tv Bloomberg Markets Bloomberg November 4, 2015 2:00pm-3:01pm EST
from bloomberg headquarters in new york, i'm david gura. hike yellen says the rate continues to be a possibility in december. the next meeting is a life meeting. we will talk to the head of legg mason, joe sullivan are cheaper prescriptions around the corner? wall street is expecting facebook will have another strong quarter thanks to its mobile app business. they release quarterly earnings in a couple hours. let's head to the markets desk where julie hyman is looking at market response to what jerry allen had to say. yellen had to say. julie: when it comes to stocks enter comments, the december meeting his life. -- is live. the fed is data dependent, as always. having less of an effect on
stocks that it is on other asset classes. stocks have already begun to trend lower. not very steep declines across the board. we will get more into what is affecting stocks in just a moment. just to run through the other places where we are seeing in effect -- this is the fed funds futures probability. pricing in a 60% chance that we could see an increase in rates at the december meeting. it was 52% this morning before yellen began speaking. you can see the trajectory of the increase, changing expectations. this is reflected in what we are seeing across rates. the two year yield is the highest since april of 2011. 0.81% getting yet another basis point today. the 10 year also seeing an uptick in yields. the highest in seven weeks,
0.24%. we are seeing the dollar gain along with rates. touching its highs since april 15, up less than 1%. we definitely saw an uptick after we heard yellen maker comments about the life meeting. gold at its lowest in seven weeks. set to decline for a fifth straight day on this perception that we could see an increase in rates in december. david: i'm wondering about oil. julie: oil doesn't seem to be as affected by the ellen commentary, trading on the weekly oil inventories. we saw a build in inventories in the u.s. for the sixth week in a row. seeing a decline in oil prices of about 3%. affect onving an energy stocks. it is the worst-performing group today, pushing down chevron and on. there is the case of chesapeake energy, beating analyst estimates.
the company is writing down the value of its oil and gas assets. that write-down is bigger than the company's entire market cap. david: thank you very much. let's get a check of the headlines. rami: we start with violence on yet another college campus. officials at the university of california say five people were stabbed today before the suspect was shot and killed by police. all five victims were taken to a local hospital. the u.k. is suspending flights over sinai sing the russian jet crash may have been brought down by explosive device. egypt's islamic state group affiliate claims it down that plane. this because at the crash coincided with the anniversary of the groups pledge of allegiance to the islamic state group. the associated press could not in a finally verify that.
trump and donald democrat martin o'malley signed on the dotted line today to become the first wager presidential candidates to file for new hampshire's primary. they filled out the one page or men paid a $1000 filing fee. -- the one-page form. hitl obama's trip to jordan a snag when a sandstorm tablets guys -- clouded skies. she was set to fly to georgia from qatar where she met with u.s. troops. you can find the latest news on bloomberg.com. david: let's turn to janet yellen's latest remarks. the december rate hike is still on the table, but only if the economy stays on track. >> what the committee has been expecting is that the economy will continue to grow at a pace
that is sufficient to generate further improvements in the labor market and to return inflation toward our 2% target over the medium-term. if the incoming information supports that expectation, then our statement indicates that december would be a life possibility. we have made no decision about it. david: investors were paying attention to two other fed officials today. bill dudley holding a press briefing in half an hour and sam fisher speaks in washington later tonight joining me is the ceo of one of the world's largest global asset managers, joe sullivan of legg mason. use at a rate hike will not be the main event. just you said a rate hike will not be the main event. e: we look forward to a rate hike, look forward to getting back to normalized rates.
it will be good for our business come introduce some risk back into the market and allow more are managers who tend to be active and high active share managers to be able to differentiate. when you have this extended peri od of low rates, everything is correlated. it is hard to this thing with between asset classes. we look forward to rates moving toward a more normalized state. david: how difficult has it in and how long do you see this persisting? >> it has been challenging for the last couple of orders. i'm speaking to the retail investor. the volatility has them a bit. -- spooked them a bit. there has been questions around valuations and equities, questions around economic growth
globally, differentials between from, europe, u.s. uncertainty around timing of rate hikes and things like that. none of that is conducive to confidence on the part of the retail investor. they need to get used to that. we will see that volatility and choppiness in the markets. we will have to get used to it. david: sam druckenmiller said he is bearish on stocks. are you in the same camp? joe: i'm not. increasingly, as rates get normalized, you will get differentiation between high-quality companies and company's that have just simply been lifted by the rising tide . that is a good time for an active manager. everything has risen simultaneously. it has been pretty hard to differentiate and distinguish between good companies and bad companies. ofare going into a period
not terrific growth but consistent growth in the u.s. the best companies will distinguish themselves during that time. 8vid: you oversee constituent companies. -- youyour business intend to keep your chips and that going forward? joe: fixed income is an enormous market. a market we are excited to be in. there are some people who say you're in fixed income, rates will rise. are well positioned for a rising rate environment they manage credit, manage debt.eign type tha when you have an active manager, that can move across and make decisions on duration or credit quality.
