turbulence. .he currency plunges the cost of trump. he says be prepared for a debt field presidency as the billionaire takes the reins of the republican party. hit the brakes? .his is bloomberg surveillance i am francine lacqua, tom keene

in new york. time in five days, we are in the green. and jim glassman joining us at 8:30. where are we now? it is a good question to ask on a thursday. francine: it is, and we will look at emerging markets. here is natural. nejra: britain is going to the polls, london will elect a new mayor. financed his own race through the republican presidential primaries. now that he is the presumptive nominee, that will stop. they will raise money for the general election by supporting two people familiar with the plan. top aides suggest trump may need

a billion dollars. in turkey, resident erdogan has won a power struggle that sent financial markets plunging. the prime minister is expected to step down this month. the two clashes between have undermined confidence in turkey's market. russians will create three new divisions, about 30,000 soldiers that will be stationed in the western and southern military districts. nato is expected to send troops to poland and the baltic state. forced 80,000t people from their homes in western canada is likely to get bigger. it has damaged about 1600 holdings in port mcmurray. stoppedanies have production and opened up their camps to residents. this is a good equities,

bonds, currencies. turkish lira front and center in the news. futures rebound. the yield turning over the last few days. onto to the next screen, if you would. better than good yesterday. 15.32, and the vix trades now before the 9:30 opening in the united states. yen is weaker, 107. what is not happening is german yields have been very stable. they have not worked to a greater negative yield. we have not seen that. figuree: i saw a actually on what negative rates is costing some of the investors , something like $24 billion. this is my cross-border asset check. stocks in the green, practically

every industry group is gaining that not by much. showing markets, i want to you that because of turkey and i put in the turkish lira after we understand the prime minister may step down. president erdogan is trying to tighten his grip. 45.14 tom:. lira moving from 182 to 80. 180 to 280. this is the optimistic chart. this is jobless claims compared to the number of employed in america. here are the double recessions of the 1980's, a small recession 2001, and down we go with this

fabulous, optimistic chart, but few claims to the number employed. very cool chart. francine: it is a very cool chart. i wanted to show you can tango. -- contango. this is the difference between what you pay in three or four months for the price of brent or crude compared to what you pay now. this chart shows you from back in december 2 now, you can see there is diminishing contango, baiting the spreads between brent futures and longer ones .re narrowing it is significant because it has an impact on a lot of these oil majors using profits to -- using this to profit from the contango. great to have you on the program. >> good morning. wherene: when you look at markets are heading in asia, a lot of it has to do with central

banks and monetary policy. will it work? idea thattill an experimenting in the asian economies will have more impact than it does in europe. >> we are watching the qe and all that kind of stuff. for asia, the story is really the u.s. recovery. if janet yellen is able to guide that pass then we get better exploits and growth. we are getting some spillover from the kiwi but that is a second order issue. will janet yellen hike in june? hike, that would take the markets by the surprisingly could have a temper tantrum. paul: i am not sure the exact timing of that, but u.s. economists are looking at 2-3, 2-4 growth.

there will be a selloff, risk will be elevated, flows will go into the yen and we will get strengthening of the yen which mr. corona does not want. oda does not want. tom: this is a spectacular chart that no one is really aware of, which is high inflation adjusted rates in china. this is off the one-year rate, which is about as good as you can do in china. what does it signify that china is burdened by relatively high real rates? paul: they do have relatively high rates in china but let's remember, they are cut off from the rest of the world because the capital market is relatively closed. it is certainly not stopping credit creation. twice nominal gdp in china and one of the risks is that china

is growing too quickly and credit growth is too high. i think china is still a domestic story as well -- as far as the authorities are concerned. tom: does that spill over into the other economies we can say not only in china but in malaysia, taiwan, singapore, real rates do not matter? paul: i would not put the spillover from chinese rates to the rest of the area. the chinese tried to loosen up the exchange rate a little bit. the market got freaked out and a 6% blowout, low volatility in the markets, and they shut it down and we go over again. it is kind of an exchange rate reform channel, kind of a domestic story. francine: when you look at e-commerce, and alibaba is coming out with figures, is it a real proxy for the chinese economy? they disappointed in terms of

expectations. paul: i think we have the old , the old economy looks like it is flat or low single digits, and the consumption side looks like it is chugging along pretty well. evaluations go up and down but that part of the story, if we ,ook at retail sales or tourism that half of the chinese story still looks like it is in pretty good shape. tom: can you make this statement, janet yellen and a central banker of the world, or is that such a stereotype? as asia goes its own way. paul: i am not sure if central banker from the world, but certainly for most of asia. asia is still very much a dollar-ized region. managed their

currency, so all the trades are nominated and dollar. from an asia-pacific standpoint, that is mainly true. .om: paul gruenwald with us brian belski will join us later on, the u.s. equity markets. we dive into real news tomorrow with the jobs day. capital,ross of janus and james glassman will join us from jpmorgan. our usual a team for jobs day. ♪

francine: welcome back. we look at currencies, commodities, and the markets. i am francine lacqua in london, tom keene in new york. barclays is carrying out

its promise to shrink the thanks global footprint, selling one third of its stake and barclays africa for $879 million. jes staley said the bank will treat from africa, one of the measures he is taking to raise cash and lighten its capital burden. rolls-royce says earnings will start to revive in the second half of the year. a forecast they will be close to break even through june. 2016 will be a challenging year overall because there has been weaker demand of the company's marine units. about 15,000 electric cars and now the company says it plans to ramp up production to a half million cars a year by 2018 to meet demand for its new model three. they are in a have more than 325,000 orders for the new car.

