tv Bloomberg Markets Bloomberg November 20, 2015 12:00pm-2:01pm EST
>> from bloomberg world headquarters in new york, i am scarlet fu. >> i am alix steel. mali, stormed a hotel in taking dozens of hostages. at least 18 are killed. the latest on the attack, and who may be behind it, coming up. nike announcing a buyback and a split. scarlet: mario draghi vowing to do what it takes to spur prices higher. we want to start with the market check with julie hyman. are we getting the volatility? stocks have been steadily
rising. we are not getting the volume yet. i am looking at the volumes, 4% below the 10-day average. a surge at thee close with the expectations of futures contracts. the s&p of one half of 1%. the dow is leading in percentage terms, up 6/10 of 1% helped by nike and united health, the biggest contributors to the game after nike announced a 2-for-1 stock split and a buyback. they're bouncing back after yesterday's decline that it may pull back from its affordable care act coverage exposure. it was ae analyst say buying opportunity. susquehanna says they do not think this will be a material event for united house. the dow is turning positive for the year to date. not by very much, just of a
100ths of ajust 8/ percent. we have positive numbers from retailers. it seems like it is give and take. somethingre might be said for people coming in because they are so battered. the outside gains may be because they have been down so much. abercrombie is showing evidence that its turnaround is finally starting to take hold. sports creating relief, raising its earning forecast about the sporting goods sector. of earningse end season. 90% express a of the companies in the s&p have reported . 44% have topped revenue estimates. that is not the whole story. for the year, the first three
quarters, the s&p 500 profits have fallen by $25 billion. severe.is pretty happy birthday, julie. how does it feel to be 21? julie: awesome. i'm going to go rage tonight. >> less chicken with bloomberg first news with mark crumpton. standoff at a west african hotel appears to be over. according to state tv, all hostages have been released. islamic extremists stormed a hotel in bomb ago. andrea's martinez is in our london newsroom with the latest. any claim of responsibility for today's attacks? .ndres so far, yes.
al qaeda has claimed responsibility. they've asked for the release of prisoners. and for a few other countries to leave that part of mali. mark: do we have a sense of what security was like at that hotel? andres: the radisson is a congregating point for the businessman. it is also a place where flight crews from air france and turkish air send their crews to sleep. hotel in theest nicest part of the country. it is really sort of a high, soft target. that sort of indicates there a major escalation. we have not seen this many civilians targeted in mali where it were has been going on for three years in the north -- mostly military fighting. mark: is there a sense because of the military action, this was
an extremist attack that took place because of the military anythingr didn't have to do with what we saw happening last week in france? far, we don't know. the pentagon said they do not believe the islamic state had any role in it. al qaeda came out and said they were responsible. it could be a way for these groups to let the world though they are still out there and al qaeda is still strong. it will not be overshadowed by the islamic state. they could be a sign of sympathy, or a reminder to the french that in their eyes, they should not have been there to start with. you so much. france says the number of people who want to join the army has tripled since last week's attack. inquiries through their website day.d from 500 to 1500 a
the french army has 112,000 troops. that is a look at her first word news. you can get more on these and other breaking stories 24-hours a day on bloomberg.com. i am mark crumpton. corporate america has a bit of a profit problem. and earnings have fallen by $25 billion in the first three quarters of the year. the main cold brick seems -- the main culprit seems to be oil. alix: how bad is the profit recession going to get? here is the cofounder of the investment group. what is interesting, in light of the profit drop, we are seeing the fed will probably hike rates . we are seeing a strengthening economy and other parts. how do you square this push and pull? have notrning numbers been good overall for the s&p
500, but it is all energy. with energy out of the next, revenues will be up 2%. the s&p 500 is the s&p 500, you can't pick and choose. energy is having an impact on the overall earnings numbers. we're seeing strength in health care and consumer discretionary and taxed. scarlet: you'll have easier comparisons in the next year? >> energy prices have been week. they are still falling. we're starting to get some stabilization. 2016, you will have better comps. alix: at what point has a stronger dollar already been factored into the companies? >> for exporters, they are being hurt by it. you look at the dollar and energy prices overall. you look at a company like caterpillar, down 16% year over year. they have been going down for 35
months. when you compound double-digit sales growth year after year, it adds up. in the industrial sector, energy, commodities, or exporting out of the u.s., you're having a tough time. the messick lay oriented companies and sectors are doing better. sectors.the retail you can blame it on the weather, or the fact that americans have shifted the way they spend. if we are spending more on services, dining, i we seeing those results another consumer companies that cater to services? paul: in monthly retail sales, it he now did restaurants and bars has been steadily rising throughout this area. the one area where amazon cannot get your business. deliveryy have made for snacks, i'm just saying. paul: amazon online sales are
hurting some of these countries. people are shifting how they spent money, on technology products. people are spending less on clothing and more on experiences. scarlet: but the s&p did in 1998 at the heart of the asian financial crisis, what you notice when you compare those two? paul: looking at how stocks traded in that year compared to prior years. .008 and 1998, have a lot 1990 eight is the asia crisis. the rest of the world was weak and the u.s. was strong. in 1998 come the s&p was up and the selloff in the fall was greater. if you look at the pattern, there is a scare in both ears. you close out on a strong note. scarlet: november on is a straight line up. alix: august through october is really fast. the caveat is in 1998 the
fed was easing policy in the panic of the russia crisis. we are looking at a fed that will hike at least once in december, it looks like. whether they keep going is up for debate. lessed is in some ways easy, but their balance sheet is higher. scarlet: what is the show you about the raising rate environment and where we are in stocks? paul: when you hike rates, it depends on the speed with which rates hike. the speed depends on whether or not there behind our head of the curve. if we see a situation where there slowly hiking rates, that is generally stocks performing well. meeting after meeting after meeting eventually breaks the back of the market. may be part of this week, like we saw in late summer, when the feds have held for such a long time, then they hike rates, every time you look at the time
they have been on hold for a year with no change, the market selloff between 5% and 10%. they have now been on hold for many years. there will be some volatility when they go off the curve, believe we may have seen that some in the summer. scarlet: thank you. paul hickey of the spoke investment group. let's go to julie hyman with breaking news on tesla. alix: she is making her way over right now. julie, tesla news. julie: the company is recalling do check thes cars seatbelts. shares are declining on this news a voluntary recalls. this is about the front seatbelt not being properly connected. they found a model s in europe with the front seatbelt not properly connected to the .utboard retentioner the company is doing a voluntary
recall. 90,000 model s cars. i don't know how many there are overall, but that sounds like a lot. you can see the shares taking a hit. they're not done that much, they have bounced a little off of the lows. when you are a young car company, and we of had so many issues with the larger automakers, this has to give customers pause. alix: and they want to hit the goal of getting to 55,000 vehicles. that is not a headline you want. julie: at the same time, it is a seatbelt. not an engine problem or problem with the electrical. that is worth pointing out, as well. scarlet: nike's new buyback lan is receiving a warm welcome. with a company perhaps miss an opportunity by spending the cash on itself? into thegle is jumping
scarlet: welcome back to bloomberg "markets." i am alix steel. scarlet: i am scarlet fu. alix: we will look at some of the biggest news stories. shares of intuit are of. accountingf software beat estimates. pushing more products to customers over the web. of walmartalysis said floor space is going faster than staffing.
