oil at $80. beware 2008. more cracks in emerging markets than five years ago as growth slowdown reveals vulnerabilities. walmart, macy's crushing it. walmart has to deliver solid growth in e-commerce. david: welcome to "bloomberg daybreak," i'm david westin. alix steel back with us. alix: i am back. david: we are waiting for walmart earnings. lots going on. growth in e-commerce critical. they trailed in the fourth quarter, margins are important. people are watching to see how they're doing to move aggressively in e-commerce, given transactions around the world. alix: by the way. mkm partnerever, joins us on the phone. what are you watching?

most important number? patrick: e-commerce growth rate. that slowed fourth quarter around 22%. it was double that in third-quarter. others are looking for summary acceleration in first quarter, north of 30%. that will be a focus. david: we have the earnings. store sales, up 2.1%. a slight disappointment. e-commerce sales up 33%. it was 22% in fourth quarter. it was up 50% in the third quarter last year. adjusted earnings per share, 1.1 4. a little over estimate. that is the quick review. go to e-commerce. up 33%, better than fourth quarter but not as good as third quarter last year. mentioned thelso

u.s. -- 2.3%. i have a lot of numbers crossing. that is light. that will be a focus. that is the business, the core business, still, the u.s. core super center business. i was at 2.5%. street was at 2.5%. nothing major. on e-commerce -- you will get both sides. the bulls will probably say that is decent acceleration from fourth quarter. the bears will say it is not good enough and you have other retailers growing e-commerce faster. the concern about amazon won't go away. 2.1%: reacting to numbers, comp stores. it was below. is it fair to read through

margins? any indication of where they may be with margins? expectation has been, margins would continue under pressure. i would be surprised to see anything else. they've been aggressive with price investment, against the gross margin and they have been spending a ton online, digital film it, making -- digital fulfillment, doing more work to the customer by rolling out online grocery in even putting it in your car if you want. that has a cost. pressure expenses and they have been raising wages like other retailers. alix: i want to break down sales. estimated, average ticket was down but traffic was good. walmart u.s. traffic was light. do we have to start to worry

with rising gas prices eating into sales of walmart, when sam's club is doing so well? patrick: that is a good number from sam's. i was at 1%, street was above flat. a nice surprise. that is not the core business. walmart u.s. and the slower traffic -- does that have anything to do with rising gas prices? i don't think so, yet. longtime --ed the a this for a long time. you don't get a big impact to store traffic and retail spending until you get well into the $3.50 area, closer to four dollars. consumermy is good, spending environment is good. i don't think it is gas prices yet. the weather had a negative impact on the quarter for sure. it was cold and wintry for a

long time across most of the eastern u.s. seasonal sales were not so good. it has a negative impact on traffic. there could be impact from amazon going more aggressively after the core walmart customer with discounts they are giving for prime, for example, foodstamp recipients. also medicaid recipients. they can pay five dollars 99 a month per prime. that is having a huge impact -- a little impact, something i'm watching closely. david: it is always tricky to anticipate how the market is responding. premarket, stock is down less than 1%. if that holds, investors are not surprised. fair.k: that is it is mixed. could make a, you positive point -- the bulls

might find encouragement in real acceleration. not good enough for some others. a mixed bag. what i've seen so far, stock should be flat to down. far, itout flip cart so will hurt full-year earnings by $.25 if the deal closes by end of second quarter. when you see the payoff -- how does that meet your estimates? when you see pale or flip card in models -- when you see the payoff for flip card in your models? patrick: if they were to close at the end of second quarter, up to $.60 next year. i haven't really modeled it. it is a lot going on there. i think any more details. i haven't seen many. others model it in -- it will take a long time for them to see

a return on that investment. year,ce implies for next an operating loss close to $1 billion. when they did the conference call after they announced the acquisition, they did not give color on how long it will take before it becomes profitable. it will take some time. david: when you say it will take time, walmart may be different from other brick and mortar companies going digital. because of the ownership structure. they are playing with more patient capital. they can make investments that won't pay off right away but may payoff in long run? patrick: absolutely true. alix: on your neutral rating on the stock -- why is it neutral and what are your concerns? patrick: some things we talked about running through the numbers when they came out. slower e-commerce growth rate,

even though it is re-accelerated, this time one year ago it was growing faster. there are competitors. they are growing faster and doing same things that walmart is doing by offering more and customers,ience to doing more work for customers, doing more online ordering and pick up, delivery and those kinds of things. while.been neutral for a as i previewed it i had a more positive tone based on pullback in stock. evaluation is more attractive than it was. it was trading around 16.5 times forward eps. fourth quarter printed february, trading close to 20 times. it has had pullback. valuation is more reasonable here. within context of my rating, i am leaning more positive.

i have to dig into the numbers today. alix: we appreciate it. patrick mckeever. the stock bouncing neutral, the esadline is u.s. com sal better than estimated. walmart, disappointed. it was sam's club that held it up and that is not their core business. -- yields,kets -- it 3.1%, highest since 2011 then you get buying on the margin. kissed to brent crude, $80 a barrel and no backing off. a bullish call out this morning, euro-dollar down. david: coming up, downbeat on emerging markets. investors see opportunities but there are cracks. first take is next. this is bloomberg. ♪

♪ alix: time for the first take on the top three stories. downbeat emerging markets. she says emerging markets are worse off than 2008. rising yields. pivot point out of stocks into bonds. walmart earnings fall short in the u.s. in core business. we are joined by the bloomberg kross asset reporter and the executive editor for global finance. the quote yesterday from carmen, she says overall shape has more cracks than five years ago, certainly at the time of the crisis, both external and internal conditions, growth slowdown begins to reveal

vulnerabilities in fiscal account. this feels opposite to every investor that i talked to ever. >> the shine has come off since the dollar bounced on emerging markets. you see that in fact the space. vulnerabilities in emerging markets -- just stock of debt, you would like that to be increasing. that is associated with increased activities. does it represent higher potential? yes. onre was a good interval gms, in 2013 it was the fragile five. e.m. things get from idiosyncratic to broad quickly from 2014 to 2016. you can get a lot of ripple effects from argentina, turkey, indonesia. david: i'm impressed by that

name. alix: you know he practiced. >> i did. david: we look at emerging markets running, foreign-exchange. the last five days. it is not pretty. -- thee at the bottom peso at the bottom, lira. across the board, currency markets are not loving em >> the downside of the debt issue, which carmen pointed to, as interest rates go up in the u.s., so much debt is dollar-denominated. when you have a chart in the red, that will make it more expensive to repay when bill comes due. >> it has to do with yields. this is my favorite chart this week inside the bloomberg, the 10 year rate now 1% higher than global yields. we are off highs of the session at 3.09%, rotation of when you see money come into treasuries is the question.

