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tv   Bloomberg Markets  Bloomberg  January 14, 2016 12:00pm-2:01pm EST

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by the behavior of terrorists it is ahe world and global need for leaders to go deal with that problem and deal with it now. that is clearly a focus right now because we know how fragile the state of the country is and the economy, but getting back to the issues you can put yourself behind and the chamber and money behind, what are you going to be putting your money behind in the hopes of getting some sort of common ground and something done in washington? tom: before i answer that, before you say nothing's going to get done in washington, if you look back at the last six or seven weeks, on a bipartisan basis, the house and the senate took on seven or eight of the export of oil, took care of the cyber security bill, took care of the xm bank, went ahead and passed the most important
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infrastructure transportation bill we have had in 10 years. beginning to are see a willingness between the house and the senate in both parties to address america's problems because they have to go run for office. go to 2016l as we and everyone says nothing is we areo get done, that going to do some things about reasonable tax policy, fix this overregulation, this piling on that the president thomas yesterday, which is just choking the american economy and we are going to be major players in the election, trying to make sure the people in the house and needs ofderstand the the business community, which they should see as a solution to their problem. betty: when you say filing on and quoting the president, you are talking about regulation? tom: absolutely. the chief of staff, who is a
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good guy was at that christian science monitor talking about we are going to have regulatory additions and executive orders like we have never seen before. you think that's going to help the economy? like things have been changing the last two weeks. what do you think has made a difference? tom: you had a reality in both houses that all of these things were pent-up and not happening. had we not fix the xm bank, we would have had a significant hole in the wall on our ability to export products to at least 30 countries around the world. had we not done that, we would have left without great assets and no way to use them. had we not done something about the infrastructure, we would
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have left a lot of people out of jobs and a lot of our and the mental transportation infrastructure falling into the ditch. i would say members of the house and senate looked around and said wait a minute -- we are not going to be judged on what we are talking about an the presidential race, we are going to be judged on how we deal in those fundamental issues that are going to affect those -- affect this country. itare going to have to face to it and maybe we are going to have to fix it. you mentioned several issues that you want to work on, including tax reform and regulation, including rolling back the regulations you say are choking the economy and growth. what makes you think any of that can be resolved when we have not been able to find common ground? what is going to be the difference? is an expanded mechanism to deal with overregulation.
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we weren't running the house and the senate on normal order. the committees of the institutions were not operating. when the appropriation committees and regulatory committees are working, you can slow down regulations and defund them. we have that to start with. second, we are getting a much more effective look on regulation, state regulation and what it is doing too small companies and to the banking industry. all of the sudden, there are a lot of people saying we are going to take a second look on that. remember the one thing about the chamber -- we have the best law firm in this city, a public interest law firm and we will see you in court and our record is better than anyone in town. betty: i know you have used that and it is a powerful one. the u.s. jim burke commerce ceo,
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tom donohue, joining us. bloomberg markets continues with alix steel and carl -- and scarlet fu. head over to the markets desk julie hyman has been tracking the moves. what happeneden yesterday. this is the third gain in four days for stocks. streake are on a winning , sort of. it didn't feel like it yesterday. right now, we are seeing stocks peering into the high of the sessions. it does feel like a bounce back from the declines we have had. look at oil versus the s&p 500. we have seen many of the movements happen in tandem. oil is also rebounding.
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there does seem to be a snapback affect. alix: a lot of technical notes say we have been so oversold that it wouldn't surprise anyone to see a rally. so what are the leaders? julie: the leaders are among the stocks that have done the worst recently. upon mobil and chevron, both strongly in today's session. some of those that have been on long losing streaks -- williams company falling, we have been watching freeport-mcmoran slide. it is coming back today strongly. nasdaq biotech index still remains in a bear market. but despite this risk back on attitude in the market, people are still buying treasuries.
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much of a change but directionally, we see a decline in yields. we are seeing flows into bonds and i just want to check the currency market. we see very little change in the pound versus the dollar. lower ands slightly the dollar strengthening against the japanese yen. let's check in now with the bloomberg first word news with mark crumpton. mark: islamic state has claimed responsibility for a terrorist attack in indonesia that began in a starbucks. blewe say a suicide bomber himself up inside the coffee shop and other attackers opened fire. when it was over, two people with five of the attackers. authorities say it's the worst
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terrorist attack in jakarta since 2009. london will deploy more armed please to counter the threat of terrorist attacks. 600 armed police will be added. more than 90% of london's police are unarmed. the leading republican presidential candidates meet again tonight. only seven of the candidates will be included in the debate on the fox business network. donald trump is fending off a challenge by texas senator, ted cruz. >> big story about ted cruz and not having reporting properly a loan he got from goldman sachs. are you concerned about that and do you think voters should be? trump: it is a big thing. i know nothing about it. and i hope heuy solves it. >> you have been in the spotlight for years and years. it is possible
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there are lots of things about him in the background as he becomes a leading candidate? andtrump: he has been up the reason is i have been doing well and i understand it. he has been nice and respectful and he has been really terrific. i hope it is not a big problem. mark: you can see the entire donald trump interview at 5 p.m. new york time. tickets with a winning combination to the powerball were bought in california, tennessee and florida. no winners have come forward yet. global news 24 hours a day 2400 journalists in more than 100 50 news bureaus around the world. i'm mark crumpton. alix: i was not one of those winners. scarlet: we did put some money into it.
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alix: it didn't not work out. scarlet: the number of ipos falling sharply in 2015. is it another sign a recession may be looming? alix: crude oil trying to crack $31 a barrel. but the oversupplied market is containing the rebound. twitter investors don't have much to tweet about as shares reach a new low today. we will look at what is behind that sign. ♪
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alix: welcome back to bloomberg markets. scarlet: it's time for the bloomberg business flash.
