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tv   Bloomberg Markets  Bloomberg  November 2, 2015 12:00pm-2:01pm EST

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scarlet: good afternoon, i'm scarlet few -- scarlet fu. but everything is hanging on the fed's decision. resultising electoral since the stock soaring in turkey. richard branson explains what it means for the airline business. we want to get you started with today's market activity. let's checking with julie hyman. there is a lot of data to digest. julie: a mixed picture, and as even if the data came in worse than estimated, it is not exactly a blessing for markets. being seeing a rally also
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bullied by the news we got in mergers and acquisitions. -- it is noty necessarily all about the fed, take a look at my bloomberg terminal for the latest from the view irp. -- wirp. it is been hovering near that level sending ripples throughout the rest of the asset classes. take a look at the 10 year and what we are seeing. evil are focusing on -- people are focusing on futures. a five week 2.18% is where we are on the 10 year at this point. remember that 50% level is up
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from 33% just about a month ago. alix: you're talking about treasuries. what about other asset classes? -- gold isn here it down. julie: it is at a four-week low. pence of ajust six percent. -- .6%. have this ripple effect. i want to take a look at the euro. it is extended its longest winning streak since september. despite mario draghi saying he is willing to come in with more stimulus, he gave an interview , it isekend, and he said too early to lower the deposit rate. he said it is still an open question as well as the central -- needs to
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we are going to check in with julie later on. involvingn deal aziza. mark crumpton has more from our news desk. high market, i am really sorry about the mess. mark: the united states is a cannot rule out terrorism and the weekend crash of that rush and passenger plane. the plane passed -- crashed in egypt and killed 224 people on board. isis claimed responsibility for -- for the incident. evidence toe is no back up that claim. officials said only an external impact could have caused that to crash. >> in less than a minute, the
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speed of the plane dropped i more than 300 kilometers per hour. there was a simultaneous loss of out to two to 1.5 kilometers. passengerssible for a plane to move like that, which means the plane was not flying, but falling. mark: the search for bodies continues. the u.s. and south korea are its rest -- are expressing grave -- to conduct a nuclear test. u.s. defense secretary ash quotingalled the regime an up close and dangerous threat. president obama calls for a massive overhaul of the criminal justice entered. he visited a treatment center in new york -- newark, new jersey. the president is calling for a
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break in the cycle of incarceration by helping former inmates successfully reenter society. monday, wews on this are continuing to follow some of the other stories today including the president being in wark.ork -- in new jeb bush hopes to jumpstart his campaign this week. sh begins a-- mr. bu three-day tour. mr. bush was once considered a front runner of 2016, but has fallen in the polls. health officials are expecting the people sickened by an e. coli outbreak linked to chipotle restaurant in washington state and oregon to go on. -- to grow. that is a look at our news right now. you can always find the latest
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on scarlet: it is one of my favorite weeks of the year, pmi week. we get a read on the manufacturing sector around the world. ist we have seen so far interesting because if you look at how the numbers checked out -- it is above 50 indicating expansion. but the -- the u.s. holding above 54. china reading above the d. -- above 50. alix: marked, when you look at that global chart, do you see stabilization? >> based on the most by their banks, i think it is safe to say they are stable for the moment because they are being very accommodative. nothis point, you can be -- optimistic, but you can certainly say they are us
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legalizing think pretty well over there. scarlet: is the global growth scare over? >> no, i don't think so at all for those reasons. an investor cost standpoint, concentrating -- what we have our on our out on -- on outline fund, we concentrate on u.s. centric stocks. there is still risk out there. ison't think the risk reward getting aggressive overseas. alix: do you favor small cap stocks? how do you avoid stability of the big multinationals? >> multinationals have been on an earnings screen for a number of years. dears, there is too much overhang and too much capacity. china is a big influence. there are a lot of large cap
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names that pay dividends in addition to small-cap names. scarlet: when you look at the tech sector that has decent earnings, there has to be a case to be made for a lot of these names. >> google is an industry that is growing dramatically. they're pricing is doing very well. growth industry. enormous.low is there is a lot of growth there. those shares, including apple, i would think those are reasonably priced names. that we have seen stocks have a lot of capital that goes towards buybacks and underperforming the market. investors would prefer a better balance sheet. they prefer something different. are you noticing that kind of rotation right now? >> i think that is true. the first being whether its
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dividend or by fax, you have to look for free clash -- cash flow. they had the opportunity to rate the dividend or do a buyback. when they are not generating enough free cash flow and they are also trying to a recipe buy back their stock, that is a warning sign that you are not going to get the payback you would expect. we are not chasing all the names just because it has a buyback. it is not necessarily a good buyback. scarlet: what is a federal rate increase mean? 50% iss remember that the same as a coin flip. we think that whatever happens, it is going to be a nominal move and very elongated. again, we are concentrating on the financials after. they had been punished so long for the rates. anything on the upside is going to be better. the caps, small caps? >> mostly large-cap names.
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some of the investment banks, not as much. we think a keyboard and is doing a good job. , it'sk at discover card all domestic. the most well capitalized financial institutions. we had a 14% capital ratio. the only reason the yield isn't higher, it's because the treasury won't let them have any higher. we think it's a very attractive stop at this ice. alix: you also like zimmerman biometric holdings. knee orver hurt your had a replacement,. you have heard of them. we also like self-help stories. it is a merger, it is a lot of synergies.
