adidas forecast sales may rise at the fastest pace in five years. we talk to the c.e.o. live. >> david: welcome to the show. stephanie: we're having a big morning and happy to have you about the hour, roger altman. i know we have so much to cover. i am so focused on heralife this morning, restating their growth numbers. this is a wow. we've already seen them move in the premarket. >> coming from london, it doesn't excite me. here's what excites me, when i see a number like this, third quarter 2015 reported up .8% versus a reported 33%. that's a discrepancy. stephanie: that is more than -- i mean, this calls spew

question their systems, and remember who's the biggest short in this. it is big ackman. this has been the trade he's been ringing the bell on the last three years. is he getting closer to getting his way? unclear, but we know this is a very big number. david: ease government regulators as it turns out. stephanie: not the only big thing happening today. roger: the other big thing happening today, bridgewater sitting down with eric schatzker. that's coming up later on. lots of news to get through, and let's start with the first news. >> mitt romney is going off to donald trump in a few hours, the former presidential candidate will make his case why trump shouldn't be the nominee. in prepared remarks, romney says donald trump is a phony, a fraud, his promises are as worthless as a degree from trump university. his domestic policies would lead to recession. is foreign policies would make

america and the world less safe. trump says romney ran a terrible campaign four years ago. it didn't take long for north korea to react to new united nations sanctions. hours after security council approved more sanctions to punish the country for a nuclear test and a rocket launch, north korea was at it again t. test fired missiles into the ocean. there's been no comment so far from the regime. and investigators are examining debefore he they suspect came from that missing malaysian jetliner. the piece was found on a sandbag off mozambique where debris washes up. a person familiar with the investigation says it appears to be part of the tail from a boeing 777. the malaysian plane disappeared almost two years ago. global news 24 hours a day, powered by our 2,400 journalists in more than 150 news bureaus around the world. david: thanks very much. take a look at the futures here in the u.s. a bit of a mixed picture, which is similar to what we're seeing overseas, really unchanged. s&p futures, dow futures efinitely unchanged.

the ftse gaining, the cac and dax falling, but europe is coming off its longest winning streak since october. it was up for five days in a row, so taking a little bit of a pause it looks like today. take a look at asia, a big three-day rally in asia, the biggest three-week rally that we've seen since 2009. you can see the nikkei here up 1.3%. the chinese shanghai comp up just a smidge, and the hang seng off as well. energy, of course, has really been dictating what markets do, what stock markets do, he should say, and you see crude here unchanged. nasdaq also not down -- but nat gas is at a 7-year low right now, so important to keep in mind just how low we are in natural gas, especially when talking about the chesapeake

aubrey mcclendon story today. gold futures up right now about .2%, and gold continues its long, large jump. it's at a three-week high right now. it was up 10% last week, it's up almost 20% so far year to date. gold is in one place where people are hiding. the 10 yoor hasn't. people have been selling off the 10-year. over the last three days in a row, we've seen the yield march up to 1.86, so investors getting out of treasuries and getting into riskier assets, as basically what we've been seeing. and speaking of riskier assets, got to take a look at heralife, what it's doing in the premarket after coming out with revising, you know, its customer numbers, revising its profit numbers, revising sales numbers, down not a little bit, but a lot accident in some cases as much as 30% to 1% or less. stephanie: that's what's so outstanding, because remember what we have with this company. this company big ackman has said bfering it is fraudulent. if you think back a year ago

where they said their biggest growth numbers were was in venezuela, when venezuela was in crisis. he has continued to say this is a pyramid scheme. now, we're clearly not saying that, but when you see a restatement this big, it calls into question the processes, the system. matt: it also makes you wonder how far it can fall. i mean, you just saw the one-year chart. it's up 80% over the past 12 months. so today's 16% loss in the premarket doesn't seem much compared to what we've seen over the last year. stephanie: carl icahn felt a lot of pain these days, more pain for carl. >> you think they would be -- if anything, you think they'd low balled estimates, but as john said, it's not just they're missing, they're missing by half or more. they're down dramatically. stephanie: when they came out with numbers, they went on and on to say what an important growth metric this number is.

active users is where they show the growth. these are the people who are buying products so. if you're not buying products, there you have it. you are in the red. >> they told to us focus on active users. we're looking at the active users. crossing over to mark barton in the u.k., it looks like the run is over. mark: you never know. as you say for now, the 6.5%, ive-day rally. disappointing data from china, we've got five other big companies in new york trading without the right to a dividend today. that's shaving half a point off the index. bittersweet today, this is the 12-month chart. a couple of days ago the shares hit a record high. basically it says its gross margin will narrow as much as one percentage point due to higher purchases in costs in

asia, but forecast sales increases up to 12% and earnings as consumers spend more ahead of the big one, the euro 2016 soccer tournament. i'm not going to ask you who lost the last final four years ago. bad memories for you. let's move on, because services, which you know are the big part of the economy, the main reason why this economy is growing, john, the p.m.i. data today was a massive blow, coming below estimates, and the lowest in three years, john. it means we basically had a triple whammy when it comes to p.m.i. data. services are low, manufacturing at a three-year low. construction, 10-month low, john. that's not good for the bank of england, who says that breakfast are in the u.k. economy. it seems that risks over breakfast are concern about global volatility, concern about global growth. john, i'm going to leave with you this. i love this shot. joe did it a couple of days ago when the market closed.

this is to the next rate hike, john. i got to ask about you this. what amazes me is, yes, the u.k. is 49 months to the next rate hike. for your area, john, it's 46 months. morgan stanley's index is saying for your area is going to hike before the u.k. what do you think about that? john: wherey been asking people to weigh in on is whether mario draghi will raise rates. i think looking at that chart, it looks like it could be a no. stephanie: mark, we're going to let you take a breather. we've got you joining us for battle of the chart today, and it's a big one. let's turn now to -- actually, before we do that, roger, as you look at the data we're getting out of europe, we're focused so much on asia. here the u.s. economy, such a mixed picture. how do you see things? >> roger: first of all, the

short-term and medium term outlook for the u.s. economy, and the huge debate about whether we might have a recession or not have a recession. my own view is no, we're not going to have a recession. the u.s. economy remains and has been for some time solid, unexciting but solid, growing in the vicinity of 2%. people forget that the export share of the u.s. economy is only approximately 15%, therefore global weakness has a limited effect on us. i personally think the only threat, serious threat to the u.s. economy from the point of view of recession risk is are the financial markets themselves and whether a spurt of volatility and financial market weakness could frighten consumers and frighten businesses and also generate a negative wealth, a series of negative wealth effect. my own view is the outlook for the u.s. is essentially fine. europe, this data is really in keeping with the macro view one would have, which is europe is barely moving up, you know, in the vicinity of 1%. that's what you would expect, gin how relatively recent the banking and sovereign debt crisis there was.

remember it was only 2011, 2012, and the whole thesis about how long it takes to come out from a banking crisis, so that's what you would expect. i don't find any of this surprising, and europe weakness is what we would be -- what would expect to see if we were historians. >> feels like we had a pretty turbulent time going back to august, where the market went way down. it seems to be coming back some. what is the significance of the fact of volatility itself as opposed to the overall level at which the market operates? does it really affect the economy? roger: the way it can affect the economy, we witnessed rather briefly last august and about four weeks ago, which is volatility spikes, it's typically inversely correlated to equity markets, for example, the higher the volatility, especially spiking up, the lower the markets. if you were to have a sufficient spike and a sufficient market weakness on the other side, you can have the effects i talked about in terms of scaring consumers and businesses and ultimately a negative wealth effect. that's the way that the v.i.x.

itself and all that it symbolizes could spill into the economy. we're not in that mode right this moment. v.i.x. is back down, and markets have been strong, and the big question is will we see a recurrence of the volatility of last august and four weeks ago? my own view is yes, we probably will. >> you don't see an he foket u.s. consumer spending yet? roger: no, this is one of the things that i think too many people don't focus on. 2/3 of u.s. g.d.p. is consumer spending. most of the data on the consumer is encouraging, not discouraging. the most recent data on retail sales, on final consumer purchases and so forth is solid. you would expect that with gasoline prices as low as they are, wages beginning to move up, job creation rate being healthy am that's what you would expect. so the consumer is relltil solid. any given piece of data can be a little bit out of that theme, but relatively solid. and therefore, the u.s. economy, 2/3 of which is the consumer is doing ok.

