tv Whatd You Miss Bloomberg August 10, 2015 4:00pm-4:31pm EDT
[bell rings] u.s. stocks rising the most in almost three weeks. joe: the question is "what'd you miss?". the $37 billion deal. warren buffett pursues berkshire's biggest deal. does his big bet makes sense? scarlett: our neighbor to the north has never meant more when it comes to global markets. joe: and stocks take a backseat t. we have the charts to prove it. move.tt: we have a steady , almost a broad advance erasing last week's decline. one stock i wanted to mention is
apple. it's first back-to-back game -- its first back-to-back gain in two weeks. alix: stocks -- joe: stocks started off in the green. then nothing happens. china, a huge move overnight. people said it was notable because there were no signs the government was in the market. speaking of china, i want to dive into my terminal. we have some dismal economic data. these two charts, the bright orange line and the bright red line show chinese import and export growth. they bounce around. it doesn't take much to see which way the trend is. they just keep going down. they are stunningly ugly numbers. 6%orts were down, like, year-over-year.
chinese commodities continue to send. scarlet: even though people have quibbled with the actual numbers coming out of china, the trend is pretty clear. joe: people always have skepticism about chinese data. there is obviously noise in these charts, but the trend is pretty clear. it's not very mysterious what's going on. scarlet: let's take a deep dive into my terminal here. let's talk about berkshire hathaway. brookshire making a big purchase -- berkshire making a big purchase. this is berkshire's cash pile, about $6.6 billion in cash. it is borrowing about $10 billion in cash. this is a really bad drawing. the bar gives you an idea. roughly the same as it was in the third quarter of 2013. berkshire hathaway has a lot of cash businesses. cash flow has been pretty much
study above $50 billion since -- ady above $50 billion since last year. a successor would deal less with, what do i do about the cash, more about improving operations. joe: warren buffett is removing one of his problems, taking away a potential successor's problems. he can just focus on running the company. i want to bring in our guest, a chief economist in toronto. thank you for joining us. thet: thanks for insight. joe: you saw the chart. one of the things people are talking about is warren buffett is transforming his company from a financial company to a manufacturing company. do you think that's a good bet? -- do you think there is a future for north american manufacturing? guest: there are two positive
things. one is the fact that energy prices have come down and are going to stay low for an extended period of time. for the energy sector, that's a negative. as you been seeing, especially with -- as you have been seeing, especially with the iso numbers and the factory components -- factorynumbers and the components, big surprises how well the u.s. sector has hung in, despite the strength of the u.s. dollar. that's a feed stock into basic manufacturing and, over time, a hgue margin -- a huge margin expansion. when we talk about the u.s. dollar, this will raise some eyebrows. it's a hit to export competitiveness. people have to realize that a lot of manufacturers are not just exporters. $15 feed right into this
trillion animal otherwise known as u.s. domestic demand, and the u.s. just happens to import more than it exports. what dominates the headlines is how the u.s. dollar -- strong u.s. dollar is always a tourniquet. we have is the catalyst -- this mercantilist view of the economy. but the strong u.s. dollar brings down import costs that go into the capitalization process, widens margins along with low oil prices. for all those people who said that this manufacturing renaissance suddenly has come to an end because of what's happened with shale oil and so on and so forth, they are missing a very big story here, that those previous years of dollar competitiveness has actually restored tremendous growth -- underlying growth in the manufacturing sector that's going to be with us for some
time to come. the proof is in the pudding. looking at the numbers right now, under the circumstances where global growth has slowed down as much as it has. scarlet: we have breaking news from shake shack, reporting that second quarter comparable sales came in higher than estimated, almost 13%, when the consistent -- consensus was for 816%. shares are now -- 8.6%. shares are climbing in after-hours trade. topped analyst estimates of three cents. let get back -- getting back to the macro picture, said vice president stanley fischer spoke to bloomberg this morning and commented on inflation. stanley: a large part of the inflation is temporary. it has to do with the decline in the price of oil and raw materials. these are things which will stabilize at some point.
