francine: the debt we should be worried about. it's a bloomberg exclusive. buys billions, george soros cuts his stocks. bunch bank has the most challenging job among banks. this is bloomberg surveillance. tom keene is in new york. we are looking at currencies. there is a lot going on with commodities. stocks are in change. tom: australia as well.

meeting much more important. i know we're going to do that in a minute. basically, the journal article suggests that what carl weinberg will-- has talked about maybe finally happened. we will talk about that. francine: we have been reporting this for a couple of weeks. it's something i addressed. they have been asking for some time and debt relief. they have done this veiled threat that if they don't get that relief, they may not participate. news.get to the >> the u.s. is backing libya's request to find islamic state. john kerry is in vienna where he met with russia's foreign minister as well is the bromance from other countries.

they ruled out the use of u.s. troops. the majority of britons want to remain in the european union. 55% of those surveyed what the u.k. to stay. that's up slightly. 40% want to leave. the referendum is june 23. in france, the french president will try to head off strikes. last week, demonstrators in paris announced the plan that he forced to the lower house of parliament. it makes it easier for companies to fire workers. this would lead to the creation of more jobs. the number three official in the chinese congress party is promising to listen to hong kong regarding its economy. he is the highest ranking chinese official to visit the

city. hong kong police are on high alert during the meeting. it's a milestone for the international space station. it has now made 100,000 orbits around the moon. that's traveling 2.6 billion dollars. astronauts of living aboard they station since 2000. construction began two years before that. tom: thanks so much. there is not that much going on. that may change at 8:30 a.m. new york with the cpi data. oil moves. brett crude finally makes a --.

this is what i'm looking at. global equities are rallying for a second day. the us trillion dollar -- dollar is significant. -- the australian dollar is significant. tom: cpi this morning, i've shown this before. red.is core cpi in this takes out selective outliers each month. the court has caught up to cleveland. yellen out here is the overshoot. eye you of a trend overshooting is a policy prescription where she would allow more inflation elevated inflation to help the real economy. that's the theme. we are there already.

you want to know where the new there is. francine: this is what i benchmarked. this forecasts growth. and this isows us why i highlighted it in red, investors are showing equities as it improves. i don't know that stocks are seeing something the economy isn't or the other way round. we will speak to experts about. let's go to china. malcolm, it's great to have you on the program. we found out a little bit more about china's debt. larry think of black rock was concerned. we find out that the pboc will have a lot more power. malcolm: that's right. just like larry think, they are

worried about china's debt. they are taking on some new areas of coverage. they've got this assessment system that has been in place since december. they are expanding that already. they are looking at capital flows. this is a new area. it could possibly have a bigger role as an overseer of the chinese economy. francine: this is what larry think told us earlier. larry: we all have to be worried about it. 6%, youconomy grows can't grow out of your problems. you can't grow at 6% and have your balance sheets go faster. francine: i had the chief economist talking to me earlier. he says china will have a hard landing. thatlm: anything around you hard landing.

say we are looking for 6.5%. there will be a bit of a turnaround according to our latest forecast. 3% would be on the low side give this huge debt pile that has built up on the corporate front. picture,down that that bloomberg estimates. that's for the debt really concentrates. tom: where is the mechanism to clear that that? i can't figure that out area malcolm: one mechanism is the state media and some of the officials champing that unsustainable stock level. securitize some of this debt. maybe that's one way out. thisovernment sponsoring

debt for equity swap process. they try to backstop some of the conversion of this long-term bank debt for the local government and convert that into bonds. tom: thank you so much. this is brilliant. larry think could buy the debt. it's brilliant. i just solved all of china's problems. francine: let's move on to greece. let's see if we can get her in trouble. janet henry is here to talk -- bank oforage of japan. larry fink is giving a warning signal to the markets. it has not played out on the markets. there is nothing turmoil we saw back in january. he says we should all worry about chinese that. as it is that as long

regulated we are not going to see the bubble burst. janet: all of that is true to some degree. we all know that china has accumulated a lot of debt, particularly since the crisis. if we think about how the global economy came out, everyone was slashing rates. pretty quickly, most of the western world was back on the stimulus because china was reviving very strongly. when you that china was accumulating a lot of debt. they have continued to do so. withrew the comparisons january. the world was looking at china. the markets are looking at china and thinking every other country has devalued its exchange rate. policyhina has another and they will devalue. what we have seen is the markets

being reassured the china still has the conventional ammunition. we've seen this monetary revival. we've seen some revival in fixed asset. all of this means the debt stock is continuing to grow. are you expecting more stimulus? it has worked so far. we see that in the figures that were unveiled. will they do a lot more? janet: i think they will do as much as they need to. what happened to china is the -- they were trying to slow the economy down. revival has supported the high-end property market. that's why we've seen some macro credentials members. a lot of the third and fourth tier cities have got a lot of oversupply. we will see further measures. all of that fits in with the longer-term policy that needs to

come through. there is an urbanization of china. i think it's been slow to much. we will see more physical stimulus. are -- does beijing have the support of the regional power cities? do they have the support of shanghai? western cities? do they have the support of hong it.? janet: i miss that the grand knowledge that my chinese speaking colleagues hampered they have a strong central government administration in china. in the same way, local governments overshoot or under deliver policy reforms and the

