resistance to terrorists from within his own party. gary cohn takes one more shot at changing his mind. hold the bourbon. a draft plan has europe retaliating on motorcycles to bourbon. don't forget the fed. we heard from -- hear from the fed today amid all this turmoil. welcome to bloomberg daybreak. i am david westin. alix steel is down in houston. you were searching for that secret not so secret dinner. did you find it? alix: we did find it, amazing reporting and sleuthing from our team down here. you had secretary-general down here saying we talked, it was great, we exchanged information.

i will be talking to the shale side, jack stark, president of continental resources can and the xto energy president. a lot is coming up. my first question, were you at the dinner? what did you talk about? david: there is no one that knows shale more than you do. alix: they probably do. it will be a jampacked day. in the markets today, it is very called as she goes. urbone the hold the bor line. futures grinding out a little stronger. euro stronger. yield upar yelled -- about one basis point. crude up 0.6%.

three stories we are watching this morning. duking with president trump. hold the bourbon. you have ecb speakers and boj speakers on friday. cigarette joins us. the president getting a little resistance, including from speaker paul ryan. this is what they had to say, we are extremely worried about the consequences of a trade war and are urging the white house not to advance with this plan. they are very concerned. how our markets reacting? -- are markets reacting? >> you saw a little recovery in the markets after these comments. i don't think people know. we have seen a lot of pushback within the president's own party.

retaliation,ope this will get some of those republican states really hard. they are worried about economic backlash. david: this is not just within his own party, it is also within his white house. we heard from gary cohn yesterday ringing people in to talk to the president one last time. situation, some thought he had been hanging around this long to avoid tariffs. there is a chance gary cohn could be out of the white house. becauseare recovering people are coming to the terms of realization that tariffs reside with congress. article eight says this is really a congressional issue. goeepresentative lee's bill s through it can really step this back. david: on one hand, the

president has said he is going to do this. >> i think the concern is it is not necessarily the tariffs on steel and aluminum, it is the prospect of an all-out trade war. he seems to be bent on encouraging that with this fiery trade wars are easy to win from all that he has said. you could see a much broader swap of the economy affected. most metal manufactures, dealing with costs is part of their daily business, so they could probably absorb that. this risk of an all-out trade war could hit them hard. alix: we are seeing tit-for-tat retaliation out of europe. here is how it breaks down. 25% tariff potentially on the harley davidson. that comes from wisconsin, paul ryan's home state. you see a bourbon whiskey import

tax from kentucky. kentucky.nnell from levi jeans from california, that is as white at nancy pelosi -- a swipe at nancy pelosi. that is about $3.5 billion worth of goods. that is not going to be enough to move the needle. >> no. it is a symbolic gesture. these are namebrand, american consumer goods. if you talk about america first, this is part of our identity. i think it is a symbolic move. i think europe is helping president trump back saw, and maybe we have not seen their full hand yet. david: it is clear they have been planning this for a while. it is not just mitch mcconnell and paul ryan. they have other motorcycles they can buy.

>> scotland is not that far away. i think they have pinpointed areas they can get support. the key issue will be the wto. a lot of european nations are going to the wto and filing complaints. has never rolled on an issue involving national security. this is what donald trump is standing behind. if this escalates, that would give him the presidential authority to repurpose congress on this. you get into a trade war, and people have flashbacks to bush in 2002. yields collapse, stock market collapse, the dollar folded. you will see it in real terms. it will not just be kentucky, california, wisconsin. >> there were comments from norway and japan saying, we are u.s. allies, where is the national security concern in taking imports from us? >> it is a very valid argumen ae

spending overseas. alix: it will be interesting to see how this plays out in the next three days in terms of the fed speakers today and the ecb and boj on thursday. something i am interested in, if you take a look at the two-year breakeven in the u.s.. you are looking at the percentage move. you can see the massive re-rating on u.s. breakevens, not a lot on german breakevens. does that scenario change in some white, put pressure on mario draghi? >> he has a couple of issues. the italian elections have caused a little stir. of italiane rerating

assets. that changes with the ecb can buy and puts pressure on the ecb. you will probably see a bigger aessure on german bunds and paper, which would keep italian rates down. i'm not sure how much we expected out of the ecb this week. given the possibility of a trade war, and pmi's are softening a little bit, does that make my draghi a little more dovish? >> i think maybe. he has been resistant to move off of this path he wants to stick to. we will probably see him continuing on that goal to easing off of qe by the end of the year. david: all right. thank you both very much for being here. coming up, we will take a look at how investors view the tariffs.

kristina hooper will be here from invesco. live from new york, this is bloomberg. ♪

♪ >> this is "bloomberg daybreak." i have your bloomberg business flash. the turnaround plan at target is putting a toll on profits. first-quarter earnings fell short of estimates, and a forecast for the coming year is lower than expected. target is spending $7 billion on new brands. the company is also constrained by a wage hike last fall. says the cash and stock proposal failed to reflect the packaging makers growth

prospects. againste of mcdonald's operational shakeups in years. the world's biggest restaurant company will start using fresh beef for its sandwiches in the u.s. instead of frozen patties. that is your bloomberg business flash. alix: thank you so much. president trump is not backing down on tariffs, especially when it comes to car imports. president trump: we cannot do business in there. they don't know how. they have trade barriers that are worse than tariffs. they also have tariffs. if they want to do something, we will just tax their cars that they sent in here like water. alix: markets shrugging off that trade talk as paul ryan got into the trade debate yesterday. the s&p closing higher despite

the fierce rhetoric from president trump. join us now is kristina hooper from invesco. how are you looking at global tariffs, and how do you incorporate that into your outlook? kristina: right now, these are just talk. they have the potential to become quite inflammatory and impact economic growth and earnings. there is so much uncertainty right now over what will it happen that right now we just have to be watching this carefully and warning that it has the potential to tamp down economic growth this year because as we know tariffs beget more tariffs. alix: we did see someone of a rotation over the last few days. if you come inside the bloomberg, you see the latest outperformance in small caps. if you want to avoid tariffs, you want to avoid large cap. do you expect this trend to

continue? kristina: i think markets will continue to take the trump rhetoric seriously, and then , almost a relief rally as markets begin to assume this was just rhetoric for the purposes of a bargaining chip with nafta. i expect us to see a flip-flop back-and-forth as we hear stronger rhetoric and retaliatory talk from other countries. i think we will see a dynamic where there will be swings in leadership among different market capitalizations within the u.s. stock market. david: from your experience, what causes the bacteria in the petri dish to expand into a full-blown infection? when you look at the amount of trade involved, it is not very big. kristina: you can already see other countries reacting to it.

