tv Bloomberg Markets Bloomberg October 15, 2015 12:00pm-2:01pm EDT
"market day." scarlet: that afternoon. i am scarlet fu. alix: earnings season underway. thanks coming in with a surprising beat, even if they are dealing with a surprising quarter. analysts cutting profit quarter to low. revampingarlet: profit. they come complete with hardwood floors and all the trimmings. once again fears of access supplier driving the drop. scarlet: first, check on the markets. for more on today's activity we will head to julie hyman with the latest. we are seeing gains right now. i am really excited what
you are planned for this show. solar panels? i am really looking forward to that. seeing a rebound after today's decline. they are now declining. much more about oil and just a little bit. i want to talk about what is going on in other asset classes today. economic data that came in better than estimated. jobless claims and consumer prices. world been watching interest rate probability. still around 30% for the likelihood that interest rate are placing in an increase of about 39% going out to january. now picking up above 50% for the meeting and much -- in march. take a look at the 10 year because we are seeing yields go up a little bit today. as you might expect given the economic data. still 2%.
i have also been taking a look at global sovereign bond yields. we are seeing yields globally at since april. today's stated notwithstanding, the general view and the general trend has been a decline in yield and the kind and expectations that the fed will raise rates anytime soon. bit of aa little dollar rebound. a lot of negative action in the dollar recently. you sell the sharp movement in the data when we got the information. when you have netflix getting hit so hard that cannot be good. isie: no, and whenever it earnings season you have a lot of big gains and losses. netflix among the no names getting hit. growth -- subscriber less than had been estimated. on the downside,
seeing more competition and the fitness space. cut the sales forecast for fitness, as well as week this because of currency, which we have heard from so many different companies. earningsmore on the picture with paul hickey. checking in on first word news that afternoon. mark crumpton has more. calling afghanistan fragile, president obama says the united states will keep nearly 10 thousand american troops in the country for most of next year. that is more troops than previously planned. u.s. military leaders have argued or month the afghans need additional assistance and support from the u.s. to beat that taliban fighters. -- back taliban fighters. he says the u.s. mission will not change. american forces no longer patrol afghan valleys.
our troops are not engaged in ther ground combat against taliban. those missions now belong to afghans who are fully responsible for securing their country. mark: president obama says the afghan military has made anes, but not as strong as it needs to be. thatcutors in scotland they have identified two libyans as suspects in the 1988 arming of a passenger jet over the town of lockerbie. scottishd allow detectives and fbi agents to interview the subject in tripoli. the bombing of flight pan am 173 people.73 the white house is reportedly in talks with pakistan to limit this to open up its nuclear weapons. the discussions are being held in advance of the prime .inister's visit next week these are the first talks in 10 years since one of the founders of the pakistan nuclear program
was caught selling the technology. dennis hastert has reached a plea deal on what federal prosecutors called a hush money case. he is accused of withdrawing almost $1 million from various bank accounts. several banking laws and lied to federal agents. hadnformation reportedly information about alleged misconduct when he was a high school teacher and wrestling coach. the pressure on the u.s. congress to raise the nation's debt ceiling just increased today. jack lu moved up the deadline by today's to november 3. lawmakers must take action to fund the government before that or risk defaults. that is a look at the first word news right now. you can always find the latest news at bloomberg.com. alix: big bank earnings out today. low.ll results
this doctrine much let on the day. citigroup more than analysts estimated. after a drop in legal costs help to cut expenses faster than the revenue fall. from a credit perspective big banks are facing a number of concerns. moody'sus is the assistant managing director who covers the global investment banks. from an equity standpoint i know one of the big questions is how do the banks row earnings. what is the growth strategy that fell from a credit perspective, have you gotten any indication the conference calls and results? what is important to raise the perspective, they are not focused on earnings growth. our focus is not so much on deliverables, but really performance for the cycle. we believe stability of earnings is key for bondholders risk.
it is and the expectations considering the market in general macro economic pressures. do they have a strategy beyond getting through the quarter? citigroup reporting today. i think it is important to note city is tracking well to perform . iti is tracking well to perform. not necessarily performing. alix: it seems in the macro picture the stuff that was helping them is rolling off erie the boost from the lungs going to get you so hard. not drying down releases. so what is the next catalyst that will boost them up rather than float around the stabilization level? slowly banks are waiting on a
rate hike from bank of america, by a we will be affected rate increase. so many banks can deliver more in terms of cost cutting, efficiency. a lot can be done. cost cutting was the way to go to offset revenue protections. what we are concerned from a bondholder perspective the extent this continues. not deliver on earnings the cost of capital, which a number of them don't still. long they will be patient from the shareholders. that typically pressures them into either more rest taking which will be negative for bondholders, or on the other hand, more substantial traditional engineering. how do the banks keep growing loans without compromising underwriting isndards? >> there
development of risk management. believe there's a big focus in credit discipline. we are almost like a turning point of fi cco. the banks have invested significant amount of risk management. resulting in standards that will maintain the discipline. alix: seems like something striking to me, all of these banks have grown the energy portfolio so much that we have not really seen the drag on that in terms of reddit performance. is there a good reason for that? the emotional exposure these loans have is significant. nevertheless they are indulged in balance sheets. even if you have $56 billion of energy, it is only single-digit exposure.
