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tv   Bloomberg Surveillance  Bloomberg  October 23, 2015 6:00am-8:01am EDT

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to the brim. global stocks higher. you are in the cloud or not. here is a partial score. we need a friday update on where are we? watching royals-blue jays baseball. alan ruskin does not know anything about baseball. he is with us. it is friday, october 23. i am tom keene. with me, vonnie quinn. teamine, it is baseball here in america. francine: i love baseball. if you are talking about the draghi baseball. he said i am ready here for cutie. it goes back to what we are trying to focus on yesterday. if he is ready to do more, how
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bad is the economy? tom: that was dazzling. he was like a power pitcher. thor is your picture and the league. we will get the story and a bit. let's get to our first word news. u.s. and russian diplomats meeting for the first time since russian jets started attacks in syria. the obama administration considers a major administration shift in the crisis. trying to revive efforts to the catastrophic civil war. in washington, officials are
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setting up a -- officials say setting up a no-fly zone is on the table. at least 42 people are dead a truck crashed. more stimulus by the european central bank. indicators point to the risk of a slowdown. mario draghi suggested more stimulus may be needed by the end of the year. hill, vote counting. the next speaker of the house will be paul ryan. the job.ccept a formal vote will be held next week. congress has 10 days to raise the debt ceiling. 's jeff bezos third
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richest person. shares jumped 10% after an upbeat report. tom: let me do a quick data check. futures up. they advanced through the morning. yield, 2.03, 2.04. alan ruskin stepped onto the set. is .6209ear u.s. note and the two-year german note is not. it is -0.32. that is a wider spread. higher u.s. yield to lower german yield. that gets your attention. . snapshot of the euro this is a massive call.
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pascual talk about barclays. in alanay to bring ruskin. did you change your call yesterday? alan: no. tom: you are smart. are you going to stay at 105? yes. tom: this is what happened yesterday. i showed this to ted fine. line is the german two-year. the orange line and the blue .ine are what the pros look at two standard deviations of movement if the yellow line goes on. mario draghi first through the bottom to 3.8.
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we rounded up to the four. why did he surprise the market vigilantes? we all that this was coming. alan: we did not. we thought the lower level was it. that was it. to open the door and say no, the lower limit is much lower than this -- vonnie: is this the market saying mario draghi is going to reduce the basis points in december? alan: i don't think it is necessarily december. the smart thing is 10 basis points at a time, leave it up to the market. you can do more in the future. december is an open call. the markets may be running ahead of itself. france is i want to go back to tom's charts.
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-- francine: i want to go back to tom's charts. how can we not be nervous about this? alan: what we have seen so far is that banks have not passed on the negative rates. you are seeing the retail section not being impaired. banks, the profitability is impacted. this well.anaged you see sharper negative rates outside the euro area, particularly switzerland. you can get another 10 or 20 basis points. the question of whether you can go to 75 or -75 basis points, or -100 basis points, that would be more challenging. francine: mario draghi was talking about threats, the currency,, a higher
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what this means for exports. how are we going to get growth? is better than i would have expected. if you asked me the same question six months ago. worked andes have worked well. independence on a weak currency. the new york times had an article on the gilded age. is the same thing going on in europe, where what mr. draghi is doing, it is only benefiting the have versus the wide body of europe? monetary policy works differently. in the united states, you have to pump up asset prices. because of the mass of the
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economy. it is stock, the holdings of stock are not as widespread in europe. that is the main effect. that is why -- is so important. tom: this is critical. canada leads and government officials manage -- can elite's and government officials manage exchange rates? alan: you get this measure from the ecb and may be an makes a fed rate hike much less likely. you get some effect. not lost his has gift for talking down the euro. alan: you have to look 2, 3 months in. he is going to deliver. run with thearely story now and he is expecting something big in december.
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chart thate have a shows what euro-dollar does every time someone from the ecb tries to talk down the euro. at 114, policy makers get nervous and we have them try to talk it down again. a very nice chart. you hit the nail on the head. this currency- whenever we get close to 115. i recommend strategies that look as selling the top side anywhere near that level, 114, 115 makes a lot of sense. some cheap buying strategies on the downside. you can look for 105. tom: what is the impulse to drive us to 105? i do not see it. alan: you have the ecb on one side.