john: you'd have a series of data and upside surprises, then you've got this concern internationally as well. but we've been told again and again and again that their data -- that they're data dependent. would you be voting for a hike if you were the fed? stephanie: doesn't it depend on what data? john: it does, but g.d.p., upside surprise. payroll, still pretty solid. both sides of the mandate, tick, tick. roger: why don't we step way back for a meant? there are so many ironies in today's markets, and one of them is that if we fell down from mars, and we knew we had a lot of economic knowledge left, we'd say to ourselves, historically high oil prices, high interest rates, prospects of fed tightening have been negative for growth, and therefore, negative for markets, so if we were beginning to see the indices

moving that way, we'd be bearish. we're in a market now where, for the moment, the higher the oil prices, the higher the open market interest rate, the greater the prospect of fed tightening is bullish. why? because there's been so much fear and because the absolute levels of oil prices and interest rates, for example, are so low by historical standards. but it's a historical irony that the way markets are responding is not in keeping with what you would expect over the long term. now, the prospect for the fed tightening, wee all seen what the futures are showing, that that prospect is rising. if i were on the open market committee, first of all, i think the rest of the world would be terrified, but other than that, i think march might be too soon. just four weeks ago we were looking at an abyss, a lot of us thought at least. so i think march would be too soon. but the prospects for more fed hikes in 2016, as compared to just the one we already saw, are rising now for

understandable reasons with the data improving. stephanie: all right. we have to turn our attention to a very, very different story. the investigation of lease bid rigging involving former chesapeake c.e.o. aubrey mcclendon. just yesterday mcclendon died in a car crash, a day after his indictment. tina davis joins us now. just yesterday around this time you were sitting here with us talking about the indictment, talking about aubrey's career, what he built. this is shocking. tina: yeah, it's been an astonishing 48 hours in this story. you know, yesterday's news took the world by surprise. we're still sort of trying to process exactly what it means in terms of next steps for his company, for chesapeake, and for the investigation. >> roger, it strikes me one of the things this causes us to reflect upon is his overall importance in the u.s. energy situation. we've gone from a net importer to next exporter, in part of

what he -- maybe not personally what he did, but he helped lead, i think it's fair to say. roger: well, i did not know mr. mcclendon personally, never met him, but he was one of the real leaders in what has now been he shell revolution. we all know the degree of turn around in the u.s. production, driven by technology, not by technology or anything else, but by tech knoll and the private sector, has been one of the most remarkable economic developments in 100 years. stephanie: especially in the state of oklahoma. changed oklahoma. roger: well, more than that, north dakota, big parts of texas and so forth. but, you know, just five years ago, six years ago perhaps, u.s. oil production had hit a 30-year low, barrels per day. and today our imports are down five ut $5 billion, and

million barrels a day, rather, and wee become an energy power house again. in fact, north america as a whole is energy self-sufficient, which is astonishing given where we were five, six years ago, and shale has driven much of that. some of it's also canada, some prospects from mexico, improving its production. but fundamentally mcclendon was one of the pioneers. john: total production now, it is truly remarkable with crude production. roger altman will be with us for the hour. tina, thank you very much for joining the program this morning. next up -- we take it to the u.k. the british chamber of commerce begins its annual meeting today, and the topic on everyone's mind, take a guess, a couple of hours away from the open in new york city. futures dead flat. ♪

john: now to the brexit is hovering above british voters. today, top executives of british businesses get a chance to weigh in on the debate with policy makers in the british chamber of commerce's annual conference. bloomberg's ryan chilcote spoke to the director general. ryan: for the government to say it would be a disaster leave, which is basically wrong, if there's a chance we might vote to leave -- and there is definitely a chance we might -- that will be very bad for the u.k., because how is the government going to roll back when it persuaded the markets, the currency markets, there's going to be a disaster, and then the day after we leave, we're going to say, oh, no, it's not a disaster, it's all ok. john: that is exactly what seems to be happening, those campaigning to stay in the european union are saying to everybody, stick with the status quo, because on the other side, if you go there, it's an ugly place. is that the theme, the tone of

the meeting you're at today? ryan: that is definitely the message, and it kicked off with a video address from the british prime minister, where he said just that, the best or biggest argument for the u.k. to remain in the e.u. is, on the one hand, insecurity, if you will, from a sort of security on the street perspective, terrorism, and also economic danger. we just don't know at this point what would happen if the u.k. was to exit the e.u. john: in terms of actual businesses, the services p.m.i. data dreadful, lowest since march 2013. that's been trending lower the last several years now. a few sandoiments? manufacturing and construction. a lot of people use that to fuel the debate that there's uncertainty out there, and it's weighing on activity. as you speak to businesses today in the city of london, are they saying the same thing? does that match the data that came out this morning? ryan: no, it doesn't really. i think they generally see this as a bit of a sideshow.

not too many businesses have told us that they see this really weighing on things now. don't forget, the british chamber of commerce, for example, came out a year ago and said we should have this referendum. in other words, at least one business group in this country thought it was ok enough in terms of the uncertainty that it creates to go ahead with the referendum, the lobby for having that referendum, where there are a lot of people obviously saying that's a bad idea, why even have this referendum? it just creates chaos. but there are a lot of businesses that say, you know what, let's have it, let's get it over with. if we can have it by summer, that's fine. i'm not seeing any huge impact just yet. by the way, they're not exactly of one view on whether the u.k. should exit the european union either. john: ryan from london, thank you very much for joining this program. next up on "bloomberg go," we fwalkt heated presidential race much that is coming up. and coming up at 9:00, stick with "bloomberg go," a bloomberg exclusive, our own eric schatzker interviews

bridgewater's ray dalio live from austin. ♪

>> we're here with roger altman, the head of evercore. he was also a very senior treasury official in bill clinton's administration. we know that you support hillary clinton. let's talk about the other side of the aisle. as an american also, you want a good opposition, not just your person to win. if you had a v.i.x. -- roger: also was a stable overall system. >> exactly. nobody would have predicted this. even today, mitt romney is going to give a speech, and he's going say, of the possible nominees, donald trump is a phony, a fraud, he's playing the american public for suckers. is this a good thing? roger: well, what that signifies is the degree to which trump's rise is terrifying a lot of the republican establishment to the extent that there is one. and by the way, beginning to scare a little bit the business

community. and the reason for that fear is the possibility that trump in 2016 is the equivalent of goldwater in 1964. in other words, historic up and down the ballot democratic victories, which bring back the senate for the democrats, conceivably put the house into play, government, state legislators and so forth. because there's a growing view that trump could suffer a catastrophic defeat in the general election, and, of course, republicans fear that. it's one thing to lose the white house or have it stay in democratic hands, it's another thing to have massive down ballot losses. that is the galvanizing theme that's motivating people like romney. >> thus far, it doesn't feel like the markets are reacting very much to this at all. have they incorporated the possibility of trump being our next president? roger: well, there are these very limited betting markets, as you know. they're not very liquid and so for the, but the degree they

indicate anything, political markets, they indicate that the likelihood that hillary clinton will be the president, and i saw one yesterday indicating a 75% possibility. even now, before she's even got the nomination. >> if the markets went to 50-50, what would happen to the financial markets, in your opinion? roger: if we actually got much closer to november than we are now, and on the other hand, trump's prospects of actually becoming the president of the united states were seen as 50-50, i think it would have a negative market reaction. but what's really going on now is growing terror on the republican ranks about a down ballot disaster. >> we're going to see more today from mitt romney. thank you, roger. stay with us. coming up, we'll talk to the adidas c.e.o. about the outlook for 2016. ♪

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business process, price units, separate from that is how you go back. ducks, and i this is a classic cfa study to tow trucks out of los angeles, loaded them with bricks, and drove them around los angeles to create revenue. the cfo said how

important this metric is that i want to share a quote where he said "we continue to see broad-based improvement in active new member numbers and are optimistic about the positive trend and impact on our business." for any publicly traded company, growth is the name of the game. we were not just questioning -- work, but your system what is the outlook for your company? tom: roger, you know this. the rules are now a lot different than tyco 20, 30, 40 years before that. so many general councils going into price waterhouse cooper's room. they will say the rules have changed. stephanie: on that call, we continue not to hear from herbalife's ceo michael johnson. we have not heard from him in years at this point. matt, do you want to

take us into this short? matt: when bill ackman announced, the stock opened at $42.73. he is clearly out of the money there, but this could change things, obviously. the former ceo, of post cereals, had a massive long. he came out and had a huge long in this thing. it was not an activist simply playing against the bill. he has got less than 4 million shares. how do you get the street to believe your numbers, no matter what you are on? tom: it is an issue. we do not know yet. we do not know from these headlines where this afternoon is or two weeks from now. roger: yeah, it is too soon to know how systemic this problem

is. herbalife has obviously been a circus, not the least of which is carl icahn vs. bill ackman, which has been entertaining, among other things, but i do not think we know yet. jonathan: have we seen more of this? we saw it with tesco in the u.k. roger: no, for the reasons that stephanie said, you are seeing less of it. if you look back at the famous -- i am not suggesting that herbalife is this, but if you look back at the famous scandals -- sterling home x, equity funding -- tom: you are dating yourself. [laughter] stephanie: taking it back. roger: i have a good memory. there are many more of them, and some of them were astonishing. i'm in, companies that literally recorded sales and later we found out that the inventory was in the meadow. this is happening less and less often because markets are much t, and theed and inten

accounting processes have become better, so actually you are seeing less of it if you want to look back with a long lens. stephanie: we have to leave it there. atomic, we're going to talks -- tom, we are going to talk sports, and i know you do not want to talk red sox. earlier this morning, adidas reported fourth-quarter earnings for 2015 cured the company forecast that sales may rise of the fastest pace in five years as consumers spend more at head of the european soccer championship this summer. adidas shares are trading slightly down. we are joined now by ideas' -- ceo herbert h ainer. you had quite a run for the last year and a half. for this quarter, 44 million euros. talk us through this. good morning to america. first and foremost, i am happy

with the 2015 results as we have exceeded our financial targets, and it was by far the best with 56r in 2015 percent, but also in the first two months since 2016, we are outperforming all the other stocks here in germany on the dax. the show's investors are very confident in our company and the growth stories, which we have, and i can only say that 2016 will be even better than 2015. stephanie: then why did you lose 44 million euros? sorry, what kind of 40 44 million euros are you talking? stephanie: you had a loss, correct? herbert: the first quarter, you mean? stephanie: yes. herbert: this is simple. we decided to invest in sports marketing and advertising.