>> it is interesting. bank of america's latest survey of global fund managers -- one thing that made them short-term bullish on stocks, fund managers were telling them -- we will not make a bigger move into treasuries until we get 3.6% on the tenure. we are still -- on the 10 year. we are still a ways away. their focus on the front end of the curve and how that might be driving people from short-term corporate credit into safer treasury bonds and how that flows through the rest of the spectrum. david: what effect does this have been other asset classes? equities? financials? is this good news for big banks? >> the steepening yield curve makes them happy. jamie dimon saying, he was seeing 4% yields. when he made that call, there was controversial quickly. that may have been more of an

impression. they're welcoming volatility. alix: if you look at the five year yield, palmistry percent. that is higher -- 3.5%. that is higher than other 10 year yields, other than greece. you will see money come in if you want that deal at the end of the day. >> that has been an insane move. we talk about the flattening of the curve. debt officials have been speaking about it this year. moved in curve has not that spectrum this year. if anything i'm surprised, given how the u.s. is on a firmer footing than the rest of the world right now, given fiscal stimulus is yet to kick in, i'm surprised not worried the curve is tuesday. tuesday. -- is too steep. david: now to retail. walmart a few minutes ago,

mixed. mixed, slightly above, 1% above. looking forward to jcpenney. have been moving up in anticipation of earnings. what is retail telling us about the economy? >> the sales number really are this week and macy's yesterday, the reasons we saw yields move up and treasuries. all signs pointing to positive consumer spending etc.. mixed, thettle more store is about e-commerce at the moment. those numbers look like they were better than the fourth quarter but still below where they had been guiding in terms of growth. that is what investors want to know. how are they going to take on amazon? david: is this good news for the economy? >> i find the signal being sent by consumer retail is a good depiction of how maybe stocks don't reflect the economy well. lowumer staples, 11 year

relative to the s&p 500. that is something. at the same time, it is a reflection of labor costs picking up, staples being first in the firing line of receiving those affects. it tells you about financial markets, there is a desire for grow stocks and highflying stocks and retail stocks, by larger not that. they are boring. they are not displaying crazy top or bottom line growth. alix: there is another magic number. three. $2.90 a gasoline at gallon. brent at $80. at what point do we need to talk about that? >> that was ahead of the retail sales number. everyone was wondering if that would hit the pocketbooks of consumers. people took part when that did not happen. alix: i heard four dollars. david: the worst possible time

of the year. vacation. alix: thank you, guys. more on the breakout in treasury yields. how much further do they have to go? technical charts and what they are saying. katie stockton. this is bloomberg. ♪

♪ alix: breaking out. can it go for more. the 30 year yield highest level since 2015. 3.1%. joining us now, katie stockton of fairlead strategies. it has been too long. fairlead strategies great to be back -- katie: great to be back. alix: how much upside the is a? -- upside do you see? katie: the most recent breakout, more short-term nature, a fly pattern, a minor consolidation phase to the upside. that yields a target of 3.23%.

that is short-term. earlier target from a previous breakout gets to 3.35%. not major upside from ear. it does it mean -- from here. it is the beginning of a major reversal. david: how strong a signal is this? is this the end of a bond bull market? katie: that is fair based on the down channel. it is something that has implications for the next the months and the next fears. -- the next few years. david: where do we go from here? katie: upside expected to be slow. that has been established since 2016 to maintain itself. as a technician we say, we expect the stair pattern. it doesn't go straight up in yield terms from here. we expect that same trajectory depending on the timeframe.

alix: where yields go is based on the dollar. that is based on oil. the oil question. white line is oil breakout. brent today kissing $80. where is the top? i thought people were crazy when they upgraded to $60. katie: i look at wti. phase, thea basing upside following through already, short-term momentum is falling for crude oil. not this morning of course. but in general. i would expect the high 60's based on wti. $76an arrive at a target of based on breakouts we have seen. alix: analysts talk about how it will be range bound. technically, what is the range? realistic, a's are

nice place to consolidate or digest the schemes. the 70's is realistic. david: those of us were not tech me,ions -- technicians like $70 will curtail demand. there is some price elasticity. at what point does the real world kick in? alix: at what point would the iae be correct? david: you know too much. katie: it is tough to judge. when you feel like you have it figured out, it changes. it is a tough game. i prefer to look at momentum, the trend gauges. they are still positive. alix: s&p. talk to me. 200 day. katie: it is a technician's dream. perfect triangle formation, a breakout.

breakouts from triangles tend to be high probability, upside following through and that is exciting. especially in something not positioned for that upside. you can arrive at target of 3 0,60. that is one wayespecially in sot positioned for that to, we can e pullbacks of the short-term position the market in place. we want to be adding exposure to stocks that have previously exhibited upside leadership. technology is the best case in point. alix: emerging markets? technicals? you can look at the relative versus e.m.. you have fundamental warnings from carmen reinhart. katie: on e.m., major pullback in absolute and relative terms. you look at cages like eem, relative to broader market or developed global, you can see oversold condition within a

long-term uptrend. also signs of short-term downside exhaustion within the pullback. at a minimum, we see a relief rally in relative terms in em. does it mean a lower high after that but we should assume the uptrend is intact. david: katie stockton of fairlead strategies. thank you for being with us. more retail earnings coming up. jcpenney's result is next. also ahead, the future of cybersecurity. securing u.s. infrastructure from cyberattacks. live from new york, this is bloomberg. ♪ . . .

alix: this is "bloomberg daybreak." i am alix steel. check where markets are heading. to me, the interesting story is what is going on in europe,

particularly in italy. up early in the day, now reversed, now down .3%, the ftse. continuing to undersell pressure, the yield of up percent, moving higher by about six races is despite some -- six basis points despite some earlier about selling. hit, notwithstanding the lows of yesterday, but nonetheless, weakness in europe, a stronger dollar session. yields pretty much where we were, 3.1%, then we eased off. whether you want to sell some stocks, by some treasuries, are we there yet? i am watching brent, over $80 a barrel, monster call. david? david: jcpenney has basically matched estimates. $.25, .2%ter loss of

of the post to 2.1%, a big difference, not so good. the first quarter adjusted loss has been $.22. they are right on for adjusted loss. jcpenney about what you expected. alix: this is a double when it because a, jcpenney has an easy comps, so they should have been better, and macy's beat estimates by 320 basis points, so it is a double ma for them, they miss, and in light of macy's easier comps. i want to hear more about the growth margins. david: they are seeing unadjusted loss for the year, $.17, before that, they were $.18. there are losses that they are anticipating. jcpenney now with their earnings, it was not a blockbuster earnings. the stock is down about 5% right now. alix: not a good day for

