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tv   Bloomberg Markets  Bloomberg  December 15, 2015 3:00pm-4:01pm EST

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from bloomberg world headquarters in new york, i'm ready lose. here's what we are watching at this hour -- a market rally underway. reboundingsurging, a crude oil as junk bonds help to ease investor fears ahead of the fed decision tomorrow. just 23 hours away now from the fed's potentially historic decision. what going to be the impact on investors? and the state of u.s. residential vacancies to explosive growth in cities like atlanta and denver, he would -- we will hear from to real estate titans. we are about one hour away from the close of trade. i want to head to the markets desk for the latest on the markets.
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right before a big decision, we are seeing a big move. ramy: you would think markets would be at a standstill but we are seeing a good move, markets jumping up from this morning and they haven't come down today. oil is rising and that's the big reason. here is where we are right now. the s&p 500 up and the dow jones up by nearly 1.2%. and of course all eyes are on the fed and the rate rise so many are expecting. check it out -- fed funds futures right now pricing in a 76% probability of a rate hike of at least 25 basis points. that is scheduled for tomorrow and bloomberg will have that coverage. as equities are rising, treasuries are falling and for the second day in a row, the
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yield is rising and the 10 year is up about five basis points. this is its highest in 11 days. it has been a big day for energy. ramy: it has definitely been a big day for energy. nymex crude has been pretty positive for the entire day. we saw a couple of downward trends but we are up i about 2.6%. of course the coming out as we are still stuck at six-year lows. starts our reigning a bit supreme today. up by 4.4%, the highest since the start of the month. exxon is also the biggest gainer on the dow. second biggest, up by nearly 4%. gas still going the
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other way, selling at its lowest price since 1999 because of the mild weather hitting us here on the east coast. we are talking about 64 degrees right here in manhattan and natural gas is down 4.6% right now. it's also facing a double whammy because we are looking at a happened overas the past several years as well as the weather being unseasonably warm. it might not the a white christmas. it might be a warm christmas. betty: thank you very much. breaking news now on halliburton and baker hughes. those shares are halted. the companies say they have extended their time for the deal to no later than april 30, pending a review by the department of justice. before the shares were halted,
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both of those stocks, as all energy shares were, rallying pending their deal closing. let's get a check on the headlines of bloomberg first word news with brendan greeley. brendan: french police say a 29-year-old man is arrested and being questioned at his home in an eastern suburb. his name has not been released. the attacks killed 130 people last month. the man can be held for questioning without -- for six days without being charged. officials in new york city say they received the threat -- same threat that los angeles received but quickly concluded it was a hoax. mayor bill de blasio says he's convinced there's no danger to schoolchildren. bratton says overreacted. the white house and i on the relation.
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>> the president has been in form of the decision based on information they have received. this illustrate something important for people to understand. it is local first responders who are responsible for taking the lead in protecting their communities. an official from a l.a. believed toit was have -- it is believed to have come from an address in frankfurt germany. -- frank for, germany. pleaded guilty to this should be shatters seat of child photography. the second court of appeals will hear the appeal. hitbiggest winter storm to the denver area has made the morning commute a mess. it has caused spin outs and crashes.