floorspace byed 45% but staffing only by 8%. they said customer service needs improving. ofrlet: the three children one of the world's richest women are among the 400 richest people, things to their mom. she distributed her stake. -- share 49% of the atlanta-based company and have individual portions at $5.1 billion, according to the bloomberg millionaire index. let's head back to the market desk where julie hyman has a check on company movers. julie: i was already here. some laggards indeed. some of the worst-performing stocks in the s&p 500. they make technology that speeds the delivery of web content.
wasas downloade -- it downgraded from sale to neutral. media delivery revenue will take longer to materialize in 20 16. kansas is estimates are too high. a lot of customers have been bringing technology in-house, that was evident in their earnings which came out a couple of weeks ago. we're watching cf industries. about abeen talking potential clamp down on tax inversions in the context of pfizer and allergan. the of industries could also be affected. they are shifting, or plan to shift, it's legal address to the u.k. as it acquires the european operations ofican another fertilizer maker based in the netherlands. some of that concern is reflecting in the shares. on the move because of a
downgrade over jpmorgan. they downgraded to neutral. jpmorgan calls this a fluid and risky situation. the analysts say that he is deeply disappointed he did not downgrade ahead of the debt spiral. they are down 7.5% today. as we pointed out, there is ownership, thed hedge fund hotel, has come down. blackock and vanguard -- rock and vanguard at the top two. greenlight capital, as of the latest filing, cutting holdings by 2 million shares. glenview capital also cutting as well as wellington management. we are seeing the shareholders trim back. eliminated its shares entirely. just doing itis
alone. a buyback in addition to a 2-for-1 stock split. shares shot up on the news. nike should actually spent $7.5 billion to buy lululemon instead. joining us is shelly banjo. the stock moved on the story. how did you come up with this? shelly: they have been at subject of takeover chatter for some time. already nearing or passed all time highs. they are buying stock at the highest prices. what else could they do with that money? they could by lululemon. scarlet: it is impressive, coming up with the numbers behind it. it would make sense from a strategy point of view. nike has been pursuing the female athletic leisure market. projected to be
$20 billion this year purchased women. you have seen even parity videos on activewear. this is something that is important to nike. they have not been able to crack it as well as they have done men's basketball shoes, or something like that. alix: they should put money on that instead of $12 billion on buybacks. they pointed out others can come by lululemon instead. saidy: under armour has that women are important to us. they have grown it from nothing to 30% of the business. both of those companies are, to be fair, proud companies. to be able to say, we want to do it ourselves, is what nike did with their stock buybacks. lululemon'swe know stance? are they looking to be taken over? shelly: their shares are down. sales havestore
been up. they had a debacle with their see-through yoga pants, and their founder insulting their customers and having to leave. they have been through a lot. right now, the stock is pretty undervalued. alix: thank you so much, shelly banjo. a great piece on bloomberg. good numbers on why this makes more sense. could they have paid a premium for lululemon? scarlet: still ahead, holiday delivery means big this mess for retailers -- means big business or retailers. google is jumping into the ring. will they be able to compete with amazon? ♪
holiday season. google is expanded their delivery service to shoppers throughout southern california. scarlet: will it be enough to take on delivery giants like amazon? joining us to discuss the west coast wake-up is reporter brad stone. why does google want in on this? google is threatened by amazon. at least 20% of its revenues come from product search. increasingly, for 10 years, people are starting their searches on amazon. they are making it easier to get things quickly. google has had to get in the market itself, delivering things, to provide an alternative to amazon. behind google express is to create a confederacy of off-line stores and macy's, and
deliver from those stores to people's homes. will they be taken away e-commerce sales from brick and mortar retailers at the end of the day? brad: you put your finger on the problem. what is the cost savings you are passing on? what google is doing is subsidizing the sales. another distribution partner, all of the stores have others and will sometimes work t or companies like instacar ups. this.er how affordable is if you're working from selections from physical stores, you have the built in inventory and real estate costs in the off-line model, you're not cutting the corners needed to pass savings to customers and be competitive with amazon. from is this to prevent me going to the amazon app and keep
me on their website to look at their ads? i don't think they would oppose it that way. they would say they are giving their users, those searching for products on google, and there are a lot, and easy way to go from search, to shopping, to delivery. they would say they have e-commerce shoppers coming to google. i think the business goal would be to block amazon. scarlet: too bad people don't buy things as much. it is all services and eating out. alix: is now the time for emerging markets? goldman sachs thinks there is a turnaround. we will discuss. ♪
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let's start with our first word news. mark crumpton has those areas matt: -- mark crumpton has those. mark: in mali, forces are .reparing an assault on gunmen there are gunmen trapped in a single room. the violence in the capital ,egan when islamic extremist armed with guns and tossing grenades, stormed the hotel. at least 18 people were killed. the attackers initially took 170 hostage. reports the majority of hostages have been freed. police say they interior ministry -- last night detained 17olice people, seizing weapons and drugs. 164 people have been placed under house arrest with new
powers remitted under france's state of emergency. tonce's senate will vote extend the state of emergency for three more months. president obama and vladimir putin agree on one thing area they can hurt the islamic state i bombing the terror group's oil. president obama has publicly refuse the russian leader's offered to coordinate, but both are targeting oil tankers. that is where the group gets much funding. groups are not just opposed to new syrian refugees are they want to take a closer look at one's ones already living in the united states. louisiana governor bobby jindal has ordered to monitor syrians to "avert threats." georgia's governor has out for the monitoring of 59 refugees living in the state area -- in the state.