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jpmorgan held down expenses in the fourth quarter and ended with a better-than-expected profit. the cost of litigation and compensation declined. new capital requirements will not be as high as estimated. alix: best buy says same store sales fell 1% in november and december. they reported sluggish demand for mobile phones slightly offset by health products and wearable devices. ackman's losing streak is extending into 2016. pershing square holdings has lost 11% this year after a loss of 20% last year on the back of a decline in drugmaker valeant. all of their publicly does closed long holdings have fallen this month. leading the decline, platform specialty products. that is the bloomberg business flash. alix: let's head over to the markets desk where julie hyman
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has a check on the company movers. julie: lending tree is one of the stocks am watching. they are bouncing back after a huge plunge yesterday. company saying it expects to itsase 2016 guidance on call on february 26. yesterday, the company presented did not givece and updated guidance. that is one of the things that contributed to the decline on the stock. shares bouncing back by 12%. today.watching yelp the stock was cut from a cell to a neutral. it is trading above that still. the analyst says it's partly due to a quarter over quarter drop in traffic. there has been increasing competition for the local ratings on the internet. affirming aators
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decision threatening the developing of solar rooftops in the state. the management is planning to sell some power plants to fund a new development. all of that contriving to a plunge in those shares of 12.5%. some double-digit movers for you there. alix: are we headed into a recession question mark some economic indicators suggest that yes, and economic contract -- economic contraction is on the horizon. scarlet: and now you can add ipo's to that list. a note published this week says if you look at ipo filings, it is discouraging. 29 companies raised about alien dollars but volume dropped from the previous year. the first half is doing ok. it's now the slowest year for ideas since 2009. alix: the proof is in the
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pudding because performance has not been that good across the board. even those that did ipo did not do that well. performance was negative for the first time since 2011. materials and financials did best. actually did better than larger companies which i find to be interesting. anywhere between 100 million -- excuse me, $500 million to $1 billion did the best. scarlet: it is curious because one of the reasons they might have been subpar might be week fundamentals. one analyst looked at the multiples and almost five times -- less than 2014, which was the peak there. still well above the average.
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the fundamentals may not be looking as attractive. actual marketnto activity and things look pretty grim. when you saw that big spike, we saw a solid six week cause in ideas. if we see the vix and volatility , that could have an impact on the amount of ipos we have seen. scarlet: and so far, it has. is recession on the horizon? do see ast says they reaction to elevated volatility, so we are seeing the vix elevated and that may put the brakes on more ipos. he is still sticking to his s&p target. these are the is transmission mechanism through which we might see some kind of recession. a good find. still ahead, with oil prices
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testing the $30 handle, will companies in the sector face the prospect of default? ♪
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scarlet: welcome back to bloomberg markets. prices leaving many companies with difficult that loads, causing high default scarlet: rates. standard & poor's expects it will rise to 3.3% by next year. the bulk of the failures will come from companies in the oil and gas sector. here with some insight is thomas
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waters, the managing director from s&p. alix: i was speaking with harold hamm of continental resources yesterday and he said he did not think we're going to see any default this year. what do you see that he didn't? going to'm respectfully disagree with harold on this one. we don't see oil prices rebounding anytime soon. if you told me this time last year that the oil trice -- oil price would be trading at 20, i would laugh and be on my merry way. clearly, the strengthening supplyand concerns about and demand and opec showing no sign of capitulation and the resilience has just been incredible this pipe the fact oil recounts art down almost 70%. there and ran sitting once economic sanctions are lifted, they could produce half a million barrels in the coming
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months. it is quite the story. isx: what harold was saying cost inflation has come down so of 20%hey see reductions or 30% and that has helped them stay alive through the downturn. some of the debt is not coming due for years and that is giving them some kind of cushion. thomas: the debt maturity profile looks good. companies have refinanced maturities for an extended amount that we are looking at a couple of factors. cost structures have been down considerably. they have about 35% cost reductions going forward and we don't see that getting much more out of that. capital expenditures are down about 35% this year.
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that is going to have an effect at some point. last yearhe companies had locked in hedges where they were able to make economic returns. those hedges are rolling off. the big thing is liquidity factors. the high-yield space does not have capital access right now. quite frankly, there's an awful basef concern with the determinations. it is more than likely those are reduced by the banks and that can put a liquidity squeeze, particular the on the high-end credit. scarlet: i wonder to what extent did the price recovery we saw last year where nymex crude went act to $60 a barrel give these companies a false sense of security and allow them to resume pumping when they should have laid off? ofmas: i think a lot companies locked into that and
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some companies were prescient in that they issued some paper. nontraditional capital market access that allowed them to give extended breathing room, if you will. the upstream about 150 companies there and two thirds of those companies are deep spec. ,f you boil that down further quite frankly they don't have the staying power you see in these downturns. last year in the oil patch, about 40 companies filed bankruptcy. we had about 22 companies miss a payment or do distress exchanges. when you have that kind of credit profile, it's more than likely you will see an awful lot of default this year. alix: we do see a lot of integrated and drillers on
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negative watch. we had a chart of how much does sectors were. a source of mine who works at a bank was saying a lot of good companies and bad companies are well-known, but a lot of the companies that are ok are slipping into bad territory and going into junk. is that negative profile going to get worse? thomas: we recently took a price that revision. that highly unlikely historically we have not taken any rating access and this is going to change this time. a lot ofing to see crossovers this year. companies were insulated in the past. that is going to be a huge shift in the market for sure.
