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 they have grew

175% in the third quarter. investors looking at this positively so far. alibaba up about 5% in the premarket. it is down about one third, more than one third since the high it reached shortly after its ipo in 2014. the stock has not done well. jon: up 3.5% premarket on alibaba. even if you're not interested in the company, to get a gauge of what is happening in china. your scorecard, futures firmer in the u.s., up 61 points. points.d 7, 8 in london, pretty much flat. switch up the board, the dollar on the front foot against some of the majors including the euro . on the back's first against the commodity currencies with wti up

$45 and $.19, 3.2%. a rally on treasuries, yields got a little bit higher by one basis point to 1.79%, over 24 hours away from payroll friday. here are stocks to watch with matt. matt: in europe, gains. i want to highlight two of the biggest gainers. refining is what is helping them and chemicals. you see a rally. bt group rising. the former monopoly of the u.k. communications industry, revenue that beat cash earnings that beat in estimates at wm morrison supermarkets up. this is rolls-royce.

gaining after posting a second consecutive quarter of sales growth. firstlook at merck, quarter adjusted eps, the estimate was for $.85 and they got $.89. revenue forecast a forecast of revenue between 39 billion and 40 billion and the street was looking for $39.8 billion. the forecast range is good for mercik. -- merck. we will talk about the tesla stories all day long, shares soaring, yesterday was an incredible day for them because it looked like their entire production staff was leaving. they have lost five important managers over the past two or three months and they said the unbelievable target that they will make 500,000 cars in 2020, now they say babel do it in 2018, -- now they say they will do it in 2018.

it,market seems to like though difficult to get your head around how he will do it. jon: a highly intelligent man, is this a business or ego? conversations in new york, the biggest names in the hedge fund industry gathering for the conference, the overriding message clear, go short. stan druckenmiller says the bull market in stocks is wearing itself out, he says i now feel the weight of the evidence has shifted the other way, high evaluations, three more years of unproductive corporate behavior, limits to further easing at excessive borrowing from the future suggests this bull market is exhausting itself here a central bank experiment with metro -- interest rates coming he is loading up on gold. get -- us is jack rifkin joining us is jack rivkin. dispersionoving into

. when you get into a low growth environment, the results very over the map. it takes an active manager to participate. stan is dealing with a lot of money. manager,l portfolio this is the time when they should be able to shine. i am not so sure they will but because some of them seem to have forgotten what it takes to analyze a company. that is where we are, we are getting dispersion. with the market today, in education this is an alibaba rally. -- an indication this is an alibaba rally. or get about their earnings, the fact revenues were up that much -- forget about their earnings, the fact revenues were up says china is in the game, game on for everybody else. carol: is gold a way to shine? jack: until the dollar regains its strength.

this is a dollar play, you can short the currency and buy gold. carol: druckenmiller says this is his currency play. jack: not a bad idea since we are in a time with negative real returns. point. own gold at this you are not getting a return for holding it. not getting a yield by you may be getting return, a real return. matt: not seeing a yield anywhere else. this chart, hillary came up with this, gold open interest, soaring to the highest level since 2010. now that everyone is talking about it, i wonder if the trait gets crowded -- trade gets crowded. jack: it does, it already has, all of the technicians on gold now. when all of them are there, it is time to step back.

david: mr. druckenmiller is a shrewd investor. take the other side. if he moves to be wrong, why will that have been? recovery in the rest of the world versus what is going on in the u.s. we are seeing early signs of that. a very difficult time for the emerging markets, very difficult in the developed markets as well. we are beginning to see some turn, the companies there, the governments are beginning to do something about that and if that takes hold, i think stan is going to be wrong. he is pretty good. jon: three decades of the average annual growth, he has done well. jack: hard to say something against them. jon: another voice from the conference related to gold, more

about inflation, check out this quote from jeff, the idea we have a debt fueled trump presidency, he promises to bring back jobs and promises infrastructure spending, let's face it, he is extremely comfortable with debt. the treasury market -- jack: having somebody else take the hit. market, peoplery say there is a lot of space, a market thirsty for more treasuries to be issued and more debt to the issue. jack: if donald trump becomes president and delivers on what he says, a big question, you are talking about what i call a market on fire. he will spend money fiscally and have debt. , a: this is important bullish case for a trump presidency, in the mainstream

media, you hear bearish but this is a bullish case. jack: if you believe he can deliver on what he says he will do, i do not believe that, i am in the leonard cohen camp, we have democracy coming to the usa for the first time, and we will elect somebody possibly that represents that and it will not be pretty. jon: great to have you with us. headlines, we will talk about whether or not donald trump will finance his own race after the presidential primaries . now that he is the presumptive nominee, he will not do that, they are building a finance operation that will raise money for the general election according to people familiar with the plan, top aides say he made $1 billion or more in the fall. britain is going to the polls, voters will elect a new mayor of

london and decide a series of local and legislative races. it is the european central banks new offensive against crime, it will stop producing the 500 euros note at the end of 2018, the ecb concerned the 500 euros note will be used to facilitate illegal activities, a decision likely to bring criticism from those who believe the central bank is trying to abolish cash altogether so they can follow our every move through digital means. carol: as they should. coming up, the turkish government in a people of the trimester is said to be stepping down, we will have that story next. ♪

matt: here is your business flash. tribune publishing has rejected an $815 million takeover bid by usa today. the offer undervalued the company which publishes the chicago tribune and los angeles times. they plan to break out the los angeles papers profit at a separate segment. barclays is carried out its promise to shrink the banks global footprint, it has sold 1/5 of its taken barclays africa to money managers, four $879 billion, the ceo said last month the bank would retreat from africa, one of the measures he is taking to raise -- and legendary capital burden. goldman sachs is predicting a big drop in hong kong home prices, now graded property

stocks. expecting them to fall, because of increase in borrowing rises up to two percentage price -- points. that is to a bloomberg business flash. carol: we have to focus on turkey where the prime minister is expected to step down any moment, he has been involved in a power struggle with the president and the clash has had effects on the turkish economy. all, let's take a step back, how did begin here -- how did we get here? >> a long power struggle between the president and the prime minister that has been going on for a wild -- while. the prime minister was a mentor to the president. but clearly there have been sinces between them

fresno didn't -- president erdog an became president. he wants to give himself more power and that led to a power struggle last night where the prime minister walked into the presidential palace and told him he needs to have more autonomy from the president. the meeting did not go well and sparked the political crisis we face today. david: what does this do to the support of president erdogan? he is is pretty -- john: pretty popular. there are people around the president who are encouraged by the polls, not inconceivable that we could see snap elections at some point in the next few months. his big strategy is, what he really wants to do is get a

mandate from the turkish people strong enough to allow him to change the constitution and turn the turkish presidency into a stronger office. to vladimirarable putin. -- is the lens to see what he wants to do. matt: how investors are taking this, equity flows from foreign investors, anything below the red line is an outflow and above is an inflow. .utflows are lessening on the equity side, it does not hurt much. on the other hand, traders are raising bets against the lira, one-month swaps. that is a concern. we are starting to see something happening. politically, the former

central bank governor under a terrific amount of pressure by the president, you just wonder, a tighter grip, not just on fiscal policy but on monetary policy, is that in turkey's case bad for financial assets -- for financial assets? john: i saw headlines seconds ago, given by one of his chief economic advisers to one of the turkish tv stations, he said that the central bank has to cut interest rates. the political pressure on monetary policy that investors traditionally do not like. davutoglu is seen as the voice of moderation and the more people who like him and the

central bank governor, the more people who like this who leave the stage of turkish politics, the more concerned investors will have a about e direction of economic policy in the country. --david: isn't this a note of democracy?a raw another country moving to a raw democracy? the president is getting everybody out which gives him more control, not related to what i would call fiscal policy, related to beliefs? compareyes, this two things happening in hungry -- you could look at poland, economist look at, compare what the president is doing to

russia, he is consolidating a lot of power around himself. keep in mind that he is extremely popular, elected by a majority, his party got a majority in the elections at the end of last year. a lot of concerns about where he is taking turkey but he remains popular. carol: thank you. holding aminister is news conference and we will monitor those headlines and bring you anything as it is known. jon: up next, we talk alibaba, revenue better than estimated and cloud revenue soaring, the sock -- start gaining. we will discuss that next. ♪