taken new great players on our roster, for example, james harden, ron miller, the of of the super bowl -- mvp the super bowl. this we have clearly communicated already at the beginning of the year. this was not a surprise to anybody. jonathan: gross profit was now as much as one percentage point. could you explain that and also a lot of analysts have highlighted the margins versus the like of nike and under armour, lagging the two competitors. what can you do to improve that situation? herbert: first and foremost, i do not think this has anything to do with the stock performance today as it is a little bit profit taking because we have performed so well over the last 18 months. we are a growth company. there is definitely potential on the operating margin, but you should not forget that we had a lot of influences from currency, which played the game because of

a weaker euro, and we consolidate everything in the euro, but never the less, there is definitely a potential to grow our operating margin. this is what we have outlined in our plan for 2020. to the operating margin, but not limiting our growth potential, which we have. jamesnie: you mentioned harden, basketball, and football, but we know your passion is soccer without a doubt. you gained a reported $130 million for manchester united more for real madrid. why are you bidding so muhc? -- much? herbert: first and foremost, with real madrid, this is pure speculation. me put it on to the business side. when you look to football

business in a 2015, this was the highest football business which we had ever achieved, over 2.2 billion euro, and this is a nonevent year, so you can imagine how far we can get in 2016 with football. federation andhe these partnerships, helping us to grow our business success. stefanie says "soccer," i say "football." let's go to something we can agree on. at the end of this year, you will step down as chief executive. when they complete your review of the golf unit, i just wonder, is there a risk that gets delayed given that there will be a succession? we have 10 years of extremely successful growth 2013,ss, you know, until and we have become the clear market leader. to4 and 2015, i have

admit that has been very difficult for several reasons. the market decline, and we also made a few operational mistakes, no doubt, but with the new introduction of m1 and is now m2, i think we are back in the race. we have done a lot of restructuring within our company, made it more leaner, more efficient, but nevertheless, we have to bring a ground making products in the market, especially with the m1 and in the last quarter of 2014, our market up 15%,hich was at 39%, where we had seen growth before. this is the first good sign that we will get back to be a market leadership in the golf categories. jonathan: will you be able to keep hold of tailor-made if that was your decision. ? is that a unit you would like to keep? herbert: we have said we would

like to keep it until the end of the first quarter -- we still have four weeks. as soon as we have made our decision, we will let you know, so keep patient. we are not far away from our decision. stephanie: kanye west has been a big name, a big brand ambassador for adidas. you kicked off fashion week with him. how much has he helped your bottom line, or is he just a marketing expense? herbert: first and foremost, it is definitely something which helps us and our brand to be seen within the eyes of the u.s. consumer because kanye is a great artist, and we really love the relationship with him. that all sure, know of the seven editions of the kanye shoe which we brought to market have sold out in days. he is extremely happy about the process, as we are.

hopefully this will grow revenue. it is rather limited today, but obviously it helps us tremendously to show what kind of innovation we have on the sports products, and we will make it bigger, step-by-step. youhanie: does that mean will help him out of the $53 million of debt that he says he is in? herbert: we have a very good relationship with him, and i am too,he likes it, and we it will continue. jonathan: herbert hainer, that was very diplomatic. thank you very much. coming up next, we will review what area of the market is making a big comeback after a tough 2015. more "bloomberg " is next. futures turning a little bit negative. ♪

jonathan: i am here in the green room. later in the show, do not miss this, ray dalio speaks to us exclusively on "bloomberg " at 9:00 a.m. eastern. ♪ second quarter profits fell short of estimates at costco. the u.s. rid -- the u.s. retailer net income was down almost 9%. they are not spending as much after recent drops in the stock market. exxon mobil sees no rebound in oil prices anytime soon cured exxon is scaling back production targets and says drilling budgets will continue to be cut. the ceo told investors capital spending will fall about 25% this year. and uber has announced a pilot

program in india. the right hailing service will now -- the ride-hailing service technologyin india's sector. that is your bloomberg business flash. matt: all right, i'm going to take it. i am sorry, did i step on you? stephanie: you can never step on me. you are my brother. matt: it is a reflex. stephanie: let's back this up. he said, "did i step on you? it was a reflex." we will talk about market movers. would you like to join us? matt: thank you very much. i am sorry. i am used to taking it directly there. all the european stocks are mixed. it is actually down, ending a five-day winning streak, the longest since october. we do have, on the upside, the miners.

glencore up 7%. 5.3%. american up the miners have been on a real tear. forary put this together me. she would probably vote against it in battle of the charts can 2016, this is miners pe versus the pe of the broader markets, so the pe of the overall stoxx 600. earnings 1.4 times the ratio of the broader markets, so basically it is a measure of how expensive the miners are compared to the rest of the market, and they have not been this expensive since the metal -- i guess the end of the crisis, march of 2009, when u.s. stocks at least bottomed out. stephanie: roger, what do you think? roger: when you see oil prices to $35,ome up from $27

you see mining shares rise like that, it signifies the lessening -- great lessening -- of fear and the degree to which the economic outlook is seen as more stable and better. it is a bullish sign. matt: it is bullish for the overall market. roger: yes. matt: let's take a look at gold. this is one of the underlying metals that has really been on a tear. gold miners are doing even better than the underlying, so we have seen gold up 17.3%. spot gold price, that is a currency, by the way -- stephanie: remember, this is coming off of three down years. matt: that is true, and it has been really tough for the miners. they have recovered exponentially. mining is up 46% year-to-date. there is gold is up 84% year-to-date. david: so roger, this is not bullish, because this is a right to safety, right? people do it by and large to be safe. roger: i am reacting to the

share prices of the mining -- david: i understand, but that is not a bullish sign. roger: no, but there are more positive signs in the last three weeks to four weeks, and the last three days to four days, really, looking at the adp report yesterday, and we will see what the final jobs report is tomorrow, but it was very positive. the latest consumer data is very positive on the u.s. side. when you see mining company shares rise like that, it is a sign, as i said, of diminished stewart. the gold price is a market unto itself in some respects, but on balance, the latest set of signals are positive, not negative. david: you also have japanese bonds, people buying with negative yields, which has got to be a flight to safety. it is not gold. roger: japanese monetary policy is doing that. the central bank has put in a policy of negative interest rate, so yes, japanese yields

are negative, obviously, and japan's growth is a real problem because we just all data on the population shrinking by one million since the most recent measuring period. while yourgrow population is shrinking. it is not surprising that japan yields are rock-bottom, but look at treasuries, $1.86. ,our weeks ago, basically $1.56 so that is a big move, and that shows a diminished fear. jonathan: you said bullish. if you look at what they have done over the last couple of months, the like of rio, bh p, getting rid of that dividend policy, is that a positive see you that the leaders of these countries are finally facing the commodity markets? roger: i do not follow the countries like an analyst would. but markets of the moment, looking through the current retrenchment, moves you just talked about, and looking at some improvement effective in the commodity cycle a bit down

the road, maybe a year or two, but they are looking through this, and commodity prices themselves, the bloomberg commodity index, is well off its lows. there is a difference now between cutting dividends, cutting and what the market is seeing a year out. matt: i think that point, david, people are buying gold for safety, but people buying copper and iron ore, that is a growth bet. copper is up 32% year to date, but we continue to see analysts hit down their target prices on the spirit of want to get, roger, your take. .- on this i just want to get your take, roger. shares here in white, it is rare here i think that we see the cash price of the stock go above the analysts -- i do not want to say analysts are typically

cheerleaders, but they are typically more optimistic if they rate the stock, and they do not cover it if it is a sale. david: it is not as rare as you might think you're we were talking about this during the break. in terms of syllables, you often analysts thanking the cycle is going to turn down. therefore a year from now, the share price is going to be a lot lower, but the market not seeing that having happened yet. in the auto sector and now -- ford, general motors, feel chrysler, and so forth -- there is a dichotomy where some people peaked, andcle has this is the beginning of a down cycle. others having a different view. but it could be -- i have not checked this -- in the auto sector, you are seeing share price above the analysts targets. jonathan: if you get up ford and i checked this earlier, the analysts were starting to fall over, and they have not quite

crossed, but you start to see a convert. roger: that happens in cyclical. matt: i have it. david last night message me at, like, 9:00 p.m., burning the midnight oil, and he put together this chart of bank regulations versus gdp growth. it is interesting because bill gross has just come out with his annual letter, and he is saying that the future of banks, the returns of banks and the future are beginning to look more and more like utilities. he is saying that banks are per milligram at at the end of the credit expansion -- are permanently damaged at the end of the credit expansion. here is a chart that david put together. here you see banking regulation in white, and you see gdp growth in blue. david, what did you take from this? david: what that is is the white line is loans as a percentage of tier one reserves. you will see it comes down.

