tv Whatd You Miss Bloomberg October 7, 2015 4:00pm-5:01pm EDT
scarlet: we are moments away from the closing bell. i am scarlet fu. joe: and i am joe weisenthal. the s&p nearing the high levels of a selloff. joe: but the question is, "what'd you miss?" scarlet: did the markets overreact? we dig into the charts. joe: we take a closer look at india and what it means for global markets. alix: and biotech stocks. rlet: but we begin, of course come with the markets, a late recovery. pushing us into the green, eight out of 10 sectors higher and only to the d's and telecom falling, but not by much, i 3/10
of 1%. joe: we saw a big surge in the market, and then the market came back, but volatility fell once again, and it does not feel like anything we saw. it feels like a much more calm up trending market. if this had been a few weeks ago, not only will the rally have in the race, but it would have been an issue. there is the rally we saw in oil, and with that, i want to take a look at the bloomberg terminal for my deep dive, and this is against its 50, 100, and 200-day average. i feel like a broken record, but i will zoom in on just the last couple of days, and you can the oil went above its 50-day, extending its rally, bumping up against the 100-day and 200-day and then fell back lower, and the reason i bring this up and why i switched charts is that there are a lot of technical factors. this is the short position for
wti, and they are right around record highs. you can get some really good insight. it is maxed out, and you can see how high it is, and moves can happen on not a lot of news. joe: i want to look at my terminal, because along with the oil rally you talked about, there has been a surge in emerging markets. it has been on a pretty nice rally. overbest rally in i think like 17 years, up 3%, and one of the pieces of data we got out of malaysia was the monthly trade surplus. it hit its highest level in nine months. imports were down, exports were up, which is what you would expect to see, a weak currency benefiting the economy, but you still have to wonder, did it rally because we had this great trade surplus number, or did it rally because of a general rally, and now we are talking about a trade surplus? i do not know. would we even be looking at this
bar chart if we were still in a downturn? who knows? i think this is one of the points that people .2. -- that people point to. deep a perfect segue to my dive. health care, not just in the united states, but certainly across the world. this shows the ratio of global health care shares, so the higher the line, the more they are outperforming. falling, performing relatively badly to the rest of the market. --arrows,ir rose and then when hillary clinton tweeted out that she was going to look into price hikes, since then, it has been market underperformance. : it is ugly. scarlet: it is ugly. at i want to bring it a
guess. the fed has decided not to raise rates, but as joe was talking about, markets were gaining back some of those losses, and last week, we saw a weaker than do weed jobs report, so conclude that the market totally overreacted? is pretty clear that the market has lost its anchor. , but thedisagreement reason for why it did not move is the emerging markets in china. that was something out of the blue. so market volatility is something that pushes around the fed decisions come which is something that never happened before, and that is where i think the market is getting a sense that, wow, if they can push around policy, where is monetary policy going? joe: the shadow feds fund rate. it showed over the last year, the shadow that fund rate, derived by based on the forward
curve of interest rates and stuff like that, there has been a tightening. it is still a factor or implicitly negative, but this has been since the middle of 2014. with this tightening, this de facto tightening the a cause of -- market to any volatility? bill: i think one of the things you have to remember is that the market conditions, financial conditions, have start and -- started to tighten. how much of it is directed by policy and how much is being -- by they market, market. where is the policy going? it would signal not only that the economy is ok but rather we are concerned about distortions in the marketplace. marketemendous volatility we have seen since the fed decision. what we're trying to do is get the rate off of zero at a very slow pace, so six years of very low rates can be unwound in a
very easy and calm manner. is we havee lost now lost that opportunity to stop that normalization process. anchor: and what is going to move first? the market is so has we have seen some de facto tightening. and ben bernanke, the architect. talkingn "charlie rose" about his new book, and they were talking about committee members when they meet to the death rates. let's listen. mr. bernanke: inflation has been quite low, and for good reasons, the fed has set a target for inflation at 2% for year, which was done when i was chairman. i think it is important that the fed reach that target. i think they agree with that. so the judgment they are making is this. first, how strong will the economy be? will the economy keep growing at a pace sufficient to keep
putting people back to work and to have the economy heating up enough that inflation will move back to target? is this bail, there focus globally on 2% inflation. we have had that in the u.s. since 2011. how will staying lower longer stoke price increases? will: it doesn't, right? not getting enough growth to generate that. price increases now paint what they are telling us though is that they are going to the price increases in the medium-term, five-yearhe 2, 3, horizon. where is it going to calm after the stress story factors have dissipated? and that is exactly what janet yellen has been telling us about. andprobably they dissipate, we are talking two or three years, so by 2018, 2019, 2020, that is where all of the forecasts are right now.
