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tv   Market Makers  Bloomberg  January 22, 2015 10:00am-12:01pm EST

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>> life from the world economic oregon in davos -- world economic forum in davos this is a special edition of "market makers." >> the central bank launches an unprecedented bond buying program to fight off deflation and boost the economy. >> one thing going on. how about this? a breakthrough in the war on poverty. the world's richest man says there will be historic improvement for the poor in the next 15 years. i sat down with bill gates. >> the dell founder on how technology is reshaping the
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global economy and what about the threat of cyber security. >> the morning, everybody. you are watching "market makers ." >> do we need to tell you where we are? >> we are at the world economic forum in davos switzerland. >> we have to talk for a moment about the ecb. mario draghi is going big all in. the ecb president announced a $2.3 trillion asset purchase plan, better known as qe. bigger than expected. investors have responded by selling off the euro. hans nichols was at the news conference in frankfurt, germany. you have to explain this to us. this is a massive number. we were saying what about 500 million -- billion? i'm having a -- like the movie
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with dr. evil. and austin powers. >> here is what we know. here is what mario draghi just said in frankfurt. remarkable in so many levels. 60 billion euros a month through december of 2016. they get you up to 1.1 trillion euros for all asset back securities. and crucially, it includes it sovereign debt. here are the limits. 25% of each issue no more than 33% of each issue r. in terms of losses and risk sharing, there are some complications -- 20% of the new assets, there will be risk sharing with them. when he was talking about the
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economy deflation, he was not overly optimistic. certainly was not brimming with optimism. >> economic slack in the euro area remains sizable and developments will continue to be subdued. >> he opened up the possibility of eventually, but essentially buying greek debt -- potentially buying greek debt. the other issue on whether or not the decision was unanimous here's some burble to gnostics. -- verbal gymnastics. the idea on the need, the imperative to do it now, that one was not unanimous. we will try to find out where the votes were. political reaction in germany could be difficult.
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>> thank you for giving us the latest. >> day after day, it seems like we have the perfect person sitting beside us to respond to the most immediate news developments. it continues, everybody. steve schwarzman one of the founders and current ceo of -- let's talk about qe. a logical place to start our conversation given what mario draghi just announced. it is different from what the fed did. will it be as effective in europe? >> the west was pretty effective, even though they did it three times. europe needed something but also needs financial reform, which is a different issue. one could argue that this type of approach that mario draghi is using should have employed much
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earlier in the financial crisis which would have gotten europe on a similar kind of platform that the u.s. has been on. it is never too late to do the right thing. >> as far as the effectiveness goes you say qe1 effective in the united states. it raised the prices of risk assets and helped to bring down the cost of refinancing homes and a number of other things. it was not perfect. it seems like it will be harder for some of those things on this continent. >> interest rate levels are much lower than the first qe. it is symbolic in a way, provides liquidity to the system. it is difficult to get decisions made in europe. we have only one country in the united states. the fed can do what it wants. in europe, the ecb needs the support of the constituent countries. >> you see it as a positive?
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>> getting support from 17 of anything for anything is not easy. >> sounds like blackstone managing. >> it is good for them to be doing. >> you said you believe western europe has the best opportunities. does this announcement change that? >> potentially it could provide more growth. we have been behind a lot of real estate assets. the biggest purchaser of real estate in europe for the last several years. assuming there is no growth in the economy to the extent that this provides more life, for us that is a good thing. >> a good thing for you and a good thing for your clients. who is it not good for? >> i think it will drive interest rates lower. they are already quite low for certain assets. >> punishing savers?
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>> it lowers the value of the euro. four people on the wrong side of that it's not a good thing. for exporting, it makes them more competitive. >> you have an opportunity to see a lot of your clients and potential clients. what is their appetite like for what blackstone has to offer today? >> there's a huge trend going on for alternative assets. >> what do you define that as? >> private equity high-performance real estate leverage real estate that needs to be turned around. hedge fund asset class and debt securities. on certain asset classes, we have averaged around 1000 basis points over the s&p for decades. what happens when you have good
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managers and good asset class investors should want to give that type of investor more money because the returns are higher. >> are there enough opportunities for the money you have to invest? >> there is. you have to be careful. certain asset classes are a little hotter concern places -- in certain places. when the world is your oyster and you are in every kind of potential purchase or investment , you have enormous collected -- latitude to innovate. >> you had a no love for russia last year. we talked about it in these chairs saying the rule of law, not sure. fast-forward, here we are. >> i guess that was correct. >> things have gotten cheaper. >> russia presents a significant
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issue for europe and the world and for russia itself. every right-thinking person would like things to become normalized. i am hopeful that something can be resolved. it will add to european growth and russian growth and a general sense of stability around the world. >> if russia is stone cold, what is too hot? you said some things get too hot. >> i will have to think about that one of little bit. -- a little bit. for a while, it was junk bond spreads. i think there will be a slow easing, slower than people think. >> pushing into 2016? >> i did not say that.
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you just said that. i said slower. that may mean either amplitude or timing. in terms of things we are really would like you are not a buyer of -- >> you are not a buyer of private private equities. >> public equities are more in a fair value. growth is lower in terms of earnings and revenues on an s&p 500 than the companies we own our growing significantly faster. there is a slowdown in growth public equities will feel it. our businesses are growing around 6%. we have 1.5% inflation so 4.5% real.