the european union is already talking about tariffs on a wide variety of u.s. goods. everybody has a free-trade agreement globally in that there is an assumption that free-trade is a good thing, and we are all going to try to be as free as possible. alix: there is another thesis out there that potentially we would have seen some weakness in the market no matter what. you have economic surprise data in the u.s. rolling over, off the highs of that in europe as well. do we need to reconsider in general a slowing of the equity momentum? kristina: we have also gotten very strong earnings that have been overlooked. i would say we need to be careful because the u.s. stock market is vulnerable because valuations are stretched. i would argue that there remains an upward bias to stocks in the u.s. and globally. david: how bad could this get?

theave people talking about possibility of a recession if we get into a full-blown trade war? has that happened in the past? tobias: -- it cana: i think exacerbate a recession, but i don't think it has ever been caused by tariffs. most economists would argue the great depression was exacerbated by tariffs. alix: i want to look at the bond market. cvs is coming to market with potentially an enormous debt offering, like $47 billion. what do you think that is going to do to the overall investing environment? kristina: it suggests there is still some appetite, arguably, for debt. i would not be surprised to see

more companies making debt offerings in the near term to lock in lower rates with the expectation rates are going up. i think dollar movement has also reflected expectations that we will see more hawkish monetary policy. alix: good to catch up with you. thank you for joining with us. kristina hooper from invesco. up, the shale boom. this is bloomberg. ♪

♪ david: welcome back to

"bloomberg daybreak." i am david westin in new york. alix steel is in houston. here, the place to be if you are anything related to oil. the big thing yesterday was opec versus shale producers. it was the second dinner they have ever had. pioneer occidental, tinie there. we walked in. no one really wanted to talk to us, apparently they were just chatting. total has proved itself to be the most resilient oil producer out there, all that producing shale. the stock is down 3% in the last year, but compared to exxon, it is holding up very well.

the totality ceo, hector beginning -- patrick pouyanne is not sweating it. >> i can tell you shale is a capital intensive activity. it is a question for me where total is the most efficient. . have some competitors when i am allocating capital, i where i cancate it find value for investors. total has some strengths, africa, middle east, north sea, and i prefer to play to my strengths rather than just trying to fill the gaps. if i am coming, it is not to produce 30,000 barrels. it is a much larger scale.

it is expensive. ofre are plenty possibilities for total. .n 2017 we made m&a i think that is more efficient to make value for investors in shale. strengthsosition my for the company. alix: if the next phase of energy cycle is going to beat short cycle and deficiencies, those things don't really -- and deficiencies, those things don't really --ef efficiencies, those things don't really lineup with north sea oil. a matter of what you

produce. total, in 2015 with the downturn, we capex. i have one billion barrels in my portfolio. it is all a matter of contractual arrangements. to share.e is linked a littlejust independent try to make money over six months, and then i turn off. the objective of a major company of our size is to ramp up production. in shale, we have a reputation in shale. it is not by short cycle we have done that. it is 10 years of capital investment, $12 billion to date have been invested.

is something where you can be very efficient. is profitable. alix: nonetheless, gulf of mexico is not something you would expect to hear along with growth and efficiency. what costs do you see the client? -- declining? >> for many years we have been investing in the gulf of mexico. discovery in the eastern part of the gulf of mexico. we are glad to be there. it is just a matter of size. like in brazil, if you have more barrels, you will be

more efficient. have $250 million or $300 million, which is often the case in the u.s., you have to avoid -- so all of that is a matter to find resources and keep in mind our priority, which is low breakeven. if you spend too much, and the mistake was to make big platforms on smaller reserves. a lot of lessons have been learned. gulf ofr the glf of -- mexico. alix: the conversation got even more intense. he got very heated. a very staunch defender of his

position. david: can he produce this stuff as cheap as the shale guys can? breakevens in the shale industry in the teens. $15aid they can get down to on some production, so saying they are efficient even without that short cycle stop. david: they certainly have to be. era.ation in the trunmp the conversation coming up next in new york. this is bloomberg. ♪ retail.

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0.6%. the dax is up as well, off the highs of the session. feels like a reversal from yesterday. within other asset classes, it wants to be a weaker dollar. euro-dollar up about 1.23. dollar-yen a little stronger as well. you have the japanese currency, the only currency down against the dollar. a little selling on the margin when it comes to treasuries. 2.90 is where we are only 10-year. we are on 3% watch over the next couple days. look at what is making headlines outside the business world. isthe european union prepared to play an expensive game of tit-for-tat when it comes to. tariff --

tariffs. that is according to a list obtained by bloomberg news. a former trump campaign aid e declared in a tv interview he specialt cooperate with counsel robert mueller. there has been a diplomatic breakthrough on the korean peninsula. according to south korea, north korea says it has no recent to possess nuclear weapons if the safety of the kim jong-un regime is guaranteed. both sides have agreed to a summit meeting next month along the border. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: thank you so much. more on ther

story in korea, let's pick up on what kaylee was talking about. she says it is a diplomatic breakthrough. is it a breakthrough? >> yes, it is a breakthrough in terms of diplomatic talks. however, it still remains to be seen whether north korea will indeed come to the table and have talks. we have heard this before, but often they have been ways to buy develop them as they their nuclear program. so far, south korean diplomatic envoys believe there is a breakthrough. at least they were told by kim himself that he was willing to talk to the u.s. as well as south korea and talks about the new glamorizing -- denuclearization. david: in principle, it appears that kim jong-un may be willing

to my ball is nuclear weapons if there was a multilateral guarantee of security for north korea. >> there is that condition. it is different from the mainline they have held for a long time, which is that denucl nonnegotiable. the fact that they are saying now that it could be part of the needle.ng moves the as to how much remains to be seen. david: we are looking forward in late april of discussions between kim jong-un and south korean president moon. does this mean south korea really has the helm? >> symbolically, it does. as far as we know, they will be meeting on the south korean side.

