tv Whatd You Miss Bloomberg October 19, 2015 4:00pm-5:01pm EDT
economist. scarlet: u.s. stocks living after an eight we hide. commodities rising against all odds. the question is what it you miss? stanley kicks it off with disappointing earnings. scarlet: china selling tons of u.s. debt. commercial banks come to the rescue. are going to speak to a renowned economist on the market's monetary policy. scarlet: we begin with the markets, equity indexes closing just around session highs,
especially when it comes to the s&p 500. nevertheless, this is looking at a market that basically consolidated around its eight-week highs. we are about to enter the busiest part of earnings season. alix: and we did see the most activity or the most movement, because the nasdaq did not keep pace with the rally we saw the s&p. one of the laggards had to have been energy. the iranian oil minister said when opec meets on wednesday they likely won't cut any output. certain members have been vying for a cut, even though they themselves wouldn't cut production, trying to get russia and other members to cut to help boost prices. oil prices fell as a result.
scarlet: this inversion rally -- it is something that remains to be seen and perhaps more data and anecdotal evidence will determine that. we had things over to london for a deep dive. >> i want to dive into my terminal. the national association of home builders optimism survey. back 25 years. homebuilders are growing incompetent. more people want to buy new houses, more people are looking in the door. as you can see it has come back quite a bit from the lows in early 2000. it still has a long way to go. you have to think that housing starts have a long way to go.
>> that is one of the bright spots in the economy in general. i want to take a look at something that is happening in the treasury market. you are looking at the green line, china's holdings of u.s. treasuries. and that commercial bank holding of u.s. treasury. hold on. it won't cooperate. it's not cooperating. commercial banks have now overtaken china as the biggest buyer, holding at a record $2.1 trillion by the end of september. almost double the amount by china. this was helped when china was selling it. concern if china actually dumped some treasuries. the worry is if traders feel better about the fed raising rates they are going to dump at the sameries right china could be selling and
what that would wind up doing to yield. speaking of banks i want to take a deep dive into my bloomberg terminal. scaling back its global investment banking operations shaping up a management. this is a snapshot of how far behind it is. you are looking at a return on equity for all these different banks. lines.ow the other rising capital requirements have driven down return on equity. this is a key measure of profitability. scaled back your investment banking, ambitions globally, and reduce your cost as well. >> ibm is out with earnings. the company is cutting its forecast. it is basically looking at third-quarter revenue that came
in and $19.3 billion. ifrterly revenue was down you adjust for currency for that impact. the real headline is operating at 3:30 perlooking share. inibm shares are falling this reduction of forecast. down 1% when you just for currency. alix: looking for the full year. 1575 on the high-end. all of that weighing on the stock. have dollar issues there by then overall business shift.
computer hardware and whatnot -- and whatnot. is the head of economics, -- head of economics and the -- gentlemen, thank you for joining us. scarlet: is the u.s. economy losing momentum? we have retail sales. kind of disappointing. going as a bear for halloween this year, aren't you? we know manufacturing sector is weak and that was can termed by the service. -- that was confirmed by the service. sales,spect to retail the volume is pretty healthy. those are nominal data points.
retail pricing is weak, sales is quite strong. 3% andunning between 3.5%. the risk to the u.s. economy don't come from the u.s. consumer, they don't come from domestic demand to the extent of gdp in the third quarter is going to be weak. domestic demand remains quite strong. it is domestic demand that drives the bus. joe: the last couple of payrolls we have gotten have been fine 200 kt dipping below that we are used to. have we downshift to say 150 range or below, do you feel confident that we are getting closer to that goal and it
doesn't necessarily mean the wheels are coming off of the economy? >> most estimates, including my own, so you need 80,000 months to stabilize the unemployment trade. even the labor force is growing at three quarters of a percent per year, no stronger. you probably get the unemployment rate -- and implement rate dropping half a percent per year. but not the 41% per year we have been seeing the last five years. if it goes down to 150 and stays there, it is not going to be a problem because it is good enough given what the u.s. economy can do. i don't think we are going to get to that area. scarlet: jobs is one of the fed's two a mandate. the other stabilizing inflation and prices.