you can get more on these and other breaking news all day at the new bloomberg.com. back to you. believes aan sachs change is coming. the bank predicting developing countries will grow a half a percent next year, marking its first acceleration since 2010. gabriel, a portfolio manager, joins us. do you believe that the markets will turn the corner in 2016? -- just: we agree do agree. there have been sectors and areas of strength. particularly stocks, secular growth companies. even china, where the market has been very negative, has posted fantastic results in the third quarter. in terms of the entire asset class turning the corner, as the article mentions, that will be
more difficult given the exposure to commodities and cyclicals. alix: goldman, and others have said this, too, point to india, russia, those areas really providing the growth from emerging markets. whereas the outliers are malaysia and columbia. our favorite markets right now are china, mexico, and russia. certainly my partner and i have had a lot of experience in the russian market and we see this as an entry point. for emerging to really perform on cyclicals and commodities, you need a pickup in growth areas that article does mention a pickup in growth, but it has to be led by chinese growth. we do see sustainability,
particularly indicators that were very week this summer. it would be positive for commodity markets like russia. you mentioned some in latin america as well. a little bitgree is on india. very high expectations. certainly gdp growth has been very strong. that market has not been very expensive. scarlet: gotcha. gabriel, you mention china. let's start there. goldman sachs is the biggest risk is the significant depreciation of the yen. a second that play out time, because investors are much more on guard for this possibility after august. it is interesting that
investors focus on the depreciation of the currency and china. does run a trade surplus. in our opinion, the currency is well supported. unfortunately, its neighbors have the appreciated their currencies almost 20% this year. so, china is losing some competitiveness, in addition to having wage growth above and beyond its competitors. we don't see the need for the to depreciate,y to adjust to any particular deficit, that it is losing competitiveness. markethas been gaining share. how do they perform when oil prices are still low. for that, i tracked the emerging markets index, and the purple
line is the bread price -- break price. it's not a perfect correlation, but how do they do it with the oil prices rallying? guest: traditionally, commodity interest has been very high. markets like russia, as you mention, are highly exposed to the oil price. assumingsitive on oil, mining, and we think there has been an adjustment. will mention the currency weakness in emerging markets, which is effective of its weakness and commodities helps corporate perform better in terms of earnings. you look at companies like samsung in korea. they benefited from the depreciation of the korean currency. weakern be boosted by currency if that improves
margins. it has to be led by a demand in china. risean't see a broad based in china. it will continue to perform very well. let's continue where you left off. you are talking about companies like alibaba and baidu. what does this do to the investment base of these companies? i think is very positive. the stocks of been out of index for quite a while. baidu has been out for a while. alibaba, new companies. the addition of these 14 adr's, which are obviously for enlisted, did not have an institutional base, in my opinion, and this does rod and the investor base.
them will have to include as they follow benchmarks, but also long only investors, which are quite long in emerging markets, will have to include them in their portfolios, at least versus the benchmark. and finally, the increase is in the benchmark in china quite dramatically. it's possible that they will be by secular growth companies and less materials that used to be in the top 10. good point.t is a it also widens the valuation gap with shares excluded from the indexes. does that create opportunities for those kinds of companies? yes, they trade at a big discount to a shares. those are at a 40% premium, which is quite wide. if you look at the northbound quota between hong kong and
shanghai, there is a premium. there is less interest is there is a premium. but in our opinion, they trade a very attractive mode will -- very attractive multiples. alix: thank you very much. great stuff, gabriel wallach. , mario draghig up says he will act fast to combat deflation. we have details from his policy speech. alix: we will have more on details after the terror attacks last week. scarlet: and we will discuss security issues and more with who many consider should angela merkel step down. ♪
scarlet: you are watching bloomberg. i'm scarlet fu. alix: and i'm alix steel. signalingario draghi more monetary easing. why it is so critical. alix: and the latest status of the transpacific partnership. the banks fell biggest challenges as it returns to the market. first though, let's start in europe. mario draghi signaled more easing at a speech and record. his comment settled on the central bank concern the inflation rate will slip further from its target. inflation is not something we can be relaxed about as in the past it has been a good forecaster for where inflation will stabilize in the
medium-term. support from the depreciation of the euro and deflationore services . it will depend on rising nominal wage growth. ecb announces its next policy decision in the next two weeks. and preparesaggy for the massive cost of fixing -- volkswagen prepares for the massive cost of fixing 11 million cars. volkswagen says it will not cut "at the expense of our future." scarlet: penny pritzker continues to make the case for the transpacific partnership. speaking exclusively on bloomberg, she called the deal a huge accomplishment. tpp standsed where now and what it means for future relations with china. it is not including
china. we have to get past the agreement with the first 12 countries, and the thing about tpp is, it does set the standards for trade among the 12th countries, among 40% of global gdp and sets the highest trade standards of any multilateral trade agreement that has been negotiated. they were bailed out during the dutch banking crisis. ceoan and -- chairman and spoke in amsterdam about the challenges of returning to the market. >> in the old days, you had to be split up, and that was quite a legal, issue and another part had to be split off from brussels, but that took about two years. the twohad to merge
elements into a new bank. and then we finalized that. the dutch economy went into recession. so, it was not easy. it was rather a bumpy route. and finally the biggest airline in the world has named two destinations at the top of list.sh they named mexico city and berlin. flights from dubai to the mexican capital are planned for plane, which7x they should have by 2020. and that is your global business report. alix: for more stories, visit bloomberg.com. here in the u.s., we want to go to abigail doolittle where she is looking at ross stores. hey, abigail. a retailyes, we have
full and ross raised its year profit view. suntrust said it was a quality third quarter beat and it should be conservative guidance. ross stores is having its best day in three years. lululemon is up amid commentary about its use of cash. they said that nike would have ratherarter buying lulu than the $12 billion buyback. this may be a temporary reprieve for lululemon. and lastly, urban outfitters, after posting a disappointing quarter earlier this week and announcing the purchase of a be a tough, it will year for urban outfitters.
