replacements. front runners are said to be new tires and chief of staff pants. bloomberg has learned that the president has asked advisors about their opinions about nominating utah senator mike lee to replace justice kennedy of the supreme court. sources tell bloomberg president thanks lee would be confirmed easily by the senate but the president has expressed concern about keeping his senate seat in republican hands. the 81-year-old kennedy announces retirement yesterday. ambassador to the united nations, nikki haley, says china is written to the united rates. a meeting that the u.s. wants to have a relationship with china. >> rule of law, and fundamental

freedoms are it this makes china's expansion of the region a matter of concern for many of us. >> ambassador haley also mentioned pakistan saying the country has been cooperate with the united states but that she has told officials that washington will not tolerate pakistan giving a safe haven to terrorists. vladimir putin boasted about his country's perspective nuclear areons today, saying they years and decades ahead of foreign designs. speaking before the graduates of russian military academy, president clinton's as the weapons represent a hugely in his country's weapon capability. he is preparing for a summit with president trump set for july 16 in helsinki. powered by more than 2700 journalists and analysts in over 120 countries, i'm mark crumpton

, this is bloomberg. >> live from new york, i'm julia chatterly. i'm joe weisenthal. we are 30 minutes from the close of trading. the question is, would you miss. pill pack causing pain for drug retailers. the changes that could be in store for the health care industry ahead. the stress test from banks will be released. what to watch as six foreign banks are in the test for the first time. and really a perfect stick. minneapolis said the president

-- an exclusive cookout with joe. julia: jeff bezos is looking to conquer the last frontier wanted to fill your prescriptions. getting into the health care space, the company made a $1 billion bid for tell pack. ravaged health care stocks today. great to have you with us, max. immediate us nationwide presence. how big is this market? >> it is pretty enormous.

it gets a lot of regulatory and initial infrastructure work out of the way. they are in the market throughout the country immediately. while mail order prescriptions have gone down under -- over the years, it is still a pretty part -- important part of the market. >> we saw the reaction of pharmaceutical stock trembling in fear. is this correct? i'm not after you to judge their value, but should investors be as scared as they seem to be? >> in the pharmacy space, absolutely. rely on their prescription counters to bring people into the store. otherwise, why are you going in there? orderad deemphasize mail in favor of the pharmacy counter itself. if you make it easy and appealing as amazon is likely to do and as pill pack already does. make it easy to refill and renew prescriptions.

this -- drugs are over 70% of u.s. pharmacy sales. >> that is the case for walgreens. it is huge business. they have actually accepted but goingins head-to-head with amazon on the issue is going to be difficult. >> i understand that pill pack is a means to an end. how big is this kind -- company? someone explain to me earlier that not only do you have your buts and individual packs it also has times printed on the pack for when you should take your pills. availedot of people themselves of the service? >> it is very much a startup. that is why this is so interesting.

big --nt to make it a better experience for consumers. it can also impact health care more broadly. patients who are taking lots of , older andedications sicker and most expensive consumers. you are looking at better patient adherence to their medications. >> there is also a personal element in picking up drugs in terms of them describing something about interactions. our people comfortable with the not having that personal connection? >> i am not. i think there will always be a role for the pharmacists for a new medication that you are unfamiliar with. if it is a chronic condition where you have been taking the medication for years, that is

where this will make the most sense. >> cost is also a big driver. canada to driving to save money and whatnot. >> walgreens is not particularly worried because it is a complicated endeavor. you can't beo way worried about this if you are walgreens. at the end of the day they have been so reliant on their pharmacy counter for growth. any threat to that is definitely a threat to their growth. >> iq, max. we want to mention some breaking news. multiple people have been shot at the capital newspaper in annapolis, maryland. a reporter told them of the shooting. a spokesperson for the police department says officers are searching the building where the shooting was reported. president trump has been briefed on the incident.

people have been seen leaving the building with their hands up. officers have converged on the building. we will be following this story. again, a shooting reported at the capital newspaper in annapolis, maryland. this is bloomberg. ♪

breaking news from annapolis. people have been shot at the capital newspaper in annapolis, maryland. spokesman for the police department says officers are searching the building where the shooting was reported. we will give you any update on the developing situation as soon as we get it. let's move on. what'd you miss.

the company is also in the midst of an $8 billion acquisition of that food maker blue buffalo. take away, eric. >> i am here with the ceo of general mills. this is a great place for an interview. what is theurious, hottest trend in food? >> the hottest trend in food is going towards simple ingredients. ingredients you can get from your cupboard. we launched yogurt this year. outave a new yogurt coming this week.

