tv Bloomberg Go Bloomberg December 18, 2015 7:00am-10:01am EST
-- we will hear from him in a moment on the volkswagen emission scandal. and what the economy looks like from the view of the ceo's of bbdo and bacardi. david: welcome to "bloomberg ." it is friday. stephanie: it is almost christmas. i have this guy next to us, so excited to andrew robinson in his tv uniform of pinstripes. of bbdo. bacardi andof former ceo of ing, mike dolan is here. welcome, welcome, welcome.
i just want you to know, i just showed up in this seat about 12 seconds ago. david: with stephanie, it is enough time. with me it would have been a disaster. stephanie: vonnie quinn, what do you have? vonnie: ukraine has set the stage for a big legal battle with russia. ukraine defaulted on a $3 billion bond payment due to russia on sunday. last week russia said it would take ukraine to court if it missed the payment. investors were caught off guard when the bank of japan tweaked its monetary stimulus. the central bank is extending the duration of bonds to buy. japanese stocks rose as much as 2% on the news, and the yen fell tremendously to, those moves evaporated and reversed. the yen strength and russia let another international conference , and continue to lead one today on new -- in new york on syria.
the agreement said nothing about a sharp al-assad's future. russia wants him in power, the west wants him out. that is your first word. now to markets with matt miller. matt: oil is really an amazing story again today. take a look at crude. just about 20 or 30 minutes ago, we saw oil come smashing down through the 35 handle, right now trading at 34.46 per barrel. this.are two reasons for u.s. crude stockpiles are the highest they have been for this time of year since 1930. secondly, the russian oil producer says it will jack up its capex, producing more oil for 2016-2017. that is the story for crude. downe gas, nat gas coming hard.
1.745. copper and iron ore are gaining, but that gas is at a 16 year low. that will be one of the driving stories of the market today. the bank of japan will be a driving story for the markets, and at least overnight we saw the japanese yen strengthen. this is fewer yen you can buy for your dollar, so when you see a red yen, it is strengthening. it was weakening and then it came back up. the nikkei was up earlier in the trade, then turned around and closed down after the bank of japan left its monetary stimulus at the same level -- at the same level. taking a look at u.s. futures, here in the u.s., we are looking at red across the board. s&p futures down a half a percent. a couple of earnings out that you will want to pay attention to. darden coming up with the second-quarter adjusted eps from continuing ops at $.54.
we were looking for $.42. and then blackberry also beating by quite a lot. still a loss of three cents per share. we were looking at $.14 per share. some good earnings stories, but some concerning commodities stories, and that typically drives the trade when you have oil coming down yet again. i was excited for 35, now 34. there is no floor. beid: who thought we would rooting for 35? we are looking ahead to the u.s. economy. and decided to raise rates, somewhere worried about the through 2016. i want to talk to all our group about this. andrew, from my experience back at abc, we saw weakening in the weakeningll first -- in the economy first with advertising. are you seeing any of that? andrew: not for 2016.
on a 16 we are expecting media growth of about 5%, up from ..5%, fueled mainly by digital even television will be at -- stephanie: when are those decisions made? if there is a slowdown in the economy, when will we see it? the first plan was set six month ago. andrew: the first plan was set six month ago. david: and there is a spot market or you are not seeing softening in the spot market. >> i think your plan -- you i think your point is a good one. stephanie: thank you. i run the risk here that he provides me with content. are in a decision of
fiscal 17. beginning in april of next year, out through the remaining year, i think him raise our -- against an original budget, a lead time of nine months or maybe even a year -- i think people are feeling relatively bullish, certainly about the prospects in north america. >> but those decisions can change on a dime, right? can't you just readjust? mike: you would think so, wouldn't you? wake-up's worke is that once allocations are made, budgets are set. unless there is a real pullback in the revenues, those moneys are going to be -- the oil collapsed, and
they pulled back on advertising. david: and everything else. oil goes down to eight dollars a barrel. whereot see any factor oil changes direction and goes higher. stephanie: the everyday person and how they live in life and are spending, they are not thinking about oil. the sentiment is about emotion. what do you think drives consumer decision-making and drives the economy? andrew: what drives fed behavior -- stephanie: we think people would go to the mall. andrew: when people feel secure and that the prospect's are improving, they over index on their consumption. mike: by the way, this is all good news. you are the economist. can i be a temporary economist? the commodity prices are going down. you have a lot of job creation. people have more money to spend.
it means more money will be sloshing through the economy. i think the prospects are pretty bullish. richard: unless you are in the oil-producing, natural gas producing areas like texas and oklahoma. transcripts of allchi the ceo's. mike: you're not arguing that declining oil prices -- it is an advantage to the consumer to have lower oil prices. richard: but if you are a commodity producer -- stephanie: everybody seems moderately bullish. we talked to sam zell two days ago. take a look. sam: there is a high probability that we are looking at a recession in the next 12 months. i think that the strong dollar is having enormous impact on u.s. production and u.s.
businesses, and they are being competitively disadvantaged by an extraordinarily strong dollar. david: sam says recession, but larry think had a different point of view yesterday. -- larry think had a different point of view yesterday. larry: my view is that the economy is decelerating. it is not going to be as fast as we want. we will be lucky to see a 2% economy in the first part of next year. stephanie: let's say i am your biggest client, sam zell is saying recession, larry fink says we are heading into a growth environment. how do businesses spend when we have this kind of bifurcation? most businesses are focused on their own categories and consumers. the macroook at picture, you can have a doomsday scenario like sam's.
you will be focused on how consumers are behaving and that world if you are focused on a catalyst soup. to mike'selieve, point, they will be genetically impacted by what is happening to the price of copper. stephanie: is there a differentiator? we talked so much about stagnant wage growth. if you look across america, at businesses, products, are there certain categories where people remain unemployed, where businesses are not doing much? and in other industries that are super focused in cities, in technology? andrew: that is the danger with all averages. if your feet are in the refrigerator and your head is in the oven, on average you are ok. oilou are working with businesses in north dakota, this will be a tricky time.
david: janet yellen talked about consumer spending. she says there are problems with exports but consumer spending is overcoming that. you drink if you are miserable, you drink if you are happy. mike: there may not be wage inflation yet, but people have more money to spend. if you look at the spirits industry in north america, you see very robust growth. we are in a world now where 5% is robust growth. i think we have to condition ourselves -- it is not like it was 10 or 15 years ago. is,rowth for most industry as you leverage that, it produces really good growth in european cash flow. david: are you seeing that in the u.s. in spirits? mike: yes, 4% to 5% growth.
richard: i have an economic question. what percentage do you get on -- what percentage do you give on the likelihood of a recession in the next 12 months? mike: it is low. i would hate to be on the other topic ofam zell on the the economy. to andrew's point, he may be focused on the real estate markets. but i think in terms of consumer sentiment and the kinds of outlays that consumers make, they are pretty good. board, automobiles. if you spoke to an auto guy and asking that question, it would be a very interesting thing to see what the response would be. ?ichard: would you say hi, low 20%, 30% chance of recession? andrew: 17%.
he is an artist, not a scientist. , lookingamarone fantastic. i will not know what to say in the next 2.5 hours. we are taking you back, showing you a picture of this billionaire in the seventh grade, where he attended st. john's school in houston, texas. she is the daughter of a diplomat and a congressional staffer. she has not had a vacation in years. that is unfortunate, given all the dough she has got. we will be back in just a few. take a look. here she is. we will be back. >." are watching "
output prices and capital expenditures were weaker in the third quarter. china signaled there had been some stabilization in the slowdown. 100 people will lose their jobs at morgan stanley's equity training unit. the bank will cut 5% of its stocks traders and sales people, according to "the wall street journal." goldman sachs says, "we were wrong when it came to microsoft." aser rating microsoft stock sell, they underestimated the impact cloud computing would have. japan today we started where the central bank announced to announce bonds as buys.
