tv Bloomberg Bottom Line Bloomberg September 30, 2014 2:00pm-3:01pm EDT
>> from bloomberg will headquarters in new york, i mark crumpton. this is "bottom line." paypal as to spin off mobile payments gain momentum. as asts in hong kong swell critical 48 hour period approaches. home prices in the u.s. are rising him but ever so slowly. to our viewers here in united states and those of you joining us around the world, welcome. we have full coverage of the stocks and stories making headlines today.
peter cook examines indian prime in ther's rockstar tour u.s.. pro-democracy protests in hong kong. we begin with paul sweeney. ebay splitting off its payments through paypal. deal for ebay.g the stock is up almost 7% today. shareholders are certainly happy. carl icahn who owns about 30 million shares especially. investors have long pushed for the separation of these two companies. certainly carl icahn brought this issue to a head earlier this year. interesting because back in march, there was that tension between the ebay ceo, john donahoe and carl icahn. mr. donahoe said. great and from paypal was not a good idea. certainly carl icahn
shone a light on this issue. that isa transaction good for shareholders in that it highlights the value of the paypal business, which is a faster growing, higher multiple business. a lot of investors thought this should be trading on its own. a separation reflecting the fact that the mobile e-commerce payments business has gotten much more competitive in the last year with the entrance of certain big tech companies such as apple. >> the competitive landscape has changed since 2002 when ebay bought paypal. with today's trends towards mobile, there is also apple pay as a potential competitor. how does this spinoff played to the competition? >> the apple play was a big announcement. anytime apple gets into any consumer business, that's big news. the folks at paypal have long felt that this is a fast-moving
business him an ever-changing business, increasingly competitive business. they have felt that they would be more nimble and more able to react to the changing marketplace if they were stand-alone company separate from ebay. competitive standpoint, the paypal folks feel like they are in a good position to compete against whatever new technology may come into the market. towe're going to talk about individual companies. how will paypal and ebay benefit from this move? >> for paypal, it's the autonomy of being a public company. giving them some freedom to make some acquisitions in terms -- focusing on some mobile technology to help them be competitive in a business that's becoming more mobile. , it'se ebay marketplace less clear to me what the benefits are of separation. it's in ebay's best interest to maintain a strong close relationship with paypal. that's a big part of the value
proposition that ebay provides. clearly, i think the real winner here from a strategic standpoint is the paypal business. >> thank you so much. we have breaking news from the obama administration. we are getting information to telling payments made to doctors by drug and device makers. let's go to olivia sterns. , thecording to this report affordable care act mandating new levels of transparency, we know u.s. drug makers and medical device makers paid u.s. billion in payments over the course of just five months last year. this report covers over 4.4 million payments that were made out. but several hundred dollars each on average. the purpose of this report is to expose the relationship between doctors and hospitals to show whether or not they may be
favoring certain drugmakers or medical devices because of corruption allegations. some missly, practices blame for corruption. this is the first time this type of data has been released by the government. it is just for a limited period of time. it's incomplete because some of the companies involved were able to delay their reporting process so they won't be included in this report. some names are de-identified. by 2015, all company names and dr. names will be identified -- names will be identified. it's going to take more time to figure out -- to dig through these hundreds of thousands of names to find out which companies were paying out the most two doctors at which doctors were taking the most amount of money.
.> olivia sterns, thanks tomorrow is the one-year anniversary of obamacare. judd gregg will join us on bottom line. we will take a look at the highs and lows of the affordable care act. pro-democracy protests in hong kong are getting larger on the eve of a two-day holiday that may bring record numbers of people to rallies. mia was recently based in our hong kong bureau and she joins me with more. >> it's just after 2:00 in the morning in hong kong and the city is marking a two-day holiday for national day. thanks, schools and most businesses will be closed. many have had to shut down already because of these protests that have been popping up across crucial parts of hong kong's districts him including central. these are known as places where
it's so easy for protesters to get to. despite a big thunderstorm that happened right before midnight, no one budged. said people opened up their umbrella. that's quite symbolic because this revolution has been known as the umbrella revolution. the color yellow has been embraced as the color to embrace hong kong's democratic goals and ideals. people continuing to protest. the protests are going to continue. in terms of the police presence, the right police are the streets. they had a visible presence on monday and sunday. that police in general have taken a step back. they are having more conversations with people, joking with those protesters. it's turned into more of a jovial atmosphere. >> what about the chief executive? >> he's the chief executive of the city, similar to a governor here.
