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tv   Bloomberg Markets  Bloomberg  January 13, 2016 12:00pm-2:01pm EST

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from bloomberg world headquarters in new york, good afternoon. here is what we are watching at this hour. stocks taking a turn for the worst again, dragged down in part by oil. oil prices making a sharp reversal, although crude now relatively flat after new data showed an increase in u.s. stockpiles. bruce sits down for exclusive interview with erik schatzker. his thoughts on the u.s. economy and why he says it's the perfect time to invest in china. larry summers advises the fed not to ignore current market turmoil. he says investors are sending an ominous signal to policymakers and should prepare for the worst. for more on today's activity, let's head over to the markets desk where julie hyman has the latest. it was a stark reversal, but oil
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turns flat for the day. we will see where the dow and s&p shakeout. julie: an interesting day because we team directionally, oil and s&p track together, but not in terms of the percentage change. the stock market remains lower. particularly the nasdaq. the dow and s&p each down .5%. look at my bloomberg terminal at oil versus stocks, you will see, yes, they track closely together. stocks in yellow, oil in white. performtually seen oil a bit better on a percentage basis. the benchmarks are lower. take a look at oil prices right now. let's look at oil, gold and copper. is not seeing as significant a change. crude oil prices up .25%.
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sharply lower after the inventory report. stocks did not recover. copper is rebounding today, gold is rebounding today. we got data out of china on its trade balance, it has a trade surplus. increase ining the commodity prices today. and the snap back in the declines we've seen recently. it is helping the commodity currencies. rand has beencan battered as of late, falling to a record low. this is the dollar versus the rand in the dollar versus the brazilian real. alix: getting back to stocks, what are the movers? in onei will get to that second. i want to point out what's going on in big cap tech. a big part of that. no specific catalyst here. these were the top two performers in 2015.
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they've been selling off along with the rest of the market thus far in 2016. oracle also on the list of big cap tech weakness. morgan stanley falling to its lowest since october. nextll report its earnings tuesday. alix: i want to check in on the first word news this afternoon. mark crumpton has more. says vice president biden no apology was given or needed after two u.s. but stripped into iranian waters. iran released the sailors today after holding them on an island base in the persian gulf. the u.s. and the rents one of the boats had mechanical problems. the incident was handled in a routine way. >> there is nothing to apologize for. with thehave a problem boat, you apologize for the boat having a problem? no. this was standard nautical practice.
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mark: john kerry issued a thank you after the americans were free. turkey's police have arrested one person in connection with the deadly suicide bombing in istanbul. germans and russians made up the largest number of visitors to turkey last year. russian tour operators have been told to stop selling vacations to turkey. president obama hitting the road a day after his final state of the union address. today, he visits a high school teacher in omaha, nebraska. she wrote the president one year ago, expressing concern about the future. he will give a speech at the university of nebraska. on thursday, he will visit louisiana. a hearing is scheduled today to determine if documents gathered against the cosby in a defamation lawsuit should be sealed. -- against bill cosby. cosby is being sued by seven women who claim he sexually assaulted them decades ago.
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dayal news 24 hours a powered by our 2000 journalists in more than 150 news bureaus around the world. alix: thank you so much, mark. $225 billion in assets, 232 holdings, brookfield asset management is the world's second-largest alternative asset manager. erik schatzker has exclusive and rare sitdown interview with the ceo to discuss why he thinks china is a good place to invest. review, for what it's worth -- our view, for what it's worth, we are devoting significant resources to the number of people and the efforts in china so we can progress over the next 10 years. this is an amazing economy that will contribute amazingly to the world into business -- and to business. this is a perfect time for us to continue to build our resources
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there we are putting more people there and we will invest more. our experience so far has been good, but modest. erik: these concerns are very real, the pace of transition from the export to the importer, domestic demand driven economy. those concerns are something you can look beyond? my comments should not be meant that there will not be issues. sues today -- i was not dealing with that. 10 years from now, there will be amazing opportunities to be in the country. it will be great to be there. alix: erik schatzker joins me now. was that surprising to you? erik: if you think about what brookfield does and has done, no. it is if you analyze what he says against the context of the
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here and now. is the voice of patient capital. he does not share the shanghai composite sales up 7% in the day. -- does not care. business.t his his business is buying property, commercial real estate, apartment buildings, malls, that kind of thing. infrastructure, bridges, toll roads. he is a cash flow investor with a long-term, patient capital, raising long-term debt, capital in public we trailed -- publicly traded real estate vehicles. he can afford to be a contrarian. that's why they been successful over the long term. that's why he draws comparisons to warren buffett. brookfield has vastly outperformed berkshire hathaway by some four times if you
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measure it by total return, which is pretty amazing. when you hear these, you always want to know, what is he like -- what does he like an what doesn't you like -- and what doesn't he like? bruce: we are in it in south america and india and europe. into oil andying gas business. we are a net buyer in anything in our favor. alix: some bold calls. mark: if you hate it, he loves it. brazil? alix: my jaw dropped. mark: oil and gas, right? an opportunity because he does not plan on flipping it. they see that as an asset that can hold for the long term. when they feel it has matured, they will then monetize it. they will bring a joint venture
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partner, exit entirely if there is a sensible industry buyer. alix: did you get a sense of what gets him scared? mark: the only thing that worries him because they are dependent on access to some debt capital, if liquidity shuts down like it did after the 2008 crisis, that is a problem for everybody. even the most patient capital in the world. alix: thank you for bringing us that interview. , the stunning drop in oil prices has had a major impact on oil services companies. stock prices have tumbled and the worst may be yet to come. ryan chilcote has exclusive interview with the russian finance minister. , larry summers says the fed needs to prepare for the worst. the danger signs he sees in the economy. ♪
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alix: welcome back to bloomberg markets. time now for the bloomberg business slash. dallas fed president robert castle has said stock market volatility reflects the underlying economy. he told bloomberg tv that fed policymakers have to watch the market move. he said they should not overreact. kaplan took over at the dallas fed last year. general electric reportedly moving its head quarters to boston. the announcement will come tomorrow. ge has been in connecticut for more than 40 years. last summer, the company friend to leave after legislature ran
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up taxes on wealthy individuals. ceo's wagon -- volkswagen's had a crucial meeting yesterday. california regulators rejected the proposed engine picks or cars involved in the mission's cheating scandal. today, he met with epa administrator gina mccarthy for an hour as they discussed revamped proposals to overcome the cheating scandal. business update. julie hyman as a check on the company movers. twitter is one of those that definitely stands out because it's been on this losing streak, falling to record lows. thatfrequent enough basis it is worth mentioning. shares are down 3.5%. a lot of negative analyst commentary. morgan stanley cutting its estimates, it already has the lowest price target on the street at $18. the engagement time spent per
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user is still falling by 20% year-over-year. of $21 -- arget recent survey showed in terms of social use on mobile devices, there is deteriorating usage for twitter. look at the overall analyst sentiment, it has been turning more negative. map one the analyst twitter. the neutral ratings have been going up, accelerating to some extent. the price and price target for the stock has been going down for the average price target still stands at $33 per share. we will see if it continues that downward trajectory. another stock we are watching that has been quite volatile is sun edison, the clean power company. sure is down another 3% today. earlier, they fell sharply.
