tv Bloomberg Markets Bloomberg January 22, 2016 3:00pm-4:01pm EST
betty: from bloomberg world headquarters in new york, good afternoon. im betty liu. here is what we are watching at this hour. as investorsrging brace for what it's coming. the major averages on pace for their first weekly advance in 2016. we will speak with goldman sachs private wealth cio. her team just wrote a report saying investors are overstating china's impact. investors are split on whether it is time to buy or s.ll stock we are about an hour away from the close of trade on this day and stocks are zooming ahead.
that doesn't mean it hasn't been volatile today. i want to head to the markets desk where remy is an seo has more. amy has more. is up by about 1.2%. the nasdaq is up the most by about 2.4%. a lot of this has to do with rising oil all day today, topping off what happened yesterday when we saw stocks performed fairly well, in the green as well. for the s&p, nine of the 10 best performers today all deal in energy as well as oil. look at oil. this shows you the sector health of the s&p sectors. energy is the leader as it has been all day today, up by 3.8%. it had been as high as 4.5%. is thetion technology
second-biggest leader, up by 2.6 percent. also, let's take a look specifically at what is happening with crude today. it is just barely off its session highs in this hour. just above themp $32 mark. i do have to say that today we are seeing the best monday rally since august and the best today rally since 2009. -- today rally since 2009. see energy stocks taking a rally. first, let's take natural gas stocks. that's one of the biggest on the s&p. some of these numbers in the double digits. williams company is up and nearly 20%. that's actually the top performer on the s&p right now. checked, win ok is
number three, up 9%. let's take a look at oil. up on the order of 2%-3% with schlumberger up the most. are the biggest sector weights on the s&p. i do want to show you a couple stocks in the tech sector. let's take a look at apple. riding higher, up by 4.7 percent. this after two analyst notes that came out. piper jaffray most notably saying that shares could rally 50% by september. that is when we expect the new iphone seven to drop. in addition, microsoft is up. it is one of the top stop picks -- top stock picks. amazon is seeing retail plans expand on the order of 7000 jobs a year. you.: thank let's get a check of the headlines with mark crumpton. mark: thank you.
though blizzard menacing the eastern united states could rank near the top 10 to ever hit the region according to the national weather service. to two feets, up for washington, d.c., eight inches for philadelphia, eight inches for new york. some roads in virginia are already seeing deteriorating conditions. an american tourist from ohio is under arrest today in north korea. the university of virginia student is accused of plotting against the government. another american on spying charges was reported earlier this month. in advance of next week's anniversary of the arab spring uprising, egypt is cracking down on dissent. a number of activists are accused of planning demonstrations. donald trump is out with his
first attack ad aimed at ted cruz. the ad paints the senator as an inconsistent politician who once supported allowing millions of people living in the country illegally to remain. describingsponded by donald trump's position as amnesty because it would allow many people deported illegally to return. betty: thank you. the fate of china's economy was discussed at the world economic forum this week. earlier today, the chairman of her beanie global economics try catch china's woes into roubini global economics tried to put china's woes into -- roubini global economics tried to put china's woes into perspective. had the view for a number of years that china is
not going to have a soft landing. it's going to have a hard, bumpy landing. betty: our next guest says the problem with china isn't just the country's slowdown, it's that investors tend to overstate its impact on the world. of -- she ishief the cio at goldman sachs. mostwriteup was one of the read stories on the bloomberg terminal today because people are trying to assess the impact. you say it is overstated. i would say that's first based on no hard landing. if china is having a hard landing, that should not derail the u.s. recovery or the u.s. bull market. betty: or the global recovery. >> or the global recovery. if we think about the impact of china or the u.s. economy -- because we do think the u.s. economy is the main driver of
global growth -- what percent of u.s. exports go to china? ..7% what about bank exposure? if people are worried about a .epeat of mortgage exposure bank exposure to china is about 0.8 percent. in general, when we look at the impact of china and the chinese it does not warrant the kind of reaction we have seen year to date or in august. betty: you say this is predicated on a believe that china is not going to crash land, right? that they will be able to make a slower but relatively high growth rate. what is that assumption? china is nots that going to have a hard landing for the next couple of years. their target is to have growth at about 6.5%.
