the truth behind the recent selloff in commodities.n china,ll of money then real estate, then equities, then commodities. that great ball of money is now leaving. +++ bloomberg here. aggregate interest for steel, iron ore, and cotton. it has come back since then. is on the normalized basis. the long positions have gone nowhere fast. jeff currie, global head of commodity research at goldman sachs, is back with us. what happens when this ball of money go somewhere else in china? jeff: well, it is in the process of going somewhere else right now. i want to think about this from the fundamental perspective as well as from the speculative perspective. clearly not only do we see in china or even here -- but even here in north america, commodities more broadly have a lot of money in them. with fundamentally -- is this fundamental he justified? in the very near term there was fundamental reasons. what was it? if you look back at, let's say, december and january, where everybody was very concerned about what was going on in china, we saw a sign

what does commodities signal? >> you have talked about the commodities having gone down a couple minutes ago. two things. if you can do a chart with the global economic growth, and you do that with the dollar exchange rate, you would find all that you want to know about commodities. if you can forecast a dollar, global growth, you are done in terms of staying where commodities are. the problem is that the dollar has been appreciating massively since we 14. you had oil prices come down, commodities coming down. the dollar weaken/ . if the fed increases interest rates anytime soon which i doubt,, and if the rates go up, once again the dollar goes up and the commodities get hit. this has been a huge deal -- we thank the team at hsbc. i'm sorry, that's a classic rollover. stronger u.s. dollar, weaker aussie dollar. would you suggest that with the commodity roll over that we get aussie back to 2008 crisis levels? >> i think the australian dollar will weaken. i have been looking at it closely. i was in australia visitin

basic commodities rule the world. exports of oil and coal are percent of multimillion dollar business for many countries. are often the most important source of income. that works as long as demand is high. then companies make big profits. for some time demand has decreased. markets are saturated and prices of hit rock bottom. over the past five years the bloomberg commodity index has fallen by 50%. a key reason for this is china's economy. growth there is weaker than it was so companies are importing less. many raw material suppliers are now left with piles of unsold stocks. china's problem is a global problem. it is the iron or capital of the region. most of the town's residents work in the mining industry. 10 years ago iron was still in demand. the companies flourished and so did the town. then demand for the raw material dropped. work slowed. she grew up there and her family has long worked in mining. she remembers many good times. she spends a lot of time out in the community >> it is been the hardest hit of all

, creating the risk that commodity price the kleins will impact asset prices commodity price declinest impact asset prices. neil: the commodity markets have repriced because global inflation has been priced out. tom: is it now stability within commodity prices for can foil drive lower? if you have real concerns about the global economy it will. tom: does it get us to a gdp run handle the u.s. of a 2% or can we even be as optimistic 3%?.8% or three point -- neil: i think generally speaking u.s. growth is around 2% to two and a half percent. francine: the impact of china on the u.s. is not as drastic as other forecasters are saying? neil: i do not think so. if you think about the dollar, that was a hot topic for the past year and a half. despite the strength in the dollar, u.s. core inflation accelerated last year so as the dollar -- core inflation in the u.s. has room to move higher. francine: when will the fed hike? neil: above their target for a period of time. to the extent they will come back to target, they will let the next recession take care of that. i think september is a reas

commodity producers despite having the gift of commodities have done worse. all right. now what's fiscal policy, what should fiscal policy do to help break this curse and to really put together a better future and at the same time deal with the kind of the current challenges. we really -- six months ago in october fiscal monitor we had an entire chapter on this thinking what are the pillars of a good fiscal strategy, first is you have to improve the resilience of your revenues. you have to develop some non-commodity earnings. there's no way around it. those revenues are less volatile. if you have consumption based taxes, a typical emerging economy tax base you'll have less volatility in your revenues. you need to diversify and develop non-tax revenues. you have to improve the efficiency of spending. a lot of the metrics we do in terms of looking at how much bang for the buck you get for spending and oil producers it's quite low. there's a lot of inefficient including in the public investment and energy subsidies. many oil producing countries provide gasoline at a price

a bit of a letter commodity story for you, -- lighter commodity story for you, a diamond the size ofnis ball. a company under the largest diamond in a century. shares of the diamond producer rallied to a record on that news, up around 20%. as 40o expects as much percent of those proceeds to find its way to the company's bottom line, about $35 million after taxes. a little data from the bloomberg diamond prices, have fallen about 8% this year. can you believe the size of that diamond? that's a big one. coming up in the next 20 minutes, after slogging through the primary without an official fundraising arm, donald trump named hisdue the -- financial chairman. we will have the details coming up. ♪ carol: this is "bloomberg markets." it's time for the bloomberg business flash. fannie mae will make a $919 million dividend payment to the u.s. treasury market after the mortgage finance giant reported a first-quarter profit, the company's net worth stood at $2.1 billion. disney ceo bob iger in a rare official meeting with the chinese president today, it comes a month before the opening of di