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appaloosa is assuming the company over a deal that involves the purchase of a rooftop solar power company vivint vivid solar -- solar. they will finance it with debt they will put on one of their affiliates, terraform power. million. if this sounds complicated, it's because it is. the structure is complicated. it has these two publicly traded affiliates. it's done some sort of capital structure things in between them. there's been a lot of scrutiny of that capital structure. alix: hit quite hard. thank you so much. oil news has been grim. analysts are rushing to lower their predictions, investment
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banks expect crude oil prices to head as low as $20 a barrel. where does this leave oil services companies? let's ask brad hendler at jefferies. if you take a look at the chart of the oil services etf and the oil price, they pretty much moved in lockstep for the most part. overdone?he selling brad: the only areas you might argue that are overdone at this point are in the very heavily leveraged names. amount or a healthy large amount of leverage on their books versus names with a very clean balance sheet, you will see aggressive selling in the former. somee starting to see spots that are oversold in that sense because we don't see a meaningful amount of liquidity risk. alix: absolutely.
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this oil price revision comes on the heels of many disappointing number is the industry like cap , herernationally down 15% in the u.s., down 35%. recounts continue to be down this year. completion activity down this year. -- rig counts continue to be down this year. brad: the backdrop of the , as you justation described, it's a tough slog in 2016 and for some parts of the world into 2017 as well because of the oil situation. earnings still have meaningful downside risk, even with our plots, it could get hit harder in 2017 as people try to wait their way through the current malaise. are overdone?es
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radical and a couple of names we've had in the portfolio include weatherford international. upgradedghted and neighbors from a hold to a cell. .- a sell we do think they make it through and the stocks are discounting too much risk if they don't. something i'm considering in the oil industry is these drilled but i'm completed wells. this in completed wells -- uncompleted wells. they have risen quite frequently. especially in eagle for. that will put a damper on the oil services recovery. brad: you raise an interesting point. one the industry has debated a lot over the last 12 months.
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how much buildup there's been and how much there will be soon. we think it is fair to assume that in the last 4-5 months of buildup, you will see a . we are now well over 5000 drilled but i'm completed wells in the west -- uncompleted wells in the u.s. cheaper form of sustaining oil production in this country, with oil prices around $30, you will not see much aggressive spending, even in that form. we will see some production decline. alix: if 2016 is the inflection point for oil prices, what is
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the inflection point for oil services? >> more of a 2017 event. the psychology around spending and the interest on the part of oil companies to repair balance sheets on their own is very powerful. even if we get an inflection in oil, 2016 will be a year in aich the well companies take next her cash they can generate from better oil prices and pay down debt. -- any extra cash they can generate. alix: great perspective. coming up next, russia's finance minister warning the falling oil prices will mean budget belt-tightening. we will discuss. ♪
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alix: we'll come back to bloomberg markets. brink, eli from the
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lilly lost several patent funds, several large products last year. but is planning to launch an invasion is -- an ambitious lineup new drugs this year. was a period that we lost the patents on our four biggest products. we are working our way back up from that drop we promised investors a year ago that we would return to growth, which we have. and that we would continue to expand margins. , when youuidance call take out the impact of rate, the against song dollar many currencies and you take out onone-time gain we had security we sold some of the growth rate is between 15 and 20%. investors understand that.
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even though we did not meet their expectations on the guidance day, our stock did not take a hit. betty: a lot depends on your pipeline. i want to talk about alzheimer's. ceo onthe biogen yesterday, who talk about their own trials. how critical is it that you have success in this treatment? what is the program -- what if the program underperforms? >> one significant accomplishment in 2015 is we rheumatoid on our arthritis drug. we had some positive outcomes data for art diabetes drug. -- our diabetes drug. investors see lily as more than a one trick pony. it is not all writing on alzheimer's. we have the most extensive investment in alzheimer's of anyone in the industry.
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phasely the drug in three, we should get a read on that study by the end of the tor, but as we explained investors late last year, we have other molecules behind that network on that amyloid target -- that work on that amyloid target and another culprit in alzheimer's disease. alix: you sell your drugs all over the world. i'm curious if what's going on in china has had an impact on you. >> our exposure in china is fairly limited. our business had been growing quite robustly up until last year when things slowed down for everyone. we taka very long-term view in china. it will be an important market for lily come a great source of talent for lily in the future. we have manufacturing in china. there will be ups and downs. right now, things have slowed. our commitment and the focus we
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are taking has not changed. that was the ceo and chairman of eli lilly. a look at the markets overall. the dow off by 82 points. i want to point out one stock that is solidly in the green today. chipotle. you do not hear that name associated often with a rally. they expect the company to see a full sales recovery. those shares popping as much since july. onll ahead, larry summers the markets and monetary policy. we will be right back. ♪
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alix: from bloomberg world headquarters in new york, welcome back to "bloomberg markets." i'm alix steel. let's start with the bloomberg
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first word new headlines. mark: they have him and they are not taking any chances this time around. mexican officials are moving joachim el chapo guzman from cell to cell now that he is back in the maximum-security prison from which he escaped in july. the prison has 24 hour video surveillance of the drug kingpin , which covers every inch of his , the cell which he escaped in july had a blind spot near the shower. the cafe in paris is reopening its doors today for the first time since the terror attacks two months ago. bouquets of fresh flowers and photos of those killed inside still adorn the cafe's front door. two other cafes attack that they have already reopened. 130 people died in november's attacks. general.s. attorney eric holder is throwing his support to hillary clinton. rival for the democratic nomination, vermont senator bernie sanders, have been collecting endorsements all
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week. this as the race between the two titans. holder is set to campaign for mrs. clinton and upcoming swing to south carolina. donald trump is the new favorite to win the republican president shall nominate according to internet adding exchange that fair, which puts the odds of a trump victory at 15-8. previous favorite is marco rubio at 11-5 with ted cruz at third. iowa caucus-goers cast the first votes of the 2016 election in less than three weeks. for the first time in more than two decades, los angeles will have a team in the national football league. nfl owners have let the st. louis rams return to l.a. in three years. the team will move into a new stadium costing almost $2 billion. it is possible there will be a second team there. the nfl gave the san diego chargers one year to either work out a stadium deal or moved to los angeles. if the chargers do not move there, the oakland raiders might.
