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tv   Whatd You Miss  Bloomberg  August 10, 2015 5:30pm-6:01pm EDT

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joe: we are moments away from the closing bell. i am joe weisenthal. scarlet: and i'm scarlet fu, in for alix steel. ♪ [bell rings] scarlet: 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. he transforms his storied company. does his big bet makes sense? scarlet: our neighbor to the north has never meant more when
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it comes to global markets. joe: and green are back in china, stocks take a backseat. we have the charts to prove it. scarlet: but, of course, we begin with the markets. we have a steady move. joe this was a broad advance, , with the dow almost erasing last week's decline. energy stocks leading the way. only utilities were lower. one stock i wanted to mention is apple. its first back-to-back gain in two weeks. joe: stocks started off in the green. and then not much happened, and they held it all the way. another thing we have to mention is china. a huge move overnight. one of the biggest, and not only was it a big rally, but it was notable, because there were no signs the government was in the market. will diven china, i
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into my terminal. because we have some dismal economic data over the weekend. these two charts show chinese import and export growth going back two years, and 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. imports were down like 8%. exports were down, like, 6% year-over-year. chinese commodities continue to defend. -- descend. 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. and they wonder. 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. because i want to talk about
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berkshire hathaway its cash pile. berkshire making a big purchase. this is berkshire's cash pile, about $6.6 billion in cash. it is using $23 billion in cash and borrowing about $10 billion a purchase. that would leave it with about $43.5 billion. 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 generates a lot of cash from its this process, and cash flow has been pretty much steady above $50 billion since the second quarter last year. this is one of the biggest ceo can face in this cheap money environment, so a successor would deal less with what do i do about the cash, more about improving operations. joe: warren buffett is removing the cash, solving one of his problems, and also taking away a potential successor's problems. he can just focus on running the company. scarlet: i like the way you put
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that. joe: ok i want to bring in our , guest, a chief economist in toronto. david, thank you for joining us. invite.hanks for the 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, and do you think that is a smart direction to take the company in? well, i certainly think that -- when you consider there are two positive things. one of them 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 and for areas of the economy that feed into the energy or that's a , negative. the numbersly with we just saw and the factory components and the payroll on big surprises how well the u.s.
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friday, industrial sector has hung in, despite the strength of the u.s. dollar. so that's a double-edged sword. that is a feed stock into basic manufacturing and, over time, a huge margin expansion. you know when we talk about the u.s. dollar, you know, that is the second positive, and that will raise some eyebrows. people will say it's a hit to export competitiveness. but what people have to realize is that there are a lot of manufacturers are not just exporters. they feed right into this $15 trillion animal otherwise known as u.s. domestic demand, and the u.s. just happens to import more than it exports. so what dominates the headlines is how the strong u.s. dollar is always a tourniquet. because for some reason we have , this mercantilist view of the economy. thator the manufacturers cater to the domestic economy, the strong u.s. dollar brings down import costs that go into the capitalization process,
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widens out margins along with low oil prices, so i actually think that 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, actually those previous , years of dollar competitiveness has actually restored tremendous underlying growth in the manufacturing sector that's going to be with us for some time to come. and the proof in the pudding, looking at the numbers right now under the circumstances where , global growth has slowed down as much as it has. all right, david, i just want to interrupt you for a minute, because we have breaking news from shake shack, reporting that second quarter comparable sales came in higher than estimated, almost 13%, when the consensus was for 8.6%. they were also raising their full-your revenue forecast, as well, and the shares are now climbing in after-hours trade.
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shake shack topped analyst estimates of three cents. so we will continue to keep an eye on that one, but getting back to the macro picture, said -- the fed vice president stanley fischer spoke to bloomberg this morning and commented on inflation. listen to what he said. cher: it has to do with the decline in the price of raw materials, and 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. because the bank of england david wasast week, , fairly dovish and he warned there might be another period of price declines. what does carney see that janet yellen and the fomc do not? david: maybe it is partly because the u.k. is so much more
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hitched to the euro zone economy, which has been growing in fits and starts and 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%. so you actually get declines, and technically, you're in a deflationary environment. in the u.s., i think 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. stanley fischer, actually the , data bears out what he was saying. when you strip out the commodities from cpi, 60% of the cpi is actually services. and service sector inflation is actually running consistently in and around or above 2% in annual rate. so all stanley fischer is saying is that those prices are sticky.
