off today. alix: u.s. stocks closing higher today. the question is, what'd you miss? why emerging-market currencies and high-yield that are the ring in investors. tracy: plus, how much further can emerging markets rally? our guest says we may be reliving 1999 where the risky asset selloff now but rally later. we are going to discuss what this means for the markets and how the euro may be the best hedge. minute. with our market the janet yellen of rally definitely continued into the day. the s&p and the dow extending the 2016 highs. the s&p higher for a 30 day. i should point out that we are off the highs of the session. the dow at one point was up 137

points and now is maybe 100 points higher. part of that had to do with oil. oil really lost steam in the middle of the day, kind of tracking stocks down a bit with it. but the nasdaq, that was a big winner of the day. in part because of apple ,onceding its best rally rallying to a three-month-tracy: you mentioned oil just then. i want to bring in currencies because we are seeing a move in the dollar off the back of yellen's dovish stats from yesterday. five-your local man off the back of that we have the emerging market currency rally specifically being led by the russian ruble at the moment, which is really having a big, big jump against the u.s. dollar, and of course, the brazilian real. alix: we had volatility in the currency market but not really in stocks. this cool chart comes from oliver renick and it basically looks at the close to close

absolute value of the daily move in the s&p. that redline their means a 1% move. march has just seen three days with at least 1% change versus february, which saw 10 moves of 1%, and january has 13. really interesting way to illustrate. tracy: i'm so glad you brought that up because we will be talking the difference between stock and volatility later on in the segment. alix: there you go. how about treasuries? tracy: all right, bonds were interesting today. lots moving in treasuries, off the back of yellen. we saw treasuries falling because we had this rally in risk assets but the action today was outside the u.s. if we go all the way to ireland, we saw ireland actually selling its first-ever century bond, a bond with a 100-year maturity for yield of 2.35%. alix: oh, my gosh. tracy: something else yielding 2.35% last year, u.s. 10-year treasuries. alix: investors would rather put

their money in ireland for 100 years. tracy: amazing turnaround. think back to the eurozone prices. i wish yields on the 10-year or something like 12 or 14 -- i wish yields on the 10-year were something like 12 or 14%. alix: fixed by higher into the inventory numbers. to a 3.5% gain. part of it was the dollar. it rebounded from the five-month low. also, there was doubt that any kind of production freeze would be nullified. kuwait and saudi arabia are starting a production again in the neutral zone. what do you believe, what they say are what they do? tracy: exactly what the market doesn't want to many hint that the supply what is going -- that the supply glut is going to continue. alix: you can follow all of the tricks using the function at the bottom of your screen. i'm looking at crude positioning

-- tracy: of course you are. alix: and how that might influence prices in the short term. here is what we have. we have the white line, hour-long sp== our long specks coming into the market. you can think of these as etf investors. the green line art merchant-long positions and they are very, very low. traders are actually shorting quite a bit. they are hedging the inventory that is stored right now by selling contracts short. these are the very strong positions we have on the market. says anyn over at citi unwind of these three things can cause volatility in the market. for example, if the hedging unwinds, do you buy back the short positions? the merchant positions can spike up and boom, you have a rally. same thing with the specs. this will wind of dominating oil prices. tracy: it could go either way

based on position at. .hat is an interesting chart i'm looking at something slightly different. i have on my screen what i will call the dash for trash. in the early part of this year we had a huge assault for riskier assets -- junk bonds, leveraged loans, limited partnerships, the pipeline operators in energy, and emerging-market currencies. take a look at the chart. you can see how strongly evident has rallied off of the back of that. a lot of that has to do do with the dovish statement we saw from the fomc in march and yelling's -- yellen's speech will lend that were in the district alix: do you want to see that? tracy: the big question is what has actually changed in terms of the fundamentals compared to the start of this year. we have a lot more central bank stimulus, but other than that -- alix: that is not going to help

