Rebels Closing In On Baghdad: (6/17)

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June 17 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Anastasia Amoroso, Michael Rubin, Christopher Grisanti, Alan Tonelson, and Carl Riccadonna. (Source: Bloomberg)

Iraqi government forces battle jihadist 34 miles from baghdad -- president obama sends in the marines.

General motors announces another recall which makes over 20 million cars to the garage.

It is the summer of discontent as ukraine --.russia turns off the gas good morning, everyone, this is "bloomberg surveillance." it is tuesday, june 17. i am tom keene and joining me is scarlet fu and adam johnson.

We are going over to the u.k. where inflation fell to its lowest rate in 4.5 years in may as food transport costs climbed.

It costs less to ship stuff.

I wish the airfare for might ship to denver had been lower, that would have been nice.

Airline fares are completely different.

European car sales rose 4.3% in may.

We got a bunch of economic data in the u.s. 8:30 a.m., consumer price index, do we have inflation?

That's why the fed is meeting today.

With the fed meeting, it folds into one.

Over the summer, where will inflation trend?

Also, we will get a lot of building permits and construction, etc.

I like eggs and sausage.

Where did that come from?

I am looking at the teleprompter.

Earnings today.

Bob evans.

I like mine sunnyside up.

President obama will be in new york city downtown.

Don't even think about going there.

It will be at anna wintour's house.

We are a bunch of upper east side steps.

-- stiffs.

The village is already bad enough for traffic.

That is your brief brief this morning.

Let's do a data check.

There is a big churn with futures up.

Nymex crude is at $106.48. it is watching the news out of iraq.

The two-year yield migrates up and this is a big story.

0.50 would be news.

Let's go to the mac monitor.

Here is the poverty rate for the nation.

Up.

up we go.

This is the feeling of a lower poverty rate in the 1990's. down to 11% and then we come back up.

This is 2012, 15%, we sustain.

The great challenge as christine lagarde mentioned -- that got the most splash.

Your interview yesterday with christine lagarde -- there is many things to it but what captured the american attention is the minimum wage.

It's hard to reconcile a chart like that with the u.s. being the best economy out there.

That is like stgflation.

Let's go to the front page.

We did not have to go very far to find our first front-page story.

Iraqi -- islamic rebels are closing in on baghdad.

They fought with iraqi forces 40 miles away from the city.

The obama administration is weighing its military options.

The u.s. is sending 275 troops in to protect the u.s. embassy.

These trips are equipped for combat and will remain in iraq until the situation is under control.

That is frightening.

In other words, marines are going into protect the area so we can get other americans out but we are also talking about sending advisers to erect.

Exactly, the u.s. and iranian officials have spoken about iraq.

This is on the sidelines of the discussion about the nuclear program.

It changes hour by hour.

It has pushed ukraine off the map.

There it is.

It was the only topic in washington.

Let's ask eric twitter question of the day -- what is the next move the u.s. should make?

We want your opinion.

Our second front-page story brings us back home -- another round of recalls for general motors, bringing the total number of vehicles recalled this year to 20 million.

This time you got more than 3 million cars being called back because of admission -- ignition problems again.

The same engineer is being blamed again.

His name is ray degeorgio.

This is important.

Mary barra is spending her first year as ceos testifying before hunger is.

What a distraction and we forget that people died over this.

It's not about keeping count.

Gm has been doing ok when it comes to april sales and may sales.

I can't believe it's not affecting them.

Our final front-page story is something we have been monitoring all this quarter -- alibaba is out with a new file as it prepares for its large filing in the u.s. sometime later this summer, maybe august.

It shows the fourth quarter revenue growth slowed down and margins got smaller because they are spending more to attract mobile users.

The filing name 27 members in the partnership.

These are the guys who nominate the nine board members.

It includes the yahoo!

Cofounder and the former hong kong chief executive as well.

We saw the effect on shares of yahoo!

In the u.s. almost immediately which fell almost six percent.

What amazes me is the fact that jd.com got in there faster.

It started at $26.89. what?

Those are the front-page stories and we will continue to monitor them.

Our guest host this hour is jpmorgan fund global strata should -- strategist amaroso.

Front and center is the fed.

Do emerging markets care what janet yellen says?

Of course they do.

Last year, they had to embark upon a whole lot of policy to stay off the declines of the currency.

They will be watching the movement in the two-year because as that yield goes up, this is a critical thing.

Is there a hurdle rate for the two year yield?

Is there a yield where it gets miserable for your emerging markets?

I think it climbs but it does depend on what the emerging markets do.

The situation is not dire because if you look at the real rates in places like turkey or brazil, there is that advantage.

They have the carry trade back on the table.

Right now, it's not a dire place to be.

Define what you mean by carry trade.

The nominal yield that you can earn let's say in brazil if you take out the inflation and that is the carry versus what you get an united states.

Which is the long and the short leg on the trade?

The long would be the brazil and the short would be whatever the funding would be.

You can earn that.

The dollar or the japanese yen?

Perhaps.

There is a bloomberg news survey of economists that show they expect the federal reserve to raise his interest rate faster than what money market investors are looking for, specifically euro -- dollar futures over the next two years.

Do you see a discrepancy between the what the fed expects what the market expects?

Not right now.

The two are actually pretty well aligned.

If you look at the fed futures rate, it is aligned with the do ts.

Either the dots will move up or the fed funds futures will react.

Is that new jargon?

Anastasia amoroso explain the dots.

This week on wednesday, we got the summer economic projections from the fed and one of the items we will be looking for is what is the federal funds rate that the fed will see in 2014, 2015, and 2016. there is a great dispersion between tyhe dots.

- each member of the federal reserve gets a dot on a plt?

That's right.