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the merger took a long time to get into place. we think the salesforce had a hard time, they lost a little share. the reported last week. we are optimistic that these are getting back on track. it is a 16ish pe stock. we think they can earn nine dollars per share. we think the story is back on track. scarlet: thank you so much for joining us today. at outlineanager funds. second entry vote this year. what is behind the deutsche bank warning of the u.s. start it? we'll take a look at the impact of industrial growth. they're saying aig is too big to succeed.
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will that support their claims. ? ♪
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♪ scarlet: scarlet: welcome back to bloomberg markets. it is time for the bloomberg business/. factory activity grew last month at its lowest pay since 2013. the management -- it's slipped in october. it barely signaled growth. scarlet: shares of valiant pharmaceuticals are rising. it will not release any new allegations against the drug maker.
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shares plummeted in one day after citroen accused the company of recording fake sales. gateway -- hammond started gateway and it became one of the most popular computers on the market. my cam it was only 53 years old. mmond was only 53 years old. scarlet: let's head over to the markets desk are as promised, julie hyman has news. julie: it is buying a piece of itself. not exactly the biggest no-brainer, if you will, if that makes sense. is going to bite european affiliate. 23 point $4 billion. -- $23.4 billion.
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exposurehe european more directly. these issues are trading lower this week. visa shares are trading lower this week. you can see this year's are down by nearly 6%. an ailingess has been 14 years and analysts are expressing doubt that treehouse will be able to turn it around. there is a nether deal in the drug industry, shiner, which is still trying to buy in and unsolicited offer, agrees to buy a company for $9.9 billion in cash to of either a new therapy for a rare genetic disorder. analysts say it could generate $20 billion in sales.
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let's get the latest check on m&a. m&a is a quarterly look at by volume. order, in the third the first nine months of the year, we have seen the highest volume since 2007. also the have seen the largest number of deals. just getting into the fourth order, a month or so, we have already seen a lot of volume. when we talk about a lot of these deals, it's because there are a lot of deals. that is what is going on. alix: the higher the price versus how many deals we have a little skewed. julie: keep in mind, a lot of this action coming after the big drop in stocks in august.
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the deal premiums are skewed by that as well. those prices have come down. alix: julie hyman, thank you so much. now to istanbul, in turkey, a surprise win for erdogan. markets are responding to the news. scarlet: bloomberg's tom mackenzie is in stumble with more. : the party of erdogan defined the polls and getting the outright majority. they upped their votes by $4.5 million -- 4.5 million votes. .he markets have responded the stock exchange and bonds all up. that this may not last. there are significant economic and social challenges facing this country. inflation is up.
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joblessness is up. that is the forecast. compared to 9% in 2011. then you have all of the political and social divisions. there are some big challenges for the government as they look ahead. tom mackenzie, bloomberg news, istanbul. alix: joining us is william jackson, he is with capital economics and he joins us from london. iq so much for joining us, william. is aight that this goldilocks outcome for investors because of erdogan's victory. will that be the same in a few months? party -- we don't have the political uncertainty. the victory has not been large enough so the ak party can change the constitution.
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there are plans to change the constitution and strengthen the presidency. if we look beyond the next few see sort of, realization that actually economic problems in turkey have been apparent, even before the round of elections tense june. inflation is higher and rising. there are concerns about central bank independence, too. unless we see improvement on those fronts, some of these recent gains may not be enough. we have a fed rate increase on the horizon, how do they continue to make it sustainable? they're looking for solutions to help restore credibility. there are some moves we should be looking out for. to cementbe efforts
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central banks's independence. allowing the central bank to raise rates. theddition, appointments to cabinets. bank is ahe central massive importance to investors, but what about or to want's priority when it comes to -- erdogan's reform? position has his relatively limited power, but he has influence over his party. -- wek -- if we look past look to the past few years of any evidence we might see is , isly to be, my best guess we are likely to see a move towards loose policy and putting pressure on the central bank. fiscal policy will remain supportive. i don't think we'll see the big
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reform. do you believe these results? they caught everyone off guard. do you trust them west? tom: we have seen a number of elections recently that caught people by surprise. oppositionwe saw the secure a majority in parliament. in the u.k., it surprised people. the fact that the ak party secured 10% point -- 10 points more, it doesn't come as a surprise. scarlet: thank you so much. that is a good point. you have the rise of the radicals of ross europe. north america, too. doesn't mean bernie sanders is going to be president in a year? that is a good point.
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still ahead on bloomberg markets, u.s. manufacturing renaissance. we'll find out why one strategist says it is turning into an industrial dark age. ♪
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♪ back to welcome bloomberg markets, i'm scarlet fu. alix: and i'm alix steel. but we saw in the late 1980's and 1990's. the founder of deutsche bank founded that fell over the weekend. the renaissance is turning into an industrial dark eight. age.dustrial dark scarlet: you were to take a look at one of the charts he included in the industrial sector, it tells a clerestory.
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they rolled over in terms of sales growth. the last two quarters have a negative read. you back out the defense sector, it doesn't look any better as well. he says that auto manufacturing is one of the better sectors. alix: he said the same being with tech as well. he said he has seen 5% of that protect. if you see google and apple, tech may look good, if you back out to big guys, it is actually negative. i found that very staggering. it doesn't show much beyond the stabilization. alix: much more coming up. aig is next.