one of the next big things are plant-based foods. especially plant-based proteins. whether that is yogurt or me, people are interested in protein. they want to get it from a lot of sources. plant-based protein is going to be one of the next big things. >> are you a believer in the technology? >> i am a believer in that technology yes. of getting idea protein from a plant-based source. >> is there any downside? >> another is not. the key is to make sure the stuff from the plants tastes as good as other sources. people want things that taste good and are convenient. >> have do you get consumer acceptance? there are people who don't feel comfortable getting their protein from plants. how do you address that? gradually. the first key is awareness. people don't even know those things exist.

is whatreally matters is the first thing they try. if it tastes good then they will come back. if not, they will go back to what they were doing before. to trends inmes consumer tastes, what strategies have you found useful overtime? out in theto get marketplace with consumers. we spend a lot of time online. in smart startup companies because they are on the forefront of what is going on in food. we have a lot of internal mechanisms that we invest in small companies to make sure we keep ourselves relevant. >> the point of sale has an enormous impact. how is that changing know that more people are getting their food from amazon and other similar sources? >> it will change over time. when of the most important things to remember is that

e-commerce is growing. it is still only 2% of the food. 98% of people are still going somewhere else to get it. now i think it will be around 5%, maybe 10%. even though it is growing more than 90% of food purchases will still be through grocery stores or other outlets were people physically good to get it. >> the demand for natural and yourum products is behind model to reshape the portfolio. >> that is here to stay. fats come and go but trends last a long time. the trend toward more natural ingredients has been here for a long time. we recently bought blue buffalo which is a natural company. we think it is here to stay. >> why use acquisitions like

epic in protein snacks or annie's to reposition the company? why not reinvent yourself from within? >> we do a lot of reinventing from within that innovation can come from everywhere area it is expensive to buy companies. one of the reasons we bought companies when they were relatively young is as they were cheaper. me as we talked internally when it comes to intervention, we have to play all the keys of the piano. internalhose keys are and summer through acquisition. >> do you think you are creative enough? >> the answer is yes. we take a lot of risk, we do great things internally.

we launched a new your company from within. we do a lot of things internally but there is more we can do. >> how do you decide when it is time to do a deal with like bluetive buffalo? as opposed to inventing from within and creating and growing new brands? ,> when we bought blue buffalo we also have $15 billion worth of other -- other business to grow. it witht want to put the investments that are behind our core business. the key for us is as we are making acquisitions to make sure we are growing our core business at the same time. next acquisitions don't come without risk.

>> blue buffalo is really good. if you can understand the strategic merits of an acquisition, what's harder to measure is the cultural fit. we had a great cultural fit with blue buffalo. the culture is similar to ours. we are still in the honeymoon phase but so far so good. the closer we get the more we see the more we like. the advantages to buying a company like that is you acquire their growth directory. what about organic growth at general mills? >> we will get that back in our next fiscal year. two years ago, we were down about 4%. this year we were flat. next year we will grow organically and that is without blue buffalo. buffalo we areue looking at nine or 10% growth next year. premium natural and

foods for people or pets that you are making and you are acquiring, they had a better health profile. there is typically less sugar, salt, fat. fewer processed grains. would you do any of that to your core products if consumers like you? >> absolutely. in most cases they will let us. --took artificial colors and and flavors out of cereal. for let us do that, except trix. a lot of consumers are looking for natural or organic but for a lot of them that is not the most important thing also. tothe food industry is going confront changes over the next

few years, what are the big ones? >> what how food is served and delivered. still be a huge change. what we have seen over the last decade is values. over the next five years it will be how food is delivered. that will be a big change for manufacturers, restaurants. 10 years from now, we will not be talking about e-commerce and food. we will just be talking about commerce. the line between e-commerce and brick-and-mortar commerce are going to fade. >> what steps are you taking today to position>> what steps g today to position yourself for what you see in the future? we are one of the leaders in e-commerce grocery. our online shares are higher than off-line shares.

we do most of our business through other retailers, so making sure we have strong partnerships with those retailers. >> when i think about challenges, i have to ask about trade policy. we have not been affected by president trump's trade policies. we have a little bit of aluminum in soup cans and yogurt, but not much at all. >> do you think it might, we have not seen the end of it. >> for me it is hard to speak about what will be. what we have seen so far has not had an impact. impact of overseas has been with brexit. the u.k. becomes

more expensive when the pound it devalues. >> finally, the commodity price cycle. commodity prices have on a relative basis and depressed over the last several years. the worry that they are going to increase. >> we have seen increases. we think they will be about five. us, the difference is $150 million. in addition to what we have seen on the commodities aside, the bigger change for us has been logistics. especially here in the u.s.. there has been a shortage of trucking capacity. e-commerce, a big a supply of trucking needed so , it isgest thing probably double digits. it is a significant increase. >> i want to thank you very much.