jcpenney. david: exactly. with retail earnings in focus, we will talk with kate of springboard growth capital and also mark collins, columbia business school director of retail and former u.s. candidate to first wordturn news. the white house is still working out the summit between president trump and kim jong-un. there is a question of whether other countries will be invited to take part if the u.s. and north korea move on to suspend negotiations on nuclear weapons. u.s. trade representative robert lighthizer is not optimistic there will be a new deal by today's deadline according to inocratic lawmakers who were a meeting with him. house speaker paul ryan said reaching a deal by today is the only way they can guarantee a vote on the north american trade

deal this year. , more will press critics detail on the plan in oak area. it will meet with the eu president, donald lusk, the last face-to-face with fellow leaders before a key summit meeting next month. the stumbling props to the brexit deal appears to be the future of the irish border. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. kailey leinz. this is bloomberg. david: thank you so much. i want to correct something. i miss right. i said jcpenney had improve their work on their losses. that is not right. her projected loss is seven cents. the original estimate was a positive $.18. i want to clarify that. it was a negative revision, not a positive one. now we want to turn to cybersecurity, one of the top

concerns for just about every ceo around the world. as part of the sixth annual national infrastructure conference, we want to welcome one of the global ceo's leading joe kaeser, siemens ceo. tell me about the pact that you have signed with other ceo's. what is it? joe: the internet now is reaching the industrial world, so instead of worrying about cell phones coming out is about critical infrastructure, manufacturing, so we have to up with something, how can we protect our data from our people, our machines, our customers. secondly, how can we find a common understanding of how we meet our value chain, our customers, because already, devices rba connected.

that is why in february of this year, at the munich conference, companies signed a so-called charter of trust, and that charter of trust talks about common ground, and it is hard to say that later today, we have , michaelour members we decideming up, so this is a good start to get common understanding for what cybersecurity is all about and including manufacturing and engineering. there is no ceo i have not talked to who is not seriously concerned about cybersecurity. where is the cooperation, because you are also competing with a lot of these companies, competing to make money by selling cybersecurity.

how far do you go incorporating, and when do you have to compete? joe: in the marketplace, it is good for everybody. at the end of the day, we have pervasive the end customer proximity. think about the internet. it is a territorial thing. it does not see territorial boundaries. we need to understand how can we communicate and secure our data? siemens has 470 factories worldwide anywhere, china, the states, france. we need a free flow of data. on the other hand, we need to be sure that those data are being protected. that is something we work through together on the industry. the reason it is not destroyed, because if we see no common

ground, we have a level playing field. we can operate based through innovation. joe, is it realistic for the industry to get together and set the common ground or standards, or do you need the government involved? i am sorry, can you hear me, joe? can you hear me? we appear to be having a technical difficulty. i hope we can get joe kaeser back. he is a very important ceo, and there is a lot to talk about on cybersecurity. to point out, david, the role of blockchain in all of these conversations could be key as well, because that could facilitate not big point, blockchain facilitates trade and communication. both sides need to have the technology to do it or it i think it will be an issue overall with cybersecurity. we do have breaking news on italy. so far, the five-star league will agree on a final government program, and that comes from unofficial, so the two parties

are trying to form a government, it appears that they do have a final agreement there. i want to take a look at what is happening in the current market. euro-dollar pretty much going nowhere, $1.17. taking a look at the bond market, italy still trading lower. of course the question becomes -- how do they pay for all of that? i am assuming there will be a lot of tax breaks the i am assuming tax reform out the window. david: is it good news or bad news? there are suggestions that maybe they do not want to pay all of their bills, so i am not sure. back even if you walk that it will wind up paying their bills, both of them like cutting taxes, and that will be a problem. david: no kidding. we want to go back to joe kaeser, the siemens ceo. i wanted to ask you, is it possible of the industry in the private sector to get together and set the standards and common ground, or do you need the

?overnment let's be honest, the government of china, the united states, european union will have somewhat different unions. joe: that is a good point, and that is why we try to take it in our own hands and move on. the matter of cybersecurity, it has got strategic interests and economic interests, and sometimes those things coincide. we do have the governments to sort of come up with the framework on how to deal with cybersecurity. i actually could imagine to have these cybersecurity component. that is one matter of global trade accompanied, but at some point in time, trading typical goods becomes trading virtual goods, and information and data. we need to find a wto sort of agreement. that will be far away, because it is not a strategic way, so i would go ahead now and do it

with partners. we look at the value train with our partners, critical infrastructure, and we are doing work now together with chicago, new york with how to secure critical power infrastructure. that is the kind of stuff we want to go ahead with. it is our value chain. those are our policies, value chain, and we agree so that we can move forward and set the standard in that asset. david: when we talk left the issue of cybersecurity, do we know how big of a problem this is? i have talked with ceo's of big banks who really do not want to say how many tax there have been on their systems -- for security reasons -- they will not say. do you share among yourselves, as ceo's, how many attacks you have had? joe: i am actually here later today for a business council, there is a more permanent company, ceo's our

meeting, and we are going to discuss this, because the last thing you want to do -- and you are absolutely right -- the last thing you want to do is go out and say we are the latest and greatest in cybersecurity, which literally does nothing but attract people to prove you wrong. everyones why i think wants to better understand what is going on and take the right actions. david: i want to get to the news of the day, and that is the iran sanctions issue. you said before you will cooperate with what the law is, that is certainly admirable. but the french president emmanuel macron said companies should be able to do what they want, but the u.s. has said no, we will go after european companies. you have a lot of business in the united states. joe: we have values and we have interests obviously, so we need to balance both in a meaningful way. the united states of america is

the biggest siemens country, with over 60,000 people working here, over $20 billion in revenue. it is not only a great country on its own but also a very important market. on the other hand, of course, we also would love to have the global political leaders to give us the ground floor, you know, to do what is right. we adhere to the law, we cooperate, so we believe that we can make good on our application, and then we need to , cooperate it means with the authorities, as we have done in the past to make the best out of it. david: ok, joe kaeser, siemens global ceo, thank you for being a show with us as we have the audio issue. joe: maybe you need cybersecurity also. [laughter] david: that is right. we are tipping our own hat. alix: don't spread rumors. [laughter] david: it is really good to talk

to you. i want to update on the breaking news -- italy's populist parties have agreed on a final government draft. the five-star movement as well as the league party have worked on a movement, and it feels like they finally agreed on a final government draft. what we knew before the sideline as they were looking at things like pledges for tax cuts, maybe writing on pension reform, pledging a citizens income for with two tax cuts rates at 15% and 20%, and immediate withdrawal of sanctions against russia. i want to reiterate, because earlier in the hour, we were seeing the deal was up by six basis points, now the yield is up by three, so there clearly was some risk being priced in. the overall question still remains. this all seems great, but how are you going to pay for it?