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dayal news 24 hours a powered by our 2400 journalists in more than 150 news euros around the world. i'm mark compton. back over to you. ofx: russia gets about half its budget from oil and gas revenues. the nation agreed on a budget based on oil coming in at $50 a barrel. that price is around $30. the country needs to cut spending by 10%. ryan chilcote had an exclusive conversation with the russian finance minister about this plan. you have said that if the government does not cut the budget by 10%, russians can expect a crisis like the one the country had in 1998. explain that to me. >> if the state finances are not adjusted to the new conditions we find ourselves in, we can expect big deficits, big inflation overhead, and the devaluation of currency, as well as 1998 and 1999.
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if we do not take the right decisions of our financial needs based on our financial capacity . in 1998, the budget parameters were cut by 10% relative to gdp and a spike in inflation. that occurred because of real budget shrink. it happened all on its own. all out of control due to the deflation and spending. we should not make the same mistakes, but we must thoughtfully cut and revise the budget to meet the new conditions. ryan: there aren't awful lots of parts of the budget that cannot be cut from the military to the social sphere. when it makes sense to change the rules and cut in those areas as well? for now, we have decided not to cut defense spending. we will see how the situation develops.
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in 2016, we have to adjust the budget a little, but we have something gone that. what is going to happen in 2017 and 2018 is that we have enough reserves and resources for the year. this year, we need to make decisions that will allow us to public -- balance the public finance in 2019 and beyond. alix: i want to bring in ryan chilcote now who joins us now from moscow. did you get the impression that cutting spending by 10% is going to be enough? ryan: no and he was very clear about that. he indicated that cutting the budget by 10%, going to about a third of the job. to get through 2016 and make the budget work, they're going to also have to do some privatization. one of the things they want to do is sell a 20% stake in russia's largest oil company. they will taken half a trillion rubles that way. that is not something that everybody in the country is up for because at $30 a barrel, the share price is pretty low.
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there are a lot of people who think that is not very realistic, particularly giving the plans of saudi arabia listing parts of their code. and they will have to use their reserves. he indicates018 as there, the reserves will pretty much have run out. they will perhaps have to get a ,it more painful and their cuts bit more bigger and deeper with their cuts and go to parts of the budget that are protected now -- things like salaries, , if they wantare to balance the budget in the future of the oil price stays where it is now. alix: some rhetoric out of opec like from saudi arabia is that they will cut a few cuts. they will not cut without cutting members production. did you get at any sense at any oil price the russians will pull back here? ryan: i've not gotten that
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sense. the russians frequently point out that with temperatures as cold as they get in the winter here that that's not really possible. if they were to cut, they would effectively be abandoning production at that well. you cannot just turn off that cap and turn it back on like that here in russia. this is the really important thing. the russians think that saudi allowing production to rise is actually a form of economic warfare against russia. ,hey think that saudi arabia and i assure you they really do believe this, once to take the russian economy out and take rush out. they do not believe that saudi arabia is being genuine or opec is being genuine when they suggest that if oil major producers cut that they will too. flood thes want to market with oil because they want to punish the russians. they want to punish the russian economy. they think they are in cahoots with the united states and they want to punish not just the shale producers as we are
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accustomed to thinking but russia as well. alix: great insight. a very cold bloombergs ryan chilcote in front of the kremlin in moscow. elsewhere, how are global worries impacting the u.s. economy? harvard university president larry summers says the world needs to prepare for the worst. he stopped by early this morning. david westin asked him what worries in the most right now. larry: policymakers make a mistake when they ignore markets. they are often driven by cytology -- psychology and technicals. they make mistakes. importanthave a very canary in a colal mine aspect of because they aggregate views and the frontal purpose is to judge the future. whereas economic statistics look to the past. in forming a balanced view, you
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have to give weight to what is happening in markets. if you look at the long-standing judgment in markets, if you look at index bond markets almost , inflation is not going to get up to that 2% level over the next decade, let alone the next several years. you look at the low real interest rates that markets are predicting. then you look at the signs of apprehension that are surely coming out of global commodity markets, that are coming out of the stock market, that are particularly manifest in markets in china. you have to regard the situation as one where risks are substantially tilted to the downside. i think that is the perspective that policymakers around the have, especially in light of the reality that there is less ammunition stored up now then there is at most
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moments because interest rates have already been brought so low and central bank balance sheets have already been substantially expanded. so i think it is a moment for apprehension and for planning with respect to problems that could very well come. said: in your writing, you regulators should hope for the best but plan for the worst. he also talked a lot about secular stagnation. unpack what you just said. what are the specific things that you're looking at in markets of any sort? second the fx markets for commodities. what are the specific things making the most worried right now? isry: my general concern that we have got a chronic ,xcess of saving overinvestment that that is depressing real interest rates and leading to deflationary pressures, that
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that is leading everyplace to want to have a trade surplus and a capital outflow, and that the one thing that cannot happen is that every place in the world gets to run a trade surplus and gets to have a more competitive currency. but in particular, the world economy is riding very, very heavily on the united states and that the united states is, in a sense, the importer of last resort. our economy is not without its own fragility. there are many people who believe that fourth-quarter growth will fall below 1%. i've been encouraged, and i think it is the brightest spot there is in the u.s. economy, by the u.s. employment picture, which was again very robust last month. but even that robustness was not enough to produce meaningful wage increases.
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and so, i think that the right ,osture is being ready aggressively, to respond with fiscal policy if things slow down in a meaningful way. respectg prevented with to a slowdown as the dominant policy priority rather than being preemptive with respect to an overheating that given the global context seems to me to be very, very far away. alix: that was former treasury secretary larry summers. coming up in the next 20 minutes, apple stock may be down 5% so far this year, but sales in china may be the company's saving grace. and what a track record. western asset management company bond fund outperformed 98% of its peers could we are going to hear from their portfolio manager on his winning strategy.
