♪ francine: the yen hits a high as fed minutes show caution over an early rate rise. jp morgan releases his annual letter and cautions of a brexit. gold rises. $35 in goldilocks ideal. this is bloomberg "surveillance." i am francine lacqua. it is all about the fed index driving commodity prices. it is a 17-one hi.

i do not know what governor kuroda can do. watch.'re on the parity the much stronger yen goes over into everything else, including lower german you. francine: i had a call this morning by 103. let's see if we have 100. in syria, fighters backed by the u.s. and russia have an on opposing sides. there are now zeroing in on the islamic state. they're trying to cut the supply routes between iraq and syria. british forces supported by the u.s. are moving closer to the self-proclaimed capital of rock. kurdish forces supported by the u.s. are moving closer to the self-proclaimed capital of rocca. is coming in two months

before the u.k. vote -- and germany, a turnaround from last year when mainstream politicians wanted to kick grease out of the euro. now they expect to reach a deal to unlock more bailout money. the demands that they take part in the aid program. we're hearing from the founder of the panamanian law firm at the center of the tax controversy. did nothingfirm wrong and he will make a few changes in his business model. mossack fonseca. fallout.d, it was a thursday antigovernment demonstration. the demonstration started with the prime minister and his wife were shown to have investment in offshore companies. they now want the finance minister to quit.

new protesting. maybe that is an icelandic thing? i can see michael mayo at the jp morgan conference call holding banana at james dimon. .t is all about the yen the 10-year has not moved. under 40.e, the next screen, this is jaw-dropping. point 38, a lower number is a stronger yen, but the acceleration is really front and center. the german yield, three digits, .106. negative .50.

they are in tandem. francine: it is amazing when you look at negative bond yields, they are going smoothly. i want to show you the european stocks unchanged. 1234. . want to show you yen i have a great chart going backwards. crude oil, 37.8. we have stockpiles that declined in the u.s.. goldman saying it is 35 on the that is a sweet spot for u.s. producers. tom: no question. to look atany ways currencies. if very importantly, they do not show the same emotion. i'm having trouble with the dollar collapses. this is trade weighted dn. it goes back 20 years. the gradual toyota-friendly decline.

this is the export policy in japan. here is a stronger japanese yen against abenomics. vonnie: the currencies are there versus the dollar. she doesn't know if there is more that abe can do. of: they are going opposite what they wanted to meetings ago. .rancine: i have yen we are now completely synced. we spoke to j.p. morgan chase, and he was saying there is no late in intervening at the moment. he believes the currency will rise to 103 per dollar. .he yen is the red line i chose options on volatility links to yen. crossng the dollar/yen

searching to 84% above average volume yesterday. it looks like it might rise. people are getting more anxious about the risks and piling into yen. let's get to the jp morgan chief asset strategist. stephanie, it is great to have you on the program. how do we price risk? it seems like the havens cannot get a break. janet yellen is not giving confidence. stephanie: there's interesting stuff to say about the yen. as an economist, i like to see fundamentals here at it might be bad news for japan. i think it is driving that back up in the yen. i don't think we learned anything we didn't know. people that are reassured the comments that we heard from janet yellen last week and her economic club speech were in

line with the tone of the meeting. they are focused on the same asymmetry. when you're closer to the lower band you have more room to increase rates. if you take a mistake you have to cut rates. that is giving them a risk-averse approach to the world. they are now openly talking about the rest of the world as a factor more than in the past. this has traditionally been parochial in the mandate. francine: economists are talking about china, but they're giving themselves time to make sure the economy is strong enough for the u.s. that seems perplexed. question: you had that in september, they are going to wait until china fixes its problems? it is more the broader dynamic around currencies and financial market confidence. there are nervous about how much

the improvement in sentiment has been driven by them and not fundamental factors. you hear them saying some of the underlying reasons why we saw momentum in the global economy is still there. just because we have injected a that is still there. even the currency question around china has not gone away. they seem to have a handle on it. they are allowing the currencies to strengthen against regional current these. we have seen the reverbs go up, as you would expect. tom: the german two-year yield went to -.502. the elephant in the room as you state is china has not moved. our the markets telling the chinese to catch up with major traded assets? we startedi think

the year worried about learning about the circuit breakers. worried about crucial things that the idea it will let loose of the currency. sent ofage they have the last few months is they are not willing to do that. if you look at the foreign exchange reserves, along with the reevaluation effects, the high reserves that come along with the weaker dollar. reduce outflows as well. sense ao not coordinated intervention. we know unilateral intervention doesn't work, but when do the japanese blink? this is the polar opposite move of a 120 yen. stephanie: they do have a problem. they are right, you have to do quarter needed intervention. that doesn't work if you are not catching a fundamental change as well. that is the issue the japanese

have. the fundamentals are pointing in the direction of a stronger yen. the account surplus, for example. you're looking at a country benefiting the lower commodity prices and structural flows. back to pension funds paying out more than they are taking in. you can not, against that, even the bank of japan. tom: the idea it is not only about yield and price, but flows. the surplus in recent quarters and years in japan. we will look at oil in the next half hour. we are thrilled to bring to you the top, the greatest transaction in wall street history, steve case looks forward to the third wave. ♪