they push together these clumps of commodities, mortgages. they called commodities.they went to aig and said, we want to buy insurance. we do not want this to go bad. lse, and it is literally a bunch of guys in say, you, they would have $1 million worth of mortgages and a $10 million insurance policy. we will buy $100 million. $100 million in the fact that the policy may go bad stop someone else goes along and that's. someone else comes along. they say that that $10 billion policy will not go bad. each one of these, because they have this underlying value, from which they derive their distance, these are called derivatives. here are the numbers. the gross domestic product in , it is roughlyes $15 trillion. the gross domestic product of the entire plan is roughly 65 million -- exceed $5 trillion. before they made these changes, there was virtually no serious trading of derivatives. this was a brand-new word for all of us. 2008, according to a bank of international settlements, in 2008, the amount of money in ,erivatives that these banks this is what they were writing.

the supply of any single commodity. a currency backed by a basket of commodities. supposed each commodity dollar could be exchanged for a kilo of rice, a gallon of gasoline, a quart of milk, so one. the accounting would become more difficult but consumers would grow accustomed to the system as long as the value remains stab stable. the holders of these commodity dollars would be insulated against any sudden increase or decrease in the supply of any single commodity. the currency would have real well defined purchasing power. the broader the basket, the more stable the valley of the currency and the more highly correlated it will be with growth and the economy overall. remember this is a theoretical exercise so let's a dream a little. imagine a currency that could be taken to some dark road in exchange for predictable quantities of food, energy, electronics, cars, bicycles. the money would not just be backed by gold arise let myself of all the goods and services you regularly consume. better yet, the purchasing power of

i hope not but if that is the case of low commodity prices? >> mr. chairman thank you for the question. i had to push the right button here. the farm credit system as the three of us all stated is well capitalized at this time. it is well positioned if you will to withstand the possible downturns in the economy, agriculture, the -- commodity they are looming. the capital position is for a strong. there is 16% f. you will with 48 early in dollars or so roughly in capital. the asset decisions are strong in the system. the managements that are currently at the institutions are, i don't want to say a lot that are but they are more informed today than they were in the 1980s. the earnings work very well the system. as you can see from our financial statements, the liquidity ratios are over the top. in fact they are more than twice what the regulations require of 90 days so i think that the system is well positioned again to withstand any downturn. of course there could possibly be some black swans out there that we are not aware of that we have systems in

any reads there through about commodities on this deal? you could may be try to extrapolate. if they are rushing to the bond anket it might indicate extended time of low oil prices, but they are also taking cheapage of relatively finance costs, taking advantage of the rally already seen in all oil, today going above $50 a barrel, and that has reignited some interest from investors on debt issuance. of orders forrth the cap tar bond, eventually upsize to $9 billion. alix: what is this mean for saudi arabia when it goes to price its euro bonds. >> you could read it either way. successfulay this is issuance signals renewed optimism. investors are clearly looking for returns, interested in debt from gulf countries, but the other way to read it is we have seen $9 billion worth of bonds come into the market. the region isfrom up by a third to a record $23 billion or so in the first half of this year. that is a lot of money for the market to digest, so it could mean that saudi arabia decides to wait for investors to digest what they had just take

commodities are 30%.echnical fundamental oil may not get up to $70 anytime soon. >> it's difficult to see where it gets to 70. if you go to 38, 39 not only will the energy portion selloff but the non-energy portion is probably down at that point. it's going to look similar to the end of last year when the fed started to become more hawkish. it indicates december was going to be the day for the hike. oil was 38, 39. high-yield underperforms most other markets. scarlet: we are at the end of the credit cycle. the end can be dragged out for a wild. it can go on and on. how long will it likely drag on for before the end comes? what will be the catalyst? >> i call that a rolling blackout. individual sectors realize the moment of distress, while others see a degree of strength. that is what you are talking about. things aren't great. they may be pretty bad but you are not in a recession environment where you have double-digit defaults for example. anotherthat could last 12-18 months. to say we could be in a situ