that is the bloomberg business flash. francine: turkey's prime minister is expected to step down after losing a power struggle with the president. paul gruenwald vista with us. if you look at the story, what do you understand? erdogan is already tightening his grip. >> i think this is a fairly predictable result of a power struggle between a president and the prime minister. the prime minister for some extent does to some extent was a mentor to the president, and came into the prime minister ship expecting to be his own man. that role is actually more powerful than the president, but what erdogan is doing, he is proving that he is in charge and asserting the primacy of the presidency, which he wants to

take and expand his constitutional powers. tom: let's look at a chart of the turkish lira, this is dollar-lira. you can see the weakness, the recent spike showing some of the tensions of last year. the one week when we study turkish history in college, you have to brief me. 31 was the prime minister for 11 years. he is now the president. is he doing a potent ballet -- putin ballet here? john: some people say that that he wants the prime minister out of the picture altogether. they do not see it that way and the fallout from this is really about, there is only one show in town. what ultimately everyone wants to do, he wants to get a two

thirds majority in parliament. so he can change the constitution, that will turn the office of the turkish presidency into something as powerful as the office of vladimir putin in russia. tom: the one thing i learned about istanbul is the idea that all turkish politics is domestic. what is the domestic story behind this unrest? we arehe domestic story, hearing from the party that their own internal polling shows that potentially their support is good enough that if it held a snap election now, this two thirds majority could be within their reach. erdogan is very strong personally but there is a lot of turmoil internally within turkey. some people say they are on the brink of civil war given the unrest with the kurds in the southeast, so it is a very volatile situation, but erdogan is rising above it and showing

himself to be sovereign. francine: i would encourage sightseeing when you are abroad, tom. span, howook at the much do we know that this has been brewing between the prime minister and president? is it just one thing, or a matter of authority? john: it has manifested itself over the last month especially, lots of different issues. in terms of the broader eu questions, he was seen as the contact person for a lot of the european countries on the refugee issue. there have been debates about economic management of the central bank. people are now concerned what will happen with the finance ministry so there's all of these , all these different squabbles are manifestations of a much broader tussle. tom: paul gruenwald with us. the basic idea, is turkey part

of asia or part of europe? paul: i guess economically it is probably not part of asia if you think about trade linkages with the rest of the region or maybe participation in the region's supply chains. i would not put turkey on that list. the connection is through the em currencies base. maybe we get a spike on the vix and then capital out of the emerging markets. turkey could spill over to him asia and the usual suspects are kind of their. yuan, the indian rupee, and so on. tom: very valuable. john fryer with bloomberg news in london. coming up in our next hour, he is with eurasian group. calium henderson for years on the single -- singapore watch. he will join us, his first

interview since joining eurasia group. ♪

francine: i'm francine lacqua in london, tom keene in new york. my morning must-read, this is about the bongo. some on fox and writes about double line founder jeff gundlach and what he said was, it is going to happen is you are going to get a reagan response with donald trump. he told a crowd in new york

said, he promises a wall, he promises to bring jobs back, and he promises a lot of infrastructure spending. it -- trump is extremely comfortable with debt. this is how you spend your way out of austerity. this has been the last $48 -- 48 hour bench of trump analysis, a lot of it will be embarrassing for a month and six months from now. but mr. gundlach is dead on now is that under republican administrations we end up spending money than republicans would like to admit to. it is not just about president reagan, it is about other republican presidents as compared to the published frugality of democrats. what i'm talking about is a real delicate debate in the united states, but clearly there is a

zeitgeist out there that given a republican presidency, this big it gets opening -- opened -- the spec it gets opened. if it hasi wonder changed since we had the debt crisis in europe and whether people will look at austerity differently. let's get paul gruenwald into the conversation. as you rightly point out, it depends on what kind of spending a government does. paul: there is good debt and bad debt. if you look at the u.s., you need infrastructure, interest rates are low. there's a good case to ramp up infrastructure spending. if the debt is created to fund that sort of investment, then it is probably ok. i think we wait for the details. there is a good economic case if it is heading to infrastructure. tom: when i look at the word

austerity, austerity in england is different than austerity in europe, is different than austerity in america. is there a thinking of austerity across asia, is that even part of the discussion across the asian nations? err onn asia we tend to the other side. south korea, even if growth is low and global trade has not recovered, they are still trying to run a fiscal surplus because they think that is good fiscal policy, so you are not getting the policy mix right where you have an easy monetary policy. outside of china, it's actually 2009, igold star in still think the instincts in asia are to be very cautious on the fiscal to save a lot of money. that is a hard habit to break. francine: the problem in china is these ghost towns so they spend on infrastructure but if you have no one in commerce.