david: you have to factor in that the ecb is buying all of those, so they have a buyer built in, which may cushion of a bit. the market may react differently otherwise. headlines, get more we will definitely update you, but now it appears the five-star and league have agreed on a government. david: we want to cover the wall street beat. first up, einhorn's midlife crisis. the size his hedge fund performing the worst possible, he sticks to investments in fact. been carried off the books. hedge fund managers race to protect their fortunes last year. finally, bent on brent. goldman sachs goes long on oil after hedge funds reduce their bullish bets over concerns with iran. kelly, us now is jason

bloomberg's chief executive -- jason: wow, chief executive. david: i promoted you. executive editor. david einhorn, when does the stubbornness kicked in? jason: i love this story. a fascinating story. he is one of the best-known names in hedge fund land, as you mentioned, not having a great run of it. david: "not a great run"? he is that -16%. end ofdown 25% since the 2014, and yet, he is david einhorn. he has had a pretty spectacular run through his career. the story points out all the ways that people really look at him as one of the smartest guys in the room. he is always among the debt collection of hedge fund managers sharing the best ideas. it ain't working with him right now. david: are investors sticking with him?

jason: yes and no. some are come about $3 billion has been pulled out of his firm is of late. some are saying look, this guy has a tried-and-true long-term strategy. he finds values. one of the criticisms has been he wasack in the day, looking at smaller, lesser-known companies. there was less competition. as he got bigger and collected more and more assets, that meant he had to make a bigger bets on better-known companies, and the opportunity for a big win there is a will long bet. alix: like shorting netflix. [laughter] david: second story. i love tax locker it i took tax law, and i did not understand a thing i learned -- tax law. i took tax law, and i did not understand a thing i learned. jason: you were in my head when i read this. lawyers are making a killing and have been for years. i have been strangely obsessed with this, private equities, for

the last decade, because it is this bugaboo not just a private equity land, but you had candidate trump and now president trump talking about it. rich people pay a lot less taxes because they take it is capital gains rather than direct income. jason: exactly. you get kind of deep into the weeds. david tepper, who i feel like this week it has just been tepper news. but very simply, what they are that they arege making if they are separating their tax profits and their untaxed profits because what hedge fund investors often do is just reinvest. david: but they are worried it will all get lumped in together. jason: that is exactly right. tax writers are saying wait a minute, the irs is not that stupid. [laughter] jason: exactly, and yes.

they tend to find these workarounds, and that has always this, itpoint of doing is these guys' job, literally, to figure out how to make money, so whether you are a hedge fund manager or private equity manager, you will find a way to get a lower tax bill for yourself and your investors with many highly paid lawyers. david: i would hope. alix: it was a really good report, super bullish on oil and commodities, basically a lot of guys in the market are saying we will ride this one out, and he is saying to not do that. they are dangerous words. long now,not go you will get screwed. jason: i was struck by the shameless suck up to the queen of oil. i have never been a suck up. [laughter] alix: one carries interest rates. you, and i was

reading the story -- david: ok. and the story is. [laughs] jason: what i find interesting is the strength of the words in this report. as you mentioned, "this is a ingerous to way to go," and know you will talk about this in your show, commodities coming up later on bloomberg television -- david: well done. jason: but this is a divergence of opinion as and where oil will going, and geopolitical issue, a geoeconomic issue, and yet you have very smart people taking strong positions either way. alix: you see hedge funds getting wiped out, as you into bullish on oil before the turn and having to close up shop, and now it is turning to the point andy haltedl, if not make it, we will sit this one out. he is basically saying do not do that. it is not the most list call out there, but none the less. jason: we had a really

interesting conversation yesterday or the were askinghere you an analyst about iran versus venezuela. david: iran can turner on a dime -- t were asking an analyst about iran versus venezuela. david:urn around on a dime. venezuela cannot. jason: it is not turning around on a lot of dimes for a long time. it is hard to bet against jeff currie, as i think you would both agree. irony is thele commodities cannot get it together. the whole bet on natural gas, but the woman who was running the hotel exited. david: a whole new team in there. alix: thank you so much, bloomberg's jason kelly, good to catch up with the. plug,on had a shameless tune in to my other show, i willities edge," speaking with an advisor at 1:00 p.m. today, venezuela and the election risk coming on at may

20, as companies start to gear up and say look, pay me. david: it is a really in for tent story, and -- important story, and i look forward to watching that. ford resuming production of the f-150 pickup truck. hinrichs will join us. you can watch online, click on our charts and graphics, and interact with us directly. just click tv on your terminal. live from new york, this is bloomberg. ♪ s is bloomberg. ♪

have of is the have-nots of retail, that is what we learned in the last hour. walmart did have their earnings as well as better revenue, but the confusion was the same store sales, the core business, walmart missed on estimates. sam's club coming in strong,

though. overall, walmart was pretty solid. it are a different story, though, when it comes to jcpenney. i fail to see anything good in this earnings report, cutting profit forecast, sales estimates despite the fact that they had easy content despite the fact that macy's blew it out of the park yesterday with comsat 320 basis points versus estimates. .2%.ney is up kroger is going to use delivery technology and buy 5% of the shares for $240 million. analysts say we may see a merger uping in, looking at ocado 64%. it is all about brick-and-mortar and teaming up with technology, david. of retail isture here. for now, let's go to ford motor company, which is what i'm watching today.

a supplier crippled production of its moneymaking f1 50 pickup truck. the company earned second-quarter earnings could be hit as a result. we welcome now the man who had to sort it all out and get the f-150 back online, president of global operations and executive vice president. joe, welcome. it is good to have you with us. joe: good morning. david: you are back up and running. tell me how you got there. joe: we start production tomorrow at the dearborn truck plant on our great f-150 trucks, and in kansas city on monday. it is really a herculean effort on our whole team, if you think about a fire and explosion, nothing you can restart overnight. our partners have been great, getting us up and going, moving 19 guys all over the world, and getting the land up and running. david: let's talk about those guys for a moment, indulge me ane, i read you found

antonov, one of the largest cocc cargo planes in the world,o ship it over here. is that true? joe: it is true. there are only 21 antonov planes in the world. enoughed a runway long to land -- these things are really big. we were able to get the 800,000 pound guy for our super duty truck. we had to get a big crane to get the guy out, ship it down to columbus on a flatbed, then loaded into the antonov plane, ship it over to the u.k., and to the reversal, loading of the plane into a plant there. it took about 30 hours total door to door. you need approval to get something out of the country and into the u.k., so a lot of help from our government partners as well to make this happen, a little over 24 hours. is veryoe, the f-150 important to the ford motor co. cured we will put up a graph to show how successful it is, the f-150. tell me how much of ability ties

