tv Bloomberg Markets Bloomberg February 2, 2016 2:00pm-3:01pm EST
from bloomberg world headquarters in new york, good afternoon. here is what we are watching this hour appeared oil plunging for a second day, its worst two-day drop since 2011. stocks are falling with it. the dow hovering around a 300 point loss. after bet passes apple as the world's most valuable company -- alphabet passes apple as the world's most valuable company. we're a out plans for yahoo! -- marissa mayer lays out plans for yahoo! pressure rising on greenlight capital. they've managed to avoid a large-scale exodus. will they deliver before it's too late? the selloff is exhilarating, dow down over 300 points.
julie: we've seen the resumption of this correlation between oil prices and stocks and the resumption of concerns about global growth with no particular catalyst today. we do have a lot of earnings reports in the u.s. that disappointed investors. the nasdaq has been leading the kleins, down 2%. declines, down 2%. it has not really made any significant attempt at rallying. take a look at my bloomberg for the movers within the dow. stock that isonly up in the dow jones industrial average. goldman sachs, boeing and chevron are the three largest weights on that index. regulator this boeing appears to be following
this general turmoil we are seeing. chevron falling with oil prices as exxon mobil and bp are reporting earnings. and the dollar have not held their rallies. julie: they tried, but it did not work. oilad a couple attempts for to take a leg up and then it has come right back down again. almost at the lows of the session, down nearly 5%. there does not seem to be a particular catalyst. it has been a two day selloff now. the biggest since summer of 2011. we are going into the weekly inventories report. it is not necessarily accounting for all the declines. as for the currencies, those we are watching, too.
moveollar attempted to less lower come if that makes sense. the euro is gaining steam against the greenback as well. much. thank you very let's check on the bloomberg first word news this afternoon. hillary clinton's victory in the iowa democratic caucus means she will collect 23 delegates and senator bernie sanders will win 21. the party officials who can support the candidate of their choice that's mrs. clinton now has a total of 385 delegates. syrian opposition groups are threatening to pull out of peace talks before they are barely off the ground.
they are demanding an end to airstrikes against rebel held areas. committeeegotiations wants a halt to russian bombing in support of bashar al-assad. they are also seeking the release of prisoners. flightline swiss says attendants and pilots will not be required to fly to sao paulo, brazil if they do not want to because of the zika virus outbreak. the world health organization declared a global emergency over the explosive spread of the mosquito borne virus which has been linked to birth defects in the americas. president obama plans to ask congress for $1.1 billion in his budget to help fight the hair when an prescription drug abuse epidemic in the nine states. -- in the united states. it has led a handful of senators nominee to head the
fda. the state appointed emergency manager for detroit is leaving the job 4.5 months early. he told governor rick snyder he completed work ahead of his 18 month schedule. thernor snyder is pushing legislature to provide state funding to address the district's $500 million operating that. -- operating debt. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. david: 20 15th biggest winner in the s&p has been on a losing streak this year. the stock is down 20% year-to-date. shares took a major hit on generally 19 after the company showed signs of subscriber slowdown -- that looks getting a big thumbs-up from piper jaffray's. -- netflix.
the key to winning over the next big wave of subscribers lies in must watch exclusive shows. >> 6 million net additions will be a record for netflix. we are super excited about that. we are seeing some of our new shows like making a murderer not only be huge here in the u.s., but emerging as a big hit around the world. david: mike olson joins us now from minnesota. you talk about how netflix is no a domestic growth story, it is an international one. mike: absolutely. this is an international story. domestic may be hitting the wall. i don't think we are at a saturation point, but the company is in talking about 90 million domestically. low 60's.y is in the we are inching closer to that
saturation point domestically. internationally, there is basically seven times the number of shots on goal's. -- shots on goal. thed: i want to ask about means by which netflix is expanding. brazenly going to 30 countries. can it grow so widely so quickly? >> there's a lot of challenges come a lot of risk to that. so far, the case has been if you build it, they will come. that has worked in the u.s. and latin america. , if they spend a lot on content and do the right marketing, can they get the subscribers? is yes.the answer it can work, but not without risk. markets like china, south korea, japan already have a lot of incumbent competition. we expect their potential to be less robust.