they will be able to use all sorts of tools to achieve that. if that means monetary stimulus, depreciating their currency, a little more fiscal stimulus, they will do that. from our perspective, the issues with china are much more long term. we don't think they can maintain these types of growth rates without a huge increase in debt. if you increase your debt by that much, either a country will a financial crisis or go the way of japan. betty: do you see a crash landing at some point? >> we think china will be much more like japan for a whole host of reasons, including very poor demographics. if japan's labor force was slowing down by .41%, china's labor force is going to slow down by .47%. they just have too much debt. a lot of the infrastructure that has been billed will not generate reasonable profits.
their enterprises lose money. the problems china has and the reforms they need to do are pretty significant. these are hard to deal with. does that put into perspective people's long-term's view -- long-term views on china that china will eventually come out of this malaise and grow faster than it is right now? you seem to be saying the opposite. >> that's right. our view is that china will be year or two,u -- a but growth will continue to slow. and the more they try to maintain these high levels, the worse it will be down the road. it doesn't have to be a hard, disruptive landing. it could be a slow, steady decline. eventually, they will be growing at lower rates than we see now. betty: it's almost like what is the lesser of two evils right now?
if china did have a hard landing ,nd they shrunk to 4% or less wouldn't that actually, in the long run, be better then this scenario which is no hard landing but a decade or more of japan like growth? >> the international monetary fund has actually recommended that they implement reforms for a good long-term sustainable growth trajectory, exactly what you say. the problem is once you allow the growth rates, you are uncertain what the implications repercussions?he currency you see the falling 10%-20%? >> our base case is that they are going to try to depreciate the currency by 5%-10% a year for the next two years.
thiser it is five to 10 year or five to 10 next year, they will do everything they can to make it as orderly as possible. they certainly have enough that,es to try to manage but our base case is that they will depreciate the currency and that will pull down the currency of other emerging markets. is to reduceation exposure. about buying? are there ways to make money in the slowdown? >> we believe there will be opportunities, but you have to be thoughtful about where you are investing. if you think about health care in china and the demand for services, that's a great area to be. some of that should be done in private equity, but in terms of whether the chinese equity market is actually cheap right now, we don't think it's cheap.
think it's average relative to long-term valuation metrics and that's not cheap enough for us to recommend clients buying in. betty: thank you for joining us, the chief investment officer at goldman sachs private wealth management on china. much more ahead in the next when he minutes of bloomberg markets. it has been a big day in the u.s. we are coming off highs of the session. forver, it has been brutal american express. shares are down the most since 2009. can the credit card icon cover? and with snow coming down, which stocks suffer the most? from restaurants to retail, we look at companies that could be left out in the cold during this weekend's monster storm. stocks are rallying. the nasdaq is higher. thanks in part to the big gains we saw from apple.
betty: welcome back. it's time for the bloomberg flash, a look at some of the biggest business stories in the news right now. goldman sachs has awarded its in bonuses.ion he earned $24 million a year before. those numbers don't include a long-term incentive plan tied to targets set for the years ahead. says demand for its 747 -- eight is very weak. -- for its 747-8 is very weak.