they have more tools at their --posal, natalie to navigate not only to navigate a rising rates but to deliver alpha during that period. david: you've been trying to diversify the portfolio. tell us about the company just acquired a majority stake in. what happened was after our signing and before our close, we took advantage of the strengthening dollar and weakening quasi-dollar -- our purchase price in u.s. dollars lys inclining fair significantly. that's declining fairly significantly. we got lucky by virtue of the fact that the dollar worked our way. our purchase price just decline fairly significantly, let's lock that in.
we just got a nice game for our shareholders in terms of having an absolute u.s. dollar price that is lower. we locked that in through a hedge between that point of locking it in an quarter end, that hedge ran against us a bit. we locked in a much more significant gain on the balance sheet. that hedge went against us a bit between the time we said it in end.quarter half of that hit was reversed. it was very for to witness on our part. that will be an important part of her acquisition strategy going forward. it keeps the partners and founders of the firm engaged not
only in the short run, but in the long-term value of the company. it is good to be aligned with shareholders now in that company, even though we are the vast majority shareholder, we are both shareholders. we are interested in tomorrow and also interested in years from now. david: the commodity landscape was much different than it is now. has the calculus changed a bit because of what's been happening with china? joe: not really. they are not as sensitive to commodities, they have a broad infrastructure capability. it is listed infrastructure. their mandates cover a variety of different strategies. they are not just impacted solely by commodities at all. we see it as a terrific add-on to solve the needs of our clients. our clients are looking for
higher-yielding assets, stable assets. another perfect company to our fixed income business, income equity business. responding to what is really a global panic for income. now theme has been in place for a few years, remains in place. whenever i travel in the u.s. and internationally come i'm hearing about income. that's a demographic issue and that will continue for some time. david: are there any things you would like to acquire? we've been fortunate and successful in filling in the traditional gaps. we acquired a non-us equity that investorsplatform, qs to fill in our multi-asset class highly customized solutions business.
now, we are morphing to a more alternative strategy. look at it and say it's a global equities strategy but it's really infrastructure based. somewhat of an alternate strategy. we would look now for something energy. we would look for something in private equity, something in real estate. those kinds of assets, it's important for us to be able to offer our investors institutional or retail breadth ofhe widest product out there in investment ability. the more diversified our clients are, that is the only free lunch , diversification. we are trying to diversify our capabilitiesoffer to our clients. david: joe sullivan, the ceo and chairman of legg mason.
company,holders of the vanguard, institutional holders, blackrock, capital group companies. not a lot of hedge funds among the top holders. i wanted to get into some of the declining stocks we are seeing in the steel industry today. u.s. steel heading for its biggest decline in six years, posting a whiter than estimated widers wider -- posting a than estimated loss. the company has been trying to repair its business in the carnegie way transformation. it looks like that is not necessarily bearing route as of yet. we are seeing the client and the other steelmakers as well.
the department of commerce announcing yesterday a number of tariffs on foreign imports of steel into the united states. one that stands out as the 236% tax on steel imported from china. that is a retroactive tax as well. that is not helping the steelmakers. david: how about that. inc. you very much. transcanada asked the state department to delay its decision on that project future. president obama has no intention to bow to the company's request. to have thisike determination be completed before he leaves office. david: with me now is the author and environmentalist -- the last time we spoke was in washington. you've been arrested after a protest at the white house. you have been at this for some
time. what you make of the news is -- what do you make of the news this week? >> they are no they are beaten until they can get a friendly face the white house. the question is whether the white house will go along with this game. i suspect the white house now having put an immense amount of work will have the opportunity to see outline what is out loud what everyone knows. this is an astonishing victory for the people's movement. when we talked quite true years ago, it seemed like this pipeline was a done deal. --, not only is keystone there has been the keystoniz ation of every fossil fuel project on the continent. david: people here are speculating that what
transcanada wants is for some of the republican party to be in the white house. as you look forward, do you anticipate playing a bigger role in politics, giving money to candidates? >> no. that is a minor part of what we do. we work all over the world to take on the fossil fuel industry. we are very happy about the keystone news. we are just as focused on those and other fights like this and this burgeoning divestment movement. largest city in sweden decided to divest from fossil fuel. we are focused on the most court questions about the fossil fuel industry. emergingy now in this scandal around exxon.