,avid: this is bloomberg alibaba shares on the move after

it beat revenue estimates on better advertising sales. revenue rose 39% in the first three months of the year. numbers ishrough the selena wang. should we pay more attention to their revenue or earnings miss? >> a mixed results. they beat on revenue significantly that's slightly net income but a positive story. investors are already impressed by the growth topline come a good story, especially in the face of the headwinds about negative news about the chinese consumer and chinese economy. david: how much does this tell us about the chinese consumer as opposed to alibaba taking more share from alternative retailers? selana: it is seen a proxy for the chinese economy and a lot of

investors will want to play out their fears about mixed results in the chinese economy in alibaba stock. long-term, the chinese has a growing middle-class and any long-term, it will be a big boom for alibaba. a positive story for the chinese consumer long-term. david: matt? matt: alibaba sales and alibaba profit on the rise since the ipo. if you look a couple of months after the ipo, we got to 120 and the stock is falling -- has fallen. one stock jim chanos says to short. he has concerns about china and has since the day he was born but he says short alibaba. david: she said we should look at alibaba as a surrogate for the chinese economy, do you agree? jack: i do, an indication of

what is going on in the consumer sector in china which is still on fire. you are building an interesting area, services is a big part of it, alibaba represents consumption of goods and to some extent services. it is sort of like amazon. amazon cell phones -- amazon is beats the number but an indication of the direction of where things are going. carol: take a reliable one? jack: i think it is a good proxy for what is going on in china. is anole market situation alibaba market because it is an indication that china is ok. carol: some of the stories trending. top stories users are reading. specifically --

jon: the abolishment of the 500 euro note, it has been watered down to my production will end remain legalt will tender in for an unlimited amount of time you can go to the .ank with the note -- a lot of people are discussing the abolishment of cash? jack: that is something that is going on, we have moved to a cash economy and the governments have no control. the u.s. has an opportunity, we are issuing the harriet taliban $20 bill, if they put on top of 2019, youby 2018 or have to switch your current $20 andrew jackson bills for harriet top and, we may see interesting

things happen in terms of cash economy. it is a huge part of the economy. $20 bills and $100 bills, a form of currency that is used away from the government. in,ou wanted to rain that and you will see counterfeit, that is where it will happen. here. great to have you david: up next, elon musk is laying plans that some say are unattainable, details on that next on bloomberg . ♪ [ soft music ]

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it is quite an interesting session. futures in the u.s. a little firmer, s&p 500 richards positive. and stayedp about 3% up 2.7%. u.s.move off the back of crude production coming down to a 20 lane barrels a day, the peak at 9.6 million. the fx market, the firmer footing with the commodity currency stopped and a firmer dollar at or team 22 on the current die single currency and treasury after a recent rally of two basis points. this is bloomberg go. tom keene and i get excited about this time of the month. tom: much more than that, i can't recall a jobs day with. such an overlay of international economics.

about eight ways to go here, but it is not just a normal. he has been dead on about the vectors. jonathan: bill gross coming up as well. seedata firms up and you the fed potentially high, you see the front end on the twos, but i wonder what it means for the longer end of the curve. tom: a lot of the consensus that is you have movement in the fiscal year higher yield, but the curve flattening is a two-year, but it or that is a guest between bill gross and the real background here, domestically is the movement from sub 2% even sub 1% 2.5% gdp. nobody knows when that is. when does this economy click in? jonathan: the productivity gains

are nowhere to be seen, that is two straight quarters. tom: before your presidential moving average of productivity and we are only once since richard nixon was president have we been at such tech levels of productivity. jonathan: at this point, we go back to the adp report as a reference point and we know that it is no leading indicator, the last time we were in the one 50's in the summer of 2015, we had a high two sprint, bubble was in there was a broad-based slowdown across sectors. at the minutiaok of adp, i don't have time for it given its value to where we are going. what i would say is that stack of data gets you back to this , where you have a

lousy first quarter and there is that whole thing of when we pick up and there is a mystery to that which the silliness about the june meeting, john williams in san francisco is one of percent right, they have no clue -- eight or 12 fed speakers, today. carol: i think it is like 20. tom: 20 fed speakers and all of them agree they have no clear until they get to the june meeting. jonathan: really looking forward to the program coming up tomorrow. tom: michelle meyer and bill gross. jonathan: that will be on bloomberg tv and bloomberg radio. carol: sticking with jobs day, just under an hour from now, we receive an initial jobless claims. and how first-quarter earnings may shape that number. whispering in steve friedman.

in stevebring friedman. would you want to be a fed -- a member of the fed right now? steve: there is a lot of crosscurrents that they are facing and it makes the communication very challenging. carol: what does it tell you about what they might do? steve: i think they are at the point where they realize the growth is very weak and in order for them to move a word with raising rates, they will want to see a turnaround in tension and growth for q2 is on track. they will want to see inflation. they will want to see higher expectations. a lot has to go right for a great increase at the june meeting. consumers are feeling cautious some of thehey feel

volatility in financial markets. lackpick up on some of the of confidence expressed by political leaders in the primary season. i think for those in the manufacturing sector, an energy sector, they are struggling as well. it is the upper and a lot that are really in the stock market and things like cheaper gas. prices affect the majority of consumers. what is more important to consumer spending? steve: under the surface, oil prices are a huge being debt huge boon to consumers. it is difficult to see how we get to 2% growth this year. as we look more probably, that exports are like the -- likely to remain weak and the investment strategy has been very disappointing. investment spending has treated very little. i see very little change over the course of this year. what do you expect out of

the fed, this year and you expect that may be affected by the political year? steve: on the first question, i do see rate increases later this year but i don't think they will have the confidence by the time we reach the june meeting. they have not really looked into the q2 data. see is are likely to to goff and they will try for two rate increases in september and december. what they have to look into his politics. carol: good luck with that. --ve: unless for some reason this very interesting campaign season leads to volatility in the financial markets which could string growth. other than that, i think the fed has to look through the elections. matt: it made me think of this chart.

it shows consumer discretionary sales are way up. consumer staple sales rising as well, but the gap between the two shows that americans seem to have more money in their pockets to spend on the stuff they don't necessarily need, but they want. the gap is the widest it has been since 2008. isn't that a good sign for the economy? steve: absolutely. those are the challenges that given week growth globally, given the risks from the global environment and inflation, still very low, there are a number of reasons to go slowly. we can't forget the fact that it inflation does surprise, the fed has plenty of room to raise -- tighten rates. the risk is that if you do hit a soft patch, it turns into a

recession and the fed toolkit is limited given that they are somewhat relative to cut into negative territory and some of the political pressures associated with additional qe. carol: in terms of the monthly job report we do for tomorrow, to you in important terms of what we see in wages? steve: i'm more focused on payrolls growth because given and we know about earnings they earnings environment being constrained, given the product but he is low, i don't see a lot of -- for wages to rise. what i want to see is that despite the weak q1 growth numbers and even q4, that we are still seeing sufficient jobs growth to bring down the unemployment rate and bring inflation higher. david: you talked about room for tightening.

there are some voices saying we should go the other way. is the fed at all concerned with a warm or moral hazard for the markets become too dependent on having the central bank coming in to bail them out? steve: recession risks are higher than they were a year ago. i think that that is very appreciative of the downside risk why it will go slowly this year and next. on the moral hazard question, i think it is a fundamental issue keep is that the fed can policy easy to try to encourage growth, but potential growth is very low right now. that feeds into a lot of the anger we are seeing at the polls. something is to be done to boost potential growth over time and that is a russian or elected officials. carol: thank you very much. i want to give you bloomberg's first word news. in all correct, we have a live

shot in turkey to show you what is happening. ,he prime minister is speaking just announced that he will not run for reelection. the president has won a power struggle and has sent financial markets plunging. frequent clashes between the prime minister and president have undermined confidence in turkey's economy. four out of five americans say islamic state is the biggest international concern according to a new poll from the queue research center. three fourths of the republicans pulled a concern the u.s. will not go far enough to stop the group. democrats are worried u.s. will go too far. anti-establishment candidates shaking up politics in the philippines. a self-confessed killer, womanizer who is promising a bloody war on crime. he leads the polls in the race for president. of a city, his

strongman swagger and call for the execution of metals has fans calling him the punisher -- execution of criminals has fans calling him the punisher. david: feeling a little bit better about our election. carol: i thought our race was crazy. david: coming up, elon musk has doubled down. it will look at the big announcement out of the electric car company coming up next. ♪

carol: this is bloomberg go. in the next hour, we are joined to talk about a potential softening in new york's high-end real estate target.