the u.s. -- they: i'm not saying fight fed put in terms of the fundamentals, maybe. you can see all these and more on twitter. here is oliver renick. .ey, oliver we just showed the dash for trash chart. why you seeing something similar in terms of stocks and risk appetite? oliver: perhaps. we were asked earlier about short interest in stocks and where people are getting short and to some extent they can be short in this market. there has always sleep in a lot of covering and whether that is something that can sustain or keep prices going upwards as a result of people covering the positions i think is starting to become a harder case to make. if you look at what is been the past couple of days, it has been a market that is slowly gone up, up, the bulldged

market we have talked about it and the strength in the market has been a good example of that. yesterday we look at this big statement from yellen, which was extremely dovish. brought up the idea that if you get deep into the tech, the possibility of reversing here at these are these tools that we have that worked previously and have been floating that out there in the markets like it a lot. we have a chart looking and basically the fed funds expectations for june versus the s&p. we have written about this type of thing before where you see the market and the expectations move pretty closely together but basically, if you look at that overtime, the market gets weaker, the s&p gets weaker, the fed funds move with it in terms of what the market expects. expectations for the fed hikes have been a lot lower than what the fed has indicated throughout the year and when you look at what has happened in terms of just the past 48 hours here, you basically have the fed funds

expectations for june going way down from 40 to 20 and the market getting a nice boost. i think that signals to have a market that is very much reliant -- very much like the news, whether or not it has been the source of all the gains in the past month, again, you can make the case either way here but it is clear that when you see the big moves and the way spreads across, it tells me the market likes having those lower rates and they have been in line with what the fed is saying. alix: yellen's dovish this was predicated on a lot of potential risks to the u.s. economy. all we got to the old marketplace where bad is good news? oliver:. sleep bad news was we missed their jobs number or the wages are creeping up more than expected but if the bad news is the bad news we are looking at with the global economy really slowing down and earnings just collapsing, then i think that is that is that ultimately does

that is bad news that ultimately -- that that is bad is that ultimately won't be good news. if they are doing that based on weakness here or at overall concern about global growth, i think that is that event. if you look at -- i think that is bad. if you look at this table, earnings expectations with disorder, it is astounding. i've been on vacation and when i connect i didn't like how far expectations came down for the quarter. alix: this is a big fear, the profit recession idea. the earnings keep getting ratcheted down. quarters with weak earnings growth -- contraction, rather. now you have a quarter you where you are taking 9% contraction and earnings growth. if you look at what sectors have flipped the most, i went to last joan and somewhat analysts were expecting for q1 16 at the time. they were expecting a 7% gain in earnings on the quarter versus -9% now.

for the second, they were expecting energy and materials and industrials to be positive earnings at this point. guess what, we are nowhere near that. we are looking at a contraction of 22%, 100% down from the year before. moreover, it is happening in a bunch of other sectors, too. six out of 10 have flipped in terms of analyst expectations for positive earnings to negative earnings, and tech is a big one of those and think that is concerning. alix: what about retail? the u.s. consumer is supposed to be the power house of the economy. is that holding up? oliver: in terms of profits it is not looking totally great. ,n terms of the economic data there is a lot of people who will make the case that things are getting better and wages are starting to creep up. people will have more money to spend. that is one of the sectors that has been a big concern for the markets because things were getting week in january and february and people were moving towards the defensive stuff and

out of those discretionary names. they wanted to be in the stables and utilities in the telecoms, the only stuff that led the first two months of the year and close to three. it is hard to really say from the economic perspective how much -- how much strength there is going to be from the consumer , but from the equity perspective you need to see a lot more strength in those names to inject a lot of confidence into the sector. alix: thank you so much, always nice to have you on. you're talking to lots of people and following the market closely. coming up, u.s. treasury secretary jack lew sounding the alarm on the brexit. for global economies have recently. u.k. leaves the eurozone.

mark: i am a mark crumpton.