me is gdprprising to growth has not trailed off because some people say the reason we're not getting better growth is because the banks are regulated. roger: first of all, i've not read bill gross' analysis, but the banks are trading very poorly. i looked at that to some degree. i think it is much more an earnings problem than a capital problem. are not learning their cost of capital in general. something has to give in that regard because you cannot do that indefinitely. either shareholder pressures will rise to the point where they change their business models, or alternatively the shares will come up. but i think the bank share prices, which are quite weak, are reflecting our concerns about bank earnings rather than if this is solid. matt: can we still plug your chart, david? i think it is a fascinating look. matt miller, thank you

very much feared roger altman of thanks for joining this program. futures were slightly negative last night when i checked. let's bring it up on the screen for you. slightly negative in the u.s. a five-day winning streak. ♪

stephanie: later this morning, we have an exclusive interview with bridgewater founder ray dalio. our own erik schatzker will be sitting down with him live in austin. ♪

>> european stocks snap a five-day winning streak. breaking weekly jobless data out in just 30 minutes.

dies in a car crash just one day after being indicted for rigging bids. in the the impact industry. mark thompson joins us live. ♪ mark: -- john -- jonathan: a warm welcome. chairman andis a friend of the program. stephanie: we will talk herbalife, netflix, we just spoke adidas a few minutes ago. julie: the republican establishment is ramping up its

campaign against donald trump. today, mitt romney will make his case relied trump should not be the nominee. donald trump is a phony, a fraud, and his promises are as worthless as a degree from trump university -- trump for his part has said romney ran a terrible campaign years ago. the attorney general approved more sanctions for a nuclear test. the test fired short-range projectiles into the ocean and there has been no comments so far from kim jong-un's regime. speculatingons by according to testimony in the british parliament. it is said to make up more than takinglion or month by

dollars and funneling them into legitimate foreign-exchange market in the middle east. by 2400ews powered journalists in whether 150 news bureaus around the world. now over to matt. matt: futures have changed very little this morning. barely measurable drops. the dow jones down just 11 points. at what has happened in the last 30 minutes of trading. index to track the market moves in the last 30 minutes of trading. it has been up for six weeks in a row. we have only seen gains like when professional and institutional investors tend to do buying and selling about 45 times since we started tracking

, 1932 until now. , you see anit out average gain of 3.6% three months later. it is a bullish sign when institutional investors by more than they sell in the last 30 minutes of trading. let's look at the other moves in the market. the euro-dollar, rising a little bit. i want to look at the pound as well. you were back in london, do you focus on dollar pound or euro pound? wasthan: the big concern euro sterling. out and saidcame he was worried about the persistent strength of the pound. the way back up in the following two months. theok and think of that as

mario draghi grexit spread and this tug-of-war between those situations now. matt: even after having moved from berlin to london, i still only stephanie: learned -- -- the most cable is important thing to me right now. matt: great to get your perspective on how europeans look at this. let's look at oil and gold. back again, 0.84 crude oil and stocks. herbalife is a stock we will all be focused on 80% over the past 12 months.

we are up 30%, bringing the stock down only 9% in the premarket. >> we were digesting those numbers. thank you very much. think about the positive run we have seen for quite some time. first significantly negative thing we have seen out of the company in quite some time. only 122,000 shares traded up. jonathan: running out of the little bit of steam. the longest rally since october on a daily basis. the u.s. economic data has

continued to surprise to the upside. steve joins me now. we will get a lot of data. we await payrolls on friday. to beside seems inflation, gdp, and the labor market. do you can -- do you expect that to continue? >> sentiment comes and goes in waves. it looks like the economy is really starting to slow down in sales will not be good. if elegantly thing was slowing down. the data has been somewhat reassuring. i am cautiously optimistic. >> a piece out on bloomberg view basically says let's not focus on the 4.9% overall numbers much as leeches and participation rate. us aroundo distribute more broadly into the economy. >> i agree with him 100% on

wages. it is on every monthly report on employment numbers and a variety people palebers, most no attention to the wage no attentionalmost to the wage numbers. that is a key indicator. at hiser number i look jobs created. thatcipation is a piece of . i'm just looking at how many jobs there will be. >> it is it important how much it grows or just that you see the direction #>> it is important how much it grows. if it grows too much, the fed will raise interest rates sooner. of their justifications for raising rates is tightening labor markets and the possibility of rain -- rates rising too much. >> a yan and for wages.

they go up too much and we will get higher rates. stephanie: also if you look at overall outlook and those who are looking at bank stocks this and billy have been up gross's way in this morning about the whole financial system. the troubles of the financial system as the driver of economic growth to the inevitable demise of the sun. he said the climate is also challenging for insurers and engine funds aired bill gross will be joining us on surveillance tomorrow saying the financial system is permanently damaged. others say we are making a comeback about the financial crisis. >> i think there is a little of both. we have certainly made an enormous comeback out of the crisis. we recapitalize the bank. and veryvery sound

capable of doing business. the flipside is the u.s. government still has its regulatory foot on the neck of the banks. i heard somebody mention the word utility in the last segment and that is how i think a lot of us think about it. these banks are becoming utilities and the strengths putting on their lending by all the regulatory stuff is not good for the economy. we have got to be careful that we do not overstep. optimism with the the fed raising rates, that was the bullish case for the u.s. banks coming into this year. do you see that developing in any way, shape, or form? >> that is let the bank stocks have been doing lately -- lately, that it looks like they will not go up, so the bank stocks were quite weak. the new numbers against the fed back on track with a couple more interest-rate increases.

you are alluding to is the net interest margin, can they make money on what they pay for money and what they lend money at. that is a phenomenon that will eventually fix itself or the longer issues are the regulatory whether the banks are over capitalized and how much return equity they could ever earn in the regime they are living in. jonathan: the net interest margin will be weighed on by negative rate spirit there is not much evidence that is happening right here and now but it is the prospect of it happening down the road in the coming years. is that something you are focused on? >> the problem with negative interest rates for the banks is it is a very odd situation for the banks to say that i'm now going to charge you money to put money in the bank. the expectation is at least as long as rates are marginally negative, the banks will make

the smaller or that is their problem. regulation is the biggest colbert, we are not done yet. the fed indicated they will keep going on the stress test. saidanie: hillary clinton -- and dodd-frank to >> candidates on both sides say we need more and more. you do not even know you're there yet. >> that is all fair and it is definitely a movement to break up the banks. i hope that does not succeed. and there will be more regulation fair the question is will there be better regulation? more regulation does not mean they cannot go in there and fix some things they have done and try to make it work better. i hear from friends running big banks is the whole process of lending money has been compromised because the regulators are looking at every single loan and every transaction and every may do and at some point we have got to get back to normalcy.

jonathan: looking for normalcy, maybe. stephanie: normalcy, what is that? jonathan: steve rattner is sticking around. the opening bell is one hour and 20 minutes away. futures are slightly negative. down by about one point over in europe, snapping a five-day winning streak. ♪

julie: herbalife plunging even though they have trimmed clients

by almost half. it says it overstated the number of new customers last year because of database errors. the company is investigating her of -- herbalife for allegations it runs a pyramid scheme. felld-quarter profits short at costco. income fell almost 9%. shoppers are not standing as much after recent declines in the stock market. estimate.ed the 4.9% goldman sachs will probably join the list of u.s. banks who agreed not to sell russian that according to a person briefed on the situation. the obama administration has urged wall street to stay away snail, saying it is counter to the u.s. strategy. stephanie: all about valeant.

confirming this week it is under investigation, further spooking investors after the company can't monday's earnings call and announced plans to reduce forecast for the year. return from a two-month medical leave. it is a feature in this week's bloomberg businessweek. brian is joining us now. mike pearson, back at the company. why not move on? is it because he has all the money tied up in their? >> no, he really is the company. he is the thing that made the thing work. a little unknown jug maker on the west coast when he showed up and that he built it into a total juggernaut. not know if there is a plan b for valeant at this point. david: when they ran into that short seller, they came out of seven of they would change that business plan.