tosaid he has no plans resign. he will continue to serve. he was bedded through beijing. many people say we need someone who does not support the ideals that beijing has put forward. you're going to hear the actual people of the movement speak in victoria park. you will see, because of the fact that schools and businesses are closed, a lot more people. tomorrow is the make or break day. thank you. there is more unrest in the middle east. fighting intensifying on the syria border. to -- heambassador joins me now from salt lake city, utah. welcome back to bottom line. >> good afternoon, mark.
the united states not anticipate that sunni islamists would take control of iraq after the american peacekeeping forces left their three years ago? >> i think it was a mistake that they left. i understand that they were asked to leave. they should have anticipated the islamists would come back. they were embedded there. that thehas known front was developing strengths and that al qaeda was very active there. -- thisn the criticism fight could take years. do you share this concern? later. came the front went over to syria. the powerbase that isis has
developed will be very difficult to eradicate. it's going to take door-to-door operations to do that. i don't think we are prepared to do that, nor are our allies that have agreed to be part of this coalition. in iraqas regime change failed to bring about democracy in that country? >> my philosophy is that the regime change in most cases will not bring democracy as we see it . in a tribal society and you have cultural differences, very difficult to unify a country or find an individual that can do it. you do a regime change, you better be prepared to know what the end game plan is. >> should syria have a role in this fight? should the nine states work with assad -- united states work with assad? >> although the president assad
is a dictator, he's the best option at this point to help to bring a conclusion to the isis situation. going into -- isis and the other have broughtps disdain against the united states. assad and work with later discussed the issue of how best to have a change in government, if that is what we want to accomplish. look at libya. the change their did not help. that will happen in syria if we are not careful. if we can switch to the ebola crisis. i know the continent means a lot to you. you spent a lot of time in sub-saharan africa. how would you assess the international response to the crisis? sending the troops over there may or may not have been a wise decision. we need to have a lot of input
from around the world. areas where we need a large coalition of experts coming from everywhere. the military can help to keep order, but you're not going to help with the eradication of the problem, which is now escalating well beyond where it should have been. >> mr. master, always a pleasure to have you on. thanks for your time today. in u.s.p, a slowdown home prices. we take a look at the housing market as tight credit and limited wage gains challenge homebuyers. stay with us. ♪
>> welcome back. u.s. home prices are slowing down. the s&p home price index increased to 6.7% in july, posting the smallest 12 month gain since november of 2012. michelle, welcome back to "bottom line." sales of existing homes in the than theyver 5% lower were one year ago. what is causing this pullback? last year was very weak. part of that had to do with the spike in interest rates we had seen in the summer. part of it reflects the fact that we are seeing a streaking amount ofa shrinking transactions. -- thisgate, holmes
spring, the home sale numbers looked a bit stronger. this last month, conditions deteriorated a bit. >> why our investors seeming to take a step back from the housing market? a lot of institutional investors were snapping up properties. >> it's been slowing down for some time. it reflects a few factors. you don't have the same amount of properties to buy. one of the foreclosures have moved through the pipeline. a lot is concentrated in areas where it's a bit harder for investors to buy in bulk. there is more paperwork, more time. the other issue is that home prices have corrected a lot already. digit home price appreciation last year. you don't have this deep discounts. >> you talk about the distressed
part. has that part of bated right now -- a bated right now? are seeing a lot more voluntary buyers and a lot more voluntary sailors -- sellers. the inventory numbers are starting to pick up on a year-over-year basis because sales have weekend. -- weakened. that reflects a rising home prices are met. people starting to realize it's become a better time to sell a house. to me, these are good dynamics. there is still a lot of broken elements. we are making some progress here. >> let's talk about the geographical breakdowns. las vegas jumped out. a 13% home price increased from one year ago. in 2013, the increase was nearly 30%. we are seeing the decline in
vegas. >> vegas, phoenix. these are areas that have a great deal of distressed buying. a lot of investors came in a few years back and by prices create that. that trade is largely done in these areas. prices have increased to the point where they are at or above their valuation. as a result, price appreciation ascetical. -- is set to cool. on the one hand, you can say it's a positive that inventory has been extremely slow. markets have been very tight. -- it canes supply lead to greater turnover and greater turn in the market. supply does mean you should continue to see moderating home price appreciation. >> why has credit been so tight?