a lot of other countries where there is less competition, there is a big opportunity. david: you mention saturation when it comes to this scriber base. is there a potential for saturation when it comes to content? a lot of competitors are doing the same thing. is there room for more content still? >> there is. you will see a shift away from content consumption on traditional broadcast to more streaming services. the dollars spent on original content will also shift to streaming services. you are seeing that today with amazon and netflix. as those dollars move come the quality of the content will move as well. how well-positioned is this company to compete with amazon and whhulu? mike: they are well positioned to compete with everyone.
amazon is a unique animal in the sense that amazon may use prime loss leadero as a to some degree or a marketing tool to drive prime subscribers. that could be a different competitive dynamic. the rest of the competitors will be looking to turn a profit on the same footing as netflix. if it comes down to netflix and amazon as the two mainstreaming streaming players, there's plenty of room. david: what is it about this moment in particular that has caused you to change your rating ? >> our assumptions did not change -- we did not change our numbers or price target. all that happened was the stock is 30% cheaper than it was in early december. we are at a point where we are seeing the potential for accelerating international growth because they are moving into these additional countries.
china is a huge opportunity down the road. expansion.ng margin that will continue to be the case to mystically. profile isward shifting. -- to be the case domestically. david: a report yesterday to be erroneous -- apple was interested in or going to acquire netflix. is this a company that is ripe for takeover? apple is less likely because apple tends to have a more closed ecosystem. likely would not want to share the content across the existing netflix enabled devices. if you look at a company like amazon who is already growing in this space, acquiring netflix would give them a huge boost.
google would be another potential option. david: thank you so much. mike olson joining us from minnesota. coming up, china's central bank pumping another $15 billion into the country's lending system. is it the right move? we will look at the latest data. rough seas for royal caribbean. the strong u.s. dollar and rising interest rates take a serious bite out of profit. oil getting crushed today as traders free with crude --ckpiles rose ♪
david: welcome back to bloomberg markets. time for your bloomberg business flash. a judge's order and yahoo! to hand over documents detailing her some liar's firing of her -- marissa mayer's firing of her former secondha in command. the judges said her conduct is worthy of investigation. shares of exxon mobil falling today. the world's biggest oil store cutting its budget to a 30 or low. -- 30 year low. takatside panel finds that ta had no program in place to -- theality problems airbags have been blamed for 11 deaths. that is your bloomberg business slash update.
julie: we are seeing this acceleration of losses as the day goes on. dowmajor averages, the falling to its lows of the session. now down it nearly 300 points as we head closer to the closing bell. we've been watching a lot of the auto related shares today. we start with tesla. from 450. the shares rose today. another car stock getting hit is for. errari.ar this is a slowdown of growth. the shares down by 13%.
we heard from a number of automakers today on their u.s. sales. even the many of the companies -- there are concerns that auto sales in the u.s. are peaking. we did hear from auto data. light vehicle sales at an annually adjusted rate of 17.5 million units. there is this perception that we are nearing a peek in auto sales. you have the five-year chart of the seasonally adjusted number. we've seen a bit of a leg down. that seems to be affecting the shares of these companies. within the dow jones motherrtation average doesn't seem to be a particular catalyst here. there was an interesting report yesterday that we are going to see a high number of cars come off lease this year.
a 35% increase year-over-year. that could suppress the value of used cars overall. cars, that could be weighing on those shares. david: turning to china, chinese stocks rally today in late trading after the central bank invested cash into the financial system. coming $15 billion into the banking system as demand rises ahead of the new year holiday. what is the say about china's broader economy? -- what does this say about china's broader economy? we hear so much about the prospect for a hard landing. rbs talking about the prospect for that. where do you stand? >> china faces significant structural challenges. they will continue weighing on
growth in the years ahead. they had significant quality space -- not so much on the monetary side. on the physical side, they are already doing a lot. -- fiscal side. like: what would it look were it to happen? >> the critical risk for china right now is that the central bank loses control of the exchange rate in a messy way. seabourn exchange reserves falling sharply in 2015. if we see a big drop in the port exchange reserves in 2016, that could trigger more bearish bets on the yuan. david: let's go back a couple of months. there's been an evolution here in how the chinese government has communicated what it's doing. everything changes to the
positive side? the gold standard of transparency that we see in the federal reserve, clearly china is a long way from that. i do see them learning from experience. back in august, there was that devaluation of the yuan. in the months that followed, , chinesen a slow burn to sayakers coming out we want a more modest exchange rate. i do see a learning curve. david: we hear so much about this macro shift between an economy centered on investing in infrastructure -- where are we ition?wetrans
are >> a couple years into a decade-long transition. is the new consumer services sector going to sustain velocity? consumer going to be unable to shake the drag from the old industrial sector? david: what has that been for the retail investors? is it still a robust market space? >> the retail investors are long -- they all piled into the market. the shanghai composite index. it all came crumbling down. retail investors were so hard hit, they stayed out of the markets for years. we got a repeat of that narrative in 2015. retail investors come in, they suffer, they come in again.