♪ francine: i am francine lacqua in london. tom keene is in new york. my girl economics and the mark their yen.nomics and the early release of a galaxy s7 smartphone gave a head start on apple and chinese rivals. it sold three times as fast in its release as the s6 did. a boost to the new ceo steve wrote who is trying to turn around a four-year decline in apparel. on luxurydiscount apartments in london if you buy in volume. developers are offering

institutional developers discounts of 220%. buyers have to be willing to take 100 homes or more. that is your bloomberg business flash. francine: thank you. the chinese foreign exchange reserves expected to increase for march. robin, reserves are rising for the first time in five months. by $10.3 billion. do we believe the figures? : i see where you are going. the fx reserves, as with all economic data, look at it with a pinch of salt. it generally shows what is happening in china. the easing capital outflow, the depreciation pressures. i do not think the figures are hugely off from what people are expecting. tom: robin, what does a stronger

yen signaled to chinese authorities? i don't think chinese authorities are looking very much outward to see what is happening with other currencies. the way they are following the appreciationowing against the dollar while allowing for depreciation against the currencies of its trade partners. how it is achieving this is by limiting the advances against a declining dollar. if you take the euro, it has risen 5% against the greenback's. it was originally 0.4%. that helped against its trading partners. it tells people it is appreciating against the dollar and achieving a two-pronged

strategy. francine: thank you for those comments. stephanie flanders is with us. we talked about the fx reserves. they rose for the first time in five months. is a weakening dollar, a better than expected economy thanks to the easing on the fiscal monetary side and curbing capital outflows. surprise. it is a the trend had been for shrinking outflows, and we knew the valuation affect would kick in this month. they have foreign currencies, not only dollars in their reserves. certainly want to watch on the outflow side, how much of this is driven by tighter capital controls, and how much by easing. we heard about one thing driving let's chinese

companies not confident in chinese ability to pay foreign debt. there was an idea that that would be a temporary factor. once they reassured themselves about the debt paid down. we might see that particular move coming out and no longer adding to outflows, but it might be too soon to say. it is not that reassuring, because we know they cannot do that. tom: is it too soon to say there is an interest in emerging markets? in my desire to acquire emerging-market assets? seen the: we have flows into emerging markets over the last few weeks has been higher than it has been. jp morgan we have institutional investors talking about wanting to get exposure to emerging markets. we have our own internal debates on the asset management side if this is the beginning of the end

of this terrible performance for emerging markets. a economists say we have not seen the fundamental improvement to see the market going up, but we agreed it is a dangerous time in emergingeight markets. if you are underweight at the start of the year, you are looking at this rally if you are an active investor, you want to revise up your balance, even if you're not piling into the market. andcine: is chair yellen the fed trying to give a helping hand to china so it doesn't hurt too much with currency manipulation? , even if the bad loans the chinese authorities want to, -- keep controlling it. stephanie: it changes the

dynamic on the dollar. it is a different dynamic on commodities and oil. the combination of the dollar ies is helpful for the dollar. in the minutes, they are aware of that here the market thinks you can have all of these things together. the more the oil price is going up, the more we will talk about interest-rate hikes, and it goes into reverse. tom: stephanie flanders. the hour will continue this discussion. yellen, ben janet bernanke, sherman greenspan, and paul volcker in the same room. that is at 5:30. michael mckee will give wisdom in our next hour. ♪

today, 4 fed chairmen will be in new york. i wonder if james dimon will be in the front row at 5:30 tonight. let's go to our morning must-read. francine: this is the first-ever joint panel. his letter writes in to shareholders, he was talking about the risk of fed policy

mistakes and weighs in on the brexit. he said he is talking about the brexit and its uncertainty. it will hurt the economy of britain and the european union. that is jamie dimon, the jpmorgan ceo. stephanie flanders, also with jpmorgan. looking at the risks of exit, there is a clear realization that these are risks for the world economy. it is no longer confined to the u.k. or europe. stephanie: what happens when you have a steady growth rate seems to be more in the 1% range rather than 2% or 3%. will have more of an impact if it comes with a broader slowdown. that is why people are talking about the broader economic impact. particularly in the eurozone. if you're seeing a slight weakening and momentum, then

why you're, that is talking about it. in normal times, this could not get europe into a recession, but there is more going on. liberates us to be open about opposition. we see risks with britain leaving the eu. i have been trying to campaign to make sure it doesn't happen. it is something, particular countries will be affected. ireland i would worry about a lot. in the long-term it is something we can cope with. it is the short term uncertainties. tom:. length leave the union is they go through with it? stephanie: we would have said that they year or two ago was a sure thing. the the low oil price -- fiscal dynamics are completely different than at the time of the referendum. i would not be so confident. that are other things

could go if you have that lived. we are seeing uncertainty. tom: we have a wonderful section coming up on oil. let's do a check. we are yen-centric. giving you the markets. the euro is expected to be 114:10. it is a stronger yen. 108.30. stephanie flanders of jpmorgan. coming up, we will look at oil. a gorgeous new york, the chrysler building to the left. bloomberg "surveillance." ♪

♪ tom: good morning. bloomberg "surveillance." the yen on the move. 108.29.

right now, let's get to our first word news. vonnie: a report from brazil, lawmakers move forward with impeachment proceedings against .resident rousseff there is evidence she used illegal financing to hide the size of the budget deficit. the house will have to decide if she will be impeached. venezuelan workers will get an extra day off every week. the president wants to save everyicity by declaring friday and saturday in april and may as a working holiday. the u.s. will search for evidence that people or companies of native taxes against russia. at least $2 billion in transactions involved individuals and businesses with ties to putin. russia has dismissed the reports.

