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tv   Bloomberg Markets  Bloomberg  October 28, 2015 10:00am-12:01pm EDT

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from bloomberg world headquarters in new york, good morning. i am betty liu. here is what we are watching -- taking aim at aig. billionaire investor carl icahn wants to break up the insurance company into three copies. he says the time to act is now. shares of apple are rising after the company forecast another record holiday fueled by iphone demand, what about other products --the watch, anybody? time for house republicans to stand up and be counted -- they will vote on the cover might budget deal and whether paul ryan will be the next speaker of the house. we are about a half-hour hour into the trading session. i want to head to the markets desk where julie hyman has the latest on the earnings news and the breaking news and aig. news, and let's not forget about the fed. two-day meeting
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and expectations that we were not see a change in rates. on the earnings news, we see all three major averages rising. i want to check on rates. look at the 10-year note to see what is going on there i had of the fed decision or lack thereof. you can see a little change in the 10-year yield. thisck check on w rip -- crunches the numbers from fed fund futures to figure out what the probability is -- at least with traders think the probability is we will see you rating beats. i think it was you who talk to dan mcmahon who said i want to know those people are because i do not know anyone that raise -- thinks they will raise rates. betty: he said let's smoke them out. let's talk about moving stocks. julie: aig definitely one of them. carl icahn urging the company to break itself up.
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shares are up by 3.5%. he thinks they should be three different companies -- a property casualty insurer, a life insurer, and one that tax mortgages. ai -- backs mortgages. theyas come out and said maintain an open dialogue with shareholders and welcomes feedback and ideas. --are watching "star wars" yesterday, the wall street .ournal --starwood yesterday, the wall street journal reported three companies were making a bid. the stocks are rising. andreens boost alliance write it. writing shares are actually falling. -- right aid shares are actually falling. they had a huge game yesterday on the talk this deal was getting close to being done. in addition, there is some concern about anti-trust approval considering how many
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locations each of these guys have. definitelyst, but not least, apple -- yes, apple. it almost got lost in the shuffle with this late-breaking news. the company came out with earnings, once again defying some of its critics. the company seeing an increase in iphone shipments of about 22% and coming out with a bullish forecast for the holiday season. betty: thank you. julie hyman. i want to check on the bloomberg first word news this morning. david gora has more. david: after a guilty pleading, executors are looking for a sentence for dennis hastert as part of a plea deal. court ind in his -- in his first appearance since june. he's accused of pain as $3.5 billion to someone referred to as individual a to hide
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misconduct dating back to his time as a high school coach. republican presidential candidates will gather in colorado for their third debate, the first debate since ben donald trump past in the polls and a sweeping readjustment by jeb bush. the export/import bank might get a new lease on life. both parties are back in the house to reauthorize the charter. cronyvatives who call it capitalism let it expire. the bill's fate in the senate is uncertain. officials are thinking of building a barrier on the border with slovenia and slovenia's prime minister says a fence will be built along its croatian border if crowds are not stopped. new spotsre seeking when there was a barrier between
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hunger -- hungry and syria. you can find the latest on betty: david, thank you. we mentioned carl icahn taking aim at aig. the billionaire investor wants the insurance coming to break up into three separate copies. peter hancock responded in a statement, saying dan kraut bloomberg's joins us now to break that language down. clearly, peter hancock does not like the idea. have there been others angling
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for it? chairman pushr this idea. there is a long history here. hank greenberg put the company together through a ton of acquisitions. property casualty insurance is very cyclical. the weather can ruin your earnings for the quarter, a year. his idea was to balance that with having a life insurance retirement product. since then, of course, we have learned the dangers of being so big -- the bailout -- betty: of course, right. dan: carl icahn talks in this letter about the increased regulation that aig's brings, and now split into three companies can reduce some of that. betty: because they are still considered systemically important, right? dan: that is right. betty: they obviously have a problem with that. what are we talking about when carl icahn is talking about splitting the company's? dan: the smallest of the morgan
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insurer, united guaranty. banks if mortgage holders cannot pay. they take on that risk. copies that have been in that business, many of them either collapsed or almost collapsed in 2008-2009. they subsequently had a resurgence. when housing is doing well or even stable, that can be a profitable business. property and casualty is a huge global operation. casualty would guard global clients against lawsuits or other liabilities. betty: right. then there is the life insurance. dan: life insurance, and that tends to be asset-heavy, with risks tied to bond markets, and that is why some people think it might not be a fit. usually, you know quicker what your expenses are going to be. noty: where in aig are they firing as well as they should be ? is it in property casualty because it is cyclical? dan: they have had some problems
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in property-casualty. side bande weather compensation. things that can have -- than competition. things that are tough to figure out for a while. expecthow else to you aig to respond to this? dan: they have done some things. they bought aircraft and leased it out to airlines. that is the easiest one to see how it does not fit with the rest of insurance. betty: they try to sell that to chinese investors. dan: they trieddan: -- they dan:to sell it to -- they try to sell it to chinese investors. they got rid of their stock in turn that into cash. hancock would point to that. dipping into smaller things as well -- chemical spring leaf, a lender that goes back to a deal with fortress.
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hancock has said that these things fit -- if you have a big, wantl company, they would property-casualty insurance. we need to ensure their buildings, their fleet of cars, and also the sort of things -- workplace benefits, for instance, disability insurance. betty: so, the bottom line, there are not that many assets to sell? dan: maybe not from hancock's view. betty: in his view. we had hang greenberg on and we said look at the stock price, and he retorted there was a reverse split and the stock is farmove that back -- that since the crisis. how do shareholders feel about the company? in, it depends when you got but a lot of insurers are traded on book value, conversions to liability.
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they trade at a lower multiple that almost all of their big rivals. betty: so there is a discount there. dan: betty: there is. betty:--dan: there is. betty: dan kraut. apple -- apple's third earnings beat estimates, but will the fourth quarter be as shiny as their phone? we will tell you what ceo tim cook thanks. that is coming up next -- thanks. that is coming up next. ♪
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betty: good morning, and welcome back to the bloomberg market day. let's head back to the markets were julie hyman has a check of company movers this morning. julie: a lot of earnings coming up, as well as a lot of and then
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day activity. let's start with fiat, chrysler, and ferrari making earnings cost -- comments. we are seeing the stocks decline. chrysler saying operating profit was up 35% in the third quarter. the kicker, jeep suv's continues to go up, though they took charges for recalls. riseri says isis should after it had prices should rise after they had a 35% increase in third quarter profits. they are also raising forecasts for delivery for the full year. nonetheless, both stocks are declining and ferrari is trading below its ipo price. we are looking at technology. down the technology is most in a single day since july, 2009, and that is after its forecast for fourth-quarter revenue and earnings missed
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estimates. they help internet traffic move quickly. sometimes when you get numbers from akamai, there is a read through to some of the industry. twitter continuing to disappoint investors. the shares are down by 9.5%. its revenue forecast for the next quarter -- the current quarter, i should say, is below what analysts had been anticipating. also, users only up by 11% to 320 million people. the forecast was 324 million. jack dorsey, the new ceo, has been talking about the efforts to increase those users -- increase engagement. it might take a while to bear fruit, however he is remaining kind of vague on exactly how long. betty: they have to get that user base up. they cannot just be about moments, right? you, julie hyman. another company that reported
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last night -- apple, defying expectations. the top forecast on earnings and revenues. on a conference call, ceo tim cook credits the popularity of the main product, the iphone. is thek: the iphone 6s most popular iphone that we currently sell. in terms of has there been a change -- if you look at iphone iphone 6 plus,d and compare it to the 5s, we are doing better at that price point and we were previously. betty: ok, but what is really drawing attention is his outlook for the holiday season, with the company predicting record sales once again. walter is an analyst at aig. dan ives is a analyst. you both have buys on apple. i think tim said something on
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the affect -- to the effect on the conference call that we have the mother of all comps coming up, do you believe him? a lot of white knuckles going into this, but i would say better than feared, when the street was expecting the worst. now, as the stock continues to not just tread water, but get re-rated, they have proved there is gasoline on the -- in the tank. betty: where is all that coming from? walter -- the purchasing? -- walter: the purchasing? they are probably upgrading earlier. --y are moving to the trade payment plans. copies can get closer to upgrading every year, where they were not able to get every year. they are also taking share.