anchor: and be sure you tune in tomorrow for more on ben bernanke, because he will be sitting down with stephanie ruhle and others. bill? what would you ask? bill: why are they so concerned with liquidity? to increase in december, liquidity conditions are terrible then, and if they get a slow increase, will the corporate bond market and other markets have enough capacity to stop it from being volatile, even when you have a slow increase? volatility and illiquidity. illiquidity is something the imf and everyone else is worried about. seem like ay ridiculous question to people, especially given that short-term interest rates are basically at zero, that is monetary policy loose right now, or is it essentially neutral? his: i think everyone and brother-in-law will say it is hyper, hyper accommodative, and the question is how fast can we alleviate this?
as the price becomes more normal, because right now, you see a menace amount of ill positioning in the markets breed people are out of their mandates. they have gone to higher and higher yields and higher and higher risk assets just to get yields, so what we have is distorted monetary policy, a distortion that has to be alleviated and alleviated soon, because the longer we stay here, the more distress in the markets will come. : it really should not be at you interest rates, is what are saying. bill: we are building out a lot of risk that we do not see. we are starting to see some of it show up in the widening of credit spreads. that is, i think him a reflection of the distortion and not so much a reflection of a tightening of conditions. joe: bill: -- bill, what keeps you up at night? bill: what i just talked about, that the fed is so complacent. lots of liquidity out there.
recommending a dividend cut or possible illumination of this payout. it also said it sees a 5.8 billion euro goodwill impairment, and as a result, it sees a third-quarter net loss of 6.2 billion euros, and without that, it would actually post a gain, a profit for the year to date through the quarter. joe: the impairment is related to its stake in -- i'm sorry, i do not know how to pronounce it. it is a chinese company name, at least. joe: it is associated with the bank. alix: and that is an interesting factoid. and we want mark crumpton. has: president obama apologized to doctors without borders for that strike that destroyed a medical clinic in afghanistan. the weekend attack killed at least 22 people.
as press secretary josh earnest said, there will be a thorough and objective account. the developers, a day after general john campbell, the top commander of u.s. and allied forces in afghanistan, told the u.s. armed services committee that the attack on the clinic was a mistake. house majority leader kevin mccarthy is trying to clarify were he made suggesting the long-running house and ghazi investigation into then secretary of state hillary clinton is motivated by politics. the california republican insists today it is not political but is meant to uncover the truth about the failed 2012 attack that killed u.s. ambassador christopher stephens and three other americans. the fronts considered runner to replace house speaker john boehner. the u.s. coast guard extending its search for the u.s. cargo ship that sank next -- last week near the bahamas. it was out to sea as hurricane joaquin wins caused waves up to
50 feet. and new details of the deadly mass shooting of a community college in roseburg, oregon. mr. harper mercer killed himself therelassroom after being with two plainclothes officers. nine people died in the attack at the trinity college. others wounded. president obama will be in oregon to meet with families -- at the community college, others wounded, and president obama will be in oregon to meet with the families. the fed prepares to normalize its policy. they had their financial stability report and said that emerging markets face of financial challenges in adjusting to the new market realities and higher vulnerability. corporate jets, especially in dollar terms, they say you can see a tenfold rise since 2009.