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it was higher last year than what we are looking at for this year. marginally slower but compared to where we were several years ago, this is very good. >> have you learned anything this week that is making you change your views in any way? >> being here at davos? >> you've met with a lot of people. >> the dominant consensus here is worried. if you are not raised in the unites states, there is not -- in the united states, there is a lot to worry about. if you're in latin america or the middle east or russia were certain parts of asia, things are slowing down. if you meet an indian from the subcontinent, they are really happy.
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there is enough geopolitical issues on the table, whether it's isis or other types of problems we seem to be having around the world. there is more caution in the face of the strong u.s. >> the u.s. is strong and unemployment is dropping and growth seems to be steady. there is a new party in charge of congress. what are you most optimistic about in terms of legislation? >> they can make progress on trade. for sure. that is something that president -- it is something that is good for america. they can make headway there. a number of people would like to make some headway on immigration
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and parts of immigration. there is quite a positive view by the republican leadership they would like to get some things done. that is good for the country. he is trying to figure out what he's doing. >> do you want him to run? >> it's a question that's up to him. i think he's going to have to look at pulling stuff. that's polling stuff. i'm tried to see what he is going to do -- trying to see what he is going to do. how was the world perceiving him? he's a terrific guy. an old-time friend of mine. we bought one of our first companies with mitt and he
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bought one of his first with us. the returns were similar. one deal was 17 times profit the other was 24. it's a serious decision he's going to have to make. the previous run was not successful. the world is complicated. this is not a decision anyone should make lightly. >> are you committed to him over jeff bush? -- jeb bush? >> i have not met with him recently. i been out of town -- i had been out of town. i like both of these guys. i have very positive feelings about mitt. i know george much better than jeb. there are so many excellent
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candidates. not to be political but if you compare the list of people were considering running for president this year on the republican side, with the group the last time, it's like a complete changeover. i'm hopeful that however the thing shakes out, there will be some is strong, bright clever -- someone strong, bright, clever, accomplished. we need someone in that chair that knows how to do stuff. >> so great to see you. steve schwarzman, chairman and ceo of blackstone group. >> we have a lot more to cover. we had to get back to the ecb decision. our team in davos caught up with uk's chancellor to get his reaction. >> this is welcome action from the european central bank.
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action from a central bank is necessary but not sufficient. we want to see this company by earlier plans to make european continent more competitive. to create jobs, to make sure public finance is in order. we have all those ingredients in the u.k.. our economic plan is delivering a stronger economic recovery. we want to see that in place on the european continent so the whole of europe c recovers. >> coming up, bill gates. stick around. ♪
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>> will gates changed the world with microsoft and spent the years trying to change it in a different way. -- bill gates. they released their annual letter making a big bet that over the next 15 years, living conditions of the world's poorest people will improve more than ever before in history.
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i asked bill gates why he is so confident in making this protection. >> there is a lot in the pipeline, whether it's medicines or the way people bank or get educated. we see people that care about these issues and our ability to communicate and draw people in is better than ever before. our bet is that this next 15 years will be fundamental for the basics. kids are surviving, people having a bank account. for a country to do well, you have to get nutrition to its citizens, the health of its citizens, the education level of citizens the financial power meant up to a certain level. by having these tools some of which are vaccines or mobile phone-based delivery, the lives they lead, the economy will be
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self-sufficient. >> what specifically has changed in the 15 years since you and melinda started the foundation to create breakthrough opportunities in the next 15 years? >> the childhood deaths is one where there had been a lot of work done before we got involved. but not ruled out. since 1990, that has been cut in half. many have -- we now have vaccines, some of which are still in the lab, given the full 15 years we will be able to get those to all the world's children. scientific understanding keeps advancing. understanding hiv malaria, all these different diseases. understanding nutrition what kind of seeds are productive what kind of diet do you have to have come out -- how to teach
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farmers to grow more via variety to maximize their output. >> what is more important? technological innovation awareness and support for what you're doing or the sheer amount of money being invested in the kinds of programs you support? >> all of those are pretty important. you have to multiply them together. without the science we could not make the better seeds or vaccines or have digital money. without the donor generosity getting these things out to those who need them the most, it would not happen. there is no market mechanism. the vaccines would be going to the kids at least risk of getting sick and not at all to those who have a very high risk of getting sick. to have governments come up with that money, you need this broad awareness.
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people encouraging these governments, even though these people are away and not often seen and these debts are one at a time and not a one-day tragedy, it does grab people this ongoing set of diarrheal deaths or pneumonia debts that if you have an awareness of that , you volunteer time or get some money but you will make sure your government takes some of its resources, even 1% would be very generous and get that out to poor countries. >> i will have much more of my interview with bill gates in the next hour. "market makers" will be back in two minutes. ♪
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>> when we come back from davos , switzerland -- you will see
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the interview when we return. >> you are watching a special edition of "market makers" davos style. ♪
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>> live from the world economic forum in davos switzerland this is a special edition of "market makers." >> this is indeed a special edition of "market makers." i'm erik schatzker. >> i'm stephanie ruhle. while we like to think all of the news is happening right here , a lot is, but not all of it. the top global business stories of the morning. >> it is a new era for the european central bank mario draghi today committed ecb to a $1.3 trillion bond buying program.