It really highlights the lack of perhaps conviction or consensus within the fed.

They will also be watching the mediumdots.

The medium dots?

[laughter] i can see people who totally disagree with this.

Look at that.

-- it's out of control.

Is that all i am?

There it is, your explanation of the dot chart.

More seriously, we will have much more particularly on ukraine.

Let's get to some company news -- we start with bp which has agreed to a 20 year contract to supply liquefied natural gas to china.

The deal is valued at $20 million -- $20 billion.

In new york, a breakthrough agreement involving walmart and costco.

The two retailers and for others have agreed to add information to websites that let shoppers compare prices by unit.

Per-unit pricing is required in stores in 19 states but showing it online has been pretty rare.

Hackers have found a new use for youtube -- they are using it to sell stolen credit card data.

A report says a youtube search for how to get stolen credit card numbers yielded almost 16,000 results.

Google says the company is constantly removing videos that violate its policies.

Very good, child abuse, it's father's day, here's a tweet -- i this is young tolan of new jersey, good morning to you and your father.

We blow up the image.

The father is screaming while he was watching "bloomberg surveillance." is that you?

That could be adam.

This coffee stinks.

If you ran that down tochr istioe's and blow it up, they would spend $5 million on it.

I love it.

. we say thank you.

We do have some breaking news.

Siemens and mitsubishi have put in a bid and it it values alsom energy, the units that the two companies along with other partners want to buy at 14.2 billion euros which works out to about 19.3 billion u.s. dollars.

Ge has put in its own bid to purchase alsom energy units which is more simple.

It's almost $17 billion.

This is a superior bid but it's complicated with two companies.

Semen intends to provide training for 1000 use in france is the headline.

The french government wants more job guarantees and want to make sure that siemens does not outsource the jobs.

We will continue to monitor this.

We will check in with alex webb of bloomberg news in a few moments.

We will take a very quick commercial break and come back and figure this thing out.

We want answers on this cap located deal.

There is the french president who will speak today.

This is "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire.

We are everywhere.

? good morning, everyone.

Later this morning, john brown, lord brown, former ceo of british petroleum joins "market makers" in the 11:00 hour.

We are looking forward to that at 11:00 a.m. this is "bloomberg surveillance." we go abroad right now.

The battle for france at alsom is heating up.

Siemens and mitsubishi have offered to buy parts of the company.

Bosses from both companies met with the french president this morning.

Will be offered derail a competing bid that has been put in by ge and accepted by the alosm board?

You just sent headlines on this story so you are on top of it.

It looks like the value of the siemens bid when you translate into u.s. dollars is higher than ge?

That's what siemens is saying.

The siemens bid is more complex.

It involves joint ventures particularly with the japanese company and siemens is trying to take the gas turbines.

What are the merits of the complex bid aside from the fact that it seems to be crafted with the interest of french politicians in mind?

It's higher but it has more complex parts?

Right, the argument seems to be that alsom is left without able asset so it is able to fund its less successful businesses by convincing bondholders it is still a viable bid going forward.

This thing has gotten so complicated.

Is this about getting the best price for these assets or about spoiling a cross-border-u.s. deal?

Ultimately from the political point of view, the french government does not want to be seen selling plum industrial assets to the americans.

From the siemens point of view, it's a question that has been put to the siemens ceo on numerous occasions -- do they want to spoil the bid?

They say no but they never like to say that in public.

We mentioned earlier that the executives will meet with the french resident -- president.

Who do these companies need to impress, is that the president or the economy minister?

In terms of ensuring the deal, it is the economic minister.

He is skeptical of american bids in general.

When it comes down to it, hollande holds the cards.

He is clearly the president.

Thank you so much for giving us a primer on the latest with siemens and mitsubishi on a joint bid for alstom.

The next up is waiting for ge to respond.

I can't imagine this discussion happening in the united states.

What i find fascinating is the french government pushing siemens to do something to come in with a competing bid.

It would appear that france would rather see a deal with germany than the u.s. somehow european deal is better than the u.s. deal.

If the anti-u.s. deal.

We will continue to monitor this.

I think they are focused on france-switzerland.

They probably are.

Coming up, wells fargo on track to become the most valuable u.s. bank of all time.

We will discuss mainstream versus wall street with our next guest host.

This is "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire.

? good morning, everyone, oil is churning as the news comes out of iraq.

This is "bloomberg surveillance." for the second time in two days, islamic militants are being blamed for an it tack -- for an attack.

Eight people were killed and sunday they killed 48 people.

The crisis in iraq is being blamed for rising gasoline prices which are on track to hit a six-year high.

The average rice at the pump is $3.68 per gallon.

The jump in crude a boost guest rises another $.10. fans went wild last night when the u.s. beat ghsana in the world cup which was an upset.

John brooks scored the winning goal in the last minute of the match.

Next up is portugal on sunday which will be tough.

They got crushed by germany.

After ghana would play portugal?

This is the group of death.

But we beat ghana, we will take it.

Christine lagarde was asked three times about the world cup.

She had three different answers and they all said nothing.

There is other thing she said in it is time for our morning must listen.

This is from my interview with christine lagarde of the international monetary fund.

The major theme yesterday in the review of america by the imf is what i would call the new neutral.

Le nouveau neutrale.

We have revised them or the 2014 numbers but we don't think it will be a downward spiral.

We believe that 2015 will be down but we have revised our growth trend on an ongoing basis from where it was on average in the last 50 years or so, three percent to 2% and we have done that on the basis of the aging population and the basis of lower productivity based on the latest trends.

There she is.

I walked into the press conference with her team not knowing what to expect.

I was sort of board.

That changed with this statement.

Anastasia amoroso is with us.

I was thunderstruck by the imf the view of tepid.

Your global team at jpmorgan do not agree.

I think there is a couple of things -- from 2014 gdp standpoint, yes, we are revising down the forecast because it is difficult to overcome the first quarter we had.

Not to say the economy is not good.

The view forward is there are some reasons to believe that is the case.

That's big news yesterday.

The new neutral.

Coming up, is baghdad about to fall to islamic rebels?

We examined the crisis in iraq and the effect on the u.s. next.

? good morning, everyone "bloomberg surveillance." i am tom keene and scarlet fu showed up for week -- for work and so did adam johnson.

Let's do a data check.

There is not much going on.

Futures are flat and the 10 year yield is flat and euro-dollar is flat.

Brent crude is $112.70 in the news overnight 34 miles outside baghdad.

Let's stay with that theme -- 100,000 kurds are guarding iraqi oilfields against the extremist rebels in the north and secretary john kerry has suggested the u.s. willingness to cooperate with iraq to prevent civil war.

Michael rubin of the american enterprise institute is joining us now.

He wrote the book," dancing with the devil's." he is joining us from washington.

How does the u.s. possibly transition from sanctions last year to coordination this year in a run -- in iran?

It is easy to talk about our shared interests but firefighters and arsonists have a shared interest in fire and it does not necessarily mean we will be on the same page print the iranians might want intelligence sharing because they are the things putting boots on the ground but the problem for us is once the iranians go in, what will it take to get them out?

They have been waiting in lebanon for has a lot to stop for 30 years.

When we talk about potential u.s.-iranian cooperation, is it military or intelligence or arms?

How would it work?

It might have to do with intelligence.

I don't think american troops will be marching hand-in-hand with iranian troops anytime soon.

The american troops going to iraq will go to effectively the green zone where the u.s. embassy compound is.

Our major problems so far has been a huge intelligence failure.

We predicated our withdrawal on the fact that we can provide security from over the horizon.

To do that, you have to have intelligence on the ground and we did not see the uprising coming.

If iranians have boots on the ground, maybe there could be intelligence cooperation and then our drones could come into operation.

You are known for going on deploying aircraft carriers and speaking to senior officers and briefing them.

If you are on the george herbert walker bush this morning, as it goes to the persian gulf, what would you tell the officers?

Ultimately, it's an issue of trust but verify.

They are going to be wanting to know what actions they are taking will contribute to the stability.

They will also want to know the motivation which is easy.

With isis seizing territory, this is a group that has been too radical even for al qaeda.

That is why there mission is important.

Connect the dots between what is happening in iraq with what has happened in syria and lebanon and whether there will be a spillover into other laces like turkey?

I am most worried about a spillover into jordan but i was in mmosul earlier this year.

It has always been a hotbed.

When i was driving in in late january, iraqi army checkpoint stilled me to go no further because it was not safe.

I was with a local vouched for me but when i went income you have the city which is already full of dissent.

It's the site of where the saddam hussein officer corps came from and tens of thousands of syrian refugees sitting idle.

It was pouring fuel onto the fire.

It is an aftermath or reverberation from the syrian conflict and that is something the iraqis have been warning about for what sometime.

You said you are most worried about jordan.

Why should we focus on the royalty of jordan?

Ultimately, the syrian conflict is spreading not only into iraq but you have tens of thousands, hundreds of thousands of refugees in jordan.

Everyone i talked to said they have not seen a more radicalized population.

Refugee flows are not just a humanitarian issue.

When you pour them into a country that does not have a great amount of resources, the price of housing goes up and the price of water goes up and food and other goods.

That creates a great deal of tension.

Isys already has thousands in jordan and when we think about isys is being a sunni group that lashes out at shiites, most of the people they execute have been sunni who are the low hanging fruit and of jordan falls, that fundamentally reworks the middle east.

What you are talking about is a complete realignment.

Let me share with you and editorial from the "financial times." can you bringsunnis and shiites together legitimately to fight this?

You can but do they have an interest in coming together?

At this point in time, it looks like not.

If any of theshiite shrines in baghdad and other cities get attacked, that sets the middle east on fire.

Most of the oil in saudi arabia comes in these turn province which is a majority of shiites.

I want to bring and anastasia amoroso, our guest host.

You have been looking at oil and seeing the spike in prices is something that investors should look through rather than look at as a threat.

Why is that?

It depends on the circumstances.

The mitigating factor is that some of the oilfields, 3/4 of the iraqi oilfields come from the south.

The second thing that helps us if we look at past instances of oil spiking and the movement in the s&p, they have been minimal.

The oil spike did not cause a market move or that has been long-lasting.

Is there a point where oil begins to affect the world economy?

If you get to $120 or more on brent crude and it becomes more than nine percent of gdp or it crosses that threshold, that eventually tiopps things over evans long-lasting.

If it's over two months, it's not mrs.

Early a game changer.

Forgive me if i back up come up but it seems odd that we are having this conversation.

Two weeks ago when no one had heard of isis, how did this come together so quickly?

That is a question we need to ask for a few reasons.

As i said, it's an intelligence failure.

If we are predicating our ability to provide counterterrorism support on our intelligence and we don't have insight into how an army managed to seize the second largest city in a wreck, that's a huge issue.

The other problem is that we were sure that the iraqi army was up to the task.

Clearly, they weren't at the same people who train the iraqi army are now telling us the afghan army is up to the task.

Do we have a crystal ball as to the future of afghanistan and if the army is not prepared?

Do we have time before our withdrawal to train them?

That brings me to the next question -- what is the most and during lesson we can learn from this conflict in iraq in terms of dealing with our withdrawal of afghanistan?

Ultimately, one is true training but another is a broader issue with regards to terrorism.

There's a tendency in the unit stays to look at terrorism through the lens of grievance that if only we resolve that grievance, the terrorism will go away.

When we look at something like isis, the issue is not grievance, its ideology.

They may dislike nouri al-maliki but whatever concessions or give them, they will still execute christians and shiites and try to restore the faith to which they turn.

Ultimately, we need to do it the fact we are dealing with an ideology which is a bigger problem.

. thanks for helping us sort this out.

It's extraordinary, particularly the fork is on jordan.

Does the focus on jordan.

That is 200 miles from baghdad and there is an expert saying pay attention to jordan.

The rebels are within 40 miles of baghdad?

34 miles is one report i saw.

It's incredible.

Our twitter question of the day -- what is the next move for the united states in iraq?

Coming up, we are talking about congressional productivity or maybe lack thereof.

Our single best chart shows a disturbing trend.

? good morning, everyone," bloomberg surveillance." scarlet fu and adam johnson is with me.

Congressional republicans want answers from the irs about two years of missing e-mails that cover the time when the agency give extra scrutiny to some tea party groups asking for tax exempt status in the iris blames the missing e-mails on a computer crash.

For congressional committees are examining the irs.

The prices of risen 74% in the last few years.

Costs will probably keep rising, the number of cattle has fallen to the lowest in more than 60 years because of drought and years of high feed costs.

Finally, fans went wild as the u.s. beat ghana in the world cup, john brooks for the winning goal in the last couple of minutes and the next step is portugal which will be tough on sunday.

It just gets harder from here on out.

Germany beat portugal 3-0? is it all in fun?

I think it is game to game.

The ball is on the field and it's good.

The single best chart -- congress has not moved on.

There are issues that congress needs to address but won't because it is so divided.

This shows the rise of legislative gridlock over the past 65 years from the brookings institution.

The y axis does not track the pages in the congressional record or the bills passed.

This identifies salient issues based on each congress is measured by at least 4 mentions in "the new york times" editorial page.

These are big issues.

What you see is gridlock has been climbing and the trend line shows the distinct move up, 70% of issues are in gridlock.

You look at the 1950's with eisenhower into kennedy into johnson, we have essentially done a double.

Unfortunately for us.

What do you think of when you see something like this?

This is not encouraging for anticipating meaningful reform on immigration or the tax front?

The immigration front is interesting because when we think about the labor market or the trajectory, one of the issues is you have a gap, a mismatch between job openings and the actual skilled labor to fill those job openings.

The lack of immigration reform is probably not going to pass now that we know what happened with eric cantor leslie.

That's a the tarrant.

-- that's a deterrent.

You were fabulous recently on crimea and on your time in russia and your childhood there.

Working with jpmorgan, new york, what is your prism of what happened with eric cantor?

Probably it was a result of exactly this chart which is seeing too much negotiation that did not take us anywhere whatsoever.

It is perhaps the voters taking a stand on saying that we do want some newness to the political institution we have.

From my prior experience, even with the gridlock, this is by far the best policymaking institution probably around the world.

Certainly, compared to rush over other countries.

That's a very important perspective.

Good perspective from anastasia amoroso of jpmorgan.

We will continue the conversation because russia has turned off the gas to ukraine while europeans are facing energy shortages, maybe not now but wintertime.

We will discuss that next, this is "bloomberg surveillance." ? this is "bloomberg surveillance." let's get you company news.

Apple is avoiding a big antitrust trial over fixing electronic book prices.

It is reaching a settlement with consumers and publishers.

The u.s. government sued apple saying it orchestrated making e-books mark spencer.

For the fifth straight month, sony has a best-selling videogame console in the u.s. the sony playstation4 beat out xbox one.

Sales in the u.s. almost doubled in may from one year ago.

Alibaba has given investors something else to consider as the company prepares for its big ipo.

The chinese e-commerce company believed -- announced its margins have been falling because of higher costs to attract mobile using's and they lifted -- listed the nine members of its ipo board.

That's one of the big stories buried in the headlines.

It is starting to bring out the data.

That prompted yahoo!

Shares to fall almost seven percent yesterday.

You look at what happened with groupon and twitter -- you start connecting those dots.

It could be july and august entertainment.

Maybe that's why jd.com got out ahead of it.

It will be 48 degrees fahrenheit in kiev which is different than nine below in january.

They will need russian natural gas in the wintertime.

The alarm bells will sound.

My headline this morning -- everybody is up to their eyeballs in natural gas, is that true?

In ukraine they are and at europe as well.

There is plenty of gas in storage.

That is the reason why there is not this pressure to negotiate this deal now.

That is the reason why there is room for a deal to break down.

It will have to happen before december.

There is unit analysis.

And there is price analysis.

You talk to your hydrocarbon experts at jpmorgan, do they suggest we should watch price negotiations?

I think it is price.

The european customers paid $3.80 is the price versus $4.85 which is what the ukrainian customers are now facing.

There's is divide that needs to be bridged.

Any deal will hinge on price.

China signed the deal and we don't know what that price is.

That is by design.

How far along are we in this?

You said the tensions have eased a little bit but will they get worse before there is a resolution?

I think we are quite far along.

If you look at the performance of the russian stock market or the ukrainian stock market since late april, it has rallied quite a bit.

The reason for that is what when policy makers find common language and when they look forward together to -- the stock markets move up and that's what happened.

Because vladimir putin agreed to the roadmap set out why the organization in europe, because he did not obstruct the election and is on speaking terms am a that a significant.

There is room for the deals to break down and the violence in ukraine is still heartbreaking but from the market perspective, when policy makers do find a way to be in the same room together and talk, that helps.

As an investor, how do you resolve the fact that we are negotiating price on one hand and on the other hand, 49 keiper will kill -- 49 people were killed over the weekend?

How do you resolve that?

It's all about the setup and the catalyst.

The setup for russian stocks is the price to earnings ratio.

The expectations are extremely low.

The catalyst repels the stock higher and that is the notion that there will be de-escalation overtime.

It takes baby steps to get there.

That is what causes the market to go higher.

We may see the headlines which are unfortunate but it does not prevent the market climbing.

Are you long and russian stock.

I am, the premise there is when policy makers do it.

The constructive tone, that means that eventually the talk of sanctions will subside.

It is not that the talks are completely alter table but it is not dominating the headlines as much.

Couple that with some reforms that russia implemented and couple that was slightly better day to come i think you get the upside to the market.

Year to date, the russian exchange currency adjusted in u.s. dollars is down about six percent.

When this ukraine-russia tension blew up, it had this chilling effect on the rest of the emerging markets.

Will it continue to do that?

Yes, but it is diminishing.

Even though the russian stock market is down six percent for the year, it is up about 17% since late april.

There is not optimism but better relationship between china and russia now.

That is giving a boost to some of the emerging markets.

There is a soccer contest going on in brazil.

Are you long on brazil?

Mohamed a larry and -- mohamed el-erian said take chips off of the table.

Do we need to lighten up on investment?

Not fully, yes, the oil spike and perhaps cause investors to take some chips off the table but when i look at the number of investors out there that are stuck in neutral -- if we look at the readings of investors that have a neutral outlook for the next six months, it is add two-year all-time high levels.

The level of conviction is low and when that's the case, it means the trend will go up.

Maybe that is the new neutral.

Maybe it is investors stuck in neutral.

I don't disagree with that.

When mohamed el-erian speaks coming makes headline.

What you think about the world cup?

I knew you were going to ask me that.

I have to think carefully.

Usa, of course, all the way.

, i. --, on.

- come on.

Do you face off in soccer?

Yes.

Brazil plays against mexico today.

Thank u so much, anastasia amoroso with jpmorgan.

Germinate be portugal -- germany beat portugal 4-0 not 3-0. the dollar-yan gets my attention.

Coming up the next hour, chris grisanti joins us.

? this is "bloomberg surveillance." iraqi government forces battled jihadist 34 miles from baghdad and president obama sends in the marines.

General motors announces another recall which makes over 20 million cars to the garage.

It is the summer of tent as you crane -- in ukraine as russia turns off the gas.

We are live from our world headquarters, tuesday, june 17. joining me is scarlet and adam johnson.

Our guest host is christopher grisanti, cofounder and owner of grisanti capital management.

Let's get to where morning brief.

Overnight, u.k. inflation falls to its lowest rate in 4.5 years for the month of may and it's due to falling transportation costs.

European car sales rose 4.3% in may which is the ninth monthly consecutive game.

In the u.s., you want to watch cpi at 8:30 a.m.. the fed will start its meeting today and we will get numbers about 10:00. after the bell, we've got bob evans reporting earnings as well as adobe.

Don't come to new york city i go to greenwich village, president obama will be there for a dnc fundraiser at anna wintour's h ouse.

The big numbers for general motors is 20 million because that's how many cars it has now recalled in north america this year.

The latest recall is more than 3 million vehicles involving ignition switches.

One engineer was ousted after an internal investigation.

A new filing shows alibaba sales are slowing down on the margins are getting slower.

It revised its ipo prospectus and said that the yahoo!

Cofounder will be an independent director.

Yahoo!

Owns almost 1/4 of ali baba.

Shares of nuance communication are up in the premarket.

It makes speech recognition software.

It has spoken about a possible sale with sam, this samsung.

Airstrikes in iraq, the united states is considering taking ownership of iraqi airspace.

Can it be effective without a commitment about redeployment of thousands of u.s. soldiers?

Michael rubin is a resident scholar with the american enterprise institute, former adviser on pentagon matters.

Good morning.

When we look at this raging debate, we will send in 300 marines to the embassy but then there's the idea of taking the airspace.

Can that be effective?

Ultimately, it can be effective under the right circumstances.

Remember, the airstrikes -- controlling the airspace is not matter if you don't have the intelligence to know who and what to target on the ground.

It's one thing to focus on a convoy flying ices flags.

It's another thing if we do not have that issue.

The one lesson we should have from iraq is that we were caught completely flat-footed.

It is an intelligence failure and if we don't have the intelligence to know what ices is doing, we don't have the intelligence to target.

Oil has moved but it really hasn't moved.

I know you do geo-politics and international relations.

Why hasn't oil jumped 10 or $15? most of the rise in the price of oil now a psychological.

The kurds control the northern oilfields which can have 25-30% of iraqi oil.

The bulk of the iraqi oil is in the south near basra which produces 70% of iraqi oil.

The prime minister's office have sent their kids to basra because it is secure there.

The nightmare situation would be if ice is manages to blow up one of the shiite shrines and that could set the whole middle east on fire potentially and most of saudi arabia in oil is produced in a shiite dominated area in saudi arabia.

This is a morning must read -- he talks about how the u.s. response is muddied by politics -- is there an american exceptionalism that does not match up?

No matter who was in the white house, there is a conceit in washington that we can have debates endlessly and the facts on the ground never change but that is not the case.

We cannot expect the opposition not to change.

The other problem is that american politicians often want to fit national security into the american the local calendar.

That does not work.

We could look at george w. bush who ordered the initial withdrawal of u.s. forces largely because he wanted to give his successor a blank slate but ultimately, that is not based on the ground but on the political power.

This dovetails with richard haas' op-ed.

One of the stunning developments out of all this -- i want to ask you -- you are the author of "dancing with the devil," the u.s. might actually start interacting with iran on intelligence matters, maybe military matters.

How would that possibly work?

This is a diplomat's dream and it is easier to talk about than conduct in reality.

Iran and the united states have a mutual interest in iraq, no doubt.

We both opposed ices but you can say that a firefighter an arsonist have a mutual interest in a fire but it does not mean we are approaching the situation from the same point of view.

The iranians might want to come in to help baghdad that the problem is getting them back out.

When it comes to how we would cooperate, if it's intelligence sharing, not sure we would want to share sources and methods with the iranians considering we confront them elsewhere in the world.

What is your likelihood or probability we will see a recommitment of u.s. troops?

Already, we have u.s. forces going into the green zone.

I don't think we will see much more than that.

When we talk about troop numbers, you got to divide those numbers by three because for every soldier in front of the wire, you've got two or three behind the wire helping with logistics.

We don't have enough logistical support to operate widely in iraq right now.

Thank you so much.

Our guest host this hour is christopher grisanti, owner and cofounder of grisanti capital management.

Let's go to oil.

Should you be overweight oil?

Yes, when the terrorist army is coming into northern iraq, it is driving up the price of rent and we prefer to play the refiners and think this is an opportunity for the airlines.

What we keep an eye on is if this goes too far and rex economic growth in the united states, you get rent at $150 or terrorist action -- i think we are ok here and this is more opportunity than it is a problem.

Christine lagarde yesterday talked about very tepid economic growth.

I don't by the imf scenario in the united states.

We are seeing a second quarter that is weather-related but i think that strength will carry into the third quarter and we may have a three percent growth.

This is a huge deal.

When i was listening to christine lagarde yesterday, what stunned me -- is the imf just lowering its forecast based on the first corner and then we get acceleration?

The imf does some wonderful things but they have a pretty bad record in predicting the next 1-2 years of economic growth.

They were optimistic in 2007 and very pessimistic in 2009 when we were emerging slowly.

I think they are looking in the rearview mirror.

Christine lagarde emphasized that this was not a call on the first quarter.

It's their forward-looking view.

They don't exactly have a track record.

They have made some egregious calls in the past.

To the extent the imf is influential, what kind of mindset does that put policymakers in as they debate what to do next?

I don't think it changes anything.

The bernanke-yellin administration will put their foot on the pedal until we see three percent growth than we are getting there.

Chris grisanti is with us.

16,781 on the dow which brings up a data check.

The euro is $135.66. coming up, medtronic is the latest in a series of companies looking to escape the irs claws and we will talk to a political analyst on how to stop this trend, 44 companies that have reincorporated a broader plan to do so.

They are going abroad and paying lower taxes matt means the individuals are compensating.

This is "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire.

? good morning, everyone.

This is our guest host, chris grisanti, who is a value investor but he is interested in growth.

The winner of the growth derby might be wells fargo.

It is richly priced as compared to james diamond and the rest of the group.

Is there value in the banks?

There is, we are in the eighth inning of the banks and there is still some value, in particular locations.

We like jpmorgan and we like morgan stanley.

Wells fargo has been so successful.

They have a terrific manager but this is how we manage money.

That is a strong company at a strong price.

I don't think there is a discrepancy between price and value their.

Do you have support from dividend income growth and share buybacks with the major banks in general or is it a separate story?

That's a separate story and don't count on that if you want to invest their.

The fed is the wildcard and there are settlements in the tens of billions of dollars from different banks.

I would not count on that and i would go for things that are selling at a low price-to-book ratio.

Doesn't have to do with technology?

I would not go for big tech but i would go for the airlines.

There is strengthen in the economy that is coming back and it will lift the ships that have single digit p/e's. some of those stocks are to the moon.

Can they stay in consumption?

You can stay in consumption and i think you are seeing consumer debt levels starting to creep back up which is good for retail.

You will see different pockets of retail like banks do well.

Why are we not talking about this more?

I like it.

I don't think valuations are terribly extended.

I think we are like the late 1990's where you will see valuation continue to extend because we are the only game in town.

You don't want to be in bonds or send your money to emerging markets right now.

Is your investments affected by the fed meeting?

I don't think so, they have been more of the same for years now.

If you cover the fed, this is a boring job.

But it's a boring market.

Is this complacency something we've got to be alarmed by in the sense that we are too complacent?

Yes, i feel that as a negative.

The vxx is at 11 or 12 in the world is not seem to reflect that.

There is some volatility incidents.

We saw that in the quiet news flow and all of a sudden, iraq and eric cantor.

We will focus our attention on chris lynn -- christine lagarde.

It was supposed to be a boring interview but it was not written christine lagarde on america's poverty.

We love much more, stay with us.

? it is our twitter question of the day -- can the u.s. be portugal -- no, what is the next move of the united states in iraq?

Isis was fighting 34 miles from baghdad.

This is "bloomberg surveillance." futures are up three and dow futures are up 23. our guest host for this hour is christopher grisanti.

We got top headlines -- for the second time in today's, islamic militants are being blamed for an at tech -- for an attack.

On sunday, attackers killed 40 people in this coastal town.

The crisis in iraq is blamed for rising gasoline prices.

They are attractive to the six-year i for this time of year and the average price of the pump.

Is$3.68 per gallon the government forecast is the jump in crude oil may boost gas prices by another $.10 per gallon.

Bringing it back to soccer -- fans are going wild across the country last night as the u.s. eat ghana 2-1 and john brooks score the winning goal in the last minute of the game.

The u.s. will play portugal on sunday.

A surveillance correction -- adam johnson -- face-off.

You don't face-off in soccer.

Nor do you get on the ice and start loosening up.

We went to our experts on futbol - dropped the ball is the closest equivalent.

How do you use it?

I don't know.

A kick off his football.

, american football.

We need a new surveillance glossary.

It just means the u.s. will not do well in the world cup.

Save us here.

Let's talk about medtronic set to become the biggest company yet to escape the u.s. tax system.

It joins 44 other american companies that have read incorporated a broad or announced plans to go abroad.

What should be the u.s. government response?

There is a book called "the race to the bottom." the author joins us from washington.

You say that corporate tax reform which is what people are calling for is not the answer because it misunderstands the problem.

What is driving this tax aversion strategy?

The departure of the corporate headquarters of these 44 companies recently from u.s. shores is only the latest twist in a very long-running story.

It's a combination of u.s. trade policy as well as u.s. tax policy.

That has created a massive unfairness problem.

It has resulted in u.s. multinational companies being able to reap all the advantages of selling to a very lucrative, enormous, high-margin u.s. market without having to pay much of the cost of keeping that market in shape, without having to pay much of the cost.

We need infrastructure and these companies don't want to pay and thanks to u.s. trade and tax policy, they no longer have to.

And the revenue is not coming in.

What is your prescription for this issue?

I'm sure there are tax policy steps that by themselves could ameliorate the situation but with really needed is not only to restore fairness but achieve the vital goal of bringing valuable production and jobs back into this country is to basically tax whatever these multinationals bring into this u.s. market from their foreign factories.

Like california.

Exactly, california has a scheme like this.

They tax sales.

They tax the actual revenue the company's make in that valuable market.

The u.s. market is much more valuable and these companies should be made to pay for the privilege of selling here.

You are a great washington watcher and a liberal that the conservative pay attention to, is there any traction in washington to push up against the clear unfairness that a corporation sets up in dublin so they don't have to pay tax in minnesota?

Tom, as you know, the politics of tax reform can get so completely logged down -- bogged down.

Once in a blue print gets into circulation, the lobbyists and special interests take over and spend a lot of money in washington b to lawmakers and politicians.

Uy they spend it very wisely.

When it comes to u.s. trade policy, we are going in exactly the wrong direction.

The transpacific partnership that president obama wants to reach is going to encourage more corporate offshore than we already have.

What upsets me is that u.s. corporations are going offshore totally illegally and the provincials are getting stuck with debt.

Can you quantify the importance of the 44 countries that have left?

One of the big problems of foreign economic policy is that we require companies to disclose so little information about their u.s. operations, there u.s. revenues versus their foreign profits and their broader foreign operations.

It's difficult to know.

Certainly, there is a massive unfairness situation here that has got to be remedied if we are going to put our fiscal house in any reasonable order.

Thank you so much for joining us this morning from washington.

That is something that will continue to be a theme as more and more companies leave the country for taxes.

The fed begins his two day meeting date and they may update their dot forecast, we will discuss that coming up here in ? this is bloomberg "surveil lance." i am scarlet fu here with tom keene and.

Bp has a deal valued at $20 billion.

Last month you will call russia's company cited a long-term deal to sell 400 million worth of gas to the chinese.

Walmart and costco.

Along with four others have agreed to add information to website that allows shoppers to compare units pipe units.

Her unit shopping is required in 19 states but per-unit online has been pretty rare so far.

Hackers have found a new use for you to -- youtube.

The parent says the company is constantly removing video that violate its policy.

That is this company's morning news.

Have seen a lot of world cup videos disappear.

People like to film it on their phones as well.

Joining us now is betty liu.

We are staying with the whole world cup theme.

Tom schapiro one of the founders and president.

Half of their projects are in brazil.

Rather than shy away from the city you have been hearing about and some of the real economic problems that are percolating in brazil, he is doubling down.

He says he feels is good about brazil now as he did back in 2009. he had stopped for a little while because of the concerns about slowing growth and inflation in political leadership.

He will be on to say why he is doubling down, and also, the cmo . that might become an extinct physician.

This is according to an author on a new book.

-- that might become an extinct physician.

-- position.

Chief marketing officer i would think is the most important jobs.

You would think, but in his view the job is not evolving fast enough.

A different kind of job a beat.

Cto cto may become more important.

I do not want the hate mail.

As you know, i was out for a couple of days.

I went to denver.

Mccourty a airport in new york city mobbed.

Denver airport mobbed.

This is why you like the airlines.

We do.

Terrible to think we get so aggravated paying with times, meals, but it is all revenue that goes right to the bottom line of folks like united and delta.

What you like most of all?

Mike favorite would be american -- my favorite would be american.

Large institutions probably will not go near there to see how it trades.

It has a lot of domestic is this.

Right now domestic business is where you want to be.

We have found from six down to three.

You needed -- united, delta and american left.

They're splitting it up in a very efficient way.

I am wondering about the changes to the frequent flyer programs.

Doesn't have any kind of financial impact when they make the rules different to make it harder to redeem the points.

The big points now are points per dollar.

Now the business flyer does not feel as resentful.

L this is a loyalty program for the business customer.

Left look at a chart of alaska air.

I saw the concord take off from boston to london.

It was a moonshot.

What is the leave ability they can sustain cash flow?

We have done a study with the last four decades better airline profits up and down.

When they go up, -- this time we do not have the capacity growth yet.

They have been much more controlled this time.

The reason for that is it is not just luck.

There is now only three and understand.

I go back to mergers.

Lex the manager of united said this is the first time in the history of the business we have run them as businesses.

They are not utilities.

Travelers are complaining, two.

Should not bother you so much when the prices go up because they were not making much money before.

Little comfort to tom whose legs are always cramped up in the seats.

Cpi data coming out.

Futures higher by almost three points.

Good morning, everyone.

This is " bloomberg surveillance." all of our product out on digital media.

For that looper radio plus.

I am tom keene.

Christopher caps on see with us.

As we look at value within the market.

Christine lagarde lowers her u.s. growth forecast.

Bill gross calls it the new normal.

Peter guber and karl richter donna believe otherwise.

They forecast a 10 year yield of four percent by the end of the year.

Thank you for joining us.

How can you go so against the grain right now?

Error all -- there are a lot of things changing in the economy.

Consumer deleveraging for the past three or four years.

Finally coming to an end.

We see a labor market stepping up.

Faster pace of hiring.

That is supporting income growth as well.

Housing finally turning the corner.

With all that yesterday with homebuilder sentiment.

We should see further evidence today.

To forecast the near-term, i think it is a bad way of doing things.

What is the theory and pushing against bill gross and madame lagarde?

What is the core economic idea that gives you optimism they don't have you go ? it is really been looking at the past four years.

Back when people started looking at the new normal economy at the end of the recession, we dissected the data and looked at each component of gdp and how they performed relative to past economic figures.

So you're saying comparing figures.

If we look at each individual component, it is really consumers underperforming.

They are 70% of the economy.

This is up against steve roach who was worried about the american consumer.

He is worried about the american consumer.

I was wondering about our carney in what he said about how rate increases could come sooner than expect the.

I do not think they will signal that this week that ultimately that is what will transpire.

Maybe for different reasons.

Worried about the housing market in london.

If the fed moves faster, it will not be because of housing turning the corner faster but because the unemployment rate is coming down and inflation picking up.

I go back to my initial point, and that is you think the 10-year is going down.

What is the slingshots and you sold bonds?

That will be when people are more convinced the economy is on firmer footing.

A lousy gdp print.

People looking for a snapback.

I think they're still doubting thomas is.

That is part of the story.

The other part is when the fed says maybe we are talking about moving slow and we need to compress the tightening cycle.

Either they have to start sooner or move faster than the 25 basis points every other meeting there currently signaling.

A major theme for christine lagarde, america, the new neutral.

Here she is yesterday.

We have revised downward to 2014 numbers.

We do not think it will be a downward cycle.

He think 2015 we will be up three percent.

However, we have revised the growth trend on an ongoing basis from where it was on average in the past 50 years or so at three percent down to two percent.

We have done that on the basis on the aging population and the basis of lower productivity based on the latest trends.

There is christine lagarde yesterday.

I want to go to the one single phrase, it aging population.

The quake, do you worry about an aging population being a damper on economic growth?

Sure.

Clearly you have to go country by country.

People like china have that in spades.

Our country will avoid the worst of that.

Also, scenes that play into that like health air and others.

Hour toward a question of the day, what is in the group of the united states in iraq?

Tweet us.

Compelling question.

? good morning, everyone.

Futures up three.

Dow futures up 22 as well.

Getting to our tuesday kind of headlines.

Here is adam johnson.

Congressional republicans want answers about two years of missing e-mails.

They cover the time when the agency gave extra screen t to tea party groups that were acting -- asking for status.

The irs blames a computer crashed.

Investors ignoring a warning from warren buffett for investing in disaster bonds.

Last week buffett said berkshire hathaway is avoiding hurricane insurance and florida because premiums are too low the number of cattle has fallen to the lowest level in more than six years.

That is tom doing the cow.

That is because of the drought in years of high the costs.

Those are your top headlines.

I was thinking of upon.

Were marvelous.

Utterly disaster.

Save ourselves worldwide.

Bloomberg television and bloomberg radio arm further bovine jokes.

I sat down yesterday with christine lagarde, international monetary fund director.

One of the many topics we discussed was unemployment and strong statements.

We look at the numbers, and when we say there are 50 million americans living below poverty level come out when we see many of those are actually working poor and see that quite a large number of them are single -- single households generally held by women am a we believe it has macro economic dimension that requires our attention and have to do something about it.

Our question, the most/within the annual review of the economy.

Chris with us.

The poverty level, like 15%. are we a nation of poverty?

Not a surprising outcome given the tepid economic growth after one of the most severe recessions to since the great depression.

We have gone from 11% up to 15% through the crisis as well.

And has stabilized the past year, but what is the imf missing when it looks at the u.s. and is concerned?

Purely a difference among forecast ideas.

I think the imf has moved toward a new neutral type of you for the economy.

I see compelling signs the domestic economy is picking up.

The mix of growth is totally different in the economy.

Late 2013 and into this year, relative -- very different.

It was an export driven economy.

Now it is export driven.

Thank you.

Coming up, our agendas, brazil takes on mexico in the second round of the world cup.

? good morning, everyone.

I am tom keene.

Tomorrow the retail pause of america.

A terrific granularity on what is going on in store development and store failure.

More kissing her.

Look for that in the 6:00 hour on bloomberg television.

Re christopher croissants he our guest host for the hour.

Owner of the county capital management.

Company news now.

We start with apple who has avoided and the -- avoided a big antitrust trial.

Reaching a settlement.

Details have not been disclosed.

For the fifth straight month sony has the best-selling video game console in the u.s. according to npd groups.

The playstation 4 the doubt the xbox one.

Overall console sales in the u.s. almost doubled from a year ago.

Alibaba giving investors something else to consider as they prepare for the big ipo.

And a new filing they reveal the margins have been falling because of higher cost to attract global users.

They listed the nine members of the post-ipo board.

That is today's company news.

Lik maybe a non-recalled ux.

Generous motors announces another call every -- another round of recalls.

Should we start counting the vehicles that have not been recalled.

They have been a $36 this morning.

Trading at one of -- $41 $.83. it is about share price.

Have shares been affected by the recall?

Shares have been terrific.

At least you cannot claim mary

This text has been automatically generated. It may not be 100% accurate.

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