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about five inches of snow is expected at the airport. some areas could get up to 10 inches. denver and surrounding areas are getting a snow day. you can get these stories and more at the new today policyd meeting is underway, expected to end with the first interest hike in a decade. that might happen for all the wrong reasons. put itself in has a position where it has to raise rates or it could lose all credibility. i think what people are focused on our what is happening after that. that is what the market is most interested in. betty: agreed. james -- wouldy
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you hated by the way if everyone told you what you were going to do? that is the position they are in. fed making a mistake? i don't think so. the fact that once the fed starts to raise rates, it'll cause people to spend more. you have seen a lot of people on the sideline thinking i have time before i buy a house or take out car loans. mayinitial increases precipitate an increase in spending. betty: would that be enough to help the economy? short-term, yes. and the long-term, there is no pricing power or reinvestment dreams. corporations are not seeing growth. they are returning cash and thus we are not seeing the robust growth we are used to. betty: and you are underweight equities? vadim: absolutely. there are tactical
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opportunities, but overall, yes. betty: where do you see an opportunity? vadim: for example, we put a small position in energy. we think the bottom for energy -- actually oil futures. selling put options on individual stocks. we think integrated's are quite interesting. it's not that we know exactly when oil is going to rebound. we just think $30 marks the bottom. why do you think it marks the bottom? price, a that level of substantial number of wealth is unprofitable on a cash basis. they do not cover the cost of labor or the cost of transportation. they have to shut down and that will tighten the capacity. betty: this is for u.s. producers? vadim: this is the high cost
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users. to canada and brazil. even though this is more consensus, i think europe offers some opportunity for two reasons. a pickuparting to see in the credit cycle. the banks are finally starting to lend. in europe more than any place else, small business formation drives employment growth and we see early signs of improvement. unlike the u.s., where there are not as many deep value opportunities, europe is still priced at distressed levels. there are opportunities to buy cheaper stocks that benefit from improvement in economic growth. betty: are you buying europe or countries in europe? vadim: europe ends -- and smaller cap within europe. back here in the u.s., you see some pockets of
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opportunity. but nobody is thinking about what happens after. let's say what happens after is you raise interest rates and fourth-quarter earnings are kind of soft. sales are not that great. what are we in store for? exactlyhat's almost what is going to happen because we have high inventory levels. fourth-quarter production is going to be very weak. we will see gdp fall short of expectations. betty: you sound confident. vadim: we will find out in the coming months. the issue is how is the market going to react? we have seen the market sell off a little bit knowing inventories are high and seeing the revisions. you look at history, the beginning of the year, people
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are a little more optimistic and 10 to reward smaller cap stocks. the fundamental news flow will be quite mediocre. i think the markets could see power through that if we get a pickup in spending, and housing, and some others. betty: ahead of tomorrow's the decision, our special coverage begins at 1:00 eastern time on bloomberg television, bloomberg radio, and guests bring you special and in-depth analysis. we will also bring you janet yellen's press conference. it is going to be a big day tomorrow. much more ahead in the next 20 minutes. shares of 3m down sharply today. the maker of posted and scotch tape lowering its forecast, saying it is due to weakening global demand.
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been kind tonot apple. does tim cook have a plan to revise or turnaround some of those declining shares? the fed is widely expected to raise interest rates tomorrow. analysts are asking is a hike going to fuel a little spending? ♪
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betty: good afternoon and welcome back to bloomberg markets. it is a rough day for shares of 3m. slid the most since august after the company cut its
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2015 rocket forecast for the second time in as many months. the reason they say is the world economy and sluggish growth. our reporterw is who covers industrial companies. are they being completely upfront? is it all just global growth? rick: i think so. they are showing their own hasness is growing, but 3m so many different products in 70 different markets all over the world that they are very much tied to the global economy. slower,ngs are a little they will be slower for 3m. betty: two thirds of their sales are overseas. so they are very dependent. where are they getting hit the most? rick: there are a number of markets that are really slow like brazil and places you would expect. they see some promising signs
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and parts of china and europe and india. there some reason for optimism. what did the ceo say about turning this around? what is to be expected in 2016? rick: they have a forecast now and technologies going to be tough going into next year because the economy is just not going to pick up like that. they see some signs in the second half of next year that things are going to pick up more. does this say anything about the ceo and how he has led the company? good job anddone a that's the general consensus. he is focused on bringing 3m back to what it does, which is develop new products and grow in markets all over the world. had been doing that and and ran into a buzz saw a recently with currency and sluggishness in the global markets. betty: thank you so much.
