tv Bloomberg Go Bloomberg January 14, 2016 7:00am-10:01am EST
plunge on a report they are being investigated for emissions testing. falling as we are moments away from the bank of england's first policy decision of 2016. ♪ stephanie: good morning, you are watching bloomberg . i am watching stefan -- i am stephanie ruhle. i am david weston. let's go right to london. we have the latest bank of england decision. >> they are keeping rates unchanged, no surprises. theng for a rate hike for
six consecutive month. he sees upside risk to domestic cost. the bank of england is focusing on domestic cost growth, not has beenh has been influenced by external factors such as the price of oil and the bank of england focus is on court inflation, on an annual basis, an increase of 1.2%. interesting that he continues to vote for a rate hike, some economists suggest it is because of events at the start of 2016, such as china, he might back off but he has not backed off. the bank of england has talked about market volatility, it's as market volatility has underlined the downside to global growth. it said the oil price drop mean the cpi pick up will be more gradual. the bank of england in its quarterly inflation report in november stipulated that the
consumer price innflation -- inflation would remain below 1% until the second half of next year. it noted the oil price drop and said inflation take up would be most gradual -- more gradual and it mentioned the pound, it says the continued deep out -- pound depreciation could lessen the price on the epi. the pound has been cited by the bank of england as being a dragging factor on inflation because the pound has weakened since december. that has taken away that downward pressure. no change in rates, mccafferty stays the only talk but good factors on the pound and the level of the oil price as well. >> the bank of england unchanged, most economists expected that to stay that way through the first quarter of 2016. a may 2010oming off low, 143.95.
decidedly -- the treasury market, 10 year, 2.05%, yields, a little bit lower. futures lower. if you look at the european session, this is where the real story is. european equities lower, much lower, down 110 points. the german equity benchmark so far this year down about 10 points. the s&p 500 at a september low and the dax in october low. if you dig into the stock 600 index, there is one story and that is the automakers, renault shares plunging as much as 20% after an apparent fraud probe into their emissions testing. talk us through the latest. >> waiting for a statement from the company, union officials say there have been raids on offices
where they do testing and where they have some of the software. the concerns is emissions regulations. it could have to do with a potential emissions or diesel scandal like we saw with volkswagen. we know very little at this point, all we know is that there is an ongoing probe by french authorities into all automakers on what emissions are. we know from nissan renault that they do not do any sort of devices, have not installed any software. the stock has reacted, down almost 20%. we are looking for more information at this point. >> the report is from the union. we have not heard from renault. that seems strange. hans: unions sometimes -- and they know quite a bit because they have quite a bit more independent authority than the company. it is not analogous saying
citing the united auto worker saying what is happening at ford. the question is, how many locations have been rated and why have these locations been rated -- raided. do withthey have to emissions standards and software and that is waiting is is is coming from but we have not heard from the french prosecutor or the french environmental and regulatory authority and/or the company itself. let's say the scandal has been going on about diesel for four months, there has been a lot of talk from analysts and independent best independent environment for groups that all auto companies are not entirely accurate on their statement emissions first what you actually get on the road. this could have something to do with that. we have seen a volatile moves with bmw in october about something that was reported that turned out not to be true. we need to have caution and there is still a lot we do not
know. >> just to update our viewers, a ise-jerk reaction in europe to sell auto stocks regardless of whether there is a story connected to them and the companies are starting to come out and give statements. who jokes said there have been s. rates -- raides matt, you see filtering through the whole sector in europe? matt: people in this country watching may not know a lot about renault, the second largest carmaker in europe. they are doing more than 100,000 units per month, big automakers. stocks that are completely at theted, if you look dax, three of the top five losers are automakers, daimler, bmw, volkswagen. what is also important is that
fiat chrysler, here in red, was the -- suspended in trading on and fallingmarket on a separate report by automotive news saying that to chicago area dealerships are suing the company, alleging fraud and that the company offered them money to falsify sales on the day before the month ended and canceled them on the day after. fiat chrysler has not commented because they say they have not seen the lawsuit. automotive news reports this and it adds to the tension, to the concerns around this industry. any bad news we get, you see dips, here as much as 10% at fiat chrysler and almost 20% year to date a are down. you can see the drop in renault shares, about 15%. big losers, the automotive industry. david: we do not really know the facts but at a time when the
auto industry we think is booming, sales are up, record sales in the united states and look at what is happening, investors are so skittish about the auto industry. >> in europe, volume has been good for a couple of years. this is something that looms large over the whole sector. after volkswagen, the question would be asked who is next and automakers in europe saying it would not be may. as for the market reaction, no confirmation, no news from renault themselves that you have to think of the environment we are in, european equities already down this morning, you see a headline like that, the union saying there was a raid, the nervousness and uncertainty that people already have in this market. david: china was way down and came back overnight, the u.s. was up when we left yesterday and came back down. every market seems to be over reacting to everything.
stephanie: there is no conviction in these markets. it is hard to find true bulls who want to be in the market and even bears, so many bears carried out over the last year and a half when central banks walked back in. if you have a slight with of negative news people are running for the door. the week in china when circuit breaker action had people racing, saying if everyone is going to sell i want to be sure i am the first one. unionis the renault waitinghe statement, for them to confirm, matt miller, we are waiting for a statement from renault. the union is giving the details. for a lot of people outside of europe they will find that quite strange. matt: here you have a more combative process between union and automakers although they tried to get along recently been
the most recent negotiations. in europe, unions are sitting on the board in numbers. in germany, for most of the automakers, union makeup about half of the board members, supervisory board members, so they not only have a lot of information but a lot at stake. it is interesting they would come out with this information. david: if you are the ceo of any auto copy, you would be asking your self if we had a problem. stephanie: you would not be using the word never, ever. next, jpmorgan saw a profit, up 10% in the latest quarter, we discussed the biggest bank in the u.s. next. ♪
your latest business flash, goldman sachs made -- goldman is contending with an industrywide slump in fixed income revenue. the bank will make a decision after evaluating client activity. salaries have been -- the paper is at rio tinto starts with the ceo. in an e-mail he said that they .ill limit travel expenditures and look at spending on contractors and consultants. he said he sees no sending -- ending to the commodities route which has eroded profit. shares of gopro are down as much as 27% in the premarket, the company released primary sales fellts -- reports which short of expectations and they're cutting seven percent of their workforce, there is concern among best in that it is a single process -- product customer -- company.
>> an update on the story regarding renault, they confirmed the raid. they are cooperating with the investigation. they are quite trading. -- cooperating. 18.57%, ak down by slight move lower after the confirmation from renault. the company confirming the rate and says they are cooperating with the investigation. news in the auto sector. david: we will continue to cover it. jpmorgan quarterly profits up as expenses fell, earnings and revenue above the expectations in the market. erik schatzker is here. this is a strong start for jpmorgan. you have gone beneath the surface. most importanthe
point, expense management, they reduced expenses, quarter over quarter by $400 million on an adjusted basis but good enough only way toat the increase profits on the bottom line in this industry is by managing expenses because there is virtually no revenue growth, revenue is almost flat. it was not the debacle some people expecting in fixed income, weakness in credit trading and emergency market and fixed income and commodities, where you would expect it but at the end of the day fixed income trading down modestly in a police trading flat. -- equities trading flat. some of the things that could undermine it jpmorgan did not result in disastrous results. stephanie: they have written off their energy and metals -- are in not saying they trouble but saying -- setting the stage for jpmorgan bracing
themselves for dark times. reasonably was a widespread expectation that the provision for credit losses in oil and gas would be higher than it was. the metals and mining should not surprise anybody because we know what has been going on for months. it is oil that has collapsed to less than $30 a barrel. there were some expecting a bigger number on a provision like that. stephanie: it could have been much worse, if you think about the businesses they used to be in, they could have been bleeding. revenuee were expecting to decline year after year, it was up 1%. they are finding growth in some areas. on the energy portfolio, 160 million on a provision, citigroup has said they may toerve 300 -- 300 million 400 million. energyize of their
portfolio, it is not a huge amount, especially with what we have seen in oil. it is important to look at loan loss reserves jpmorgan, anything above the redline is adding to loan loss reserves, below the red line, it is written using loan-loss reserves, this goes back to 2005. during the crisis, they were boosting them big-time but starting in the first quarter of 2010, they were producing loan loss reserves and had not added back. onlyam correct, this is loan reserves, this does not count -- erik: if you take the total amount of credit provisions and subtract from that the net charge-offs to find out whether they are actually increasing reserves or decreasing reserves. the reduction reserves at student income. -- adds to net income. that goes through the end of the
third quarter only. have aulation shows we built in reserves of about $187 the first times we have seen jpmorgan build reserves since the end of 2009 and it says something about the overall deterioration in credit quality, maybe not on the consumer side but we know what is going on with oil and gas. david: i want to go back to expense reduction, how much of that is legal, not having to spend as much on legal and how much is people and are we looking at layoffs? >> expenses were down in legal and compensation. analysts typically expects jpmorgan to spend about $2 billion a year in legal reserves. about $500 million a quarter, this quarter it was $417 million. a little lower than the average but not $1 billion or more we have seen in past quarters.