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♪ worldt: from bloomberg headquarters. i'm scarlet fu. we'll check in with mark
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crumpton from our news desk. mark: a rush an airline official says and asked impact probably to crash inlane egypt killing all 224 people aboard. they have ruled out the possibility of pilot error or system failure. james clapper says he cannot rule out a terrorist attack. >> we don't have direct evidence of any terrorist involvement yet. responsibility in a tweet. know andeally don't once the black boxes have been recovered, perhaps we'll no more. said,as director clapper
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they claimed -- isis claimed responsibility for shooting down the plane, but those claims were not credible. three nightclub owners are suspected of manslaughter in a people.t killed 80 it caused a stampede. statistics show just how large european refugee crisis has grown. more than 218,000 refugees made the journey in october alone. investigators say they may have found the wreckage of the cargo ship el faro. 33 people were on board. investigators, using sonar,
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found a ship below the ocean's surface. kansas city royals fans have been waiting 30 years for this victory. series fore world games to 1. salvador perez was named the most valuable way or. -- the most valuable player. scarlet, don't say it. scarlet: they need you read the headlines? you were groaning as you are reading it. mark: i'm feeling pain, but congratulations to the new champions. they played a very, very smart series. alix: i'm waiting for him to blink something. [laughter] , aig, the stock is higher.
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big said the company is too to succeed and he has been calling for aig to split into three companies. ask an analyst who joins us from san francisco. icon and paulson once aig to split. they discussed a spinoff. that doesn't go far enough. you think should be done? see what the plan as. it is worth taking a look at. this is something that they have looked at in the past, but there are some hurdles they have to cross to get there. there is a broad consensus that aig is a franchise that is underperforming and not meeting its potential. alix: do you have any idea of the relationship between the tune as. do you know what their communications strategy is? very openit is a
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board, open management team. i know they have looked at exploring different ways to extract value. scarlet: p or hancock has been hancock.lm -- pierre what has he done to prove his medal? >> it is a difficult situation that aig. they had this miraculous recovery and have done a great job. at this point, the next stage of improving aig is improving the underwriting results, cutting costs, it takes time. i think he has been given some tall orders. that,t: you mentioned that it is competitive, the underwriting business. three were to split into and to become focused, is a
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scope to combine with someone else or something else once that part of the business is taken care of? >> that is a possibility they were to be broken up. they are underwriting results and -- results underperform their peers. it's not only on the operating expense tied, but the administration side. certainly, there is a lot of work to be done. alix: he said he is the manning that 10% of a return on equity. hancock says he would hit and that has not been the case. -- what can we expect on that address of the call? i think there is some expense cutting opportunity. this is a company that was formed from corporate
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infrastructure. up-to-date systems the new technology could cut costs. there isn't actually are of government oversight for aig which has a cost as well. is that it argument may lose its status if it were to be broken up. scarlet: what does aig need to do? i think they have a broad set of shareholders. i think they do view that they are underperforming right now. it i think the stock valuation indicates that there is an understanding that aig is not meeting its potential in terms of its earnings. alix: good stuff, thank you so much, cliff.
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we'll get those results after the closing bell. scarlet: the next 20 minutes, virgin america says aloha to hawaii. richard branson will tell us about his ambitions for the company. alix: chinese manufacturing is down for a third month. should investors be worried? the bond market is sending ominous signs around the globe. what our bond traders predicting ? ♪
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♪ scarlet: welcome back to bloomberg markets, i'm scarlet fu. alix: and i'm alex deal. scarlet: time to look at the biggest news stories.
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buffet at the way is expected to record -- release corporate profit. spot in whatght has been a challenging year. they are struggling to regain market share. geico struggling with rising claims costs. alix: u.s. construction spending rose to the highest level since 2008. due to a surge in apartment buildings. construction of single-family homes rose 1.3%. overall, private residential construction rose to the highest levels since 2008. prices rose for .eaworld th
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you can always get more business news at alix: chinese manufacturing contracted. stocks fell for a second day. pmi rose from a six-year low. that is still in contraction. chinese manufacturers are faced with continue pressures and weak demand from abroad. atshows some stabilization 49.8, the same as the previous month. month in was the third a row below 50. scarlet: that was bloomberg's stephen engle from hong kong.
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has theigail doolittle latest from the nasdaq in manhattan. abigail: it is m&a monday over at the nasdaq. we have shares of dyex. this bid can move up higher depending on the approval of a rare disorder -- rare genetic disorder drug. they're calling it a strategic fit for the company. that they'reing it calling the deal a win. web-based enough marketing services company is up sharply. represents -- endurance sees immediate and long-term benefit from the deal and
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12%cts to generate 10% to for fiscal year 2016. alex and scarlet. launchedvirgin america a new nonstop flight from san francisco to honolulu. branson and david cush are both on hand to celebrate this event and they sat down with cory johnson will begin by asking branson's virgin america was meeting his goals of the company. take a listen. >> we couldn't be happier. voted the airline best airline. we both have honolulu and maui. [laughter]
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importantly, we have 4000 wonderful people who work at virgin america who do it with a smile. the -- when you are on a virgin plane, you can feel it. >> do you get a premium for that experience? one can argue that the airline industry is price-sensitive. i would say we do get a premium. we are slightly above industry average in terms of average fair. we are 20% above low-cost carriers. price is important, but it is not the only component. shoppedast, when people at price only, it's because all the airlines were the same. is all it takes to make a difference between profitable and very profitable in this industry. >> you have been in the airline industry for a long time, what
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do the competitors not get about this? they would all talk about customer experience. they don't deliver. >> i don't diminish the complexity of the company these guys are trying to run. cap 1000 airplanes. their job is to move metal around, move airplanes around. they are big, complex systems. we have an advantage because we do use a simpler system. we have new, energized employees. they have been challenges. employees whoad have been on the dell for a long time, so they are disgruntled? >> the industry has been through tough times. i think those wounds take a long time to heal. el. >> in terms of the internet