stephen, i want to point out inside my terminal we have this chart comparing the break even inflation expectation for oil. you pointed this out a couple of weeks ago. seems to- the market take its cue from oil prices, with break even rates tracking oil prices. what kind of complications does that create? steven: if oil prices stabilize of his levels or even drift up a little higher, it will be harder for central banks to make the case that things are falling apart and there is a fire burning and they have to ease things very quickly. for the u.s. the impact of oil will be diminishing over time. i think the rhetoric of the central banks in terms of their , it lagsbout deflation the reality in the market. they continue to see these -- to see this stability.
there is not going to be a disinflation problem. alix: it actually shows there is some inflation in the market. you have to be looking at the right wing. bank -- nthe -- neil eil: when you think industrial markets you are thinking copper service sector inflation is quite firm. when you think about service sector prices, those are not changed frequently. an expectation of future inflation embedded in them. most economists tend to think service inflation tends to leave. none of these arguments really matter at this point.
we have to check off every single box in june 2004 in order to get the green light, it is important to remember janet yellen didn't look at the 2006 tightening cycle. i don't know why there is this is some should on the market. and the real issue is whether they are willing to throw out models that have existed for quite some time. i think it is too early to compete on those models. joe: you wrote to clients that there is a rising risk of higher volatility due to the fact that we are getting this verbal split in the fed. some of these other doves have been questioning that out loud. other people have said this is not really that much of a split and now we just know who some of those dovish dots are. this is not some new thing that
has emerged since the last meeting. why should investors be nervous about this rhetoric we have heard? neil: i think that is baloney. us -- ellen is telling have two diametrically opposed arguments. disagreement and the sort of congeniality of the fed. if they don't go on december -- idea waiting about additional information, it makes very little sense. they really elevate the importance of inflation in the global economy and the response function.
to have breached an account belonging to jeh johnson. the cia has referred the matter to the proper authorities. in presidential politics at least one leading democrat thinks joe biden be too late to the party. dick durbin of illinois says he is not sure the vice president could win the party's nomination even if he enters the race right now. bloomberg news is still considering his options and is not expected to make a decision by the end of this week. fox news says he has made up his mind. is cutting medicaid funding for planned parenthood clinics. this according to state health officials. the move follows release of videos that report lay show officials discussing sales of fetal tissue. planned parenthood denies those accusations and says those videos are heavily edited. in louisiana a judge ruled the state must continue funding for at least two more weeks.
authorities in mexico are hot on the trail of drug lord joaquin guzman o. guzman has -- he escaped from a maximum security prison. that was the second time he has done that. back to you guys in the studio. alix: we are back with neil dutta and steven englander. when you look at the global effects market, in terms of developed currencies, it seems like things have stabilized. in your opinion does that mean have seen the peak the dollar? i think now, especially in q4, the major central banks of the world, by that i mean the central bank and the fed, see it in their interest to stabilize global asset markets. think the chinese authorities
are determined to get into the fdr. i don't think they care how much reserves they spent or what it markets asabilize decisions are being made. the focus should be on when their second hike comes. they want to do the first hike in december or later in the context of stable asset markets and the feeling there won't be any asset market disruption to they moved in december and said see you in june. anybody would be to do that too concerned. the question of how steep that
slope of hikes will come back. scarlet: in talking about china and what it does to make sure gets into the drawing rates for the imf, what does that mean for the other asset classes everyone priced that in already? neil: china does need to come up with a credible drug strategy and deliver it to the market. there was an expectation there devaluationtinued and the slowdown was getting away from the authority. for the fed, the issue is the same. we are importing deflationary pressures from abroad. import prices have been declining for basically eight of the last nine months and we are talking about how u.s. core inflation has been confirming. asset markets are important to the fed, it is important to are telling us
equities are overvalued. perhaps not as overvalued now. scarlet: biotech and social media. if they keep using -- neil: if they keep using the markets as a deterrent to going, you get the circular feedback loop going. we have all these countries in joe:tion and the u.s. -- we have all these countries in deflation. doesn't really matter for the u.s. economy? is there any reason we should be concerned commodity driven inflation is now negative or should we be happy about? >> if you think about the taxi driver as your model for the u.s. economy. the fact gasoline prices are lower actually help them.
in so far that we are importing this reallyon, value added price level doesn't fall as a result. we actually do better. it is sort of a mistake to look at real interest rates against headlines. take a look at it against the median inflation index or all thesepce, discussions of real interest rates going up disappear. scarlet: we have more on central banks and monetary policy. in the meantime we are with neil dutta and steven englander of citigroup. as we had to break, take a look at ibm shares. third-quarter revenue fell 13%. ibm also cutting its forecast. ibm saying the stronger dollar reduces sales by nine percentage points.
