tv Bloomberg Markets Bloomberg August 31, 2015 10:00am-11:01am EDT
of trading since 2012. president obama heads to anchorage, alaska for an arctic summit. the point of conversation will be drilling for oil after recent approval of shale's explanation plans in this eight. -- in the state. donald trump is getting competition from ben carson. he is not the only one making waves in the race. good morning. happy monday. i'm olivia sterns. u.s. markets are lower again this morning. the s&p down by 20 points or about 1%. you can see the s&p is on track for its biggest monthly loss since 2012. this follows declines in equity markets in asia and europe.
i would show you what is happening to the u.s. dollar. we are seeing strength of this morning, perhaps off these comments. the dollar is a little bit lower. it has been trading higher since we heard from the vice chairman of the fed, stanley fischer, speaking in jackson hole over the weekend saying we do not necessarily have to wait for inflation to get back to 2% before we start tightening. i want show you what is happening on oil markets. we have seen a correction in the price of crude. crude down about 25%. lower again today by 3%. a huge pickup in volatility remaining in the oil markets. let's take a check of your top headlines at this hour. a hand grenade exploded during demonstrations in ukraine's capital. nearly 50 police officers were hurt. it happened outside the .arliament building in kiev a crowd gathered to protest giving more power to the war-torn eastern region. the vote was part of a deal aimed to stop fighting between
separatists and government troops. steppingnd hungary are up the search for migrants attempted to cross borders. wrote checks caused a 15 mile traffic jam on the hungarian side of the border. the bodies of 71 migrants were found in an abandoned truck near vienna. five suspects are currently under arrest. the obama administration is drafting sanctions aimed at punishing china and other countries were hacking computer networks. the measures have not been finalized. there is concern that sanctions could lead to more online attacks. president obama is starting a three-day trip to alaska today. he will become the first president to visit the state's arctic region. the president is expected to call for stepped-up action against climate change. the president is changing the name of mount mckinley to denali, a name meaning the great one. puerto rico's that plan is being delayed while the island recovers from a tropical storm.
advisors were scheduled to give the island's governor and rish plan yesterday but he is now giving them until september 8 to finish the proposal. puerto rico is facing a burden of about $72 billion. it was a round to remember for golfer brian holman -- brian harman. he is the third player in history to have two aces in one round of a pga event. harmon could manage only a 30th place finish as jason day one. two holes in one and he came in 30th. those are your top stories at this hour. the s&p 500 index is on course for its biggest monthly loss since 2012. this after a tumultuous august. the index continues to take a loss as we head into september. does this mean game over for the bull market? .ere with me is julian emanuel
this time last week, the dow was off about 700 or 800 points. we proceeded to see several days of 2% moves up or down in the markets. what you think all this volatility is a buying opportunity? julian: essentially what you had is preparation earlier in the year for volatility. you have seen the swiss national bank cause this to happen in the swiss franc. we saw the european central bank cause blonde boon to volatility. the fact is, the economy is strong in the u.s. we raised our 2015 gdp this morning from 2.3 to 2.6. we are looking for 2.8 next year. recessions kill bull markets. olivia: bull markets do not just run out of steam, they run into
a recession and we are not heading there. julian: we are not. the temptation is to think that we are running out of steam. when you look at the backdrop of a yield in the s&p 500 of around 2.5% and a 10 year yield of 2.15%, you're more or less getting paid to wait for an earnings recovery which we think will happen. olivia: isn't this volatility a negative signal for the market? julian: it is and it isn't. something to it is us that is more the sign of a capitulation and panic. if you look back to last monday and tuesday, the price of downside puts versus upside , worse than any time including 2008 in the depths of the crisis. that kind of fear is the kind of fear that has been a buying opportunity. olivia: your gear and target for
the s&p is 20 to 25. we need to see -- 2225. julian: we get there by working through the next several weeks. we don't think the last three days -- olivia: do you think we will see a big pickup and corporate earnings? story. that is a 2016 what's happening right now is getting over this idea of the economy and china possibility -- china's ability not to affect the u.s. economy. we need to get used to more volatility. the fact is, the economy is strong and that will allow people, give them the patience to wait for this pickup. olivia: the chatter in the markets this morning, everybody trying to digest what we heard from the jackson hole said conference over the weekend in the course of last week. everybody is trying to figure out when the fed will raise