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on the other side, the question of -- do you have the fed? of thee central banker world is now the central banker to mario draghi. i just want you to get in trouble. alan: not quite. they have to work in tandem. the exchange rate is some variable the fed will have to look at. more important is what the economy is doing. december becomes a possibility. then, you have impetus. ecb, going in opposite directions. tom: may be a theme for next week. adamant december is still on the table. we continue our conversation on bloomberg television with alan ruskin. later today, daniel yergin. the author of "the prize
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and of the quests." this is fun. bloomberg surveillance. ♪
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get your weekend started, a sensitive view of hong kong. it is an artsy view. absolutely gorgeous. it is a beautiful. it is beautiful. let's go to business with vonnie quinn. of the world'ser largest shipping line is cutting its profit outlook.
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container rates have fallen because of worries about china's slowing economy. twitter ceo is donating one third of its company's stocks to its workers. they will go into an equity pool for twitter employees. it could improve morale after some job cuts. clout sales more than doubled from a year ago. been focusinghas on selling the cloud services. let's get started with the cloud. i forgot my password on apple, so i am not hooked up to the cloud. mr. sweeney speaks to four or five geniuses on this stuff. what is the single message non-sophisticate's need to know about the cloud?
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growth had extraordinary rates. , if you think about where the distributive computing is going, it is going to the cloud. tom: how much falls to the bottom line? amazon has had no profit margins for years for investors. started disclosing the profitability of their web services to 25% operating income margins. how did they get it so wrong? that is amazon. you could live a truck through it. it is a crapshoot every quarter. tom: they are making 25% on the desk $.25 on the cloud world. paul: they are investing a lot, but the residue is 18%. thisfrancine: i have to do
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tom: francine says i have to do this every show. i look like a tool. who has not caught up? not one ofhere it is their legacy businesses, or it does not lend itself to going to the cloud. a hard timeies have making the switch to the cloud, where companies like amazon, those aree, like -- companies that were not in the computer storage business, but as the business grows, they have to find a way that was the most official way to manage storage. francine: do we have a latecomer to the game? paul: there is room to grow.
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there is wrong for a number of players. amazon, google, microsoft have established themselves as the early leaders. let's talk expense control with paul sweeney. technologist paul: of the year. she is the -- technologist of the year. her hand on cost, created this alphabet thing to give it more transparency and is returning cash to shareholders. based ceo isw york going to silicon valley and teach the children how to run the books. in with a mandate and has executed it. she has the support of the board. investors have been thrilled with the changes she has made. amazon has added 500
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plus products. this is where the growth is. what do they do to keep that growing and look after their core business? amazon, the core e-commerce business continues to grow double digits. that is what investors have signed up for. beatsoft had a nice yesterday. what got investors excited was the growth in cloud business. companies that can show they have a leadership position -- 's next year the acquisition of the cloud? yes. tom: full disclosure, i still do not know what it is. ballmerpalmer -- steven will be talking basketball and
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possibly the cloud. ♪
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francine: this is "bloomberg surveillance." beautiful, live pictures out of london. visitingse president the home of the red devils archrivals when he visits manchester united with david cameron. a little bit of soccer, football
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for you. tom: this is something alan and i have talked about many times. shouldis means, everyone simply put much less faith in financial engineering. leverett should be reduced and making bets on derivatives should simply become a much smaller part of what the financial industry does. it is about distribution. when do we get a greater it can do?out what >> they put in the risk, some
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extent priced in. tom: forget about the strategy. how do you use derivatives differently now than you did in 2006. >> there is more possibilities in terms of the kind of p&l shape you want. you can match that almost perfectly. >> there is a cost in terms of setting up any form of hedge. >> it depends on the client, how they assess things.
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they see the benefits as outweighing the costs. is there a region that does this better? the way you look at economics and finance, are their research that does this better than others. allen: new york is sophisticated. at this point in time, that kind -- nformation francine: humans can take back control of the markets. there have been 35 bazaar.
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>> the issue of liquidity is a big one. there is a treasury market and it was a huge deal. on -- an ruskin with us we will speak with kenneth burns. really looking forward to that on bloomberg radio. from new york city and london, this is "bloomberg surveillance." ♪ the only way to get better is to challenge yourself,
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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.
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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. tom: good morning. it is "bloomberg surveillance."
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right now, first word. the u.s. considering a major strategy shift in syria. kerry is sitting down in the anna today with the foreign ministers of russia, turkey, and audi arabia. in washington, officials are planning to shield syrian civilians. setting up a no-fly zone. the collision of a tour bus caused a fire ball. most of the passengers were elderly. a 19-year-old man was killed last night. it's target with an argument over a dice game. the shooter fled.
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ben carson is ahead of donald trump in iowa. you can listen in on bloomberg radio. the formal election as next week. congress has to raise the debt .imit by november third congress also has to pass the spending bill. if not, the government could shut down. phil mattingly joins us from washington, d.c.