scarlet: mixed messages from the federal reserve as to when they should raise red -- raise interest rates. others say 2016 or 2017 is a better bet. jpmorgan ceo jamie dimon spoke to bloomberg about the impact. jamie: normalization is a good thing. it will actually reduce uncertainty. timel let them take the when they do it. i think it will be a good thing, not a bad thing. scarlet: will china like it? will japan like it?
steven: right now they would prefer a weaker dollar to a stronger dollar. the weaker dollar with the higher commodity prices would be associated with less pressure on emerging comedies that emerging economies. it has been associate with stronger equity markets. in a time of inflation, you might like a strong dollar, in a time when you are concerned about global disinflation. caseld argue it is not the or the u.s.. alix: what does that even mean, what would it normally even look like? we actually tighten right now when it comes to monetary
policy? steven: is falling at the same rate it did last year. fed is getting closer to its statutory goal, then monetary policy proxy by the real interest rate is becoming more common native. -- more common data. i think the weakness in the global economy, temporarily per -- temporarily suppressing. it is important to remember the case the doves are making really rests on some of these really abstract ideas. these are only things you can guess. you don't know them with any degree of certainty. knows the unemployment rate continues to fall and core inflation appears to be firming. joe: you think this idea that monetary post is tightening is
not as? but absent any strong real inflation measure. but athens of a smoking gun that inflation is on the rise, how else would you even measure that monetary policy? the falling pace of unemployment rate? reasons why there is an much pickup in inflation is because there is an expectation the fed will actually do something about it. if the fed came out and said we are going to do anything in the face of a nation, then we are appointed talk about it -- face of inflation. the unemployment situation continues to tighten and this argument has been here for a while. you can see it in consumer confidence, in the labor market, monetary policy is still far from normal. now a pleasure to have you on for the whole half-hour.
scarlet: what did you miss? let's go to first word news with remy. remy: we begin with a race for the white house edit request for secret service protection from donald trump and ben carson. the top two gop presidential candidates, but officials say the requests will not be approved until the head of homeland security consults with members of congress staying with politics, hillary clinton has a 16 point lead over rival bernie sanders. it has been first conducted since last week's debate. that gives clinton 45% to
sanders 29. joe biden with 18. only sanders got a boost from the debate. his support is up 5% since september. drone operators are now on notice. federal regulators will require the registration of most thrones to help track operators who it more safety rules. the faa is setting up a collaboration with federal government, industry officials, and hobbyists. the move is to prevent thrones from crashing into planes or hurting people on the ground. texas, authorities say the wildfire that has burned her a week is now 70% contained. officials say 270 firefighters are now working to strengthen lines surrounding that lays. it is located 40 miles southeast of austin. the fire up early began last tuesday when the farmer pulling the shredder accidentally ignited tallgrass. stampede in saudi arabia --led to house and 100 21
killed 2121 pilgrims. individual countries identify bodies and work to determine the whereabouts of hundreds of others who are still missing. the official death toll is 769 for salaries -- for saudi arabians. that is your first word news. back to you. scarlet: breaking news in the past five minutes, sandisk, the flash drive maker, is in advance talks to sell itself to western digital. the two could reach a deal as soon as its week. this is an example of the m&a taking place in the semi conductor state. it is up about 16% since october 13, when the news reported it
has been exploring the sale. advance talks to sell itself to western digital. they spoke to western digital and micron technology. you want to cut costs and scale of your business and everyone is looking for them to gain on that. we do want to update you on what happened after hours at ibm. it was a pretty ugly earnings report for the company. dollarhurt by a rising at about 9%. low margin operations and shifting its r&d. it is also dealing with a weaker emerging-market and older businesses. to that point the company wound up cutting its forecast for the year. something to readjust for that business transition.
scarlet: it was an interesting day when it comes to chinese data. we are going to joe for a deep dive. talk a lot going to about headline gdp, basically coming in right around estimates. i want to dive into my terminal because the first thing you notice is there was a split. this white line, this is the services. those are actually accelerating. the secondary industry, continuing to decelerate. this is what they want to happen. they want to make this shift. this gdp report was a snapshot in and of itself of the economic change china is undergoing right now. alix: take a look at tax revenue.
