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tv   Bloomberg Markets  Bloomberg  October 8, 2015 12:00pm-2:01pm EDT

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from bloomberg world headquarters in new york, good afternoon. i'm scarlet fu. alix: i'm alix steel. bill gross is suing pimco for hundreds of millions of dollars laming wrongful termination. this stunning allegation of --er, and greed and dishonor dishonesty against pimco. and the imf managing director aboutto bloomberg news emerging markets, corporate debt and the emerging economy. get the highlights from the annual conference in lima, peru. we want tot first get to the market activity with julie hyman. everyone thought china would serve -- would search when it reopened for trading. you did not in that might prove
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to be a disappointment. julie: perhaps one of the things weighing down the markets this morning. the federal reserve releasing the minutes for its last meeting this afternoon at 2 -- in advance of all of that, kind of a drift with u.s. stocks. dow's best performing three and the nasdaq being dragged down by biotech. so much for the rally yesterday in biotech stocks. declines are accelerating, down more than 2%, and that is weighing on the s&p 500. the dow is the out performer and i want to look at some of the best performers in that index. and got an upgrade to a buy mcdonald's not seeing much in the way of individual catalysts, but these are the stocks lending the most to the dow path gains right now. on hsbc there is a call that 10 year yields are doing ready to fall.
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: an interesting call and he said we will see 1.5 percent on the 10 year. right now we are at 2.08%. he says the fed is not going to raise rates as quickly as anticipated and he talked about the likelihood of quantitative easing from the ecb and the ripple effect that will have around the globe. bloombergk in my terminal. this is the average forecast for the 10 year note at the end of the fourth quarter of next year. the forecast has been coming down, around to about 3%. one .5% far below those levels. a record is pretty good. he predicted prices in treasuries would keep going up and yields would keep going down and there were not too many people predicting that in 2014. alix: and he mentioned that the
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bund would fall 10% and was focused on the ecb and quantitative easing there. it was a cool call. let's check in on bloomberg first world news with mark crumpton at the news desk. mark: we begin with the folks wagon -- the volkswagen hearing on capitol hill. these the top executive in the united states about the test -- about the omissions testing scandal. >> on behalf of my company and me personally, i would like to offer a sincere apology, sincere --logy for full flag and volkswagen's use of the testing regime. mark: they will not sell any of their 2016 diesel engine models in the u.s..
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the outgoing speaker of the house of representatives, john boehner, is supporting kevin mccarthy of california to succeed him. he will cast a vote for mccarthy when the nomination vote gets underway today and again when the final vote is taken. mccarthy is expected to win but the conservative house freedom caucus is backing florida congressman daniel webster. that could deny mccarthy a majority during the final vote in three weeks. the top u.s. commander in afghanistan says at least 60% of the taliban and may be open to peace talks with the country's government. general john campbell made a push before the congressional committee for more u.s. forces to stay in afghanistan beyond 2016. that is when the white house wants to reduce troop levels to 1000. general campbell said that would reduce coalition training and counterterrorism operations. found thes have suspect to caused a locked down
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at u.s. army base in maryland. the base houses the national security agency. someone crashed a stolen car at an unmanned gate at fort meade. the suspect then fled onto the campus which is the home to the nsa. the 12 plus our search, the base functioned on reduced operations in several rows and area schools were closed. wreak as aarting to garbage collector strike continues for a fourth day. waste workers the have walked off the job. the workers say wages are not keeping up with the cost of living. earlier today, they often hide -- they occupied a building to protest spending cuts across the economy. that is a look at our first word news. you can find the latest on bloomberg.com. scarlet: thank you very much, mark crumpton. as we have been reporting, bill gross is suing pimco and alliance over his ouster.
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he says he was wrongfully pushed out because of greedy executives. for more on the story, let's head to marry child who broke the story. the language in this lawsuit is just like bill gross's monthly news letter. what stuck out to you? mary: so much. it is colorful and you can delve into the whole thing and get an idea of what he sees as going down. he talks about a cabal of managers colluding against him, rounding up support against other hedging directors to force him out of pimco because they were greedy and ambitious and wanted not only his position, but his slice of the profit pool. now? my question is why this happened a while ago and he nus.been at ja mary: i have an armchair
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psychologist theory about it. over the course of the year, he talked about how he wanted to show them who was boss and who was keen and wanted to demonstrate that with performance. what i think happened is people expected a ton of money to go out of pimco and follow bill. that really did not happen. i think he feels like he demonstrated in the market and to show the world he's the great investor he knows he is stopped i think he's trying to show that these guys are wrong to me, here's what they did and it was unethical and wrong. so in his view, he's trying to set the record straight. alix: for more insight, we are joined by a man who worked for pimco for 20 years. he now runs a hedge fund called armored wolf in california and joins us now from san francisco. great to have you talking about this topic. you have said in the past you are blind-sided that bill gross left pimco and you thought he was going to retire. what is your take on this
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lawsuit? i think it is a sad day for the money management industry, for pimco, and for bill. bill is a guy with a great amount of energy, great intellect, very talented and and a type personality. he has been able to channel some of that ego and narcissism in a positive or action for five and a half or six and a half decades and i have to say the past three or four years have been a sad chapter and unfortunately, not the way bill should have moved forward toward the twilight of his career. a very illustrious career otherwise. you are at pimco from 89 until 2008 and mohamed el-erian was 'sere and left to run harvard
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endowment and came back in 2007. you saw the two of them work together. what was your experience with the two of them? john: both of those gentlemen are incredibly hard-working. they are both extremely successful. they have both then rewarded. no one in this society would suggest they have not been rewarded in proportion to their excellence. now, for bill gross to kind of come back and start to say i should have been paid more or i'm going to donate these winnings to charity i think puts the emphasis on the wrong thing. i'm in the money-management business to serve clients, to do my best. it's not about compensation. obviously, there was tension at pimco. i have full confidence all the managers at pimco want to do what is best for their clients
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and so did bill. it was a difference in opinion and simply stated, bill was not able to maintain the coalition necessary to lead a firm like that and not surprisingly was asked to step aside or forced out. he chose the latter. that's the way the world works. the story is as old as king lear and shakespeare. do you have a take on one of the points bill gross makes in this suit -- there was a difference between the burgers and bonds versus the cheesecake factory. -- you are spreading in a wide array. burgers and bonds are like i'm doing my thing fixed income, and we are sticking to it. dichotomy or tension
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is as old as pimco itself. i was not at pimco in the late 80's or early 80's, but pimco used to be a corporate bond shop in the early days and then they expanded into futures, mortgages, international and bonds and commodities. at various times, equities. i would have to say bill's baby was always core bond management. i don't think in the 21st century, you can be a global money manager as a narrow core bond manager and therefore, the naturaln of pimco was on, even though pimco peaked a number of metrics in 2012 or 2013, the decline of pimco since
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not say you can attribute it to any core specific decision, but it's a reality. if you are number one in a field of 5000 competitors, it's more likely than not after a year or two that you might end up eating number 2, 3, or four and slipped downward. that is inevitable. it's hard to find someone as talented as bill gross was when he was 29, 39 or 40 years old. by the time 2012 came along, pimco had to find a future and it was not with bill gross. thank you so much for sharing your thoughts with us on this news that will gross is suing pimco for hundreds of millions of dollars over his ouster. and our thanks to mary childs, who broke the story. it is available on bloomberg.com. alix: coming up, we will tell