so-called booking season, the peak january-march season where cruises are booked. david: i mentioned the strength of the dollar, the interest rates. >> that had a positive effect. they really negative affect came from yield impact. david: we heard a lot about the virus. the potential to spread. did that come up today on the call? >> it is something we watch carefully because 40% of crews uises are deployed in the caribbean. they have not seen a booking impact to date. afraid ofe i traveling, they might allow me to cancel or change my reservations?
>> they've offered expected to postponeoption their cruise or rebook it to a region that does not include those territories. david: they are used to this. sars've seen things like be on the minds of observers. i want to ask you about something that came up in the call today. the opportunity for expansion globally. you have a lot of cruise lines looking to china as a place where there will be growth. >> china is a significant opportunity. there are only 700,000 chinese cruisers compared to 11 million american. that may present some growing cost forterms of investment in china and the
shift from seasonal to your route appointment in china. they will have about 9% of their capacity in china this year. carnival, about 5%. not significant, but a significant growing opportunity that will carry caribbean prices. ahead, oil is sliding, having its worst two-day drop since 2011. stocks also plunging. is this the new normal? ♪
quarters york, this is bloomberg markets. launched theirns latest doomed attempt to kill president obama's health care overhaul. legislation cutting much of the law and also ending federal payments to planned parenthood. torepublicans are poised hold another vote today for the 60th time to repeal obamacare. it is almost like it is groundhog day. it actually is groundhog day and they are doing it again. mark: this is the 62nd time the house has voted to repeal the affordable care law since republicans took control of the chamber in 2011. beating back a strong challenge from senator bernie sanders. the iowa democratic party said today it would not do a recount of the results and a spokesman for the sanders campaign said it
does not intend to challenge the results. next up, new hampshire. that primary is one week from today. second placesaying is not as he has previously said "terrible." "my experience in iowa was a great one. could notperts said i do well there and i ended up in second-place." ted cruz one on monday. marco rubio came in a close third. the pentagon will ask for 35% increase in funding to fight islamic state. the u.s. military also wants $3.4 billion of european-based security initiatives aimed at countering russia's aggressive moves toward ukraine. global news 20 hours a powered by our 2400 journalists in more than 150 news bureaus around the world. -- 24 hours a day. david: i'm looking at the dow,
down 310 points. we have stocks once again working to the lows of the session. it has been deteriorating as the day goes on. nasdaq downow, the 2.25%. a decline in oil prices as well today. that is notable. those moving together. oil now around the lows of the session as well, breaking below $30 a barrel. those -- thatp gain, that bounce off the lows as well. we had a couple within the industry. bp comingbp earlier, out with proper declines of 91%. exxon mobil profit declining, beating estimates, but the company also cutting its capital expenditures considerably. by about 19%.
it has risen from the lows on january 20. still posting that 19% drop on the year. david: for more on crude oil, i -- we areing in seeing the market prices decline in concert with oil. talk about that correlation. >> we are seeing the correlation between oil and equities. coming into 2016, we knew we still had the same headwinds on supply that we had coming out of 2015. now, there is a macro economic story on top of that that is helping to push along this correlation. david: what is the overarching macroeconomics? if you look from a currency perspective, we have two things going on in currency markets.
we have the commodity currencies that are being pushed down. at the same time, we have the u.s. diverting from the ecb, the bank of japan and china. we have the strengthening u.s. dollar which causes the further push down in oil. it's also important to focus on the china story. at a 25 year low in growth metrics almost anywhere you look. that is causing a lot of downward pressure. there's a lot of concern about the future and what that might mean. possibly another recession rumbling. causes these markets to get crushed. the macroeconomic climate has changed a bit. what do you see as changing this round?