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you're getting some new planes to go with it. it ing of a change is terms to have to rewire planes? >> you don't really think twice about. this is just a continuation on the evolution we have always been on her it we are the first -- we have always been on. we are going to satellite now that it has been proven. our challenge is going to be getting our airplanes as soon as possible because the customers are expecting more out of wi-fi. you expected on an airplane and expected to work. that is a big part of our challenge. >> how does it relate in terms of what planes to our buying? we'll continue to be an
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airbus carrier. they make great airplanes. 2016 and 2017, we are very interested in that airplane. alix: cory johnson enjoyed -- joins us. they said they have very different ways of differentiating themselves other than price. how does it stack up against other carriers? : as he points out, the ticket price, you see the difference. across the third quarter, you saw the average passenger revenue. so many of the airlines is as a metric. the industry saw prices fall. virgin felt the least among the big carriers, or the major u.s. characters -- carriers. you can see it in the way they
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like the planes, quality of food on the planes. i flight was a bit and i flight virgin america light a bit. there is definitely a little ine pet in their step -- pep the step of their employees. that is a competitive advantage a have because their employees don't take their job. alix: you do have overall profit margins because we do see oil prices stabilizing. they are not pity percent declined. spirit has -- they are not 50% declined. cory: so the company has taken the delivery of five warplanes and they are in expansion mode. as to howbeen clever they have expanded. they are in portland, but only
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do two flights a day portland to san francisco. dallas. expanding into they have a couple and that has been a very profitable route for them. the expansion in hawaii is a really big deal for them. in to honolulu, starting today, into maui in a couple of weeks. virgin america deftly in expansion mode. -- america definitely in expansion mode. alix: he looks like he's ready to travel, isn't he? scarlet: we have the latest economic data out of china and manufacturing. we are going to talk about what is concerning investors. alix: it was very lovely and warm in new york outside. ♪
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♪ back, i'melcome
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scarlet fu. investors looking for any signs that china is changing directions. rpirelease of the official still showing that the contraction. is, dohe first questions we trust them and do we care? don'take it clear they want to be a manufacturing economy. >> we are trying to figure out what that economy is doing. manufacturing is still a part of that. can we trust the numbers? what is a real number can look at coming out of china? if you look at the difference between the manufacturing pmi there is avices pmi, consistent gap, but services are still going. if you look at manufacturing or a credit expansion can make a
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services,, unlike but it is possible this expansion policy they have had over the last six months. consistent rate cuts, dropping ratios, the credit swap with the local government, that has had an effect. there is not much evidence when looking at the numbers that you are seeing a takeoff and services. scarlet: we have to go to the unofficial sources. what does that tell us? index, it another pmi is kind of a blunt instrument. up for a leg manufacturing, but it was consistently lower. let's go to the terminal, because i just found something. bloomberg intelligence has is a real- this activity index. this is where we see some real to virgins. it looks like
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nonmanufacturing activity, is the purchase of medications, any number of different thinks. you are looking at the yellow, the actual manufacturing. we see a clear to forget there. -- we see a clear divergent there. nursing to virgins and not amazing recovery. divergence, andg not amazing recovery. alix: we are not seeing services explode across the global economy. at least, it is stabilizing. that seems to be the goal. >> that is a perfectly fair reading. we are talking about the difference of what monetary structure can do versus structural -- monetary policy
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can do versus structural policy. it works much better for industry than it does for services. when an industry is not working at capacity as is now the case right now, there is less incentive to go out and buy new stuff when you have equipment that is lying idle. changes can provide economic growth. you cannot rely on your central bank to do everything for you. scarlet: it we have to look at some way like where money is actually heading. ?hat about outflows t >> it is looking at foreign exchange and the into china. foreign exchange going out of china. you're looking at capital outflows. there are people who know what is going on in china's economy. when you look at that number, would you look at the way it has
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outflow,$190 billion they know thinks they don't know -- they don't think we don't know. money is moving out of china. at -- we usedking as a proxy, real estate access meant in london and new york. it is also not looking at appreciation and the value. we are looking at absolute numbers. alix: good stuff. thank you. we'll have bloomberg marketing coming up.
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scarlet: welcome to bloomberg markets. ♪ ♪
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scarlet: from bloomberg world headquarters in new york, olivia: no matter where in the world you look, bonds are gaining. scarlet: what are the benefits of one global company. olivia: the controversy over valley and continues. valiant continues. scarlet: let's go over to the market desk with julie hyman. if you look at equities, we are at session highs. julie: stocks are gaining on the session and gaining steam. bit fromown a little the 10 day average.
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all three major averages are gaining. biotech stocks in the nasdaq are really ramping up. has been the leader today followed by energy and financials. they are up i more than 1%. we have had all this m&a activity giving fuel to a lot of gains in health care. we are watching pfizer and allergan again. they are making progress on what could be the year's biggest acquisition. they are working on a deal as early as next month. both of these stocks have been gaining in today's session , that company is coming out with earnings that beat estimates. one analyst writes that this is at and taxes contributed to that beat.
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they raises their forecast which is a nice surprise. cardinal health shares are up 4.5%. olivia: hewlett-packard is splitting into 2 middle market companies. julie: and it's a tale of two cities in terms of how the stocks are performing. it's an interesting split. hewlett-packard at the moment is not changed and even falling back. hp was the remnant of the original company -- about half of up 1%. whichever way you slice it, hp inc. is doing much better today. it sells printers and computers. the market value is around $26 billion. hewlett-packard enterprises sells servers and storage devices and its market cap is around $27 billion. meg whitman who is the ceo of
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hewlett-packard as a combined company says she expect a lot of volatility in the next few weeks. it looks like investors are voting for the legacy. business is the one that's doing better today. olivia: you would think software is where it's at. it's very interesting. and business focus but maybe there is a lot of competition on the enterprise side right now. olivia: thank you so much. scarlet: let's check in with mark crumpton. as investigators try to determine what brought down a russian passenger jet over the weekend, there is new information on the risks of flying over the sinai peninsula in egypt. there have been overflight warnings in place. the site of the crash that killed 224 people on board is the metro bus air -- is the metro bus airplane.