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customers are converting to apple, and this will new virtuous cycle in providing growth, going out until next year's december quarter. betty: tim said something to the effect that about one. -- what they are seeing is about 30% of those replacing their phones are coming from android phones. dan: walter had a great point because it is about how much room there is. it is a huge run lane. if 30% have upgraded -- now you get to 65% by the end of this year. that is really the key. they are a little too bearish on the growth prospects. i think that was a prove me quarter and i think you will see that over the next few quarters leading into streaming, other areas, as well as iphone 7. betty: tim cook also talked about china. when her how increasingly important it is for iphone sales. let's play what he said about china. mr. cook: we see an enormous
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change in china over the next several years. the latest study i have seen from mckenzie indicates if you look back five years, china's middle class had about 50 million people in it. five years, itad will have 10 times that number in it. i feel we are reasonably well positioned in china. i am sure we can do better, but i think we are doing fairly well there. betty: they are doing well. where can the do better? walter: first of all, middle-class -- focusing on that, it speaks to the high has, and now apple that product can grow in a large company. we're not talking about a lower-and company. the other growth -- as they use stars to proliferate in emerging markets, there is a lift in revenue from applepay, or itunes, or apple music -- another revenue stream. , 5, 10 billion
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over time, but it could take -- take a three percentage point growth company, to six or seven centage points. people think it is cheap, 11 times. free cash flowis of the company is generating $70 billion of cash flow. that is an 11% free cash flow yield. that is to low as far as valuation is read -- concerned. betty: bottom line it for me, dan. you know you are bullish on the stock. we know iphones are growing like crazy. do we care at all about any of the other products apple sells? maybe the ipad? dan: that will be key, especially the reversal of the negative trend we see as they go into the upper -- enterprise. streaming, streaming tv comes out in 2016. you look at ipad for enterprise,
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they are -- slowly, building this out. it will give them more fuel in the tank as we look for to the coming years. meat and potatoes is still iphone. the bears have to throw in the towel's. betty: those are becoming side thoughts --the watch? build thoseed to out. they realize they cannot be a one trick point -- tony. by the way,ter: those side thoughts are stuff that adds three or 400 basis points to the growth of the company, and that makes a difference to how investors will value a company. walter peicyk and dan ives, thank you.
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house speaker john boehner said he wanted to clean up the barn before he left. we will see if they cleaned up their act -- we will take you live to washington. that is next. ♪
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to thewelcome back bloomberg market day. it is a big day in washington. congressional lawmakers are expected to vote on a new bipartisan budget agreement as early as today. the house gop conference is poised to nominate paul ryan as their candidate for speaker of the house. the move is expected -- is hope the threat of shutdowns and default until well after a new president takes office. let's go to phil mattingly live from the hill. this has ripped open more of the within the gop. what is the likely consequence bill?s bill -- -- of this
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them take this away for the republican party in a negative way. it has exposed the divisions that have always existed -- the house freedom conference released a statement that they will en masse oppose the bill. they haveo, ted cruz, all said they would oppose this bill. as it currently stands, it looks like john boehner will have a large number of lawmakers, a bipartisan group of lawmakers to move this forward today. included in that group, paul ryan, the likely next speaker. he will be nominated by republicans today. he will become speaker tomorrow on the house floor. he said while the process stinks, and he does not like it at all, he exit does more good than harm and he will support it. betty: paul o'neill, the former treasury, also said the whole
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process stunk. let me play for you what he said. mr. o'neill: this is not about authorizing additional spending. it is authorizing the treasury to pay for bills that have already been incurred. it is a nightmare aversion from real fiscal responsibility. to me, it is galling to watch the tragedy that has become our federal process of how we run our country. betty: ok. i mean, i have heard this before. what are you going to do about it, right? that he, behind closed doors, you will not hear anyone disagree with secretary o'neill was saying, particularly when it comes to the debt ceiling. this was a vote that was never an issue. the majority party would always increases, you expect this is something you would have to do. that changed when republicans took power in the house. that is now off the table until 2017.
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for republicans that now control the house and the senate and want to get stuff done -- do the types of things they were elected to do -- taking this off the table, even if they use this as leverage to get spending cuts, it is a step forward for the house and leadership base. this was a positive step forward for most publicans. betty: phil mattingly -- most republicans. betty: phil mattingly, thanks much. we want you to join us tonight for a special one-hour "with all due respect," beginning at 5:00 p.m. eastern time with a look at what is ahead at tonight republican debate in boulder, colorado. ♪
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betty: live from bloomberg's world headquarters in midtown manhattan, you're watching the bloomberg market day. i am betty liu. we have breaking news on u.s.
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crude oil inventories. of course, they come out every week, but they have been affecting the oil markets specifically. julie hyman has those numbers. julie: those numbers will come out in 10 seconds, but i can tell you oil is rebounding ahead because we have seen slumping prices and some analysts have said they are due for a bounce. it reboundn slightly. there is still over supply and oversupply concerns, but we did get an industry report earlier today that did show a change in him -- crude oil inventories come a showing they have gone down. even though we are past the time, it looks like the numbers are potentially a little bit later this week, interestingly enough. there you see the crude oil inventories. betty: not seen the number either. julie: not seen the number. this is really odd, especially since you can see a leg up in oil prices at 10:00 a.m.. betty: here we go. julie: very go. better late than never.
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crude oil inventories up 3.8 million barrels last week. gasoline inventories down. this would inventories down. this is in contrary to what we heard from the american petroleum institute. the energy information administration talking about an increase. a're not necessarily seeing reaction in crude oil as of yet. i will take a look at my bloomberg terminal. we're seeing a little bit of volatility. a little bit of a leg up in oil prices on these headlines. usually it takes a few moments to adjust, betty. we will check back on it at the top of the hour, how about that? betty: ok. thank you, julie hyman. let's start with the bloomberg first word news. david has more from the news desk. david: once one of the most powerful men in politics, former house speaker dennis hastert is facing six months behind bars. he pleaded guilty to charges in federal court as part of a plea deal.
