tv Whatd You Miss Bloomberg November 25, 2015 4:00pm-5:01pm EST
alix: u.s. stocks edging higher with the dollar in light training, signs the american economy is good enough to withstand higher interest rates. >> the question is "what'd you miss?" >> the economic impact from natural gas to trade over the downing of the turkish jet. joe: is the shopping season set to fade? el niño could wreak havoc on the economy. we will discuss the effects of a warmer winter. we begin with the markets. it was a very light volume trading day. stocks ended mildly in the green. the s&p was off by 30% versus the 10 day average. has felt whole week like a classic holiday week,
low-volume, not much of volatility, not much of direction in the market. --got a big delusion of data bunch of data. it was kind of mixed. there were some good numbers in terms of services and durable good orders. mediocre numbers on consumers and spending. alix: that feeling you should see transmitted through the two-year yields and tenure yields. both of them sold off. the idea is that if you have murky data, perhaps the fed will have a slower pace. that whole curve moves down as you can see in the spread there. joe: everyone has accepted that a december rate hike is likely. what happens to rates in the future? if people are not feeling the data is great, those rates come down. i want to talk about rates, specifically germany.
we've been talking about negative rates. this green line here is the german yield curve today. it is now negative out to seven years. all the debt is negative. absolutely extraordinary. people are saying so much to the german government to hold their money. the yellow line is one year ago at that time. you can see that in the last year as the etb has embarked on easing and lowering the positive rates and doing more qe, how dramatically that yield curve shifted across the entire thing. alix: the two-year yields are clawing their way up to the 1% level. the move has been dramatic. joe: that is that huge divergence. alix: what caught my eye is we
talk about the geopolitical risk premium. i'm interested in what that looks like. an unbelievable function that shows you anything you want to know around the world. what you are looking at is turkey, tankers that move in and out. the main reason we want to focus on it is this area right here. turkey has control of that. 145 crude tankers that have passed through this year according to bloomberg intelligence. is that going to be in trouble? is that going to get disrupted? not coming out of the ground, but how you transport it. will that affect oil and stock prices? joe: we have got a little pop
after news. alix: the markets are so short. any headline that could impact the markets does have the risk of short covering rally happening. joe: you can see all these charts and more on our twitter feeds. , a membering us today of the u.k. house of lords from london. thank you for joining us. joe: what do you make of the tension between russia and turkey? russia has not done anything get in terms of a direct response. what kind of moves do think that vladimir putin is thinking about? opposite sides in the syrian dispute. i think turkey has made that very plain. what the real facts are, but it does seem that they could have warned the russians to get off their
airspace. they claim they did. the russians say they did not. it was a hostile act. there are many different competing players in this game. there is russia-iran, and then on the other side, turkey. what turkey wants is disputed. syriaeople say they want to disintegrate so the turks can reoccupy that part of the world which they lost when the ottoman empire collapsed. that is one view. it is complicated. alix: how does it wind up working out economically? turkey and russia are big trading partners with each other. turkey imports 10% of its goods from russia. russia sends 5% of its exports to turkey. who has more to lose as the standoff continues? >> it may not continue.
i think this was a serious incident, but we don't know how russia will retaliate. the basic point to grasp is that russia is coming in from the cold. no one is talking about the sanctions imposed over ukraine and crimea. russia is an essential partner in the quest for peace in syria. i don't think the west likes that to be the case, but it is. themselvesrussians are starting to shrug off the fear of the sanctions and look for to some greater cooperation. these things change into sleep -- change instantly from one week to another. the cards fall in a different way. joe: do you have any doubts that the sanctions imposed by your will in fact be lifted? well, i'm not sure they will
be lifted, but i don't think they will be increased. that was always a threat. the russians haven't done what they wanted them to do. i think they will gradually fade away. whether theyquite will be officially scrapped, but certainly they are not the dominating factor any longer in the relationship between russia and the united states and europe. joe: you say they have come in from the call. what critics say is that russia is not a partner in fighting against isis. the only attacks they have made our against the rebels and not isis. is vladimir putin an ally in the fight? or does he have his own agenda? >> i think he has his own agenda. there is a power struggle going on. he is an ally of bashar al-assad
and the regime, but the point is that russia is indispensable. what is the basis for a political settlement in syria? it has to involve the existing regime. it is hard to say who else is involved because the opposition is scattered. there is no single entity that represents the moderate opposition. what vladimir putin said is simply what the west has denied, bashar al-assad and the people around him are an indispensable part of any political settlement. that seems to me common sense. alix: it seems to me economically at home for vladimir putin it is a different story. the government missed its bond sale target for the first time in a month, implying it is seeping in. is there some divergence there
between putin politically and putin at home? >> there is still a lot of and certainty, but you had another -- basicallyut people are paying the government to hold their money in germany. there is a big increase in uncertainty everywhere. the political risks in this situation are greater, and the markets are reacting to that. i think they do understand that the international system is in a very unstable situation at the moment. think leaders in the west will come around to vladimir putin's view on bashar al-assad? >> they are creeping up to it ,radually with encoded language a transitional arrangement, fresh elections.