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>> there are conditions to his acceptance. a couple were he wanted to bend weekends with his family. the campaign arm needed to pick up the fundraising duties. that box was checked. he wanted all three of the major sub groups inside the conference to get behind him. two of the three, not a problem. he was not able to secure their explicit endorsement. enough for him to move forward with this. is this a condition for someone to take a senior office in the legislature? a creature ofs this institution. he was a young member, he has come up. he believes in the committee process.
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speaker is on something he wanted. conditions were one way to get himself out of it. most of the conditions were met. the crucial condition, the idea that they could not put on a remove him as speaker, he has backed off of that. tom: what is he moving forward to? what does it go back to? what does a go forward to? >> sam rayburn had a power centric reign as speaker of the house. this will not be that. what changes with paul ryan? nothing. republicans have no clear path forward.
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francine: why was he reluctant to take the job? speaker will ruin his chances of becoming president? >> that is an element. the committee he was cheering was response ball for or tax writing care issues in the country. he thought he could do a lot there, most notably an overhaul of the u.s. tax system. not this was the way to do it. jobtically, it is a chaotic . ishe wants the future, this the position he takes. phil mattingly cannot explain this to an american
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audience either. one more question, royals or blue jays? >> i'm going royals. they will make it and daniel murphy will hit another 14 home runs. vonnie: your prediction direction -- your prediction record has been pretty good. >> i am like 0-30. tom: later this evening, dr. ben carson, editor ted cruz -- , a spiritedcruz conversation is expected. stay with us this morning. "bloomberg surveillance." ♪
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tom: good morning.
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sunrise here in new york. francine: we are going to talk about sylvia berlusconi. allen is an american journalist. great to have you on the program. i grew up with sylvia berlusconi. no one would vote for and then always got voted in. do we need to look at his appeal? is it an italian thing or because he was plain speaking. a lot of critics would say it is because he had media power. he abused his control of media to get elected. we know here that never happens. the key here in life as he
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promised to cut taxes. he was a ronald reagan republican in italy and he taxes and create jobs at a time when that was unusual. berlusconi was a larger-than-life figure who had charisma. francine: he did more worse for .taly than anyone else forou think there is a risk silvio berlusconi to come back? the phenomenon is of historic proportion and is about how you manage to get elected, stay in power and this is a man regulation, and
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he failed to make them because the italian system is against structural reforms. tom: i congratulate you on the book. you end your photo part of the two tawdry when did he shift from being a guy to being cartoonish?
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alan: berlusconi is known for scandals more than achievements. he was acquitted. he is still facing other charges. he is a self-made billionaire not dissimilar to the early days of donald trump. a real estate mogul, made his first millions, invented commercial tv at a time when there was only state tv. he bought a football team and became a sports leader, then he became a politician. tom: what is mr. trump going to
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learn about being better, giving mr. berlusconi's travails? think anything can help donald trump one. he should tone it down, by a football team. he needs a football team to be like berlusconi. francine: in italy, there is a feeling that this guy did that things for the country. it was a difficult system to push through. he did not want to push these reforms through. how would you explain the parallels? -- if you are a u.s. citizen, can you look at berlusconi and say there are alarm bells telling me what not vote for donald trump? he can be compared to
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berlusconi in the early days. my way of putting berlusconi in context for americans is to think of donald trump who morphed into rupert murdoch and has has billions, media control, then he takes over football and the white house. that is the american comparison. francine: you asked berlusconi about trump. what did he say? i said i would not try to imitate him as i were you, silvio. did not: he express an opinion to you? alan: he likes him. thanks he is a strong guy. berlusconi as a guy, i am not
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defending him or attacking him. inent to see vladimir putin july. he talked about his friend. tom: interesting. 250 pages on berlusconi. language about lagarde and sarkozy. right now, we need photo angle. a long day for hillary clinton. she left the benghazi hearing after 11 hours. on committee focusing security divans -- security demands in benghazi. francine, you have our second photo.
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francine: we are looking at nicola sturgeon. she promised there would be a future for steel manufacturing in scotland. she spoke to union representatives and wants to find a buyer to keep the plants open. this goes back to steal manufacturing and they are always blaming china. some are saying they are just not competitive enough. vonnie: students in south africa have been protesting tuition hikes. raise 10%,going to the government has dropped the rates to 10%. alan ruskin, he went to the
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university of cape town. did you pay any money? much less than you would expect. francine: most of the rest of the world has low tuition fees. being ableyou see it to come into the united states. something is going to give. there is change in the air. tom: good photos today. thank you so much. the former microsoft ceo, he owns a basketball team in los angeles. ballmer, later. ♪
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tom: we will get to a discussion on the u.s. dollar and what it means. we need to go to a euro-dollar. let's make it eurocentric.
