tv Whatd You Miss Bloomberg November 5, 2015 4:00pm-5:01pm EST
>> u.s. stocks closing mixed joe: the question is, what did you miss? disney earnings out in minutes. the they will tell us about media business. >> and the ripple effects of quantitative easing. >> we begin with the markets. not a lot to get excited about. everyone is paying attention to the jobs report. no one wants to get ahead of it. people say it tilts more towards the summer. conviction in one
direction or the other. very, before the storm. scarlet: no, when it comes to valiant stock. it fell the most since 2011 closing at its lowest since 2013. i wanted to take a look at what has happened. i want to take a dive into the bloomberg terminal. i have outlined for key moments. the pain started here in september of the 21st when hillary clinton said it is outrageous. it hit the valiant stocks. a few days later we have the democrats in the house asked subpoena valiant for drug price increases. over here this is where you have the huge leg down, the subpoena served to valiant.
they will be on the hook. this happen before the report came out accusing it of sketchy practices. that happened around here. moreaw the stock decline and then it treaded water. here was before our conference call defending the stock. the stock continued to fall. what was striking is that they are in a tough spot before the want came out. joe: absolutely. when i think of them they already have these issues that made it suspect. the fact that people think the business model is controversial, and then this report on top of all of this other stuff. today was ugly. there was the story about had sent an e-mail expressing
nervousness. .hat freaked people out akron had to say i have confidence in the board sent an e-mail saying they had confidence. which is the last thing a.c.l. wants to hear. alix: we don't have confidence in you. is such ahis distraction for the company and what it usually does, to by other companies and raise prices on their drugs. you showed us how it has plummeted in value. the currency is less and less every day. how does it go about making the next acquisition? alix: i did some calculations. if you look at the 19 million share possession he has lost $13 billion over the past six years on paper. he also added that is 2 million shares he bought at the end of
october and that has lost 78 million shares on paper. all in all a horrible couple days. i want to dive into the terminal and look at something that happened today. voted toof england keep rates at zero. then they lowered the growth and inflation outlook. you got a big pound fall, over 1% against the dollar. one thing they said was that the theygth of the pound, called that back. the currency tumbled. scarlet: we have seen mario draghi the the master. he said he would investigate all options for stimulus. that an unleashed a wave.
terminal,e inside the of the 42 potential trades, all but five of them have made money since october 22. the most profitable trades are too short the euro. each of those have returned eight and a half percent. >> you are white knuckling that for sure. can see these charts and more on twitter. i want to bring in our guest. thank you for joining us. joe: what are you looking for tomorrow? guests: i don't feel bad for the economist who try to forecast of like this. expectations for a move in december by the fed is up to 60%. anything around that would
temporarily cement that notion december is going to be the move. i don't know. you may see expectations drop for december. seen, the trend has been job openings are quite high. it is the hiring that can't keep up. what does that tell you? >> we have a skills gap that has become a cute. the national federation of independent business is, over small businesses, they show that although job openings are robust and the desire to hire is robust the number two sided reason why when small businesses are asked what is your problem, it is the skills gap issue.
that is becoming an increasing problem. that is not a problem that can be solved quickly. that is more like turning an ocean liner around. it will take some time to solve that problem. joe: it has been a decline in that. now they are leaning about difficulty of finding labor. the question i come back to, why hasn't that translated into strong wages? economists are predicting a another 2% gain. despite the rising number of businesses. >> that has been the conundrum. i don't know anyone has a clear answer to it. wages have shown a pickup. suggests wedicator should be seeing that live in short order.
all of that suggests we should be starting to yield pressures. we have a structural issue. we know it has been a slow growth recovery. wagef those tie into why growth is weak. alix: if you are making money you probably aren't spending it at shake shack. they increased 17.1% for the quarter when analysts are looking for increased. also double digits of 11%. revenue, $53.3 million for the quarter. and on an adjusted earnings per share basis, $.12 for the quarter. just to give you an idea of ofenue, they see revenue $190 million where previously
they saw $174 million. mcdonald's, which i know we are not necessarily saying it is comparable, because they are a huge company, they are looking for sales of $25 billion or more. it shake shack is tiny when you compared to mcdonald's. that has bled to the mcdonald's pain over the years. alix: it is the momentum names of the fast food sector. you talked about how we're at the mature bull market. what does that mean? guest: i wish i could time it out for us. that would be great for our investors. the more mature phase we are through timent with limited drama in the market. almost four years before 10% corrections. they tend to occur every 1.5 years.