the race heating up between bernie sanders and hillary clinton. senders lists wall street donations to clinton's super pac and support for the war in iraq to say that she is not qualified to be president. has died.ard he came out of the bakersfield, california music scene in the 1960's and had 38 number ones. is known for okie from the skokie. mistie from must okie -- ogki. tom: bakersfield wanted to be more like l.a.. there was a revolt led by bakersfield. and thisga, anderson, was the guy. you went to the bakersfield

airport and it was the merle haggard airport. it saves country music, no question. real offense when people mention okie. there is so much more with merle haggard. he truly saved country music. was that too much on bakersfield? experte: no, yoare an on country. i more of an electronic and blues brothers. aboutg to oil, talking news, goldman sachs saying $35 per barrel is more of a goldilocks price. not too high or too low, but just right. stephanie, thank you for sticking around. foris the perfect number u.s. exporters.

they want it higher? i don't think $35 is what the global oil companies want. .articularly the country i think we will probably see, before a large scale bankruptcy, we will see one or two major export countries getting into trouble. you're seeing downgrade for countries like brazil. i think at $35 we will see more. 10 days wehe last spoke to the saudi deputy crown prince who is saying they won't budge if iran does not freeze off oil production. we heard from kuwait saying that they will freeze, and they don't care what everyone else says. if you do not have saudi freezing productions, oil won't move? iain: they are the biggest player, but there is non-opec

production as well. the the rebalancing of market argument depends on is the u.s. going into reverse, which is happening. there are enormous capex cut by on theors having effects world. it will happen, how long it takes is hard to guess. .il declines if you don't invest, production goes down. that is what is happening. tom: you have an interesting opinion on royal dutch shell. explain why i should be interested in royal dutch shell. iain: it is almost a no-brainer at the moment. they have a new ceo that is determined -- tom: not to be royal dutch shell. iain: exactly. shell, i don'tor

think many people cared. about technology, progress, other things. the guide now really cares about profitability. that is the difference. also, you have a restructuring acquisition,e bt which is second to none. the last time he saw move this big was when exxon merged with mobile over decade ago. tom: explain on the balance how supple their capex is. what can they do to manipulate investment spending over the next five years? do they have flexibility? iain: i talks about bringing down. they have to get below $30 to ben if they are going competitive to what exxon has done over the last six months in terms of production.

we will hear about that when they give us a strategy update. the third thing is the yield. you have a dividend yield in the company. they have promised they won't cut back. shell will move heaven and earth to deliver. a fairly low oil price which will improve. also, the dividend yield, it is a no brain or. francine: is there any value to be made in the industry? volatility. so much geopolitics is complicated. opec has lost control. this market has come such a long way. you see the supply reaction, which will take a while to see through, but that is the fundamental that has changed. you are seeing capacity down and investment in future capacity down.

over the medium-term, that gives you a market where it is not the overall evaluation, it is particular stories around particular turn around prospects. you could look at high returns. asset managers are starting to see this less as an asset class and more as an individual corporate story. where is the terminal value of oil? is it 50, 70, or 80? isn: the way that we look where costs are going. they're coming down dramatically. in the service industry particularly having to make significant cuts to service costs. the long-term terminal cost, terminal price, used to be 100. it is closer to 70 now. that is what you need to get the

engine going in terms of supply when we come through this time of oversupply. that is where we are heading. stephanie: what has changed is the dynamic. we know there's more of a cap to oil from the ease with which the back on stream. some of the shale has been taken out of the market and we know that can come back on. it changes the dynamic for opec, and also the market more generally. tom: michael mckee in the 6:00 .our on a most historic meeting janet yellen, ben bernanke, alan greenspan, paul volcker will look at our monetary policy. that is a huge deal. ♪

♪ tom: bloomberg "surveillance." francine lacqua in london, i am york.ene in new you'll get a 107 handle on the yen. you wonder what the response will be from the bank of japan. i wonder what they will do. i have no clue what they will do. francine: stephanie was talking sout the fact that there are many risks. even if you look at the risk of the brexit, we could've handled it a couple of years ago here and now we're talking about china and geopolitics, it does not seem like a great risk to take. tom: stephanie flanders from j.p. morgan. talking royalare dutch. , royal dutch, a

heritage of two offices. one on continental europe and one in london. what does the brexit mean for corporations like royal dutch shell? robin: not a huge amount to be honest. it has worked across borders for generations. sometimes they benefit from the fact some countries don't talk to each other very much. in some ways, they are aided by dislocations. tom: it is fascinating what individual enterprises to given of what wend awe could see in late june. francine: some companies are looking at plan b. if you are a small company in the u k and you export the london, that is not a great situation. we have seen a lot of the risks being priced into pounds. will it impact gilt longer-term.

if we see a brexit? stephanie: in a lot of cases we immediatelyooked to the silver market and said that was feel the effect. we have seen it short term in the six-month to nine-month range, which is brexit related. we would see a big move in gilt, and we have it. there is no fundamental financing issue that will come out of it. we will not question the ability to finance. veryall in the pound is applicable. if there is a structural change in the economy, that has a long-term impacts. long-term, the impact will be more micro than macro. in the short term, we think growth will be dented in the next 18-let's significantly if we have an exit, but long-term

it is about individual companies. maybe some of our assumptions do not play out. francine: there will not be a pound collapse? stephanie: it is hard to believe that you would see the pound rise, that would be a surprise. so faralready fallen when you think about the underlying fundamentals. the growth dynamics in the u.k. still look good. tom: going back to currency dynamics. you can barely see it, we are subtle with our graphics. stephanie flanders killed logarithms in sixth grade. this is the 100-day chart of the japanese yen here this is the .hock and awe of the yen a massive strengthening in the last two days. francine: one of the points that we talk about as a haven. we see it with gold.