alix: welcome back to bloomberg markets. i'm alix steel. scarlet: and i'm scarlet fu. terrorist attacks in europe and the middle east have renewed interest in exchange traded funds that invest in your and defense companies. a good space. one etf has outperformed of the s&p 500 by 30 percentage points. related tos this instability and how much of this
is a valuation play? guest: it is a little bit of both. military expenditures of ghana for 10 years straight. you look at what happened last the s&p,ou see it done but this is part of a continued story. this is a hidden gem. i cannot not taken here often, but when you look at aerospace shares, this is the big one. it has beaten the s&p for 30 percentage points for the last 10 years, as you just said. etf's as a whole are now at a billion dollars, which is a lot for a little industry. when you look at this one, this is a big market cap one. it has 9% weighting to lockheed and boeing. they have been crushing it. sometimes an etf is market cap weighted. it can help if they are doing well. it has held those companies.
diverse is it? how many companies are there when you break it all down question mark really talking about exposure to three or -- when you break it all down? really you're talking about exposure to two or three companies? yes, aerospace is only 20% of the weighting of the industrial etf's. you're getting a little. plenty for most people. if you're going into an industry, it's a little more volatile than the s&p, not much. that passes my test as to whether this product has any value as an add-on to a portfolio. going back, i was trying to regress the etf by two 2000, because a lot of the rhetoric friday wasriday was
france's 9/11, in terms of it will change the way that they look at foreign policy, the defense surveillance system. i wonder there is a correlation that we can draw in terms of the aerospace and defense sector? is old and i did not go back that far. parties are talking about beefing up the military. could be a huge issue, no matter who wins. if you see this as a bigger threat, it does bode well. but you have seen these etf's search already. one quick point though -- there's another aerospace etf, powershares. this is way more liberal in what it uses as. it has 15% tech in there. it's like cyber security -- scarlet: it is the new world of defense. .ric: a little side note the differences in the holdings.
alix: i open noticing, looking up the commodities sector and how we have seen so many commodities go below their 2000 nine low, at their 2008 low, some as low as the 2002 low. it's kind of insane. what commodities are not participating in that? there is only one that is in the green at all and it's up theand it is the coco with great ticker chok. berserk.g there is a general increase in chocolate demand. market,merging middle-class continues to grow, that is something they will demand. this is more about shortages. when you look at commodities, a lot of people go with the broad market commodities.
why one, i think, proves when you go broad, you may want to equal weights. there is a ticker, gcc. you never know which of these commodities will have a breakout year. even though this is an anomaly performer, cocoa, this is helped best rod-based commodity index because it equal weights commodities. outperform etf's related to energy. to lookingit speaks under the hood at the weightings of these products, even in the commodities space. we were- scarlet: one analystier -- indiohat you should by
with the caveat that you do not -- he should buy and it with the caveat you do not look at your portfolio for 25 years. eric: sure. how great is it that a portfolio manager talks about such a long-held view question mark is right. 25 years, you're probably going would say etft? i investors would be in step with him. indian etf's have been on fire in terms of flow. even among civil country etf's they are the 10th biggest assets, they have taken in the second most money next to japan. they are why above their weight. there is nothing like a regime change to get some central -- single country etf's going. it has obviously gotten hurt a little bit. the data products you see people going into are the ishares and
inda, that is the big one. it is at 65 basis points. the one that has them the best are the small caps. sometimes the small caps may be like a backdoor way to play the mystic demand. they are companies that are not multinationals, so the small cap multinational demand has surged. scarlet: very good. thank you. alix: coming up, we get perspective on global terrorist attacks in the world economy from former german defense minister. we will be right back. ♪
markets. good friday afternoon. alix: this is what we are watching at this hour. the deadly siege in a mali hotel is at an end. the bloody scene comes a week after the terror attacks in paris. we will talk to former german defense ministerkarl-theodor zu guttenberg and just a moment. scarlet: bulls or bears in 2016? bloomberg asked some of the brightest minds on wall street for their predictions. candidates promising change. but how much is realistic? though, we want to head to the markets desk were julie hyman has the latest. we are at the end of the week. how does it look. -- how does it look? julie: things are holding up
relatively well. we have a pretty clear direction. it is upward. we have retail earnings. we have mario draghi talking about his willingness to increase accommodation in terms of monetary policy in europe. take a look at my bloomberg terminal here for the sectors on the move. discretionary and tech have been leading the gains. there are a lot of positive movers to choose from. and the refill sector, a lot of it does have to do with earnings. nike will have the stock two-for-one. hibbett sports is raising its full forecast for the full year. afterbell is rising announcing it is considering put up for sale. a lot of it has to do with earnings and the fact that these
stocks have sold off by so much as of late and there has been concern over retail. looking at other retail movers, gap is rising even after it cut , andnnual estimates abercrombie & fitch really standing out today. they are up 3%. alix: and also look at commodities. they are rallying after this big numbers came out. julie: it's interesting it is biking after the bigger hughes number, because that spike had begun beforehand. we had already seen oil moving up. the rig count coming in, it looks like 574 is the number i am seeing. that is an increase of two. this is the weekly rig count coming from baker hughes.