have a look at what is happening across the commodities space.et me point out what is happening with southeast asia. that is sort of like a fairly bright pocket of weakness. that is your chart year today. we are on nine straight days of decline on the southeast asia index. the data earnings coming through -- the big earnings coming through out of singapore, a election's coming through next weekend, or this coming weekend, and manila in the philippines. -- in manila in the philippines. this is something they keep in mind. on a day like this, there is very little appetite for risk. this is one pocket in asia that usually gets hit the hardest. manus: david ingles there with the latest on the markets. you can get more of that and the rest of the day's news on our brand-new digital destination. you will find in-depth reports, market data from the region. plus, you can watch all of our reports, interviews, and special content. rishaad: fugitive indian business are hitting out at lawmakers and the media. we are heading over to mom by live -- mumbai live

commodities doing well as chinese data overnight depressed equity prices but boosted commodity prices. the central bank saying it will do what it can. iron is down. copper is up. across commodities, a lot of green arrows. because of that, the biggest , all of the miners are putting up the gains -- big gains. the biggest gainers on the ftse index. london is where most of the miners trade. i have put together a chart. 1326 is where you can find this on bloomberg. in white, i have the stock 600 trading today. the broader index. in purple, you can see the basic resources index. those are the miners. in blue, oil and gas shares. well and gas and commodity shares are doing the best of the bunch as you see the underlying prices rise especially for brent crude. we saw a selloff in equities at the same time we saw a selloff in bonds. you see yields rising. in the u.k., yields rising. the german equity markets are closed for the german debt markets are open. greece as welln bouncing back and forth all morning. betty: vonnie quinn has more from our newsroom. vonnie: a strong earthquake has show

commodity gross -- commodity producers have done worse. so what should fiscapolicy due tohelp break this curse and really put together a better future and, at the same time am a deal with the current challenges? six months ago in october, we had an entire chapter on what are the pillars of a good fiscal strategy. first, you have to improve the resilience of your revenues. you have to develop some not commodity revenues. there's no way around it. less volatilear if you have some income base taxes. you will have less volatility in your revenues. so you need to diversify and develop these. secondly, you have to improve the efficiency of spending. a lot of the metrics we do in terms of looking at how much bang for the buck you get in spending for oil producers is quite low. there is a lot of inefficiency, including in the public investment. but also energy subsidies. many oil-producing countries provide gasoline at a price below the market. that is an implicit subsidy. ,nd if you just get rid of that charge at least the global marketplace -- m

there is a commodities selloff pushing them down.n the other side's health care, up by 1.1 percent. i wanted to dig into the rally that we are seeing. if you look at large cap pharma companies, allegan reports earnings tomorrow. johnson & johnson on the right. these of the biggest contributors in terms of the games we are seeing in the s&p 500. terms of what's driving -- driving them there, kevin, the big maker of generic pharmaceuticals be estimates and says that its generics pricing is actually not dragging down earnings that much, as are has been widespread concern about pricing of generic drugs and whether it would continue to decline. they said they didn't think they would see that much more downside. that is having a ripple effect. they also say they are going to complete their proposed acquisition of the allegan generic is this by the end of june, which could help those shares as well. then there is horizon pharmaceuticals. a specialty pharma company that has been beat up recently. shares have had a seven-day slide but you can

is for different types of commodities. it does create a wrinkled up there, whether you face challenges the legislation, with drought or other natural disasters. what you really can't plan for or predict. with the outlook of the ag economy over the next several years, what are the steps that you can take within the credit system to prepare for that? maybe you could explain how that works. >> well, senator, and as the safety and soundness regulator, we try to examine and anticipate all risks that may have been. in fact, our examination, are risk-based, we try to look at what problems that might be on the horizon and we try to develop rules, if you will and regulations that would help us to do a better job, to make sure that the system remains safe and sound. >> are you able to adapt quickly in those situations if the rules are going through the board, you know, reacting to the situation on the ground, whether it might be a drought or other crisis that you may see. >> well, quickly kind of relatives i'm not fast enough for me

where we have seen action is definitely the commodities.dity stocks, copper and gold with those, transocean and time and offshore all taking pretty substantial hits here. they have not all seen substantial gains since the lows in february. the other big area of activity has been within drug takers. drugsaying that generic pricing will not fall further. that is reassuring to investors who have been concerned about the drop we have in the prices of generic. at the same time also saying it expects to complete acquisition of allergan's generic is missed by the end of june. allergan is out tomorrow, that is something investors wanted to hear about the closing of the sale to you can see allergan shares are up by better than 6%. pharmaceuticals, another volatile company out with its numbers. they beat estimates and the company reaffirmed its forecast for the full year and said cash flows should increase as the year goes on. it had been down for seven straight days heading into any's report. seeing a big gain and other biotech and specialty pharma