that is it from the aspen ideas festival. i want to send it back to you guys in new york. >> what'd you miss exclusivenes from my interview with him in a few minutes. modest wage growth shows there is still slightly in the labor market. you can catch the full interview here. >> now back to the breaking news out of baltimore, maryland. people have been shot at the capital newspaper. a spokesman for the police department says officers have been searching the building in annapolis. a person believed to be the shooter is in custody again. that is according to cnn. we have not yet gotten any kind

of confirmation of casualties at this. we will update you if and when we get it. more information about whether the building has been secured and what the effect on the newspaper staff has been. again, a shooting at the capital newspaper and annapolis maryland. this is bloomberg. ♪

shares of chipotle are plunging. , aighly anticipated strategic update did not meet expectations. ceo joins from taco bell and investors were hoping that he would outline is huge turnaround plan. instead, smaller tweaks. talking about a new advertising plan, they are establishing and advertising plan.

what appears to be happening with the stock. from the february lows to the highs of about 90%, on this movie below it will be interesting to see where it closes. some investors like what the new ceo is doing. the stock has done well. >> it is done very well. to 475one from $350 during his couple months in play. he is really planning on keeping a healthy fare in place. they are trying a new product including a chocolate milkshake. again investors were really expecting some much out of this and it came up a little short in terms of detail. >> the market closes coming up

next. here are the major averages less than or minutes into the close. another reversal today. from new york, this is bloomberg. ♪

>> "what'd you miss?" stocks obsolete for another session, cyclicals outperformed oil. i'm julia chatterley. joe: and joe weisenthal. we want to welcome you to our closing bell coverage every weekday. julie: we begin with our market minutes, another bad oscillation, the third straight session we bounced between gains and losses on the s&p 500 in the span of a single day, that's as we get various trade headlines on any given day and as we see down,dual sectors technology being a prime example. let's take a look at some individual ones. we just heard about chipotle mexican grill and a big decline for that stock. investors were not terribly coming up the ceo with five initiatives to drive

sales, but analysts said details on timing were very limited. and be just becoming public, a ipo's.k for market, theto company raising about $637.5 billion in its initial public offering, and obviously well received by investors today. then we have the amazon effect, this time it is the pharmacy chain turn as amazon agreed to buy cold pack, which has various licenses across the 50 states to be in the prescription pharmacy business. this is something the market had been bracing for, or waiting for, depending on what set of data segment of the market you're in. and this is how amazon has revealed is going to enter this business, much to the dismay of investors in these public that's publicly traded pharmacies. look at theake a government bond market starting

with the u.s. to year and tenure. not a lot of action today, pretty quiet. kind of like the general market , not in as and downs particularly strong direction. let's look at the commodities, starting with oil, which has been on a very nice run if you have been paying attention to it. up over $73 a barrel on the sexes intermediate crude. really strong gains in the wake of last week's opec meeting. , some of those concerns out of china he knows briefly. date has been set for fox shareholders to decide on the disney deal. it will take place on july 27 at 10:00 a.m. eastern. comcast was waiting for fox to set the data -- to set the date and it came back with a counter offer p another we have a date and confirmation, this sets the trigger for that to happen. we will monitor for any announcement, but just to

reiterate, data's been set for fox shareholders to decide whether or not to press ahead with that disney deal, july 27 is the date at 10:00 a.m. eastern. let's look at tech currencies for now, just toledo from what joe was saying, all the oil linked currencies gaining in the session, as you can see, but the , and canadian government yields as well a day after the back panel of governors hinted that rates may move up back -- at the july 11 meeting. broader trend, wti crude prices hitting a fresh three-year peak as joe manchin in the session. england chief of commerce saying wage growth in the u.k. is sufficient to warrant a rate hike.

he officials opining on the prospect of whether or not there will be a decent deal or no deal at all as far as brexit negotiation are concerned. we had the e.u. summit earlier today as well. and what is going on in emerging markets, you can see the outperform is the mexican peso, as we head for the mexican presidential election. the government of the central bank saying they did not rule out additional rate hikes. that's on the tops of their for the mexican peso after weeks of decline and the argentinian peso is still struggling. those are today's market minutes. julie: let's bring our next guest, dennis is the head of portfolio strategy. to see you. good maybe can help shed some light on what's been going on recently for us. as we mentioned, we've been

