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tv   Bloomberg Go  Bloomberg  January 6, 2016 7:00am-10:01am EST

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they will be opening even lower. meanwhile, oil is not been this low in 11 years. , north koreae exploded something, but was it really a hydrogen bomb? ♪ stephanie: good morning, welcome to "bloomberg ." david: we have had a lot of news in this new year. stephanie: we have, in one direction -- lower. the dow down to 50. i'm going to call this guy the grim reaper. jonathan ferro in from london. david: you will fix it all for us. jonathan: i will try my best. david: welcome to bloomberg go.
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we always do with first word with a vonnie quinn. theie: north korea says for first time in a successfully tested a hydrogen bomb. the government broadcast called an act of self-defense against its enemies. it is the fourth time the country has tested such a device. , a long-time alley of north korea come also said it is opposed. some experts say the tests may not have involved a hydrogen bomb. just to manyhow refugees germany taken last year. the interior ministry said it except 1.1 million asylum-seekers in 2015, more than 400,000 of them from syria. rmany has taken in more refugees than any other country in europe. theremed group is worried will be a federal rate.
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authorities say they are still working on a peaceful resolution. the group said it believed the refuge once there was a plan to turn over management of federal land to locals. ever news is powered 44 hours a day by more than 100 journalists. take a look you read markets. to looking back ever since jonathan ferro got to this country we have seen declines. 30 points on the s&p mini futures. you should dow judgment a contract. down the most, there's a lot going on with the chinese detonating some sort of weapon. you have tensions escalating in saudi arabia and iran. the chinese devaluation always spooks equity markets. sorry, the north koreans
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detonated something of the chinese. just to correct myself. below $35.t cfall this is the global benchmark for oil. in the u.s. look at texas, 35, n basically nonexistent in the spread there. gold has been rising amid these three terrifying events that i highlighted earlier. three days in a row gold right 1084 an ounce. it just continues to rise as people and investors seek haven assets. as far as currencies go, but the now, you canright buy offshore at 6.72. you see some dollar strength against the euro, a little bit of weakness against the yen. take a look at apple, apple stock right now trading at 131,
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down 2.25% in the premarket. it'll bens below 100, the first time they open below 100 since august 24. it has enclosed below that cents october 2014. stephanie: we have to break some news. yahoo!'s marissa mayer can't get out of the news. star board back in the next delivering a letter to yahoos it is necessary to the board to be open-minded in the future. basically saying you need to take a much closer look if you want to create value for the shareholders. we may need a management change. we haee -- hearing from star board quite a bit here. in december they were very aggressive. now getting even more aggressive. this is less than four weeks after melissa -- marissa mayer had twins. david: plus yahoo! announced
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they were going to shut down was a bigich initiative for her. it was original video. the nfl program was on screen. they shut it all down which is a major strategic change for her. she said she would invest in high quality video. now they said they are going to go cheap. stephanie: spending doesn't seem to be what the shareholders or big shareholders want to see her do. it might not be enough. has been are herself under attack. you have seen a lot of senior management turnover in less than four years. -- doit much of a yahoo!? you know much about yahoo! there been a lot of to and over the last 60 days. correct me if i'm
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wrong, under 1% of total company they hold? stephanie: you don't have to be. jonathan: i'm just saying, is that a big deal? stephanie: it doesn't matter anymore. that is the big shift you've seen in activism. gone are the days when you need to have such a big position. he has a tremendous success with less than 1%. is making arboard lot of noise. marissa mayer has come under attack. david: i think this is a clear point, there has been a change in activism. if they can get a better idea, they will go with you even if an activist. stephanie: this is a year will be are seeing simply not entire sectors or equities or technologies move up. where we seeear real differentiation in terms of investors. remember, with alibaba out of maybe not asand
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positive as people font, things are looking tough. you have to move on. the overall markets are having a tough day. this is sell is continuing worldwide. ch: i think there are three things to pick up the year. you have some softer data in china, and the geopolitical nervousness about the north korean news. finally, some concerns about policy. how much devaluation is china going to engineer? what about the fed? how many hikes for the fed? that leads to choppy markets. david: one of the things on the market is oil. what seems to be remarkable is there is clearly an oversupply. yet every announced that we see is people producing more. i don't know of any of the business for that is true. rich: part of it is with the fracking sector, you have a lot of people producing just to pay
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off their bank loans. we are starting to see a cutback in u.s. production. i've think the supplier response will be there. but there is a structural imbalance. one big story is a depreciation of the currency in china, the other is brent. but right in the back end, the shift low has been phenomenal. waygovernment 75 all the down to 55. factor that into the fed, can they really get four hikes in th is year? rich: our view is that we will not see four hikes. the fed says they would like to do for, but i would like to pay -- play third base for the yankees but it is not going to happen. if we do i will be thrilled because edelman the economy is booming. our view is that the economy is plodding along. with oil, we will probably not get four hikes this here. matt: john pointed out this
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chart earlier, this is the brand curve going forward. david, i know, looks at these curves. the start at around 35 where we are, coming up to -- it doesn't get to $50 a barrel until 2019. this is a big scale. this is what the curve looks like last year at this time. this is where the market that brent would be today. $60ing right now at about or specific to seven dollars a 57 dollars a share. it is hard for your planning department when you are a big, integrated oil company. jonathan: this is why it is a difficult, the likes of shell bp looking for a rebound. onn people have got it wrong the rebound is the rollover in production. total u.s. production, we have seen it slow and rollover. look at the five-year chart,
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that is still huge production coming out of the u.s. stephanie: we aren't operating in a vacuum. opec has everyone in it for themselves. those meetingsf and say i am so going for the biggest piece of the pie that i can. it doesn't feel like there was any certainty across the globe coming anytime soon. as we look out of the market to 2016, is there a moment for you think we will have some more clarity and calm? rich: i don't. we now have divergent monetary policy for the first time in several years with the fed hiking in others easing. the geopolitics never gets any better, it only gets more complicated. the data will probably be next, and several years ago it was booming emerging markets and a sluggish and g7. that seen in no longer works. this is the world will look like in 2016. david: does it loom large of an
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fundamental structure isn't that strong. having an immune system that is challenged. you're prone to every cold. rich: trend growth has been marketed down. 2, which means any given adverse shot pushes you closer to zero. stephanie: if you're feeling concerned, who better to listen to than mark, the publisher of the bloom boom, he set an early with our colleague francine lacqua and didn't disappoint. mark: i think the next thing that will happen is that all of the asset markets like the titanic will crash. it won't matter much whether you own a big hospital or the s&p. it is all going to go down. washanie: they ago, i unaware that the titanic
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crashed. i thought it sank. can talkly marc farber about the titanic and laugh. is, it is whatever it all going down. when he says of the like this, what does this mean for the overall markets? like more and more investors are sitting on cash. just because they are afraid, they have no idea where to go. rich: i think this could be a year when it will be crucial to try to identify bottoms and rebounds. an 11 year low, at some point you lessen 2015 is that it is tricky to find the bottom. i got is that 2016 will be a year when that is going to pay off. oil at these levels and several other market indicate to me, including emerging economies, i think they're been beaten down to very low levels. my sense is there will be choppiness this year but also
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opportunity. stephanie: i am the optimist, unless you change your tune, we have to end this segment right now. we will be back with rich in just a minute. internationaln snow and ice festival in china is officially open. you thought it was cold in new york? take a look at this heist castle -- ice castle. this festival was established back in 1985. china,old, speaking of which direction will china take this year? we will hit the global go. you are watching bloomberg. ♪
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vonnie: here is your latest bloomberg business flash. a direct apology is made to the american people. the issue with diesel engines is nothing to be proud of. and he is truly sorry. they admitted faking emissions tests. the company could face billions of dollars of fines. president obama announced new restrictions on weapon sales. the company says first-quarter revenue may be 16% higher than forecast last month. gun sales surged in december after talk of no limit new icad is sam bernardi no massacre. bernardino massacre. according to a person familiar with the matter, twitter maybe raising its character limits to the thousands.
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still, jack dorsey says he expects most tweets to remain short and conversational. jonathan: we focus on china, as always as we has done almost every single day. the u.n. sicking to a five-year low after a central bank said -- the yuan sinking to a five-year low. this after an intervention by the pboc. the shanghai composite, that is usually the headline. the real story to this year is the currency, isn't it? >> it is. i think you'll see more weakness throughout the year. this move towards more reflexive exchange policy was part of china's design to integrate into the global financial community. they wanted to be part of special rights and become part of the reserve currency basket.