how important is the stabilization of commodity prices? are advised that the world bank, although i take care more of the financial side and the if you read the communiquÉs and other things, what is important is to address the macro things. brazil has done that. you're making the macro adjustment, then you have to work on the supply side. you have to look at labor markets. i think it is common to most countries. and of course infrastructure investment is very important. the world bank is devoting a lot of time because it believes even thate global level infrastructure investment can be a great opportunity to help sustain global activity, especially at a time when global train is a bit -- global trade is a bit stagnant. the world bank committed almost $600 million last year in is up to $800 million this year. 2012.off the high of are you in discussion on any new loans? of this't take care part, i take care of the funding of the world bank. look at the global situation, the headwinds in so many countries. we do see a demand for support from

alix: where is your biggest weakness in the commodity sector?orried about the price side, it is making it difficult for the government to work on the budget deficit. scarlet: idea part of the problem? you are still producing supply, even though you are taking market share, but it is hurting income and australia, but is about perpetuating the issue? guest: it is a vicious cycle. we are one of the biggest producers of coal and iron ore, so we are part of the problem. scarlet: how do you fix that. ? alix: this is the issue that is hurting you. guest: supply will not change, the next couple of years you will have an increase in liquefied natural gas exports, though there is one supply to come. we are dependent on our markets in china and the rest of the world, and we need to be strong enough to tackle the extra supply and we think we have seen encouraging signs and it will over time absorbed the supply, but it will not be enough to trigger another boom as we saw 4-5 years ago. alix: michael, you are in town visiting clients. scarlet: what is the num

the trade this hour is the commodity rally over?n we s weiss, and josh brown and pete najarian. and now, with the are reaction of both of the moves, and joe, you made some bug moves, because you do think in fact that the commodity rally is done? >> yes, history is repeating itself, and 2016 is the same as 2015, and

but you're right, the commodity price is important.pendent on the commodity exports. and we have to look for china. there's a lot of doubts in the market about china and there was a bit of excitement about a recovery this year. but i think a lot of the excitement has disappeared again because data has been disappointing. and you know about the structural challenges of the chinese economy, their whole debt position is a problem. so yeah, with china not moving much and china certainly not having a great growth recovery, commodity prices probably will not be very strong. that's a problem for emerging markets as well. >> do you think china holds steady at the level we're seeing, particularly in terms of the data we're seeing? because if you look at the credit growth, a lot of people at the same time say actually how long can this last? are we looking at two months or three months before we see the pink in that extreme credit growth again and then we're running into problems again, so are we looking at that for the issue for the second half

david: commodity markets are closing in new york.atural gas inventories for last week came in above estimates. the commodity falling on concerns of supply will reach a record be or the winter. u.s. stockpile shrink more than expected last week, pushing the vti and brent above $50 a barrel at one point, prices we have not seen since october. i want to bring in rich redash and also jason bloom. jason, let me start with you. $50, one that is pleasing to many. what accounts for it, will it stay for a while? jason: our outlook is that we would reach 50 but not until the end of the fourth quarter. pretty straightforward story. it is all about supply. it has been four years ever since saudi arabia boosted production. we had supply disruptions over the last few weeks, wildfires in canada, militant activity in nigeria, kuwaiti oil workers strike. hiding the risk tales more tour the upside as the market comes into balance. we are seeing fundamental trend demand stay good. supply decreasing, steady pace tothe u.s., it does point higher prices g

actionhat you do see the , commodities and commodity stocks. the weakness in commodity stocks dad it wasweak trade around the globe. you have the mining index falling the most since 2008 and the bloomberg world mining index in the biggest decline since the selloff last august and u.k. stocks led in part by mining shares fell again. it was his longest losing streak since january. copper and gold also getting clobbered. eye wask that caught my chesapeake energy, one of the worst performers in the s&p 500. exploreke may need to options to refinance debt or raise capital. investors thought the worst was over and they would have enough money until 2018 but the numbers say not so fast. joe: despite the fact that ,quity markets erased losses you see yield on the two and 10 year down a bit. the 10. those are the lows of the day. we saw them dip lower in finish out in the basement. scarlet: breaking news out of brazil. the impeachment motion will proceed. there was some confusion earlier when you look at the brazilian real. that was the case before this