stephanie flanders made a clear point that this is also structural reforms. abenomics is not delivering. stephanie: i think the safe haven thing is overdone. there are plenty of places if in are worried about risks the world. surely the bank of japan will respond. we saw a demonstration of what you might argue was the bank of japan's impotence. they moved into negative territory and the yen went up. tale. if they no longer have that power they no longer have that power. there's a confidence vote around the market and that is affecting the dynamics. francine: tomorrow at 5:00 a.m. in new york in 10:00 a.m. in london, we speak with the former chief economist of the imf.

with -- peak ♪

♪ tom: features deteriorate.

dow futures -86. we got a stronger euro print. it is fractional, but that is important. , dramatically stronger japanese yen. let's get to the thursday bloomberg's newsflash. is the a texas teenager 10th american to die in a crash involving a ruptured takata airbag. the airbag defect led to the biggest auto recall in u.s. history. lawyers for republican ship will appeal -- lawyers for blankenship will appeal his prison sentence. that stems from the 2010 explosion at a coal mine in west virginia that killed 29 people.

europe, the rush to replace people in the insurance industry with software. a modernization program wants to with$1 billion by 2018 changes that will affect a thousand jobs. to the lossay lead of a quarter million insurance jobs over the next decade. francine: this is the super panel at 7:30 a.m. ecb publishede minutes from its meeting. at 10:00 a.m., french president francois hollande and german prime minister angela merkel will hold a joint press conference at 3:00 p.m. u.k. time. ever, 4first time living federal reserve chairs will take the stage. they will meet for discussion at

the international house in new york. we talked about the fed about brexit. let's go back to emerging markets. this is my chart. in blue, you see emerging-market currencies. then you see the emerging market index. they have been thrown a lifeline thanks to the fed minutes and the verbal easing from chair yellen. flanders and iain reid. let's kick it off with you. emerging markets getting the most, dollar doing what it's doing. it can breathe more. iain: there are big challenges in some countries. lower oil prices is fairly terminal for countries that depend almost entirely on oil revenue. russia is case in point.

the trendbucked somewhat, because their earnings in dollars and paying some of the costs in rubles, which has depreciated. they have been able to keep producing at relatively stable levels. it will have to reduce at some point. --has a big scandal. part of the rationale for the bt was brazil.uy that is of great interest to people like me tom:. does the emerging markets need in audio? it is different in canada and the united states. what price do they need? iain:

developing oil reserves is more expensive. they have huge numbers in terms of reservoirs. i would say $60 a barrel for it to grow. in order to thrive, $70 or $80. russia is different. a lot of its future is offshore. they could also do with prices doubling from here in the medium-term. them outhat will get of jail. you talk about other cases like venezuela and ecuador. they are also in big trouble. the big producing areas of the world, we don't think about them very much, they are in trouble. francine: pushing in structural reforms to be better with mexico and the ones that are behind? stephanie: mexico is in a different category.

are talking about emerging markets as an asset class. clearly, a vague junk of the emerging market universe is importing oil and commodities. we would have expected them to benefit as it hits the physical dynamic with others like russia and brazil. what we needed to see with some sort of stabilization on commodities for those underlying fundamental stories to get better in countries not facing negative fiscal complications of lower oil. it is too soon to say it is onward and upward for here. you need to see corporate earnings pick up. corporate earnings are still negative, the first and second derivative are still negative. tom: the idea the first and second derivative, what do you need to see it oil, or in

general commodities, to signal a better em world for the philippines or indonesia? stephanie: on the commodities side, you have seen some improvement. it is more when you are looking at the real economic improvements and corporate fundamentals. a return on equities and capitals, is it picking up? way.ve seen it in a patchy the european emerging markets like hungry have done fantastically well. we are seeing it in certain places, but it is hard to say it is a broad-based after. it is dependent on the dovish language from the fed. is not fundamental, it is important, but it cannot read the beginning of a fundamental turnaround. tom: stephanie flanders thank

you very much. much,eid thank you very particularly your comments on royal dutch shell. we will look at the chart of time warner from the past, and looking forward steve chase -- the third wave. his book is getting wave reviews. that is what you get with the former lead singer of a bar band here it a book that is actually readable. dow futures down -77. the japanese yen 108.17. a stronger yen. stay with us. ♪

♪ tom: it is a global resurgence.