you see the upsurge in oil prices, of about 3/10 of 1% here . so i am looking at this acre rig count. it does represent the lowest we have seen in quite some time. even if it is a small uptick on the week. and they are going in the opposite direction? we are checking the u.s. dollar. we have seen the euro fall because of those mario draghi comments, so commodities reacting to some extent versus the dollar as well. if you look of the dollar index, it has been trading lower against a basket of other companies. alix: good stuff. scarlet: let's check in with mark crumpton at the first word news desk. an extreme group that split off from al qaeda from
north africa branch is claimed responsibility for the attack in mali. the group said it wanted fighters freed from prisons and attacks against northern maliki and's -- malians to stop. malian state television says 18 bodies have been found and there are no more hostages in the hotels. troops that by special forces from the u.s. and france are on the scene. security forces are preparing for a final assault on the gunman, who are said to be trapped in a single room. the french prime minister made his announcement in a speech to the senate. of others were wounded. many severely and last week's attacks. after 30 years in prison for spying for israel, jonathan
pollard is a free man. he walked out of a north carolina prison. the intelligence analyst checked in at a federal probation office in new york city. his imprisonment has long been a source of tension between the united states and israel. israeli prime minister benjamin netanyahu was among those celebrating his release. welcomeeople of israel the release of jonathan pollard. i longed for this day. pollard is not allowed to leave the u.s. and return to israel. hillary clinton is solidifying her lead in the race for the democratic presidential nomination. according to the latest bloomberg politics national poll, she leads vermont senator among sanders 55% to 30% registered democrats or those who lean that way.
another survey included vice president biden, who decided not to run. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. desk, i amrst were mark crumpton. back to you. thanks, mark.et: the deadly standoff at the hotel in mali is over. it does underscore the scale of mobile terror attacks. alix: karl-theodor zu guttenberg we're joined by karl-theodor zu guttenberg, who -- we're joined ,y karl-theodor zu guttenberg who served as defense minister and finance minister of germany. declared it is at war with isis. critical to that, preventing recruiting by these radical groups.
i want your prescription. how does france do that question mark how does europe do that is one of the hardest tasks we are facing right now, to detect the people coming to europe. at just to give you the german example, we have 10,000 refugees per day still at the very moment. that means up to 1.3 million this year, only in germany. so, finding out that small number who would, or should come with bad and even worsen tensions is something that needs to be coordinated among all member states, and we desperately need help as well. france has voted to extend the state of emergency there. we have a fence built in currency -- and hungary and slovenia. is this the end of free open
border policy in europe? disaster ifuld be a that happens. i personally think that is the it is an option to say that we must have much stronger border control. and the outside borders of the european union. but if we come to a conclusion we need border control with austria, hungary, france, germany, that brings us closer to the end of a big, dream. our bloomberg view editor to the opposite side of that saying the dismantling of this altogether, if it came to that would be a serious loss, but it wouldn't be a disaster. what would you say to that? i strongly disagree.
i think we need to be extremely careful not to undermine any of the big gains the european idea has brought up, and one of them freedom of movement. but the freedom of movement is more than just something which has been built up as a symbol. it has a very emotional component as well. security has to be established by the outside borders. we have to work together as a union and not a re-nationalized, fragmented european not union any longer, but europe. do that how do you question mark have you step up security without jeopardizing movement between borders in europe? we havehe specifics are to bring the forces together internally. we have to find military forces willing to control the outside borders. hungary cannot do it alone.
croatia would not be able to do it alone. greece is facing a lot of pressure in that regard. so, why not having german police forces, austrian police forces helping out over there? helping intelligence forces, areing with people that needed for controlling properly? i think that is way better than building up all of those controls with india. how do you pay for that? we need funds from brussels, of course, and we need putut way more on the -- way more on the table. in needs to be resolved in a common effort and not in a race to having the most nationalist approach. alix: something we have seen over the last week is german
chancellor angela merkel could be vulnerable because she has been so open with the refugees in germany. what is your position on that? what is your take? she is taken a very admirable position at the very beginning. however what i think she meant, was the "comma, but" at the very beginning. that means setting limits. andnumbers we are taking right now are way too high, not manageable any longer. she is facing quite a mighty wind right now, in and my opinion, she needs to act. very quickly, what would your refugee plan look like if you're not chancellor? i am not. i am joining a free life right now, specifically in the u.s. one, we have to act together at the very place where the whole crisis actually has its root.
so, we need a more concerted international effort in syria, some veryven with unhealthy, uncomfortable partners like russia. to work against them will not work. we need their support without coming to foul compromises. secondly, we need more control next to the borders of the crisis and we need to engage turkey there. we need to engage a couple of other countries. our we need to take domestic and inter-european problems. it's extremely complex, but a problem that needs to be addressed and we need americans being a strong partner. alix: thank you for staying up late to speak with us. really appreciate it, karl-theodor zu guttenberg, former german defense minister, joining is there in germany. scarlet: coming up, how will be paris attacks affect the european markets as we head into
90,000 vehicles. report, goldman sachs says that 2016 could be the year that emerging markets assets hit bottom and start to turn around. scarlet: a talk about moved, with the help of a flatbed truck. the iconic building was named "numero uno." afterword it would be demolished, it was moved to the comedy headquarters. saw: i would freak out if i that flying through the air. let's head to the markets desk with julie hyman. want to give clarification on that baker hughes rig count. we saw that fall to a five-year low of 564 in the weekly
numbers. for theinitely accounts spike in oil price. it is coming back down. we will continue to update you on that. also, health care, after the selloff, after united held troops that it was -- united was paring said it back on exchanges, susquehanna says that it is a buying opportunity. its forecastcing for the full year, saying it will not necessarily be affected -- or be whitef higher cost related to the exchanges. that was something united said. and molina healthcare, ubs aying that the exchanges small part all of the company business. just how small are these exchanges? take a look at my bloomberg
terminal. a bloomberg intelligence health analyst said this to me. this is an enrollment, not the percentage of earnings. united health enrollment in these exchanges, only 1% of its total earnings. even molina, 1%. just to give you some perspective of how important, or not, the aca is to these companies. scarlet: united health is the biggest insurer by market cap, but it makes it clear that some scale is needed here. you: julie hyman, thank very much. coming up, how large a role millennials play in the investment market. we will bring you predictions portray 16 by top financial experts.