. -- a decline in commodities.: the latest employment deity from austria, moments away from that. ♪ suzuki recovering losses, the carmaker confessed to using a win to measure consumption. the chairman apologize, but insisted the test data is still valid. mark zuckerberg wants to build trust and ensure the integrity products after meeting political conservatives over claims of a liberal bias in news feeds. week said facebook had downplayed conservative sources on the trending news feature. let's get straight to sydney. what do we have so far. it is better than expected, 5.7% is the read for australian unemployment in april. that are than expected. there had been an expectation for 5.8%. the change, 10,800 jobs created, worse than expected, 12,000 were forecast. once again, that we see the split between part-time and , 9300 full-time jobs lost, 20 thousand 200 part-time jobs gained, so again there will be some questions over the quality of this improvement in the unemployment figures. ate a look at the employment dis

>> it was the commodity currency of choice. -- if yout to buy want to buy commodity currencies, by thear because you don't have the volatility like in brazil. do you want to have a commodity theme? you have all these other drivers. if you want to go to australia and by china and by brazilian, by domestic. what do you want to express and where do you so most comfortable. 's numbersearly today are looking better. i interpret janet yellen's comments is that they want to be behind the curve and only raise rates as inflation picks up. markets have to rebound. the fed is going to have to the markets are quiet. rates, there is turmoil in emerging markets. it will be a mixed picture. scarlet: that is pretty much a loop right there. there are warnings about raising rates for too long. i want to move to the yen. the bank of japan wanted to wait at the last policy meeting. they have a month before the next doj meeting. are they likely to that stimulus? >> the japanese -- the bank of has the authority on the markets. they have done a couple of things the markets have breast aside. because again ha

still ahead, the commodities close is coming up. oil up 2.3%. bloomberg markets after the break. ♪ david: let's start with the headlines. mark crumpton as more from the newsroom. mark: hillary clinton and donald trump are in tight races and three swing states. survey, mrs.a clinton leads trump in florida and pennsylvania while trump leads in ohio. statistically, all three states are too close to call. since 1960, no one has been elected president without winning at least two of the three states. struck a north syrian town today and at least 10 people were killed and several others wounded. the dome of a mosque was knocked over according to activists. this came hours after a limited wasfile -- cease-fire extended for another 48 hours. climbers are making good progress on mount everest and the first group to reach the debt could reach the summit as early as thursday. it comes after two years of disasters. killed 19 climbers and injured 61 others at a base camp last year. guides, 16 guidance -- were killed. appears to have won a seat in the philipp

commodity prices are no longer a drag on profits. that could alleviate some of the big negatives we have seen in the energy and materials sector. seem to hit a bit of a pause in the interest rate cycle. we had more comments today. your own boston fed president now streaking -- now sticking to the strict. we also have esther george speaking as well in the last little while. where do you expect the next interest rate to come from and how soon? jeff: we do anticipate another rate hike in the second half of this year. it is very data dependent. even the bea has noted the seasonal economic data. as inflation begins to stabilize and rebound later this year, not sharply, but we have seen increases in wages. we have seen core inflation begin to firm up. it would suggest that the fed is wise to begin to know that. we expect at least one more interest rate hike in the second half of this year. itself impact on stabilizing the dollar which has been on a down run so far this year. the emerging market rally very dependent on the continuation of a

see noese big traders recovery on the horizon for commodities.he crash, their first annual losses from mitsubishi and others, which are champions in the nation's economy. upforced them to really ramp the shift away from energy and raw materials. they have invested heavily during the boom. look at that forecast. it is not pretty. they all expect further declines in oil, gas, and copper prices. flooding 19% in the fiscal year. -- look at that, the most bearish, nearly 29%. some prices could stay stagnant in the next two or three years. and let's look at the kiwi dollar, on a bit of a tear here this morning. .6 percent, it rose as much as 1%. the new zealand central bank said it is watching its nations booming housing market to see whether further restrictions are needed to curb demand. balances in the housing market continued to rise, contributing to financial stability risks. cut the graham wheeler cash rates to a record low, .25%. he says it may be required as inflation undershoot its target. he is also worried that lower borrowing costs could fu

i hope not, but if that is the case, of low commodity prices. >> mr. chairman, thank you for the question. i had to push the right button here. the farm credit system as the three of us all stated is well capitalized at this time. it's well-positioned, if you will, to withstand the possible downturns in the economy that, the agriculture economy that are moving. the capital position is very strong. 16% capital, if you will, with $48 billion or so, roughly, in capital. the asset positions are strong in the system. the managements that are currently at the institutions, i do want to say a lot better, but they are coming to more informed i think today than they were back in the 1980s. the earnings were very well in the system. as you can see from our financial statements. and liquidity ratios are over the top in fact they are more than twice what the regulations requirof 90 days. so i think that the system is well-positioned idm to withstand any downturn. of course there could possibly be blacks want out there that we are not aware of, but we have systems