matt: first-quarter earnings beat expectations at merck. sales fell short of estimates, still they were helped by new draws including cancer treatment. merck is trying to boost revenue after or straight years of decline and trying to do and it top-selling diabetes drug, which is facing more competition. youtube is coming up with these conservatives that would allow cable tv streams over the internet. people familiar with the plan say the service can roll out next year. youtube has already had talks with most major media companies but has not walked out the right to programming. a demand for gas in the u.s. has not been this strong in almost 40 years, but is not enough to stop the supply glut. gasoline imports in the east coast are near the highest since -- in months and refiners are

maximizing gasoline output. the result is inventories are at their highest seasonal levels in three decades. that is your bloomberg business flash. david: now we go to electricity, we will need that gasoline anymore. earnings wheng they lost that was more narrow than expected. elon musk plans on ramping electric vehicle production to 500,000 cars by the end of 2018. for more now, we go to jamie butters in detroit. doubts about tesla making this many cars by 2020. jamie: this is something that toyota and the big companies have been doing her years and decades. was really about making the most excellent car you can

and figure out how to put it together. this one, they say they have figured out the model three, they will make it easier to he is noty can -- only talking about taking his factory in california to 500,000 vehicles, which toyota and gm never achieved, he said he might be able to get it to one million and produce one million cars out of that plants by 2020. he has talked a lot about stress goals and opportunities for breakthroughs in manufacturing and it feels like there is more room for innovation and manufacturing. he thinks they really uncorked something. david: before you get to the assembly issue, you have the battery issue. are they in a position to make that many batteries? steve: what they are doing now -- jamie: what they're are doing now is making battery packs, they will start making actual cells by the end of the year.

they are still building that out and that has to come through in a way that they have struggled to deliver another manufacturing efforts. there is one where they have a huge ramp trying to work -- build the world's largest battery pack that would double capacity for lithium batteries. carol: i find it fascinating and i think he is a visionary, but why should we believe elon musk with these production -- projections? he has not been good in keeping other protections when it comes to rollouts with new models. jamie: he talked a lot about this, last night and at the risk of it being misconstrued and i hope i don't misconstrue it, but he talked about stretch goals and you have to set ambitious targets, even if they are not going to be met, you have to set a really hard target like, beginning model three production , probably not

really going to happen but if you don't aim for that, then you will not start in september and -- or october. if you aim for december, you will not get started in october. he is pushing very hard to say they can get the 500,000 and 8 -- they have all this unmet demand. david: over and above the production issues, what about the money? how much capital investment will be required to make stretch goals and where will they come up with it? jamie: they are still assessing what the needs are going to be, but they will be greater and they are looking at the potential of one million vehicles by 2020, you have to start thinking about a second or third assembly plant. we are talking about billions of dollars and he is going to get it from investors. a lot of investors want to buy the stock and would love to loan the money, but especially want it in on equity. i imagine it will be something in the billions. i have seen $3 million loaded.

david: thank you so much. here is something you may want to spend it on, the world's largest gem quality, rough diamond will be up for auction at 70's london on june 29. 11,000 caret diamond was discovered in botswana and is expected to fetch more than $70 million. i know my birthday was last week, but guys. --id: how many carrots? carats? what you do, make a lot of diamond rings out of that? carol: or one really big one. we show all this to you and off the charts, coming up next. ♪

jonathan: welcome back, time for off the charts. u.s. crude inventories would spend to a record 550 million barrels this month before starting the seasonal slide according to a forecast by citigroup. matt: i want to take a moment to strip it back and let it breathe. -- i think it is amazing to look at the stockpiles in blue, rise to the 1929 record, the highest level on record, and then citigroup is forecasting even higher stockpiles. you see the price in white and it has bounced up a little bit and i know you will say the price bounce is due to a reduction in production. --ve: i might say jonathan: i might say it hasn't in view it -- jonathan: i might say it has

something to do with production. it is quite a move and i think everyone looking to the middle east for production cuts, they are happening in the u.s.. matt: you are not seeing them in the middle east, you are seeing the opposite and what citigroup sees his production in the middle east ramping up is going to outweigh the production cuts in the shale. that is why they forecast for stockpiles rises. we have a great function which shows you seasonal changes in any equity or asset classes. or total oil inventory from the department of energy stats and you can see that this year, we are above averages for the past five years. the inventories are hanging high and that is one of the problems with getting the price back up. i want to show you this. a short-term price game, up about $40 a barrel for

wti. this is something i noticed back when you were doing a radio show in talking about getting ct. if you look outside -- if you look out five years, the price continues to remain much lower than the current price. investors don't expect this price rise to increase or even stay at that level. jonathan: the interesting dynamic -- dynamic is iraq. they said that production is rising a lot quicker than anybody anticipated and all of this as we spin forward into the june opec meeting. we have situations where they are calling southeast's bluff. and they get production of big enough, then they can say they will dissipate in a production freeze because they like where production is and could freeze production at very elevated levels. matt: all-time high levels. i know you think the production

story is where it is at, but the drop in u.s. production does not make up for the rise, over there. prices continue to rise even though we have more production and stockpiles. what'ss you question behind this increase. jonathan: the beauty i print brent a parody -- wti almost a parody. carol: looking ahead, dreamworks , gopro, just some of the companies reporting earnings after the closing bell. lots of that speakers will be gathering today at stanford university to take part in a panel discussion on international monetary policy. they will have a lot to speak about. david: i wonder how hard it is to be one of those gentlemen because the fact is, everyone pays attention to janet yellen, but i don't think anybody is listening. it is really what janet yellen

is saying. carol: i think it is voting or nonvoting member, but we are in an era where we just had -- are dissecting everything they have to say. david: i think the markets are looking for some sort of direction. very interesting. up, aftering averaging 30% returns, one big-name investor is warning of a dying bull market. we discussed this next. ♪

jonathan: shares of alibaba surging in the free market after quarter revenue beat estimates. david: stanley druckenmiller says the fed is losing sight of the endgame.

carol: pharma giant merck topping estimates. ♪ david: welcome to the second hour of bloomberg go. carol: we are talking about the u.s. economy as we get to the appetizer, friday's jobs report. weekly jobless claims are due out in about 30 minutes. jonathan: let's get you an update on the markets, you jurors a bit armor in the u.s. s&p 500 futures positive. over in europe, the dax trimming some of the earlier gains. board, the dollar

on the front foot against -- a half of 1% on the currency pairing. the yield is ticking higher as we approach the cash open inequities, treasury yields up. 3.3 to $45.24. matt miller, some big moves. matt: kellogg's earnings coming out and the company is beating estimates with $.97. in the release, they are saying that they are making u.s. surreal share gains -- serial share gains. cereal consumption is on the decline. fewer people are eating it for breakfast, even though ie did for three meals a day. kellogg's is taking share and selling more pringles. tesla shares are soaring after elon musk promised to speed up

electric car output. the company wants to make 500,000 cars by 2018. two years sooner than estimates that people expected him to miss, anyway. amazing that he is bringing that forward and the shares are up 3.5%, up 800% over the last five years. -- trying to win market share, they did say revenue will exceed the estimate as profit misses whiteley, but here used getting sharesd, the -- alibaba are taking higher despite a miss on profit. sales beat estimates by 4%. the chinese are spending money even as we are concerned about their economy. tripadvisor down again on their

own weaker than expected results, missing on both top and bottom lines. sales fell 3% and referrals from third-party sites took a dive. the past 24 hours, i have had so many comments about this story. stan druckenmiller, arguing that stumbling oneen low interest rates, saying i have argued that the myopic policymakers have no endgame. markets do and i will get to this quote as well. ironically, this is the least -- joining us now is russell price. .reat to have you with us the fed has no endgame, the least data dependent ever? russell: i would disagree. concern, is not a

mostly, indicators have been pushed higher by a few components. medical care costs and housing, primarily. we are not seeing the same pressures on inflation that we normally would. on the unemployment side, i would say the unemployment rate is -- there is more slack in the economy today than what that 5% currently shows. it is easy when you are up in the bleachers criticizing the people weighing the game. if you were the fed, what would you have them do? russell: stay the course, i think we are doing a pretty good job. they get a lot of criticism from people in my position. they have been recognizing that there is more slack in the , that the economy is growing, but at a slowerthat there are concerns and deflation is still a risk, certainly as we

have seen in europe and japan. it is why i think they have been appropriate. maybe this year, we get one or two hikes. the economic data has to improve. jonathan: the criticism is not just on the policy, it is on the communication of the policy. janet yellen was in charge of the committee that was supposed to improve the communication. it has been absolutely awful. do you disagree? russell: i do, i think you're doing the best that they can because it is the interpretation of their communication that has been awful. carol: i feel like they have almost gone overboard. i think they lost their efficacy in their ability to stop that surprised the market. -- ability to surprise the market. russell: what some officials

indicating is that they want a height and other officials say this is not the time. that is reflective of the current economic conditions. carol: we had an earlier guest talking about 15% economic growth. the fed seems to be doing all that they can do. is it now up to policymakers? russell: in washington, i think there is some more work that needs to be done. isever, what we need to do see confidence improve on the part of consumers and businesses. consumers are in very good financial shape in the united states and it is a lack of confidence or them to be able to spend a little bit more. given that they are 70% of the economy, that would have an impact on economic activity. some of the economic weakness has been in part due to transitory factors. those things should fade. david: is there a connection

between the communication of fed policy and consumer confidence in the sense that when the consumer fears we are in a really bad position, or you don't have growth, we have to have extraordinarily low -- extraordinarily low interest rates, how can a consumer be confident in that environment? russell: i talked to a lot of retail clients and the one thing that has shaken confidence is talking about negative interest , a specially for a lot of retired or upper income americans who rely on fixed income. negative interest rates causes them economic concern. they say they had never experienced it for, what is going on in the economy? that is a concern. carol: is a recession a concern? russell: i think some people worry about it, but i do not think it is likely. it seems as though consumer financial conditions are in very sound shape.