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$70 billion a month until september of 2016. everybody is in favor of quantitative easing. germany was a post. -- opposed. mortgage rates falling to the lowest since may of 2013. the average 30 year fixed-rate mortgage was 3.6%. this comes just a day after words that housing industry just wrapped up its best year since 2014. shares of family dollar have improved after a takeover by dollar tree. dollar general made a larger offer but a proxy advisory firm said dollar tree's offer was going to face fewer antitrust roadblocks. sheldon silver surrendered to the fbi. the case involves payments from a law firm that specializes in
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seeking reductions of real estate taxes. silver says he hopes he will be vindicated. >> thank you very much. here we are in davos switzerland. one thing that always perplexes me is why so many billionaires come here. i can understand why policymakers come here. why the billionaires -- they have it all already. when i sat down with michael dell took his company private a year ago. we had a conversation. i asked them, why do you come here? >> i like meeting with our customers. a lot of big companies around here we do business with. it's interesting to pick up on the feeling of europeans. >> what are you picking up? >> there always pretty fearful.
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you come away a bit pessimistic than you came because they tend to worry a lot. we see with the emerging markets and all the digital opportunity greater opportunity -- the u.s. is doing well. our own business is doing well so we are more optimistic. >> do these conversations you have influence what you do let dell -- what you do at dell? you think i will do something different? >> one of the things talked about here you can control. they give us helpful context. what is going on, what our customers worry about. >> what is the most interesting thing you've heard here so far? >> i have heard, there is a lot of nervousness about the digital
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transformation. how do companies adapt to that? we're helping our customers do that. it means more opportunity. a lot of discussion about cyber security. >> sure. those are things everybody seemed to be struggling with. what to anticipate in the wake of technological change. how will it transform the economy? and how to adapt to that. and then cyber security. how much money do you need to spend to protect yourself? >> the threats are merging all the time. in digital transformation, they seem to companies coming into their space. we are working with new companies as well. that is a big part of what we do
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in i.t. services. in cyber security, we see 80 billion events per day. spending a lot in threat analysis and understanding who all the bad guys are out there. what they are doing, what kind of tools they are using. we're helping protect our customers protect their information and valuable intellectual property from threats. >> would you say technology is going to be a job creator or got destroyed? -- job destroyer? >> all technology creates and destroys jobs. take the wheel. it created some jobs but also killed some jobs. i tend to be more optimistic. there is a substitution effect when technology can replace jobs. moreover, the bigger story here
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is how do you reimagine things now that you have technology and reinvent them? if you take the technology and plug it into the old way of doing things, that makes it more efficient and productive. you have to reinvent and reimagine all the possibilities now that you have all these tools. >> you talk to me about the benefits of being a private company. there are many. >> i'm still convinced. >> there are lots of ceos out there still struggling running public companies. who out there do you admire the most? >> we learn a lot from our customers. all companies are trying to change and evolve. the challenge that any company
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has is that technological change is much faster than the rate of change of organizations and even individuals. >> hence the struggle they are having. >> if you think about the next 5-10 years in the context of the last 5-10 years in terms of your people and organization -- >> who is getting it right? when you look at big companies who do you see making the smart decisions? >> it's a good question. we are actively helping our customers engage in this new digital age. you have to experiment and take risks and dive into the new domains aggressively. you can't sit back and watch it happen. there are plenty of good examples out there. >> given these tremendous benefits you have found in
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private, will dell go public again? >> we don't have any plans to go public. we are enjoying being private. >> if the company doesn't go public, what happens to silver lake? they have made money on the investment already. eventually, they will want to resettle the capital. >> they have not indicated any intention to do that. there are plenty of ways to resolve that. >> are you in a position yet to be a consolidator in your industry? >> we have been growing share for the last eight quarters in a row. during the calendar of 2014, we had the fastest growth rate of the top three companies both worldwide and in the united states. we think it will keep going.
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there will most likely be further consolidation. you can count on us to be a consolidator. >> in terms of market share gains or buying things? >> both. >> if you think about buying things, how much spending power you have? >> our capital structure is strong. we have additional equity that can be treated if needed. -- contributed if needed. to the extent that opportunities present themselves, we are ready and able. >> big bucks? >> sure. >> how do you define big? >> i'm not going to go there. capital is not the issue. there's plenty of capital out there. >>'s hp were to sell its pc business, would you be interested? >> i would not want to speculate on something like that.
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there is consolidation going on across the whole ip sector. we are well positioned to be part of that. >> there is additional equity put to use if necessary. a lot of your wealth is tied up in dell but a lot is not. let's go back to those conversations about the economy and monetary policy. how are you investing the money? >> i have this great team. and have been doing this for 17 years now. i pretty much leave them alone. >> my conversation with michael dell. look how relaxed he was. >> how relaxed he was? look at the year he just had. wouldn't you be?
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>> life is so much easier for michael dell. you can tell. >> relaxed and happy. carl icahn probably does not have that view of michael dell. we will be sitting down with a man putting in a 100 hour work week. are watching a special edition of "market makers." ♪
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>> welcome back to "market makers." i'm stephanie ruhle. we are with christian meissner. i'm guessing you had one outlook for 2015. now that we have seen some of market volatility, has it changed? >> probably a little bit. basically, the underlying focus
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for us is the recovery among financial institutions. that is good for our business. >> is this volatility affecting mna flow? >> not in the short term. as long as markets stay relatively friendly, which they are and the need for mna is still there which it still is yeah. >> it took years for conference to return in the unites states. the ecb just announced quantitative easing in europe. how long will it take in europe? >> i don't think we are starting from the same place. european ceo confidence has been improving for some time. relatively speaking, we are pretty far off. this will be a positive.