u.s. secretary general ban ki-moon says -- u.n. secretary-general ban ki-moon says the united nations is "very appreciative" of political efforts to address the refugee crisis. he discussed a deal with turkey on a newly arrived refugees who will be sent back while the eu recitals more refugees. i think it is clear we need to be seeking solutions, solutions based on shared responsibility. i have been calling for countries to work together in the spirit of shared responsibility. the key to this agreement is implementation. mark: he spoke during a joint news conference in stockholm with the swedish prime minister. the paris prosecutor says a french citizen arrested last week has been charged with plotting what is called an imminent terror attack it officials say the suspect participated in a terrorist

group with plans for at least one attack. he is also to serve processing and transporting arms and explosives and holding fake documents. the airport in brussels, belgium, will remain closed to passenger flights at least until thursday afternoon. it has been out of operations since last week's terrorist attacks. once the airport reopens, arriving passengers will be sent to a hangar to collect the bags. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton, tracy, alix? alix: thanks, mark. what'd you miss? thatt is going to be for the economy, running to secretary jack lew in a charlie rose interview. youetary lew: i don't think will be good for the u.s. economy or the global economy. charlie: what is the impact? secretary lew: partially economic in terms of trade and

economic relations and partially geostrategic in terms of holding onto unity and in a world where one of the things that drives the economy is the uncertainty of geopolitical risk, it was interesting at the g-20 minting the risk of the brexit is something that people were talking about -- charlie: talking about it in china when i was there over the weekend. secretary lew: is that something you can measure with the economic index? no. but the unease and economic consequence? yes. i see all caps customs about what it means for the british economy and european economy. -- all kinds of estimates about what it means for the british economy and european economy. charlie: and youth unemployment. secretary lew: huge youth unemployment. anything in the wrong direction would be destabilizing. catch the entire interview tonight on bloomberg

television at 7:00 p.m. eastern time in the u.s. here on bloomberg television. tracy: the british referendum date is months away but investors are finding ways to hedge the brexit risk. bank of america is recommending selling the euro-dollar as a cheaper way to short pound-dollar. this is pound-dollar volatility, now i do record high. that means the pound has tumbled 2.3% this year. >> for the process of integration or disintegration in europe, it also raises the risk to some degree for the global economy as a whole. we don't think it is going to happen but people are concerned

going into june. alix: tracy is one of the conspiracy theory lovers from looking at -- mycy: i am going to wear tinfoil hat on the air. [laughter] no, janet yellen talked a lot about china and the global economy. if you look at the chart we prepared, you can see market expectations of interest rate rises moving closer to defend -- sorry, i should say vice versa, basically relationship building in the market and fed expectations. is janet yellen and the fed now the central mike of the world -- now the central bank of the world? >> not the central bank of the world as a whole but they do important things. shanghai puts a seal on something and the fed has been a lot more open about viewing the dollar as an important part of u.s. monetary conditions. they have done that for about a year now. they are also much more conscious like the

bernanke fed of the way that $ could tighten conditions -- dollar strength could tighten conditions for the rest of the world. that is important. a variant quinton part of this is much more confident about reaching its unemployment target. at the same time, they worry reaching the inflation target and i suggest that is because they think we have a series of global factors that push down inflation even if the u.s. economy is fine. alix: which implies that janet yellen is willing to tolerate inflation to stave off deflation and the rest of the world, which it seems like a world central banker kind of move. karthik: he does to some degree, except we're not close to that. core pce is 1.7%. goingd projections see us 2 years and we still don't get to 2%. perhaps some parents of

conspiratorial fashion they are thinking we could overshoot but i would suggest it is the other way around. they believed is inflationary portions for the rest of the world are strong enough that they will hold down inflation even if you have u.s. wage increases, and since 1994 uf had a strong correlation. speaking of the global economy let's go back to brexit for one second. you think that if the u.k. remains in the eu that could be bad for the u.k. economy. karthik: for politics and economics, and that is because of the concessions that might be made to the you take that to the u.k. to stay in. it is based on the underlying idea that what europe needs financially more than anything else -- it involved some degree of neutralization, some degree of federalization, some kind of risk transfer. all of these steps bring forward were raise fears of european superstate in british minds.

our argument is that those things become harder, if britain is in, because they keep pushing for more repatriation. conversely, what is given to britain's acceptance that the eurozone is a multicurrency area. the idea that the ever closer union is not the fundamental process in europe. that makes the argument is needed to stabilize the euros and much more harder politically within the eurozone countries. if we have a fed meeting weeks before the referendum in the u.k., do you think janet yellen is the ground being like, guys, we have to hold off because there was a big risk for the global economy and for your? -- and for europe? karthik: that i am not entirely persuaded about.