systemic risk coming from from a big commodity going under? i must worry about the systemic risks. i think the wobble we saw last year, when there was concern that monetary stimulus in that -- that increasing monetary stimulus in that case in europe and japan was having diminishing returns. in the sense that that may be the only tool in the arsenal. francine: negative rates really haven't worked as expected. bill: we have not played this one out yet and no one knows how , it ends. we have to be careful and aware of that. that's why i am comfortable in a well-capitalized position and am resilient against things we are concerned about that don't know -- about, but don't know how they will play out. the other risk that you mentioned, the market became very concerned about the combination of a tightening fed and a china whose objectives were unclear. francine: janet yellen has been dovish, she has become a lot -- it she becomes a lot more hawkish in the next couple of weeks or months, what does that do to emerging markets and debt? bill: i think t

and then they also use commodity many. but have always in the name of progress for those with no intrinsic value. we don't need that specialize think anymore a potentially with latin america the only complaint if they could get enough of the high quality paper. so it is very strange with the brief the radical detour. so basically you can take in terms of the money and just like bitcoin that is not really money but will this be around two years from now as the medium of exchange? looking for a commodity for gold that performs admirably but gold has its drawbacks. with the castro aide strikes earth with the cumulative life savings in goldi will not feel rich by comparison but astra raids aside its melting ice in the arctic has this break in the quantity of gold. and this happened during the colonial period to break the back of prices would go up. even if the supply would increase creating stable prices in terrible circumstances the gold reserves of china and russia. and then to control of foreign powers and are not always al

a huge stockpile of the commodity in china, putting downward pressure on the commodities priced. just having a quick look as well at current seas. the aussie dollar ahead of the china inflation. a little weaker there and this weakness in the japanese yen as well. the japanese yen down by about .10%. certainly giving some upward trajectory to japanese stocks that we are expecting a selloff for the rest of the region. we have been on watch for a potential spike in inflation that could trigger a pullback when it comes to stimulus. what is expected when the numbers break in about 27 minutes? riske potential downside to the stimulus bill into the chinese economy is of course a potential spike in inflation. chinese authorities are always vigilant to rising prices in they will be watching the cpi number closely at the bottom of the hour. already it is at the highest level since the middle of 2014. economists forecast cpi to have stayed steady at two point 3% in april. that is the same pace as the previous couple months but it has come off from lows in october of 1.3%. food and housing p

the commodities boom out of china is it -- the commodities boom out of china is slowing.ional incomes is going to continue to weigh on asset prices in australia. as much as house prices are coming up, we believe house prices are going to come down further. workto work off the men at hit "who can it be now?" which central banker is going to react to fit? to inflation? is it going to be janet yellen? paul: we have seen fed rate hikes continually deferred, and that would be quite helpful. a strong u.s. dollar would mean a week or australian dollar. that has allowed australia to rebalance. i think that was a key converting factor to why they cut today. , is hisretary jack lew jawboning going to be of good use? paul: we would like a lower aussie dollar. it would be very helpful. we need a stronger u.s. dollar for that to happen. i am more optimistic about australia then atul is. australia is making a good adjustment to the end of the mining boom. tourism and education -- that is the new growth story. help along the way will be lower currency. tom: from australia, to lay lay an

it's going to trade in line to a large degree with commodity prices. it's going to trade with global stock markets. it's going to trade a little bit with the economy. but it's not like you can have an amazing ceo who smooths that out. it's just not going to happen. >> but you can sort of better manage your business or have better items up for auction. if your thesis was the case, then christie's and sotheby's would just trade in lockstep all of the time. and one of the reasons why low got involved in sotheby's is because they wanted it to be more competitive and they thought christie's was eating their lunch. >> you can twiddle the knobs, you can't change revenue. revenue is what the uber wealthy want to pay for sculptures. that is not going to be influenced by how you -- now, you can keep suspenexpenses in . you can do things. i don't mean to suggest a monkey can run the company, but, again, basically, what this is, if you look at a chart, it's a proxy for the health of global stock markets and commodity booms and busts. >> 100% correct. when you thin

most of the commodity markets seem to be turning for the better. turning in those directions. but if i had to choose one that i would sell if you make me sell one, i'll sell copper. will i excited about it? no i won't. i would much rather be long the crude oil and gold market and grin grain markets. i like to be long something and short something else i'll choose copper to be short. >> dennis, good to see you. thank you. >> thank you. always a pleasure. thanks for having me on. >> dennis gartman with the gartman letter in a game of higher or lower. steve, are you with dennis on his prediction? >> yes, as a whole i am. he said oil higher but i would bet not that much higher. do you think gold is going higher? 4-1 outperformance up and down over gld. up 80% gdx. >> big call on freeport today. >> a couple of things going on with freeport. they've raised some cash. they said they're going to cut $5 billion to $10 billion in the fourth quarter. meanwhile, if you have $2.40 copper prices this is a company that has significant free cash flow. southern cop