he said there are no specific or credible threats against the united states right now. go into thanksgiving weekend, i want the american people to know that we are taking every possible step to keep our homeland safe. alix: the president said americans should go about their usual thanks giving activities. german chancellor angela merkel this is the circle in paris that is the focal point for tribute. she laid a single white rose at the column. president has been drumming up international support for the fight against the islamic state group in syria. he will meet with the italian prime minister before meeting with vladimir putin. the surviving pilot of that downed russian fighter jet is shooting down turkey's warnings claim. he says there were no warnings from turkish authorities. he also denies the plane
violated turkish airspace. turkey says it sent out repeated warnings before downing the play. the other crew member was killed. less than 10 weeks before i all caps its first vote, a virtual tie. a survey shows donald trump with 25%, ted cruz at 23%. that is in the margin of error. you can get more on these and other breaking stories at bloomberg.com. with a member of the u.k. house of lords. joe: you wrote an article entitled "the decline of the west revisited." when you look at income equality inequality numbers rising, what is your big worry? >> i think that itself is very haveing, but you can't
increase in an equal societies, social cohesion at the same time. that wasn't my main concern in that piece i wrote. i suppose it was a bit gloomy, the paris terrorist attacks it just happened. that our do point out international system has become very unstable. to west has lost its ability shape the agenda or pattern of relations over a large part of the world. that was something we thought we had after the fall of communism. alix: what happened? what was the trigger point to shake this out? >> i think it was over optimism. there was an assumption, which was really embodied in that piece in 1989 called "the end of said all in which he the major sources of conflict
are over and the world will move democracy, free markets, the rule of law, and so on. what has happened is that the peripheries have not been pooler frill. -- have not been peru friel -- that is on the borders of europe. borders that unlike in the united states, borders that are virtually defenseless. joe: in addition to the general economic stagnation of across europe. there is the growing refugee crisis. out there arets positives to increases in population, immigration, people point to the fact that most of the european countries have done an abysmal job of integrating refugees into society. the you see any hope that the refugees and immigrants could be part of the fabric of these societies? do policies and other reasons, with a remain marginalized?
>> economists are bad and understanding that human beings are not just economic agents. fromare people who come their own cultures, norms, and histories. factors of just production in a market. europe is not just a market. if it were, there would be valuable additions to those markets. -- they would be viable additions to those markets. absorb no way europe can 10 million or so refugees from countries around the middle east. it would profoundly change the character of european society. it won't. it just won't do it. what is going to happen is that european member nations are going to start defending their borders again, which under eu
treaty they can't do because you have the free movement of labor within the union. alix: we have already seen that with slovenia, hungry -- hun gary. what does that do for youth unemployment? >> look at the popular unemployment in europe. it's nearly 11%. look at the raid of growth. it has been zero for the last five years. , which the output gap the oecd has estimated to be about 3%. and that falls on you. if you exclude germany, germany being a successful country, then the records are worse. there is no real growth strategy that makes sense to me in europe at the moment. the quantitative easing they are doing, there is the new big
investment initiative, at the moment that is only on paper. we will have to see what happens. should the eurozone due to reinvigorate growth and put a dent into these ugly employment numbers? really takegot to seriously the connection between balance of trade imbalances and productivity. ir onlymoment, the strategy for making the less excess will countries competitive is to depress their wages, but if you do that, you are also depressing productivity, because much of labor within go into low-carb to -- into low productivity jobs. it's absolutely hopeless for growth. you need to raise productivity in europe, and that is a supply and demand problem.
you've got to have more demand and more production. alix: what you do in terms of the refugee crisis? i've heard different solutions. there should be a year old refugee bond to pay for it. how do you integrate them without the money? >> you don't integrate them. the idea that we will integrate most of them is pie in the sky. we will not worried we will keep them exactly where they are. we will pay. we should pay. some of the initiatives now in operation to get peace in syria are going to work in a reasonable span of time. sufficient conditions of peace and security will be restored, but most of them will go back, and most of them want to go back. people don't want to be torn from their roots in huge numbers.