i think that is something that is going to maintain throughout the year and we look for a u.s. economy to grow by about 2%. that is reasonable, but not quite as up to speed. jonathan: can you reconcile that the that policy is good and acknowledgment that low rates is hurting consumer and confidence. russell: in the u.s., the low rates are hurting savers to some degree, but the other part of is the higher rates, that would not be able to be maintained in the marketplace because to get market rates to be higher as well, and savings returns to be higher, you need people to want to borrow that money and higher rates are just not going to bring that about. is really ahat it situation where the federal reserve is showing some confidence in the markets, but they don't want to get ahead of the game and i think for the broader u.s. economy, that is

not appropriate. jonathan: thank you very much for joining us. do not miss tomorrow, it is the playoffs, the payrolls report. bill gross joins us on radio and tv at 8:30 a.m. eastern . matt: bloomberg first word news, i'll trump finance his own race during the presidential primaries, but now that he is the presumptive nominee, that is going to stop. his campaign is building a financial operation that will raise money for the general election according to two people familiar with the plan. top aides say he may need $1 billion in the fall. turkey's president has won a power struggle amid the financial markets lunging. the prime minister is expected to step down, this month. today he said he would not run for leadership of the ruling party. clashes between the two have undermined confidence in turkey's economy.

a wildfire that forced 80,000 people from their homes in western canada is likely to get bigger. it has already damaged about 1600 bill -- -- 1600 buildings. oil companies have cut down on production and opened their work camps. up, a cooldown in manhattan's retail rental market. we hear from a prominent new york city developed their -- developer. ♪

carol: take a look at the markets, teachers up across the board. s&p and the nasdaq indicating a

higher open. this after we saw stocks selling off in yesterday's session. this is bloomberg go. regulators in china are trying to determine whether foreign drugmakers -- foreign drugmakers have violated anti-trade law. the review focusing on whether companies used dominant market position to restrict competition. barclays is carrying out its promise to shrink. the ceo saying last month, the bank would retreat from africa, one of the measures he is taking to raise cash and lighten capital burden. rejectinging says -- a takeover bid by usa today owner. they said the offer undervalues the company which publishes the

chicago tribune and los angeles times. that is your business flash. david: now we turn to real estate. a cooldown in manhattan's luxury apartment rental market, hitting some developers where it hurts. our job creation and salary levels of enough? we are joined by ceo of rudin management who has a few projects underway in new york. do you see evidence of the slowdown? bill: there was definitely a slowdown at the beginning of the year, but we have seen tremendous activity over the last couple of and we just started closing and had people move into our lane project. in our rentald portfolio. we have seen a tremendous pickup

and activity. david: described the price point. a high condominium project we started a couple of years ago. 500,008, alumina ties in a sought-after location for people who want to be in new york city. 70% of our buyers are new yorkers, so it is not internationally driven. david: are these the $100 billion apartments? and: between $2.5 million $45 million. if you want to come down and take a look -- [laughter] happy to show you to it. amazing projects, year to two technology industry in the brooklyn navy yard. partnering with

boston properties and we work as our major tenant, they're taking over 250,000 feet of space, and it's all geared toward technology oriented. companies we put a lot of amenities into the project so that the tenants can come to the project, take less space because we provide the food services, conference space, the wellness centers. we have valet parking for bikes. it is all really geared to the companies that are really growing in brooklyn. carol: how much demand is there? bill: a third of the buildings rented and we are breaking ground. it will not be online for another two years, but i went to an event last night called tech nyc. tech companies that came together to promote technology in new york city and the job growth and the tech industry is tremendous. carol: let's go back to the residential market because you

have an interesting chart. matt: i have in white, luxury rentals. condo price index for new york. do you see this? a little bitetting less expensive or at least not growing at the same pace as buying a condo? bill: as we said before, we have seen demand slacking a little bit, but it has picked up again and prices have stabilized. you are also seeing people moving from rentals to condominiums. we had several turnovers in our buildings were people moved out who had rentals, bought apartments. matt: that makes perfect sense for the chart. the population in the city continues to grow, we are seeing people coming into new york job growth. we had over 250,000 jobs created over the last two years. 40,000 in the first quarter of this year.

that is good for the consumer, giving them choice and ability all over the city, whether it is manhattan or brought in or queen. we are seeing a tremendous building boom throughout the whole city. david: tomorrow is jobs day. you usually hear about it from the top down. you are involved from the bottom it is employed in construction workers or the people renting your condos or rework. what do you see in the new york area in terms of job growth? bill: we are seeing tremendous leasing activity, about 9 million feet of leases were done in the first quarter of this year, people are talking about economy and the stock market, but we just signed a large lease with financial service companies called bank great -- bank rate. the markets reflecting this job growth that has happened in new york city. companies want to be here because the young people are here, and that is where the

companies are following the employees. carol: who is actually buying? we hear about these demographic trends of older folks coming back and younger people coming in. bill: a tremendous mixture, people who are coming from the suburbs wanting to be here or empty-nesters. and done people and everybody in between. on the commercial side, the growth of statistics, 40% of all leases done in the city for companies under 10,000 feet. a significant amount of companies, you hear about the big companies like mcgraw-hill taking 900,000 feet downtown or facebook renewing and expanding, but there is a tremendous amount of small companies that are really the lifeblood of the city in terms of economic growth. carol: people building software, you don't necessarily need a time of able to do that -- a time of people to do that. bill: that is what we are trying 72 -- and incubate at doc

dock 72. david: thank you very much for being with us. carol: coming up, health care checking on merck, topping expectations in the first quarter. will that translate into market share. ? ♪

jonathan: this is bloomberg go. let's get you up to speed on what's happening with markets. points, theup 52 dollar on a firmer footing against the euro. that is not what is driving crude. , upin -- wti session highs

to $45.67. we are now around 8.8 million .arrels of oil a day treasury yields following the dollar and crude up about seven basis points. carol: what of the names investors will keep an eye on, global health care company merck reporting first-quarter earnings before the bell, topping estimates even though pharmaceutical sales slipped, once again. doni bloomfield covers biotech .t bloomberg news and joins us doni: what came out here was that they are still getting growingles from their cancer drug and they are defending their diabetes portfolio pretty well against some stiff competition.

carol: they have been worried about some of their drugs in the pipeline. whether ceo said is that they are looking for development, meaning deals, in the batting industry, emissions are down a lot since this past summer, so i think a lot of big pharma which has cash on the books is looking to spend it and beat up their portfolios. sales were down a little bit, even though they had some key drugs driving growth, so they are really going to look for big assets to drive growth going forward. matt: we are getting chesapeake numbers and their loss actually narrowed more than wall street had anticipated.

more importantly for the stock today, you can see the reaction is very positive in the market, if you take out one tiny items, they lost was one since it -- $.10 a share and we estimated that we would see $.11 loss a share on average, so chesapeake, the shield driller that has been taking a huge he -- huge hit because of tumbling natural gas prices and of course the founder recently died, is doing better than the street was looking for. carol: getting back to doni bloomfield, talking merck. they reported significant sales and what people are really looking forward -- what looking for is what's going to happen or therapy drug and cancer drugs and looking make a big impact in the seat market and gain some market share from gilead. carol: do we have to worry about

it moving just a hair? doni: it depends on what they do on the deals front and if they can defend their diabetes portfolio. carol: thank you so much. merck shares are up about 4%. david: coming up, breaking news on the u.s. economy ahead of friday's jobs report. jobless claims are coming up next and we have them right here for you. ♪