if kim jong-un was to walk across, it would be the first north korean leader to set foot in south korea. if you look at it that way, you could say south korean president moon has the upper hand. david: there was no comment out of the pentagon, national security council. are americans being caught flat-footed here? do they know behind the scenes what is going on? >> i'm sure they got headwind on that one. they are in the mode of trying to assess how genuine kim jong-un is with his offer of talks. i think they will get more clarity when the south korean special envoys are flying to washington, d.c., debris donald rief donald-- deb

trump. seoul bureaus our chief. on bank regulation so far, but now it looks like we will have some real action. taking in yesterday directly at the volcker rule. >> the statute defining market-making activities stresses a number of complex requirements that are difficult or impossible to verify objectively in real-time. spend far tooanks much time and energy contemplating whether transactions are in plants with the volcker rule. david: we welcome now isaac research, director of at compass point.

and gerard cassidy from rbc capital markets. catches up on this. regulatory initiatives that have not yet been announced seem to be imminent. >> you are right. think of this as dual tracks and their efforts on each. on the administrative side, president trump has slowly but surely been getting his nominees in place atop the alphabet soup of regulatory agencies in d.c., stilling mr. quarles and waiting on a few more. they are doing the slow, steady ize the regulatory regime. that is largely happening in the background. at the forefront right now is the legislative effort. later todaas the

crapo bank bill. that is named after the chairman of the banking committee. , butis a few hundred pages it is largely skewed towards softening the regulatory regime for banks under $100 billion in assets immediately, and that it to lessen requirements for banks under $250 billion. it is known as a community and regional bank bill. that is going to become law this year. david: it is also bipartisan. that is even more remarkable. as you pointed out, the bill really differentiates twin the really big banks and the small banks. if they really do simple by the volcker rule of taking up your own position versus doing it for a customer, does that help big banks too?

>> i think the legislative effort just for political reasons can only impact community and regional banks. the conversation on the hill right now is largely making sure the bill does not help the largest banks in the country. it is also focused on the potential, and some would say the misguided thought this bill would help international banks. they cannoty, really touched the big banks. it is going to skew smaller. it is going to be administrative changes to supplemental rules that could help the larger banks, but that is not going to happen nearly as in the public view as the bill we talked about. alix: let's take a look at what we will see with big banks. on the bloomberg terminal, you see yield curve ladder, and bank

equities continue to -- flatter, and bank equities continue to grind up. >> i would suggest bank stock prices are already anticipating regulatory relief. when you take a look at the performance of the bank stocks since the presidential election, these have outperformed the general markets because of the expectations of a stronger economy and regulatory relief. the yield curve, though it has bit, since the beginning of the year, it has actually steepened. if this continues to advance, and we see real gdp growth exceeded 3% and more inflation, and the fed is unwinding its balance sheet, that is going to go through 3%, and the front end

of the curve will continue to rise. if we can keep the yield curve in that 100 2050 basis points, 150 basis points, that would be good for the banks. alix: when you take a look at that as well as the leverage ratio and clarity of volcker rule, what is going to take advantage of that? >> i think our universal banks are going to be the best position. products ine-based the capital markets area. the volatility that has come back into the markets this year, i think we will see as a result better trading results for j.p. morgan chase, citigroup, and goldman. the banks that have a diversity of revenue are the places to be. we would look at investments in

bank of america, jpmorgan, and to own. the banks david: thank you for joining us today. coming up, changes at goldman sachs. after posting the worst commodities revenue in 19 years, they make some changes. we will dive deeper into the news. today, you can turn on the radio and listen to our colleagues from 7:00 to 9:00. bloomberg surveillance can be heard in new york, boston, the bay area, all across the u.s. on sirius xm radio. this is bloomberg. ♪

♪

>> this is "bloomberg daybreak." next hour,n the cumberland advisors chairman and chief investment officer. ♪ david: we will turn out to wall street beat. number one, goldman sachs continues to shake up its lagging commodities business with investment bankers. news,cohen is in the taking another shot at research, trying to make on folks play nicer with money managers. david swanson has taken on a new challenge, taking the yale student newspaper down a peg. alix: that is kind of an amazing story.

we want to kick it off with goldman sachs. basically what they are doing is moving part of their commodities sales business into their investment bank. can i say the words cross-selling here? >> it is something i thought of right away when i heard this story. banks for a long time have leveraged their opportunities across consumer and private banks. goldman is going back to basics in some ways. great we have a lot of partnerships, so we are going to move the commodities sales team business andr leverage that. alix: they have been adamant it is cyclical, not structural. here's what they had to say about the commodity world earlier. >> our fic business and commodity business is a jewel. if oil is going to stay us or minus a few dollars -- plus or

minus a few dollars all your, it is not going to be the golden age of commodity trading. it is interesting because commodities are rising. we are seeing oil, copper, gold rising. we are in this rising rate environment. banks are aware that selling commodities in an inflationary environment is getting increasingly attractive. this is making sure they are leveraging after some stumbles last year. david: another move they made is by steve cohen. we all hear about big data. he is trying to put together the big data folks with the money manager folks. the liberal arts folks with the mathematicians. story. is an interesting it is a culture war.

they are really trying to bring together the two sides of the house. they started up a quant business and let it operate as a stand-alone business for a while, coding computer algorithms and passing it off to money managers. they found they really need to combine those two, overlap the human intelligence with the computer algorithms or what the computers are spotting together. they appointed a new person to oversee multiple units that are devoted to more quant t rading. rading. david: in yellow, you have a legendary endowment leader up there. it turns out the student newspaper decided to criticize david swanson and his investment decisions. they now have a fight doing on between david swenson and the

yellow daily news. >> this is a proper. david swenson is notoriously private. he does not talk often about the endowment. you have this discussion over the ethics of journalism essentially. some in males were sent that were pretty critical of the editors, and they were published. to whatd of roots back is becoming an increasingly tense part of the endowment world, the social responsibility. students were digging through the endowment and thought they had found investments into private prisons. he is saying they are not actually correct in terms of what is actually held. david: coming up, tariffs dominate geneva's annual showcase of cars.