german bonds are priced to perfection. greenspan bernanke and yellen will assemble in the same room. reconsider the third wave. steve case. considering the internet affect forward. this is bloomberg "surveillance" from our headquarters in new york. i am tom keene in london. francine lacqua, it is a technology our work. the yen surging is game changing for japan. francine: it seems that investors are trying to test the bank of japan's resolve. 2108 to theg dollar. they keep buying it because the bank of japan has not said that

they will intervene outright. tom: let's go to our first work news with vonnie quinn. vonnie: syrian fighters backed by the u.s. and russia are now both zeroing in on the islamic state. they're trying to cut off the main supply routes between iraq and syria. forces supported by the u.s. are moving toward the self-proclaimed capital of occa. rejecting a treaty between the eu and ukraine high-margin of to-one. the referendum is not binding. it comes to months before the u.k. boat on whether to leave. in germany, mainstream politicians wanted to kick greece out of the euro, now they want to reach a deal to unlock more bailout money. they also want to demand the imf

take part in the aid program. we are hearing from the founder of the panamanian law firm at of theter controversy. he says his company has done nothing wrong and he will make a few changes to his business model. companies0,000 shell to investors. in iceland, more fallout from those papers. -- morenst demonstrations. the prime minister steps down. now the protesters want the finance minister to quit. global news, 24-hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. i am vonnie quinn. tom: let's get to our data board. futures deteriorating negatively. now -11. the euro at 114. iain reid that was a great interview withiain reid moments

it -- that was a great interview with iain reid a moment ago with his caution about our higher oil price. we are down to 108.15. we're clearly on a 107 trend to watch. down two the bund points. i have the same board, but i want to show you european stocks. there is now a clear reversal, risk aversion. tom: wait until you see the u.s. 10 year. well.basis points as this is the yen. meetings ago, they used a lot instant messenger to communicate. this is what they wanted to happen. they wanted to go from point a to point b. it didn't happen and now you have a convexity of a stronger

yen. francine: at the g7 meeting in may, they are not going to want to do anything before that. tom: a unilateral intervention is not what happens in textbooks. francine: i look at it on a technical level. whaten is surging toward 08. i have a chart and i'm looking at options of purchases. 84% of above average volumes yesterday. breaking above 110 it looks like it is lower. the yen is the red line and these are the options. .om: let's get started away from the markets, this will be a fun hour in celebration of this tome. a beach read for this summer. people who lined up behind the book is the general electric. joining us is steve case.

he never gets credit. chartup the time warner if you would. is the green circle. i saw you weeks after this, i'm sure you do not recall. it was a dazzling transaction for you. did you see what was coming? steve: we did know the valuation of internet stocks soared. in $70 million at the time of the merger, then it was $163 billion trade we saw the surge in interest and valuations here and we knew the valuation was quite high. there's some concern about the downside, but we believed in the upside. the path of broadband and the idea of the internet. we believed we would be able to capitalize, sadly we didn't.

the execution of the merger, it ended up being a disappointment. tom: a senate about some of the certitude about the second rate in silicon valley. how do you view silicon valley ?ight now with talk of unicorns the idea that silicon valley can play by a different rulebook that everyone else? steve: i'm excited and proud of many of those in silicon valley, the innovation is exceptional. they are sometimes disconnected. people talk about the inside the antway in d.c., there is inside silicon valley mentality. they're out of touch. they do get caught up in valuations. my investment firm violations in silicon valley in new york tends to be too high. i have a chapter in the book about that.

the middle of the country are great entrepreneurs building great companies that will be wave.f the third the venture investors will start looking at these cities. tom: francine? european and the global audience, you are one of america's most accomplished entrepreneurs. you talk about fintech. why have we not seen a bank by facebook or google? steve: they are too expensive. it could have happened earlier. one of the challenges of the a large company is that you are a defender. our theuptors attackers. i talk about a balance between defenders and attackers in the book. when they are merging people are skeptical. i'm sure 10 years ago, when the idea of airbnb came up, that was

crazy. now airbnb is worth more than marriott. you have to look at the disruptions and realize there is a cycle, but when they hit the tipping point valuations soar. sometimes little things end up buying the bigger things. francine: what is the endgame of the third wave? five-years, 10-years? steve: i think longer. the first wave was building the internet. when we started 3% of people were online. the second wave is building on top of the internet. integratingve is the internet seamlessly in every aspect, health care, education. in the book i talk about the internet of everything being broader than sensors and devices. a book where get

the author is the lead singer in a williams college band -- steve: i knew i should not have put that in. tom: your entourage is over there. steve: i'm going to go to every bookstore in the country and rip that page out. not.and was great, i was that is why got out of singing into the business side. tom: you had value from copyright. is this nation, with the third wave in internet, ready for a new copyright body in music, art, movies? steve: there's a lot happening in many forms of contentd being meaningfully disrupted. money byago many made selling music, cds. now they make most of the money in concerts and sponsorships.

the disruption of the industries in the first wave one now force policymakers to think differently. i even have a chapter on how berican government needs to disruptive if we want to remain the most innovative. it is not guaranteed. tom: steve case, the book is "the third wave." fabulous. meet the beatles. michael mckee. the greatest meeting we have seen. asogether, look for that 5:30 p.m. ringo will show up as well. bloomberg "surveillance." ♪

♪ francine: i am francine lacqua in london. we're watching macroeconomics and yen. posted betterg than expected first-quarter profits on the galaxy s7 smartphone, giving it a head start on apple and chinese competitors. did.ld faster than the s6 billion dollars spent on political ads. in the past campaigns have not thought of sports channels when they buy ads. fox hopes to change that. they found sports viewers are undecided viewers, and those of the people campaigns want to reach. goldman sachs says $35 a barrel is just right to make shares

worth buying. $57 next year.ge they believe opec will increase production rather than freezing. that is the bloomberg business flash. tom: steve chase is with us. we digress. we could not remove this from the hour. michael mckee and i are excited because the beatles will be in new york today. i love the graphic. michael: if you are a certain age, you had to note the .esemblance to meet the beatles we don't know which one is ringo, john, paul, or george. the first time there have ever living chairs in the same place. pleasantpect reminisces and the evolution of