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what this also does for the miskicked the more flexibility them is give them more flexibility. risk pushinglicies china back to where they have been. what they're trying to do is stimulate manufacturing. they are already producing overcapacity. think -- allowed when the currency to depreciate, they are risking antagonizing the world as well. stephanie: how many more pull?rs do they have to simon: i think those levers are becoming increasingly unaffected. the risk is -- china -- the world does not need more chinese steel.
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the world does not need more chinese manufacturing capacity. rates, ib interest don't know if there'll be the loan demand in china to pick up -- no one wants to invest to increase capacity. of the greatest misconceptions is that this is an artificial devaluation. but something else is going on, china is actually stemming decline. the chart is amazing. if you look at the onshore and offshore yuan. offshore you can buy 6.7 for a dollar, onshore 6.5 because the manipulates her that inside its borders. the interesting thing here, the spread, while it doesn't look huge, it is 4.7 standard deviations from the theme. it is massive. it is in the 99 percentile.
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can china do anything? they have to weaken this currency. it is a gravitational force. i don't think they have to, but i think it is certainly in their interest. david: china tends to think about the long game. they have as a policy to make sure their currency is exchangeable. this is a process. i wonder, by moving to a basket rather -- does that cushion the blow? simon: it does. one of the reasons they are letting exchange-rate depreciate seen the currency appreciate over the last year. yes, they want to maintain competitiveness. the problem is, china does not ultimately want to revert to model thatcturing
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produced of the problems in the past. but they want to do is transform the economy to a consumer led, services led economy. a more healthy growth model. the problem is, the easy policy rates to cut interest stimulate loan demand and let the currency depreciate to revive that manufacturing which is part of the global problem. david: does that mean we should buy equities in china? simon: the issue is -- i know a lot of people when the look of mainland chinese market still say equities a very expensive. the problem is, there was this huge divergence of valuation. if you look at the hang seng china enterprises index, that is the hong kong traded basket of chinese stocks that is accessible to most global investors, that is one of the world's cheapest markets. the problem is -- 50% of that is banks then followed by the energy companies. there was a lot of questions about those. within china, you do have a very
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interesting private sector growing up. we have that growing consumption story. there is a lot of interest in companies around that. i think china's challenge of looking long-term is to maintain the confidence of those entrepreneurs were driving that private sector. so they don't to join this currency outflow and decide that chinese policy is just too opaque. that is what china needs to do. male, it is always great to have you with us. coming up next, the always troubled pharmaceuticals are back in the news again. we will talk about that on bloomberg go. ♪
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david: welcome back, valiant is laming -- and naming a new ceo.
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their current ceo is hospitalized with pneumonia. our expert joins us now. wouldthe new ceo reportedly be temporary. but i have another question, why did he not just do this to begin with? kind of a huge mystery. to refresh, mike pearson, the ceo they say is critical went into the hospital with pneumonia. a few days later they announced a three-person executive team that would take over. a week after that they said they would name a single executive. the idea is to get some leadership ahead of this huge conference. this seems like it will stay the same until mike pearson gets better. a couple: i spoke to of large investors who said it was unclear how sick he was. he works himself sick, he was under the weather, but now it seems here we are and things it
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seems are much more serious. do we have an idea what could be the direction they are going and? drew: we don't. the challenges they face haven't changed at all. they still need to rebuild trust with shareholders and health insurers and the entire health care system. the stock is down more than 50%. they have a kind of work to do. and a new ceo is not the key got there all been banking on. we still enough who it is, or when mike pearson is back. david: whitley be there, thank you for a much. up next, north korea futures. ♪ the only way to get better is to challenge yourself,
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and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. welcome back, you would looking admit town manhattan. from theold roof shot headquarters. you're watching "bloomberg
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." a very warm welcome to our own tom keene. tom: i'm waiting for a dull day in 2016. david: not yet. stephanie: not possible. first, how about some first word news. some weapons experts are disputing north korea's claim that it has exploded a hydrogen bomb for the first time. the north korean news called it an act of self-defense. but it is likely they tested another kind of atomic bomb. we will have more on and that bomb in just a moment. in venezuela, lawmakers that they can power in the national assembly for the first time in 16 years. one lawmakers in the first priority will be getting political prisoners freed and to pull venezuela out of a recession. he will work to have the president removed from office in the next six months.
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and the man accused of buying the rifles used in the san massacre appeared in court today. he faces charges of conspiring to buy materials to support terrorists. he could face 50 years in prison. he has yet to enter a plea. you can get the new 24 hours a day in more than 100 countries around the world. david: tom,t righto on the news. you doing you see this news is going to the think tanks. showndon, this was the from foreign relations. this is an absolute must read. november of last year a north is distance itself from china. they rejected russian invitations to go to meetings. a u.s. strategy designed to representates --
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possibly the last chance to redirect a self isolated north korea toward peaceful coexistence. what i got out of this is the multiple sets of bombs and that north korea has create a great urgency here. ofid: n/a a have had a devil a time trying to figure it. i spent a week there. can't imagine how different it is. more than any of the country i've been to come it is so different. we have been negotiating to do a documentary there, and the file and said as long as the president comes over, but there is one other demand -- the leadership insists you bring with you a full set of the first year of "lost" dvd's. because they really like it.
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tom: you can't make this stuff up. stephanie: did you bring it? david: we did. tom: that shows the bizarreness. that the point you raise, to negotiate a think about the world in such a different way. normally, you can figure it out. they see the world so differently. "lost" was a really good show. it was awesome. tom: i watched a tom hanks vehicle which i was one of those kids at the end the tv set when they announced the spy trade and all that. we are a lot removed from our memories of these moments. at the new thing now is that there is no dialogue. to get ones hard going. understand, the entire basis of the regime is that they are the
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most important country in the world. if their clients quiet too long, death to pick up a fuss. tom: the observation we heard from a number of people this atning, particularly from chatham house is that there is a renewed urgency for the central player, not benighted states, not washington, the central player has to be china to do an angela merkel and provide real leadership. stephanie: i want to talk great britain. jonathan ferro is here. david cameron is in germany today saying he will need -- meet with angela merkel. we're talking brexit. he told lawmakers that the government ministers will be allowed to decide which way the campaign in the uk's referendum on staying in the union. that at theion is
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conclusion of the renegotiation, the government should reach a clear recommendation. in the referendum will be held. it was in the nature of a referendum that it is the people, not the politicians, who decide. as i indicated before christmas, there will be a clear government position but it'll be open to individual ministers to take a different personal position while remaining part of the government. stephanie: what does the market think? we know jpmorgan is already set if this happens, you will see depart, andobs companies was it thanks but no thanks. what does it mean to you? jonathan: it is a doomsday scenario. referendum,ttish that was a big problem. if you wanted them to leave, it was ok. the state could always leverage the uncertainty. that fuels the states campaign. the leaders will of a hard job
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that it is not that scary. david: there was a survey just last month about what the biggest risk to the british economy would be. number one and number two were brexit. jonathan: it is a risk, because it is an unknown. the principle of collective responsibility pushed a side and the people within the government are going to be able to campaign to leave if they wish. m: if the job leaves london, where do they go? new york, frankfurt, paris? it depends what business you're in. the state campaign the leverage it as follows -- you go to sleep in europe, you wake up in england. that is what has happened. i'm not entirely convinced of that argument. the are people operating and free and open trade agreements and that is what the lead
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campaign has got to convince people. but they will be up against it. stephanie: six years ago and was overnight at hedge funds woke up and said guess what, we will now be domiciled in geneva. go with it with alternative investment guys. thei would suggest that issue here on a type one, type two analysis is not london, it is ok if that doesn't work out. i can't get a straight answer what the new london is given all of this doom and gloom? david: i'm not sure i have an answer either. i think if other people in new is inhink the competition new york and london for the major banking and financing. jonathan: hsbc are looking at where they are domiciled. what it is really about tax rates. that is what it really comes down to.
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tom: this is a microcosm -- david: maybe dublin. when every wall street from is going to move to stamford, connecticut. bother to ask the employees, they didn't want to go. stephanie: all they did, they moved everybody out there -- than actually, no thanks. it is not like they are making tv set and radios, you have to go with the talent is. you bring up a great point -- hedge funds can say i have three terminals, i can be domiciled wherever, but i'm alan howard, i'm around the world. jpmorgan will not get thousands of employees to set up shop in zurich. tom: in london, only from what you talk but every day, is there really a believe london could deteriorate because of brexit? necessarily, because it is such a risk.
