tech. splitting up the job of monitoring giants with fears of a breakup and revelations clotting stocks. the st. louis fed president says the fed should cut if inflation stays low. they will discuss strategy in chicago. and inflation, what inflation? inflation in europe disappoints, prices uncomfortable below their targets. there will be central bank meetings this week. david: welcome to "bloomberg daybreak." president trump is meeting in london as we speak and he is at number 10 downing street, just outside you can see the beast, the limousine. he is meeting with the prime minister and there will be a news conference after that, but before that there was a state dinner last night. alix: apparently, some issues with outfits. david: listen, i do not comment

but it looked a little low to me. alix: is it supposed to look like that? david: i have not worn it that way. he is the president, he gets to decide. alix: that was the state dinner, today it is all about messing up u.k. politics, getting involved. throw off the shackles. david: we have a sweet trade deal for you if you throw off those shackles. alix: forget brussels. theresa may loves that. david: i think we will have a presidential news conference with the prime minister coming up at 8:45 a.m. eastern and we will bring it to you as soon as they come out. alix: in the markets, a sigh of relief. everything taking a bit of a pause. futures are up by 4/10 of 1%. yesterday, totally hammered by tech. it is a weaker dollar story, looking at the dollar running lower for three days,

euro-dollar is up by 1/10. and yields are up by three basis points in the u.s. with heavy buying in the u.s., particularly germany and italy. crude oil stocks up 1%. the labor strike is off the table, now we are back onto the oversupply story, but it feels like we should take a break. david: in the meantime, turning to the morning brief. at five minutes before 10:00 a.m., jerome powell will give the opening speech at the due date event being held in chicago. at 10:00 a.m., u.s. factory and a durable good orders for april. then the world bank will release their biannual economic prospects report. alix: time for our first take. our chief content officer and lisa abramowicz.'s the first toy has to do with tech. the faang index underperforming the s&p so far for the whole year, for the last year, this

finally happened. marty, the prospect of inflation, what is the reaction? marty: i will date myself, take into account when the u.s. went after at&t many decades ago and it took 10 years to break it up. this is not going to happen overnight. there will be tons of lobbying back and forth. this is clearly going to take a long time, but it may affect their current behavior. that in fact is reflected in the stock. david: that was in the 1980's, by the way. alix: [laughter] lisa: we already see the companies at adjusting their behavior. there have been statements on itunes, consumer privacy issues, so definitely that is the point that the shareholders will look at, how will the company's reach their businesses in order to get ahead of the increasing bipartisan pressure, especially ahead of the 2020 election. david: we had that announcement

from the doj and ftc reporting about the leaks, perhaps on purpose, of the four big things they will go -- faangs they will go after. the democrats saying they will have their own investigation. marty: and the investigation over the power wielded by social networks, which virtually have no regulation whatsoever. so, it is coming, it is a question of when and how. david: the question about what is coming is whether we will have a fed rate hike. there has been speculation, the market has been pricing it in, now james bullard says there will be a downward policy rate adjustment, it could be warranted to center inflation and expectations at target. also to provide insurance in case of a sharper than expected slowdown. is he leading or following? lisa: either way, the market is responding. there was a steep reaction in the expectations for a fed rate cut. based on the futures trading,

there is a 92% chance of a rate cut by september, so you can see people really pulling forward their rate cut expectations and uncertainty that the fed will cut at least once by the end of the year. i go back to the really important point, that the federal reserve is stuck between a rock and a hard place. if they do not cut rates, they risk a policy error. that will tighten financial conditions and a spiral the economic issues we have seen. on the flipside, from a credibility standpoint, from a standpoint of what philosophy are they exactly following other than finger into the wind and follow the market -- that is a big risk. alix: the other one is it looks like they are following the president, he could be bullying them into a rate cut because of trade wars. marty: i do not think the fed is responsive to the trump tweets, even though the optics are not great. they will do with the data tells them to do, but to lisa's point

they are in uncharted territory. this is a consequence of qed, the extraordinary measures -- qe, the extraordinary measures they have taken and how it is playing in the economy today and how they are dealing with that. we will get a clue from jerome powell this morning. lisa: australia cut rates this time in three years, so we are moving toward a flat globally or a tightening stance to an easing stance. david: london, the president meeting with the prime minister. marty: the class trip. alix: [laughter] david: before he went to the state dinner, he talked about throwing off the shackles. we are looking at the meeting he is having with theresa may, what will come out of that, what is he accomplishing? marty: he wants to make sure he does not make any huge mistakes. so far, there have not been any, except for his waistcoat. dot he is really trying to

is encourage of the u.k. to get out of the european union, because he thinks that weakening global institutions is good for america. and to the extent that he provides encouragement, then he has accomplished his mission. david: it may weaken global institutions, but what does it do for trade? are we going to get an agricultural product in the u.k., help health insurers get in the u.k.? marty: it is sort of like the tech issue, it is going to take a lot of time. the devil is in the details. whether this president or the next president, it could be this president, cuts a deal worthwhile is really questionable. to me the brings leadership overall, it feels like angela merkel is falling apart, her party, and if she actually will be there, so we will wait to see what havoc donald trump can create. lisa: what will fill that vacuum is the question, not so much

that somebody else is taking the power as much as it is splintering away from the core, liberal order, which was sort of the norm before. so the question is, what type of philosophy will pick it up. we saw some populists gain, but not as much is expected. how well will donald trump play into that. in france they are kind of like, meh, with president trump. david: marty and lisa, thank you. stay with bloomberg, we will have coverage of president trump and theresa may's joint news conference at 8:45 a.m. eastern. alix: you can find the charts we used and more on gtv , check them out and save the charts. fire thread.anging silicon investors -- by a thread. silicon investors running for the hills.

that is next. this is bloomberg. ♪

>> this is your bloomberg business flash. , variousamining uber authorities looking into the ride-hailing service, according to a company filing. uber says it has adequate amounts reserved for tax issues. apple unveiling and privacy tools at its annual conference. users will have a way to bypass facebook and google sign in services when using new apps. apple will mask a real email address when you sign in and it will give apps a random string instead. and the latest jobs to be

outsourced. a growing number of asset managers, keeping a trading desk is not worth it. they are turning to companies that specialize in outsourced trading. northern trust is in talks with 40 potential clients for its -- and jeffries entered the business a year ago, trade and now expanding to europe and asia. that is your bloomberg business flash. alix: the nasdaq 100 down in seven of the eight last trading sessions. technology shares hit on trade, and antitrust investigations now. at theirare looking outperformance from last year falling below the s&p. joining us is seema shah global , investment strategist at principal global investors. -- much is it struck little structural versus cyclical? seema: i think it is a bit of both. when we think about technology, for the last year we have been worried about the regulatory

side, so this is something we have been waiting for. it is unfortunate, but it is coming at a time when technology is in the middle of the cross of this trade war. so at the moment, the outlook is not looking positive. alix: any value at some point? netflix for example, will there be some that are not drawn in or a sector that can withstand the trade war as well as oversight from the government? seema: i think it is difficult to say. given how technology is innovative, i am sure that there will be one superstar that emerges from this and it could be, possibly, immune from things, but at this stage everybody is caught in the middle. david: there are a couple of things hurting tech right now, to what extent are we learning how tech drove the market overall, because it was disproportionately supported by tech to begin with? seema: absolutely, if you look