seeing these ounces between gains and losses. it appears that trade is part of that. is that the whole story? we generally have that many headlines on that topic today. dennis: i think it is a decent part of the story. it has become increasingly clear that there are worries about economic growth slowing materially in late 2019 and into 2020. wiley coyotemaybe comment that reinforce a lot of beers. -- a lot of fears. if you look at the dynamics of the market, anything with high foreign sales names got decimated. defensive factors, which are most lever to the mystic u.s. economic growth, small caps a outperformed. i would say yes. joe: in your view, are these fears while we haven't seen any rates on the long end, and related to that come at some

point are going to see the fed cave in some way to this and maybe indicate they are not going to hike as the market expected? dennis: i wouldn't use the term cave yet, but it's clear they take emerging-market factors into account. if business in search ago to a point where there's little because cap he's have no idea what the outlook is going to be ahead of a potential slowdown, i think the outlook for fed rate hikes would be very little and the fed would probably cause earlier than they had anticipated. as far as your question on the tenure, absolutely. it's followed with the potential for the unforced error. julia: does earnings season change anything? --nis: it's an interesting yes, potentially giving every client we are talking to right now is worried about earnings season.

i'm afraid that guidance from companies am especially those that are levered to trade coming out saying everything is great now, but we have no idea about the future. of trade goes down the route something significant, it becomes a big problem for a lot of these companies. julie: you note in your note to us that we received, you are observing all of these more defensively oriented actions in the market, rotation for value, rotation for defense stocks. is that the right way to go? do you think people should be bracing themselves? not necessarily, no. if you look at junk spreads, for example. they have not moved whatsoever. inflation expectations have not moved whatsoever. expectations are roughly 2% owner five-year forward basis. although the uncertainty will be with us at least probably from

the midterms, to bet that the worst-case outcome is the most likely a think is a difficult one to make right now. joe: is there a political or trump put in this idea? is there a point where if we were to continue to -- could we get a while back on politics? dennis: clearly we had a down day monday or tuesday and by the end of the day we were getting other trump officials saying we didn't mean what we said. the worry is that china keeps on going. maybe the damage is done. they be our relationship with him is so broken that they do push back in different ways, like the currency keeps on going down. apple stop showing up at stores in beijing. the chinese have an interesting way of pushing back like they

did to japan with toyota couple of years ago. that is something that is tough to gauge. i'm sure it's not in their best interest to do that. it's a different situation, but it's a possibility. dennis: i don't want to tell people that are managing money for living, savings of other people, that is ok that is long as the market goes down, everything will be fine. there is a point where it could spiral. julia: a good warning dennis, great to chat with you. the head of portfolio strategy. we want to recap some breaking news, a date has been set for fox shareholders to decide on the disney deal. the vote will take place on july 27 at the new york hilton i 10:00 a.m. eastern time. comcast was waiting for fox to set the state before it came back with a counter offer potentially. this could now set the trigger for that to happen. we will continue to monitor for any developments or announcements on the comcast

side. this is a deal that keeps giving him and we will move on from that. julie: and an update on that shooting in annapolis, maryland at the capital gazette there. we have learned now, according to police in annapolis come they have confirmed injuries at the shooting at the newspaper. we do not know exactly how many injuries or how rave they may be, but the police have confirmed that there were injuries. there have been various reporters there who have been tweeting that the shooting had been happening. it looks like we have seen at least some people cleared from the building at this stage. youill continue to bring updates on the situation. this is bloomberg. ♪

mark: i'm mark crumpton with first word news. as we've been reporting, multiple people have been shot at a newspaper in an apples, erland. witnesses say a single gunman fired into the newsroom. people with their -- a newspaper in annapolis, maryland. the bureau of alcohol, tobacco and firearms is said to be on the scene. the newspapers are owned by the baltimore sun media group. the wall street journal reports that white house chief of staff john kelly is expected to leave his position sometime this summer. the journal says president trump is consulting advisors about possible replacements. heirs, bus -- chief of staff and mick mulvaney who heads the office of management and budget.

the successor for chief justice anthony kennedy will face a confirmation by. those of us warn of massachusetts told the gathering, people around the country are worried and they are right to worry. understand, people are rising up. donald trump is not king. no one makes it to the supreme court without going through the united states senate. mark: republicans re: hold a slim majority in the senate, so they should be able to approve any nominee as long as their coalition holds together. -- interior department's inspector general is looking into complain about a montana land deal that links the interior secretary and the head services giant halliburton. a spokesperson says a .reliminary review is underway democratic lawmakers called for e'sinvestigation into zink