i saw the markets initially did not know what it meant either. x eckley right. confusion. and euphoria turned into disillusionment. you can see the brutality of what happened in japan's trading. the nikkei, 1.9% global to we saw the japan yen strengthening at the dollar. then you have yields coming down. you see a rush to the safer haven. that is japanese debt. this does not show the volatility you were just speaking of. , it isly, the beginning quite lower. we saw the dollar, the yen weakening. it sounded like quantitative easing was bringing in investors and traders because the bank of japan was coming out saying we will buy more exchange-traded funds. more qe. but then you look under the hood thanith $2.5 billion more
-- more of etf's, this is why you are seeing the nikkei up by 1.9%. this is why you see euphoria turned into this illusion it. the connection to all the other red that i am seeing there? caroline: check out what is happening in europe third we are on a down day, risk aversion. this is what socgen is calling the hangover. is keeping the dax at 1.3%, the cac at 1.1%. now suddenly the focus is on the commodity rout. that is continuing. disappointing, concern about the data in china. overall, i will leave you this. industry group, every single industry group down once again
stephanie: welcome back. you are watching "bloomberg ." we are going to focus on argentina because yesterday was the biggest one-day case of devaluation in 14 years. matt miller has been digging into it. this man has a chart on how it is affecting companies. matt: i have a relative rotation graph. things get sexy on bloomberg on fridays. matt: the space is important here. rg and can type in r
plug-in your index. it shows stock momentum here of all the companies listed in the index. the interesting thing is improving, leading, weakening, lagging. the rally has already happened in argentina, so distressed investors, or people looking at the opportunity, have already seen it. they grabbed it here and most of the momentum is leading and headed down toward weakening. the oil companies -- you see pfrobras here, why ps -- why is leadingthe index per if you look at the graph, it has soared over the last two years. david: the red sectors are energy, by and large? vonnie: yes -- matt: yes, only energy. it is good for everybody else in the country.
i think this is actually the first time where this calls for optimism about argentina and also venezuela. i think there really is some call for optimism. the regimes that were totally uneconomic and really destroyed the backbones of both economies have really been washed out by public vote, and i think there's an opportunity now for both of those countries to come back. : we have had our hopes up before in latin america. we have seen this movie before, and the question is, can there be long-term, lasting reforms, which have not happened yet. mike: that is the $64,000 question. succession of roman candles, where everyone thought the brazil economy was finally on the road to being one of the great economies in the world, that did not happen. argentina has been through this story half a dozen times in the
past century. so you hope that this will be the one that proves the exception to the rule. but even if it is the rule, what we are looking at potentially is five to six years of robust growth. stephanie: we have to take a break. agree or disagree? andrew: always agree. stephanie: stay with us. we will be back with more on the 2016 outlook on advertising and ."rketing on "bloomberg ♪
but he has not. it is about the content. are delivering, and if that was not fun, guest who showed up? blazerut this pinstriped here? tom keene, welcome. this is a whole lot of beautiful. david: he will keep the momentum going. stephanie: let's get you first word news. vonnie: all right. stephanie: stripes in the middle of this. you are up. vonnie: congress takes final looks and votes today on the spending bill. they also provide hundreds of billions of dollars of tax breaks for businesses and individuals. the conflict of interest into supreme court cases with two appeals and an environmental cleanup case. roberts -- the conflict [indiscernible]
casino billionaire says donald trump has been critical support for the republican debate. a longtime republican supporter asked couey years supporting for president and listen to what he said. >> the family has not made up willind as to who we support. we may just wait until a number of the primaries are already established and who is governing all of the largest number of delegates. vonnie: adelson says he donated millions of dollars in 2012. david? david: thank you. morning must the read. we will kennedy and london. we have been following oil prices, pretty dramatic. tom: this morning, it opened ugly. it is a mental exhaustion out there about rationalizing from 180 to 40 in the course of
percentage changes as you go lower. we see that again this morning. read,s the morning's must this is liam denning's story and it is written smart. oil braces for the fed ripoff, rising rates at a time of loose monetary policy and most of the major economy raises the risk of that old bugbear for emerging markets. namely, capital outflows for the u.s.. the feds move it should remind oil bulls trying to time the recovery that supplies only half of the equation. he mixes a supply and demand analysis and economical analysis and the answer is, as price comes down, many things happen. this morning, it is a continuing corruption. stephanie: talk to us. will: the supply side is ugly. what you are seeing is global stock piles of building and building. one thing that is he is the
weather. it is warm in london, warm in awayork and it is going from christmas and it feels like spring and having a huge effect on the oil market. people are not heating oil and they are climbing. bloomberghad our economist on earlier, and he says no event on the horizon that would stop the slide in oil. to you agree? -- do you agree? will: that seems to be the mood. they're looking at the market and i think that more and more people are saying, we could get to a situation where there is nothing from this tumbling down to $20. it is looking more and more like some crudeppen and oil prices are are already below $20 a barrel. stephanie: how about storage cost rising ask some countries on been pump? that does not come at a flat rate and it gets more expensive. you want tos where be. you want to work on ships for
anything where you can put this. these are the guys making money. oil tankers are having a great time. the cost of an oil supertanker is very high. tom: there was an article summing up the oil tanker and there is a wonderful macbook houston, texas, of 30 tankers are 20 tankers. important, this even folds over into areas where you you would think you would never see it because so many parts of society see in income and wealth decline as the price shift is done. have you seen ramifications from the oil business? >> i have xm mobile as a client. stephanie: they would be affected. >> but on the consumer business, there has been no impact. tom: with exxon and mobil, they have to look at the international perspective. from $70 to $60,
and some people are talking about $50 a barrel. andrew: they are really, really, really good. tom: we have to rip up the script. this is important. are they a bank masquerading as an oil company? stephanie: come on, now. tom: that is a joke. stephanie: mike, clearly you care about the global economy and commodities. specifically, you cannot be watching oil prices day in and out, but how does it affect your business? mike: it benefits it. i do not get it. this is like worrying about what is happening to bank traders. do worry. i mike: you are in the very rare smear because not many people do. a lot of people do not worry about the oil companies, sorry, andrew. i think the general population, as we were talking about, the beneficiary part. i think for the consumer,
product people, automotive, this is all good news. if on the guys pumping oil, a good for the rest of the people in the world. stephanie: will kennedy, you have a lot to cover over the next year. his morning must-read and now we will turn to another model, say this, tom. traditional marketing and advertising models are fading fast. we love to talk about digital and social media and how they are here to stay. as he looked toward 2016, how will this impact industries across the board? i want to start with andrew. we look to say it is all about digital, but give us a campaign of company where their marketing is making it work and they can actually monetize. you see all this advertising on twitter, snapchat, instagram, but where is it making money for companies? word social is
probably a misnomer now. what defines some of this media is just like any other media except the get content for free. bit of aes quite a good business model. them arehere a lot of going. the big shift is we are moving from buying a demo in which we hope to find an audience to buying an audience will rebuild of one individual at the time. stephanie: say it again. andrew: we are aggregating individuals to create the audience that we buy in said buying a demo in which we have to find. david: which digital makes possible. andrew: when you are scrolling on your iphone and looking at your facebook feed and you come across an ad, at that moment, there are 80,000 advertisers who might be interested in buying your eyeballs, 80,000.
in one second, there will be 100,000 auctions are those eyeballs, and they will know -- i happen to know that you like buying cute socks from amazon -- puts a certain and that value on you for advertisers. they have to bid for your eyeballs at that exact moment. the media owner has an algorithm to takeding which bids in my advertising is served up to you in that minute. stephanie: whose eyeballs are more valuable? david's mine? andrew: it depends. instead of buying an aggregated audience, this is the point, if i am selling tube socks, yours are more viable than david's, and if i am selling beautiful ties, his more valuable than you. that ability to target that precisely and put a value on it, that is transforming. david: that takes me to an
important question, which is, are we out of date talking about demographics at all? years agodefined according to age and gender, but now it is psycho graphics. i use social media and i am not a millennial. stephanie: if you look at facebook, i feel like it is marked 65-year-old women then 16-year-old girls. david: it is targeted toward lifestyles. andrew: and the hader. what it is that you do, what you do, where you shop and what you buy. -- i do notattached know your name -- but your eyeballs, therefore, i can put a value on those eyeballs. stephanie: what do you do with that data? anotherthink there is important issue, and i think it gets to the question you started off with. as you look at the migration of people away from traditional media -- traditional tv -- into
social media, the one thing that really has not caught up to it yet -- the population has migrated, even people in older demographics are facebook users -- what has not put up to the trend is the ability of marketing organizations to develop messages for that new media. the advertisement agencies were built to produce 32nd ads on tv, well, no one is watching 30 second ads on tv, so it has moved over to all of these instagram and facebook and what have you, but no one has really cracked the code on what the content and that is supposed to look like. andrew: we just did a thing on google and youtube, and in one week, we produced nine pieces of video all driven by the same idea. x, how you feel
when you are hungry. i love them. andrew: choose left or choose bright. the old model would be that you spend a long time developing, refining, honing one execution that would go and run for four weeks. this was nine different versions. nine different films produced in one week that you then just put out, you put them out on youtube , measured which once performed best and the double down on the ones that formed better and throw away the rest. that is a different way of working from an analog way. is ony book of the year economics, but i have a book of the decade, 2005 2015. i'm kidding. marshall, and this has got to be the year where the genius of the licks in. we finally have gotten to the point where the medium is the message, what are your thoughts? andrew: yes and no.