into the f-150. -- profitability ties into the f-150. joe: we don't give out profit and priceline's, but the f- series alone has a greater profit than all of coca-cola or nike, over $41 billion, so that gives you some perspective of the size of the business and how much we had to rally the troops to get everybody excited about getting us back up and running. we are really proud of everyone's work. isis no secret that it important to the bottom line at ford motor company. that is why we are excited to have it starting up tomorrow and through the weekend. david: your new ceo, jim hackett, a real redirection under bill ford, one of the things you said is it is not to entirely get out of the car business -- largely you will be trucks. and that is a strategic matter. certainly the profit margins are higher. did this express with the f-150

illustrate a vulnerability in a strategy, that you put all of your eggs in that basket, that you are vulnerable to whatever market changes or physical changes might happen? joe: that is a great question. we all feel that way. years inery several the auto industry with the type of business that we have. you have seen how we were typically able to, and a little over a week, get it back up and going. consumers have been moving to suv's all over the world. cars are down all over the united states. consumers want affordability, but they also want the versatility of an suv, so we want to give them both. we want to give you the option spirit overtime, body styles change. hasof, a hood, and trunk morphed into a lot of different things. we will give them what they want. david: this final question -- i know you have to shut down the plant for a couple of weeks. you say you will make one back in july. done,ou get all said and

will you be ok, are you going to make as many of sell as many as you would have, is it just a matter of timing, second quarter versus third quarter? joe: it will definitely be affecting the quarter. we are to our full-year guidance $170 a share. we had planned to weeks of downtime for our shutdown period, and now we'll have one week. there are a lot of efforts going, as you noticed, to reinvest in the business and to work on the cost. we think we are in good shape for the full year. we have 80 days' of supply in maine, the spring selling season. our dealers have plenty of f- series trucks. we will get the supply quickly. david: joe, thank you for being with us, joe hinrichs, for president global operations. great to have you with us. joe: thank you.

♪ number, retail paint and gain. walmart sales fall short while jcpenney is left out in the cold. in-store sales coming flat. italy, do we have a government? the leaders of the five-star in league might have sealed a deal. david: welcome to "bloomberg daybreak," on this thursday. delighted to have alix steel back again. your voice is holding up. alix: markets, s&p futures lighter down by five points. euro-dollar taking the headlines from italy in stride. staying flat from earlier.

1.17, not kissing the lows of the past 34 hours. whens up on the 10 year, do we see asset classes in the treasury market? brent crude, kissing $80 a barrel. i should start believing it. -- question the bond market what is happening with italy? david: that is the question. italy, italiann officials say the five star and league parties have agreed on a government program and are making progress on the choice of a premier. alix: what is interesting, we get buying coming in, yields are up for basis points. -- four basis points. the league said, we don't have a government. david: not sure whether it is good news or bad news. alexandra.

tell us what is going on. reporter: i wish we knew. we thought it was done. we were excited and we had seen drafts of the program. it is mostly set, they know what they disagree on. then the league said there is still more to talk about, we're not there yet, they agree on policy points. a lot of that is what they said during campaign. analysts are saying is not doable. this government is not even a government yet they are offering soap opera twists and turns already. david: when does the president run out of patience? reporter: i think the president might be intentionally letting them go on because, doesn't want to seem like the one who stopped it. he wants electors to know, we let them try.

-- if itsn't work out doesn't work out he doesn't want it to be his fault or the other mainstream institutions. if they fail -- it is on them. alix: when we thought we had a deal for 10 minutes, there was still the question of the prime minister. how difficult will it be for the parties to agree on one person to meet the government? -- lead the government? reporter: that is the point. the only logical solution is a third-party in either league nor five-star. that is difficult because they want political leadership. leadersone of the two can because the other would be able to take it. there are inside issues, if the league nominates the number two guy then maybe the number one guy feels like he is being put out. it seems almost impossible to find a solution. david: thank you so much.

reporting from rome. we continue the discussion, of italian bonds. we welcome carmel wellso, janus capital management llc and also constance hunter kpmg llp chief economist. as you look at what is going on with italy, is it limited or does it have broader consequences for investment in italy and europe? >> you can see the pressure on the currency as a function of the italian elections. in terms of the businesses in europe, they are used to dealing with more volatile political situations. alix: would you like europe investments or italy investments right now? carmel: i would like the italian investments. they have been hit harder than they should have been. europe still has a cycle ahead of it, which will extend the growth longer than anticipated.

david: constance let's turn to you about the ecb. what could this mean for growth patterns in europe? therefore for the ecb as they decide what to do with monetary policy? constance: the ecb's conundrum. you have two economies in europe. germany, france, the netherlands, exceeding precrisis peaks. then you have italy, spain, portugal, greece. you have a severe recession. then the crisis, and recession, two years later and italy is not above precrisis peak. it is not reached it. in terms of growth, italy has struggled. if you layer on top of that the difficulties they have with deflation, expanding debt to gdp ratio despite primary surplus, they are in a tough spot. the matter who takes over the government, it is hardly going

to be an easy path to get the economy back on track. there are still structural reforms that need to take place. ecb's quandary is they have to make policy for out performers and underperformers. i've been hearing rumors they may extend qe. we thought they would end it in september and they may extend it for another six months. alix: at some point you have a new head of the ecb, most likely from a northern country, more hawkish. constance: finland is what i'm hearing. the finish central bank president. alix: the bund spread, in the channel, we are at 153 basis points. carmel, do you feel this accurately reflects the risk we should be thinking about when it comes to italian equities and bond markets? constance is shaking her head. carmel: i would say it does. weak euro will lead to better

exports and people are misunderstanding how strong growth could be in the longer term. italy will struggle. it is only part of the economy. the other countries still have a cycle ahead of them. unemployment is coming down. still high in some markets like italy, youth unemployment still at 30% plus. that means there is more potential upside. they don't have the squeeze, in terms of employment that other markets have. david: i want to turn from the italian to the u.s. bond market. treasuries. this basically illustrates the 10 year yield is more than a full percentage point above global yield on bonds. how long is that sustainable? constance: the big question. fed officials have said, they expect the yield curve to steepen, term premium to return

to u.s. bond market as they start to unwind balance sheet in a more aggressive fashion. that would indicate we have higher 10 year yields going forward. if you couple this with rate of growth and rate of inflation, picked up a little bit over the last year, that is the justification for the higher yields. if the u.s. were a large closed economy on an island. of course, the world economy, we look at europe, japan, we see the softness in those countries and markets over the first quarter -- and suggests, there will be continued for and buying of u.s. treasuries because the yield is some attire. -- is so much higher. david: why is this not self-correcting? why don't foreign buyers for it and drive this back down? policies, because trade impacts, they are so