we are in midtown manhattan. i did not realize, it is nice outside. it is friday. of course it is nice outside. i'm alix steel. we looked at some great mind to get their productions on the new year. let's go to carol massar and cory johnson. ix and scarlet, thank you so much. carol massar and cory johnson. we are looking ahead to 2016, finding out what these best and brightest minds have to say. our personal finance columnist joins us in studio. you have talked to a bunch of people about different topics, europe, china, bonds, stocks. where do want to start? >> we will start with europe. the attack in paris last week, talking to rebecca patterson, the cio of a trust that runs
funds for the wealthiest thaties, they should know the crisis is the biggest tell-all, and she thinks that a lot of investors have not thought it through. she is still overweight european equities and position for a week or europe him a but really on alert for how the refugee crisis might change spend the -- spending patterns. that's really interesting. the financial implications are unclear, we do not know how open borders will be end of that means for european trade. that is a question right now. >> yes, she sees that as one of the biggest challenges for the european yet. exactly that reason. up until now there has been free movement. we are seeing signs that countries are thinking about their borders in different ways and what will that actually mean for the european union could ultimately affect markets.
carol: you talk to one of my favorite individuals. what did he say about interest rates and what it means for the fixed income world? >> yes, exactly. dan is a gold mine of knowledge on the fed and the global perspective grid i talked to him last week. he was in bangkok. he said it is hard to forecast because of all of the geopolitical turmoil, but you yields on the 10 year could be at 2.8% by the end of next year. not that much higher than now, but slightly higher. that is his best guess right now. mixl: what is his portfolio he is recommending? >> what he is recommending is to go through the rocky times next year because of moves in the fed, a mixture of investment-grade corporate's that essentially have a majority
of five to 10 years. but he says, be very careful in the high-yield space. he says you want to be picking almost like a stock pekka rinne high-yield. relying onwant to be that. cory: interesting. what about equities? >> i talked to the head of the latin american private banker j.p. morgan, and he says that next year could be the year that latin america comes back in some peoples portfolios, that argentina is looking better, like a ray of sunshine, and that could not only be better for argentina and investments there, but the entire region. he was one of the places saying, look for opportunities next year. whatet: will --carol: about china? >> we talked to a couple of people lead varying rules. the head of emerging markets equity of morgan stanley says
the world may be one big chalk away from a big global downturn and it looks like china may be the likely culprit for the global downturn next year. but we also talked to the chief china economist at nomura, and he says, you know what? china will be fined next to her. it will still have growth. -- china will be fined next year. china is going to be fined next year. u.s. equities -- is that going to continue next year? >> it's interesting you say that, cory, because i hear that all the time, too. but i also hear this repeated confidence in the u.s. economy. they still expected the u.s. economy to improve next year. they are still bullish on u.s. equities, but not necessarily
that we will see so much return as we have in the past. that is where you are starting to get people talked about being a stock picker. a wildcard pick? >> investments in cancer research. great. you have given us a lot of stuff to keep on our radar. our bloomberg personal finance reporter joining us on bloomberg radio. back to you guys. scarlet: thank you so much, carol massar and cory johnson. energy having a major credit problem. what does it say about the broader, high-yield bond market? we are going to explore. ♪ the only way to get better is to challenge yourself,
it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. alix: from bloomberg world headquarters in new york, welcome back to "bloomberg market day." i'm alix steel. scarlet: mark crumpton has more.