the reason it is only part of the story is that the world does not need anymore content. tom: agreed. andrew: in the hour that we are on the show together, enough video will be uploaded on youtube for you to take two years to watch in the hour we are on the show. goodis needed is really content, content that people will go back. tom: so you are going back to. and. has that worked out? andrew: it is up there with disruptive innovation. no, cure ration is part of the story but the point is you need a brilliant message. mike: you are talking about pieces of the video, five seconds, seven seconds, and the
whole system has been built for producing 62nd ad our chop down and chop60 second ads down to 30, so something has to be done. the twix think is interesting, the earlymore in stages of determining how you do this properly. youhanie: tom, we will get back to radio. when we will be curating this rep to innovations from curators -- disruptive innovations from curators. stick with us. you are watching "bloomberg ." ♪
guide us as we move forward to make things right with our customers." ken, joins us now. thank you. i know the company does not go into this without first some sense about how big the problem might be. what kind of parameters do you have? ken: we will see in sitting down beginning next week with the company. is it north america or the united states or certain eligible vehicles? 500 -- therebout are about 500,000 vehicles on the roads and we will have to sit down with the company and begin the task of delineating the scope of this program. what will be offered or what will attract customers to maintain some loyalty with the company, get out of the courtroom, it is a claims alternative to litigation. david: has volkswagen given you
any sense of how big your checkbook will be. -- will be? : lowe, but the company has given me a sense that they want to do right by the customers, and that means they will probably be a menu of options available to customers designed to maintain loyalty and support for the company. david: what sorts of things will menu?the k you have to come up with fixes. the regulatorse -- ken: you have to come up with fixes and the regulators know what needs to be done from a public perspective and we have to be aware of that. what in addition, what legal consideration, it will take to voluntarily, voluntarily get people to opt out of the court system? that is an additional challenge. david: that is the question, how many losses have been filed so
far to your knowledge? ken: hundreds of class actions involving hundreds of thousands therekswagen owners, so is a storm of litigation out there that is just beginning now. david: you have been through this several times, the high-profile situation, do you have any sense of a time frame? ken: i do not. i will say this, and you guys know this because you talked with me in the past, at least, in this case, we are not dealing with death. we are not dealing with physical injuries arising out of automobile accidents. and is an economic problem an environmental issue. it does not involve human injury or death. i am hoping that we can accelerate the program by not having to take into account these horrible calculations that
surround death and injuries, but we will see over the next few weeks and get a better handle on a timeline into 2016. to claims programs, and we talked about this, how quickly can you offer relief? to individuals who would otherwise relitigating for years and years. david: that is part of the trade-off because they could get remedies faster than otherwise they might. what will success look like? what does your client want? this works perfectly, what would you have at the end of the day? think the client once customer satisfaction. that is the first thing. theclient wants to retain loyalty of hundreds of thousands of customers. i think that is very important. secondly, usually in these , can you 9/11, bp, gm
secure a huge percentage of eligible claimants? 97%, bp,rget, 9/11, eligible93% of all claims entered the claims programs, and the challenge here is how do we make an offer? this is an independent program. once the protocol is in place, volkswagen has agreed a will not challenge my individual discretion. way to entice, invite as many customers as possible into the program? that is the challenge. experience, how many individual claimants would you expect to meet with to get a sense of what is required? jwbl= -- en: just to draft the
program, you want to meet with scores. once the program begins, you want to hold out the option of meeting with individual owners. these are not death and injury claims, so i'm not sure how many will want to meet or should meet, but that has to be considered. there may be too many people like at bp when we had over one million claims, but clearly, we want to get the input, not only of volkswagen, but in drafting the protocol. them, to get the input of the of lawyers, and the regulators, do not forget, the technical fix that will be required here has to pass muster with regulators. .avid: ken feinberg, thank you stephanie, back to you. the wait isow, finally over. "star wars: the force awakens" debuted at midnight last night
and analysts expect the film to be one of the highest grossing ever. it could take in more than $2.3 billion in global box office sales, but what is it meaning in the advertising world? andrew and mike are still with us and now we have paul sweeney. welcome. if you are any kind of company and you attached yourself to "star wars" and would that be right? -- : the thing andrew: the thing about the moment like this is it is a big global event. one of the things that makes sense and they take advantage of is events because they have moments of shared experience and connection. there are a lot of people out there who love "star wars," and a lot of people who will see the movie, my toys, a huge franchise. connecting your brand to that kind of event and participating
in it is a big opportunity. stephanie: is this the new super bowl? years ago, that was the only big event that connected to advertising. now whether it is the oscars, a movie premiere or jingle ball last week -- paul: i think andrew is spot on that the move away from the 30 second ad, one of these -- gargantuand movement in the advertising world, has relief fueled a lot of interest in social media, which we talked about before. mike: also in looking at events that tie to demographics that are important to the companies involved. i think star wars is very important, particularly for younger demographics and forming families. that?would you agree with andrew: it is.
it is a big event. david: there are so many companies who have become associated. "iost every ad on tv has was" somewhere. stephanie: isn't busy like, get out of my kitchen, this is my deal? paul: i think they are taking advantage of the whole experience, so that reduces the amount of marketing promotion that disney has to spend, so when they can list their partners, the partners have to be big brands and effective marketers. andrew: and the data says that even though there are, i think nine different ads to "star wars" -- stephanie: i wanted to share an ad you did, hp? david: there it is. ♪ stephanie: if i am hp, i want to connect myself to younger people
wars?"e about "star andrew: i want to capitalize on the event that is "star wars" to make people love my brandon moore. stephanie: can "star wars" do no wrong? paul: for disney, it is a $4 billion investment and another $2 million to make, so it is a big investment, but this is as close to a slamdunk as you get in hollywood and they have many more behind it. stephanie: is it a home run? andrew: yes. stephanie: paul sweeney, andrew robertson, mike dolan, what an hour. j walker will join us. ♪
how to use digital networks to create new business opportunity. we will be speaking with jay walker. starsng markets, rising lost their luster. we will be speaking with bruce richards, founder of marathon asset management. welcome to the second hour of "bloomberg ." i am stephanie ruhle. david: i am david westin. we have had the great power. stephanie: fascinating and it is not just about advertising but all about sentiment and desire, and what people want. we ended the hour talking "star wars," and now i see our colleagues on the west coast and i think of the bar of "star wars" when i see you. ca just showed up.