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it is a factor that really guides the thought process. >> the specter of activism hanging over but what how long has that been the case -- -- >> how long has that been the case? >> a couple of years. >> handful of investors have changed your business entirely? >> they have had a big impact. we have been forceful advocates. that has driven activity. in europe, it is a minor factor. i suspect that will increase of it -- a bit. >> what has taken them so long in europe? >> the environment is different. you need a different level of social consensus. what do employees and employers and governments and so on -- governance is different. the shareholder culture is
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different. >> it is forcing them to think short term instead of long-term. >> there is undoubtedly some good that comes from it as much as there are decisions that are difficult. i do think there is something to it and sometimes people have to make short-term decisions that may be are against the long-term strategic interest of the country. >> how much of a struggle is it for an investment bank like yours to decide whether to work or not to work with activists? >> we have a strong mna franchise. our approach to this is that we like to work for corporate and management's. that has been our approach today. we are comfortable with that. the activists are big customers of the firm. on the mna site, we work for
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companies. >> what do you think of sports franchise valuations? it seems crazy. does it seem out of whack? >> when you think about the increase in the value of media rights and increasing -- sports is one of the few places. >> and bloomberg tv. >> a must have, without saying. when you think about it in the context of what is happening in the media industry more broadly, it makes sense. these are trophy assets and people are competing for them who sometimes think of them purely as investments or for other reasons. >> trophy assets for teams -- a team that can win. -- can't win. >> with monetary policy moving
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at different speeds now and the nights it's moving towards a tightening at some point and europe initiating quantitative easing, what does that mean for -- >> we have seen this boom in refinancing for a number of years. he has been coming to an end to some degree already. a lot of it is done, so at some point there is limited additional activity. we have been at a high level for three years now. i suspect we are at the peak or pretty close to it. >> how much lower levels likely to be in 2015? >> hard to say. a lot of it depends on corporate activity a big driver of this strategic activity. i suspect we will be hard-pressed to exceed 2014. >> will these low oil prices
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-- >> some of the weaker companies are changing their business models. >> how are you changing your firm to benefit as much as possible? everybody is doing the same thing. how are you getting the competitive advantage? >> i don't think this is something that just happens and you decide one day to focus on energy. this has been a core franchise for us for a long time. when we are in a tough patch, we stand by our clients and help them. >> bankers had a huge here last year. have you accepted that wall street has changed compensation? you are working 100 days a week -- i was week. -- hours of week. >> it is what it is. it is still a good living and good way to spend your time. you do interesting deals.
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>> what happened in 2014? did you find yourself in a position where your group had to subsidize the traders? >> you always ask me these questions. it is not a matter of subsidizing. there have been years when all the money was made on a certain part of the firm that benefit someone else and these things go up and down. you can't run a business like ours without a platform -- >> you just don't go with subsidizing. >> i don't think that is the case. we could not do what we do without a markets business. we work together. >> great to have you on. christian meissner.
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much like brian moynihan, ice runs through their veins. no jacket, no hats, gloves. >> what about me? >> you have a sweater on. >> coming up, the ceo of blackrock. ♪
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>> welcome back to "market makers." let's talk about what's going on on wall street today. we are seeing a rally based on the ecb stimulus that mario draghi announced today. that pointed to, the purchase of 60 billion euros worth per month of bonds around the eurozone. the s&p and dow are rising. we are see the euro falling to an 11 year low. as for movers in the united
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states, look at twitter today. as we had this unverified, unconfirmed speculation yesterday that maybe there was an activist taking an interest in amazon, there seems to be some takeover speculation about twitter. it is unconfirmed but we are seeing this happening in the markets as of late. financials are leading the gains right now. we have some earnings from the regional banks. bb&t beating estimates. crown castle also on the rise. we have a couple of important downside movers. american express announcing it is cutting 4000 jobs after its earnings missed estimates. discover financial also coming out missing estimates. that is a round up of some of what's going on on wall street.
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"market makers" after the break with more from davos. ♪
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>> live from the world economic forum in jobless, switzerland this is a special edition of "market makers." with erik schatzker and stephanie ruhle. >> mario draghi goes all in. the ecb comes out with a bigger than expected on buying program. will it work? we are speaking with the ceo of black rock. >> on the verge of a historic time. bill gates says conditions for the poor will improve more than ever over the next 15 years. i set down with the world's richest man for an exclusive interview.