way stimulus is delivered. policy is set by the federal government. coming up from the london school of economics, will join us. we are thrilled to have him on today. ♪

francine: this is bloomberg surveillance. tom keene is in new york. are's sales growth

that the estimate. profit came in short of expectations. vodafone has narrowed declines. meanwhile, the government of japan will pressure motion phone carriers to come cheaper plans for customers. rising profits show the mobile operators have room to reduce costs. japan's three largest carriers have offered rate plans but only to a limited number of users. who has the toughest job in european banking? martin gilbert told francine that it's the deutsche bank coat ceo. ony don't have to count investment banking for earnings growth. the think he probably has tough job. there is a very good wealth manager that he can fall back

on. think they've all got good hits and they've all got investment banks that are probably trying to downsize sherry: shares are down 36% in this year. francine: thank you so much. we had a great conversation with mark gilbert he did not pull any punches. week oncatch that this friday evening. we talked about brings it in the risks out there. lehman likeout moments. he said that's not going to rexit happens.b tom: i haven't looked at deutsche bank chart in ages. it's not a pretty sight.

of residence, the wall street journal reports people concretetalk about terms of a proposal by the monetary fund where they say these will be the rules. paul joins us from the london school of economics. quickly, you have said for years there must be a long-term debt extension to help greece. are we finally there? paul: i hope so. the imf has been pushing for that for white some time. they will have to convince the germans to go along. happens, this will be the final debt relief it is essential for greece to survive. tom: how interesting is the rate

if they postpone the debt for years in a negative rate environment, which is clearly what europe is in. how important is a coupon? is that something made out of thin air? the greek debtke and you compute the future payment,the interest you have to take a higher interest rate. take one that has some risk involved. i think the scheme that the imf implies debt relief is substantial. really a debt relief. it goes in that direction. francine: what's new now?

the imf seems to have put a date on it. they want debt relief until 2040. is there a probability that if they don't get that, the imf walks away? what does that mean for the credibility of the plan? change thewould whole thing. some might also be bargaining that they are putting on the table. there might be the hope that it might not the is drastic. this would be fine. this can succeed. don't want debt relief or anything like that.

they can sell to their own population. thank you so much on a short notice. an amazing story as we finally are there. we will advance the story with deutsche bank. brian will join us from civil research. he has huge digital disruption within media. this is bloomberg surveillance. ♪

francine: tom keene is in new york. we look at oil trading. this is on speculation that crude stock piles climbed last week we lost production in nigeria and canada. our chief energy correspondent is here with us. when you look at the price of oil, it seems like it's much more imbalanced because of this disruption. clue that weve not would lose so much. the economy production is at the lowest in 27 years. are hitting.

they know what they are heading now. there is a significant disruption. francine: it's a benchmark. if you look at the chart i made, it follows the wti. we came remarkably close yesterday. i think there is a lot of attention. to things are going to happen when we hit $50. we are going to have an index bracket. that's going to enter the oil arc it. we are going to have a lot more hedging from oil producers in the united states. be two veryg to strong forces that at this point we don't know which one will win. he dollars is the key. francine: does that reassure you about the economy?

janet: that's certainly good news. it stabilizes the inflation expectations. i worry if it rises to sharply, particularly if it's supply lead rather than demand led. , that rises to quickly engine disappears. francine: we were talking about how there is so much cut in investment. janet henry stays with us. we will talk about some of the currencies next. this is the picture for a lot of the currencies. i want to show you the australian dollar. you can see european stocks are getting 6%. ♪

tom: many stories are out of london to keep us entertained. first wordhere's

news with shery ahn. the missing malaysia an airliner may not found. guardian there is a decreasing possibility of success. they have been searching the indian ocean since the plane disappeared two years ago. the world take may issue bonds to fight rakes of diseases. the debt would be modeled after catastrophe bonds. would bein protests -- forgiven in the event of a disaster. the obama administration will announce today that its easing sanctions on myanmar. they have a democratically elected president in office. easing sanctions will make it easier for u.s. companies to business in the country.

and amtrak engineer was distract for his train derailed in philadelphia, killing eight people. that's when investigators will conclude today. according to people familiar with the matter, a rockthrowing incident involving another train caused the engineer to lose track of the speed limit. hillary clinton will try to avoid losing both of today's democratic primaries. her lead over bernie is almost unbeatable. lose in kentucky and oregon would slow her momentum. kentucky is considered a bigger prize. global news 24 hours a day journalists and 150 news bureaus around the world. francine: thank you so much. this is what we're watching out for the rest of the week. we are talking about federal monetary policy.