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you what christine lagarde had to say about emerging markets, corporate debt and the global economy in an interview with bloomberg television. we will be right back. ♪
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welcome back to the bloomberg market day. i'm alix steel. scarlet: and i'm scarlet fu. alix: it may be a less than jolly holiday for retailers. sales are expected to grow at a slightly slower space -- slightly slower rate. spending will be of approximately 3.7%, lower than last season toss 4.7% increase but higher than the 10 year average. it would mark the first slowdown
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since 2012 when retailers were hurt by superstorm sandy. scarlet: plaxo group is agreeing foury biomed realty trust $8 billion. i am it is a landlord catering to biotech companies. anheuser-busch and that is going over the head of miller directors. it should push the board to engage in talks over the $100 billion takeover offer. as a b miller says the offer undervalues the country -- undervalues the company. you can get more business news at bloomberg.com. thelet: let's head over to business desk where julie has information on tesla. the fourth down day for the company. there just seems to be trepidation over the model x and how well it is going to sell. andfourth straight down day
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if you take a look at the bloomberg terminal, you can see the longer-term movement and tesla. this purple line is the 200 day moving average. it has fallen below the technical measure and the stock is in a bear market, down about 20% from its high. on the year,ed interestingly, despite this recent decline. is another stock that has been declining -- another record low. the second day in a row it has made a record low. it was downgraded to neutral like cleveland research. one analyst says there is deterioration in action camera shipments. yesterday, morgan stanley slashed its price target. domino's is out with its numbers and they are worse than estimated. they are seeing pressure from currency moves and higher insurance costs and the stock is
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down more than 5%. even with the indexes mixed right now, you have two stocks higher for everyone down on the new york stock exchange. alix: no shortage of drama at the annual meeting of the world bank and international monetary fund. china's impact on the global global climate change our major parts of the talks. is in lima,qua peru. what was said about the global recession? francine: we talked about shocks. -- she talked about risk and we know what these are -- structural reform or the lack of structural reform in these emerging economies and her personal concern and the imf's concern that janet yellen will raise interest rates too soon.
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the specter of deflation and why central banks have lost control of inflation. she said she is not worried about inflation, she's worried about the lack of investment, which feeds into deflation. : it would be helpful to see inflation pickup so be based on solid data that they signal would be strong and monetary policy could evolve, but i'm more concerned about the lack of investment and factors willence encourage a bit more investment going forward. francine: of course these are linked but it is confidence that is the issue. i also talked about china and the chinese delegation will arrive in a moment and a lot of the participants want to get to the bottom of the turmoil we've
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seen in the last couple of they have aake sure handle on the situation. that is something that will be discussed here at the imf. scarlet: francine lacqua, thank you for joining us. she spoke with christine lagarde, the chief of the imf. the conversation is how much firepower is left and how imf have? does the scarlet: are they way too overextended? scarlet:their balance sheets have not risen as much as some of the other central banks. coming up, we have a look back at the 2008 crisis. alix: we will hear about the behind-the-scenes negotiations that occurred with ben bernanke. ♪
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scarlet: you are looking at a live picture from capitol hill
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where house republicans are holding a secret vote to nominate house speaker. kevin mccarthy is said to be the favorite. phil mattingly will be joining us to give us the recap. a lot of people wonder who really wants this job. alix: that is a great point. ben bernanke and john mack, former chairman and ceo at morgan stanley were on bloomberg go this morning. they were asked to recount their experiences during the 2008 crisis. thebernanke: a lot of pressure turned on investment banks and one of the things the twodid was make the companies holding companies which were mostly symbolic. it was essentially ensuring the market that the fed would now be overseeing those companies from a supervisory point of view. morgan stanley and goldman sachs went out and got private investors and that was key to
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strengthening. mr. mack: it did not happen right away. hank paulson and i had a conversation, a very forceful conversation of what they wanted morgan stanley to do, which if here members, i was not going to do that. they wanted us to sell the firm for two dollars a share. to jpmorgan. was tim whoess, it wanted that. david: would jamie dimon have bought it at that? had a fewwe conversations where tim cap saying call jamie and jamie didn't want to do it and i didn't want to do it, but when the head of the new york fed is pushing you to make the calls, you make the call. stephanie: you look at the last two years and the problems banks
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have faced since these acquisitions, is it fair because when we look and say it was the fed that pushed the banks into these trades? not fair.that's to talk about to get us in this position -- when you just made money and the market is going your way and you can borrow or sell high and securitize and people are making 20% or 30% with their stock, someone's got to blow the whistle. they got carried away and leverage was wild. when you think about the leverage these firms had, including morgan stanley, it was absurd. a really interesting conversation there. seven years later, it takes a question, what shape are the banks really in mark regulation can beget new issues. we have credit squeeze planning to shell cares to -- to sell shares to raise capital. the whole point is you need money in your reserve to fight
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against the potential crisis. scarlet: and the potential question has always been we know that this is happening -- is another capital raise necessary? you are cutting your dividend is another piece of that news that investors don't want to deal with and employees see it as a sign of i'm not going to get paid a bonus this year and my job is my bonus. alix: and where do they go and how does that bank lined up surviving? the bank system has been reformatted globally. we have much more coming up on the bloomberg market day. here what republican voters in iowa and new hampshire had to say about jeb bush. they were honest and brutal. ♪
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scarlet: you are looking at a live shot of capitol hill where we just learned that kevin mccarthy is out -- he says he's
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not the right man for the job. a startling announcement from capitol hill. and as a result, house republicans have postponed their election for speaker. phil mattingly joins us now. what more have you learned? : this literally just happened and folks are stunned on the aids side and lawmakers site. we have to some context around this -- this morning, kevin mccarthy made his pitch with paul ryan, a very -- very powerful person as his nominating member. he was planning as of 8:00 this morning to make this run. he had the votes, no question, he needed -- he had the votes he needed to become speaker. this came out of nowhere. they said everyone was sitting in stunned silence. kevin mccarthy informed members of the republican conference that he was not the right man for the job. this takes out not only the sure
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front runner but guarantees the next speaker of the house, the current majority leader, and it leaves everything up for grabs. republicans have postponed leadership elections until a later date. they don't have the date -- that's how surprised everyone was. this means the next leader of the house of representatives is an unknown and whoever he or she is going to be, they will be an unknown commodity when it comes to a leadership position. really can't overstate how much of a surprise this is. as of this morning, kevin the votesot only had but had a nominating speech made on his behalf by paul ryan for this position. this is an immediate turn of events -- turn of events. scarlet: john boehner is set to stay on as speaker through the and of this month, so time is ticking down. what does that mean in terms of what republicans have to do to
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get everything together? do they have enough time? phil: they have enough time but people who were never expected to step up will almost certainly have to. there were two other candidates in the race, jason chaffetz and congressman webster from florida who was representing the far right. in this race but the expectation -- the expectation i have heard is that someone else will get in at this point and that person will need time to form a campaign and start reaching out to members. they have time before john boehner steps down but things are really up in the air and they will need to move fast. the big question becomes can or will the establishment get behind either of the existing candidates or try to find someone else to push to the floor -- pushed to the forefront. there are a lot of calls for someone like paul ryan to run for speaker.