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i'm not walking around people scared about an exit, you don't really see it in the markets. what it will come down to, when we had the scottish referendum, but it came down to was that first poll that showed the true potential scotland could leave the u.k. at this point, until we get that this is the u.k. could leave, it will been year the time potential to. that is when it will start to effect the markets. david: what is your best to guess about when we will find out? jonathan: i don't know. they're saying by the end of 2017. at this point, we still don't know. he will navigate once he is done that. tom: is wayne rooney done? jonathan ferro and i don't know, this is another example of uncertainty in the markets. whether or not the brexit or not had a direct correlation to equities going up or down is yet another factor of a geopolitical uncertainty.
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markets don't like that. david: we want to get you on one of the subject, offshore yuan. tom: i woke up early about this. jonathan: i didn't get a lot of play here. i was looking at the right side, look at this. 4.8 standard deviation. it is insane. tom: yeah. matt: it is just off the charts. bell curvea tilted over there. point to it, that yellow arrow but it is out where it is never been before. i'm going to suggest this is a flow analysis of the money flowing in and flowing out of china. it speaks to the underlying debt restructuring that has to come. ready to the standard
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deviation for the this goes back to david that goldman sachs years ago, forget about medical analysis. when you get out to standard deviations, things happen. you can talk late it on bloomberg. you were dead on this is a big deal. jonathan: what is interesting -- c is stemming the decline of the onshore rate, how are they doing that? when we get the next update, counterintuitively the could be sending treasuries to stem the decline. is critical, this goes back to bank of america, treasuries are selling long-term. they are not doing bonds of seven and five year durations. it is all short papers they are moving around. jonathan: this is too much jargon, we have to stop. stephanie: don't talk bad about
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tom keene. up next, volkswagen continues an apology tour. brent crude at a 2004 low. ♪
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stephanie: vonnie: welcome back to "bloomberg ." flash. your latest the committee will reduce output of its latest iphone. nikkei, apple will 6s modelsewer iphones in the first quarter. the stronger dollar makes the
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iphone more expensive overseas. shares of apple are down. the company controlled by the miniature span -- the richest man is about a trade out of compton. value legendary entertainment a close to 4 billion u.s. dollars. intel is looking for new markets and branching out into sports. and made deals with espn, new balance, an energy drink company red bow. the parts will be used to give audiences more information about the sports they are watching. ces is underway, i'm headed there in a couple of hours. s areyear several auto ceo grabbing centerstage, including volkswagen we spoke a bloomberg
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news yesterday to a dress but ss whatpany is -- addre the company is doing. >> we solving issuing it in the approval of the people. keeping the customers happy with us. a very supported dealership, i think our division is doing a great job. matt miller, keeping the customers happy with us. if you look at vw sales, they are not doing too bad. clearly, this is big news, but of the customers happy? matt: they hardly have any customers in this country for that even subaru outsells volkswagen in this country. i think keeping the customers happy for the u.s. is second priority. you heard him allude to the fact the dealership network is key. that is a carmaker's bread and butter. they have to appease the
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dealership. i would say that is the first order of business. stephanie: what do they do? matt: they have to give them money. stephanie: there you go. matt: customers as well, a software fix will not cut it if you realize you have been poisoning your neighbor silently for the last couple of years. think -- they are almost at an advantage in this country in that they haven't sold almost any product here. they are not selling 200,000 cars a year here. they're not a lot of u.s. customers to be angry because the didn't i into that. stephanie: but there are u.s. shareholders and look at the sensei if they have to spend money to repair this -- how much? when does it suck to affect the bottom line? that kind of guessing game
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is just as fun now as it was a few years ago with bp. we will talk about dozens of billions of dollars. david: but it was to be number one, now expanding sales was an important part of that. now, that looks a lot harder than it was before. matt: true, but before the diesel issue they were striking out in the u.s. said, listen to what dee they are going full throttle into product in this country. the chattanooga plant, which i have been to end scene, able invest more in that. it's not that they according to his comments. that they will cutback according to his comments. >> we are just upgrading our plant opportunities in chattanooga. they will be a huge product offensive ones where through the crisis. matt: the question is, do they
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really know what americans want? they have never known before. stocks down 50%, investors are punished them big time. they areuestion, ces, unveiling a full electric car. you need money to finance a concept. will that money be there? matt: you need over a billion dollars to develop a new car. jonathan: will they have the money to develop into the future? matt: they seem to think that they will. he family will stand behind them. this could be the kind of thing of $70 billion when it could cost. i'm sure they hope it will cost much less. fines, and alle that will cost a lot more than developing one or two cars. stephanie: if you walk the floors of ces, if he did know
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where you were, you would think you are at an auto show. when i look at the lineup, it is car company to across the board. from sound systems will be closer to driverless cars. this is front and center for automakers. thank you very much. more to come on "bloomberg ." ard's lettert starbo to yahoo!. ♪
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jonathan: welcome back to "bloomberg ." a big headline across the isomberg terminal, starboard once again urging yahoo! to make
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changes. in a new letter, it is pressing to make overhaul of management. erica is with us now. a point i made at the beginning of this program, stephanie came back at me -- a company, a fund with less than 1%, yet they can move the stock premarket by 1.5%? it doesn't happen a lot in europe. >> a couple of reasons. the first is actively shareholders approve and that you don't need to have significant skin in the game anymore to command shareholders attention. starboard has demonstrated that more than any other form. that is a restaurant operator the used to own redline are no longer. ter no longer. the were able to sweep out
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entire board and hire it on executives. now it is responsible for in the company and has done well. they have a good track record to begin with. secondly, yahoo! is a disaster. there was no other way to describe it. the stock is down 35% over the past year. isphanie: hold on, erik, he barely an institutional investor and think about the impact when it comes out. erik: they both feel the same way. costs are rising in revenue is declining. management and the board have proven reluctant us far to sell the core business which appears yahoo!'s only alternative. and they spent money on acquisitions that haven't proven, at least resulted in anything material. knew: all true, but we all that before the letter. the question i have --
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why do the futures go down? you could say finally someone is going to fix this thing. that is an excellent question. i don't have a good answer because i'm not an institutional shareholder. the tone of the letter suggests that yahoos management and the, more important, the board are totally entrenched and unwilling to listen to at least what jeff smith, the managing member at starboard. thus we are headed towards a proxy contest. butresult may be good, nobody knows what the outcome will be. if starboard loses, who knows for yahoo! was going? stephanie: if you are starboard, and that any success working with management to respond the way you're happy with, you wouldn't be writing and of the letter. it is like you are slamming your fist against the desk saying someone better listen. the fact that they're coming out
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again, more aggressive, tells the market she is listening. erik: it is very clear this is a last chance offer to negotiate for a proxy contest is waged. " if the boards is unwilling to change, a contest could be needed. with a boardlace that will -- to your point, pounding the table you can do with words. callss letter, jeff smith for a new management six times. he says he is frustrated five times. stephanie: we'll be back with more. ♪ the only way to get better is to challenge yourself,
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and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20.
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it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. ♪ >> so much for a winning streak. u.s. socks are set to go lower. -- u.s. stocks are set to open lower.
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weapons experts are skeptical -- the economy.t of and plane -- employment figures just lower from now hearing last crucial meeting. ♪ ♪ welcome to the second hour of bloomberg go. introduce oure to collect from london, colin farrell as well as steve ratner. i want to say hello to one more person. every day, we have a four-year-old named pj. his dad works at wells fargo and he watches us every morning. he is from england. good morning and good luck at
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preschool today. the dow is down. it is pretty negative. we may give you a little positive news. korea says it has tested the hydrogen bomb for the first time. x it's are not so sure. it is the fourth time a country has tested a nuclear device. experts say this explosion did not appear to have the power of a hydrogen bomb. u.s., china, and russia all criticized it. cruz says president obama passes executive actions on gun is a -- the president spanning background checks to gun shows, flea markets, and online sales. ted cruz says when elected, he will repeal all of those executive orders. germany has made it official.
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it took in a record number of refugees last year. about 1.1 million asylum-seekers enter germany in 2016. no one else in europe took as many. more than one third of refugees were slain the civil war in syria. news 24 hours a day powered by 2400 journalists and news bureaus around the world. now to matt miller on the markets. matt: we know it will be bleak. , trading down 300 points right now. 2%, astures trading down our nasdaq futures. take a look at oil. oil andow prices in falling further and further, especially crude, a benchmark. now down 34.63 a barrel. you have wti trading higher right now than rent crude, and
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inversion of what we typically see. i have got a cool chart i have been playing around with. seasonally adjusted averages. this is the median average over the past 10 years. price, 98, 140 dollars per barrel. low price, seasonably adjusted throughout the year. look where we are starting this year in 2016, below the seasonal low. a cool chart i will tweet out at matt miller right now. check out the price of gold, marching up with geopolitical concerns, three days in a row for gold futures to rise right now. 108670. minors, which had been battered down over the past couple of years with the price of gold
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coming back up a little bit today. lining up 2% in the the market. minors are getting some advantage to this right now. with the price of gold rising as investors seek safe haven assets. safe haven is a bit redundant. stephanie: it does not matter what you own, it is going down. matt: haven is already safe. david: you found a little glimmer of hope, which is good, i appreciate that. global stocks have been rattled all year long. i would say happy new year, but i'm not sure. it is pretty rough. let's start with why it is happening. china letting the yuan, how big of a factor is that?