the fed will give more indication after we see the data. we will have the g-7 meeting in japan. a lot of people are talking about that. the boj did not want criticism on their home turf. let's get to the chief economist. people are saying we are reaching the end. there are so many side effects. it's unclear why the fed is not hiking. are you concerned that a major policy will stay? that will bring us into something ugly? janet: we've done all of the easy stuff. there are more things central banks can do. there are risks associated with them. i think the fed's reaction has

shown they are well aware of the risks of making a policy area. they seem to start the year with we are going to raise rates four times in every year -- last year they got one. they will likely get one this year that. they don't want to be like the other central banks it had to quickly reverse policy. they have actually had to reverse course. i know it's extremely difficult. francine: is there a dangerous it inflation overshoots and they missed the boat with a need to start normalizing further? janet: there are always risks of overshooting. the fed has been very clear that they have asymmetrical target. it's not like the ecb. the fed is equally happy with 2.5%. i think they are more or to take

the risk of overshooting. they have undershot so long. it's almost like a price level target. we can afford to take the risk and overshoot. we know what works to bring inflation down. tom: we have shown this many times. here is the original boj action. this is what they would like within the japanese government. this is where they would like it to go. down we go with the yen strength. there is an interview today. aboutis a discussion intervention as an option. do you see us anywhere near coordinated or less than coordinated for intervention? i don't see it. i don't see the rhetoric around intervention.

janet: i don't either. we've got the central bankers and the finance ministers this week and the heads of state the following week at g-7. we know the constraints we operate, you can only intervene if your currency is significantly overvalued. i don't think the yen is overvalued at these levels. that level- where is of over valuation? what would it give you a tendency towards overvaluation? janet: it's more the japanese authorities. that could be a potential trigger for currency intervention. your point about coordinated intervention, are we there yet? there was speculation after the shanghai agreement. i don't think there was an exclusive report.

i think it's clear that yellen and draghi went home with more awareness of the fact that their policy actions could have implications for the rest of the world. prevent them from meeting their own inflation targets. we are still a ways away. it's not in place of the idea of some kind of a court come through. francine: the boj has the most difficult task. they cannot increase wages. they are not getting the inflation target up. it goes negative. last month, they decided not to do anything does that make him lose credibility? janet: i think the credibility has been damaged. he did not manage expectations. he not only didn't get the end

reaction, he damaged consumer and business confidence. he said he did not do anything. i think the yen is an interesting one. 82 120.went from that did not help the japanese economy very much. to me, the important policy for physical.ctually the i think it's moving toward fi scal and monetary policy working together. francine: is the jury still out on whether it works? do you think it hasn't worked and that's why they have to focus on the third area? janet: hindsight is a wonderful thing.

i think when it was initially maybe it would have had a chance of working if they hadn't raise the consumption tax as quickly and aggressively as they did. the monetary expansion is what the textbook said they should do. it was in the right direction. expectation was in the right direction. they did not given enough time. they killed consumption with a consumption tax and -- tax. tom: later today, a set of conversations that are quite important. alix steel is in california at the goldman sachs leverage finance conference. she has a set of speakers. they are speaking on commodities and the state of m&a. this is bloomberg surveillance. ♪

tom: good morning, everyone. it's time to migrate to an important discussion about emerging markets. let me bring up the chart right away. i was not aware of this massive underperformance fund going back four years. the emerging markets. that is a nice segue. forget about robert redford and meryl streep. of dunn has done that out africa.

we are thrilled to have you here. what's the biggest stereotype developed people get wrong about africa? >> things are moving on its own terms in a rational way within individual countries. or: what help to they need the health to get out of the way? jan: there has been too much foreign interference. africa needs investment and entrepreneur ship. the private sector can generate. respond whenou they say they're going to exit? jan: it makes no sense whatsoever. jumping on a bandwagon is

superficial. francine: do we consider it a frontier market? there might be a lot more risk out there. it'syou look at africa, individual countries with individual problems. jan: very much so. there are more than 50 countries and some of them are doing really well. it's this difference between frontier and emerging markets. it's unclear. it's a spectrum. you have some very shallow capital markets and move too much deeper financial markets. africa really spends a broad range. there are middle income countries. francine: where do you see the biggest opportunity? i am looking at south africa. it has huge potential. there is an effort to restore investor confidence.

what does an investor do in south africa? janet: it's interesting. the bond yields are high. a major pickupf in inflation and growth are very low. it's an environment where opportunities are quite announced. back-and-forth. what is the jumpstart to emerging market equities? ashmore is focused on that. there has to be a catalyst. there is always a catalyst that takes it go. jan: we are experiencing it right now. brazil is performing extremely well. there has been a big change this year. emerging market currencies are outperforming the u.s. dollar. commodities are up. these are factors that right now are creating positive earnings

momentum for companies and emerging markets. francine: when i talked to a lot these are companies that are suffering because of their exposure to emerging markets. they were the big miracle of the decade, they would decouple from the u.s. economy. when we going to see this new thing? janet: i think it's going to take time. we will see the growth come through. there is still huge potential for productivity. that they got lazy with growth. when they were flooded with cheap money and provided by central banks and the chinese investment story, they were accumulated a lot of debt. they were slow down for structural reforms coming through. what some of them are waiting , the ones that are

serious about growth should be using the opportunity to get on with the structural reforms that will approve their long-term growth potential. francine: are we going to see more defaults? you were talking about a massive amount of that. do we need a catalyst movement for a lot of these markets? janet: it would not be the adjustment that refreshes. it might be something that poses bigger risk. this is one of the additional reasons why the fed will tread very carefully in terms of normalizing policy. there is a huge improvement in emerging markets. anything that reverses that would be at risk of bringing