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rents andecause of health care, they are likely to go further, so when we hit a point in time when the dollar stops appreciating, when commodity prices stop their freefall, what is going to happen is that headline inflation will ultimately gravitate towards service sector inflation, which is closer to 2% than 0% or 1%. so that's just a mathematical premise. joe: david, it seems as though september is starting to look very likely or that there is a good shot that that is 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 -- you know, last year, when we caught that taylor went, it seemed like a good time. for whatever reason we were , still on qe3 at that point. and i was of the view recently
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that they would take a pass on september, and i lost confidence in that view for two things. not just the tenor of the employment data on friday, but we are seeing some bad revisions that are telling us that second-quarter gdp growth could be very close to 3%. and it would not surprise me now, you know looking at the , hours worked and the supply side of the labor market is giving us a reading that we could actually 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. and when you take a look at the fed's forecast for the second half of the year, 2.5% to 2.75% growth was really, i think, the line we had to cross for them to move, and we may well be getting there. i think that is the tone of what dennis lockhart had to say over the course of the past two days. i do not think it is a done deal that they will raise rates.
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over the previous five days with , all of the economists and strategists, smart people think that the fed is almost universally going to go in december. i am not going to say i am one of the loan standouts. i'm still not fully convinced. with the fed futures contract, at the flip of a coin, still another payroll number -- but my sense is that -- i will put it this way. whereas previously, i would that be 20% they would move. i'm now closer to 50/50. joe: all right, david, you will stay with us through the break. scarlet: breaking news from kraft. let me pull it up here. 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 $.98, than the consensus estimate. i should say heinz kraft -- kraft heinz says 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
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is confident it will deliver against its initial merger views. so we will continue to monitor this one, as well. joe: ok, coming up 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. ♪
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♪ 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 from $50 oil. unemployment soared it to 3.4% in may, the highest in a decade. 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, of course a step no
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, finance minister wants as their legacy. norway's spending could start to outstrip the income that it generates from oil. and that is the light blue line, and you can see the inflows to the sovereign wealth fund have been steadily declining and could go lower. joe: all right 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. scarlet: bloomberg spoke to canadian prime minister stephen harper about the economy. mr. harper: everyone predicts that the canadian economy will be at or near the top of the g7. and, look. serious challenges, but we believe and the bank believes that the oil price shocks should be transitory on the canadian economy. joe: david rosenberg of gluskin sheff is still with us. in toronto. david, do you agree with prime minister harper, that the oil
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shock is temporary and that the canadian economy will be fine? david: i think there's a lot of hope behind the comment about oil price. i have found very few people on the way up or down who have called this successfully, but, remember, the bank of canada 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 rates twice, which they did recently, because the story in canada isn't just about energy. it is really about how the spread has affected other sectors as well, including manufacturing. and i think the big surprise in canada is that even with the canadian dollar declining as much as it has, really, it has only fallen this much before in a 12-month span in the 2009 global collapse, the big surprise in canada really is not so much what energy is doing. it is when you strip energy out, gdp in canada year to date has still contracted at a 1% annual rate.
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so the big surprise is why is it in canada that the manufacturing growth has not revived, and acted as an antidote to what has happened in the energy sector, because that was the that -- the bet 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 to move again. joe: you are talking about manufacturing. we have seen a big decline in the loony. how much further does the loony have to fall before the manufacturers to start thriving again? david: like interest rates, the currency markets will impact the broader market with lags that are very long. because, look. 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 is also hedges that have to roll off.