one of the things that is not appreciated by the market is the large difference between the financial dollar and the tray dollar. if you look at the dollar index that everyone except on that is eurosercent euro -- 70% and sterling. trade weighted dollar is only 20% euros and sterling. what you get in the immediate aftermath of it is some pressure on the dollar, some pressure on the euro. is it enough to hold the fed back? i'm not sure. you would see more traumatic events. potentially a significant in bank debt -- those of things you need to look at. to see yellen hold off yet again , or you need to see confluence of other events occurring. if the fed is inclined to be

more dovish or not, i have yet to see that. stock and currency volatility is now at the lowest on record. next, a chart you cannot miss. ♪

tracy: i'm tracy alloway.

what'd you miss? the difference between stock and fx volatility is the lowest on record. curiop dive is a market presented for your enjoyment because i don't know what it means for markets. here is the vix volatility index. market expectations of future volatility in the s&p 500. my below it, i think it is deutsche bank's current volatility index. measure of expectations. you can see that the spreads between the two is now at a record low. again, i don't quite know what to make of that. it does suggest me that fx volatility remains reasonably high. maybe the currency wars to live on to some extent? alix: it is about central-bank action at the end of the day. than inhave more juice the equity market that is what we are seeing. tracy: i'm short brexit risk is an elegant alix -- isn't helpin.

alix: good point. i'm looking at brazil. the curve of the swap that will expire in 2017. this is the market telling you what the interest rate will be in brazil. the markets have we rated down by as much as a full percentage point cut by the end of 2017. basically, markets are telling you that dilma rousseff is going to go out and be impeached and the central bank will have the juice to be able to do something different and help fight the recession by lowering interest rates. that green outline is what the expectations were on march 11. in a two weeks we have rerated that much on the curve stays relatively low and flat for the foreseeable future and that is when the impeachment risk really picked up and gained a lot of steam. tracy: this is yet another example of the brazil impeachment rally. alix: exactly, or hopeful interest-rate cut rally, i guess? coming up, is it 1999 all over

again when it comes to stocks and currencies? ♪

show me movies with explosions. show me more like this. show me "previously watched." what's recommended for me. x1 makes it easy to find what blows you away. call or go onliand switch to x1. only with xfinity. great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about.

i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. mark: i am mark crumpton. let's get to "first word" news. judge merrick garland, president obama's choice for the supreme court, met with two more senators today, al franken of minnesota and tristan gillibrand of new york. both praised him and called on the colleagues to give him a confirmation hearing and a subsequent vote. 2 minneapolis police officers will not be charged in the fatal shooting of a black man last november. police say the 24-year-old was reaching for an officer's gun when he was shot. witnesses say he was handcuffed. his death led to massive protests. virginia governor terry mcauliffe is vetoing legislation aimed at protecting opponents of same-sex marriage.

he says the bill would legalize discrimination and hurt the state's economy. the measure would stop the state from punishing religious groups who refuse services related to gay marriages. day, hours 24 hours a by hour 2400 journalists in more than 150 news bureaus around the world. i am mark did. tracy, alix? alix: let's look ahead to asian markets, opening in just a few hours. paul allen is in sydney. good morning. paul: good morning. we are expecting gains on the nikkei and a sx following the good lead from wall street with new zealand to open in just under 30 minutes time. once hong kong gets underway, we will be closely watching chinese banking stocks -- bank of china, icbc, and china construction bank all reporting weaker than expected construction growth. icbc reporting 42 billion and profit for that is their weakest growth in a decade.