back all of that emerging market risk unless we see further evidence of these fundamentals. tom: you have a telling paragraph in your research which is the split between turkey and brazil. those are two different things. commodity super cycle having a bottom and will rebound , or is it a political distinction? jan: it has nothing to do with commodities. there are three drivers in brazil. one is economic, what is political, one is judicial. there are good institutions in brazil. we saw the president step down in an orderly fashion. the economic cycle is beginning to turn. the currency is rallying. it's an interesting environment for fixed income. the fact that he see the president leave and he replaced

with a more effective government turns brazil. tom: did i get it wrong 12 years ago? jan: it is like that. brazil has been oversold and there are changes that are unfolding. if you take a forward-looking view, we are heading into a better place. the yields are extremely attractive. tom: thank you so much for joining us today. that's fascinating. we will continue with janet henry. let me do a data check. the last couple of days have not been good on data. 47 .84. brent crude is 48.86. they are near $50 a barrel. this is bloomberg surveillance. ♪

francine: we talked a lot about markets and central-bank policy. tom keene is in new york during that's get to the business flash. ahn: they are headed to china. bridgewater has become the first

hedge fund manager to win chinese approval to set up an investment management business. that's according to a consulting firm in shanghai. -- $154age $154 billion. we are getting look at how much debt saudi arabia holds. the u.s. says the saudi's hold $117 billion in treasury. that's up from $83 billion two years ago. they are among the top 12 countries holding u.s. debt. -- freedom ofamer information request from bloomberg. what are once it to be easier for you to send longer messages. they will stop using photos and links as part of the 140 character limit. links take up three characters. plan to give more flexibility to users and a trending one.

that's the bloomberg business flash. tom: all you need to know is if you have invested like michael mckee did 10 years ago, you would've made a 16% for year. apple is the only foot. michael: april was a good month retail trade home depot is different. their fortunes are tied to the housing market area it's not a question of whether home depot gets its shares rising. take a look at the chart you this is the percentage change over the last five years. they have done much better than housing has. home depot has boosted private heavy, improved offerings, taken market share. they've done a lot internally to boost their operating martians -- margins. the ceo got that up to 13%. tom: what is their distinction versus walmart?

michael: they are in different businesses. people have been putting money into housing. they have done a lot internally to improve their operating margins. that's why you live in manhattan. they are going to make $1.35 on revenue. cop stores are up 4.4%. wouldn't macy's and nordstrom of that? disappoint the did fell by about half. francine: macy's is a language you can understand. i'm sure you've never been to home depot. the two are linked. how much is the fed looking at this day to? they are looking at china and the risk. janet: they are data dependent.

the global data is what they are looking at. at china.ooking they are looking at emerging markets. they are looking at the ada of the u.s. dollar. all of those are factors that dominate. we never seem to have all of the moving in the right direction. it's mario draghi look at these figures trying to figure out what janet yellen does next. janet: in many ways, the fed has a broader mandate. it has a full employment as well as inflation. it has asymmetrical inflation target. it sets policy in the world to a larger degree. this is the magic of home

depot. this is the last thing i bought at home depot. this is the dog bowtie collar. that's the magic. michael: they don't have dogs. they are not just selling two by fours. good morning. we will continue. janet henry, thank you so much. michael mckee and i will -- forward with hours of bluebird surveillance this morning. on greece.g ♪

is the new 2045.

new demands for greek debt relief. oil continues to move ever barrel the$60 per new $50? on digital as king. this is "bloomberg surveillance." it's tuesday, may 17. with mean is francine lacqua. the may 24 eun, meeting of ministers becomes important. francine: i would argue that it has always been important because we have been following the renegotiations, the bailout, the money and the debt relief for quite some time. in europe for the last three weeks, there has been the sense that this summer may be messy for greece once again. 12 months ago, it was almost the

end of the world where the eurozone was going to break up and we may see that once again. tom: home depot is out and we will talk about that. they will have earnings and is michael mckee mentioned earlier, calm store sales is something macy's would only dream about. these are stunning numbers. of 2016,irst quarter 6.5% and comp sales for u.s. stores domestically, 7.4%. those are very big numbers. the chairman and chief executive officer has every title at home depot and sweeps the floor's. he notices week to week demand spikes around weather variability. with that, we will watch home depot this morning. let's go to first word news. is backing its.