david: i always get his name wrong. we have jay walker, the cofounder of priceline. jay: you'd look nothing like chewbacca. stephanie: if you had seen them at 6:00 a.m. erik: first word. -- david: first word. vonnie: president obama will leave for his annual vacation to hawaii and stop in san bernardino, california, to meet with the victims and their families from the terrorist attack. you can watch the president's news conference on bloomberg tv at 1:50 eastern time. the u.s. and russia have another national conference in new york. last month, 20 nations agreed to meet. the agreement said nothing about power. path toeresa is on the
sainthood. less than two decades after her death, the vatican said they will credit her as the second miracle. won a nobel prize for her work caring for the poor. that is our first word news, now to matt miller in the markets. at futures, look down across the board. s&p 500 index in the contracts down 10 points, dow jones e-mini contracts down about 75. the reason the big drop in crude this morning, right around 6:00, we saw crude oil come crashing down below the 35 dollars level. right now, we are looking at $34.73. a little of a recovery, but we have headlines out that u.s. crude supplies were at their highest level that they have been this time of year since 1930, according to the iaea. and the russian oil producer was going to jack it up and continue
to produce as much as a look at the effect of that -- well, gas down for the eighth straight day, down to about 16 year low. the biggest losing streak in three years and down to 1.7 -- 1.738. copper and iron ore up. the interesting thing about the price of crude on top of iron or is that the lower crude goes, the cheaper it gets to take these things out of the ground and miners will just push up their production. take a look at what is happening from the japanese anger japan. they would not change -- the japanese bank of japan, they would not change their policy as far as stimulus level but like the. the yen is strengthening against the dollar and you can only get 121.40 six and yesterday, you could get 122 in change per dollar and the nikkei coming down. both of these reversals today. by billy, fossil was downgraded
to sell from neutral over at goldman sachs. an effect, down 7.5%. more interesting is this reversal, goldman sachs had microsoft as a sell for two years, and in that time, 84%.soft has risen that is over the 29% gain on the s&p 500, so analyst saying, we were wrong on microsoft. it is now a neutral with a price target of $57. stephanie: we will stay on the tech world, but blackberry reported a narrower third-quarter loss than estimated as software revenue kicked in, and yesterday, apple announced a series of changes to the managing team. we do not hear this often. jeff williams is stepping into coo, which has been vacant since tim cook took over as ceo. jay walker, what you make of this? oftenis here, we don't
see inside apple, so what does that tell you? the when you look at what signal is, the coo they have appointed comes out of the guy who created research kit, which is apple's attempt to bring the health world into the home world. apple knows the future is in a allergy, it is in us, and being healthy and well, and ultimately, apple will have to make the transition from being medication platform to being the center of a lifestyle platform that is biologically-based and i think that supports it. david: so this is the direction of the company? jay: absolutely. they are not the short-term quarter to quarter company. they think two years, 10 years down the road. you will look where he comes from when they elevate someone. shkerli i think the secret -- secret hasink the been managing inventory for apple. the ability to make just enough stuff, not too much and not too
little. historically in technology, that has been a disaster, whether it was companies putting bricks and boxes and sending them or companies like a way who had successful popular products and a too many and flooded the channel. that has been a problem for every major technology company and apple has done a great job, but apple is facing challenges because they cannot find new markets to expand to and they have not found a new product to the iphone. the challenges of managing the production of stuff that apple has never been greater. david: talk to us about production of stuff because there is emphasis on some of the things they say about their supply chain and maybe challenges have had. has been the way technology always covered manufactures. they try to figure out if they are making more and less and what that tells us about demand. one of the secrets of apple and the growth of the iphone has earliering you markets
and earlier. initially, they launched the new iphone in the u.s. and canada and then a couple of geographies, but with every new phone launch, they have bad new geographies and now they don't have any new ones to launch two. think the secret is managing the stuff. i think the secret of apple is skating to with the puck is going to be as opposed to where the puck is. you have to execute well and they do it brilliantly, but they were always ahead. they said, music will be the center, apps will be the center. it is really about health and wellness suddenly becoming the center. i think these guys are going where the puck is going to be parried we can let quarter to quarter, but at the end of the day, they're not afraid to invest the billions on markets that do not even exist, let alone geographies they have to penetrate. stephanie: let's send the puck to matt. you have a map on supply chain. matt: i have taken a look at the
apple supply chain chart and change this payable to the three-month price change, so i want to look at what has happened to the companies who supply apple and the customers over the past three months. you can see clear winners and losers as far as suppliers. down in the last three months and samsung electronics, which gets far less, only 4.8% of the revenue from apple, is up over the last three months. you move over and take a look at the customers, and you can see gains in customers like verizon, which gets 5.5% of revenue. at&t gets 4.9%. these customers are doing well right now. customers that are doing less well, for example, vodafone only gets 2.2% but it is down big time over the past months, so lplcquote plc -- so this function is crucial.
you can break it down in so many ways. to thei went come back puck because we are talking about out successful apple has been and they are increasingly relying on the iphone. what is the next thing they bring on? are you suggesting health and wellness and how did they make money off of it? apple has always made money by satisfied customers. that is how they make money. if your phone becomes the nexu, for how well you are and how will your parents are, how much is that worth to you to monitor what is going on inside your body, monitor what is going? on with wellness? -- going on with wellness? stephanie: it also puts up the pieces together. think about nike's relationship with apple. they stop producing the band over a year ago, when you saw fitbit crush it and job own, that whole universe getting bigger. the fact that nike pulled out
but apple is interested, it makes you wonder if they are doing something even bigger, so nike would not participate at a rudimentary level. with the ways they have put a focus on the watch around health, around the same kind of things that fitbit is doing. i think part of this is also tim cook. for all but tim cook, steve jobs, tim cook is an athlete, he always has a bottle of fodder in his hand and is always working at on the bike, so god is part of who tim cook is. it is something that is a press -- so that is a part of who tim cook is and something he is. jay: we live in an age of chronic disease, diabetes, obesity, and that will require monitoring. biologicalthat with editing tools, we will be able to change the cellular nature of who we are. where would you go if you are a company that big?
you would have to go to a market even bigger. only health and wellness is a good than entertainment, music, all the rest of it. stephanie: we do want to point out there are a lot of analysts talking that apple has been referred the last month, but it is the end of the year. many are looking to take profits, close the year. if you think about their portfolios and what they look like and the energy stocks they could own, yes, apple has taken a downturn, but do you believe people are changing their views on apple or do you say, it is december, let's take props? corey: i think they have tried other products and markets. example, has been a surprising failure lately. the ipad sales quarter after quarter are declining, just when you think it cannot get worse, it gets worse. even the new ipad, it does not stem the failure in the business. your year is strong, but the
lack of growth. it has been coming down again for a couple of years now and i think that the success of the current phone, apple is thinking long-term than the current phone, but they have stuff to sell today. someone has to unlock the door and cell phones today. are raisingones questions about how successful they will be. stephanie: does it mean anything that they have brought in a new head of marketing? do not think of apple as a company who needs marketing because the whole point is that the product is that good. every company needs marketing. there was no exception. it is figuring out what customers want and how to deliberate. we look at apple as the short-term company, but if you look at it with a traders lens, a look at it as an ecosystem. you cannot steer ship that they by watching the waves in front of you. you have to be looking ahead at
the climate that you are staring into. david: that is interesting. the ship on the hockey rink. way too many metaphors. stephanie: and it to, change, it has melted. have more onl blackberry earnings at 11:00 a.m. eastern time. the ceo will be on bloomberg market. martin shkerli is out on bail after being arrested for alleged fraud. it is quite a story on "bloomberg ." ♪
commercial vendors, saint ukraine could give better terms. lastly, russia said they would take ukraine to court if they missed payment. casino billionaire sheldon says he expects it to start recovering. china'seen hurt by slowing economy and anticorruption campaign that has kept high rollers away. they are expecting revenue to fall by one third this year. in paris, shares of french grocery stores are down again today. yesterday, we saw -- they said that casino is the target and that the are giving financial engineering the height that deteriorating for business. the allegations are misleading. earlier this week, jpmorgan graded casino shares -- upgraded casino shares. david: thank you. martin shkerli is out on $5 million bond. keri geiger is with us and you broke the story. congratulations. thank you.