rush out weighing the possibility of engaging in talks with saudi arabia on production. -- russia. what would change this fundamentally? >> when you look at the situation and the russia story, iran coming back potentially, it almost feels like a classic prisoner's dilemma. everybody knows that all those players will be better off if the price goes up. how they move is the classic problem. there has been the rumblings and we saw in recent days little blitz coming up in the markets when there seems to be maybe some credibility around the russia-saudi arabia talks -- the reality is, at some point, russia will be having a hard time with oil prices at these levels. so, production will come off. the cuts to capital
expenditures, that is emerging as a big story as well. outlook for 2016 looking bleak. >> in a way, this was expected. we knew in 2015, the companies that did hedge were fairly well hedged through 2015. coming into 2016, those hedges are coming off. across the oil complex in all the different majors, the independent producers, we knew that pretty much all the costs squeezed out of production had been squeezed out. we are coming into this new phase where what went going to happen except for capital expenditures are going to get slashed. i want to ask you about the bank of japan going to negative rates. i wonder the greek which that is japan reacting to china. -- i wonder the degree to which.
>> there is a lot of real nervousness right now. there is the need for countries do asure out, what do i the group fiduciary responsible for keeping my country going? maybe that will work for me, to bank. it becomes more challenging when you have the u.s. taking the opposite approach. david: some movement in europe today toward a vote on the brexi t. how important will that be? >> it is important. something lessaw significant, the potential separation of scotland from the u.k. that was also important. boats are important
because not only does it affect the specifics of the countries, but it signals confidence in what is happening in policy, the view of a lot of the other overarching challenges around immigration. having these votes and the outcome signal to the markets a view is very important right now. david: thank you very much. the pressure is rising on greenlight capital's david einhorn. his firm has lost $3.2 billion in assets. can he turn the fund around? y alphabet has power to pass apple. ♪
david: welcome back to bloomberg markets. david einhorn's greenlight capital under pressure after the worst underperformance ever -- only the second time in two decades that they have reported a loss. how badly it underperformed compared to the goals. 15%is goals are to generate of outflow, this difficult number to calculate. he wants to get 30% of the s&p 500.
last year, that would happen 15.4%. positive. the fund is down over 20%. that does not meet his goals, to say the least. david: why haven't we seen the flight we saw out of other hedge funds? >> a lot of investors are saying i've made a lot of money with green light over the long term. he's been around for 20 years. , theyof these investors came in in the 1990's and early when they did not have this headline risk. there were not people clamoring at the doors saying we lost 20%. the average 16.5% year. they are willing to say this is a bad year, let's see if you can turn things around. david: it would be hard to take out my assets. >> right. if you are a normal investor,
you are only going to get a chance to take money out once a year. if you come in recently, you are locked up for 25 months. if you pull before three years, you have to pay a 5% fee. that is a pretty big hurdle for people to that even if this is their third year. other something i will not pay full fees for a long time. will get me 150% of those losses on top of that before i start paying full fees. i might as well cp can recover from here. -- see if you can recover from here. david: i was a wrap. the race for the white house has moved forward to new hampshire. hillary clinton won a narrow victory over bernie sanders. ted cruz with a strong win over donald trump and marco rubio did better than many expected.