monetary policy. talk about monetary policy. we were told explicitly by alan greenspan. tom: they will talk about fed credibility and independence off of 1951? michael: they might talk about independent. credibility? they might get to questions about janet yellen and how the communication strategy is doing. francine: will they talk negative rates? what will they talk about, it is all theory? michael: it is all theory. nolan in the united states likes it. experience of the ecb and around the world it isn't doing a lot. money market here would be destroyed by negative rates. if they are asked about it, i would not expect a lot of enthusiasm. they do not want to criticize

other banks. maybe they will come up with stories. francine: i can only imagine they would have things to say to each other in private, but will we see that? michael: they don't want to be seen as undermining the work of the current fed, and they have gone out of their way to avoid criticizing what is going on. if you look at the minutes, it is a difficult time for janet yellen. seriously, he categorized you among his students. steve: he is great guy, i took his leadership class. out and said i was like one of his medium students. that is generous. complicated questions about economic theory. tom: a simple question and michael mckee's world, can you

work in the great distortion we have been given by washington and the fed? steve: of course. who doesn't like free money? the fact that the interest rates have been so low and fueled investment in companies. some of that has benefited startups. particularly where they do not have 75% of capital. it went to new york, california, and massachusetts. some of those may be looking for other opportunities, crowdfunding, to enable that. it has been helpful. it cannot last forever, but it driving helpful investment into other security classes. some of which will be the facebooks of the third wave. francine: three over use the word "disruption?" word overuse of the

disruption? is it something that should come more naturally? steve: probably. my mom doesn't like the word, it seems aggressive. taking a fresh look at things, attacking big sectors. health care, 1/6 of the economy needs to be more convenient, a better outcome. you can call it disruption or revolutionizing health care, let you create the companies of the future by riding third wave trends. tom: is the fed disrupted? the volcker fed was divided at the end of his term and he left because of an insurrection on the board, the famous gang of three. when three members wanted to undercut his power. from there on, he had a hard time and left.

it looks like there's a lot of undercurrents of dissent or division in janet yellen's fed. she is keeping them together and no one wants to come out publicly against her, but we icult timea diff as they figure out what to do. you have to go to bed at 6:05 p.m. studentnot the median -- we will do this more on "surveillance" radio. michael mckee on a big moment for economics, coming up. that will be at 5:30 tonight. futures negative nine. 108.35. we are with steve case as we look at the third wave. this is bloomberg "surveillance." ♪

♪ tom: bloomberg "surveillance." york.om keene in new david kirkpatrick will join us with steve case and a celebration of the third wave. we celebrate a smart outdated. a must-read for global wall street. contrary to popular belief global core inflation is near a 15-year high. though disguised by the oil price crash, the energy gravel

fade from the price data i july. headline inflation may smash through the fed's 2% target the end of the year. this is critical. evans pritchard the backs it up with charts of the first and second derivative when we get to $140 per barrel of oil fall through. francine: a lot of people are disagreeing. he talks about popular belief, popular belief. central banks have been doing everything apart from throwing money from helicopters at the world economy. they're trying to target inflation. if you strip out energy, headline inflation might to be stronger than we think. if they are taking this seriously, it has huge implications. say it hast going to

never been greater, but it is ingible or you have a lift inflation. a lot of our viewers in the united states, versus the advantages in goods and commodity products, like oil. francine: wage inflation. we talked about the fed. we understand what they are targeting. it is not all linked to energy. central banks have been throwing everything they can to try to get inflation up. that is sticking up as well. tom: the german two-year showing stresses in europe. washington does a pretty good job of clearing markets within the first wave, second wave, third wave. the american way is disruption. the government invented the internet and commercialize the internet with the telecom act.

they broke up the phone companies, unleashing innovation. they stayed out of the way to let the market work. the third wave, it will be more involved. trickier balance for the innovators to work with government and not ignore or criticize it. tom: the government even went west all the way to hawaii. we'll talk about that in the next half hour. we will celebrate his book the third wave. we will do it with david kirk patrick -- david kirkpatrick. the steve case effect. i like that, that could have been a title. case, it isrick and technology bless. ♪

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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. ♪ francine: tom keene is in new york. he left the architecture in london and today we found out from developers in central under

best london that they are offering investor discounts as much as 20% for luxury apartments. "surveillance" apartment block. tom: that would work. francine: it would work. let's get to the first word news. vonnie: a report from brazil, lawmakers move forward with impeachment proceedings against the president. there is sufficient evidence that they used illegal financing too high the deficit. the full house decide whether she should be impeached. in venezuela, workers will get a next or they are every week to save electricity by declaring every friday in april and may a nonworking holiday. a drought has pushed water levels to a critical threshold. -- people or companies evaded sanctions against russia. that $2iles show

billion in transactions involved individuals and businesses that had ties to vladimir putin. russia has dismissed the report as an attempt to destabilize the country. rhetoric heating up between bernie sanders and hillary clinton, sanders says the front runner is not qualified to be president. sanders lists wall street donations to clinton's super pac and her support for the war in iraq. clinton was asked if sanders was qualified and sheet decline to answer. country star merle haggard has out to the music scene in the 1960's. he is best known for a song which criticized 50's at the height of the vietnam war. -- criticized hippies at the height of the vietnam war. tom: the ultimate disruptor of

country. we forget what he did come in nashville was going to write los angeles sound with strings and he and buck owens said, i do not think so and they completely redefine. a lot of time in and out of jails and marrying and divorcing. tom: johnny cash talked about san quentin, rural haggard enjoyed a few years -- merle haggard enjoyed a few years. vonnie: 21st birthday in solitary confinement. us is david kirkpatrick, author of -- as we celebrate steve case's "the third wave." a beach read this summer. knowledgeable about where we are headed.