i think that is exactly what should happen. i say what should happen, but whether it will happen, that depends on a very high level of political leadership. maybe it is there, maybe not. alix: you're are staying with us. coming up, just a few weeks away from the fed december meeting. will they hike? we will discuss. ♪
u.k. house of lords. we will talk federal reserve and economics. people think it looks clear that the fed is likely to raise rates in december, market-implied odds are 75%. is that the right move? >> i don't know. the united states is different from europe and from the u.k.. point of monetary policy really has been to try and keep the rates of inflation constant. they have inflation targets -- targets. if you think inflation is a threat, you raise federal reserve rates or central bank rates. be?hat likely to
there is sign of resurgence of inflation in europe and none in the u.k., so i would expect rates to stay exactly where they are. growth in theal that addsnion, and so to the argument. in the u.k., there is growth, some growth, but no sign of inflation. i'm not sure exactly what the position -- the balance between growth and inflation and deflation is in the united states. it has obviously been at balance they have had to negotiate for a year or so now. i would be quite surprised if at this point with all the extra uncertainty creeping into the global economy and political system whether the fed did raise rates soon. i would be surprised. i'm not the expert on the american economy. joe: let's talk monetary policy
and central banks more broadly. in 50 years, when historians are writing economic history books , whatthis great recession will they say are the biggest mistakes that central bankers made and what they should have done to better combat the malaise of the world economy? >> i think most of the mistakes of the central bankers -- i wouldn't say the central banks have made big mistakes here it they did roughly what they had to do in 2008-2009. there was a central mistake in macroeconomic policy, which was that if you kept the inflation rates constant and hit your target, then the economy would be quite stable. they were quite unprepared for the banking collapse, which showed there was some missing instrument. the second mistake and macro policy, less in the united
states -- i give the united states better marks than my own country actually. i think they completely underestimated the power of fiscal policy in a depression. they went on to the austerity line much too quickly. joe: we just have a few seconds. when you look at 2016, what is the biggest risk in the economy? > the biggest risk is further deflation in much of the world economy, no growth, slowdown in growth where it is happening, and no group -- growth continuing where it is not. joe: thank you very much. alix: i'm saying goodbye to you. you are leaving early for the holiday weekend. good luck with your travel. i will see you on the other side of this break. this year's back, el niño is one of the strongest on record. what are the implications of these changing weather patterns. kent, natural gas. ♪
alix: i am alix steel. "what'd you miss?" let's get to our first word news update. president obama wants to reassure the american people that the u.s. is doing everything it can to defeat islamic state. he spoke with his national security team. he said they are working around the clock to keep our country safe and that there is no credible threat to the u.s. at this time. police armed with automatic weapons in the belgian capital as they reopen since emergency measures were imposed. subways also started running again. belgian and french authorities at leastto hunt for
two suspects linked to the paris attacks. the fate of daily fantasy sports on hold. a new york judge the climb to render an immediate ruling on whether or not the sites promote legal gambling. the lawyers for the two biggest argue the contests are games of , not chance. a judge will issue a ruling after the holidays. the family of frank gifford announced today that signs of a generative disease were found in his brain after his death in august at the age of 84. the brain disease can be diagnosed only after death. it has been found in the brains of dozens of nfl players. you can get more at bloomberg.com. julie hyman has a quick recap of u.s. markets. pretty flat. that volume was light. >> yes, about one third below
the 30 day average. not surprising. let's talk about what did happen. we did see a mixed session to end the day, even after stocks had traded higher. if you take a look at the groups on the move, health care held up throughout the session. consumer discretionary also rising going into the holiday shopping season. energy shares lower along with materials. energy shares, they felt after oil rebounded. if you look at oil over the rocking is,had some inventory data coming out that ,howed inventories declined even though it was less than anticipated. production fell for the second week in a row. then we got the weekly rig count that showed for the 12th week out of 13, riggs declining. then we saw a late stage surge. in terms of health care shares.