what role do the farm credit system play when there's volatility in commodity prices? >>, i think the ten year period i recall when that happened, that was a challenge for producers and funded several thousand dollars. we're seeing a huge price increase of less than 10 years ago. see a huge price increase in a very large crop so able to meet those needs. >> mr. hall, with experience in farming yourself the same type of question. do you think the farm credit system is prepared to handle the current volatility in agricultural markets, and how is the current market situation similar to those that occurred in '07 and '08 or how is it different? >> there's a lot of similarities. the system is , as examiners we want to make sure they're prepared. i'll go back to the 1980s. one of the big differences between now and then is the cost of money. at that point, a lot of the farm income was going to pay off debt. i think farmers had paid down debt coming into this current period and i think with lower interest rates, they're going to be able to work their way through it so i don't

i think we are seeing in the commodities complex the best gain. we think that is the area that has been beaten up the most. demand for commodities will be stronger than had been expected. supply in the u.s. likely to come down. we are high conviction that we see a cyclical low for commodities. lookr limited partnerships interesting. it's not that you see huge gains in here, it's more have you seen the low and does that allow you to collect the coupon from dividend and interest paying areas. whether it is high yields or senior loans, there's relative value there. maybe cyclical stocks that pay dividends that have not run up as much as the utilities. cyclical but still a nice yield profile. betty: where do you think the fed is going to land? guest: that's one of the biggest reasons we are looking at things half full. we think the fed will continue to underwhelm. has come around and now the focus is more on the fall. going to beably lucky to get one rate hike this year and that would be at the december meeting. continues to be dovish, that continues

-- a bid to oil and other commodity.y keeps marginal producers live. to you also think that element is a factor here in terms of what is going on and prices? think of commodities more broadly, i like to separate the macro drivers from the micro drivers. what you are talking about would be a micro driver. it would create more supply at the macro driver would lead to a higher cost. canada, up toin 80% of the cost is denominated in canadian dollars so when you have a weaker dollar, you end up with a stronger canadian dollar and higher cost to produce the oil. what i am talking about is fundamental or micro drivers move these macro drivers the oil -- commodity price. these macro variables drive the overall price level, and there is a reason why oil is considered a fixed income instrument. like rates, it is more of a carry instrument and we think of its equilibrium value, it is a function of rates. currie,that was jeff goldman sachs head of global research. let's take a look at some assets moving today. we are seeing a strong

i hope not but if that is the case of low commodity prices? >> mr. chairman thank you for the question. i had to push the right button here. the farm credit system as the three of us all stated is well capitalized at this time. it is well positioned if you will to withstand the possible downturns in the economy, agriculture, the -- commodity they are looming. the capital position is for a strong. there is 16% f. you will with 48 early in dollars or so roughly in capital. the asset decisions are strong in the system. the managements that are currently at the institutions are, i don't want to say a lot that are but they are more informed today than they were in the 1980s. the earnings work very well the system. as you can see from our financial statements, the liquidity ratios are over the top. in fact they are more than twice what the regulations require of 90 days so i think that the system is well positioned again to withstand any downturn. of course there could possibly be some black swans out there that we are not aware of that we have systems in

isn't one of the really interesting things about commodities is all the commodity lenders and the increasingeing in the high-yield market? the high-yield market has become two-tiered. 80% of the market is quite is companies0% whose business model appears to be broken because there commodity extraction. jeffrey: that is exactly what i was referring to, that for the fixed income market are now about the sustainability of a lot of the business models, whether or not at these lower levels even if we bottom to the floor, we are not going back to $100 oil. you are having to deal with those issues and that is showing defaults, rising defaults expectations, and the bifurcation in the credit market. jim: we were talking earlier about the high-yield etf. i find the idea of a high-yield etf based on the index kind of a strange concept because it is such a bipolar market that you could have an index of the energy piece and the index of a non-energy piece, that might the coherent. isn't it a case that high-yield is such an efficient and varied -- such an efficient and varied market that it really does no