scarlet: and explosion. joining us now is a head of macro strategy at morgan stanley, ruchir sharma. alix: around the emerging market currencies in the past few days, what of that has to do with the china fx reserves come up to kerley today, when they fell, but not by as much as we thought ? is this sort of a relief rally? sharma: in july and august, it seems china was going to have a complete breakdown with a stock market collapse and a currency devaluation. people were fearing a financial crisis out of china, and then over the last couple of weeks, markets got really oversold, and there was some relief that china -- growth remains quite slow and disappointing, and what we are seeing across the board, which will last for a few more weeks,
is that a lot of parallels are being drawn about the current the 1990's,d something repeating itself. joe: one of the things we saw with the malaysian ringgit, and i talked about it earlier, and the was a data point out saying their trade surplus had hit their highest level in nine months. is this the kind of thing where we are in a big uptrend of emerging markets that people say that data explains it, or which direction does the causality go? markets are really oversold and write for a rally. looking at malaysian data, a lot can happen, because it is very weak. the economy is very strong. there is the drain on fx. joe: that is exactly what you want to see. one of the good things about these emerging markets
currencies collapse is you start to see a rebalancing as exports get more competitive, and they are doing less. sharma: some callings of mine got back from africa. they are looking at just how cheap the african rand has become. less than $50. this is telling you that some of these currencies are now getting very cheap. but i do not think the chinese currency is there yet. it has a minor adjustment. markets next year, there is a letdown and the chinese currency. that sort of weakness is still there. earlier today, larry summers spoke about the potential danger ahead. take a listen. mr. summers: i think there is a risk to the downside. you look at the industrialized ok-ish for theas
last several years, but that was in part being propelled by emerging markets, and now you have emerging markets submerging. scarlet: submerging. you make the point that the next global recession may actually be made in china. what would that look like? is it 3% growth west mark is it street protests? mr. sharma: i am not expecting any street protests, but in the case of china and many emerging markets, such as india, it does not take a classic contraction for it to be in recession. it is when the economies are doing well below their potential. and it is about 5% or so. kind of a letdown 3%. that could put the economy into a recession because growth everywhere is very weak. that is the point. today's global growth is the weakest it has been the recovery
also, what09, and region in the world has had growth returned to where it was before the crisis is to mark this is a growth crisis that the world is seeing, not a financial crisis. that is the difference between 2007 and 2008. sharma, stickr with us. we will be right back. a document detailing some holders, but why didn't need all of those pages? joe: in a pdf. alix: we will tell you, after the break. ♪
"what'd you miss?" nk had a largeba document. why did they do that? page, theafter quality of the gold, and you wonder is it all constant -- tungsten? you can theoretically write anything on the document, but it is out there if you want to read it. india, the moving to country not immune to the global showdown. you just heard ruchir sharma. datad manufacturing slowing. for all purposes, india should actually be doing pretty well. it is an oil importer. it has a lot of people working. the population is growing. it saves money, and it is a stable government, and about a quarter of the exports to the
uae, only 5% to china. what is goi on with india? why is it not growing to where it should be, considering it has so many assets? growth is quite tied to what is happening in other emerging markets, as well. india is going at a decent case compared to other markets, 5% or 6%, but the official data in india is just not trustworthy. about 7%, and nobody on the ground feels it that way. as far as india is concerned, the growth rates are ok given how bad the global economy is. and it do better? of course, it has dash cam, but the progress has had some reform but nothing really breaking. this is a growth rate well below its potential growth rate. joe: one of the big stories has been globally, and people say
that the global workforce is exploding, and that is holding everyone's wages down. as we saw in that chart a bit ago, the indian workforce still has plenty of decades left of growth. will this be a factor on a global scale, the new workforce potentially holding wages down further for everyone? a: you know, there is a big change going on out there. as to why the global economy is so weak right now, not like it used to be, it is part of the global population growth falling off a cliff, which if you look at it, the average population growth used to be about 2%. 1%, that is down to barely so that is 1% knocked off global growth, and global growth is a function of the number of people coming onto the workforce and productivity, so the world population is growing at such a slow pace today, i think that is
something s gothat ig to be a big drag on growth for a long. keep her of time, and, in fact, if anything, this may ease pressure on wages going forward, simply because you have less people competing for the jobs out there, so i think this is a big shift going on, and as a need tohe people recognize it. this is a big thing, that the main reason the global economy to itss not returning precrisis level is because the global population growth has fallen off a cliff from 2% down to 1%. ruchir, i love how morgan star -- morgan stanley hired you. they had heard of you, and you were only 18 years old. ont about your analysis india? monitor is my impermanence, which is nothing lasts forever, and if you look at the world today, around 200 countries, only 35 are
classified as developed. everything else is emerging, and many countries from brazil to mexico have been emerging forever, which is the big mistake people made last decade, a huge boom across emerging markets, and people thought all of these emerging markets were going to prosper and gets the standard of the developed world. well, growth is very hard to sustain, so that economic cycles do not last too long. alix: and having babies to increase population growth. that is the takeaway. thank you. scarlet: and before we get to break, we need to bring you the latest on deutsche bank, loss of to post a net about $7 billion for the third quarter. it may also a limited its dividend for the year after taking a write-down that is tied to capital requirements as well as its units. deutsche bank shares trading lower in after-hours trading. we will continue to monitor this
been suspended, multiple media outlets say the ethics committee fifa.op ad calling for joe biden to run for president. he may decide as soon as this weekend. south carolina, national guard is averted at a dam or threatening to break. governor haley said more than 60 dams across the state are being monitored and that 13 have failed. to people who disappeared in walters after driving around a barricade on a closed road have died, bringing