♪ >> this is "bloomberg ." i'm jonathan ferro alongside david gura and carolyn -- carol massar. points down.3

switch up the board. footing.s a firmer euro and a stronger dollar. matt miller. matt: we are looking at the take-up in initial jobless games. -- jobless claims. this is the third week in a row that we have seen gains in initial jobless claims, although we have been hovering around those we hadn't seen since the 1970's. the 1973 low we hit three weeks ago. seeing claims of 2.1 million. continuing claims, which the

street does not follow closely, than estimated. initial jobless claims missing the mark. jon: matt, this is a high-frequency number. i have it up on bloomberg terminal. jon: it really shows the improvement on the initial jobless claims over the past five or six years. it is trended all the way down. i won't get that excited about a pickup. if you are try to look for fuel for the narrative, there is a slowdown for the labor market. maybe you can push that. that chart shows a considerable improvement. numbers that have we got in a number of economist saying sooner or later, we will not continue growth at the 200,000 plus level. we have be prepared for that possibility. matt: can i show you something very cool? follow these numbers, you

will see a column that shows you the relevance of any number to the street. it gives you bars like a cell phone battery bar, and what they indicated how many bloomberg professional clients are subscribed or set up an alert for these data points. you can see the initial jobless streak,elevant to the maybe not to handle economist. but big daddy, coming out tomorrow, if you want a set a clock for tomorrow, -- medivation, may approach holders. the headline right now. matt miller, the story that keeps on giving. matt: we will continue to see

more stories about m&a. right now, let's get to the morning meetings. with hisgarty joins us outlook for inflation ahead of tomorrow's jobs report. martin, we saw labor unit costs rising yesterday. the number that is most important for people to look at is wage inflation, but what are you seeing as far as numbers most important for you to look at as an investor? >> we are looking at the full array of data. we are looking at overall headline employment numbers, labor market utilization, the unemployment rate, and the earnings number release tomorrow. matt: what is the path you are seeing on your screens? 2%you see as getting up to

when you strip out food and energy and looking at the pce? >> that is a great question. there are two major inflation industries -- one is cpi and the other is pce. cpi, we are already above the number when you strip out food and energy, and when you add in food and energy, we are on a trajectory to be near it at 2.5%. the pce number is a little harder to forecast given some of the underlying components, but we do feel we are on a movectory to get to gradually higher from the current levels we currently reside at. matt: what do you think the fed is seeing and thinking right now? a lot of people suggesting that they may not mind overshooting the projected target. >> recent comments from janet yellen implied that 2% is not a

ceiling, and is a midpoint of a range. we spent a considerable time below that 2% level. we could just as easily spend a fair amount of time above 2%. what is interesting is that i do think the level of real rates, front and nominal rates and less inflation are tremendously important, not only for the u.s., but globally. marketa very negative reaction in january and february and i think that was partly the result of a rapid move higher in real rates in the second half of 2015. i think that is front and center in the fed's mind whereby they want to ensure that real rates are sufficiently low enough before they even contemplate patenting policy again given the transmission regulation that real rates have with the rest of the globe. matt: if we look at real rates, we are looking at negative yields in the u.s. what do you think about

investment vehicles? etf that hasat an rocked in 2016. it is -- is it a good investment still? >> a lot depends on the end-user . in terms of fixed income space, i think treasury inflation protected securities, are a very sound investment at this stage. with nominal duration instruments of equivalent length. matt: thanks so much for joining us. martin hegarty, black rock. david? david: alibaba was out with its earnings. the company is still going on and posting mixed results. shares are up on reported revenue growth. joining us on the phone is victor anthony who has a buy rating on the company and a

target price of $85. and cory johnson joins us from san francisco. victor, i want to start with you. what did you learn on the call? call, the numbers that they mentioned in the press release, which was accelerating growth as well as revenue, as you can recall, investors were concerned about the chinese macroeconomy and the pace of investments the company has been making. and the fact that gdp had decelerated. accelerated. beat street estimates. about call, they did talk makro situation. they said that chinese households have about 4.8 million -- 42020 and dollars of net cap freezers they are looking to spend.

the chinese economy moves away from more of and only investment a consumer-led economy. the consumer data was extremely strong. what did we learn, if anything, about what their margins are at alibaba? did they talk about that? victor: yes. 47.9%.me in that slightly better. outside been way down of the core business. they did talk about in the future they would give animal -- nue guidance to at least continuing toout invest in these businesses that

have different market structures versus the core business. what they will do in the future is break out the core business versus those investments to give us a clearer picture. i assume the core business is doing much better than the headline numbers we see. to out to the situation bet.that -- alpha you feel like you are getting transparency when it comes to this company? do you understand what the money is coming in? victor: it is difficult to get a clear read based on the press release itself. given the fact they have made -- every other month, they are making some sort of acquisition or investment. it becomes somewhat difficult to pass up the core business. on the call, they understood there investor concerns

about the question you just raise. it to make it clear that they will continue to make these investments as they continue to build the platform. they have 400 million buyers on the platform which is roughly a third of their chinese population. carol: i want to bring in cory johnson in our san francisco bureau. corey, take a look at the number -- revenue number. corey: it is still growing at a fantastic rate. faster growth on the e-commerce platforms. they are doing this by expanding the market faster than the market can catch up and setting up kiosks so people can get online in villages that don't have access, so they can get those people. they are looking -- working hard to expand the market. one wonders how much they have to go given to great lengths they are going to find those

customers with they wouldn't naturally be. it jon: the key multiple for alibaba has grown as where it was at the beginning of the year. here is a stock without a single cell on that. how much growth is already in the price of this company? , i think the multiple reflects the growth potential for alibaba. i think they have ambitions outside of china. trades at a rich multiple. when you adjust that for growth, the multiple is as egregious on an absolute basis. it is approaching a price target of $85. david: that is victor anthony of axiom capital management. musk sets a very high bar to produce half a million cars a year.

details next. ♪

♪ this is "bloomberg ." m&ang up, global head of and jones day on the impact of energy bankruptcy. ♪ carol: this is "bloomberg ." i'm carol massar. expectations the short and mark. -- expectations fell short at

merck. diabetes drug is facing more competition. newsday is offering subscription services. they say the service called unplugged could rollout next year. they are in talks of most major media companies, but has not locked up the rights to programming. banks -- thentral ecb is concerned the 500 will be used to facilitating the collectivities. is likely to bring criticism to believe the central bank is trying to abolish cash altogether. that is your bloomberg business cache. earningsa reporting with a loss narrower than expected. elon musk plans on wrapping up the model s production to 500

electric cars by the end of 2018. for more, we are joined by cory johnson from san francisco. before we get into the nuances statement, isow this a serious target? >> what do you mean? jon: to get production up to where it should be. elon musk. interesting is it is very ambitious goals. haveodel three, which we really yeah to understand what the car was going to look like. one of the issues this company has had is a history of delays. delays of any car that has been substantial. because a great ambitions they haven't this company, one of the --ngs they focus on a lot is

perhaps this big goal is a way to get the suppliers to gear up to get them the stuff they want. at a certain point, we could admire elon musk's ambition, but recognize the history on not delivering on deadlines. david: go to the subject that jonathan referred to which is cash flow. they had been burning through cash very quickly. this new ambitious plan a production will be higher a fair amount of capital investment. flow was not as important as it was this quarter. the model s investment was down and a lot less than the previous quarter. we can see that they pulled back a lot with the model x.

interestingly, in the call, they would not pen down on how many model x's they have sold. expected to be half of sales, but it wasn't. maybe the model x maybe not as big of a success as the model s. when you look at the cash flow numbers, you think out forward. company they did 20,000 cars in the last quarter. if they want to do a half a million cars and one year, that in theirfold expansion production capacity. they are going to have to raise a lot of money. during a conference call, -- look at that number, the more cars they sell, the worse their margins get. fundamentally, but raising money, they need more money to build a builder -- a bigger factory.

they lose their money due to cash flow. that is clear to investors there will be a capital raise coming. they raised 400 million -- they raisedor a minute they $400 million. i liked how you took a swipe at the suv by calling it a station wagon. david: you had a point here, matt? [laughter] sometimes i want to talk a little bit. i have something that bloomberg is capable love, which is going through social media data and showing you positive or negative value for it. on twitter, this is a three-day charge of tesla's stock. right here is when tesla yesterday came out with news on a real problem.

two of them -- two of their base executives are leaving. they have had and a exodus other executives. that combined with earnings, you get a time of social media activity, most of it is negative. the red line are -- the red line is bad tweets. the green is good. when the head of production leaves, it says something. talkedt -- elon musk about the challenges and the capital rate. he was not to say that they look like they are going to have to do something. he talked about it need to go to the capital markets to either borrow more money. make more sense to raise more money.

diluting the current shareholders by raising more debt as the company is burning through free cash flow is a high wire act that tesla is pursuing. jon: bloomberg editor at large, cory johnson in san francisco. up, tesla's stock up. those negative tweets, how much of those were cory johnson's? the battle of the charts is next. ♪