they have been conservatively reserving over time. take up last quarter and is quarter and energy-related reserves. we do not think this will be significant event because of the diversified lending portfolio. thank you so much. she is with the u.s. financial institution. alix: too vague to be hurt by oil. profits for s&p companies are expecting at least a 7% decline for the quarter. it sounds bad, is it simply a case of analysts winning it all wrong? scarlet: first data ipo lackluster at best. brand instantly recognizable. the shiny airstream trailer. what exactly are they doing that ceosales surging? the
alix: welcome back to thealix: bloomberg "market day." alix the. time for a look at the biggest business stories and news right now. goldman sachs ceo lloyd blankfein is assuring employees hewill keep working as battled cancer. went fine held a goldman managing director today. he announced last month he has lymphoma and is confident it is highly curable. and trading a big today after the biggest ipo of the year in the u.s.. this is the private equity firm
kkr that did not sell any of it shares. scarlet: second year of the mining products -- profits after a weak market. this will cut benefits and long-term insurance $547 billion. softening demand in china and were very is feeling it even more. scarlet: we need to head back to the markets this would julie hyman has a check of the individual movers. to netflix come back because it is such a poor performer. domestic subscribers falling short of estimates. the stock earlier was down the most any year. it is being punished here. subscriberstic net
addition here. it added 880,000 subscribers. the estimate would have been around here. one million subscribers. keeping the forecast for the full year. 5 million is what she is forecasting she will add. we will see if it can meet that. we are watching hospital change. is after hca, the largest in the united states came out with preliminary earnings that missed analyst estimates. rising to 8% of total visits. seven point 3% a year earlier. this is raising concerns about what we will hear from the smaller competitors, tenet healthcare and community also dropping. calmness --t pharmaceuticals. we're been watching this so
frequently on concerns of how your drug pricing. information on pricing decisions. alix: interesting. they tend to get whacked all the time now. technical term by the way. thank you. scarlet: earning season underway. investors currently on edge. fall by 7%ected to for the quarter. alix: could the negative sentiment actually turning to positive return? joined by paul hickey, cofounder of the spoken investment group. give us a perspective how bad it is going into earnings and how it compares historic the? aswe like to track analysts -- sentiment.
we look at the spread between positive and negative revisions over rolling month time. what we are seeing now is it has been negative for quite some time. we are near the lowest levels of the recovery. there has only been for other corridors where the you have had more negative sentiment heading into an earning season then we see now. there are plenty of reasons to be negative. strongrope markets dollar. the question here -- here is what does this mean? there is a strong correlation between analyst sentiment and the market performance during earning season.
the negative revisions outnumber the positive revisions. positive returns 84% of the time. when they are positive heading into earnings season you can to see the market decline a little over 1%. more recently there has only been one quarter where analysts us -- sentiment was positive. that was the only quarter we saw a decline. definitely a strong inverse correlation. scarlet: bank of america merrill lynch has a number were 26 companies offered guidance. it is not enough companies are offering any kind of guidance, positive or negative. do investors go and ins -- assumes a worse? >> can be part of it. especially when you have the situation. in conversation with analysts they are not slower a lowering guidance.
what you see is this negative companies are not saying boo about anything. for companies that do beat numbers they have a very strong cross performance. you saw fedex earlier. the stocks really got hit hard. i wanted to take a look into my bloomberg terminal to chart what has happened to earnings at apple in the past year versus the stock price. it is holding up versus the provisions the red line. it looks pretty ugly. thatnalyst to pessimistic this type of chart. the stock price is right and still up. big question with apple is the large numbers.
product isoward the very strong. how much more can you grow on revenue and keep the growth when you get to high levels? there is a group thinking the strongest growth is behind apple. performance on a lag basis has been under pressure scarlet:. is there a lesson here for the rest of the market? >> with walmart specifically, if you estimates, your sock will get creamed. walmart has the third worst day going back to 1980 and the decline. there are ways to issue that information. when you look back at 7% decline or more in a single day, going
forward the stock has average gained up 5%. over the next three months, and median gain of over 10%, about twice the return for walmart. look at three months or six months, walmart had a really out of the ordinary day yesterday. typically it leads to short-term gains in the stock after that initial drop. paul hickey, giving us a read on that year -- on the earnings season so far. breaking news on deutsche bank, planning to sell the u.s. private client rock business. raymond james reportedly in talks to buy the business. it manages money for individuals as pfizer's. does not include the u.s. private bank that has some of the wealthiest clients out there. this is an acquisition
deutsche bank has made of the past 20 years. but different kind to come up with a strategy for growth. that would imply perhaps investment banking will be ramped up or significantly important. scarlet: the big issue here no matter what happens is people would get paid less. that is one thing they can control. alix: a lot more coming up on the bloomberg "market day." ♪
scarlet: yesterday albertson's lowering the ipo. we've brought an hour stocks editor mike reagan to give us perspective on this. not a great showing for ipos in october. mike: obviously when you have a volatile quarter you do not want to share quarters for the first time when it is clearly a risk/all mode. -- risk-off mode. the bloomberg ipo index is down very sharply this year. alibaba is a market cap weighted index of it makes up 40% of it. more at the average eight will weighted, down about 2%. actually, outperforming other equal weighted indexes. not as bad as it appears. scarlet: i have a chart that shows the drop off in volume for ipos.