i'm going to deep dive into my bloomberg terminal. it is up 5.4% in the first nine months of the year. this is tax revenue. you can't make this up. if it is growing or stabilizing or expanding, it is completely legit. >> it is the improvement so far this year. the manufacturing slowdown has massive implications for countries that sell commodities to china. inside my bloomberg terminal i have australia's terms of trade, this is export prices relative to import prices. when the line goes down, as it has since 2011, export prices are falling relative to import prices. from this point, the peak in 2011 down about 30%. that is a pretty big effect for
a country like australia. scarlet: australia is a lot of -- really is the biggest iron ore exporter. china is importing a record iron ore, because they don't what alix: --ou market your alix: john williams expects inflation to stabilize and growth to persist, allowing for a rate increase in the near future. joe: with me now is robert skidelsky, a well-known biographer of john maynard kent. thank you for joining us. banks around the world have been trying to fight this deflation. everywhere you look there is easy and nobody has been particularly sex oh -- particularly successful at it.
why can't you get inflation to their targets essentially? robert: essentially people don't want to test. banks are so overleveraged. the monetary system has really seized up. anyway monetary policy is almost useless. central banks of course want to raise interest rates and rebuild their ammunition the next recession. of course if they do that they will produce the next recession. joe: do you think they need to rethink how they have done it, perhaps with more monetary policy that is direct funding fiscal stimulus or helicopter money type thing, where they direct money to the people? robert: i think fiscal policy needs to rethink. monetary policy has reached the end of the day.
has been revived in some wayer cranky ray -- cranky by the leader of the party in this country. the point.lly one has to rethink the scope policy, not necessarily in the united states that in europe -- in the united states but in europe. quantitative easing has hardly lifted the european economies. in my view you have to set of national investment banks -- set up national investment banks and european investment banks, which track the sales of pension funds in order to build infrastructure. that is the way to get the economy moving. was a wonderful no doubt from deutsche bank, talking about the fed should can it or operation twist to it should consider operation twist two -- the fed should consider operation twist two. the youth inc. something like
that could bring down yields? think something like that could bring down yields? robert: i don't think monetary policy is the answer here. i think everything has been put on monetary policy. the whole fight against the recession was put on monetary policy. there were massive amounts of into the economies. they didn't do what they were intended to do. the reason they didn't do what they were intended to do is because the banking system was really broken. on the other side, there was a real lack of inducement to invest. talk aboutot of this when interest rate's are going to go up or are they going to stay down is besides the point at the moment. about europe particularly. europe is one of the biggest of depressing big
forces. they rely entirely on monetary policy at it hasn't done the job. scarlet: ben bernanke has pointed the finger at fiscal policy makers as well, saying they need to do more to put us on a path sustainable growth after the fed had stabilize the financial system area what country has shown the appropriate fiscal policy response? has there been one? robert: i think there was an appropriate fiscal policy response at the beginning of the recession. i think there was a big stimulus decliningbally at the economy, and was partly monetary stimulus and partly fiscal stimulus, big stimulus in china. that stopped the slide. -- fiscaliscal for policy went into reverse. huge worries about buildup of deficit and debt and posterity started. -- and austerity started. i'm not going to criticize america.
actually the best example of recovery that we have in the world economy. , undoubtedly austerity delayed in your. -- in europe. joe: there has been a lot of acid value growth, especially stock market in major cities. do you think the leaning on monetary policy has exacerbated the inequality crisis? robert: of course it has. quantitative easing has boosted the price of assets and a lot of the money has gone into asset price. against the general dis-inflationary pressure, there has been this big increase in asset prices. i think that is very dangerous, because that is the basis of the next crash. that is exactly what happened in
scarlet: this is a time -- it is time for the bloomberg business splash. alix: ibm third-quarter revenue falling short of an analyst expects -- analyst estimates. market of 14th street period of decline. shares are falling in after our trade. scott a bank deutsche bank reportedly sent $6 billion to a client by mistake. the money was recovered the next day.
a junior member of the banks foreign-exchange sales team process the trade using a growth instead- a gross figure of net figure. alix: therefore violating antitrust laws. the class action lawsuit targets the league and its terms. the suit challenges the nfl sunday ticket, calling the distribution deal unique among american sports. that is your bloomberg business flash. now we want to head back to london where joe is with lord robert skidelsky, a member of the house of lords. the u.k.. the u.k. government announced to take in 1000 syrian refugees before christmas, which is an increase. opposition leaders say they should admit more. where do you stand on this?