>> this is how they made all their money and how they feel the teacher or they do not have a true research and development pipeline that people are excited about the they have these older drugs people rolled out into a now offshore company here in they are charging a lot for them and this has come under huge scrutiny and may not even be viable. stephanie: if he is not part of the new plant, he is the only guy who can untangle the old land given how that duck they were. theycts i have no idea how will solve this. i would not underestimate him. the most aggressive and tells of her company that there is. i do not know anybody operating at that level. unknown,omplete interesting story to follow. keeps getting more interesting. not have more information on that. stephanie: even holding it together is very difficult at this point. >> i think so.

i think this is what he knows how to do. i expected to be interesting. jonathan: skeptics have characterized pearson's work is nothing more than playing financial gains -- games. let's go forward about two chapters with that in mind. presidential race. is this a kind of guy who should be leading the company like this ahead of tough regulations? we have seen the banking regulations shape. the regulations were not came online barclays. is that what we're going to see in the industry? >> i think the industry will have a half -- a hard time. if they made a mistake, it was raising the prices too quickly. i think they learned there was room to raise prices that they did it so fast that they do not learn a lesson about boiling the thought. you do it slowly.

stephanie: or you do not do it at all. collects the sounds increasingly like this is a company that depends very heavily on financial engineering for success in a lot of different ways. when you're going to be dependent on financial engineering and various ways, you better get it right. they already had to pull back, as stephanie said, on the they have got criminal investigations going. it sounds like houdini wrapped up in chains under the water trying to get out. it is possible. >> i am may be slightly more optimistic about it. i think you have to separate out a few of the things the company was doing. it was a wiring things eliminating rmb. illegalgal -- it is not . they were raising prices too fast. that will have to stop. companyll have a real

and products that solve real things to people that want and need them. what you may be looking at, assuming they can work all of these -- work through all of these, i do not want to minimize that, you may be looking at a company that could go on a slower growth rate and therefore probably deserving a lower stock price than they have. a company with a viable business, unlike other companies that turn out to have nothing but nothing. stephanie: he came back on sunday. thinking you know what, going to need a little time to get settled in. david: that is very fair, stephanie. thank you, brian. steve, you will be staying with us. up next, the -- the top stories treading on bloomberg this morning. ♪

david: time to take a look at the top trending stories on bloomberg. week.tting ready for next i want to talk about herbalife, which i do not see a. there is a story about herbalife overseeing growth. we talked about that already on the program. i know you followed this mostly. bill ackman went in and short of the stock. because hef that was thought that the regulators would come down, and that is still pending. but this is entirely different. so you may end up being right for the wrong reasons. stephanie: this is not necessarily going to get them to her bill says they are. thewould have to look at way they are reporting this. the number we have some latitude

in. it raises the question, if you have got this much of a see, what else is in there? besides the fact you love herbalife shakes. >> i have not enough knowledge and no opinion about. have experience with companies that come wildly off their estimates. these are like 50% of what they thought would be. like thismething happens, there is generally a lot more there than you are seeing. i'm not qualified to speak on it. stephanie: when you see a number that is this wrong with this much of a discrepancy, this could lead to them rating -- raising a flag and saying what? to attacky is said phony child in a utah address today. it feels like the gloves are off.

anytime anyone steps up to the plate, donald swats them down and they back off, which is what you often do with a bully. could mitt romney make a difference here? the chump train does not want to stop. >> you now have an army. it is not just mitt romney. mitt romney may be the general, but there are an army of people behind him trying to get chump down. the republican establishment has been awakened. they never imagined they would be in this position. you will see in the next two weeks, every dollar of republican money on wall street were elsewhere brought to bear to try to keep donald trump from winning ohio. >> if you're going to shoot at the king, you better kill him. stephanie: how do they pivot? if he wins, how do they turn and say, but we like him. of them will and some of them will not. we saw chris christie pivot.

some will say i support the nominee and the primary is the primary and we'll have fun and move on. this is something i've never seen anything like. i think mitt romney is obviously doing the right thing and they are doing everything they can to get trumped out of there. then what do they get? ted cruz is doing better than rubio. he is in some ways guerrier than rubio. i do not know at the end game is except right now, they are trying to get chump out. a 25 or 40% chance. there is a decent chance i could get rid of him. stephanie: dumb and dumber, so you are saying there is a chance. so much more to cover. ♪

jonathan: welcome back. good afternoon to the beautiful

city of london. i miss you. a five-day winning streak. attention shifts to the u.s. now. claims, thatobless is coming in and about five seconds time. i want to talk to matt miller to break it down. matt: are you getting homesick? the000 of the month -- for month. for the previous week, we got 270,000. a weekly number that comes out every thursday. that is a little bit higher than the previous week and a little higher than the survey at 270,000. still a low number. claims, 2.25 zero is what we're looking for. basically in line on continuing claims. on futures, we typically have no real reaction there.

gold futures come down on this, about 50 cents now. downad taken a huge leg before. it may not be in reaction to the initial jobless aims either. the tenure is where you typically see reaction to this kind of data. you see a little kick up. we have seen bond selling off three days in a row. if investors start buying, that will turn around from those levels. here is the euro-dollar now. we saw a little more strengthen the euro -- in the euro earlier or it now less strength. to theh reaction official job claims numbers. i have got jobs claims draft over five years. you see gold again for your we have the average.

and hassan hubbell a will hundred 75 level for the past few months there is economist in really a very much lower this spirit it would not be healthy for the economy. confit -- lose confidence, inflows into fixed income having increased -- decreased dramatically. we discussed this further with our morning meeting. matthew tucker, thank you for joining us. you and i had a great talk about this in the afternoon yesterday. the activity in fixed income has become huge as more mom-and-pop investors just want to have the six. of income and this is the easiest way to play that? investorss a mix of

30 think about who is investing and it is really everybody. mom-and-pop investors and those who have trouble accessing the market directly. it is hard for you and i to buy an individual bond. the etf gives us a way to build a custom portfolio for us and empowers us to build a fixed income portfolio that meets our needs in terms of income risk. you have big institutions playing as well p review look at the flows and audience, they tell a story about sentiment in the market and where investors are thinking of putting their money. matt: bloomberg news has been doing a report about how much they are doing derivatives. compared to what there was five or 10 years ago. are the etf's sucking some of the liquidity out of the treasury market? >> i like to think they are complementing some of the liquidity in the treasury

market. treasury market liquidity declined and everything is driven by regulations and some of changing business practices on the dealer side. otherors are looking at ways to get liquidity. u.s. treasury futures are using both. they are also using etf's. there is about $7 billion of volume every day in the u.s. it is becoming liquidity that all investors could access and help become from the drawdown we have seen. matt: if you look at the price of oil, you can see extreme volatility at the beginning of ats investing in the commodity. a lot of investors will say etf caused a lot of volatility in the underlying price of oil. can use davis name for the treasury market or is the etf import -- portion of the overall market in its incomes still so

low that it does not have an effect? >> i think it is still so low that it does not make a dent. there is less than $2 billion of assets in treasury etf's. it doesn't really make a difference. interesting is etf makes the market visible in a way that it was not. a lot of investors could not see the treasury market for the high-yield market before etf's came along. the etf giveaway to view it today and see it, which is valuable information. it lets you observe it in a way it could -- you could not before. matt: are there any disadvantages to investing in etf's rather than fixed income? asset wherehave an you can see it every day, that will give some investors pause. you can see a volatility you could not before. you pick of the paper and look

at the stock in the morning and see what happened to it. now you can watch that stock -- it might feel less comfortable, but it is still the same market. you are getting the same end of day price, but you observe it in a way you could not before. matt: thank you very much here we appreciate it. an interesting subject and the. i'm going to toss it back over to david. the last decade, newspaper ads have declined 11.5% annual rate your digital ads have decimated the print industry. the new york times is shifting online. let's bring in the company's president and ceo, mark. you lead an icon company can you have watched the shift.

mark: the heart of this is you have a great newsroom and a great brand, you have a potentially wonderful business. we have the plus of reaching the entire world, 190 people every month. subscribers onnd every continent. the downside is the structured particular, print advertising, being punitive away. toward a bigger audience. to enhance digital advertising. >> talk about that revenue stream. for everybody, the revenues of traditional media are going down. are you at a point where you are replacing that and making up for

losses? >> yes, essentially, we are holding company revenue pretty by strongly growing our digital revenue to upset the print revenue principally through. we are not seeing quite what you are talking about. there is no question of a strong secular headwind. stephanie: you mentioned the power of great journalism and a great platform. what about the that that that is changing in terms of what the consumer is asking for? on social media and twitter, you are seeing donald trump's tweets have more power than anything. isn't that a risk to the power of good journalism? andhere is more competition many more places where mr. trump and anyone else can if there views across. trusted brands,

names people associate with fact checked, reliable journalism, in the case of the new york times, we still have more than 30 foreign bureaus. i would say twitter and facebook are great environments for us and our brand and we have more subscribers than ever in our history, probably because we are more prominent and because we face less competition for the kind of journalism we do then we would have 10 years ago. stephanie: you're kind of journalism requires that much more overhead? because of the oversight and integrity. can just tweet something out. it is not enough to yahoo!. >> there is a reason why hastings is investing heavily in content. the game will be decided, in my view, certainly at the high-end, on the quality of the content you offer.

the times, most american newspapers, dis-invested in journalism to we kept a strong investment in journalism because that is what sells. quite apart from believing in we what else will you sell? asked people to spend a lot of money. you cannot asked people to pay for it unless you are prepared for investment. >> facebook is a competitor to you and a partner to you at this point. there was still controversy at the time. you and others have said we will let you host it on your site is. is that a material part of your revenue, for facebook? >> no, it is not. is we should try pre-much every platform. relationships with all the major digital and social platforms. do not give most of those platforms the totality of our

content, but we like to see how users use our content on a different platforms and how we work in these ecosystems. i regard the facebook partnership as an experiment and we are running many experiments at the team time, trying to learn from all of them. stephanie: given the demand for online video, why would you >> ouryour staff? expectation overall with video is to invest more money on video, spend more unconventional video and an additional amount on virtual reality. million withthan a the sunday times. that was a great success in a moneymaking exercise. would say we are rebuilding video rather than disinvested in it. david: you made -- made money on that. cost clijsters. -- investors.