we had low volatility. we are now in the stage where we see bouts of volatility. the market will be tied more toward earnings growth and extreme valuation expansion. i think that is the environment we are in. sentiment has been subdued in this bull market. it has been remarkable. fund flows into domestic mutual and exchange traded funds, no net money has come in. .hat is extraordinary the wall of worry is still in tact. that keeps us from being in that final stage. joe: something mark carney said today, when they hike rates it is likely to be slow and
shallow. how important is that for stocks? rapids not a surprise acceleration. >> there is this obsession we all have about the start date it ise fed when we think the path of rate hikes from that point forward, the slope and speed that matters more. based on history, if you look at prior slow tightening cycles, where they were taking it very slow, versus fast cycle like the last one we had, where the fed raised rates at every single consecutive meeting, you could see the difference between how the market performed during slow cycles and how it performed during fast cycles. the market appreciates a fed moving more slowly than quickly.
militants are taking responsibility for the crash. the terror group has not provided evidence to support that claim. >> we don't have enough information to make our own determination about what occurred. we do have enough information to not rule out the possibility of terrorist involvement. >> they would not discuss what intelligence officials have learned so far. exxon mobil is being investigated by the state attorney general's office. schneiderman's office wants to determine whether the company lied to the public or investors about the risks of climate change to the oil business. they have issued a subpoena for records and e-mails. homeland security says secret service protection has been approved for donald trump and ben carson.
the front runner's requested protection last month. jeh johnson approved the requests after consulting with five members of congress as required by law. that is your first word news. 24 hours a day at the bloomberg.com. back to you. alix: we do have some breaking news pre-disney earnings are crossing. scarlet: the headline here, and unadjusted basis, $1.20. that is an improvement from the previous year when they came in at $.89. $13.5 billion looks to be a slight miss when you consider the estimate was $13.56 billion. it does also represent an increase from the same time a year ago. the b question has to do with its media business.
we have a revenue increase of 12%, higher than what was anticipated. income for the media business was $1.7 billion. in line with what analysts were looking for. a lot of analysts have downgraded estimates for what the cable business would bring in because they had less than bullish comments. on a bottom line basis apart from the resorts they made less versus $812million million. in terms of how the stock is moving, let's pull that up. 2.3%. is down share -- $110 a cents a share. alix: we are looking at the
relationship of espn. increases,tual rate subscribers have increased as well as more for espn and affiliate fees are higher. which is interesting. scarlet: estimates have come down since last quarter. people re-rated because of the bearish comments. gueststo bring in our for a deeper look into all of this and get that you have been -- and you have been looking at the numbers. what in this report sticks out to you? guest: the biggest concern was certainly the espn numbers. worry fore biggest investors, whether espn will be able to maintain its growth outlook. mentioned, we had those
less than bullish comments that caused investor panic. yesterday we had disconcerting results from time warner which likelywn its guidance because of subscriber losses. the subscriber outlook is going to be paramount. why is the stock down? they delivered. : when i look at this, one of the things that jumps out at me is profit margin. profit margins were going to get better or edge better because of a slowdown in spending. of course they have to pick up in spending. on a year-over-year basis, operating margins are flat. perhaps that is a disappointment. some analysts were looking for some upsides. profits may be
not what they had hoped. they tended to be half of the businesses. i look at my model, it was only 47% of profits of the overall company. that sounds fantastic, but it is less than last quarter. 31% reliance in the quarter. look at the last quarter numbers , if you add in q4, they show 31%. a little bit down in terms of the reliance on espn as a source of half of the company's profits was less than that. subscription numbers have been poor. in the last earnings call disney disputed the report that showed them losing subscribers saying we're down but not near what they said. they suggested they were picking
up subscribers thanks to their sec network add. joe: bigger picture, last quarter the stock was clobbered with cord cutting. now that we are getting earnings , where is that story today? guest: longer-term, where the numbers might look good, that does remain a big threat for the media companies. we have the time warner report of them saying they had more subscriber losses. longer-term it does continue to downconcern as they pare there tv packages. disney has said they are not going to go to a direct to consumer offering for espn like hbo and cbs all access. we will see if they make access -- make updates to that. alix: thank you.