china construction bank income of just .1% and bank of china profit of just .7%. the percentage of profit paid out by all three dividends is going to be falling. the bank of china president called this the new normal. he says that the era of double-digit profit growth has ended as the chinese economy slows. there could be some more pain for shareholders on the way, long-suffering as they are. this deal is the end of a four-year road. pay $4.5 billion and this deal fell over and it was almost about to be signed and then it leaves the list of potential liabilities. an hour after this deal was announced, sharp told the tokyo stock exchange they will be

riding down inventories and reducing sales targets. the prophet was due to be and it looks like it will be a $1.5 billion loss. i am paul allen from bloomberg tv in sydney, australia. tracy: what'd you miss? we have seen emerging markets fall and rally since. is it the 1990's all over again? at the end of 1998, emerging-market equities fell almost 60% from their highs and currencies fell by 40 to 80%. saysext guest, chen zhao, it is happening all over again. what were financial conditions like in the late 1990's? well, actually from a lot of celebrity between the late 1990's and today. if you recall, in 1995, that is when the fed started to raise interest rates. at the same time, bank of -- bank of japan was cutting them.

that is diverse and you have a policy divergence between the united states and the rest of the world, and as a result of the divergence from we had a huge rally in the u.s. dollar. the dollar gained 52% in trade weighted terms, and as a result of the big rally in the u.s. dollar, we got destruction in commodity prices, we got one crisis after another in emerging markets and by october 1998, i think, russia defaulted on its debt. debt crisis actually spread into the u.s., because the russian declineprecipitated a or collapse -- ultimate collapse of long-term capital management. tot really forced the fed step in and bail out the form and reversed the policy, most importantly, starting to cut interest rates again. a lot of celebrities. chen, when that happened, we saw huge risk rally across the board which is in

essence what we are seeing now. are we in the same kind of risk rally now that we were back in 1999? chen: totally. i think this year will be a reflation year brought about by two things. the fed has filed back the rate expectations. if you look at the united states them janet yellen, she basically told the world that she is going to be turning very cautious. another change this from china. the chinese government is making a good time for the right reason towards more stimulus, towards more demand management, because it you are caught the beginning of the year, the chinese government told the world they will do supply-side restructuring and that spooks -- i'm now they realize that the problem with the chinese economy is inadequate demand.

from request to reserve requirement reductions and physical stimulus. i think these changes gave the way for the return of the reflation trade, probably the next couple months. it seems to be the u.s. dollar and maybe if the fed is forced to react to inflation and then we get the interest-rate cut and that brings down the rally, is that right? so.: i think the fed is basically just the concern that the rest of the a weakerreally needed dollar. if the fed started to turn dovish, that would naturally pave the way for stabilization of the u.s. dollar. i don't think the dollar is going to collapse. i think the dollar will stop advancing and that will be good enough for a lot of commodity prices and good enough for the emerging markets to rebound. a lot of the asset markets have become massively oversold.

they are undervalued. they are being down so badly that they need a relief rally thei think the dollar -- weakness in the dollar actually provides the window of opportunity. alix: can you give us a percentage? how much of a rally will he see in u.s. equities, they shanghai composite? chen: i think if you use the analogy of the 1999, reflation, that was the reflation year, brought about by the fact that the fed changing policy, we had about a 40% rally in emerging markets stocks and 20% rally in emerging-market currencies, we had a pretty good rebound in commodity prices. i think we can see that scenario being repeated this year. when it comes to the fed and asia, something i thought was really interesting was deutsche bank pointing out a

chart that showed the number of times yellen mentioned china, the dollar, and global in her speech yesterday. it was a huge increase on past speeches. what was she so focused on china in particular? chen: because time is such an important economy. i think the china economy generates 40-50% of global growth. that is a massive economy. if that economy caves in in terms of growth, the world will feel the pressure. it is very legitimate for janet to focus on global risk. it is legitimate for a to talk about china. that is the one thing -- another thing, you have to manage the weaker dollar because when you think about the world economy, still very much dominated by the u.s. dollar. the dollar is very much a reserve currency for every country. if you start to allow the dollar to keep going up, that is a de

facto monetary tightening around the world. if you measure everything in the u.s. dollar terms for the last two years, anything that has not been expressed in the dollars are all going down. that is why janet yellen is very right that they have to talk down the dollar. alix: why is yellen more important now than draghi? chen: the key thing is that the united states is the economy that has got growth and the u.s. dollar is still very much dominated currency that is being widely used around the world. i think the fed -- if you think about the bond yields, u.s. treasury yields, 2% to 3% depending on whether you are talking about 10-year or 30-year, or whereas the entire euro zone or japan more talking but literally zero bond yields. i think on the marginal basis, the dollar and the fed policy is much more important than the ecb and the bank of japan. alix: thanks very much, gd to

