tv Bloomberg Markets Bloomberg October 26, 2015 12:00pm-2:01pm EDT
>> good monday afternoon. i am scarlet fu. valeant telling its story, but investors not buying it. it's the equivalent of yelling fire. scarlet: duke energy's and piedmont gas. what is fueling this deal. alix: hank greenberg taking aim at ben bernanke. they refuse his claims and his .ew book about the aig bailout scarlet: first we want to head to the bloomberg news desk with julie hyman for details.
julie: lackluster is the way to sum up to this activity. what we have a slightly negative two. part of it is the waiting game that markets are playing. it is a very busy earnings week, but the proposed limits -- preponderance of volume is not here today. a fed meeting as well. investors are not expecting any change in rates, but nonetheless, you still have a little tiny miniscule that of suspense at least going into that meeting. we did have economic data today as well. purchase of new home slumping in september to attend month low. as he will see on the bloomberg terminal, you'll see the biggest month over month drop in these monthly home sales going all the way back to july 2013. this drop is the biggest since that point in time. the data that we have gotten so far this year has been pretty positive, so this is a little bit of an interruption and a hiccup in that data that we have
seen. that is causing the homebuilders to decline and take a look at the stocks of the homebuilders. we are seen declines in when are and they are all trading lower. what i'm calling today is the homebuilders adjacent, some of the suppliers to homebuilders, like lumber liquidators and top billed, are declining because of that number as well. earnings really the big focus with someone he companies reporting. alix: let's now check in with the bloomberg first work news. mark crumpton has more from our news desk. mark: thank you so much. the search for survivors continues in northern afghanistan are the strongest earthquake more than six kids -- six decades left people dead. reports were also made in neighboring pakistan. were dispatched from kabul to islamabad to new delhi for rescue efforts. inmunications have been cut
some areas and property damage is set to be expensive. president obama and the leader of indonesia are scheduled hold talks today at the white house to address the threat posed by islamic extremism and tensions in the south china sea. president rose to power on a wave of popular support. his first chance is a chance to build relationships with president obama and to track investment in southeast asia's biggest economy. another day of violence in the middle east. a palestinian man stabbed an israeli soldier on the west bank. the alleged attacker was shot and killed by israeli soldiers. the have been more than 40 suspected palestinian knife attacks in the past three weeks. attack comes after prime minister benjamin netanyahu accepted a deal aimed at using the violence. belgium is on high alert today after a suspected attacker tried
to smash his car through the gates of the major army barracks . the driver fled when soldiers opened fire. the suspect after an intense three-hour manhunt with police man's, special operations task horses, and helicopters taking part in the search. the woman accused of plowing her car through a crowd in the oklahoma homecoming parade, killing four and injuring dozens of others, is due in court today. the suspect is held on for additional counsel of second-degree murder. she was arrested on suspicion of driving under the influence after that crash on sunday. her attorney says she may be at mentally ill. she also says that was no indication that she was drinking before the crash. as a look at your first word news right now and you can find the latest news on bloomberg.com. scarlet: thank you so much. alix: valiant of out this morning with a defense of its relationship with a specialty farming. on the conference call, the
company ceo singled out the founder of citroen research, who had questions about their practices. >> to protect our shareholders after the false report from citroen and to properly coordinate with our outside counsel to make a request that the sec investigates citroen. our counsel has met with the sec to discuss the matter. by our: we are joined contributors. alix: andrew, have you been contacted by the sec? andrew: no, i'm not. alix: what is your response about talking to the sec about citroen research? andrew: two fold -- the first thing is that over the past month the valiant stock was down around 35% based on the comments that came out of bernie sanders
and follow-up articles from "the new york times." my first articles that theussed price gouging and stock was down on valiant armies. lastly, the stock went and other like down on the report where i idor andto discuss phil their undisclosed relationships. what was most unsettling was when he made the analogy of yelling fire in a crowded theater. i'm very aware of what yelling in a crowded theater is. what i did is i walked into a theater, smelled a lot of smoke, and i said to people, excuse me, there might be fire in this theater. there's a big difference between the two. it is three days later. investors have had a chance to walk to the theater and see the theater owners response and have actually decided to leave the theater. so let's keep exactly what they said in context. i want to take you
inside of the bloomberg terminal leant tradedhow va in the early market so far. at 6:00, that is when they released their hesitation. they are saying that the accounting issue was confirmed as appropriate. the second red arrow is when the conference call began. mr. pearson made the comment about you yelling fire in the movie theater. the conference call ended and we have seen the stocks reached highs, but it is off by more than three dollars. i want to get your reaction to some of the action the company has taken. value act is not backing away from the stock. what does that state in all t signal to you? andrew: him joining the board is like my mom saying you corrected he's been a longtime supporter.
