not have those concerns? >> if they are not willing to insume the type of risk january of this year, they should build those into the portfolio now. there are still tremendous opportunities worldwide. we see attractive qualities in preferred securities now. when the fed at least keep their rates to historic lows. there are other opportunities. i think the retail sectors, should do well in a gradually and slowly improving economy. >> do you agree with the notion that we may have stronger dollars and if so, how does it play against equities? david: i have no way of knowing

what it will do over a short time, but i do think the federal reserve will raise rates faster than it is priced in the market now. it could push the dollar up. in the long run, it will get in the u.s. will grow more slowly. it is a combination of day trade and slow economic growth will give you an opportunity in markets. he is now want to say about risk in general, people want to hide in cash. that is paying you a negative high return. it is not your father's cash either. used to get 1% or 2% real return for being in cash while you think about what to do. now you have to pay 2% in real terms. when you think about it from garminrspective, i think argument for investing is that much stronger. i struggle to reconcile

the fed will hike faster than everyone thinks and yet it will weaken. do you agree with that? to define long-term. if at some point in time the global economy does recover, and banks are less accommodative and start to raise their interest rates, then yes, the dollar will get weaker. over the short-term to medium-term, i do not see why the dollar cannot or should not get stronger than the stage? >> i like five years. people invest in equity markets or risk assets, should be five years or more. do i think we will be 110 against the euro or parity? to bek it is more likely 130. that is what i mean about the long run. i want to emphasize i do not think people should worry too much about short-term bets on the currency. i do not think you can make them. i have yet to see a model that

can predict this is central banks are so focused on getting the rate down to stimulate the economy, they neglect their duties that we're always going to be in a huge question mark around securities. conversation.at kevin, thank you for joining us today. david, we are not done with you just yet. depot beathome estimates this morning after les week's results from walmart and nordstrom. we will bring you our retail earnings scorecard next. ♪

>> i'm in our new hp greenroom.

tomorrow, we will talk with the cfo of green bus. stay with us now for more bloomberg . ♪ i'm julie --julie: hyman with the bloomberg business flash. it is replacing jack griffin as ceo. the move comes less than two years after he joined the company and justin will replace him. dearborn was previously the merge of the publicly traded house care company acquired in october. home values rose at a steady pace in december. 5.7% in the previous month. more than 11% and washington have the smallest gain, less than 2%. home rental price growth slowed in january even in markets like this have us go bay area in denver and portland. said it adjusted

2.9% from a year earlier. that is the bloomberg business flash. sales are up home this morning after walmart and -- weakm gave week forecasts last week. jpmorgan's david kelly is still with us. shannon, last week, when we let that walmart and nordstrom, we looked at them beyond these specific companies, getting a view of the state of the consumer, not spending, still hurting, and maybe not. >> macy's was not a bloodbath. expectations were really low. the doubt above expectations. still shrinking companies. sales were not

shrinking as much, but still shrinking companies. consumers are spending away from traditional retail. macy's is still struggling here. home depot is the interesting one. you just heard julie talking about the housing numbers. you see people talk mother homes as investment. a smart -- smart and strategic place to put it. as long as customers are doing that, home depot is doing well. they have been aggressive online. they really improved customer service. it is noticeable and you can tell. stephanie: this quarter is not even their big quarter. it is spring when they spend on home improvement. it is a bigger positive than i think we even give them credit for. you look at the consumer and we try to look at every retailer out there and start to understand their behavior. macy's still cannot get their activist investor off of their back. are we going to see a change now

that consumers have money in >> it is mostly on services and mostly online set are invisible with retail store reports. for year was a great year consumer spending. the fourth quarter was a little up 2% to we think we will do better than 3% on this quarter. onlinef the growth is and consumer spending and services. it is just not showing up in traditional retailing. see this in terms of employment numbers. how can retail sales you this week and yet employment is growing this much? the other thing that affects things is the retail sales andrt have gasoline in them they are nominal terms. you look at retail sales, that also looks fine. all the consumer fundamentals are healthy. down 47%: my stock was