back from 2009 up until last year, the main driver has been technology. if you take technology out, i think that returns was 400%, technology at 900% over the last 10 years. one of the main concerns for the equity market, what is the other leader if you do not have technology? at this stage, with the yield curve as it is, it will not be financials. alix: we just had a chart up showing all other equity markets in the world peaking, but not the u.s., so if tech rose over have we peaked? seema: that is interesting, because you look at europe and look at their comparison point with the u.s., it is when european financials outperform u.s. technology that european industries are up. so you need european financials to do well. and it is not looking good for them either. but which is going to be worse? david: cyclical versus structural over a long time, it

was thought we were in the middle of a conversion, going throughout industry globally, we are going to that, so that will sustain tech. no matter what problems we have with trade or investigations, is that still intact, is that still the case that companies and people will have to buy more technology for the foreseeable future? seema: i think that is true. i should have said that there are certain parts of technology, this cyber where staff that has tended to be a stable part of the technology side. that demand from companies will only continue. we have seen that. unless you expect the entire world order to go backwards. that is one area that could continue to do well. wherenow, the concern is will the u.s. government turned its attention to next. maybe some parts are ok, but i would not put as a guarantee. david: to that point, the announcement of the mexican

tariffs sent a shudder worldwide. mexico is important to the u.s., but if you're going to turn to mexico because of a border issue with immigration then no one is safe, they could impose tariffs anywhere and anytime for some dispute. seema: when that announcement came out, you saw sort of that people announcing that they are forecasting federate cuts, increased chance of recession. it is not that mexico is really that significant of -- for global growth, but it implies nobody is safe and tariffs can be used for things that are not necessarily just about trade. alix: what is the potential dip for the s&p? how low can we go? seema: i could not possibly put a number on it. i say that because if you look back to last october, and since then, one of the main drivers has been sentiment. the market sentiment at the moment is a key driver of the kind of magnitude of the moves.

that is because of the echo chamber, it is so great within markets, so there is downward pressure further from here, how i havegoes is -- when spoken to people of the last six months, the number of people who failed to get in on the market rallies since january means and there have been people standing on the sidelines waiting to put their money to work. i ask, what are you looking for, a small correction? as an as they do not see a recession, they want to put their money back to work. i think there will be corrections, but i didn't am not sure -- but i do not think it will be sustained. david: what about the u.s. consumer? we have not seen the u.s. consumer back, is that a bulwark against regulatory issues and trade disputes? seema: the u.s. consumer has been the strength behind the u.s. economy for the last few months. when we look back two months ago, when we got the trade war would be resolved, it was looking like the u.s. had a lot a downward trend coming through

from delayed, like the fed rate hikes, the sugar rush fading out, that was going on but the u.s. consumer was keeping the u.s. economy up. the as we continue to see increase in prices that consumer is at risk. and the tech side, what else is there to keep the u.s. economy going? alix: they got out of structural, now they will have to go to cyclical. david: ok, seema shah will stay with us. coming up, the president is meeting with the prime minister of the u.k., we will go for an update. s online andout u interact directly. on your terminal. this is bloomberg. ♪

with: president trump prime minister theresa may at this hour, following his estate

dinner last night and ahead of a news conference with the prime minister expected to be around 8:45 a.m. anna edwards is outside of the residence. i see you with own umbrella, typical london weather. what is on the agenda, do we know anything about what has been said so far? anna: you are familiar with london, david, and the weather that it throws at us. just one hour ago, the noise of trumpast was here, donald being delivered to meet with the prime minister. now we have the sound of protesters in the background, i can hear that from whitehall, one of the roads running perpendicular downing street where i am. in terms of what is happening behind me, we have the bilateral meeting taking place, not just theresa may but there are members of her team, members of the trump administration as well, and they are talking about

iran, trying to find a way forward there. and they are also talking about huawei. they do not see i do i on it. there has been pomp and ceremony past hours, indeed the possibility of a trade deal as well. david: we have heard talk from the british side that they agree there is a security issue with huawei, but will britain go along with the u.s. than in -- banning the company, will there be an agreement made with the outgoing prime minister? anna: there is a lot to consider, the intelligence sharing, the u.k. and the u.s. only australia has really come down to be tough on hallway -- huawei. we do know that they both get

briefings on security and both have been playing down the role of politics here and today they will go with security advice. we will see what that really means. david: thank you for reporting. stay dry. thank you, anna edwards outside of number 10 downing street. we will cover the prime minister and president trump's joint news conference expected at 8:45 a.m. new york time, 1:45 p.m. london time. alix: we see inflation in the euro area. commence at the bloomberg, you can take a look at the inflation rate coming down, the core rate slipping 8/10 of 1%, inflation breaking even and rolling over. so we still have seema shah here. that does not give the ecb in a covered cannot admit that things are slowing down and they might have to do something. seema: they have to do something. that they have to out of the market?

look atexpect them to holding rates until the end of the year. the market is already pricing in holes throughout the rest of next year, so we would expect for the guidance there. and details on the liquidity operations as well. they need to have some kind of encouraging discussions. david: how much is the optics and how much is a substance? they have to do something, is it likely any of the things they could do would actually make a difference, could they affect the growth in europe? seema: the only way the ecb could affect growth is to do something that will help the banking sector, but unfortunately they cannot do that so they are in a bind. the other thing i would expect a lot of the focus to be on his who is on the panel, because we have that rollover of a number of officials on the ecb panel, so they will be looking for are there more hawks than doves -- t his could be a telltale week for europe on that basis. alix: there is speculation that

the loan rates could be negative, lower than the deposit rate, or even zero and that could really do it for the banks. are you a buyer of that, do you believe that? seema: i would not have believed that with the recent data we have seen, the recent data shows that the rates have been encouraging the banks to extend their lending, but it is not enough. what europe really needs is there a correlation with china, you need china stabilization to come through and you need a lot of the sentiment to pick up. one of the problems with europe we have seen is there is so much negativity and pessimism about europe. the emerging markets, which have gone through torrid times, people are eager to get back into emerging markets but with europe it is the opposite. you need a round of good inflation data, good stuff from china and maybe we'll see a return. david: how much is physical rather than monetary? and physical related to

politics? like you said with angela merkel, it is unlikely we will see some fiscal stimulus out of germany and france, although italy is trying. alix: they are light, we will do it anyway. [laughter] seema: that is true. ofmay be one of the faults the market, that the level of fiscal tightening is not permanent in europe. we have actually seen some fiscal stimulus coming out from germany. alix: ok, seema shah will stick with us. committed, the center was fed president says the fed may need to cap rates -- cut rates to stem off inflation. we will discuss that, next. this is bloomberg. ♪

alix: this is "bloomberg daybreak." calm in the equity markets. up for tenths of 1% after tech wiped itself out yesterday and

the nasdaq 100 went did you correction territory. european technology stocks hit over 1%, as the clouds around regulation and a big to continue to mount. in other asset classes, you are looking at a bottle rally continuing in europe, but taking a pause in the u.s. we are at 187. italye 10 year yield in down 10 basis points, whatever, maybe there will be a government tomorrow and maybe there will not be. i want to highlight the aussie dollar, flat now. but it is the first country to cut rates, and the canary in the coal mine, you have to wonder if other central banks will do the same thing. you cut rates and the currency is flat. david: that was big news overnight. alix: now the currency has clawed its way back. david: now it is time to look at the business world. we have first word news. >> china is blasting u.s.