♪ jon: "bloomberg ." this is -- this is "bloomberg ." i'm jonathan ferro. matt miller, you are up first. [laughter] we can just change it for him, if you want. wars. chart i am ready for it. tesla has been in the news.

line is a look at the number of shorts we have seen on tesla's shares. the white line is the share price. the short position has been rising. pressure on the stock. the stock has had quite a rebound. you have seen a lot of short covering. i should point out the shorts are still 28% of float, which is fairly high. the question is, if you take a look at the share price, it is a little higher. people like what they got from tesla. what will happen to the short position whether or not we will see it higher or lower? some people argue having a high short position is healthy for the stock because it gives you a little cushion on the downside with shorts covering, right? carol: right. david: i have one that hillary handed to me a few seconds ago. the white line, emerging market marketla the -- emerging

volatility. currency, nations' dollar, pound, euro. for the first time in the year, the volatility of g7 currencies surpasses emergent -- emerging markets. that means investors are confident in gauging the performance of emerging market than they are that they can gauge the performance of developed market currencies. that is pretty amazing. david: but you don't have these investors talking everyday. matt: the central banks is the reason why they don't know what is going on and cannot forecast what is going on in currencies. matt miller, i have to go with matt miller. i came in the other day with my coanchor. we were going through the fx market your today.

in the space of a couple of ads, market completely reversed. through the day, the fed speakers talked up the dollar a little bit more. in the what is happening market is absolutely fascinating. carol: you just love currencies. i'm going with carol, actually. i predicted it to go up. do you want to break the tie? carol wins. next, energy bankruptcies on "bloomberg ."

david: long on short ideas. stan druckenmiller says the equity bull market look exhausted. forecast, elonew musk has the most ambitious

timeline. more stock data in the u.s. market, jobless claims rise to the highest and five weeks. -- in five weeks. david: we are just under 30 minutes away from the opening bell in new york city. bloombergloomberg -- with carol massar and jonathan ferro. jonathan: s&p 500 futures positive six. the dax pretty much unchanged as we approach the close. quickly, the board commodity market dominating the conversation with wti at a session high, 48.4%. the datas after

yesterday showing u.s. crude induction slide in the most eight months, down from the peak of around 9.6. treasury yields climb a little bit higher. the commodity currencies on the frankfurt. the other majors, the euro and the pound on the back against the stronger dollar. matt miller, big moves across assets. matt: let me talk about what was once the darling of the stock ipo,t with the biggest alibaba shares moving higher despite a mess on profit. just a miss on profit. -- a miss on profit. chinese consumers spent 39% more on the alibaba site then the previous year. tesla shares are also rocking and rolling after elon musk once

again promised -- not rocking and rolling as much as they were. now only up 1%. promise toade a big make 500,000 cars a year by 2020 and pulled it forward two years to 2018. he says he is sleeping at the office in order to get that done. fitbit earnings hit the lowest of estimates. they did say revenue will exceed wall street's estimates but profit missed widely. the shares getting absolutely punished, down 12% in the premarket. chesapeake just got earnings out, shares on the rise with a 12% as asset sales are using some of the pain and the drop in natural gas prices. aghast driller posted a smaller loss than estimated.

investors like that in the premarket. is time for a special edition of three stories that matter to the market. joining us as michael collins, -- we investment investor are talking about stan druckenmiller's view on the bull market. great to have you here on "bloomberg ." its talk about a trump presidency and what it could potentially mean. michael: i personally think it is a very low probability and there are some market gauges which take into account people's expectations. those market indicators lean toward about an 80% probability of hillary winning and a very low probability of trump winning . it is a very big divergence from what you see in the standard polls.

this has been a campaign cycle that has been very hard to predict. michael: i know a lot of people talking about trump and his tendency to borrow money and -- debt.etter dated certainly in the private sector we have had experiences with them. as a junk-bond analyst i have had meetings with donald trump. he has come into our mosh -- office to fund bonds. i think he was offering a 13% coupon and we politely passed because the experience in the past with a lot of his entities has not been that great. i do not know if that has any indication of how he will behave as president. david: some people say the markets are not paying any attention at all to the election and some say the market is holding back because of the uncertainty. what is your view? michael: the more that markets think that clinton is going to

win, the better it is for the markets. it is an indication of clinton having a better chance of winning because she is a known quantity. hernd bill i think are much more moderate than they seem to be in the campaign. she is definitely catering to bernie's left-wing supporters but i think the really more moderate and market friendly. jonathan: democrats are bashing wall street and you have spoken about donald trump, a man who knows what a coupon is. michael: trump is a wildcard and the one thing markets hate is uncertainty. the amount of volatility associated with a trump presidency is very high. carol: do you anticipate much change if hillary anza in the white house in terms of policy? michael: i think it is status quo if she is elected. carol: what else are you

focusing on? we also had stanley druckenmiller talking about gold , his currency play. do you like that idea? michael: i do not have a strong view on gold. i think it generally works well if you are in an inflationary environment and we are certainly not there yet. work well if you are concerned about a severe crisis,overeign debt particularly in some of the major reserve currencies. carol: gold has moved up about 20%'s -- 20% since mid-december. michael: i think the negative interest rates around the world and so many of the government bonds are at negative rate territory, makes gold look attractive. jonathan: it is difficult to make a positive case for the xe market. corporate earnings down.

the multiples are pretty high already and you have to think about what will expand that multiple, but i pick out your mark -- your point, it is the bond market against the xe market, and what is your conclusion? michael: it is a relative valued world. .nvestors have to make choices at the end of the day, stocks look at a good among all those other comparable investment opportunities, and the fact that the multiples on the stock value, even be fair the discount rate that we are likely to be living with for a long time, i.e. low government bond bills, could allow for multiple -- and stocks are driven by earnings. earnings have been really bad with four consecutive quarters of earnings declines. we have had this big collapse on earnings across a lot of sectors. many factoring sectors have

probably seen -- manufacturing sectors have probably seen the worst behind them. second derivatives that we look at, if we look at commodity prices in the second half of this year, they will be higher than they were a year ago. the dollar is already weaker, and those are two of the big headwinds that were hitting corporate earnings. jonathan: you mentioned low rates. some big calls in the last 24 hours. adam fisher, offered a bleak view on japanese bonds saying " the 30 year bond in japan may be the most overpriced security on the face of the earth." he was not keen on betting against european sovereign debt, saying that trait -- trade would be a widow maker. , an accident waiting to

happen, the original widow maker. why is it an accident waiting to happen imminently? michael: it is not imminently, that is the problem. they are not going to be able to service their debt over the next 20 or 30 years and i think something bad is going to happen. have time on their side and it is not dissimilar to china, 200% of gdp, but it is all funded onshore. --se countries run through run into problems when i cannot get the funding anymore. neither of those countries have an imminent problem with that. they have a huge, unsustainable debt load and investing is a risk. we actively manage across the curve. we like the 20 year versus the barbell, but those are picking up pennies. jonathan: not much space, and

when you say who was going to buy, the government fund was pushed to get out of it a little bit. somebody has to buy it and the big pension plans in europe are all coming here, shifting their allocations to non-japanese equities and bonds. we are seeing big inflows into u.s. fixed income products from japanese investors so that is an issue. carol: which fixed income? michael: they tend to like very high quality, but investment grade corporate bonds, high yield now and then, structured product is an area that we think is an attractive opportunity because you have a lot of aaa rated assets that generally have big spreads they can asset -- they can benefit from. david: you refer to the debt burden of china and japan. those are two different circumstances.