>> when we launched our virtual reality app, we were able to include that as well. we are in the business of storytelling and we want to be on the forefront of every innovation on storytelling. >> you mentioned global. you bought out the washington the international new york times or how much of your revenue at this point is coming from outside of the united states? >> a relatively small amount. what would -- we believe on the digital side of particular, a wonderful international we have seen a real uptick in digital. the world is crying out for journalism you can trust. that old tag, without fear or favor.

we get to thoughtful readers on every part of the planet. stephanie: journalism trust is paramount as we head into the election. what kind of impact will it have? >> we are seeing astonishing numbers. our biggest month ever in january of this year, 2016 was the biggest ever for the new york times. stephanie: in total? >> in total. i believe one of the significant isws is because this intriguing and some people would say a disturbing election. people are fascinated. in particular, anything which could help them impartially figure out what is going wrong, i think they are very hungry for it. in my personal view, it is good for serious journalism. i expect when the roller coaster ride continues possibly all the way through, an amazing year.

we are also focus on in the london, union, just in that is another intriguing story we will follow through the year, i am sure. stephanie: thank you. that is the new york times president and ceo. thank you for joining us this morning. netflix putting pressure on cable companies. we will look at the arms race for digital content. ♪

matt: in the next hour, erik schatzker has an exclusive interview.

john: -- jonathan: just keep spending per years ago, cable would play reruns, not anymore. netflix come and arms race with other media companies. the netflix ceo is still with us. cory johnson is in san francisco. spend nearly $5 million for original content. is the money well spent? cause a lot of it is all for already made for others. it is a game of keeping subscribers. keeping those subscribers with better content that will get

people addicted in watching the service. you see netflix, such a big spend acquiring content from others, but also original content is there over other producers, and really changing the stakes throughout the entire business of hollywood. important point. some of the $5 billion for netflix and frankly the $4.6 billion for time warner, it is going to other people on the chart. it is revenue for the other people. >> right disney does not hate the trend. taking marvel characters to other producers to create stuff, and not just for netflix. one missing there is amazon. but amazon is out there. the hottest party hollywood tonight will be the launch of the second season of this tv

show, they are spending big dollars on it and they are hiring the producers of the wire. and especially no. pushing the level of spending in hollywood and are changing the entire way hollywood work and even the business will -- business model at hollywood works. for here is the netflix international strategy. the team have got very big ambitions. they recently announced launching hundred 20 countries around the world. much of their existing catalog, the rights are locked in the u.s. they cannot offer that .ncredible selection content,he original they're making 500 or 600 hours a year, and what they're trying ,o do, if you think about it you have got thousands of hours

of content you completely control. part of it you should see as part of netflix's international expansion. the other obvious thing is, put straightforward, competition with wally content and trying to encourage people to cut those courts and rely on netflix for great content, they have been doing a good job i think. number one, they do not always own that content. they have it for a limited time that their life doing it and they will lose it. the international growth is so important to them because the growth in the u.s. seems to have slowed down. if they do not grow internationally, they cannot pay for the content they committed. at a minimal level to pay for the content they already commissioned.

they do not grow internationally, they cannot start to pay for that. >> it is a high-stakes game but cory is right. if you are a producer in hollywood or arqule the anywhere else, it is christmas came early. >> it is good news. thank you very much, cory johnson. you have got to come back before june 23. we will next have a battle the charts come our favorite part of the day. ♪

david: mark thompson is still with us. the new york times ceo. matt miller, do it again. >> you better do well. to you, mark. but ii cannot hear you gather you are cutting to me.

adidas, a big story. i wanted to compare adidas and nike. look at what happened since 1995. it started trading on november 17 of that year. $1.59 billion. nike at that level with 4.3 billion, spin it forward to decades and adidas market is $22 billion. nike market cap, ein increase of 24 times. evaluation is five times additive. you had invested in adidas shares all those years ago, you would be sitting on a profit. 1000 you'd be sitting on 555%. we were at the same school so mark, i expect your vote. admire the cost

professional of mark barton, even though he lost his sound. as one of the liberal media elite, and you all belong to that >> as well. how can we stop donald trump. when we are selling the product, we need to plate to the american public that want to read about donald trump. mentioned in 125 media sources and you can -- you can see that mentions of trumps -- of trump -- mentions of mitt romney are only 75 per day. we will make as big a deal as we can about mitt romney, but the general public does not care about mitt romney. >> the question is which tells the story better of those two charts? a sigh think the romney chart is more interesting.

but mark went to the same school as me. >> i am voting with mark barton because i think it is inappropriate and incorrect to call this table the liberal media elite. >> he was upset the other day when i beat him. afterward, he was still crying about it. >> you one. -- won. stephanie: thank you for joining us. up next, erik schatzker sitting down with the founder of bridgewater. ♪

david: investors await new clues about the health of the u.s. economy including tomorrow passes job reports. shares of herbalife shrinking

after the company says it overstated growth in active new members. exclusive interview with bridgewater's ray. we are just under 30 minutes now from the opening bell in new york city. i'm david westin here with my collie jonathan ferro. we want to go right to austin, texas. with thetzker is there bridgewater chairman and co-chief investment officer. erik: good morning and on behalf of bloomberg television viewers, worldwide, welcome. people who know you and follow you know you developed models to

explain how the economy works. anyone even remotely familiar with bridgewater knows about the importance of the business cycle and furthermore the importance of the long-term business cycle to what are they telling you now? overtime, productivity matters the most. learned, debt cycles. short-term debt cycle what you spend more than you earned over a short time. the five to eight year cycles, everybody understands that. then there is a long-term debt years and goes on 75 goes through its limitations. when you have too much debt, you

cannot service it anymore and interest rate go to zero, so there cannot be stimulation. we have run out of monetary policy and we have to go to monetary policy number two, and number two is quantitative easing. this happened in the great depression, it happened recently. the purchase of financial assets those central bank, and other financial assets will rise and have the effect of lowering expected returns. when those other expected ,eturns are low in relationship one is almost indifferent. money in thethat system. on ais called pushing string. it began in 1935.

we are approaching it. we did a country that doolittle tour. ok. japan was there first. for a couple of decades, pushing on a string because they get interest rates at zero. and they are trying to stimulate to get inflation and they are going nowhere and it is not working. europe is there. if you look across the curve, interest rates are at a euro or slightly negative. depending on where. interest rates, it will certainly not work. raising those assets is very limited. we are close to being there in

europe. in the united states, we have a little more room and close to zero interest rates. very --ads are relatively low. returns probably around 12%. to the downside, tightening is going to be affected. it is easy. you raise interest rates and things slow down. not a problem. the situation is the risk on the downside. on thehave a movement downside, it is a risky situation. you will see the movement to make other forms of stimulation, which i'm calling monetary policy, three, which will not be just through quantitative easing.

and it stays in the financial community. we are going to have to theeasingly move toward making of purchases that put money directly in the hands of spenders. the linkage between having money in the financial assets and having done is becoming weaker and weaker. >> what you are effectively saying to me is monetary policy interest rates have run its policy to monetary quantitative easing, if i take you correctly, central banks are now going to have to hand money to consumers? >> one or another, they are going to have to go more directly to spending. it can work in a combination of fiscal and monetary policy.

in some cases, you could have the federal government run deficits which the central bank monetizes my lending the money and that is one path. then there is a continuum. the far side is called helicopter money. processt means is the of essentially putting it directly in your hands. the central bank has the legal capacity to essentially get money in your hands. the loss change from place to place, to put it directly in your hands and have used ended. bypass therds to financial markets to do that. if there is a range of ways for that to be done, history is loaded with them. comeong-term debt cycles once a lifetime. even once a century. they are rare and if you go back

through history, they erik: happen many times. erik:let's look -- the: let's look in short-term and examine what will happen a while. saying youen anticipate the fed will have to ease again and possibly a mark on the new round quantitative easing. will be minor moves, a 25 basis point move, it could be up. you could see another 25 basis points rising rates. will have tomove be toward quantitative easing rather than a big tightening. erik: we could be up and we could be down. said, and ialways continue to say, i think it would be a serious mistake and i think the federal reserve has come around to the notion that

we are living in a world economy and the circumstances cap surprise them because they're not paying enough attention to the long-term debt cycle. in other words, there is a reason the attitudes have changed. i think it is great to have changed. if you look around the world, the risk is not inflation and the risk is not overheating economies. erik: you feel the same way about the trajectory of the federal reserve and monetary all see. if the risks we talked about our asymmetric to the downside to the global economy and effectiveness of monetary policy because of the spread between return on fixed income and risk assets, what does that mean for asset prices? ray: it means asset prices correct to a point where they come back. words, the correction happening in the stock market --

let me be clear i not bearish on the stock market. have is, aswhat we you have those risk premiums, i expect stocks 4% return. long-term percent -- long-term return at 4%. pension funds like the university we're at right now. ray: yes. it is a big problem like a slow-growing cancer. it will not happen overnight. investors make a choice of assets. a bond has less than 2% return. equities have something like a 4% expected return. assets, look at those when they sell off, it has the effect of making those assets more attractive. it draws us or others in.