>> why are we still sing tight credit -- seeing tight credit? challenge for the the housing market right now. we are not seeing the real opening up of credit. we are day before october 1. headed into the final quarter of 2014. this home price deceleration -- is it going to continue through the remainder of the year? >> i think it will. i think prices are set to cool. are looking for home price 4%.eciation for next year, thre 3%. the double-digit gains are not sustainable. -- data we have seen so far we are holding to our core beliefs. going to get septembers jobs numbers on friday. >> we are a bit above consensus.
growth, which is number of men from august -- which is an improvement from august very low number. up?hat number revised >> bit closer to a to handle. closer to 200,000 or so would be reasonable. that is something a lot of market participants will be keeping a close eye on. >> are we going to stay the same? >> it shows that the trend is continuing to come in between 200-225 for payroll growth. which is what we're seeing in the rest of the economic data. >> thanks so much. stay with us. "bottom line" continues in just a moment. ♪
the hour. that means bloomberg television is on the markets. matt miller fresh from detroit is back with the update. another down day on wall street. >> not too bad as far as the losses are concerned. we are looking to end this quarter on the s&p index up for a seventh straight quarter. seventh consecutive quarterly gain. the dow down 45 points. the nasdaq off about 20. ford -- the automaker says it will miss full-year profit goals. it will also have a billion dollars of warranty and recall costs this year. johnson & johnson, the company is buying privately held alios viropharma.
>> welcome back to the second half-hour of "bottom line." i'm mark crumpton in new york. the leaders of the world's two largest democracies met at the white house today. and thent obama indian prime minister are working to bolster the u.s.-indian relationship. how did the meeting first go? >> both sides reporting progress. they're prepared to expand cooperation in a range of areas according to president obama and the prime minister. they discussed economic issues,
including global trade. they talked about a range of issues in a meeting at the local office -- at the oval office. this is the centerpiece to moti's five-day visit to the nine states. he's headed up to capitol hill. they squeezed in a quick trip to the martin luther king memorial here in washington this afternoon. meetingicials saw this as a pivotal moment to reinvigorate the u.s. india relationship. landslide election allowing them to reset the relationship when it comes to economic ties. >> we have so much in common. it's critical for us to continue to deepen and broaden the existing framework of partnership and friendship that already exists. >> two areas of cooperation
expected here specific agreements on that have to do with climate change in the defense industry. the prime minister telling reporters that india is going to be open to u.s. business. with leaving washington the hopes that u.s. companies are going to invest in india. >> where does between these two countries stand right now? >> there is certainly room for improvement. both sides can see this word think such large democracies. $65 billion in goods trade roughly last year. $100 billion a year when you factor in services. ranks at just 11 in u.s. trading partners at this time. the potential trade between these two countries could be closer to $500 billion a year. that's a long off: this point. the prime minister spending a lot of his time trying to lure
investment from american companies. he met in new york with a number of ceos. has more meetings with business leaders here in washington today. delivering the message that under his leadership, he's going to get rid of the red tape, the obstructions to u.s. companies being able to invest in india. that is one take away so far from the strip. >> peter cook, thank you. more now on our top story after nine months of pressure, carl icahn. what he wanted. ebay will be splitting up paypal. trish regan joins me now in studio. he talked about this earlier with paul sweeney. said this ebay had separation was not going to happen. >> he was on with me about eight months ago saying he absolutely
thought this was the worst thing for the company. there were some new synergies between paypal and ebay. they needed to stay together. carl icahn was insisting these are two different companies doing two different things. he kept saying it's very hard to recruit top talent when all you have to offer is ebay. whereas paypal is more of a tech company where you can get better people in if you are reporting -- ebay stock had gone nowhere for quite some time. think -- this is not a new idea. carl icahn got on the bandwagon for this one. a little bit later than most. ebay and paypal are two separate ideas, separate companies. paypal has been getting the majority of its revenue from outside if ebay -- outside of ebay users. it had become a real entity.