amazon is offering refunds to anyone who bought a hover board and the government wants other retailers to follow suit. multiple cases of hoverboards exploding or catching fire are being investigated. not dead. that is the bloomberg business flash update. -- not good. that is the bloomberg business flash update. investors are not happy with american express's latest earnings report. year to date, the stock is down 20%. warren buffett off -- sold off berkshire hathaway shares. what strong here question mark -- what is wrong here? ?avid: where to start revenue growth has been a problem for american express. they have done a reasonably good
job controlling expenses. they are going to the well again with restructuring, but it is really about increased competition for the premium card holder and the company's struggles to come up with products that consumers want. as a result, revenue growth has slowed and come in below peaks. this is thentioned worst drop since 2009. what is it about this report really hit shareholders? david: i think it was pretty well understood that 2016 was a throw away because they are program incostco march. but the company was still holding out for growth in 2017. last night, they took that off the table. now they are just looking for modest growth. the recovery to 2018 at the earliest. betty: wow. who are the rivals who are
eating up market share? david: chase is one that has done a good job at the high-end of the cardholder market. if you look at some areas of the company that have grown well, it has been similar to the visa and mastercard model. too small a part of the company. they have struggled for growth in foreign markets relative to visa and mastercard. it has been a combination of factors. they have fallen a little bit behind the curve in digital efforts and online. they have been a little slow to get an online digital wallet, which just started. it has been a number of things. betty: it sounds like a confluence of a bunch of factors. the big headline though, as you mentioned, was costco, losing is a major decline. is there no big whale like it
that out there for american express to make up for that loss? david: one thing we are watching this year, starwood is being acquired by marriott. marriott has a program with j.p. morgan chase. starwood has a program with american express. at some point, there is going to be competition for the entire program. it is unlikely that the merged company will deal with two different banks. in 2016 ornt later 2017, that will be a major big one up for bid. betty: thank you. still ahead, we will look at options on a day when stocks are higher. we are rallying as we head to break. some of the most active stocks today, bankamerica, ge, j.p. of the big oil
betty: welcome back to bloomberg markets. im betty liu. stocks are rallying for a second day after a three-week losing streak. oflook at how the options market is handling all the activity. >> toiling us for today's -- joining us for today's options inside is a lead strategist at delta derivatives. row,he past two days in a we are seeing rallies. are these two glimmers of green in an otherwise ocean of red year to date? >> you are certainly seeing a lot of shorts today covering over the stimulus that
came out overnight from japan and europe. sold offum names were hard. we are back at the 1870 level, which is a critical level to hold going forward. i think it's going to be a combination of stocks that really aren't cheap and money that is cheap as the yen and yang here. as the parent of two teenage daughters, i think this market is very much like that. you have to quit trying to figure out what's going on and just accept the day to day drama. >> just hang in there. long -- it will be interesting to see how long the stimulus talk from mario draghi hangs on. mightng do you think that
stick around? >> as long as we hold onto the 18 70's support level, and even when we broke it earlier in the week, it was in with conviction. wasn't withee -- it conviction. we didn't see the vix anywhere near where was in august and september. i think everyone is not committing. both bullish and bearish. inhink fix will be kind of 23, 24, 22 was kind of the pivot point. option prices are coming down, but not calming -- coming down hard. >> what is catching your eye? i saw that city is getting overweighted from barclays right now with a price target of $49. what is attracting you to citigroup? -- to solar city? stock is literally cut in half from the end of last year. it had a big jump up with energy being put them play.
but the fact that -- with green energy being put them play. but the stock has come down hard. partly to do with oil finding a bottom. i think solar city will as well. i like the implied volatility on the options to sell against that stock to protect the downside a little. let's get to your trade on solar city? what are you playing? >> it's a simple covered call. we are going to be buying the shares around $32. selling 30 calls around five dollars. the debit is 27, which is below the lowest we saw earlier in the week when the stock bounced up sharply. we are positioning to be a net buyer below the old recent lows, collapsing -- collecting some nice option premiums. it's a contrarian kind of buy signal.
i like that i am buying a washed out stock and can sell very expensive options against it to hedge. >> tim victim, lead options strategist at delta derivatives s, lead -- tim biggam options strategist at delta derivatives. that he: still ahead, is now the right time to buy stocks -- betty: still ahead, is now the right time to buy stocks? here is a look at the major averages this week, on pace for the first weekly advance of 2016. the nasdaq is the best performer. ♪
snowstorm taking aim at the east coast of the united states could turn out to be one of the 10 worst ever to hit the region. is expected to get the brunt of the blizzard. new york may get up to a foot. 5000 flights have been canceled the next two days. mexican drug lord joaquin el inpo guzman may end up maximum facility sooner. ordering officials to accelerate the extradition process. it would take a year for him to answer charges. mexican marines captured gusman -- captured guzman shortly after he titled after -- tunneled out of them mexican prison. the charges included arresting arrest -- included resisting arrest and disorderly conduct.
an unarmed black teenager was shot and killed by white police officer in august 2014. a regional at the -- regional official has resigned in connection with the flint michigan water crisis. susan is administrator of the epa region that includes flint. flynn's water supply was contaminated with lead. former campaign manager is now working with donald's presidential campaign. according to multiple media reports, serving as an unpaid informal advisor. bennett says he spoke with other republicans before going with mr. trump. 24 hours per day from the bloomberg first word desk. >> thank you.