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>> i think it is part of an overall picture. what is bothering market thedly, more important, is chinese manufacturing trend, which was down for the fifth straight munch -- straight month. that is what is scaring the market. au are in the middle of global slowdown and that is affecting commodity prices as well as the stock market. we think china is still growing, but nobody thinks it is growing at 7% or anything like that. you cannot have a global slowdown in manufacturing forever. >> we have got a weaker chinese currency. we have got to look at the consequences. consequences are disinflation for the rest of the world. 20% of your exports go to china. the cause is a weaker, underlying economy. what is more important, the consequences or the cause or it?
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-- cause for it? >> i think it is the cause for it. it has devalue faster than we. was the chinese currency pegged to the dollar, that has hurt it. some of the countries now in the business of making the angst china was good at making. it is bad for japan. we are in a global competitive devaluation throughout the world. every country is trying to get theirs down in order to get it up. north korea potentially testing the hydrogen bomb, potentially reuniting tensions between north korea and china. is this a factor for you? does it matter from an investment standpoint #-- standpoint? >> know you cannot get too wrapped up in one event of some
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significance. i heard you say the u.n. is then devalue faster than you thought. how fast did you think it would be valued and how fast do you think it will be valued? i -- outflows from china, here is a u.n. climbing up now and the white line is obviously capital outflows. >> when china announced the new policy, it was projected a 3% over the year that would then follow. that fromexceeded when china announced last august. the market projected a 3% evaluation. that is where we are. they would move to a basket.
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>> from china passes point of view, it will solve their problem and if you move to a basket, given every other itrency in the world -- would fall faster, which would help china and hurt us. >> did you wake up on wall street and are watching the city of london, you're looking at rent crude and futures match. the recruit takes the tech. every economist says it is good but it is not good for stocks at the moment. what did you make of the moves? >> this is where to you -- you get to the question. i think crude oil prices taking a low temperature and a -- is note is a good good because global activity is so low. that is what the crude oil price is saying. nothing good is happening on the
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supply side. u.s. production is declining and no one else is really increasing. this is reflecting weaker demand than anyone thought there would be. that is scaring the market. jonesnie: if the dow loses 1000 points by the end of the week, what could it do for u.s. treasuries? could we see the 10 year go on a it could be out of control. >> treasuries have been moving up and down in price all week. willroader question we talk about later is what the implications would be for the fed if such relation persist. >> my final question, treasuries this morning are down five this points. every single year, strategists come out and join this show and look out and say they went higher. they don't. how will that play?
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>> the fed has been wrong. the fed has been wildly overoptimistic about rates and where they will be in the last several years. there you go. i guess you agree with larry. steve: on some things. stephanie: speaking of the fed policy meetingnt out later today. we will preview that next right here. ♪
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wants: activist investor
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major changes at yahoo!. in a letter to the directors, star board asked for changes in yahoo! passes leadership strategy and execution. they lost all confidence in yahoo!'s management and board. marissa mayer has been under has not because she been able to turn yahoo! around so far. according to people with knowledge of a deal, there is a deal that would value legendary entertainment close to $4 billion. ago wanda acquired amc. , one of rate is 4.4% the lowest rates in more than a decade. demand for older apartments in the suburbs is keeping bank rates down. minutes do from the
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federal reserve passes historic december policy meeting come out today at 2:00 p.m. eastern. mike mckee joins us now. what are you looking for? the number one point you are looking out for in those minutes? mike: the fed forecast implies -- people willr be looking to see it. if there is any kind of in the nation on what the fed will decide in the next rate increase, janet yellen says -- actual and expected progress toward inflation goals. look at what matt miller has an telling you about oil prices. in terms of expect to progress, you look at a chart of consumer expectations for inflation, they are going down. what will they base their decision on?
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look at the news this morning, crude low, weaker chinese currency, disinflation, the consensus is year and yields. looking at these bloomberg forecast, u.s. 10 year ending the year at 2.8%. it just ec nailed the market in the last years. i want to cross over to matt miller for the jobs numbers. way over the estimate your 257,000 is the employment change. we were looking for 198,000 in the survey. this is the 80 p number. we do not get the big number. the real payroll number out until friday. we are looking for 200,000 four the same 198,000, so survey number for adp employment, we got 257,000. feeding the estimate by almost 30%.
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eating the estimate by almost 30%. how predictive is it? >> it does not give you magnitude. just to the definition, it will be off from what we get on friday. they are usually over a six-month average by 45,000. it could go either way but it will probably cost people to markup. does not: even if it give us exact, it does tell us direction and direction is positive. how much does janet yellen need to rate the positive we're getting against what we're seeing globally? what we're seeing globally is the opposite direction. on what is focus happening in the united states. we do not read on the rest of the goal is tose do what is best for the u.s. economy. it goes back to the old john conolly line.
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power dollar but your problem. the fed has a specific mandate, inflation and employment. theres the statutory charged with doing. stephanie: on paper. >> i think in reality. last september when the fed did not raise rates, part of why, was what was going on in the rest of the world. we have probably until march before they will raise rates anyway. several more jobs numbers and a lot more economic data. rate isnemployment fine. the point is there is another side of the mandate, not just the labor market.
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>> i would put an asterisk on the labor market. labor force for patient is way down. it is hard to argue there is any sign of wage pressure in the labor market. operates on the phillips curve to they believe as unemployment goes down, wages have to go up. they are lacking, it will happen. they make policy based on what their forecast, and according to their models, we will see higher inflation because unemployment rates keep going lower. matt: we also see higher inflation if you look at the fed five-year breakeven rate. down everh cpi comes since the meeting, you see the breakeven's rise in up. >> the fed says they do not pay as much attention especially when you includes -- include
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tips, but there are reasons they fill the market is in for, part of it is the liquidity. pull of the if you other charter brought up, the survey of consumer expectations, those are going down. people are thinking inflation, not coming back. thank you for joining us, michael. guess what is happening later today. not just a little fed information. a very's national interview on with all due respect with the one and only head of the wu-tang clan talking about indicted drug company executive martin shkreli . he says he does not regret selling his $2 million album to martin shkreli. deal, sold it, cannot judge it, it is what it is. next, are democrats lighting the hands that feed them. leaving the building.
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i am heading to vegas. i will see you in a couple of days. will expect some gadgets, virtual reality, smart car? ♪
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matt: brent oil to its low slow and a decade. outstripcontinue to demand. joining me now, philip. what do think of the moves, it is unbelievable considering the conflict. an 11 year low. i think we'll push down about ready to. i remember a time when oil would carry a $10 premium because of geopolitical risk. now we see stocks go down. gold gets a little bit of a bid.
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slide lowernuing to here. increased production, stronger dollar, slower global growth. we have got inventory coming tomorrow. oil prices are continuing to selloff. i think in march, we could get into the 20's. see someically, we kind of correlation between oil and stocks. over the past year or so. >> a lot of people have talked about it. -- thehurt the and the energy sector. most are playing it for the high dividend. got to hedgeave your portfolio now. maybe you consider a short on the oil futures to hedge against it. it looks like it is traveling lower at the moment. moore bloomberg is
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coming up now. sanders after a speech on wall street said this. huge -- have to be broken up. that is not ms. clinton's position. you have two separate commercial banks from investment banks and insurance companies and breakup major financial institutions for the good of our economy. clinton'slary campaign pushed back saying hers on wall street is the toughest out there. smart money ise going to the gop? steve: it depends on who the nominee is. there are a lot of people on the sensible center. democrats or republicans, looking for someone who is moderate and constructive.