see you. chen zhao of anyone global. tracy: a new york investor is rebuilding his empire with a brand-new hedge fund. ♪

alix: i am alix steel. time for a look at the biggest business stories in the news right now. blackrock plans to cut 3% of its workforce according to people with knowledge of the matter. the reductions are the biggest in the money managers history. ceo larry fink said that market swings might pressure companies to eliminate jobs. the cuts will be announced in the next few weeks. of pfizer ander

allergan is the subject of an in-depth probe by antitrust officials. the federal trade commission issued a so-called second request to the company for more information related to the review. pfizer and allergan agreed to merge last year in a deal they would at $160 billion. chipotle may be getting into the burger business. the company filed a trademark application this year for "better burger," according to u.s. patent and trademark office website. chipotle says it has invested in 2 small change and is considering opening another restaurant concept focused on hamburgers. and that is your bloomberg business flash. what'd you miss? the fall and now rise of hedge fund titan. --dan8, chen zha w zwirn was forced to shut her his hedge fund because of an accounting scandal. zwirn has been cleared of wrongdoing and is, to fill a void of banks with lower risk

appetite. tracy: thanks so much, alix. sharens me now will his story and discussed wider views of the credit market. talk to us about your new fund, when you are doing, what the opportunity is there. daniel: sure, thanks for having me. tracy: sure. daniel: we have an asset manager and we're focusing on different pockets of liquidity around the world, illiquidity around the world, opportunities to finance businesses, consumer, stricter financial assets and real estate properties that are otherwise unserved by more conventional sources of finance. tracy: this is the old idea of we have all of these new financial rules come in for the banks and there is a whole left in the market for people like you. daniel: that's right. companies around the world are much less able to serve those assets and companies that are in need. tracy: is there a reason that you focus on the more illiquid products?

be morethey can to structured and have more complexity and perhaps might take more of the collateral might require more collateral to han othery banks t companies and he gives us an opportunity to do something different. tracy: you have a long history dealing with credit. let's look at the recent rally with credit which is amazing compared to what we saw at the end of last year and early this year. it seems like high yield investors in particular have been on a roller coaster. daniel: yes, they have. what is going on is what we have 2013,ince the summer which is at times credit markets begin to more appropriately price asset and credit risk, at which time central bankers and other regulators create a dynamic that encourages the market to think there will be a better time out there and things

snap tighter. and we think that there is really very little connection between where the yield is priced across both -- each of the corporate mortgage abs and other -- traditional and nontraditional fixed income capital markets. we don't think the pricing makes a lot of sense at all. tracy: you think the market is frothy come in other words. daniel: very much so, and has been for a good amount of time. tracy: foreign investor looking for yield of its very difficult this for an investor looking for yield it gets very difficult. daniel: it can. people are lulled into a false sense of security that if the instrument is trading at a very tight price, it is safe. in fact they may be taking on lists they don't really fully understand, particularly given the longer direction -- longer duration and the lower levels of credit quality that we have seen in issuance. tracy: one thing i wanted to ask is you talked to hundreds of companies when you're dealing with credit decisions, whether

or not to give them money. what are you getting in terms of on the ground feedback about where we are in the credit or the business cycle? daniel: well, i think there is two different dynamics. there is the underlying performance of companies and then there is where the credit is price and how. one we arethe first hearing and seeing that the performance is really stagnant at best, as a general matter. with regard to pricing, it is a have and have not story where those who are very large, understandable, etc., can generally access credit and really efficient prices, particularly on the corporate side. in the last several months things have changed material and in the aba's dish in the abs markets. -- things have changed materially in the abs markets and those properties that are in the have not market really never participated in the run-up in the first place and continue not to participate with access to capital in the way they have since before the crisis. we have seen a number of

