tv Bloomberg Markets Bloomberg May 29, 2015 5:30pm-6:01pm EDT
you are looking at eight of the 10 sectors. not so great.ing in the red, overall stocks holding up around those record highs. we have breaking news, julie hyman with more. hyman: we have to forfeit 104 million dollars. this was the mastermind behind the silk road online marketplace drugshelped folks peddle and he was working in bitcoin. he has been sentenced to life in prison. that is the sentence just handed down by a court. he was known as dread hire it roberts. headline is that he is getting a sentence of life in prison. he was facing 20 years.
as he ran this marketplace he has been accused of several murder for hire situations, trying to silence folks who were going to unmask his identity. all of this is a complicated case. he is getting a sentence of life in prison. alix: thank you for getting us that breaking news. for more on the markets, the dow and s&p looking at their worst week since april. worst week, but lots of m&a to go figure. >> we are still pretty high. we are getting a string of these down days. no individual day has been particularly dramatic on selling , but if you add them up it starts to become real and people notice. alix: potential m&a in the
health care sector, humana really popped. one of the best-performing sectors this month. joe: people have like health care for a long time. there is a lot of m&a, so we have a combination of news that humana might be for sale. the general view is that health insurance, people are needing a lot more health care a big demographic story,, huge opportunities to consolidate. alix: one area had to be the gdp revision, down 0.7%, dragged down by net exports. a small inventory build. joe: so once again, for the second year in a row we have a gdp contraction. everyone expected it. the headline number came in better than predicted. the real shocker came out later with the chicago pmi report, much worse than expected.
what is scary, this is fresh data. we can say the gdp report was q1, we know that was bad, but we are supposed to have a spring rebound now. alix: i was looking at the consumer sentiment that came out, the university of michigan consumer sentiment, showed a drop from april, plus inflation expectations increasing at the same time. jpmorgan had a note out, rising inflation is not good for consumer spending, especially when income expectations are drifting lower. joe: it's interesting. the fed will look at that, maybe they will get more confidence they could raise rates if inflation expectations are starting to rise, but if consumers feel prices are going up but they are not seeing commensurate wage growth, it does not particularly augur well. alix: eggs, bird flu, by the
big story of the week has to be china. a credit suisse note came out today talking about chinese stocks, saying they are 23% overbought after this huge run-up in the stoxx, and they are in a bubble. joe: the chinese market has been really fun to watch. it's incredible. on thursday, there was a 6.5% crash in chinese stocks, but that only brought the market back to where it was on may 22nd. variations of the chart have been going around for a while. if you look at the rise in the stock market, it coincided with a huge surge in retail trading accounts, the number of people who want to step up to the table and play has exploded in recent months. alix: one of the big reasons why, if you take a look at loan
growth, a great chart about that. loan growth is 15% year on year, but deposit growth is at its lowest level in 15 years. the idea is that people are not leaving their money in banks. they are moving it into the stock market. if you have a bank loaning but the deposit base is lower, what are they going to do? pboc has to get in and prop up banks to fill in the gap in some capacity. joe: the bubble goes on and on. alix: we want to -- that says it all. we want to bring in tom lee and carl riccadonna. good to see you. tom: good to be here. alix: joe, you were looking at something in the gdp. joe: one of the things you were tweeting about this morning, carl, these corporate income did
not have a very good first quarter. but it wasn't a bad quarter for labor. the on employment rate continues to decline. so i'm wondering -- unemployment rate continues to decline to someone wondering if we're seeing a shift to labor may be getting some strength at the expense of business? carl: we saw a slowdown last quarter. march was pretty lousy. some rebound in april, but march got revise even further down when the report came out. so i don't think there is a big shift happening here. rather, corporate income and profits in particular tend to be a leading indicator of this decision-making. if the profit number is slumping, businesses tend to decide to invest less in infrastructure and capital investment. ultimately, they invest less in labor. that will be consistent with a slower pace of hiring going forward.