secretary of state mike pompeo for his a statement on the 30th anniversary of the tenement square crackdown. andaluted the protesters urged the chinese government to make a full accounting of those killed. china calls that in affront to the chinese people. they say that mike pompeo grossly intervened in china's internal affairs. republicans are considering whether to overrule president donald trump's plan to impose tariffs on a mexico. lawmakers could revive a resolution disapproving the national declaration and the president used as a basis for the tariffs. senators and farm states are worried about the impact on voters. and in south africa, the first quarter, the economy shrank the most in a decade. ddp falling out an annual rate of 4.2% with manufacturing and agriculture having the biggest contractions. widespread power outages hurt confidence and at rain fell against the dollar.

south african banking shares also declined. president trump hailing the passage of a $19 billion disaster aid bill that congress overwhelmingly approved, providing aid for those hit by flooding and wildfires in california. lawmakers pushing back on a request for border security. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. david: the federal reserve starts at chicago meeting today, buted as a listening event, everybody will looking for any signal for a possible rate cuts. ames bullard said yesterday, downward adjustment may be warranted it soon to help re-center inflation and expectations, and provide insurance in case of a sharper than expected slowdown. we are welcoming our man on the

scene, michael mckee. means thatthat this they will be looking for broader strategy issues, but what is the likelihood that jay powell may give us hints in his opening remarks about cuts? michael: he week ago i would've said it is probably not likely, but now you have to wonder, because as the saying goes the fed decide to winter raise rates, but markets decide when you have to cut rates and they are sending a strong signal that that is what they want. but is this the right forum. jerome powell was supposed to speak about the monetary policy framework, what they look at, what targets they have. so does he have to make an acknowledgment of what is going on in the markets? you would think that that is the case that he would say something. at the economic level of new york, they talked about the economy being in a good place, but said they are watching what is going on. maybe that is enough for the markets.

we will find out in a couple hours. david: one of the things they will talk about his communications, whether , you cannot talk about communications without communicating rate cuts. michael: that would signal that jay powell might say something today, because the markets took his comments on the balance sheet in december wrong and we had quite a selloff then and angst on wall street. that could be a listen to him, so he may feel like he needs to acknowledge the fed hears and sees what is going on in the markets, even if they are not ready to react yet. they want to figure out better ways of communicating said they do not have episodes like they did in december, so they do not have the kind of confusion that the dot plot represents, the fed four times a year making forecasts that do not keep up with the markets. or show that the fed is ahead or behind. so there is a lot that they are

working on in that regard as well. alix: michael mckee, thank you. set, we have rob waldner, chief strategist and head of multi-sector for invesco fixed income. seema shah, global investment strategist at principal global investors. guggenheim looking at buying treasuries, a federated that could go to zero, do you agree with those thoughts? rob: i do not think you should buy treasuries here. could they go to zero at some point, may be, but not in the near term. the market has taken the fed seriously about this change in their structure of how they will operate and conduct their policy, so they have been telling us for the last six months, and it ratify today presumably, that they intend to get inflation up. if they really want to get it above 2%, they need to provide more stimulus, because we know what has happened so far this year is inflation has come down. alix: where on the curve needs

to see the most rereading? e-rating? rob:rob: we have the fed and we have the global picture, where global growth is weaker than u.s. growth. forces, i think tomorrow pulling down the long end of the curve, so you have this unique situation where the curve steepness is staying the same from 2's on out, but the .ront end is getting re-rated david: talking about their goals on inflation, basically they have not done it yet so no matter what they do with rates, is it because they have not done enough or that is not the way to get inflation to 2%? that is the redline, blue is the core. seema: it is interesting they have undershot the 2% target since 2009, they have not been able to meted. it. mayarly -- meet

have to clearly have a clearly go through a change in the process. this deserves not necessarily a new target, but a new way of delivering. with communication, that will be important to deliver the expectations, but when it comes to the balance sheet is one of the hardest things to communicate to not only the public but market participants. so they will have to find a way of interpreting it clearly to the markets. alix: especially when they are like, look at the balance sheet, we will be fine. it will be easy. when you take a look at the broader implications of what you laid out, rob, what does that mean for high-yield and investment-grade? on one hand it is we need to search for yields, on the other hand it is we need to get out. rob: certainly nothing like a recessionary type of levels, but while we are working through this dual threat of the trade sort of worries around trade and

want to beyou cautious for credit assets. even at current levels. but ultimately, we think this expansion could continue and we think that we will be around a, maybe 1% -- exceeds may, 2% or slightly below 2% over the next couple years. and credit assets should do well in that environment. david: talk about growth and its relationship to the yield. i will put a chart up that suggests that the yield has further to go down, the white line is jp morgan's pmi, you can see how it has come down. the blue is the 10 year yield. so they could come down if they are tied into pmi's. seema: i think that the pmi move, it is important, that the global pmi is somewhere in the -- its own, the contraction zone. but with the yield curve, you know, you are pricing into rate

cuts already for the end of december, we will not get three. that is unlikely. so you have to assume that you are near the bottom, unless momentum will carry you through that level. if we arewhere is -- looking at this environment that rob laid out with a structural shift of global growth but still low yield, where do you go? seema: move defensive. go up in qualities. i would prefer investment grade to high-yield. and within sectors you are looking at real estate, utilities, staples, insurance, these are ones that are more synced in with the global cycle, but also they generate less of the revenues outside of the u.s., so they are immune or more immune to the global trade issues. david: same question, where is the investment opportunity right now for fixed income? rob: credit assets in the u.s.,

potentially some in europe. you have to be cautious about emerging markets. and think about the global trade war, how we are talking about it, is that it might -- those that will get hurt the worst are those who are dependent on trade. not the u.s., but the emerging market countries, china will be hit worse. we would stay-at-home. ema, thank rob and se you. we will give you a glimpse of the mexican news conference. this was a delegation sent to washington from mexico into the main news i have gotten out of this is the foreign minister has a said they are preparing for talks with the u.s. and robert lighthizer will in fact be meeting with them, shortly. alix: 80% odds of negotiating a resolution with mexico. i panic my mexico congresspeople will also visit washington. it is like -- david: this is a full-court

press. alix: nobody is there, they are in the u.k., but they are descending upon the u.s. to talk. david: they definitely want to talk. there is news out of france, reportedly coming out that the french government and fiat have resolved key differences on the proposed merger between renault and fiat, this was in the works. lee were talking about sweetening the deal for the government, perhaps giving them a seat on the board and a dividend being paid, the report now is they have come to any agreement between fiat and renault for that megamerger. alix: both of those shares are up. and apparently there is one for renaultwill be on the board. job cuts and the french government, i do not know if it will happen and how it will get through. david: i do not know where they ended up, but the reporting

beforehand, one of the things they were going to offer the french government was to say we will not cut jobs. how you do not do that -- we have talked about italy -- how do they make that work? where's the cost savings? we will find out what is going on. the irs investigating uber, their taxes are under scrutiny from 2013 and 2014. more on that, coming up. this is bloomberg. ♪