the death toll to 19 across south and north carolina. that is your first word news. thank you so much. a quick recap on u.s. stock markets. , definitively hire, s&p 500 up. dow jones industrial average 122 points. almost 1%.up telecoms lagging behind. to bring in allison williams of bloomberg intelligence for more 'srspective on deutsche bank quarterly loss after write-downs. this would look to be as if the bank is treating the quarter as a kitchen sink quarter. these write-downs are tied to capital requirements. >> it does seem like that. it is not surprising that when
you get a new ceo you get these kitchen sink charges. on track tok is announce a new strategy october 29. we're getting a few things that are a preview to that. >> when that new strategy include changing its forecast? arehe biggest thing people watching with the new strategy is what is the bank lent to do with its fixed income unit. there is discussion over whether they will downsize and follow in the footsteps of other companies that have successfully transitioned towards wealth stanley, andorgan as a result have improved their equity.n that is one of the main things that people are watching. billion euro right off,
is that material for them? of material things that we got in this release, 7 billion is that scary number. the bank is saying they may cut or 11 eight -- eliminate their dividend. the second thing we saw was a big legal charge. a fairve already taken amount of charges this year, so that adds on to the charges we had in the first half, and one of their big issues is capital, capital adequacy, and deutsche bank with its european peers has lagged behind in terms of the legal charges. saw bankamerica get behind them with a big announcement. some other u.s. peers, whereas for deutsche bank and goldman
sachs, one of the peers that may still have losses ahead of it, we are continuing to see these large legal charges. >> you anticipated my question. what was in that report that might cause us to look at other banks as earning seasons come up? the legal charge might be another signal for goldman sachs. they did take a provision. did increase the reserve or possible losses beyond what they have reserved for, so it is possible that we could see another charge:, and to the extent that regulators move sometimes that is a sign that things are progressing for another bank. if you look at what they are talking about for their
underlying process -- profit, it is lower than the consistency -- consensus estimates, but may not have moved to reflect the most recent market movements, so they may have been lagging behind, but there is some pretty negative expectations for training this quarter. >> thank you so much for giving rankinganalysis, senior and analysis for bloomberg intelligence. we were talking about how the weakness and global fundamentals is breaking down, but what about the technicals. you sent some charts over, and i have one in my terminal, s&p on a monthly basis. it looked really busy. break it down what you see and where the trend is. >> this goes back to 1995 here
-- 1990 five. pull it back all the way to 1995. that is important. you are seeingat is the three bull and to bear markets that have taken place. it so we can see it all at once? i have the daily one. chart -- that is the one we wanted. there you go. very good. this goes back to 1995. the vertical line shows the monthly momentum sell signals,
june in 2000, january 2000 eight, and another one in april -- january 2008, and another one in april 2015. this is where we got our monthly movingross, the 10 month average crossing below the 20 month moving average. the daily has many more fluctuations. this is a more important observation. we have not seen it occur yet for the s&p 500, but it has occurred on the new york stock exchange. long-term warning here, so to speak. there are seven basic questions you can ask. up, 200% to 300%, yes,
it has something to reverse. hasn't broken support levels? we have come down. we have had a rally. -- i don'tsome signs see the momentum there, but there was a positive urgency on the secondary test, which suggested you could have a rally, but there is a down trend. once the support levels are broken, the last question you ask is has a downtrend been initiated. you should in-depth with physicians protected. you can answer that final ,eventh question as a yes protected your positions. we would use this rally as an opportunity to sell into strength. the fact that we have the potential for a rally suggests that energy and materials could
well have a good bounce, but at the same time, you're seeing what we saw -- call the best go last, the deterioration in health care, one of the outperforming sectors into the peak, something that always outperforms into the peak. that is a given. you are seeing a unraveling there. the next roll over, whether it's the downtrend, could form a right shoulder, and you get a larger top. you have distribution in place already. it will take time to reverse any of this, but there are times when we would rather be out of the market wishing we were in then in the market and wishing we were out. this is one of those times. >> we have to leave it there. i apologize for the technical difficulties. we will get that fixed for the next time you come back. up, what you need to
the new york attorney general punching his own investigation into the company. yum brands stock tumbling 19 percent, cut its profit forecast for the year. it gets more than half of its revenue from china, where same-store sales rose 2%, short of 9.6%. that is your business brief. >> "what'd you miss?" u.s. oil production is falling rapidly. this comes from energy aspects taking a look at the spread wti.en brent and the u.s. oil production is rolling over. it is not technical. you seen not spread come in, that overhang moving to heavy crude like brent and not to
light crude, like united states. fascinating development. how much production wines of rolling over, could be a bullish trend. they could compress the spreads even more. >> the damage has done to oil producers in the states. finances had deteriorated and the state may post a budget deficit for the first time since 2009. that is one side. norway is a country suffering as well. cash fromto with draw the sovereign wealth fund to cover budget holes. thing iost fascinating read today was this note from barclays. it basically said that you have the buildup of the sovereign
wealth funds from these petro states as a qe. and theyld accumulate would go out and buy financial assets. one chart we have shows oil versus investment-grade spreads thesehe idea being that countries had oil cash and bought financial assets and narrowed the spreads. you have a huge purchasing of financial assets, spreads coming down, and now the fear is with the selloff that you have a reverse qe coming. you have all these petro states selling down there sovereign wealth funds, and maybe that will be another thing to cause higher spreads. another fascinating consequence of falling oil i haven't heard many people talk about yet. >> this is why people were worried about the exit strategy of the federal reserve.