alix: tom, would you agree? are we going to see payrolls come off a little bit? tom: you know, i'm not sure if you are referring to gdp, the income number, but on the s&p, outside of energy profits were up nicely in q1, so i think there's plenty of industries where there is growth in demand. there's going to be hiring. but when you look at energy, that tells it all. there's going to be a passing their, and jobs losses. i think it is true in the energy sector. i think it is true for manufacturing. we will see that spread into other related service sectors as you go into the third quarter. now, this is not a recession call by any means. but don't look for the kinds of job gains we saw in q4 to be extended. alix: you are tempering your expectations? carl: they are not going to slump indefinitely, but if profit growth is restrained,
that means businesses, private sector decisions for investment and hiring, are going to be restrained as well. the moral of that story, don't look for a riproaring growth surge like we saw last year. instead, look for the economy limping along at 2.5% over the next few quarters. alix: the revenues, where we're seeing growth, citi had a note out on cash cows, where companies are sending their money. apple paid one dollar for every $.28 they spent on r&d. that accounted for $16 billion in r&d last year, $16 billion in dividends and buybacks. how do you feel about that? tom: there's a good way to look at it, and a bad way. u.s. companies are the biggest spenders on r&d, no question. tech especially, as a percentage of revenues, is near the internet bubble highs of the 1990's.
tech companies are all spending on r&d, only in the u.s. so if they have extra money and they are giving it to shareholders, i think that is great. but something i think investors are not even paying attention to, this year for the first time in four years, companies are raising capital spending in any sector, or in most sectors, are outperforming. alix: citi said the guys who spend more money on buybacks and dividends did well in the market. tom: that was true. this year, we see a shift. i think that tells you the market is starting to reward companies that are investing capital, not returning capital. joe: what do you think of that, carl? carl: it makes sense from a macro perspective. the businesses seeing demand for capital investments, r&d spending, capital expenditure,
infrastructure, they are facing capacity constraints. that's why they are investing. other businesses that are seeing slack activity, like a lot of manufacturing sector, there something out investing because there is not the need to. alix: what part of that winds of heaven to do with the fed taking a macro look at it, as we see -- having to do with the fed taking a macro look at it, as we see. does that make dividends not as attractive? tom: i don't think the fed will try to tighten conditions. they want to have some dry powder, but still fairly easy monetary conditions. in other words, they are essentially trying to confirm reflation area environment. that is really bullish for capital spending oriented companies. alix: we have a lot more to talk about, including what stocks you are interested in. thanks for joining me, as always. have a wonderful weekend. much more with timely, -- tom lee, his top stock picks right
alix: welcome back to "bloomberg market day." here's a look at top stories we are watching at this hour. the man known as the dread pirate roberts was sentenced to life in prison for running a $214 million online drug bazaar called silk road. ross ulbricht was convicted of conspiracy and drug trafficking as anonymous users used bitcoin to buy drugs, hacking tools, and fake identification. he will forfeit almost $184 million. sepp blatter has won a fifth term as president of fifa, two
days after u.s. criminal charges targeted his inner circle. nine officials are among 14 charged by u.s. prosecutors. there could be even more arrests in the probe for racketeering, money fraud -- wire fraud, and money laundering. the greek government says they can survive another week without defaulting on the imf. officials warn the window of getting eight is closing. the greek finance minister says he can scrape up enough cash to make a payment of $329 million due on june 5. the obama administration is taking one more step towards normalizing relations with cuba. the state department removed cuba from its list of state sponsors of terrorism. the move was largely symbolic. president obama had announced the move last night -- month, and congress took no action to block it. that's a look at top stories at this hour. the s&p 500 is posted its first weekly drop in four weeks, but that is not stopping this bull over here. tom lee is still with us. what do you do on a day like today, buy?
tom: we have had some sloppy days this year, and a lot of people nervous. i think the best course of action is just to not do anything to quickly. on a day like this, you have to think about what you want to buy. add to your position. alix: what is on tom lee's shopping list, and why? tom: where are things going to be really different two to three years from now? the groups in my mind that will be completely revisited, re-discovered, are tech and financials. alix: why? tom: tech is a group that investors think is very narrow. alix: big tech or potential snapchat ipo tech? tom: it won't be like health care in 2011, where you did well buying the hospitals and pharmas or biotech. tech is the beneficiary of tighter labor markets, an industry that has had good return on equity. the multiples are incredibly low. i can't believe how cheap
software stocks are. microsoft below double digits, when it is essentially a staple. stable stocks trade around 27 times. alix: what about banks? tom: banks are similar. banks have managed to produce really good results under a huge amount of regular tourist scrutiny. they are a beneficiary of a credit bubble. when i think of investment spending recovering, bank earnings will improve. you will see a big earnings recovery. alix: what is the risk in the medium-term, when the fed starts to raise rates and ever just in the rest of the world? tom: it is a real dilemma. i know it is a dilemma for investors, but we think the fed wants to raise rates without really tightening monetary conditions, which means they just want to confirm that things are better. i think investors are going to ultimately look at that the way they did in the 1950's, as a bullish signal.