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i think you will only see an increase -- both of those men it rejected those calls and i have not gotten any sense they would want to run at any point during their careers. those calls will increase. it's not just a lot to shake out over the next couple of weeks, but really over the next minutes and hours. alix: the backdrop of this is that we are going to hit a debt ceiling of the beginning of november. onit really puts the onus the speaker to pass and raise the debt ceiling limit. that throws that scenario in jeopardy now. : that was already a tenuous situation and this increases it, not only because they don't know who the next beaker is, but that next speaker will have to make a deal with the hard-line conservatives. the white house has already said that they will not negotiate on an increase in the debt ceiling. jason j fits this morning
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pledged he would never pass a clean debt ceiling resolution. there would have to be some kind of corresponding cuts. it is presumed anyone who comes out here will have to have the same position. that means there is a break and no one knows how this negotiation is going to work out going forward. lasttary jack lew saying week was the deadline and there was hope that speaker john boehner before he left town would try to get this through. over the last few days, everyone i have talked to both on the lawmaker and aids side have set absolutely not -- this conference will not allow a clean debt ceiling increase. that means we have no path forward and that's not even including the deadline for the highway bill and the spending bill deadline on december 11. there's a lot of stuff going on right now and an immediate potential crises right around the corner. forlet: a huge to do list
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whoever the next speaker is. phil mattingly, thank you very much. up on the more coming bloomberg market day. we will be right back. ♪
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scarlet: welcome back to the bloomberg market day. i'm scarlet fu. alix: and i'm alix steel. scarlet: bill gross is suing his former employer for hundreds of millions of dollars. he claims pimco wrongly fired him. he said pimco executives wanted him out to get a bigger slice of the bonus pool and refuse to pay ofonus for the third quarter 2013. whatever he wins, he's promising to donate the money to charity. are: german authorities
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investigating the vaults wagon scandal. wagon scandal. a cruel investigation was they cheated at on admissions test. scarlet: jobless claims totaled 263,000 last week. 300,000,ve been below a level at, say is consistent with a strong labor market. you can get more business days at bloomberg.com. let's look at what is moving in u.s. stocks. matt miller is there right now. a mixed way so far. matt: it has been a down day for nasdaq starts, but i want to start out with a story that is nyc-cedric.
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for ari's ipo. ari --'s ipo. fiat chrysler is planning to sell it. first, the important stuff. deliveries could be up 25% according to the ceo, up to 9000 a year could be sold. amazon,the nasdaq -- in the newsy ball because amazon revealed its new unit -- amazon handmade. that's for art is no goods or handmade goods. they are going to go up against site like betsy. ebay as well to some extent. amazon and ebay put out monthly sales that were lower than the
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previous month. september monthly sales up almost 20%, august up almost 25%. growth there and more competition -- very exciting stuff. miller at the nasdaq stock exchange. we want to go now to mark barton in london for a check on them european market close. : european stocks rose for a fifth day. it was not convincing. it spent the day that the -- bouncing between gains and losses. the best run in over two months. minutes from the bank of england signaled the scope to keep rates at a record low as inflation weakness persists. is not pricing in a rate hike until next year. the ecb also released minutes
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from its meeting in which it said purchases in its qe program would be somewhat frontloaded to prepare for an expected drop in liquidity. in germany, we had exports slumping the most since the height of the financial crisis and recession in 2009. further proof it is feeling the pain of global trade. we had french business confidence unexpectedly worsening. that's the macro side. how about the stock side? deutsche bank is the story of the day -- falling as much as three point 7% and rose as much as 3.7% after the company unveiled its biggest loss in a decade. they said they may scrap its dividend for the first time since the 1950's. it paves the way for the ceo to present a strategy of eight for shoring up capital and increasing profits. bydit suisse down today
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3.6%, the swiss bank preparing a substantial share sale that will be announced when the chief executive presents a strategic overhaul on october 21, so says the financial times. fiat chrysler almost finishing up by 4%. workershe united auto reaching a tentative deal on a new labor agreement, averting a strike that would have seen workers, 40,000 of them, walking off the job. that is the latest from london. alix: chinese market came back from their week long holiday today. let's see how they did. speculated the government would take more steps to boost the economy. the shanghai composite gained 3%, led by tech and health-care shares. targetingrs are
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stimulus as rate cuts have failed to stop the slowdown. a property down payment requirement was lowered for the fourth time in five years after cutting a tax on car purchases. let's look at commodities now and start with china. signs of a weak demand outlook in china, the world's biggest consumer of the metal. low -- aeven-month bullish sign as chinese smelters are stashing away copper to sell later when prices are high. from in ken hoffman bloomberg intelligence. the smelters and refiners go by the copper and make the product but don't sell it. why? ken: they can make a lot of money holding it because they
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use it for inventory financing. they take the copper, go to hong kong and say let me borrow at a 2% rate. a bring the money back to china and their interest rates are internally 14% or 15%. it's the greatest deal in history and it could be massive. alix: how much of that is used for financing versus and demand? of it could be used for financing purposes. that could be more than 20 metric tons. they said the carry trade is between one million -- $1 trillion in $2 trillion. it's only about five percent or 7% being used for this. it could be massive but the question is -- chinese demand is not what you think it is because copper coming in is not being used to make pipes or wire. it's being used for financial purposes. all of the analyst models rip
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them up because they are worthless because everything you thought about china is wrong. tracking the moves of copper is not a great gauge of the macroeconomy. : because this is so massive, it works everything else going on. nickel and indonesia -- the world's biggest provider of the metal -- the price of nickel has gone down 60% because the carry trade in china has been unwinding and it's making analysts go nuts. this metal is there and has an unused. we need to figure out what is chinese real demand versus financial demand. happeningwhat ends up when the carry trade unwinds for copper, how much will that flood the market? : that's the biggest question. one analyst says no one understands china and this is spread among thousands of traders and no one knows how big it is.