he is pretty much married to the company. the relevant. reactionshat about saying that the specialty pharmacy concerns are overblown? the disclosure shows limited ability to channel stuff and specialty pharmacists make a really small percentage of overall sales. is that disclosure sufficient? the answer is twofold. as for making a small percentage of the overall sales, the important part is what the specialty farmer represent to organic growth. them to johnson & johnson, they are still relatively expensive. the reason why they're given this premium is because of their organic growth. it would be more relevant to say pharma led toy far organic growth. in my opinion, through the research of publicly available information, if at best scenario
not accounting fraud, it's insurance fraud. insurance fraud will eventually lead to accounting fraud. why do i say this? as much as mr. pearson has made me the poster child for someone shorting his thought, i have to say that some the best work out there was done this past weekend andhe wall street journal" by roddy boyd over at certain it is not injured. i feel nice and i feel very flattered that he has made me a poster child, but am i the one who laid off everyone at the passion long research department and raise the price of heart medication? there's a reason why his stock is here and it's not because of me. >> one question for you. given the details of the presentation we saw today and some of the astor tatian's that you made last week about channel stuffing, about fraud, i think
valeant gave a detailed excavation for how they record revenue. do you still feel what you say holds about the channel stuffing and the fraud and inflated sales? those are pretty big claims that you made there. andrew: absolutely. i'm sure that you will understand that valeant has had four days with all hands on of 90making this answer slides. i cannot sit here two hours later and opine exactly what they said being legal or not legal. i'm sure it will all play out in the marketplace. to you before, at best in my opinion, there is no accounting fraud and that it is insurance fraud. "the wall street journal" did a pretty good job of explaining that this weekend. using the word insurance fraud, but if this just tons out to be an exceptionally aggressive business practice, but a legal one, do you still see the type of risk to valeant's business
that you pointed out and some big claims that you made? my opinion, what was brought up by "wall street journal" and bronte the past week, is not aggressive. i understand aggressive versus illegal. to me, it sounds illegal. what i found to be most is thating this morning valeant is asking the sec to investigate me. my name is andrew left. i'm a u.s. citizen. i pay 50% of my income to the u.s. government and taxes. i've not spent hundreds of millions of dollars to set up offshore entities. one of the asked the government of canada, luxembourg, every other offshore company where i payide paying taxes more taxes than valeant does. why don't they blame their sans salespeople for not making earnings last week? why not blame for not making a sustainable business strategy
where they said they cannot raise prices going forward? that where thes difficulty ones into is that you have shorted the stock quietly. researchve done your and due diligence, but instead of the report hit the mainstream and has a triple -- trickle aspect into that, even if you believe in the stock, you may have to sell it because of the headline risk even if you do not believe the claims. you can make the argument that there is a conflict of interest there. andrew: there's a conflict of interest because i expressed my freedom of speech? i don't understand that. every sale side analyst -- there is more financial interest vested in this come from desk company on behalf of valeant than me. i will trade any profit on valeant been here since paychecks in the past four years. scarlet: are you still in a short position both? andrew: i don't discuss my trading. hedge funds clearly
matter to valeant and vice versa. according to goldman sachs, hedge funds on 22% of valeant shares. 7% of hedge funds owned valeant with 5% owning it as a top 10 position. and those cases, the average weight is 10% of the portfolio. there is a lot of state -- at stake for these guys. what should be the response of hedge funds? how would you like to see them respond? andrew: a good question. the the hedge fund saw initial decline and valeant stock, they should have right immediately limited exposure. there is a reason why people pay hedge funds performance fees because they are supposed to do better than the s&p and better than a standard mutual fund. that would be by understanding more than a simple discount cash flow analysis in looking at a company. understand the dynamics of the market, valeant was a big momentum stock that made a lot of people a lot of money last year. it seems to be a momentum stock
it if i was a fund manager, even if i like the company, i would limit my exposure to it, hoping that i could buy it at a future date at a lower price. do notow you said you discuss your traits, but i do want to ask you. after of the declines that we have seen, do you think that there is more to go here for valeant stock? we have seen a very significant erasing of value out of this company. isrew: right now, the stock -- it is bigger than me. the story is bigger than me. it depends exactly how comfortable people feel with it. right now, if i were a fund manager, i would be looking to buy the collateral damage in these other names that do not deserve to be down as much instead of necessarily going ahead and pounding the table on valeant. alix: thanks a much. unfortunately, we have to leave it there. we appreciate it in your insight on this day valeant on the conference call responding to
the accusations. andrew left and drew armstrong. scarlet: it is merger monday. duke energy buying piedmont natural gas -- a $4.9 billion acquisition that. and rich stone flying pep boys. we will look at the state of mna. the: was aig the villain in financial crisis or a stick a scapegoat? hank greenberg is telling his side of the store. scarlet: and hank on board is -- einhorn is going back to basics. we will have more ahead on "bloomberg market day." ♪
market day." i'm alix steel. scarlet: i am scarlet fu. alix: time for a look at the bloomberg business flash. fedex is gearing for it is the holiday season. they are hiring 55,000 temporary workers to deal with than increase1 12% in business. they are handling more than 15 million packages from the day after thanksgiving to christmas eve. is it really the holidays already? the tirebridgestone maker agreeing to buy pep boys, the chain of automated shops. ae deal is valued about hundred 30 $5 million and represents a 20 prett 23% premium. alix: the air force is expected for itsthe contract team of bombers. -- bombers are as stated estimated to cost about $550 million each. scarlet: you can always get more
business news at bloomberg.com. let's head over to markets desk with julie hyman who has a check on company movers. you're going to pick off on this m&a announcement. julie: you were talking about pep boys and there's also a big deal in china that has to deal with online travel, a deal rating the largest online travel service in the country. it is not exactly a deal percent. it's not exactly an acquisition. see trip and cunard are agreeing to a share swap in partnership. that is pentecost that travel service. that is why we have been looking at that stock is what. you can see that they are both trading higher. of see trip when this deal is done. agreeing to buy piedmont natural gas and we have seen a number of utility and power companies get into the pipeline business through these acquisition. this will increase its stake in
the atlantic coast type one by 50% gift you can see that piedmont shares are sharply higher and duke falling by about 2.5 percent. we have a real estate deal as well, starting with p buying apartments from equity residential for $5.4 billion. equity residential's want to use that cash for a special dividend of nine dollars and $11 a share. scarlet: we going to stick with that topic because -- alix: megadeals -- are they making a comeback? they count for two out of every five transactions. we will talk about the state of m&a. ♪
dollars and it energy acquiring piedmont natural gas for 4.5 billion in cash. here is jeff mccracken, bloombergs managing equity editor of mna. notethere is a cool out about m&a catching up to the global stock market. we are nowhere near the peak that we might think. what is your take on that? jeff: we have had a trillion dollars in m&a in each quarter for seven quarters. this is probably going to go the rest of this year into next year. what is interesting that a lot of the deals being done now that driven not by companies taking on a ton of money. it is more companies that have consolidated or cannot do more with their own business. they are buying their cheap rival or number two and number three in the second. we will buy this company and put it in our stash and then we will go from there. scarlet: it is strategic dealmaking as opposed to debt