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totching from industrials the complicated and sensitive real estate market, manhattan vacancies hit their highest levels in nine years last month, suggesting we have hit the ceiling for how much renters are willing to pay. the median monthly apartment over $3300. to just i spoke with the founder of a global real estate firm and the chairman of the real estate development company people's corporation. you are seeing the cost of rent have escalated so much that there is no discount to rent. 1.8 discount to ownership and a lack of confidence in the for sale market. to rentals as a safe haven and many people could not qualify as a result of what happened in the financial crisis. now we have people who are buying. now because there was such a
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limited inventory on the for , there is a lot of preconstruction sales and those sales have not gone to record yet. down,velocity appears it's a more active market and we are seeing now because these transactions are happening in terms of free sales that are not closing yet. slowdowne will see a and we are seeing somewhat of a slowdown from the tremendous velocity on the for sale side, but the rentals are going to pull back a bit. they are at a point where we were really were a couple of years off the peak. i will talk about the commercial, particularly office. i will go even further around the country and talk new york, seattle, chicago, etc..
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and 24 hour18 cities in america, right now it is utopia. you are still not peaking in terms of where the rents are as compared to other prior peaks were, but tremendous demand and grows driven by our entrepreneurial society. betty: this is commercial you are talking about. guest: as a result of the voracious appetite for technology companies to grow, which is all of the capital coming out of the venture capital community hoping to back the next uber or facebook concept. betty: is that sustainable? as crazy as it sounds, it's going to be decided by the financial markets. gaga over people are the private valuations of facebook or a company like uber, saying i want to own the next uber and as long as that capital
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is flowing to all those young kids, i think it will continue. , with those funny valuations, facebook or google has something called confederate money. consideredy that was almost worthless, but people would spend it in both loads. they've got that capital in terms of their stock prices. creating, converging with the fact that we have been the most entrepreneurial society we have seen in america and that's creating new business, new excitement and demand for office space. we will be back with options in sight. ♪
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betty: welcome back to bloomberg markets.
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docs are extending their rally to a second day ahead of tomorrow's huge fed meeting. we've got more on the options in sight. joining me is kevin kelly, the chief investment officer at recon capital partners. we have a couple of trades to talk about today. the first, key etf's have fallen about 11%. probablyn says it's just the beginning. what are your thoughts? seen over the past month that a lot of people have been hedging over high-yield exposure. if we look at the put call to ratio, you see two times the amount of puts eating traded, meaning a lot of people were hedging their high-yield exposure. what we saw yesterday is seven times the amount of puts. once the flood actually came of hedging the high-yield exposure, theeally opened up
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floodgates, but we have seen this coming for a long time. carl has been very eloquent and in front of this for months. ramy: let's get to your trade on this. what do you want to do? kevin you want to position yourself for a little upside because we have seen so much trading to the downside. people are keeping it real close, so you want to sell they andaround 77 or 76 and by 81 call. point rate25 basis hike tomorrow first stop -- tomorrow. ramy: how concerned are you investors will be a bull to get their redemptions? kevin: that's one of the biggest concerns because people are selling high-yield bonds indiscriminately. but there's not a big concern
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because there are buyers out there and there are great things to buy, such as the health care space. health care is in its first inning of a bull market. we see aging population and m&a. it's a great space to be. andre seeing buyers in that the higher allocation the high-yield space and energy. apple, a lot of wall street analysts are going bearish on the stock from barclays to morgan stanley. what are you looking at for your trade? kevin: it's one of the largest market cap stocks in the world. we've seen the stock rarely move at all, but they've got tons of cash on their balance sheet and trading at 12 times earnings. they can increase their dividend and do tons of stuff, but you want to turn it into a high-yield bond.
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you can buy the stock around $111 or 112 and sell the june 120 call against it. gives you an absolute yield of 4.8%. it is a great trade. ramy: we have to leave it there. betty, back to you. still ahead, what is janet yellen going to say? that's the question that hangs over wall street. the fed decision looming tomorrow. ♪
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betty: live from bloomberg's world headquarters, you are watching bloomberg markets. start with a check on the bloomberg markets with brendan greeley at the news desk. brendan: defense secretary ash
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carter is in turkey. he says the us-led coalition needs to step up its efforts against islamic state militants in iraq and syria. >> we are looking for ways to do more in the air and on the ground, in the air to hasten the defeat of ice. we have to defeat them here where the tumor is. officials in new york city say they receive the same threat that led to the closure of the los angeles school system and quickly concluded it was a hoax. mayor bill de blasio says he is absolutely convinced there's no danger to new york's cool children. and the new york police commissioner says l.a. overreacted by closing the second largest school system. the e-mail is believed to have come from and ip address in frankfurt, germany.