cut 1000 jobs between the third quarter and fourth quarter. stephanie: of all the endless that cover them, 75% have them as a buy and 25% as a whole, those cells. billion in quarterly profit puts them in the top five of all s&p 500 companies and their stock was up from 3.7% last year. they have room to go. erik: if you're betting on them you are betting on an investment in banking. the lending business to consumers and small businesses is going to improve. stephanie: doesn't -- investment baking can thrive in bear markets. erik: in some cases but if m&a and there are not a
lot of debt finance transactions, that is not good for jpmorgan which counts on a big balance sheet to generate earnings. stephanie: there is a deal in the market one of the most oversubscribed, we are not going to see deals across the board in every sector. >> erik schatzker you will be back. thank you for joining us. still to come, barclays chairman speaks to bloomberg about risks to london financial sector. a quick check on the markets. equity markets across europe down and down hard, the dax up 2.7%. europe aews in potential emissions fraud probe of renault. they are confirming a rate and say they are corporate with the investigation, the stock down 17%. ♪
an excessive interview with john mcfarland. we spoke about some of the challenges banks still face. francine lacqua said that with them. with him.n cityine: he says that the has a chance outside the eu but it is uncertainty he is worried about. markets worst nightmare, uncertainty. we do not know what david cameron is negotiating ahead of the referendum and do not have a date on when it takes place. aread that decision, if you a foreigner looking at the u.k., you say why would i invest in this country if i do not have -- no the country will stay in the you -- in the eu?
really do not know what impact that has on currencies. if you are the boe, you hold off because you do not want to send a political message. john: the question is -- will it be much better or worse? in our opinion, it will be significantly worse. ancine: he was saying the city of london and financial services and general, a big portion are outside london will be further -- far worse if they are not part of the european union. i tried to get him to say what percentage -- the chance of this country leaving but he would not say, he said it was difficult to tell but one of his worst nightmares. >> regardless of which way the u.k. boats it is the time of uncertainty that is crucial. when you look at the data, the bank of england this morning, the real loss of momentum for
the u.k. economy and plenty of challenges outside of u.k. economy, plenty of risk for the bank. rancine: john mcfarland wanted to talk about barclays a little bit but they aren't on a quiet time, we have an update with a possible new strategy i the ceo that will -- he was trying to talk about the main challenges to european banks as a whole. he told me he is concerned that a lot of the investment banks in europe were not european in the longer, deutsche bank as the biggest exception. gettingthis -- we are our lunch eaten by u.s. investment banks. i asked him about turmoil and he was worried about china. john: several years of emerging markets being the dominant group in the world as a whole. withf that is changed
china and the weakness in the emerging markets. we are dealing with a very different world. i might have argued some time ago if it maintained itself, london or singapore or hong kong and i am not so sure anymore. looking at alls the headwinds around the world and he says the threat of brexit is the last thing we need in this kind of environment. stephanie: thank you to francine the coiffed joining us from london. u.s. futures are falling with european equities down this morning. we have citigroup equity global strategist when we come back. ♪
terrorist attack in indonesia again at a starbucks. a suicide bomber blew himself up inside the copy shop and other attackers open higher. , five of thever attackers were dead. several others were wounded. it is called the worst attack in jakarta since 2009. the refugee crisis in europe. days, three 10 times as many refugees arrived in europe than in all of last january. the next month must be dedicated to regaining control of national borders according to one. hillary clinton and bernie sanders are a lot in a race in iowa. clintong to a poll, leads sanders 42 to 40. that is a significant drop from last month nine point lead and still within the margin of
error. the iowa caucuses are the first test for presidential candidates. the will be held february 1. powered 2400 journalists and 150 news bureaus around the world. david: we go to tom king joining us from london. exact inversion by moving van you want to talk about. remember wcvb channel five in boston. let's go to the wonderful essay on ge in leading the quiet suburbs. this may surprise people. massachusetts is now only the 11th highest state and local highest tax burden in the country. massachusetts's business tax climate is circulated is solidly in the middle of the road, 24th
in the u.s. i looked at this and all i could think of is the courage of the former mayor to make this happen for boston. none of this would have happened without political courage years ago. stephanie: one does it mean for the state of connecticut? what does it mean for the governor of connecticut? tom: i think it means for the governor of connecticut and the other 49 states the same thing. there has to be a holistic planned to do what is basic for business to create investment. that is what chuck o'neil did. that is what mayor menino did. the basic idea is boston did not to go to ge having to go to boston. andas a plan to create jobs hit the ball over the left-field wall, the green monster, last night. re is athe
competition between our states. that is the way the founding fathers set it up so they could compete with businesses. witwe used to think of connecticut as a little tax state and massachusetts as a high one, but now they have switched. tom: connecticut was exceptionally graceful in comments yesterday. this kind of thing is a real wake-up call for states about not becoming low tax for service but finding the upper middle zone versus being at the high end o. stephanie: when you are the mayor of the city, you have to scale your town. you have to make yourself business friendly because that will do the job. tom: it is different in boston. ago, it ago or 30 years was basically a parking lot with the gillette factory in the middle of it. that is not too much of an exaggeration. what boston did over 30 years to
get from a horrendous expressway to the big dig and the success of the rose kennedy plaza and onto what they did with the seaport area is just extraordinary. david: great to have you with us this morning. thank you for joining us. let's check the markets now. the s&p 500 pulling back to september lows. dow jones plunging more than 300 points. futures this morning a little lack. great to have you with us this morning. >> nice to be here. >> as you dissect the market moves in 2016, the take comfort in anything -- do you take comfort in anything? >> maybe i want to move to boston. the one thing that is interesting is credit conditions have been somewhat shaky since early november.
the survey from the reserve board show tightening conditions for commercial industrial business loans. that was the biggest shot across the bow. the instructional high-yield market seems to be much more resource oriented so energy mining bonds are the ones really getting hit and the rest of the market is ok on heidi build.ield the survey was worrisome. the good news on the other side is if you looked and saw it again, the data is showing small businesses not finding it hard to get credit. that is critical because when they start to have problems, about a year later if not longer, the economy runs into trouble. the comment about the economy seems to be ok. markets seems to be more disjointed. those comments are very fair. you almost get fdr-like.
there is nothing to fear but fear itself. is a secondary aspect. do corporate leaders see their stock prices being banged up and that they hunker down? the market is somewhat smarter than we are and we can debate that one. stephanie: is there an indication of a good thing? that gets us back to fundamentals. high-yield, and everybody went into the asset class before digging into the specific credits or sectors. it is a positive to do that. tobias: absolutely. sitting there and going to the details, a very different cash you are the depth bringing and that is 100% fair. it is the fear level that tells us something else will go wrong somewhere else. i find people who make those comments to be alarmists and
often deeply inaccurate. there are so many misperceptions in markets out there. i watched some of these very thinkoices with i seriously misleading consequences. >> what is really interesting about this is 12 months ago or 18 months ago, we had a series of federal reserve pres sidents come out and not give the market any comfort. several days since the s&p shop the market. it seems central banks have changed their attitude to market in offering the comfort. sayas: we can sit there and the central banks come in to provide liquidity when we are in a very crisis oriented environment. with the job growth and more importantly, i know there are people saying the 292,000 jobs we saw last month was more about
history, not the future. the business that hiring expectations is a incredibly consistent. it is a lead indicator for the and implement right by 12 months. what small businesses tell me they will hire an 80% to 85% come out of new hires, i'll pay a lot of attention to them don't pay a lot of attention to what they're telling me. it is not their jobs to control markets. that is more investors. investors have to have something beyond a one day or one week myopic look at the world. there is a lot of trading going on. not a lot of investing going on. it is frustrating. i get it. is the fundamental environment ok? it is ok. it is not super, but it is ok. as a result, the federal reserve
board to be looking unemployment rates and inflation and those can a phenomenon. there is a lot of data about whether they are right or wrong. i am really happy i don't have to make the decision. david: we had 70 on yesterday that gave us advice or at least a prediction. he had a cautionary tell about the fed. if theuld be surprised world economy can comfortably withstand hikes. i think basically markets agree with me, and that is why despite the statements being made, markets are not expecting four hikes. david: what is your reaction? tobias: he is right on the markets. if you look at the markets back they year treasury yields, up and that is
fine. i respect larry summers a great deal. he is the one that said last year the strength in dollar was the equivalent of fed hikes. the fed does not work in a vacuum and they will adjust if they have to accordingly. i do think what he said was inaccurate. we will see if the economy shows the strength. they clearly set they are data dependent. stephanie: they have always been data dependent. at, the data you look more confused and scared you will be. tobias: here is the fun discussion. everybody is excited about big data as a concept. there is a lot of information. what is salient? look at credit conditions, hiring intentions, capital spending intentions. those will be much more indicative of what is going on, not that we see oil prices drop
a dollar a day and everybody freaks out at that moment. stephanie: if the effect is to operate in a vacuum, what exactly is the role? ,hey said please pay attention we are stepping over here and many said that is not janet yellen's job. was specifically should be in her sideline? -- sight line? tobias: if the market is disruptive, it becomes a potentially economic consequence because businesses respond. they will look at what are people's reactions. there is concern about the fence moves.- fed's christine lagarde's commentary was about that, i would suspect. respects, a love these countries including the u.s. have to do something about structural reform. we can ask the central bank to do everything.