recognized that as well. when he pushes for it, it gets more noise. street smart coming up at the top of the hour. talking with the ceo of imax. we are going to be looking at a new business model in hollywood. teaming up with netflix for the release of a sequel to crouching tiger hidden dragon. it's different in that you have it in the movie theater and netflix at the same time. street smart with trish regan at the top of the hour. coming up come argentina finds another way to go around the u.s. court ruling on its debt. ♪
>> it's time for today's latin america report. argentina makes another move to get around the u.s. court ruling banning it from hitting its overseas debt. depositing $161 million from bond payments in a state-run bank. this complicates things, doesn't it? >> it does. what they have done is they've had originally asked for the original bond trustee to step down from their position. prohibits in the u.s. this money being transferred to bondholders because i haven't paid -- they haven't paid holders from 2001. argentina has -- even though the intermediaries has not stepped down, they deposited the money in a local argentine bank.
they're basically saying the money is there, come and get it if you want. >> was this a run around the federal judge's ruling? >> absolutely. it comes a day after they were found in contempt of court. is against the law in the u.s. and people who aid and abet argentina in doing this plan are going to be found in contempt of court as well. it's a very hairy situation. even though the money is there -- bar in holders to pick up for bondholders to pick up, it could be risky if you are scared of court action. >> in argentina, they believe the judges ruling is against the law there because they believe this is meddling in the financial affairs of a sovereign government. >> absolutely. , twou have two countries very different views on this -- they are found in contempt of
court here in the u.s. what can we actually do to punish a country? they can find them every week or so. fine them every week or so. what can you actually -- how can you make a country pay a fine? how can they punish this country? >> according to the contempt order, the fine was what? $50,000 a day. until it complies. is that something that is feasible? >> we will have to see. the court will have to figure out how they're going to punish them. there has been talk about other ways they could punish them because this is a diplomatic situation. perhaps something along the lines is broader -- government not allowing certain jewels to
go through. clearly, they don't seem to care that they are in contempt because one day after, they just went right in the face of the judge and did what the judge told them they could not do. >> you have two sides who were either talking across purposes or just don't believe each other or just don't trust each other or just don't like each other. the statement about the contempt ruling was that it had no practical effects be on providing new elements in what they called the defamation campaign being waged against argentina by vulture funds. how can this get resolved? >> you are spot on in terms of all the different problems these two have appeared from the personal to the technical. there is a lot at stake here. >> this has gotten very nasty. >> now, it's about you are impeding on my sovereign ability to do things as a country. i have the right to do whatever i want.
perspectivena's among the u.s. saying they in contempt of court is just mo re fodder for them to fight this at a higher level. u.s. is sovereign, too. with more companies based in the u.s. and more bondholders, they have the weight. >> to be continued. thank you so much. that is your latin america report for this tuesday. bond investors getting the jitters. a look at what investors are doing to reduce risk in the debt markets. "bottom line" continues in just a moment. ♪
programs. thank you so much. where is the risk is priced to be in the bond markets right now? >> the riskiest places any part of your portfolio you have not visited in a long time. things lurking in the back of the closet that you really should pull out once in a while. i say that because we are getting into the sixth inning of the credit cycle. you want to be careful the credits you own our bonds he would rather be married to. >> are there any safe havens at this point? >> we have debated that quite a bit. the obvious one is cash, which you still have inflation at 2%. would i think the best solution is, a spectrum of investment
types. return focused on capital preservation. on the other end is more total return. and higherreciation volatility. on the extreme safe end of the spectrum where you can do long shorts and hold cash and trades that are not correlated to the rest of the market, those types of investments are nice and safe haven to add to your portfolio. >> has a generally been increasing with cash allocations this year? >> we do have certain funds that are holding more cash than normal that were well-positioned for the volatility that we are seeing. those are the funds that tend to be more capital preservation oriented. other funds we have -- we've taken our cash balances up and down as opportunities have entered the market. question i always ask the