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investigator's claiming he paid millions to hide sexual misconduct. he'll be sentenced in february. the plea deal will keep the because of the charges against him from becoming public. the house is expected to pass a budget that will protect the mistake borrowing until 2017. republicans have raised questions on whether cuts you will offset spending increases. nominate are set to paul ryan as the new speaker. he says he will vote, even though he thinks the process stinks. policymakersank's are wrapping up their two-day meeting. bond traders are betting there will not be a rate increase until next year. booming -- bloomberg will bring you the fed announcement as soon as it is released at 2:00 p.m. eastern time. iran expected an invitation to
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join leaders in vienna. support basharey al-assad, and american officials admit iran is needed to work out a solution. nigeria's military says it freed 338 people. islamic -- officials say 30 islamic militants were killed. girls kidnapped from a school in april of last year. that is a look at our first word news. you can always find the latest news on betty: david, thank you. 15 of the biggest players in the $14 trillion market for credit insurance are also the referees of this market. when it comes to determining whether or not a country like argentina has paid what it owes, or if it defaulted, 15 players
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that include jpmorgan, goldman sachs -- they hop on a conference call to decide whether a default has taken place and how much money will ultimately change hands. reported nabila ahmed the story. it is a complicated story. you did a lot of reporting on it, but it is very popular. it has been number one on our website for quite some time. tell us what this whole committee is about. nabila: when a country like argentina defaults, people who are in default insurance, they have to find out whether they will get paid or not. this is a committee that decides whether a default will trigger a payment for people who hold the insurance against the default. betty: ok. and how are they appointed? nabila: so, it is basically the biggest players in the market -- you have jpmorgan, goldman sachs, citigroup, and then you have five of the biggest buyers -- by side investment firms.
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you have elliott management, eatonvance. betty: how did this come about -- a determination committee? it is mysterious. nabila: a little bit mysterious. betty: how to this arise? nabila: after the collapse of lehman brothers, the way it was operating was that a country could befall, but the seller of the insurance could say i do not count that as a default, i will not pay you to the buyer. at that time, the wave of defaults that were going to come, timothy geithner at the new york fed said we're going to fix the system, make it official, said the people who bought the insurance have some kind of assurance they will get paid. so, he hastily convened the top traders from these banks, jpmorgan, goldman sachs, deutsche bank, and they got together and said how can we fix this quickly because we have an
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avalanche of defaults coming. we have to solve this now. they decided it would be best if they, themselves, made the decision. betty: they knew the markets the most. nabila: exactly. betty: here is the rub, right? they are making determinations they are players in, sometimes very big players. nabila: that is right. almost everyone on the committee has a position and stands to win or lose. betty: so, conflict is just a part of it? conflict is a part of it. to committee says we try mitigate the conflict by having as many people as possible know about the market making the decision, but it is up to a crazy stage where a firm convicted on a decision this conflicted on a decision, they
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say -- conflicted on a decision, they say we do not want to vote because it looks bad, but the rules do not allow for that. betty: they have to vote on it. they have to vote, and of course they voted yes, which means they got a cut of the payout. betty: exactly, so they were pushing for the default. what will they do about this? if anyone pushing for this? a set of changes have come out that they say will reform the committee. there's pressure from inside and outside of the committee, particularly in light of scandals like libor and fx rigging. you know regulars are watching the markets closely. changes do not go far enough to some of the market because they do not address the issue of whether you should be able to recruit yourself -- recruit -- refuse yourself. inty: why couldn't they say situations where you have a large position you should be allowed to recuse yourself?
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what is the argument against that? nabila: the argument is everyone has a position, so if you allow people to recuse themselves, you might end up in a situation where there are not enough people to make a decision because they are all conflicted. spoken to youne from the committee about this -- making statements? nabila: not on the record, but we have spoken to all the committee members on background, and there is a groundswell of concern. betty: even among the committee members? nabila: even from the committee members because they do not want the extra regulatory scrutiny. some of the members say that more decisions should be made by an independent panel, however the not want to get rid of it altogether, because they say it would cost too much to have an independent panel making all of the decisions. if firms like jpmorgan and costs toochs say it much, it says something that
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they do not have the money to pay for something like that. betty: thank you so much. nabila ahmed, our corporate finance report. still to come, a shakeup in the airline industry -- northrop , beating outa deal boeing and lockheed. we will break it down for you next. ♪
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betty: welcome back. we are just over an hour into the bloomberg market day. it is time for the business fl ash for a look at some of the biggest stories in the news.
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a deal to buy the maker of kettle potato chips -- both boards have a link the transaction, and oaktree capital, diamond's largest shareholder, will vote in favor of the deal. volkswagen is feeling the pain from its emission scandal. vw posted a loss in the third quarter, its first loss in 15 years. they said full-year earnings will be lower than last year. the volkswagen ceo address the scandal during a conference call. >> we need to find out the truth and to learn from it. me assure you we are being extremely thorough in our analysis. we will be ruthless in punishing those involved, and we will be apprehensive in learning from it so that something like this never happens again. betty: the testing scandal has billion,automaker $7.4 but analysts estimate the problems will cost bw every $22 billion. shares of alamai technologies --
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mai technologies see the biggest drop since 2009. they have seen stock rise 20% this year through yesterday, but it is off 20%. you can always get more business room on staying on company movers, hasail -- abigail doolittle the latest from the nasdaq. abigail: gilead beat analyst 5%,mates on the top line by bottom line by 12.5%, and they raise their full-year guidance range, and you would think that would be enough to send shares higher, but it missed estimates. shares are off about 2.5% for the full year. another stock going lower is
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jetblue. the company reported yesterday. it, credit suisse has downgraded shares from a cell to an outperform. analyst julie yates says she prefers southwest, saying both companies have attractive earnings profile, but the bar is set higher for jetblue. she recommends rotating out of jetblue, taking profits, and into southwest. jetblue is down about 11% from its peak in september. abigail doolittle, thank you so much, live from the nasdaq. another story we are watching -- northrop grumman is a big winner in the contest to make the u.s. air force's next-generation long-range bomber. it is an $80 billion award that secretary of defense ash carter says represents the future of america's defense. the long-ranger: bomber will support the strategy by forming the backbone of future strike and deterrent capabilities. betty: joining me now is
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bloomberg intelligence senior analyst george ferguson from princeton. george, this was kind of a david and goliath story -- northrop grumman was the underdog in winning the contract. george: there were a number of people in the investment community that thought of it that way, but when you look back at the decision, the pentagon has made a lot of noise about how they want to keep the industrial base in tact, and i think given that northrop has no major prime contract under its belt right now, from an industrial-based standpoint, it made a lot of sense to go to northrop on this. it made a lot of sense on the stealth bomber to carry through some of the technology to that airplane. betty: how? long ago was that that they had b-2 wasract george: the wrapped up in the 90's. it has been a number of years. it is part of the problem here -- the bomber fleet is very old.
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by bulk of it is built b-52s, which are 50-year-old be onees now, and now 1 and b2'seral -- b -- they are getting old, and we need to think about replacements for the b-52s, the bulk of the bomber fleet. betty: will this be transformational for northrop grumman? george: it will be important for the revenue and earnings. we think it will get to 10%, 50% of the revenues as they get out to the 2019, 2020 era. they will probably build eight of them a year, worth $4 billion. the engine makers will take some of the money, 25%, 30%, 40% out, but it will be good for the company. betty: what about lockheed and
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boeing? george: it is another industrial policy consideration. boeing has tankers that will be high-revenue, fixed cost. they have those projects in house. lockheed has the joint strike fighter. they have plenty of stuff to work on. would it have been nice to have it inside of their portfolio, the bomber as well? it would have. they are pretty of worked this work to do. i notice they are sideways or maybe a little off. the community does not seem to be too worried about the loss. right now, we see northrop really rally and their valuations are approaching lockheed martin again, so they are inside the same valuation space. betty: george, out of curiosity, how does the process go? now that they have been awarded this, when will they start actually making these bombers?
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george: so, the technology is supposed to be relatively mature, but we still are going into a testing, research, developing phase. i think you will start to build these things -- you are still probably three, four years out from getting many of these airplanes starting to be built. you sogeorge, thank much. george ferguson, our bloomberg intelligence senior intelligence analyst on aerospace. still to come, speculation is over -- barclays named jeff daly the new ceo, but is he the right man for the job? we will big into that in a moment. ♪
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betty: welcome back to the bloomberg market day. i am betty liu. time to get you caught up on all the action going on, not just here in the market, as you see we are in the green ahead of the fed meeting, the fed statement, but in asia, the nikkei gained 0.67%. the shanghai composite slipping, you can see, down 1.7%. one big story out of the region is china's central bank discussing the country's five-your plan, and investors are eager to see what happens in the next five months. bloomberg's dividend last reports. are meeting to hammer out the five-year plan. investors are equally focused on what happens near term -- problems, and how the country is going to respond.
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21 economists say they are actually done cutting ranks. -- cutting rates. most importantly here -- going bo might leave p thesec rates at record low levels. clearly, this is something to chew on. much to debate. betty: switching gears, back to the u.s., there is a new boss at our place. jes staley has officially been named the new ceo, ending weeks of speculation, and appears to renew the focus on investment banking. so far, you can see investor reaction is kind of muted. and us is erik schatzker with more. you have been following jes staley and his movements. four many years, and factor this is a job jes staley wanted to he was passed over for ceo of barclays when they chose
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anthony jenkins. he was booted when they found he did not transform the bank fast enough. to understand what is going on, barclays struggled in the as returns period declined, and they came to the conclusion, as well as many others like crazy sent deutsche bank are coming to now, that they had to shift away from investment banking, focus on the commercial banking business, the consumer banking business, and what they call an asset-light business. here is a direct quote from jes staley who said "we will complete the necessary repositioning of the investment bank to a less capital-intensive model. there can be no retreat from becoming a values-oriented organization that conducts itself with integrity at all times." is he talking to employees, regulators? betty: exactly. erik: both, i think, and it is
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now clear to -- important to him his britishr to audience, because it is a british bank, that he is not a wall street cowboy that will turn barclays back into the was inking operation it the pre-crisis years, and even for a period of time after the crisis, like bob diamond, who was bounced out in the early days of the libor scandal. betty: he will have to continue the transformation, and as you pointed out, and just in the investment banking side, what about the relationship with regulators? erik: barclays has a lot to prove, and they are taking a risk by putting an american back in the job. there was always some friction between bob diamond, an american, who came from the boston area, and british regulators who did not warm to an american, perhaps as much as and do to a brit
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furthermore, bob came from an investment banking background. he was a traitor at morgan stanley. has somey, while he work cut out for him on that front, as something's going for him -- he might have been head of the invoice -- investment bank at j.p. morgan, the most of jpmorganars he spent a before going to blue mountain was in asset-management and more client-focused ranking. said, he is aand client guy, and there is truth to that. he is not a traitor. he is not a swaggering -- betty: i like you say wall street cowboy. erik: that is what a lot of people think. if you look at kali -- columns in the british newspapers, that is what they thought barclays was getting. describe quickly the process he had to go through and the hurdles --whether any major stumbling blocks? erik: from what we know, it
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seems fairly clear that the board settled on him as the number one choice fairly early. he did have to interview with regulators, which is clearly different than what goes on in this country, before he can take the job. he takes over december 1. betty: ok. we will mark that. they do, erik schatzker. much more ahead on the bloomberg market day. we will get a preview of today's statement on the fed that comes out later this afternoon. what will it say about the interest rates, the economy? their outlook -- we will get a preview of what to watch for. ♪
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betty: it is 11:00 a.m. in new in hong 11:00 p.m. kong. welcome to "bloomberg market day." ♪
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from bloomberg world headquarters, good morning. i am betty liu. here is what we are watching this hour to what will janet yellen and the fed say about the economy today? we will get a preview of what to watch for. the republican presidential candidates face-off tonight as new polls show ben carson in the lead. what will donald trump do to change this dynamic? walgreens agrees to buy write it for an than $9 billion in cash. we will tell you what it means for the retail pharmacy business. and we have someone breaking news on the high finance front. we are getting word that tpg is said to be near hiring a former goldman sachs copresident john winklereid.
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we have devon who broke the story for us. tell us about the background . >> we are told they are looking for some kind of professional management to come in and help the cofounder continue doing what they do best, which is to invest, but to help the firm extend its business line and a professional manner. this may be a precursor to an ipo because this is the move that we have seen from firms like blackstone and apollo do before they go public. the bring in some outside professional management to help the company present itself to common shareholders and basically comfort potential , shareholders day-to-day while investors continued investing . betty: didn't he drop up in 2009? devin: he was the president and
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co-ceo and has had a interesting history. he spent 27 years that goldman on both the banks and sales and trading side. he moved around and spent some time in european he was basically a company man who spent 27 years that goldman. he was trusted by paulson. betty: paulson was one of his mentors, correct? devin: yes. in thathink of and tha wicke hay. he has been advising ttg for a number of years and winkle read those him very well. to know that they started formal talks around june. they have gone to rodeos together and spent family time together, the whites have gotten to know each other. we are told an announcement is fairly close. he will become co-ceo alongside jim colson. betty: why did he leave in 2009?
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devin: there are different storylines. our own bloomberg coverage at how garytalked about cohen established himself as the possible successor to ceo. potentially, he felt that it was him to cede. betty: and speculation of an ipo. thank you so much for breaking that news. we are 90 minutes into the trading session. i want to head to the market desk where julie hyman has more the action. julie: we have stocks rising right now as a combination of earnings. we have more deal flow going on today as well as all three major averages trading higher right now than more than that half of 1%. it is also telling to take a look at the imap. you can see what is on the move. energy was far and away the biggest drag and it is outperforming today by 2.7 percent, followed by materials,
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telecom, and financials. we are seeing energy stocks rebound as oil itself is rebounding. it has had a recent streak of losses, but oil prices are back on the rise today. even after we got in inventories report that showed a build in inventory, it is really fascinating. betty and i talked about that a half hour ago. you can see that oil is now up by nearly 6%. i went back to my bloomberg terminal and look at the inventory data. this is the weekly change in inventory. you see that we have seen a build for the past five weeks or so. smaller ine build is inventories. we have seen a drawdown in the isvince of oil that gasoline. it is interesting that we are seeing this increase in crude oil prices. it is not just oil prices going higher. gold is also going higher and that is giving a lift to stocks like newmont mining, up by 7.4%. another important note is that
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it will be out with its earnings after the close of trading. data, we to bloomberg could see revenue rise for the company about 10%, despite the drop we have seen in gold prices. betty: thank you so much, julie hyman. let's get a check of our first board headlines this morning. courtney has more from our news desk. courtney? we start with former house speaker dennis hastert. he is looking at a possible prison sentence. he withdrew almost $1 million from bank accounts to make payments to an unidentified person. it has to do with allegations with his days as a high school wrestling coach. are saying that he should spend six months in prison. the fed has not raised interest 2006 andrate since policymakers are saying to hold off again. they are wrapping up their two day meeting today and there will not be rate hikes until next year.
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economic data has been mixed. manufacturing,, and retail sales were all worse than estimated. bloomberg will bring the fed's announcement as soon as it is released. that is at 2:00 p.m. eastern time. the house is expected to pass that compromise spending plan today. the bill would avert a government shutdown and prevent a debt default. are opposedatives to this. congressman paul ryan will vote for it, even though he says the compromise "stinks." republicans are likely to name ryan their nominee for speaker of the house, locking up the election for him. the senate will decide the fate of the export import bank. republicans joined with democrats in the house to revive the bank. many conservatives consider the bank a form of corporate welfare. senate leader mitch mcconnell will not allow a separate vote. he may allow the bank measured to be attached to a highway bill. and republican presidents candidates face off again tonight.
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the debate is at the university of colorado and it will be the first one since ben carson climbed to the top of the polls. before the main event, there will be another main debate featuring four contenders that are farthest behind in the polls. we will bring you a one-hour preview live from boulder, colorado. it is a special edition of "with all due respect this afternoon at 5:00 p.m. eastern time. that is a look at our first word news are now. you can always find the latest news on betty: courtney, thank you. have been reporting, investors are eagerly awaiting the outcome of the latest fed meeting at 2:00 p.m.. while most do not expect a rate hike, they will be looking at changes at the language of the fed statement. kate moore told bloomberg that it is not clear what will happen next. >> does the market leave the fed said leave family th the market? we have wondered this.
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did financial conditions really stop the fed from moving in september? if that is the case and the market is leading the fed, that's more of a dangerous admission. betty: joining us now is mike mckee. what do you think? do you think the markets are ?eading the fed mike: i think they are looking at it as a measure of how the economy is doing. right now, the fed is more optimistic than the markets about which way the economy is going. until the to come closer together, you cannot say one is leading the other. betty: why is the fed more optimistic? mike: they are relying on traditional models telling them that when you get the unemployment as low as it is that you will start to see curveion, the phillips relationship. that has not played out how they expected, but they believe that will happen if they look at
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inflation being extraordinarily low and bling that largely on commodity prices, particularly energy, and they expect that to start a turnaround. they do think the economy is growing fast enough that the unemployment rate will keep going down even if we do not continue generating 200,000 jobs a month. betty: what are we going to hear today? what we looking for today in the statement? mike: probably looking for as little change as possible to the statement. they are certainly not going to raise interest rates unless they change their policy to one of shocking financial markets. they do not want to take december off the table either. by doing as little as possible and changing the wording of the statement, they will keep the ambiguity there. they will keep the markets guessing as to what their intentions are. they're going to have to downgrade their views a little bit on growth because we have seen some disappointing numbers. to note probably going make any major changes. they might go from modest to modestly or something like that. betty: they might add two letters onto their description.
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mike, the fed is up for december on whether they will raise rates by the end of this year. it comes at a time when the ecb will also be holding their december meeting and they are likely going to add more stimulus. do they complicate their own situation by waiting? mike: it is going to be at december to remember and they are going to have a lot of data to parse between now and then -- two jobs reports, several inflation indicators, numbers on consumer and business spending. a lot for them to think about and to try to put together and make a forecast for how 2016 is want to play out. it does get more complicated with foreign central banks like the ecb lowering rates are likely to add more stimulus has that pushes the dollar higher and that weighs on u.s. growth. it is going to be a difficult decision for them and december, which may be why janet yellen has scheduled a major speech on the economy, congressional testimony early in the month,
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even before the jobs report to try to lay out what the fed is thinking as they go into that month. right now, the markets do not think they will do anything. the fed does not want to make that decision yet. betty: are we going to hear from plenty of others? are the other fed officials going to be just as vocal as they have been over the last several months? mike: you can bet that is going to be the case. we have a number of fed bank presidents who have scheduled speeches into december. we will be hearing from all the sides in this debate as they stick out their positions. it will be interesting to see today whether we get any more -- whether with her anybody joins him in a public effort to push the fed one way or another. betty: mike mckee, thank you. we will have full coverage of the fed's announcement coming up at 2:00 p.m. eastern time right here on bloomberg television and on bloomberg radio. charles plosser will be joining mark crumpton and tom keene and kathleen hays. much more ahead on "bloomberg market day." walgreen set to expand its
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drugstore empire and a $9 billion deal to buy write it. the question now is whether regulators will get in the way. ♪
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betty: good morning and welcome back to "bloomberg market day." let's head back to the markets desk or julie hyman has a check on company movers, including the deals going on. julie: big and small -- one that we of not gotten to is chicago bridge and iron, more on the smaller side. their earnings should be analysts estimates, but they also announced the sale of its nuclear construction operations to toshiba's westinghouse. this has assets in the u.s. and
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china. buy aill acquire those new subsidiary. shares are higher by 14%. the group is also getting a boost and that is because westinghouse is in negotiations to higher a managed construction workforce onto u.s. projects. though shares are up by 7% as well. bella, theing at cap hunting and sporting goods retail chain. it's up 19% after elliott associates disclosed in 11% stake in the company and made a push for a shakeup or sale, saying the shares are significantly undervalued. those shares had a drop last week after reporting earnings missed estimates. the shares even with this game today are down 25% this year. and then there is the big deal today -- that is walgreens agreeing to buy write eight for $9.4 billion in cash. if you add that to that, the value goes to $17.2 billion.
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if we look at those white eight shares, the offer is nine dollars a share. interestingly, rite aid has been falling today. were up huge yesterday on speculation that this deal is getting close to completion and there may be some antitrust concerns. the total locations between the two of these would be nearly 13,000. could be some concerns about any antitrust scrutiny. betty: the appellee could be. julie, thank you. staying on wall screens -- and expanding their drugstore empire, that would combine the second and third largest drugstore chain. the cfo explained on a conference call why he is confident about the deal. >> we will access the structures in a way much we have done with the walgreens alliance transaction. we have a team who is very thoseenced in accessing
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and we are very confident that we are in our numbers. betty: bloomberg news is here to break out this deal for us. it is as julie was describing a gigantic footprint now between the two. how is that going to go over with regulators? >> the question is whether or not regulators look at it and say why not divest x number of stores? in some industries that would not be an issue, but there is a huge question of who is the sellrer if they have to 400 pharmacies. there are not many other chains that look like natural buyers. it does not seem clear if they are exactly required to divest rather than close stores, which the sec can do. sell stores need to to retain the pharmacy footprint that exist in a given community. it is not clear who might be the buyers. that, what do they
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do? if they have to sell the stores, what do they do with this? cynthia: they might have to look at selling them off to individual pharmacies. they may not get the sell price necessarily that they want and that made make the deal i little less attractive in terms of the dollars and cents. they have talked a lot on the call about rationalizing the store base and making the store based work for them. from the walgreens perspective, this is about the bigger retail footprint and how they manage it. they are trying to sell the deal to be ae not using this stronger negotiator with the pharmaceutical benefits managers and insurers, which is a whole other side of the deal which is a really important dynamic. betty: isn't it not going to give them more leverage? they say they are not doing this, but it is. cynthia: it is inevitable. see will be interesting to is how this plays out and whether this is a measure issue for -- another issue for regulators. it looks for now that regulators -- it would be hard for them to wait and on some of the distribution arrangements that they have because it is a little
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bit convoluted and not as directly obvious how it impacts patients. ultimately, the big risk here is that everyone ends up paying more for their drugs as a result of this much bigger pharmacy chain emerging. s?tty: what about cvds cynthia: it leaves them at a competitive advantage in size at one hand. on the other hand, they already have a pharmaceutical benefits manager. a control a lot more of the pharmacy chain and distribution chain than a combined walgreens and right aid would. bigger make it much competitor, particularly on the retail side. that is a big part of the business that both companies are trying to spruce up your it does create top attention from that point of view, but they have a captive audience because of owning this pharmaceutical benefits manager. betty: quick before we go, you mentioned the retail footprint and also what walgreens needs to do to transform, i guess, some of right aid's if the deal goes through.
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what is working and what is not working? a reallythis is interesting time for walgreens because they are in the process of integrating already, which is a deal that they put together with this european chain and american change. they are trying to bring the european brands and give it a component. beauty they are in the process of doing this and the results today were not great from a retail point of view. that is part of also what is going on with the stock. analysts are saying that we are not excited with how the retail is going yet. still playing the question is how they get that on track and do they carry that out through rite aid. that remains to be seen and that is a tough business to turn around, but they are already deep in it right now. betty: thank you, cynthia cans of bloomberg news. staying on retail on the date," targetket is making a turnaround and how
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the retailer is getting back on track after a really tumultuous 12 months. ♪
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>> we have had to make some tough choices and over the last 16 months, as a teen, we have made some really tough choices. exit camera, which was a very difficult decision. not what i expected when i joined the company back in august of 2014, but as we looked at it, it was the right thing to do. wrong? was what was wrong where? that might've been part of where the flaw started to surface. the canadian consumer is very different from the u.s.. the consumer in canada is very different in montreal than they are in vancouver. we may very quickly up there and we opened up 133 stores in about 18 months and built three
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distribution centers. unfortunately, we moved faster than we built capabilities. at the end of the day, when i looked at the canadian opportunity, it was not right for us. it was went to take us years, probably until 2021 to get that business to a point where it would even break even. we made the tough choice to really double down on our u.s. business and we are seeing the results of that focus. david: does that important lesson tell you about future expansion overseas? does that limit you for the time being to say that you do not look for real growth overseas? >> we are focused on the u.s. right now and we think we have growth opportunities for a number of years, but we have certainly learned some lessons from canada. as we go forward with some of our initiatives in the u.s., we are being very thoughtful about how we face those. we are going to validate before we rapidly expand. we are moving the smaller formats and to a number of quick urban centers. they are often great start in
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markets like boston and down in washington and san francisco. we are opening up a handful and we are testing and learning and getting consumer feedback before we rapidly expand. stephanie: you are making these extraordinary investments and showcasing everything for me at a time when i can go online and say, great, brian just taught me all the things that i want and my kids are going to want to i'm going to buy a cheaper elsewhere. how do you prevent me from doing that? value.till offer great but we have got to make sure that we deliver the right experience and stay true to our priorities, the essence of our brand promise is to expect more and pay less. we have to do more. we also have to make sure that we offer unique proprietary target brand. you cannot find those with other retailers. so that focus on making sure we are building our own brands and continentalght financial brands is a way to differentiate from competition. haveanie: those retailers
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stolen your gym by collaborating with high-end designers. at the beginning, it was only you. that is what got somebody many people in urban centers and a target store could now it is really what everybody does. how do you differentiate? >> we set the pace in the space with over 150 collaborations. while others try to emulate what we do and think about what we did in april with lily pulitzer, it was a single visits -- biggest collaboration ever. the buzz that we received -- we created black friday in april, people lining up in front of our stores. i think it showed that we can still deliver collaborations like no one else. and as we think about the future, and those will play a very important role in keeping the buzz and interest around our brand. ♪
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world live from bloomberg headquarters in midtown manhattan, you're watching "bloomberg market day." i'm betty liu and let's start with the bloomberg first were news. courtney donohoe has more from
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our news desk. courtney: let's start with the federal reserve. two and a half hours from now, we will see what policymakers have decided. on traders are betting there is no much of a chance of a rate hike. a now count on the fed delaying a rate increase until next year. economic data has been mixed since the fed met last month. embers on job, manufacturing, and retail sales all canon worse than expected. bloomberg will bring you the fed's announcement as soon as it is released. that is 2:00 p.m. eastern time. former house speaker dennis hastert is likely to be headed to prison. in chicago today, the illinois republican pleaded guilty in a hush money case. prosecutors amended that he get up to a six-month sentence. hastert was accused of taking almost $1 million at a bank account to pay for an unidentified person silence. it has to do with allegations from his days as a high school wrestling coach. meanwhile, the man who is likely to be the next speaker of the house says the budget compromise
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itinks" but he will vote for anyway. congress is facing a hard deadline and has a few good options. the house is expected to vote on the budget bill today. house republicans will name ryan their candidate for speaker, ensuring his election to market the atlantic storm season is entering its final month and it has been 10 years since a major hurricane hit the u.s.. since 2005, every category 3, 4, 5 hurricane that has formed in the atlantic has missed the u.s. and that is the longest streak dating back to 1851. that is a look at our first word news right now. you can always find the latest news on atty: courtney donohoe there the news desk. for the first time tonight, the republican candidates for president are going to face off with a new front runner this time. of a recent on top national poll with 26%. donald trump is not taking it in iowabegging voters
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to get his poll numbers up to be says he is big and iowa. all this comes in a campaign season that has the five expectations. i want to give to steve who is life for us in boulder, colorado , where the debate is going to be held tonight. the republican candidates have a new target on their list -- ben carson. is it going to be easier to take down ben carson then it was to take down donald trump? anybody is not think saying that anyone took down donald trump yet. there has been a national poll that says that he is trailing he isrson and their definitely trailing him in iowa. we have seen polls showing that. ben carson is the new darling of the race as some might say. he is leading and iowa and he is the tougher target than trump because of his demeanor. everybody says they like him because he is so soft-spoken and he is a little bit more -- he is less rambunctious than donald
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trump. people like that. it is harder to attack someone like that when they are calm her -- when they are calm her and a little bit more reserved. he has been ahead in these national polls for only a couple of days. betty: it is still in the early days of his lead. some of those lagging behind, in particular jeb bush, boy is he disappointing some of his backers. some have said to me that this debate is going to be key. it is one to show whether or not he can survive and thrive here. what is jeb bush going to have to do? has everyonesh watching him. he has probably got the most on the line right now. he is going to have to show that thes not only wanting presidency, but is willing to fight for it. i think we will see that for a lot of candidates, including trump. trump does not like to lose. he said in iowa last night that
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he was chiding some of the voters and some of his supporters. he said, what are you doing? my numbers are down here and i will not talk to you again if my numbers up.g it was classic trumpet and we will see a lot of that in this debate could trump does not like to lose and he will do anything to not fall more in the polls. betty: at least he seems like a winner when it comes to the size of these green rooms that these candidates have. you cannot see it, but our viewers can f. television and plus chairs. rand paul, in the single digits here, is green room looks like it is in some storm of locker room or bathroom stall or something like that. apparently, rand paul's campaign made a big fuss about that. do we know what the result was, steve? steve: i think it has been fixed. happy about that
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and there were a couple of campaigns like chris christie's that were not happy about it either. i think this shows the dynamic of what we are going to see on the stage. you have trumped being treated like a king and marco rubio has the speed or as is green room. there are a couple of candidates who are trailing in the polls and a little less in the bitlight who got a little of the secondary green room space. what it says about the debate is this -- you're going to see everybody fighting for time. you will see everybody fighting for respect, for attention, for everything. i think we should watch these candidates like the rand paul's and the chris christie's -- those that do not feel like they're getting their just deserts. they will fight for time even if they are not called on. we will see a little the fireworks because of that. betty: they will not be put in their place by any green room, not for a moment. steve, thank you for bloomberg
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politics at the debate. i want to bring in wendy schiller, a professor of political science at brown university. we got the down low with steve on the debate. howade a great point about ben carson may be a little bit of a tougher candidate to try to knock off. what do you think the candidates are going to do? wendy: it is really important for ben carson to reinforce his conservative bona fides. ohio is a very conservative version of the republican party. they are concerned about social issues. ben carson has come out strongly against abortion. that has hurt trump and iowa. they do not trust his social conservativism. let's see him try to adapt to that. trump still has a bit of an edge, but they are skeptical of his finances. they like fiscal conservatives and do not like to spend a lot
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of money. who knows how trump will play their? the big question is on rubio and bush. libya has to capitalize on momentum from the last debate where he did very well. you has to show the republican party that you can be the front runner and leader. bush has a problem being tagged as a loser. if his results do not move soon, people will wonder if he can win the general. that will waver his poll numbers in the primary and keep them low. betty: speaking of marco rubio, his hometown newspapers are not happy with his campaigning and what they see as a complete lack of focus on his job in florida. "yourortis sentinel" said job is to represent floridians .n the senate either do your job, senator rubio, or resign it." should they give him some slack here? wendy: you are giving ineffective florida on the residual race and senate rate. want to lose that
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seat in the united states senate. they do not want rubio to be vulnerable in case he does not become the nominee. then they have a problem of fighting for that seat. theillary clinton is nominee and has momentum and foredeck, that could carry a democrat in. that is a double win me for florida and the gop. that's why they want him to pay attention to the senate job. congress is one big pile of mud stuck on lots of issues that voters are unhappy about. if you're running for president, you want to run as far away from congress as you can. go, youust before we mentioned hillary clinton. she is likely going to be watching this debate. what is interesting is that she was on the stephen colbert show less i could -- last night. couple weeks and has pulled way ahead now of bernie sanders in polls. she talked about wall street and letting banks fail. i want you to hear what she said about that. and theu are president banks are failing, do we let them fail? >> yes. >> we let them fail this time?
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>> yes. >> wow. >> first of all, under dodd-frank, that is what will happen because we now have stress tests and i'm going to impose a risk fee on the big banks if they engage in risky ,ehavior, but they have to know their shareholders have to know that, yes, they will fail. betty: how do you think that is going to go over, professor, letting banks fail? , the landhink in iowa of populism, i think that is what bernie sanders has it. it is a very smart campaign in getting bernie sanders out of the game early and winning iowa. you cannot let the big banks fail. obama knew that. i think dodd-frank is about regulating so that they do not fail. i think she misfired on that answer. the answer should've been the obama administration has put in place steps to make sure the
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banks do not fail. she is trying these standards and fighting for her final lead in the primary. running for the primary can cost you little bit and maybe a lot and the general. betty: thank you so much, professor wendy schiller, professor of political science at brown university. make sure you stay tuned tonight for a special one-hour "with all due respect" beginning at 5:00 p.m. eastern time, a look at att is the state -- at stake the repugnant debate tonight in boulder, colorado. another well watched that they could twitter is taking on the chin today after disappointing results. we saw the stocks down considerably today and it is off now by 6%. can the company ever be as mainstream as facebook? we going to discuss that next. ♪
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betty: welcome back to "bloomberg market day." it is time for the bloomberg business/, a look at the biggest business stories in the news right now. i really workers at general motors will get a bonus as much as $8,000 in a new contractor the deal includes a better profit-sharing deal than the contract approved last week by a union members at fiat chrysler. workers sto start voting on the contract friday. weather channel and weather underground websites and not the tv channel itself could the terms of the deal were not announced. ibm calls it part of a bigger strategy. >> we will certainly extend the weather capability, but we are not doing this just for the weather. we want to extend this is a telematics and mobile and health care and other areas. betty: ibm has been trying to improve its ability to crunch data for customers. it will now release forecast data from idea. -- ibm.