halfway through october less than 4 billion and ipos announced and you had 21 billion and the summer. indid drop -- drop off september. market conditions are one thing people have cited. albertson's you have the general market volatility, and then you have a strange time for that space. getting killed. love walmart yesterday. i think albertson has two separate issues they have to deal with her. editor at large. alix: still ahead, airstream ceo. we will dig deeper into the product. ♪ the only way to get better is to challenge yourself,
and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. alix: from bloomberg world headquarters in new york, welcome back to the bloomberg "market day." i am
alix steel. scarlet: and i'm scarlet fu. m u.s. secretary of state john kerry condemning a recent series of attacks against israelis. speaking today at indiana university, secretary kerry said there is no justification for violence and israel has a right to defend it will. the state department says the secretary will meet with both israeli and abyssinian officials. at least 40 palestinians have been killed in the past four weeks. israel is accusing moppet abbas of escalating violence by spreading a false death claim. saidseparate speech, he israel had executed a 13 rolled boy who was seen lying wounded and a video. the boy is recovering and an area hospital. he was run over after allegedly being involved in a double stabbing. this case has become a lightning rod as both sides blame each
other. the united states sending heavy artillery and equipment to poland. the soviet nation hopes it serves as a deterrent to russia the, border in territories have been on edge. they say it is rare but might explain the deterioration and the condition of scottish nurse pauline chris christie. two is treated in september and believed to up recovered and september. she was readmitted a few days ago. she is listed in critical condition and still suffering from ebola. athletes often the story is what student -- will soon be a free man. said to be released in prison in five days. a south african parole board allowing the story is to serve
term afterlaughter being on house arrest. that is a look at the first word news right now. you can always find the latest news at bloomberg.com. some products are so classic you can recognize them by just their shape. for instance, the airstream trailer. scarlet: that has pretty much been the same for 80 years. recently airstream has been making subtle changes. sales have taken off. matt miller is here with the company ceo. matt: i am here with matt miller. have quintupled since the recession, and everybody from ralph lauren to the yacht maker riva has gotten involved in the design of this product. what is behind the popularity? >> we have had a tremendous
popularity. handbuilt but they love latin america. we are also being pushed by the demographic wave of the b bloomberg. 10,000 return a age every day. that will continue for years to come. : in the past 15 years every done the entire product. it is much more luxurious as far as the interior goes. there luxuryon product? >> wii and up as a luxury product when people look at what they cost. be foundthe buyers may a small business. we have the celebrities, but we also have a lot of people that save a lot and decide to spend their retirement traveling in an airstream. tony apparently lives in
an airstream and has for apparently a year. we have a story about a guy that moved out of his home that he sold and into an air's dream. it is becoming a downsizing, turned the kind of thing to live in smaller places or alternative use places. movement, weome think we are well-positioned to step right into that. tople look at different ways live their lives. millennials in particular have tuned into this way to live their life. matt: it is not just the demographics, you have kids on , a ton of airstream camper's you can stay in for a night for a week. >> exactly. there are a lot of cultural things going on. not just demographics. we look across a lot of different generations that we can provide products to and enhance their lifestyle. assuming it may have
slowed a little bit since the recession. the entire rv industry looking at six percent growth this year. are you outgrowing the industry? for the past five years we are grown at a much faster clip than the industry has as a whole. up the rightd dealers in the right markets and got rid of dealers that did not represent the brain as well. marketing. getting the word out about what we are and how we do. finally, the product. making things that are relevant or today's buyers. we are try to focus on what the millennials will want to look at and use in the years to come. to that end, you are working with students at columbus college to build a new design, or at least build a new possible product. >> they developed the concept
with us. fantastic group of very creative students. do your job on the road. at one end of the trailer is a beautiful desk that opens up with a screen so you considered there and work almost outdoors. the rest of the trailer is kitchen, bathroom sleeping. take the job on the road. we hope this idea catches on as more people realize jobs can be done from home. released aight tesla software updates of their cars can drive themselves. you have to think a little bit ahead. will we see a driverless airstream at some point you don't >? >> i certainly think so. we hope to be one of the first of bring that to market working with partners like mercedes matt:. it is fun to think about this. futuristicwith these
vehicles that come automatically. you have to focus on the future and incredible growth. how difficult is it to keep up with capacity to meet demand? >> everything is built by demand. we have to hire carefully and train carefully. that takes time. we just completed a 70% any fracturing floorspace. manufacturing floorspace. we have about four products. we need to get that down and a little more closer to what the market demand is. you are looking to hire younger people. don't you and per -- prefer to keep people for a long time? >> we really like people to come and stay. we are lucky that we are having people leaving other jobs to come and work at airstream. they are not necessarily
scrambling for a job. longevity is key. you have to have experience to build them and build them with quality. we like people to stay 10, 20 and 30 years. craftsman.e ca i imagine the material prices have been pretty good. has beenmmodity price great. our aluminum we are not in that a decrease in price. we are working on processing deficiency to hire the margin. matt: you will not tell us the margins because you are a privately owned unit. >> and my bosses watching. matt: thank you very much. bob wheeler, ceo of airstream. alix: great. thank you so much, matt miller. scarlet: coming up in the next 20 minutes, we had to the nasdaq
to check on stocks like wind resorts. key clues intode the economic health given the huge presence in macau. alix: why netflix is spamming the switch to chip space credit cards. is it a legitimate excuse or just an excuse? data showing the u.s. fed taking a serious bite out of manufacturing giving more reason to pause and a potential hike. ♪
a look at the thickness -- the biggest business stories. scarlet fu. according to people briefed on the matter, raymond james is in talks to buy the business, which manages moneys for individuals. this does not include u.s. private banks that handle some of the wealthiest clients and have been expanding in recent years. triple b minus or brazil. one level above junk. it's also says outlook is negative. the move reflects the rising government debt burdened, as well as increased challenges to fiscal consolidation and worsening economic growth backdrop, not to mention political instability. scarlet: the number of americans filing front of what benefits last week dropping to the lowest level since 1973. initial jobless lanes declined