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26,000 feet is for bitten. russia says it will not stop until all of the bodies of been recovered. government will take more remains from egypt to st. petersburg. u.s. defense secretary asked carter says the regime of the north curia and later -- of the north korean leader is a continuing threat. he is in seoul meeting with south korean leaders and washington and south korea are expressing concern about the plan of north korea to conduct a nuclear test. president obama will visit a drug treatment center in new jersey as a push to overall the nations criminal justice system. they are call for breaking the cycle of incarceration by helping former inmates successfully reenter society. congress is considering legislation to cut sentences for nonviolent drug offenders. health officials say the number of people second by an e. coli tle inak linked to cipo
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washington state is set to rise. three people in portland and 19 people in western washington state have been second and senate -- and 17 of them ate at the restaurant. today's the 15th anniversary of the international space station. nasa and are celebrating the milestone as are the six men aboard the space station. the first permanent crew moved in november 2, 2000. first wordook at our news and you can find the latest on alix: bonds are signaling a growth for the global economy. scarlet: joining us now is lisa of rommel with. you just have to go -- lisa abramowitz. you can count the number of countries with huge yields.
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france and germany are right there and sweden and the netherlands. the u.s. looks relatively rich. lisa: let's discuss negative yields. people are saying we will pay you money so we can lend it to you. it is hard to pronounce the word. trillion of6.3 european government bonds in the 30% negativee yield which is insane. this tells you that investors are bearish on growth. if you look at the u.s., treasury yields on tenure notes are hovering around 2% and they can't seem to get away around -- away from that. even though u.s. is accelerating more than other races, you see signs that it cannot escape the dis-inflationary impact around the world. the 10 year yield in china
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are around 3% which is surprising. you think that's work growth would be and more risk put into chinese bonds but that was not the case. lisa: china has a different dynamic. people are trying to avoid risk and are piling into bonds driving yields lower. you have the prospect of more stimulus coming out of the government they are probably through the bond market. they have not used it to the extent other central banks have. they could potentially inflate values further their. in china, some of the same effects are happening with the central banks having to stimulate the economy more than it would otherwise do. the economy is slowing down and they need a certain amount of acceleration. to maintain the quality of life. betty: ho scarlet: how comfortable are the central banks with this?
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lisa: it's a perverse consequence of their actions. a more volatile market when you have negative yields. once you don't have momentum and yields are not going more negative, there is no reason for investors to hold these bonds. the only reason why investors are holding these bonds is if it was a bet on the euro. they might think it's going to strengthen which has been happening but longer-term that's questionable. or if you thought yields would go more negative and other was more stimulus. marioa druggie said -- draghi said we are not sure. alix: you said negative yields would be a global recession and the only indicator is 55% call in cities. is this banks needing to hold on to more stuff because of regulatory complaints? it's not necessarily
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recessionary indicator. scarlet: it seems to be a consequence of regulations. : why aren't people spending their money on other stuff? less sanguineting about the credit situation in the u.s. you're seeing fundamental to terry ration and corporate balance sheets, governments that are less credit worthy. this is becoming more of an issue in a goes beyond simply the technicals. scarlet: what does this mean for liquidity? in terms of the ease of trading and getting in and out of trades -- i don't know if the bearish sentiment has to do with liquidity but a central banks start to lose control, you will -- if people cannot that predictably on the direction of specific central banks, you will start seeing incredible amounts of volatility. people are not sure and they
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lack their conviction there -- and there will not be as many players on either side to pick it up and create a buffer. you might see prices swing quite a bit. alix: safe haven but not really. thank you so much. scarlet: much more coming up on "bloomberg markets." is making a $20 billion bet on europe and we will have details next. talk to joseph stiglitz about what worries him about the u.s. economy. scarlet: how a tiny irish drugmaker could help make pfizer millions if it goes through. ♪
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scarlet: it's time for the bloomberg business flash. almostsoros is firm has $500 million from an account run by bill gross. the redemption is a setback for bill gross who has struggled to attract assets at his new on because of mediocre returns in the first year. as fun declined 1.2% this year trailing 71% of similar funds. alix: a big deal in biotech, dayax.s buying dyax makes a promising treatment for a rare genetic disorder. scarlet: volt wagon failed to report one death in three injuries involving its vehicles
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as required by law. the lawsuits tied to the accident which was filed in last eight years was not found in records cap by the national highway safety administration. the database is designed to save lives by spotting defects. 2 scarlet: you can always get more business news at alix: it's time to check on some company movers. monthlye had the macau gaming numbers but less bad. a decline of 28.4% year on year but that is the smallest decline we have seen since january. the casinos are all rising on this number, those that that -- that have exposure to macau. i got this change in the gambling revenue and you can see we have seen at shrinking to some degree ever since we saw the depth of the decline back in
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february. the number has been getting a little less worse. this is also the first month since january were the decline has been less than 30%. overall, gaming revenue in macau is down by 35.5%. it may be a measure of how things -- of how bad things are. also, looking at the earnings reports, we heard from church and dwight who make armand hammer. the shares are trading a little bit lower after earnings beat estimates. the company brought down the upper end of its estimate for full-year earnings growth. is doing quite well, rising the most in three years after its profit topped analyst estimates. the company has been introducing new products and has been selling well in luxury fragrances. those shares are up 7.5%. another one in the personal products arena is clorox.