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the 90's and it had a huge impact on copper prices. do we know how long they are going to hold off? could it be months or years? ken: it has been years. as it starts to go commie see the valuation of the yuan and interest rates start to drop as a stoke the economy. while you think it might be good for metals, it is that because it causes the unwind of this trade. morgan stanley said a deficit next year of 350,000 tons. all of those are hogwash is what you are saying. are saying it's based on what chinese demand -- ask this question -- how much is going to the financial trade? nobody has an answer. we know it's big and we know the carry trade knows how much money is being used and the only way
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you can bring it in and out of china is to use financial means to have something back at. i have copper, gold, and oil all for this. play devil's advocate, we have seen rates for things like wire rod mills which you use for industrial uses. if we have seen higher operating rates, you cannot store it and wait because it does have a shelf life. is there still some underlying demand? is underlying demand. when it comes to china, 77% is in the unknown category. basically 77% lost copper right now? ken: we don't know where it is. scarlet: how do consumers plan their purchases of copper? ken: i knew a guy who grew his
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rate. his operating rate was 5% because with 200,000 metric tons, he can borrow so much more money to put into the carry trade. it is basically free money for these guys. alcoa is reporting today. you have the end-user company, the stuff going to make cars and you have the mining company. ken: aluminum prices are down 20%. the business everyone was looking at -- it's like the good part. and itm prices are down will be interesting to see what the revenues are and earnings. a lot of people have said everyone is focused on the split and don't care about earnings. love the fact that they call it the value added business. that would suggest the upstream
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business is the no value business. alix: kind of because they have all of this aluminum and don't ship it out. scarlet: how good is it to invest in a useless business? : one of the companies that split, the good business is down 30% and the bad business is down 70%. alix: so they are just going to have to wait it out until the cost valuation becomes so intense -- cost deflation rises and they can't produce any more. scarlet: thank you so much. coming up, house republicans will be delaying their vote for a new speaker as kevin mccarthy backs away from the job. we will have the very latest. scarlet: he says he's not the right man for the job. ♪
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alix: welcome back to the bloomberg market day. i'm alix steel. house republicans have postponed elections for new leader. the front runner, kevin mccarthy, says he's not the job. speaker for the the reaction in stocks has been immediate and severe. the minute the news broke, you saw stocks fall off, the idea that we have the debt ceiling limit coming that will be hit on november 5 -- what happens if we have this uncertainty and john boehner is stepping aside? scarlet: it does everything into question and you have a leg higher in the vix. you can see how the vix has shot up to its session highs. this is not a huge move when you look at it in the context of how the vix has done this year, but this is where we are at right now -- above the average for the year, but still notable that it climbed on the announcement. let's turn now to john heilemann
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who has been tracking this development. this was a shock. john: correct. l politics. the republicans who went into that room did not expect to hear that and everyone has emerged in a state of confusion about what is driving mccarthy. questions about whether he would be able to get the votes or not but as of 24 hours ago, most people said he was the likeliest next speaker of the house, so there's some question about whether political considerations, personal considerations or what may have driven him to make this announcement but it does throw the leadership question into a state of chaos. what the medium to long range of fact is is really unknown, but the first thing house republicans will be looking for is some kind of consensus candidate to step forward. mccarthy had a couple of
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challenges, neither of whom were likely to command rod support. i think there will be a lot of pressure now on paul ryan. has made it he clear he did not want the job. john: he made it clear he did not want the job until this happened. a lot of people thought ryan was a perfect candidate when boehner step down. he's well-respected by the conservative caucus and republican house. he decided not to run and that cleared the way for mccarthy. with mccarthy now not running, i think there will be a lot of people in those two caucuses -- the more establishment wing in the more conservative wing who will be looking for a unifying figure to pull the republican caucus together. the obvious person to go back to is paul ryan. i'm not saying he will get in but i have no doubt there will be a lot of people calling him on the phone and saying we know you don't want this job, but you
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need to take this job to get our house in order -- not to punt too much there. the surprise from the republican establishment members -- one member saying he doesn't know why kevin mccarthy announced he was dropping out and pete sessions saying he does not know when speaker elections will be called. it seems like across the board everyone doesn't know what happens. are not many things in politics, especially in leadership elections, were genuine surprises occur -- virtually all the players involved did not expect it to happen and this is one of those moments and you are hearing from those house republicans -- they are not playacting. they are genuinely puzzled as to why mccarthy has made this decision. this is very much breaking news. i do not know the answer. i think that's true of virtually everyone in a house republican caucus. scarlet: how do the democrats
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respond to this? john: they sit back, smile and have another beer. there's no response required except that it's great to see house republicans in disarray. alix: but president obama is going to need them to raise the debt limit. john: john boehner is not going to leave office for a while. one of the things we thought there was a chance or might try to do before he left was to get the debt ceiling increase and he works as a pretty good partner with president obama. you could see more pressure on boehner to get that done before he leaves. for "with in tonight all due respect." we will be right back. ♪
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>> kevin mccarthy is speaking right now after saying he will not be running for house speaker. ande had our conference, calls into the district.