interact with us directly using tv . live from new york, this is bloomberg. ♪

genevawe all go to the international motor show every year for the coal cars. this year, there is a second drug, finding out how european automakers are responding to president trump's frontal assault with tariffs. one of the senior executives at the center of this issue. >> that is right. i am here with klaus zellmer, he runs porsche cars out of north america. thank you for being with us. what you make of the possibility of tariffs thing slapped on european cars -- being slapped

on european cars? your biggest market is in the u.s. klaus: we only produce in germany. that is kind of our trademark, only engineered in germany. on the other hand, we have always believed in free and open trade. i think starting a trade war where everybody loses, i hope they reconsider, everybody who has that decision on their place. ron material prices are going higher, steel and aluminum. are you seeing costs rise in manufacturing? klaus: not yet. so far, we don't see anything of that. not to to be cautious ruin something we've all been working for for decades.

as far as i know, there are no diesel cars for sale by porsche worldwide right now? is the u.s. market interested in that sort of offering? klaus: we don't see a great demand for diesel cars in the u.s. going forward. we very much appreciate our hybrid technology, which will be available with our new cayenne. on aat is a take great panamera in hybrid form? not with thee hybrid specification, 60% in europe. we think there is a big potential in the u.s. as well. >> is there an issue in the u.s. with charging stations? you are talking about all electric concepts. how much does that interception

need to be developed in the u.s.? in the way ofds all electric makers, range and capacity. carre the first of bring a with technology that you can charge and around 15 minutes. the car can do it. the infrastructure is in question. we have helped build that. it percent of the charging is either being done at home or at work. we need to cover long-distance traveling. we are working on that. on the porsche a picture of what i believe to be the 992, the next variation of the 911. should i expect some version of electric power train to assist? klaus: we love that people

anticipate stuff, but we never talk about future products to sell. at the moment, there is nothing to say. >> let's talk about the cayenne turbo. i had the opportunity to drive it through the swiss alps. it is a mind blowing car. what are the sales like in the u.s.? klaus: we have not introduced it in the u.s. yet. >> what are the orders like? klaus: porsche customers go top notch. we have not got any orders in the system yet. but we are very confident. >> do you expect those two to be vying for position as the cayenne comes into the market? klaus: at the moment, the cayenne is ramping up with its new model. they will go head-to-head when

it comes to suv sales in the world. >> final question here for klaus zellmer, do you see an effect from the trump tax-cut on your order book? i saved money on taxes this year, so i invented come in and buy myself a new canaan? klaus: we don't see those effects. we can see a robust economy. we see gdp at record levels, unemployment at record low, and consumer confidence at the moment that we also feel. partners are happy at the moment. ♪ mom you called?

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i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around. david: not so fast. president trump faces increasing resistance of tariffs within his own party, while the chief

economic advisor takes one more shot at changing the president's mind. hold the burden. a draft plan has europe retaliating against deal and aluminum tariffs by imposing their own on .otorcycles and bourbon f and don't forget the fed. we hear from dudley brainard -- where do they think the economy is heading with all this turmoil? welcome to "bloomberg daybreak," i'm david westin in new york. alix steel is in houston. a big dinner down there, shale and opec. did they come to some agreement? alix: no, that probably wouldn't even be legal. a uae them come in, minister, the secretary-general sawpec, sheffield, we john hess. surprisingly, no one wanted to talk about it.

they did say they are just talking with lots of demands, they need opec and shale oil. david: who needs it? you have your own red carpet down there. up,: we had paparazzi set stealthily trying not to get us kicked out. not only shale today, but also the significance of non-opec, non-shale producers like norway. surprisingly, their energy production has rebounded quite quickly. despite the lower prices. i will speak with the norwegian oil minister later today. also, as you know, norway's sovereign wealth fund gave the boot to oil stocks. what does he think about this? in the markets, we are looking at a riff on steel. the news from north korea that they are opening the door to talk to the u.s., s&p futures up by .4%.

the dollar is the weaker call an currency against all the others. andre now looking at 1.24, a little selling on the margin at the long end. cvs coming in with a monster bond offering, what will that do? crude up 1% on the weaker dollar. david: ok, we will not talk about president trump, who says he is about to slap tariffs on steel and aluminum, but there is a growing call in his own party urging him to think again. yesterday, paul ryan said there was spokeswoman, "we are extremely worried about the consequences of a trade war and are urging the white house to not advance with this plan. used oflegislation has the economy and we do not want to jeopardize those games." we want to welcome our white house correspondent. talk about this backfire from speaker ryan, and now gerry connolly bringing a bunch of people in? what's going on? >> good morning.

the discrepancies within republicans are on full display regarding the proposed increase on tariffs. that said, you have people like paul ryan and chairman jeb hensarling, and even kevin brady, as well as representative mccarthy saying they are all against these proposals. this comes at a time in which this white house is doubling down on their america first principles in mayfield. this is what they would like to see happen. we should note that carrie coon is trying to organize more. meet with the president who are against it. the business folks in washington, the chamber of commerce, are all against these policies, but frankly, i speak with sources who say this is an opening bid for the president, but ultimately he could see it watered down, but he will double

down this week. let me give you some alternatives. the president sticks to his guns, does what he says he will do. on the other extreme, he backs off. in the middle, he modifies it. mr. brady, who you referred to, says don't do it for canada and mexico. is there a middle course? >> yes, there is. the president could ultimately decide to have carveouts for some types of businesses that would allow them to raise tariffs on some companies while not doing it on others. yesterday president trump spoke directly about nafta to reporters in public comment. he also said he does not think there will be a trade war. i spoke with a source yesterday who is working on trade who told me that there could be a watering down as this gets to the finish line, but that this is an opening bid, dented puts him directly at odds with several of his key allies, most notably boeing, as he tries to

attempt to get this done. david: ok, kevin, thank you for the great reporting. alix? u.s. stock futures are in , shaking this morning off rhetoric about tariffs. joining us now, david cohen talk. i wanted to get your take. as markets continue to come back and things go well, does that make president trump -- on his harsh rhetoric? >> i was going to ask you, you are at in the middle of the oil conference, and there are terrorists influencing the discussion. now north korea influences the discussion. is and he backs to him -- trump blusters, then faxed to a middle and claims victory. i suspect this is where it will play out. start out strong, scare everybody, tweet, have fun, then

get to the middle and make a deal. that looks to be his style, whether we like it or not or are comfortable with it or not, it is what we are seeing. alix: david, to answer your question, on the record, it is all about building bridges,. not walls of our -- i have yet to hear a ceo say it will materially impact their business. costs might rise, but one ceo said we can handle it. >> you've got long history in the commodities space, and you have seen this from the inside before. i don't ever recall this kind of blustering as the openers in the tariff war's before. david: your response for figuring out how people should invest their money, you have had a view based on the tax cuts in various things in the budget deficit. how much is this tariff changing your perspective, and how you

would invest your money? >> it gave us an opportunity, a swoon in the market. in february, this volatility, we were fully invested. we are overweight banks, overweight financials. we think what is happening there is positive in a very structural way for a long time. and we also think the energy is opportunistic, so we are natural gas and exploration in the u.s. david: when you say you are overweight bank, is that because of deregulation? >> it is based on all the movement away from the imposition of banks. it's being removed and peeled off one key set a time. a longview is we have stretch of positive, sequential games for financials -- gains for financials, just beginning to be realized. i'm very bullish on banks. i don't like them but i bullish.