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been charged with a hacking scheme that in vault personal information of 60 million people. the men hacked the computers of four companies they also allegedly hacked a credit monitoring service in texas. donald trump heads into the debate tonight with his biggest lead yet. has 38% poll, he support among registered republicans and independents leading -- leaning that way. carson eachand ben had 12%. you can get more on these and other stories at betty: we have less than 30 minutes until the close of trade . stocks are in play to rise for the second straight day. we see an unusual move ahead of the fed meeting. abigail doolittle joins us live from the nasdaq. abigail: we are off the highs
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just slightly but still up nicely. the composite indexes back above its 200 day moving average. i was just communicating with the head of technical analysis of this movement is indicative of overall market jitters around the fed decision but emphasizes the ability to trend higher over the long-term and thinks tech holds up better through a likely q1 correction. that will lead the market higher once conditions improve. wearing so well as apple. shares are down again after dialogue so my conductor cut its fourth quarter revenue forecast citing weaker demand for its mobile segment. does comeir revenue from apple. this might suggest that iphone demand is weaker than expected. that would be in line with the
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possibility jpmorgan outlined yesterday saying it could cause fiscal second-quarter estimates to come down. on the year flat after massive swings up and down. the key to breaking that range may be whether profit do grow as are expected for fiscal 16 or not. betty: thank you. 22 and a half hours away -- we are really counting down, to possibly the first rate hike in nearly a decade. the move would come at a time when the commodity swallow -- commodity slump is spreading unease across trading desks. here to talk more about what a tightening environment would mean is josh wright and alexander skaggs of bloomberg intelligence. you wrote an interesting story about how some economists think this rate hike could spur
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inflation. >> this is one of my favorite theories. it is really out there. and there is very little evidence that this is what does happen. but what it shows is we understand very little about what drives inflation. tell us who is proposing this. is a sickly a playoff of irving fisher's models from more than a century ago. they are saying higher rates could actually used inflation. think because americans the economy is doing better, they will spend more money and that will be better for the economy and spur inflation. what do you say to that?
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josh: the counter to this is the 80's and paul volcker inflation came down according to the traditional models. we have never understood inflation and the malls were wrong all along or we need to models. a lot of people agree with that and from that perspective, this is what we have a university tenure system for -- for people and kickp with this the tires. if i came appear and said the id needs to raise rates, might face some consequences, but these people alone. there is a lot of interesting analysis and you can see it is starting to pick up. there's a growing following -- growing following in the academic community for this inking. understandgoing to the new normal or the new mediocre? we are still looking for the terms, let alone the modeling.
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: the reason they are getting more following is that the evidence is backing them up. look at what has happened in the u.s.. you hadn't low interest rates and no inflation. might we need new business models to test these old theories? must be -- this is the super bowl for you tomorrow? definitely a celebration where you think you know what's going to happen but we are all going to find out. it is going to be historic one way or another. of 2013 where we expected them to begin tapering and then they finally did. that is what we expect this time , another pull through at the end of the year. this is where we will see history being written one way or
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another and the 2013 example is important to bear in mind. one of the theories in the article is someone saying there could be a confidence in fact. maybe long-term rates will rise and it will be more profitable for banks to lend and that will stimulate the economy. if as likely. what happens at the long end of the curve? could the fed movie short term rates but long-term rates do not move with them? themwould run against because you don't have an increase in bank lending on those grounds. maybe we will see something a little more traditional. economists are other telling you about how they see the possible rate rise and what the impact is going to be? alexandra: a good question is what would happen to long-term rates like josh mentioned before and also whether it's really going to change people's behavior.