1954 to 1958, the stock market rallied strongly during the entire period of that tightening. alix: talking about banks, data such an exposure to government risk at the end of the day. in terms of banks, you have more regulation, higher tier one capital ratios, lawsuits that keep popping up out of nowhere. tom: every quarter, they are reporting huge reserves for liabilities. unless you think it is going to be worse in a few years, this is the nadir, the absolute peak o regulatory scrutiny. if it diminishes, multiples expand. alix: what does energy tell you about where we might be in a relfationary cycle? tom: energy is a tough group.
i think it ends the year title, because -- higher, because energy prices are higher. but there is a lot of volatility. there's already a lot of money in the space, but the bullish signs are there. the -- if global growth is improving, and there's a lot of evidence of that, it bullish for higher oil prices. alix: is there risk of a deeper yield curve, more than you expected? had you prepare for that? tom: what matters the most in the markets is the 10-year versus 30-year, and you want it to be steeper. it shows you what markets are paying for the future growth, if growth is strong, the curve should be steeper. that is bullish.
alix: welcome back to "bloomberg market day." i am alix steel. the top story of the day was the reelection of fifa president sepp blatter for a fifth term. former professional soccer star jimmy conrad stopped by today. he discussed results with scarlet fu, mark crumpton, and -- >> there's a lot of corruption that exists. not only with fifa. if you are in it for a long time, you understand this is part of it. it is bad from a voter perspective. you are voting for two different versions of blatter, the man who doesn't have any idea or the man who is the most corrupt in the
entire world. scarlett: a jordanian prince was also in the running, but with through candidacy? >> it became clear he was not going to win the absolute majority and become president himself, to spare everyone the next round. i surprise he got as many as 73 votes. my most generous estimate was 60, and he went far beyond that. some south american teams and central american teams, to do that. >> i was surprised. i will be interested to see what the repercussions will be. if you go against president blatter, that things usually happen. >> the u.s. asked there be a paper ballot so sepp blatter could never know who voted for what. did you hear people say things about blatter the past two days they had not said before? >> they finally stepped up to take some ownership of it, have
the courage to say that we don't believe in who you are and what you stand for. if you have your organization'ss best interests, you should step down. >> in the last hour when all this news was breaking, he gave me the best expedition i heard this week. i asked, why is this so important outside of the realm of sports, outside of the realm of football, soccer? he said, it's about power. is this about unbridled power? >> no question. you would think the international committee would be next. another organization that has this power, can do whatever they want without any repercussions. it is sad to see sepp blatter will still remain in charge. scarlett: you mentioned repercussions. let's talk about the repercussions for team usa. are we never going to get to
host a world cup? jimmy: i don't know what it's going to be. maybe we get held hostage in terms of the 2026 world cup, which would have been a nice place for us to land. if they do and of turning -- moving the treatment from qatar in 2022, would we be a nice destination? england would be another one. it will be interesting to see. hopefully time heal some wounds, but if the authorities from the u.s. get involved and they end up bringing these people in, sepp blatter will be in trouble no matter what. brendan: i want to ask you about the fbi case. i assume you have contacts all over europe. what do they say about the u.s. stepping and? jimmy: everyone has applauded, that we actually have the bravado to step up and say -- >> except for vladimir putin. jimmy: you have to take him with a grain of salt.
with regard to the u.s., it was nice to see we had enough hard evidence. if we can flip those guys underneath blatter, maybe we can get him. >> to you think any confederations will pull out of the world cup in forecast -- protest? >> i don't think they will do that, but that is some thing you can consider. sponsors, tv deals, you want them included as well. you can have a separate alternate universe world cup. alix: that was former professional soccer star jimmy conrad, who played in the 2006 world cup. that wraps it up for the "bloomberg market day" for the week. have a wonderful weekend, everybody. we will see you back here on monday. ♪ we live in a pick and choose world.
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>> from our studios in new york, this is "charlie rose." charlie: the whitney museum of 1930 one.rt opened in its mandate was to focus exclusively on the art and artists of this country. to madison avenue in 1966. the new building designed by renzo piano will open a few blocks from its original location. it is called a depth