alix: david, you make a good point, the value versus growth conversation. if you are a value investor you e investing when yields rise. on the other side, you have the weaker dollar, which is good for growth. how do you square that? >> that is the hardest thing in the world to do, the trade-offs between currency changes in interest-rate changes, and now you interject changes in prices because of tariffs, quotas, and trade barriers. there are three moving parts. it gets harder. you have the fed ratcheting back, and we have a deficit fiscal policye and monetary policy are moving in opposite directions. this is a very, very challenging time. david: i want to go into the banking regulation. something, which

is that there is a provision in the crapo bill coming up for a vote that says state and local bonds considered "high-quality liquid assets." explain why that is important. rule determines how you structure the balance sheet of a bank. hqla is an and acronym for one of the tests. why should the bank in the eurozone be able to hold italy but a bankn debt, in the united states can't told the aaa quality state of utah? why? because of the rule. this rule will change, in that will change the market positively. it will change the banking areas positively. it's going to level the playing field in these asset classes. italy and utah, i think utah is a better credit in italy. alix: [laughter] maybe, i don't know.

what we sawbanks, the last couple days with small-cap trying to outperform large-cap, partly because of the tariff issue. when you are looking at stocks you want to be looking at small caps in these sectors and large cap. >> large caps have an upward the momentum is intact, but we are overweight small caps and we now have an etf that has micro caps. if you look from the february 9 low forward, for trump's election, and compare small, micro has, and micro, quietly been the stealth outperform or. qand caps next, mid next, large caps have been on a tear. the tax bill, we would say, adds a lot of sauce to the small caps, because they are the beneficiaries of the 20% rate, too, and they are the targets of

acquisitions with repeat creation funds coming back to the u.s. we're bullish on the markets and bullish on small caps. alix: great to catch up with you. david kotok of cumberland advisors. coming up, oil prices are up the most in almost three weeks. we will look at how it's affecting global dealmaking, and what it means for the energy equities that consistently underperform. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i have your bloomberg business flash. the turnaround at target is taking a toll on profit. the discount retailer posted fourth-quarter earnings falling short of estimates. target is spending $7 billion on new brands and store remodels. they have also been constrained by a wage hike last fall. it is one of mcdonald's biggest operational shakeups in years. the world's biggest operational company will start using fresh quarter pounders instead of frozen. mcdonald's is looking for ways to entice customers and fend off competition. prices have been rising for the past three years. at a rejected takeover bid nordstrom is heading partners against the executive. independent director turned down an offer by the founding family by buying the chain at $8.4 billion.

the board told the would-be buyers to increase their offer or move on. and that's your bloomberg business flash alix? alix: thanks. oil prices are up by the most in almost three weeks, while equities keep underperforming. oil prices rising higher, well you have s&p energy continuing to roll over, meeting energy stocks continue to underperform. joining me now is a man who was ,n the know, bobby tudor cohead of advisory at taylor weinberg partners. such a pleasure, thank you for joining me. >> pleasure. alix: explained to me this underperformance and energy equities. >> public equity investors are skeptical, given that they have low capital over the past two years without much return. they are skeptical that the energy companies can do what they say they were going to do, which is generate attractive returns on capital at these oil prices. in particular, investors are

concerned that the growth of drilling in the u.s. will accelerate to a level that will find ourselves with downward pressure, squeeze margins, and lower returns. alix: and the answer for a lot of these companies has been, we will hit you with dividends and buybacks and pretend like we won't -- production growth. a, do you buy that argument? >> well, these things tend to go in cycles, and we clearly are in a moment in time where investor preference is for return overgrowth. flat tods to happen in declining oil price environment, and in rising oil price environment, investors tend to favor growth. these things change over time. company managements hurt the message loud and clear, and are behaving accordingly. wind upt if we don't seeing energy stocks outperform after they went through all the trouble, they would say forget this. >> overtime, energy management

teams are highly conditioned at what they get paid for. that has been the history of the last decade. it's not the case right now. and in part of is not the case because we have had this incredible shale revolution where huge amounts of capital have flowed into the business without much capital coming out. at this point, investors are saying you need to show me that this business can generate free cash flow, and until you do, i am not inclined to reward you. in particular, i'm not inclined to give you more fresh capital. alix: how does that feed into m&a? if there is pressure to return capital, you want companies that will be strict on budgets. why would m&a make sense? cases, many companies are getting to the point that they are free cash flow positive, or at least neutral. at that point, it makes it easier to do something in m&a. but every company has a different growth profile and cash profile, and there are

people who need more inventory, there are people who need more growth, there are people who need to average up the quality of their acreage. we don't see a dead m&a environment and all, but it is true that the buyers are very high for public company management teams. alix: so who? what areas of energy and who would need to make those tieups? >> it's a range. we think the asset market will continue to be active, particularly based on the scope stack merge. alix: despite high valuations? >> despite high valuations, it tends to be the best real estate around. that is of the public markets are paying the highest multiples for. alix: who else is left to get in there? >> there are a handful of potential new entrance over the past couple years. the biggest consolidators tend to be the innovative players,