last year, which it was, how do i have the time and the money to re-strategize that consumers are spending but spending in different ways. >> if you had a great store that people love to go into, and you had great a peril that people had to have, they have the money and they could be spending it. eat -- eacht investor could have on their own. i am sure some of that is thinking they have a great strategy but i think some of it is also thinking yes, that is green light and the activists trying to take over the company and they have a shot and this andany is a takeover target they said they are worth more dead than alive in the real estate is worth more than the market cap according to that. stephanie: jeff bezos can open more stores and put those in. >> as if they do have enough problems already. say retail numbers are

wrong with the labor market is right. people will say no, it is an isurate description of what happening. numbers describing the employment in the wrong way. what islow-paid job at the argument against that? >> the government has done a better job over the years of what has gone on in the labor market. there is an evolution in retailing and not much of a revolution -- evolution that people have to go to work. think they counted very well. the biggest mistake everybody makes, they talk about low labor force for dissertation. that is not what is going on. there is a change in the baby boom is hitting 65 and half of the clients are because of that. unfortunately, the problem is what is remaining in the economy is not very employable. we have got high unemployment amongst people who have not

finished high school. an increasing drug problem and a problem with literacy. the bottom of the labor market barrel is not that good men in terms of good workers who are unemployed, looking for jobs, their arm -- there are not many of them. we are seeing that in some of the wage data recently and a lot more ahead. david: thank you for being with us. any's is under pressure from activist investor with real estate holding spared another target is in the news, yahoo!. sources tell us it has a new suitor. time inc. is joining the fray as an interesting higher in its core business. joe was with us just yesterday and he stressed his company's strength as an inquirer in the media industry. >> the opportunity is to continue to grow the business. we are a player of scale in the industry. who we are because of the size and scale, just got together and

are trying to get their back office. they are trying to reach our scale and get to the scale we arty have. i think they would be the acquirer of choice should they come to the market. classy put a brave face on it, but his stock is down 45% this year. he is losing traditional revenue from print media faster than he is gaining digital. is he in a position to go after yahoo!? stephanie's point, and maybe he feels he has no other choice but to do something here. yahoo! is a big bet on the transformation of the business. on the face of it, that would not be the combination i think most people would put together in terms of who yahoo!'s eventual merger partner or acquirer would be. they would probably go with verizon or comcast, but the

benefit here is actually a tax benefit. if you put the companies a trust, a taxo efficient, tax-free way for yahoo! to spin its core business and then merge it, probably slightly smaller. the other reason yahoo! might consider doing this is that it is a way for yahoo! not to sell at the bottom. if yahoo! is going to sell out at this point unless one of the big media companies will pay a big premium, yahoo! is pretty close to its 52-week low at this stage. if you believe in the yahoo! story and that is a huge if, it is a way you could pick up the upside by putting these companies together. stephanie: thank you so much. david kelly, thank you for joining us. breaking news throughout the past 2.5 hours.

we will take a quick break next. a look at today's show highlights. ♪

>> now it is time for a look at some of the conversations in got to go. >> a surprise to some, myself dividend ofat the lower energy prices has not put enough money into consumers pockets and engendered the kind of confidence you might expect. maybe a little bit of a lagging there. i think most of my colleagues in be andustry expect this to better year for buying and private equity even though we will see disruption. i was disappointed because that does not state my view on this. i believe with the right safeguards, there are cases where the government, on our stop terrorism,

which could get worse in the future, that that is valuable. striking that balance, clearly the government has taken information historically and used it in ways we did not expect, going all the way back to j edgar hoover. i hope now we can have the discussion. there are safeguards where the government should not have to be completely blind. >> plenty of great interviews. that does it for this show. tomorrow, we are joined by steve rattner. and futures partner chairman, tom. the s&p 500 down one third of 1%. ♪

>> welcome to bloomberg markets. ♪

vonnie: good morning. i am vonnie quinn in for betty liu. opening lower a day after hitting a six-week high following crude lower once again today. president obama set to make good on old campaign promise from 2008? we will hear from the president on his proposal for the future of prison at one -- one, and obey. does the microsoft cofounder stand with the rest of silicon valley? that is ahead. let's head to the markets desk were julie hyman has the latest on the markets. julie: breaking news on a couple of economic fronts. sales