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euro-dollar, 110 .97. -- 1.1097. there i am, doing my hands. forget about dollar yen. a lot of pros saying this is where the trade is. now, let's get to a business flash. vonnie: u.s. dropping charges inside a major insider trading case. the case was weekend by an appeal for a decision.
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-- close down 14%, they are facing a lawsuit in oregon. the lawsuit -- the company says the lawsuit has no merit. tom: a full praise -- a britain. in channeling the legendary roger angell on baseball. this is something george would love. it was after midnight. nearly all of the cubs fans left , bound for establishments. beautifully written.
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really well, dispatch from chicago. be wearing should white, looking out at robert redford. we need to look at the history of the u.s. dollar. it is about urodynamics. >> you see the market trading better. much better against the euro. the dollar is trading better against the euro. and has lost a little bit of ground again.
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havenne: is it not a safe anymore? saw in the space is that we had to move to both the yen and all three g3 currencies. francine: we heard from mario draghi yesterday. where does this lead the conundrum for janet yellen? they have constantly said we have to make monetary policy based on u.s. financial and real economy conditions. that is what they are going to do. influence that somewhat.
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ultimately, it is highly contingent on the real economy data. tom: i believe there is an october meeting coming up your. draghider -- is mario data dependent? >> i think he is, to some extent. the acting has to wait. he does a wonderful job in terms of drawing things out. tom: what does it mean for the german people? that might be the case in the future.
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francine: the currencies that we tied to saving the euro, are seeing the elections on sunday, 4.25. what do you see for those currencies under pressure? >> the fundamentals are being constructive as of late. they are not typically weakening. tom: what does it mean for swiss franc? draghi affects everything in europe. >> they seem to leap frog the ecb with negative rates.
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>> it is almost a negative rate war. war with alane ruskin. francine, thank you. what a week here. ballmer one bloomberg . and you think you think he knows anything about hockey? steve ballmer on the kings. i can see him owning a hockey team. we continue on bloomberg radio. ♪
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what do seven deaths mean for the future of a drug? david says i am david westin. and i am stephanie ruhle. we are going to have a huge day. jason kelly is with us. ballmer, he is joining us. we have done big news from companies. for you, the biggest standout
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moment? jason: the google-amazon the extension to which the big tech companies drive earnings, but give a harbinger of what is to come. it is amazing. matt: png earnings out. $.98 is what we have got. seeing the shares moved down lower in the premarket. we were looking for $.95 and got $.98. sales missed a little bit. look at american airlines. the earnings are out. a beat on the third quarter. this should say to 77. that was the adjusted number. it is a beat.
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up about 2.2% in the premarket. both companies beating on the bottom line. let's go to first word ms. with vonnie quinn. vonnie: it has been called the worst accident in nearly three decades good a bus was hit, burst into flames. most of the passengers were elderly people. another shooting at a college campus in nashville. an argument over a dice game ended in gunfire. three female students passing by were wounded. donald trump in an unfamiliar situation. second place in a poll. ben carson has taken a commanding lead in iowa. now at 28 percent.
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that is up 10 percentage points since august. trump, at 19%. they are followed by ted cruz. : that is a surprise. stephanie: all week long we have seen earnings. many of those companies did not perform well. take profits. they hope the losers turn around. matt: positive premarket trades this morning. many contracts&p up. is, you are going to talk about great tech earnings. a look at google, all bigmicrosoft,
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beats. google is now called out for that. these all came out after the bell yesterday. look at amazon. a massive beat. jeff bezos promising investors profit. also up 10%, came up after the bell. look at microsoft. beat year. you can see a gain of eight. big beats after the bell translate into big gains in the markets. stephanie: the s&p has rallied, making performance year to date almost flat. we are seeing mixed signals. you look up volume, yesterday, we saw 16.8 billion onds trade grade 17 billion wednesday. we have not see this kind of
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volume since june. is that confidence in the market or we have to trade because we have to get out of these positions? jason: hearing what we are feelng, it is hard not to a little more confident, especially relative to the summer we had. all the volatility, all the questions about china, you have companies coming in, who do have global exposure, and they are talking confidently and beating their numbers, it is heart -- it is hard not to be copped it -- cautiously optimistic. stephanie: people wonder if this could have to do with oil prices. matt was talking about franklin templeton. matt loves there'd ticker. they are under so much water and
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pressure because they have lost so much in the energy sector. our performers are selling because they have to take profits or just piling in. think about where else people have gotten hurt. biotech, pharma. it is a nasty time. david: big earnings for google, amazon and microsoft. they all topped analyst expectations. gene munster is with us. let's start with google. there were a couple of things that surprised me. success in their mobile advertising, something that has been a question. secondly, the stock buyback. were you surprised? the buyback was a big
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surprise. she pulled a rabbit out of her hat. second consecutive quarter. you look at the results. they are good. the reason the stock is moving is because the buyback. the combination of those two is what did it. : it was thought that facebook nailed advertising and that google was having trouble with it. how have they solved this problem? gene: you get room for one ad. they have created new ad products that can capitalize on a smaller screen. with your mobile phone, you want apps.