we saw a bounce back in allergan and pfizer. they had been declining in the announcement of their deal that there would be regulatory hurdles because of resistance to tack in version in washington. discretionary also seeing a bounce back during the day. , macy, and tiffany, bouncing back. we will go shopping after work on friday, right? let's go into the terminal to look at the eco-data. two things stood out. , theirst is the core pce measure of inflation, the blue line. ,t appears to be stagnating
relatively unchanged. what also struck me was the wages and salaries within the personal income number. that is the green line you are seeing. this was up by six tenths of 1%. it highlighted the fed's conundrum. overall core pce stagnant, but wages tend to be rising, so will they converge or continue to diverge? how will we know more about that when the job number comes out on friday? this year's el niño is one of the strongest on record. warmer december temperatures mean major pain for gas traders. , thank you for
joining me. we saw that chart. it looked like things were getting hot. can you explain what the patterns are telling you now? >> it looks like the on is peaking in strength. we willnext 4-6 weeks not get too much of a break from the mild weather on the east coast. i don't think too many of us will be complaining. we are having a split-flow pattern across the united states where warm mild air is crashing into the pacific northwest and dominating the northern half of the united states. the southern half my trend from the temperatures north wander down there. it will be mild compared to typical december temperatures. alix: when does that mean for gdp? what is the relationship there? here, interesting thing
everybody believes the fed hike will happen in december, but the trajectory is uncertain. what will happen after that? funds believe the fed futures, were not expecting the hike for the next x months here at -- next six months. what i'm trying to say is that historically, we have had tough winters and 2011, 2014, 2015. as a result, we saw a drop in gdp. when the fed looks at this mild weather and sees the economic data is better than expected, there is a substantial possibility that he could be more aggressive. alix: the other part of this is what it means for my wallet and consumers. part of the story is that natural gas futures have been pummeled so much, shorts built
so much, because the expectation is that it will be hot. can you tell us what you are seeing? >> we've seen front in contracts and drop 20% in the natural gas market due to the decreased heating demand through late october, november, and the expectations in december that we will have lower demand. short interest among money managers has decreased the past couple of weeks as they are taking profits out, but the weather shows there will be a lack of demand, surprises will say lower longer. alix: do i spend that utility money? >> that is what typically happens. alix: talk to us about the relationship between what i spin and win it gets cold out -- what i spend and when he gets called out. see on the second chart, states rely on various
sources of income. one is general sales and motor fuel. mild weather, we will drive more, so that helps. more, so theopping result of that is potentially more revenue for states. the chartcircles on are when it got really cold in the first quarter of every year, and we saw those sales decline. how much you think states will make this year? >> i expect, depending on the revenues will look pretty good. say they haveld been doing the well, maybe not fully recovered. it will be an additional benefit , but not a make it or break it. alix: how long does it last?
you were talking about peak el niño. weeks, is have 3-4 there a long-lasting impact when it comes to the atmosphere, or does it in all of a sudden? >> that is where the real debate is. the el niño right now is so strong that it is dominating the pattern. we don't have to look at other indicators to get an idea of what is going on. winter,t later in the that el niño will decay. are have toens, you look to other factors that hold a few more unknowns. --ave been advising clients the end of winter, you could have a turn to the colder side. there are some indicators slipping early on. we can't be totally confident on that, but that is what we are watching. while december should be warm and everything is lining up or
january to be warm, february is uncertain. alix: if you are looking for a boost in gdp because of warmer weather, is this bringing for demand? >> it could happen. my point which i made initially, let's look what the fed will do. they will tighten in december and start monitoring data in january and february to identify if they should hike in march or wait. by that time, assuming we have mild weather as we expect, they will be getting good data, so they might have an incentive to move in march. alix: great stuff. thank you so much. happy thanksgiving. coming up, will this black friday top last year? we will have the numbers you must see, next.
alix: i am alix steel. "what'd you miss?" it is a time for the bloomberg business flash. to recall wants vw automobiles. days to they have 45 assemble a recall land. -- recall plan. it also applies to audi and porsche cars. pilotse to shake up how are hired. instead of looking for experienced pilots, the airline would provide its own training. candidates would have to meet u.s. requirements,
including 1500 hrs of flight experience of to be certified. coming soon to a theater near , theaters are looking to boost revenue when the new star wars movie opens. they will be selling posters, keychains. they need the extra cash because they have to pay a higher than normal percentage of each ticket to disney, the film distributor. that is your bloomberg business flash. thought of ass the top u.s. shopping day, but it's importance might be fading. the national retail federation has been tracking the data for you. the importancet of black friday sales have declined in recent years, down 11% last year. 15%weekend counts are still of overall holiday sales, but not as it used to be. one of the big themes has been
weakness in brick-and-mortar sales. look at year-on-year sales at brick-and-mortar. they are consistently down. we have not seen positive growth since 2011 in any quarter. that makes online e-commerce that much more important for brick and mortar stores. in fact, e-commerce is expected to rise by 14% this holiday shopping season, outpacing sales overall sales. that title goes to amazon, dominating online. however, the smaller players have been trying to get some traction in online, but it has not been working. ,here is a slowing pace for gap j.c. penney, nordstrom, walmart. can see here that growth has been slowing. sales 4.5%e-commerce