request for weapons to fight the islamic state. secretary of state john kerry is in the and i worry met with the russian foreign minister. also diplomats from 20 other nations. he's is a make sense to arm libya but he ruled out the use of u.s. troops. a new poll shows the majority of richins want to remain -- of britons want to remain in the european union. the poll says 55% of those surveyed want the u.k. to stay in the eastern block, up slightly from last month. the referendum is june 23. another report out of the u.k. highlights the problems the bank of england is having in getting prices to rise. the inflation rate unexpectedly fell last month to just 3/10 of 1% and the cost of living was airfareswn by cheaper and cost-of-living. in france, the president will rick --nact a plan for

for labor reform. them and straight as in paris forceded a plan that he for the lower house of congress which may make it easier for companies to hire -- to fire workers and reduce overtime pay. he says the reforms would lead to the creation of more jobs. it's a milestone for the international space station, it has now made 100,000 orbits around the moon. that's like traveling 2.6 for 10 round trip to mars. asked not seven living on the space station since 2000. day,l news, 24 hours per howard by air 24 hundred journalists. tom: thank you so much. futures are up a little bit and the euro is weaker over the last two days and oil is at $47.91 or

is $109.57. global equities are rising a touch. george soros cut his investment on u.s. stocks. i want to show you the australian dollar. the central bank released minutes of its latest meeting. tom: forward guidance from home depot -- here is the lesson from home depot and the recent moonshot off of this great bull market. maybe the only equivalent is apple. forward guidance is out and it's extraordinary. fiscalking at 6.3% for 2016 and compensate a of 4.9%. there is no equivalent. it's extraordinary. i love the home depot

story because we see something similar in the u.k. i wonder if people are shying away from buying new homes and remodeling their existing homes. the euro stoxx 50 price index in blue compared to the city economics index in white, you can see the reversal for the last six weeks. this tells us that investors seem to still be shunning european equities as a measure of economic sentiment is improving so we don't know whether this is what we are foreseeing and whether stocks are seeing something that u.s. -- european economic indicators are not or the other way around. tom: thank you so much. ock.ing us now is torsten sl officially hold court on at deutsche bank? are you focused only on america

or looking at everything else? >> our main mandate is to focus on the u.s. but even how important the rest of the world is -- u.s. analystbe a when you have the rest of the world so it's important. with janet henry was just talking about. it was an amazing call for a 1.5% yield on the 10 year and you say this is not an unhealthy thing. you say this is constructive because of a shortage of lawns. templetonto john decades ago predicting a shortage of hans. is that where we are now? >> one important driver of rates is the economy. inflation rates go up and bonds go up. held by of treasuries foreign interest and 50% domestically, foreigners and

central banks are important drivers. the supply in the u.s. of treasuries has been declining substantially over the past several years. if demand is still there which it is coming means that less supplied means there is a move for u.s. rates to hold them down. franicine: given the fact we have introduced no interest rates, how do we price bonds questio? >> there are two false is that hold u.s. rates down which is less supply in the u.s. the second false is if there is negative interest rates around the world and uncertainty about the global outlook, that means many investors find the level of u.s. rates very attractive no matter what the outlook is for inflation and the u.s. economy. needs to happen

for the yield curve to grow higher? is there something else that could be a catalyst? >> the issue then becomes, if the rest of the world is so important for u.s. rates, maybe the answer is the rest of the road needs to get. we need to see an improved outlook for the euro area and japan. and not until then will we see more lift in the u.s. yield curve. historically, in the business cycle, u.s. shields should be higher -- yield should be higher. the u.s. continues to chug along and slowly be better but the rest of the world is not seen rates going up and rates around the world have stayed low and that's an important drag down on u.s. rates. tom: the extension of the u.s. maturity is important. have an american perpetuity bond, one that is out

there forever? >> a lot of europeans of note issued a 30, 50 year and beyond bond so the u.s. could do longer maturity. the issue becomes that there are problems with that over time and there are issues over who wants to buy this and what are the risks? tom: they would sell out tomorrow. i would buy one to give to my kids. >> the problem is, there are issues from the demand and supply side. generally speaking, the but it hasf that been successful. tom: your call on the 10 year yield by the end of this year? >> we have the yield slowly going higher this year. this forces the rest of the world to pull things down. tom: give me a number. >> 25. tom: you are kidding, shocking.

coming up, we will continue the conversation on the american economy with the great optimist, mark zandy. optimism and some are tending to where he is. ♪

francine: this is surveillance so let's get straight to the bloomberg business flash. roles biggest the sovereign wealth funds is undergoing an overhaul. will put $100 billion of investment and local companies plus it is abandoning their

holdings names synonymous with high-profile deals. all this is according to people familiar with the matter. other countries have an looking to diversify their assets. oncepresident joe biden compared it to a third world country and now new york will find out if laguardia airport can get a facelift while staying in operation and without cost overruns. a group led by a swedish a canadiann firm and airport operator will borrow $2.5 billion in the bond market. they promise to renovate laguardia within 60 years and on budget. i have never been to laguardia but i came in through jfk this saturday and two hours through customs. tom: and jfk is nicer. i think you and i need to do a lavrov trip to laguardia for lunch so you can experience the full laguardia joy.