paul: they got to hook to the debt and now they have too much debt it -- debt creation. in principle, for an economy that is running below its potential, the markets are still twoing to fund the u.s. at for the 10 year, that is not bad. up in our next hour, he is out with another book. they are always thoughtful, this one especially so. it is about your children. , luck,frank on success and the good fortune, the myth of meritocracy. ♪

tom: good morning, everyone, bloomberg surveillance. a most interesting day, a quieter day which gives us thought for good conversation

before the jobs day tomorrow in the united states. now to our bloomberg first word news. nejra: in syria, a cease-fire has been extended to include aleppo. the truce took place today after talks between the u.s. and russia. syrian president aside have been fighting over the largest city. four out of five americans say islamic state is their biggest international concern. almost three fourths of the republicans say the concerns that the u.s. will not go far enough to support the group and more than half of the democrats are worried the u.s. will go to far. islamic state forces use a bowls -- bulldozer and homemade trucks to stage an assault that killed a u.s. navy seal and iraq. a team sent part of in to extract american advisers.

about 4000 military personnel are in iraq. blames antipathy to the government for the flint water crisis. governor rick snyder has borne much of the blame for the contamination and has professed the virtue of small government. it is the european central bank's new offensive against crime. it will stop production of the 500 euro note at the end of 2016. they are concerned it will be used to facilitate illegal activity. the decision is likely to bring criticism to those who believe the central bank is trying to abolish cash altogether. 150al news in more than news bureaus from around the world. francine: i love that last story. i was looking into it years ago, and i think the most counterfeited banknote is the

$100 bill from the u.s. i think it was a story about north korea. i am mixed up but i need to get into it. tom: it is a good day to get next up. us as paullso with grunfeld. we need to talk about central banks. we have a conference about hedge funds and one of the main things they were saying, or at least mr. druckenmiller was saying, a lot of this equity has had too much of a run, that we are going to see a correction. is that the starting point you would advise your clients of? globally, it is concentrated in the u.s.. if i look at the economic factor, it is still producing global gdp is growing. central banks are still supportive.

with that background, we expect the earnings to continue to grow so we are still positive on equities. francine: where are earnings growing? we are not seeing real growth for a lot of these companies. themis: we do have a little bit of growth on the back of cost-cutting but if you look at the u.s. last year, there was very little growth if you look at the headline numbers. , you do get out oil growth outside a couple of sectors, energy and of course commodities. tom: you are a breath of fresh air and that you come from your claim as a chemical analyst for years. tell me how the big chemical companies look at the world you are in now, the draghi world of macro policy. is it good for basf? is good company -- big company europe going to adapt and adjust to this new macro europe? chemical companies, if i

look back at my career when i started covering european chemicals and 1998, the used to trade on very low multiples. over the years, they focused on and adaptedpital, to the global environment. it is amazing how well they have done. companies like basf came out being one of the most successful companies globally, because they changed the way they approached business and the have been adaptive. what makes life a little more difficult for companies in general, not just chemical companies, their central banks certainly grow in the whole economy and that makes it a little bit more uncertain because in the good old days, he just looked at the cycle because it goes up and down, and you try and manage that environment.

now you produce another element that can be a little more unpredictable. tom: i love how you call it in the good old days. in the bad new days, our european companies becoming more anglo-saxon as they deal with this massive rate distortion they are living? .hemis: they are adapting they are clearly adapting. if you look at european large companies, overtime to have been very successful. to look ato, we used the u.s. and the companies and see how they manage and how you could learn from them. it is now a lot of the european countries leading a part from tech -- leaving, apart from tech. francine: what companies are you talking about? ?s it the french and germans a lot of companies are still mismanaged and if you look at the banks and consolidation, you

need a couple of defaults at least. companies are not managed well they will default. what is helping everybody is the very low interest rate environment where they can borrow very easily. francine: and stay alive. themis: then you can keep going. if we hit a very negative economic environment these companies will default. obviously, the administrative environment is playing a role in keeping them going but i do think european companies have restructured with time and the focus has returned to cash flow. maybe they have learned from the american model, they have become stronger, but you still have constraints. very difficult to restructure in france. labor laws are quite inflexible and that is why a lot of french companies tried to grow outside of france. paul: i was going to ask how

does potential central-bank behavior create a risk in your world? is that the most dangerous thing, or is the that rates are too low for too long? themis: i think it is a crucial question, how long will rates stay low and if you listen to the central banks, it is likely that the rates are going to be a lot lower than they have been in the past. having said that, the economy is growing and interest rate have to go up, and the question is how quickly. will they give time for the corporate in the market to adjust? francine: interest rates have to go up at some point, they can be three or four years. one of the things that is interesting and in eurasia -- interesting in eurasia, we are talking about helicopter money. a sharpere has been

rise in interest rates and we keep pushing the day of reckoning back, that the temptation is you get rates too low for too long you get over borrowing. they are inheriting most of this because it is begging into the dollar. tom: thank you so much. themis is with ubs. we will look at the equity market, much more of the american equity market. what a time to speak with brian belski on the blue chips just tobelski-like perfection. it is a gorgeous new york. it is donald trump's new york and hillary clinton's. ♪

francine: i am francine lacqua in london, tom keene in new york. a little bit later we have alibaba so let's talk about the chinese consumer. alibaba will post earnings a little bit later on in the s&p chief analyst paul gruenwald is still with us. when you look at alibaba, it is almost a proxy from the chinese economy, meeting the expectations for further growth are slowing down a bit but overall year on year, still growing quite a lot. how much do we know about the chinese consumer? how much does it help you understanding where the problems are? paul: the household sector in china is not very leveraged. it is the corporate sector. heart of this rotation to more