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thomas waters, managing director at standard & poor's. peter green was saying something along the lines that is a huge risk. that could be like the wild card. stephen short will join us at 2:00 eastern. scarlet: still ahead, how to -- how do the current market conditions compare with these past? we have a few scenarios run the history books. before we go to break him a quick check on how the equity markets are faring this afternoon. volume is higher and we are looking at the third game this week for the s&p, dow and nasdaq. ♪
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alix: from bloomberg world headquarters in new york,
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welcome back to bloomberg markets. i'm alix steel. and i'm scarlet fu. mark: president obama is ordering the biggest increase in in two decades. he is using a congressional fund to resettle refugees in the u.s. the money will help those from war-torn regions as well as central america. 15,000.increase of the effort to close the military prison at guantanamo bay has reached a milestone. 10 prisoners have been released nationt to a middle east for resettlement. that puts the prison population below 100 since it opened in january, two thousand two. a new poll shows hillary clinton sanders locked in a two-point race in iowa. mrs. clinton leads sanders
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42-40. that's a significant drop and within the margin of error. days, mrs. clinton has stepped up her criticism of mr. sanders. the iowa caucuses are february 1. a hurricane is strengthening in the mid-atlantic. packing 85 mile per hour per hour winds. tropicaly the fourth or subtropical storm to form in january since record-keeping began 165 years ago. news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. back to you. history is often a guide to how markets will behave in the future. aarlet: earlier today, we got number of scenarios that pulled from the history books. >> there has always been in my
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head that we could have some 1990's, of the 1980's, particularly 1998 when the emerging markets were performing well. commodities markets were performing badly. there was financial stress in the credit markets, like we have seen. oil bottomed out. russia defaulted. capital went bust. but we grew something like 4% plus and created 200,000 plus jobs a month. there was no inflation, and the stock market returned over 30% in the u.s. with a stronger dollar. i don't think that scenario is my pace scenario, but if there were to be some sort of messy financial market story, i would put it in the 1998 category before i would put it in the 2008 category or the 1937 category, which is what other
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pundits are often referring to, which is this colossal fed to mistake sending us into a second great depression. be one bigy difference, and that is the extent to which we have become interdependent with the world. one thing that jumped out at me this week was the percentage of from overseas corporations, which is like 26%. that means that when china moves, that could affect coal, potentially. ability is more of an to go between different countries. if things are weakening in china but getting better in germany, we have the ability to move capital so much more freely. things were rigid. we could not get out easily. im quite positive just on the ability of capital to flow.
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get some of why we these crazy volatility scenarios. some ways it gives people comfort because then they can say will this happened, so this might happen, but the elephant in the room is the last five or six years and the amount of stimulus we have had. it makes it almost impossible to compare the here and now to the past. >> sure, as i think i have said way too many times, this has been the greatest monetary policy experiment in history. part of what we started unwinding on december 16 is something to watch with a lot of care. we were nervous about it last year. coming into nervous this year. we actually felt like the liftoff went well on december 16. we are watching commodities carefully to see if they will feed on effects from something
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the central reserve is doing or something that is pent up from experimentation. i kind of think that is not the case, but i am open to the thought. but the real risk is some sort of relic -- regulatory arbitrage like we had in 2008. it strikes me as unlikely. a 90% probability we will be like august and december. get to some lows before we go back up. and then i have a probability about a much deeper emerging market crisis that feeds back and keeps the fed virtually on hold for the whole year, and potentially even more comments like jim bullard made today that indicate that they might be there to backstop us a little. alix: that was earlier today on bloomberg. nextet: coming up in the
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20 minutes, the u.k. central bank did not take a cue from the u.s.. why they voted to keep interest rates at the current level. no, go pro shares. what does the slide mean for larger markets? scarlet: equities and commodities having a rough start to 2016, but one asset is bucking the trend. how it has been able to succeed with all this volatility. a quick check on equity markets right now. afternoonining on the so far. we are pretty much at session highs right now, the third game in four days. is this a dead cat bounce or a sustained rally? argument for a technical bounce. much more coming up after the break.
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scarlet: you are watching bloomberg. i am scarlet fu alix. alix the debate heats up in the u.k. and the chairman of barclays weighs in. scarlet: what is the strategy to keep russia's economy moving along? alix: and a look at the luxury market. sales fellorts that over the holidays on reports of weaker demand in a key market. the bank of england is voting to
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keep its key interest rate at a record low of .5% inflation. also watching recent market volatility is a possible risk to global growth. the chairman of barclays, john mcfarland, is speaking out against great britain and leaving the european union. john: the question is will it be much worse? our opinion is that it will be significantly worse. deputy of the bank of russia spoke to bloomberg about the ruble crisis. there are new demands because of inflation. when wetry to meet them have a policy meeting at the end of the month. scarlet: for the first time
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since 2008, christmas sales declined for cartier. demand is weak for luxury watches in asia. swiss exports to hong kong fell 28%. bloomberg quick take, when we provide context and background on issues of interest. today, china. it has been urged to embrace free markets and and its habit of intervening when things go wrong. the government is overhauling a financial system that has seen runaway growth. but can the rest of the world country the -- can the handle all the volatility without interfering? the answer appears to be no. indexnchmark shanghai more than doubled pboc interest .ates
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economic policies ended in july when a market slide saw the government step in with measures to control the route, arming a state agency with $400 billion. since then, the government has taken conflicting stances, intervening at times and letting the market sort itself out in others. why is china's shifting policy such a big deal? the imf and china's trading partners argue that china needs to better integrate with the world financial system. china got a thumbs up from the , solidifying its power in the global economy, but it's a delicate shift. authorities in china fear that loosentoo quickly to controls or mishandling the process could lead to more turmoil. the u.s. has scolded china on and off for decades for keeping
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the yuan week to boost exports. thea's intervention in stock market has increased volatility by sending signals about its intentions in the true state of the economy. that's today's quick take. for more stories visit torlet: we want to return abigail doolittle, who is live at the nasdaq with the latest. abigail: we're seeing a big turnaround. it's pretty stunning. the composite index was down earlier. now up about 1.5%. of it is biotech. the nasdaq biotechnology index -- behind a lot of it is biotech. indexsdaq biotechnology was up earlier.