uncertain. when you have volatility out there, people stick with physicians they have. -- with positions they have. we have seen people buying into the u.s., technical indicators in the last couple weeks but, that is more a function of weakness elsewhere than in the united states. the u.s. is a few steps ahead. alix: take me through an equity allocation with yields at 3.1%. some would see a recession, 2019, thinking about getting more defensive. what are you doing? carmel: i don't think 2019, we get a recession. we currently have raw materials at one of the highest asked inventories -- the waiting time for inventories -- for raw materials is at one of the highest levels it has been in years. we have capacity utilization continuing to rise. there is not a sign we have an

imminent recession in front of us. the only thing pointing to that -- people keep referring to it -- the yield curve. frankly, that is one indicator. on the ground we talked to so many companies and we are seeing, things are ok. they may be slowing in china but growth is still over 6%. how are we allocating? we like the u.s. the secular growth story is still strong in things like software, health care. we like europe. but we are selective there. in japan, we are sticking with global players that have exposure to secular growth. when you see volatility pickup like this, what you need to do? you need to be a stock picker. we can find ideas in every market. china, things are slowing but if you look at numbers, alibaba, they are strong. alix: exactly.

amazon example. constance hunter and carmel, they stick with us in the latest headline from italy. five star, we still don't have a prime minister, by the way. david: yesterday we were saying, just rotate. greece did not even do that. alix: retail week in full swing with walmart, jcpenney's out with earnings. the future of brick-and-mortar, from jcpenney's you, it is not good. this is bloomberg. ♪

♪ david: we are right in the middle of retail week with macy's reporting strong earnings yesterday. walmart, comparable sales fell

short of estimates. jcpenney reporting, widely missing estimates. rmel andth us, ca constance hunter. carmel, you are an investor. you invest in retail. what is your take? are you disappointed? with the exception macy's? carmel: anyone surprised by these results, they have not been reading the news are paying attention. the reality is, online is winning. if you have a winning digital platform, you have good numbers. you can see that at walmart, macy's yesterday, they had online improve. the reality is -- the big elephant in the room, amazon is winning more. that is my biggest concern. david: if that is the lens, does

that mean walmart numbers were encouraging? they fell short in comp sales, they did better than expected online. 33% growth. walmart,f you look at floorspace in the united states is what they need to be dealing with now. they need to start addressing brick-and-mortar operations, shutting down stores, they need to make sure they are turning around what they are doing in those store areas because it will be a drag on online offering longer-term. the flipcart deal is evidence. they are buying into a market where amazon is already doing well. to turn that around and another market, while they still of problems at home? they have a lot to address. we are long-term investors. i don't think this is a great sign, that they are turning things around.

they have a lot of work to do in the u.s. alix: what kind of retailer is best equipped to handle three dollar gasoline prices? constance: that is a trick question. how much they will increase delivery charges, how sensitive the consumer is to that? it also depends on wages. wages are rising. we are almost at 3% on the employment cost index. 3% on hourly wages. if they rise in line with rising gasoline prices, it will take less a bite out of retail. salesk at gasoline store as a percent of total retail sales. right now, 8% on the number. when that gets to 12%, approximately $3.75, four dollars a gallon, than it takes a bite out of other retail sales. we are away from that now.

it depends how fast it gets there and how long it stays. that is the threshold. this battle going on between brick-and-mortar and amazon or online -- what about the overall pie? how does that look. what does that tell us about the overall economy? constance: if we look at retail sales, online as a percentage of total sales -- it is still 10%. eating andsame as drinking establishments, restaurants. when it crosses that, it will be an interesting threshold. as far as overall health of the consumer -- it is strong. we're starting to see rising wages. consumer health in terms of consumer credit? we are not seeing the consumer overextending, we're adding mortgage equity tones as older families paydown homes. overall, macro, a look steady. how doas an investor,

you square the modest percentage of overall retail online with how important it is and which companies are best positioned to make the transition? carmel: that is a great question. in reality, i disagree with a number of the statements she made. one is, rising wages is going to lead to extra consumption. if you look at what has happened with oil, the typical client of walmart -- those prices rising have taken a bite out of the tax benefit they got earlier this year. disposable income hasn't changed a lot. rising wages are going up but perhaps not enough to offset things such as rising oil costs. person isn'tcome necessarily feeling the strength some other people that have the wealth effect coming through as

well as actually having less exposure to oil prices. which companies are best exposed? we like the companies able to benefit from less discounting we saw in the macy's numbers yesterday. something like, under armour. the travel industry. people have disposable income. there are a number of firms, where they can benefit. globally. you see it in china, here in the united states. alix: thank you so much. really appreciate it. can't help -- carmel and constance. coming up, we discuss this firm's global head of real estate. this is bloomberg. ♪

♪ kk beating up its presence in asiar, adding real estate

assets and a new ceo. joining us now, ralph rosenberg, global head of real estate. ted: great to be here -- ralph: great to be here. the region's growing tremendously. by 2025, half the world's population will be within a three are flight of singapore. you can imagine the real estate possibilities. we will position ourselves to take advantage. alix: and what areas of real estate do you see the opportunity as shorter-term and more longer-term? ralph: it varies by country. we have the benefit of having offices in eight countries across the region. some countries are developing, like southeast asia, some armature, like japan -- some are mature, like japan and korea. for example in china, you have a combination of deleveraging inking system which should

create -- deleveraging banking system and the emergence of a growing middle class which should expand retail. we have made investment in a retail outlet mall company in china. david: to what extent is the opportunity? people have gotten over extended. they need to get out of these positions. as theit will be both banking sector deleverage is overtime, we will take a village of the fact that people have gotten over extended. at the same time with the growing economy, 6% to a percent a year, that is creating a consumption pattern across individuals that should benefit hospitality and retail sectors. david: kkr is enormously successful. it has not always been known to be dominant in real estate. i won't mention one competitor. how can you catch up with blackstone? alix: you mentioned it.

david: he chuckled. ralph: we are all good. we have a dedicated real estate investors since 2013, with running fiduciary capital. over our 40 years, henry and george were prolific in real estate space. it is since 2013 when i joined, we have been a global real estate investor along third-party capital investors. we have a global brand. a dominant franchise in europe, asia and the united states. my job is to connect the dots across the different parts of the firm that are established in these geographic locations to take advantage of real estate related opportunities on behalf of our capital and our clients capital. -- what talked earlier are your favorite plays, retirement homes for example -- housing.