sherry: we will do that for lunch. tom: it's like rebuilding heathrow. they will rebuild laguardia but we are not talking a third runway. still being's debated and it will go for a long time. i like that you are taking sherry and to laguardia keeping the cost cuts under control and that's what we do. let's talk about gold. gold climbed for a third day as george soros joined a slew of investors piling into gold. interestson cut his in gold. great to have you on the program. when you look at golden everyone tod the two says to buy gold hedge against everything that can go ugly in the world economy, it's going to be an overcrowded market. >> not yet, back in december,

everyone hated gold. the stocks were going bankrupt so why talk about it. quarter, a lot of these hedge funds started loading of mainly because they are concerned that central banks are starting to lose control, that is too high, i was china going to get themselves out of their situation? if you had zero allocations and golden now you 1% of gold, is not that much of a movement for a lot of these funds but has moved the gold price. francine: i have this chart for you. it then smart gold against the silver. what kind of technical level can we see for gold? >> the most important thing is currency which it is seen as. it has no central bank and silver will move with it and if you see say that people start to look at gold as and as arrency

currency allocation basket, all of a sudden, it's a get -- if it gets a 2% move, it has a lot of upside because there is not that much gold out there to buy. tom: if it's follow the money, who do i look at to be the underlying bid on gold? retail innd from asia? is it central banks? who will be underneath the price of gold? >> it is china. china is the world's largest producer of gold and yet you have never seen a commodity producer be the biggest producer and the biggest importer. they are getting as much as they possibly can into china. that's what you watch for. watch their currency and what's going on with china. -- georgeep buying, soros talks about china and he is buying gold and the money leads into china. any linkage for

gold as a precursor to higher inflation? >> in china, yes. they are creasing -- they are increasing their m2 within the next five years. that's inflationary. rancine many people say that -- everyone is talking about gold and they say it's a bubble and at some point, if the world feels better, it could collapse quickly. >> you have seen a lot of etf's rise this year. it could turn around in a second. if the u.s. starts to raise interest rates and people don't think we will but if we do and we normalize interest rates and the rest of the world is not fall apart, the big fear is that down goes the rest of the world. tom: is there a new orthodoxy to gold or is it something you in

your team look at? >> gold has always been a hedge against tail risks. traditionally it was inflation. now we have other tail risks. we have china and deflation because if negative interest rates come to the u.s., gold is also a good idea because it does not have a coupon. it would have a fixed return where instead of buying a bond with a negative return, gold would be a hedge. tom: this is critical, you are suggesting negative interest rates affects the microeconomics of gold question mark >> many investors want to buy short dated government bonds for the next 3-5 and they would rather have a real asset so gold is at risk of inflation goes up that if it but -- but it is attractive if inflation goes down. tom: thank you so much. we have a special moment with alix steel in california.

speak with the chief curry on oil.jeff that will be later today. ♪

francine: this is not the first

speech of the week and this is -- the last as david cameras cameron is campaigning for the u.k. to stay in the european union. the vote is on june 23. the government is saying they don't have a contingency plan brexit were to happen but the u.k. prime minister will debate with his colleagues from his own party that would vote for brexit in the coming days. another speech, another day. we really see a government trying to do everything they can to speak to the younger voters. this seems to be holding the key. many in the u.k. don't know why they are even voting on the future of the u.k. in the eu and the young population will be a crucial vote. tom: very good, the prime minister is a little bit is he from now until the end of june. this is our morning must-read. ands here in america

bloomberg view hit the ball out of the park over the last two days with the history of america and our debt. stephen carter yesterday on 1816 and here is the story -- we don't have those distractions now and i don't want you to talk specifically about donald trump

or secretary clinton but the idea of a not hold faith credit debt scenes on a manageable. it some believable we are discussing this but one thing that is important is this just another bullet point of uncertainty about whether there will be changes. investors around the world were look at u.s. treasuries and think of this as a safe asset and it is important for the stability of global financial markets. tom: where does that take volatility? >> one piece of titans is what happens with the debt ceiling but also getting to the fiscal cliff situation we have had in the last couple of years. once you have uncertainty about u.s. debt, the risk rises. if the topic is on the table, people will think about it as something we take seriously. it becomes important.

everyone i would urge to go and check out something on the bloomberg terminal which says that donald trump is now running to the left of ernie sanders on federal debt. understand seem to that if you do it here, you automatically upset foreign and a mystic inventor -- investors. tom: it speaks of a between donald trump and the republican establishment and speaker paul ryan. onphen mim, your clinic civil war, banking, and finance. coming up, the important weezer.ew with brian a wheez ♪

francine: the u.k. prime minister speaking in london, talking about the consequences br of a possibleexit and saying

this would take time. the government is trying to tell the voters who will have to decide whether they stay in the eu on june 23 that trade deals will be more difficult to come by. there has been a real shift in the last 24 hours. the pound is rallying the most after two weeks after the latest poll cannot yesterday showed people who support a campaign to remain in the eu exceed the ones that want to exit. let's get to first word news. but number three official in the chinese common as parties promising to listen to the hong kong suggestion regarding its economy. the chairman of the national people's congress is the highest-ranking chinese official to visit the city since pro-democracy protests two years ago. hong kong police are on high alert during the three-day visit. the head of a search team says the missing malaysian airliner may not be found.