driven financing or debt driven dealmaking. i ask that because lbo's are relatively low right now. mean?oes that jeff: we are to keep seeing lbo's in the range of $4 billion. we will not see what we saw 2006-2007 where companies like txt were taken over for tens of billions of dollars. that is not the way the world works anymore. private equity funds team together and they do it rarely for these deals. you will see some lbo's with some smaller companies. if we are talking about blackstone or silver lake. alix: why now? the conditions that make mna attractive have been there for a while. low rates in some countries and you want to look for some kind of value if not organic, so why the trigger? companiest of these were focused inward and they are try to reduce their costs or the
find the next product to get them growth. when they did not find it, they set to look outside. investors were rewarding companies that took a big lead and spent billions of dollars to buy someone. it would cease share prices go up even if they were the buy side company. i just rates have stated low and that is when to end really soon. icad and december or early next year. orit could end in december early next year and that is why we have seen this run for nearly six quarters. we have seen these go up in addition to the target. is this still happening? jeff: it is starting to fade. i think duke is down a couple percent and intercontinentalexchange the deal with a bot idc and the shares are down a little bit. you're starting to see some skepticism and that makes me feel like we are in the seventh or eighth inning in this run. i think we are in the end of this trillion dollar quarter m&a run. you mentioned these smaller deals will take president in those deals about
$10 billion have accounted for 40% of these deals this year. that crushes 2007 and 1999. four differente deals worth $5 billion plus. i think we will still see 10 billion dollar deals, but they will not be lbo's. i think oil and gas is an area we have not seen as many. scarlet: waiting for. and: i think they will come they understand that $40 a barrel is roughly the number they will be at and people will trade or sell off of that. scarlet: i think they will need to see oil prices stabilize first. jeff, thank you so much. alix: much more coming up on "bloomberg market day." hank greenberg and his attorney go on the offensive. ♪
let's head to the news desk with mark com crumpton. mark: republican seat to cantu of never held office as the best best to win the white house. trumpshow that donald could win the race if he is the party nominee. six in 10 see bee ben carson as most electable. jeb is holding a series of meetings in houston and that reinvigorating his campaign. he is meeting the stock fundraisers reassuring them that he has a plan to win the republican nomination. last week, he ordered job cuts in his campaigns and pay cuts for those who kept their jobs. a texas billionaire is among the latest supporter of republican president shall hopeful ted cruz. darwin deason is a tech entrepreneur who gave millions to former candidate rick perry. senator cruz has dominated the
texas donor class. according to the associated press, he has raised more than three times as much money in the state as jeb bush through the first nine months of this year. a flag with the confederate emblem is no longer flying at the oxford campus at the university of mississippi. the interim chancellor ordered the lowering of the flag earlier today. public displays of confederate symbols as well as a series of public shootings of unarmed african americans have been at the center of a national debate on race relations since the june massacre of nine black churchgoers in south carolina. it is official. sausage,o much ham, and other processed meat items can come back to hockey. the world health organization released its most definitive report about the relation to them in the same
danger category as asbestos and cigarettes. the organization says that red meat probably increases cancer risk. farmers and meat industry groups have rejected the findings. them in the same danger category asthat his firsr right now. you can always find the latest news on bloomberg.com. back over to you. scarlet: thank you so much. alix: former federal reserve chairman ben bernanke has opened old wounds in his account of the 2008 financial crisis in his memoir. scarlet: one of the book chapters is titled aig -- it makes me angry. predictably, hank greenberg is hopping mad at ben bernanke's versions of the company's conduct. they are appealing the class-action lawsuit filed by aig and its shareholders. -- theyt back and lashed back at the former chair in an interview with betty liu. >> after aig stopped engaging in what ben bernanke calls insurance of the swaps, ben bernanke was still giving speeches saying there was no problem with these mortgages. one of the things the judge said
very explicitly and is accurate and reflect the evidence is that aig was not in any way the cause of the financial crisis. it was a victim of the financial crisis. it wrote this insurance based on misrepresentation and it stopped at the end of 2005. so if there was a problem here in failing to recognize the risk that was being taken, it was on the part of the regulators more than was on the part of aig. >> the implication there was that hank rain bird already knew that there were problems that could arise from its credit default. >> absolutely. >> you and i have talked about this many times, but do you think that ben bernanke and geithner -- do they target you? do you feel like you are targeted by them with some of their remarks, that they are not listening to what you say? hank: i do not think they are listening because they have made their mina with what they want
to say and do. -- their mind up with what they want to say and do. they weigh overreached on behalf of the government. that is what the lawsuit is all about. more than they just overreached. they did overreached, but they made aig and they admitted this at the trial a political scapegoat. they were trying to demonize aig for their own political purposes and they had to admit that at trial. a lot of what you're seeing now is simply an attempt to support what they felt they had the for political reasons during the crisis. betty: bernanke child that -- title that chapter "aig -- they make me angry." hank: and it makes me angry. betty: i want to talk about the lawsuit. it's happening and i believe it's going to be heard by a panel now. if that, there is a possibility
that the panel could rule for damages, but they could rule for no damages, but also reverse judge wheeler's decision? do you want to risk that? david: anytime you go to appeal, the appellate judge could disagree. but we feel that the law is very, very clear. as just wheeler ruled, the statute is very clear and the legislative history is very clear. the 75 years of interpretation is very clear. it all goes one way. everybody recognized, even the fed internally recognized, that they did not have the power to consequent -- confiscate equity. i feel very comfortable with the appeal and we think the court will look at this fairly and carefully and we think that only well they affirm what judge wheeler found in terms of the
legality of the constitution of equity -- the illegality of the confiscation of equity, but i hope they will award damages, too. betty: why is that decision by judge wheeler not enough? it was a moral victory for you do not get images, but it was a moral victory. hank: i feel we have an obligation to all the shareholders who lost their life savings in many cases. this lawsuit is not for me. it's for all the shareholders. betty: we are talking tens of thousands. hank: absolutely. betty: david, why did you take this case on? i know that you and hank go back a long way, but why did you take this case on? david: it was partly because of was, but also partly it because i think this is a very, very important case to the way our government operates. we give our government
tremendous power and discretion. if the executive branch can use that discretion to leverage still more power, there is as justice jackson said in the seizure cases more than half a century ago, either no beginning or no end to that power. and that is very troubling for citizens because what it means is that the government can one way or another confiscate their anyerty without congressional authorization. our government is a government of limited powers. the executive branch only has the powers that the constitution and congress give it. if you allow the executive branch to begin doing things the cousin they think it is a good idea, even though they have not been authorized to do that, our projections of individual property and our protections of individual liberty go away. this is a very important case to the way our government operates and to the preservation of
rights that our citizens need to have. alix: that was hank greenberg and his attorney speaking with betty liu earlier today. scarlet: coming up in the next 20 minutes of the "bloomberg market day," what is moving up the nasdaq? a live report from the exchange. the nasdaq is one of three indexes moving to the. greenlight capital lost 70% in the first nine months of the year. was he planning to do to turn the hedge fund around? scarlet: remember the dow's 1000 point drop in august? could we be headed for another decline? we discussed. ♪
alix: i am alix steel. scarlet: time for look of the bloomberg business flash -- a look at the bigge business story could afford and the united auto workers reached a deal as i. it covers almost 33,000 workers. gm workers will vote on the deal later on this week. alix: star board capital is expanding and the homefront industry. the investment fund will buy thousands of apartments from equity residential. that price -- $5.4 billion. the residential has expanded as young americans find it harder to buy homes. thanet: yahoo! says more 15 million unique visitors watch the first nfl game streamed over the web. paid $17 million for those rights. and you can always get more business news at bloomberg.com. alix: let's look at how markets are starting this week. they have rise to a two-month