commodities are down. it's up. commodities are up. it's down. so it's a day-to-day. this is consolidation noise. you know, 2010, 2015, big technical support. at least in my opinion. in the s&p 500. clearly the record high is resistance on the upside. if we just bang around in here for a little while, before we head higher, that wouldn't surprise me at all. >> scott, what happens to your cal ku louse if energy takes another turn south, like probably most market participants think will happen? what does that do to your overall thesis? >> i tell you, i think that energy earnings, we were looking for 90% in the first quarter, it's down actually a little bit more than that. really, the first three quarters of this year, you're going to have some really nasty earnings comparisons in energy. for me, and i think for the equity market as a whole, the line in the sand is still probably $30. if it looks like we're going to break through 30, the market's going to be very tightly correlated with the price of oil. and it's going to go down. but i think as long as we're stable abov

and second is the issue of the commodities, how real commodities are we have.nd we have seen a huge spike, for example, and we've since then come down from the peak. more than 20% from the peak. we believe now than actually started helping them that might be a little problem for the currencies especially ones more correlated with base matters. >> luis, great to sigh. luis costa head of cea effects and rate strategy at citi. >>> meanwhile, hillary clinton a and bernie sanders face off today. let's get to tracie potts. >> hi, hillary clinton is trying to avoid a new symbolic loss. she's still the clear front-runner to get this naum in addition. symbolically, she does not want to lose kentucky. it's very to west virginia. it's coal country. it's an easy that she easily won eight years ago but is now having some trouble with because coal miners are concerned she may be after their jobs. that the clean energy initiative she's been pushing could simply put them out of business. she's been on tour trying to assure them that's not the case. polling in kentucky showing

there is no sign of inflation or a bubble except maybe stocks and it's not exactly a commodity.you say the u.s. economy is strong, do you think the traders on the floor are saying the cleanest dirty shirt in the closet? >> we are very strong. we have below 5% unemployment. corporate profits are a little weaker than past quarters. but the economy is very, very strong. mr. obama gave an interview to the "new york times" in which he bragged about how well he handled the recession. though i'm not a fan of mr. obama, i think he's right. his administration is doing better than previous administrations. i'm not a fan of his, but they are doing well. the economy is doing well. where is the money going? it's just circulating around the world. it doesn't have to go any particular place. it's circulating around and around. deirdre: as far as labor market participation rate it's still at the lowest since the 1970s, which means people have stopped look for jobs. even for people who have jobs, they haven't gotten raises. if you look at adjusted for inflation. so people don't have any muscle l

she is more the commodity then trump.s long as the opinion polls suggest she will be back in november, political risk is perhaps a lesssen. but if that changes, we could see volatility in the dollar. manus: one of the conversation we're having here in dubai this morning with our political at wargaming. governments are doing it, traders are doing it. if you had to bet money on a single fx option trade, if you had to buy some fx option trade that could cover this period of time, would you look at yen, euro, the emerging market? where do you think the prism of volatility will pop the most? you did not put sterling -- jane: that one is perhaps the closest, that is next month. and certainly, the options market, certainly the customers relating to euro sterling has been looking at that. there is al, i think long way to go in terms of political uncertainty with respect to brazil. i think you'd be fairly brave to get involved in that market. with respect to the yen, that is of course certainly a very significant liquid instrument

for emerging markets, and in conjunction with commodity market.e've had the golden cross now. laid foundations are being one by one. anna: thank you very much. up next, we are talking about brexit. ♪ welcome back, this is "countdown." breaking news, the german energy incomeey underlying net was better than the estimates. it comes with some caveats, they say that the improvement is due to the agreement, and their earnings would have declined without that. make a expecting them to one-time adjustment for natural gas contact. the agreement ended a two-year to cancelenabled eon some provisions that it made in earlier years. enabling some upside to the earnings picture. the firston generally shifted its field and trading into a separate company. it wants to listen that business. look for anyugust, further details coming through from that. there talking with the transformation process, making progress. this is going to make it -- look like a very different business. it will be going into that other listing, and eon will look much more renewable. will be

david: commodity markets closing in new york. look at today's biggest movers, starting with copper, 10thng today in the biggest drop since november. usda: a report from the shows a dryer outlook in most of ins states.a going over $50 a barrel at one point, then closing at $49.02. oil is set to cap the longest run of monthly gains in five years before opec meets thursday. shery: let's bring in stephen schork. he joins us now from philadelphia. thank you for talking to us. i want to talk about expectations for production of crude and natural gas. this chart shows that expectations for production of crude and natural gas are climbing. we are seeing prices falling in the past five years. will this subdue prices for ?onger perhaps more m&a. stephen: one of the largest arabia's about saudi intention is that saudi arabia was trying to destroy north american crude oil production. industry done the oil in canada and the u.s. a tremendous favor. companies toing retrench. oil in a certain place would have cost a certain amount, $75 a barrel