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that is a big part of it. when they do a search, you will see a search result for a direct abp install. deep linking, which if the app search, provider can draw you back into .he app creative products around mobile, purely mobile, starting to take off. and new arereative not words i use when i think ibm, oracle. the cloud space. what you think about them? tech those are other companies, so i should not comment on those. ews is gaining market share. amazon is making progress around cloud computing. pricing is so aggressive, it is hard for incumbents. developers develop on aws. ,hey jump to other companies
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to bring some of those skills to other companies and creates more market share. think about the flywheel that had a positive effect on microsoft in the 80's. david: matt, you have something for us? matt: amazon has a smaller portion of its revenue coming from cloud computing services. you can see this is electronic sales in whites. in orange, media sales. in yellow, cloud computing. it is growing, but nothing like microsoft. cloud computing is a big part of that. you can see a large section of it.
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microsoft is the blue -- cloud computing is the blue for microsoft and read his personal computing. he david: let's talk about amazon. they turned a profit. is that because jeff bezos decided not to buy any expense of, shiny, new objects that order? jason: one of my favorite quotes was they need to not do stupid stuff. listening,bezos is becoming a little more mature, more grown up. a profitable amazon is a very powerful force in the market.
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stephanie: as it relates to oust labette and google, how long before we take a close look at where they are going to make real money? gene: and they will put more of a focus on other stuff, other bets. that.ill feel they have some diamonds in the rough in that business. one of them, there is this profound technology around augmented and mixed reality. to see going to start that take off after they report the december quarter. gene, thank you for joining us. jason, do not go anywhere. we have more to cover in the next hour.
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you are watching "bloomberg ." another item -- possible impeachment. david: south of the border. ♪
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vonnie: welcome back. new economic figures out. index of european manufacturing rose this month. mario draghi suggested more stimulus may be needed by the end of the year. jack dorsey says twitter wants to reinvest in it people. he is donating one third of twitter stocks. -- atares are valued out about $200 million now.
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david: thank you. we are going to go to global go. stories around the world. latin america. two of the biggest economies. big changes a foot. let's begin with brazil, stocks have tumbled. tell us about this impeachment initiative. that is the big news at the moment. >> this comes from two people regarded in a different way by everybody else. this is being taken more seriously. up to theg taken lower house to see what is done with it.
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they relate to the fudging of fiscal accounts, breaking fiscal law and fudging with numbers to show the budget deficit was not as bad as it was. stephanie: on the reverse, this is alove this time to buy it on a discount. into thisen investors region. where is the disconnect? if she is impeached, shoot -- if she is impeached, they will be happier? >> she is a bottom feeder. have a strong private sector. companiest finding that have been unduly punished. chart. have a bonds,look at the investors are losing faith in brazil. it looks like they are gaining more faith in argentina.
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explain?that even though the bonds are in is about -- we are going to have a new president. >> particularly for bondholders. >> she needs to settle with these holdouts from 2001. her successor is going to have to do it. we will see ahat, lot of inflow of capital into the country. it is going to be the next boom, that is the hope. >> it is the second biggest
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economy in south america, only behind brazil. stephanie: you are going to be working all weekend. what, it is friday. it is time to play the yearbook game. frombusinessman graduated children hama high school in pennsylvania, class of 1962. he got his start in the beer business after purchasing a brewery with his father. .weet us your guesses he is handsome. love that hairdo. we have to talk --. the fda warns that one of their drugs could cause life-threatening liver damage. ♪
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david: this is "bloomberg ." if you are a journalist, great news. china cut its interest rate by a quarter of a point. it is cutting its reserve requirement ratio by half a percent. outs allowing banks to lend more money, trying to spark the economy. even though the market has not opened here, the premarket jumped. big gains. you could see this and believe to commodities and fx market. that is big news. david: when china has tried to
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stimulate the economy, the markets have reacted badly. stephanie: matt miller loves talking about this. what it means about the underlying economy. if you are an asset owner, you .ave to look towards greece it has been a disaster. as soon as you have positive news, the market likes it. to see something go from 40 to 45 is a positive. this is the kind of day there could be a trade-in and we could see high volume. >> this is action, something people have been looking for. there has been a little bit of a
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long. whether it is great news, i do not know. there is a trade in here somewhere. it seems the chinese government has decided they need to do this. we are to do what it takes. we are going to make sure this economy keeps growing. u.s. futures having a big reaction. matt: you can't a vertical line here. dow futures up higher. nasdaq futures up 1.6%. all of the charts look the same. markets love to see central banks giving them more juice. the first people it helps are those with assets. tos is what they are trying
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do, drive that wealth into this area. >> futures go up even more than where they were? matt: absolutely. this is where they were before the news. we were already up about two thirds of a percent. the same across the board. you see the etf, futures, everything is up now. stephanie: we have more to cover. this will dominate the rest of today. return, tom keene is going to break it down. you're watching "bloomberg go." ♪
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stephanie: you are looking at a live shot of hong kong where it might look quiet but it certainly is not. let's take you to matt miller.