he is out of jail, but martin shkerli's legal troubles, it is a long path ahead of him. my guess, although i do not know personally what the legal strategy will be, but given his public persona and the way he goes to battle with anybody in the social media that comes at him, he will probably opt for a trial. i am sure it would be an interesting trial if he does that. stephanie: why would he opt for a trial? seems that the way he goes against the media and the way he is aggressive is that he might opt for that. i do not know for sure, but it is an option. david: it seems like he has never seen a camera he does not love. stephanie: what do you make of this? jay: typically, you say, sociopaths? what are they going after? reality like television shows where somebody says, well, i am the star, look at me. ,avid: it is not just shkerli
but his lawyer. he went to his lawyer on how to advise them how to move the money around. keri: the transactions they did, part of the indictment, are clearly laid out by the department of justice and there was a clause in the indictment that was a hot part after he got arrested. there is an asset forfeiture process so the government could go through that and take his assets. david: we know what that includes. keri: that is true. stephanie: he is back again. david is a huge fan. keri: you could potentially, if that happens, they could go up again, david, so there you go. corey: outside of that asset is unclear because that asset is actually for one person. and they could change the rule around that. stephanie: back to business. i could talk wu tang all day
long, but i think about this even more. would thise found -- investigation has happened? how big is the fraud? with the government care about it if it was not in the news? keri: i think the public would not care if it was in the news -- if it wasn't in the news for price couching. know how stock they are in terms of resources. how high would this be on the pilot cases to investigate? david: there were investors saying, we have been cheated out of our money and they were saying that publicly. keri: there were a lot of people who said they lost money through the hedge funds, so those are cases prosecutors take on. the brooklyn attorney office does have a security fraud division and they do have quite
a few cases. david: this is not the toughest case together evidence for. corey: this wasn't wiretaps. keri: exactly. he laid it out at the civil lawsuit, so it has been out there for a while. stephanie: you know what? he is a superhuman but cannot avoid the law. keri geiger, congratulations. david: just great. stephanie: as a thank you, they should send you the wu tang album. , what you are reading on bloomberg today. ♪
from bloomberg news. here's a look at the top five. we are talking energy prices exciting, bond maturities been extended. morgan stanley cutting 5% of the equity trading staff and hedge funds are seeing more go down than the previous quarter. cory johnson, what are you liking in the terminals? corey: my favorite story is about the ceo of whole foods. cumulative he is the -- he is the queue leading 338 days of vacation. he has a saved up and he sets the tone for his company and this guy does not take time off. because this money is owed to him, they had to put it into the proxy savings for the company. a wonderful story on the terminal today. andrews mila and went there and found a bunch of come these were the ceos are owed a lot of time off but they have not taken up because that is the way they do it. david: the companies i have worked for, they do not let you do that. corey: this is a great day,
proxy. in some places, you do not have a choice. it goes over whether you want if you are not. stephanie: is this a some of the companies are doing unlimited vacation days like that salesforce? the best practices and hr, they force people to take the time so that they take the time and the lose it or use it rolled, they say it is better for the employee because they do use it that some people do not. stephanie: no vacation for you guys. we have more to cover. cory johnson and jay walkers sticking with us. we will be back. ♪
walker and cory johnson. we will talk tech. this is exciting. vonnie: we start with john -- the court rejected to appeals and environmental keynote cases. a court spokeswoman says the conflict should have been called but was not. united nation security council approved to -- the national data director for bernie sanders's campaign out of the job after snooping on hillary clinton. took advantage of a
software error to look at private campaign information. now to matt miller with market news. matt: i want to look at a couple of companies putting out earnings. all of them are better than the estimates. i will start with garden. the restaurant company with same-store sales and earnings better. revenue that was slightly lower than the estimates. 2.75an see garden up percent. with estimates. rises up as wages according to the company. i want to take a look at blackberry. we will interview the ceo at 11:00 this morning. blackberry came out with a loss that was smaller than expected,
three cents. the street estimate was for a loss of $.14. shares up 2%. take a look at my bloomberg bloombergi have intelligence that had that breaks down where the company gets revenue. the orange is hardware. no one uses the blackberry anymore. erik schatzker still uses one. erik schatzker and some other canadian. revenuew, software picking up. this is where john chen is getting his money, this is what he is been banking on. that has been the plan. it is not huge, only $4 billion company. it has to get back from somewhere and software is where it is going to be. stocks are lower around the world today. euphoria from that that decision seems to be fading.
i want to focus on what a u.s. rate rise means for currencies. we discussed this in our morning meeting. like theseems divergence between u.s. policy and other central bank policies around the world should send the dollar higher. and the euro lower. is that a slamdunk? brad: it will remain a slamdunk as we move into the new year. the fed delivered with their interest rate hike. got that out of the way. the ecb gave us an interest rate cut some the first time we've had a divergence in a long time. differentials will continue to drive that trade. you could have your occasional shakeout related to risk on, risk off and positioning. the market forces are in place for dollar higher from here. >> did we see a lot of carry
trade going forward? euro and bet on gains on the other currencies? >> you want to remain shortly euro. it will be hard to traded from the long side. the other funding currencies will remain funding currencies. of aollar is becoming less funding currency now that we've had this interest rate rise. againstding emerging-market currencies which are going through an adjustment now. that will make it hard to take your long side. you have the funding currencies, but word you invest your money in the space going forward? that will be the tricky part, especially with china in a potential moderate evaluation. >> the most interesting currency event of the past few weeks. china moving closer to the idea
yua against a basketn of currencies instead of just taking it against the .ollar -- th , they want approach to take your eye off the ball. can now appreciate from here as they make their adjustment on the basket side. that will put pressure on the rest of the emerging-market sector, especially in asia. dollar korea, dollars singapore come anything levered to china. that will remain under pressure as a result of this adjustment china's move to the basket is then telling us, we have room to depreciate from here.
david: thank you very much, matt. we are back with rice line jayder -- priceline founder walker. our audience might think patents -- we talk about nothing any , globaln growth growth in domestic growth. innovation is one of the primary drivers of that growth. patents are direct -- you have 450 pence. pens are the property side of innovation. you can innovate in a way that is first and unique, you can get a government right to own it. we call that a patent. we are having a patent heart attack in the united states. they are becoming almost worthless in america. even when giant companies like apple take their patent portfolio and try to asserted against samsung, what do they
end up with? a slap on the wrist. in america, we have so undermined our patent system, it is near complete collapse. david: you have gotten somewhat of a bad name. there are a couple reasons for that. some people think there are too many patents. some are really innovative and some are not. the other is patent controls. apple has copyrighted the curve. seemof the patents warranted, others are ridiculous. the when you have some of granting a quarter of a million patents a year and humans are involved, will they make mistakes? sure. that's lexington that get rid of all property in new york because a couple of people have used property. the get rid of all nights because some people use knives wrong. you want strong patents.
if you don't want long-term investment, you can have an india economy with no pharmaceutical patents. aboutnie: i want to talk companies you love and hate and patents make me think about ibm. ibm has so many -- but they don't have is its groove right now. jay: ibm has been looking for growth. it is shrinking and shrinking, buying back stock and raising its earnings per share from financial engineering. ibm has to grow. patents are not a guarantee of growth. they are just the property interest of your r&d. look at qualcomm. they just decided, we cannot spin off our patent division. when we go to court, what are we going to do? what we really need is to innovate, we need to come up with systems that take into the r&d of the world and figure out how to exchange r&d.
if we don't figure out how to get the r&d of other companies to combine with my own, how the hell is my company going to go? stephanie: what do you think hp says? jay: hp is to companies, not one. if you are thinking about the printer business, they better invent a new kind of printer. if you believe in 3-d printing, you like hp. stephanie: people let 3-d printing right now. cisco? jay: they have a problem. their hardware turns into software. i no longer need to buy a box. the cloud is the enemy. hp, dell --ve ibm, they are all shrinking. cisco is not. jay: their products are commoditizing. you worry, how does cisco reinvent the nature of their business? david: does yahoo! survive? jay: no. david: gone. that is directl.
-- that is direct. amazon? jay: jeff bezos invented cloud computing. he is a leader coming in a letter -- he is a leader, and innovator. stephanie: what happens to my company -- walmart calls itself a tech company. is that a death wish? walmart is not a tech company and sam walton is not a life. that's alive. stephanie: yahoo!? jay: it was an option on alibaba and marissa mayer. you are guiding a ship and you cannot turn the ship come it doesn't matter how brilliant the captain is. stephanie: one social media platform -- jay: facebook if you believe in messenger. that is the answer.
wechat.r is becoming they want to put the apps in the continuous stream. it is all about being live all the time. messenger is following. stephanie: what is your favorite food? jay: ". -- vegan foods. stephanie: crushed me right there. priceline founder jay walker. we have more to cover. when we return, william schatz william shatner and priceline? he has started hundreds of bats. ♪
are priced too high. the company sells discounted unsold tickets to move inventory and give customers a way to enjoy it best for less. the private equity fund robinson, theavid admiral. with joins us now along the ceo, david goldberg. welcome to "bloomberg or go me about this business. it is a great business with sports, something i feel close to. i feel like i understand. gets you are not aying to sell, we have a w to fill those seats and build a relationship with customers. they have a phenomenal team, they understand the business. it is a great partnership for us. >> scorpion has been along for beenears -- scorebig has
around for six years. roughly 40% of all life entertainment tickets that go for sale every or go unsold. there is not a lot of yield management channels available in life entertainment. david: it helps those teams connect with the people who might want to go to the game at a certain price point. three weeks or four weeks ahead of time, they will come in and say i want to spend $50 to bring my son to the game and they can go on scorebig and find the tickets they need. stephanie: there is nothing worse than going to a game on the weekend and all the seats owned by corporate are empty. you see trufant sitting so far away. -- true fans sitting so far away. david: so many seats go unsold.