you don't know what the ripple affects. >> if they do reversed, it could be $400 billion of annual demand taken out of financial assets. you not only have investment-grade spreads widen out, you're taking out that money from the demand. the liquidity was $2.3 trillion. that is how much these countries bought in financial assets over the last few years. crashing,l started all you heard was that it was great for the consumer. not seen thate big tailwind. we're seeing headwind after headwind. >> it's real. ofthat note, the pricing drugs has come under attack by many politicians, including hillary clinton. --will speak to one assets analyst as to whether biotech's are undervalued. ♪
scarlet: i am scarlet fu. "what'd you miss?" valeant from a cynical's, taking criticism for pricing, tumbling since mid september. >> the third-largest investor defending practices. he talks about profits leading to violations. we have a very big position in valeant. if i had to pick one stock that has dropped the most and is undervalued is valeant. from ahe most attractive risk-reward perspective for the next year or so. >> joining us now is the manager of specialty pharmaceuticals and
generics. she has a buy rating on valeant stock. violation dependent on its ability to raise prices on drugs and takeovers of other companies? >> that is a big misconception in the market now. these drug prices, but the point that we are trying to get to investors is about the future of the company. the company looks very different to date than it did two years ago, so we look at the future assets they have, products that they bought, and that is what you have to consider. one of the things we did was take out all the price increases they could take over the next two years, and we still come up with a price of 250, which is
still significant upside. >> in all these discussions, everybody has been going back to whenhillary clinton tweet she talked about high drug coincided with a sell off in biotech. is there any regulatory prospect of a crackdown on prices? >> i think it is just political and will turn into nothing. if you watch the senate committee hearing, and innocuous and mild, very much as we expected it to be, but investors are scared that some companies are the on pricing. the government has to be very careful about getting into the pricing debate, because what happens is -- and i will give prices werexample,
driven down by competitors. it became a market that companies decided to exit from and not invest in. what we ended up with were bad manufacturing or no one available to produce the product, and what is leading to price increases is not companies jacking up prices, which they are doing, but the lack of competition. that is where the focus has to be. the fda has to approve more in eric drugs. there is a huge that club, and the talking about that. productsthe two >> quoted, price increases were already compensated when they bought a company. no one else is buying those
assets. they could just have exited the market and there would be no products. as an investor, we would have looked at that decision, and if they had raised prices or getting a return on the investment, we would have wondered what valeant is doing. >> when we won it seeing the selloff, even if it's not justified, what does it do to its mergers and acquisition profile? >> they were dependent on mergers and acquisition. last year, when valeant was trying to buy a company, i was analysthe most vocal defending them. i think valeant has changed a lot. they don't need to do transformational deals, large acquisitions. they have built and
infrastructure and have late-stage products. they can do small deals which give them a couple of products, and that is what the model is built on going forward. people looking backwards at what valeant was should be looking forward. e target.ice to even more if they raise prices. what is your target if they raise? >> to 90. 290. they buy companies, some with developed products, but indirectly they are paying for research and development. they are funding r&d. >> thank you so much. we appreciate it. we will be right back. ♪
scarlet: i am scarlet fu. "what'd you miss?" chinese markets reopened tomorrow. after a one-week break. look for a big move in shanghai. during this time, it climbed 11% . >> fed minutes for the september meeting. we will know more. ae week jobs report makes it little less relevant, but that will be interesting to see how close it was. big monetary policy. >> you know i'm checking out alcoa. earnings after the closing bell. you have to look at aluminum premiums, the thorn in its side,