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mckee spokeichael with robert kaplan and has first national interview since joining the role. his production for the health of the economy in 2016. ♪
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bloomberg.e watching i am alix steel and this is your global business report. here's what we are watching. general electric cutting thousands of jobs in europe. where exactly the company is cutting down. the state of falling oil prices and opec may be changing of its playbook and what does the nigerian oil minister have to say about its next meeting . sales of iphone on the rise in a crucial market. details of the head. -- ahead. we begin in switzerland as the
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nation's currency continues to strengthen. the ceo of ubs gets his outlook. >> we have been told about it for a long time and so that is how we built. at this stage, we do not expect more rates as the parity of the lisfranc stays around 108 and 110. it is probably around the right level at this time. we are not planning for or forecasting negative rates. alix: general electric plans to cut 6500 jobs in europe and among 800 of them will be in france and the energy unit that she bought. ge is sticking to its plan to create net 1000 jobs in france. opec's output is topping 32 million barrels a month, even as low oil prices are hovering at oiluros low speed nigeria's minister says the next opec meeting could be as soon as march given price pressures. >> between the time we have the last meeting, prices have
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tumbled from around five dollars so we have seen the depression of oil prices and that's a significant move. that has been a massive, massive drop. the whole idea that conversation will be to see if it is time to do something differently. alix: anheuser-busch begins what may turn out to be the biggest global bond sale ever. the beer maker is selling debts to prepare for its takeover of sab miller. the portion of the deal may be about $25 billion, according to a person familiar with the matter. it appears there was a search of iphone sales in china and the fourth quarter. according to the chinese government, shipments of phones that do not use the android operating system rose by 33% in china. the vast majority of those would be iphones. in the third quarter, apple doubled its revenue from china. this has been your global
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business report. for more business stories, visit bloomberg.com. we want to get over tab guilty little live from the nasdaq, which he looking at mastec could -- nasdaq. abigail: it has been another volatile day. the index is down partly because of amazon. this tech name is down and the story here is pretty interesting. your tok is down 10% date on a lack of any real news. it seems to simplify a trend that we are seeing this year with investors selling some of last year's top performers. at this time, amazon is hugging support of the 100 day moving average. it will be interesting to see if that continues to hold i. also weighing on the average's biotech. biotech scripts down 10% and express scripts is plunging after its largest client, anthem
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health insurance, threatened to leave unless it brings $300 billion of cost savings on drugs. worry about the potential for 14% lost revenue. alix: thank you so much, abigail, joining us from an up,c the nasdaq could coming though volatility has many questioning the path. we will talk with one bond manager with the look ahead. ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. a cloudy day in san francisco today. the recent volatility in financial markets has many investors, especially in the bond world, doubting the fed's rate path. traders are now pricing in a 41% chance of a rate hike for the march meeting come at down from 51% at the end of leicester ear.d -- last you
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mark helped oversee a successful bond fund and he joins us now from pasadena , california. thanks so much for joining us. our last statistic is that you have outperformed 98% of your peers last year. out of your biggest consensus call that you have for 2016? ethics areafternoon having me on. we are quite pleased that western assets that we're been nominated for the second year in the road to the morningstar award. having won it last year, that consistency has paid off for investors. your question, giving the volatility and manic-depressive behavior of investors, unlike the last couple of years where our macro esrategies and our headdg have paid off on behalf of investors, we do think that 2016
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given as difficult as it is right now the for the first 10 days of the year is that spread sectors be the beneficiaries of the market movements and the fundamentals that we think will be a bit better as we go through 2016. unlike the last couple of years where our hedges and our macro strategies worked and helped hold up performance, we do think that some of the very attractive spread sectors that exist today to help performance in 2016. alix: it sounds a lot like my equity guys. where are the spread sector values? mark: very much similar. i would agree with you. the only difference that we would have, and this is not going to surprise you coming from a bond shop, we are exclusively bonds. we see extraordinary value in many of the sectors with some nervousness for sure about the macro view in the economy and what is happening around the globe. in order, i would say that certain parts of the high-yield arket we are seeing
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yields today that reflect far too much pessimism in terms of the implied default. certainly energy but many other sectors as well. secondly, i would include the structured market both in the united states and globally. for example, mortgages and commercial mortgages. inrd and quite selectively the emerging markets. fourth in the investment-grade corporate markets. high are bonds so these yields are very competitive with the equity market today. alix: yes, definitely, in terms of volatility as well. where in the high-yield sector would you be picking through and what kind of returns with you expect? everyone i talked to from high yields say it will either declined 10% or rally 10%. mark: that's a great question. as you know, the high-yield market is quite bifurcated in terms of high-yielding securities, many of which are energy and commodity related, and others that are closer to the average and some below that
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depending upon the quality. is answer to your question it depends. it is not so much for us in 2016 a specific sector is underweight or overweight, but a bond by bond analysis are global analysts to actually choose the securities. the average of the indexes are practically 9%. that would be a very good year indeed. it seems like a long way from here to there, but we do think that investors are being paid in many sectors of the high-yield and other parts of the market. alix: something that you have not mentioned, but i looked through allocation is that within your corporate want sphere, which represents about 33% of your portfolio, financial bond make up 18%. the benchmark allocation is around 8%. what do you see that makes you so much more overweight? mark: are investment-grade professionals, analysts, sector heads and traders have done wonderful jobs when it comes to
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the overweight that we have had in finance. to bring you up-to-date on that, we have had a slight shift in our thinking there and that they have been such good performers . when you look at the agitation of returns across the bond fund chosen for the award last year, finance was a positive influence. they have improved substantially from the crisis that we saw 7-8 years ago. those yield spreads over treasuries have come below other investment-grade corporate securities and we have ever so slowly been shifting out of those with the help of our investment grade group. alix: i should also point out that treasuries makeup -- government bonds make up about 31% of your portfolio as well. one of the questions percolating in the market is what happens to the yield curve? do we flat or stephen and what does the fed actually want and what you think? mark: many investors and consultants ask us why do you own summary u.s. treasury securities and why has your
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duration been long? raisingre positive in rates, the answer to that is that one of the things that we n are thete o diversification within portfolios as well. those treasuries act as a diversified when the risk is off. you'll want something that will help offset those widening spreads. on the fed specifically, there's a whole host of gases out there. officials --ed alix: unfortunately we have to leave it there. there are a lot of forecasts out there with what happens to the yield curve and what the fed wants. we will be right back. ♪
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alix: it is 1:00 p.m. in new york, 6:00 p.m. in london, and 2:00 a.m. in hong kong. welcome to "bloomberg markets." ♪
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alix: from bloomberg world headquarters, good afternoon. i'm alix steel. here's what we watching at this hour. >> i think the u.s. and the world is going to have to get used to lower rates of chinese growth. i think the world is adjusting to that. alix: exclusive interview with a new dallas fed president robert kaplan who is paying attention to the markets tough start, but hee not to overreacted says there are other things to worry about. bloomberg asset management set down with the exclusive sitdown. why he is putting his money into brazil. my interview with harold hamp. despite the stunning drop in oil prices, he remains bullish on u.s. shale. he will give us his outlook on the u.s. industry. to head over to the
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bloomberg market desk where julie hyman has a look at the latest as we deteriorate here. the s&p sliding down to lows of the session. julie: all three major averages experiencing weakness today and it has gotten worse since the day has gone on. the nasdaq has been the biggest loser throughout the day. though there is this uncertain sentiment and this risk off sentiment that we see play out across the market. within technology, there's a lot of salon today. netflixnd amazon down today. netflix with a particular sharp downturn. google or alphabet is down by 1.2% as well. also in the nasdaq, there is express scripts seeing a sharp decline. anthem, the health insurer that is express scripts's biggest to do its forened a competitor unless express scripts can deliver $3 billion or more in savings a year in drug costs. they are sort of going acting
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fourth at this point. biotech shares continue to sell off as well. this is been the theme this year. you see the nasdaq biotech index down and some of the individual movers within it. , if youaq biotech index look at it for the year, is already down 15%. twice the decline that we are seeing is the nasdaq composite itself. a huge rallyas last year. nonetheless, i wonder what gold treasuries are doing. i'm assuming they are safely a playwright. julie: you are assuming correctly. yields on the 10-year note have gone down to 2.09% as we see some buying of treasuries. not as dramatic of the move as we saw yesterday. gold prices indeed are also catching a bit today. .ot a huge one something else one of my produces point out to me is that divergence in utilities and transports. we have seen utilities gain less than 1% here.