>> we are in the hewlett-packard enterprise greenroom. david rubenstein coming up in the next hour. ♪

>> here is your bloomberg business flash. the trump administration may have found its most powerful weapon yet in the fight against huawei. the chinese company is losing ground. one analyst says the demand for their phones has dropped off a cliff. some consumers fear u.s. restrictions means the phones will quickly become out of date. and shares plunging, the danish maker of luxury electronics posting a larger than expected drop in sales for the latest fiscal year. consumers are balking at paying premium prices for the products. a $50,000 tv is one example. and gripping a nation, this is a heartbreaker for some, they are falling just short of the jeopardy record of more than $2.5 million set in 2004. he lost in his 33rd game on the show to chicago librarian emma

better. he is a professional sports better, by the way, he lives in las vegas. that is your bloomberg business flash. the: we have to wonder if producers were like, you have been on 33 times, we need to spice it up. david: the results elite out in advance -- leaked out in advance, that was big news. alix: i would like to see you on jeopardy. i think you would be really good. some obscure greek things. david: as long as that was a category. we will cover three things wall street is buzzing about. uber is under a federal tax examination. the irs is investigating the company's taxes for 2013-2014. new woodford slams on the brakes, and top money manager looking at redemptions from his flagship fund after a string of losses triggered outflows. gettingides traders

outsourced. alix: joining us is sarah. uber cannot get a break. >> know, this is not the news you want to get for a newly public company that is already trading a percent below its ipo price. this dropped in its quarterly filing and it is not just at the federal level, it is also at the state level, supposedly some foreign authorities are also looking into it as well. we have to see if more details come out, because uber is saying it is difficult to estimate the amount we could actually see their tax benefits reduced. i'm not a tax expert, but this is over transfer pricing positions. they said over the next 12 months we could see benefits reduced by $141 million or so, but when you are a company already losing over $1 billion, that is not something you want to hear. david: some banks just started

coverage, it was looking like they would get a break. sarah: the quiet time is over, so some of those banks that worked on the ipo can come out and rank the company like jp morgan, barclays, all coming out and initiating a buy on the company, then this news pops. we have not seen a huge move in premarket trading, a drop of maybe 1%, but they have already seen a good amount of pain, so you would think something good has to come out. alix: gene munster was like, not this year, but next year it will be ok, it will do better because of investment. david: i am surprised they are paying taxes at all because they are losing money. so what about the woodford bank in the u.k., the run on the bank? stopping payments because there has been so many people withdrawing. is like as

celebrity in the investment management world and the u.k. come at one point he managed the largest fund in the u.k. it was also known as the oracle of oxford, conjuring up images of warren buffett, however the fund has done poorly, down 18% over the last year. and investors now want to get out. they do invest in some liquor positions, two of the top are private companies, so as people are trying to get out of the company he is saying, wait, i need to get out of these positions. effect, they said they will keep investors up-to-date on when it will end. david: it is like a run on the bank in the sense that you lose confidence as an investor. sarah: it does undermine confidence, and to some it could bring up remembrance or memories of 2008, so nobody wants to see this or be told, you have to stay in our find, even if we are down -- fund, even if we are

down. alix: we will see where it is in one year. and our third story, which is the buy side trading goes automated and outsourced. so walk us through this great report about how asset managers are changing their trading desk world. sarah: it is no secret they are under immense pressure, especially as we see the path and industry really grow, so they have to look where to cut costs. if you look at a trading desk, you are not just pain for the people, but you are paying for the computers and data, so one consultancy firm estimates that one trader can cost more than $500,000. more and more we are seeing asset managers start to outsource trading, because it can get pretty costly. so they are estimating that by 2022, not very far away, about 1/5 of investment managers that have about $50 billion or more in asset management will be outsourcing in some form or

another. this is already an area under siege with electronic trading. david: it is obvious when you hear it, but what about the mega shops, will they just do trading for lots of asset holders? sarah: if it is not already automated. if you have really big shops, if you have $1.5 billion in turnover, it might make sense to keep it in-house. but we are not just seeing the boutiques doing this, large ones are doing this as well. alix: you would think it would be the small guys, but as the pie gets smaller what else are you going to do? david: all done out of india. maybe eastern europe, like the computer programmers. alix: really? david: that is my experience. alix: what is outsourcing? on jeopardy. la and it'sa' -- tes a secret source of cash.

tesla andlooking at credit deals. more on that, next. this is bloomberg. ♪

david: tesla's secret source of cash, they are getting cash from general motors and to fiat chrysler. they are paying the money to take some of the credit for their emissions, they need the standards down. alix: totally. this does not surprise me, because it is what happens in the snl market when you have the renewable identification numbers. when you blend ethanol integrated gasoline, you get a credit, because the government says, give me 10 credits they get the 10 credits, then they sell 15 on the market and other refiners seldom -- or by them. david: if they actually release, as president trump has talked

about, backing off the emissions requirements and then tesla does not make money. alix: what money? david: ok, revenue. but it indicates how dependent they are on the government. alix: that is true, but then you have to wonder, then we are back at tesla not being an automaker, it is a tech company, where a few years ago they were trying to be in automaker. i mean, what happens? if they went under it could be one of the best things that happens for gm. david: the prices getting lower. alix: yes. david: there was a time that could have never happened. it is interesting, because it may end up being a car company that changes the world, but it may not survive. alix: at the end of the day. and it depends on china. we have heard china does not like all of the electric vehicle

makers they have and that they will make the bar higher now, because the market is so fragmented there. david: you talk about it government committed to electric vehicles, china is that, into the u.s. is not so much. china, they are not backing off. alix: and norway. theitted, david rubenstein, coexecutive chairman will be joining us. and in the next hour, president trump and theresa may will hold a joint news conference in london. as the equity market selloff takes a break, equity futures are a touch higher on this tuesday. this is bloomberg. ♪ the latest innovation from xfinity

isn't just a store. it's a save more with a new kind of wireless network store. it's a look what your wifi can do now store. a get your questions answered by awesome experts store. it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome. alix: the battle over big tech, the doj splitting of the job of

monitoring tech giants with the fears of a breakup in regulation clotting stocks. to cut or not to cut? the fed is kicking off a meeting to discuss strategy. jay powell is on deck. and we will speak with david rubenstein. and president trump stirring the pot in the u.k., saying the u.k. should throw off the shackles of the eu and walk away if brussels does not negotiate better terms. david: welcome to "bloomberg daybreak." as we are speaking to my president trump is in number 10 downing street with theresa may, they are having a bilateral conversation. after that, they are expected to give a news conference. this is a earlier video when he was arriving at number 10 downing street, greeting the prime minister there and blue, with the first lady with him. there are things on the agenda wee iran and huawei, but as know we are never quite sure

what the president might get to. alix: and how important in theory the meeting actually is going theresa may will not be leading the conservative party by friday and we know there is a lot of dissent in her own party as to whether trajectory of the country should be, so we need to take stock in that. david: in the meantime, president trump has been pushing for a trade deal with the u.k., which they cannot do yet. alix: saying, i would get this done no problem. david: throw off the shackles. we expect to at least have a press conference from the prime minister and president trump around 8:45 a.m. and we will bring it to you as soon as that happens. alix: we are getting a bounce in the equity markets here. tech was hammered yesterday. and you are also getting another break on the dollar, down for now three straight sessions, the euro-dollar up 1/10 of 1%, despite the fact that core inflation missed again in euro.