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, it's ahink about it very small increase and it is a big signal, but if everyone thinks the fed is going to move slowly, it's unclear it's actually going to change the way people act. betty: and they are going to move slowly. josh: they are still concerned about the long end of the curve. last two years of monetary policy have been focused on avoiding what happened in mid-2013. tomorrow is the culmination of those efforts. janet yellen and ben bernanke have prepared the market toward what looks like normal voluntary -- monetary policy and tomorrow is expected to be the beginning of that. betty: thank you so much. an important programming note ahead of tomorrow's said decision, we will have special coverage. it is like the super bowl for
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the business world. lots ofbring you special guests, in-depth analysis and we will carry janet yellen's press conference following the announcement tomorrow. but starting at 1:00 eastern tomorrow. as we head to the break, the yield on the two year treasury note now approaching a five-year high. ♪
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betty: good afternoon and welcome back to bloomberg markets. it is time now for the bloomberg 's nest flash and a look at some of the biggest business stories right now. shares of advanced auto parts are surging. there are reports it has been
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supported by a buyer. scrutiny been facing from activists investors since last number one hedge fund disclosed a nearly 4% stake in the company. citigroup is a lack of storage space could bring more pain to oil markets, setting a price of west texas intermediate crude below $30. the tanks used to hold oil are filling up and could force supply cuts. local markets are oversupplied opec'sboom in output and refusal to curb production. you can get more business news at decision by the fed, nouriel roubini says the labor market might be pointing to a rate hike, but there is no sign of inflation. he spoke about this with tom keene and dubai. roubini: the market is improving, unemployment rates
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may be close to the structural and therefore some acceleration of wage growth acceleration could occur. economic growth is close to potential. on the other side, inflation is still too low. wage growth is dynamic. the appreciation of the dollar inuces prices and a leg down oil and commodity prices. that's the dilemma the fed is facing. liberal markets would suggest it is time to start hiking but there's no sign of the inflation in the economy. tom: long ago and far away, you studied with jeffrey sachs. did inre any study you your academic that suggested a central bank and get out in front of events, or by definition, is any central bank a reactive touche in? being: some can be close
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to reactive. one of the things right now is symmetry. suppose they move too fast, too soon. then the economy could be stalling and going back to conventional policy is a mistake. suppose we were more cautious and if the economy is strong and it nation picks up, you are behind the curve, but you can tighten faster. within theymmetry's risk of living too soon or too late to stop therefore, people are questioning why the fed should stop raising rates right now. tom: your phrases have become iconic in this great contraction in the financial crisis. are you still on the qe watch? mr. obedience: i am with the following caveats. central banks have decided not
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just to go to zero policy rates, but negative policy rates in the eurozone, denmark, switzerland and so on. it is a trade-off. you can do more quantitative easing or you can go more negative. in japan and the united states and u.k., we have not gone and the direction and in the eurozone, where there is less tv, there has been more reaction and policy rates are negative. tom: what will happen when we unwind negative interest rates? it's one of the great mysteries. when switzerland move the 10 year, the seven-year, the four-year back toward zero, is that just a normal process? mr. roubini: we don't know yet. rates are policy negative and the capital gains,
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once you go in the reverse, there will be capital losses, so there will be significant wealth of facts. one than a technical issue how to go from -20 or how to reduce the balance sheet, there are economic issues -- can you do it and what would be the impact on the economy? the balancereducing sheet of central banks are moving from -20 and toward positive like the fed is doing right now. betty: that was professor nouriel roubini speaking with tom keene in dubai. want to bring in joe weisenthal, cohost of "what'd you miss?" are now at 22 hours and 14 minutes. over 22 hours ago. what are you going to do with your final 22 hours? what are you going to spend it on. better buy that house
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now. what did you think of what he was saying about inflation? everyonend large, agrees the fed is much closer to hitting the employment side of its mandate as opposed to the inflation side. but there are signs inflation is picking up. today's cpi report, inflation pressers continued to build. -- inflation pressures continue to build. that is sort of a way to exclude the effects of energy and the dollar which are arguably transitory. another interesting look was core inflation tax housing. we know housing inflation has been pretty hot, so are there other aspects of inflation out there? case to be made at the fed says we are not there yet but we think it is going to go there. of ather things defenders
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rate hike would say is monetary policy works on lags. it's not like the fed flips the switch and immediately something changes. today may notoes filter through the economy for another six or nine months. so there are already arguably close to structurally full employment. if you think inflation is of the up and the effect rate hike will be felt for a long time, it doesn't look that ridiculous. betty: though there is the larry summers camp that says you could wait a little longer. it easier to correct a non-correct a hike. joe: that is right and there has never been a good counterargument to that point. why not wait? this tick up in inflation and we are decent on wages, but why not wait a little longer? it seems like we could hike to
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correct inflation. the argument then is aggressive hiking would spook markets, but it's a cogent response. this point, they have boxed themselves into a corner. good to see you. coming up on his program today, david bloom, the global head of currency at hsc joins them to discuss the fed's big decision. we are just a few moments away from the market close. stocks have rallied all day long. here's a look at the averages as we head toward commercial. ♪
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betty: welcome back to bloomberg markets. markets are closing in just about 10 minutes. of tradingull day ahead of the fed decision. our lives will be changed.