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i don't want to make voting for speaker a tough one. i don't want to go to the floor and went with 220 votes. and they do best thing for our party right now is that you have 247 votes on the floor. we have be 100% united. let's put the conference first, because that's where it is. we have been -- i've been talking with a number of members who have been thinking about this throughout the week, trying to see we can get this. i just think it's best we have a new face. that was not helpful. could have said it much better. the benghazi committee was
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created for one purpose, to find the truth on behalf of the families of the four dead americans. i should not be a distraction from that. that is part of the decision. [indiscernible] no. no. come on. i think the conference should be able to decide, thank you very much. kevin mccarthy, presumed to be the man running for the house speaker position. just now, he abruptly dropped out of the race. what struck we was held relaxed he was. >> he was happy. >> he was calm, he was relaxed. he could not that -- it could have said it better but he said it might have been part of the decision as well
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when he started to politicize the benghazi theory. we are joined from capitol hill. what was your take on that conference? >> he said he felt good about the decision. and look like the weight of the world was pulled a look -- off official there's. his key point was this. fact of the matter is, he could not be a like he had 100% of the conference. he felt like he had the votes to win today during the conference meeting, but then he would have to fight for this on the floor on october 29 and then, if he just aswould've had many problems in the conference as john boehner did. he decided in the wake of concerns by 45 lawmakers that said they would not vote for him, he decided to step down. i want to give you some color from behind the scenes. this morning he had a nominating speech made for him by paul ryan.
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up until 45 minutes ago, house wererence members expecting that kevin mccarthy would be the person they voted for today. they had a closed-door meeting that started at noon. they were talking normally and kevin mccarthy came in and decided to talk in -- deserted to start talking. every expected it to be his final pitch for the vote, but then he told them he was not the guy and that he did not want to buy the conference. he felt like his elevation to speaker would be divisive based on what yet seen and pulled himself out. stunned in -- stunned is the word i have heard over and over again. the big question is, what happens next? kevin mccarthy said he will remain as majority leader, but who will be the next speaker is anybody's guess right now -- anybody's guess right now. a shorter-term congress -- a
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shorter-term member of congress from florida -- there is an expectation right now that somebody else will rise. somebody else will have to rise. paul ryan has already said he will not run for speaker, no matter who asked sam. dass asks him. him.ks >> leaving the gop and complete disarray -- in complete disarray. >> josh earnest coming out saying that gop lawmakers must serve the public and not the right wing. it shows they are not really ready to lead. if they don't, that's the problem. the democrats are seizing on this opportunity by looking forward to the 2016 presidential election. >> we do want to head to the markets because we are seeing a reaction. you just heard philip say
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now or mainstay mystery. who will it be? the market does not like mystery. investors want to know that they can predict what's going to happen next week, next month, next year to the extent that they can. stocks already had a mixed town today and get a peg lower after this announcement. we also have to point out the other factors that are in place today. it is the failure of the s&p 500 to move above its 50 day moving average. take a look at this terminal because we have seen three times now, the s&p 500 make an attempt to climb toward 2000 post the august selloff and fail each of those times. it appears to be happening once again. what is selling out the most, health care, information technology, energy, the commodities.
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within health care is selling off once again after a short-lived rally yesterday and we are seeing the massive biotech index fullback once again. some of the big cap biotech companies that have been so volatile in recent days have had a negative tone and a falling once again today. companies like amgen and biogenic are falling apart. thank you for that check of the vicious reaction of the market to this uncertainty in washington. of there other top story day, bill gross is suing pemco spoke with the form -- about the work environment was like undergrowth -- under gross. >> i have full confidence that all of the managers at pemco wanted to do what was best for the clients and so did bill. there was a difference in
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opinion and sibley stated, bill -- and able to maintain simply stated, bill was not able to maintain the coalition to lead a firm like that. not surprisingly, he was asked to step aside. he chose the latter. scarlet: eric joins us now with more. you have a relation with bill gross. you have been pouring over the lawsuit. what has been your take away? is from the moment you open these 19 pages, it is breathtaking. references to the the cheesecake factory style of firm that he alleges mohamed el-erian wanted to build. it harkens to the monthly investment outlooks he used to write for pimco. it has to be one of the but -- greatest opening sell those in the history of white-collar
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civil litigation. " driven by the power of lust and greed, a cabal of pimco managing directors plotted to drive bill gross out of their behavior and it must be exposed." the choice of nouns, verbs and modifiers is amazing. as you have pointed out by saying this is about hundreds of millions of dollars, this is about the money, sadly. not quantifyoes how much he wants. >> he says he is owed a pro ofer share of millions dollars and claims that he was owed the share of the $250 million bonus he expected for that year. at the very least, we can talk about that. the numbers in general and as we have begun to learn, are kind of insane.
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he made something to the order of $300 million in 2013. there is reference to a $50 million bonus that mohamed el-erian was owed for a single quarter. believe it was 2012. -- itust sort of establishes the context for the dispute. i would add that in addition to money, there is something philosophical about it. >> reputation. >> yes, but not just reputation. bill gross says that become all -- that the ball -- that the cabal, to use his term, went from being a safe management firm that he cofounded into something more high-octane and jacked up on risk that could milk investors for higher fees. >> this all goes back to mohamed el-erian and his departure and the leak that happened at the
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time and bill gross's allegations -- reluctance to cover it up. he did not want to do the dirty work that other managers were asking him to do and that made them hate him. it was reading as if it was some kind of drama of corporate intrigue. mapping out what happened when mohammed el-erian left. >> he accuses a current managing director of leaking the story to the financial times and sets really speaking to the wall street journal and claims that there is documentary proof that he admitted to speaking to reporters of those news organizations. it goes back to the conspiracy mindset. let's not forget how passionate gross is and how seriously he takes his job, whether it was at pimco or currently at janis.