high after an interest rate cut this year. top members of the communist party are meeting in beijing to map up their five year plan for the economy. more from hong kong. will focus onnt the structural change to ensure that china remains on track and its march toward high income status. it is expected to outline the dismantling of currency controls and lower barriers to non-bank financial firms and emphasize homegrown technology. it is the first time since china open its doors to the world in the late 1970's that policymakers have been tasked with the nation facing sub 7% economic growth. a more immediate fix to combat china slowing economy has already been delivered by yet another rate cut, china six in a year. was julietat reporting in hong kong. let's head over to london where
markets are getting ready to close after last week's rally stocks. they're slipping a bit after investors molded it of possible increases. joining us now is nehra. to start with some of the biggest movers and that is averaging management. this is riven the most desperate is in the most since april 2014 since the company found out potential buyers. it has denied this to bloomberg. looking at persia, the stock is down after vehicle sales worldwide fell in the third byrter and push down in part a drop in china. ,inally, looking at talk talk that company one of the worst performers on the stoxx 600 today. it is still reeling from that news last week of a cyber attack on its website. if i take you to look at europe's equity benchmark of course, the stoxx 600 coming off a three-week rally and coming off a two-month high and also
falling after its biggest two-day rally on thursday and friday since july. that news from china and the announcement of a step up in stimulus for the sixth time since november is raising a lot of questions about the fundamentals of the world's second-biggest economy. we have not seen that euphoria carried through in the same ways that we did after that ecb meeting. if i take you to look at national equity benchmark, you can see quite a bit of risk aversion here. it was more mixed picture earlier. percent andths of a down half a percent to the dax has been one of the best ,erformers in western europe but german business confidence was not as big a drop as economists had expected. nonetheless, european stocks really taking a breather after the recent optimism, especially bank of more a central policy meetings.
the bank of japan this week and of course, the fed. scarlet: thank you so much for that outlook and that view of what is going on in european markets. alix: for a look at u.s. markets, abigail doolittle has the latest live from the nasdaq in midtown manhattan. abigail: stocks are really struggling for direction over here. we are just up slightly at 2/10 of 1%. there is one area that has clear direction and that is up to those of the china travel stocks. they were announcing a share swap and a partnership to form china's biggest online travel service. this comes about five months after they rejected an outright buyout offer from sea trip. now at a 25% ownership stake in ctrip and investors like this news. they are among the top 10 performance in the composite up 20% give itp
is coming over to the states. priceline is up today about 3% and trading at a record high. not to be outdone, alibaba also out with travel news today, saying it is going to expand its trip unit. is in the monthly performance. alibaba is on track for its best month ever, up about 27% right now and trading at the highest level since august 11. this comes less than a month of 57.20 oncord low september 29. scarlet: thank you so much. credit,om stocks to open ended bond mutual funds have become more popular in the past few years come even in liquidity in the credit market decline. these have become the largest holder of corporate bonds. scarlet: they are not the only ones because hybrid mutual funds also invest in corporate bonds. these funds own stocks and corporate bonds as well as government bonds. they now have almost $1.4
trillion in total assets under management. that is the swell that you see there in the chart. the question is if they face reduction, it could have huge impact on the markets because the equity market does not have the same liquidity restraints as the credit markets. if you meet redemption and you're going to sell off the easiest security to sell up, goodbye equities. alix: there was a great note document how the ownership has actually increased, but the turnover of these corporate bonds has not increased. the idea being that more people are owning them, but they are not actually trading them and holding onto them. that one's line has been going down. corporate bonds outstanding have actually been rising. turnover has been falling. this is in the last six years 18% of the assets under management is invested in these corporate bonds. its $250 billion -- that's a lot of cash. scarlet: it's interesting because i people in equity markets say that they look to the high-yield credit market for indications of what is what
happened next in terms of macro trends. if that is what to be a lending indicator but people cannot get out of securities fast enough, they will go straight to the equities that they see. some of the equities are most commonly held by the 50 hybrid mutual funds barclays tracked, you would expect blue chips like , general, wells fargo electric. wells fargo is owned by 30 out of the 50 funds. microsoft owned by 37 out of the 50. alix: they might actually have to sell a microsoft or wells fargo to me that. the other thing that barclays pointed out as well is that these funds have a lot of high paying dividend stocks. of average is 2.5% in terms the stock versus the s&p dividend yields. names like duke energy. they own names like gm. they are not the huge holdings, but they are quite substantial considering they are not a huge waiting state in the s&p. they have the dividends. the risk is bizarrely widespread
in that way. scarlet: it will encourage companies to continue to hang out dividends as well. goldman sachs noted that investors reward companies that buy back their shares they will boost their shares artificially, but also those companies that return cash to shareholders through dividends. if these hybrid mutual funds are purposely looking for the stocks with high dividend yields, that is on a virtuous circle in which the companies will continue piling money. thelet: it seems like company's piling money into buybacks have been underperforming and the last few weeks. alix: maybe is more about your balance sheet now and less about inflating your ppf spirit it is more about what you do down the road. it is not like all the sudden there will be a wipeout in the stocks, but it is a risk to consider. scarlet: it is something to consider with the rise of high mutual funds. that is something we will be watching for. are: coming up, losses mounting for david einhorn. he is revisiting page one of his hedge fund playbook to turn
alix: welcome back. i'm alix steel. scarlet: and i've scarlet fu. david einhorn of greenlight capital battling his worst year since the financial crisis and is now trying to offset some of his losses by hedging oil. alix: according to a new filing, he added derivative positions that will protect against lower natural gas prices and a gain in crude. joins us now with more. what was the problem child and why did he need to counter the hedges? every quarter he seems to have a problem child. this court's holdings. it is starting a hedge against natural -- and coal producers. 10% decline in natural gas
would be a $2.4 million gain. the issue is that natural gas has been oversupplied and that there would be this huge supply got and that would have underlying equities. sonali: it is like all year that he bore a a lot of pain, but it only goes so far. he is getting closer to hedging his bets. scarlet: he is in short position in time he appeared -- in high any. sonali: he started to hedge against oil also. it would be a $4 million profit that offsets a wrong with that here. -- a wrong way back here. a huge deale calling it a mother frack are. they are spending so much money to produce oil that they do not have free cash flow. why would you on a company with no free cash flow? production is still up quarter on quarter double-digit. scarlet: that has not been
paying off. my question to you is does he have a macro view on the energy complex in the energy market overall or is it very company specific? we were talking about gold a little bit early. yes taken a bit of a macro view on goal. he has invested it for a long time. in the central bank stimulus. clearly, these derivative bets are in reaction to some of his other bets and how they are playing often equity market. that shows to be a little company specific to me, but it is not clear in terms of how he feels overall on the price of these commodities. alix: what other issues is he running to with these funds? are there other ones you want to highlight? sonali: there are others, but got capital that he to invest in his equities, but the reinsurance markets have also been really pressure. he also saw very steep losses in the reinsurance sector also.