10 year yields seeing some selling. buying in europe, whether it is italy or germany. crude is off by 1%. let's wait and see. david: we will be watching jay powell. now the morning brief. morning, thethis fed chair will give a speech at the listens event in chicago. at 10:00 a.m., u.s. factory into durable goods orders. and the world bank will release its biannual economic prospects report. in the meantime, back in the u.s., prospects for investors may never have been intertwined with geopolitics as they have become since donald trump became president. david ruben south -- david rubenstein's carlyle group is the only private equity fund in the nation's capital. welcome now david rubenstein, host of "the david rubenstein

show." welcome. i will quote back something you said earlier in may, it was after president trump's tweet, you said talking about u.s. and china relations, "both sides need a deal. i think this will get worked out and i do believe by the end of the summer a deal will get done." do you think that way today? david: i think it will be in the summer or the fall. the chinese economy has been weak, i think the chinese government recognizes it has not been helped by the sanctions or tariffs. the president believes he has stronger leverage now and as the u.s. economy weakens there will be more pressure on him to get a deal done and i think his negotiators recognize this, so something in the summer or early fall will get done. david: this president is

different from others. in one way, when he said something he usually means it. he loves tariffs. he seems to believe that tariffs make the u.s. economy stronger, is there a way to dissuade him of that? david: as a that some of his advisors have talked about them hurting farmers and to in the midwest. i think you see pressure increasing from his own advisors saying that tariffs from like mexico would not be advisable. i think he will get the message. tariffs are not normally something you need to do. the history of tariffs throughout the last 100 years or so is they do not produce better economic results for either economy, so that history will ultimately be reflected in the fact a deal will be done, in my view. alix: it feels like we are still living in a new paradigm, where tariffs can be bandied about, even looking at protectionism from the u.s., the huge lack of

leadership from the u.s. -- now it is reality, how do you look at that? david: you cannot pass legislation by yourself if you are the president, you cannot go to war by yourself, so what can you do by yourself -- you can impose tariffs. it is something the president can do unilaterally, so that gives them leverage, and than ultimately there will be back and forth. but this is something he cannot do in other ways so readily. david: put this in a larger context. is this another tariff dispute or is this an historic transition from a number two rising power, economically, in china, overtaking a dominant power? and a president that wants to slow it down or reverse it? david: there is a book about this that basically says throughout history you have rising powers and when they are challenging in existing power

you often have military disputes, in some cases you do not. clearly, women number two is rising and the number one is not rising as fast there are problems. it is very rare that the number one economic problem -- power in getworld and a number two along really well, but we have gotten along better than expected. the u.s. is not sinking, we are just rising slower than the china economy is rising. i think that negotiators know that and i think the principles know that and i believe a deal will be done. alix: when you speak with company ceos, what is the idea, are they holding money on the sidelines are waiting to invest until there is clarity? what is your take on the street? david: nobody knows when the next slowdown will occur. slowdownspically had on average every seven years, now we are 10 years into this growth cycle so people worry

when the slowdown will occur. the skies do not open up and say, now the recession is here. it happens gradually. there is a concern that if tariffs keep going on, eventually we could go into a slowdown, so i think the president will feel pressure to get something resolved because advisors recognize that the economy is slowing down slightly. david: you have referred to his advisors several times, are we confident he is listening to his advisors? it seems like he replaces them often. david: robert lighthizer, i think that he respects him and listens to larry kudlow as well. i think he listens to steven mnuchin. he does not agree with them all the time, but no president agrees with his advisors all the time. alix: what do you think about growth for this year and next year? david: it is likely to be around 2.2%, to be honest. i do not think it will be 3%.

2.4% is not bad for an economy are size, but i think the days of 4% are unrealistic. china is somewhere between 5% and a 6%, higher than some people think. i think they are growing between 5%-6%, but it is hard to know because there's just a six are -- know because their statistics are vague sometimes. david: it comes at a price of borrowing money, and it thus far the world has wanted to buy our weer, but at what point do grow concerned that may not be true? david: i have been worried about that. we have $22 trillion of federal debt, and the state pension funds have about $4 trillion and we are adding about $1.3 trillion every year. there is a new school of thought in parts of the democratic party that that does not matter, deficits do not matter, we can sell paper as long as we want, but i do not agree with that. we have to deal with this at

some point. there is only three ways, increase taxes, you cut spending or you have higher growth. right now we do not have any of these things going the way that we want, so we will need to face it. the real issue is can you postpone this until after the election, because typically when presidents run for reelection they do not want to increase taxes before, they like to borrow money. can we keep borrowing and get away with it before the next election is over? alix: do you think? david: i think we probably can, but i do not know for certain. out, itif war breaks could be a concern. right now, we can sell our paper and it is amazing how may people want to buy our dollars, but at some point somebody may say these are not as great as they used to be and we want a higher interest rate. alix: i do not know if i feel better or worse. david: the u.s. economy is in pretty good shape, we are doing better than europe, and we have been doing better than any other

developed economy for 10 years now. we are just not as good as we could be. alix: that is fair enough. david rubenstein is sticking with us. it is not as good as it looks, that is what warren buffett says about private equity performance. ,e will take a look at it coming up next. this is bloomberg. ♪

>> we have very bloomberg business flash. fiat chrysler into the french government have reportedly worked out differences on a proposed merger with renault. the french government agreed renault will give up one of

their four seats it was hoping to hold on the board. france is their largest shareholder. today, shares of tiffany are falling. the retailer posting first-quarter results that missed estimates. comparable sales falling 2%. tiffany blames that on dramatically lower worldwide spending attributed to foreign tourists. 'sd the irs is examining uber taxes. various authorities are also looking into the ride-hailing service, according to a company filing. uber says it has adequate reserves for tax issues. that is your bloomberg business flash. david: still with us is david rubenstein, the cofounder of the carlyle group. he is the guru of private equity. give is your point of view on private equity right now. most evaluations are high around the world, global growth is slowing and money is pretty cheap, where are the opportunities or where is there

underpricing? david r.: we would not put you on our fundraising team with that kind of presentation. [laughter] remember, the rates returned to used to be in the 20% net area and today i would say about 15% net is closer to what you can really achieve on average, but that is still attractive to investors. the u.s. is by far the best place to invest. the rule of law, transparency, quality of the exit opportunities, there are plenty of good opportunities here. would saysay the -- i that outside the u.s., europe is attractive and it is a developed market. in the emerging markets, china is in a league by itself because of the size of the market and the welcoming of private equity, that does not scare the regulators. alix: look at declining bond yields, does that make it harder to make investments because there will be more competition for assets that will yield is something? david r.: there is more