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the green line is the philadelphia utility index, not awesome, but not as bad as anything else. here are the transports. the transports have already been underperforming and do tend to be a proxy for sentiment about economic performance. you see that sentiment is not good. alix: thank you so much, julie hyman. what's check in on the bloomberg first-order news this afternoon. mark crumpton has more from our news desk. mark: the house of representatives has approved republican backed legislation giving congress greater oversight over that landmark iran nuclear deal. 191-106 and occurred less than 24 hours after tehran day taint -- detained and released 10 navy sailors. the white house says president obama will veto the measure if it reaches his desk. meanwhile, secretary of state tohn kerry says the agreemen could be delayed in 10 days.
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a school group that was killed in the al has left three injured. due outned in the region could there was an avalanche warning an avalanche warning in the area before the snow slide. police say a search and rescue squad is on the scene searching with dogs and a helicopter. last month'sin mass shooting in san bernardino, california has filed for claims with the county. according to the report in "the san bernardino sun loo," she is seeking damages of 58 million dollars to her husband was one of the people killed in the and when regional center at tech. it is too close to call in the republican presence of race in iowa. three days before the caucus, ted cruz leads donald trump 25% to 22% according to the latest poll. senator cruz's leaders within
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margin of error. eric holder is throwing his support to hillary clinton. mrs. clinton and her rival for the democratic nomination, bernie sanders, have been collecting endorsements all week. this is as the race between the two titans. help with the swing and south caroline appeared global a. global news from 2400 journalists and are more than 150 bureaus around the world. alix: the federal reserve has put everyone on notice that it will raise interest rates this time this year. robert kaplan says it is not a sure thing. he sat down with michael mckee for an exclusive interview today. kaplan says it is hard to ignore the turbulent start to financial markets in 2016, but it was important to not overreact to the sharp downturn and i does not reflect the u.s. economy. markets are going to go
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up and down. this has been a very tough start to the year. it says a lot though about the turmoil in the markets and china, which were reflective of their underlying issues. it also says a lot about our companies in the united states. 20%exports may be less than and manufacturing is less than 20% of the u.s. economy, it is a much higher percentage of the profitability of the s&p 500. when you see weakness, it affects our companies and profitability. it affects the market to a greater degree than it might affect the underlying economy. maker, youry policy have got to watch these market moves. you've got to realize that they may or may not reflect what is going on in the underlying economy in the united states or better yet, they can go down for two weeks and they can rebound as they did in august and
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september. the underlying fundamentals are still strong. you have got to watch it and understand but not overreact. it takes time to figure out what the market may be saying to us. friday, the government reported almost 300,000 jobs were created in december. monday, the markets tank. as it were you when investors do not react positively to good news? robert: no, investors in the market are reacting to corporate profits and expectation of corporate profits. i very mindful of that fact. corporate profits in 2015 were down in the s&p. there's not been a lot said about that, but they actually declined. in the first couple of weeks of the year and that the end of last year, some of the estimates for comfort profits for 2016 have been revised somewhat down. again, it is much or more reflective of prospects around the world as it is about the health of the u.s. economy, so
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i'm not surprised the markets are going to pay attention to other things. i think the job numbers helped. it helped bolster confidence in the u.s. economy. we will have to see over a period of time. the markets may not we are to information in a day or a week, theyver a period of time, will lay the information and you will see a strong u.s. economy an reflective. michael: what are the prospects of the rest of the world differently china on the u.s. economy? robert: the forecast for growth outside the united states, i would call sluggish. they are going to improve a little bit and 2016, but it's very uneven. so for example, any country like venezuela, brazil, russia, that are exposed to commodities are actually in recession. that is probably going to continue in 2016. india is a bright spot. china, on the other hand, is
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dealing with another of issues that are not cyclical. they will take years to deal with -- overcapacity in their industries, overleveraged, aging population, and this transition they are trying to make from an export driven economy to a service sector economy. that will take many years. i think the u.s. and the world is going to have to get used to lower rates of chinese growth. i think the world is adjusting to that as amplifications for commodity prices. there are definitely implications for u.s. domiciled companies who are tried to do business around the world. i think the world and companies in the markets are trying to digest all that. was veryrobert kaplan well known at goldman sachs and a harvard, but as a policy maker, people do not know where you are necessarily coming from. would you characterize yourself as a hawk or eigha a dove? robert: i probably consider
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myself as a business person as a centrist. what do i mean by centrist? tomeans that i'm quite open looking at new information and changing my mind. i do not rate unemployment versus inflation. i rate out the risks of those in the importance of those about equally. i do not come in with a preconceived point of view as a hawk or a dove. i'm a person more focused on diagnosis, what to do, and how to do it. probably at this point, i would, self a centrist. i think you will see me at times advocate positions that sound a little hawkish and you may see me at times given the facts and a littlenalysis is dovish. i will probably seen as a centrist. alix: that was robert kaplan speaking with michael mckee. coming up in the next 20 minutes, brazil's economy may be heading for a recession. brookfield ceo bruce blatt is
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diving in headfirst. why he is betting billions on the south american economy. oils big morning. the rally putters out and now oil is flat. harold hamp says do not give up on show. the federal reserve released its base book in an hour. the reports give a much-needed lift to the markets? -- will reports give a much-needed lift the markets? ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. brookfield asset management world's second-largest
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alternative asset manager only behind blackstone group the toronto-based company focuses on real estate, renewable energy, and infrastructure. erik schatzker sat down with bruce platfor for an exclusive ember interview. he explains why he is putting big money into brazil. bit of a mess right now, but this country is going to come around. we have had a history of being there for a long time. we have continued to put money into the country over the last while and we will continue to do that. we are finding are two entities which either -- opportunities which either you never would ore had access to before eying a fraction of her placement costs. the one thing that we've found in the real asset business, whether you're buying pop lanes -- pipelines a real estate, is that if you can buy discounts to replacement cost, you have a huge margin of safety when you are buying. we are buying with a large
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margin of safety when we are buying in brazil today and we think we will come out five years from now with a great opportunity to . i wouldn't suggest if you only have a one-year horizon to go to brazil and it's not for the faint of heart. we have been there a long time and it's tough doing business, tougher than most places. we have 5000 or 7000 people in the country. that gives us an enormous advantage with our operating people to deploy capital and make sure that we can work out the assets if we have issues. erik: how much more capital do you see yourself applying ther e? bruce: we have to be prudent with our balance sheet money and our client money. we will never bet the farm on anything. we are very diversified for a specific reason that you could be wrong. you have to keep investing to get out the other side. or 15% of a fund and to brazil -- and to brazil and that's a significant amount of money.