18 economy is growing very robustly. the other is not. growth, what to could they do in terms of fundamental reform that might lead to growth in japan? michael: they have a real challenge driven by demographics. their population is shrinking. if they do nothing in the next 50 years, the population will almost be cut in half. that is huge for a country without much debt. it is hard to envision them growing their way out of their debt burden. jonathan: those are some of the stories that matter to markets right now. michael collins taking with us for the next 30 minutes at least. matt miller counting down to the market open. matt: suing banks in the u.s. will be easier if a regulator gets its way. the issue -- those contacts -- contracts you signed for a

credit card or loan, they require you to settle disputes through arbitration. the consumer protection bureau proposes a rule to let groups bypass arbitration and file a class act lawsuit. the banks will probably challenge it in court. the michigan house approved a $500 million restructuring plan to detroit public schools to make sure that teachers are paid and the district pays off debt. teachers held a two day sickout after learning the district could not pay them for the summer. lawmakers in new jersey are battling over how to keep .tlantic city from going broke the seaside gambling resort could run out of cash within a week if the state legislature does not come up with a rescue plan. lawmakers are fighting among themselves. one sticking point is whether new jersey should be able to break union contracts. i am matt miller. carol: much more ahead on

bloomberg . we will be speaking with david whiston of morningstar. shares as you can see up almost 2% in the premarket. back in a moment. ♪

jonathan: this is bloomberg counting a down to the market open 15 minutes away. , s&p 500p 32 points futures positive around four points. crude punching higher. 2016, who would have predicted this back in december? a great market for high-yield.

michael collins, senior investment officer of prudential fixed income is here to give us his take on a credit market spread two tight. who saw this coming? michael: we think spreads are wide. jonathan: you think they can, and even more? michael: the spreads are 600 or 700 basis points. it has been a lot more time historically below where it is today so given our level of rates and the fact that low rates are probably here to stay, look at the spreads in places like japan. they are like 30 basis points. when your rates are negative you get desperate and you reach for yield, and that has not happened yet in the u.s. tight.n: 2014 was do you think we can test those levels again? michael: ideal. they have typically done below

300 basis points in past cycles. there is definitely scope for them to fall, especially if you think some of the default that everybody has been waiting for baby are already happening. -- maybe our already happening. david: if you have default picking up, what happens to the yields? michael: i have a view on where we are in the credit cycle and what the default outlook is. some of the commodities sectors you could argue that we have seen a lot of the falls are ready, a lot of the falls that are going to happen are probably priced into the market. a lot of the non-commodity sectors are really doing well. i sit in on our high yield meeting every morning and it is incredible how good a lot of the fundamentals of these companies are. carol: investors are discriminating.

it is not like all high-yield is going in one direction and that is a healthy market. michael: it has become super bifurcated. everybody looks at the average yield of 7% or 8%, you cannot invest because there is very little in the high-yield market that is at the average. high-yield managers have flocked to that defensive sleep at night part of the market which has arguably created potentially an overvalued system with some of those bonds. the trick is finding the bonds in the middle that will not end up in the default category that are offering decent yields. carol: which are the bonds in the middle? michael: we have dozens of credit analysts who do this every day, and they all have issues. you're not going to find one that does not have issues. corp hasourt --

issues but at the end of the day the bonds are probably covered by the underlying value of the company. that is an extreme example. there are a lot of credits that offer attractive risk. david: what do you look at actually? is it balance sheets strength, trends on revenues? michael: you have to look at all of the above and at different points and the cycle you focus on different things. at some point you focus on liquidity. a lot of the energy companies have liquidity issues and that is typically when you run into a default when you run out of cash. just in the last few days we have seen the markets open up again. the high-yield market is issuing debt again and they have also a kid -- issued equity. they have done a good job to sell assets, cut dividends. they are in survival mode which

is good for a bondholder standpoint but you look at the free cash flow of the company, the ability for them to service their debt. you do not always need a lot of growth to service debt. a lot of them do need growth to grow into their balance sheets. carol: where are you when we have various guests and say, growth is going to be anemic. michael: that is a big challenge for equities and high-yield companies. if you cannot grow your top line or bottom line you have to cut debt. yourannot grow into balance sheet so you have to reduce the size of your debt burden, and a lot of these companies have been doing that, deleveraging slowly and paying down debt. jonathan: michael collins, great to have you with us. david: up next, whole foods on on the moveof --

and premarket after reporting earnings that beat analyst estimates. some of the other stocks that are on the move ahead of the open. ♪

carol: this is bloomberg , i'm carol massar. first-time filings for unemployment benefits rose to a five week high. was the largest in a year and may be a sign the strong labor market may be moderating. first-quarter earnings beat expectations at merck although fall short of estimates. merck is trying to boost revenue after four straight years of declines and is attempting to defend its top diabetes drug. hsbc or on thend shortlist to help manage the saudi arabian stock exchange's

ipo according to people familiar with the matter. morgan stanley being considered as well. the saudi exchange is not expected to go public until 2018. over to matt miller, stocks moving on earnings this morning. matt: whole foods, second-quarter results beat estimates after cost-cutting measures helped cushion slowing growth and a fall in store sales. they may face trouble in the second half. revenue would gain as much as 3%, compared to a past estimate of 5%. weight watchers is sending opera a nice gift basket. after are shooting higher its high-profile partnership rah. op sticking with the food fan,

craft, heinz and kellogg beat estimates that kraft heinz and kellogg beat estimates and most of the credit is going to strong cost control. kellogg was able to post strong earnings as cereal consumption continues to fall. kraft says it's cost cuts accelerated this quarter. we did a businessweek story that people are eating less story -- serial bank -- cereal. maybe they are eating more bacon. carol: it is a car and we are cutting out carbs. david: it goes back to weight watchers -- jonathan: it goes back to weight watchers. let's whip through the markets for you very quickly. futures stay positive in the u.s., positive 36 points.

s&p 500 futures around the five point mark. the dax just dipping lower by a touch, not even five points. 500 -- ftse 100 also rolling into the red. euro weaker against the dollar at 11430. the dollar weaker against the commodity currencies, on the march against the dollar with wti up 4.13%. , this after the data rally yesterday showing u.s. crude production coming down the most in eight months. equities and the cash open next on bloomberg . ♪

show me movies with romance. show me more like this. show me "previously watched." what's recommended for me.

x1 makes it easy to find what you love. call or go online and switch to x1. only with xfinity. show show me more like this. s. show me "previously watched." what's recommended for me. x1 makes it easy to find what blows you away. call or go online and switch to x1. only with xfinity. jonathan: this is bloomberg . alongsidehan ferro david westin and carol massar. joining us is marco collins of prudential fixed income --

michael collins of prudential fist income. -- fixed income. ahead of the open, about 10 seconds away. , upres going into the open around 30 points. s&p 500 futures up for. a real prospect of a fifth straight day of losses. crude very much on the front foot. wti up over 4% through much of the last hour. wti $45 and $.67. , 1.78%. inches higher a lot of stories and a lot of earnings. matt: there is a lot going on in today's market. let's look at the major indexes. we are looking at gains across the board, not huge gains.

at 2054.ight now take a look at the industry groups that are moving. -- mostsee that we have of the groups are gaining. consumer discretionary stocks and utilities are down. jeff gundlach yesterday was saying short utilities. --ill take you about all of talk to you about all of those calls in just a minute. , lot of earnings moving individual names, mark topped even as sales revenues fell -- merck topped even a sales revenues fell. the stock is down to and a quarter percent. tesla brushed off a q1 net loss as they announced a production plan that will speed up the 500,000 car a year goal two years by 2018.

investors look relatively confident. tesla shares up about 1%. the rest of us are pretty skeptical. fitbit is hurting after saying its earnings will miss estimates. fitbit getting absolutely pummeled in the open, down 13%. alibaba reported its fastest revenue growth in four quarters as they cap spending even as the economy slowed. 423 milliond over active buyers, one of every three people in the most populous nation. they missed earnings by a lot. in ass what they came opposed to 3.52 but investors are shrugging it off. david: moving from high-tech to oil, chesapeake outperformed expectations and slashing jobs, pledging more than 90% of its

assets as collateral to retain access to its lines of credit. robert, the last time you were with us we talked about default in the energy sector and you bravely predicted over 500 in 2016. are you sticking to that? robert: deloitte published a report in january that was very gloomy. they forecast hundred 75 publicly traded expiration of production companies filing. there is a lot of ripple effect on that and frankly, the toughest space right now is the services space. , if thatgoing to be comes through, it is inevitable that the number will be something like that. also we are seeing a fair amount of distress in the debt market midstream. downstream is fine.

pipes, lots ofof terminals and other stuff built in the last five years. any of them are almost empty. david: so we have that 500 number out there as a possible, how far are we toward that number so far? robert: we are in the bottom of the first inning really. i think generally in terms of bnp companies, there have been about 70 bankruptcies so far. only 15 in the first quarter. we have the redetermination in april and a lot of stuff going therepeople drawing down lines before the redetermination. there is plenty of distress. the main reason, everyone says why now? there was a lot of production coverage in terms of their derivative positions. .hat has really worked down

i do not know how people count the stuff but less than a third of production is covered. and they do not have hedges so they have to deal with the market. there is the psychological factor. carol: you are out and about meeting with individuals. robert: there was sort of a psychological difference. it is not as if it is the end of the world if you have to file, getif you do not file and by by the skin of your teeth and selloff machinery which a lot of them are doing, what is going to happen when the prices turn up? they will get to 50 someday. what we be positioned? jonathan: are we at the point of capitulation? robert: not quite. in any bankruptcy the last thing you want to do is file when it all starts, and that is the right thing, but at some point you have a lot of company.