to 255,000. economist say under hundred thousand is the sign of a strong labor market. you can always get more business news at bloomberg.com. alix: south korea's huge conglomerate spurring a flurry of m&a this year. only china eclipsing the most deals in asian economies. taking a look at the unexpected winners from this m&a spree. jumpedvalue of new deals 17% from a year ago to more than 86 billion dollars in the first nine months of 2015. dealmaking has been driven by a generational shift and management as a family run shambles and increasing pressure from the conglomerates to simplify the ownership structure syria who is sweeping the benefits of the multimillion dollar deals such as the controversy by you of samsung tnt posted by elliott singer. banks such as goldman sachs and
morgan stanley in south korea. scarlet: now a look at the european market close. checking in with mark orton from london. mark: european stocks rose for the first in four days. groupsingle industry rose. strategists expectations for the stoxx 600 at the end of 2015 are not -- are now rising. china and bolts login emissions scandal. interesting comment from one central maine fed governor. he said the ecb is clearly missing inflation target. only three weeks ago we spoke to him and talked about an equilibrium and prices. he is clearly worried about the economic outlook. tomorrow we will get data from the eurozone about cpi. expect a drop of 1%. how about the big moving
equities on this recession? unilever. hellmann's mayonnaise. salessed for your forecast after third-quarter sales beat estimates. put it down to emerging markets and ice cream. burberry down. the biggest drop in five years. why? it indicated profits will probably drop for a second straight day. not a good day for the luxury lovers out there. well said.: doolittle to abigail at the nasdaq. welcome to bloomberg television. >> thank you very much. we have the good and the bad over here, and then we have the ugly. garmin. this gps communication navigation company is down 13.2%
right now as the company party announced the limitary third-quarter results to the downside. this is the second straight negatively quarter miss for slashednd they also full-year guidance. sighed intensifying competition and fitness and soft demand and aviation. last we turn to the green side of the ledger or at least one analyst is liking facebook. the shares are up nicely today hold. upgrade to buy from analyst jo bonner sent a price target of 115 and have successfully made the transition from mobile to desktop twosidering they have the most popular apps on the smartphone. he said based valuation metrics are in line with those of peers but do not adequate -- adequately reflect the status as
the industry leader. he really thinks there is an opportunity there with the shares of faith book. that is all from here. back to you. abigail reporting from the nasdaq. new to the bloomberg family. one stock we want to highlight is netflix. you can look at this destruction. the distraction that has been done to netflix over the past two days. the reason why this is so significant, when you have a high flyer stop coming off of it , this is one of the names that has led the market higher over the past you months. what happens when that cannot deliver jacob let is left to support the market. energy talks. sweeney wasl telling us about how when walmart preannounced the forecast for next year and took such a big hit, for a stock take netflix that has been roughly the past couple years, if it
the financial industry switch to new credit card. is not consistently the case people do not have the same account number in some issuers will replace that. for us, as a recurring merchant where we want to reduce the friction of renewal and reduce the friction of having any sort of interaction where you have to update your payment method and present an opportunity not to do that, it means there is more noise introduced to that. we think it is a contributor. is anyone finding that excuse? excuse?g that cory johnson is one that is not. that half of the turn is involuntary. people who can't pay their bills or something happens with processing. cory: the question is, if this quarter was that the reason for the weakness? andcan see in the body
which, general difficulty in the transaction. thankfully we have numbers where we can really see this. we do not get straight out numbers from netflix but we get a lot of data about where the subscribers are and where they are adding them, in streaming and non-streaming, the dvd business. international versus domestic. thes look at some of numbers right now. subscriber numbers, you thought they 3 million subscribers worldwide. and that is a good thing. 59.2 million subscribers worldwide. that was a little more than they added in the previous quarter. we look at the percentage growth rate, something that is important to track. x percent of users worldwide. this business is all about growing the maximum possible size. international growth for the company and investors. that had nothing to do with the
credit card change that only happened domestically. scarlet: that is a really good point. netflix missed on domestic subscribers but beat on international subscribers. the subscriber base is a lot bigger. does that indicate they put a bigger premium on domestic subscribers rather than international subscribers? cory: let's look at the excuse of the new credit card. took lacepermit that october 1, merchants that did echips could be held responsible for fraud. if you look at the growth rates of u.s. streaming subscribers for netflix, it almost calls into question the exclusiveness. of the u.s.ion market. that is a problem for netflix. how big can the market be? the overall 6%, yes.
and the u.s. it starts to look like the business is saturated. ,f this were a one-time thing what about last quarter? two .2%. what this suggests is netflix is about as big as it is going to be in the u.s., and that is worrisome because of the growth internationally. the price of the content, all of the content to have over 10 billion renewed last quarter. they did not even tell us yet about the minimum guaranteed payments due on the content. they buried that number and do not put it in the quarterly press releases. we have to wait for the sec filing to find out the minimum amount of payment. this is a company spending a vast fortune in marketing. marketing determines how many subscribers they are going to have. competing with amazon, hulu, , cnn? whohbo, vice
are they not competing with yet though things are getting expensive for this company and are running out of cash to do things with. this and theeading majority are all constructive on netflix. citing things like access to disney movies. going into original movies. they are more integrated into the apple ecosystem. cory: apple ecosystem. during the conference call they said they have to give up 30% subscription fee to apple. much less profitable addition of subscribers. they want thehat customers but will get a lot less money for the customers. during the conference call there was confusion where reed hastings had to ask his colleague whether or not they would get that. which disney movers -- movies they get is pretty important. not getting star wars is an important factor. the fact that they have to keep
going back to the bond market and equities market. i'm not saying analysts would be unhappy because of an come,riting move soon to but worth noting they have to continue to go to the market to announce a new bond offering and borrow even more money to keep the business afloat next year. cory johnson joining us from san francisco. don't forget, there was also a price increase for netflix. is also interesting, if you want to get the look at the chips part of the business, look at netflix next week. they would have the same issue. coming up next hour, new york fed president bill dudley says there is a clear strategy, but what is unclear is what is at stake for the u.s. economy. ♪
choose, choose, choose. but at bedtime? ...why settle for this? enter sleep number. don't miss the columbus day sale. sleepiq technology tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore. so your sleep goes from good to great to wow! only at a sleep number store. right now save $600 on the #1 rated bed, plus 24-month financing. hurry, ends sunday! know better sleep with sleep number. alix: it is 1 p.m. in new york and 1:00 a.m. and hong kong. scarlet: welcome to the bloomberg market day.