involvement in a land deal with halliburton's chairman. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. gettingnd we are now nike earnings just coming out. nike reporting fourth-quarter earnings of $.69, five cents above what analysts had been anticipating. fourth-quarter revenue of $9.8 billion. it looks like a greater increase in estimated. billion, and they are reporting a new buyback program as well. a $15 billion buyback is what nike is authorizing, so that's likely to help the share reaction as well, the shares already up about 3%. we typically look for anything forward-looking. this is what we have been talking about a lot for this season, what they will have to say about the global

environment. the conference call from nike should be quite interesting on that front. mark parker, the ceo in the statement talking about innovation at nike and that something we got signals from in terms of the retailers that sell nike shoes, that that has been doing well for them. it's interesting in light of the program you just talked about, they are already in a $12 billion -- 12 to share repurchase. then the new one will start. we're talking about over six , the return of $27 billion if they continue this to the end. joe: and speaking to the concerns about trading all that, billion.ales, 1.37 that's a good number. it speaks to their vulnerability , particularly if there is a symmetric reaction. again, no question this is going

to come up on the call. a couple more quick points, gross margin of 60 basis points at 44.7%. the company said that was due primarily to higher average selling prices. and a favorable fool price sales mix is also interesting. in other words, less discounting of issues, which is interesting given the trends in retail as of late. converse mama a much smaller part of the business, not doing as well, down 14% on the currency neutral basis. that is one spot that was not as strong. it changes charges

related to the night when of the tax cut so it is clearly having an ongoing impact. we want to recap some other news at this hour. a date has been set for fox shareholders to decide on the disney deal. vote would take place on july 27 at the new york killed in a -- --came eastern of it at 10:00. >> it's now or never. we talked about this yesterday, we've been told that it was waiting for the state to be set, he felt like there is no pressure to move before that. now that the date has been set, we are just watching to see what comcast does next, whether they come up with a better offer, which is what is most likely. and we will see. julia: you are reporting yesterday, depending on how high the price gets, trying to upset

or at least share some of the potential burden. we can argue there's reticence among shareholders that comcast at this moment. way theu look at the share price has gone, they don't want them to spend as much money. they will really have to lever up the company to do this deal. there is some talk that they could go up to $90 billion, it's a bidding war, for sure. fox shares on incredible run, coming close to $50 or share. they were anticipating multiple rounds,-- nabila: this is the last asset of this sort of scale. there's going to be a shootout, even though the fox board has come out and endorse the disney offer, you never know what can change if comcast comes in with a higher bid. so we got a day, we are

waiting now for comcast, the likelihood here ultimately is based on all the reporting it done as far as fox's concerned and ultimately what the murdochs want here. remember, this is the second time the murdochs have overlooked comcast interest. really worried that the congo still may be delayed or even derailed by the regulators, and they don't want that. they do want to wrap this up. remember there's a time value of money, some fox shareholders believe that comcast would have to come in and at least eight 10% premium to make up for the fact that they would be delayed in getting approval. julia: great to have you with us. julie: another update on this news out of annapolis, maryland. a shooting at the capital gazette newspaper, multiple people have been shot there, that is now being confirmed by the police, although we don't know the severity of injuries

sustained or how many people were involved in the shooting. cnn earlier reported that a person was in custody who is believed to be the shooter. we don't have any more updates on that, whether indeed that person is in custody. they are still investigating and cautious, they don't know if there are bombs on site or if there are other shooters. so they have blocked off the area and are trying to investigate this shooting. we will continue to bring you any updates here as the situation is active and ongoing. this is bloomberg.

julie: wanted to bring you

another update on that developing situation in annapolis, maryland, where several people appear to have been shot at a newspaper. you see their police activity close to where the newspaper is located. a reporter at the capital throughout theg experience, saying that an individual shot multiple people and also that the gunmen had shot through the glass door to the office and then opened fire on multiple employees. we're getting some police commentary at this moment. a police spokesman saying we did have an active shooter situation inside that building. we do have injuries. i cannot get the extent of those injuries at this point. once the building is secure, we will give more information whether the suspect is in custody and then we will get a briefing at that point as well. a spokeswoman for hospital close to the newspaper said to patients had arrived there, but she did not know their conditions. we have seen footage of people being evacuated from the newspaper.