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here is what he had to say. >> i did not like how i left. i did not care for the aspersions that somehow i might have lost my touch. i don't think i lost my touch. i'm in this seven days a week and 18 hours a day. -- hopefully the performance numbers speak to competence. >> he deeply -- he is clearly deeply passionate about what he does and he is protective of his reputation and that underlies a lot of what is going on here. not just the money involved. i urge everybody to read it. is making its way around wall street because there is some stuff nobody has ever seen before like a copy of the profit-sharing plan that pimco ran together with its managing directors. one of the important things to note, we have made efforts to
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reach mohamed el-erian and dan apperson and andrew balls. we do not have a comment. hopefully that will be forthcoming and we will reach everybody named. coming up in the next 20 minutes, hillary clinton is taking on wall street. we will tell you about what she wants to do when it comes to high-frequency trading. alix: it's a sector that has seen some of the biggest lawsuits, but -- how does that impact executive pay? scarlet: a former chairman stop by to talk about the 2008 crisis. we will bring you the highlights. ♪
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scarlet: welcome back. it is time now for our business flash and our first story, a uaw committee will decide tomorrow whether to recommend a new contract for its fiat chrysler members. a candidate deal earlier today and the union said it one significant gains. german authorities investigating the volkswagen scandal rated companies and the homes of several employees. more than four dozen officials searched the w -- they told regulators they rigged diesel powered cars to cheat on pollution test. alix: amazon has a crafty new site that is aimed at at season $2 billion arts and craft business.
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some etsy users are unhappy. you can always get more business news at bloomberg.com. let's head over to our market desk where julie has a check on some individual company movers. fall we saw the big in biotechnology, there is a new week deal. -- which is an over -- an owner of office buildings that cater to the life sciences and biotech industries. it's a $4.8 billion deal and blackstone is looking to grow in biotech is one of the reasons behind this deal. share --ollars $.75 a $23.75 a share. you can see the shares are up about 9% in today's session. you just heard about the agreement at the uaw with fiat chrysler.
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we want to look at the stock reaction. fiat chrysler stock up about 3%. they are on an eight session winning streak. all three of these automakers are on an eight session winning streak, the longest in more than two years for gm and more than six years for ford. this is after the company registered to sell as many as 2.6 million shares. -- the currentes float is 9.6 million. even though we have seen a lot of volatility in the stock, it is more than double its price of -- that ipo much profiled, high-profile that happened back in january. >> julie hyman with the latest. plunge the equity is just a reason why dde asset management made a decision to drop stocks and insist -- it may have been a fortuitous call for canada's number two
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asset management firm. companythe cio of the who joins us from toronto. about we have a talking the volatility and uncertainty in china, but what happened in the market today is very interesting. we do have uncertainty surrounding the seeker of the house that speaker of the house. -- speaker of the house. i think we are ready stage where the market is vulnerable to bad news which really is not about that news in of itself. it is about the broader context. a continues to be we are in low growth world that will make it more challenging for companies to grow their earnings at the same pace we have seen in recent years. growth is going to decelerate and -- we don't think they are particularly cheap.
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the kind of news we are seeing noise buta way, it is the reason it hit stocks is because there is more underlaying fundamental factors. exacerbateline risks the concerns people already have about the fundamentals of the equity market. >> exactly. >> in terms of what you are doing, you told us back in may that you were anticipating the end of the bull market. it looks like your expectations have played out here, so what is the next step? we have a lot of uncertainty to wade through. the debt ceiling is back in question. >> i think longer-term, this is really just about a grinding low growth, lower turn sort of environment. we have not made any more meaningful shifts from the one who talked about in may. we think it is a time where our
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clients want to make sure they are protected against high having somealso thick income does create stability on the portfolio. on the equity side, a high-quality focus and setting expectations around not shooting a lights out. we are not expecting dramatic moves one way or the other. >> you invested in fixed income and will continue to do that. you had a no doubt that lower the 10-year-old -- 10 year yield forecast. what do you think about that? >> we have been firmly planted in the lower, longer camper many years and we continue to be there. the fed would raise rates and we think it's going to be the loosest tightening in the history of the fed. maybe they will tighten, but it will not be as far or fast. that is linked to the idea that there is a lot of debt out there
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and growth continues to be pretty lackluster. it is driven by the fundamentals, that is what is keeping yields low. >> in the camp of asia -- of bruce camper, cio of td asset management. >> still ahead, biotech stocks still having a tough year. we will tell you who has taken the biggest pay cuts. ♪
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alix: welcome back. biotech stocks and taken a beating in recent months and he route has not only impacted investors, but also the company's executives. packages have seen dramatic losses. scarlet: anderson malin joins us now. tell us about what you have seen
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with the paper to a between biotech and pharma companies. >> we can see a strong trend with respect to biotech because they have -- executives with pay packages that are generated heavily on equity and stock options. they tend to be very exposed to price swings. what executives were left out in the cold with this biotech selloff in which once held up? >> the ones we have seen -- jeffrey leiden of vertex is down by 18%. we also see some guys holding out. >> how did that happen? paul burns of and a core, up 263%. >> they are very event driven.
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the digital acquisitions by a bigger pharma company, things like that can really drive the share prices. >> we were looking at the chart of of a science and last year, the stock was only down by about 26% but the height of last year is down about 80%. it's kind of in line with the cut in ceo pay package. pay you look at the packages for these ceos, are they founders of the company or are they hired guns? a lot of these firms tend to be small and not make a lot of money. >> they rarely have revenues and they are very dependent on funding and the attitude by bigger pharma's to come in and acquire them. sometimes they are founders and sometimes they are outside. >> how do they wind up getting paid versus a bank? lothe usually don't have a of cash to throw it is executives and the whole idea is that you are trying to develop
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something that you will hit out of the ballpark and get bought out by pfizer. they want executives to share the risk as well so they get paid usually in a ton of stock options. >> makes perfect sense. >> that you so much for joining us today. coming up on the bloomberg market day, we will be talking a lot more about a conversation with -- ♪
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>> welcome back to the bloomberg market day. scarlet: let's start with the headlines on the bloombergs
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first word news where we check in with mark crumpton. >> a political bombshell on capitol hill today. house majority leader kevin mccarthy has withdrawn his name from consideration to be the next speaker of the house just minutes before a nominating vote was to have taken place. he told members of the republican conference that he is not the right man for the job. afterward, he spoke to reporters. >> the one thing i found in talking to everybody. if we are going to be you -- if we are going to unite and be strong, we need a new face to help do that. >> today's nominating vote for speaker was postponed. mccarthy is expected to remain house majority leader but it is unclear who the favorite to replace speaker weiner will be -- speaker boehner will be. authorities say airmen first-class spencer stone is hospitalized in stable
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condition. it is -- there is no word on whether a suspect is in custody. authorities say they found a man who led police on a four mile pursuit in a stolen car and then crashed it into a unmanned fence around an army base in maryland. onto the campus which houses the national security agency. they found the suspect trying to hiden the ods. six months ago, nsa police shot at two people who ignored orders to turn around a stolen vehicles. one of them was killed. the top u.s. commander in afghanistan said at least 60% of the taliban may be open to peace talks with the country's government. john campbell made a push before the congressional committee for more u.s. forces to remain afghanistan. general campbell says reducing the force will limit coalition training and counterterrorism operations.