alix: how the effects of quantitative easing are actually exacerbating inequality around the world. we want to look at the u.s. and japan where the gap between the have and have-nots have widened. you brought this to our attention, the fed did a study on this and took a look out what happened in 2008 when the red
targeted mortgage rates. and what happened to the mortgage markets once they came down. they had a chart that shows 25% worst borrowers, the pink line, blue line are the best borrowers. up afterously moved quantitative easing but the better cities did so much better than the weaker cities. i take away was the people who didn't need the help got it the most. joe: it makes sense. one of the way the transition mechanism works, people could refinance their houses. areas where people still have equities in their homes they can take advantage of them. alix: those borrowers took out more equity in terms of cash from their house. their debt load through in a good way versus those that couldn't. scarlet: if you want to take advantage of lower rates you have to have the financials to
back that up. that does not happen in the u.s.. one thing that is worth pointing out, it doesn't necessarily condemn the program. an area like nevada has a huge comeback since the crisis. it could have been much worse. the fact that the stronger -- es it is an interesting fact. alix: maybe you need more policy than a transmission network. it also worked in cars. joe: same sort of thing. in places where the stronger place is more people could borrow loans. a look atf you take the jenny coefficient to measure income inequality, it has moved higher.
u.s. has gone from 37 and 2012. above 40 in maybe that is why we're seeing things like donald trump moving the polls. joe: one other story, in japan where they took a survey. they are seeing a rise in inequality. willies are seeing there wealth surge. the single person households with no assets is on the rise. definitely something to watch for. there program came later. to see if the same trends are evident. up, as the fed gets ready to make its move, what is left to drive markets? ♪
scarlet: i am scarlet fu. what did you miss? let's get to mark crumpton. mark: flights to and from the egyptian airport, which have been suspended since last weekend's crash, will resume on friday. that is according to british officials who suspended flights over fears a terrorist bomb may have brought down the plane. meantime, there was a joint news coverage in london with egypt's president. british prime minister david cameron said there is a battle within islam, which he called a religion of these. >> there is a minority of a minority, as it were, that have
taken the tenets of this religion and poisoned them, turning them into a perverse narrative that justifies suicide bombs and killing and maiming and all of the things that i.s. are doing. mark: he added that they will take a much more robust approach towards extremism. details of the transpacific partnership agreement are out. the agreement between the united states and 11 other countries runs 30 chapters and hundreds of pages. it lays out plans from the handling of trade from railway sleepers to live eels. it sets the stage for debate in the congress before ratification. thousands of representatives with wide partisan support. the bill also includes reauthorization of the
export-import bank charter. and that is your first word news. more on these and other breaking stories 24 hours a day at the new bloomberg.com. that to you. -- back to you. disney with -- reported ernie -- scarlet: disney reported earnings after the market close. they did eat estimates. -- beat estimates. revenue rose slightly lighter than what analysts had anticipated. when you look at how the stock is doing, it was down earlier, but it is now back to little changed in after-hours trade. the concern is about the deep selloff in media stocks three months ago when it warned of subscriber losses at espn. since then, they have eliminated
300 jobs at espn, which, up until now, was heralded as the crown jewel among disney's media properties. alix: that stock is lower, but making up losses from earlier. i am going to take a deep dive into the bloomberg terminal. german factory orders were down for a third straight month, down about 1.7% in september. it is that way line that you see there. the yellow line is volkswagen. the reason why i wanted to chart this -- the scandal broke for volkswagen right around here. in not even able to factor the impact of factory orders. in the last two months, you can see more of a correlation between the two. orders rebound a touch, but volkswagen stock continued lower. had three brad months -- three bad months, what
happens when you factor in volkswagen? scarlet: auto jobs make up one out of seven in the german economy, so this took a dagger to the idea of german engineering. want to take a quick look into the bloomberg terminal to look at two-year yields the we keep looking at this to see if the market is getting ready for a december rate hike. they marched higher today. they pulled back a little bit at the end of the day, but it is just a steady march higher. obviously, everything could change tomorrow with the jobs report. it could cement the december rate hike or perhaps pushed it back further. for now, the market is more and more convinced. to look at one of the more global factors, which is china suffering capital outflows. chinese domestic investors might andicking their wounds
shifting their money to australian real estate. australian home and apartment sales. it moves pretty much in tandem with the chinese yuan. i have inverted the chinese currency pair. when the red line goes up, it shows the aussie weakening versus the u.s. -- the yuan. it remains to be seen whether that will hold up. speaking of, emerging markets have been under fire in the last year. the msci index down about 13% since january amid signs of a glow -- slowing global economy. head of multi-asset emerging markets at blackrock -- if the fed winds up raising rates, what is going to be left to drive emerging-market assets? guest: the problem has been the absence of growth. this story of the emerging markets is one of fast growth and reforms.