consumer growth -- part of this rotation to more consumer growth -- get all these upper-middle-class stuff that people get. thereg in is tricky and are things about local partners and stuff, that from a macro point of view, i think that story has legs. fromu look at the split the old china, the industrial, and the new china is industrial spending -- consumer spending. or is room to grow so that has got to be the story for china. im: the reality for me, and would suggest for most of our global viewers as we go deep into china, a few others like you actually go into china. if i go into china with your old-new nexis, what is the story on the rural urban migration

helping to support that consumer? paul: i do not go that deep into china. i hit the top cities. i was in shanghai last week and there are more german cars on the road than in any other country, so if you are talking about rising middle class, some of the provinces are increasing. the rural urban has been going on in the important part of that story is the chinese labor market has been tight for several years. double-digit wage growth in china for a number of years and that is structural so that will help support the rising consumption story. for companies outside, you have got to pick your spots and go in. there are lots of potential entry points and the story has got legs. righthis really folds into the idea of rising wage growth, because the regime is a

higher real rate as well. as you said earlier, they are very alone on this. paul: the other thing is the consumer sector in china does not historically use a lot of borrowing so a 50% down payment on a house. a lot of cars are bought with cash, so the whole idea of consumer loans, that is new and that is just starting. real rates, the economy is growing by six and a half percent or 7% in real terms. they do not look too far out of line with that so that story fits together. china has slowed down but we are still growing by 6% plus. francine: when you look at china growth, what we have been trying to figure out with some success to some extent, trying to understand the pboc's plans. we had a bit of turmoil last

summer and in january and these were policy mistakes. it is unclear whether this is because it is still an immature regulator and central banks, or they want to go away but do not really have the stomach for it. paul: the banking regulation has gotten much better in china over the years. the opening of the fx market, they are responding to the turbulence. to what extent does that have an impact on domestic china? that is kind of a bigger international question. domesticlity and the chinese growth story is probably a second order issue. francine: so you do not think china will go to effect devaluation, or will devalue on purpose? paul: i think stability has such let theeight, if they

rate for 27% or seven and a half percent, that makes them more competitive in export boosted growth, that export will not save the chinese economy. china is twice as big as it was before the crisis, so getting a big external contribution and pulling them back up to where they want to be is not going to happen. get the market driven stuff domestically. tom: we have been deficient in talking about japan. help me with strong yen. yen in fortrong china and the rest of asia? paul: we know what it means for japan, trouble re-fleeting the economy. china does not really compete with japan head-to-head. i think of japan, korea, and germany competing against each other. china is doing its own thing and

the region is kind of dollar denominated anyway so i do not think the cross between the rmb and the yen is a big thing. i'm not sure china is at the level in terms of this to test --histication of the export sophistication of the export that they are going head-to-head with japan. tom: paul gruenwald, thank you so much. bill gross, jim glassman to join us on jobs day. re-think,mic rate -- michelle meyer on the american economy. will this call on a probability of global recession? william bauder of citigroup. ♪

tom: good morning, everyone, bloomberg surveillance thursday before jobs day. francine lacqua in london, i am tom keene. right now, let's get to our bloomberg business flash. and publishing has rejected an $850 million takeover bid by usa today owner. tribune says that offer undervalues the company, which

publishes the chicago tribune and los angeles times. youtube is coming up with a subscription surface -- service that would offer cable tv screamed -- streamed over the internet. the service called unplugged could roll out next year. youtube has had talks with major media companies but has not locked up the rights to programming. that is the bloomberg business flash. tom: thank you so much. we are thrilled to begin a briefing with brian's -- brian belski. on, doubtmuch going distrust about our macro economics, and linking and over to equity with a weak earnings season. i want to get to the money in question. i'm going to suggest, not that

we have never seen this, but when we have seen this before, bad things happened. help me own colegate, help me own pepsi-cola, help me own mcdonald's. brian: we continue to believe we are heading into what we like to call the warren buffett/peter lynch era of investing. it will continue to outperform etf's in the broader market as we are buying good companies. you just listed good companies that are continuing to perform, some of the most iconic and consistent companies in the world. if you go back to the 1990's for the tech wreck, these companies were what greenspan talked about with respect to irrational exuberance. we are nowhere near that. tom: why not? brian: we believe investors will pay for consistency and clarity.

these companies continue to show the best risk adjusted returns, the most consistent earnings of any sector. tom: the journal had that yesterday. these are the leaders in that value, why aren't they priced to perfection? brian: they will continue to throw off good earnings. when you see this volatility happening, we think they're going to go back to these areas, especially in the summertime where we believe u.s. markets are going to continue to be quite volatile. francine: i am looking at the sun investment conference and stan druckenmiller saying the bull market in stocks is done, go for gold. he is saying that basically everything is overvalued. brian: i think blanket statements like that are a little dangerous, especially when you look at areas like financials, the most under and -- under owned sector in the

world. they are just now beginning to pay dividends. in america, we are cowboys. we have not paid dividends for a while and we are just beginning to see these types of situations. tom: we look at the price underneath it -- as the numerator and the denominator is the earnings. call in terms the of 17, 18, and 19 that we will see a resumption of revenues growth. the bull market is still very much alive in our call for a 20 year bull market. 2016 is kind of get going again. markets are never linear for long so this motion -- notion that the bull market is over -- francine: i understand, but everywhere i look there is a