we need better labor markets that function without regulatory frameworks that did not allow them to function properly. i have been personally critical of the central banks being complicit in the government's irresponsible behavior. i am willing to see governments be forced to do the right thing as opposed to the convenient thing. stephanie: it is always great to have you here. tobias: thank you. stephanie: the chief equity strategist at citibank. i want to bring your attention to one individual stocks this morning. get your camera on. it ma is gopro. fasten your seatbelts. matt: gopro has been a fascinating company to follow. right now, it is down 24% because the company put out a pre-report on its revenue for its fourth quarter that was disappointing. revenue jumped in the fourth quarter last year. holiday sales were huge.
the hero three was a huge camera, with the company only put out a couple of cameras in the last 18 months and is trying to move to a content company rather than a hardware maker. stephanie: the whole point what it is not about to the cameras. they were going to be a content company. that was the big move, the big investment. matt: it was. these are sales going back to 2012. you can see last christmas, you gave me a gopro camera, but not this christmas. come in right around here and they want to see it come in right around here. there was a thought that there was maybe a takeover target. it came down a shocking amount, 76%. dan ives and while back said maybe apple can swoop in and by this company. on higher out a note yesterday and said they have not revenue content or new cameras.
all you have is basically the software. it is just not going to happen. stephanie: one of the highest-paid ceos out there, why? matt: because he is so cute maybe. stephanie: matt miller quoting george. so strange. iran sanctions lifting as soon as next week. for another bracing leg down? we have a lot more to come here on "go." ♪
company says third-quarter revenue was down 4%. they say asia is partly to blame. exports to hong kong fell 20% in november. the cable network al jazeera america is calling it quits. . will stop in april. the network was controlled by commerce royal family. it struggled to build an audience in the united states. stephanie: thank you so much. crude trading above $30 per barrel this morning. with iran set to come on stream weeks from now, could we be in for another leg down? we are joined by clearview energy partners head of research, kevin. welcome. i really don't like talking about markets going red or taking a leg down. is that what is in store?
has beene color red there for a while and i am not sure it is about to go out of fashion. is the market already pricing a new volumes? that as a yes. the question is how much new volume will come on stream. expectations are between 300 and 500,000 barrels per day over the next several months of incremental iranian crude. we tend to think it is closer to the range, but if it were to be at the high end of the range or to come back faster and more aggressively than expected, that to be exactly what oversupply market would not want to see and could scare us further to the downside. crude story is u.s. rolling over in production. producers is the there was still some significant hedging going on in 2016. and a lot of people will be
swimming naked in 2016.his this the year we get that pain for the high-cost producers>? -- producers? agreement.re now new encroaching on the received costs of the wellhead will have a big effect to what we had last year. the original conception the u.s. production would end up replacing saudi spare capacity, that is not the case at all. there is latency on the downside and the outside, too. we may be overly optimistic expectations that drilled uncompleted wells will come to the rescue with a price spike. not with labor force is shifting and capital scared of what might come next. i think it does come next year but don't expect it to be as brisk as it might otherwise have been. david: i wonder if there is another factor in here and it is technology.
kevin: that is the general thinking about what you have seen in the last year. it was cheaper to drill the wells in the breakeven comes down. plus, indebted producers producing just to cover the note on their debts. technology costs have fallen. there is organic technology and efficiency gain still in process. services companies cutting discounts will not stay in business if they go down 20% per annum. david: when do prices start to come back up in your model? kevin: the problem is the models are based on the expectation of a fairly steep incline right now in the u.s. and a fairly shallow growth in the global supply from iranian producers. i would say you are looking at a third quarter early fourth quarter uptick and a swing that continues into 2017.
the deltas to that could come not just from around there but from libya which is blinking on and off like a pat light will. >> it is one of the most important variables for markets. we caught up with harold. this is what he had to say on prices. harold: we see several things that will move the market higher throughout this year. we are close to an inflection point on price. >> you listen to harold hamm. this is one of the producers that took all of his hedges all going into 2016. he is hoping for that rebound. kevin: i think of course he is talking about how. that is universal -- talking about hope. that is universal across the community. it is not shale oil that disappears and does not come back. it is the legacy low-volume producers that will be crushed
by received a prices in the teens and some of the canadian production getting shoutin. that could be the agent of his salvation. >> thank you for joining us this morning. bloomberg spoke exclusively to donald trump. we will break down what he said. that his next. up.res in the u.s. euros down, and down hard. ♪
donald trump sat down last night with bloomberg last night and pulled some punches on the issue. >> big story in the new york times about ted cruz not having reported properly a loan he got from goldman sachs. are you concerned about that? do you think voters should be? mr. trump: that is a big thing. i don't know anything about it, but it is a big thing. i hope you solved it and it gets all. >> you have been in the public spotlight for years and years. he has not. do you think it is possible there is lots of things about him in the background now as he becomes a candidate. the reason is i am doing very well and i can understand it, but he has been very nice to me, very respectful. my ideas, my whole being has been terrific. i hope that is not a problem for him. david: ted cruz is a real challenge to donald trump now.
he is putting the canadian thing. goldman sachs, he is pushing all the buttons. >> it is the birther argument all over again, but this time it is ted cruz. david: guilt by association. stephanie: i find it funny. look at donald trump's presentation. rooting for another guy, wishing him the best, sitting back. i have interviewed donald trump, and i assure you he is always leaning in and you are on a tiny stool. >> he is a charismatic man. you can catch the full interview with donald trump here tonight on 5:00 p.m. eastern with all the respect. more on "bloomberg go" next. ♪
emotional's l off over the last two weeks. and this bonds for you. a record-breaking debt sale to pay for it takeover of sab miller. ♪ welcome to the second hour of bloomberg . stephanie: our anchor in from london, jon ferro. a coworker who has done much better since having to sit next to me, cio of oppenheimer funds to cover extraordinary markets. refugees keep pouring into europe.
three times as many refugees arrived in europe as all of last january. the vice president says the next month must be dedicated to gaining control of national borders. the islamic state says it is behind a deadly attack that began with a suicide bomber inside a starbucks. other attackers opened fire outside and set off more bombs. five of the attackers were killed and five suspects have interested. at least three winning tickets were sold in the $1.5 billion powerball jackpot. california, tennessee, and florida. the winner's identity has not yet and revealed. .lobal news 24 hours a day matt: we are seeing a real turnaround.
dow jones futures up 58 point and nasdaq futures up .2%. david mentioned the emotional aspect. goldman sachs came out this morning in a note and set the s&p's fair value should be a 2100. he sees a 10% increase in the s&p of to its fair value because he thinks we have overreacted to events overseas and the u.s. economy is expanding and that earnings will be our savior here. european markets still down across the board. stoxx 600 down more than 2%. down as much as there are not big automakers on the ftse. it was revealed it was under and is cooperating with an investigation as far as emissions are concerned.
also, there was a report out that said a couple of dealerships are suing fiat chrysler, alleging that things. fiat chrysler has not answered to that yet but stocks are still down. crude oil up right here in new york, the nymex 1% here at only $30.8. $.80 area -- we have been talking about the gopro this morning. fiat chrysler i just told you about. jpmorgan really turns futures. jpmorgan came out with its earnings and you saw futures turnaround on the back of the 10% growth, keeping costs down. best buy we are watching for sales. best buy is down about 6.7%. quickly take a look at some of the big indexes.
the dowto watch transport, down 10% since the beginning of the year. officially in a bear market. john: just want to bring your breaking news a little bit of a rebound. thanks face tougher capital moves for market risk. stephanie rules for how banks measure market risk. a lot of details here but it continues. , revamp seems to stop after reeve amp banks have to continually just -- adjust to the new rules. >> this is the last thing jamie dimon wants to's the, another surcharge on the risk jpmorgan takes on the markets. to affect the banks most active in capital markets and investment banking. that would include jpmorgan and would include deutsche bank.