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the decision to stop searching for the crew members of the second cargo ship is angering some of the love map -- loved ones. in the alfaro -- loved ones in the el faro and did last night. ended did last night -- last night. you can always find the latest news on bloomberg.com. leaders are uprooted this week for an annual meeting. >> there is plenty to talk about about the weakness of the global economy. among the hot topics is the future of u.s. interest rates. we are joined with axel weber. i ery plsed to have axel weber here to -- we spoke to world bank president.
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welcome to bloomberg tv. we were talking about your main concerns, inflation, central banks in the power of inflation. problem? longer-term >> there are some longer-term problems as well. the next couple of months, we will see declining commodity prices. the medium to long-term, what central banks took as a bed of monetary management and disinflation caused by central banking, it was my -- it was driven by the emergences of china and other emerging markets that added to global productivity and global capacity and we are now in a situation where we have global overcapacity, so inflation is not going to come back anytime soon. the central bank trying to reinflate their economy is not what you do a lot, either and therefore what we should do is work down these capacity overhangs and that will happen over time.
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, morek structurally capability of making demand and supply matchup at global levels. >> you are concerned that the fiscal stimulants and monetary policies -- for example the fed, that they are not normalizing -- were the risks? >> the risks that are -- are that we are already seeing -- more than under why -- underlying violations. take for example the stock markets. -- the marketned -- itd going but that's is not a fundamental dymic so we will see volatility in the market and volatility is the main concern. we see excessive prices in some other asset markets. if you have fixed income assets traded very low or zero returns for a longer. of time -- a longer period of
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time, people realize -- and we see boom and bust in those markets. i am more concerned on a stability side then and inflation side. trying to get to 2% inflation two years out, they risk excessive valuations in other markets where it drives -- as if bubbles, overheated markets, basically -- liquidity is a major issue in many of these markets. essential markets are providing global liquidity and local banks are intermediate in where they created to the areas were liquidity is needed. what we have seen in the past, if you have a market correction, if people want to unwind position, it is hard to get by liquidity and that is a situation in time. we should not be full by the time -- the fact that -- liquidity will always be there
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for unwinding positions when it is mostly needed. >> when do you think the interest rate will be raised? >> the majority of the committee is that they will continue to go at some point this year. i'm not in the business of guessing when the next move is. what is more important is the medium to long-term value compared to the markets. is the curve going to go over a one year or two year are rise meant -- are rise meant. i think to go it every second meeting and covering 100 basis points over a year and time is quite a bold assumption by now. i clearly expect the fed not to get way above 3% over a span of three years -- a couple of years. >> one of we don't get a rate hike this year?
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-- what if we don't get a rate hike this year? >> the u.s. is actually in a recovered stage for the constellation of 3% growth and 1% inflation does not fit anymore. i think the u.s., as an economy, can withstand such a rate hike. >> what is holding them back? >> i think there was some concerned about weakness in emerging markets, china the foremost. in many otherwth markets like india and central banks in these economies, including the bank of japan, but also now india and others reducing interest rate, so raising rates is almost a unique feature on the agenda of the fed. it's not on anybody else's agenda. it will happen -- you will have
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an impact on the dollar, but the fed has placed a lot of weight on the impact of foreign policy on the dollar. i remember when my take a talked about currency and every buddy refuted and said that the fed should do anything else -- i don't think that has changed. i think we are seeing some repercussions. the u.s. is more open now that in the past, but that should not deter them from doing what is right for the u.s. economy. i think the u.s. economy is right for a rate hike. >> you will see some chinese delegates, what is your question to them? >> we had a board meeting in hong kong when i was in china just a you weeks ago. was that yesi got they would be some recognition and some action lag in seeing the problem unfolded reacting to it.
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also, the combination of the correction into policy markets and the chinese retail investments moving from property related to equity related investments for the first time, caused some concerns about allowing an outright correction in the equity market. international investors that flooded into china were starting to pull money out in the correction just -- we have seen a number of factors that overlap. >> you are not worried about a credit crunch? i think the chinese have recognized the problem and our top -- are on top of it. they seem to agree with the market correction that we've seen that many times in the past that authorities in a retail --ket that hits consumers they are more cautious in letting retail clients the impacted. a big we are seeing some concern for the broader impact, but just equitiesou a bigger,
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is about only 10% of chinese -- the correction in the equity market is not going to have a broad-based impacts on consumers in china. >> that you so much for joining us. we will have plenty more interviews here. >> looking forward to them. up, former fed chair ben bernanke south by to share his thoughts on monetary policy. >> the fed is releasing its minutes in the next hour. we are sending my to give you the latest. >> bill gross is suing his former employer. we will break it down. ♪
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>> welcome back. it is time now for our business buzz. first-time claims for the lowest level since mid-july. just beginning of march, claims 300,000, that is a level that stays consistent with a strong labor market. >> it may be a less than jolly holiday season for retailers. they're excited to grow at a slightly lower rate than 2014. 3.7%,y spending will be a just over $630 billion. that is lower than last season's 4.1% increase, but much higher than the 10 year average of 2.5%. it will be the first slowdown since 2012. >> the ferrari name and status as a supercar for the superrich is driving a value for its upcoming ipo.
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peoples they could go higher than $12 billion after owner fiat chrysler cells a state of the nearest stocks exchange. the ceo said the brand should be valued as a luxury goods maker, rather than automaker. you can always get more business news at bloomberg.com. we want to head to the market steps where julie hyman has latest looking at these markets, dealing with the fact that kevin mccarthy will no longer run for speaker of the house. comment on the cool sounds that variety -- that ferrari made. julie: let's take a look at what's going on with oil prices. there was that kevin mccarthy news. oil prices have been seeing a upswing ever since this morning and a pretty significant surge around midmorning. no higher by more than 3% and approaching $50 a barrel.