we have less than 30 minutes to the close of the trade. first weekly gain in 2016. they have led the losses as well. abigail doolittle has more at the nasdaq. apple one of the big winners today. >> the nasdaq is actually having its first triple digit gain. its first weekly gain in about a month. not without much volatility. if you recall the weakness earlier in the week, let's have a look at some of the big standout winners and losers, starting off with the laggards. this is the worst percentage performer in the nasdaq. nothing specific but could represent a continuation for investor concerns on weakness in the pc market. 4% afterhares are down continuing to fear that the
andest client might leave midst big savings. shares are up 8% this week, activist investor eric jackson is said to be looking to make big changes at the company including management shakeup. the chipmaker is up 12% the company reported better than expected fiscal third quarter. outperforming the nasdaq not just on the week but for the year. >> thank you. there is no question that despite the gains today it has been volatile and stomach churning for stocks. some of the top money managers continue to there is a difference of opinion on whether investors should be selling the rebound. george soros advised investors to be very cautious in an exclusive interview with bloomberg.
>> therefore since i don't know eyes short the material producing countries and asian countries, currencies against the dollar. >> however, some buying opportunity in the market mayhem, joining bloomberg's erik schatzker and david whitson in dallas to explain. >> the markets trade on a lot of emotions. we should not pay attention to the daily swings. yearnk we came in the new really questioning our large assumptions.
historically we have three or four global political events. if you add all the political events, we probably had a dozen. everywhere you had uncertainty. then you have the collapsing oil prices that brought it down to below 30. it tests so many companies and so many countries. problem, the market sees these problems that are so immediate. 4 billion human beings are going to have cheaper heating and cheaper energy costs, and that will be put back into the economy. we don't see that, it is so incremental. why the market may still have some digestion problems. we will see a higher market. global gdp will be around 3%,
maybe not as high as imf. i think the most significant problem was the understanding that oil has significant issues with countries and companies. since august we have seen some large inconsistencies out of the chinese leadership. china is important for the emerging world, and that uncertainty, that lack of a cohesive message has become unsettled. mostprobably was the unsettled component of why we have this huge capitulation. capitulation, is not a bear market. >> having sat in the traders chair for so many years, you understand reading that psychology. futures up 200 points this morning, that we saw the bottom?
believe blood in the street, i still believe the markets need to digest the lower oil prices. i would say to any investor, you buy these tips. this isn't a real capitulation. it is so fast and so swift. investors are across the board and use that emotion. let me just tell you two other things i have learned. of the year week have witnessed some large official institution selling. i think that was an unsettled part and reminds everybody where we are at the beginning of the year. that began the re-stabilizing of the markets.
i'm talking all institutional right now. >> is that a bitter sign than retail money? >> retail money you will expect these short violent corrections. it takes longer for retail to come back in the market. -- why i keept. telling our clients you can't walk away from these movements, thesen't leave the market are great opportunities, that is what we are seeing. dallas larry fink with erik schatzker and david westin in dollhouse. here to break down contrarian , speaking with different investment strategies. clearly defining two different sides of this market. >> i would say since the middle
of wednesday, we are up about 5%. good.g they are the big asset manager. start buying again on wednesday, that is definitely an encouraging sign. ignore what they are saying. that is definitely on the forefront of people's minds. think recognizes we have capitulated a little bit from maybe some of our more bullish stances. definitely something to keep an eye on. i think a lot of his argument relies on the sense of -- the sense that outside foreign investment may destabilize a little bit. right now the balls are winning. next week could be a totally different story. >> why are there such differing opinions?
>> it comes down to china and oil. are going to bounce off 30, we are going to go all the way down to 20. you have guggenheim partners, based on the fact that oil is going down to $20 per barrel. that is the sticking point. it also comes down to what your view on china is. there are some people who don't look at either of those things. management, he is a bear. particularly in the last 12 through 18 months. market is being held together by duct tape. we have a couple of good blockbuster stocks with a bit of underlying weakness. transportation has been in bear markets for months and we are seeing some internal weakness.