rates. does when the fed raise rates change your target for the s&p? julian: no. our view is that they are going to hike in september. essentially, this is a longer process. the fed has told us all along this cycle will be different from any other rate hike cycle in the last 50 years and the fed is going to be patient and accommodated to changes in the coming data. olivia: where are you looking to buy? julian: we love cash. if you think about it, the last six or seven years of zero interest rates have caused cash to have no value essentially. as we look toward rate hikes and as we look toward greater volatility, the sectors that hold lots of cash, technology come health care, and financials , are the places where they can benefit the most. the sectors that have had the best earning trends in recent
quarters. olivia: are you ready to buy in now? do you want to wait a little? julian: it is a process. we dipped our toe into the water last wednesday morning. yesterday very patient. the mindset of an investor needs to change. it is not a run to the races. olivia: you want to get ahead of that mindset. julian: absolutely. you realize that you are going to have days like we see this morning. it is a process and by the end of the year we expect market flare up. olivia: that you so much. julian emanuel. you realize that you are going to have days like we see this morning. great to have you. coming up, are americans getting sick and tiled -- tired of the political establishment? we will break down the findings of the latest iowa poll, coming up next. ♪
olivia: good morning. this is "th bloomberg market day." s&p recorded best three-day winning streak since 2011. we are on course for the biggest loss since 2012. matt: we are looking at what would be the worst month in five years for the dow jones. down atsee we are session lows. a drop of 174 points puts us not only at the worst month in five
years, firmly in correction mode. a drop of more than 10% from the highs that we saw back in may. big losses here after the chinese market dropped overnight and investors are concerned the party in china does not have the tools or the power to hold up the market. the problems that would ensue will be a problem for us as well. take a look at the energy sector . the worst performer of all the sectors in the s&p 500 year to date. down 1.28%rgy index oil, the underlying issue here, $44 a barrel. .e went below $40 last week a little recovery but we are losing some of that one dollar 16 a barrel today. -- $1.16 per barrel today. berkshire hathaway expanding its
stake in philip 66 to $4.5 billion stake. you can see we open higher today but we are still up about 9/10 of a percent. philip 66 is the biggest refiner in the country and refiners have done quite well year today -- year to date compared to the broader oil index. here. pulled up a screen refiners in orange and the s&p 500 energy index, the worst performer year to date, in white . doing poorly compared to refiners. refiners have boosted the amount of business they are doing with cheaper oil. that is one of the reasons warren buffett thanks this might be a good buy. people are driving just as much if not more than ever before. we are approaching labor day weekend when a lot of people will be out there on the roads. back to you. olivia: thank you so much. i look at top stories at this hour. walmart is spending $1 billion
to provide more training and raise wages. employees have been told to leave shifts early or take longer lunches. samsung shares are slumping for a fifth straight month. the electronics giant has lost $44 billion in market value since april. demands for new galaxy smartphones is weak. shares are down more than 8% this month. the company's longest losing streak in more than 30 years. a man whose movies caused countless sleepless nights has died. wes craven created "nightmare on him street." wes craven was 76 years old. the latest bloomberg politics iowa poll shows voters turning away from establishment candidates and supporting candidates like donald trump in bernie sanders, pitching themselves as outsiders.
phil mattingly is here to help us break down the polls. hillary clinton's support in iowa has dropped a third since june. i remove a couple months before the caucuses into thousand eight , hillary had a 40 point lead on obama -- in 2008, hillary clinton had a 40 point lead on obama. error -- right now you have hillary about 37%. bernie sanders coming in at about 30%. it's not that bernie sanders made a huge move forward. hillary clinton dropping more than a third of for support. the area of concern for the clinton campaign, it is not that people are opposed to hillary clinton. 96% of bernie sanders' supporters do not have problem with hillary clinton. it's not the e-mail issue.