we are not going to be as low as we are now forever, and we need to be looking ahead as we go. scarlet: i would like you to comment on the context of this. wasnk of england governor fairly dovish and he warned there might be another period of price declines. what is he that janet yellen and the fomc do not? david:aybe: it is -- maybe it is partly because the u.k. is so much more fixed -- hitched to the euro zone economy, which is still plagued by a tremendous amount of excess capacity. the inflation rate in the u.k., if i'm not mistaken, is actually 0%. technically, you are in a deflationary environment. in the u.s., we are a little farther away from that, which is why the markets are pricing in the fed to move up earlier than the bank of england does by
several months, if at all. joe: stanley fischer -- the data bears out what he was saying. when you strip out the commodities from cpi, 60% of the cpi is actually services. service sector inflation is running consistently in and around or above 2% in annual rate. all stanley fischer is saying is that those prices are seeking. sticking. when we hit a point in time when the dollar stops preceding -- appreciating, when commodity freefall,p their inflation will ultimately gravitate towards service sector inflation, closer to 2% th an 0% or 1%. that's just a mathematical premise. joe: it seems as though september is starting to look --
that's a good shot for when we will get the first rate hike. do you think that is too soon? do you think that is a reasonable time to start hiking? david: i had been of the view that if they were going to move -- last year, we caught that tell tailwind seemed like a good time. we were still on qe3 at that point. view confident of the that they would pass on september because of two things. we are seeing some bad revisions that are telling us that second-quarter gdp growth could be very close to 3%. it would not surprise me now, looking at the hours worked and the supply side of the labor market is giving us a reading that we could be close to 3% again for the third quarter. up until recently, i did not
think that was possible, but it looks as though that is a probability now. when you look at the fed's forecast for the second half of growthr, 2.5% to 2.75% was the line we had to cross for them to move, and we may well be getting there. that's what dennis lockhart had to say over the course of the past two days. i don't think it's that big of a deal. with all of the economists and strategists, smart people think that the fed is almost universally going to go in december. i'm still not fully convinced. contract,ed futures at the flip of a coin, still another payroll number -- my sense is that -- i will put it this way. previously, i would be 20% they would move. i'm now closer to 50/50.
scarlet: breaking news from kraft. kraft coming in with a second-quarter loss of $.91 because of merger-related expenses. when you back out all of these one-time items, the adjusted earnings per share was higher than the contestants -- the consensus estimate. says graph -- kraft heinz it will deliver its initial financial view for the merger, and it does not expect to issue or update its earning guidance as well, but it will -- is confident it will deliver against initial merger views. joe: norway may have survived the global financial crisis relatively unscathed, but we have a chart that shows how oil at $50 is wreaking havoc on the scandinavian country. ♪
scarlet: i'm scarlet fu. joe: i am joe weisenthal. "what'd you miss?" before the break, we told you norway is feeling the pain run -- from $50 oil. scarlet: we have a chart that shows how bad things could get for norway. the company may have to take money out of it sovereign wealth fund, a step no finance minister wants as their legacy. spending could start to outstrip the income that it generates from oil. you can see the inflows to the sovereign wealth fund have been steadily declining and could go lower. joe: another northerly country hit hard by the fall in oil prices -- canada. the commodity decline has helped to shrink canada's economy the past five months. torlet: bloomberg spoke stephen harper.