again, the newspaper is the capital gazette in annapolis, maryland. we will continue to update you on any more information we get on this situation. julia: "what'd you miss?" a breaking in ceremony at the new foxconn campus today in wisconsin. the resignation of supreme court justice anthony kennedy has given the president a new opportunity. the irony is not lost, great to have you with us, obviously been at this breaking in ceremony and 25 miles away, you got pressure being placed again on harley davidson and what they plan to do as far as production is concerned on foreign vehicles. i think he again is sort of miss under -- understanding the situation with harley davidson. europe is assessing tariffs on

harley davidson in retaliation for donald trump's tariffs on aluminum and steel. it all comes back to donald trump's trade war. trump in wisconsin for the groundbreaking of that big foxconn plan. meanwhile, there's the threat to harley davidson jobs in wisconsin and farmers in the upper midwest very concerned about the tariffs. wisconsin isews nice, but not great for others. said that walker, the governor wisconsin has done great work bringing the foxconn project online. walter -- walker put together an incentive package for foxconn to something like $3 billion, the largest package of tax

incentives and benefits offered to any company in the united states ever. so a lot of wisconsinites are not thrilled about the amount of money leaving their treasury and going into the pockets of this company. julie: on that front, they're up in polls that show the majority convincedin's are not that the economic benefit outweighs the cost in this particular case. so on balance, when you look at business and trade, how is the president looking and polling? he gets pretty high marks on the economy. this is what allows him to take very aggressive measures entrée. the underlying strength of the economy. he can point americans to unemployment and gdp growth and say, look, have some patience with my trade policies. there is some give in the economy here. we've got flexibility with other countries. wayne,thank you, alex

bloomberg white house editor. up next, said stress test. this is bloomberg. ♪

news, were just starting to get the results of part two of the fed stress test. they conditionally passed the goldman sachs and morgan stanley cannot used payouts this year. but they are not alone. deutsche bank, the u.s. unit , we weree fed test talking about this and whether that would be the case. the fed doesn't object to the capital plans of 34 banks in the stress test and the fed ofecting to the capital plan

deutsche bank. josh rosner. this is exactly what you were morganting, saying watch stanley and goldman sachs and of course deutsche bank. >> almost everybody, all the enemas -- all the analysts were expecting deutsche bank to fail. it would be shocking if they passed. in the results we got last week, their numbers on leverage came so close to the minimum, the mass didn't work. what's really interesting is they are still getting a little wereore down like people

expecting. a lot of analysts looked at the numbers and said not only can they not increase, they have to decrease from last year. they're passing that actually allows them to stay at the level of the last two years. a little better than people were expecting. >> the thing that is important to think about in terms of the way the fed is looking at it is, banking versus investment banking. deposit assets versus securities business, training, etc.. especially given the fact that there's questions about what's going to happen in the economy, we've got an ugly yield curve. i think the fed is thinking about that future. that's part of what we forget, it's not really the current condition, it's the future condition. joe: think it's worth noting, looking at the after hours reaction, pretty muted. obviously orchids pricing a lot in, particularly after last week. on the qualitative side of this,

it's easy enough to sort of look at the assets and make an assessment of how far they fall. on the qualitative approach, what is that? >> we have this many years past the crisis, a number of institutions that are still having significant operational risk problems, management and they keep popping up as surprises. obviously we got america's favorite way to hate, wells fargo, deservedly so, continuing to have those type of problems. deutsche bank just settled your state for $205 million. those are the clear poster children, the reasons for this qualitative tests. what we are going to see is going forward, the administration, everyone expects at the regulatory environment. think this administration is going to keep the pressure on the largest banks in a way. it's a fan of the community

and the others are east coast-west coast, so i think that really is going to matter. if you're looking for some relief for the big banks, i think you will have an increasingly difficult curve. you have the recession that will be coming on next year. we are seeing slowing in the mortgage market, increasing auto,m loans in subprime and i know you've been thinking about it, what is the real condition? because if you look at the debt ripple effect, it looks like it's been scaled back pretty radically, but we are not sure what ultimately comes back on the balance sheet as risk. >> what we look at teen years later, it's been 10 years since the crisis, initially the

reaction from our regulators, the government rules were really stepped up. capital levels went up so much, and looking at the stress test, for many years, most of the prophets, they just had to hold on to that. the last few years, they've been able to return more and more. about basically the 100% level. it's still not there, really. 95% is the average for the banks that are passing, which is 30 4 p.m.. they are still keeping a little more. as we saw with morgan stanley and goleman sacks, even though the fed explains that is because of the tax reform that passed at the end of last year, which hit every bank with one-time charges that brought down the capital and going forward, they

can hold more of their profits instead of giving it to the government, but still they are asked to maintain levels, which means capital is still strong. leverage ratio when you calculate all other 3% ofof things, it was assets are capital, now it's about 7%. it's more than twice. joe: even with one-time , the results demonstrate that the largest banks have strong capital levels. >> very strong, and i don't think there is any question about that. one of the things we need to question that we haven't is, we are shoring up the banking system. than some operational risk

issues, which are significant in some cases. as we head into a new economic where are those risks going to pop up? i don't think they will be in a major way in the banks. the banks have gotten smart enough that there are some repo transactions that are hiding their exposure, but for the most part, we're seeing banks originating loans now not even to hold it all and secure it but to sell off as whole loans. that's going to end up eating some large asset managers in the future. julie: we are learning about the capital return plans that it we got these results. citigroup is planning to include to $17.6 of up billion. jpmorgan is planning to boost its dividend. it doesn't say by how much.