it is also a double-edged sword for him. scarlet: is david einhorn -- is his hedge fund the only one performed badly? can you put it into context for us? sonali: he took his public into 2007 and a few years later dan low-tech his public. while amwell is not seeing a 30% drop, einhorn venture drop the most since 2010. lowe's is down about 4% or a lot less. it dropped about 22% last year. in a lot of pain for the hedge fund managers. alix: good stuff you pioneer capital is probably like ahh. thank you so much. scarlet: coming up in the next hour of "bloomberg market day," a new week brings a new wave of policy decisions. it does feel i can afternoon. alix: how are investors going to
good afternoon. i'm scarlet fu. im alix steel. here is what we are watching at this hour. sales slumping to lowest level in nearly a year. scarlet: a big surprise in argentina. election into a runoff. huge changes for the economy. we speak to an investor who is just there. alix: and the world health organization adding processed meat to the list of items that cause cancer. how will the news impact producers? first, we will head to the market desk where julie hyman has a check of how things are going. the nasdaq is the only one that
is green but not by much. partly what isnd responsible for the nasdaq doing better with its emphasis on biotech. overall, not much change in the major averages. investors are playing a little bit of a waiting game or more earnings coming later in the week as the pace picks up later in the week and even if the fed will not do anything with the race rates, people are still waiting to hear what the fed will do. take a look at the various groups on the move. consumer discretionary health care as i mentioned doing relatively well today and energy and utilities are the worst performing groups. energies in particular are really seeing slums. the is what is holding back s&p 500 in particular. we see that group falling by 1.7%. scarlet: why energy lagging so much? are down butices not by that much.
natural gas in the energy complex, what is seeing an enormous tumble state. take a look at the fort street .- fourth straight down day there is a supply situation similar to what we seeing in oil, too much of it. a near record inventory for natural gas. forecast.ild weather all of that is helping to push down the natural gas and some of the natural gas producers are taking a hit as well. some of the energy oil producers are doing poorly today. the decline of more than 8%, it has been accelerating as the day has gone on. so many shorts are weighing on the price. el niño is coming in. the warmer where is even more bearish. any positive good news in that situation and that could be huge. scarlet: thank you so much. alix: everything leads to oil. now to bloomberg first word
news. mark crumpton has more from the news desk. the death toll is nearing 200 and it is expected to rise. officials say most fatalities reported so far occurred in pakistan. cut power and communications in some areas. saystan's administration the necessary sources are available to carry out rescue and relief efforts and that assistance from the international community will not be needed. a palestinian man is dead, shot and killed by israeli police who say he stabbed and nearly wounded a man. in the meantime, benjamin netanyahu has accepted a deal meant to reduce violence over a holy site in jerusalem. agreement was brokered by the u.s. secretary of state john kerry. president obama and the leader of indonesia are holding talks talks white house to hold
on the threat posed by islamic militants. washingtonisit to since taking the oath of office marks attempt to build relationships with obama, who spent his childhood in malaysia. hoping to track investment in southeast asia's biggest economy. lawmakers are trying to finalize a budget deal before house speaker john boehner leaves this week. the associated press reports and negotiations are meant to report the contentious issue before the presumptive successor paul ryan takes charge. john boehner mr. is pushing for a deal. steve jobs was a big disappointment at the weekend box office. the film took in a little more than $7 million in north america, about one third of what analysts were expecting. sold the, sony troubled project to universal after rejecting the cast and
budget the filmmakers wanted. that is a look at the first word news and you can always find the latest on bloomberg.com. back to you. back to the markets, the recent stock rally is stalling now. are pushingestors back against the idea of a policy shift this year. of ahief strategic officer trading group joins us now with more. your bread and butter is technical training. -- trading. we are extended above the 200 day moving average. what does that mean? >> we have got to take it step by step. the next step was can we rally with force and commitment and we did that by taking back the moving average around 1990 and last week on the tech of earning that we saw thursday with the ecb being more accommodative, we
come in this week as traitors and the question is, can we digest causing above the 200 day here, and eventually turn into a performance chase. scarlet: what happens until the announcement wednesday and the boj later on? hopefully, we show commitment to the latest movers. says it is short covering but right now, we are not falling apart. we had two big weeks of gains and right now, the dow is down 10 or 15 points in the s&p is down three. the longer we stay above the levels, the more the fund managers have to get involved. alix: you can see this is the
falls,so as the -- as it you see it weaken against all the moving averages. even though they are relatively washed out. shifts if it be remains in that trend. it is now like 44 or 45. that continues in oil gets weaker. you have to see how some of the names in the oil energy sector, if it can hold up because in order for the overall market to hold up, you need more than just the rally. you need some impact. in the beginning part of the year when the dollar was strong, it did not impact earnings as much. if the russell could play some catch up, and they do go above, it could help broaden the rally
a little bit. in the 200e russell what you see there is the russell making relative new lows. in august anding once again in september. it has stabilized a little bit at what does this reflect that we cannot get above the 200 day moving average? iswhat i see on that chart an inverse head and shoulders pattern where we bump up against resistance and if we take down a level where you see the resistance above the 50 day, maybe the next move will be of above the 200 5000 day. the s&p was bumping up against 1990 and 2000 and it finally pushed through. push through that spot, it might rally more and as some fuel and broaden the rally out and with the strong dollar, you have to look at places that
might not impact. the strong dollar impacts oil and mostly commodities. alix: valeant is still in the news today. take a look at the bloomberg terminal and you can look at a of how distracted it exley was. >> the stock was below every major average well below when he came out and said they were problems. the chart indicated there were problems and the files have been somewhat broken. what is interesting to me today kind of out of play and you see it is perking up. if that could be isolated to a box, all the sudden the -- they rally a little bit and that will also help the rally broaden out and people are fuel versus again, what is so strong right now. thanks for joining us. scarlet: much more is coming up in the next 20 minutes. chicago emerges as the country's