let me ask you first of all about mr. trump who gave a conciliatory speech last night. what did you make of what he had to say and his outlook for new hampshire? >> i've heard various interpretations. some said he was morose. i thought he was trying to be aacious and trying to be contrary to the caricature of mr. trump. he thanked the people of iowa, said he had a great time there. donald trump last night won more votes than any republican is everyone before in the eye will caucus. except for now ted cruz who won more the donald trump. the only thing that matters to mr. trump is winning. .- in the iowa caucus
he is still the republican front runner, i believe. he is far ahead in the polls in new hampshire and most everywhere else. next 48 change over the hours. for now, he is still in a good position to rebound in new hampshire and set himself up for a big one-on-one showdown with an establishment player in south carolina. marco rubio was giving a speech that made it sound almost as though he had won. he came in third. >> a big night for marco rubio. who will be the establishment mainstream candidate who can be the alternative to donald trump and ted cruz? marco rubio by last night finishing with a strong third in iowa, doing better than any
previous polls adjusted he would be almost challenging trump for second place. he can go to the mainstream wing and say i'm your guy. if you comes into new hampshire and can lay waste to jeb bush and john kasich and chris christie, he could put himself in a three-way contest between crews, trump and rubio. cruz, trump and rubio. david: the democrats in a narrow race. sanders'ses to bernie backyard. what does it look like for him there in new hampshire? >> these are both candidates who came out last night feeling like they had one. both of them have reason to say that. hillary clinton came in third iowa innt 2008 -- in
2008. buy a very narrow margin claim victory. that is a huge boost for her. she said i know what it's like to lose in iowa and i know what it is like to win and winning is a lot better. she is staring down the barrel of bernie sanders with his home state advantage. every poll has him 15-30 points ahead. sanders came within 50 points of beating hillary clinton in iowa. now, he is here in new hampshire where he is strongly favored. this race is going to be a battle. some people say hillary clinton should skip new hampshire and move on to south carolina. problem with that. bill clinton believes new hampshire is the place -- almost
a home state to the clintons. no matter how many people might be saying to her, let's not play to win, let's downplay new sopshire, not build it up that it won't have the same magnitude when bernie sanders wins. bill clinton disagrees, saying we can win here if we work hard enough. david: thank you so much. john heilemann joining us from new hampshire. include johnson i sununu. julie hyman has morphed in the markets desk. has thesetech exaggerated moves. you see a decline of nearly 4% today. specificard to find
stock news. one stock we did find is bio pharma, cutting its dividend to five cents from $.15. that is weighing on those shares by 12% here. been one of the biggest losing groups, losing ,hree times that of the sp y down 30% at the moment. our shares are higher in 2016. it has been overwhelming, the amount of selling we have seen within biotech. , despite the fact that biotech's have come off by , the valuations are still about twice that of the s&p 500 if you look at the
david: welcome back to bloomberg markets. alphabet is now the world's most valuable company. the web company has been inching closer and closer to the iphone maker in recent weeks. investors lost confidence in apple's smartphone business. now that they are on top, can they stay there? i want viewers to take a look at my bloomberg here, this comparison of apple versus alphabet. apple in white, alphabet in blue. what did we learn yesterday?
we talked about what we might parse from that earnings report. alphabet separated the x and googleoogle fiber and nest. from the core business. the core business profitability has surged. they are all doing even better than we thought they were doing before. the other areas are costly and the cost has increased. the amount they are losing on these moon shots has actually doubled. had a lot of confidence and the stock has been surging since she ended up in this division. people are feeling confident she --going to control these there will be more transparency. they did not learn as much as they were hoping to. what we did learn, all looks
good for google. david: what more did you want to learn? what are you looking for? emily: it would be great to know specifically which other bets they are trusting the most. bet.e fiber is a big it is better to look at them on a year-over-year basis because the spending may be uneven. how much are they spending on that? -- much on their spending the projectnding on to expand lifespans? david: when you look at the business model of alphabet and compare it to apple and facebook , how does it look? business hasre ad been strong. there's been questions about how well google has been able to weather the transition to
mobile. they are monetizing mobile ads better than ever. at first, they were relying on those desktop ads. they have gotten their. -- it was a tough transition, but they have gotten there. the leaders are google and facebook. there is no one else. david: we are expecting earnings from yahoo! emily: i read one headlight out there that suggested this could be the most important earnings for marissa mayer in her entire career. we are expecting her to lay out additional plans for her turnaround. to convince investors this is indeed possible. there are questions looming about a sale. of the open to a sale? at the moment, they say the business is undervalued. they will not sell the company when it is undervalued. she is trying to buy herself more time and a bit of patience
from the investment community. she is going to ask them, hey, look, i think i can do this in this amount of time. please give me more time. thank you very much. tune into bloomberg west tonight. an exclusive interview at 6:00 eastern time right here on bloomberg television. a bit of breaking news -- s&p aa negative.on -- there's about chevron. more "bloomberg markets" coming up on bloomberg television. ♪
welcome to "bloomberg markets." from bloomberg world headquarters in new york, good afternoon. i am betty liu. blows are setting another in afternoon trade, the dow tumbling more than 300 points at one point. energy prices continue to crumble with wti settling below $30 a barrel, oils worst two-day drop in five years. reports showing that voters are lighting expectations. yesterday morgan stanley cut its price target to 333 from 450. is that still too optimistic on tesla? ipotle reporting after the bell. investors appear to be welcoming news as the company and the stock of finally on the mend.