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erik: what are we talking about? bruce: many more billions. alix: that was bruce flatt speaking to erik schatzker. let's head over to the market desk where julie hyman has a look at the company movers today. julie: chipotle is one of those we are watching. it has been down 3% since various food safety scandals have rocked the company. it is up 6% today and it's presenting at the icr conference in orlando, florida. according to analysts who attended, it has been trying to reassure investors, expressing confidence in its business, and that this will be a short-lived problem. it reiterates that it plans to terms oflan and opening as many restaurants as anticipated in the coming year. we are also watching shares of williams companies and energy transfer partners. is selling itself to energy transfer, but the stocks have been declining.
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williams is down for six straight days. energy transfer is down for seven straight days. a $38 billion deal, but they're having credit downgrades for the company. of course, energy prices have continued more or less to slide. now investors are asking a lot of questions about how this deal is going to go ahead. finally, we are watching a number of different companies within the auto sector. one of them is an auto parts maker. it looks like it is leaving room to miss analysts estimates in terms of cell growth -- sales growth. ford came out with its earnings after the close yesterday -- i should say earnings outlook. they are paying a special dividend. initially, the stock got a little pump but then fell. the profit outlook coming up short of what analysts had been anticipated. general motors also provided an outlook that is read more
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positively. it is also returning cash to shareholders in the form of an increased stock buyback. two big automakers going in opposite directions and borg warner is another notable move as well. alix: stocks continue to deteriorate. oil is relatively flat. he mentioned earlier that we are not seeing a bid in treasuries or gold. where is the money going? julie: that's a good question. cash? i don't know. energy stocks continue to decline. alix: very fascinating. thank you so much, julie hyman . according to two former wall street is, investors should not base their decisions solely on financial analysis. we will hear about the company next. ♪
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alix: welcome back to "bloomberg markets." time-out steele could looking beyond simple financials -- that is the goal of new york company
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think gnome, which analyzes data from public sources to investors. leicester,nning of analysts recognize booming numbers in the adoption of wayfarers mobile app and the stock is up. cory johnson and carol massar have more on these types alternative analysis. carol: we want to welcome everyone from bloomberg tv. cory johnson along with carol massar here. we want to talk about this next company because they are all about analyzing the turn of data. let's bring in justin and he joins us and our bloomberg studio in new york. justin, great to have you here with corey and myself. tell us exactly what you're doing. justin: investors are analyzing companies and looking at stocks versus. 10 case.ing data from now the most innovative investors are going on the --ernet and an advising
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analyzing the wealth of data left behind by companies. carol: like their websites and social media. justin: exactly. it comes from all the apis on the web. carol: what are apis? justin: they are basically code word data can be transferred from one application to the other. many of the up-and-coming tech companies are really going towards this movement of basically having all the data become exposed through apis. cory: when i was a portfolio manager, i would often look for things on the internet that would be specifically about product or about secret lives of company executives. specifically, what kind of data? you're not talking about general trends in the marketplace or a sentiment. you're really talking about specific pieces of actual information, the clues of which are left somewhere in the inter-webs. justin: some examples of
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alternative data is tracking things like product pricing. we track many retailers. we are analyzing their products that are going on sale. which companies are making these products? investors want to know that. another example is tracking restaurant locations and weather patterns and how that is affecting the same-store sales. indexed all this alternative data on one platform that investors can call the company they care about and use it just to generate on their sites. carol: these are great examples. you look at cabelas. talk about this when they were rumored to be an acquisition target. justin: cabela's was rumored to be an acquisition target of asked pro shop, which had a hedge fund client that analyze their score locations and decided there was too much overlap between the two companies and they were able to looking at the
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stickers on the map. that is one example of how our clients use our data. cory: there's also sort of the customer partnerships or the products sort of changes that happen where we are ou able to see if the company gets a contract or something. we can see the details of the contract to see what the contract really is as opposed to the way that the company might optimistically described it. justin: we track government contracts in real-time. the government actually discloses every contracts to resellers. you check a defense company, they will tell you whether they want a contractor not, how big the contract was, who else was involved, etc. carol: how much demand is there for your service? we spent time looking at the obvious analytics and this is kind of taking investment advisors into a whole different area. you got started this company went? hen? justin: we started this company
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a year and a half ago. we work with hundreds of hedge funds, banks, and we have been seeing interest from corporations themselves. a company like cabela's wants to see where they can open new stores where they want to track how their competitors are pricing different products. we are seeing different great demand from our target user base for this type of data. cory: what do guys charge for this kind of thing? justin: we have a monthly substitution model. it depends on the fund and the needs. some funds, we roll it out toward an institutional tactic. it really depends. cory: i also wonder in terms of targeting -- this is a great conundrum, right. the most asymmetrical data is in the smallest company's. all the funds want to trade the big stocks. the best data that is unknown is in the smaller stocks. how do you take the copies that are going to go do the work? do is itart of what we
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is really scalable. if we gate data for a big company, we take the technology entrance retraced mockup me. that is part of the reason how we have been able to index data for thousands of companies in a very short amount of time. carol: you're expecting around 2016 for having data for every public coming. justin, got to run. he is a cofounder of thinknum joining us. alix: thank you cory johnson and carol massar a bloomberg radio. the calls for $20 oil is getting louder. is it panic for fundamentals that is driving the pylon? ile-on? ♪
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from bloomberg world headquarters in new york, welcome back to "bloomberg markets."