hedge funds underperform in recent months. is this a cyclical thing or something more fundamental and structural? would argue that when you are really seeing is a melding of what people call hedge funds, which is a rock term, and the more conventional asset universe. chileou get to three dollars, that which is alternative becomes not so alternative. ultimately it is difficult to outperform in a lot of liquid security situations where there is relatively little edge to be had. you are seeing folks trying to do different things in order to gain an edge, whether that is in a trading prowess were looking at different kinds of assets or what have you. tracy: thank you so much to dan zwirn. we will be right back. ♪

alix: i'm alix steel. what'd you miss? is to dollar natural gas here to stay? i spoke to a ceo who says we have already seen a bottom. 2008 i said back to we would never be below six dollar natural gas. alix: what happened i was so surprising that got us to two dollars? >>tom: how much we were able to produce under different types of reservoirs. not only shall, with limestone, sandstone, the amount of production that can come online was more than anticipated. alix: and the amazing thing we have seen is that the production keeps rising as the rig count has kept falling. how do you explain the huge discrepancy? is: well, in natural gas, it mainly due to an area that has

infrastructure coming in and the wells are very good and you can bring on more natural gas out of the east. the story about natural gas is actually about demand. as demand has continued to increase, that is going to allow prices to recover. alix: it seems like what everyone is waiting for is the one in natural gas price that is going to help rebalance the market and help the healthy market going forward. do you think there is such a price? tom: i think it is happening now. what we are seeing is under two dollars natural gas you are seeing a five or six increase a day in demand. we are down below where you can produce for coal is because the extraordinarily warm winter so not since 2012 and 50 of before that have we ever had as little heating demand as we have had in the winter. tcf of gas coming online that would not have been

in storage if it had not been for lack of winter. alix: does that mean the decline we have seen in natural gas you attribute more to demand rather than supply? tom: i think we have extra supply, but the only reason it will offset the supply with higher prices is demand. alix: meeting you don't think supply have to roll over that much. you just need to make to start picking up more. --need demand to start picking up more. tom: that's right, and demand is picking up more. if you have a normal summer going into the winter we can get back to 4.1 tcf to storage moving into winter but then what is trumping everything now is supplied in staying flat to actually decreasing at the time when demand is increasing. alix: do you think we will see natural gas prices resume their decline? tom: i'm always the optimist. alix: that is true, you are. tom: i do believe in a bomb.

alix: half past can completion crews get back online? tom: that is chicken and egg. where is capital coming from? for me, in my career when i started in 1983, since the 1980's we have not been with it cash flow as an industry x majors. maybe a couple months in 2004 and 2005. we are still lie today. the fourth quarter of 2015 we outspent cash flow nearly two times, even just last quarter. at some point, reserve-based lending is contracting. we know that. capital is becoming more scarce. that makes it much more difficult to spend once we quit spending, declines kick in and the declines -- most people will think they are more than was people think. alix: when you take a look at the market and you think the

capital market will open again, the debt profile of companies will be no problem going forward but it takes a while to get there -- what is the new source of funding in the meantime? is it going to be pe? is it going to be more bankruptcies because of that? mean, we know the bankruptcies are in process. the new source of funding can be from mergers, as you discussed, or people just moving down to live within their cash flow. alix: does that wind up also constricting production for the medium term as we wait? tom: yes, and what happens even in the world is that as capexies decrease their budget, prices go up. alix: you have access to capital and are always open to a takeover. are you also on the lookout requisitions right now? alsowell, we have a grid

so we have developed acreage of our own that we are drilling on. others are more constricted with their capital and we have been able to rise in leases and develop areas in northwest oklahoma that look quite good. alix: that was my exclusive ceo.view with the capstone ♪

alix: i'm alix steel. what'd you miss? don't miss this. housing and construction orders in japan tomorrow at 1 a.m. we are awaiting estimate announcement from the japanese government. tracy: you know what else we have? and job cuts.

also on friday we have nonfarm payrolls. alix: shout-out to joe, initial jobless claims, too. that is all for "what'd you miss?"

john: i'm john heilemann. mark: and i'm mark halperin. and "with all due respect to donald trump's concerns about michelle fields' pen -- >> ♪ >> a class for grenade. three clicks, it arms the views. another three disarms it. seems to me they were right. >> she had a pet in her hand, which secret service is not liking. is it a bomb? >> ♪