one of the richest, most powerful fossil fuel companies knew everything there was to know about climate change and engaged in a campaign of disinformation over the quarter-century. you are looking ahead to the upcoming climate conference in paris. what role will you play? will there be protests outside? mostly,ll be outside there will be large demonstrations. it's less the game than the scoreboard -- we find out how much pressure we are able to apply in copenhagen, we got nothing. it was a diplomatic failure. there was no movement to hold the president accountable. with a fiascohome on their hands and paying a price. that is no longer the case. paris will do better than copenhagen. you will not do well enough to
david: welcome back to bloomberg markets. stocks reacting to janet yellen's comments that a december rate hike is still in play. abigail doolittle is standing by. abigail: stocks are little changed in the face of those comments. the composite down .1%. when we look at a one-year chart of the nasdaq composite and it stands out. volatility. whether the fed will raise or this,ise, when we look at
we see the index was down as much as 80% between july and august, now back up 20%. only time will tell if we climb back above it. investors are adapting quite well. turning to a top performer, tesla. they put of a mixed quarter after the bell yesterday. missing earnings estimates, trimming deliveries but the company did say it's on track to meet its production target of 50,000 vehicles this year. could help to explain why shares are up more than 10% today. another key metric is free cash flow. it was negative by $600 million in the third quarter. double consensus estimates. this could help to explain the 27% short interest on this stock
, suggesting the company will need to deliver in the future but today, the bulls have it. david: still ahead, washington going after valeant. we are heading to capitol hill to talk to a commitment wants to know prices are so high that to a congressman who wants to know why prices are so high -- we are heading to capitol hill to talk to a congressman who wants to know why prices are so high. ♪
bloomberg markets. with u.s.t presidential politics. donald trump and martin o'malley the first major candidates to file for new hampshire's presidential primary. throughng period runs november 20. police say man was firing sporadically inside an apartment complex in san diego but no one was reported hurt. the location is in an upscale neighborhood in your little italy. -- near little italy. the latest on that fatal russian jet crash, the british government is suspending rights over sinai. the crew reportedly had no warning of trouble before it crashed in the egyptian desert the planes black boxes did not record any topic discussion -- cockpit discussion about a
mechanical problem. resigning after thousands of people flooded the streets in antigovernment protests -- 32 people were killed in a night club where last week. demonstrators blamed officials for the incident. comedy central says the daily show host trevor know underwent an emergency appendectomy this expected back on the show tomorrow. that is a look at our first were news. you can find the latest news on bloomberg.com. is pressuring commodities today. let's look at some movers as prices settled in new york trade. gold touched a one-month low after jenny allen told a congressional hearing that he move on interest rates in december is still a possibility. -- janet yellen told a that asional hearing
move in interest rates in december is still a possibility. washington, pharma companies in the crosshairs of congress with lance to which investigations into drug pricing. house democrats wrote to jason chaffetz seeking support or subpoenas against valiant -- valeant and turing. we ask that you not block us from investigating them on behalf of our constituents. up.r something as jason chaffetz said he does not want to have these come before the committee or is he just installed? -- just stalled? >> he is stalling.
it is an awful situation for him -- he is just stalling. david: there are 18 of you on this task force. what are you pushing for? thet is basically to get information out there. we see these drug rices -- prices going up dramatically. people are worried about something going up 5000%. drug prices are gradually going up, going up 13% this year at a time when we are telling seniors there is no cost of living increase. there is also the question of whether the federal government can negotiate on behalf of people who are senior citizens. we negotiate for veterans, negotiated medicaid and governments negotiate prices. the 48 million people in
medicare, we don't negotiate because republicans put it in law. we have to change that. david: when you are talking to your constituents, is this something they are talking about? what caused you to join this task force? -- as you get older, things happen. the wheels fall off your wagon and you are increasingly relying on drugs for one thing or another. everybody therefore has to deal with this on a regular basis. whenever you go to a meeting, you will have four or five people come up to you and say us is what i used to pay in this is what i have to pay now. everybody has a story. is i willou can say go back to washington and see what we can do about it i'm the ranking matter on the democratic health subcommittee in the ways and means.