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they were for obama in the first election. if it is chris christie or marco rubio, that is one thing here down to -- donald trump or ted cruz, that is another thing. >> they reflect on the financial crisis. bank.k., very small have you got any push it back -- push back? >> i think this is an incredibly emotional issue p the mood of the country is clearly on the line of what bernie sanders is saying. street's goal is to get under the radar screen. the last it will do is get into an argument about what caused the financial crisis. it does not quite get delivered. ff think there is tough talk on many issues. what herump is saying
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would do, i cannot imagine if he would become president. collects steve ratner will stay with us. up next, we will look at how the slump in oil prices affects consolidation in the energy industry. brent crude down by 4%. that is a 2004 low. open, 60 minutes away, s&p futures -35 points. to futures -280 five this morning. good morning. -- dow futures -285 this morning. good morning. ♪
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david: breaking news about valiant. >> remaining on medical leave. howard schiller.
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stock is down but coming up. if you take a look, i have got a look at the live trade right now. the premarket was down about 6%. 2%, you can see the jump. i think sometimes the market just wants certainteed. this guy worked at goldman sachs from 1996 to 2011. david: he has remained on the board and this is one of the names that were mentioned. is one of the prominent names mentioned. he clearly knows the company. and probably knows a few things about the business valeant has been doing. exactly. the main thing it seems to me, they have got a problem with their company.
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they need to get through this. they need to figure out what went wrong or did not go wrong and get thattors behind them. steve: totally. the market does like clarity and wants to know what is going on and they have to get this behind them. no question about that. john: for me, if you are waking up on wall street and arrived at work, you are not talking about valiant. -- valeant. s&p futures -34 points. i'm not thinking about valeant right now. tradewe had a negative allen so 43.8 9 billion. this is a little tighter than expected.
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we got the adp headlines 15 minutes ago. at 250 7000 jobs according to adp. nowet the trade balance out . we will get some factory orders about 10:00,later, and durable goods orders and that kind of thing. we were down more than 300 points in dow jones contracts. a tiny improvement, but still down more than one point i percent on all major averages as far as teachers are concerns. -- concerned. this is an interesting stat. trading at 142 in the premarket. if it opens below $100, that will be the first time since august 24 of last year. it has not close below $100 since 2014.
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apple is down near a low right now. also take a look at pioneer. a company selling shares. it is a shale oil producer. trading at 270ny times earnings. i looked at the p/e ratio. you have all seen the price of oil. it does not look good. they are selling shares in this moret to try to fund extraction of oil falling like a led zeppelin? john: one, they goes to the equity market. they are using that money not just to plug caps and the budget, but to boost production. west of them, there is still a margin even with wti. got things wrong is these guys would pull back and would have to pull off production. it has to happen in the way many people thought.
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the pioneer story speaks to the home market on what is happening in the last 12 months. it is interesting they are still making money at 35 per barrel. the more interesting point is that they have gone to the equity market to fund this rather than the debt markets. what does that say? david: we have had reports this morning that north korea claims it successfully tested a hydrogen bomb. huge advancerk a in nuclear capabilities. thank joined by richard, you for joining us today. we have been following this very closely. what do we know about what happened? richard: it is the fourth nuclear test north korea has conducted in the last nine years. it is not clear whether or not it was a hydrogen bomb.
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is worry some simply because they continued testing in the faith -- in the face of international pressure. they continued to improve their capabilities and it is not happening in isolation. they are improving their missile capabilities. a north korea getting better on the weapon side and on the missile side, that ought to give anybody pause. one thing i focused on is china. north korea is an isolated country and they live by their own rules. we have always thought china had some leverage. when things go bad, they can turn to china. condemned this. it does not seem like they can stop it. richard: china could if they chose to. more than two thirds of north korea's trade goes in and out of china. china wants to turn the screws on north korea, then it could. it is worried about what north
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and it is worried the country might implode and the idea that you could have a unified peninsula in the united states strategic orbit. china does not use the leverage it has and i would argue the real goal for american foreign policy is to bring about a change in chinese thinking, that is riskier to tolerate a nuclear north korea than to put pressure on it. it is easy to sensationalize the headline. the performance of markets in south korea is actually ok. it does not have the impact. i spoke to people in south korea overnight and they said it is business as usual. is this or is it an escalation to you? richard: it might be business as usual in the sense that it is a fourth test, not the same as a utility strike so there will not be a need for a military
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response, but we have got other considerations. sometime during the next presidency, the united states will wake up one day and north korea will be able to put -- ear warheads the only concern about north korea cannot be the direct military threat they pose to south korea. they could to worry threaten the united states directly. we have a broader set of concerns than the people of south korea and that is a source of tension for people in that south korean relationship. david: s&s within the next four years, it is possible that north area could have a ballistic missile. richard: i think somewhere between four and eight years. if the next resident is a two-term president, conceivably by the end of the first term.
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north korea is on the shortlist of the most difficult intelligence targets facing the united states. closed, difficult to track society. matt: i want to ask u.s. far as an investor's take on this, how much does this matter? markets have not been affected much. index,rging markets asia each of the red lines is a date north korea said it tested a nuclear weapon. it does not seem to affect trade , at least the equity markets much. how much does it matter to you richard: notr? much. we cannot live our lives around whether north korea has a nuclear weapon. if it looks like it is threatening the world and they will do something with it, that would be a different matter. a test even by north korea is not market moving.
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thanks.chard, a big crudeher big story, brent dropping to an 11 year low, below $35 per barrel. revenue continues to fall. let's bring in libby, a portfolio manager. steve ratner is still with us. another headline, pioneer going out there and raising capital to boost production. put those together? companies areergy the best at technology. we have lived through this with natural gas and have seen it go from 12 to below three dollars and the producers continue to make money. example of a company that is taking advantage of the willingness of investors to take a long-term view and take the equity down because
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they do not believe we could see energy prices stay at these low levels. david: in any other business, when you have structural oversupply, someone starts cutting back. in a car business, you start cutting back your production. steve: let's not get too carried away by pioneer. drilling is way down. production in the u.s. peter beensummer and has declining. there is a supply and demand affect going on out there. i would make the bet that the margin of excess supply in oil is really not that great and that sometime in the next couple of years, you will see the whole thing reverse itself era john: 9.6 million barrels a day, we are only at 9.2. we have declined but the point is the pace has not been as quick as many people thought.
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>> when they contrive the cost structure down, you could economically,ill and especially in the permian basin. substitute fora crude oil. we have a short term and valance but this will not last long-term. >> how long is long-term? it is not a unique market. russia will increase markets if they can do it iran will come out with 500 thousand barrels. the saudi's saying we will keep our productions, it is not just the u.s. >> that is what is lengthening lower for longer. we keep seeing people trying to push. the reality is this is a depleting asset. 5% depletion, a conservative number, you have got to replace 4.5 billion or so arrows, you put demand in conservatively, you are five
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plus million barrels, you have just got to replace to stay even. growingd is still around the world largely because of emerging markets. it is exactly that point. >> if you go back 20 years and the at what is projected, affected reserves, and compare it with now, it is much greater. >> it makes us more efficient. no better example than in the u.s. 5.5 barrels five or six years ago. john: and we were talking about peak oil. we have been looking at the curve and how flat it is and how far it has come down. the fundamental futures supply. the big question is when.
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>> i do not have the answer and this is what we do all day long, but whether it is sometime made this year or late this year or early 17, supply and bounce is less than 2%. we have got geopolitical tensions, no risk in the marketplace for that. we will see that come back into play. david: when will we see the deals being done? about $150deals were billion in m&a led by shell and bg. right behind that, we saw energy transfer. as we continue to see the industry,n the energy you will see more and more m&a. david: thank you for being with us. you are staying with us, steve, and matt, aaa.
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matt: one of my favorite places to eat lunch. fourth-quarter eps, they are seeing a dollar 70 $21 and 90. fourth-quarter sales down 14.6%. a market reaction. a big dip. we were down 7% in the stock and now the stock is down 2%. it toock is not taking badly. headlines continue to come across but chipotle december sales were down 30%. one of the main things i love now about going to jump pull it for lunch is no line at all. i am the only guy in there. the stock has obviously taken a beating. not reacting too terribly. down to the earnings report and the outlook.
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miller, bloomberg, and bloomberg news cannot verify the length of the lines. matt: it is not open yet. it does not open until 11:00. ♪
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david: we have more breaking news about to pull a. matt: -- about chipotle. the virus event in california. remember we talk about chipotle a lot as far as its e. coli issue. it has also got a virus issue. chart.ent me a great
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you can siege of pulling over the last couple of months. can see rightu now in the premarket, down 2.7%, down from november about 30% on concerns that started with e. the company closing down some restaurants in the northwest. it has also had virus issues in california and in boston, the 80 students from boston who had issues, health issues, after eating chipotle. each one of these points is when we had a negative news event out of aaa on food safety. they are saying now they're getting a drenched -- grand jury subpoena. >> it is hard to know what to make out of that, a criminal investigation? is there there is a lot to the story or there is not. matt: grand jury's do not always indict.