after the global financial crisis, economic activity at a global scale has been very low. not only that, when you look at the export sector, export and trade-related activity has been on the recession. the very story of the emerging markets is struggling or has been struggling over the past few years. on top of that, you have commodity prices collapsing. a double whammy of manufacturing and now commodities. this absence of growth is the reason why the fed has not been able to lift rates. if the fed gets comfortable with the economic environment and p,arts pushing rates of -- u that means underlying economic activity is starting to pick up and that has to be good or emerging markets. scarlet: we asked about the impact of a fed rate rise on emerging markets. what if the bank of england moves before the fed?
would they have an outside impact on the emerging markets? guest: in general, it is something that markets have been discussing for a very long time. i cannot remember a recent episode in which a potential tightening has been discussed so much as the next move of the fed. what that implies is the structure of rates, credit, and equity markets have had enough time to adjust for a potential fed rate hike. when the time comes for the fed interestraising rates, rates may -- two interest rates need the underlying economy to recover. the data looks very bad. brazil continues to spiral down the rookie do we have a
situation in which e.m.'s continue to rally? guest: i think we would need a catalyzer. what we have seen in the month of october, which was a strong whole, the.m. as a negativity around asset classes. undoing that triggered the recent rally that we had seen. going forward, the economic environment will be determined by the future of the performance of the asset classes. when you go through the landscape and look for a good investment opportunity, what are your top two or three criteria? guest: in this slow growth environment around the world, we have been focusing a lot around countries that have the capacity
to generate its own economic growth momentum around the structural reform agenda through domestic sources of aggregate. countries like india are very attractive. countries like mexico also look attractive. in these low-growth environments, in which inflation is not coming back anytime soon, we want to look at countries that, on the interest rate side, you may actually get a nice carry trade. countries like india and indonesia attractive from that perspective. much do you factor political stability or instability into your decision-making process? guest: it is very much at the center of emerging markets. the underlying fundamentals are
and political institutions, the potential for social unrest. that is something that is always with us. it is something that certainly needs to be analyzed. political unrest has been an important driver of what happens in the economy. you want to make that a core part of your analysis. alix: lots more coming up. we are going to talk about which emerging markets are best prepared to weather a global growth slowdown. ♪
what did you miss? a look at some of the biggest business stories in the news right now. walt disney company reported sales that were just shy of analyst estimates. 1.20,t at disney rose to $ excluding some items. that compared with a consensus estimate of $1.14. rose as well. alix: shake shack reported earnings per share of $.12. analysts expected seven cents. same-store tales -- sales were up 14% versus estimates of 7%. revenue wound up increasing 70%. scarlet: monster beverage beat third-quarter estimates. three cents better than the consensus estimate. third-quarter sales rose. net income increased more than 43%. the company attributes the gains
to its international coca-cola bottle of partnerships -- bottler partnerships. guest.back with our he is head of multi-asset emerging markets at blackrock. you like turkey. did you like turkey before the latest elections before erdogan won in a surprising victory? guest: absolutely. this was not our central scenario. we like turkey based mostly on valuations. we have liked it for a few months already. the story from a macro perspective is one in which the country is going to run important adjustments in its external accounts. the lira has appreciated significantly. equity markets look attractive. they have been rallying recently in a strong manner that we saw after the election. it has been positive for the markets to the extent of
consolidated political power will allow them to continue pursuing the proper adjustment of the economy. it has been rallying very significantly. it is something we are starting to look again at. joe: another country that you like is thailand. what is the story there? guest: it is similar to the rest of the spectrum from a valuation perspective. that is the most important driver of the asset class. if you look at what is the best time to invest in emerging markets, it is one in which growth is going down, currency is depreciating, economies start going through an important ingested. -- adjustment. that is when value is created. that is the case for thailand. plus, the potential for some structural changes.