we have yet to see what the massive revamp does to that business. it certainly affects goldman sachs where it will affect jpmorgan, the largest investment banks in the world which play the largest role in markets. and probably less so the more regional and consumer a commercial thanks, kind of like wells fargo, though that has gotten really big. more along the lines of the u.s. bancorp. mentioned you deutsche, ubs will already on some level retreat from businesses because they are saying we do not like capital requirements and this is costing us too much. and they simply say we will get out of some of these business -- businesses entirely? >> some have gotten out of the businesses for the most part. there are going where the growth is. therefore banks that focus on capital markets a great deal
will probably have these headwinds facing them for a while. say the fed isu testing the resolve of jamie dimon and brian moynihan that continue with a plan to be a global universal bank, doing everything across all regions, including maintaining a large invest bank along the consumer and commercial business? like jamie dimon, it is a long game. giving up on investment taking because of rushers today, it is probably too early. they are committed to it. i think they will stick with it for the time being. talked to last time i a major u.s. tank, they said the fed is already imposing requirements higher than basel so we are repaired for fossil to go up. maybe you are right, but i am not sure this will actually change the big u.s. banks gave
your. good pointyou make a here and i would love your insights on it. very strict in the last few years and likewise swiss. you want the swiss finish third go up and above where every other regulator is. where do you see the banks and the regulators behind outside the u.s. and outside of >> forland question mark large banks, capital time and is an issue but not the driver at the moment. the driver is the revenue stream you can generate in the capital market. those other two think they are rationalizing and people who will do well are the people who will rationalize on both sides of that equation. capital related issues have been with us banks for quite some time aired it is not the driver at the moment. himselfe: jamie dimon
said just how me what the rules are and we will figure out how to win the race here it when you look at earnings, how do you think they are doing? >> under the circumstances, really well here they are optimizing their business, getting away from businesses where the return on capital is not good. ,nd focusing on businesses advisory, things like that that they are good at and they can make a lot of money. >> they are adjusting, but look where they ended up. in the fourth quarter, they have adjusted to a return on it the of 9%. can generate and are only of 9% in the long run and be considered a desirable investment. you're absolutely right these banks are adjusting, but what are the circumstances going to be that will ultimately deliver to the shareholders a reasonable return on their investment? it is hard to see because we just ended two ears with the
best investment banking environment we have ever seen short of maybe 2007. stephanie: you are saying it is not a reasonable investment but it is more responsible because the black box which it was when you invested in the bank has gotten more clear. collects it is a cyclical business. it is a cycle and at some point, the cycle will return your it the big players will stay in the game for a return of the cycle. david: i want to bring in another act for who is on the phone. i do not know if you are able to hear much of the discussion to we were about how the banks will have to change their behavior. >> it is an important question going lowered. if you look at jpmorgan, we have got 11% -- across the capital, somewhere closer to 10%. i don't know if cost of capital is what they will be happy with
or investors will be happy with. going forward, i do not think we will see as high in our league, especially in trading and the investment banking businesses here the average aro we might be not quite as high but the highs will not be quite as high and the lows will not be quite as low. i think the keys to improving that are a leave from here -- roe from here is how productive your assets are with revenues and how much more efficient you can get. decisive scale a advantage. scale matters more than ever. we will see what they end up with their balance sheet size live. look at them to be concentrating
generating assets and pulling lending andme of some of the things that have a lower asset yield. >> the street expects jpmorgan revenue to grow 4% in 2016 and an additional 20 -- 6% in 2017. given the volatility in markets, the concerns over credit, particularly in oil and gas, and uncertainty over whether the really slowwill positively, can those estimates really hold? >> i think they can. it depends on the way the environment is. on the verge of a global recession, no, they will not. if cheated. and thetays in their economy globally can hang in there, i think the sell off see now is a big overreaction. i could easily get to those theth numbers just with
type of loan growth these guys have shown in the back half of 2015 and a rebound in trading and investment banking. as good as the announced m&a business has an in recent years, that does not generate revenues. investment banking, you know, we are not near what i would call cyclical peaks and trading has been week. markets and capital no recession and we will get there and then some. john: it is my personal interest and it stands out. on loansss provisions to energy companies. you wonder how exposed the financial sector is to what is happening in markets right here and right now. more specifically in commodities. issue.it is an thever, i think most of large banks have a portfolio they have managed reasonably well. there will be losses but i do
not think the losses will be of the magnitude we face in other credit crises, whether that was the asian crisis or the subprime crisis and it's like that. will increaseng for sure, but i do not think it will be like before. >> or the telecom bust. >> no. a lot of the speculated capital was really raised in the capital market rather than through the banking system. that is why the losses in banking systems i think will be far more controlled. the point jeff makes is good. if you do not believe, if you do not think we are going to have a decent growth environment, i think tanks will not do well. but if you think global growth is not slowing down and it is more a traction in the cap market, reaching those targets is really not that large a deal. stephanie: do you think we are
in a low growth environment? >> i don't think we're heading for a recession. i think we are heading for a correction. oil in china but those are symptoms. the correction is driven by the fed and the tightening. at some point, the fed will get off of that and we will have a growth picture in the u.s. and i think on a global basis, it will probably clarify in the not so distant future. later.is back a big thanks for joining this morning. more on an investigation next. sutures this morning, 15 minutes away from the open in new york city. -- we are positive five points. we will debate that. ♪
vonnie: welcome back. banks will face different capital requirements thanks to a revamp of rules by the global regulators are the committee is putting new restrictions on banks when it comes to trading bonds and other securities. the people's bank of china want to close loopholes the banks used to understate the riskiness of their assets. shares of best buy fell. the electronic chain says same-store sales fell in november and december. sluggish demand for mobile phones partially offset by better performance and health products.
shares of gopro are down as much as 27% in premarket trading. the company released preliminary results that fell short of next dictations. gopro says it is cutting 7% of its workforce. concern among investors that gopro is a single product company. >> shares plunged as much as 20% . hans nichols is live in berlin. thenard from the union and we heard from the company itself. give me the news. >> the company is cooperating and confirming. this has to do with a government fraud investigation into emissions output. we have that connection now. reportedly 100 vehicles being investigated by french authorities. they announced this in september when they said they would look into volkswagen. of those these -- of those
vehicles, 25% were made by renault. big for u.s. exposure here. they do not really sell their diesels at least on the auto side. story just a u.s. yet. 20% hereock was down we had confirmation and now the stock is down by 11.2%. just to navigate how that unraveled, it takes time or do you have any idea of a timeline going forward through the rest of the week? is the, but what we know volkswagen exposure will be much more it's and sit in the u.s. 480,000 vehicles in the u.s. and they still have not gotten the green light from the resources board or the epa. vehicles, itillion
is just a software upgrade. the regulators at least taking the volkswagen case has a template. on diesel, a lot softer and a lot easier to pass. they do not have its kosher on the auto side. they do not have exposure on the auto side. they do not need to worry about washington or caliph on you. this story is not going away anytime soon. when we get back, more to deliver. taking a look at united airlines five years after the merger with continental. the deal has been a disaster for them toys and customers area is united finally turning a corner? it worked out for shareholders are in ♪ -- shareholders. ♪
david: welcome back. let's take a look at united airlines and whether the company is finally taking -- turning the corner. it is our latest businessweek cover story. .ere to join us is straight i read this carefully and it is quite a piece. it struck me how bad it got and the fact that it may be getting better. >> it has been an incredibly different -- disappointing merger. all the ways in airline can screw up, it managed to screw up. all the performance -- they have been very upset. >> they crawl off the airlines. >> yes. one of the many customer service nightmares they had. this fall, an enormous amount of drama where a ceo had to set down and a replacement ceo had a heart attack. we now learned he had to have a heart transplant.
a lot of uncertainty at the top but they do seem to have managed to turn the corner. is the kind of basic blocking and tackling stuff like on-time arrivals, cancellations, all those numbers are heading in the right direction. also see in terms of internal customer service numbers, customers are happier. finances are good for that has a lot to do with cheap fuel prices. they hedged fuel prices a year in advance. it is not like they get the huge benefit we do when we know our cars. >> right. but analysts talk about how they have made a lot of money but they have not grown. john: when i look back to europe, it seems the only part of the sector that is ok if the budget sector. ryanair. what they have been great at carriers.acy
in the u.s., how different is that question mark how tough is it? >> it is very tough. though you can look at delta and they have managed to do well by getting all of the basic stuff united's problems are not just sector problems. they are self-created. stephanie: ryan air is not boastful but the ceo will tell you, i offered you comfortable but i get you there the cheapest. attitude.ed to be the it is so difficult to fly with you. i don't carry, you come because we are cheap. that has changed. when easyjet started going after the business passenger. customer service experience as well. you just wanted smaller operators.
actually have a future in that kind of environment. >> business travelers are incredibly profitable. that is an advantage united has. david: what is the load factor? are they coming up? that is where they are really getting killed. >> no. they are still having problems with that. stephanie: this is a great piece. this week is extra special. thank you for joining us. pick up the copy. i really like the cover. tomorrowit newsstands but you see in online today. ♪ we live in a pick and choose world.
save $1100 on the i8 mattress with purchase of sleepiq technology and flexfit3 adjustable base. ends monday. know better sleep with sleep number. john: good morning. welcome back. about an hour away from the openings destiny new york 80 and futures are indeed higher. dow futures up following an ugly
session in the s&p 500 set for a bounce for a september low. este up eight points this morning. let's cross over to vonnie quinn. a new pull shows hillary clinton and bernie sanders are locked in a race in iowa. sanders 42-40, a significant drop from last month's line -- nine point lead. the iowa caucuses are the first tests for a presidential candidate. it will be held february 1. a leading republican presidential candidates will be back once again tonight. only seven of the 12 candidates will be included. donald trump is still the leader and he is now comparing his campaign to that of a republican icon. he's oh on with all due respect. mr. trump: reagan had a little
bit of this not to this extent but he also one here at we will have to see -- he also won. we will have to see. the entire interview to that :00 eastern on bloomberg tv. how did british culture failed to protect david cameron's alexion? says pollsters were better at finding middle-class than working-class and the young rather than the old. day.l news 24 hours a i am vonnie quinn. mark is now with matt. matt: a little breaking economics news. jobless claims at 280 4000, a little more than the street had anticipated. the median estimate was 275,000.
slightly higher and higher than the week before. continuing claims, two point two 6 million. we are looking for 2.1 million. a little bit higher there but economists love to see that number and it has been for quite some time. take a look at s&p futures not reacting negatively to the news. .5% and futures are showing some gains this morning as jpmorgan came out with a profit that the estimates. up 10%. ase optimism in bank stocks a whole. if you take a look at bank stocks, they are up across the board. citigroup up more than 1%. goldman sachs came out today and said the market is reacting, a little too emotionally to the issues around the world and that the u.s. is -- and u.s. earnings should bring the s&p fair value to 2100.
--o take a look at gold gopro. we have been talking about it all morning. it came out with fourth quarter preview of revenue much lower than had been anticipated. the holiday season was not so great selling gopro cameras and analyst says he does not think they will get taken out. maybe as we heard from dan has a few weeks ago. gopro down 20% and change. the chips used in gopro. that is also down 10% today. chipotle., the cdc may be close to giving chipotle the all clear on the e. coli scare after the meeting it had with companies according to an analyst. as you can see, chipotle is reacting early well today, up
seven dollars and 72 -- $7.72. with banks cutting the 2015 growth expectations, what does it mean for the credit market. us.k you for joining what do you think about the u.s. expansion, earnings season? should we expect positive news from the earnings season or do you think earnings will continue to decline in 2016? >> i think earnings will continue to struggle the credit selection will be important. the price to movement, there are a lot of things going on in the macro environment. the u.s. that has already started to tighten policy because of the language. and a sustained time of slowdown commodities, you are starting to see asset rises readjust.
more so than changing the forward expectations of earnings, the uncertainty of those earnings are increasing and you are seeing discounted multiples change. matt: no one has been on top of the high-yield story more than destiny. an interesting note yesterday that high-yield spreads are of acting a 44% chance recession here in the u.s. than jeffre bearish was in his presentation a couple of days ago. what doou think the high-yield >> theis telling us? market already started to adjust and has been moving for the last six months. some of that has been out of the concentration of energy and mining in the united states. the high-yield market is pricing in more than the equity market and you're starting to see that more now. as the markets reprice expectations of earnings,
equities might still be under rusher but you might be a big move in the worst couple of weeks it is hard for the high-yield to rally in the face of a selloff in equities. you are starting to get down toward for longer-term investors who need income with the high-yield market, it is starting to rise in and that makes it more attractive to buy into. matt: what do you think of m&a this year? is it worth playing as an investor? >> in this part of the market, 2015 was a big year for m&a. will continueies to try to find a way to grow their business. it back up andn credit spreads, for many buyers, it is an attractive opportunity to extend business. i think m&a will probably go down but still be attractive for the market. that will probably take out some equity.
we think all credit markets will be a bit more attractive. we are looking at the deal though. matt: thank you very much. jim is the global head of fundamental edits. stephanie: we will stay on that story. they are raising a record $46 billion in the bond market as the was saying to finance purchase of sb miller. here is what we need to dissect for the audience. december, it seemed like high-yield was cracking, over and done. two weeks into the year and this is second-biggest bond yields ever and it is a blowout. it into context.
who is playing in it? quite coy over there. everybody loves beer and india came down to that. it is about quality. he are flocking to the good stuff. are really worried about liquidity in the markets. they are thinking if they buy a chunk, they will be able to trade in and out quickly. we aremorning yesterday, looking to raise 25 billion they got orders of 110 billion. it is more than four times what they wanted to borrow. story.can spin this everything is ok there is so much demand. the other side is $11 billion at 4.9% bonds over 30 years, a lot of people need that yield in this kind of environment. it was a rush to quality, still
a rush to yield. you do not just see it in corporate credit. the demand for the u.s. treasury , the most in one year and one month. to a little bit of a risk aversion in some way. quite absolutely. the deal yesterday really highlighted the widening gap in the credit markets. you saw it happened on the same was a three year high. clearly people are still worried about credit. it is all about selection now and all the sudden, he baku cup up anything and everything are saying, maybe any to put myself on a diet. >> i would read this headline. it is good for credit markets. the urge to go into this because isre is so little else that high-quality come a lot of stuff out there is bad.
it is a scarcity problem. >> i think the problem will be that we have got more to $200 billion of m&a to be funded. that willout 38% of be in technology and i think some of those deals, people will have to pay up to get those deals. stephanie: compare this to the very top? >> a $5.5 billion deal. theyd investors telling us were reading them three times to say at what price would you buy these things? investors were like, we will not play ball. so far, they are saying they will wait for market to stabilize. david: thank you very much. jp morgan conference call is underway right now erik schatzker is sitting in to bring us latest on fourth-quarter results after he has heard what
welcome back. a surprise increase in first-time applications for unemployment benefits last week. any figure on the 300,000 generally considered a sign that the market is getting stronger. it cut one than 5% of fixed income traders according to a person with knowledge of the matter. goldman is contending with an industrywide slump. the bank or make a decision this
quarter after evaluating client activity. the end of the longest rally since at least the 60's. consumers are being swamped with increased supply of cheaper point -- pork and it chicken. hamburger prices are down. stephanie: thanks. j.p. morgan chase said fourth-quarter profit rose 10%, as expenses from litigation and employee compensation shrank. erik schatzker is listening to the conference college began a few minutes ago. anything stick out so far? >> everyone is waiting to see a jamie dimon will characterize his expectations for 2016. we are hearing from area like and she said a few things that stand out. gas. begin with
j.p. morgan took $550 million in 2015 because of the deteriorating environment for oil and gas companies. marion lake says the company expects to take more of those for 2016 but they will not be significant unless prices remain at current levels for a while. she did not specify how many weeks, months, or quarters. if we do notwords, have 30 dark crude, it will not cost j.p. morgan a lot of money in the credit quality of its loans and energy companies. they also talked a bit of a client activity in the markets. there was lower client activity and lower inventory. no more color or detail yet on the outlook for capital markets. how important it is for j.p. morgan but also bank of america and morgan stanley at citigroup, which have yet to
report. they talked a bit about the outlook for interest rates. we know j.p. morgan and others anticipate further hikes in 2016 and based on what they expect now, j.p. morgan expect to generate millions of dollars in incremental income. it sounds like a lot of money but in 2015, they have $43.5 billion of that income. 245 .5. a love that will slow down to the bottom line. significants potential increased profit but not the bonanza that maybe some hoped-for at one point when the fed would begin hiking interest rates. it'll take a while before we get to a positive yield curve in an commercial where banks like jpmorgan can make a lot of money on loans. those are the highlights right now. be listening and waiting for mr. diamond to speak.
i have to note nominations are out. the big short, the movie based on the subprime crisis, nominated west picture, best directing, and adaptation of a screenplay. that is huge for michael lewis and our audience. we know it was quite a big story. >> deutsche bank get a nomination for best support -- best supporting actor? thanks, erik here we will see you shortly. we will turn back to older. and morganrica stanley are selling shares of uber to their high network clients for about $40 a share according to someone familiar. a financing round in december financed at $62.5 billion, about 80% of companies in the s&p 500 index.
let's bring in alex. most of us will think that sounds like an ipo. people offering these are pretty special investors. >> a net worth of more than 100 million, they're asking for a minimum purchase of $1 million of shares. $250,000 worth of uber shares. a play for the bank to get in with uber. they can promise high network clients. the stake in this has been abetted by their own financial equal in-house. as the markets elsewhere are not showing as lori is returns as we bloomberg is a name we want everyone to get into. bank of america getting in for equity here, and it is more to a that uber sold to
goldman sachs to let these individuals get in as well. stephanie: let's talk about the demand and the potential investors. uber has of a clean raise money from the beginning. think he would have already been invited to invest in the private rounds. why do they need to come in now? >> this allows them to get in individually appeared a different kind of structure than being a limited partner. also, we have heard over come out and say an ipo is still a few years away. there is still some running room before this hits public markets and gives them an exit. you still have more of that scarcity, the fear of miss out. people want to get in as it has started to improve it business model. we have seen over it and into business lines like delivery and push harder into china. these are promises to boost value move toward that these
high net individuals want in their portfolio now so they can potentially make a bit of money if the stake is valued at more than $49 per share. david: uber has not only said don't hold your breath but they set it right here. take a look. >> uber is 5.5 years old, a very young come in he. we have got a long way to go. travis the other day said it is like ask a ninth grader what they will wear for the prom hair you have got some time. when we are ready to go, we will go. that isst to go, i take somewhat of a negative sign in that it management team is not selling any, we are motivated to drive the value of the company and we will do it as long as it takes. i take away from this that this is a tryout for the ipo for some of these banks? >> they are already doing this stance. morgan stanley in the mix, goldman in the mix. these things lead for ipo
underwriting. they need to have these relationships now. more than a, it is lot of the s&p 500. when it comes to that nice check the banks want to get, they need to have the relationship with management. as michael said, when they do get ready, they have an in and they can take home a paycheck, underwriting and ipl. in thenvestment advice apple drawings. that is next. ahead of the open here in new york city, futures are higher. print crews coming off the session. we are at 3069 and teachers across the board in the green. the s&p 500 futures positive, 900 points this morning.
john: welcome back. how should the winners invest their money? from the bloomberg billionaires team, we are joined now. george roberts says to buy some index funds, list frugally and do not invest with your friends. >> [inaudible] >> your microphone is not working. but usa it is sound advice. i will translate you. you cannot object, it is sort of like motherhood. 5% and go crazy. the other nine for death 95%, go crazy. >> vr as are stacked against the
winners fearless folk basic knowledge is researched how lottery winners fair after the winnings, and 70% of them actually end up bankrupt. stick it advice is into an index fund and if you are making me percent, live off of 1% and make a little cushion your >> i hear the stories in the united kingdom as well. they win and lose and i asked how, what do they do that makes them lose all the money? >> i will tell you what the professor said. it is kind of like if you are walking home from work and you find five dollars on the street. you are actually going to just spend that and buyers of a falafel and not think about it. what number is it when that becomes important? >> i also suspect there are people helping them lose the money. they have got all sorts of people flocking in with all sorts of schemes and they are not necessarily the most
sophisticated people. and they fall prey to them, i would guess. >> it is an enormous amount of money for people who could have never dreamed of that kind of money. put it in a bank and get a steady return. if you want to give to a charity or your friends, give a low what you're getting back. >> thank you very much. thank you for joining us. a lot more to cover. gopro, we will talk about it all with david. futures are higher ahead of the open, 34 minutes away. ♪
chief market strategist at jefferies. here with the first word news is vonnie quinn. today it hassaid met a key demand of the nuclear deal with the west. the core is the nation passes only have the reactor and it has been removed. international inspectors will verify that. the nuclear deal requires iran to makets ability nuclear weapons. want to sanctions lifted. giving responsibility for attacks in indonesia. seven people were killed by gunfire and suicide bomber. police say five of the victims were attackers. and the leading republican presidential candidate will debate again tonight. only seven of the 12 candidates will be included in this event. it is the sixth republican debate of the primary campaign. by 2400ews powered
journalists in one-on-one hundred 50 bureaus around the world. up across the board after turning down big-time yesterday afternoon. s&p futures up at .5%. dow jones, many contracts up 78 points. recovered from the big drops here that translated into big drops their. you can see the stoxx 600 down 2%. than the ftse,e almost double the losses there because they have take auto stocks. bmw, volkswagen, all down. down because of those reports that were no had some computers seized by authorities testing emissions issues. thent to point out commodities we have been following, crude and gold, crude has had a rock he moved today but still up about 1%. still at a very low level, a 12
year low, basically. gold is down a little bit. looks like people are selling haven those hate -- those assets. look at the 10 year quickly. we see a little bit of buying in there but not a lot of movement. 2.08. finally in my terminal, i get excited when the rsi gives me a buy signal. a lot of evil follow tech all indicators. relative strength index on the s&p, we just come down below 30. right now is 27.5. does that matter? i don't know but it is interesting to note. you can see the terminal on your own bloomberg. 46? 54? vtv54. jonathan: three stories that
matter to markets ahead of the open. number one, jpmorgan's earnings underweight. earnings beat estimates. profits rose 10% as expenses from litigation and employee compensation shrank. by 2.2% andp goldman sachs considering itsing more than 5% of salesmen late in the quarter. david joins us now to break it down. put the stories together for me. >> sure. that is how they are generating earnings and preparing for 2016. goldman looking to cut headcount. the peoplet paying they have as much as they used to. generating surprised by cutting costs. >> i wonder whether if the fed is not getting its way one where the other, they have a smaller sense of breaking up but they are smaller than they would have
been. the move is not growing the let's make sure we are contracting in the right way. >> i was impressed with jpmorgan numbers. the street has been roughed up in the fixed income business and they have held it together. i thought that was impressive. i think the 5% number, most investment banks ruled the bottom 5% out and try to get better people throughout the -10% back in.g 5% a constant shuffling. to see a 5% number is not unusual for the beginning of the year to do some housecleaning and figure out who was the winner and who was the loser and try to find out if there were guys on the street who are displaced from another bank. >> i think they may cut as much as 10% in 2016. so may be going a bit the on the yearly call. were 12,000here
headcount down year-over-year. a significant number. >> a lot of analysts are coming into the quarter and they said they are starting to run out of room. people thought jpmorgan would have revenue down year-over-year. was up 1% p.m. maybe they could find some revenue growth in 2016. it is what they will need to drive the stock and the estimates and expectation. there are not a lot of cuts they could continue to do here. david: the number two story that came up while on the air, that was the banking supervision posting rules today. the rules are stiffer and will result in a weighted increase of 40% in capital charges. david is still here with us here the question i'm asking is, did this is -- is this really a change?
>> i think the bank saw it coming. what it is trying to do here is get away from a reliance on bank models. as we know, some of those models proved insufficient going into the crisis for estimating the riskiness of trading books. they are making some changes from theting away value risk model a lot of banks rely on, moving more toward an exposure model, how much they could actually lose in a black swan type of event. banks saw this coming there they are not happy to see it. risk-weighted assets in the banking system, in trading books, goes from 6%-10% now after this change. if you have a big trading book, this will certainly affect you. >> is this a never ending journey for regulators? >> goes back to the original point on forcing these guys to get smaller. i think this is really where the rubber meets the road.
it is where your charges start to come in. you cannot provide the services the clients have wanted. and that industry just shrinks or creates new shadow pieces on the side that fill in the voids. i think those things can take a lot of time. in the junk-bond market, when it drexeled after the fiasco and early 1990's, it took for quite -- four or five years because they were such a dominant force. markets take a while to figure out who will be the liquidity divider and how it will work. no one wants to be the only liquidity provider either. your point, this will evolve for years and not quarters. jonathan: on to number three. down as much as 23% in the european session. shares have recovered slightly around 10% this morning. -9.24% on the screen right now.
concerned company was regulated by government investigators as part of a probe into vehicle emissions. others down across the board as well. cap chrysler down 7%. bmw also negative. you and i have this conversation this morning. we went through the headlines. the french union came out with the headlines first. on any other day, maybe would not have seen the company stocks and the whole sector just go down the. >> you do not see this sort of reaction unless there is a fair amount of nervousness. in this company and in europe, they have been testing in an artificial way. they have not been testing the cars on the road. and when you really raise the requirements a great deal, people may try to cheat. how surprising is that? >> would it surprise you if guys in the industry who made the diesel engines talked about some
of the new technologies to avert regulatory structure? in finance, we get together and talk about our new businesses and lo and behold someone comes itand we get a crisis out of . the same sort of thing can apply to any industry. i'm sure the diesel engineers at every one of the country -- every one of these countries new where was going. >> to your point, if the regulators are going to be serious and have teeth, they should go to dealerships, take cars for a test drive or by them himself and actually run tests in the real world. if you do not do that, you have got to expect someone is gaming the system. i'm not saying that happened here we have no idea what is happening with these cars. i will say it is a bigger problem in europe than for us. diesels are huge there. fan becauseesel
they have a lot of torque and i love the pulling power. but they are nowhere near the amount of sales here. in europe, it is over 50%. has been subsidized because it was considered to be cleaner. much it is fuel-efficient, lower co2 emissions. it is just the nitrous oxide stuff that will kill your neighbors. that is the problem. question asked after volkswagen was whether that investment would continue, whether all of this would have to get pushed to the side .ecause they could not do it matt: i put that question to almost every ceo i spoke with in the last couple of days, including carlos of nissan and no, and they still see room for diesel products. products areel safe as far as emissions. nissan makes a truck here, a diesel truck.
those have special canisters that help to clean out of emissions. >> we really don't know what the facts are yet but i'll be curious to see how tesla stocks are doing today as an alternative to diesel. we will come back with it. you have it there? good call. while, we find trouble. thank you. those are the stories that matter to markets now. futures are climbing higher this morning. we will next take a look at what is moving up and down in the premarket. we are over .5% in the s&p futures. that is good. coming up next. ♪
it is being hurt by weak demand in asia. markets now with matt. matt: a look at a couple of stocks here starting with chipotle, it got an upgrade. analysts saying the meeting chipotle held about the e. coli and may be thep cdc will take aaa off of its watchlist there. this could be good news for the stock. it was up a lot yesterday. buy came out with a holiday sales decline. down 1.2% because of sluggish sales of mobile phones. in the last holiday season, they were up 3.4%. see, down you can almost 10% in the premarket. finally, gopro has been getting crushed in the premarket. it released preliminary holiday sales figures well below analyst estimates.
inflation expectations may be falling due to the oil drop. you see the market-based expectations rolling over as well every time crude rose over. the killer line is the drop in inflation expectations is becoming worrisome for the federal reserve, especially when the ballpark figure for 2016 is fall rate hikes. >> some of those dots may have moved around a little bit. to jump inavid, just quickly and get your opinion on this as well. do you think federal reserve officials and central banks elsewhere should respond to lower inflation based on a move in the commodities market? david: we consume commodities and it is part of the overall mandate. we does have to look at the noise and try to find the signal. the signal is that these prices are a little lower. we have seen this before with jim when the market gets a little rocket. he puts out a nice little flair.
seems to have a knack. i would not be surprised if that is on his mind. a lot of things have probably changed not just for the fed but the ecb. the ecb minutes for out as well today. they were talking about everything being normal in china and every being happy-go-lucky and things were pretty good. and i'm sure the discussion at the next meeting will not be like that as i assume the next fed meeting will be a little more nervous about what happened to start the year in china. are also now and energy producer. if you look at gdp growth, a surprising percentage of it came from the energy sector and it does not look that will continue going forward. more effect than just consumption. >> does. you have all the investment that came from the qe that induced a lot of risk taking. you also have an amazing thing that happened which is everyone has got to dollar gasoline which puts a lot of money in the
pockets. the investment might not improve to the shareholders, but it has accrued to the united states consumer feeling pretty good about it. aswe want to turn to tech tech stocks tumbled. -- darling, gopro came out with shockingly bad news. the camera maker announced all-important holiday sales have been well below gopro's guidelines and 7% of the workforce will have to be cut. shares already down 72% last year are down another 20% in early trading. is here with us in new york. welcome. and cory johnson is in san francisco. david is here with us still. let me start with you, corley. -- corey. -- cory. this stock is not doing anything. cory: it is bad news. gopro cells a lot of presence.
q4 is good for gopro. when they announced guidance, they thought it was conservative. all the market dollars are pushing toward it. when they come out with the fourth quarter that is not only less than analysts expectations and the thought to be conservative guidance, sales quartern in the fourth on a year-over-year basis for this company. it is disastrous. it makes it look like this was a fad or the competition has caught up with them. the product is cool in the videos are cool to look at. the growth of the business has evaporated. what i keep seeing again with gopro is one trick pony. if you are a one trick pony, you can carry on doing that. that accusation has been thrown at apple. you wanted to continue if
you are a one trick pony. itlects you have got to make fresh and exciting and renew the software, really the hardware. it is taking them a really long time to do that. it has been like 18 months. a big important refresh. the products out there are just not capturing people's attention. they are knockoffs. there are people who are talking about, they can go into drones and virtual reality. great idea. incredibly packed. it is a competitive landscape. we were talking yesterday. look over the convention center and there were drones everywhere. a lot of companies already out there. vr, you're getting a head start from facebook and google. want to point out a couple of things. one interesting, you can do a search for a lot of billionaires. it is interesting to see that
nick has at least taken some of his money out of gopro stocks. this red part of the pie is gopro and this green part is cash and securities. an interesting thing for investors, look at the short interest if you have not already typed in gopro on your terminal. look at short interests in your stock. 40%. a massive short interest here. >> the borrow rate on that short the borrow rate was also economically high. there are extensive things -- as pointed out, everyone has got a drone. that was a joke, that everybody had a watch, age or, and virtual reality all in one. this company from day one new that the knock against it was a one trick pony.
they talked and said we are a media company. we will have media because we create media as if the makers of the device -- then they said we will be a drone company. the promise was always for gopro. when results fell apart in this quarter and the knockoff, a great camera store in manhattan, i went in there a few months ago and they told me the gopro.lling camera was the best-selling cameras were the dozens of knockoffs. >> someone out there looking for a market indicator today, talk to me about it. what are we expecting? they represent sort of two big trends in technology. the datae mood in center. intel spent a lot of money trying to shore up the business. and they couldon
start to see some traction in that perhaps as early as the third order. the pc business has been so much owne than intel's's predictions even into the last year when they thought they might see a consumer rebound. still has a giant pc business that has been dramatically shrinking. it has been so much worse that one wonders if there has been risk to we have got stacy smith after the closing bell to talk. about what he sees. jonathan: thank you. you will stay with us. about four minutes away from the open here in the united states and futures are higher. ♪
futures up 17 points. a repeat of yesterday. let's switch it up quickly as the stocks opened in new york city. a lot of selling going on across assets. the pound against the dollar, people keep tweeting me about this. come home. a 2010 low, we've gone back five years. euro-dollar -- a stronger euro this morning. in treasuries, yields a bit lower. 2.08%. looking for a trading cue from the commodity market, there it is, wti back at $31 a barrel. david served most still with us. zervos still
with us. anyone in the markets decades -- is it a repeat of august? putting thehat is template well. i'm comfortable with that idea. no idea that we could have some inkling of the late when the u.s. economy was performing very welcome and the emerging markets were performing very badly, commodity markets performing very badly. there was financial stress in the credit markets. at $90.omed out we had a lot of financial craziness. if you look at the year as an economy, we grew by 4%. there was no inflation. the stock market in 1998 returned to over 30% in the u.s. with a stronger dollar.
--on't think that is an area essyuere were a m financial market -- messy financial market story, i would put it in the 1998 scenario. david: there may be one big difference. the extent to which we become interdependent with the world. one of the numbers that jumped out at me this week with the of s&p 500of profit companies from overseas operations. it is like 26%, which was not true in 1998. when china freezes, we catch cold. david: there is more interlink edness, is that is a word. tore is more of an ability
go between countries. if things are weakening in china, things are getting better in germany, we have this ability to move capital so much more freely. were of are links before very rigid. we could not get out very easily. i'm quite positive just on the ability of capital to flow and move and maybe that's why we get these crazy volatility scenarios. we look for these comparisons because it gives people comfort because they can say that happened and this might happened and that is scary -- the elephant in the room, the amount of central-bank stemless we've had, it makes it very different and makes it less possible to compare the here and now to the past. david: this has been the greatest monetary policy experiment in history. part of the unwinding of that, which we started on december 16, is something to watch with a lot of care.