does the u.k. have the capacity to take a lot more than what the government has extended? robert: of course it does, and europe does as well. the problem is the middle east itself. as long as the state is collapsed in syria you're going to get a flood of refugees. already 5 million have fled syria alone. , you have 50 million knocking on the gates of europe. let ins no way we can that many without grave social disturbance. joe: you wrote the nature and scale of this exodus has rendered all previous political assumptions of migration obsolete. what do you mean by that? robert: we used to distinguish between economic migrants and
asylum-seekers. there were two categories we knew about, but we never had a because of refugees, refugees aren't subject to particular acts of torture, it is just that their states have collapsed. they livethey have -- in conditions of incredible insecurity. we've never had a legal basis for dealing with those. you pointed out is europe isn't particularly well-suited to deal with this situation right now because it lacked cohesiveness because it is still not a single political entity. and you expand on what you mean by that and what kind of steps grand might take in the scheme of things to become more of a single unit. robert: it lacked ability to make a decision about the middle east itself. it can't pursue a coherent policy to try to bring peace to syria. countries that can do
that are really america and russia, and they can't get together because they can't agree on the role of bashar al-assad. i agree with the russians, he have to have a role in the transition. i don't think the europeans will accept that either. there is no basis for a political settlement. as to how europe can get more cohesive. who the heck knows? they have lots of paper plans, but basically they are community of 23 nations and they can't agree on anything that really matters in the realm of politics. impetus or see any energy going towards that or is there no momentum towards integrating europe at the moment? robert: there is no momentum at the integrated europe home appeared to be have the eurozone worked out.
euros ohems of the have dented and dimmed the whole european project. joe: do you see the refugee crisis affecting the british referendum coming up the? robert: i don't think that is going to be so critical. problem, which ,as caused the rise in britain it has been europeans coming to rather than syrians. no syrians have arrived. joe: we will talk about this and more after the break. lord robert skidelsky will be sticking with us. when we come back we will talk about germs corbyn and the rise of radical politicians around the globe. -- about jeremy corbyn and the rise of radical politicians around the globe.
joe: i am joe weisenthal, what did you miss? aremy corbyn is a set -- is surprise example of more radical politicians around the world. he became leader last month and spoke about the reasons behind his rise in popularity. >> we have grown enormously because of the hopes of so many ordinary people for a different britain, a better britain, a more decent britain. they are fed up with the inequality, the unnecessary policy. joe: i'm still here with lord robert skidelsky. did he get ushered into power because people were fed up? >> it is this anti-stare the -- robert: it is this anti-austerity wave in europe.
you had a rise of extremist parties. their parties protest against what they think is the governmentsof the and the disconnect between political language and the experiences of ordinary life. you get in some countries a pretty toxic mixture of anti-us stare anti-immigration. >> donald trump leading the poll by a wide margin in the republican primary. would you associate him with being that same wave? robert: you get a charismatic third-party person. there have been many of them. they don't make it to the white house ever. of course they express
something. quite know what the mix of frustrations is that has run -- has fueled the rise of donald trump. i know what it is in europe, anti-austerity and anti-immigration. joe: one of the things that happened there, the party doesn't seem to be as radical as it did when it took power and alexis tsipras moved toward being a partner with other european leaders. does everyone eventually get co-opted and learn to play ball, or could somebody win and actually be an opposition? robert: serious option was a very radical. it had to do a grexit. -- the risks of doing a grexit were so great that they were forced into the center. i think they negotiated as much as they could, but basically
they didn't get everything they wanted. joe: two quick questions, should people listen to jeremy corbyn's economic message and take it more seriously? and is there any chance there will be another prime minister? robert: it wouldn't surprise me if there was a breakup of the two party system. maybe break up the conservative party over europe. systemh case a coalition would play a part. on the first point, i think economics are rather distracting. joe: thank you very much lord robert skidelsky.
scarlet: to bully and yahoo! reporting earnings tomorrow. the focus will be on the cardica's headwinds the company faces. alix: what i'm paying attention to is any sort of mobile video service from verizon. the could be a huge driver for them as they ship to cutting the cord. earnings out tomorrow. >> don't miss this. tomorrow we have housing starts and building permits which will be out at it: 30 a.m. eastern time. economists looking for a 1.1% month over month growth. scarlet: extra watching