from bloomberg world headquarters in new york, good afternoon. alix: here is what we are watching at this hour. new york fed president william duddy -- william dudley is committed to raising interest rates this year, but admits recent economic you -- economic news suggests the economy is slowing. what does the latest wave of violence do when it comes to economic growth question mark alix: big gains in the oil did not last long. crude futures are heading for the worst week since july with concerns about oversupply that will not go away for -- go away. scarlet: let's had to the market desk where julie hyman has the latest. julie: when you have these earnings-driven days, you have
the individual stocks moving a lot but not a lot of overall consensus. we are seeing gains across the board, but we are looking at right now.e session take a look at my bloomberg terminal to see where that strength is coming from. care, and, health utilities doing well. but a pretty broad-based strength here as we had about the session. if you've ever wondered what determines the size of the pie, it's the waiting in the s&p 500. slice likeve a big technology that accounts for about 1/5 of the s&p, it's rising overall. it definitely lends a lot to the overall averages. talk about oil prices because the energy group is up but oil prices are down, although they seem to be making
a bid at recovery. and haveventory data seen the biggest increase since april. helped contribute to the declines we saw, but we are seeing a little rebound in oil prices. alix: and why? because shale production was down by 79 house and barrels a day. that was totally overlooked by the markets. interesting to see the divergence between the underlying commodities and stocks. julie: and there's even divergence within the energy stocks. so you see companies like chesapeake energy, one of the worst reformers of the year, they have now turned around. i was just made a liar of with live prices. countries that are refiners are doing well, helping to lead some of the gains.
refiningbnp and companies have been doing better today but obviously not going in tandem with oil prices. scarlet: julie hyman, thank you so much. bloombergk in with first world news. president obama says afghanistan is still fragile, so he's keeping more troops there than previously land. 5500 american forces will remain in afghanistan. mr. obama says combat for u.s. forces has ended but the two key missions remain. while america's combat mission may be over, our commitment to afghanistan and its people indoors. doors -- people endure. in torces remain engaged
narrow but critical missions -- training afghan forces and supporting counterterrorism operations against the remnants of al qaeda. mark: a leading republican is challenging the president must strategy. john mccain says 5500 troops are not enough to conduct counterterrorism operations or train afghan forces. the pressure on congress to raise the debt ceiling just increase. treasury secretary jack lew moved up the deadline to november 3. treasuries rejecting that resources maybe $6 trillion short of rejection. congress must take action before the deadline or risk default. ukraine has a new platform to take on russia face to face as one of five nations elected to the united nations security council. five were unopposed in their
bids for nonpermanent seat. ukraine and russia are not the only two nations sitting on the council that do not see eye to eye. japan has territorial disputes with china and russia. and insurance companies is to massive wildfires that turned up parts of northern california caused nearly $2 billion in damage. the fires are among the cost us in state history. the flames killed six people and burned more than 200 square miles. the open hills fire remains california's most expensive. insurance was by nearly $2.7 million when adjusted for inflation. that is a look at our first word news. you can find the latest news on bloomberg.com. scarlet: thank you so much. new york fed president, bill a professore with at the brookings institute on how the fed should decide raising interest rates.
dudley: i think will the economy the strong enough is a real one given that the economy is only slightly above trend and unemployment is coming down very slowly. recent economic news suggests the economy is slowing and we have emerging-market economies in a way that could come back to hurt our economy and pull down inflation. so the economy is slowing but he still favors raising rates this year. how does this all make sense? joining us now is a chief economist from bnp paribas. how do you reconcile these views? guest: it is interesting. what he is trying to do is cover his bases and keep options open. if things improve, they will go this year. some slowing in
data, so the question is does that continue or do we get a bounce back at the end of the year? scarlet: the jobs report for september is the one that slammed the door on the possibility. the question is whether it's a soft patch or the beginning of a downturn. what do you use to determine whether it is a soft patch? guest: whether the data returned. how much of the pain is going to affect us to medically? how much of the turbulence happening in terms of labor markets is going to persist? we don't have a good indicator of what is to come. if you look at sentiment and things like that, they are ok. if you look at those things, we should see a bit of a rebound. we talk about this a lot on our 4:00 show -- do you feel
monetary policy is loose if you look at the interest rate? are we in an accommodative time? guest: i think so. one thing to suggest that as we have a tremendous amount of excess reserves in the system and banks a sickly think it is better to save than to lend. that is a sign that it is very loose policy. , sos are unwilling to lend a sign you need looser policy to stimulate growth. the other side says growth is above trend. how much of a drag is that going to be? jack lew running -- warning that the treasury would run out of its extreme measures faster than expected. some little room and some uncertainty. we have faced the ceiling battle
before and congress has done the right thing, which is to pay its bills. there's tremendous tail risk, which is that they don't get things together and republicans cannot agree on the same strategy and the democrats are not on the same page as far as how to approach on their side. there's always a tail risk, but we do not get as a significant probability that it will happen. next 20ming up in the minutes of the bloomberg market day, a wave of new violence breaking out between israelis and palestinians. has the latest unrest hurt israel lost thriving business communities? we will ask the israeli finance mr. next. scarlet: our companies at risk to default in the global economic slowdown? barrelfter testing $50 a last week, oil is headed down, since for its worst week july. the supply glut is showing no
backet: -- alix: welcome to the bloomberg market day. it's time for the boom -- the bloomberg business flash. deutsche bank is planning to sell its private client wrote great. bloomberg news has learned raymond james is in talks to buy the business which manages money for individuals. the sale would not include the private bank that handles some of the banks wealthiest clients. scarlet: shares of first data are trading today for the first time. it follows the biggest ipo of the year in the u.s. did not sell owner any of its stock.