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the company sales and earnings beat estimates. the only lacking part of the business was international in large heart because of currencies. scarlet: thank you so much. visa has agreed to buy visa europe are as much as $23.4 billion. the company was let back in 2007 it will be reunited. deal andknows of the earnings estimates are waiting on the stock. shares are down more than 3% today. give us some more perspective on this particular transaction? bth: this is a big deal
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for the first time as a public company, all of the these of business will be under one roof and investors will see the money generated in europe. in many ways, this was expected. bloomberg reported as early as may that these talks were underway. it's something the company has said it's been working toward for a number of years. even some of the deal terms were outlined in things analysts were expecting. havings of the benefits, all of your business under one and being ableit to see the earnings in that region. another advantage is pricing in the region. -- that these at europe there is an anticipation from analysts that the set will be able to raise its prices and therefore make some money. there are number of other
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benefits being under one roof. prices is goodg for them but not the consumer and it's a defensive play against mastercard in terms of their ability to capture u.s. and european customers? is this an opportunity for mastercard if visa has to raise prices? zabeth: this does not go directly to consumers. this sort of raises the question that because if they can raise prices or because they will have a formidable rival with mastercard, there is a chance mastercard could gain shares on the edges. it will take the company about four years to really implement this change. it's something that analysts and investors will be watching. scarlet: talk about the risks in this transaction. thissts have said that
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europe acquisition will be time-consuming and complex and take time to work out so we may not see the benefits right away. beth: the cost and the time it takes to implement these two businesses are seen as risks. this is a huge deal. already processes trillions of dollars of payments every year so there is a regulatory risk. i would go back to the pricing. in simple terms, mastercard can compete more directly and aggressively with visa. therefore, it makes it a more formidable competitor. alix: thank you so much. scarlet: we've got much more coming up. we will sit down with joseph stiglitz to get his read on the global economy and why he does not agree.
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scarlet: welcome back. alix: the gloves are off in a battle to define america's economic future. on the one side is former treasury secretary larry summers who says the u.s. economy is in an upward swing. on the other side is paul krugman saying the u.s. will be stuck in a state of depressed demand. where does joseph stiglitz come down? tom keene asked him that very question this morning. paul has often talked about the fundamental problem is what is called the zero load balance. the federal cannot lower interest rates below zero. it's been an zero for a long time. if only we could have the negative interest rates, the
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economy would recover. i think that's basically wrong. -2% interest rates because zero has been the nominal interest rate. we have had slow inflation. it has not helped a lot. %, it would make a difference but not much. people do not have income. when they don't have income, they don't spend and that's the trap that we are in. this is where i differ a little bit from larry summers. i have tried in my own writing for a long time tried to understand why there is this deficiency in aggregate demand. one of the reasons is inequality. pie withe dividing the
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more going to the top and less to the bottom, the people at the top spend a lot less than those at the bottom because they are spending less, there will be less investment. it's a vicious circle. that's where rewriting the rules comes in. how we rewrote the rule beginning in the 1980's to lead the massive inequality. the united states is now the number one in the world of vast inequality. there are a number of other factors that interact with why we have this inequality. we are engaging in a structural transformation from a manufacturing economy to a service economy. that transformation is never easy. markets do not do well on their own. what is the policy that you advocate?
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wages do not fall on it recessions to prevent unemployment from rising -- that is your statement. wages came down but not enough, unemployment went to 10%. the president says we are a job making machine. the sinks and is these are not the right kind of jobs. >> that is part of it and the other part is we have made enough jobs. those two ideas are related. whyof the important reasons we have such a weak economy and so much inequality is that job creation has been so slow that there is no pressure, upward pressure on wages. a normal expansion -- tom: 5300 or whatever. >> if the economy had not had a of 2008-2009, with the
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expansion of the labor force, we would have created a lot of new jobs for the new labor force and we did not do that. our jobs gap is over 3 million. what i'm saying is part of the problem is that while we create a lot of jobs making up for the lost jobs, we have not kept pace. scarlet: that was joseph stiglitz of columbia university. alix: that was a great conversation. u.s. drugmakers are finding possible golden ireland and we will explain what that means. ♪
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scarlet: this is "bloomberg markets." the white house says it is
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offering support to each of as officials try to determine what brought down a resident -- a russian passenger jet on the sunny peninsula. search teams there have finished combing a seven mile square area where the metro jet plane went down killing 224 passengers and crew. russia says it will not stop until all of the bodies of been recovered. officials say terrorism has not been ruled out. the owners of a romanian nightclub where a deadly fire broke out friday are apologizing. in a statement, the three so they have been reckless and take responsibility for the loss of life. 31 people were killed in the fire. 180 others were injured during a stampede for a single exit door. more than 100 people remain hospitalized. republican presidential candidate jeb bush is hoping to jumpstart his campaign this week. he is on a three-day tour which coincides with the release of a
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new book detailing his time as the governor of florida. he was once considered the front runner but has fallen far behind in the polls. former president jimmy carter promised he would lighten his work schedule after his cancer diagnosis but he admits that is not happened. fine.s he feels just the 91-year-old says he will continue to receive immune boosting drugs to help his body seek out cancer cells. the announced doctors had discovered tumors on his brain in august. our first wordat news. you can always find the latest news on scarlet: thank you. it is not just the luck of the irish back and say pfizer billions of dollars of it buys allergan. alix: a small drugmaker northern ireland deserves a tip of the cap. we have the story of the tiny drugmaker generating a