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we've got more at the markets desk. am i being too sarcastic? ramy: maybe a little bit. let's take a look at the markets with about 10 minutes left until the close. we are off our session highs but still on track to close up for a second day. .he s&p 500 is up the most the nasdaq is up about .9%. this is the best to day rally since late october. tracking the move and, looking at nymex crude, it is off its session highs but higher on the 2%. up a little more than this is its best to day rally in the past two weeks, but is still at six-year lows. have tolk about oil, we talk about natural gas. it settled at its willis price since 1999 because of mild
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weather here in the eastern u.s.. talking about temperatures around 65 degrees today and tomorrow. natural gas is down by nearly 5% , going for a fifth straight daily lost. gas prices facing a double whammy. equities --lk about equities are falling for the second day in a rowand the yield rises. the yield is up five basis points. the yield is up in terms of percentages by 2.7%. this is its highest in 12 days. and we will see how our lives will be changed tomorrow with the fed movement. betty: for more on the big rally, let's bring in michael regan. fast commentary section. are you surprised how big we have moved today?
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michael: i think what is happening is the stock market is taking its clues from the other markets. oil having a tremendous today rally after last week looking like it was in freefall. u.s.otential to export cruise a big part of the story. who knows if that they dead cat bounce holding a bottom there, but for today, energy shares are the leading sector. do you think is going to happen tomorrow? michael: obviously, they will raise rates. betty: how do you think we're going to trade for tomorrow? michael: it would not surprise me to see a big rally if we came into the fed decision pretty weak. i think the momentum we have behind us going into it says a lot about where we will go. me we will probably rise on it because it has been such a telegraph think.
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everyone is expecting it. stock investors will have their eyes on the other markets. the big story, the 3rd avenue fun last week. betty: that is a big story, but hasn't had an impact on the stock market? michael: junk debt and stocks tend to be tightly correlated and that has weakened a lot recently, which is kind of alarming. you figure one of them is going in the wrong direction. today, bill gross was on another network saying junk wants were a bargain. there was an interesting story backing up the numbers to that. 3.5 debt yielding about percentage points more than the earnings yield on the s&p 500. that's a pretty wide spread and in the past, has meant junk could outperform stocks for a
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while. when bill gross is saying there are bargains and junk debt markets, that's helping to town today. everyone knows what is going to happen tomorrow. what would you say? the market rallies were falls after they rate hike? go up.: i think it will there's not a time of reason to be optimistic long-term until the prophet picturing concludes, but we might get a decent rally after the fed. betty: we will find out tomorrow. commentary, type g.a.a. df on the terminal or search bloomberg gaslight on the web. dad fly on the web. ♪
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>> we are moments away from the closing bell. i am scarlet fu. >> i am joe weisenthal. >> i am alix steel. ♪
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>> u.s. stocks closing higher. u.s. equities halted a six-day losing streak. is "what'd youon miss?" >> junk bonds us all the first gains in four days. joe: under 24 hours until a potential rate hike. we discussed what the fed will be watching. , the lifespaname of a tech company. we explain. let's begin with the markets. stocks rallied, credit markets recovered. oil's helping is the recovery for the second day. joe:


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