when you think of steve case, what do you think about? david: i worked at time warner. a lot -- i think a lot about that deal. he pioneered consumer use of the internet. we did not call it the internet, we called it aol. he is a major pioneer and a friend who has been involved in other conferences. tom: we showed this earlier, the green circle is where steve case. out, the green circle is where david kirkpatrick loaded the boat. i talk about the facebook effect. i am a huge fan of david. what is the effect forward for all of this technology? steve: david's book is a great example of the second wave. people are connected to the internet and the focus was building on top, facebook did not exist at the beginning of

the second wave, now arguably the main media content. they can come out of nowhere and be a global giant, we will see other companies like that in the third wave. focusing on parts of their life like staying healthy and getting kids educated and consume energy. haveector of the economy not been disrupted that much in the first or second wave that they will be in the third wave but it will require a different playbook which is why i put pen to paper and wrote a book. francine: unclear what facebook becomes in five or 10 years. what kind of company will it be? they have other parts, the integrated, how big will it become and how far-reaching will they be? steve: they have done a great job in expanding their initial service. yesterday, they launched a new facebook live with a 24 hour

channel. they are not just focusing on how do they involve, that you've all, they have new brands, newher it be instagram -- companies come instagram, they want to be part of the future and eight jump through it through an acquisition. big companies will need to understand what is happening with these entrepreneurs and not just watch them but jump in and partner with them or buy them. david: i love talking about facebook but about the third wave that connected to facebook, i love that steve is focusing on the disruptive potential for all industries. what aol did and what facebook did, one of the reasons i wrote a book about facebook is empowered the individual in a fundamental way that changes the nature of economic landscape. the third wave is all industries having to adapt to a world where consumers have a voice through

live video. that give them unprecedented capabilities to feedback to companies and say, i do not like what you do and demand they be more socially responsible. , as people have gotten more familiar with technology because of facebook and twitter and uber, they go to their doctor's office and it is like a third world court their kids school and eggs have not changed. -- things have not changed, that will put more pressure on industries to invent new things. book is it of this is not just about the software and engineering, you need strategic partners to be successful and engaging with governments to be successful. the technology people can get together with policymakers, we need more of that discussion. complicated issues, most of these industries are regulated.

you cannot just focus on the software. you have to focus on partnerships with people in the industry and policy with government. david, we have not harnessed the full power of facebook or other companies, how can a central bank or government use it better to understand what people are looking at? a huge productivity puzzle in the u.k. the polls are ridiculous. we did not foresee a tory win. data: we have all this about the economy that is emerging from a digitized connected landscape that the government and regulators and financial regulators are not tapping into in order to have a much clearer, real-time view of the economy. they make mistakes as a result. too much focus on regulatory issues around financial services.

too big to fail or should the banks be broken up. i wrote an op-ed that the real places to focus are the big banks to dig to innovate -- big to innovate. they will be undone not by the galatians by startups attacking their franchise. tom: what is your prescription from death for jamie dimon to keep the momentum going? steve: position the company with what you are doing already internally and filled just build the network around your company and understand what entrepreneurs are doing and partner with startups. we are invested with companies august on the lending platforms, including ways to reach out to the unbanks. you captured in your book, is engineers first. the david kirkpatrick quote from

the third wave. as facebook, engineers are encouraged to move fast and break things. not because zuckerberg's reckless but he understands that innovations need the space to take risks and most large companies, innovators are often discouraged or thrown out the door and told to watch "bloomberg surveillance." problem, i saw that as aol got larger, we shifted from a innovative attacker to a defender and after the merger with time warner, focused -- one initiative with aol that launched a communication service for skype and got shut down because time warner cable was doing something similar. these big companies are generally trying to figure out, in the short run protect what they have and sometimes they mess up. i think they are doing some really smart things to continue to move with the times

and respond to snapchat. they cannot sit still. tom: a six-hour broadcast of "bloomberg surveillance." david kirkpatrick and steve case come in celebration of the third wave. tomorrow, we speak to the internal -- the attorney from jones day on the most interesting world of mergers and acquisitions and transactions. we talk technology. ♪

♪ francine: tom keene is in new york, this is your biggest market move, tom is focused on some of the german boones but this says it all to me, 1.838, a lot of people think the next

technical support is one of five and this is strongest for 17 month. reluctance to intervene, investors buying the currency. .25%, 10843, more buying as long as equities keep going down. for the g7 meeting, they cannot do anything. it will not be intervening. tom: thought we would have fun as we do technology with steve case from aol and time warner and his work with our government and with his own investment vehicle. in celebration of the third wave. sharp, short, book. thought we would look at a transaction with david kirkpatrick, author of the facebook effect. you.thrilled to have michael dell worked with steve case startup america with the president that michael dell took

a different path. describe our original dell path. >> they reinvented the pc. and selling it. they said itself it first and assembled it to order. -- sell it first and assembled it to order which propelled the pc market. dell has gone private. it is taking emc right at. this is about disassembling e mc. and taking the core storage part of it private. it is about deal mechanics. tom: is it financial engineering? the anti-steve case idea. >> it is, the legacy business whose revenues are waiting, the cloud model is impending the business. dell is tryingl