guest is about the geopolitics. russia scared the market a bit today. what are the geopolitical implications of people were either married to work inning what they have? >> the geopolitics are important because they can spook the market. spook people into selling where there is risk. a forced want to be seller at a time that everyone else is selling for the studio political reasons -- for those geopolitical reasons. >> how do they get scared and say this might be an aberration or a phenomenon? >> here's a great example. thes say you own a fund and world that fund -- and it's the world debt fund. we have news out of hong kong. that's making me nervous about the bond market. i'm going to sell this fund. if you have an active manager, that manager would have avoided those places or short those
places to protect capital. understanding what you own and not just selling it because of the name. >> in fairness, the unconstrained funds have not outperformed. they've been underperforming. in a market where there is not so much volatility -- how much of an edge can you really have until there is true volatility where you can keep cash? bonuses -- you think about the unconstrained space, you have more capital preservation. you also have the total return oriented funds. they can go anywhere in the world. this is their environment. we've seen high yield in the u.s. selloff. european high-yield. we talked yesterday about the mexican peso. that might be an interesting trade for those types of funds. there is plenty of opportunity
for active managers to pick up some good trades >>. --the druggie affect over i' >> he says he has cast a spell on the market. it's a good spell for the credit market. in addition to the asset-backed securities purchases, there is speculation they may also by peripheral bonds. what you do -- central-bank buying leads everyone else to take more risks. >> how concerned are you about increasing amounts of leverage and from they side investors that have been boosting leverage? >> from the corporate perspective, what we have seen leverage start to pick up, it's been healthy.
the companies have had earnings and you've seen that in the last earnings call. that doesn't concern us as much. this is an environment where you want to be careful who you lend to because interest rates are so low. you don't want to lend to a company who keeps increasing therage and doesn't have those more highly leveraged companies and bad sectors versus companies that have stronger fundamentals even if the leverage has gone up a bit. we will have to leave it there. ladies, thank you both so much. another check on the market movers is on the other side of the break. ♪
means bloomberg television is on the markets. let's get you caught up on where stocks are trading. board.ross the not much movement on the dow jones industrial average. the s&p had been up and down and is now down. still looking to close out this quarter for the seventh consecutive quarterly gain. index showing that prices rose at the slowest pace in almost two years. still rising, but not as fast. for more on the housing markets, through reading is with us for today's sector report. talk to me about what you saw in the most recent report. .t's always a mixed bag >> it really continued the trend
we've been seeing over the last eight months. prices are starting to a decelerate. -- starting to decelerate. you have more inventory coming to market. the depressed inventory levels are one thing that helped drive prices higher. you have decreased affordability. ability -- the >> the deacon 2008. -- the peak in 2008? >> the postrecession peak. >> still affordable if you are thinking about the mindset of 2006. it's always a broad -- what u.s. cities -- 20 u.s. cities is a lot because there's a difference between phoenix, arizona and what's going on in san francisco, california or new york city and pittsburgh, pennsylvania. >> you're seeing that within home sales. local economies are really driving the market.
we still and phoenix, have 13% price appreciation. that has come down a lot because those investors have started to pull back. >> that's not a lot of price gain for those areas. aey had been exhilarating at much higher pace because they came from such a low bar. they fell hard. such a were coming off low base that the percentage gains were large eared largely driven by investors that came into the market scooping up those distressed properties. you are not seeing the same type of price appreciation. >> what are you seeing on the coast? san francisco, higher prices that don't move a lot. where pricesbout are rising perhaps the fastest and strongest, you're looking at the west coast. you mentioned san francisco. pricing has been strong. that is driven by the job market up there.
>> welcome, everyone, to the most important hour of the session. 59 minutes to go until the close. ebay decides to spin off paypal. a former pimco money manager has accused the firm of atf manipulation, and hong kong prepares for a fifth day of former pimco money manager has accused the firm of etf manipulation. hong kong prepares for a fifth way of protests. i want to take a quick look at the markets. stocks paring earlier gains. the biggest drag on the market today is energy. the sector is down more than 1% with oil taking a big hit, suffering its biggest drop in over a year. crude oil