in the second quarter, down from 10.5% in 2011. this is becoming a big problem for retailers. where ever you shop during the holidays, get pumped. you will see some killer deals. the inventory to sales ratio has been moving higher. retailers need to offload inventory and like in their loads to make room for new products coming in, and that means we will get good deals over the next four weeks. to terrying, we talked lundgren macy's ceo, and ask him about these retail trends. shops way the consumer starts with their phone, does research, and says i want to buy . when they do, hopefully macy's will pop up. they will come into the store and try it on to verify quality, color and all that, then they will decide whether they will buy in-store or go home and buy
it on their couch. that is the way consumers are shopping today. we benefit from that. you are talking about the consumer in general, and we have seen the consumer buying other automobile record sales, home improvement doing extremely well. we are benefiting with furniture sales along with home improvement. weeks, how bige are the sales? we've seen thanksgiving and christmas, how big are they compared to the rest of the year? >> is huge. it is so important we have a great holiday season. that weo our employees work so hard 12 months out of the year, but if we don't finish the year between thanksgiving and christmas really strong, the year will be tough. you can make up a lot of ground with a great finish. >> has that percentage gone up
or down? >> it has stayed pretty steady. there has been a little ship because of the thanksgiving and black friday holidays getting longer. it has shifted into thanksgiving. if you look at that 24 hour time span, it still the biggest day of the year. that is extreme important through december 26. asleep on friday. i hope a lot of people will be in your stores. about how the trend will change. 94% of sales will still take , and in physical stores yet that is down from 2014. is that a trend that continues indefinitely? the way i just described the
large majoritye of consumers are women, but i think it plateaus at some point. ally, it's 92.5% of products being sold in stores. let's say that gets to 85%, someday 80%, still the majority of the business takes place in brick-and-mortar. i see that trend continuing, and we will be benefiting with the strength of our online business, but having bricks and mortar will be critical to long-term success for retailers. alix: it was a very optimistic and macy's ceo. coming up, when our oil prices going to rebound? we will hear from the ihs vice chairman next. ♪
alix: i am alix steel. "what'd you miss?" oil production in the u.s. has remained resilient in the wake of the collapse of rig count. we sat down with ihs vice chairman. >> it turns out that the people who do the shale oil are ingenious, entrepreneurial, and have become a lot more efficient. service costs are down. ihs has the performance if i later, which let's is look at every well in the country. in 2014, only 30% of the new wells produced 80% of the new oil, so there was huge room for a lot more efficiency, as well
as continuing innovation and so forth. at $60, this would have continued with momentum, $40,e are now closer to and you are seeing the impact of being down about half a million barrels a day from the peak in april 2015, but back to where it was in november of 2014, when market share strategy was there. more declineome because of the pain, but it has proved to be more resilient. we talked before, having been in the middle east and their --ectations for it is talk that the credit markets will shut down more production in the shale patch. ,ill we find out that supply shale supply, is more elastic
than anticipated? >> it has been less elastic than anticipated one year ago, but maybe more it last going forward. between theeraction financial markets and shale producers, because this is a capital-intensive activity. we were looking at our numbers for 2015-2019, and you see that 40% of capital expenditure will be spent in north america, and a lot of that is in shale, so -- the other thing out there is that there is that famous ride powder private equity estimate, $60 billion waiting for stress to get there. as you pointed out, we are starting to see the stress melt up now under these price pressures. >> how much lower are the costs and the sale -- shale patch than one year ago? >> remember how tight all the
service industry was in terms of rigs, people. we would say the costs are down around 30% from what they had been. at this point, service providers really want to keep their crews and equipment working. there has been some impact clearly if you look at the rig count on what is happening in the shale patch, but the large multibillion dollar projects that the majors keep canceling. what is the impact of that longer-term? >> that's why we have to remember that this is a cycle and it will come back. 2015-2019,k at it in we see $600 billion less investment in the upstream than anticipated one your ago. we've seen some high profile project being canceled, but the mantra in companies is slow down and don't go fast, postpone, delayed, or cancel out right. i think it will show up in the have people and we
doing what ever they need to do to get in there, but companies will become more selective in where they make their commitments for future investments. beforeuld be remiss asking where you think oil will be trading one year from now. >> let me put it this way, i think the next couple of quarters will be tough. iranians,tion day, that will put more oriole in the market, but one year from now we will either end 2016, 2017, the oil market gets back into balance. part of that question will be what happens to those big cushions, 3 billion barrels of inventory out there? alix: we will be right back. ♪
mark: i am mark halperin. john: i am john heilemann. with all the turkeys not lucky enough to be pardoned by president obama, it's all gravy from here, guys. ♪ mark: happy day before thanksgiving, sports fans. a thanksgiving meal, debate real, appeal, and thanksgiving seal. we will dig into what the president said this morning when he delivered a statement on national security and reassured americans