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we are live in dabo swinney lead, i am stephanie ruhle. i have to send you back to new york to talk about the bulletin. olivia sterns has more. >> the ecb. an unprecedented move for the bank. mario draghi committed the ecb 201 trillion dollar bond buying program to fight off deflation. they will buy assets at a rate of $70 billion a month until september 2016. not everyone was in favor of quantitative easing. germany was opposed. nature banks will cut more jobs this year according to 83% of those responding to a bloomberg global appeal -- a bloomberg mobile -- bloomberg global poll
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. pricing its ipo after the market closed. chairs we offered at a discount. that is assigned that the box faces stiff competition. it is still not showing a profit. turning to pro football. new england coach bill belichick says he's is not know anything about the deflated footballs. the nfl is investigating the ball's used in the championship conference game. the nfl has found that 11 of the 12 foot walls were deflated. --
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>> i knew i didn't want to talk about it in a last 40 years. >> they will play seattle in the super bowl a week from sunday. mario draghi is not the only one worried about deflation. bill belichick is also worried. >> that was a good joke. >> let's turn away from olivia sterns with an exclusive interview with bill gates. you can see bill talk for himself and then you could make the call. every year bill and melinda
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gates released the annual letter from the bill and melinda gates foundation. this one is usually, there is usually a note of optimism. it is particularly optimistic because it prevents -- emperor dekes the conditions of the world's poorest people will improve more over the next decade and a half than ever before. in seattle, he went through in detail the progress that can lead us to that kind of a better outcome. >> in the next 15 years, we will cut childhood deaths in half. it took 25 years before. this would be down to dying before the age of five. for others we say we will cut it by two thirds. you have to have antibiotics.
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you have to be able to stop bleeding. in some cases you have to do c-sections. that is very much a delivery thing. the maternal part is about the quality of the health systems instead of delivering in a health facility. >> what about farming? >> we are funding the research centers that come up with better wheat, corn, and rice seeds. that is a global good. no single country -- and it is often underfunded. scientists are dealing with those. predicting a 50% increase in productivity. instead of buying $50 billion worth of food like today it
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will be self-sufficient and able to grow as much food as people eat on the continent of africa. >> you think by 2030 africa will be able to feed itself? >> that is the prediction. it is ironic that the continent , for over 60% of the people are farmers and they are buying food from the united states were less than 2% of the people are farmers. they are spending their money to have imported food. they have lots of land and labor. if we can get that productivity to be better they will not be spending their money on food from other countries. >> bill, some people are perplexed by the notion that bill gates, of all people, sees opportunity, the lunch --
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philanthropic opportunity in banking. how will that change the lives of poor people 15 years from now? >> banking is more fundamental than i realized. when you have a medical expense you do not expect, when you need to pay for a funeral or school fee the idea that you have to save up to buy seats at the start of the lighting season and fertilizer and that you only get the payment at the end of the season. if the weather has been bad some years you will get very little. is hard to tide yourself over. there have been attempts like micro-finance groups cooperatives -- about the transaction fees were too high. into a got to the digital approach where we avoid currency, bank tellers, and complex atm machines and we turned the cell phone into a
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debit card that you can transfer money to a relative in a rural area and to the shops. you can have a savings plan for the farmer. into your get those services with little fees onto the cell phone in digital mode, banking will only be for those who are better off. >> what is your bed for education? >> education is fundamental. if you can fix a society goes up . when kids go into a class they may have no experience with letters, words, or simple math. with the beauty of online technology apparent will be able to expose the kid to letters, numbers, and games. the software will get a sense of the level of knowledge and make it interesting and challenging to give that kid a sense of progress.
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not only will we have classroom learning, we will have software delivered through the phone or tablet -- different screen sizes connected to the mobile network which connect to the internet. the quality of that software, including the pre-forms, 15 years from now will be so dramatically good, that as you go through life, in a teacher can go in and see what you are good out and what is tough for you. it may education more productive. particularly for motivated students. they will no longer be limited by the material in the classroom . >> the optimistic bill gates predicts the conditions for the world's poorest people will improve in the next 15 years dramatically. stephanie, and you sit down with bill gates -- >> he is not just participating.
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he is creating that change. that is what is extraordinary. >> i had the opportunity to sit down with bill gates and draw connection between the work with the lather fee and the efforts he is making to improve things for poor people and the efforts that other people, like central bankers, like mario -- >> i think he is having more of an impact than central bankers. >> there is a lively debate about it. >> it is good for small numbers of people. bill gates has done an extraordinary amount for poor people. >> we talked about the post crisis global economy and the global efforts to stimulate growth. >> we have the aftermath of the collapse of the credit bubble. what you're trying to do is to get people to not be too conservative. you are encouraging them to
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spend. the world economy is coming back somewhat. the eurozone still as a challenge because of their ability to manage very different economic results within the framework of a single currency and no common fiscal policy that the u.s. is exhibit a that spending has gone up, the job market has gone up. it was slow, and a financial bust will be slower than a business cycle bust. some people are feeling good that if nothing else comes along, we will be on an upward growth path. >> there are lots of people who say that the cure is as bad as the disease. the quantitative easing, in particular, disproportionately than a fitted the wealthy and did not do that much for the poor or middle class. are they right?
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>> quantitative easing is a technique used when you want to stimulate spending. business and consumer investments. when you have interest rates at essentially zero, if you want to bring down the price of what is going out for the future interest rate, it is a tool that has been used. it helps debtors at the expense of savers. as a general rule, if you have a saving account you are getting very little, whereas a debtor you have your debts at low interest. that makes financial assets all capital assets like houses and stocks, look more valuable relative to the interest rate. you get the stock market going up. it is not done to favor one
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laevel of wealth over another. any tax policy can take the level of inequality and, in particular, cause adjustment there. >> how has this unconventional monetary policy affected what you can do? >> unfortunately, the wealth of the foundation has continued to increase. the various investments have had good return. other parts of the assets some in microsoft stock, some and other stock. the general level of the stock market although there have been ups and downs, the investment policies have allowed us to go from 3 billion year we were giving away six years ago to a bit over $4 billion a year. >> stephanie, you were
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skeptical. can we make a connection between what he'll does philanthropic lee and what bankers do in terms of monetary policy. there we have it. bill said that his foundation has benefited from quantitative easing because it raises stock prices and makes him wealthier and able to do more good. he cannot help all the poor people who did not benefit from quantitative easing. he is trying. >> do you think he is the smartest person you have ever met? >> he is certainly one of them. he is exceedingly thoughtful. >> what an honor. once a year we truly get to sit down with some of the most influential and thoughtful people in the world. before we go, look at where we are. >> the sun is setting over the outs. it is amazing. >> it is absolutely gorgeous.