risk. the bull market needs to run on something and i would argue that it needs to run on good quality growth but we are not seeing that around the worth -- around the world. we are talking about helicopter money, monetary policy reaching its limits. brian: oh, my gosh. this is three months removed from the end of the world in january where people were talking about contagion, fear that no analytical substance. francine: give me one optimistic view about the world. brian: the u.s. economy, the isld's largest economy america and continues to improve. francine: america is not raising rates. what is it waiting for? brian: it is may. stick around until june. francine: but it is not priced in the markets. brian: the 15 year hedge fund

manager mains very negative, and the cycle of life, things go up. we need to get back to that. tom: francine lacqua firing up ryan belski this morning. we are going to continue this morning into our next hour. mr. belski will continue. we will see a francine lacqua can beat him up anymore. idea of what foreign exchange is doing is the litmus paper of an interesting international system. this is great, ryan belski fired up with francine lacqua. ♪

♪ tom: what should you do?

we consider the stock market amid our great distortions. the two big to fail banks are in search of a business plan. janet yellen is central banker to the world. reconsider brutal currency moves. eurasia group in this hour. we consider america's meritocracy. inm our world headquarters new york on thursday, may 5. it is a quiet day before jobs day tomorrow. turkey. is quiet except francine: everything is quiet unless you are emerging markets. we don't know the prime minister of turkey is resigning. the president of turkey wants to have a lot of power. tom: we sense a great distortion

across all of economics, finance, and investment. here to catch you up on the news is nejra cehic. nejra: britain is going to the polls to vote for the new mayor of london. financed his own race through the republican presidential primaries. now that he is the presumptive nominee it will stop. trump's campaign is raising money for the general election. may lose suggest trump $1 billion in the fall. in turkey, the president has won a power struggle that has sent financial markets plunging. expected minister is to step down this month. lashes between the two has

undermined confidence in the turkish economy. russia will create three new divisions, 30,000 soldiers, stationed in the western and southern military districts. troops tosend 4000 poland and the baltic sea. 80,000 people have been forced from their homes in western 10 and a and the fire will get bigger. it has damaged 1600 buildings in the oil town of fort mcmurray. working cams have been opened. global news, 24-hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. am nejra cehic. tom: i want to get to the data check. your equities, bonds, currencies, rebounded up 7. the vix.to the renminbi was weaker.

i guess that is good news for stability in europe. miners have some gains in europe. equities are rebounding. they had a four-day drop. they are gaining emerging-market indices. i want to show you the turkish lira. nymex 45.10.put in tom: let's go to the bloomberg. one of the great optimistic out there. this is claims. if you are an optimist this is your number one chart. we have never seen claims compared to the number employed in america so good back to the late 1960's. that is were the data goes back to pre-or recessions. it is extraordinary. we'll see that data later this

morning. francine: this is what i pick. the difference between the brent futures and the longer data. we can see the spread between the two. it is the spread between brent futures now and 12 months. it means the spread has been narrowing. in december it was never late, now it is 3.5. a lot of the oil majors are profiting before the spread starts to fade. tom: this is exciting. we have brian belsky from the bank of montreal. we are pleased to bring in telemedicine. -- callum anderson. he is joined eurasia group. how did you meet ian bremmer? joins eurasian group and i thought that is the greatest thing going. how did it happen?

: it was good to join an organizationjust on the overlap between politics and markets. i am focused on the foreign exchange. wereof our tools politically driven, even if we could not talk about politics. when the opportunity came up, i jumped at it. tom: you have the practitioner's guide to currency investing, etc. i want to step this up with brian belsky's world reacting to henderson's world. this is the inflation adjusted dow back in one gazillion years. we are elevated and you look at where we are. can we know where we are? do we know what the risk-free rate is? brian: the framework that we use andurasia from a political

market perspective is the 1930's. of course, we have not gone through the great depression. the reason that we did not was because the fed did not make a mistake, unlike 1937. we have an increase in politicalization of financial markets in the u.s. and europe. tom: brian belsky, this frames the fear the people had. it is like the 1930's. people like you have to go into the trenches of equities and say "no it is not." why is it not like the 1930's? to america youct remember the dust bowl situation. the majority of gdp in the 1930's was agriculturally driven. the war machine got things going. when the war ended we had an industrial machine ready to go. that is the important difference. demographically when you look at

where the u.s. is now versus the 1930's, or asia versus the 1930's, there is a lot of differece. sometimes we go back and we try to find periods to tell a story. i think it is easy to increase the fear factor by talking about the great depression and the 1930's to hammer the point. francine: you were mentioning policy mistake is the biggest risk. do you see a policy mistake happening or ready to happen? what would it look like? callum: fortunately, we have avoided most of the big ones. those are the fundamental -- there are fundamental differences in the 1930's and now. we have avoided the great depression here and we have gone through a great recession. have reactedthers

more positively and proactively against the threats. there are political threats. there are potential market threats down the road. starting with foreign exchange and monetary policy. we are seeing the politicalization of markets between the united states, asia, could lead to danger. for now, markets are supported by the fact that yields are low and liquidity is high in the equity market. for now, and this is where i fundamentally agree with brian, the equity market has no competition. francine: at the same time, a lot of the markets -- i am thinking of the japanese markets -- almost mistook what governor kuroda is trying to do you read he said we are going to carefully introduce negative rates. markets, after a couple of hours it's meantcause