competition. in china, we used to have the private equity world almost to ourselves, the americans who would come in and buy things but now there are indigenous chinese firms that are very good. there is competition everywhere. it is harder for the chinese to buy things here, that probably will not change for some time, that is why chinese companies are buying things in europe and emerging markets, it is easier for them. david: do you have to take into account geopolitical risk? for example, is that more active to have a business that is strong in a domestic market as opposed to one that is heavily dependent on international trade? david r.: any company is dependent on international trade, there are very few that are completely indigenous. manufacturing happens all over the world. these are factors, but we are making longer-term investments, so you cannot worry about their daily parts of politics, you

have to take a longer-term perspective and that is what most of us do. alix: i like it. so you outlined regions that have value, board about sectors and areas? i'm thinking about the consumer in china. david r.: let me talk about one area that is attractive, health care. the baby boomers are aging, 10,000 are turning 65 every day in the u.s. and they have the most wealth. they will spare no expense on artificial knees or hips or whatever they need, so you see more money going into health care the baby boomers want to stay alive and be reasonably healthy. so you will see a lot more in health care. in china come as people live longer, or in japan, they want to spend their money to keep reasonably fit, so you see more money going into health care and that is a really good growth sector for us. david: i want to give you an opportunity to respond to warren buffett. he had some things to share

about private equity. one thing he said, we have seen a number of proposals from private equity funds where the returns are not calculated in a manner i would regard as honest, it is not as good as it looks. does he have a point about private equity in general, there are not the same regulations and we do not have the same transparency, in particular the way that they account for their funds. david r.: he is in the greatest -- he is one of the greatest investors of our lifetime. sometimes those in the equity world like to talk about gross internal the net return is probably more relevant and that is what we like to talk about. but with private equity over the last 5-15 years, and has outperformed any other asset class so it is still attractive and that is why people give money to firms like ours. alix: will that continue? david r.: if there is any virtue in this world and god is looking down favorably, i think it will,

because we are doing a good thing for investors, we are doing a pretty good job of making companies more efficient, we are helping the economy, so i think we have this go set to make good returns for our investors, but there is no guarantee in life. if you want to invest, we cannot guarantee anything but firms like ours have a good track record. alix: how much are you invested in? what are you waiting for? david r.: the entire industry has $1 trillion of dry powder. but we are not investing the money if we do not have good deals. we need very good deals to make this work. if we do not invest the money it goes back to investors, it is not burning a hole in our pocket. david: ok, david rubenstein co-founder and co-executive , chairman of the carlyle group. david rubenstein will be sitting down with leon black today, so what is your first question? david r.: why he is not appearing on this show more

frequently. david: that is a great question. ok, i will be speaking with the bridgewater co-ceo and alix will be sitting down with bob diamond. watch of the conversations on live and here on bloomberg television. coming up, google's enemies come together preparing complaints as they face a probe. we will speak with a shareholder. that is next in today's bottom line. this is bloomberg. ♪

david: time for the bottom line, three companies worth watching. i'm watching bank of america, they said they will issue 4 million new tap to pay credit cards. you know that they will start using the subway in new york and other banks are saying, we will wait until people replace their

cars, but bank of america wants to get ahead of it. maybe this is the new thing. alix: they do it in europe. it is super easy. we are so behind on the card technology. i want to look at shall. we spoke with the ceo earlier today and two things stuck out, they are raising capex investment and free cash flow outlook, but they are also looking at a new way to think about the company. they are looking at core upstream leading transition and emerging power. this is interesting as the energy companies tried to become more of a power company, an alternative energy company but it would not give them their the returns they are used to. some of them are sticking to it. david: that is really hard. alix: it is like throwing a dart at the board. what works and what can we fix? david: and i'll flip it, google's parent company is

facing an antitrust investigation. joining us is matt benkendorf, good to have you. we have had this pretty underable four companies this antitrust investigation, so how concerned are you because the nasdaq took a dive on this and of those stocks did not do well? matt: if you look at the reaction i think it is appropriate to a slap on the wrist. if you look at the issues in europe, here we have the foresight on what has happened in europe already. they have been really tough on these companies and they put google through the ringer, but the company has moved on. we are not scared about what is going on in the u.s. right now. david: it has been a slap on the wrist, billions of euros of fines, it has not been particularly material for these companies. are you confident it will not get as far as structural changes in the companies?

matt: with antitrust or they doj, when they go after them, they are usually fighting yesterday's balance -- battles. they are usually dealing with issues from years past. it takes several years to conduct an investigation, so by the time it comes to fruition the business model has evolved and i think we have confidence that will be the case with google. alix: at the heart of it is, if they have to rewrite contracts or change terms, if they are looking at older acquisitions, how do you model earnings for these companies and buy them with visibility going out five years? matt: you want to not presume they did anything wrong as well, so let's start there. the key measuring stick has been consumer harm and it will be difficult to figure out where customers have been harmed thus far. these are companies that provide great services, for free largely, and other companies have been disadvantaged because

the landscape has changed. it will be hard to argue consumer harm. david: and we do not even know if there are formal investigations started, they have not even started as far as we know. at the same time, if you look back at microsoft, when the department of justice went after microsoft it really slowed microsoft down and perhaps allowed competitors to catch up. matt: that is a great reference to look at history and microsoft. if you look at that case, many other things were going on and what set them back was a shift to mobile, where they were not well-positioned, so you would need something like that to have that same result where google but mired for a decade, that seems unlikely right now. they seem to be where the puck is going, so it is hard to see something coming out of left field with a shift in the landscape. alix: when you look at quality, you have a decline in the stocks, do you need to buy them? is this an opportunity?

matt: we are in interesting times, we are in one of the most difficult environments we have seen for a long time with the amount of crosscurrents going on and context coming out of the monetary policy that is changing, so the backdrop is treacherous, but that is positive from an investment perspective. warren buffett says you want the stock to be down, not up, so you are getting a lot of uncertainty in the health care space, and now with tech uncertainty you could get another bite of the apple as these names come back in. alix: we will get much more into that. matt benkendorf is sticking with us. coming up, the st. louis fed president says the fed needs to cut rates to prop up inflation. we will break it down. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. equities stabilizing, getting a bid in the u.s. s&p futures up. europe up but not as much.