61% of democrats polled said the e-mails, none of that had anything to do with their support of bernie sanders. pitchsanders' ideas and to iowa voters that is resonating now. if your hillary clinton's note is morech to concentrated than anyone else, the issue you have, is this a message problem for hillary clinton. i would say her support is very real. her campaign depth, the organization is real. this is not some -- this is not barack obama coming up behind her. these numbers cause pause. olivia: i would've thought the conventional narrative around hillary clinton is that the support for bernie sanders is a rejection of clinton but it is interesting that it is more his appeal. donald trump remains ahead on the republican side. the candidate coming in second place, ben carson, why is he resonating? phil: almost the same reason as
trump. one of the more intricate parts of this poll, we polled, how politiciansat currently. 93% of republicans said they ."re "deeply dissatisfied 17 candidates, very deep and accomplished. people who have really done stuff in the policy arenas over the last couple of decades. donald trump and ben carson are not in that group. you have donald trump, hitting mid to low 20's. ben carson at 18%. this is an antiestablishment narrative rising through the republican party right now. , two months ago, his favorable rating was at 27% in iowa. that looks like you can never overcome that. 61% of people in
iowa have a favorable opinion of him. 35% do not. jeb bush, the presumptive front runner, 45% favorable, 50% unfavorable. his ability to flip that is amazing. one operative replied simply, this is absurd. donald trump, not going anywhere anytime soon. olivia: that is amazing. what is the latest chatter on a potential biden run? phil: i think it has died down a bit. he is the rest of this month to decide. you look at his numbers in this iowa poll. he was at about 9%. better numbers than he had when he ran into thousand seven but the pathway forward for him -- in 2007, but the pathway forward for him, he would not take from the elizabeth warren caucus of voters so the pathway forward, what states he would be able to attack clinton on and whether he would be able to attack at all.
questions that do not have easy answers. i think it will be tough for him to decide. he said on a private call last week that he is looking to see if he has the emotional fuel. you talk to people close to him, they do not think he does. couple weeks left for him to consider this. if he sees an opening, i think you will see that he takes it. olivia: thank you so much, phil mattingly joining us from d.c. we will to you why equity investors are keeping a close eye on credit. don't go away. ♪
president obama about to take off and rude to alaska -- on route to alaska. bond investors are saying i told you so yet again. some analysts say the bond market does a better job of anticipating the direction of shifts in the economy. market routes may be far from over. here to explain is lisa abramowicz. last week when we were struggling to find a catalyst for the big global route, i did have a couple of people come on and say credit spreads told you so. creditver since may, spreads portend of broader weakness that may not be correlated to specific high-yield companies. those also tend to be a good tea leaf for stock market. ever since may, credit spreads have been widening. companies have been selling hundreds of billions of dollars
of corporate bonds to buy back their shares and pay dividends and acquire companies. bond investors have been saying, enough already. stock investors have loved it. they continue to buy and enjoy the ride. typically, since 1996, three times when credit spreads widened this much, 32 basis points, in three months the s&p 500 has declined 18%. that would be a problem. it suggests that we have a lot more to go. olivia: explain what we are looking at. lisa: what spreads are, the extra yield investors demand to own credit, corporate bonds, over government bonds. it has been widening steadily which means investors have been growing more cautious and
saying, we do not buy that you will be able to pay us back or we do not think is worth it to take the risk for what you're willing to pay us. meanwhile, stocks have continued to rally. you are seeing it somewhat come back where you are seeing that stocks are coming down a bit. this is basically the big concern people have which is, right now, are we heading into a period of deflation. are we heading into a period where growth will not be able to sustain the amount of debt that companies have incurred since the credit crisis? olivia: about a year for stocks to heed the warning the credit markets were signaling. lisa: high yields have been more pronounced. -- you arelast fall starting to see a trickle out beyond oil. are energy companies that
in the energy sector have lost more than 7% this month alone. olivia: do these credit spreads tell you anything about which sectors will selloff the most? is it brought equity indices? lisa: it has been broad-based. this is leading some investors to say, we think there is value. double line came out and said we are buying investment-grade bonds. we are going to take this opportunity to rotate into higher quality bonds. some people are saying, not so fast. in the past week, investors flooded into money markets. they are holding cash. you are seeing that in a broadway. it is unclear what is going to happen. people are less worried about any potential rate hike and people are talking more about, does the fed have control over inflation? is china in control? people want to hide out in cash right now. olivia: including julian emanuel who was just on with us.
he was looking for equities to hold a lot of cash on the books. is the biggest fear china? inflation? lisa: the people i speak to, deflation. many central bankers do not have tools left to counter it. olivia: they might not need to wait until inflation appears. lisa: i think it is interesting because there has been this debate where people are saying, who cares if companies are raising money in the bond markets to pay off stock buyers. right now stock buyers are saying, it is not ok for us. olivia: that you so much. lisa abramowicz joining us. yields are signaling it might be time to sell. don't go away. ♪
going along with their plans degree the largest utility in the united states. the washington dc public service commission rejected the takeover. regulators have approved the deal in other states. the d.c. commission gave exelon and pepco 30 days to request reconsideration. google's life science unit is teaming with -- the companies will of elop methods to store and analyze a glucose levels in real-time. diabetes will affect an estimated 600 million people by 2035. it costs the u.s. alone about 20 $45 billion alone in health care. warren buffett is betting americans are still thirsty for gasoline. berkshire hathaway is making its most significant energy investment in two years. a $4.5 billion stake in the largest oil refinery in the u.s. the s&p energy index is down 18% this year but phillips is up almost 8%.
it has not been a good year for endowments at the nation possible public universities. they are reporting returns that failed to meet industry standard. texas had aty of 3.3% return. ohio state, indiana, and the were belowof florida 5%. tokyo is the winner of the little league world series. the team overcame a deficit to beat lewis berry pennsylvania by a score of 18-11. the teams have broken the little league record of 23 runs in a title game. the victory gave japan its 10th little league championship. congratulations to those kids. let's take a quick look at where markets are trading. u.s. stocks, in the red but offense lows. the s&p 500 heading for its worst monthly drop since 2012. oil is continuing to sell off
today, down by about 2.5% but it is up at $44 a barrel. we spent a lot of last week south of $40. you are seeing some of the heaviest selling in energy stocks this morning. still to come, much more policymakersnomic just wrapping up their retreat in jackson hole, wyoming. the biggest takeaways you need to know for the event. mark injuries and weighs in on cyber security and the relationship between tech companies and the u.s. government. we will bring you that interview. macau pataca's gdp dropped more quarter -- macau's gdp dropped more than 26% last quarter. president obama is departing for anchorage. he will become the first president to visit the state's arctic region. the president is expected to
call for action to fight climate change. this comes weeks after he gave shale quarter -- approval to beg for oil in the arctic. for a closer look at the expectation for oil in the arctic i want to bring in former shell president john hofmeister. he joins us now on the line from houston. also with us, alix steel. yo with you.t with we saw the oil majors flashing plans for investing as the price of oil collapsed. why doesn't make sense for shale to be doubling down in the arctic -- why does it make sense for shale to be doubling down of the arctic? john: we have to find out what kinds of resources are available. that is the purpose of this round of drilling. let's find out what is there so that companies can make appropriate decisions going forward. there were reports over the weekend that russia and china
are rushing to the arctic to exploit the resources in their part of the world. if the u.s. ignores the opportunity, the 20 20's and the 20 30's, we could find ourselves short of resources. it makes all the sense of the world because the world will need more oil in the 2000 20's and 2000 30's to develop the right technologies and the right safety precautions to make sure it can be done in a sustainable way. that is what i think i is taking place right now. alix: you mentioned that we need the oil resources to secure our oil supply. we are swimming in oil. inventories are standing at 450 million barrels. production is near a high. we cannot use what we have right now. john: that is because global demand is much lower than was anticipated when the companies spent all that capital to try to
increase production. decisions made in 2011, 2012, and 2014 were intended to meet 100 million erroll's -- 100 million barrels of demand a day. 100al growth -- $100 million barrels demand. the world will demand it. the oil we are producing today is one to 2 million barrels -- one million to 2 million barrels to much. on a percentage basis, it is not that much. and ifal demand returns the population continues to demand more oil, which i think it will, we really have to pursue all avenues to try to sustain global supply because that is what fuels the economy. olivia: there are a lot of environmental politics around this. alaska, a state that has the
most visible evidence of climate change and also a lot of criticism of oil majors drilling off the coast. what do you say in defense of the project to the environmental activists who say this is the last thing we should be doing, drilling for more fossil fuels underneath the ocean floor off the coast? john: they can have that opinion but if the world is short of oil and the global economies are fading and unemployment is rising, they might be required to rethink their position. i have been to where the president is going. i have met with mayors. i have met with the residents in town halls. there is a desire for jobs and economic growth on the north slope of alaska, just as there is a desire for environmental protection and environmental security from effects of climate change. i went in february. the president is going in august.
there is a difference in what he is going to see in august compared to what i saw in february when the whole place was locked in with ice all around the north slope where the villages, the highest temperature we experienced was about -16 degrees fahrenheit any day i was there. a different place in the wintertime. having said that, the president has every right to visit and listen to citizens of this country about what their concerns are. let's remember on balance, this is not only an environmental story. this is a story about national security, energy security, economic empowerment, jobs, and all of the related activities associated with how we use oil in this country. alix: it seems like any company that is going to pump billions of dollars into the arctic has to fight against saudi arabia. these types of projects, shale, areon-u.s.
the projects saudi's want to put business. can oil companies really stomach that? john: the saudi's do not have enough oil to supply the world. alix: but they are the swing producer. john: business. can oil companies really stomach that? the u.s. could become the swing producer. it is a question of putting together all the plans from around the world to achieve 100 million barrels a day. we're not there yet. we will have to go beyond what hundred million barrels a day once we get there. we developed the deepwater gulf of mexico while saudi arabia develop its low-cost energy fields. at the gulf of mexico is producing record levels of oil today. we have developed the shale formations. increase production to the u.s. back almost to historic levels from the 1970's and early 1980's. the world needs a lot of oil and i think it moves the industry to find it wherever they can. not just oil, natural gas as
well. you have to spend the money. you have to develop the production capabilities and you have to create the environmental standards that protect the earth and future generations from whatever affects of climate change might be felt. olivia: a fascinating conversation. i wish we could keep you on for the hour but we have got to go. my thanks to john hofmeister for sharing his view and also my thanks to alix steel will be back for the next hour. still to come in the next few minutes, what is the fed thinking? we will have a postmortem with carl riccadonna. ♪
market day. it is time to get you caught up on all of market action around the world. i want to start in asia. the shanghai composite ended in mixed territory. bolstering the chinese market, the government is asking brokerages to buy back shares. stephen: chinese policymakers are try to bolster sales before a world war ii victory military parade later this week. the securities regulator has asked brokers to contribute $15 billion to a revived market rescue fund after stocks late last week fell the most in nearly 20 years. state media reports six people, and four a journalist, executives of china's biggest brokerage have been arrested for various crimes including insider trading. olivia: stephen engle reporting from hong kong.
mark barton is standing by in europe. mark: what a difference a day makes. 600, biggest fall in seven years. the stock 600 caught back all of those losses. today we have loss is nothing like a week ago. one eye on china, one eye on the united states. the stock 600 in august down by 8%. biggest monthly drop since august 2011. every industry group on the stock 600 has fallen this month. chemical companies have lost 50 billion euros this month. basic resources companies of lost 27 billion euros. oil and gas companies have lost almost 60 billion. currenciesforming globally on a trade weighted basis, the euro, the yen. the only interesting piece of data of choice today was
eurozone cpi, on a year-by-year basis rose. 2%.r cry of just below does that mean the ecb needs to increase monetary easing? many say it will have to do so by september of next year. the german 10 year yield coming down to 73. has not been above 1% since june. the lack of inflation could push the ecb to pump more money into the economy. to see about the ecb -- we will have to see about the ecb. it is august 31. we will end this month in a bloody fashion. at the levels you are seeing now , the s&p will have the worst 2012. since the dow jones will have the worst august since 2010.
the worst in five years for the big blue chips. but authorsly down session lows. the dow was down 100 points and we have been down 175. clawing their way back into the midday. take a look at crude oil. it had been clawing its way back. it had its best week since 2011 last week. it is back down again today, more than 2%. almost a dollar a barrel. that is why we see energy stocks losing so much today. if you take a look at the imap i have on my terminal, you can see the energy stocks are the biggest losers. we have a sea of red across the board. with the exception of a couple of stocks. gm is gaining so you see a little bit of green in consumer discretionary. some retailers are up like .ignet
you see green in health care. in general, energy stocks are doing poorly today with the exception of phillips. phillips 66 getting another purchase from warren buffett. back to you. olivia: matt miller joining us from the newsroom. economic policy makers have wrapped up their retreat in jackson hole, wyoming on the agenda, concerns about inflation risks. whether the timing is right for a fed rate hike. james bullard shared his point of view. >> i think it will be a good day we make this first move. we have been at zero for 6.5 years. i think it will signal confidence in the u.s. market. olivia: did the discussions reinforce the idea of tightening monetary policy? ask carl riccadonna.
september ratea hike was lies. we had the volatility last week and we heard from bill dudley and it seemed like september was dead. then we heard stanley fischer say, you don't have to get to 2% per inflation. carl: september seems to have nine lives. the common theme we heard from fed speakers last week was, if we get beyond this market volatility, if we look beyond the volatility, the economy is where we needed to be to start the exit process. that is a big if. we are starting this week off and it has been trading, late august. london is closed today but we see the decline in the equity market. olivia: is there anything you heard that surprised you? carl: not in particular.
i hear this constant drumbeat that policymakers want to get off the zero bound in 2015. they have an itchy trigger finger to do that. i did not hear a lot ofthat polt off the zero bound in 2015. folks, even some of the ones leading more in a hawkish direction pounding the table on september. interesting thing i did hear was this repeated notion that october is a live meeting. i think participants are trying to write that off and say it is either september or october. policymakers do not like this two-tier system for fed meetings where the press conference meetings count for more than the non-test conference meeting. i would not be surprised if at some point in the next couple of weeks, maybe at her september conference, janet yellen says october is going to be a press conference meeting as well. olivia: we will have a press conference. fed fund futures would go wild. how important is the jobs report on friday?
is there a number that knocks september off the table? new york fed president dudley said the jobs report would be dated because the survey period for august occurred before all of this market turmoil so if you are looking for that negative , you areinto hiring not going to see it in the august jobs report. jobs report -- we have been steady around 200,000 per month for job creation this year. i don't see a compelling reason why we should deviate from that trend when we get the latest figures this friday. the of indicators like jobless claims numbers. all of these things tell us hiring momentum is at least holding up, if not happening. olivia: i read this morning, 11 million jobs created since 2009. carl: a solid track record three
olivia: this is the bloomberg market day. last week, ash carter was in silicon valley and on the heels of that visit, emily chang got a chance to sit down with mark and treason -- mark injurie he has set up a unit of dod assigned to build more bridges. defense 50 years ago was the first customer of all the technology companies but
over the last 25 years, the defense department focused on the large federal contractors. there is a bigger focus on working with early-stage companies. i think national defense has become synonymous with technology. warfare istional heavily influenced and the future is being shaped by new technology. is early-stage companies can play a role. emily: what is your ask? c: it is very hard -- there is no natural fit for companies that small and that -- organizations that small and that big. pathwaysg without fundamentally changing
-- having a way to get involved early is critical and that is what this new unit is set up to do. emily: what is the biggest risk to our cyber security right now? marc: the biggest risk i would say, one is, we're not used to defending against nationstates. 20 years ago defenses were against teenage kids. now the defenses are against nationstates. the threat profile has changed. cyber security is inherently asymmetrical. the defender has to be correct 100% of the time. the attack on the needs to work once. if you make the attacks more sophisticated, the defense has to get much more sophisticated. we are in the process of catching up to that. emily: mark zuckerberg called u.s. surveillance the biggest threat to the internet. marc: i would never contradict mark in anything he says.
i think there is an issue globally. every country in the world either does the kind of surveillance the kind of snow to revelations that show the u.s. -- the snowdon revelations show the u.s. does. , you have a company to figure out how to operate in a world in which every company is doing this or trying to do it. it has become a messy situation. emily: so many companies. do you think we are in a cyber security bubble? do you think some of these valuations are unsustainable? i was speaking with a cofounder who said a lot of these companies will not be around. living in an online world. we will all have connected devices all the time. the fact that we have this topic
on how to protect cars from cyber hacking, that is a new thing. olivia: that was emily chang speaking with marc andreessen. the parent company of bloomberg television is an investor in his company. still to come in the next hour, the economist who changed his 15 allte call from 2000 the way to march 2016. ♪
that is the question on everyone's mind. untilay it will not come march 2016. behind what is samsung's incredible plunge? alix: we look at the future of tennis. adults are increasingly staying off the court, but the kids are taking to it. ♪ olivia: good morning. welcome back to the bloomberg market day. minutes into the trading day in new york craigslist that you look at where u.s. markets are trading right now. we are all session lows, but the outcome of the nasdaq, and the s&p all firmly in the red.