we were very nervous about it last year. less nervous about it coming into this year. the liftoff went pretty well. we are watching these eseerberations in chin commodities carefully to see if there are feet on effects -- feed on effects. i tend to think that is not the case, but i'm hoping. someeal risk is not overleveraged financial crisis with regulatory arbitrage is like we had in 2008. that strikes me as very unlikely. it is 90% probability we are in -- thenst-september we go back up. there's a little probability on a much deeper emerging-market
that feeds back and keeps the fed on hold for the whole year. david: it may have been an experiment, but it's had to effects. -- two if expert it has the leverage household and corporations. - it has had two effects. it has left the fiscal people in congress -- >> fiscal policy has been underused in europe, underused in japan. ofer the first several years crisis with it was used quite successfully to bring about a rapid turn, fiscal policy has been underused as a resource in the united states. david: is this something of a bright spot?
something we haven't tried yet that we can try? david: i don't think have ever seen mary summers talk negatively about fiscal policy in his life. -- larry summers. he loves fiscal policy. i'm a big believer in monetary. i don't necessarily believe you can go back in the history books and find that many great fiscal experiments could the japanese one looks awful. they had massive fiscal expansion with very little monetary policy accommodation. very tight monetary policy for decades and they never grew. that wouldsponse to be they would need to do more fiscal, probably. response to that. economists on political lines. more fiscal means more government, more big programs, more intervention in the marketplace. debatee that chicago
that comes into it. larry is from the m.i.t. harvard site. not the other side. we have seen monetary policy work amazingly well in the united states. amazingly well in the u.k. it has been started in japan but it is fading a bit because they are losing a bit of the political impetus to go f urther. the same thing with europe in december. the ecb stopped short of where they should have gone and the markets are recognizing that. maybe there is a little less qe in the system globally than the markets were anticipating and that is a bit why we are jittery here. i hate trading on hope -- my hope is the ecb and the bank of japan gets the message. we were big fans of that last year. we pushed that aside this year.
we will hang our hat with janet for a little while david:. one thing to think about. if fiscal policy that worked big-time, the marshall plan. what is going on with the markets? matt: we are seeing gains. slight gains. points and up three the dow jones only up nine. this is one of those days -- my producer absolutely loves the imap function. one of those days when it really is helpful. you see it almost even split here with materials and energy down even though crude is up. gaining.staples you can click on little pieces of the pie, i.t. is up across the board come except for hardware and equipment. down here and see
consumer discretionary is down, all the media stocks and consumer services stocks are up. the imap function is really fascinating, especially on a day like today. take a look at crude. still holding onto gains in nymex crude, brent has come off. nymex up 1.2%. $30.85 a barrel. thatnd it interesting inflation is being weighed on by crude this year when we start off the euro $30 a barrel. how much lower are we going to go? jpmorgan coming up with earnings that beat the street estimates. it is slipping down a lot, now up only .3%. chipotle up about 4% after a big gain yesterday. they think chipotle is getting further away from the e. coli concerns. financial times has a report that went and is thinking -- web possible sale
m.d. is thinking about a possible sale best i came out with november sales down 1.2%. best buy. fiat chrysler come a story that a couple of dealers in chicago are suing fiat chrysler alleging fraud. fiat chrysler has not come out with a statement yet because they have not seen the full lawsuit. 20% on concerns that go pro sales over christmas for not as strong as they could have been. go pro put out a preliminary go pro sales were still strong at willoughby's, but the other cameras were out sellers. abigail doolittle is at the nasdaq. abigail: the stock is down sharply this morning.
and barela is a major chip acquirer -- the stock is off significantly on that there is go pro story. it is down 20% through the close yesterday year to date, slicing through last year's lows. selling pressure is likely to continue. a possibility that is in line with the very high end bearish short interest of 42%. next, stocks and commodities may have pledged to kick up the new year. ♪
vonnie: welcome back to "bloomberg ." sources that goldman sachs -- essay goldman sachs -- sources essay goldman sachs may lay off staff. the world said the air internet is worsening income inequality -- the world bank says the internet is worsening income inequality. hit the green to with jordan spieth. on what he will be paid for the multi-year deal. stocks and commodities have not had a good start to the year.
while many hedge funds have been getting crushed come a qr's crushed, as -- qr's -- >> i don't want to win for too much from it. hedge funds complained there was not enough volatility. they did. a boring market, not enough going on, how do you make money. i would not buy that excuse. there is no perfect market. you can make or lose money in any market. i don't think anyone will make money all the time. can't point to the current environment and say who can make money now. it has not been a particularly tough time for us. we will have tough times when other people don't. that happens. what we try to do is pretty uncorrelated.
it is hard for me to address this. i don't want to be too short-term about it. a lot of people are trying to do the same things with the same information and it gets harder. david: here with us now is charles stein from boston. david zervos is still with us. take us first through how well snes done?s >> last year, they had to funds that were up 17%. they had two others that were up 80%. their biggest fund was up 2%. this is a year when nothing worked. qr'sas an awesome mere for a funds. david: is there something unique in his approach? >> it's not like you can look inside the portfolio and say ha
aha, this is what work. the fund focuses on quality, value and momentum. thatomentum, the idiot what is working will keep that what ise idea working will keep working seems to be helping again in the first couple weeks of this year. foromentum was the theme 2015. we wake up in 2016 and it seems you got punished big-time. what do you make of that? the euro was down substantially european stocks were up. the trend was not there in the u.s. there were great trends in japan and emerging markets. they were down all year. the guys who have the more mechanical approaches don't get as easily freaked out in the guys who are discretionary get a
little more freaked out. maybe those quantitative funds have some secret sauce that works. cliff made a great point. you never know when that is going to change. we saw a lot of quantitative funds that had done very well also fall by the wayside because ir secret sauce falls by the wayside. jonathan: momentum in 2016 is down. you would play that well by writing it down. david: the u.s. stock market was unchanged in 2015. there was a lot of divergence. for right here, right now in 2016 come it seems, so far this week, you are proven by the close. david: that may be the new strategy these guys are hopping on. while. on it for a
the theories running on the sovereignthing from wealth funds that are needed to sell something because their oil is down -- you can make up a story for anything. these corrections have been quite frequently. in quite -- happen quite frequently. there is this thing that frommentally eats away other is something rotten in emerging markets. .e need to clean that out are they too big now compared to where they were before? it is possible. i still think the whole storyline revolves around developed market leadership and growth. i will not fade that story yet. david: a lot to clean up in emerging markets. what david talks about is exactly what cliff talked about.
a rule-based approach to investing rather than picking judgments. ?s there something to that? >> i don't think over time you could prove that. there are companies like dsa where they stick with this rules-based approach. there are times when it works and times when it doesn't. qr.5 clearly worked for a will it work again for 2016? we will have to see it. will investors to with the approach if it stops working? 13 a real tendency in this alternative state to bailout when things are not good. we will see if aqr can hold onto the money. about 20 we are minutes into the session in new york city. let's get up to speed on where stocks are trading in the early part of the session this
jonathan: welcome back. let's take a look at the conversations we've had today, as heard on "bloomberg ." >> it is the field level. a market tells us something will go wrong somewhere else. -- it is the fear level. i find those people to be --rmist and often deeply i've watched these very loud, arrestable voices with seriously misleading consequences. >> i don't think we are headed for a recession we are going through a correction. it is oil and china.
those are symptoms. the correction is driven by the fed. the fed tightening. at some point, the fed will get off that and we will have the growth picture in the u.s. clarify in the not-too-distant future. >> would there be some sort of messy financial market story, i would put it in the 1998 category before i put it in the 2008 category or 1937 category, which some other pundits are often referring to. we have a little tradition here. me to let my lover of the week is a character from animal house. standing there in the middle of the cast just saying remain calm, all is well. i feel like a force like that these days.
i try to point them to the same type of price action we had in august. it is very similar. now, i'm sticking with the story that that is what we're going through here. if i had to pick a hater of the week, there's so many to choose from, i would pick my twitter feed. the 140 people or 50 people i follow because 139 of them are sending a pretty full messages every day on the market. i have not seen sentiment this bearish since 2011. the most negative sentiment i've seen in the market -- jonathan: 12 months to the day that thomas pulled the plug on -- what is the lesson from this time last year? david: gdp was good last year.
they came back from it. maybe the lesson was they did not need to buy all those euros. they thought they did. the jury is out. they still have a lot of deflation. as much of call that a hater move for the swiss. a hater move for a few people in the market who had the wrong position. david: lessons to be learned by the swiss national bank. david zervos, always good to have you with us. markham we will be joined by howard marks. that's tomorrow, we will be joined by howard marks on "bloomberg ." ♪
good morning. i'm betty liu. here's what we're watching at this hour. we are a happen hour into the trading session, shares fluctuating as european stocks are falling, but crude is holding onto those gains after briefly falling below $30 a barrel this week. prop it popping at j.p. morgan, the biggest u.s. banker up 10% in the fourth quarter acid/his expenses again. a new shocker for the auto industry. ault shares plunging after its offices in france are rated by the government. quarter% in the fourth expenses again. matt miller has the latest on the markets.