the issue we are dealing with is the possibility of the negative feedback loop that comes from the monetary policy. when stocks go down, and it has a negative growth effect, that has a negative effect on the economy. ability do not have the to ease, what i'm worried about is should the situation become weak enough in the economy like decades,ituation, two you have a situation where they do something else. this is the founder and chairman of bridgewater's associates. we are broadcasting live. let's go beyond stocks. if the long-term average annual and it is less for government bonds and cash -- at the moment, what makes sense as

an investment strategy? what you buy and what do you short, effectively? broadly speaking, what is working today? there are two ways the average investor should think about investing. one is, are you going to create a good strategic balanced portfolio that means you will not go to the betting table and that against investors like me. i'm scared to be wrong in the market. it is more difficult to win in the markets than to compete in the olympics. erik: you guys have an extraordinary track record of winning. is it harder to compete than it has been? ray: not the way we do it. vices.ot take systematic for a lot of people, they are systematically long everything. bad, it isrld gets

bad for them. in 2008, it was great for us. we have the opportunity to go either way. wrongo scared about being that it has reduced my chances of being wrong because i have so scared. andiversify our portfolio that is how we got track record. i was comedy in terms of, you asked me about investors. and what you think is appropriate for your investors. averagehink the investor, most everybody, do not compete against ourselves, do tackle allocation, moving around in the markets, because you will probably lose. you have to have a balanced portfolio.

think about how you will have a balanced for folio. asset classes as a whole will outperform cash. that is the thing you could be most comfortable with. the only time that has not happened. to cheap -- to achieve a balanced portfolio, that is another subject. i could come on the show and say, i think this is good. month later in the night change my mind and something has happened, i will mislead people. we are in an environment where it is important to be well diversified and that includes assets like maybe a little bit of gold in your portfolio. investors, try to achieve balance in many ways. think gold at 5% or 10%

of your portfolio, under the circumstances, would also be a prudent thing to do. prudence is important. have a situation where debt is money. we have a monetary system. we are having problems as central banks operate. 0% interest rates or less, think of it as one of those possibilities in terms of how you create diversification. erik: i expect the fact that it needs to change or you will be an effective investors, but i would like to get your tactical view if i may. oil? ray: no. erik: china? ray: i will you be my thoughts on china.

going through situation that is very similar to what the united states and other companies have gone through, which is debt is rising too fast. the template. that is what has been happening. you apply to china. they are going to have to restructure debt and they are in the process. they have to restructure their economy and they have to have a different kind of economy. the new industries have come in. industry andteel we went from manufacturing to services and now we are going to digital technologies. they have a balance of payments issue. we have had three balance

challenges and flows. we have a situation in china very much analogous to those cases. there are good ways and that ways to manage these things. leadership matters. i will say from my contact you have over there, you have very capable people in leadership. stock market handling was not capable. do not mistake the stock market handling for the capability of , theucturing their debts process they are going through. the way i have described it a long time is it is like china is having a heart transfer. if i said you will have a heart transplant. and itl probably be fine will probably weaken you.

is a difficult situation that will weaken you and you will get through it and be better than you were before. i think that is the situation in china. there are people who have looked at it as a boom or people who looked at it as a disaster. i think they are missing what is going on. >> you mentioned the debacle we andessed in china last year how that is not reflective of how the leaders are handing the army. about theirbetter ability to handle the debt situation now than six months ago? probably about the same. the balance of payments issue is going to be a challenge.

these cycles happen everyplace. it creates a balance of payments issue. of the issue, they have for example, they just opened the bond market for investments. we estimate probably in 18 months or two years, that would be worth probably in the vicinity of $200 billion of inflows. you can have by having foreign investors invest in the market, it will attract money and many of their companies are multinational companies and they have greater controls dan we might think for ourselves. while there is a balance of payments challenge, there are ways to do with that.

it is a challenging situation. but i would say the capabilities of managing it are excellent. i would say i get to know different economic leaders around the world in different ways. toir capabilities are equal the best that exist anyway in terms of things that need to be done. restructuring debts, all those types of things. disadvantagest of to a system like that. is of the greater advantages the control. erik: the issue you described, they will have to devalue their currency? ray: i do not know. say is thereould is a balance of payments pressure. it is one of those things where

it is too close to call. the tools there are really great in many ways. it is one of those too close to call situations. we go back to what you were describing, failures of monetary policy to quantitative easing, the possibility of monetary policy, or somehow governments get cash into the is -- whatnsumers, it truly -- what is for if you are thinking as an investor? there is the economy and then there is the investor. i would answer the economy first but you asked in the perspective of the investor. i would use japan as what is

most likely unless there is a debt restructuring to deal with these things. limits as tod the debt relative as a group. countryl take us as a and as a warrior -- as a world. world has a limitation right now in terms of you cannot raise much debt so we cannot borrow our way to higher spending. with zero interest rates down there, that is where we are. that low return environment is the main issue. erik: i would remind everybody -- is that --g the trajectory?

i believe that is the most likely scenario. slow growth, very slow growth. ups and downs. increased difficulty in stimulating monetary policy moving toward increasingly other havingtives ways of monetary policy that will produce stimulation. i'm not expecting something like 2008. that was 2008. we will probably see the big bang crisis. in which there is a and notof low returns

much picking up, stagnant and volatile markets. markets over a time. seen aske what we have far as the beginning of the year. ray: you have zero interest rate and the market selloff. from an investor point of view, you might move out something like cash bond or something like assets equities, you have a movement up and down. erik: are we there yet? ray: no one knows exactly what the range is. see then we will

have to see the negative feedback loop. stocks go down and that means the wealth effect is lessening. as the dollar goes up and the wealth effect, that makes us less competitive. the rise in the value of the dollar and the decline in the is a tightening of monetary policy. there is a tightening of global they pass through the economy is the asymmetric risks i am referring to. i want to touch on something i know is important to you. it has attracted attention lately. and theer's culture attention it has attracted is due to the notion there is some kind of dispute between you and your co-cio.

people are asking questions about it. ray: ok. succeed is bye having thoughtful disagreement. i am so scared about being wrong and the key to my success is to try to find people who disagree with us who are smart and try to understand their point of view so we can have disagreement. in order for us to have independent thinkers, there will have to be disagreement. you have to be able to disagree well. so you have to bring all , individual strengths and weaknesses, and you have to work your -- work yourself through in a thoughtful way. that is how we are succeeding.

isone sentence, what we want meaningful work and meaningful radical transparency. what i mean by radical truth is we could talk about whatever weaknesses are and so on bring all those problems and services. radical transparency so everyone in the company can see all of this stuff going on so there isbehind it. that is what is going on. greg and i have been working together for 20 years. there was fantastic people. you know david mccormick, murray, francis has been with us for 30 years. we have a whole team of people. a company of 1500 people. caricature story

-- ted out in the media erik: it is important for you to clear the air. ray: thank you for the chance. but that is what is happening. greg and i disagree on some things. is david mccormick, who might disagree on these things. workinga process for through that. when i started my transition out of management, i will always play the game. as long as i am welcome at bridgwater, and they let me play the game, i will play the game. management part in that transition, it would take a while to figure out how it works. for youe last question appeared i'm curious to know because we talked a lot about the machine and cycles and how the economy works, what role

does politics play in that? american politics is attracting an enormous amount of attention. it seems as though mr. trump is on his way to winning the republican nomination. things could change. do you have to recalibrate your models to account for things like that? i will take the first part of the question. if you go on youtube, i took 30 minutes to say how the economic chain works. erik: a great video. ray: so it is on youtube. it will explain everything i know. what happens is there is a part in the cycle where there is tension. when you get to this phase of there is tension between haves and have-nots, and also a frustration with government.

the unitedpening in states is not much different than what is happening in spain and what is happening in many countries, that there is a frustration. whiche a situation in emotionally charged individuals who may not be well informed leaders, might select leaders who are not capable and our emotional themselves. if that happens in these prone to, which is happen in these circumstances with these tensions, that means a type of leadership which handles the situations worth -- worse. then if you have people who understand how the machine works and how they deal with it. whose hands it is an is important. , if onementation exists group is fighting against another group, it is going to be bad.

if there is a moderation and a bringing together of people in terms of a common mission and thoughtful disagreement, while we are talking about thoughtful disagreement, you can work your way through to get the right answers, then this is all manageable. politics does matter. in answer to your question, we measure what their actions are. based on their actions, we make our responses. erik: thank you. it has been a pleasure. is the chairman and cofounder of bridgewater associates. jon ferro, back to you. n: we will get the interview up in full as soon as possible. the opening bell just seconds away. let's get you up to speed with what has been happening.