technology stocks down 20% for for theal -- down .8% global regulation cloud. in the last half-hour you did get a dollar pop. you look at a south african rand up. south africa's economy contracting the worst in 10 years. david: 3.2%. alix: huge. you are seeing the 10 year yield in italy down for basis points. strong buying in the bond market. in the u.s., seeing struggling in the market. on the front end. by .5%.- crude off david: we are watching 10 downing street, the residents of theresa may for the time being. theresa may and donald trump are expected to come out any moment

where they will hold a joint news conference. that was predicted for about 8:45. that is the location. we will bring you that live when it happens. in the meantime, news out of mexico. the president having a news conference and he says he thinks they will get an agreement with the united states by june 10. alix: that is very specific. the tops of the u.s. are going well. david: there was a report they would sit down with robert lighthizer tomorrow. alix: robert lighthizer was against the tariffs on mexico to begin with. david: that was the report. president trump is not there. maybe robert lighthizer can fix it. june 10. that is putting the cart before the horse -- before the horse. fed is supposed to be

focused on larger strategic questions that will be focused on closely for any hints of rate cuts. st. louis bread -- st. louis fed president saying a downward policy rate adjustment may be assumed to help re-center inflation expectations and provide some insurance in case of a sharper than expected slowdown. ,e welcome michael mckee bloomberg international economics and policy correspondent. that far away from jay powell's opening remarks. what are we expecting to hear? ago il: a couple of weeks might have told you not very much, because this is a conference about how the fed makes policy as opposed to what the policy is attempting to achieve, whether or not they want to change the interest rate americans pay. changes wee market have seen, there is some pressure on jay powell to say

something. ran out ofe you just mexico city underlines the fed dilemma. what if they were does ignore cut in the markets moved and there were no mexican tariffs? the fed is then behind the curve going the other way. be very cautious of what they say and do. thereal questions is have markets moved enough jay powell feels the need to say something to tell the markets we do here you, we know there are concerns and we are keeping an eye on things without promising any action. david: this is such a powerful point and you have followed the fed so grossly pursue many years. it must be -- so closely for so many years. who is leading whom? or the markets leading the fed or is the fed leading the market? michael: the fed is listening to academics and former fed officials talking about the tools they use and whether they

were successful or not. interesting papers coming out. the fed has also got to listen to what the markets are saying. as the saying goes, the fed decides when to raise interest rates and markets tell you when to cut. the question the fed has, is the market sending a clear signal or is the market just expressing fear of what might happen or might not? alix: you raise a good point in terms of markets. we should clarify what market? do we expect any sort of clarity on that? michael: not really. , he willpowell speaks talk about markets in general. the fed will follow the fixed income market because that is the market directly influences. cannot do much about the equity markets. the equity markets are 5000 or more different stocks. that has a huge impact on the dow and what is happening with

google in the news. none of that has anything to do with conditions in the united states. what does the fed do about the equity market? they mayot do much but recognize their something to talk about. recognize the equity market is if there are tariffs and a bubble in the market, that is their fault. alix: michael mckee, great reporting. still with us is matt bekendorf. matt, highlighting what mike was talking about, he cited the three-month 10 year yield spread. look at this chart. is this opportunity, is this panic? ,att: if you look at the fed trying to do the impossible the ungrateful is a tough job. ironies in lot of this business and people are up in arms about jay powell right now, but he is the fed chairman everyone wanted.

this "pragmatists" not a classical economist. he is probably the right guy. i think the market has been too emotional. i think jay powell is trying to learn by fire. no fed chairman's had to act target trade war for a long time. he will have to make it up as he goes along. he will be pragmatic and i do not think there is a sense of urgency people think there is for the fed to take action. david: the economy looks ok. we have some economists saying of the united states goes forward and imposes tariffs on the remaining chinese imports and china retaliates, we could see of substantial reduction in gdp here and much bigger in china. matt: there are two important parts to your question. statistically speaking, when is a plane most likely to crash? takeoff and landing. that is sort of where you are an economic cycle.

the fed is trying to navigate this landing. it is difficult. i think he needs to keep his eye on the runway and he is doing a good job with that. i do not think there is a need to cut preemptively because we do not know what trade deal will be signed and what the net effect will be. i think the trade deals largely irrelevant in and of itself. is --ct everything everyone is tried to manage around is the permanently changed relationship with china. alix: what has been interesting to me is that while europe gets hit because of its relationship to trade in china and the u.s. from emerging markets have not. it is still a by the dips story. do you agree with that? matt: i think the emerging markets are getting more developed and developing getting more emerging. political cycles have got much more calmer emerging markets and much more volatile in the developed markets. that bodes well for emerging markets. your a lot of the election cycles over.

your run through a series. clear sailing in the emerging markets. the undermining -- the underlying economic underpinnings are good. david: let's talk about india. you have investments in india. president modi just had a resounding victory. we talked recently with the head of the u.s. india business council and she had concerns that india needs to open up more. this is what she said. has not been open and liberal on trade. i think prime minister modi understands there is a larger opportunity for india it is playing not just for the indian market but the global market. for him to do that, he needs to open up the economy and liberalize the trade. david: is she right? does president modi recognize it? matt: that illustrates what the

glass half-full is for india. it is an insular economy which makes it one of the best places to be in the world. we are all interdependent, that is a great feature of india, that they are not so intertwined. they are moving in that direction, but i think what modi understands this they have a lot of domestic issues first. to be international you have a lot of infrastructure issues. you have issues with the taxation system to make the economy move more freely. those steps are being taken. let's not forget india is a large exporting economy, but it is a large exporter of things like i.t. services, not hard goods. it is in good places, capital like places of the global economy and not so much in the capital good space. that is a glass half full. there is opportunity there. alix: for traders outsourcing. that might be a thing. matt bekendorf will be sticking

with us. coming up, david rubenstein will have a conversation with leon black. that is at the bloomberg best conference you can follow on live go. we are also awaiting president trump and theresa may's joint news conference. look at that. so pretty, all those flags. this is bloomberg. ♪

viviana: this is bloomberg daybreak. i'm viviana hurtado in the hewlett-packard enterprise greenroom. coming up, david hahn. david: president trump has been

meeting with prime minister theresa may at 10 downing street and we are waiting for their joint news conference. for more we welcome bloomberg's anna edwards who is there outside the prime minister's residence without an umbrella. what are we expecting? anna: without an umbrella this time around. give it a few minutes. you never know. we are expecting president trump and theresa may for their joint press conference to take us through some of the thinking they have been doing behind me at number 10 downing street. we understand conversations will beran and huawei part of the conversation. climate change is something the u.k. government had suggested it wanted to keep on the agenda. we also hear noises to my left from whitehall road perpendicular to downing street blinking trafalgar square in westminster.

we hear boos now. a lot of protesters gathered there. jeremy corbyn has been interesting -- has been addressing those protesters. he refused an invitation to the state banquet with president trump yesterday and instead wanted to address the protesters gathered here. waiting for the press conference and waiting for word of what they have discussed. theresa may is on her way out. not a great deal of decision-making. we will wait for anything they have to say about huawei and global trade. edwards,ombergs anna looking forward to that presser. still with us is matt bekendorf. when you look at europe, qc quality growth anywhere? investors have been squeezed more to stocks there. we still see opportunity with

the concentrated portfolio. interest rate stable in europe. a great opportunity. i think in the u.k., you are setting yourself up for a right opportunity. brexit has been the slowest moving train wreck we've ever seen. that will be the good news. .rexit will eventually happen a lot of the negative byproducts of brexit have already been clawing their way into the economy over the last couple years. when you get an inevitable hard brexit at this point, i think that will open up opportunities. integratedu.k. is so in terms of trade in goods. they have to figure it out one way or the other? they both need each other. -- europe needs britain to some extent. matt: i think that is the way a lot of people looking at the trade deal. a lot of rational people are saying it has to happen. a lot of what should happen does not often happen.