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you are watching "market makers" special edition. ♪
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>> first of bloomberg. >> welcome back to "market makers." i moderated a panel on the meaning of person -- the meeting of purposeful transformation. companies with strong purpose perform better. here is the ceo and chairman of ernst & young. i love these stories. they make me think of do gooding. this is bloomberg tv. we spend time with carl icahn and download. i never hear about purposeful transformation. i hear what is the bottom line look like? >> today you heard from great
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business leaders from all over the world what they are doing to improve the lot of wine over the long-term. i shared this story this morning. we are in 152 countries. have to understand the why as well as the what. why are we there as an organization. 65% of the people our generation wide. the median age is 28. the work force the future is interested in who they are joining, why they're joining and whether career will look like, and what they will be making a difference. >> why are worried about what 26-year-olds thing? >> the only thing we have to sell is our people. when the engagement scores go up your more profitable, make more money, they are happier, and they stay longer. >> so our company is going to do better in 10 years when they are
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purposeful as opposed to 10 years ago when they are just punching clocks. >> we are an independent agency that interviews business schools around the world. we were the second most preferred employer in the world. >> does that mean you will make more money? >> when we get great people and sell their time we get more money. >> in a world of activism where's the place for corporate and social responsibility? if it costs money, does it survive? >> there is part of that. this is an important business decision. anyone you talk to you, they will tell you the biggest issue is talent. if you have the smartest and best people you will do a better job and make more money. >> companies have had extraordinary talent for years. no one 20 years ago and said they needed a yoga center. >> welcome to the 26 year olds
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of today. i >> i would tell them to take a hike. >> what happened if you had that conversation with carl icahn? >> the only way to provide value is you have great people teaming together. >> you don't worry that this idea feels 1999 flavored? younger kids asking for too much? >> they are better at what they do at work, and that is important. if they get more pleasure at it the better. >> i thought i was good in 1998. >> where is the most bang for the buck. advising other companies to improve theirs and what you're doing for your company? where's the best return? hiring good people? >> you have to get the best people to start. you cannot understate that.
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we spent half $1 billion developing the people. the things they learn in college will not mean anything by the time they get to the job. we do more and more every year. we get better and better. technology is making it better. we are providing more flexible workplaces. we are always done it, and we have done it well, but as the world changes you have to adapt. >> is wall street the most difficult when it comes to this transition to purposeful transition? reluctant. that is the word. >> wall street will look at all results. not how we get there. >> are banks still yachting and saying give me a break, go back to work? page was banks are looking at results. if you can tie what we are doing to better results, they are happy.
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they are looking at better results at i looking at how you get there. >> where bankers and traders tell you that compensation is no longer the number one priority? >> flexibility is more important to 28-year-olds than what they get paid. if they say if you did not give us flexibility to have a life outside of work we will start our own company. >> a pleasure having you on. mark weinberger, the chairman and ceo of ernst & young. >> from demos, switzerland the world economic forum. after the break.
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>> glad you watching our coverage. guess who we have when we
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return? >> larry fink, the chairman and ceo of black rock. no better time to have him on right after the ecb decision. that is on bloomberg tv. ♪
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>> live from the world economic forum in davos switzerland this is a special edition of "market makers" with erik schatzker and stephanie ruhle. come back. i am stephanie ruhle davos in davos. i am erik schatzker. >> guy is here to take us through the closed. >> what a call -- roller coaster of a ride. the european market is responding to what mario draghi delivered earlier on. we had been told it should be positive. axel weber kicked off that story
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this morning. since then, the main market guys have been telling us that. you can see it on the screen. the euro has been dipping strongly. there has been a speed through into the exports. ec castoffs doing well -- bmw trading higher, daimler, stocks like renault in paris -- they have been a good day as they continue to motor on. the biggest holdings in government bonds here in europe they continue to gain in value. the yield continuing to get crushed. the spanish-yield under pressure. 10-year. mario draghi wanted asset prices up. he wanted to get the euro lawyer
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-- lower. he wanted to get the export market moving. tick i the box there. he did even more what's on were expecting in the market close reflecting that. >> guy johnson, thank you. >> we are at the world economic forum. you heard guy johnson talking about quantitative easing. we have been looking for the right people to talk to, and if you walk around the town long enough, you will run into the king of the mountain, sitting right here, larry fink the chairman and ceo of blackrock the world's largest asset manager. >> i'm not sure i feel like the king. >> why not? >> i am cold. go on. >> quantitative easing -- what do you make of the announcement? >> it was very much expected.