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matt: really the market reaction, i find the most interesting because it is so pronounced across most asset classes. china is cutting its benchmark rate by a quarter of a point and cutting its reserve requirement ratios by a half a percent. i am still looking at s&p many futures up 1%, but if you look at etf's that change -- that trade the ishares china, you can see they are both gaining big in the premarket as well. 3%. across -- i think tom actually pulled up a dollar chart. i do not know if he wants to talk about it. say, itom, i have to have been around breaking news for several years but never have i been around breaking news where you get instantaneous reactions. david: no better place to be --
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stephanie: no better place to be than bloomberg. tom: markets are reacting. i'm looking at the bloomberg terminal on my cell phone and the equity markets up 179. i want you to focus on something we can focus on friday, which is the punch bowl is full. what is going on now is a global reload of the punch bowl. we saw a whisper of it earlier this week in south africa and we saw a 3.8 standard deviation movement by draghi yesterday as he clearly went to accommodation. and now the chinese. this is the currency of china, the one compared to the dollar. to the left, they were fixed. they threw in the towel and there is the massive strengthening over 9, 10, even 11 years. they then tried to devalue. they then try to appreciate.
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that does not work so they are going back to an interest rate strategy to jumpstart a troubled economy. stephanie: what does this mean for traders? this is a risk on day. for anyone who is borderline long, risk on. forebears, maximum pain. they're basically frozen. on a day like this, there is no way to get out of it simply but to hold on. david: what does this mean for global monetary policy? tom: it is not in the textbooks. day, we do week into 2016 is working outside of any kind of models we have ever dealt with. what i would suggest is each nation has their own way of doing things. a unique government and unique linkage of budget to central-bank monetary policy to
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businesses, has their own calculus, and we see it again with this accommodative policy. david: in some ways, they are new to the game. tom: i think that is true. david: let's go to a bloomberg colleague in beijing, tom orlik. what are you seeing over in beijing? we are following this very closely in new york. tom: i think the first thing to a highthat this reflects degree of concern for chinese leaders. we had a 6.9% reading for gdp in the third quarter from the official data agency on monday. a lot of people called that into question. i think this is going to raise more questions. do they come forward with this immediate graphic move to ease? i think the second point is the issue reflects growth but also
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what is going on with the exchange rate. we are seeing very large quantities of money flowing out of china. that is why today we have got the interest rate tax to support bank lending. the aim is to replenish liquidity in china's financial system to offset some of the funds flowing on expectations of yuan depreciation. stephanie: it was china that was really the main catalyst of the selloff that began in august, yuan devaluation. chinese government can effectively stimulate the economy and stock market, is this going to be the moment where the global economy says, let's get back in? tom: i think the other thing to say about this is this is not the first step in china stimulus. this is the sixth interest rate cut we have seen since the end of 2014.
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we have also had multiple cuts in the reserve ratio. this is an extension of a stimulus rather than immediate departure. is, whyern it raises haven't the first five rate cuts been effective? i have they cut interest rates five times and growth continues to slide? what that suggests is that china is facing some more problems around the very rapid told up -- build up. what that means is that even though the government is cutting interest rates multiple times, it is gaining traction and bolstering -- back to saying debt is being true. to every single interview says the same thing, they have debt up to their eyeballs and they have to clear it. against that is their continued ageless mandate, to employ at
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number of people per month. nothing has changed about the rural, urban dialogue of china which is that government issue which redounds on to the economy. david: and the state owned enterprise challenge. tom: you wonder where that is. lee lynn anderson in china is a little skeptical about the easy shift from sco's over to the private sector. stephanie: what you are talking about the fundamental problems in china. if the government can simply slap a band-aid or a piece of duct tape on this, enough for the markets to feel somewhat, event -- confident, that is all they need. a lot of money has been coming out of china. if this can give global investors outside of china little more confidence to maybe switch back into, i do not know.