martin dolan of the safety bureau tells the guardian there is a decreasing possibility of success. a multinational team has been searching the indian ocean after the plane disappeared more than two years ago. the obama administration reportedly will announce today that it is easing sanctions on mynamar. for the first time in more than 50 years, it has a democratically elected president in office. easing sanctions make it easier for u.s. companies to do business in the country. and engineer was distracted in the moments before his train derailed in philadelphia last year killing eight people. investigators are likely to conclude that today. aport will say that rockthrowing incident involving another train cause the engineer to lose track of speed limits. hillary clinton will try to avoid losing both of today's democratic presidential

primaries. her lead over bernie sanders is almost unbeatable. still, losing in kentucky and oregon would slow her momentum. kentucky is considered the bigger prize and oregon is voting today by mail. the demographics favors bernie sanders. tom: thank you so much. slok is with us and we bring you brian wieser who has been brilliant on facebook are you he owns the high ground on the linkage of your television, digital, and advertising world to all that's going on a digital. let's look at the single best chart. year and this one is just content advertising and choice. p, and for toys, i have apple

and they've got oh wait to them which is a fear about digital. help me with these three iconic companies and where they will be in five years. ande will apple and wpp disney going to be? >> they will continue to be successful enterprises. they can take different directions. facebook is ultimately along with google hegemonic players and digital advertisers -- in digital advertisers. they are a long way from taking over the traditional tv players. tom: the global audience does codesderstand the two zip of tv people outside the window looking down 12 stories. take them off the ledge. is tv advertising and the way we consume tv going to change? >> it evolves. most things to do with the advertising industry and protect is evolutionary.

who is the customer and an advertising base? it's not the consumer, you are the product. consumers are the advertisers. to study how budgets evolve, you have to study corporations as people. saying that were are looking at it wrong? you say the way we look at consumers and budgets need to be fundamentally changed? absolutely, most people look at this space incorrectly. of workingthe luxury in the industry for eight years and i would hear people making argument that the consumer is in control. then i would ask practitioners what the -- why they did what they did. institutions make decisions in their own ways. there is a consumer that

indirectly, there is a relationship between the two. francine: when you say that which look at it wrong, companies may go under because you have a ceo that does not see this clear vision? >> they can succeed in spite of themselves. we have done good work on this and the fact is i observe in my house everybody not watching ads. that is the reality. the internet is different. television shows through hbo, there is no ads. >> we perceive that to be true. tom: i saw it. >> do you have enough not rough or standing over your -- and ethnographer standing over your shoulder? people don't understand how many ads they consume. they perceive they don't see these ads. supportedbo or non-ad

content, it's 10-15% of consumption. the u.k. has the bbc and that 1/3 of consumption with no ads and no one is complaining. it has been on fire advertising market. tom: what about the bbc? do you say it's a good thing or a bad thing? this is something the u.k. government is trying to make we pay $113 per year to make sure the bbc lives on. that does not work in many economies. >> when people talk about the united states going from 10% of to add supported content 15%, it's nothing. francine: when you look at media stocks, warren buffett has said

to be backing a group hitting for yahoo! i was under the impression that warren buffett only wanted things he understood and that he stayed away from. has his view changed question mark >> i am not an expert on warren buffett. my understanding is that he is only supporting another individual who is forming the actual did. i don't think you can read too much into it. tom: when you look at the panic it is true analog panic in new york about where digital is heading. what would you say to bob eiger about content? >> make sure you listen to your underlings. it's not always the case that >> the executives or the

hipsters question mark >> i mean the actual revenue generating practitioners. you have to balance it. that tv is not dead, just resting. the ceos are removed from it and they are not day today in the ad sales business and they can talk down -- bob eiger has said advertising is not that important. traditional forms will not survive. there are organizations that understand were the business is going. tom: what is your single best buy? >> it depends on content. disney is a pretty goodbye. we will come back. we will talk facebook as well. do you look at ads at home? the viewing has gone down but

in a european context, there are more ads here. tom: thank youtom:. there is also a dated check and we will come back about facebook. brent whether race to $50 per barrel. the brazilian real finally gets a bid and stronger yesterday and today. from new york and london, this is bloomberg surveillance. ♪

i am in london and tom

keene is in new york. let's get to the bloomberg business flash. sherry: a rare bright spot for u.s. retailing, home depot posted first quarter earnings that beat estimates. its earningss forecast in its report comes after a series of dismal earnings results from department stores and other chains. lending club has filed a report form and terms of last week's turmoil. it says material weakness was at the end of last year. the stock plunged 51%. daphone posted profits that beat estimates. in the last year, it has narrowed declines internationally. that is the bloomberg business flash. tom: thank you so much, on facebook with brian wieser.

here and genius down this is the rhythmic chart of facebook. this looks like their revenue billed. do you you assume this is like amazon? >> between google and facebook, they take the bulk of the growth of the market for digital advertising and protect it. international expansion and that supports that revenue growth. tom: what acquisitions do you see out there? is facebook acquisitive question ? >> selectively. instagram worked out well. make a handfulo of big acquisitions but mostly they are not overly acquisitive. you see a lot of act tivoli in the smaller advertising tech marketing which is more important.