you look at everybody else cleaning up their balance sheet and say, how will we survive if we do not file? at the asset look side and liability side, how does it stack up? michael: it is a very bifurcated market. carol: are the bigger guys traditionally the habs? michael: i think that is fair, although chesapeake is one of the biggest in the natural gas space but they were and over levered entity for a lot of time, in our view. it really depends, it is a company to company bottom-up analysis that they have to do. there are a lot of over levered companies still in the space that even if oil moves along the current strip, which is pretty flat, the curve has flattened out. in two years price is only expected to be at 50. if that happens, a lot of these

companies will run into problems and will have to file voluntarily or restructure debt. david: several banks talked about problems they had with energy loans and my question is, is the money they are to go bankrupt? you need debtor-in-possession financing. there is a lot of pressure on these banks from the risks they are taking. it is hard to get in all businesses right now. it is the most reliable financing. tough. there are not that many banks that do dip. there are plenty of hedge funds and this is a market that is dominated right now by private money, by hedge funds and that sort of thing. banks are not touching them and one of the reasons is because of the regulators telling the

banks, you really have got to crack down and reserve up on your loans. banks are not making new loans. david: they are trying to cut their exposure. robert: and they are under a microscope from the regulators and they have to have reserves. david: where do we end up when this is all over? do we have a more concentrated e&p sector and what will that do to prices? robert: i think so. weear ago i would've said were going to see some m&a in the space. we have not seen much. i do think the mid-majors and majors and guys below that have the capacity to whether the sport -- the storm. in, evenare not coming though these are bargain -- look like bargain purchases and buying these companies yet, and i think it is because you are a ceo and you are going to reduce

your budget, laying off all these people, but i would like to buy this, and of a tough sell with your board. but that will change. i think in the second half of this year -- because there are lots of distressed opportunities . a lot of these bonds are buying with the expectation to eventually sell when people can afford to buy. matt: i can back up what bob is saying. it is the outlook i cannot give you. e&p's, have oil and gas jumped upount in red in 2014 and has been coming down. , which is in yellow, jumped up in 2014 and has been coming down so we have not seen a huge pickup and deal action with the interesting thing is if you think it will pick up in the second half. david: thank you so much, robert

and michael. thank you for being with us. carol: coming up next, elon musk doubling down. his plan to ramp up production is the most ambitious since the ford model t. ♪

matt: i am matt miller in our hp greenroom. chairmanublishing michael pharaoh coming up at 1:30 p.m. eastern on bloomberg markets. ♪ this is bloomberg , i'm jonathan ferro.

equities creeping higher in the u.s.. the s&p 500 around a quarter of 1%. i want to get you to some business flash news. demand for the gas in u.s. has not been this strong in nearly 40 years but is not enough to dry out glatz. refiners are maximizing gasoline output. inventory is our at their highest seasonal level in three decades. urgingdrugmaker is negotiation on the takeover offer. they say medivation shareholders overwhelming desire for a deal. ford is investing $182 million in a new cloud computing starter. ford is trying to boost its software expertise well it

prepares for a shift to electric and self driving share -- cars. that is the latest business flash. matt: let's check out some of the action yesterday at the sound conference that was mostly on the short side. david einhorn said caterpillar is set to topple along with prices of natural resources like coal and iron ore. iron ore -- he pitched general motors, with sales in china expected to grow. he was positive on gn but short caterpillar. jim chanos is not short of short ideas. he is maintaining bearish bets on valeant, solar city, and tesla. target their production will be hard to reach and he is still a bear on china. position ina short

alibaba as a bet against the chinese economy. says hisckenmiller biggest holding his gold and warns investors to exit stocks. the biggest offender he says is the u.s. fed. jeff gundlach is telling snvestors to buy mortgage reit and says negative interest rates are the definition of deflation. he told the market to get ready for a trump presidency, predicting a wider use of debt financed programs, and compares donald trump to ronald reagan. david: in one respect. matt: in structure, and borrowing. jonathan: when the mortgage reit story came out, he said basically back people buying houses but not switching the lights on. david: that is very clever.

well done, jonathan. .e will go to abigail doolittle taking a look at a couple of stocks at the nasdaq. abigail: whole food shares are trading higher after they posted better-than-expected fiscal earnings, to make $.44 per share. the results largely reflect cost-cutting efforts but while the company is doing a lot to improve its operations, they need to drive traffic -- traffic and people into the stores to improve sales. shares of whole foods are down 40% over the last year, the most on record of a rolling one-year basis. costco posted disappointing sales in april. sales were up 2%.

bloomberg intelligence analysts say the sales were week with and without gas and deflation continues to weigh on cosco's sales. a down more than 7% year to date. carol: have to talk a little bit more about tesla reporting earnings with a narrower than expected -- expected loss. david whiston of morningstar joins us from chicago. you actually upped your rating inthe stock to a buy mid-february, and tesla shares have rallied more than 50%. we are we now in the tesla story? david: last night was a dramatic turning point in the tesla story. lots of execution risk, but coming outside that's coming out

last night and saying they are accelerating production and on the q&a of the call elon throws out one million units as his best guest, that is a -- his best guess, -- you are talking going to half a million by 2018. if they can pull that off, i think there is a lot of upside to the stock. obviously you need capital. there are cyclical risks and one risk that does not get talked about enough, they have an exclusive domain in battery electric high-end vehicles but that will change over the next few years as the germans and cadillac give them competition. carol: he said if they can pull that off. if you look at his track record, some would call him a visionary but if you look at his other projections, he has not been good on that front.

you are paid to make decisions on what happens next. what happens to tesla next? do they meet the timetable he has laid out? about howtalked a lot the model three will be a lot easier to make them the s or ask so that will suggest that a lot of the delays happened and even not be had them it will as dramatic as the first two models. 2018 and i thinking am starting to consider giving them more of the benefit of the doubt. as long as we do not sink into a global recession or a recession in china, the u.s., and europe, there is the potential for me to increase my fair value. i am considering a range of 300 to 330. david: if they could deliver on

this, it would be truly revolutionary. point, up on carol's steve kay said a vision without -- w.: you are right they have missed on timing but when you look at the product, it is outstanding. my one problem is i would like to drive more than 215 models on a charge. it is fantastic, very high tech. is not quite as mass-market as people make it out to be, but i think it will do some damage to a three series audi a4. carol: we have had fun with the comments that elon musk is sleeping at the end of the production line. maybe it says, why does he need

to do that? .: he is clearly from the outside a micromanager, and is hyper excess -- hyper obsessed. you want the product to be perfect because you are up against some very formidable competition. there are many failed startups out there. has been able to buck the trend and part of that is marketing, part of that is a tremendous product. you have to stay on that. that model three has got to stay ahead. i think they are on the way but a long way to go. my point on competition i think seenvalid one, we have not competition yet. carol: david whiston, and give very much for joining us. jonathan: tesla up in the

premarket throughout much of the morning and down in the open about one and a half percent. , bloombergbloomberg markets with betty liu and mark barton. back, they do not appreciate you. the door is open. anyway, what have we got coming up? libby cantrell, a big day in politics. it is a trump-clinton standoff and what does it mean for the market and economy? she says the electoral college benefits clinton in a runoff. james albertine will be talking about tesla. can tesla produce 500,000 cars a year in 2018? matthew campbell is with us to

talk about nestle. it is moving into the business of selling medicines. would we buy it? it sounds a bit strange. one minute it is selling chocolate, the next it wants to sell medicine. a busy our coming, do not look away. jonathan: up next, a look ahead to what is on the agenda today and tomorrow ahead of payrolls. ♪

carol: this is bloomberg , i'm carol massar. -- gopro,, grow pro and square among the companies reporting earnings after the bell. participating in a panel discussion so we were look for some headlines. david: chairman and ceo of mgm resorts international jim moran

will be here for an interview at 2:00. jonathan: tomorrow is payrolls day, payrolls out at 8:30 tomorrow. k, jobmate of 200 estimate of 5%. -- basess tomorrow is are all loaded. from bloomberg tv and on bloomberg radio, bill gross of janus capital coming up minutes after those numbers come out. carol massar and david westin, thank you very much. bloomberg markets is next. ♪

>> is 10:00 a.m. in new york. i am vonnie quinn in for betty liu. mark: this is bloomberg markets on bloomberg television.

♪ vonnie: here is what we're watching. alibaba sales surge. the e-commerce company seeing a 30% gain in revenue as they gain new users and sales on mobile devices. excuse me. trumpundlach says donald is extremely comfortable with debt. a closer look at what trump presidency would mean for investors. vonnie: and how tesla's new forecast could change the entire industry. introduce half a million cars a year by 2018?