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david: valeant this morning made interim studio the powered schiller, the comes of the board. true arm star -- drew armstrong, you are our ex. -- expert. drew: the former member of the board, he was therefore essentially the building of the company. cfo for a number of years with mike pearson. he knows the company and helped turn it into what it is, for better or worse. a guy who has a lot of experience especially compared to other executives who have not been around as long. john: some people will wonder whether it is just temporary. drew: every time we talked to the big investors, the guys who own a ton of company and are the influential voices,
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all the scandals and all the criticism and all the falling of stocks, they say mike pearson is the guy we want there and they want to see him get well and get back in the chair. he has worked with howard but i have a feeling despite all of this, we have not yet seen -- even though we have schiller stepping in, it would step up a potential replacement if that is what they decided to do in the future. david: the underlying investigation that really drove down shares so far, do we have any sense of what that will drive down? no, having my pearson out will probably slow down this ability as well as external investigations to go ahead. mike pearson will not be able to appear in front of congress .nytime soon
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he will not be at jpmorgan. even with schiller there, everything with this company is likely to slow down a little bit. armstrong, thank you for joining us. a record for 2015 after a strong december. steve renner will talk about what is driving growth coming up next. ♪
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david: welcome back. 2015 was the biggest sales year ever for the auto industry after posting a solid gain in december. steve ratner also advises the bloomberg empire. steve is with us now. is this low gas prices? what is driving this? sales are recovering a lot before the gas prices became low. a lot of pent-up demand.
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auto sales were below replacement levels, meaning the car was getting lower and lower. some of it is more drivers and some of it is low gas prices. >> the sweet spot is where people have to change. the other elephant in the room is credit. how much is an expansion of credit has to do with that chart? is deftly an expansion in the subprime area. remember during the financial crisis, even subprime auto credit never really defaulted in any considerable extent. people give up their houses before they give up their cars. david: let's talk with gm. the chairman title in addition to ceo, what do you make of that? mistake think it is a and we should be following the european principle.
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really, for good governance. it is something we did at gm. ford and fiat chrysler both at separation from ceo's is. i think half of the s&p 500 today, it is simply a matter of good governance and there is a macho thing among ceo's is that they need to be chairman or otherwise they are not a full person. i just do not rank that is the way it should be. david: i was going to ask if this is a status thing. steve: yes. you do not want to be just a's elp or you want to be chairman and ceo. i get that but it is bad governance. au should have a board with separate chair. part of why they had so much trouble, there was a chairman that would not let the board function as a board. david: we saw gm make a big and
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with lift. steve: there is a huge amount going on there. .tephanie is on her way the autos will play a bigger role than they had before. whether this will turn into something exciting, time will tell. david: thank you very much being here. you, john. to thank more top stories moving markets. yahoo! gets another letter from star board and valeant, and interim ceo. down in the futures. bloomberg next. ♪
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david: welcome to bloomberg . i am joined now by our co-anchor, erik schatzker.
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good to see you and welcome aboard. we will be talking about yahoo! again. i am diet -- delighted to welcome henry. his company runs equity benchmarks, including the world index, analytical tools, asset managers use to make investment decisions pair welcome. henry: thanks for having me. david: here is the first word from vonnie quinn. vonnie: nuclear experts say north korea's latest weapons test is worry some. says -- experts say the lessons could be smaller making delivery more feasible. president obama -- it will reach
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president obama's desk. the bill would also defund planned parenthood. , parliament will debate than in donald trump from the u.k.. a petition signed by more than a half-million people. his mother was worn in scotland. news 24 hours a day powered by our 2400 journalists around the world. down 274 points on dow jones. the s&p futures down one and three quarters percent. nasdaq futures down about 2% right now. take a look at oil. one of the most interesting stories of the day, even with .ll the geopolitical unrest what is going on between the saudi's and the radiance. we still see oil coming down hard. brent crude trading at 3475 or barrel.
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-- per barrel. volatility is huge here. the oil volatility index really running back up to where it was the last time oil was in a freefall. just about in the beginning of the year here. have 50 and the highest we gone is to 60 since at least the 2008 highs. of volatility. look at the oil companies. they seek to determine the rest of the market. exxon, chevron, all down about 2%. gold is going in the other direction and it is the third day in a row for gold games. safe haven assets here, you can see it climb. 1084 90. gold producers are doing quite well in the premarket today.
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we will begin with the activist, turning up the heat yet again on yahoo! an activist hedge fund sent another letter to yahoo!'s's board this morning calling for the company to overhaul its management, replace directors, and change strategy. shares have been trading down this morning. the broad market is down as well. tom is here. henry fernandez with us. let's talk about yahoo! first and then we will get your perspective on activism. you have tangled with some activist. deuce, ife d anything, from this? thing is clear. they have had it here the frustration is dripping from every word in this very strongly worded letter. they have had it. yahoo! has given into some of
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the demands already. the activists asked them for a spin off. they got concerns and said scrap that you yahoo! scrapped that. but yahoo! did not go far enough when it caved to that demand. these guys want to overhaul the board, overhaul management, go radical. really cut to the heart of things. yahoo! is not going quite that radical, though they have come close. >> we should add there is a punch line at the end of the letter that is a threat. star board will fight for seats on the board. one would assume with the help of some other similarly interested investors and get on with it. it is a strong indication they are ready for a proxy fight. shareholder, how many seats on your board? we agree on to other people
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to sit on the board as well. your experience, what would you advise yahoo!'s board to do? henry: engagement directly to we went through a process like this right around this time, the first day of the year, the monday of january when we all came back. wanted to divorce it in their private indications with them. they were not happy with what we're doing. we engaged with them. we eventually settled, we listen erik: what kind of interaction have you had with them on the board? are you adding value, asking questions, have a helped you in desk the better investors?
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, they they can see around are very constructive in what they propose. they have a flurry of ideas all the time. to engage with them and respond. by giving star board's 1, 2, or three seats on the board, or given how much is already happening, is it too late? henry: i do not see any other way. this has been going on so they have to be a compromise here. it has to be a form of engagement. the benefit of the company and the benefit of the shareholders. has got to come
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up with a plan for yahoo!. we want to talk about oil. brent crude dropped 35 barrels -- $35 per barrel. expected tota is show fuel supplies actually rose. traders have shrugged off rising tensions between iran and saudi arabia. henry, you are not an oil trader. a lot ofeal with customers. you advise a lot of people who have to deal with the consequences of these prices. what are they telling you? henry: basically, clients are more than 80% of the top investment institutions in the world. a constant battle as to what it is they're looking for. the fundamental issue is an aggregate man issue. what is the rate of growth for the global economy. it is driving everything. .ice, oil, commodities
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this is a reflection of the issue. where increasing aggregate demand will come from, there is only certain amount of work that the world can do. there has to be a lot of engagement for fiscal authorities. matt: i have a cool graph that breaks down the different industry groups. you can see which are the leading industry groups weakening here. you have tech companies weakening, health care and consumer staples. ,bviously lagging, commodities material stocks. but we see energy coming up here into improving along with financials. do you feel like maybe we could have autumn here? bottomed here?
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henry: all caps the index, 99% of capital market of the entire world, a lot of the concerns are made in consumer staples, health ,are, consumer discretionary and technology. it is a fascinating chart. of rotationot coming, i just don't see how they will break down the pattern of the establishment of .16 tong to 2015 -- 2015 going 2016. i believe staples will be a place. health care, technology, and the like. down pressure and the like. david: china's central bank
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signaled it is becoming more tolerant of the currency. the daily reference rate is as since aprilt level 2011. we hear an increasing amount of fear that the chinese economy will have a hard landing. henry: clearly the economy is slowing down. is hard to have expected a smooth transition in the chinese economy from a manufacturing export investment economy to a technology consumer economy. no country in the world has been able to do that transition smoothly. we are going through those bumps. bet on the want to government authorities in a country that has largely stayed on and they have a lot of levers
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in what they can do in monetary and fiscal policy and aren exchange policy to revive the economy. i am definitely not a believer it would he a hard landing. erik: we know corporate america is beginning to adjust to the idea. in oil, we talked about it a minute ago. is corporate america beginning to adjust to the idea that the chinese economy will underperform expectations? tom: it will very sector to sector. in the technology industry, there is a question about how quickly that transition will .appen, to the consumer that benefits a lot of technology. apple is out there, etc. the combination of a switch over from the manufacturer led economy, the week is an oil, it leaves a lot of other areas vulnerable. much.thank you very tom is responsible for our tech coverage at bloomberg.