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it will be interesting. you can have monetary policy. at some point there has to be fundamental reform in the underlying economy. you have to be making things and employing people. your punch bowl analogy was perfect. the punch has to be going to somebody who is making something. tom: i will give credit to william martin at the time of president truman. i would suggest a level of triage. you have much more of a town of triage than in south africa. drug he is not doing triage. he is -- draghi is not doing triage. he is making some sort of a decision from an area with strength and that economy. we have to be respectful of the differences. china faces huge challenges.
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stephanie: at this point it is like currency wars. i know you mentioned, i am not a macro economist. just two days ago we sat here with luke ellis. one of the things they got started in less discretionary macro. that is who started the hedge fund business. for luke ellis and man group to say, we are getting out of discretionary macro, it has gotten too difficult, this is another answer -- example of how that is underscored. we heard about credit suisse lessening up in their macro business. it has gotten exponentially harder. tom: matt miller and i were talking about linear algebra this morning. stephanie: that is a hot friday. tom: we were talking about the greek letter on the right side of the equations, which is epsilon. policy managers are saying we
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cannot get a grasp on that. i would go back, all the cart, every nation is for it self and how it is adopting to lagarde's new mediocre and the toolbox they have with china. stephanie: market spiking over here, what do you see? and: i just want to reset show people what is happening across asset classes. lco, youok at glc a -- can see commodities prices so it is a sea of green with the exception of national -- natural gas. anl up copper, this may be indication of the health in the chinese market, and you see a big spike. , a same if you pull up wb look at all the barns across the world. you can basically see a selloff across. if i go to the u.s. and pull up
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the 10 year and look at agi p/e, a one-day chart of the 10 year, you can see the price just drops here because there is no more reason to be in the safety of u.s. government debt if you can make more money in riskier assets, which is where people are going. tom: that is a price chart. normally we show a yield chart. stephanie: i want to bring in dan loss. he leads our economics coverage worldwide. he joins us over the phone via washington. let's talk about the chinese government's actions. from their position, they simply fear a tiananmen square two. they want to keep order among the chinese people, would you agree? dan: i think what they are trying to do is avoid a situation where the economy slows so much that unemployment starts to rise. when unemployment starts to rise, if migrant workers in
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cities hanging around with nothing to do, i would not go so far as to draw atmi men analogy, analogy, but that would not be a good thing from the start. i am wondering whether the challenges that people are facing is there is no one overarching global story. it is like driving through the rocky mountains. a series of microclimates, and that is one thing investors are probably encountering as a challenge when they try to figure out the big picture. tom: i would suggest there is microclimates as he drive up the upper east side of madison avenue. you are 100% right, and it and 1994,ck to 1997 but the sequence events that are just sort of here and here and here, they are all waiting for an exogenous shock. not to be gloomy about it, but
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this week we have south africa, the bombshell out of druggie, and this announcement out of -- the bombshell out of dr and, and the bombshell -- the news from china. idea, then gets us on to what the fed will do. again you wonder, i have never seen a time where a u.s. century bank is so buffeted by tangible international debts. or 1998?even in 1997 tom: that was more of an emergency event. important to say this is not catharsis, it is not economists on the cover of time magazine. stephanie: christine lagarde this summer urging, almost
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begging janet yellen to pay attention to the global economy and what the world looks like a broad. tom: she did. stephanie: but the more people we speak to hear, big-time u.s. investors that are feeling great about our economy, who does janet yellen have to listen to at this point? the trick is trying to sort through the noise. we have had one soft-ish non-farms payroll report. we get another one soon. goods next week, what is going on with. when we look at the fomc statement stay, and remember there is no press conference, they will try to find a way to acknowledge that some of the recent data has been soft, yet keep things open
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said that if sunshine should come through, they are in a position to go in december. we have a number of fed officials still hanging out there with december. so the ones that have suggested next year might be better are the ones that have got the attention. it is quite a management challenge. tom: and again, it is a parlor game. i would suggest, and everything dan said is dead on, is they are completely beholding to international events and to their credit, vice-chairman fission and chair yellen have acknowledged that. david: as you say, you have never seen it as buffeted. i do not know that we have ever seen the central bank of the united states explicitly recognize that things outside the board of the united states are largely affecting in a significant way the monetary policy. adamant, real wages
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are increasing with this wonderful loan. look at the benefits. john tucker is spending like $1.85 a gallon when he fills up his homer. it is amazing the benefits we are seeing. stephanie: i am talking to rick cimarron from bloomberg, and he says nowhere on the planet are elevated interest rates causing a problem in investment, so why do we think these cuts are an elixir? is a really important observation and with rates so low, why would they go down? to think, we'll think of a nominal rate environment. inflation ork in a deflation adjusted environment. daniel, you were just on bloomberg radio, and we were talking with him about not a currency war but an interest