blackstone just me to play into warehousing. where is the best opportunity you see? ralph: globally? alix: yes. ralph: korea, the logistics opportunity is interesting. theard the earlier segment, discussion around retail consumption and brick-and-mortar. in korea, 23% of retail sales are online compared to 10% in the united states. there is notkorea, a strong supply of state-of-the-art logistic facilities. we are proactively developing logistics facilities outside of seoul. david: you have a powerful global brand. the you get a look at these deals? reason for thee hire? ralph: part of the reason. we have 20 people on the ground

in asia. it is about connecting to our country teams and our private equity franchise. with john coming in, that solidifies our ability to take advantage of connectivity across the firm to leverage franchise, brand, source and underwrite real estate opportunities at the asset level and at the entity and corporate levels. david: great to have you here. ralph rosenberg of kkr. coming up, the manager of the countries largest pension fund, the big push into private equity. coming up next. this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak," i'm alix steel. does italy have a government? italian stocks, up by 2/10 of 1%, reversing early losses. a potentially weaker open in the

u.s. other asset classes. btp, selloff, higher by six basis points. yields higher by one basis point. 3.1% on the 10 year. euro reversing gains. brent holding steady at $80. jobless claims coming in, not a surprise, in line. 222,000 individuals filed claims last week. strong job market, show me the inflation. we wind up hearing, not a market mover, continuing the potential, gradual rhetoric from the fed. david: when do we start wage inflation? return to the largest u.s. pension fund. making the biggest push ever into private equity. the california public employees retirement system is launching two new funds. we are here with ted eliopoulos

reporter: the morning. >> tell me about this bush? ush?his p >> we are announcing moving forward into private equity through new partnership vehicles, that our board has authorized us to begin. reporter: you have long and existing relationships with kkrone, -- with blackstone, and apollo. why take a different approach? >> we will continue those relationships into the future. we have a 7% rate of return requirement, as we have talked about a number of times. private equity is an essential component of our asset allocation to meet that target. is our highest returning asset class over the last 20 years going into the future we believe, private equity is essential asset class to move

forward. we have developed a conference of strategy to invest in the private markets, at scale. has $355 billion of assets. as we look forward to construct of private equity portfolio, we know we need to build a portfolio of scale, $60 billion private equity portfolio. we need a number of tools to access the private markets. reporter: like it you do that exclusively with outside managers? >> it has to do with scale. we don't think we can invest at the scale we need to in the traditional offerings of private equity general partners. reporter: because of fees? and amountt the size of capital pouring into these relationships -- we are not able to build a $60 billion portfolio

solely through traditional general partnerships. that is number one. number two. there are advantages to design alternative business models in private equity. namely, we have a long-term investment horizon. we have liabilities we are overng to pay, and invest 40, 50, 60, 70 years. many traditional vehicles we invested and have shorter horizons. -- they have shorter horizons. the ones we are announcing today will have evergreen investment horizons and that will allow us to match liability stream directly. >> you raise an important question. why should any public pension plan, let alone calpers, with the kinds of liabilities you have, continue to invest as much as you do in public security? 50% of your portfolio is in

public equities. just raised fixed income allocation to 20%. even though you have tens of billions going into private equity, it is a fraction of overall portfolio. >> public securities are essential. reporter: but you don't need liquidity. >> we do need liquidity. >> sure. >> overtime, we get paid for that liquidity provision. so, i cannot imagine any scenario where calpers or an institution of our size can achieve our goal solely through the market, the private marketplace. as important as the private marketplaces, we have to be investors in the public marketplace. we have discussed this many times. we are able to invest for basis points in the public markets and it is a cost-effective, efficient way for us to earn and meet our overall 7% rate of

return. -- is the outlook for returns improving or deteriorating? >> it is a challenging environment for returns. we have a great run and we continue to have this rally of long-term, since the financial crisis. we have had a great year. with our calendar your return, over 11%. looking forward over the next 10 years, as a long-term investor, we see muted returns. we think our portfolio, heavily invested in equities, 50% of public equities, additionally, the hope to get another 10% invested in private equity, even with those equity centric investments in our portfolio, we are estimating a 6% return over the next 10 years. reporter: you won't hit your target. >> not over the 10 year horizon.

as we completed asset allocation, we are looking to years of 11 through 60 four normalization of interest rates, otherwise to allow us to make that 7% required rate of return. reporter: one of your products has been to reduce the number of investment managers with which you do business. you started out with more than 300. euro to reduce it to 100. >> 138 today. we have made great progress in achieving that goal. in addition, it is not just about eliminating or reducing the number of strategic partners. it is growing very strong relationships with strategic partners that we do business with. that has been successful, really struck should -- real estate, infrastructure, private portfolio, we have much deeper relationships with this talent base that exists in the external manager world and we are deeply

involved and appreciative of that partnership. reporter: you are leaving calpers at your end to be closer to your daughters in new york. >> that is right. reporter: what we do next? -- what will you do next? >> i will focus on closing this chapter at calpers. i have devoted much of my professional career to calpers. reporter: back to the private sector? >> that is the next chapter for me going forward. i have spent so much of my time in public service. going back to private sector is a likely outcome. my first priority is making sure this transition at calpers over the next seven months is smooth and to the benefit of calpers beneficiaries. reporter: let's talk about the future of calpers after you're gone. this faces enormous political pressure to take an active his position on social issues. should calpers be an activist fund? >> we need to be active in

monitoring and managing risks in our portfolio. reporter: that doesn't necessarily mean, automakers say, don't heed the trump administration's desires on omissions? >> we drive a hard line at calpers between divestment and actions politically motivated and those actions that we take because we are concerned about risk that could affect our portfolio. reporter: whether political pressure or something else, what changes would make it easier for to investd the cio, and generate returns for your beneficiaries? what would you like to see? >> which of my we wanted to see has happened. we have internalized over 70% of asset management inside covers. we have an extraordinary investment team internally.

mainly managing our public asset classes. what we are needed and what this announcement today, in creating these new direct vehicles in private equity -- it allows us to access the talent we need to invest in private marketplace. we quite consciously did that in form a partnership with external talent, knowing that at this point in time, it is not feasible for us to bring that level of talent. reporter: you can't pay for it? pay for it or put the infrastructure necessary around the globe today. we are excited about the approach of partnering with talented vehicles. reporter: given that challenge of generating returns -- over the next 10 years, best at 6% -- i'm sure you hope for better -- given pressures and constraints -- in your opinion, is the

defined-benefit public pension plan model a sustainable one in this country whether in the state of california or anywhere else? reporter: i fundamentally believe -- >> i fundamentally believe it is. we have incredible asset-based and liabilities going forward. we have modeled our returns, the alternative, historical events that could befall us. we have built up a resiliency within our asset allocation but there are risks. one of the challenges of a pension fund like calpers is not only investing, monitoring risk, but also engaging in public policy debate about what if? what happens if alternatives happen? reporter: i will draw you into another debate. the reporting structure at calpers will change upon your departure. the cio will report to the ceo. is that not dangerous?