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i'm alix steel. let's start with the first word news this afternoon. mark crumpton has more. mark: 10 u.s. sailors detained in iran are now in qatar. the nine men and one woman will be deeply unable officials and get medical checkups but there is no sign that they were armed. us thatndications tell our sailors were well taken care of, provided with blankets and food and assisted with their return to the fleet earlier today. i think we can all imagine how a similar situation might have played out three or four years ago. iranian authorities released the sailors after determining they entered iranian territorial waters by mistake. a turface official says one person is under arrest in connection with the houston bowl. the interior minister held a conference today with his german counterpart.
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most of the people killed in the suicide bombing were german nationals. in antack happened historic part of istanbul popular with tourists. the bomber was a 28-year-old syrian with links to islamic state. killedt for workers were in an explosion at a factory on the outskirts of shanghai. so far, there is no word on what caused the blast. a day after president obama's final state of the union address , his staff is talking transition. the white house chief of staff says planning for the next administration will ramp up in early spring. mcdonough says he has been discussed the issue with the president. news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. alix: oil has seen many price crashes over the years and $30 oil is nothing new. what is new in this price slide is the emergence of shale.
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u.s. production has remained resilient, surprising everyone, and creating a hurdle or saudi arabia. earlier today, i join the bloomberg team to speak with harold hamm, chairman and ceo of continental resources, one of the earliest and biggest producers. aasked him if the u.s. had chance to become the next saudi arabia and keep costs low. a this last year has been good example. all the companies become much in drillingnt and and production operations across the board. if we are on a level playing field, and that is what this did -- it put us on a level playing field. we are not captive to just the u.s. refiners. we can sell our products anywhere in the world. we are getting the same price that the saudi's were. last year was not the same. we were suffering from a 25%
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reduction in the u.s. a level are on playing field. free market trading flipped the two prices once we went exports. it will be a new day, we will be a market of choice in the future. have aahead of us, we wonderful resource to invest in over the next 20 years. >> which is one of the reasons that crude will bounce back because as soon as it gets back to 50 or 60, it all comes back again. you do not put much weight on 2020.rrent curve, but wrong and what we are seeing now, i mentioned earlier, this is the last hand that the saudi's can play. from this point, that is over.
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everyone thought that they had a lot of excess capacity. they played that hand. they used to that. -- they used that. it will take a while to get back of the running. 75%do not shut down drilling in populations, everything in the industry -- you lose a lot of people out of it. that is the important part of it. you lose a lot of the qualified and trained people. it takes a good while to get back up and running. it will come back on gradually. stephanie: the energy sector killed a high-yield market last year. what will we see in terms of forced m&a or bankruptcies this year, given where prices are? >> i think you will see some .&a, you have seen some forced there has been a lot of
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resilience in our industry that has been displaced by oil companies. we have not seen a lot of forced m&a's like you did in the past. stephanie: if we get to $20 oil, some of the smaller producers out there are faced with tons of debt and they have no choice. >> they do have some long-term choices out there. very few of them have so much debt that they will have to go under with $20 prices. the lower end goes, the shorter time it will be there, that is how the market works. stephanie: so you don't think we will see bankruptcies this year? >> i don't think you will see bankruptcies over the top. we have not. a lot more resiliency in the industry than everybody imagines. alix: that was continental resources harold hamm from earlier today.
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staying on oil, crude prices at or near $30 a barrel, the profitability of u.s. will could be in trouble. harold hamm was a bit more constructive. what does andrew cosgrove, who covers drilling and oil fields, think? he is with us in new jersey. how much, and these production levels, are underwater? >> it is hard to quantify, but if you think about lifting cost across the u.s. enp sector, they read between the midteens to the mid to high 20's. on a full cycle basis, some people like to point to that if you are bullish. if you look at any emp presentation right now, those prices are nonexistent on any of those charts. not: what also is
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nonexistent is stripper wells. of oilg a small amount but significant to the overall production profile in the u.s. if you look at how much is uneconomic at these prices, $20, day, nowand barrels a 200-6000 barrels a day of oil underwater. >> that analysis assumes a gas price of natural gas of $2.50. take up another 5000 barrels a day every 25% move in the gas price. per daya 50,000 barrel decline in every five dollar move in the group price. stripper wells produced 10% of u.s. production but they make up about 80% of the wells currently online in the u.s. right now, even though some of the people that own these stripper wells are operating on a cash operating loss basis, what they are trying to do is game the system by holding those mineral leases which are also incentivizing them to keep producing those wells that
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produce less than 15 barrels per day at a loss. so there is a little bit of gaming going on. alix: that is the staggering thing that is happening. economic, bute on that does not mean that they shut down. this is the essence of why production has remained resilient. >> correct. say that all stripper wells are uneconomic, but there are many that are out there. in addition, if you look at the u.s. enp space, some companies are operating profitably because they had some hedges on, some are more exposed. efficiency gains through wells getting bigger, so instead of having 300,000 barrels come out of your overall for the first two months, you have 700,000. there are a lot of moving parts. the market and people looking for production rollover in 2015, we did not get it.
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the efficiency gains were so drastic. now that we get into 2016, they probably taper off, but it may not be until 2017 that the buck really stops, and it crude prices stay below 40, then there is a rude awakening that will be coming for u.s. production. we will have to wait until then for things to clear out. is,: my other question here if a company decided to shut down one of these stripper wells or the others that are uneconomic over the longer term, how quickly can they come back online? >> the stripper wells, 64% of the cost is just supervision and maintenance. the other parts of that are subsurface -- surface and subsurface. other part of the equation is getting the frack crews back to work, drilling crews back to work. right now on the fracking
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quitman side, it could take a while to rehire people. couldurton says they quickly hire people, but it could take a few weeks or months to gather everyone up, get them situated to where the activity is ramping up. the uncompleted well inventory may also not be available in 2017. time inventory that people had been anticipating to be there may not be there in the back cap of 2016 or early 2017. ofx: harold hamm says a lot those guys got construction jobs, so they are not available. thank you, andrew. oil prices under $30 a barrel yesterday, so how will live -- how low will they go? do the calls for $20 have any weight at all? and we get the page been booked
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-- fed beige book in about 20 minutes. and the st. louis rams are moving to the l.a. area. how this will unlock billions for the nfl. ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. it is time for the bloomberg business flash, a look at some of the biggest stories in the news right now. the federal government is planning to identify and track secret buyers of high-end property. the new york times says the catalyst is concern about illicit money flowing into luxury real estate. the u.s. will initially focus on two top destination for global wealth, manhattan and miami-dade county.