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and of course henry fernandez stays with us for the hour. those stories matter to markets now. another big story, chipotle releasing information, details on how about the reese and e. coli out rake has been for the has been fortbreak the company's business. ♪
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erik: welcome back. chipotle shares are sinking a new this morning, down more than $11. company sales are plunging more than expected in the fourth -- ter and chipotle
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consumer companies including chipotle here on bloomberg. clearly in the middle of a scandal, whether it is the neural virus or e. coli. it is doing terrible things for company sales. the subpoena raises it significantly. collects it is not clear whether -- >> it is not clear. we will learn more about this as the day goes on. sales are down 14.6% in the fourth quarter. it will be the first quarter ever as a public company, first ever time they had negative sales. . very bad quarter >> it says something more
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broadly about chipotle. california, more than 200 people got sick here it is sick worker came in with the virus. that is what it is about. risk.l see headline it raises the criminal aspect of it but it is different than if they were saying a criminal investigation of the e. coli issue, a wider thing. it is just one restaurant at this point. >> chipotle has never really had to confront anything of this nature. how do you deal with it? henry: a franchise threatening issue like this, you have to get in front of it. you have to get a death come up , be able to bean transparent as possible.
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issues that need to be aired extensively, communicate, create an action plan. david: going back further, jim burke. he went out and said we are taking all the tylenol off the shelves. matt: i have a cool chart bloomberg users can access. since the first incident here was reported at 1005 -- 10:05. at each point, there was another thesent, you can click on blue points and see the story. the stock has fallen since that
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happened but still trading at $449 per share. my buddy pete worked this out. it cost 116 chicken burritos at the first event and now the shares in the stocks cost 67 bring us. how would you describe the company's's response so far? they were a little slow. the big problem is the cdc has not come out and said we know what happened. there has been no closure. it wasto come out that lettuce, it was cilantro. they questioned the handling of this at a presentation last month. it has really hit them. cdc said it is another five or three cases. they're waiting for the cdc to say all clear, we know what it was. there is a chance we will never
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know the source. that is part of the way they do business. david: thanks for being with us. next, the top market structure trends of 2016 liquidity, high frequency trading, and exchanges. that is coming up next on "bloomberg ." ♪
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matt: just about 10 minutes until the open of trading on the new york stock exchange. apple is one we are watching this morning, down 2% in the and $.70. at $100 we have been talking about the fact that apple has opened below $100 per share on a split justice basis -- split adjusted basis. below $100 pered share on a split adjusted basis
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since 2014. apple is getting closer and closer to the $100 level here as analysts right a couple of notes this morning. i also want to talk about valeant. ,hey appointed the former cfo howard schiller, to replace mike basisn on and interim because mike is in the hospital with pneumonia. 3.4%.t shares are down the market is taking a little solace in the level of certainty. howard was there for wanted to expand philidor. finally, once talk about chipotle. chipotle was issued a grand jury subpoena in california on the neural issue. it also has had a few restaurants linked to the e.
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coli virus or remember a grand jury does not have to indict. we have heard about a number of grand jury's that have not indicted. chipotle shares are down 3.2% in the premarket. they had been gap -- down more than 8%. chipotle had a much rougher time , about 30% since the first issue was reported in november. erik: we have heard a lot about the loss of liquidity and fixed income and what that could mean for investors in 2016. the other aspect that matters to and with us kevin, as well, henry fernandez. kevin, a liquidity crisis. is it on the horizon? think so.o not something investors should be concerned about. the reason why we do not expect a crisis is because everyone is so concerned. they have been speaking about this for a long time.
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if you are left out in the cold, maybe you should look harder at your strategy in the past couple of. erik: what is your view on market liquidity? henry: it is definitely shrinking. everyone is preparing for it and looking at this. it is almost like y2k. y2k soe is talking about it became a nonevent when it did arrive. there is a sense of that happening. >> you have taken a look at issues many investors have taken seriously. what else is important to consider? kevin: one interesting bit is the regulatory action. there is a lot of talk in washington about fixed income, liquidity, of course.
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of the four or more regulators that oversee the markets is quite taken with the equity markets. there is not a lot of focus for proposing new rules. just more of a lot of talk in we do not expect a lot of regulatory action in 2016. banks have the balance sheets in the precrisis era and now they do not because they're not allowed to read -- level up as much. kevin: high-frequency trading will get a lot smarter. we will talk about principal trading firms or nonbanking. --ot of rocher dealers broker-dealers. hedge funds in a position to provide liquidity. anyone of those does not have a balance sheet, but to put together, they certainly could influence liquidity. to what extent will we go to robo trading, essentially?
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kevin: we break fixed income into 18 different buckets so it is hard to talk about it in one big lump. the u.s. treasury market very moreronic and likely to go electronic. there has been a lot of growth but even still, it is not that automated. >> we will come back later and talk more. kevin, henry fernandez, still with us, and we will be back with him after the break to talk about where money was made last year and where investors can or hope to make money in 2016. that is next. ♪
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erik: welcome back. we are moments away from the opening bell. in shaping to be an ugly day for stocks. futures are pointing to a sharply lower opening.
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points futures down 34 as measured by the s&p. you would be the fourth day out of five of declines stretching back at it 2015. hadhe fifth day we've not too much of a rising market. you can see the bell being wrong at the nasdaq and the new york stock exchange. let's get a quick check on what is moving in early trading with matt miller. you got a screen of the tells us -- matt: let's go back. this is sort of the basic model i use when looking at the markets. especially on an ugly day like this, you want to keep your eyes on the big majors. you also want to keep your eye on treasuries. the 10 year yield whip sawing around right now. 2.19. you want to look at commodities.
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one of the huge drivers of a trait like this, witi and rent are trading at about the same price. -- $34.70 for brent. i have a bunch of these over here. the heavyweights really moving indexes around. apple the biggest company in the world. $100.92 a share. we're watching the $100 more closely. a couple of analyst camilla notes concerned about iphone growth. also in a down market you tend to see the big stocks move around. they are dragged around by the index investors. this is a worksheet i use. anybody who wants to access it, i continue a copy of it. i have a whole bunch of commodities, bonds and stocks on here. >> what jumps out at me is the green japanese yen. it tells me investors are really
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nervous. they are flocking to the yen for security. matt: as well as gold. it's the third, day in a row investors have gone into gold. $1091.70. you are seeing dollar strength against the euro. ¥118 for youret dollar. erik: henry, you have been in financial markets. what perspective can you offer? henry: it's an ugly day. mind of it is driven in my by the evaluation of creative , competitive evaluations and the like. it is reflective of the aggregate problem we have in the world. it's getting worse. erik: do you believe investors
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see the people's bank of china allowing for the currency to depreciate and draw the conclusion that the chinese central bank is trying to stave off this hard landing? >> correct. i think there are a lot of things the devaluation is giving you. it spread between the onshore in the offshore. they are trying to grapple with the issue of a slowing economy in china and how to prop it up. secondly, the more the value the more the about export become cheaper and that has the forced valuation across east asia and emerging markets. another factor is the more the appearance of softness in the chinese economy, the lower the commodity prices go. that has a ripple effect throughout the system. erik: i want to make a bit of a transition let's stay on the same course the strategy. matt talked about big stocks like apple and microsoft and out .or that have -- alphabet
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you are in the index business. the growth of passive investing, etf's, index based products has been great for your business. -- are there some unintended consequences as well for the growth of passive investing we need to be aware of? investing is with a man-made supply -- people want to replicate that price and the weight in their portfolios. what is driving the passive investment trend is we are living in a world of expected low economic growth. therefore that should be to lower returns on asset prices. which therefore puts a huge emphasis on the cost of managing those assets so that the pension funds of the world get a better net return.
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a lot of focus today by the big money pension funds and asset managers is going to cost them managing the assets. one way to lower the cost is passive management. you have lower fees than actively managed fees. >> it'salso reward. -- it is also reward. it must make people feel more concerned. i can get a cheaper product that's not going to underperform or extensive products. henry: in a world of volatility, if you want to be advertised -- equitized, you know with the index is over the next number of years -- x number of years. in a world of uncertainty and quick decision it gives you more comfort.