his boosting his quarterly dividend to $.80 from 56 cents. so jpmorgan doing a larger than estimated boost with dividends, were starting to get these ideas of how much capital these banks are allowed to return to shareholders. julia: you are saying where other risk being placed now, are they contained within the stress tests with the level of aggressiveness that we are seeing? >> that was my point come the risk in the banks largely is. the counterparty risk is elderly going to matter. >> one of the results of today, and this was a conditional past was we, the condition weren't so happy with how you are calculating and adjusting your counterparty exposures under stress. their specifics are to the point and the fed explains this is how

are going to look at these. if we have a recession in the next year or whatever and we see a lot of the shocks to the system, you need to really be better with your counterparty exposures, how much might lose from them, how do you deal with them, or you're going to do with that. --t's how the banking system if asset managers fail and the banks don't really have exposure to those asset managers in the way they been money to them, that's ok because they are not to big to fail. >> that's exactly my point. if the risk is distributed, and by the way, that was something that gave the fed and regulators. for heading into the last major crisis. we securitized all the real estate assets, they are not as much on bank balance sheets as they were, so we can breathe well. that was the thinking. i think it is largely true this

time, certainly a lot more true, but you are also seeing originations being made by banks with the goal of selling them as whole loans, and there will be some stuff stuck in pipelines if it went up having a reversal. i think the banks are well conditioned for that. julie: i just want to mention a , bank ofher headlines new york mellon as well, maybe, announcing it's going to also do a plan here, if i can remember what the ticker is. somebody help me out. julia: to rise by 17%. josh, you are sort of a longtime skeptic. now 10 years removed, how significant has the cultural changes been, or they significant enough that you

really don't have -- people get into banking to make money, so has the culture really change significantly enough that you don't have risk taking? other controls enough? >> there's only so much you can do regular tour lee. with regulatory. i think that's part of what the fed was looking at when it looked at morgan stanley and goldman sachs differently, not that the culture is a risk that the malaysian culture, but definitely should -- by business ishere more risky of that is part of what is being looked at. in some cases it took a long time. wells fargo, case in point, for them to get it handle have a culture was. it's only this year we've seen that addressed. i think in the banking system, by and large the culture is

leaps and out the head of what it was. think is better than most of its counterparts on the large bank side. joe: what is going on, some people say ego stuff, what are people talking about? reason. are lots of trade war, if we go into a global slowdown, u.s. recession plus or minus, those things hurt banks because banks are global, they finance trade, capital markets, equity markets, bond markets are impacted by such small bounds. those things impact banks. meanwhile, the yield curve is flattening.

>> it's also another sign of recession. also, i think josh had mentioned earlier, all these deregulatory expectations, everybody felt the rules of going to be off, we're not seeing that. there existed from dodd-frank, existed from some of the stress test, but the big banks are not seeing huge changes, the tax --orm helps, but all those julia: you got to separate the two different types of branches. >> and it goes to a point i made last time well sat here together, but everyone was sitting here assuming in the

market that we were going to end up seeing a very different shaped yield curve where net interest margins -- margins were going to expand and we were going to see that type of recovery. that was the overall market perspective. it's only more recently been dashed. i've been concerned that even if we did have a steepening curve, we wouldn't see the net interest margin improvements in a gone to the is we bottom of the barrel in almost every single asset class. so the question was where with the loan demand come from as we started seeing problem loans rise in a bad economy. now we got the risk of problem loans rising if the economy softens if we get an inverted curve and again, you're still going to have a hard time generating new growth. >> but hanks were conditioning

themselves -- banks were positioning sales for interstate going up. they were all positioning, like wells fargo, they had all these hedges, interest rates, futures that they had hedged which they were getting out of because now the interest rates were enough. when they position themselves, that doesn't really of them anymore, they can continue making money. the marketo goes to psychology shift that we've seen with stocks. expect fromdo we earnings season, how does that move the dial? >> capital market, how they are moving is very important worldwide.