to make the business smaller, more profitable, smaller. tom: this is the third wave which is financial engineering. alle is trying to take it on himself, michael dell, take it private. will he be successful? steve: i have known him for three decades. very smart. he was enjoying a private company life. trying to figure out a way to focus his assets and the ones that have the growth potential and a crisper strategy, that is smart. the real opportunity for the large companies is to figure out where the future is and be part of the future, not just about managing the scale, making sure you are making the right investments. >> will he be successful? plenty of companies doing it for

free. steve: hard to say, i am not focused on it. david: the key test will be how do they innovate under the new structure. and does the freedom from the public markets give them the chance to do it year things -- .dgier things michael is still getting it together under a private structure. it is promising and dell has more promise than hp. dell got rid of its service businesses. all kinds of financial engineering that i do not inc. that is the main way to look at dell, the main way to look at dell is getting out from under the public scrutiny of wall street should allow them to be much faster moving and innovative. steve: a lot of people have that view, as i saw with aol and other companies including facebook, when you have that public offering, a successful

offering in the market cap is high you have currency to make acquisitions. facebook probably could not have required -- acquired some of these assets without public currency. one company that has done a good , shed general electric some businesses and done a good job of reaching out to entrepreneurs. i think the transaction will be successful. dell will do better as a private entity. the global market transformation has just begun and dell and hp are significantly less relevant in the cloud model then they were five years ago. emc, have to find a way to be relevant in the public cloud which is where the dollars are going. vonnie: what is the value proposition, if i want to get into dell, what do they need to

convince me of? >> you need to invest in your own infrastructure. you should be fortune 500 company investing in your own infrastructure and those dollars are waning. they are moving to the likes of google and amazon. microsoft. this dollar diversion, the spending diversion is what it's upending the model for legacy ip. the problem for hp and dell. tom: thank you for coming in. on financial engineering and the new. coming up, we continue with steve case and david kirkpatrick and look at tech stories now, the third wave for so many is the publicly traded companies of today. tonight, janet yellen with ben, alan greenspan come in paul volcker for the first time together. looking forward to that at 5:30. ♪

♪ london,m new york, "bloomberg surveillance." let's bring in jon ferro.

he is looking at the yen. is the research you see on how the japanese will respond? >> i do not think it is about ist the boj response, it whether it works in the weaker dollar world. october 2014 low, the flipside of the weaker dollar is in china with the reserves rising for the first time in five months. , that moves in the japanese yen, it is a big deal for the fx markets. tom: absolutely discreet, part of bloomberg go this morning. we are with steve case, the book is "the third wave." david kirkpatrick is with us, author of "the facebook effect." the apple wave, what you learn watching mr. jobs at what mr.

cook has followed on with. the single best chart, slow matters, the massive persistent success of apple. what is the apple wave you see? steve: i remember when steve jobs went back into apple 20 them ago, everybody gave up for dead, 2% market share. people thought they were irrelevant. he focused on products and clarify the product strategy and had great people and added great people and reinvented the company and leveraged the brand and launched a whole series of things, the ipod, iphone. they have been able to attract and keep talent. very impressive. tom: david, the way you are connected to steve case's world, how do you retain talent? david: if you are not doing something that matters, it hurts. not just about making money and

getting options, that is not the primary motivator for the best engineers and thinkers. they want to be in a place they feel the world is going to be altered. that sounds clichéd but i think it is real. he is motivated people that way and zuckerberg really motivates that people -- motivates people tim cook.nd so does , these sharing economies do not pay tax and are not related as rivals they are disrupting. david: it will be more complicated any third wave --steve: it will be more complicated in the third wave. the sharing economy was started a decade ago and is getting momentum went initially airbnb was thought to be a dumb idea, now they have traction, marriott and hilton are nervous at it be no- it started to

taxes and now they are starting to pay hospitality tax. they are becoming more mainstream. the challenge is to have the innovators and policymakers have more discussion to figure out the right way to move forward. tom: steve, we need to have the fact of the matter that there is something different in the air in hawaii. you were senior and the president was a freshman and you played basketball. what is in the auction -- oxygen in this wonderful school in hawaii that made for the success of you? steve: it is hard to say. it is a great school and i'm proud to be associated with it. a lot of people who have come out and other schools in hawaii. i did not appreciate this when i was there, what an interesting melting pot of people and perspectives, people respect the paths and lean into the future

-- the past and lean into the future. any innovator will figure out how to strike the balance going forward. tom: twitter, david, what are they going to do? david: i think they are moving in a decent direction. i think doing the nfl thing was creative. nobody saw it coming. talk toeople -- i marketers and it is amazing the excitement they have about twitter. tom: the book is "the third wave." tomorrow, blanchard, roubini, surveillance. ♪

>> the japanese yen surges to a strongest level in 1.5 years, global intervention. plugging the leak, china's foreign chains reserve live for the first time in five months, capital outflow pressure eases

as the u.s. dollar weakens. dear wall street, jamie dimon uses -- cautions over brexit and explains why he is still investing and trading. ♪ >> a very warm welcome to bloomberg . stephanie ruhle is a way. david: quite an evening for yen. >> looking at the fx market, maybe some tears, painful. theie: a long time before g7 meeting, not much you can do before it. fed will sit on his hands for a while, that was the implication that read across the ks