and in particular the larger companies who have the balance sheet capability and free cash flow capability to do more. we think the super majors will continue to grow in onshore u.s. we think the larger players will consolidate somewhat. and we think private equity buyers will remain active. m&a is not dead. alix: let's talk about private equity. there was a cash shortfall, do you still expect that to be permanent, and will they be more active in the past couple years? >> they have been active and will continue to be active. i don't think it is exclusive. they have been active in other places. the rocky mount region, for example. alix: but the stress level that would be attractive to buyers never materialized. >> that's true. it never got cheap. there have been a handful of cases where companies now owned by credit investors decide they just need to unload their company. there has been a little of that. but on the whole, never dipping

to distress levels. so if you want in, you have had to pay up to get their. alix: moving forward, what will be the biggest deterrence? why wouldn't companies merge, get into the permian pay off? >> well, equity capital availability is a deterrent. as we said, there's a buyer strike going on. if you bought energy equities, and particularly upstream, you are generally underwater. no fresh been almost upstream equity issued over the course of the past year. i think the big question is will that change. if you are a company that means more equity to execute m&a you are probably sidelined,. if you are a company where you are happy with your valuation and happy to use your stock, it is more likely you can be active. alix: what about the debt market? noble burned a lot of debt investors, it blew up over in asia.

do you feeling that part of the market is open? >> that market is more open to the higher-quality names, but , the kind ofdown covenant free deals that we saw in the height of the shale boom in 2013 and 2014, we are a long way from that. but investors sometime have short memories, and it wouldn't surprise us to see the markets come back. coming to light is very available across the broader economy. alix: great to get your perspective. good to see you. bobby tudor. 's blockbuster debt sale, looking to sell $45 billion in debt to finance its aetna deal. will there be enough demand, and what price will it take? this is bloomberg. ♪

alix: the investment-grade bond market is on tender hook, waiting for a potential issue from cvs that could be worth more than $35 billion. this is a high-grade secondary market spread. joining us now, lisa abramowicz. what can we expect when this goes down? >> let's put this in perspective. it could be a $45 billion deal, which rivals the $49 billion deal verizon issued back, in 2013 which was the biggest ever. this will be one of the biggest bond offerings in history, and it comes at a time of weakness in the bond market. yields have risen to the highest level since 2011. people are expecting the 30 year slice of debt that cbs is planning to sell to price at a wider spread than the average for longer-term corporate bonds. this really is going to pose a massive test of the investment-grade bond market.

will there be enough demand especially, for u.s. debt in general, to price this deal at value, given the fact that there's a lot of other m&a deals getting done, a lot of other discussions? what will this save for all those deals and all the other plant fit -- the other plant financing. alix: and at the same time, companies are selling debt in europe, for example, to bring their money back to the u.s. if you come inside the bloomberg, you can see how spreads performed during other big issuances. spiked 220reads basis points. so lisa, which one is it going to be? a verizon or a bud? >> first of all, verizon ended up being very controversial because it was underpriced for what the demand was. it also came at a time of increasing demand for u.s. debt. but it did very well following

its issuance. i should say, there is a bit more trepidation this time around. you have benchmark 10 year yields that have been rising. you also have the extra yield that investors are demanding widening, because there isn't a cushion enough to raise the increasing benchmark rates. there's a bit of concern that if this deal doesn't do well, it will create a real damper for the entire bond market. david: lisa abramowicz, thank you. coming up, blackstone head of private wealth solutions will be joining us next. this is bloomberg. ♪

♪ david: welcome to "bloomberg daybreak." i'm david westen, all by myself, alyx steele is in houston. we miss you. are you having fun down there? alix: i miss you, too.

but i'm having a good time. in the markets, it's a risk on steel tone to the early morning trading. futures are higher and dow jones sitting right at 25,000. you see the dax up by 1% and a relief after the italian election over the weekend underway in europe. in asset classes, a weaker dollar story, turning lower with the headlines north korea is ready to potentially talk. ro-dollar up by .5%, the yen was modestly weaker against the dollar and is pretty much flat on the day. you're seeing selling on the bond market and treasuries moving higher by one basis point and some will be a supply coming from cbs. the crude .8% higher on the weaker dollar. david? david: time for headlines outside the business world and we turn to kayley. kayley: there's new pressure on the u.s. to agree to peace

talks with north korea. kim jong-un is willing to give up nuclear weapons if the safety of his regime is guaranteed. south korea says the north is ady to suspend weapons talks and they'll meet later. a critically ill man hospitalized is charged with spying. he came to england in a spy swap in 2010, he and his daughter were found unconscious on a shopping mall bench after exposure to a unknown substance. boris johnson said if russian poisons him, more sanctions are possible. the union is set to play tit for tat if president trump imposes tariffs, the e.u. will million on on 3.5 products ranging from products. global news 24 hours a day powered by more than 2,700

journalists and analysts in more than 120 countries. this is bloomberg. david: thanks very much, kailey. blackstone is raising money from individuals hoping the retail channel will become one of the top sources of new capital. joan solotar is one of the most senior women in private equity and in charge of the retail effort and joins eric now. eric: thank you very much. good morning to you, joan. joan: same to you. eric: you're in charge of what we might call blackstone's retail effort. here's where i'd like to start. when blackstone extended its reach to individuals, the clients had to meet the s.e.c.'s qualified perform standard, at least $5 million in investments, who are blackstone's private wealth clients today. joan: we're still targeting that market of qualified purchasers and those are products like the traditional private equity and global real estate product. erik: the same stuff the

institutions are allowed to invest? joan: correct. but today we're creating product, the spoke for credited investors and those below but are targeting the $1 million to $5 million investor. the biggest client group of many of the brokerage firms you might think of and they are really underpenetrated in the business. erik: in the past blackstone has done fine tapping into the institutional market was the source of $400 billion plus of your assets under management. why move downmarket? why is the retail channel, which is a downmarket term, hold so much appeal? joan: a couple reasons. first is the need and demand on the part of the big firms. so most of the chief investment officers have an allocation they recommend of 10% to 20% import folios and if you go to most of the major firms, 97 out of 100 are invested in daily

liquidity product. to date they haven't had access to quality returns across alts. and if you look at black sfone's -- blackstone's portfolio, real estate, hedge funds, credit, we can provide the spoke product in each of the areas and weave them together and create multiassets solutions. erik: retail investors or individuals perhaps, and we'll have access of the full range of blackstones products? joan: if you're a qualified purchaser, you're eligible for all. erik: already. joan: though our funds are oversubscribed and not sure they'll have access to everything. if you're not, then no. you really would be more in structures that we're creating, things like a private read. we'll take an institutional product that most of the major global, whether it's cyberand wealth funds or corporate pension fund or accessing, and we'll create a structure that allows accredited investors to

generate those returns as well. erik: how do these products differencer from the institutional class products, i'm thinking fee structure, for example, risk-return profile, or perhaps some other parameters. joan: so the fee structure is not all that different, actually. with a we're really trying to do is create institutional product, institutional pricing. but what is different oftentimes are the liquidity mechanisms. so many individuals don't want a 10-, 12-year lockup fund, so something like an interval fund or private read that can offer monthly or quarterly liquidity fits in their portfolio better but they want good yields and protection against inflation and lower volatility assets and assets uncorrelated with what they already have in their portfolio. erik: you charge the same for that? joan: we charge the same for that.