they have been more volatile. volatility is good to a certain extent. if it's too much, it starts hurting because that makes the broker and the market maker get caught in the middle of that volatility. so far volatility has been there and not too crazy. and more toward the end it went back. with moderate volatility, capital market numbers will be good. equity markets trading numbers, those help all the banks, not just morgan stanley but all the banks. , the wholeding interest rate environment in those things, those haven't really it things yet, and the seen seen provisions going up. julia: we need to get perspective on --

joe: and then to your point earlier, these are growth and globalization businesses. might end, volatility matter a little bit on the margins for trading, but in in, if there's an economic slowdown probally and retrenchment in activity and things like that. thought you were going with growth in global businesses broadly, which is interesting also. i think we were starting to see a shift back to community banks from a market perspective and also in terms of performance. julia: but can they continue to do that? >> i think they can for probably the next year, and then we will be in a difficult environment. but again, part of that is the search for yields. as i was saying, there's a lot of community banks that are amazingly originating whole loans to sell immediately. we're talking private equity,

business development, demand for that higher-yielding credit. julie: we just got morgan stanley, that company raising its quarterly dividend to $.30 and $.25. like $4.7k looks billion. so we're getting all these various capital returns. is there going to be any reason they will have to dial this back if things go pear-shaped in the economy? >> doll back the increase, of course. the actual capital returns, i don't think so at this point. i think that is a long way off their number for the most part. i really believe that, whereas in the past i've had concerns with the culture more than the capital. but with the capital, uncomfortable. however, anyone who is investing and inspecting that's expecting the biggest banks to get relief on the leverage ratio, i think that goes out the window.

>> but they do it just these plans when things change. thee got the tax reform in fourth quarter in december last year which caused them one-time charges everybody had to take, and some banks would dial down what they were going to buy back. goldman suspended its biotech plans for the second quarter of the year, for example. when conditions change, they do slow down. as one of the things the fed looks at, not just from stress test, but if there's different conditions in the economy, capital cultivation is more often focused than it was before the crisis, which is very important. writing stories just a few quarters before it blew up, lehman was still buying back billions of dollars of shares.

why is it buying back shares when it should be raising capital? julia: great to chat with you, thanks for all the context. julie: i just want to give you unfortunately an update on the situation in annapolis. now we have learned from police that five fatalities are known to have resulted from the shooting at the newspaper in annapolis, maryland, the capital gazette. onece are saying they have suspect in custody at present payment this is footage from earlier as we were seeing evacuation from the building. the police say they believe there are no other shooters in the building, but again, they are talking about five for talent he's time that are known from the maryland shooting. fatalities that are known. the governors saying this is a tragic situation and we do not yet have all the information. but again, five fatalities is

what we now know about. we will bring you more information as we do have it. this is bloomberg. ♪

julia: it's time for the bloomberg business flash. the world's biggest hedge fund is making good on a plan to , planning to change its partnerships. visitation plan has been in the pop line for years. the building are investors taken a step back. under the new structure, employees will have a bigger voice and a bigger economic stake. bj wholesale shares jumped 35% in his first-ever trading after moreembership club raised

than $637 million wednesday in its ipo. it returns to trading after being taken private back in 2011. it's just one of a dozen listings this week, the most in the u.s. since 2015. holdings, the second-biggest ipo this week, raised almost $469 million in its offering. the personal information of millions of customers potentially at risk, power today. alerted the leaked data included encrypted passwords. adidas saying it does not believe credit our health information was compromised. and more transparency about advertisers on its platform of twitter. starting today, anyone will be able to search for a twitter account and see all the ads and have run in the past seven days.

u.s. political advertisers would be able to see demographic targeted data and the number of times tweets have been viewed. that's your business flash update. back to the breaking news. julie: one more update on this breaking news out of annapolis maryland. there has been a shooting at the capital gazette in annapolis, maryland. police have confirmed have been five fatalities that have resulted from the shooting. we don't know if there are more injuries or fatalities. what haveities or been confirmed by police. there is one suspect in custody and police say they believe there are no other shooters in the building at this time. it is footage earlier of people being evacuated from the building and there were reporters inside the building tweeting about a shooting as it was happening. we learned as well that this investigation is ongoing, and that they were still trying to

investigate exactly what happened here. we don't know anything about the motive of the shooter as of yet, although again, police believe there is no other shooter at this point in the building. this is bloomberg. ♪

julie: back to that breaking news in annapolis, the latest headlines that five totality's have been confirmed. we don't know if more people have been injured or killed, this is only what police have confirmed at this point. we see earlier people being evacuated from the building, the capital gazette, owned by the baltimore sun and based in an apple is, maryland. -- based in annapolis, ireland. we have heard condolences from governor larry hogan as well as president trump who learned at the shooting just as he was about to depart from wisconsin. stay tuned for more updates here on bloomberg. this is bloomberg. ♪ two, down, back up!

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