that were revised downward. especially hard hit with sales down a record 52%. alix: a major energy sector deal today. the all-cash deal is worth $4.9 billion and gives duke the distributor growth and power demand slows. tennessee and carolina. for the fedex is hiring holidays. it plans to add about 55,000 temporary workers to make sure packages do get delivered. 10% more than last year. an anticipated increase in online buying. can always get more business news at bloomberg.com. alix: let's head over to the market desk. removers looking specifically at analysts. they talked about a litigation expense as it
variouss to battle with music labels with licensing rights. the shares are rebounding by 7% outperforming,by saying it was an overreaction and that the company's listener hour and user metrics look pretty good for the company. shares, the company reports earnings tomorrow and ahead of that, the technical one of the 63 s&p 500 stocks he would judge and so ahead of earnings because of the stock trading pattern recently that suggests quarterly numbers might the supporting. earnings today were disappointing. take a look at my bloomberg terminal. eeg is a way you can graph the earnings estimates and how they have changed over time. the red lines are the earning
estimates. excuse me. the white line is apple stock prices to we have seen it fall and come back up again. we should mention it is a tight range. $1.88 is the estimate for apple returns tomorrow. looking at analyst calls for the financials, this is coming from -- equalg citigroup from weight to growing rate. changing places on these two stocks. saying on goldman that the first quarter is typically seasonally stronger we see that in a risk reversal on the market. a basically sounds like goldman switch is a matter of preference for goldman right now because of where we are situated versus citigroup. alix: thank you so much. scarlet: who knew chicago was a censure -- center of bond trading. the windy city dominated the
training -- the trading. that is good news. it cannot really happen overnight. how did it happen? us now. guru joins it is surprising news to both of us. how did this happen? >> this has been happening over decades. the firms in chicago set the stage for taking over trading in the treasury market. 1990's, the options of other instruments as a way to , aitrage markets quickly computer-based algorithmic trading strategy that really grew up in chicago starting in the 1990's. you know how these firms, citadel, don't trading, all in forago and are accounting the high-frequency trading firms. they account for more than 60% of trading on the biggest
treasury electronic trading platform out there. this is according to risk.net. force inretty dominant this incredibly important market. scarlet: why is it so significant this is happening? >> it shows the treasury market is going electronic and it raises the question of do wall street regulators really have a handle of just how much the market has changed and have a adopted tools to really serve look at it in an accurate way. the answer was basically no. saying,ly, everyone was we do not have a handle of what was going on, where it was going on, and that is an alarming thing for the market. we cannot overstate the importance for the treasury. rates for mortgages, corporate
bonds, carloads, and it sets the tone for the rest of the world. people look at the markets to set cues for everything relative to treasuries. it makes the stocks look puny compared to trading and treasury. affecting borrowing costs in the future? was it is a question people are looking for. they are trying to figure out, doesn't make it more or less volatile? the answer may be both. people want to get a better handle. we are still trying to figure it out. thank you so much, lisa abramowicz of bloomberg news. investor, the average only allocates 3% of his or her portfolio to emerging markets. our next guest is here to separate the myths from the reality. ♪
risks. emerging markets have have had the greatest volatility over the past 15 years but also the largest returns. we had now to bloomberg radio with brendan greeley and cory johnson. >> thanks and welcome to all of our radio listeners as well. we have with us in the studio ed, the vice-chairman of emerging global advisors, here in the studio to talk about emerging markets. i want to talk about emerging debt. the imf reported at the end of september. i will read you the first line, corporate debt of nonfinancial firms. economies quadrupled between 2014 -- 2004 and 2014. should we be concerned about the dollar-denominated debt? >> it is an alarming headline. debt?ch debt is too much think about the corporation. is $1 billion a lot? does it depend upon the size of the corporation. maybe when you think of
emerging-market debt, maybe think of it relative to the emerging size of the economy. as a share of emerging-market gdp dollar debt, it has in about 15 to 20% for about 15 to 20 years now. it is really not particularly high. classic it makes me wonder, if you can compare it to the size of the economy, a chart here basically says it tracks market capitalization in those countries and those to decouple right around 2010. you have debt rising much faster than the market capitalization and particularly in china. we talk about all of this, we have been talking about emerging-market debt. are we really just talking about loans in china? beyond.e're talking corporate debt, so the business dollar debt, therefore, natural there anyway. has oh is been of course, when the fed finally makes it move, this five-year
and seven-year expansion in emerging markets, that party is over. dissuade me that something catastrophic will happen in december or march when things change? >> this is probably the most preannounced change in the central bank monetary policy in my almost 40 years in the business. if anyone is surprised by this, they have been sleeping. been fore fed move has six years. it is true. i wonder, you are seeing a widening particularly of emerging-market corporate debt. the emerging-market central banks. the problem the fed has is it seems to be working. there using, the ecb. but emerging markets in the aggregate had just begun to ease
as a whole in january. we are just a few months into it. have roomtantly, they to ease. the emerging-market policy rates, it is about over 150 basis points in inflation. we will see a lot more of what we see in china or other emerging markets. that will probably stimulate the economy. tot is the offset i am tried give you to try to make you feel better. >> tournament changed when there was an actual emerging-market crisis is that investors have gotten better at distinguishing among them. there is no longer a broad category you can call the rest of world. brazil is not india. they are completely different stories. is the through what right framework? how do we distinguish? is it is a crucial point. not only are emerging markets different, but they are all different from each other. if you take the typical developed market, the correlation is about 50%.