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lot of green for u.s. companies. give us the back story of how ireland became the preferred domicile of drug companies. reason ireland is attractive to drug companies in part is because they simply have a lower corporate tax rate than the united states. they are normally 12.5% versus %. ireland also has some other incentives that are attractive for pharma and tech companies. assets that are patents, they can get an even lower rate. we see companies continue to flee to ireland? what does that mean to regulators? >> from the u.s. perspective, rather than companies just starting in ireland and growing up there, many u.s. companies are finding these backdoor ways of becoming irish. u.s. rules, they try to prevent that from happening, they have to get creative. tos not enough
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declare yourself viruses sometimes they have to do a merger. there was a tiny drug company originally from northern ireland that helped 4 different pharmaceutical companies merge with it and get bigger. if it merges with pfizer, it will be the biggest drug company in the world. scarlet: was that always the intended destination? >> not at all. the guy who started the drug company was thinking in a different way. 2001 andhe company in after that, it started doing these big mergers with american drug companies. -- what does ireland get out of doing that? the day, pfizer is still not going to be an irish company. would not work out for the u.s. companies of ireland was getting everything. they do get something and they get some kind of second order effects, more employment in ireland they would otherwise
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have and i've got a thriving economy now. the basic justification is the tax breaks. scarlet: does the irish government looking for any more from these big companies? >> there is a discussion throughout the eu about how much is too much for a particular country to offer to companies to locate their. ireland has had to cut back on some of the really sweet things they were offering companies that the rest of the world set is too much. scarlet: how is this tied to the european debt crisis? did this come about because of the troubles that ireland had? >> i don't know if you can draw the connection but something we saw in the crisis in greece was the greek government does not collect a large percentage of the taxes. there is a connection between taxes and funding the government. alix: the big wildcard for u.s. companies will be the 2016 presidential election.
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falloutgoing to be the in that respect especially with their counterparts in ireland? >> the republicans are saying will stop tax inversions by offering most u.s. companies the same benefits that companies that flee to ireland get already. it will be interesting to see what the democrats come up with. they have historically taken a tougher line with companies even though they want to see lower rates. president obama has done some things to prevent inversions directly. we still have not heard what hillary clinton's plan is. scarlet: i think about pfizer and how it tried and failed to buy astrazeneca because of pushback from the british government. what would resistance from a pfizer-allergan deal come from? >> that's a great question. astrazeneca is a national champion. it has been in england a long time and did not want to get sold. those are differences from
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allergan which is a company that has run a string of deals and is it does not seem like it is low to do another one. it's not really irish. it's run from america. is there another island out there? >> almost anywhere compared to the united states is more attractive for multinational companies that do business in the u.s. to be based. the u.k. and ireland are the hot ones but the netherlands, bermuda was big 15 years ago. scarlet: thank you so much. alix: coming up in the next tournamen 20 minutes, sales of valeant are rising and there will not be new allegations against the drugmaker. scarlet: why the purchase of craft heinz is nothing bigger
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problems in the berkshire hathaway portfolio. others, mored reporting today. we discussed why deals are having a huge impact. ♪
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scarlet: welcome back. alix: time for the bloomberg business flash, a look at some of the biggest business stories in the news. the epa's expanding its investigation of the volkswagen diesel emission scandal.
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have and porsche models equipment to turn off emission systems. a top executive told u.s. lawmakers last month that the scandal was a work of a few engineers in germany. on theomaker could be hook for fines as high as $18 billion. scarlet: u.s. factory activity lacked last month, its lowest space since 2013. alix: sprint is improving relations between washington and havana. it is now the first u.s. wireless carrier to sign a direct roaming agreement with cuba. it announced the deal with the telecommunications company in cuba. you can always get more business news at scarlet: let's go to the markets
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desk with julie hyman. depth i want to look at a -- at a bunch of different commodities. this is the global commodity monitor and it gives you a snapshot of the same commodities. in this column which is a one-day percentage changes we have an awful lot of red on the screen today. china is partly to blame for that. we have been talking about the global pmi readings today. the chinese pmi signaled a slowdown in demand. we have been talking about 50 which is the dividing line between expansion and contraction and the number of 49.8 in china is better than had been estimated. something that is weighing on crude oil in particular is ,ussian oil output is climbing breaking a post-soviet record. thus the fourth time this year that has happened.
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when we see an uptick in supply, the prices go down and what's happening once again today. we are seeing gold prices sell off. they are the lowest in one month, down about half a percent on the agricultural front, wheat and corn are both heading lower. biggest dropng its in about eight weeks and had again last week. it's coming off a strong month. we had the chinese economic data weighing on things. in terms of one of the rear areas of green, it is sugar, up for the first time in three sessions. this had seen a slump after a strong october. we look at the cftc data. and what money managers are doing. they've got the highest of bullish positions in raw sugar
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since november of 2013. sugar is up 4% on the day. alix: there are reports that investments are being made in the ethanol industry in brazil. there's possibly more demand there. thank you so much. valeant shares are higher for the third time in 11 sessions. citroen will make -- will not make new kinds on the company. others are speaking out. the berkshire hathaway vice president calls the company's practices deeply immoral. here with context is drew armstrong. when you take a look at the rally today, part of it says it's oversold so we will get some kind of bounceback or are investors leaving the position of being so negative? drew: this started on friday
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when bill ackman had his conference call defending the stock and his position. leshe middle of that call, said he would have this blockbuster report he was going to issue and monday. all of a sudden, the shares on friday went from not a whole lot happening to 10% down on the day. out andt night, he came he said he will not release any major figures. you are seeing the shares recover. this is almost a self-created phenomenon. he is still negative on the company but he's not bringing any new allegations to the table. scarlet: the negativity reached a crescendo last week are. there are reports.