in the european equity, the five-day winning streak, the longest winning streak since october, done, over. lower for european equity markets. matt miller, let's get you up to speed. erik did a fantastic job where the central bank comments were fascinating, saying the fed could be raising rates but increasing rates would be a big mistake. very interesting. >> a very confident in chinese leadership. he said this is as good as you have seen around the world. jon: many people would agree with him. his point on monetary tightening , stronger dollar, weaker stocks, that is tightening. that is something the federal reserve has to think about. he does not see a repeat

of 2008. down --es, we are sorry, markets are open. present, we are little changed in the cash trade. not a lot of movement if you look at the major indexes. breakdown of the function, let's see which groups are moving up and which are moving down. energy, the only green spot here. it has changed down. consumer staples, consumer discretionary, health care, the biggest losers. we saw novartis down in europe. down in europe. those are the heavy stocks. that weighed on the stocks. let's look at oil.

a leg down before we have the initial jobless claims. they missed the estimate by a little bit. oil had come down. 3424.trading down 1.2% at a look at gold. investors should hold five to 10% gold in their portfolio standard. say not want to boilerplate, that is pretty standard. gold futures, if you had more gold this year, you would be a happy camper. it has been on 8:00 a.m. tear, up almost 18% year to date. it was up 10% in february. the 10 year. it has been selling off for three days in a row. we see it unchanged. getstors were looking to out of the 10 year and into riskier assets but it did not stop them from buying gold.

some stocks to watch, we have .een talking about herbalife that company coming out this itsing early and saying customer growth is not as strong as it stated. it said 16.5%, now it is saying more like 3.5%. this company being investigated by the ftc, concerns about its future. the stock is only down 7%. 80% over the last 12 months. this kind of thing would bring down a stock more. cameen this news first out, we had a drop of 16th .16%. it takes a long time to work out. much weight do you put on the numbers that came out this morning. there is a lot of confusion. >> you do not want to wake up and see your stock down. we have to wait and see.

matt: i do not want to underplay it. alcoa down you see here. metal producers down. bhp in rio are up. alcoa is down. aluminum, herehe you see disney shares upgraded. a $120 price target. sun edison had to downgrade.

fix kamman nasdaq maketh the first day. -- costco shares are trading down. a dollar 24 per share. just 1.5% growth. it looks like high and spending is coming to a halt and slowing a bit. it is something that is surprising. said these results are a bad omen for retail retail and a bloomberg

analyst said deflation is weighing on the results. not just this quarter, but the past quarter. we have a negative trend in a possibility that could weigh on shares of costco. we have the portfolio manager of tcw. welcome. we will cover three stories now. , jobless claims climbed to 278,000 people last week. average fell. tomorrow, we get the jobs reports. how important are these jobs numbers tomorrow? >> it varies depending on where you are. we are looking at the number is being a lagging indicator. what we are seeing is the global economics matter more. china.cerns are with over time, the jobs numbers are beginning to deteriorate.

there is still good strength there. this last cycle is central banks can do no wrong and can fix all problems. it continues to be in place. you get to the point where what you are talking about is getting rid of the $100 bill and going to negative rates. things are getting scary. always had a series of upside surprises in the u.s. matt miller has it for us. me walk you through what this function shows you. of the economic data points that we take into account, which way they surprise. here, you see the biggest positive surprises have dan in the jobs market. retail and wholesale, the big negative has been housing and real estate.

chart, thisup this little arrow here, you can see the economic surprise indicator, it was very negative. it has turned up. this is a six month rolling economic surprise indicator. we are getting closer to zero as we get more positive economic surprises that we have negative. >> do you expect to see believe across? >> it eventually. we are looking at the high-frequency numbers. the markets are reflecting that. we have seen much better market performance over the last couple of weeks. story remains in place.

europe has its own unique set of problems. are talking about coming up with two-tiered systems. those are your best ideas, i go back to the original statement. our expectation is that the situation is going to bleed into the u.s. probably remain the most attractive place to remain for the long haul. everyone is going to want to move capital out of the countries. >> banking and financing seems to be a screaming sector ready to be bought or a permanently damaged victim.

>> i think he is talking about the stock here. we agree. we have been saying this for a long time. bank stocks are unexciting. the regulation is continuing and accelerating. >> it is not just that they are unexciting, if you look at earnings, with a couple of exceptions, the earnings are not matching the returns. point, it is broken. it would suggest they have not

bottom doubt yet. >> i think it is a risk here. obviously, they will have to say enough is enough. you look at the size of the capital cushions in the u.s. banks and it is a huge differential at this point. gross will be joining us on bloomberg tv and radio tomorrow at 8:30. do not miss that. erik schatzker spoke with ray the last play minutes. he talked about federal rate moves. another 25ld see basis point rise in rates. the next big move will have to beat towards quantitative easing rather than a big tighten. predicting a downside

rather than an upside. big statement a to make that the next big move will be easy. the next big move will not be tightening. it is really not anyone's sonority oh at this point. ready at thisay atnt -- anyone's priority this point. the data, if you look at it, everything is playing out in the way they anticipated. they are all about the data. shouldn't they be hiking this month? said they are data dependent. fix their looking at what is going on with china. china is at a unique stage where

they may give up 20 or 30 years of credibility they have developed. the federal reserve is conserved about -- is concerned about that. if there is a difference between devaluation. what they did in august was devaluation. ,hat they are saying now they're not going to let this thing go rather quickly. it is going to drift down over the course of the year. >> that is the base case. markets can have a way of getting to a position where you lose control of that. a gradual depreciation becomes a d valuation. fix those of the stories that matter. .s bloomberg ♪

>> tomorrow, we will be joined by carolyn iversen.

final three months of 2015. this as labor costs jumped in the fourth quarter. the labor department said productivity fell at a rate of 2.2%. that was for all of 2015. it is the fifth straight year of week gains. google is joining the fight against the zika virus. they are donating $1 million to keep the disease from spreading. google will help engineers and scientists figure out where zika will strike next. that is the latest business flash. jon: thank you. we talked about bank debt a little earlier on. the concerns around it, particularly in europe. for good reason. many banks were posted annual loss. if you are an investor, thinking about what the total return is going to be, particular down the capital arecture, the markets talking about deutsche bank and having the capital structure cut off and equity ties.

bond markets are pessimistic by nature. >> how much is the pressure on the banks? does it really affect your business? >> it constrains the lending. you see increased defaults. it is not going to be enough to hurt bank balance sheets. officers, the lending you lend less to other industries. thing that is affecting us, the regulatory side. inare seeing poor liquidity the fixed income markets, particularly the breakable assets. capitalthe subordinate parts of the structured products markets. their liquidity is terrible. you see this immovable

object going against the force of regulation. monetary policy is supposed to be down to the bottom. the story there? that is not going to change. stories one are two liquidity. one is the regulators and the other is our central banks. they have pushed everyone onto one side of the ship by raising asset prices and compressing spreads over the last seven years, they put everybody on one side of the trade. it is difficult to find a liquidity to get out of the trade. that is the search for yield you are talking about. to bes a dangerous time going down in capital structure and credit quality. david: are we nearing the end of the credit cycle? laird: the answer is yes. we are nearing the end of the credit cycle. we are seeing things like a report this morning, china has the largest debt expansion,

nominal gdp growth is down. there is worst debt service coverage in those areas. likee talking about ideas negative interest rates. you see it in the leverage ratios. it has gone up to write near where was the last cycle. you also have the markets telling us near the -- we are near the end of the cycle. these are companies that are broken. the capital structures are broken. management is trying to play through for the equity holders. they burn the furniture, so to speak. debtpay subordinate holders. senior debt holders get stuck with the bag and poor recovery rates. see as manyy defaults as we have since 2009. that is dramatic. do you agree with that? they are in a

good position to make that projection. baseline tos a good have. the market agrees with that projection. function you can run on your own services that will show you the diversion of spread, which you will see is that plus or -100 basis points around the average spread and high yield only 12% of companies sit in that area. most companies are trading three or 400 inside of the average spread. 300 to 500 outside of the spread. david: thank you very much for .oining us coming up, bloomberg markets. vonnie quinn is in for betty liu. biggestthe second position. he is going to tell us if this is a big misstatement or whether it is something immaterial to the shares. be -- and mitt

romney's speech. we have that live. more from vonnie quinn later. next up, a look at the show highlights. ♪

>> a look at some of today's conversations or a >> the only threat to the economy are the financial markets and whether a spurt of volatility and volatility weakness could frighten consumers and businesses and also generate a series of negative wealth affects. trump could feature -- could face a catastrophic defeat. it is another thing to have massive down ballot losses. that is the galvanizing thing motivating people like romney.

need to shift towards a bigger audience and our thesis is a significant revenue stream to enhance digital advertising. going to have to move towards purchases that put money in the hands of spenders. the linkage between having money in the financial assets and having spending is becoming weaker and weaker. of interviews. tomorrow is jobs day. do not miss that. ♪

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♪ mark: we are going to take you from new york to london. here is what we're watching today. u.s. stocks slightly lower following the biggest two-day gain in the s&p 500. european stocks halting the longest winning streak that's october. investors eagerly awaiting breaking news. vonnie: shares are pledging today and still down about -- shares are pledging today. plunging today. the latest on the investigation into the death of the man killed in a car