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the stock itself had been down sharply earlier. year to date, down more than 15%. this rally we are seeing could , butbit of a relief rally we do see an upgrade to buy from morningstar. some analysts are making use of the recent weakness to offer bullish views. nonetheless, it has been a very volatile year for celgene over the past 12 months. it will be interesting to see whether an out the stock can trade back up into that range, or frankly, it looks like it is more toward the bottom. it will be interesting he was ahead. to one stock firmly heading in one direction, and that is down, shares of go pro. saying they are likely to have revenues about 15% light of what the street had been looking for. they are also talking about a 7% deaf reduction. plunge is somewhat
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stunning, but it is completely in line with slowing sales. 80% stock is down about from august and trading about half the value of its ipo. scarlet: for more perspective ongoingpro, we are joined by our tech reporter and our editor at large. was once an investor darling. but it is a one product company. >> yes, everybody has been calling it a one trick pony. essentially, it has a camera that's really good at what it does, that they don't have any other products. they were talking about a drone, but they have been pretty vague about any details. that they haveis software limitations. they are a hardware company.
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they need to find ways to upload videos that are not so cumbersome. unless they can get past that limitation, they are not really going to see demand grow. do you get the feeling that this is a go pro specific issue or that it's an overall sector issue? cory: i think there are specific issues you could see coming a mile away. you have the business of gopro cameras to surfers and cliff divers and all the knuckleheads -- i have certainly lost my fair share of gopros over the years. try to two man submarine, lost a gopro doing that. businessrofitable bo with a nice growth margin, but from the beginning of the ipo,
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they said we are a media company. later on, we are a drone company. we don't really have media or drones, but some day we are going to have media and drowns and you should value us like that. , and you should value us like that. that it is, it was all about fourth quarter. when the fourth quarter not only missed estimates and guidance, but actually shrank, double digits year-over-year, that's a big problem for a company that supposed to be a big growth story. it's worth mentioning that these other kinds of businesses are both one, difficult, and two, crowded. i was at an event where everybody had a gocrow, a watch, and a drone -- gopro, a watch,
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and a drone. that's a good perspective. selena, what strategic options does the company have at this point? selena: analysts are not optimistic about it. they are like, this is not .ikely to get better if they can overcome the software issues, they could see some real revenue being derived from that. people talk about the potential of an acquisition. it doesn't seem likely. atre was investor interest one point when they said maybe apple would acquire gopro, but it is not that likely. ip want a company for its and its talent. go pro doesn't have that much ip around its camera. if apple can solve the software -- the hardware issues itself,
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why would it acquire gopro for its camera? ry: i went to a camera store is they told me that gopro their best selling camera. it's a big seller for them, but it was surrounded by all of these knockoffs, and that is the environment they are in right now. they don't have ip protection. revenues a falling story, it's an entirely different story. it's also worth noting that insiders were selling's dock in great sizes -- selling stock in great size over the last year or so. analysts who same said this is the next apple and that steve whitman was the next steve jobs. wall street promoted the heck out of this thing when it was a hot nasdaq stock. the analysts were wrong and you
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have a stock price down 72% last year and another 15%-20% today. alix: item care what you say, cory likes analysts. also looking at shares of twitter. someet: we are seeing analysts cutting their price targets on twitter. what is the latest on that company? cory: i don't want to read too much into it, because there is a lot of portfolio adjustment, but this is the worst start to the s&p 500 we have ever seen, since the beginning of the year. ,ertainly, in the last few days we have seen companies that can freee growing amounts of cash flow are not punished as much.
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plus days of free cash flow generation are still far in the future, -- twitter's days of free cash flow generation are still far in the future, if they will ever happen at all. alix: thank you very cory johnson and selena wang. , stocks anding up commodities may have plunged in investorear, but one -- one strategist is making money for investors. we will tell you what striving that, next. ♪
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alix: welcome back. scarlet: stocks and commodities have not had a great start to the year, to say the least. cliff was on bloomberg go back theovember and discussed challenges of investing in this kind of market. cliff: i am the first to say the short term is tough.
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i don't want to infer too much, a couple of, for years, hedge funds complained there was not enough volatility. they said it's a boring market. there's not enough going on. i would not buy that excuse. there is no perfect mark a -- market. you can make or lose money in any market. i don't think you can always point to the current environment and say well, who can make money now? we will have tough times when other people don't. that happens. i think what we try to do is pretty uncorrelated. it's hard for me to address because i don't want to talk about what's going on with other people and i don't want to be too short term about it, but a lot of people are trying to do the same things with the same information. it gets harder. alix: charles stein is joining
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us from boston. what is a liquid mutual fund? it's basically a hedge fund strategy inside the wrapper of a mutual fund. it got quite popular after the financial crisis. people are looking for invest in better uncorrelated, -- investments that are uncorrelated, maybe less volatile. some have done well. some have really kind of flopped. is this fund doing to succeed where others are feeling? easy to answerot because it's a quantitative system, rules-based. they are looking at momentum, quality, value. they plug it into the computer and it spits out an answer. probably the real thing that has helped them is momentum. they had key drivers in the fun last year that had attack killer spectacular--
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performance despite a blot year on wall street. you see thisdo sector or strategy growing? charles: people really want to find uncorrelated investments. the big question is will it work. it will work sometimes. it's hard to know over the long haul whether it will work better than the alternative. coming up, peter fisher, senior director of black rock, will be our guest. oil, deflation, china, it's going to be good.
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alix: it is 1 p.m. in new york. scarlet: welcome to bloomberg markets.
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from bloomberg world headquarters in new york, good afternoon. ims scarlet fu. i am alix steel. here is what we are watching. u.s. stocks rising. is this a relief rally? world prepares to unleash its supply of crude oil. you were its wealthiest clients first dibs -- uber giving its wealthiest clients first dibs, but they can't see financial statements. why? brutal: after the selloff yesterday, a bit of a recovery. julie: it feels oddly study today. not only did we have a selloff,
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but it was accelerating throughout the day. recently, there has been volatility, fits and starts, jerkiness and choppiness. today, by comparison, stocks have held onto gains relatively well. the three major averages are all up over 1%. we had a big upswing early on in smooth has been kind of sailing. take a look at the s&p 500. a burst of oil prices. the white one is the s&p. you had the surge early on. been a little choppy, but both are trading higher today. yesterday, there was not a correlation, but it seems like it is back today. yesterday, exxon
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closed in the green, the only dow stock to be up on the day. and it's also leading the way today. to find a theme today. it's a snap back or rebound for some, a continuation for others. energy stocks are the best performing group today. by almost 4%. health care has been snapping back. it has been one of the more poor performers this year as well. a jpmorgan health care conference going on in san francisco. a lot of i/o tech -- biotech stocks sold off. technology has showed weakness as of late after a relatively strong 2016 -- apple excluded. those stocks are coming back today. a pretty broad-based rally. are doing well.
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some strengthen the dollar at the same time. oil stocks. big cap talking about the dollar as well, we have dollar strength and gold weakness today. a bit of a reversal as well. the dollar index versus the basket of currencies is up a little bit. oncefutures are risk on again. it has really been a fascinating week because there have not been a lot of catalysts. everything is sort of sentiment driven. alix: and the volume implying that it is domestic selling. thanks so much, julie hyman. in on theet's check bloomberg first word news. mark crumpton has the headlines. mark: islam x date says it is behind the deadly attack in indonesia. -- islamic state says it is behind the deadly attack in indonesia.
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attackers opened fire outside a starbucks and set off more bombs. two people were killed along with five attackers. of french official says to high school students -- two high school students may have been skiing ahead of their teacher when they were killed in an avalanche. another regional official says this being group had no guide -- the skiing group had no guide. they have returned today to continue the investigation. finance chairman has resigned. dean parker was under scrutiny for elaborate spending. has raised millions but presided over an operation known for exuberant spending. he has slipped in the polls, lost his campaign manager and communications director. democrats who introduced a bill paul lepage say he abused his power. and impedes rent -- an
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order would likely not survive because it would go to the republican controlled senate. a new study says expansion of the internet and other digital technologies has fallen short in improving opportunities or the world's poorest. in developing countries, mobile phone access eats up a big portion of incomes. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. alex and scarlet? is still trading around a 12 year low. there may be another down leg to go with the prospect of iran unleashing its supply on an already oversaturated market. it's possible if they meet all the terms by the end of the
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week. scarlet: what will that mean for amarket that already sees weakening in demand and too much supply? >> to talk about iran, you have to ask is the market already pricing in new volumes? yes. the question is how much new volume is going to come on stream? right now, expectations are between 300,000-500,000 barrels a day. it is closer to the low end of the range, but if it were to be at the high-end or to come back faster and more aggressively than expected, that could be exactly what an wouldn'tied market want to see. >> the story for 2015 that didn't happen in a big way was u.s. production. we still have 9.2 million barrels a day production in the
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united states. till significant hedging going -- there was still significant hedging going on in 2015. in 2016, will people be swimming naked? a bigwill probably have effect relative to what we saw last year. is momentum to this. the original conception was that u.s. production would end up replacing saudi capacity. that's not the case at all. there is latency on the down side. there's going to be latency on the upside. i think there are overly optimistic expectations that wells would come to the rest you with a price spike -- rescue with a price spike. thisnk the term does come year, but don't expect it to be as brisk as it otherwise might
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have been. >> i wonder if there is another factor in here, which is technology. >> the general thinking about what you have seen in the last year is that it is cheaper to drill the well. you will see production continue. anna scherzer producing just to --er the notes on their de managers are producing just to cover the notes on their desks. they are not going to stay in business if they keep going down 25% per adam. -- when do prices start to come up in your models? >> the problem is the models are based on the expectation of a fairly steep decline in the u.s. and shallow growth from saudi
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and iranian producers. i would say you are still looking at an early fourth quarter uptake and a swing that uptickues into 2017 -- opti and a swing that continues into 2017. that was kevin book. he was: the flood of oil talking about, you can see the damage in the bloomberg terminal. this is where the long term damage is. this green line is where we thought prices would be over the next 10 years, and the orange line is now where we expect those prices to be. in just one week, long-term prices have re-rated on the market by about five dollars. thought it was going to be $55, now it's going to be 60. -- $60. i have yet to meet an analyst
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who doesn't think we will see substantially higher prices in the back half of the decade. the market is extremely pessimistic over the long term. ofrlet: there are a ton ramifications for companies and how they find themselves, whether they get access to more cash through debt sales or through loans. obviously, watch this space. we will be. , morgan stanley bankamerica giving their clients a shot at buying shares, but investors have to do shares of it over -- buying shares of uber, but investors have to take their word on the financials because they are not allowed to see them. ♪
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alix: welcome back to bloomberg. i'm alix steel. scarlet: and i'm scarlet fu. streak isn's losing continuing. his holdings have lost more than 11% this year after a loss of more than 20% last year on the back of a decline in value of a drug maker. meanwhile, james bullard could be humming a new tune on inflation. at a speech today in memphis, he said falling oil prices may delay a return to the feds 2% inflation target. he has been one of the most hawkish policy makers on
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interest rates. an increase in unemployment applications last week. under 300,000 is generally seen as a sign that the labor market is strong and remains strong. that is your bloomberg business flash update. alix: julie hyman has a check on some of the company movers. you are looking at web m.d.. whether d -- web m.d. is off sharply. take a look. in company said it was not discussions to be acquired. earlier, the financial times reported it was in discussions with potential buyers. when web m.d. said that's not we saw thehat's when stock decline. brown-forman, according to people familiar, is selling
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southern comfort. something called to walk a to a fireball maker. it is focusing more on core brown's -- core brands like jack daniels. haveeys like fireball become more popular and southern comfort has been losing market share. take a look at best buy. reported a decline of 1.2% in november and december in part due to weakening smart phone sales. not as many people upgrading. apple having relatively weak numbers from suppliers, and best buy shares are down by 9%. thank you so much, julie hyman.
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organ stanley's wealthiest clients have first dibs on shares of uber -- morgan stanley's wealthiest clients have first gives on shares of uber. to see theot get financials, but they will get morgan stanley's take. got a holdlie, you of the document for morgan stanley, which is 290 pages. it's short of financial details, so what is in there? julie: we've heard the valuation is about $62.5 billion. morgan stanley believes that's the right number. --t makes it $48 and $.70 $48.70 a share. market volatility or volatility in the industry that uber operates in could delay an ipo, and it might not even happen. somebody could come in and acquire uber. this is further
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wealthiest clients, who can invest a minimum of 250 thousand dollars. is that typical? for bankamerica, one million dollars is the minimum. that's substantially higher. there may be some thought of maryland clients moving to morgan stanley because they -- merrill lynch clients moving to morgan stanley because they could invest in uber. is there any financial data investors can get their hands around? julie: there wasn't much. there were no hard numbers on net income or sales. employees have grown from 160 at the end of 2012 to close to 5000 in september of 2015. so, substantial growth. alix: what stood out to you?
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ande: a lot of risk factors the independent contractor issue. this could be a huge cost for drivers are considered employees. you would have to provide health benefits and other things. right, the 5000 employees don't include drivers. that's administrative at this point. alix: julie -- julie: right. still ahead, investors are looking for some relief. we are going to hear from an a portfolio manager who says don't discount the little guys. ♪
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scarlet: welcome back to bloomberg markets. i am scarlet fu. alix: and i am alix steel. the volatility in the market
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might make finding a place to put your money a difficult task. but one person thinks he has the answer. scarlet: let's head to bloomberg radio for more on the strategy. welcome, everybody on bloomberg tv. this is the bloomberg advantage on bloomberg radio. we want to talk about investment ideas. it's a tough space, the equity market, in 2016. george young is the comment or of a fund with about $3 billion in assets. fund wither of the about $3 billion in assets. nice to have you back. it's been 10 going. you play in the small-cap space predominantly. -- it's been tough going. in the small-cap space
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predominantly. george: investing is a long-term game, not an overnight transaction. if you have the opportunity to invest for a long-term, saving for retirement, a longtime off, there is risk in the equity market. we know that. there are always opportunities out there. of great stocks available to us. taser international, who makes the stun guns. and now they have body cameras, which are important. talking about go pro and how they have to expand their product line. it is kind of hurting them that they are a one trick pony at this point. begun: taser is not anyme, it's the body camera. all of these horrible problems we have had in ferguson, baltimore, they can be captured on film, and must be.
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was down why aren't we seeing that reflected? george: therein lies the opportunity. that's why we dutch that's where we come in. we started buying the stock about two months ago. when we talk to local law enforcement agents and national law enforcement agents, they say and the taserguns the law has now mandated that they have these body cameras. cory: revenue is only growing 14% in the last quarter, the slowest they have seen in year. the opportunity is not being reflected in the financial result. george: right, but you have to look forward instead of looking backward. the cofounder has moved to
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europe for a year. he sees opportunity ever there. london metropolitan police bought 20,000 body cameras. and over there, they don't have the predominance of cops using pistols and other weapons. they need to make sure that whatever actions they take, not only do they use the stun guns as a weapon, but the body cameras become all that more important. you also like an online educational company. george: correct. education today is still where we were years ago, like a log cabin with a chalkboard. unc is aschool well-known business school. yal, georgetown -- gail -- e, georgetown nursing school, you can get a degree online.
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you,: i have to ask because there is a fair amount of competition in this space. ofhad the head of you dass e.on. there is a fair amount of people doing online education. george: the differences they will do the marketing for university of north carolina, .or georgetown, for yale carroll: and they have marquee names. george: exactly. and that's the real difference. they are not going to go with somebody who is fly-by-night. they are going to go with somebody who has a track record. corey: you mentioned talking to police departments. try to get do to ahead of the financial filings? carol: 20 seconds. george: we rely on a strong team
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of analysts we have worked with for years and then we talked to management to rectally. it's very important. arol: bottom line, the downturn is a buying opportunity. george young joining us here on bloomberg radio. back to you guys. ♪ carol massar and cory johnson of bloomberg radio. still ahead, jpmorgan is kicking off earnings ahead of estimates. will others follow suit?
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alix: we are looking at a rally still underway. overall, a tremendous rally, the
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dow up by almost 300 points. scarlet: within the dow, 29 members are gaining, only one is declining. home depot. alix: it's like whiplash from yesterday. bloomberg world headquarters in new york, welcome back to bloomberg markets. i am alix steel. fu.let: and i am scarlet let's start with headlines. mark crumpton has those. mark: the leader of al qaeda is calling for attacks on the kingdom of saudi arabia following mass executions earlier this month. was releasedorded earlier this week and reported by a us-based terror monitor. the message comes among high tensions between saudi arabia and iran. the executions included a prominent shiite cleric. president obama is kicking off
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his final year in office by hitting the road. in louisiana, the president took audience questions and discussed a lost opportunity. my biggestbama: regret is that politics has during mye rancorous presidency, and more polarized than it was when i came in. praisede president louisiana's governor for expanding the state's medicaid program to provide more health care coverage. that's something bobby jindal refused to do. baltimore officials have approved spending $200,000 for equipment police say will improve the safety of the the hands. the issue gained attention after the death of freddie gray, whose neck was broken during a van ride. new bumpers will keep prisoners
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from sliding and add straps they can hang onto while handcuffed. water iswhere the poisoned now has a new health crisis. a legionnaires disease is spiking in flint, michigan. of lead were found andhe water last fall, bottled water is being handed out door tdoor. news 24 hours a day. im mark crumpton at the first word desk. jpmorgan arees of gaining today after the bank reported fourth-quarter earnings that topped analyst estimates. jpmorgan is the focus of this week's the numbers don't lie segment. sales have yet to take off since the financial crisis, hampered by a new regulations, but revenue project a growth of up to 5% in 2016.
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profitability should improve for global banks on the whole. after bottoming in 2012, the return on assets is seen rising through 2017. for jpmorgan specifically, improved credit costs have helped. you see the return on equity last year. they did dip lower to 9% in the last quarter, but they are still on that project three. wall street firms are under fresh or cut costs. fixated on things like the efficiency ratio. jpmorgan is targeting $2 billion in its consumer unit and more in its investment banks. bread-and-butter business is making money off of loans. that's in decline.
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now that the fed is raising rates, analysts estimate that's ready to increase. we saw the market start to move up just a tad. ix, that your directory will determine whether investors continue to favor -- that will determine whether investors continue to favor banks. alix: bankamerica and morgan stanley report on tuesday followed by goldman sachs on wednesday. joining us from baltimore is christmas stock deal, a bank mufstacio, as chris bank analyst. erik schatzker is with us as well. he has been covering this story on morning. at some point, cost efficiencies run out and you actually have to grow. when are we going to find that? we going to find that? chris: that has been the
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question for the last few quarters, if not the last few years. a bigger part of that is managers a margins with interest rates being so low. we saw some relief in that. income dollars are up quite nicely, a few hundred million dollars. hopefully, that is a sign of things to come. are starting to trend downward with a combination of modest growth and cost-saving measures. eric: is there a possibility wells fargo might surprise tomorrow. we saw jpmorgan report better than expected. also, there is loan growth that jpmorgan. if they are benefiting from certain factors, it would not be a surprise to see wells fargo similarly benefiting. chris: i think that's right. we are about 2% above the
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street. $1.04. i think the consensus is $1.02. it's very broad based. it was consumer, card, wholesale, commercial. we think we are going to see similar results in terms of loan growth. we think there is a pretty good chance we are going to have a decent report tomorrow from wells fargo. aboutt: talk little bit the provisioning, eric, that you have seen at the banks. that's obviously going to be a concern with all the damage in the energy sector and the resource sector. error: and jamie dimon was questioned, if not hammered about it -- eric: and jamie dimon was questioned, if not hammered, about it on the conference call today. if oil stays low for 12 months or longer, jpmorgan is looking at $750 million of additional loan loss provisions beyond the
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$550 million it took in 2015. needs tuesdayil that low for that long for that to be a problem. one of the things jamie dimon cited is that cost's are coming dramatically fast pace. many of the companies that lots of people thought would have been left for dead by now are still in business. alix: part of that, to your point, is as hedges rolloff contracts with other companies, we could see more cost inflation down the road. onrlet: where do you stand the credit quality trend? is it set to deteriorate? chris: it's a good point. of jpmorgan's loan portfolio is consumer. rates are going to be low for some time after the right down the banks took during the financial crisis.
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we don't think the next recession is going to be consumer led. it rarely is. as it relates to oil and gas, keep in mind that the potential about $100e is million over six quarters. the increase in income dollars that jpmorgan posted today would more than offset an increase in the loan-loss division based on oil or energy. we are pretty comfortable with the exposure there. eric: foreign exchange, commodity, trading, investment banking on the debt underwriting side don't bode well for citigroup, do they? chris: i can't comment because i don't follow city, but -- will tell you i that relative to our expectations, we were fairly
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conservative. they came pre-close to their expectations going back to november. -- pretty close to their expectations going back to november. they expected to be flat, and that's where they came in. what it tells me is that for the month of december, at least for jpmorgan, they didn't fall into the abyss. eric: that's a point. one of the things they benefited from, in addition to not having a disaster is quarter on the revenue side, was the cost-cutting. the efficiency ratio is down, or the operating ratio, if you prefer. to go furtherit down. do they have the room marion believes they have to cut costs the way they have talked about? chris: i think so. they have been pretty good about
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their guidance and able to hit those targets. i will say that the low hanging fruit has probably been had, so this is going to be a little tougher. the targets are out there that we think will move in the next avril quarters. -- next several quarters. metlife says it has divested its domestic retail business. there is debate over whether it is better for shareholders at big banks to break up into smaller units. how has the thinking on this evolved? think the fed't was trying to break the banks up. i still believe in my heart of hearts that's true. thefed keeps moving goalposts further and further. if they continue to do that, there could be a point in time when they are saying can we earn
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enough with the capital on our balance sheets for shareholders? we think the jp morgan's of the world can still earn rotc in the range of 13%-15%. the capital ratio continues to go up. they may have to rethink that view. scarlet: so the answer is not yet. alix: thank you for joining us. also, thank you eric shatzer. scarlet: coming up, despite oil trading at its lowest level in 12 years, here is one area of canadian oil production were spending is increasing. we will explore. we have all heard or experienced airline horror stories, but united is taking big steps to ensure delayed flights and lost luggage will be at a minimum. can it really turn things around? leonardo dicaprio fans are celebrating. oscar nominations are out and his film took the lead with 12.
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what will it translate to as box office sales? ♪
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scarlet: welcome back to bloomberg markets. the: it is time for bloomberg business flash, look at some of the biggest stories in business right now. reynold may face a volkswagen type scandal. nault may face a volkswagen type scandal. there is an investigation into vehicle in missions. thelet: the automaker is latest to come under scrutiny for its scruples. a federal lawsuit -- chrysler
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in europes halted after shares tumbled more than 11%. credit default swaps surged. alix: if you're headed to the -- two. us for the world economic forum, prices in avos for the world economic forum, prices in the swiss town have dropped. blame a building boom. that is your bloomberg business flash update. scarlet: julie hyman has been keeping track of the latest movers. you have a couple of names for us. julie: taking a look at the .ally we are seeing my take away, by the way, just
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for theit is not time world economic forum. it's not crowded and it's cheaper. nasdaq is up by nearly 2% as the rally gains strength. we saw declines yesterday gaining strength as the day went .n take a look at the s&p 500 over the course of the day. we had a reversal both in stocks and oil early in the session. it has not been a straight line up, but more or less, since then. we have beenings talking about are declining valuations. price, right? a this is the forward earnings -- price to earnings ratio on the s&p 500. we are about at the lowest since october of 2014. that's one of many things investors are assessing. another thing i have been
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watching is the s&p versus moving averages. they are a little hard to read on your screen, but just to make the point that we are trading below the 200 day moving average after this little uptick. even if we are up 1.5% today, it does not make much of a dent in the declines we have seen this year. at the same time as we have seen money flow out of stocks until today, we have seen a lot of money flowing into the bond market. we are now seeing a reversal. an auction of 30 year notes about 45 minutes ago, and now we're seeing yields move a little higher. alix: thank you so much, julie hyman. scarlet: oil is trading in the low $30 range, but spending on existing operations is expected to rise. alix: last year was the first
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since 2009 that investors spent more on sustaining projects than building new ones. joining us now is pamela ritchie, bloomberg canada's tv anchor. you are not going to put out millions of dollars to create a keepell, just paid to existing ones producing more. that makes sense. who is the winner in this situation? pamela: the people cleaning the boilers and making sure the boat -- bolts are tightened. they are expected to see the same trend for the for see a bull future. aconanies like a con, -- spent to expand, but they also have a significant maintenance side of things. they are likely to see gains. their stock has done well over
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the course of the last year there is fiscal spending and they are projected to be a recipient of that. ,n the repair side of things north american energy partners does support services, operation of service lines in western canada. they are down about 31% over the last year. of appeary are more player. they earned 74% of their revenue last year on maintenance and repair. many people think they will do better in the year to come. is one more expected to do quite well. alix: we have seen a futures curve come down so much with the markets expecting oil to stay in the $50 range for the next 10 years.
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is there an argument to be made that longer-term markets will continue to benefit as maintenance continues, or at some point, will maintenance run out? pamela: some analysts worry that the maintenance is done and the overall environment will make that too difficult to maneuver through. certainly, there is an argument these short term that companies will do well. $50 for canadian producers is not really enough. alix: not at all. i'm looking at the oil cost curve. it's a whole different bag of chips. scarlet: coming up, are clearer skies ahead for united after a rough few years? the company is seeing happier customers and employees. we will discuss the turnaround. ♪
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alix: welcome back to bloomberg
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markets. i'm alix steel. and i'm scarlet fu. united airlines has faced challenges since it merged with continental five years ago. chronic issues are delayed flights and mishandled bags. company has seen three ceos and a broad range of overhauls in the past few years. can it turnaround? it is the cover story in this week's bloomberg week. just how bad do things get for united and where are they in that trajectory? >> partly through it. think if you look at all the performance metrics that airlines are measured on, they consistently, for a few years, have finished in the bottom of the barrel among non-discount airlines and even as bad as the discount airlines. that has begun to change.
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they have managed to change things in the past few months to the point where they are in the middle of the pack. i still don't think we have seen the airline we were promised with this merger, but i think we are headed in the right direction. andlet: the consolidation merger was supposed to make things easier and result in cost cuts. it worked for delta and northwest. why not united and continental? >> it did result in cost cuts. but there was too much focus on the cutting of costs. you lost certain amenities. you end up alienating a lot of there was less focus on customer service as well as the basic blocking and in planeshat results showing up on time and bags showing up on time, the things that are important to customers. what is the worst story
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you dug up over the last few years? >> there was an unaccompanied minor. no one showed up to meet her arrived.plane it took customer service forever to find the child. alix: and no one met her at the gate. >> it was a big deal. there is another more recent one, where a disabled gentleman arrived in d.c. and there was no wheelchair to bring him off the jetway. he waited for half an hour and ended up crawling off the plane. did anybody see him? >> nobody helped him, but a flight attendant did apparently notice and feel bad about it, so they alerted customer service and apologized. a heart the ceo had
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attack and has not yet returned. what is the state of management? -- oscar meanceo euros is expected back. z is expected back. he had a heart transplant. it's a serious operation. alix: great stuff i encourage everyone to read. drake bennett. make sure to catch his article in this weeks edition of business week when it hits newsstands on friday. scarlet: much more coming up. , donald trump is on "with all due respect." ♪ . .
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david: welcome to bloomberg markets.
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from bloomberg world headquarters in new york, good afternoon. here is what we are watching this hour. u.s. stocks surging today, the dow climbing 250 point as higher oil prices boost energy shares. jpmorgan kicked off bankshares with a rise in profits. we will tell it to expect from citigroup and wells fargo tomorrow. and the action in gopro is downhill as demand slumps for its cameras. plungedsees its shares 19% since the start of the year. first, let's head to the markets desk where julie hyman has the latest. julie: stocks rebounding from the declines we have seen, not putting much of a dent in the declines of the year. up at her than 2%. in terms of this bounceba


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