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lesh saidat andrew last week. >> in my opinion what was brought out over the past week is not aggressive. i understand aggressive versus illegal. to me it sounds illegal. scarlet: he brought up the connection to enron without proving it. did bill ackman provide any firm case for defending the company aside from the fact he believes in it and thinks it's : the best wayew to look at it is to look at the stock friday. the answer is probably he was not successful. the shares went down. he was there and did a huge presentation and invited investors and went through dozens of slides. he said this is why it's not a big deal. it, he says it's a
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it wasnagement team and a lengthy and detailed presentation, four hours with tons of questions. at the end of the day, the stock was still down. with andrew left walking his comments back, who gets credit for what we are seeing today? i went through some researcher or its and valeant has seen some grant debt downgrades. the commentary says longer-term, they still like the valley and story. they need to establish confidence. drew: they are saying there is some good assets. that's an idea we have heard from many people. they say there will be
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volatility we will go through some months if not years of waiting to unlock any of the value. if you are an investor thinking about where you want your money, you may not be willing to take a years worth of volatility just to get back to a place of growth while they deal with their issues. there can be other places you can be invested for growth especially since you have seen valuations come down across biotech and pharma. things are cheaper than they were even six months ago. investors say there is time to buy things now that are affordable. isn though valeant, affordable, people might want to book their money to work elsewhere. why isn't michael pearson making a more vigorous defense? not out there holding a four-hour conference call. alix: he's doing it or bill ackman.
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it's one of the things that bill ackman criticized him for. i believe it took them five days to come out with their own version after the damage had been done to the stock. other people have said this guy is not the best communicator. he said they did a terrible job on pr and investor relations. he criticized reports in the media. i still don't think we have seen very much at all from michael pearson. i wonder if we will see more in the future or if they feel the worst of this is behind them. scarlet: i think it shows how many people have criticized how they don't like him as a person. yeah, you can read "the bloomberg view" doing calculations saying this cost them more than $8 billion.
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still $21oes it's billion undervalued. thank you. we will continue to bring you the latest in this drama. scarlet: it will keep unfolding. there will be another chapter tomorrow. coming up, warren buffett is having a tough year but one of his holdings may outshine the leaving berkshire hathaway employees to declare a record profit. ♪
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alix: welcome back. scarlet: warren buffett is having a tough year. his holdings are down for the craft-heinz that on may have saved the day.
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noah covers berkshire hathaway and joins us from seattle. >> i'm doing well. scarlet: thank you for joining us. kraft is a big win but there are a lot of laggards. when we look at the stock portfolio at berkshire hathaway -- everyone identifies warren buffett is being a great stock picker. he has had some real challenges in walmart and amex and ibm which are three of the four sorry, four ofs the 10 biggest holdings in his company. that has been outweighed by this big bet he made on kraft-heinz. he was instrumental in putting them together. through a number of transactions, he will be booking an enormous gain in earnings -- it will atct
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about $7 billion pretax. has this emboldened warren buffett to go find his next big elephant? yeah, i think it puts an underline. berkshire hathaway at this point in time is much more about the deals that warren buffett can do rather than a stock portfolio. it's an important part of the company but where he is adding value of these days is by going out and buying companies. kraft-heinz fits that mold even though it's technically a stock holding now because he does not have complete control of the company. the other thing that should be progress that has been at berkshire hathaway is the deal he did in august to buy a company called position cast parts which is a supplier to the aerospace industry.
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berkshire shareholders like that because over the long haul, they think the addition of that business will improve earnings. scarlet: this speaks to his relationship with 3g? alix: that has helped some of these mergers? >> yes, no doubt, it has been a hugely lucrative partnership for berkshire hathaway. he has taken some heat about some of their business practices. 3g has aggressive managers and they tend to cut jobs and make operations very lean. financially, it has been very profitable. scarlet: i want to turn to valeant firm ascetical because charlie monger has pushed against the idea that valeant is a value stock he would pursue. he made some strong statements there about it. like andt looks buffet
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it could be a deep value play. what can you tell us about charlie monger and his discussion of valeant. >> he did not pull any punches. charlie speaks his mind. is in theirn here business model, he does not like the idea of a company that is so aggressive at raising prices and just worries about the sustainability of that long-term. he did say he did not think this was a house of cords are anything like enron, where the short-sellers have been putting out there. time, he sort of questioned the long-term sustainability of the model. he understood why some people who follow value investing might have gotten in here. valeantaid, the ceo of has taken some of the glitz
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out of running a pharma company and that can help gurus margins and make it look like an attractive investment. if you are so aggressive that you are hurting your customers, maybe it's not such a great investment. alix: thank you so much. this pits charlie monger against the sequoia fund which is a leant it'sever in va interesting to see these big-time investors split. scarlet: they also think of themselves as deep value investors. in the next hour, its merger monday and we will talk megadeals. ♪
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>> it is 2 p.m. in new york and 7 a.m. in hong kong. welcome to bloomberg markets.
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bloomberg -- from bloomberg i amuarters in new york, david gora. take a look at what is behind all of this m&a activity. and more problems for volkswagen -- reports that the automaker failed to report a fatal accident to regulators. and a low hop. maidenairlines makes its voyage to hawaii. that first to julie hyman for the latest at the markets desk. hey, david. all thrve


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