says the army in mali terror attack on luxury hotel is over. killedt 22 people were when gunmen claiming loyalty to al qaeda took over the radisson blu hotel in the capital. 170 people were held hospital -- held hostage. assisted troops in responding to the attack. french police have been conducting more raids in the wake of the paris attacks. police say nearly 800 raids of taken place since last friday with 182 occurring last night alone. the french senate voted to extend the country's state of emergency for three months. the paris attacks have hardened the resolve of european union members looking to toughen border security, tighten gun laws, and block the flow of funds to extremist groups. an emergency meeting today, they made plans to improve policies for collecting and sharing
airline passenger information. the obama administration says new drugs shouldn't be priced out of reach repair -- for patients. drug costs of the leading health care concern for public, with support across party lines for some kind of government action. the president called for giving medicare legal authority to negotiate prices for high cost specialty drugs. liberia reemerging in more than two months after he was declared ebola free for a second time. health officials say the latest case involves a 10-year-old boy in monrovia. it is a setback for liberia, one of three west african nations hit hardest by the virus. according to the world health organization, the worst ebola outbreak in history has resulted in more than 10,000 cases and more than 4800 deaths. france says another suicide bomber went through greece, those details coming from us --
coming to us from france. more on that story at the top of the hour. more onget more and bloomberg.com. i'm mark crumpton, back to you. alix: chesapeake energy has a major problem, and nearly all of their bonds have plans to the lowest level ever. the company is bleeding cash and says more charges are coming because of the ongoing commodities route. laura keller joins us now with more. is this a sign of things to come? laura: it's the time of surrender starting to happen. it's one of the bigger energy categories we have, it's the second-biggest junk debt issuer. it's sort of the first time we are seeing these big guys collapse under the weight of these oil prices. spencer covers energy debt at bloomberg intelligence, and he had a hypothesis on chesapeake. it could be they may be getting
ready to exchange their unsecured debt for secure debt area investors are panicking. othercould mean -- companies of done that, either bankruptcy reasons or to help their p&l. laura: you've seen them change over time. some of the bonds you are talking about, if they are going to come and do a deal, be layered on. they did change their capacity for doing $2 billion worth of new. scarlet: i was reading that training is much worse than chesapeake's credit rating might suggest. a downgrade might be around the corner. what does that mean for the price and volume and volatility? investors see where there is a path of getting downgraded. you might have trading action
can't hold itunds because it's rated lower. i don't think you will see that with chesapeake, but you will see prices change to where agencies say we actually have some things here we need to refocus on. and the company is not doing as well as this rating really should be, they may downgraded. it does have a negative outlook. alix: i've been waiting for capital markets to freeze up some of these energy companies and it looks like that's happening for chesapeake. i never thought it would be chesapeake. i thought it would be smaller, independent emts. i would have never have thought a griffey would be an option. what is the next step for chesapeake? it will probably try and do exchanges, that's what you do with the company to stay alive, save your equity for as long as you can. but they do start to run out of options. 30%,ur bonds are yielding 20%, it's very difficult to even do an exchange. you'll probably see that start to happen. andproblem with chesapeake
others like peabody energy, you still have a lot of real money investors, mutual funds, insurance companies that don't want to exchange. you have to hedge funds and their, they want to do an exchange like that. it's going to be a bit of an issue for somebody like peabody energy recipe. alix: laura keller, thank you. chesapeake's credit problems indicative of what we're seeing across the high-yield market. check out the junk bond spreads, the premium that investors demand in order to own those over treasuries. analysts blame energy companies for this jump to read is that true, or is it a canary in a coal mine are other companies? joining us is our colleague from london, simon ballard. simon, such a pleasure to have you on set.
something liket chesapeake, what does that tell you about the junk bond spread and the general market? simon: it's an interesting story. you have two transitions, commodity prices and the prospect of shared left off. the funding cost that that's going to imply for some of these weaker rates, the high-yield corporate's that have been living off cheap debt for the last couple of years. much moreoing into a technical and demanding and challenging environment for the high-yield space area using these blowout in high-yield spreads, and a recent deepening in the u.s. of the quality curve. in the investment rate versus high-yield, we come back a little bit in europe and we have tightened back to about 330. but we are still very wide in terms of the steepness of the curve over here in the u.s., which suggests to me that the market is very nervous about high-yield will react is all this continues to play out. scarlet: what happens of the
federal reserve doesn't raise interest rates in the summer? simon: i think there will be a short-term rally and in the high-yield space. people look and say they haven't managed to raise rates because they are obviously worried at fundamental backdrop, from a credit metrics spectrum is negligible. it supports the idiosyncratic on an issuer basis. the stress is not only been to the junk bond market, investment radio has also been rising. we are seeing that trickle. where is the safe haven? simon: rupees yesterday looking at the status or havens in the current context. previously you have the japanese yen, we had the central banks, that's wiped out that story. corporate credit has been the
safe haven asset. if some of the higher leveraged sovereign balance sheets, the ecb expanding its potentially, people moved in the corporate credit. alix: corporate credit is the safe haven, not sovereigns anymore. simon: absolutely. there is no real safe haven now. there will always be the overall haven from the dollar, but there is no general single asset that people say is the haven in times of stress. the observation that private sector balance sheets are considered stronger than public sector. simon: you had risk over the past i've or six years. alix: then you have names like glencore volkswagen that have abandoned this great space at the same time. that's no longer even a safe haven. simon: it drives home the fact that is a stockpicking market, because there is heightened interest. you've really got to be on your
toes all the time. scarlet: in the united states, dividend yield versus bonfield. how does that look -- bonded yield? if you look at the relationship between bonfield and investment-grade on yield, in the u.s. relative to europe, in europe you have a 200 point spread between dividend yields, much more attractive than investment-grade yields. because of the ecb policy accommodation, we've got a very low level investment-grade yields. is the flipside in the u.s.. that marginroding as of late, but it's more attractive to buy bonds than equities than the running yield basis. for a yield basin best are, you need to pick your chances while you can. scarlet: simon ballard,
bloomberg's first world global credit status expert. alix: coming up in the next 20 minutes on "bloomberg markets," argentinians head to the polls for the runoff election. at the candidates are pledging to do for argentina's economy. the u.s. is wrecking it harder for companies to do inversions. -- making it harder for companies to do inversions. recentlywhy nike's announced by back strategy could be a missed opportunity. ♪
stories -- biggest business stories. 65% of the 31 analysts who cover the trader advocate buying shares. glencore lost two thirds of its value this year, battered by a route in commodity prices. scarlet: volkswagen supervisory board plans to meet next month after announcing cuts today. he automaker is grappling with its prices. feedback ondiscuss technical solutions for fixing the cars. they're also working on a more conference of spending overhaul. the three children of anne cox chambers should remember her on mother's day. they are among the 400 richest people thanks to their mother. stake yourloping her
children. valued at fortune $5.1 billion. , get it carol steele together. scarlet: bloomberg's julie hyman has a look at the under the radar movers. julie: let's start with mentor graphics, a company that designs chips. first quarter numbers coming in below estimates. and the president of the company saying in a statement that part of it has to do with semiconductor consolidation. that means perhaps your customers -- fewer customers. by 33%res collapsing today. storagea network
startup shares down, losing half their value in a single day. public,any became trading at 1017 at the moment. the company's forecast well short of what analysts had been projecting. pharmaceuticals as well as -- by marin falling after the fda theed some questions about expandable treatment for muscular dystrophy. it mostly affect young boys, and what's interesting in the commentary, the fda said even in the context of an invariably disabling and fatally is such as dmd, the safety profile of this drug is concerning. making a competing extra
mental treatment, and the fda is that to decide whether to februaryhat are not by 26. alix: thank you, julie hyman. happy birthday. scarlet: 21, right? the sunday, argentines had to the poll again in the second round of voting. two candidates vying for the presidency in iraq election. scarlet: the choice is being billed between continuity and one that single change. both candidates have planned it to resolve the long-standing economic woes. here to talk about this is katia porzecanski. how is it that he is leading the polls? he was supposed be the outlier, the one that is not even supposed to push this into a runoff election, but he is actually leading? katia: i guess argentines really want change. there's no other expiration.