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after we had the court case in brussels 10 days ago, it's that the ecb in motion that they would be allowed to do this. before that, it was a legal issue. they are allowed to do this. we have seen in the last few years you have to trust in mario, and mario draghi got what he was trying -- >> you trust mario. i think the market should not doubt mario. he has been able to pull this through. there was obviously much public debate whether this was going to be helpful. what we should all understand -- what this is going to do, is going to keep the euro week. it will keep the euro weak and the weakened euro will allow the european economies to improve. i think european economies we marginally better this year than last year. >> because of this?
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>> we also completed the stress test. the banking system is over the deleveraging process. we have to understand, the u.s. banks stopped deleveraging years ago because our stress tests were real legitimate in 2009. europe went through the first stress test. they got it right now. you have a banking system that is real leveraging marginally and you have a weakening euro and an aggressive, stimulated policy by the ecb. it will all lead to a more positive europe but we are still not addressing some of the major, structural issues. i would call this -- this will give you more time to, hopefully, six itself. i did not have time to hear the qa day -- q&a, but i would hope mario draghi and the governors of the ecb start talking about needing fiscal reform to create a more vibrant europe.
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>> before we get to fiscal reform, are we going to see euro parity with the dollar? >> i have heard views of that. i do not think so. >> why not? >> because i am a little more worried about the u.s. in the next quarter or so. >> what are you worried about? >> what am i worried about? i am worried about a lot of things. >> the arrest, nash in the u.s. everyone is so -- in the u.s. everyone is so bulled up. >> we benefited the last four years of having a weak currency because our central bank was the most aggressive in easing. we are talking about taking the foot off the pedal. obviously we have, not doing monday -- bond purchases anymore. our companies are now being marginally armed by the stronger death -- harmed by the stronger dollar. it is all marginal versus
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european companies. secondarily the lower oil pricing the long run is very powerful for the american. in the short run, it is negative for these companies. you will see a reduction in capx . you'll see some layoffs. we already exceptional birthday announced -- slumber j announced leah -- layoffs. we will not see a 3.5% economy in the first quarter. we may see that once the energy number really goes into the economy. incrementally, you will have a stronger europe, a marginally weaker u.s. from the trendline. i am still suggesting we're going to have a strong economy but the trendline will be slowing down a little bit because of the strength of the dollar, because of the short-term impact of the lower oil prices and, so -- and, the question is, will it flow down -- slow down the federal reserve's behavior?
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as chairwoman yellen has always said, it is all data-dependent. if an economy is growing not at 3%, but at 2.8%, and we see more unemployment claims because of what is going on in the energy sector, we most certainly will see less capital expenditures. at $40 $50 a barrel, you will see the fracking and new rigs slowing down. we already see great count -- great -- rigs counts going down. will we see parity? i think know, much of the euro move is behind us. we are already at 1.40. could we see a downward trend to 1.05? i do it is sustainable. >> what about a rate hike in 2015? >> well it is not-dependent.
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it the dollar is weaker, i think there will be an announcement of a 25 basis point decrease. then they will pause and wait. i do not think you will see normalization anytime soon. you will have more discipline. if that is true, the dollar will not appreciate as much as some people think. as much as i never heard anyone talk about parity about the dollar two months ago, now everyone is talking about it just like two months ago did anyone say $48 a barrel no. >> we also are not talking about the swiss franc seven days ago. >> know, we were not. >> we have to take a break. we have more with blackrock ceo larry fink when we come back. we're not what you let them put a coat on, so he will be on edge. >> i am on edge. [laughter] ♪
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>> welcome back, everybody. you are watching bloomberg's
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live coverage of the world economic forum. >> are you so cold you almost forgot? >> no. we are back with larry fink. it was one year ago that the swiss -- one week ago that the swiss national bank drop the bomb by allowing the swiss franc to float freely. how did the decision go down inside of blackrock? >> first of all -- >> did he call you or did you call him? >> thomas or phil? >> i love that he gets to talk to both of them, by the way. but let's be clear, the plan to peg interest rates, it was always meant to be a temporary exchange, and i do believe with thomas needed to do -- it was becoming more and more expensive
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for this country to stabilize that currency. somebody told me it may be over $1 billion a day of stabilization. i think what the ecb did today it was going to be even more intolerable. you know, i do not think he had any choice to do this. you could argue, could it have been done in a more elegant way or not? >> a man has to do what a man has to do? >> there is a debate, could this be a messaging in the marketplace where this would resolve it or could you do one big bang, as you called it, and get it over in one day? i think the real test will be with this was currency revaluing itself as much as 20%, is this going to lead to a recession in switzerland? i know all of the narratives from all of the men that jurors but these manufacturers -- all of the manufacturers, but these manufacturers have proven to be
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incredibly adaptable. we have witnessed over tens of years how adaptive this small nation is. when you think about the power of this nation, for a nation of this scale, it has had as much influence as any country in the world. it is very adaptive. it is a big conflict. the big question is will this lead to a recession or not, and if it does not, that is more problematic to me. >> that is just for switzerland. what some people say -- and i kind of get the argument, a decision like that undermines trust and confidence in central bankers. >> i do not agree with that. they all said it was temporary. it was expensive. could it have been done in a more elegant way by messaging that this was going to end soon? yeah, but it might have caused more volatility by doing it all at one time. there was a lot more pain. i would expect the swiss economy to go into a recession because