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that does not mean that active management does not have a big place in investment. it should be a bigger part of the investment process but that is what happens in situations like these. erik: henry, we will come back to strategy a moment but it want to go back to matt miller. the dow is down 260 points. matt: a big drop. nasdaq 500 down 1.5%, down 1.5% as well. main loser ofthe the day and what is driving the trade. brent down 4.5%. down theally dragging index. take a look at my map. it breaks down the s&p by industry groups. it is a sea of red. all the 10 major industry groups are down. energy is the biggest loser,
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down 2.5%. , and you haveoms materials down. i.t. down. those of the biggest losers that are dragging down the index. the 10 year yield was whip sawing around a little bit. you can see that it continues to fall. this means that investors are buying bonds. they are seeking safe haven assets. as they buy, they push up the asked -- price. a number of stories are in play today. althoughabout apple, it's alleviated from the premarket about iphone sales growth. in a new interim ceo while mike pearson is in the hospital for pneumonia. they are down but only 6/10 of 1%. they had been a larger drop in the premarket because of concerns that there was nobody to run the company.
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chipotle down 1.4% -- down 1.4%. it said it was going to drop 8%-10% for the fourth quarter. now the are saying 14.6%. they also said they got a subpoena for a grand jury appearance in california. not good. investors are reacting. they are taking it well. pioneer is a great story today. down 7%. they are raising capital in the equity market because they want to go out and drill more to try to get more oil out of the ground in the permian basin. oil just tanked. the equity market is willing to give them more money even as the oil price falls further and further. there are 7.26% worth of concerns for that plan. pione -- " drill or drop." matt: or "drill, baby drill."
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we are talking about pass investing and you are right. becomes a much lower cost to investors. one thing must be said for beta which is it has offered huge rewards in the time of quantitative easing. now it's whether that trade is running out of steam. i built a chart to help illustrate potential perils of passive investing. you canlast 15 years, see what is happened to the s&p 500 total return, that is the orange line. the yellow line is an absolute return of 5%. that does not sound like a whole lot? pension funds cannot be their obligations with a total return of 5% a year. yet over 15 years that is exactly where we have come.
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don't you think it is important for people to remember that we are hitting a period of declining markets where we may be at the end of able run. that -- and of a bull run. issue there is quite an that reverberates through the of ae financial system world of low economic growth and low financial asset returns. what it means is that a new norm, are going back to the paradigm prior to 2008? i think they will at some point. if not, we will have much more bigger social and political problems in the world. everyone is doing everything in their power to achieve that. i think the issue of passive versus active is also a cyclical issue. there is clearly a secular structural issue going on and it has been exacerbated by
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uncertainty. the issue is when you are picking stocks and you were controlled in monetary policy and geopolitical events and it create a little bit of an issue of how good can you be picking stocks on the basis of that. >> you deal with so many investors. when you face this world, including what we are watching this morning, what is the strategy you see most people pursuing in this low growth world with a fair amount of volatility? a lot of our big institutional clients around the world, pension funds and the like, they are looking for a number of alternatives to manage higher rewards and lower costs of managing. lower costs is what we talked about. side moreive allocations for real estate for example. not as much in the u.s. but around the world huge levels of allocation for real estate because people believe as we
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investing- urbanized in the top 100 cities of the world is going to be a major boon. real estate is an example of a place to be. david: we want to go now to abigail doolittle live at the nasdaq where she has the latest on netflix which was down big in the premarket but is now recovering. abigail: volatility is the story for netflix. it was the top stock last year but over the last month is down more than 17%. there is one analyst doing the difficult thing in this challenging market environment to defend the stock. weaknesshe recent represent some buying opportunity. there is more than 20% of side to his price target of $130. perhaps it will be a top stock in 2016 as well. david: thank you abigail.
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man versus machine. can long-term investors compete with markets driven by algorithms? that is coming up on "bloomberg ." ♪
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vonnie: slightly higher ticket prices are in the air at major u.s. airlines. several carriers are boosting round-trip domestic fares by six dollars. he was quickly masked by southwest, american, united, jetblue and virgin america. airlines is spirit expected to maintain the no-frills policy of its
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predecessor. that is your latest bloomberg business flash. erik: the quick market update. now the dow is down 220 points. there was only one stock rising and that is walmart which is up about half a percent. everything else under -- in the top 30 are down. chevron's down the most, about 3% with a decline in wti and brent. this is where he zero in on controversial issues. we have a question for kevin and henry. our equity markets rigged against fundamental investors? the reason i ask this question is because yesterday we got the word that nasty capital was
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capital down -- nesky was shutting down. " we are come regretfully to the conclusion that the curtain algorithmically driven it environment is one that is increasingly incompatible with our fundamental research oriented investment process." kevin? this was a guy making money. not an excuse for losses. kevin: the market is overcomplicated. " rigged" is a little too strong of a term. fundamental investing goes against talking about algorithm trading. it's a longer time horizon. it's about the value of the company. is aboutic trading quantitative short-term trading. they are two very different things. i think the former has led to a much cheaper way of trading for the latter. it was not positive. erik: henry?
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henry: there is a big difference between trading and investing. if you're in the trading business and some hedge funds , trying to dig of the differences between one and tother, therefore you have be good at that game. it's a game you are playing against machines. software driven algorithms and the like. most of our investors and client base is in the long-term business of investing. they understand values of whatnies and understanding is going to happen three years from now, five years and now, 10 years from now. rating is too strong of a word. ng is too strong of a word. sometimes it creates market distortions that trade down
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stocks. kevin: short-term movements. if you are a fundamental investor, looking at your retirement account, and he goes up and down on a given day that should not impact your retirement. david: does it depend on how patient the capital is? those are two very different answers. --in: i'm a firm belize are believe it you should not be daytrading your retirement money. that is where the professionals who do this all day will run you over. you are doing your day job and logging into your account, that is not a good idea. the patience of it is critical. erik: people who do not know your bio without that you came , and yourgan stanley read morgan stanley since 1994? henry: 1983. trading in equities and fixed
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income, doing mergers and acquisition. erik: do you have seen financial markets for three decades. is the market we live in now a better market than the one investors were dealing with in the free -- pre-2007 era? henry: i think so. there will always be evolution of markets. it's the modernization the markets. the market we live in today, even with this high-frequency trading and algorithmic trading, can create enormous opportunities for long-term investors. there is also a tendency for shorter and shorter investors and traders to come into the market. the more that happens, the more you can have a competitive advantage if you're a long-term investor because there are fewer of you out there. you can benefit from short-term fluctuations or securities and
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establish great positions in companies at lower prices. kevin: we have a much more informed investor today. there is information and available if you -- available if you care to consume it. 20 years ago it was harder to come across charts and data and historical information and relevant news. erik: why do hedge fund managers complain about strategies? or technologies like high-frequency trading? kevin: they see flaws in the current market structure. everybody disagrees on exactly what those flaws are. henry: it's like complaining about the news. go back to newspapers. rather than online news. david: thank you kevin. henry fernandez will be staying with us. highlights from today's program next on "bloomberg ." ♪
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♪ david: welcome back. the markets are selling off right now here in new york. let's head to matt miller to hear the gory details. but not as bad as it was a moment ago and not quite as fed as the premarket indicated. the dow jones down 200 points. s&p down 23. a 1% drop right now on the s&p. let's go through things weighing on the markets today. oil. down 3%. increasedh we have tension between saudi arabia and iran that has done nothing to drive the prices up.
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people are going into gold, into bonds, and a safe haven assets. you also see another thing that is weighing on markets today. the chinese currency. they have allowed it to slip lower. we can buy more of it for the dollar. this is the onshore rate right now. saying north koreans they had detonated a hydrogen bomb is also an issue weighing on markets to some extent, causing some nervousness. second too i have a show a chart? this is the msci because we have henry here. this in oranges the chinese evaluation. a real big deal from august. you see what happens in the chinese do that. david: that is fabulous. henry, give us a glimmer of hope.
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henry: is reflected in the markets for some of the positive surprises they can come in 2016 is maybe the dollar is peaking. these are the last legs of that. maybe what mario draghi is doing in europe works. you are seeing a better economic growth in europe. will not have his bat is expected crash landing and things will get better and give us better returns in the equity market. erik: henry fernandez that the chairman and ceo of msci. that will do it for "bloomberg " today. see you then. ♪
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betty: welcome to "bloomberg markets." ♪
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betty: from the world headquarters in new york, here is what we are watching of this hour. the dow plunging more than 200 points at the open sending stocks towards three-month lows. what is driving this a lot today. a clue is china. valiant pharmaceuticals naming a new ceo this morning. how the news is driving shares. , surprise,s skepticism as north korea claims it has tested its first hydrogen bomb. ♪ betty: ahead to the markets desk for julie is looking at some of the breaking news that is just coming out, including on the services side of the economy. julie: services is the biggest part of the u.s. economy. that never is coming in a little bit worse than estimated but not