>> i think it is the benefit of pimco's investment process. we are looking out three years to five years. we have a the picture and enormous team of 240 portfolio managers and 55 analysts. talking specifics. what were the winning trades? we have been positive on housing for the last five years, and the fund has been overweight. investments -- weighted investments and we are favoring consumer sectors. also, we bought energy at the lows in the first quarter of 2016, a contrarian trade investment that pimco made. energyably bought more bonds than anyone back then and had taken profits on about 90% of that position, but that was our research edge. the final think is we have been opportunistic around the world, tapping into selected emerging markets where we see opportunities. vonnie: i know you are buying argentina, brazil, and illinois. at what point do you need to get out of those kinds of trades? i am talking from casino trades to illinois. they are all investment grade but rarely some of them. -- barely some of them. >> good point. this is why

bill gross had built pimco. pimco was synonymous with growth. he was like the bond king. then there was this generational power struggle at pimco, gross got pushed out, and iversen inherits this firm that is hemorrhaging money because all of these investors are like, what is going on with pimco? we put our money in a bond firm like pimco to make sure they protect our money not lose it. ,it is their number one mission. so iversen moves in, it is like an airplane that is in a nosedive. he has to take over the helm. and he has managed to basically stabilize this spiraling plane and now it is getting an upward glide path. oliver: now that upward glide path to be clear is some consistent with what you want from a bond manager, not necessarily that things went terribly under mr. gross, but again in the later stages the returns were subpar relative to peers. it was a very different style that, what i take from your story here, is that iversen essentially wants to eliminate the personality and the big portfolio managers that have a large brand. what he wants is just a company tha

when yields backed up, pimco is buying. thinkpriced in, and i yellen's testimony last week was very insightful. she brought up the point that the neutral rail rate. it could be much lower. we are seeing the inflation. the removal of accommodative policy is going to happen very gradually. particularly in the context of low inflation around the world. it means lower for longer and less fiscal stimulus. that equals relatively stable growth and it will remain very robust. that is what is supporting the bond market right now. it also what we're hearing at of europe and what mario draghi is saying? that is the elephant in the room yvonne:53, whether he will that is thething -- elephant in the room, whether he will announce anything. and is that driving yields higher? >> europe is fundamentally behind the u.s. by two or three years. we see the announcement of eventual taper by the ecb. the taper will likely not happen until next year. importantly, any rate rise in europe is probably two years away. we are seamless the around the g

joining us is an pimco. an advisor for pimco. we just wrapped up two days of janet yellen's testimony. what is the biggest thing you learned from her appearance on capitol hill? guest: i did not learn a lot of things from yellen's testimony, so i think she was steady as she goes. i think she made it clear what the fed's game plan is, repeating what was said earlier. the game plan is to focus on balance sheet runoff, quite likely that they will announce this in september for an october start. the other message was not really surprising. they are still looking to hike rates one more time, but it will inflation, andon i think there is a low inflation problem for the feds. yellen said there were probably someone offs in the data that explained part of the reason for a turn down in inflation, but they are not sure. i think whether or not we get a hike in december really depends on whether the inflation data go . on our forecast, inflation will be pretty flat between now and year end. if that's the case, they are not going to hike, but

oliver: the new face of pimco plans to do less talking and more investing. carol: not giving up on globalization. oliver: all that ahead on "bloomberg businessweek." ♪ oliver: we are here with editor in chief megan murphy. let's talk about the business section, looking at the effects happening between qutar and its arab neighbors. megan: a continuing fallout that keeps unfolding in the middle east between qatar and some of its neighbors. this is what has happened with bahrain, saudi arabia, they are accusing them of harboring islamists and not cracking down on terror. it has been a long-running incident and it is now imploding in terms of imposing bans. one of the biggest businesses affected is qatar airways. oliver: a company doing very well. megan: a favorite of luxury travelers in particular. whether it is emirates or qatar airways, they have clotted for out of nothing over the past two and three decades. moved into routes, competing on long-haul flights with some of the american carriers. there has been a big concerted effort by the american carriers,

pimco's cio said the controversy is dimming the u.s. economic outlook. why is the jobs market hot but inflation not? one of the key questions facing janet yellen as she prepares for her congressional testimony. time to tighten. could canada become the first g7 nation to join the u.s. in raising rates? and amongst the hawks, a dove. ben broadbent says he's not ready for a hike. we will get u.k. jobs data in 30 minutes. this is "bloomberg surveillance ." i'm mark barton. check out european equities. they are rising for a second day ahead of the yellen testimony. stoxx 600 is a 0.5%. investors pondering reports of donald trump junior's contact with a russian lawyer. sterling unchanged, was lower, declined for a fourth day. bank of england deputy governor ben broadbent said he isn't ready to support an increase in interest rates. the u.s. 10-year down a basis point. the yield falling for a third day. up, 2%not, 2% higher -- higher. u.s. industry data showing crude and gasoline stockpiles declining, easing a glut. busy day today, just getting data out of chin

joining us again is mike amey, managing director and portfolio manager at pimco. we will start with his volvo story. explain what this is about. the end of the combustion engine? volvo announcing that by 2019 all of their cars, they will not have a combustion engine in any car from 2019 onwards. the first classic car company. they will have an option of combustion in the highbury. name one is developing in internal combustion engine now, he would? you have the transition going on. the key question for the car industry, where the focus is. whether the incumbents will be the dominant force, or the newer companies coming through. volvo trying to be one of the newer companies, making the move early. you are a convert? we have an electric car. it is great. really enjoyed it. what about the range? about to edge and 50,200 six miles. what happens if you want to go 500 miles. we have a diesel car. we thought that when we were told the authority by diesel cars this would you give up your gas guzzler? andy says electric cars are not the future. hydrogen fuel cells will be t

today, richard cleared from pimco. we speak to the professor on his theories of the path forward for chair yellen and the next chair. this is bloomberg. ♪ francine: this is "bloomberg surveillance" and i'm francine lacqua in london. tom keene is in new york. we have a lot of earnings today. roche shares are trading higher today. earnings came in at 8.23 francs. we are joined by the ceo from switzerland. thank you for joining us. first of all, what drugs will drive your growth next year, mr. schwan? >> we have seen a very strong performance in the first six months and it was driven by the newly launched medicine. it is now approved in late stage lines for those lung and bladder cancer. a very good uptick of our medicine in a specific form of lung cancer. and finally, our new medicine good initialry demand over the last quarter. francine: europe has seemed to approve to purchase two versions of your best seller. how can you defend your old bestsellers? >> our strategy is very clear. we are not hanging onto the old medi

and russia stay in the spotlight as pimco warns the controversy could dim u.s. economic outlook. david: welcome to bloomberg daybreak on this wednesday, july 12. i am david westin with alix steel. jonathan ferro is off today. alix: here are the markets. s&p futures relatively flat, although the high for the assion, sterling getting boost. it was lower earlier and then we got those job numbers out of the u.k. with the 10 year treasury pocket , that is supply later today as markets handle that as they move lower. crude is getting a big relief rally by over 1.5%. they lowered the estimate for production in the u.s. for next year but this feels like a call before potential more storms. david: time for our morning briefs. it is a big day for the federal reserve. at a: 30 this morning, 8:30 this annual monetary policy report delivered to the house financial services committee. she will appear in front of congress at 10:00 a.m. to deliver remarks and answer weston's. we will watch for indications on how fast they will raise rates or when they will start reducing the fed's balance sheet.

back lower toward the 2.3 handle joining us to discuss, market strategist and portfolio manager at pimco good morning thanks very much for joining us. first up, let's talk about january either yell janet yelles testimony. what would be top of mind to try to gauge what she is thinking? >> we want to know when the fed will implement its balance sheet reduction program. the fed has given about plenty of indications that they will announce it in september potentially implementing it around that time and then proceed with ragz interest rates who knows when if they try to pin down yellen as to on when she will raise interest courts again, of course as usual she will say very little >> and the other question of course is if she is likely to stay on and clearly again she's unlikely to reveal that particularly because it relies on other people as well. but is the fact that she's coming to the end of her tenure artificially speeding up her normalization process? is she thinking i need to get some of these things started even if the economy is not ready for it >> pimco has an important adviser ben