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rate war is maybe more where we are right now. so what is the next move in an interest rate war? tom: the next move is to watch blue jays baseball. stephanie: i just brought my kids artwork. matt: this is the devaluation, and you can see what happened to u.s. indexes. i have the dax, the commodities index as well. when i want to point out as we are getting new headlines from room to, it said it has cut rates further because consumer prices are low, and it says it will step up to support weak spots in the economy. stephanie: we want to go to jonathan fendi, our new guest from trusted sources. , think you so much for
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giving us the time. tell us about what is going on in china. jonathan: we just had the pbocest rate cut from the and a cut in the reserve requirement ratio for banks. this is the sixth interest rate cut in a year for china, and is a further sign that as the economy slows in china, down six .9% quarterly growth on the official print in the third quarter, the authorities are doing everything they can to push up growth. this is not huge in itself, it is a psychological move. tom: you are one of our great china watchers. is beijing in control of the dialogue or are they adapting with these rate cuts and other the fiefdoms like shanghai? jonathan: you hit the nail on
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the head. it has been evident through this year is that the economic management from the center, from shall i put it this way, less competent than people thought it was before. in particular on the interest rate from the people's bank of china, it has been running behind the curve. instead of making a few big interest rate cuts which would've had a big effect, they would be doing the small 25 basis point cuts which are kind of drip feeding and have not really convinced investors to invest, consumers to spend, and all the other things you need to keep the economy going. tom: are they an independent central bank? jonathan: no. the governor of the central bank , butes a very good speech he is in the power structure in china, if the government
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rankings. he ranks 34 out of 35 officials so he is down on the bottom. edges political rankings where the communist party counts, he is not on the 200 person central committee. hiss not independent and power can be greatly exaggerated. stephanie: what happens if this does not work? this is their sixth attempt. sure, futures are up now, but come next week or the following if it does not stick, what is the downside? jonathan: they will have to cut rates even further, which there is room for that. solation is low in china they have room for further cuts. is, the government in china has been spending a lot of money to stimulate the
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economy but that is not necessarily being spent. , about $160 yuan billion has not been spent by local governments this year, they sickly because people are afraid of the huge anticorruption campaign in china. if you get involved in any projects, you may find there is a bit of corruption marking. who should bee putting money into projects to stimulate the economy are sitting on their hands. that is a political, psychological story rather than an economic numbers story. david: jonathan, thank you so much for joining us from london. i know why john -- tom has read all 45 books. we will be back shortly, and talking some more about china. ♪
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stephanie: welcome back. you are watching a big market go." chinaomberg central bank cut its interest we have got to take a look at the markets. we had a very positive spike. people seem to be very excited. this is excited because another example of how the global economy is slowing down. matt: we have been waiting for china to finally do this, loosen up policies substantially.
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it is hard to decide where to look so right now on my screen, i have copper. people call a doctor copper because they use it to measure the strength of the chinese economy. we were still up about 8/10 of 1%. if you look at for example, the 10 year, and i will pull up the yield chart, you can see the yield is spiking up his people are selling off debt, no longer needing a safe haven of u.s. treasuries. they go into riskier assets. look at, for example, gold. price, i will gip it. a big jump in gold prices. it is the same across all assets, whether you look at commodities, it is all doing well. stephanie: the thing that i find --
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david: the thing that i find interesting is the timing. they are about to start on sunday where they are going to do their five-year plan. i doubt that is a coincidence. remember, he is flying back and that is after this globetrotting trip, signed a multibillion-dollar nuclear deal, was in london. after beingas soon here in the united states at the u.n., meeting with lots of different types of people. everyone is a stakeholder in china at the end of the day, and i think you are seeing that as we swim in this sea of green. stephanie: we will be back with more, steve ballmer joins us after the break. ♪
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stephanie: china tries to jumpstart their economy. dundas inhas not
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five years. he is promising wall street that amazon will make a profit. during the holidays. it is game on for steve ballmer. his team is about to begin the new nba season. welcome to the second hour of bloomberg go. david: we have a very special guest. wouldnie: indeed we do, i like to welcome steve ballmer, former ceo of microsoft and owner of the los angeles clippers. we are about to get revved up. china had a rate cut, give us an update. matt: china cut its benchmark rate


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