particularly in sports where you have season tickets holders locking in a price to pay six months in advance for 40 home games, the teams cannot take that inventory that is not selling and mark it below what season-ticket holders pay. they need channels like scorebig to move those tickets. how do you enter into the middle of that transaction? i'm a season ticket holder, i bought my seats come i will not use them on that february game. david: it is not for the season-ticket holder, it is for the team that is they will have access ticket inventory. customers can come on and with some amount of opacity, they bid for a ticket and if they clear a reserve price, they get the ticket for that event.
it is a different way of buying. it's about information come everyone has a cell phone come everyone is on the network all the time. wayng your own prices one to clear a market, as long as you can preserve the retail price, you are serving an enormous value. you guys should do that well. buy the tickets well in advance or is this like flying standby? david: we sell on average tickets 28 days in advance. when they are made available to the general public, we have access to those tickets as well. their outcomes are pretty good and they have to figure out how to clear a market. they cannot destroy their retail price. stephanie: you have one son playing football at notre dame and the other is going to play basketball at duke? david: he is a freshman now.
stephanie: will we be seeing tickets for these kinds of games? david: we have colleges as well. these tickets are typically for events that don't have full demand. david: when you are trying to value this investment, do you think about the bnc level games or a games? david: i'm thinking about it as a whole. i know the teams, i know we rely -- our on people corporate sponsors are 30% of our revenue. we need those guys to know that there are seats available. we need to build relationships with customers who are deciding if i have enough money to go to every game or not. this is a great way to get them in the door and make sure they are enjoying the experience and build relationships with them.
our first choice, the largest 80 radio advertiser in america. bill cosby. bill cosby was the first choice. i read enough science-fiction that i got to shatner and said i will build a giant company, you need to hear but i'm going to do. he said i will meet you for 10 minutes in a bar in new york. we met for 10 minutes and it was an hour later he says, ok, i'm in. i'm paying you in stock. david: i want to go to another story. -- its driverless cars turns out a fair number of them get into accidents. the fault is the fault of the human drivers because they don't follow traffic laws.
they get into accidents if they comply with the laws. jay: humans are very strange. what do you expect? a bunch of engineers at google expect everybody to follow the rules? nobody follows the rules. they are trying to test these things -- ford is testing driverless cars in the same place. problem.idents are a we can reduce accidents, we can reduce pain and suffering if we have our cars just a smarter. it puts on the brakes when you know it's going to be an accident. that is abs brakes on steroids. that is a good idea. stephanie: what you think of this? matt: i am horrified by self driving cars. i like to drive. doesn't like automatic transmissions.
matt: i like to do everything myself. stephanie: i love driverless cars. rolls-royce says they invented them. chauffeurs. thank you so much. your second year but game clue. this seventh grader went to st. john's school in houston, texas. the youngest self-made female billionaire in u.s. and her least favorite thing in the world, needles. tweet us. stick around. up next, a marathon. ♪
i'm stephanie ruhle, joined now by erik schatzker. i was excited by who you were delivering. erik: look who is here. bruce richards, the ceo of marathon asset management. it has $13 billion under management. david: you are selling him short. erik: in my selling you short? stephanie: thought influencer, major investor. erik: we are delighted to have you. we need to bring you up to speed with the news. u.s. diplomats talking with other world powers today in new york on how to and syria of a war -- syria's civil war. victories over islamic state in iraq. airstrikes damaged militant sites near ramadi.
kurdish forces say they killed more than 200 militants in a counterattack near mosul. president obama will meet with reporters today before starting his winter vacation. he will meet with the families of the san bernardino massacre. john heilemann will bring you the news conference this afternoon at 1:50 eastern here on bloomberg tv. cap: futures down across the board. nasdaq futures have just popped up. little changed. the recovery in s&p and dow futures after losses of .5% earlier. yen,a look at the strengthening against the dollar. as this gets lower, that means a stronger yen because your color
can afford fewer of them. that is a turnaround from what we saw earlier after the doj decision. -- boj decision. carmakers have to compete with such a weeak yen. crude has been driving the trade this morning. we saw it dropped down here at 6:00 after we got u.s. crude supplies come inventories at the highest levels since 1930. production inits 2016. little recovery, but oil back down trading at $34 $.63 a $34.63 a barrel. the oil price coming down now.
volatility picked up a little back in 2011 in the august drop of the equities market, picked up again here august 2015. when the equity market dropped in the oil prices came down. well until the this time has speed up and the oil price has they down. erik: after the fed changed course just a couple of days ago , raising interest rates for the first time in a decade, the bank of japan is taking a different tactic. they will keep the main monetary stimulus target unchanged at the same time making adjustments for purchases of government bonds. richards has an awfully difficult job ahead of him. there was a lot of anticipation
that the bank of japan would expand its stimulus program instead, he is nibbling around the edges and you saw a dramatic strengthening of the yen just as you saw a strengthening of the at the time that mario draghi unloaded this surprise couple weeks ago. japan is in a tough spot. aging population, thinking population, economy starting either side of 1%. this quantitative easing program --y have committee trillion 80 trillion yen is doing little so far. this disappointed the markets because it extended maturities for treasuries from 10 years to 12 years. who cares about an extra two years and treasuries? the markets were disappointed. that's why the equity markets sold off in the markets did not
respond on the currency side. david: what message were they trying to deliver? bruce: i don't think there is much individual lots to be able to deliver from a monetary stimulus standpoint. test much in the toolbox. with less workers working, it is hard to accommodate. unless companies become more , which is not something monetary tools can effectuate. 's mainuerto rico electric utility, there is a deal, a breakthrough for puerto rico. electric utility as a tenant agreement with its creditors which include a number of bondholders, among them marathon asset management. insurers including assured
guaranty and mbia. they would restructure $9 billion of debt into a securitization vehicle. effectivelyis to tie prepa's hands and take the a and paid into prep direct that cash to the creditors. an enormous breakthrough. since bruce richards is sitting right next to us, we have to ask bruce. it is a tentative deal and it has yet to be approved by the puerto rican legislature. if the terms of this deal proved to be what ends up being finalized and signed, is it good for everybody? stephanie: nothing is good for everybody. bruce: marathon is part of the creditor group. the discussions are ongoing. at this point, i'm not able to comment on it. having said that, we are
of prepa andditor believe very much in the puerto rico economy. we would like to see a deal get done. i cannot comment on any specifics. david: let me ask you this. this is not all that that that puerto rico has. that puerto rico has. $74 billion in debt overall. a $70 billion gdp. the debt to gdp ratio is rather high. it needs some type of debt relief. as an economy, as an island state that it is. we 2016 will be a big year for puerto rico to start to advance
those discussions in hopes of moving forward. agree, prepyou not a is the easiest to restructure because of this a utility? the cash flow can be used to pay out the obligations. it is a lot different when you are talking about tax collection and things of that nature. david: it is like a lockbox arrangement. you can do that with a utility. you cannot do that with an economy. erik: the key here is participation. mbia areuaranty and ng the way forward by putting up a surety bonds. the hope they will never have to call on that capital commitment. that is a key part of this deal. bruce: i cannot confirm or deny any of that.