the company -- the country is going through significant change. thailand has a new central bank governor and he has signaled that monetary policy will play a supporting role. we have heard that before from other central banks, but it does not always play out. they kind of pass the baton to the fiscal side. what is your confidence that this will happen? guest: the thing with monetary policy, and this applies more to developed markets than emergin markets, is that it has been pretty much the only game in town from an economic policy perspective. on the physical side, we are seeing some probms of not adjusting. case in point, countries like brazil. when the time comes, you are left without enough maneuver space on the policy side. policy,ase of monetary
the good thing is that inflation , that pass-through from currency depreciation into inflation, has been absent for the first time in recent history. it would be hard to find an episode in which we have seen s ofency depreciation 20%-30% across the board not inflected -- not affecting inflation. that will encourage monetary authorities not to have to tighten, even when growth starts coming back and even when the fed starts tightening. sort of getting both on the fiscal and monetary front. you like equities in thailand and turkey, but you like fixed income in indonesia. tell us why.
guest: it is an economic environment of low growth. no inflationary pressure. currency depreciation with no pass-through. you have got to look at the countries that offer high absolute yields but prospects for stability on the monetary policy side. to the extent that you can capture the beginning of an , then the case becomes very attractive. there are not many countries out there that offer the yields that you can get in indonesia. indonesia is far advanced in the macroeconomic adjustment. yields went up earlier this year and now we are seeing the benefit of this stable macro environment. alix: thank you very much for joining us. great stuff. coming up, we take a deep dive into the construction market and what is next for housing. joe has a bunch of charts and he is excited. ♪
joe: i am joe weisenthal. what did you miss? cite the housing sector as being major tailwinds. how strong are they really and how much more do they have to give us? i am joined by a construction economics analyst to discuss what charts are telling us about the current economy. thanks for coming on the show. we have had a strong string of housing starts. what is that telling you about the economy and how much more is there to run there? guest: the housing starts have been growing 6%-8% for the previous years. over this past year, around 11%.
what we see is pick up in housing starts. i think we are going to see the same continuation for next year. housing starts tells me that the itovery is increasing and has momentum. joe: what does it mean for overall construction spending? something you point out is that housing starts will hit construction spending with a lag. it is not immediately 1-to-1. in terms of the contribution to gdp, when will we see that kick in? guest: when we talk about starts, if $10 billion worth of construction starts this month, 12-18, take the next even 24 months for the spending to take place. intoe starts lead us
construction spending that we might experience over the next year, year and a half. we anticipate seeing construction spending -- this year, we know we are going to have a nice, the number. construction spending is going to grow by 11%. we anticipate another 11% growth next year. joe: these are pretty phenomenal numbers by historical standards? twost: yes we have not seen back-to-back years of 11% construction growth since 2004-2005. joe: there is a bifurcation between office construction and manufacturing construction. guest: office construction had been growing rapidly for the previous year or so and manufacturing construction was unbelievably high this year.
manufacturing construction experience a six-month period in the last year where it grew at an annual rate of 100%. starts, two years ago, grew 46%. last year, 87%. starts will be down this year by 30%, but from such a high number, it is still the second best year ever. with thedoes this fit other economic data that we have seen, which says economic manufacturing has had a mediocre year? corporations are in a position where they need to expand and seek capital expenditures. coming to fruition, we have had several years where there was not that same kind of spending that we are seeing now. demand.nk it is pent-up
joe: what does the labor picture look like? how much are companies, homebuilders, restrained by a lack of labor and what will that do to wages? guest: labor constraints are going to be difficult this year and next. we have a chart here that shows that, in 2010, we had a different between the number of jobs and the total labor force. and available labor pool of over 1.5 million, close to 1.8 million workers. that has whittled down to less than 500,000 workers. what has happened is we have added jobs but we have lost workers at the same time. so the pool available to grow the workforce from, the pool, hasd cool --
fu.let: i am scarlet what did you miss? do not miss this. the jobs report is out tomorrow at 8:00 a.m. earnings is estimated to increase 2.3% year on year in october. thee september of 2009, average change of earnings has been in a very tight range. you have to look at the total employment. that number expected to come down to 9.9%. labor force participation