>> he says you can't forecast this at all? >> he is a little bit on the fence here. the big predictors of the bull market. he came out yesterday and said it is the most worried he has been since 2009. with the price of oil, they are black boxes, you don't know what the full story is. you can't possibly understand the political dynamics occurring. you have to be tempered in your investment. he is recommending staying on the sideline. >> still ahead on bloomberg markets, a major show -- a major snowstorm is about to hit after dumping snow and ice. we take a look at the stocks to
>> good afternoon and welcome to bloomberg markets. it is time for the bloomberg business flash, a look at the biggest business stories in the news. united airlines may be heading to some labor stability. hike and restores pay. the extension was approved by 79% of the pilots approved. workforce after a 2010 merger
with continental. verizon and hearst may join forces for a video venture. talks to develop new digital media branch for the new mobile cd -- mobile video app go 90. most are looking for way to attract younger viewers and digital ad dollars. and house of lies makes history. it is the first television show to shooting yuba. also reporting a surge of interest in cuba as a viable location for filming. that is your bloomberg business flash update. it is finally here in a big way. a monster snowstorm is there a link north. it is hitting washington dc.
snowfall coming from the sky. getting more than a foot of snow. in this weekend storm, let's bring in craig jia modell who wrote the story. you actually zeroed in on one particular food chain. >> that was shake shack based off of bloomberg intelligence. shake shack is a newer chain. 70% in the storms pass. it was founded here. they have a bunch of stores in d.c.. a big percentage of their stores closing expected to be affected by the storms. it could be a slow weekend. you look at a major chain like mcdonald's or wendy's.
much smaller percentage. any projection on how much they can lose in sales? you see shopping before and after. another thing to note is it is easy for these chains. last winter was tough. it might not hurt them that much in the earnings. >> what has happened in the meantime? it is a pretty volatile sock -- volatile stock. change over 2015 was up 2.3%. it really had wild sit -- had wild swings. people thought that was an intense interest from short-sellers. this outy meyer put for the ipo, they put this out a number of shares. a lot of trading and big swings.
more than doubled. went all the way to 90. now it has settled in. into 2016. do the stores do as well as here? >> shake shack and other food companies, how they may be effective. ,reaking news, david einhorn some news that they are shorting netflix and amazon. short positions disclosed in an investor presentation against david einhorn, the big hedge fund heavyweight. netflix andort amazon, these take momentum stocks of 2015.
with all of this, a couple of superlatives to keep in mind. to snap a are on pace three week -- we're also seeing rallies since december. so much of it has to do with rising oil. taking a look at what is happening over the past week, we are in the green for the s&p 500. least of the leaders still up by 6/10 of 1%. biggest leaders up by 2.2%. ,et's take a look at wti crude because that has been the push. we have almost been at session highs. up nearly 9%. on the $32 handle. are back at that threshold.
we are seeing the best one-day rally since august and the best today rally since 2009. say everything is rosy. that is scraping the bottom of the hat and has been the whole entire day. it is q for a profit. a bunch of factors, including the deal of cosco as the stronger dollar. >> thank you so much. we are a few minutes at the close of trade. rally.ongest two day was this a capitulation. michael regan joining us, columnist for the commentary section.
there is a wide berth between two sides. >> it is pretty amazing. what is especially amazing as people are willing to go out on a limb. big investors. you feel the need to express yourself. you have to have a big opinion. it is a fascinating dichotomy. other sane the complete opposite. it takes two sides to make a market. that wednesday, that terrible 3.7% drop in the s&p? that the idea with capitulation, that the bulls given, they throw in the towel, sell everything, and the bears
are satisfied? >> how will we know? >> you won't know until we are in the warrior -- until we are in the rearview mirror. there are technical reasons that can cause a rebound. a dramatic drop we have seen in the beginning of the year, 10%, at the bottom, obviously they are short covering us. if you look at some of the big movers, any with is going to bring in short covering to more heavily shorted energy companies. even though some are down 70%, even though southwestern energy, up huge the last couple of days, and others like williams heavily shorted compared to what they are typically.
>> you know what is interesting is how many people start to call the bottom. >> citigroup looking for a this surge in supply comes after the iran section. a point of trivia, the bull market is technically up over 20%. by our technical definition. bloombergou columnist, much more ahead, including the market close on this friday.
u.s. stocks closing after a volatile tgif. the question is what did you miss? the biggest names in davos away in on volatility. >> our guest says u.s. stocks are still too expensive. fornd oil prices lower longer, why one analyst says this is a miss. the markets, what an incredible week. kind of a turnaround on tuesday and then it took off on wednesday. we are on the strongest two day advance. >> the kind of put it into perspective, the dow sought tremendous swings from the low itit