they are intertwined but on a path that puts them in a tight spot. theresa may was handed a poisoned chalice. the outcome has been inevitable. i think you are headed toward a hard brexit. you will get british stick to it does. that will create investment opportunity. when you look this trade issue, the china issue, the mexican issue, we need to stop thinking about what should happen and start looking at the reality of the world we are dealing in, what is happening. and: that is a great point, we talk about that when we are talking to experts in china. just because they needed does not mean it is going to happen. you talk a bit about the opportunity in the u.k. once a hard brexit happens. what would they be? matt: the u.k. has an abundant history of going global. your great u.k. multinational companies, particularly in the staple space. unilever. those are low hanging fruit that

will come under pressure. then you look at the u.k. services sector, good distribution companies, a number of good businesses in the u.k.. they have been global for a long time. well run, good management, a lot of opportunity. alix: when it comes to overall europe, is there any kind of yield you might be interested in that will yield more opportunity? matt: europe is never getting this interesting scenario with slow to negative interest rates. we will wait and see as they bounce along this bottom. i think opportunity will definitely manifest. bekendorf, thank you so much. a pleasure to have you on set with us. david: besides london, there is another big event. our bloomberg invest some of. david lubin steen sitting down with -- david rubenstein sitting

down with leon black. >> when you see an opportunity like that unfolding, are you thinking we are approaching another recession and are you ready to buy debt at a discount again? leon: pleasure to be here with you on bloomberg. the moderator is right to say i do not usually do this. i do this because you are so good at it and i do it because it is peer-to-peer. if you ask a tough question i can always turn it on you and say what do you think? question, wer started apollo 29 years ago this week. it was in the midst of a global recession. out of theapollo ashes of a firm i worked in for 13 years. of 1990, when

drexel went under, the world was a mess. you had the oil shock, you had the world in a recession, you had consumer confidence down, su had the snl crisis -- the &l crisis. we were lucky enough to get money from a big french bank who 1990ed us out in june of with about $800 million of capital to take advantage of the andocations in the market our backgrounds was as students of capital structures. milkengone to the mike school of capital structures analysis. i had been the head of m&a and corporate finance.

i don't with most of the private equity firms in existence. to build at it took good capital structure at the right time, but we also knew the pieces of it so that when things went bad, how to deal with the deleveraging process of buying debt and restructuring the company. fast-forward, if i look back over the last 29 years, there actually been four cyclical downturns in the last 29 years. one of the great arrows in our quiver is we have studied companies in nine different industries that we specialized debt we areow which interested in buying it discounts, at what prices, and our hope is you make money on is debt or the greater hope

that it becomes a new form of a buyout because you work with other creditors and deleverage the company to an appropriate level and hopefully if you have accumulated enough debt, you become the owner on a few levered basis. we've been doing that for 29 years through four cycles. you mentioned the great recession of 10 years ago. was it was a great time to backup the trucks, as long as we have real conviction. we didn't sometimes with third parties and sometimes with our own portfolio companies, which we still believed in and was basically a way of averaging down her price by buying the debt at a discount.

if you ask about where we are we have neverard, felt we had a crystal ball, but we are 10 years into an up cycle , so at some point the music time,top and at the same we have an administration that has done a pretty good job in extending the economic growth and consumer confidence and kept inflation down. therefore, it is hard to say whether we will have another cycle with interest rates where they stand now and with the growth and inflation numbers. they might. probably not until after the next election. that is not that far off. the key is to be prepared. we go through hundreds of credits in the industry as we

like and study every part of their capital structure and know what what prices we want to start buying the debt. years, the benefit of 30 or 29 years of doing this, and we do have a lot of conviction and it is a useful, as a value investor, a useful pathway to finding great value. david: in the last recession you bought a company called lying down chemical. you made a reported $9 billion profit on that. when you are sitting around the investment community looking at that deal, did you think this would be a $9 billion profit, or were people nervous about buying the debt at a discount? pres. trump: would -- leon: we thought it had the potential, but the key is knowing where you want to be in the capital

structure of the company. i first started doing this 30 years ago. reward, the right security to be in was lower in the capital structure. it might be subordinated now. the last recession, most of the subordinated got wiped out because the recession was so severe. valuey there was to see in a company that was cyclical, and to know where the right risk reward was. if you look at the company, it was a fine company, of $50 billion company, one of the best in its specialty, chemical space. --had $25 billion in debt

when the great recession came, the $1.5 billion cannot support $25 billion in debt because so much was banked with covenants. the company went bankrupt and we were buying debt. that is the other thing, why you have to have conviction. is keep want to do buying debt on the way down. your investors have to believe in you and be able to take the mark and you have to have that conviction because you are marking it down and down and down as you keep buying. we've bought into the senior part of the capital structure and provided the possession because even the banks were running for the doors. we and the other creditors decided what was the appropriate amount of debt to be in that company and we took the company

down from $25 billion in debt to $5 billion in debt in the bankruptcy with a bunch of it getting wiped out at the junior levels and with some of the seniors also taking on the new equity in the new company. that got approved by the judge and low and behold, within six months, which we never could have forecast, the economy turned around and the company went back from $1.5 billion to 6 billion. now we have a company with $5 billion in debt. that is where we ended up and we owned a third of the company's equities so we made a lot of money. the debt kept going down, were you happy or sad it kept going down? leon: both. you are marking down, you are taking on more of a loss that you have to report. that is why you have to have conviction. if you believe the value was there, you are happier when it is going down because you are

able to accumulate the position that will allow you to have a seat at the table and restructure the company. david: it my not of been predicted he would be in this business from your college days. you went to dartmouth. while dartmouth produces a lot of business people, you were a history and philosophy major. did you want to be a historian or philosopher and what went wrong in that direction? leon: certainly it went wrong. there we agree. i thought i might be a history professor. i've always loved history. at some point i thought i might go into filmmaking. i've always had an interest in art. even to this day i have a great admiration for the secretary of the treasury's father, who i knew going way back who was a partner at goldman and became an imminent art dealer -- an eminent art dealer.

my mother was an artist, my aunt had an art gallery for four years in the city. i had no escape on the art side. to get somenced me exposure. he was in business, to get some exposure to the business world so i went to business school right after graduating from dartmouth, and i hated business school. i love doing business, but studying it i did not find that interesting. died and i was not knowing for sure what i wanted to do. david: you graduated dartmouth in what year? 1973 in from hbs in 1975. david: in those days you could go right from college to business school. leon: even then it was only 12%.

it was a mistake, especially with the case methods. you're better off having some business experience. david: you graduated in 1975 from harvard business school. where did you go? leon: i ended up going a circuitous route. ofdad died in the spring 1975 and i graduated a few months later. i was not sure what i wanted to do. -- the big buzzword was you when wall street industry or management consulting. i wanted to management consulting. that lasted three months. i left and then i worked as the assistant to a publisher of a business magazine for a year. then i went down to wall street, which i've been avoiding because my dad had inhabited that world and i wanted to do something different.

i decided i had to see how it might do better. that is my went to drexel. david: you want to drexel, then led by mike milken. leon: partially. he was certainly the profit engine, but it was early days. i worked on the first high-yield or junk-bond deal with him back in 1977, which is the $30 million deal from the oil company called texas international. coast.still on the east he then moved a few years later. david: have you always stay in new york or did you move to the west coast? leon: iowa state in new york. i never liked l.a. that much. i like it more now. my wife likes it a lot so we go more. it is better. better restaurants, museums, artists, museums. david: drexelas