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so it is not like you take any currency down in time a, and it has a big impact in time b, and the lags 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. and yet the canadian dollar was , trading 20% above that. 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. so in some sense we've gone , through a real gutting of the manufacturing base to the point that canada's manufacturing share in nafta is at an all-time low. so it is hard to really 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
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speaking or call it $.70 to $.75 in the inverse. it's going to be less about it goes fromher here. it has already been an epic decline, and it's going to be at these sort of levels for as long as it was at par. it's going to be many years that the canadian dollar really flirts with the bottom it's at right now. you talked about the dual rate cuts from the bank of canada. meanwhile, prime minister harper has continued to pursue a balanced budget. does it make sense to put all of the weight on the central bank to revive the economy, or should fiscal stimulus carry some of the load as well? david: you know 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 was they knew that energy capital investment in canada was going to fall like a stone, which it did. but, you know, monetary policy as an antidote to such a deep hole in energy capital spending
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is a very limited response. really, what we needed more was a fiscal response. i wrote about it at the time. and canada, you know being the , poster boy of fiscal globally,d integrity we had the room for large-scale capital spending to offset infrastructure spending, to offset the capital reduction over in alberta. but 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. but there is no question from my lens that a fiscal response would have been appropriate. joe: all right thanks to david , rosenberg, chief economist at gluskin sheff and associates. ahead keeping , renters at bay. which u.s. city has the highest average rent for a one-bedroom apartment? a staggering $3500 a month. we give you the answer after the break. ♪
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♪ scarlet: i'm scarlet fu. joe: i am joe weisenthal. "what'd you miss?" scarlet: before the break, we asked everyone what u.s. city had the highest rent for a one-bedroom apartment and -- joe: surprise, surprise, san francisco. $3500 a residents are being priced out and interactions have been soaring, sparking political rallies. scarlet: san francisco's mayor is backing one possible potential fix, proposing a $310 million debt they'll -- sale 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. it is everything. joe: wild times. scarlet: let's go straight to
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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 s -- is unpayable. joe: shake shack beat expectations in the second quarter. the restaurant chain said revenue increased to $45 million, raising its full-year revenue outlook. shares are surging in after-hours trading. and those are your top headlines. scarlet: here is something you may have missed about shake shack's earnings. take a look inside my bloomberg terminal, and what we have here is a chart that puts the burger chain's sales and growth in market cap in perspective. this is shake shack. it is small because its market cap is relatively small compared to the big yellow, mcdonald's. in the upper left-hand corner. mcdonald's is on the left-hand corner because of its falling sales growth, while shake shack
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is on the right because of its faster sales growth. ,he purple sphere in the middle those whose sales growth kind of split the difference, right in the middle. i just 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. because you have seen all of these things, like their sales compared to average mcdonald's, but they are night and day. scarlet: they are not even in the ballpark 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. and yes, we mean on a tear. the stock is up -- nearly -- here is the two-day chart. nearly up 1000%. it is actually higher, near
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2000%. 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. because how else in the world could you have your money grow basically 40 fold in a couple of days or a few hours, except by these companies? scarlet: aquinox employs 24 people, based in vancouver, with a market cap of $202 million. joe: it's the american dream. it's amazing. one day, crazy rich. scarlet: it trades on the nasdaq, too. it is not even an otc stock. good stuff. how did you find that one? joe: people were talking about it in the newsroom. scarlet: we've got more coming up. we will be right back. ♪
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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 report. i love this report, because there are so many interesting questions they ask small businesses about how hard it is to find labor and they're pricing power and access to credit. you get interesting answers. there are interesting trends. it's a fun report to dive into.
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scarlet: the average over the last couple of months has been 92.3. joe: right now, it is down a little bit. scarlet: all right that's all , for "what'd you miss?". thank you for watching.
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>> from our studios in new york city. this is "charlie rose." . charlie: analysis of the first republican presidential debate. the top 10 candidates topped off in cleveland and questioned them. this included the economy and social issues. all of the contenders high lighted conservative themes and it was good television and one of the most awaited political events of the year. here's a look of some last night's most memorable


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