in --let's bring stephanie: so lovely to have you here. erik: let's talk about the importance of this restructuring deal. as we've said, doesn't take care of the whole enchilada. prepa is an important step forward. >> of course. this would be the very first time that puerto rico has been able to show investors that they the effect restructure their debt. this is a small piece of that $72 billion in debt. this would be a huge, huge at sign of relief. erik: we talked about the surety cent at part 15 that the creditors are taking. to be able to demonstrate that
somebody is going to take the pain surely is important. prepa has paved the way for everybody else. you have to show that somebody is willing to give up something. >> 15 for investors would be a relief. we were expecting much more than this. at 15, that is a relief. people are pretty happy to see that. it is a win for everyone. erik: thank you very much. more on that coming. we have bruce richards with us. a breakthrough, tentative deal on a restructuring for prepa. puerto rico. i did a primetime special on puerto rico. hiker two is the fed rate
and the worsening supply glut in the u.s. sent oil one direction today. -- u.s.st intraday low crude stockpiles surged 24 90.7 barrels, the highest since 1930. barrels. .7 30% of the market. why so many guys are getting killed right now. what you make of this? bruce: it is 18% of the high-yield market. that is 4.3 chilean dollars. you are talking about a couple hundred billion dollars. $4.3 trillion. in the next three years, prices --roach 30% david: a third of these copies
will go bankrupt. third of high as one these companies will be forced into some type of restructuring. it is going lower. and what did not get agreed to at the last meeting. and a glut in supply. expect lower prices. look at the charts, you will see that back in 2008, wti intraday touched $32.40. we will test that level with rather high certainty. erik: what does that say about marathon? are you sitting back and waiting for oil to pierce lower levels before committing capital? bruce: with this last trade down , we have heard back couple positions. -- paredired
back a couple positions. -- you short energy cannot do it in a single name but you can short bonds. erik: much exposure do you have to energy? bruce: not much. 4% or 5%. david: let's talk about another story that matters -- much just what percentage is in cash compared to last year? cash: it has gone from 20% to around 40% cash. stephanie: you believe we're headed downward next year? bruce: it is the whole credit cycle is help and how cheap credit has become and how dislocated the market has become too less liquidity. less liquidity.
a bigger subject than just energy. 40% cash it seems crazy to me in terms of historically -- when is the last time you were that heavily weighted in cash? bruce: it has been a few years. stephanie: sign of the times. david: reports are you are not alone. bruce: credit is back to 2009 levels in terms of spread. it will offer a lot of opportunity. we want to be positioned as the new year starts to buy what has some goodudden -- names trading very cheaply. another story that matters to markets today. ukraine. ukraine defaulting on a $3 billion bond payment to russia. the two sides move closer to
legal action. this is interesting. the imf is siding with ukraine on this. bruce: they are. ukraine just a few months ago restructure their sovereign bonds, $18 billion. with that come in the imf came in and provided ukraine new money. that time, they negotiated with russia to restructure its bonds. --s is not a bilateral loan it is a bond form. while the other parts will get restructure, we want you to restructure your bond. russia refused. the payment date is here now. ukraine will pay -- they won't pay because they have a deal with imf if they don't make that
payment. there's something's going on behind the scenes and russia is being forced to restructure that that. -- that debt. if it was a bilateral loan, they would have had that position but because they did it in bond form, why should they get better treatment? that is the imf position. david: good news for lawyers. erik: what a great start. we have so much more with bruce richards. he is here for the hour. ♪
kuwait airways will no longer fly israelis from jfk and new before joining google -- there are only 60 female cfos in the s&p 500 companies. more coming up with bruce richards of marathon. more market moving stories. matt miller with some market indicators. thank you for joining us on "bloomberg ." ♪
erik: recapping some breaking news. moments ago, we told you that puerto rico's electric utility repa has reached a tentative breakthrough agreement with bond insurers and creditors. it will allow for their $9 billion of debt to be rolled into a securitization vehicle. the insurers are putting up for , from -- bruce richards clint hamilton and others will take a $.15 haircut to par. it takes the way for further negotiations on puerto rico's $72 billion in debt. noteworthy to see something finally happening. david: there have been rumors
.tephanie: bruce richards marathon asset management is with us. yield has had seen in ages. we saw 3rd avenue go down. help us dissect what is going on. bruce: high-yield is down 4% this month, 6% year to date, and that is what this coupon is about. prices are down 13%. we have not seen a market decline by this order of magnitude ever in the high-yield market going back to the early 1980's with michael milken.
this is the worst non-recessionary year that we have ever had for high-yield. high-yield was a little bubble ishous with a high-yield index coming in at five and a quarter. now we are nine and a quarter. we have backed him this year. high-heeled is actually fair value or slightly cheaper to fill value -- fair value. stephanie: what happened to fifth third? bruce: the triple c cowboys. 90% of their portfolio was in triple c non-rated securities. stephanie: how are you invested in triple c and up your mutual fund liquidity? bruce: you can ask them. 41 47 -- percent of your portfolio in unrated assets.
intricacy -- in triple c. i don't know, performance down 35% over the last year and a half. they lost about a billion, then they saw some outflows. how big are mutual funds in the high-yield space, is 3rd avenue a one-off? bruce: it is the size of the entire high-yield u.s. bond market. 1.4 trillion. 20% is owned by these open-ended mutual funds offering daily liquidity. 20% of 1.3 trillion is 1.2 through -- billion. the biggest buyer of high-yield in the markets are the open-ended mutual funds. but a lot of these are not concentrated in triple sees the way that 3rd avenue was. bruce: good quality portfolios.
while they don't have the problem that 3rd avenue has, they still have other problems that we all have in the market. lack of liquidity in the high-yield market. stephanie: why does it work for etf's? are j first of all, etf's and k. they represent the high-yield etf's. collectively, 25 billion in size. 25 billion is a small drop in the bucket compared to 312 billion in daily liquidity. that is the first thing. second thing, go back to december 1 and pull up all the trading value in j and k and hyg, and you can see they have turned over 40 billion. more than 1.5 times. look at ge.
$300 billion market cap, maybe treated 25 billion this month. it is as liquid as any stock. stephanie: what does hyg and ja and k due to the index? bruce: the high-yield index is only big institutions, so it is a way for retail to play high-yield investment. it is liquid and you can trading on the penny market. it has held up very well. eds are going to capture market share, just as they have in the past and other segments of the market from the mutual fund segment. the big picture is that mutual offering daily liquidity, so they have to be very strongly managed with cash balances, lines of credit, good, quality names that you can trade
in the marketplace when you need to sell, as opposed to what 3rd avenue was doing, which was put 90% of their positions into non-rated and triple c investments, which we all know is not appropriate. does a bad actor hurt all of you? people do not like the financial industry. what third avenue did, does it hurt you? bruce: it will not hurt us because we are not a mutual fund. stephanie: do people on the street differentiate? bruce: other mutual funds are being tested now, and we will be able to stand the test of time. there are a lot more intelligent people and how to run the business. eds will capture more of the market share from retail that mutual funds on a go forward basis. this will accelerate that trend. after 2008, after what we
had in the repo market, how is it that professional investors still find themselves caught in this liquidity mismatch graph between assets and liabilities? how big a problem is it still? moving target on this money is not necessarily the assets themselves, but the liquidity of the assets. 2008, 11, 12, the high-yield market was much more liquid. banks will not lose a penny because they don't own anything. dodd-frank and the volcker rule, the intended consequences, is they would not make markets in these assets. the risk is now held with the asset managers. what do we know about who owns this stuff?
is owned by mutual funds, 22 percent by insurance companies, 21% by pension plans, 10% by hedge funds. there are seven muffed punt and private investors that own a few percent here in there. there are people summer that gave the money and somebody put them into those mutual funds. to go into 3rd avenue. somebody advise them to go into that. bruce: maybe financial advisors or the chosen do it themselves. david: where are the financial advisors in this? bruce: some did directly to 3rd avenue, high-yield funds. it did not perform well. your end is coming, people have to mark their books. where are think quoted in the high-yield market, and where are
they actually trading? that differential could hurt people. in january, we could see funds go down. we have a lot of trading points that have happened on little volume. i don't think the market is the issue. the ability to get in and out of those marks, rather than where the markets are. c is down 30% in price and you have high-yield bond down 5, 10 points in the last week. those will get marked to where they should be. the problem is, it takes longer to get out of that position than one day. stephanie: we have sell side high-yield traders try to tell us that we had massive liquidity. it is like the go-go days. are they full of it? bruce: they are holding strong cash balances like we are. when you look at these ritual fund managers, they had set up lines of credit. they have significant lines to meet redemptions and cash if you
cannot get your bid in at a certain time. second, everyone is moving toward higher cash balances on this dynamic. in the old days, it's a listing came up for a high-yield bond, $100 million bid list, it would be hedged in the index market and take a few weeks, months to trickle out. now when the bond comes up for the bid, it has to trade at the moment because the seller needs to sell. now finding a buyer at that moment may cause prices to fall five or 10 points. as an opportunistic investor, this is a market. although it has hurt us, should set up well for 2016. asset prices have gotten cheap quickly and we can use the cash balance we have to put money to work to buy assets that we like at cheap levels. we like this market on a go forward basis despite the fact that it's been difficult. david: we need to check in on
the markets. matt: an interesting trade here. crude growth preachers down. it has bounced back up. we are looking at green arrows, $35. take a look at the bloomberg. crude over versus the last 10 hours. crudenteresting because recovers earbud s&p futures are still down. if you take a look at the majors, cash markets are down as well. they have not recovered with oil not substantial losses. 139 points from the dow right now. been down in the cash market. take a look at what industry groups are doing. there are no gainers. even energy, which has recovered , is still the loser.