alix: lloyd blankfein is assuring staffers he's staying on the job even as he battles cancer. the conference call was earlier today and he told goldman's managing directors that he will still be bothering them as he undergoes chemotherapy. he announced last month that he has lymphoma. you can get more business news at bloomberg.com. scarlet: we need to head back to our markets desk where julie hyman has look at our best performers. two of every stocks are higher. gaining a little steam today. some of the best performers, does lending the most to the s&p 500 gains have to do with earnings and analyst commentary. deigning after it came out with earnings that beat analyst estimates. apple is rising and facebook is gaining after argus raised its
recommendation on the stock in part because of its transition to mobile. that is what is lifting the s&p. , we have been talking a lot about the stock, coming out with subscriber growth that missed estimates. united health group reporting its earnings -- it's morning -- it's margins slipping to some degree and walmart, insult to injury, after falling the most 1998 on that new forecast, falling once again today through analyst negative commentary. it is worth pointing out that the two best performing stocks on the dow today, one of them is nike. nike having the big analyst day yesterday. that stock is up and other 2%. that price was raised today i piper jaffray. it was approaching the old price
target. that has to do with the outlook for sale coming out of investor day. boeing one of the best performers on the dow yesterday, selling after comments coming from delta airlines about widebodied airplanes. wolf research saying the decline was overdone and that stock is bouncing back. inx: continued violence israel is bringing the country almost to a standstill and it could wreak have it on its currency. the israeli shekel has strengthened this year but one analyst is predicting it will weaken to levels last seen in 2009. scarlet: for more on how this could affect the country, we are joined by the director of the ministry of israel's finance. talk about the impact that would have on israel's economy. when business is disrupted come at tourists stay away. end of the day, israel is resilient and stable, israelh unfortunately,
has been going through cycles of violence many times before and we hope the security situation will resolve quickly. but i don't think the current situation will effect the israel -- the israeli -- the israeli economy in a severe way. we should see how it develops and and we will have a better idea. you have had to cut your gdp forecast. at the end of the day, the central bank has cut rate 13 times. for the tax, it has been dropped
what kind of tax exemptions can be done? done is tork being see how we promote growth. productivity issues not just in israel, but everywhere around the world. we want to see how we get levels of productivity up. this is something we are addressing as well. there are several steps we are taking. does a 25 basis point rate hike mean for a country like israel? do you want them to do it? guest: it depends. and advantages and disadvantages. we are trying to concentrate domestically on how we deal with what we do and not whether the fed would increase it or not. we have to look at the steps that have to be taken regardless of what we do toward the and of the year. scarlet: controlled what you can
scarlet: welcome back to the bloomberg market day. i'm scarlet fu. alix: i'm alix steel. investors and corporate bonds are getting nervous. borrowing is raising the rates of default. carol: we welcome all of our viewers on bloomberg tv. carol massar along with cory johnson and we are talking about credit markets with the chief investment officer at lehman and
he joins us here in the studio. we were talking earlier about the environment. third quarterreat for high yields. what does it look like in the third quarter? marty: we are off to a great start and since the widest spread was october 2. backarket has come roaring particularly in those industries that have been beaten up a lot in the third quarter, including energy and telecom. eaten verych got badly after a downgrade by moody's and the weeks return for october was above the median for all quarters of historical returns, just to give an idea of how big that return was. about ann you talk
individual industry, the oil and gas industry has been just down and out. you can see that pain. but a lot of that debt has not completely collapsed yet and i wonder if we are waiting for one more thing well -- where he will see a big default. you have not seen a ton. marty: what's coming up as a recalibration for companies and exploration of hedges. although the bonds have been depressed, it is expected it would take a while before they would topple over into default. so there is more of that and the market is looking for a heavy casualty rate. carol: what happens in terms of a higher rate environment westmark what happens in 2015 or 2016?
or 2018?2017 buty: it makes a difference it is important that companies don't have all of their borrowing at loading rates soar in the shirt term -- short term. get a rise in longer-term rates, which is not obvious that you will with the rise in the short-term rates by the fed, it will take a wild to float through. some are more dependent on credit and customers will be affected by the rise in rates. a companyt down to specific level but the best you can hope for is that the fed hike will be a clear signal and give some confidence that the country is on a strong enough footing that the fed feels confident taking that that. in wethe clear signal has
are going to raise this year and then it never seems to happen. i wonder how individual corporate issuers are starting to respond to that continual postponement? put you in a tough spot because it can look bad no matter what you do. on a key point there with uncertainty. that has been a problem for buyers, sellers and investors and issuers. getting the 25 basis point hike out of the way would probably have a positive effect from the standpoint of not agonizing each time the fed open reacting.ting is carol: where are their the most risk exposures? highesthe ones with the
concentration of distressed issues are metals and mining, energy services and retailing would be the top four and they stand out from the pack. carol: thank you so much. back to you guys. coryet: carol massar and johnson, the bloomberg advantage radio team. alix: still ahead, too much supply and not enough demand. a potentially scary scenario for the price of oil. ♪
welcome back to the bloomberg market day. i'm alix steel. scarlet: and i'm scarlet fu. let's start with our first word headlines with mark crumpton. biggerormer u.s. house dennis hastert has reached a tentative deal with tears who have accused him of awarding -- avoiding federal laws and lying to agents. the 73-year-old made payoffs to a man to hide what they say is a legend sexual misconduct by hast or he was a high school teacher and wrestling coach. the deal keeps potentially embarrassing secrets from becoming public during a trial. he pleaded not guilty back in june and faced a maximum of five years in prison on each of the charges. republican presidential candidate john kasich as if he is elected, he will balance the budget within eight years. plan focusesrnor's on tax cuts for businesses and the wealthy. at the same time, he will cut nonmilitary spending. his campaign says the growth
sparked by tax cuts with the spending freeze would balance the budget for the first time since bill clinton was in office. the government said there would be no benefit hike next year for the millions who depend on social security. it is the third time in 40 years benefits will remain flat. the main reason for no increase is low gas prices. than 70 million americans. is obama administration reportedly in talks with pakistan to limit the scope of the country's nuclear weapons. talks are being held in advance of the prime minister's visit to the u.s. next week. these are the first discussions in 10 years, since one of the founders of the nuclear program was caught selling the technology. some experts they it is doubtful pakistan would limit its program. former paralympic and oscar pistorius will be released in
five days. a parole board is allowing him to serve out his manslaughter sentence under house arrest. he was given a five-year turn for the fatal shooting of his girlfriend. our first wordat news. you can find the latest news on bloomberg.com. scarlet: thank you. we will check in with mark crumpton soon on the latest first word news. alix: oil is continuing its longest losing streak and july and prices are dropping on news that crude inventory rose by 7 million barrels last week. some analysts are calling for oil to fall to as low as $20 a barrel. research explained where goldman stands on oil. it's important to look at it in long-term, medium-term and near-term.