erik: i have anecdotal information to say some if not all of your institutional clients are putting pressure on your firm and others in the industry over fees. you have to have a little more pricing power over the individual than you do over, say, california state teachers retirement system. joan: well, for the largest institutions who are putting in half a billion dollars into a fund they get a break point. if an individual wants to invest that much, they'll get the same break point, i assure you. erik: how much capital did blackstone raise from retail investors last year? joan: last year 15% of the total. so typically we're raising somewhere between 15% and 20% per year in the retail channels. and in total today we have about $75 billion we're managing on behalf of individuals. erik: 15% to 20% growing to what over time or do you expect that to stay more or less static? joan: i think it will grow. i think we are such early stage. we started out distributing

through the big wire houses and we've expanded to mid sized firms, independent broker-dealers, r.i.a.'s and large families. i think there's no reason that ultimately it won't account for half the assets we manage. erik: over what period of time? and i'm thinking about the conversation i had with steve schwartzman, your ultimate boss, back in october when he told me the firm planned to double its assets in five years and at the time it seemed like it was going to be $800 billion and now blackstone reported $441 billion in assets the end of 2017 it could be closer to 900. by five years from now if that's the case, retail will be what percentage of that funding mix? joan: i'll give myself a little more than five years. let's say 10. but if you think about the large initiatives around the firm, whether it's the insurance business, infrastructure, and retail, hese are all poised to grow. erik: retail in theory is bigger than insurance which the

firm sized at $100 billion. joan: we put in the release, at least $100 billion. i think the goals are much bolder than that. erik: what does the funding base look like five years from now in in fact back stone is at $800 billion, what percentage comes from institutional and what percentage comes from retail and what percentage comes from insurance or what perhaps from another source of capital we haven't identified? joan: when we went public, less than 5% of our assets were from individuals, today that's 15%, so that's tripled as a percentage. so if i look out five years, i'd say guessing somewhere in the 25% to 30% range. erik: and insurance? joan: well, again, using the same kind of math if we were to double in five years and that's not a goal, by the way. we did say it's possible and insurance was, you know, let's say $100 billion to $200 billion, so somewhere in the

15% to 20% range. erik: what is next for blackstone, the firm talked about opportunity and life sciences and people want to know what you're doing in technology or health care perhaps or other areas. joan: we're always innovating and hard to say exactly what will come next. we're continuing to expand some of our regional funds. this is the first year where we actually launched an asian fund for private equity. we've continued to grow similarly in relies -- real estate. we're adding core so much longer duration assets, both on the real estate side and private equity. i think you'll see more of that. and we're working on a couple things hopefully we'll talk about in the next year. erik: joan, you're one of the most senior women in private equity, certainly among the big alternative asset firms and blackstone also just promoted one of your colleagues, kathleen mccarthy, co-head of real estate. what is the firm doing toance women?

joan: we've taken a really innovative approach. when i was asked early on to launch a women's network at the firm, we started looking at the data and it wasn't so much that we weren't accepting women who were applying to the firm, we weren't seeing women apply. 10% of our applicants were female. erik: in what year? joan: about five years ago. so we -- 2013. yep. five years ago. so we embarked on an early program to go on to campuses and attract sophomores, educate them, even freshmen, about what it's like to work in finance, what it's like to work at blackstone and just started pulling more resumes. we started a sophomore program where we have women, really talented women coming to our firm and spending a day and a half. we do interview workshops, talk about the different areas of the firm and lo and behold, we've gone from incoming classes where we had 10% to 15% women to today where we with 35% to 40%. so a huge lift in just five

years and you mentioned kathleen mccarthy now co-heading the biggest part of our firm's business. erik: where the rubber hits the road, of course, is at the most senior level. so today what percentage of the m.d.'s, managing directors, or greater are women and where will that be in five years? joan: it's hard to predict exactly. so what i would say -- erik: make it aspirational? joan: if you just use the incoming numbers and assume that women -- that we can retain women and promote women it should net-net. erik: a big assumption. joan: we have a lot of folks committed to it and development programs from the earliest stage through mid career and beyond. so my hope is it 35% to 40% of our incoming class is women, ultimately that will be reflected in the senior ranks. today it's less than that. i think we're better than most

but not where we want to be. erik: great to see you and thank you very much for joining me here. david, that's joan solotar, senior managing director and head of blackstone's private wealth solutions. david: alyx, you have a big guest of your own coming up soon. alix: ahead of the shale producers i'll talk with today, i'll talk to regina player of resources and she has a read of what clients are asking about in terms of opec and rebalancing and the future of oil. key conversation next. and as you commute in today, you can tune in to our colleagues, tom keene and john farrell over on radio and tim fox joins the conversation at 9:00 a.m. and bloomberg surveillance can be heard in new york, boston, bay area and washington and across the u.s. on sirius x.m. this is bloomberg. ♪

taylor: this is bloomberg daybreak. i'm in the hewlett-packard greenroom. coming up on markets, former u.s. trade representative. alix: here in houston the talk it on opec officials and shale producers met over dinner last night for a second straight year and compared notes after a tough period of low oil prices and bloomberg caught up with mohammed barkindo, the opec secretary-general, after that dinner. guest: all i can say worthwhile is very educated, listening to experiences of various players

in the industry, every player has had one formal freak experience or the other in this cycle and i think it's good to take stock. alix: joining me is regina mayor, global head of energy and natural resources. was this just a listening exercise in reality for opec? regina: u.s.a. shale behavior continues to confound opec. they're doing research and coming to houston to interact with them live and try to figure out what is driving those behaviors and what they can expect relative to production increases. alix: let's talk about that. you look at the bloomberg terminal and we show u.s. production versus saudi production and u.s.a. has overtaken saudi or close to russia as well. opec wants to figure this out. what do they need to do to figure it out? regina: they need to accept u.s. market realities. i continue to get questions

about why won't u.s. shale producers get together and fix prices? that's not how u.s. markets work and we'd all go to jail. alix: it's illegal. apparently there are lawyers in the meeting, making sure no one says anything bad in this dinner. regina: they don't understand the national oil level and how u.s. dynamics work and the fact shale production is incredibly fragmented. you have 20,000 barrel per day mom and pop producers to millions of barrels per day producers and they're all in the money at $60 per barrel. and that raises the question how longo peck cuts will have to be sustained. alix: i talked with the knew gearian oil minister yesterday and asked him if they'd sustain it a while. >> in terms of the relationship, there is a lot of energy around it. there isn't anything that shows me it's going to end the production but again, we're going to keep looking at the dynamics and we'll reach out across the divide to look at shale producers and individual

rights to say what can we do collectively to stablize the market. is it going to last past this year? potentially yes but what form, i don't know. alix: that's the key, regina, yes, an agreement extended beyond 2018 but what will that look like? in your research and sources, what does it look like? regina: they'll have to extend those cuts. that's the thing making folks comfortable in the $55 to $60 range. the thing about u.s. shale production, there's no real governor on price deescalation. we'll continue to see production growth and continue to see investments, frankly tax reform will unleash more investment because of the tax reduction that many u.s. producers get, and that increase supply will weigh down, you know, create excess supply and be a governor on price. i think opec will have to continue to try to stabilize the supply picture by extending the cut. alix: and i.a. said they'll have to do that until 2021 or

you'll risk some surplus. if they continue to lose market share, what will be the opec solution? is it going to be a very fed rollback which basically you have opec increase production a little bit unless prices fall out of bed, are we going to see cheating or unleash some kind of a shale production out of opec, are you going to see russia and opec continue to talk a lot? what's it going to look like in your mind? regina: in my mind what it will look like is they will continue to produce, so long as they're creating monetary value for their respective countries, i think they'll continue to try to drive and achieve that right balance because even if you produce more and drop prices by $10 a barrel, you're not net benefiting the country. where i see the national oil companies going as well as the integrated oil companies, which particularly is interesting, is talking about the energy transition and what are we going to do in a lower carbon intensive economy and lower carbon intensive environment? how do you make money post the

oil boom because opec really as a block could become less relevant over time as we move towards other sources. alix: and you see that, saudi ramco looking for a stake in the l.n.g. exporters and trying to diversify from there. when you talk to the players in the u.s., how concerned are they about that turn? regina: i think they're all thinking about it, some are more sophisticated and mature than others. there is a belief at sarah week, there's all kinds of debate when peak demand will happen and some estimates are it will be as early as 2030 and other estimate is it won't be in my lifetime so i don't have to worry about that. everyone is talking about it and i think what's important is it's a race to lower carbon alternatives, not a race to renewables because we need to not demonize any one source of energy product, it's an

and-and-and strategy. if you're going to guess energy poverty that we have 1.3 billion people in the world without access to welcome trit and the fact western mature economies will increase their need for energy, crypto currencies and block chains consume more energy, not less. alix: fair point. before i let you go i want a read on the potential tariffs we're seeing from the trump administration, 25% on aluminum and 20% on steel. when i talk to the c.e.o.'s they complain but say business will be fine, is that true? regina: i don't believe that. i think there are unintended consequences. it's the capital project push. the tax reform led many c.e.o.'s i talked to to say capital projects on the bubble are now back on track and you'll see more investments in refineries, modernizations and petro-chemical expansions all of which use steel and aluminum and the tariff, if it really goes through will have a negative impact on the bullishness we just saw on

capital projects and frankly i think that is driving some of the uncertainty. the industry gets excited on the one hand and something else comes out that creates more uncertainty and it's a very difficult seesawing process we're going through. alix: great to get your perspective, regina mayor of kpmg. david: opec has to just get over it, the u.s. shale producer in the catbird's seat and won't change prices and opec has to get their head around it. alix: totally right. we're here to stay. i'll talk to the shale players, jack stark, and sarah ordwein and part of exxon and ryan lance of conoco phillips, c.e.o. i'll talk to several of them later today and what their take was about the dinner and if they weren't there, what's their take on growth. david: i'm looking at texas where you are, kicking off the first primaries of the midterm election season.

that's what i'm watching coming up next. if you have a bloomberg terminal catch tvgo on your terminal and send us an i.b. dsteele us a question,@a and davidwestin. this is bloomberg. ♪

david: this is what i'm watching now in texas, you know there will be midterm elections in november. they get started today in the state where you are. there will be primaries across the state today and a week from now we'll have a special election outside of pittsburgh, pennsylvania, for the house of representatives and on the 20th the illinois primary. we'll start to get some sense of how it will look, particularly the house of representatives whether it will go over to the democrats or stay with the republicans. believe me, the president is paying attention to this both with respect to his tariffs and steel in pennsylvania but he's on his way to pittsburgh to sort of campaign down there.

alix: and do we learn anything, david, about this in terms of the midterms? david: one of the things you learn is voter turnout because the early reports on balances where democrats are coming out bigtime and makes the republicans very nervous. they have big turnouts for primaries is not great news. alix: good stuff. you're watching that, i'm watching oil. coming up, i'll have an interview with a norwegian petroleum energy minister. lots of production coming on there and want to find out if it's sustainable. david: and the bloomberg markets will be open and drew mattus of metlife and others. live from new york, this is bloomberg. ♪

jonathan: from new york city, i am jonathan ferro. 30 minutes to the start of trading. this is the countdown to the open. ♪ jonathan: coming up, last-ditch

attempts from within the administration on the tariff effort. the eu plans its own retaliation. geopolitical risks diminish as the north says it is open to giving up nukes. investors speculate the hardtop on trade won't translate into policy. the story as follows, equities firmer. third on theout a s&p 500. euro-dollar back up to 1.24. 2.88 ones unchanged at the u.s. 10-year. donald trump's tears face -- tariffs face increasing opposition at home and abroad. >> we think this is a