that is the same kind of structure that indirectly got others into trouble because of the implicit pressure the ceo comes under from unions, for example. from lawmakers. other interests in california, to make investment decisions that benefit those interests as opposed to the beneficiaries. >> that is primary. the calpers board hires and selects the ceo under a number of criteria but one of them is integrity and ethics. we had challenges, many years ago, in that and that choice was horrible. one oftoday in our ceo, the great, young professional ceos in the public pension world. she is fantastic. she operates with incredible integrity. i have every confidence in her

to govern the entirety of calpers and balance all of those policy pressures that happen at the intersection of calpers. she is a tremendous supporter of the investment office. she has been a very strong partner in working through these alternative private equity models. are message to the marketplace -- our message to the marketplace is this announcement is the considered worth of the entire organization. we have worked over a year with the board, i have worked closely with our ceo and i'm very comfortable and optimistic about the government structure going forward. reporter: thank you for spending time with us. good luck wrapping things up with calpers and the next chapter of your career. >> thank you so much. --id: thank you so my think you so very much. coming up, e-commerce and what does it mean for the future of brick-and-mortar?

cohen, former ceo joins us next four retail therapy. this is bloomberg. ♪

♪ kailey: this is "bloomberg daybreak," coming up later, european central bank vice president. david: it is a big day in a big week for retail earnings. this morning, mixed results from walmart, followed by jcpenney which cut the forecast. after the bell, nordstrom. we continue to look at different

aspects of the group in retail therapy. today we look at the battle for e-commerce. tomorrow, the final day, we focus on the death of them all. which seems dire -- the death of the mall. which seems dire. and kay.s now, mark she is the founder of usa networks. she has served as chairman of the board. welcome. great to have you. i will start with you, you know these big retailers well. tell us about where we are on the big brick-and-mortar retailers trying to get into e-commerce? walmart, kroger? >> the paradigm shift is underway. it is in full swing. the marketplace, did not exist 20 years ago. if you wanted to shop you had to go locally, to a store.

you were tethered to what was available to you within some radius of where you lived or worked. the internet emerges as an alternative. customers have embraced it with a vengeance. everyone is mobile enabled from kids who can barely talk to their grandparents who are pushing them in a stroller. 20 years ago, folks and never -- folks in no one would ever buy anything on the internet, today there is nothing that isn't sold on the internet. the brick-and-mortar legacy based businesses are reeling from the change. the changes just getting underway. it is anyone's guess which legacy players will survive. interesting today looking at jcpenney versus walmart and comparing macy's yesterday. what makes a good strategy? double-digit growth for walmart. makesrt -- and what

something not pan out like jcpenney? mark: you have to have things customers want. it has always been about the merchandise. you have to have a value proposition, whether luxury or low and everyday low price at the walmart level, that customers find appealing. you have to provide access. walmart is struggling, breaking out of a legacy brick-and-mortar model, chasing amazon, which i submit is, not an even race. they are running five in a two horse race. amazon has the benefit of amazon web services which feels the enormous market share expansion. david: to you think it was a big mistake to buy jet.com e-commerce sales are going up 33%. mark: i think it was a terrible waste of money.

it is not a terrible mistake to pursue the internet. spending $3 billion plus on a site that has no traction, is a big mistake. david: kay, let's turn to you. how does a brand maneuver themselves? you have amazon against big players like walmart -- have you maintain your brand, get the distribution that amazon gives you? kay: it is really access to the consumer. brands like kate spade were aggressive early on using social media to attract consumers and keep them close. it is all about engagement and direct access to the consumer, that you continue to mount the brand with them and build it. you see the reaction. predictive analytics has come to retail, especially online sales. of see changes in terms customer engagement directly. withbrand can survive,

walmart and amazon out there if you have a strong following among brand loyalists and you keep them close. that is what is happening. that is why i started a fashion toh lab five years ago, bring this new technology into consumer's hands. david: you can't survive without giving into amazon or walmart? kay: people sell some of their products on amazon -- not walmart, the interesting thing -- walmart bought jet.com, bonobos, a lot of smaller brands to get close to the consumer. you can't buy them from walmart. you have to go to the nobles -- site.s alix: they are buying talent. in addition to the site. it was the talent.

you need to pay off the $3 billion plus to get the talent. mark: that is a heck of a price to pay for talent. people make the world go around. i would have hired a handful of really smart clients to come up with the algorithm jet had to offer and i would have spent less. david: kay, i cannot let you go. you founded usa networks. cbs, what is going on? kay: it is a real battle. of whoe for supremacy will survive and take over and make the merge. is a big gamble on part of the shareholders, the board of directors -- they don't have voting power to over par -- david: shery has to pay money or she fires them. kay: she may be willing to do it.

kay, thank you both very much for being with us. alix: i am watching oil traded at $80 a barrel. is it iran or venezuela, oil production shrinking. you have an election this weekend. what i am watching. this is bloomberg. ♪

♪ surprise. oil at $80 a barrel. in light of venezuela, we know the country is suffering, oil production down 1.4 million barrels a day. it should be at 8 million based on reserves. also be election this weekend and the pressure oil companies are putting on, to pay out what they are owed, different than making a case against venezuela. there are no assets vacancies. david: it is basically a

commercial enterprise, you can go after commercial enterprises but not the state itself. it is not becoming go -- econoco . there are a long list of creditors not being paid. alix: they have seized assets in the caribbean, because they are refining assets in country are not any good. they can't export because they are worried they will seize the ship, tankers are being trapped in venezuela, so they cannot get the oil out. refineries in the u.s., three that are owned. do they go after those? the finances behind them? this could have a dramatic implication for the oil market. david: it could be a race to the courthouse. if you are a creditor, you don't want them getting the lien first. everyone is saying, what are the assets and how can i get them?

alix: the election is made 20th. it will be maduro. david: he might when. -- win. alix: how does the u.s. respond? to they put sanctions on them? i will break them down at 1 p.m. on my show. energynt obama's former adviser will be joining me. coming up on bloomberg markets, jim karen of morgan stanley investment. yields at 3.1%. this is bloomberg. ♪

>> from new york city, i am jonathan ferro. this is the countdown to the open.

jonathan: the president's clashing over china. navarro clinging to the table for talks. reinhardt turning heads, saying in is in worse shape now than during the global financial crisis. landss populists dropping , maintaining pledges for spending and lower taxes. 30 minutes away from the opening bell, the story shaping up as follows. , just aboutkness with us for a fourth straight day. in the red treasury market, 3.1% .s your yield on a u.s. 10 year topping the level for the first time since 2011. almost seven years. wall street weighing in on the bar and -- on the bond market selloff. >> when you have gdp growth on its march