in between the bricks themselves, it is about 50%. look at lesser developed emerging markets from the more active frontier markets, cross correlations, only about 20%. the philippines event is not a vietnam that. you might be afraid of anyone a portfolio of, emerging-market come you get a lot of diversification, which mitigates a lot of the risk. cory: when you look at the slowing gdp out of china, i wonder which one will give first? >> i think both go the same time. story, they are only 34% consumer. we're 70% consumer. you will see policy changes and you have seen it happen already in terms of the system enabling
people to relocate with their and monetary policy, we will have a five-year plan out of china in april. a new five-year plan addresses in china. you.ank scarlet and alix steel, back to you on tv. alix: still ahead, a big surprise in argentina as the opposition candidate is forcing. we will see an investor. ♪ the only way to get better is to challenge yourself,
headlines for you. mark crumpton has those. mark: thank you both so much feared a texas billionaire is among the latest supporters of public and presidential hopeful ted cruz. a tech entrepreneur who gave to former candidate rick perry. senator cruz has dominated the texas donor >> according to the associated press, he has raised more than three times as much through the bush first nine months of the year. the former governor is holding his second day of meetings. he is trying to reassure his backers that he has a plan to win the party's nomination. the one time front runner ordered job cuts in his campaign and a cuts for those who remain on staff. seeking two candidates who never held public office as the republican party's strongest.
many say donald trump can win the white house and 60% say ben carson is the most electable. republican candidates debate wednesday in colorado. the university of mississippi removed it state flag from a campus because it contains a confederate battle emblem with -- which some see as a painful reminder of slavery and segregation. said it is being sent to the university's archives. public displays of confederate symbols has been hotly debated since the june massacre of nine black churchgoers in cow -- south carolina. a look at our first alert news. you can always find the latest on bloomberg.com. back to you. rallying, showing the top two does are headed toward a runoff. 2030 three fell into
default last year and jumped to an eight year high. surged asark index much as 6.5%, the most since june. scarlet: clearly investors like a move -- the news. this was a surprise because no one anticipated a runoff the first in argentina's history. >> the polling data was very close to a runoff were not. the front runner needed a 10 point lead in order to avoid a runoff. or 9.5 or 10.nine it was very unclear so it was a big surprise, especially that the lead was so small. right now, only about 2.5 percentage points ahead of the market favorite. runoff election is november 22. what happens between now and then? >> we have to see where the votes of the third-place
candidate goes. he is kind of in between. he kind of aligns himself in that way, but he is in opposition candidate in that way and sees a need for reform. his boat could go either way and it is about how the two candidates are going to try to win them to either throw his support behind someone or not. withn you really argue results can be seen as leading to a binary outcome? one person good and one person bad for the markets? >> it is a good point. the markets have become idealizing. there has to be something done the matter what. one way or another, someone will have to get something done. how fast it happens is another question. time is running out. they are running out of reserves and they have a widening fiscal and trade deficit.
they have booming inflation because instead of being able to tap markets, they fund themselves. it is a very unsustainable environment for them. alix: joining us for more, we're joined by diego who just got back. what was your take as an investor? obviously, it is great news. expectations with argentina was that change was great and either one would be much better than what it is now, primarily because both have understood the first task the administration has to do, the difference is it is being received and because of the cabinet it isions and the ones -- much more of a transition and trying to smooth whatever
changes. the market is being very upfront --ut the need for an author orthodox change. that would mean fixing the issue and second, as important, is to open up the external sector. that would allow foreigners to to --, something they had they have not been able to do. scarlet: it will likely depend on how voters vote for the third candidate and will then turn out . do we have any read on which way they will likely bend? informedf the best people there have suggested that in a way, there have in some the election.re in a way, it was important for them to be a part of it. a lot of the votes could have gone for him to in the first round. the feeling, if you're asking my
opinion, is that most of those would align with mockery. rejection of the the administration and the second one is a little more subtle. in a way, he has a chance now with a few others not tainted by the loss to become a leader of the party and you become that if the party loses. .r at least, the party aligned better toit is support mockery. if you take a look at the terminal, you can see the etf. at one point, it is the most ever. this is the today chart. you really see the jump. is what is good for investors actually good for people on the ground? >> what policies you're talking
that didher hold as not accept the 2010 restructuring, that will have immediate benefits. companies can start borrowing at lower rates. business will start booming. a lot of economists agree it is a necessary thing to do. in the long term, it will make the country more competitive. >> both candidates had the view that the more money they could receive from argentina, the issue is whatever adjustment you have from argentina. the adjustment to be more ciccone and, that is precisely what a lot of people in the market will like. comes fromey argentina, some of the adjustment will be out. inre was a huge growth government employees in argentina. ofof gdp in subsidies to all inks have to change of people
privatetransfer to the sector. without productivity and investments, that will not happen. i think that is why the market is so optimistic. what will you be doing with argentina assets between now it's my second? a sin terms of becoming more and more the favorite of the market, and brazil is not because of what happened to we like argentina and all liquid aspects of the financial market. we think eventually, it will pay off to really invest in companies in argentina. let's not forget argentina has not received any funding for the last 10 years. the country is starving for capital and it is an opportunity. alix: thank you so much. scarlet: coming up in the next 20 minutes, chinese leaders are gathering in beijing to hash out
boxed rivals. a research analyst says fourth-quarter same-store sales may be flat and he has downgraded the shares to underperform. scarlet: auto parts and repair industry, agreed to buy pet toys. has an equity value of about 835 million dollars. it presents a 23% premium to pep boys last close. expanding in the home rental industry. the investment fund will buy thousands of apartments from equity residential and the price tag is $5.4 billion. the residential rental market expanded as young americans find it harder to buy home. can always get more business news at bloomberg.com. let's head over to the market desk were julie hyman has the latest on this lackluster day where volumes are also pretty light. the time looking at the balancing act we are today, what is working and what is not. you can see the major averages
and not much movement at all. you look deeper here at the bloomberg terminal, i will bring back the imap with various sectors on the move. .8% today. is up little more closely on what is going on. health care first of all, a laboratory corporation of america is the best performer of the s&p 500 today after the company came out with earnings. it is the biggest diagnostics company in the u.s.. it made an acquisition to move beyond blood test and more sophisticated genetic testing. sales were up 46% in part because of that acquisition. those shares are doing well. health solutions are being upgraded today. and analyst is saying the shares should be bought on the unwanted weakness we have seen them fall sharply on concern for specialty pharmaceutical companies and there was an approval today from the fda.