losers, financials, consumer staples, industrials. the 16 has come down to -year alone, but has come back up again, and is now up 2%. commodities, very volatile today. a couple of industry groups you want to look at because of earnings. out with earnings that was better than the estimate. $1.21. we were looking for $1.12. revenue was a little bit lower than what the street expected. toll brothers is down a bit. also keeping restaurants today. darden restaurants out this morning. also meeting the streets estimates with eps, beating the estimates with same-store sales growth. just a little light on revenue. nonetheless, gaining at 3.5%. mcdonald's, yum! brands down.
now let's go over to abigail doolittle at the nasdaq who is looking at blackberry. it appears the beaten-down phone makers prospect may be turning around. the company beat third-quarter fiscal estimates posting a loss of just three cents. consensus was $.14. the company expects revenue growth in the physical or quarter for its software and messaging units. apparently the new android devices being received quite well. who is constructive on the report said that the study recovery appears to be on track. the street is mainly bearish. 92% of analysts rate than at a hold or sell. some believe the price may go higher by 40%. matt: thank you.
bruce richards is still with us. erik: we spent several minutes talking about high-yield. bruce has some to say about drug prices. martin scroll he was arrested yesterday on securities fraud. he is the guy over the controversial pricing over entering. you have a point of view. bruce: i am a little annoyed at the health care cost. 2016, our insurance, small , weness, 150 professionals provide insurance for our firm. , theealth care costs cheapest one, is going up 14% next year. last year, 12%. how can this continue? here is the big picture.
the u.s. economy is a $17 trillion gdp, biggest in the world. do you know what percentage we spend on health care costs? 17%. you know what sweden spends? 9%. u.k., 10%. billions, and it may equally trillion dollars a year on health care costs. let me tell you one story quickly. that we areompany working on that we do not particularly like. horizon pharmaceuticals. , buy model is acquisition it, jack it up. when you get a headache, you take motrin. for some, it may upset your stomach, so you take pepcid. -- no r&d here. the compounds are exactly the same inputs.
that sells for, one-month prescription, $167. competitor.e add bill does motrin and pepcid. they have the monopoly on that because they have fda approval. they went out and bought their competitors drug. zeroonth after, they put a on the end of each one of the drugs. for $1670.g sells a doctor who prescribed this, do you think he cares? insurance pays for the drug. justn't care because we pay the $15 for the drug and insurance picks up the rest. the hospitals prescribed it because it is easier. stephanie: so what is the
takeaway? bruce: insurance companies don't care. they simply jack up the rights next year. , thesee bad actors specialty pharmacy companies .hat are doing what turing did erik: i am watching horizon shares get pummeled as you say these things. i need to understand. you are comparing horizon to valeant. 40% of their revenues, this one compound that anyone can do. all you have to do is get your pepcid and aspirin. stephanie: are you sure on the stock? bruce: no. the yearbook game, it's friday. who is this seventh grader?
erik: welcome back, everybody. you are watching bloomberg . .oining us now is jason furman he has been spending some time with our colleagues in d.c.. the fed do his job, it took nine years to get back above zero on interest rates. janet yellen has an encouraging view, shall we say, on wage growth and inflation. when is it going to be congres'' time to do something?
we have seen some encouraging signs, a bipartisan agreement on the spending bill. you see, between now and the end of president obama's terminal this, fiscal stimulus? what we want is to make sure you are not having unnecessary austerity and you are having fiscal protect ability. that is exactly what we are getting. a month ago we got the agreement that bought back 90% of the presidents sequester proposal. saw that pass with a strong bipartisan majority in the house this morning. we expect the senate to be passing it shortly as well. that will put us in a place where we will not have the type of drama -- we will have an expansionary fiscal policy at about 0.2% to gdp growth next year, but then it leaves a private sector to do the work, which i'm confident it will do.
erik: bruce richards -- i believe you know him -- the ceo of marathon asset is with me. he has a question. one of the big initiatives of the administration over the last eight years has been obamacare. i am a private citizen, i run a company, and my health care year-over-year% for our employees. when i look at other hear theeople, i obamacare insurance rates are going up 25% or those companies -- for those individuals. any thoughts on what the administration can do to bring down the health care cost that are skyrocketing out of control? cannot speak to your company, but if you look at the official data, the price of health care has risen 1.3% in the last 12
months. that is the lowest rate it has risen in 50 years. average premium growth for last year, it was 4.2%. lowest premiume growth years on record have been over the last several. we saw on average double-digit premium growth 10 or 15 years ago. we are not seeing that anymore. again, that is an average. your company seems to be above average. other companies are below average. is faster than anyone would like, of course, which is why we need to keep aggressively going -- bruce: i don't believe the data. i'm happy to share with you, but these are statistics from the kaiser family foundation, the most respected health insurance group out there, and and bureau of
economic analysis. stephanie: let's talk about economic growth. we sat down with sam zell who things we're heading into recession. larry thinks as we are in a slow growth environment. help us understand what is the real path. >> the most important thing to look at is consumers. they are 70% of the economy. over the last year, consumer spending is up 3.2%, that is a faster rate than the year before. you have the important determinants of consumer spending, real wages. aminal wage growth is up little bit, but also because the price of gas is down. consumer confidence is the highest it's been in over than a decade. we have the stage set for continued robust spending into 2016. if you add in the residential construction growth that we have seen lately together with the more protectable fiscal policy,
i feel good about the economy in 2016. talk about wage growth. you have been a fan of the walmart model which is not always lead to wage growth. administration's position on that, what are you doing to encourage at, if that is your goal? >> one thing is a stronger economy. things that we had done with this budget agreement, last week, the week before, a significant investment in our highway and rail and transit infrastructure in this country, and 11% increase. that creates higher-paying jobs. the transpacific partnership is a really important thing. we concluded the agreement this year, we need congress to pass it next year so we can have 18,000 tax cuts on american exporters go into effect. that will also help us support
higher-paying jobs. tpp, you need it, but what are the chances that you will get it? >> you saw the farm bureau come out in support of it this week. we are expecting to see more business support growing over the course of the next month or two. it is something that we think and expect should pass in the next year. thank you, jason furman, chairman of the president's council of economic advisers. stephanie: bruce, i have to tell you, since you began, my bloomberg is on fire. we have talked about high-yield. you say things are going to be cheap in 2016. where, specifically, and when? what are you focused on? bruce: you can buy some good double b credits.
they have cheapened up from where they were a month ago. take a telecom company like frontier. 11% coupons, the bond is down 10 points. very strong credit. i think the price will appreciate. if you want something more depressed, go into the emerging markets. brazil's equity is down 40% this year, columbia is down 40%, peru is down 40%. this is their index. these countries are getting pounded. but there could be one good credit within that. so look at a stronger company that is getting caught up in the commodity mix, and you can buy 60ir 7% coupon at a price of and have lots of upside. meanwhile, the company has $5 billion in cash, asset sales for $5 billion, and is bringing new lines online that makes them
cash flow positive next year. specific investment that you can find in a dislocated market where you can build a portfolio and mix in good returns. stephanie: you just won bloomberg tv in a not :00 hour. today was the yearbook game. -- 9:00. this is the daughter of a diplomat and the youngest made female billionaire. yes, elizabeth holmes. that does it for today. on monday. you
from bloomberg world headquarters in new york, good morning, i am betty liu. it is the end of the week. fed effect is fading fast. are fallen, bonds are rising, oil hitting a seven-year low. the democrats saturday night fight. can they use the debate tomorrow to cut into hillary clinton's substantial lead? it was a box office smash. you know the movie we are talking about. it looks like star wars is living up to the hype. we are a half hour into the trading session. i want to head to the markets desk where julie hyman has the latest. ticket sales are up, stocks are down. julie: