tv Bloomberg Markets Bloomberg October 6, 2015 2:00pm-3:01pm EDT
>> from bloomberg world headquarters in new york, good afternoon. here is what we are watching this hour. bolts wagon pots ceo says there will be more pain ahead as the company plans to delay non- essential investments. -- volkswagen's ceo. oil surging to a one-month high, closing at $50 a barrel. late drop in crude production use the glut -- will a drop in crude production eased the glut? minute he bear has released its list of top 50 innovators. has released its list of top 50 innovators. julie hyman has the latest. julie: we are seeing this mixed session today.
been seeing the nasdaq and s&p 500 both really bearing the brunt of the selling today. the dow has held up relatively well. let's take a look at the imap. this illustrates that push and pull i mentioned. here are the sectors in the s&p 500 energy materials trading higher. -- energy and materials trading higher. is really the big drag once again. biotech stocks getting hit hard. continuing concern about drug pricing. are quite lofty. if you look at oil prices today, you see why many of these energy stocks are higher. oil has been getting a lift in today's session. right now come up about 4%.
production had fallen in september in the u.s. some optimism about a bit more progress being made on supply-demand alignment. if you look at the movers individually, it is the oil movers that stand out. the stocks contribute in the most today, chevron and some mobile -- exxon mobil. increase -- gold getting a lift today. mining stocks also doing well. there is this perception that the fed will not raise rates anytime soon. thank you very much. let's take a look at our bloomberg first word headline. mark: the top u.s. commander in
afghanistan says the deadly weekend airstrike on a medical clinic was an error. his admission came during testimony today before the u.s. senate armed services committee. >> i have forces provided air support to afghan forces. the decision to provide aerial madewas a u.s. decision within the u.s. chain of command. a hospital was mistakenly struck. we would never intentionally target a protected medical facility. mark: 22 people were killed at the clinical was run by the international group doctors without borders. clinic which was run by the international group doctors without borders. inmates could be getting an early release. the washington post reports it is a plan to reduce overcrowding and relief does provide relief to drug offenders.
it may be the largest ever one-time release of federal prisoners. they will be released between .ctober 30 and november 2 the pentagon wants to avoid any misunderstanding over syria and russia agrees. russia says it is willing to keep talking to ensure the two nations do not interfere with each other. native criticized russia for irresponsible behavior for allowing its warplanes to cross into turkish airspace. -- nato criticized russia. president obama will be with families of the community college victims. nine people were killed and nine others injured before the gunman committed suicide. another college campus tragedy averted today. in alleged gunman is custody. the suspect was taken into custody in a classroom on the
campus. he may have tossed the gun. philadelphia area colleges and universities agreed to hire security afternoon fbi warning. fbi warning. you can always find the latest news that bloomberg.com -- at coming up on. -- at bloomberg.com. emily chang and brad stone are there at the summit, joining us now. emily: hey there. we have stewart butterfield with us. -- hefounder and ceo of was talking about bubble or noble. no bubble.
you have so much money, it would take you 60 years to burn through it. so, why are we not in the bubble? stewart: there will be a correction at some point. we've had a great seven-year run on the public market. pop with nothing behind it? surprises come these companies will have strong valuations. would that be the bubble popping? that is the argument i have. there is something behind this. >> some of the concerns right now are around companies that sit at the junction between consumer and enterprise, like dropbox and evernote. how do you avoid falling into the same traps?
stewart: we have been focused entirely on enterprise. government, the faa, department of energy research lab, general services administration, department of state. we've been avoided consumer -- >> are they adopting an organically? >> organically. they want to negotiate terms, that kind of stuff. emily: dropbox did not start thinking about salesforce's enough. -- salesforce soon enough. >> there is a question about what would be the most efficient way to grow. advertising. it is easy to stop advertising
when you need to. the second choice would be other marketing. , events,e sponsorships things like that. the third choice would be sales. it is much more expensive and harder to make the change. if you hire 1000 salespeople, -- it is an people empirical question. we have been growing historically about 20 or 30% a month. the rate of growth that is difficult for us to keep up with. emily: we were talking about this -- we may be seeing the beginnings of a down route. downgrading the value of their stocks. why will that happen to you -- won't that happen to you?
stewart: to take money on a specific set of terms come i've to be pretty sure. 95% sure that this is a valuation we can grow into. people argue sometimes about whether the company is worth that much money. people make investment decisions based on the future value. can this company grow by 10 next x or 20x? 10 it is borrowing against future growth. we have to be confident we can hit that. profit comegross operating revenue four times expenses. we are in a great position. >> let me ask you about the product. the bloomberg technology group's experiment in with slack. is there more you can do to replace e-mail?
slack.xperimenting with >> it only works in the places where it either replaces or consolidates other communication. it will not replace e-mail 100%. teams e-mailed to set up this meeting. it's a terrible way to communicate internally. are, you haveyou this tiny slice and everything is opaque. you join an organization, given up the inbox. -- you have an empty inbox. slack will replace that. it will only work if people are -- >> you did cofound flickr. instagram qubes reporting these incredible numbers.
-- keeps reporting these incredible numbers. how do you see this playing out? possible -- we still have a couple decades. to figure out how we will invest. the technology is so new. everyone has a camera with them all the time. the ability to instantly send it result.dy else is 3-5 it is a brand-new capability. it will take a long time to figure it out. letoaredrry o com
would have provided a racist to all workers and narrow the pay gap for second-tier workers. being capital liquidating its $2.2 billion hedge fund. bain capital. the trade deficit soared in august. it rose 16%. exports have been hurt by the stronger dollar and weakness in china. you can always read more headlines at bloomberg.com. let's head over to our markets desk. kullman who retiring.upont edward green will be taking
over. the shares are searching on this. -- surging on this. a so-called sum of the parts valuation. what would these various pieces be worth alone? --ut 30% where the shares above where the shares are trading right now. line, dupont shares down 25% since that proxy battle. that gave her less bargaining power when it came to stay or go at the company. spinoff from dupont. these shares down 60% since that's been off. there is no guarantee that the stock of the individual parts will do better as a result.
.- since that spinoff i'm also looking at semi conductor makers today. we are seeing weakness in the philadelphia semiconductor index. it is now just turning higher. works, theing at sky company agreeing to acquire pmc sierra for $2 billion. these shares are still lower today. we are seeing bank of america come out with a note and say that the valuations are compelling for these three stocks. bank of america saying now is the time to buy these semi conductor makers. david: let's move on to some dealnews. the two biggest beer companies in the world -- rejecting a takeover offer from anheuser-busch.
jeff is the managing editor for global m&a. do we have a sense of what would be a fair deal? >> it was about $100 billion. 40 pounds is what the offer was. sab want something more like 45. about $110 billion. they are separated by $10 billion. as abc and to want something like 110, may be higher than that. sab wants something like be higher than that.han th david: how have analysts reacted to this? >> i don't think they are surprised. when you make an offer, the person on the other side will always say no to the first
offer. people are not reading too much into this. the shares and react. shares to about 4% when our story broke today. dipped about 4%. david: the reason behind the steel, what this deal would create. >> the world's largest beer company. the low interest rates, now is the time to act. sab doesn't that have any other options. they are in a position come in a corner. everyone realizes it is an open secret that they should come together. david: thank you very much. more bloomberg market day in just a minute. ♪
david: welcome back to the bloomberg market day. president obama is trying to sell the largest free-trade agreement in history and its focus on what it could be for workers. it could be the cornerstone of his economic and foreign-policy legacy but he has a big political battle ahead. this is played out over many months. we still don't know exactly what is in this deal. we don't know the contents entirely. done quietlyeen and within the four walls of the conference rooms. we don't know exactly yet. it ise some idea because been discussed in general terms. with thoses start
who stand to win or gain from this particular deal. >> the united states gains a lot. we've been asking for other countries to have higher environmental standards, higher workplace standards, higher standards for intellectual property protection. we want state enterprises to assume responsibility for competition. gainers. the some good opportunities we have not had before. the united states does quite well. we have to give to get and you to make concessions, as every country has done. it is good for the united states. then again, we don't know the details, so it is hard to make a final judgment. from what i've seen, it looks
like we're going quite well. david: pharmaceutical companies in a cultural interests saying this will be harmful. do they have a case? do they stand to lose? >> certain groups did not get as much as they wanted. that is the nature of negotiation. the pharmaceutical industry wanted more. certain types of high-quality drugs, they did not get as much pen protection -- patent protection or as long as they wanted. farmers wanted to get more in certain markets. the auto industry did not get as much as they wanted. large, you up to look at this from where we started out to where we are now. -- you have to look at this from where we started out to where we are now. it seems to be positive.
we should not reserve our judgment. there are groups of people who criticize this and say we don't have enough information. at the same time, they don't announce that should denounce it -- they announce it. you cannot have it both ways. -- they denounce it. is a very good negotiator. david: thank you very much for your time today. still ahead, mining and energy company may be splitting its units. more after this. ♪
headquarters in new york, this is the bloomberg market day. mark: islamic state controls large portions of iraq's north and west come including mosul. a former united nations president is accused of taking more than a half-million dollars in bribes. for steeringff lucrative investments and government contracts. developer and four others are facing charges. could face ator $200 million fine. the aerial photography company did not have permission for the
flight. they have 30 days to respond to the allegation. the american airlines pilot who became ill while flying from phoenix to boston died of natural causes. that is the determination of the new york medical examiner. when 47 passengers were aboard the cross-country flight when michael johnston became incapacitated. -- 147 passengers. captain johnston was 57 years old. u.s. deportations of immigrants in the last 12 months dropped to a nine-year low. government figures indicate total deportations are down 42% since 2012. of immigrants deported in the last 12 months were convicted criminals.
you can always find the latest news on bloomberg.com. david: commodities just closed. let's take a look at the biggest movers. oil staying solidly in the green today. companies shift more investments to fields already producing copper. freeport-mcmoran seeing a pop today. looking at a possible oil and gas spinoff in the wake of falling commodity and energy prices. talk to me about the timing here. ramy: the whole reason for this is because shareholders are not happy. the share price has fallen 50% since the year started. over the past year, it has fallen by two thirds. shareholders very unhappy. the biggest shareholders are the least happy. chief among them is carl icahn.
he has the biggest stake in freeport-mcmoran at 8.8%. stake andhas an 8% vanguard at 5.5%. freeport-mcmoran has been talking with shareholders. these shareholders want them to cut costs and spinoff. in this case, the oil and gas division. david: we have seen them slim down there board it. what is the goal of all of this? ramy: right now, they want to get rid of their debt. around $20 million or so. -- $20 billion or so. they just want to cut it down to $12 billion. in 2012, the only had debt of about $3.5 billion. we saw this conglomeration in
the oil and gas industry where freeport-mcmoran took on oil and gas. producers. now, because of what's happening with the commodity prices, they want to spin it off. david: speculation that falling crude reduction will help beat the global supply glut. triple.es are likely to the head of oil research for societe generale. have we hit bottom? >> i think it is just noise. this volatility has been going on for a while. it will continue for a while. weaker dollar, stronger oil today. , with the week payrolls data on friday -- the
market chose not to focus on the dollar-oil relationship and instead on what was underlying it, weaker fundamentals. this is what a volatile market can be like. at thewhen you look out geopolitical current, does that give you pause? pause.oes give me you have a pretty powerful military that is getting involved in a pretty bad neighborhood. a minorria itself is player in oil, neighbors a lot of countries. this is what we were worried about in 2013. big picture, at this point in time, the markets are a bit numb to what's going on in syria.
the spillover happen. it is called isis. the oil markets rolled with it. david: i want to go to the other side of the world, china. how nervous or fearful are you slowdown? economic gdp might come in with the slowest pace of growth and a quarter century. team isacroeconomics following it closely. we think it's a 30% chance of our lending. -- chance of a hard landing. having said that, it is a concern, a worry. when you look at the data on the oil side, demand has been quite healthy. robust even. we are on high alert. you hear anecdotal it's and pieces of that. -- bits and pieces of that.
let's see what the data says. worrys point, it is versus the reality. the reality is not that bad. david: what about alternative energy? this is something that will affect things in the short-term? >> it is a long-term issue. down,ve costs coming things like solar. it is coming. in different segments. on the other hand, you step back forthy renewables and so -- in a $75 oil world, that is very different. when you are comparing alternatives to $100 come everything works. is not a less $50, it slamdunk anymore. where are the costs coming down?
david: i want to play a quick what the prospects are for alternative energy moving forward. >> by 2017, in most of the united states, it will be the cheapest. in lots of the united states, it is the cheapest now. every year, if you think of how this energy is getting created, it is created by technology. cell phones get smaller and more powerful and cheaper every year. >> that is all well and good. in the oil markets, demand growth. whether you are an advanced , it'sy or emerging-market about transportation fuels. faster is oneer, thing for cell phones, but it's
different for automobiles. coming, but for oil, you need that perspective. whitner.rk a quick programming note. commoditiesglobal research joining an all-star lineup on surveillance tomorrow. that is tomorrow starting at 6:00 on bloomberg television and bloomberg.com. coming up in the next 20 minutes, volkswagen's ceo warns that more pain is to come. what does the automaker consider nonessential? cigarette sales rising in the u.s.. it is creating big profits for one group of investors. we will take you to the bloomberg market's most influential conference.
david: welcome back to the bloomberg market day. time now for a check of our top business headlines. amtrak threatening to suspend train service in december unless congress extends a deadline for adding safety technology. amtrak officials say the vast majority of its network will be inoperable without an extension. the deadline is to sever 31st. the technology was ordered after a deadly train derailment in philadelphia in may.
-- the deadline is december 31. the brewery has rejected an informal takeover offer from anheuser-busch. shareholders were looking for an offer in the $110 billion range. airlines as make money by emphasizing short trips in the u.s. to airline will start flying six cities in latin america and the caribbean. southwest has run out of cities in the u.s. to serve, so it is going international. you can always read more headlines at bloomberg.com. the s&p trying to extend its 2015 best winning streak at a joinsssion -- julie hyman us now with the sector report. julie: energy stocks have been the best performing group today. rebounder and during this
five-day rally -- rebounding during this five-day rally. it is up about 2% today. one of the outperforming groups we are watching. it is getting a boost from oil prices. lastction in the u.s. fell month by 120,000 barrels. will we finally see more of a supply-demand alignment? they have extended gains in oil prices, a 5% increase in wti today. on the opposing end of the scale, biotech in a big way, providing a big weight and drag on the major averages. this is the etf that tracks biotech stocks. 4% today. continuing concerns about drug pricing.
added on top of that, concern that the new transpacific partnership will cap the extensions of biologics protections that these companies have had. all of that combining for a dismal day for the bio techs. to look at how these groups have done for the year to date. biotech stocks measured by bit -- measured by that. this chart is normalized to account for percentage changes. the xle is down. the energy shares bouncing, it is bouncing off a low level. bio techs are coming down off a hell high level. -- 218
david: another big mover is volkswagen. the ceo said that he recall is set to begin in 2016. saysnvestigation so far only a few employees were involved in engine manipulations. the german carmakers and it will delay or cancel all nonessential investments. at whatme with a look that might mean for the company is jamie butters in detroit. an optimistic timetable? >> not at all. this will be very upsetting to the regulators in california where they have been told they need to start making repairs within 60 days. this will not please a lot of people who are concerned about the amount of nitrous oxide being spewed into the environment to create smog in places like california and
london and china and other smoggy places. this does not sound like an aggressive timeframe. they will get some criticism from congress on thursday. it will be interesting. this is not the timeframe that a lot of regulators were looking for. the new ceo gathered all the employees and told them what was on his mind and characterized this problem as huge. give us a sense of the scale here. they are still trying to grapple with understanding the magnitude of it. $500 times 11hem million vehicles or $10,000 times 11 million vehicles? the costs could get very huge. they have to put the brakes on a lot of programs. they can manage them and a lot of things can get going again. if you stop product development,
it takes a long time to get going. they are multiyear projects. gm shutdown all of its product of element during its bankruptcy. -- product development. the are just now getting their car lineup back and running. could find itself short-handed through 2020. david: when they talk about these nonessential investments, what are they talking about? is it research and design? onthey spend a lot research and develop it. -- research and development. it is actually product development. they could pull back on electric vehicles. since they are in trouble on diesels, it cannot play well for them politically.
>> we have to ask ourselves, is the world moving at a dramatically different pace than we thought it would? the answer is, not really. week nonfarm payrolls, u.s. growth estimates vicinity nott 2.5% much has changed. , there is a slow recovery. the picture for asia and emerging markets, bit more complex. have questions as well. there has been some turbulence, equity volatility. no effects on real growth
numbers. chinese numbers still look more or less in line with where they would have been. the rest of emerging markets are the worry. plunging commodity prices, slower funds back into the u.s.. japan comic'sof x -- a big part of the world population, reasonable part of the gdp. brazil, russia, south africa, turkey. a number of countries where the combination of lower commodity prices -- will represent a challenge. bitsich of the particular
-- >> not as bad as the asian crisis in the late 1990's. fundamentally different dynamics. foreign exchange reserves look better. markets ifs emerging you want an area of concern. they are a lot of money. -- they borrowed a lot of money. since the crisis, we have seen a 50% jump in the borrowing by corporate's in dollars or hard currency. a lot of that has come to emerging -- this is the data that is publicly available. some of these corporate cap hedged -- have hedged it. others may be playing a carry game. borrow in dollars, investe domestically. >> do you think there is a
question about how good those companies are? the have written the commodity boom in past. maybe not have as good of a management as it looked during the boom. >> the last few years have been kind to emerging markets. you've had a number of factors in place, cheap funding, surging commodity prices, chinese growth. they have used that to shore up their balance sheets. over the next 12-18 months, it will not be so. david: a quick programming note. all-star lineup on "surveillance" tomorrow. -- andres will be joined -- andwill be joined morse bill ackman sits
good afternoon, i'm pimm fox. here's what we are watching at this hour. selling and biotech and health-care stocks leading the nasdaq lower. , we will find out why the bears are in charge. commodity prices surged today. crude oil gaining more than 4%. companies like freeport macro ran surging ahead out there, we have got details. microsoft releases three new smartphones and tablets. microsoft, can he make a dent in an already saturated mobile phone market? this is