of the votes that were supposed to go to the third candidate in the last place, purely went to of going to the parent list. it's been a surprise, polls are indicating that he is well ahead. however, can we really trust the polls? they been really misguiding and misleading elections around the world this year. aen last year with brazil good example of one that was a complete shocker. that hepolls indicated wouldn't be making it to a second round in the first class. can we really trust them? investors are certainly trusting them, they really pushing the market of high. alix: how did we get here? katia: how do we get to the situation where they want change? how did we get to the point that they want a runoff.
they have tremendously high inflation. inflation is the one thing that, across economic lines, everyone really feels. when you feel your pocket getting lighter and lighter by the day, and your salary isn't changing at the pace that it should, when you feel that the government isn't reporting inflation that the ties you really feel that it is, that really impact two. plus you have other things that are really tilting the sectors, which is your currency is in depreciating the way it should be to make up for inflation. you never really valued -- overvalued exchange rate that is distorting everything within the economy. things havel that to change so dramatically, and it could be very very painful when this happens. scarlet: but eventually it should balance out. have ather candidate plan to address that inflation? katia: so far, no one has detailed anything. one has said he would get into single digits, the other has
said he would get it below 10% as well. of them don't really believe that inflation is where it is right now, even though they have had a big change in the methodology of targeting inflation. there's a clear necessity also to change an agency and make sure they become credible again. because everything is being impacted by these allegedly false numbers. including how you allocate money to the poor. seems to other issue be companies coming in and setting up shop there. enticing global companies enough to do that, do either of the candidates have a specific plan? we've seen a lot of green companies wanting to expand in argentina, setting up offices there. -- this is had a lot a huge agricultural company. the meant a lot of hoarding of grain because farmers are hoping -- for the peso to devalue
more so they can bring in more money want to does. they have a huge warning situation, which is also something you only see in these countries that have these distortions. the plan should be that once they settle with the holdouts, once they settle with elliott management and other investors that are holding these defaulted bonds from 2001, that money can really start flowing into the country in a way that it just hasn't ever since the default. once that money really comes in, people are expecting -- companies are expecting to find a huge boom across many different sectors. porzecanski,a thank you. she covers opening markets for bloomberg news. alix: coming up on "bloomberg been a bigfizer has company to avoid the tax system. will new rules for their plans? ♪
"bloomberg markets," i'm sorry. pfizer is that to create the largest tax and version ever with its $150 billion bid for allergan, based in ireland. mitre -- mider joins us. it is rules or guidelines that need to be discussed and then voted on and implemented down the road? zachary: they could change, but they are effective today. they could affect any deal that happens tomorrow. if the deal hasn't closed yet, it would be under these rules. scarlet: what are the rules? zachary: they do a lot of things to prevent certain kinds of inversions from happening, and from companies that are inverting, and that's when a u.s. company shuffle some paper around to claim they are no longer american, that they have
a foreign domicile for tax purposes, the rules also say when it happened he's actually carries out, it will make it harder for them to read the tax benefits they are seeking. alix: what are the rules the government is proposing will be in effect today? zachary: one of the makes it more difficult for a company that got foreign subsidiaries, it becomes foreign, to try and move those foreign subsidiaries out of the u.s. tax system. it's complicated, but it will postpone the company's ability to read the tax benefit of an inversion transaction. this is very controversial, lots of presidential candidates have discussed this. what are people saying on the campaign trail, and how feasible are some of these plans? zachary: people like donald trump event very outspoken about their concern about inversions. for the most part, republicans who have been critical of said let's just cut the corporate tax rates as they apply to foreign earnings of u.s. companies to
remove the incentive. right now you have an incentive system that makes it very attractive to be a foreign company doing this in the u.s., as opposed to u.s. company. scarlet: would that do it? zachary: it would remove the incentive. alix: the treasury has come out with rules that were retroactive, that were in fact going to start the day they came out. what happened to potential m&a during those times? zachary: last or the treasury impose some other rules that were effective immediately, and actually killed three pending including thes, biggest, and $80 billion pharmaceutical company. that have a real effect. this time around, we are not seeing that much reaction in the market to suggest that any of the pending deals are really under great threat. scarlet: so it down inversions last time, but pfizer is still proposing this deal, so it doesn't kill it off completely. companies can still pursue it,
it will just be more expensive. zachary: it's unclear whether any of the rules would actually apply to the pfizer transaction. mider, thankary you. day after we heard these might be coming down, we did see allergan and pfizer trade lower, saying this may be lower. to johnrget to tune in kasich, on bloomberg. scarlet: more "bloomberg market day." ♪
from bloomberg's that quarters in new york, good afternoon. i'm david gura. mario draghi set the stage for the central bank to add more stimulus when it meets in a couple of weeks. he says he is ready to act quickly to boost inflation. will geopolitical risks derail his plan? it doesn't look like anything can stop nike after its most profitable year ever. it announces a 2-for-1 share split and a buyback. but is that a good investment? today, new album drops but it is not available for streaming. can she get people to buy her album the old-fashioned way? julie hyman has the latest. julie: we been stealing -- we have been seeing a ral,