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it will take time to either to renew currency level. if he does not go into a recession in the economy continues to fair -- if he does not go into a recession and economy continues to fair fairly nicely, what is it mean for another economy a little north of here? there has always been a debate, should germany be in or out of the euro? obviously germany is committed to the euro, and i am not trying to suggest chancellor merkel is not, but one of the arguments about germany is a would-be suicide if they walked away from the euro because they would have a currency revalued 20% or 30%. now, if switzerland does not have that revaluation, that impact on its economy -- >> in other words, if it is not suicidal. let's think it will lead to a large debate in germany from the right wing look what switzerland did, it was not so dramatic, so why are we not
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considering that? i will spend a lot of time over the next year following the swiss economy. with the swiss action last week, whether with elegant or inelegant, i do not think that matters. >> you are one of the biggest client on the street. when you have the volatility, you are interfacing with the selling side. can the banks fully operate when you have extreme market news now that they are so regulated? >> so, in one day, no, but the market, calibrating itself over a couple of days, is fine. i think it is very clear realtors worldwide want banks -- regulators worldwide want banks to use less of their balance sheet, and one thing i heard from manning him today -- manning him today we had paper tantrums, the oil crisis, always
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other one-day crises and this regulator is able to see daily positions of the banks in his jurisdiction, and he says nobody really lost that much money. unquestionably he can say today banks are less risky for society than they were. >> and that was the goal. >> that was the goal. he will also say, that will mean, over the short run, we will have a less liquid world, and over time -- this is one thing blackrock has been supportive of -- we need to have more electronic markets, more things done. we are in this period of time where we will witness periods and bouts of illiquidity. we had a 24-hour period of time where there was a devaluation, but in the scheme of things it is not that meaningful. you guys reported -- >> in disco terms, the beat goes
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on. >> number will lose sleep in manufacturing in switzerland. >> people lost sleep last week larry. >> i lose sleep all the time. that is not meaningful impact over a 1% economy. >> larry, thank you. >> we have to end that. larry fink >>larry fink -->> larry fink, chairman and ceo of blackrock. ♪
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>> it may be cold, but i will say it, we have had a hot day here in davos. >> we have one more coming up tomorrow. the chairman of aig steve miller, will be here. >> not the space cowboy. might freeze and marriott ceo arnie sorenson. we're talking ecb germany's
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reaction, oil prices, so much more. >> and in between now and then we a lot of work to do. >> not parties. >> we will see you tomorrow. have a great day. i'll most said night. night for us. thank you for watching. ♪
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>> we are coming up on 56 past the hour. that means bloomberg television
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is on the markets. we have a rally. stocks in the green. the dow is taking aim at triple digit gains, up 90 points after ecb president mario draghi launched a new seamless plan and that reviving the euro zone economy larger than anticipated. we are joined by the senior equity derivatives director. i am curious to get your thoughts on the ecb plan and volatility we saw in the wake of the wake of that. >> a lot of people are wondering -- the news came out yesterday why would they leak in early? >> they want -- may have wanted to establish a baseline to surprise today. it also looks like the program might be open-ended, if needed. many investors have been worried about the commands in europe.
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i think to the extent that mario draghi will do whatever it takes in this new program, that removes downsides helmets, even if it changes the picture for exports and competitive trade balances in the near term. >> what about the outlook for volatility, because that is really been a big part of the story thus far in 2015? not in the event is behind us does it take volatility out of the market? >> it might reduce the risk people are pricing in two options. if they were worried about that scenario, there might be reasons to not price options so aggressively in that way for couples that are more sensitive to your. >> i want to focus on one stock that is ebay. they will be cutting jobs exploring jobs for the enterprise business. they are putting a carl icahn rep on the board.
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how are options reacting? >> options on ebay, looking at a three-month horizon, have fallen to some of the lowest levels ever on the stock. for this name, it is a really low level. the conclusion to draw is the standstill agreement with carl icahn, the decent earnings for the fourth quarter, and resolution of some of these one-time issues -- the google search problems, and saw the other problems -- has taken a lot of uncertainty out of the name and provided upside volatility possibility if "money clip -- and then a activity picks up. >> your trade is an etf, it tracks industrials. we have a lot of industrials coming out. my read is it is a pretty bullish trade ahead of those earnings. walk me through the trade and then we will talk about your reasoning. >> sure. the trade we are doing a cell
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the february 52 put spreads. we are using the credit from that trade, last check $.38 or so, to buy upside calls, so it is less expensive looking at the february 6 56 calls. it is a little bullish, but there is a volatility play with cap we have a strong you about. what is noticeable about xli eight of the 10 largest etf's are reporting. we had strong results with consumer demand. as far as that continues -- especially if earnings do not disappoint sharply to the downside in these key industrials, you can see the risk premium in these xli puts start to,. the key metric is the volatility skew, the cost of downside puts relative to the upside calls. that means it is more expensive
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to own put options on xli relative to the price of calls than it has been at any time, and i think that justifies at least looking at a trade that is a contrarian view, arguing that maybe these put a little too expensive. >> interesting. jared woodard thank you so much. some of the top holdings, for reference, 3m, united technologies, boeing. he will be watching it as many of these companies report earnings. jerod, thank you. appreciate it. "money clip" is next. ♪
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>> welcome to "money clip," where we have the best stories the most important people, and smart people in business news. i am pimm fox. it will give the progress report on how he and his wife are changing the world. it -- bill gates and his wife will in the progress report on how he and his wife are changing the world. the federal reserve is getting out of that business -- mixed reviews on whether the fed is playing it right. intech, pc pioneer michael dell sees the future


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