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you can always get more is this news at let's head to europe where mark has the latest from the rally going on in london. european stocks rising and investors are waiting for the outcome of the fed meeting. they are readying themselves to dissect the policy statement. here's a nice fact for you, betty could since the fed kept rates unchanged on september 17, europe's benchmarks have risen by 3.8 percent, only 24 hours ago. we were talking about oil companies being the worst performers. turned it on its head and flip it over because today oil companies are the best performers as oil rallies today, following that drop in u.s. prices. it is not just about the fed today. it is about a slew of earnings from some of europe's biggest companies could among them is volkswagen. yes, we had a loss for the first time in 15 years. yes, we had a profit warnings,
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but we had increased margins at the namesake volkswagen brand. that was important. that has boosted volkswagen shares by 3.6%. also, the chief executive says the company does have the strength to overcome the scandal. betty, he would be forgiven for thinking that there are only two your companies in the world. do not be mistaken. there is a third and is the world third's biggest. it is heineken. shares of by 4% today. the company reported better-than-expected third-quarter sales. why? because of a warm european summer. very quickly, it's not about the said today. there was another major central bank which issued its latest policy announcement. we are talking sweden here. yes, interest rates were kept at a record low of minus .35%. more qb -- the qb button was 65ssed and increased qe by
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billion crown. it is not every day that you see a currency rise when a central bank presses the qe button. isyou consume, the dollar falling against the krone. that creates headaches for the central bank in sweden. it wants a low currency to boost inflation, the opposite of courses happening. that is it for me. from them.nundrum mark barton in london. for a look at how u.s. markets are trading here, abigail doolittle has the latest live from the nasdaq, starting with tech stocks. akamai does bucking the trend with a composite index of 6/10 of 1%. akamai does not so much, down 19% for the biggest drop since july 2009, after the company salesd a full years forecast that missed the estimate of $591.4 million. you have a number of downgrades
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including j.p. morgan and calendar. it shows in the stock could talk about volatility. just yesterday, the stock was up in 20% year-to-date and now it is down 3.8% year to date. we do housing green as we mentioned with the composite , this company put up a great fiscal year fourth quarter yesterday after the bell, beating top analyst estimates on both the top and bottom line. and partly, the company says it sees another record holiday season coming on strong iphone demand. is really bullish year. 84% of analysts out there have a buy rating and there is 27% 12 monthtential to the consensus price target of $148. shares are up a little more than 2% at this time, betty. betty: thank you, abigail doolittle. shares of twitter under pressure after earning results fall short of expectations. on a conference call, jack
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dorsey argued that new products are a string in a new twitter. start of older civilization efforts on twitter. i challenge our teams to look beyond assumptions about what twitter makes the best place to share what is happening. i'm confident our ideas will result in a service that is far easier to understand and much more powerful. betty: cory johnson is in san francisco for what is next with the company. another month and another quarter of slow user growth. what gives? what are they going to do? cory: the revenue guidance was a shocker and they hope the worst was over. he got a central the conference call that the worst is not over for twitter could you are right. user growth numbers are really a disappointment, i think. you look at facebook with so into the billions and you have twitter really stalling at 320 million. they only have 4 million users in the growth rate.
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tohink that is the best way look at it. it should not be a seasonal business, practically at the state. 1.3% growth over the previous quarter is the slowest gross -- growth in users that twitter has ever had. you think of all the money from the ipo and the awareness of what the product is would be adding users like crazy right now. indeed, it is going the opposite direction. get this -- they have added zero users, zero net users since march in the u.s.. they have been stuck at six is 6 million users in the u.s. since march. whatever users they have had, they lost another one and as a disappointment for this company. betty: i do not know if it is a lack of awareness, because they are doing thing now where they bought an ad during the world series game last night. is any of that going to help? cory: i do not think awareness is the issue. i think functionality and
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usefulness. i think the narrative might change a little bit. i did not see everything as a negative from the results yesterday. one of the things i look at is not much about the users they are adding and where, but the value and how much they can charge for an advocate if they do a really simple calculation of the average revenue per user, that actually has gone up quite a bit. this was as low as $.25 at user and now you have these guys doing really big numbers there. showed ite image that at $1.78 per user and the most recent quarter. that is quite high. and going really rapidly. it is growing well over 46% year over year. i think that is the narrative that might change around twitter for the company because the growth on users are not good. but the value of the users are getting better and what that fundamentally means is that twitter is finding ways to sell the ads better. who is not on twitter that you want to see on twitter anyway? do you really want your mother
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on twitter? maybe not. donald trump? definitely. betty: cory johnson, thank you. cory johnson with the west coast wake up. still ahead on "bloomberg market day," julie hyman with a look at the austin market. will be back. ♪
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julie: welcome back. i'm julie hyman. let's get to today's options inside. chicago ands from jim, we are looking at a rally today heading into the fed. you are seeingif any interesting activity prices in the options market ahead of that. really now, there is expectation that the fed is going to move on rates today. are there any anomalies that you have been noticing? jim: there are definitely any anomalies.
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if anything, the order flow nobody ishe idea that expecting fireworks from the fed today. we are seeing a move lower in the vix/ . so someone is concerned about thereight happen today, is price protection. expectations are for little to no movement. s&p futures options market makers are pricing 20 points. what of action to the upside or down side by friday's close thomas of there is not much movement regardless of what the fed cattle assay. julie: the big catalyst that we have had his earnings. it has been more stock focus. that is where your trade of the day comes in. you're looking at mastercard come out with its numbers tomorrow morning. we have seen the stock go up over the past several quarters when it comes out with its numbers. you have a bullish trade here. jim: absolutely. the stock has rallied 10 out of the past 12 quarters. there is an average move up around 3.2 5%.
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market makers this time around are pricing around 3.4% worth of actions and to the options that expire this friday. i've in upstate target between 102-103 between friday's expiration and i can take advantage by buying the 101-103 call spread that expires this week for $.45. this is a 45 for one dollar bet that gives me a potential reward of $155. if it goes to the market makers target, i can triple my market money in a few short days. julie: there is a pretty products expectation that we are going to see the stock move higher. is this a relatively pricey trade for you? jim: this is actually a pretty cheap spread to put on you. i'm getting some much upside. it is exactly the type of trayvon one-run up. we are seeing individual correlations in the broader market breakdown. the s&p correlation index is the lowest it has been in a couple of years and i want to have trades like this better catalyst driven an individual equities could the broader market
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struggles to find direction here. julie: i am lastly curious about mastercard versus visa and why you chose to go bullish on mastercard versus visa. might you still do that as well? jim: i may get long run visa as well. mastercard and visa are my favorite names in the space. a xp had a dismal quarter that they reported last week. indications ahead of that earnings release were also very heiress. we have bullish indications in visa and mastercard, which is why i want to long those. julie: good for you. jim, thank you for joining us in chicago. we will have more "bloomberg market day" coming up. ♪
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>> it is noon in new york and 4:00 p.m. and london and midnight and hong kong. betty: welcome to "bloomberg market day." ♪
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scarlet: good afternoon. i am scarlet fu. i am out still. willis said rate hike come down at 2:00 p.m.? probably not, but there is much to discuss while the watch and wait. scarlet: anchors may not find hillary comments laughable. what is underneath those chinese fourth-quarter numbers? scarlet: we have got to start things off with today's market activity. for that, i went to head over to bloomberg's julie hyman at the market desperate we are at the height of the session. ahead seeing stocks rally of the fed statements. i'm not going to call it a decision because there is not much suspense going on there could als
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