the analyst says that should also be positive. catalyst were headlined but the company is coming out with earnings next week. downside, we have got material stocks and i want to point out steelmakers in particular are doing poorly. downgraded over bank of america and merrill lynch. down sharply, 12%. going into the earnings reports more morning, bank of america is also cutting it still price estimate because of greater exports from china. we are talking about u.s. steel prices in particular also because there has been a drop in scrap prices. past year, over the the measures we're talking about. a problem for some steelmakers when you see prices collapse in that way. earnings tomorrow morning should be interesting. >> there is an oversupply and i do not want to cut or leave money on the table. then you get lower prices.
thank you so much. scarlet: chinese leaders are meeting in beijing have their hands full. alix: the country is also doing with a manufacturing slowdown. it cut its interest rate for the sixth time in a year. join bloomberg this morning with his take on what china is doing to address economic problems. >> in my view, the recent interest rate costs will not be particularly helpful for the because we have had a meaningful slowdown already at the time they cut interest rates six times since last november. mark, isn't it the case with china that they are in this transition from being an
industrial economy to be more of a service economy? so it is not surprising we are what is going on particularly with lower global growth, what is going on with the industrial side? it is a question of whether they can do this balanced or if we will see an accident coming out of this. do you think there is an accident waiting out of here? >> it depends what an accident is, but i would say this. capital overeavy the last eight to nine months, coming out of china. the had to bet on someone, local knowledge or some economists somewhere the world, talking about china and how great it is, i would bet on the locals who are shifting money out of china at the record level at the present time. secondly, the gross figures the
government are publishing do not match reality. they exports -- the exports are down and the imports are down. industrial production is down. car sales were down. a lot of indicators are very negative. traffic is down 17% year on year. you want to tell me the economy is growing at 6.9%. it does not. to say theis it fair economy is barely growing at all or just not growing at the rate and's bead we have grown accustomed to? there is a big difference. >> i think many people do not has atand that china population twice as large as the u.s. and europe combined. it is not just the country. it is an entire empire. you can have gross in some
sectors of the economy. i have no doubt some sectors are importantt other very sectors like industrial production is not growing at the present time. some hot --u.s. sometimes have a recession like in the early 1990's, and other states were growing, you could growing andovinces others contracting. to measure economic growth in a country this large with that many people it is very difficult. evidence shows it is nowhere growing at the same pace it was growing between 2000 and 2007. what we have in china and what they should realize is a credit bubble of effort proportions -- of epic proportions. i've never seen credit as 1% of the economy growing as fast in china as the last seven years.
the publisherws of the gloom, boom, and doom report to penny on your perspective. we will get a report of a lot more reads in china because tonight, they will announce industrial profits because in august, it was down 9%. not a good sign. as the economy transitions, it would make sense. alix: bloomberg intelligence had a great thing about this. can really no longer ease and part of that is when you use, the u.n. wants to go down versus the dollar. then china has to spend a lot of reserves to support the u.n. because they want the u.n. included. they are at max capacity. you can kind of see what it was talking about. that is the slowdown in foreign exchange reserves.
the fall off your seeing around here in part has gone to spending of the u.n. so it does not drop 10 or 15%. that is a dilemma they find themselves in. thatet: it is something may get resolved once the imf make the announcement next year and they can china -- they can shift their focus to other parts of the economy. they are spending a lot of political capital making sure that happens even as investors say it is immaterial whether the u.n. is part of the fdr. a lot of capital flow. it matters to china and it will determine what china does next. it does come back to investors in a roundabout way. in the immediate aftermath, they are like eh. will tell you about a controversial call from the world health organization that could cause you to think twice about eating processed meat. scarlet: no.
scarlet: hold the bacon, sausage, and ham. processed meat causes cancer. the nearly 1000 suspected carcinogens the agency has evaluated since the 1970's, the meat industry is lashing out. here to talk about the controversy, allen is joining us from washington, d.c.. the now in the coffin for all of pork and beef suppliers out there? >> probably far from it. you look at the report and it restates a lot of what science has already been saying in terms of some of the risks of over and red meats.ss this has been added to a list of a lot of other activities which
include well-known and dangerous threats such as tobacco and other less known threats like working at night, which disrupts your circadian rhythm. raisesly being alive your risk of getting cancer. it has to be kept in this context. while this will certainly give filled with folks who have nutritional advice, it may not be the end of the world for the meat industry. is this worse news for the pork industry than the beef industry? how does the poultry industry play into it? has been talked about for several months, the meat industry knew it was coming. is aake a look in there difference between processed and red meats. the more processed, the greater the risk eating scene. you may have some people processed meats to more of a regular red meat or leaner meat. then means things like beef and
pork might have more of an issue than chicken, for example. people are already moving to that cause of the price. jim o's or organic, there is a huge push for those types of meat. >> there is no to station other than processing or not. the industry does not like some of the research they're looking at, but this is a respected panel. they'll looked at more than 900 different products since the 1970's and they tend to say they all have cancer risk in part because they do not look at anything. there is a certain amount of self filling prophecy here, one the industry has been bracing itself for. alix: thank you. are in: processed meats the same category of hazzard as tobacco. and hot dogs cannot possibly be just as dangerous as
smoking cigarettes. if you are planting corn and the next year you want to plant soy, it could take years to get a calf to full growing beef capacity. it is not like you can just make chickens instead. it is a longer-term project. it is fascinating. the cycle is different compared to raising livestock. nasdaq has moved to little changed while the dow and the s&p 500 are lower. the s&p 500 is losing four points at 2071. also fairly is light and we will be right back. ♪
david: good afternoon, here is what we're watching at this hour. major biotech and from cynical companies are set to perform -- deliver earnings this week. can they convince investors to jump back in? a temporary slip or an ominous shift. iphones last quarter? the market desk, where julie hyman has the latest. not a whole lot happening today. , stocksolume is down are muddling along today. today was a relatively quiet day in a busy week for earnings.