demand out of the emerging markets has been substantially weaker than we anticipated. turn to supply from low-cost players like saudi arabia and iraq, all surprising to the upside. productiont non-opec outside the united states -- whether it is norway, brazil or other parts of the world of a partially driven by weaker currencies. a report was released recently showing declines in u.s. production are weaker than we initially thought. put it all together and the markets are more oversupplied and we thought. guest: you can feel the pain of this wealth transfer, the tie it -- the china slowdown as the stock is down 10%. look across emerging markets, where is the biggest pain you are seeing now? guest: commodity exporters have been in the eye of the storm. that is where currency moves have been the most acute.
if you move more to the medium-term, the commodity pain has been immediate. places like china and the medium-term growth from the pickup that is likely to be there for years. that's where i expect to see a lingering growth slowdown. supply, iraof member sitting at my bloomberg terminal and the headline had goldman sachs and the crude down at zero. what on earth takes us down to $20 crude? guest: we never forecast in 200 or 20. but in terms of thinking about what is driving that scenario, it is the idea of reaching storage capacity. so large thatuses it interferes with the ability to store oil. it ofn store and ink
aluminum right outside the smelter and if all you need is a parking lot and chain-link fence, you can stack metal to the moon. oil, you cannot do that. how do you get the correction? prices have to collapse to get producers to shut down. >> on the way down to the 90's and 80's and 70's. goes lower if the price lower, aligning with u.s. shale. do we have to think about a ceiling if crude starts to rebound? we saw that this last spring when prices rebounded to the 65 dollars a barrel range. high yield markets opened up and cash flows increased significantly such that drilling picked up again. what is unique when we use that term is the fast cycle nature of
shale. you look at super majors between when you hit capital, and thater is 14 days can be brought on in very short order. that was a fascinating interview as he talks about that $20 a barrel and what drives us there. barclays had an explosive note out saying that brent needs to be $85 a barrel and the forward curve is nowhere near pricing that to meet up with demand because rates for shale are so steep, about 3% over the last five years. oil thatto replace much more quickly to to meet -- to meet demand. does not seemust within the realm of responsibility -- within the realm of spots -- within the realm of possibility.
alix: but the result is production is going to be shut in when you stop investing in existing wealth, the decline rate is very steep and that is where we will see the distinction between prices now and the future and they need 85 to incentivize producers. crunch atve a supply the end of the day. there will be too much demand and not enough to fly. areas like the middle east and russia have slow decline rates, so you can continue to get more for your money as time goes on. that's why shale is the wildcard when it comes to this market. scarlet: when does opec meet again? alix: that's a good question. november? they are a non-factor.
at the end, it does not move the oil price. alix: there's no actual quota. there's a suggestion. iran wants to make up all of the lost revenue and saudi arabia continues to pump, so why would anyone cut back? you would literally be giving money to u.s. producers. why would anyone want that to happen? it's not the opec supply we want to watch. it is u.s., it is russia, it is everywhere else. much more coming up. we will continue the commodities discussion because banks are becoming more cautious in lending money to energy companies. harmthis cause long-term to the industry or does it help
that rebound? alix: look around the world and you will see central banks cutting rates, but the rate cuts harm consumers more than they help us chew mark scarlet: albertsons postponing its ipo in the last minute. is it due to choppy data or the changing grosser business? does walmart have anything to do with it? ♪
planning asch inbev record bond sale to finance its $106 billion takeover of sab miller. bloomberg news says budweiser plans to sell $55 billion in debt. the takeover is the biggest consumer deal ever. citigroup has a better than expected quarterly profit rising 51% as the drop in legal fastero cut expenses than revenue fell. the ceo has been closing branches to save money. scarlet: the number of americans filing for unemployment benefits was the lowest its 73. initial jobless claims fell to 255,000 top kong -- anything under 300,000 is a sign of a strong labor market. but hiring has slowed. you can get more business news at bloomberg.com. alix: let's check in with the
markets desk where julie hyman has been looking at the latest. you are looking at valiant and something particulars happening with that stock. julie: the company is getting subpoenas from prosecutors, looking into how it is pricing it trucks. this goes to the debate about the pricing of drugs, what some say are unfair pricing for drugs. officials were questioned by congress, so the fact that prosecutors are subpoenaing the company is sending shares down once again. whenever we talk about valiant, i like to look at who owns the stock. it has a who's who of hedge fund and the fund world in generally. i know this is hard to read -- goldfarb is the number one owner of this talk. they are loosely affiliated with warren buffett. johng square capital,
olson and viking global are a couple of other hedge funds that own the stock. when it gets hit comedies guys get hit and we know hedge funds have in struggling this year. biotech stocks are holding up surprisingly well today. the biotech index is up 2.4%. one of the standouts is a company called five prime therapeutic. this is after mr. myers signed a deal for one of its cancer drugs. of the company's market cap the for this big search today. we have been watching big cap i/o tech, which is doing well. stocks like amgen and biogenic are helping to drive the gains. it does seem like the
headline risk won't leave valiant alone. even know it has been pointed out underscore of 2014, when they were looking into gilead sciences, nothing came of it in the end and investors were able to look past it. when does rationality rolea huge roles -- huge in markets? even if it's not a realistic long-term risk for the long-term market, you still have the stock trade on it. alix: thank you so much, julie hyman. scarlet: we were talking about oil prices in different calls on where they are headed, and banks are reassessing how much they will allow to be borrowed. guest saysext struggling energy producers face cuts of 35% to 40% to their credit lines. imagine if that happened to your