pimco down. that economicims outlook. do you think he is right? why are the markets now paying attention? has a quarter been turned? >> i'm not sure a significant quarter has been turned, but we are playing that narrative. the trump administration will fiscal stimulus because they are distracted by the distractions in russia. we are seeing a bit of a resurrection of that theme. up.ear treasury yields, spike, topping out in may. is readyg, the market for yields to come lower. we are seeing the yields lower. it is not because the markets are committed. couple of quick questions. gary cohn as chair of the fed. how will the market react? x i don't know they will price too much into it. they have too many other things to worry about. there is no point trying to do the marginal pricing if the and on sheet is uncertain. guy: can i ask you about another central bank, canada. loony has gone up quite a bit. an interesting chart you can see on your bloomberg. the risk reversals, the fact reversals areeek above the one-month reversals, indicating the the mark

plans to sell half of a billion-dollar package to pimco in fortress investment group's. he spoke today, saying the deal will close in the next couple weeks and they will divest the rest of the portfolio, saying failure is not an option. he says after the bailout, there are no more systemic issues for the italian banks. reportet to the deals where we zoom in on an analysis from the biggest stories behind the deals. we are talking about whole foods and amazon and the idea that whole foods might have wanted $45 a share, not $42 as offered by amazon. alex: when these big deals are announced they come with a proxy statement, which gives details about how the deal happened, and of the various bids along the way. it is like christmas for a reporter. one of the details mentioned is that during negotiations between whole foods and amazon, there was a bit of a back and forth on price. goldman sachs representing amazon in this transaction. taking a hard line in negotiations. if you backtrack, basically what we learned through this was april 18, jana partners said we have an 18.3% -

of pimco. r, anthony rexit is coming, as sterling strengthens. is the chancellor of the remainers to ells leave or leavers to remain, i really don't know what's going on with brexit. russians are coming. wait, that was a carl reiner comedy classic from my childhood. president trump would like the russians, like those dragons, just go away. everyone. g, this is "surveillance." live from our world headquarters in new york, i'm tom keene. "game of thrones." guy johnson does not catch it. game going whole on in the throne of england, which is over brexit. monday an update on a morning, guy. guy: tom keene is speaking in code this morning, but we'll decipher it. figure out what's going on. we'll watch the show. it's the 't think royal family we're worried about, i think it's what's happening with the politics. we're trying to figure it out. trying to work out which is the more important series of developments, what happens in week, politics this specifically here at home in estminster, or what happens in brussels, where we have mr. brexit, mr. davis,

joining us now is the global economic advisor for pimco. you are the first one to come in and expense what we can do here at bloomberg. great to have you. let's talk about the jobs report, a mixed bag, that beat on the payrolls, but wage growth quite stagnant. of structural issues and demographics? is more slack in the u.s. labor market than meets the eye. the unemployment rate is low, ,.4%, the previous month 4.3% but there is hidden slack and you can see that in the lack of wage pressures. this will have to concern the fed. displaying this religious belief in the phillips opponent comesan down, wage growth will accelerate, but the longer wage growth stays down here, the more problems the fed will have. >> you mentioned those indications of slack. 9067, thev underemployment is slightly higher to 8.6%, so some indication that slack does remain in the job market. is it going to be any indication for the fed to give some pause? there is still some dissent among policymakers when it comes to inflation, and the fed seems to be overlooking some

rishaad: pimco reporting its biggest quarterly increase in assets since bill gross left. second biggest u.s. fixed income manager jumping to $1.61 trillion, assets at $2 trillion in the first quarter before concerns about rising interest rates led to some withdrawals. hong kong's reputation as say financial leader damage by rising market misconduct. to insider trading and market manipulation have doubled since 2011. the soc says the recent sudden plunge in at least a dozen stocks highlights that problem. china's leaders are gathering in beijing to kick off the two day national were conference, a meeting that happens every five years and is designed to improve the country's gigantic and complex financial system. so what are we expecting out of this meeting. w.t's bring in helen cho i was reading the laundry list of things they have to deal with. a conferencee of last year that seemed to be the exact same problems. what are they and do they have the appetite to address them? >> this is something different. the national financial work conference usually takes place at the be

i prefer the word i learned from my former pimco colleague. correlated. because they are seeing the same thing. i think investors are underestimating the evolution in central bank policy response. they will remain the market's best friends forever. they are evolving to something that is different. but they are doing it in a very careful and measured way. speakingamed el-erian earlier today. vonnie: it is time to check in on the first word news. >> poland wants assurances from washington when president trump visits this week that u.s. and nato troops will remain on the ground as long as russia remains a threat to their national security, according to the a.p. citing poland's foreign minister. president xi jinping has complained about a negative turn in its countries relations with the u.s. the president called him to pressure him on sending --north korea's nuclear program. the leaders are set to meet this week at the g 20 summit. wonapan, shinzo abe's party only 23 seats in the election for the assembly. the worst performance ever. hurt his scandals has su

pimco realty, coming out with rental revenue that be estimates as well as its cash flow coming out ahead of estimates. that is propelling though shares higher by 6%. on the downside on the s&p 500, we have as why networks down seven -- we havesy networks -- we have sy networks down 7%. johnson controls, maker of components for various industries, including the auto industry, that company's numbers missing estimates, as well as whirlpool, cutting its forecast, citing the cost for rob materials and customers find -- citing the costs for raw materials customers finding -- ups as well. revenue per package was a three percent, which is better than estimated, however, its forecast for adjusted earnings for the full year, the midpoint of that guidance missing average estimates.exports -- ea on the bloomberg is the earnings analysis. right now, we have two hundred 38 the 500 companies in the spa that have reported. there is a surprise tab. the gross tab says we have seen 5% sales earnings growth. that is better than estimated. it is the margin by which they beat estimates. 74% of the companies h

i don't think it's orchestrated or coordinated, i prefer the word that i learned from my former pimco colleague andrew goal, it's correlated. because we are seeing the same thing. i think that investors are underestimating right now the evolution and central-bank policy response. they will not remain the market's best friend forever. they are evolving something that is different, but they are doing it in a very carefully measured way. julia: that was mohamed el-erian. bloomberg view columnist speaking is to us earlier today. scarlet: what you need to gear up for tomorrow's global trading day. from new york, this is bloomberg. ♪ julia: don't miss this, big meetings i had in the g-20 summit later this week. china's president xi jinping will meet with russian president vladimir putin in moscow tomorrow and then german chancellor angela merkel in berlin on wednesday. scarlet: should be exciting. fed minutes come out wednesday at 2:00 p.m. eastern, and make sure to tune in tomorrow on july 4 prehistoric boston pops fireworks spectacular, live. alix steel, carol massar, and matt miller wi

oliver: the new face of pimco pleasant bess plans to do less talking and more investing. carol: not giving up on globalization. oliver: all that had on "bloomberg businessweek." ♪ oliver: we are here wit

former pimco ceo and chief economic adviser mohamed elevator-erian is here a about yoburrito blow-out and moments ago ibm, united airlines, csx all on the move. we'll bring you the very latest. first we start off with a battle for the ages netflix soaring to an all time high after an earnings report. facebook and amazon trading at an all time high very different story for bank stocks goldman sachs and bank of america following the foot steps of their peers and dropping. the question is do you buy this dip in the bank stocks or stick with the winners which is tech stocks >> i think you have to -- where your looking year-to-date or one year performance? that tells a bigger story that we're looking at right now if you look at tech, obviously the runaway leader if you look at financials versus tech on a year ago basis financials are up 32%. i don't think anybody knows they beat tech on a year ago basis because of the pop coming out of the election so it's not as if they really lagged fms, that is. so i do believe you buy tech now. as the underperformer to the financials because netflix re

oliver: the new face of pimco plans to do less talking and more investing. carol: not giving up on globalization. oliver: all that ahead on "bloomberg businessweek." ♪ oliver: we are here with editor in chief megan murphy. let's talk about the business

manus: we have a story from pimco, which is the likelihood of u.s. reform dims. the ability to get a 3% growth rate, the ability to get the escape velocity has changed. that escape velocity, and along with these politics, hurricane force five hitting the white house, what "the washington post" says, does that change the dollar positioning? we flipped in this dollar positioning. >> i think a lot of the traders in currencies already price in the fact that donald trump will be a flop. we don't see that as the primary support. it goes back to monetary policy. what is the fed going to do? i think the market has gotten a little bit ahead of itself, trying to figure out what the fed's next move is. they're looking at janet yellen's testimony today. we expect the reiteration early in the morning of the fact that transitory, that interest rate hikes are going to be moderate, that exit strategy probably has a lower threshold for reduction in september than the dual mandate and the full employment and price stability. it's nothing we have not heard already. anna: and we wil

assets at pimco climbed to $1.6 trillion as of june 30. it's the biggest quarterly increase since the 2014 ouster of the co-founder and prompted a flood of withdraws. pimco is the largest fixed income manager in the u.s. call it the amazon effect. the online retailer wasn't the only winner in the prime day sale. a person familiar with the matter said ebay had the two best sales day ever in july during amazon's event. in anticipation of prime day the competing marketplace launched a advertising blitz using the slogan did you check ebay. that's your business flash. tom: john farrell and i at times on saturday had a beverage of our choice, maybe a glass of champagne and within it we go through the gloom articles of friday and into the weekend. the world's coming to an end, you really shouldn't be in the stock market. jonathan: you make it sound so sad. tom: there is a lot of gloom out there. how about a chart, the trend is your friend. i rarely use them but if i was teaching at a college course on kisses and moving averages. this is a great s

banks later on, jpmorgan pimco. this is the story for allianz. gain trillion, the biggest since gross left. look at the performance that allianz managed to deliver. the top of vanguard, something to pay attention to as well in the sector of the industry. another stock you were not think attention to as well. fox has made the decision to roll the dice with a regulator rather than risk a political decision. that came out late yesterday. you can see the decision and its impact on the share price. the charts to really capture the full drop because you can see this on your bloomberg. you get the drop down even further. the market recovers even a little bit as you come up. you have an endless coming up to talk about that later on. at the moment, not seeing much sense of direction. the fair values pointing to a rise of 2/10 of 1%. you can see s&p futures pointing to a very flat and open. we are going to be getting cpi data later on. to describe that as a key metric undervalues it. it is one of the pivotal moments in terms of the journey that the fed is

earlier anad interview on bloomberg with a cfo from pimco. he said investors all around, buticularly in the u.s., those around the world looking into the u.s., have to make do with lower returns. i want to play for you what he was talking about. >> we think that over the next three to five years, the returns on financial assets will be much lower. we are concerned about monetary policy eventually reversing. fiscal --number two, expectations are too high in the u.s. and number three, we are worried about geopolitical risks. in general, we have been reducing risk across the board. betty: particularly in energy, mark was referring to. we have been seeing what is going on with energy. you agree with that more pessimistic view? you have tok because costs at this stage of the business cycle. we do not know when the that next recession is. but we have a lot of years behind us in terms of economic growth and the stock market appreciation. i do see changes in terms of credit availability. withre familiar probably auto delete quincy numbers that have p

interrupt the goldilocks rally on wall street joining me is richard, global strategic adviser with pimco katie, is there anything that the fed could say or do today that will move the stock market one way or another >> we actually think the fed is going to forecast forward and enacted later on this year i think they will be very, very careful about the way that they present this to the market and recognizing that, as you said before there has heretofore been balance sheet reduction. we expect that to be a very straightforward announcement we don't expect any movement on rates. i think the fed will give the market what it expects today so there's no reaction to the fed but what the market is reacting to is the fundamentals, which continue to be very, very strong as you said earlier, we have very strong organic revenue growth with nearly 5%. we have over 7% earnings growth on what the companies have reported with great results from industrials like boeing and great results from financials and technology companies which are postings earnings in the double-digit area. the earnings season is

if you look at the standard etf, which is one of pimco and punch in on your bloomberg dvd, you will see it is yielding 1.8%. it has become something as opposed to zero and it starts to impact. you should compare that's 1.8% with us date of dividend yield which is 3.3%. start to getey closer, it has an important dynamic in allocating. tom: yell. francine: i want to continue that covers nation with richard turnill. if you look at the competition and the markets, it has led to much more hedge fund activity because there are fewer players. richard turnill: we see significant flows into the market through etf. or we see in the cross of the industry and that is driven by investors looking at the market in a cost, liquid way over time. one of the features many people do not recognize, you think of it being indiscriminately buying stocks. the reality is most of the buying passive is actually making activist decisions, active managers using etf and index tools to get exposure into the market. going init is money and distorted is not the case. it is groomed by active managers. i pointed out that

former pimco ceo and chief economic adviser mohamed elevator-erian is here a about yoburrito blow-out and moments ago ibm, united airlines, csx all on the move. we'll bring you the very

is not how do you compete with direct competitors of yours at prudential or the black rocks or the pimco's? us, 100 $40 billion of third-party asset management is a big number. was zero.ago, it that shows how we have grown the business and how we are thinking about continuing to grow it over time. there are a lot of very large managers out there but it comes back to what i said previously. there is a role for an asset manager who can identify unique capabilities and provides services and performance to clients. that is what we're focused on. is a lot of pressure on asset managers like yourself. these are something you also have to fight for as an investor. to what degree would you putting pressure on private equity firms to find ways to co-invest in order to bypass those fees? steven: my general account investing hat on to answer that. we always look at fees we are paying but what is most important to us is the net return we are getting. i might not like the levels they are charging but -- erik: is that a general statement? levels let's say the fee we know are fairly high and certain alter

i prefer the word i learned from my former pimco colleague "correlated" because they are seeing the same thing. i think investors are underestimating the evolution of the central bank policy response. they will not remain the market's best friends forever. they are evolving to something different, but they are doing it in a very careful way. david: those of us who have children say it is "parallel play." you have been on the program before. you have a book that talks about fundamental structural reform and the need for that to get growth going. do. cranny green shoots -- you see any green shoots around the world or in the efforts of the trump administration? >> yes on deregulation. not enough on tax reform, labor market reform. you know me. recognition of the need. the answer is yes. is there design of appropriate measures? that is ongoing. the third step is political implementation. that is where the headwinds are. we see it in congress, in europe, france being the one exception now. but it is hard to be overly optimistic. it is wonderful you have recognition and are getting progress on

coming up, pimco's global credit cio. that is coming up at 10:00 a.m. eastern time. do not miss that conversation. the cash open is 10 minutes away. futures are positive on the dow and s&p 500. this is bloomberg. ♪ jonathan: tech is the year's top performing sector. getting some resistance. the nasdaq has fallen five of the past exceptions, underperforming the rest of the market. tony dwyer is still with us. you sounded the alarm on tech a month ago. the call has turned out nicely, looking at the performance since you mentioned that. the question is as follows -- is this you questioning the secular growth story that supported this particular sector or we saying that the price that was paying for it was too extensive? tony: i would say neither. i do not think there is any secular change. thank you for mentioning it, but in that note, we mentioned that when you have such broad participation of the s&p 500 index information technology sector index, making a 52 week high, pulling 44% of info tech components a month ago, when that happened in the past, you saw a 20% cor

., when janet yellen and pimco were driving monetary stimulus. what you are starting to see in europe right now is that monetary stimulus shifting to the cyclical economic areas like housing, so you will see more lending. there was a mention of copper, those type of things, where it lists the economy. it is this baton handoff, where in they acts as a switch cyclical part of the economy. we have had a more constructive you on europe. i would say germany is the epicenter, a global player within a euro region, and they are of all the places where we play in europe are benefiting the most. chart to's see a illustrate this point. the idea is monetary policy in europe has gone from a headwind in 2012 -- henry: i think there are two forces at work, one is ecb and monetary stimulus and this chart you brought up. this is the government going from austerity to becoming a contributor to growth. it is amazing. you had a 150 basis point drag shifting to a positive. that would give you almost 170 basis point list from the government not strangle holding. over