everyone predicts that the canadian economy will be at or near the top of the g7. we believe and the bank believes that the oil price shocks should be transitory on the canadian economy. joe: david rosenberg of luskin hef -- luskin chef -- of glusskin-scheff is still with us. david: i think there's a lot of hope behind the comment about oil price. fewve found people -- people who have called that successfully. the bank already cut rates earlier in the year in light of what the oil price had done. i don't think many people thought they were going to cut prices. the story in canada isn't just about energy. it's about how the spread has
affected other sectors as well, including manufacturing. and i think the big surprise in canada is, even with the canadian dollar declining as much as it has, really, it has only following this much before in a 12 month span in the 2009 global collapse -- only fallen this much before in a 12-month span in the 2009 collapse. gdp here today in canada has still contracted at a 1% annual has stillp in canada contracted at a 1% annual rate. this was the best that the bank of canada made earlier this year . the big surprise was cutting rates twice, and the second rate cut wasn't about what's happening with energy, it was about manufacturing. it really precipitated the bank's move again. joe: you are talking about manufacturing. we have seen a big decline in
the loony. how much for the does it have to fall for the manufacturers to start writing again? -- start thriving again? david: like interest rates, the currency will impact the broader market with lags that are very long. there are contracts that are signed with foreign customers that could take place over 12 to 24 months. they roll over with a long time lag. there are also hedges that have to roll off. lagsgas typically -- typically are long. what makes it more challenging in canada, in some sense, we are paying the price for those years where the canadian dollar went above par. fair value might have been $.85. the canadian dollar was trading 20% above that. there was a time three or four years ago, you could not pick up a newspaper in canada and read about some manufacturing company
closing shop and moving into either the u.s. or mexico. we've gone through a real gutting of the manufacturing base. to the point that canyon -- canada's manufacturing share in nafta is at an all-time low. it's hard to say if the canadian dollar has more downside potential. i would say it probably does have some, but it's really going to be the length of time that the canadian dollar has to stay at these levels, call it at a $1.30 or $1.40 range, broadly speaking or $.70 to $.75 in the inverse. it's going to be less about where it goes from here and more that it's going to be at these sort of levels for as long as it was at par. thatgoing to be many years the canadian dollar really flirts with the bottom it's at right now. joe: you talked about the dual rate cut from the bank of canada. meanwhile, prime minister harper
has continued to pursue a balanced budget. is there a way to put this on the central bank to revive the economy, or should fiscal stimulus carry some of the load as well? david: i wrote about this last year when it was apparent. that's one of the reasons the bank of canada cut rates the first time. they knew that energy capital investment in canada was going to all like a stone -- to fall like a stone, which it did. monetary policy as an antidote to such a deep hole in energy capital spending is a very limited response. really, what we needed more was a physical response. i wrote about it at the time. canada being the poster boy of integrity, we had the room for large-scale capital spending to offset infrastructure spending, to offset the capital reduction over in alberta. in my opinion, it was a blown opportunity. i think it's too late now to
really have an influence by the october 19 election. there is no question that a fiscal response would have been appropriate. joe: thanks to david rosenberg, chief economist at gluskin sheff and associates. scarlet: keeping renters at bay. which u.s. city has the highest average rent for a one-bedroom apartment? we give you the answer after the break. ♪
and interactions have been soaring, sparking political rallies. scarlet: san francisco's mayor is backing one possible potential fix, proposing a $310 million debt to build affordable housing. that will go before voters in november. this would be the largest housing fund in the city's history. it's not just san francisco. let's go straight to the top headlines. lots of earnings. we begin with morgan stanley. it says congress will probably come to the aid of puerto rico. it says lawmakers will probably provide access to a control board. puerto rico had its first default earlier this month, struggling with a $72 million debt that the governor says in run payable --is unpayable. joe: shake shack beat expectations, revenue to $45 million, raising its full-year revenue outlook.
shares are surging in after-hours trading. those are your top headlines. scarlet: here is something you may have missed about shake shack's earnings. what we have here is a chart that puts the burger chains sales and growth in market cap in perspective. this is shake shack. marketmall because its cap is relatively small compared to the big yellow, mcdonald's. mcdonald's is on the left-hand corner because of its falling sales growth, hwile -- while shake shack is on the right because of its faster sales growth. those whosee are difference splits the middle. i liked this because it was a way of putting shake shack in perspective. joe: it's cool. it shows how hard it is for the apples to apples comparison. you see their sales compared to average mcdonald's, but they are night and day. scarlet: they are not even in
the ballclub, but everybody is wondering about shake shack. it trades at 445 times. joe: speaking of amazing, and this is why markets are so fun and awesome, a biotech company is on a tear. yes, on a tear. the stock is up -- here is the to-day chart -- the two-day chart. close to 2000%. it was a dollar-something stock a couple days ago. the company had positive results for a treatment for eczema and bladder pain. this is why markets are so fun. this is why people love playing small-cap pharmaceutical companies. how else in the world could you have your money grow 40 fold in a couple of days or a few hours, except by these companies? quinox employs 24
scarlet: i'm scarlet fu. joe: i am joe weisenthal. "what'd you miss?" something you don't want to miss, tomorrow morning, the small business optimism or. -- report. there are so many interesting questions they ask small businesses about how hard it is to find labor, they're pricing power, access to credit. you get interesting answers. there are interesting trends. it's a fun report to dive into.