i wrote a letter meant to the chairman sing let's have a hearing. not heard a word from him. elijah cummings wrote a letter. he has not heard anything. republicans are simply stalling on this issue. david: the obama administration says there will be a special forum focused on the issue. we had susan collins yesterday saying the special committee on aging look into this. is the goal here fact-finding -- they the prices don't reflect the amount of money, time and effort that goes into creating these drugs. is it to find out more about the economics or is there something else at play here? >> it is basically fact-finding. the drug companies and say we need this money because we are using it for innovation.
an awful lot of their money goes into advertising of blockbuster drugs they have and that means the more money they bring in, the more goes to their stockholders. do withoutcannot medication. the people are kind of caught between the drug companies claims and what their pocketbook says we are trying to find out nobody wants drug companies not to make a living or make a profit. we don't want it to be an extraordinary one -- with: we heard a lot speaker boehner stepped down and paul ryan was elevated into the role of speaker about a new sensibility, new attitude on capitol hill. i wonder how that has trickled down. when you talked to jason chaffetz come any sense that the tone has changed?
that anything is going to change? >> not that i can see. they are so focused on one thing, winning the white house in 2016. everything is ordered around that issue. i don't see them opening up and making the system work -- mr. ryan said we will have regular order. there are not enough people in this house to know what regular order is. it never seen it in the lesson years. -- they have never seen it in the last 10 years. come when going to mr. ryan is going to face the same problems from the sporty guys in the back of the boat who say no way, our way or the highway. period for difficult this country. david: jim mcdermott joining us from capitol hill. wall street is expecting good
and manipulated test results. the company will face in a new chemical to inflate its airbags there finds in the u.s. could reach a record $200 million. holds wagon unable to halt the flow of news is volkswagen. unable to halt the flow of bad news. the new findings affect 800,000 cars. software tricks emissions test to comply with air-quality rules. receipt is recalling 126 million cars and suvs in the u.s. ercedes. -- mayor say you can get more business news at bloomberg.com. julie: we have earnings from a
number of these copies of it. michael kors the best-performing stock in the s&p 500 today. the open new retail locations outside of the unite states. they opened new retail locations outside of the united states. the company over saturated the market with its merchandise. the shares today recovering, up 7%. same-store sales that ball in the quarter by a smaller margin than it had been estimated. avon products falling sharply today. down 20% now. the company posted in an expected third-quarter loss. -- unexpected third-quarter loss. avon has been struggling for several years.
three years of losses and the ceo has been trying to snap that string successfully. dsw, the discount shoe retailer cutting is forecast, down almost 10%. it named a new ceo. there's concerns about the company's performance here. we've had other shoemakers are sluggish numbers this report we've hadumbers -- other shoemakers report sluggish numbers. about beingtalking cautious on these two companies theseesult of these -- shoe companies as a result of this dsw news. skechers is in good shape. marco rubio is pushing back today over questions about
his personal finances. tocharged personal expenses a republican party credit card. debt,s he only has one his mortgage on his miami home. some reporting from the tampa bay times about marco rubio's spending, the subject of some investigation and interest a couple years back. mark: marco rubio is going to get more scrutiny now. , whensidential politics you run for president, you become a leading candidate, you get scrutiny of old things that become new. something's will come out that if ever, before. some things will come out that have never come out before. his interviews are getting mixed reviews. he left unscathed in terms of
admission, but people are questioning whether this strategy in the long run will serve him well. he was on good morning america and to that as an opportunity to respond to these reports. >> this came up at the debate last week -- >> i wanted to make sure we had cash on hand. it is not day-to-day living expenses. if your refrigerator breaks. joe: you subject yourself to from other candidates as well for you spoke to donald trump. you discussed marco rubio's finances. describedubio questions about his personal finances as discredited. >> his personal finances are discredited?
look at his credit card. he is a disaster with his credit cards. i love florida, i'm in florida all the time. for years, and hearing that his credit cards are a disaster. when you take a look at it, you will find that. and what heard debt did when he was running the party apparatus with credit cards, i've heard about it for years. >> would you trust them to manage the country's finances or your finances? >> he has a bad record of finances. look at what happened with his houses -- he lives above his means. david: is this a taste of what we will get? mark: he did it again today in new hampshire. rubio said maybe there should be more scrutiny of trump's bankruptcies. whether out of defensiveness or strategy, rubio is being
critical of trump in a way that he tried to avoid up until now. to send a signal to trump or to get the press to spend less times group as marco rubio. david: we have this taking up a lot of attention. how is marco rubio actually doing? holsinger will be backing him. singer will be backing her. -- deking him. -- backing him. >> he's just rubio will regret taking that endorsement because of singer's background. he moved up a little bit in the polls. can he raise money? he is not going to explode in fund-raising. he's still one of a handful of people who can win this nomination. people are worried about jeb bush, chris christie and john
kasich. david: in new hampshire, the first primary will take place, martin o'malley being the first candidate to get his name on the ballot. mark: trump did the same thing. it's a tradition to do it in person. david: thank you very much. mark halperin, managing editor of bloomberg politics. 5:00 will be on tonight at .astern time facebook set to report third quarter earnings after the bell. how did the role of mobile play in revenue? we have a preview, next. ♪
david: welcome back to bloomberg markets. facebook will release third-quarter earnings later this afternoon. the stock passing massive growth over the past year, currently trading over $100 a share. joining us with a preview is cory johnson. a big focus here has been on marketing. how has facebook been doing? is so interesting to me. the committee manages the business and not the corner. -- quarter. whether it's operating profit, cap profitability, earnings-per-share, you don't know what they will spend in marketing, r&d, could be all over the map. they could suddenly decide to blow an extra $1 million in the course of 13 weeks to build new servers.
$100 million in the course of 13 weeks to build new servers or of ai experts. spending could be a surprise. we look for in revenue growth to be terrific. we look at user growth, even as competitors find it almost impossible to find users. facebook has picked up. these are big numbers. they are continuing to grow that business at scale. david: i see you toiling in excel -- when you get this report, what will you look for? cory: this is a great business. it is massively profitable and truly profitable. it frees up a ton of cash flow.
looking for changes in how the business works. , they had nopublic revenue at all for mobile when it went public. today, most of the revenues are for mobile. they break out some of those numbers, 1.3 million mobile users -- 1.3 billion mobile users in the last quarter. that number continuing to increase. million mobile10 run rate in terms of revenues. mobile is dominating facebook. 76% of the revenues came from mobile usage. when you look at the mobile revenue, the number that jumps out at me -- from nowhere at the time of their ipo, they created -- $10 billion
mobile business. interestingly, a lot of people never use facebook on a desktop. last quarter, 656 million people using facebook never access it through anything but a mobile device. the number is growing dramatically. those numbers are impressive. more than any company in the world with the exception of apple, even more than google, they have figured out mobile and how to monetize mobile. david: looking at what facebook is trent to do next, there's a lot of interest in virtual reality, messaging. is a dominant platform. stingray announced they are over 400 million users.
-- instagram announced they are over 40 million users. -- 400 million users. the way they are monetizing on mobile could be a multibillion business already for facebook. , bloomberg'sohnson editor at large joining us from san francisco. tonight marks the season three premiere of studio 1.0 with emily chang. she sat down with the father of the ipod to discuss his time at apple and conversations he had with steve jobs about building an apple car. >> if we were to build a car, what would we build? what would a dashboard become, what would seats be? constrained,y, so it would be great to do it, but we can't. >> was this something he was
like, we're not doing this right now? >> there's a lot of things we said no to. why did in the ipod turn into a great video camera. tb was another big one. -- tb was another big one. -- tv was a big one part we focused our energy on cell phones. let's focus on really big markets that have incredible impacts well beyond steve's re ign as ceo. ♪
from bloomberg world have perez good afternoon. i'm betty liu. -- from bloomberg world headquarters, good afternoon. does the data back her up? congress launches an investigation into pricing by valeant, turing and others. facebook faces high expectations as it reports quarterly earnings right at the closing bell. the social network has consistently delivered surprises to the upside. about one hour away from the closing bell. let's head straight to the market desk where julie hyman had the latest.