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general electric is moving its headquarters to boston. they had been in connecticut for more than 40 years and last year they threaten to leave the state after the legislature raised taxes on companies and wealthy individuals. the volkswagen ceo had a crucial meeting with u.s. regulators yesterday -- excuse me, today. yesterday, california regulators rejected in the proposed fix to the emissions scandal. the head ofmet with the epa for plans on overcoming the diesel emissions cheating scandal. around $30 ag barrel and calls are increasing for $20 oil. i wanted to take a look at the banks making these calls to see if any of their fundamental reasons are actually panning out , or if the selling is just panic. let's start with morgan stanley. this cannot a few days ago.
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their reason for $20 has to do with a stronger dollar. they see a 15% devaluation of the yuan. yuanthe last few days, the as stabilized. yes, it is weaker versus the dollar, but we had seen some stabilization here. america, back of in december, calling for a black swan event. saudi rial deep end from the dollar. you have oil prices sinking, the saudi's would see pressure on their fx reserves, and would be forced to depeg. this was the outlier of that for bank of america. what has happened? the peg is pretty much still in tact. goldman said in september the potential for u.s. oil to fall to 20 if production takes a
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lot longer, and the u.s. storage is filled to capacity. so where are we? let's take u.s. production. yes, it's falling a little bit, but we are still at record levels, and it's taking much longer to roll over. coming out and saying 2015 production in the u.s. was up. next year they see a decline of 900,000 barrels a day. let's check out storage. it is high, record levels, rose by 234,000 barrels last week, but there is more space. energy aspects seized 200 billion barrels of space here in the u.s., mostly on the gulf coast. made a big call in september, a 30% chance of oil falling to 20, but they made the call in february. they said prices will have to go to cash cost for producers to be scared enough to have to shut
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into production. this one may actually be the closest call right now. u.s. producers have done with cuts, drilling in the ranks, all of this fancy for work to keep pumping, and that has lower the cost to production curve. so $20 is no garage. here with analysis is dan murtaugh who follows the industry. he is with us in houston. when looking at all the different calls, which one to you has the most weight right now? >> i think you are right. citigroup and goldman have the fundamentals behind them. there is a massive glut of oil around the world. this week, the iea reported more than 2 billion barrels of oil and oil products in the u.s. alone. it is not going away anytime soon. these producers have found ways to lower their costs and still make money and stay alive.
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if it gets down to 20, i think it is the u.s. production that will drive it down. was talking to harold hamm about whether those reduction would be permanent for oil producers. he thinks they are going to save that money for many years. what do you think that means for companies than? thate big problem companies are having right now is access to capital. oil drilling is a very capital intensive upfront business, where you are spending a lot of money on the geology and drilling, and you are getting the money on the backend. so you need people to lend you money to keep going. the real struggle that companies are having right now, especially the smaller companies, is that people are not as willing to lend anymore. in front of the oil price will not help them any. alix: what does capitulation look like? when the calls came for $20 oil, i thought, is this capitulation? i would have said
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yes, but now i don't know. standard chartered put out a note yesterday saying that they could see crude going to $10. our old way of looking at the oil market is basically thrown out the window. who knows what will happen going forward. alix: that is a great point. how much do you feel in your research this move lower has been fundamental-based, and how much has been more market timing and dollar driven? >> it's a great question because the dollar has been increasing this whole time -- strengthening the whole time that oil supplies have been increasing. obviously, oil is traded around the world in dollars, so any currency that is not pegged to the dollar is unable to buy as much with the same amount when the dollar strengthens. but the fundamentals are in favor of the price going lower. oute is just a ton of oil
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there all over the world and easy to buy. up would you have to pony extra money when it is just sitting there filling up in storage tanks? alix: thank you. he is my go-to guy when i am wondering what the chart is for this. fed will release its beige book analysis in a few minutes. we will have the most important things you need to pay attention to. ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. over to the markets desk were julie hyman has the latest. upie: as long as i can get the various charts. let's take a look at what is happening on the major averages. we continue to see the deterioration that we have been talking about. the nasdaq now down 2%, the dow down 220 points as we see an acceleration of the declines going on. you can see what is working and
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what is not. consumer discretionary down the most in the s&p. health care industrials, financials. broad-based selloff, except the utilities, which we talked about. utilities have been performing a little bit better. there is also the idea that utilities have done better this year thus far. if you take a look, this is a great chart. this is essentially the s&p 500 utilities index divided by the s&p 500. when it goes up, it shows up performance of the utilities relative to the s&p. these red bars are recession. utilities pick up relative to the s&p 500. have seen thise happen significantly is when the u.s. is going into recession. in other words, people are feeling nervous enough right now that they are going defensive. the other way to look at this is
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to look at consumer staples. a similar move in the uptick going into recession and even coming out. into the recession here you can see the staples performing relative to the s&p 500. earlier we looked at utilities versus transportation stocks which showed that divergence. this is just another way of feelinghat people are very nervous right now about the global economy. alix: thank you, julie hyman. in 10 minutes, the fed will release the beige book analysis, a compilation of the economic conditions throughout the 12 federal districts. with me now is joe weisenthal. when is the number one thing you are looking for? joe: trying to see signs of inflation, the labor market. they go through each of the 12 fed districts and there is some anecdotal data. one thing we have seen in recent months is people talking about
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labor market tight thing, companies saying they have to pay higher wages to attract workers. it would be nice to see that trend continue and see some more solid evidence of it happening. the thing to bear in mind, this is very anecdotal data. alix: what about the dollar? it seems we can learn more about the impact of the dollar on stronger exports. joe: last month, they said broadway in new york, theater was hurting because foreign ticket buyers due to the dollar, not as many of them. thing to watch, what people are saying about the dollar, probably not good. alix: some of the rhetoric coming out of the jobs report is the divergence in gdp versus the labor market and why that gap has gotten so big. the question is how that ends up resolving itself. alix: hopefully we get some
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hints, but on that question, we will have to keep watching the data over the next months and see whether the general data turns up or the jobs data starts to fall over. alix: thank you so much, joe weisenthal. coming up, we will be speaking , the ceo of thrune education company udacity. much more after the break. ♪
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david: it is 2:00 in new york, 7:00 in london, and 3:00 in hong kong. welcome to "bloomberg markets."
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from bloomberg world headquarters in new york, good afternoon. u.s. stocks aren't extending their decline in trading. more on that after the beige book. brendan greeley is standing by in washington. brendan: the song remains the same, stuck with the same paradox. increased economic activity but little overall change in wages and price pressures. wage increases are flat to moderate, price increases, the districts reporting are minimal. we have some demand for labor, .ight demand for labor in new york, cleveland, atlanta, minnesota, but wage pressures -- here is a word to hang onto, some dude. that will not change anytime soon. -- some dude. -- subdued. one way to

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