central bankers did not have the tools to combat anything ugly. the more central banks do, will it be reverse psychology where the markets selloff on the back of it? callum: central banks in terms of the ecb and the bank of japan have tried to prove that andzero ban was not a ban there was no limits. in doing so, they did the opposite. tom: this is the broad trade weighted dollar. the ruben-dollar of the late era. percent here,s move it over here, and the ruben percent move. we have dollar weakness. the threat with ian bremmer is that you will have a dollar policy. who makes that happen? go back to the first administration. people focus on ruben and forget

what happened before that and forget why he changed u.s. foreign exchange policy. initially there was a weak dollar policy. you have a situation where a significant part of the s&p has been hurt by a strong dollar and you have u.s. exports hurting. our view is there is at least a risk that whoever wins in november will implicitly go for a weak dollar. tom: what does a weak dollar policy mean for multinationals? when we look at those stocks, we believe the majority of clients around the world are in the position of an industrial recession since 2014. you look at the railroad stocks -- tom: is there an opportunity? brian: you talked earlier about evaluation. we think earnings are bottoming

out, especially in the railroads. volume inn pleasant some of the bigger machinery stocks focused in asia still have issues, but they are focused on domestic or north american growth are very well positioned. henderson and brian belsky. we will go beneath the headline data from james glassman of j.p. morgan. bill gross on the economy and the fed. bill gross on bonds. ♪

♪ francine: i am francine lacqua in london. tom keene is in new york. we welcome you back to "surveillance." .

here is nejra cehic. nejra: barclay is carrying out its promise to shrink its footprint. they sold $879 million to africa. retreat fromd africa. one of the measures he is taking to raise cash and lighten the capital burden. rolls-royce said earnings will start to revive. the jet engine maker forecasted it will be poised to break even through june. they have said 2016 will be challenging overall thanks to weaker demand in the marine unit which mainly serves the oil industry. built 15,000 electric cars. ramp upany plans to production 2.5 million cars by 2018 to meet demand for the new model 3. tesla has 325,000 orders. that is the bloomberg business flash. francine: this is a picture for

the emerging markets. the emerging markets world index, it is falling for the fifth day. the longest stretch of losses since december. we have a selloff in currencies not only linked to the fed, but volatility in turkey. let's get back to our guests in new york, brian belsky and callum henderson. howalked about colgate, but do you view emerging markets? they are stuck between a rock and a hard place. you believe when the fed normalizes they may surprise the markets in june and it will be ugly for emerging markets? brian: there has been independence for returns for the last 16 years. any light at the end of the tunnel in emerging markets, we see the fast/momentum money in emerging markets chase from a

fundamental basis. they are in the beginning stages of massive structural reform for reasons. rate anda 50% savings the consumer is trying to figure out how to spend and own property. all of these things are happening in china are you have issues on the opposite side in brazil.to people are trying to figure out positions in emerging markets in a credit area that continues to be restrictive. at the end of the day, we think people are

they did like system in 2008, with kennedy the president was a system one there is an old adage about speakers. he will never forget how they made you feel. this is some steam on the great work of daniel. on the idea of emotion winning in a political process.

quote,e: when i read the it baby think that donald trump had 15 years to practice. he was on tv and had to show. it goes back to the political system that is united states where you campaign for a year, in the u.k. to protect ourselves for how candidates make voters feel, we have narrow rules and you can only campaign for 30 or 40 days and cannot spend that much. tom: the idea that secretary clinton will have to find feelings while mr. trump will have to find thinking. as they moved to the middle ground, maybe what we expect as they model themselves. francine: the issue may be less understandable from my side of the pond, is why hillary clinton is so unpopular and why the

emotional connection in that three to four months coming up. tom: look it up, katzenstein at bloomberg view. -- cast son skiing at bloomberg view. we are thrilled to bring you robert frank, the most interesting smaller, thought-out books, and this one is on your children. how much luck to your children need within the american meritocracy? the fog has descended on new york, it is either secretary clinton or mr. trump's fault. ♪ iaae-m"

♪ francine: we don't emerging markets. -- we talk emerging markets. let's get to the first word news. syria, a cease-fire

has been extended to include the besieged city of aleppo's, it it took effect today after talks between the u.s. and russia. rebels and forces loyal to the syrian president or the last two weeks have been fighting over the country's largest city. for out of five americans say islamic state is their biggest international concern. that is according to a new poll. republicans are concerned that the u.s. will not go far enough to stop the group. islamic state forces used a bulldozer and homemade gun truck to stage an assault that killed the navy seal in iraq. he was part of a team sent in to extract american advisers appeared about 4000 american military personnel are in iraq. the rest justin's apartment -- the u.s. justice department says

the north carolina law restricting bathroom used to transgender people is illegal. bank's newn central offensive against crime, it will stop production against the 500 euro note again -- at the end of 2018, they are concerned it will be used to facilitate illegal activity. it is likely to bring criticism for those who think the central bank is trying to abolish cash. global news 24 hours a day. tom: thank you. time for our single best chart. belski.is with brian bringing -- blending economics. here is the single best chart. in the yellow line is before your presidential moving average that shows how unusual

back to before eisenhower this moment is. do we blame corporate officers for their efficiency and use of capital which has allowed us to have minimal labor? brian: we blame, in conservative nature, the term holding cash, manufacturing or earning and not wanting to spend to grow. we think that will change over time. as growth and revenue comes back to america, we see increased manufacturing. tom: when they spend, will they spend in the united states or malaysia? brian: a mixture, over the last 10 years, primarily and emerging markets, we think they will be spending more in north america. tom: let's look at the same chart, we can do this on the bloomberg, blown up. here is the four-year moving

average, the ugliness of the early 1980's, how unusual and short, this gives pause, the thickness comedy dimension of our lack of productivity. how does this affect nations worldwide? callum: we have declining productivity but not just in the united states. at some point, that has to impact markets, difficult to tell when. is declining return. we have to have a rebound in terms of total lack of productivity. francine: how does it impact markets? if the productivity puzzle is because we work differently because millennials do not tend to work on a daily basis, or the way they work is different because of uber, deflationary pressure, the need to think of our metrics and how we measure

the economy differently. callum: that is correct, we work differently and have a lot of disruption in terms of industries and you mentioned some of them. we come back to the overall trend and that is that the underpinnings of our financial markets are being questioned by the decline in productivity. at the moment, you have competition between stocks and bonds where bond yields are so low that that is a fundamental supportive factor for equities. if you have a trend line in productivity, that is a? -- that is a question. francine: how do you see productivity, brian, is it something you can take advantage of if you see the power of facebook or it were -- or uber. or is it something more sinister underlying the economy? brian: i do not think it is

sinister, the end of the day we had the greatest brands in america with a lot of cash. over the next years, the question is how these great corporate giants put the cash to work. we know this has been the slowest recovery in the history of her covers and people are still defensive end people -- and how people are managing their companies. inflation andge the fed raising interest rates, it will help force these companies to put the cash to work with respect to return on invested capital. tom: i look at this discussion and it falls into the election, where we are in america. corporate separate or -- our corporate officers are with the rest of the america? brian: in this reactive mode, we are afraid to be wrong, we are playing defense. microcosm of a

what is going on in society, not the retail investor on the hedge fund manager but corporate america. we are afraid to be wrong because of the repercussions. the defensive nature, we need to believe in ourselves again and focus on fundamentals and move forward. tom: come back when the pittsburgh penguins lose a game. he will join us on bloomberg radio in about that in a bit. .- in a bit tomorrow, our discussion on economics and job stake, michelle meyer will join us from bank of america merrill lynch at villa bauder of citigroup with perspective on foreign exchange and a global recession. ♪

that, thelook at

millennium bridge over -- that links london with the gallery. the warmest day of the year so far in the u.k. and london. let's get straight to the bloomberg business flash. nejra: demand for gas in the u.s. has not been a strong and almost 14 -- 40 years not enough to stop -- gasoline imports into the east coast the highest in seven months and refiners are maximizing output. the highest seasonal level in three decades at a time when supply is usually declined. on the sachs and hsbc shortlist to help manage the saudi arabia an stock exchanges ipo, according to people familiar with the matter, jpmorgan and morgan stanley are among the others considered. the saudi exchange is not

expected to go public until 2018. youtube coming up with a subscription service that would offer cable tv channels streamed over the internet. service called unplugged could roll out next year, youtube has already had talks with most major begin companies that has not locked up the rights to programming. -- media companies but has not locked up the rights to programming. we are going to talk about your children, my children, everybody's children who are victims of our meritocracy, robert frank is our most i willful economist, morning must-read, mr. suns dean makes it clear this is a sstein makes mr. su it clear this is a beatable book. i love how you bring dickens and this. great expectations, it defines the understanding of the 19th century about what charles

dickens says, imagine one selected day struck out of it, where did our this missile of luck big and -- dismissal of not begin?ash of luck you have worked hard and solve difficult problems and when you are building your life story those are the things that spring to mind, i am successful because i have worked hard and a very talented. what doesn't spring so readily to mind is the set of little things that, if they had not happened, your career would have unfolded in a different way. tom: what surprised you in writing this book about our certitude of meritocracy now? robert: i take a forgiving attitude to the people who feel certain they did it all themselves because, as i say in the book, there are natural cognitive processes.

cass will talk to you about them. maybe it is a good thing, if you think luck does not matter you will be more apt to send the energy to work harder. invariably, careers depends usually on tiny chance events and the fact that we do not think of that has a tendency to make people hold onto every nickel that comes their way as if, because they earned it, they are entitled to keep all of it and that is not a good way to build society. francine: you need to use your brain, if you have a lucky escape warlock, it has to be -- --gay or luck, it has to be it has to be the way you use the luck. robert: people not on the lookout for opportunities, they

miss golden opportunities frequently. if you are not alert, the world will pass you by. i am distressed that some people hear my message being that it is all luck and you do not need to work hard or develop expertise. that is not the message of the book. francine: i was interested in the meritocracy, living in london, it is clear the anglo-saxon world is held up as the most meritocratic, compared to the periphery countries in europe. is that right? is my assumption right because of the inequality game that we have seen in the last three to four years? robert: meritocracy was created by the house of lords, a scathing satire. the system was running amok because of some of these credentialed people felt

entitled to do things their way and it became a term of approval, he was distressed at that. tom: i want to talk about a presidential candidate. frames a certain attitude in the united states. it moves away from buck and there a try -- luck and meritocracy, when you hear the dialogue of mr. trump, not only as a candidate but within his reality tv career, what does that signal about luck and meritocracy? robert: i think trump is very proud as he presents himself as a winner. several people have done the calculation that if you have taken the money his father gave him, his father was a very wealthy man and put it in a mutual fund, he would have more money today than he has today. he was very lucky. he has built some businesses and

destroyed some businesses. the idea that he thinks he did it all himself is very strange. tom: goes back to mark twain. this quote from the american philosopher out pacino, consider the career about pacino, one of the most celebrated actors, hands may find it difficult to find alternative history he did not succeed as an actor get his story career owes much to one highly begin see an improbable early casting decision. coppola wascis ford 34 years old, directing his first major film, made michael .orleone the lead character he wanted to cast al pacino, somebody who looked like a sicilian. the studio bosses wanted none of it, they wanted robert redford

or another high-profile actor. --ally prices for the bola finally, francis ford coppola insisted. starnt on to become the figure in what many critics have called the best motion picture ever made. what an incredible break. would he have been successful had it not been for that break, maybe. tom: what was the moment where you got lucky, signing for cornell, a previous position? robert: as an economist it ,atters where you are employed if you have good students and her colleagues you will be much more productive. i got my job at cornell by the skin of my deep, i learned that i was the seventh of seven people hired. they had never hired that many before or since. thatng colleague told me

when he seconded the motion i get the offer, the chairman was so angry he threw a piece of chalk at him. tom: a fabulous story. robert: he wanted another candidate, i have followed the career of that other candidate and i am fortunate to feel i have done better than the other candidate. tom: robert frank, success and abouti cannot say enough this book, a humbling book for every parent. francine? ,rancine: breaking news earnings coming out better than expected in terms of earnings per share and they are guiding forward, earnings-per-share for the year, they believe will be between three dollars 65 and $3.77. the most important about merck, they have said they are looking for opportunities for health-care mergers as the collapse of the merger between pfizer and allergan has been raising questions about tieups

in this industry. we are hoping to have more news about merck and following the news conference later on. a picture for equities, three hours into the european trading session, up, energy leading a lot of these gains and this is a picture for turkish lira after the prime minister of turkey may resign. ♪

tom: good morning. francine look what an tom keene. -- francine look while an tom keene. the euro churn. remember he gives away a little bit. renminbi gives away a little bit. tomorrow, interesting to see how markets react. francine: you are not giving me much emerging market currency chat so i will turn to bloomberg . maybe they will have more of an angle. news for you and tom, we

continue the conversation of the conference in new york come along on short ideas. has the bull market exhausted itself? stanley druckenmiller thinks so. , in a sleeping bag, that is what he has to do to get production where he wants it, we will talk tesla and talk turkey, the president trying to tighten his grip on power. you saw the markets. francine: thank you. thank you. futures up 11. we are with callum henderson. the simple thing from your expertise in for exchange is one single word, you see it in yen, well over to standard deviation, the euro almost got to three standard strong, what a brutal

moves up for exchange? callum: you are seeing this because of political and market uncertainty that option implied volatility in g7 exchange rates is higher than emerging markets. tom: why? callum: politics is impacting monetary decisions, economic decisions, and because we are not used to pricing that, the options market is demanding. tom: the money question is -- how can we price risk? with low nominal and real rates, how can we begin to make our calculations? callum: we cannot, huge uncertainty. volatility. in g7 exchange rates, some which should be safe havens but have rallied or collapsed on a daily basis. francine: if you are saying

politics is influence monetary policy, what is the endgame? a common thread to the politics around the world, and that is the antiestablishment vote. how does monetary policy prepare for that? callum: a huge challenge, take turkey as an example, or south africa or brazil, you have declining productivity across the emerging markets, you have growth slowdown. you have china slowing down although it has seen some degree of stabilization recently. you have this degree of political uncertainty in countries. -- combine that and you have the u.s. is the best place of the world, the money has come home to the u.s.. you have the fed potentially tightening later this year. you have questions over the independence of central banks. and the various combination.

-- a nefarious accommodation. francine: can the u.s. withstand the turmoil around the world? callum: the training tone of the couple ofhe past meetings, particularly focusing on the rest of the world where previously been market was onored, it has an impact now yellen has noted that. tom: is there a canary in the iron ore mines, you spent time in singapore. canary in iron ore mine, expand on that. domesticuge amounts of , either retail and investor savings in china have gone to stock markets where we had a massive bubble and then a crash. hasiquid markets and steel greater daily volume than the

imports on an annual basis in china. tom: unbelievable. callum: it is truly extraordinary what is going on, a massive speculative double. bubble.e -- on radiowill continue with us for more perspective. bloomberg coming of next on television. tomorrow, guest led by bill about her of citigroup, thrilled to have them -- bill about her of citigroup. -- a show meyer will join us, -- michelle meyer will join us. no gross will join us for the jobs report at a: 30.

david: get elon musk ramp-up his production. jon: stan druckenmiller loads up on gold, he says the market looks exhausted.

out, look tornings the cloud for future growth. -- looking to the cloud for future growth. ♪ david: welcome to bloomberg . welcome back, carol. we are getting earnings from chesapeake and mark but alibaba numbers out. report,ibaba, a mixed earnings that missed estimates they beat on revenue. -- yuaan 24 billion u.n. n. the cloud revenue theyve