credit card. our guest specializes in petroleum industry turnaround and is based in dallas. inc. you for joining us. something distinctive is we have seen marginal cuts in the borrowing base as evidenced by oasis petroleum. where are these big cuts? when are they going to come? guest: that's a good question. what we are seeing is when the borrowing basis was returned in march and we're done twice a year, the banks took a very andervative approach allowed oil to recover to the extent was going to recover in the short term and not take a radical approach. we are six months further down the road and looking at long-term oil prices based on a by 2020.arket of up 60 that quick turnaround everyone
in the industry is hoping for doesn't appear to be happening. this let's define what might be. i have a mortgage out that $500,000 and a bank will look at the global economy and say i'm only going to give you a mortgage of $300,000. what do i do with that extra $200,000 that a bank is not going to lend me but that i/o them? michael: you have to realize that as of march, only about 50% of companies that had a borrowing base loan had access to a line of credit. a lot of companies are not even utilizing that credit. those were well underutilized as far as that is concerned, so it is going to hit the company's hard that have a fully drawn facility with ongoing drilling operations and requirements. that are the companies will be thrown into under most
agreements either into a lump some repayment or repayment over six months in the next predetermination absent being able to make that kind of payment, then you find yourself in a traditional workout scenario. imagine the check you have to write your bank if your mortgage rate got cut. our redetermination set in stone? can they be modified if oil prices collapse further? michael: your standard credit facility will allow at least one interim borrowing base redetermination that can be requested either by lenders or borrowers. if there is a significant spike in prices, a borrower can go in and request a redetermination. that could free up additional funding for them. on the flipside, banks typically have the right to require redetermination as far as that
is concerned. scarlet: part of what we have seen is that banks have been helping companies issue debt and stocks in part to go pay themselves back that loan that is outstanding. case, is that a huge risk for oil companies which banks have in anxious to lend? michael: the banks are not in the business of trying to put companies out of is this. all the indications in the markets indicated that prices would at least remain where they were. investors, financial institution investment advisors are all putting in new equity debt and the like. banks interest and markets interest to support these companies as best they
can, but you have to take a critical look at where the market is going to be going in the near term and longer-term as well as a federal regulatory overlay that goes along with it. the banks have to comply as far as identifying potential losses. scarlet: connect the dots between the m&a we have been waiting for because they're still too much room between the ask and offer price. michael: i was hopeful act in march that some of the companies that were fairly heavily leveraged would take that opportunity because there was a lot of money sitting on the sideline and they would take the opportunity to sell some assets and come out as a stronger company. but there's a big delta between the ask and the selling price and as a result, the investment
markets have stepped back a little bit and are waiting for the next shoe to fall. that's the borrowing base redetermination that we have. a number of companies were trying to capitalize and sell us for a 12 or 18 month oil price and that 12 months is going to be a in the first quarter of next year going into the third quarter. what you are going to see our a lot of restructurings and a significant of sick in an and day activity and distressed asset sales. yearve had 17 so far this and we expect that trend to continue. thank you so much. the reason we care so much is that if companies go out of business and cannot produce oil, that will shut in oil production. it is not materializing. scarlet: there's one thing that
alix: welcome back to the bloomberg market day. scarlet: central banks the world over are cutting interest rates are keeping them low on the eases that lower rates help spur economic activity. according to deutsche bank, lower rate actually hurt consumers. alix: that is one of our many misss today on "what you miss."'d you
joe: it's an interesting idea -- the conventional theories you cut interest rates so low that you just incentivize savings because people are not making money with money in the bank. that's one way rate cuts are supposed to work. what his team argues at which a bank is that people have a seven out of money they want to make or save and then if they are not going to get paid on their savings, they are going to pay more to compensate. very controversial thesis and i would say it undercuts one of the many claims fed stimulus or central-bank stimulus is supposed to help. scarlet: and it ignores the fact that we are at pretty low rates. ali central banks around the world have cut rate several times and are cutting them even further. it's not anything close to being normalized. joe: we have not seen any great consumption boom.
have this incredibly long era of ultra low nominal rates and we have not seen the consumption boom we are supposed to see. ,lix: which raises the question our rates actually low? joe: maybe we need negative 3% rates. thelet: we have to redefine way we call monetary policy. alix: all of this, we will be talking about at 4:00. nextet: coming up in the hour, petra bok cut to junk last month and they are pulling $790 million in bonds stop how will this affect capital markets? that conversation is coming up. ♪
11:00 a.m. in san francisco. welcome to "bloomberg market day ." ♪ from bloomberg's world headquarters in new york, good afternoon. i am david gora. albertsons calls off its ipo. dudley today says the economy is performing well, but the latest economic data could have fed chair janet yellen have second thoughts about a rate hike later next year. first, let's head to the market desk with bloomberg's julie hyman. yeah, the highs of the session are gaining steam throughout the day. the s&p and the nasdaq are now