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we have the oil minister of venezuela saying that opec and non-opec nations are to be meeting on october 21 a technical meeting -- in a technical meeting. the secretary-general said that demand will climb more than estimated this year. at the same time, the file -- does not necessarily mean we will see any kind of production cuts. speaking of production, take a look at the numbers that we got yesterday, which is one of the reasons that oil was down yesterday. we had an unexpected built in inntories and we had a kickoff in production what you can see is a big -- a significant downtrend in production causing some concerns in the oil market yesterday. oil stocks are some of the best performers today in helping support the orall arages. >> of course you want higher prices. >> even when they say they're
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going to cut, that does not necessarily mean that they actually well. >> we're looking forward to -- they're outed about just it -- just about 15 minutes. >> we were to look at the other aspect classes because we had the kevin mccarthy news. you see the oil stocks with a particular of the dollar index as well, you see the significance and consistent downtrend from the dollar from the outlook for interest rates to go up being pushed up further and further. will there be more evidence of that today, we will see in those fed minutes. you can see that in the perception of the rent market -- rate market. we are seeing in upswing in the yields on the 10 year so following sort of a different trend within the dollar, the yield now going up to 2.1%. 2%t last week it went below so we have seen some significant moves there in the treasury. >> thank you so much. the story that we've been following since it broke last
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hour, kevin mccarthy withdrawing from the speaker race. comments made earlier today, he emphasized the need for a new face. i will stay on as majority leader, but the one thing i found it talking to everybody, if we are going to unite and be strong, we need a new face to help do that. >> now what? that is the question. we head over to bill who is in capitol hill. current house speaker john boehner has said he will stay on and help the process through. >> he said he will remain speaker until another speaker is elected. he says he has full confidence that will happen in the next couple of weeks. one thing the statement does not say is who the speaker will be announced a the big question going on right now in the republican conference. they were two other candidates whohis race, daniel webster
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represented about 40 of the most conservative hard-liners in the conference. all 40 of them said they would not vote for kevin mccarthy. there is a lot of, -- chaffetz who jason is a conservative member from utah who is believed to be one of the candidates that could bring people together. another candidate, at least one other, will rise and will need to be a consensus candidate. who that will be right now is anybody's guess. speaker boehner saying he will remain speaker for the time it goes past his decision to retire in october. and a lot of big deadlines coming up legislatively that people need to figure out. not knowing who the speaker is going to be will be a huge problem. >> the s&p has actually recouped its losses that it saw when the information about kevin mccarthy came out. what have we heard from the white house? >> they are concerned.
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josh earnest said their primary concern right now is related to two things. one, the debt ceiling. if you don't have a speaker in place, let alone a strategy -- the debt ceiling is a problem. very longent, and a press conference, said he would not sign any budget agreement that was not considered long-term. we been looking -- working on short-term budget agreement for the past few years. -- one quick story. immediately after this was announced, i got an e-mail from a house democratic aide that said ha ha ha ha. it said, man this is a big problem. there is likely to the sense that the republican party is in disarray, but there is also a
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recognition that there are serious deadlines coming up and no clear path forward in the house republican conference. >> there is definitely some scrambling going on behind the scenes. what we notice when kevin mccarthy was speaking was how relaxed and relieved he looked. the only tension we saw was he was -- 20 -- was when he was asked about benghazi. >> that was what raised concerns over the past couple of weeks. he recently said that the biggest a compliment of this house republican conference was the benghazi committee because it was able to drive secretary of state hillary clinton's numbers down. obviously the conference speaker said the point was not political but to find out what happened -- what went wrong in the death of those americans. that caused a lot of problems but what i'm hearing now is that is not the sole reason but it may have played a role and let into the idea that maybe kevin
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mccarthy was not the guy to unite a 247 person conference, maybe not even get a full 218. >> thank you so much. on the bloomberg market day, as we wait for the fed minutes coming out in nine minutes, we will spend a couple of minutes revisiting a key fed moment from the past. >> here what ben bernanke had to say about the levels. >> there is a huge difference between the u.s. recovery in other countries. to europe six years longer. in terms of the income distribution, we can go with ais at any length, this is long-term trend that's been going on for 30 years or more and is the latest in things like globalization, technology, things that will not reverse. ♪
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>> welcome back. we have seven minutes to go before the federal reserve releases the minute met last meeting. the team on bloomberg oh held a lively discussion on monetary policy past and present with ben bernanke. >> he talked about his role in the housing bubble and the lending crisis. >> i think the critique of the fed prior to the crisis, and a lot of -- people who look at it carefully generally agree that monetary policy was not the main reason for the housing bubble. one of the ways the fed was responsible was it did not do enough to prevent bad mortgage lending. there was a lot of reasons for that, one reason was that there was this strong lyrical support or subprime lending because it was creating homeownership probably. -- broadly. >> strong political support, so
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barney frank for example, who had been so critical of bad bank behavior, during the financial crisis specifically run mortgages, would you say it was barney frank who was promoting this as part of the american dream? >> it was not party alone. with -- it was not barney alone. subprime lending is positive because it proves homeownership. it was a goal and a lot of people were pursuing and in doing so, some bad practices were not taking care of. >> it goes back in the 90's. to answer your question, at least those specific things have been addressed pretty significantly. i've had a lot of complaints about mortgages being too hard to get now. the other thing we have done, we the regulators and the country is made the system a lot stronger so capital in the banks is way higher in the system is much more resilient. >> joining us now is mike mckee.
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we want to look ahead to the fed minutes. are we going to get a statement that back up the super dovish statement or a hawkish statement? members ofded were the fed, how serious the think the problems were overseas? we us in the dollar come back down, we have seen commodities come back up. you are talking about earlier on your program, are they really concerned, is there something to be concerned about? we will find out. >> we will find out and about cointreau minutes. -- about cointreau minutes. next, as you mentioned, the fed minutes coming up. we have the stock market at the moment showing gains in the dow and s&p 500. ♪
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welcome to the bloomberg market day.
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moments away from release of the fed's minutes from its september meeting. michael mckee joins me now with the details. for the we are waiting headlines to cross from the federal reserve. was the federal reserve divided or not over what happened? anchor: there was a question over they would raise rates and they did not. janet yellen spent a lifetime talking about global market volatility on the fed decision. that is what we expect to learn more about. michael: we are just getting the headlines now. i'm told the fed is releasing its minutes. i am trying to call it the data as we speak.

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