these are smaller acquisitions. francine: is it crazy to think that facebook could one way -- one date -- one day be a bank? the nextapture generation of consumption that we look at. will regulation be too stringent? >> regulation will be an issue but anything is possible. that's a long way removed from where they are today. i don't think they see themselves as being a seller of advertising which is what they are. that is a long way to get to what you just described. francine: how do they see themselves? says i willalyst probably be a google analyst because they are in driverless cars. will google or facebook be the one-stop shop? >> google is trying to be a

diversified conglomerate. facebook is much more focused and much more disciplined. i don't the get so much of an issue for them. tom: the core of your argument is 20-year-olds, 30-year-old and 40-year-olds will change when they get older. do you see evidence of that that cks toill go from adfdblo no ads? mobile adf all, blocking are real issues. that constrains the inventory that's available. it's the possible places where in advertiser can spend money to support the media. consumer behavior and advertising behavior are separate. tom: we tend to conflate them. tom:i like that argument but at

the end of the day, the advertiser behavior hinges on what people do. >> advertisers make decisions because of better than the alternative. as long as it's better than the alternative, if you spend 10% of and revenues on marketing 5% is going to paid media, with that number were 8%? what if the number were 12 or 13%? your business would not necessarily be different. francine: what is the one thing they cannot get wrong? facebook has had some challenges on the advertising side and google has dominated their. they are trying to compete differently. tom: what happens with twitter? >> i'm still an optimist on twitter and they have good people and i think they can evolve. tom: thank you so much. have a cocktail on us tonight. have 10 cocktails.

you and i should go to the upfronts. alix steel will have perspective and she is out west. she is at the goldman sachs a leveraged finance conference. have dead she will have interviews later today. ♪

tom: good morning, bloomberg surveillance. foreign exchange strengthened over the last few days. 6.53 is that remember you -- remember a - remembyi. coming up shortly is "bloomberg ." what is going on today? jon: a stronger pound is the focus.

it's not just on the back of a poll showing the big boost to the remain campaign but also sterling, the characteristics of sterlingrket with behaving more like a risk market. we will talk about inflation without the noise. more on that later. tom: thank you so much. slok with usten from deutsche bank. if we changed our psychology of housing, does your team assumed to what we knew before the crisis? >> the homeownership rate has continued to decline and that is a very different sentiment

compared to what we had before the crisis. the fact that the homeownership rate is not turned around and we are turning more toward a rental economy and that has a number of profound effects on the rental market. it's in terms of how people think of the prospect of buying a house. change or will we stay more like europe, a rental america? the risk is that the rental market will continue to be a dominant theme. rate fallingship is an important structural change that has implications for the federal reserve. rents are going up and that's pushing up inflation. about 30%-40%. so much of inflation is coming from housing and not from china. that's an important part of how the dead things about things. francine: looking at the figures from home depot, they raised their forecast.

that goes hand-in-hand with remodeling market. if you are model your house, doesn't mean you feel richer or the consumer in the u.s. is stronger or does it mean you are not buying a new house and therefore it's not a great economic indicator for the fed? >> it's important because it's symptomatic of the change toward the environment where you don't buy a new house because it's more difficult. there are issues with credit extensions and issues with credit scores going down. therefore, the remodeling sector is telling you that we have a situation and the housing market where people stay for longer. the value of the homes have depreciated. every year, you don't im new-home and every year you rent , you don't renovate your apartment. they need to improve the quality of the houses. it's a symptom of the broader situation in the housing market. francine: when do you expect the

u.s. consumer to be fully back? bright spot. the >> i think the u.s. consumer still has momentum and upside risk. the key driver of consumption is whether i have a job and then there's wealth and financial conditions and these three things saying consumption should be higher than where it is. slowly we are trending up. there are shocks hitting the economy. we expect the slow grind higher and housing should continue to support gdp growth in the broader economy. im: i look at housing and don't know what proportion of gdp it is but it's less than 2006. >> it has been cut in half. it has been grinding slowly higher. attention because it may be a small share of gdp but it's a cyclical component.

if you want to understand the business cycle, housing is very important. how does the fed look at inflation? -- they may overshoot on inflation targets. /3 of the cpi basket is goods and that's competing with the rest of the world and that will not go up dramatically but 2/3 is services of which housing, transportation and others are important and they him and going up and wages are going up so that could be moving that part of the basket. what is your overshoot speculation for janet yellen? fomc will sit with their hands on her lap but will long rate investors accept that?

will we see the bond vigilantes wake up and say we are having an overshoot and we see the fed behind the curve and maybe we should be trading higher. whether the fed is behind the curve or not is an important discussion. tom: thank you so much. " continues next with an important set of interviews later today with alix steel. we will continue our conversation on the american economy with mark zandi and his look at jobs through the adp report. this is "bloomberg surveillance." ♪

>> rising debt, slowing growth. bloomberg gets larry fink who

says we should all be worried about china's debt pile. years, saudi arabia's treasury holdings are unveiled, ranking the kingdom in the top dozen foreign nations. lisa: a very warm welcome to our viewers worldwide. alongside my colleagues for the week, bloomberg gadfly columnist lisa abramowicz. david westin on assignment. lisa: we have got a lot of great guests for you. we will have more on that bloomberg exclusive with a black rock ceo larry think. plus, the chief investment strategist at bm oh capital markets tells us why energy