tv Bloomberg Go Bloomberg February 8, 2016 7:00am-10:01am EST
arabia to do something to shore up oil prices. histrying to revive campaign, chris christie goes after marco rubio. the new hampshire primary is tomorrow. stephanie: welcome back to david westin. matt: i am back -- david: i am back. i am back just in time to see the super bowl. stephanie: unfortunately, just in time to look at brutal markets. we are here to break them down with stephanie ruhle. is fromnd adam posen the peterson institute of economic and jamie metzl.
welcome to both of you. first we want to get started with the first word, and that would be vonnie quinn. vonnie: thank you so much and welcome back. withoutetting started first word news this point. united nations security council is fouling to punish north korea for launching a long-range rocket. that did not seem to bother the north korean government. the u.s. considers such launches a for been test of ballistic technology. there may be new economic sanctions this week. in taiwan, two survivors from the killer earthquake were pulled out of a toppled high-rise building or more than 100 people are still believed to be trapped. saturday's quake has killed 37 people now. 50, denver'sbowl defense shut down carolina's cornerback, giving the broncos a 24-10 win. it may be the last game for peyton manning, who is 39 p will take some time before deciding
whether to retire. global news 24 hours a day, i am vonnie quinn. let's take a look at futures. we are seeing drops across the board of more than 1%. the dow jones many contracts now down 179 points, but we have seen a drop of more than 200 points. one of the reasons is we are following in sympathy with your european markets are down -- with european markets. singleve been down every day this month. you can see the stoxx 600, a broader index down. the dax is down 2.5%. down 26% from their highs. a big bear market. the cac also down there. take a look at my terminal. i want to show you u.s. majors, year to date. i want to show you what we are looking at as far as february. with the -- i put together a
heat map here with this function. down 3.1%.y we are so far, only one week into it. but we have not had a february in the red since 2008-2009. that is where we are as far as the trend is concerned. i want to take a look at oil. the 10-year, let's take a look at those pretty as the 10 year yield coming down to 1.82 as investors by up. they will drive down the yi eld. down and takeive allegra's morning as the china demand was down .8 of 1% in the month. i do not have this loaded up right now. i do want to show you a couple of stocks that we are watching today that are getting hit hard premarket. down after a concern to almost one million vehicles
that when you put the vehicle in park, it is not really in park and it rolls away. i think it has caused 121 accidents. citroen says it is the worst business plan that they have seen. they want to apologize to all the companies, giving negative reports in the last five years because they think wayfarer is worse, going down. and then cognizant came out with earnings that disappointed the market. they do i.t. tech support for all the big banks. stephanie: it was not just citroen. they have had a tough since they have gone public. even broader than that, it is not as though the market cannot find equity support. last week when oil was up and dollar was down, that was the argument, that you would see some sort of rebound, and you are not. you're seeing, in terms of investors, in terms of fast money, the wheels come off.
when you look at facebook, amazon, all of those -- so much -- so many hedge funds were in and theocks last year, second there was a sliver of guidance, moving downward, one single analyst, you are seeing stocks get whacked. david: it strikes me that all last fall we were hearing from investors, that is where people should be putting their money, in european equities. that was the potential for growth. i keep waiting for those markets to turn north, and they are not. stephanie: keep in mind we have the risk of brexit. frome a door knocked away greece potentially needing another bailout. what about european banks? sort -- are we in support of the acronym fang? like yellow -- like yolo? david: moving on from this
interesting debate about fang, let's go to china. governorweekend, the released data that showed china plus foreign exchange reserves shrank by $99.5 billion in january. this has not been just month month -- has not just in one month. even with all the reserves, at some point it gets thin. >> it gets thin but it is about two things. first is, they opened up the outflow but not the inflow. they could have allowed more western investors to come in. there are plenty of people even with the bad news would like to buy china low and get involved, so there is no counterbalancing force. the other thing this shows is piling up reserves is a stupid idea. even if you are china, currency can come under attack. all you're doing is wasting your people's money instead of giving it to the people. so the amount of reserves does not matter that much.
they have to clarify their policies and get that money into better used than burning through it. what do you think?hanie: jamie: it is concerning. the job they need to do with that money is enormous. they are wasting the money. as adam said, they are trying to defend the yuan, they are bailing out their stock markets, they are pumping it into stimulus. what they really need are structural reforms, so they have enough money to buy time, but they are wasting the time and eventually it will not be enough money. tippinge: when is the point? if reserves continue to drop, many investors are saying when they are forced to devalue, that is when you will see the wheels come off. wrong? -- is exactly that is exactly wrong. when the devalue, that is when they take control of their economy.
they will not be instability pushed out of china. they will make a one-time adjustment that will stabilize things and that will take them forward. jamie: but that will scare a lot of people. to whatt that goes back stephanie and david were saying at the start. you can put up whatever acronym, but the keyword is panic. there is nothing fundamentally driving the market. if they by china now -- jamie: the problem is there is structural weakness, and there needs to be structural reform. the basic problem in china is that their economic problems are not core economic problems, they are political problems. to have the structural reform they need to shift their economy beyond a sustainable basis, they need to allow the markets to work. they need to allow -- the problem in china is that the markets do not recognize that the private sector has taken over. jamie: that is really not definitive.
the basic problem is -- adam: i understand it is nice that you want to say it is a political thing because it is a very popular thing in the west to say. but if they have strong control, which they do, and much greater growth in the services sector with employment and consumption getting growing -- this is all getting out of hand. jamie: the basic problem in china is the misallocation of every resource of political power. it begins with political power, and it flows downhill from there. so you have 70% of the bank theseare going to enterprises. that is the problem they were trying to address by enhancing the markets, and they talked them up and they messed that up. so the basic issue is they are not getting capital where it needs to go. could they fix it? yes. require structural
reform. to get the structural reform, they need the political reform. checki think you should the facts on that. it is not 70% that is going to state owned enterprises. that is not true. inid: their foreign reserves part were always available to address the credit issue. they are drawing it down to support the yuan. they will not be there to support the credit issue. adam: that is true, but they have a huge amount of physical growth. the have almost no public debt. they have stuff they need to plug holes with. they have plenty of room to do that. we are still talking only 30% of gdp, which sounds like a lot, but their savings are enormous. it is safer than when the debt is foreign debt. but the basic issue, at least as i see it, is they have a window. they have buildup strong that
they have built up strong forex reserves, and they have a window to an act the structural reforms that they themselves say they need, and they are not doing it. the reason is they have these legacy institutions, starting with the party, that are distorting things. -- ifnie: the answer is the answer is people need to be buying china right now, how come we cannot find any who are? adam: there is a difference between the way investors think and the way market leadership thinks. in the past, usually the investor sector was not right but it was more right in the market. what happened in 2008 and 2009 is everyone lost trust in that sector. everybody missed the small things like subprime, which led to the big things. so they are distrustful now. markets create their own reality with panic. but the fact remains, china is capable of growing, and europe. stephanie: you bring up a
fantastic point, but it panicked becomes reality and the devaluation causes the market panic, then we are in a horrible situation. jamie: china is a bubble. there is a real economy underneath that bubble. has led people to have misperceptions of what they are capable of doing. for sure, there is a lot of concern and maybe even panic in the market. i completely disagree that it is completely misplaced because unless china addresses the underlying problems, then the panic -- this bubble, this confidence game that is china, will begin to recede. stephanie: we have to take a break and leave it there bank. here is the positive -- the story is not going away. thank you, jamie metzl. adam posen is not going anywhere, joining us for the hour. all eyes are on the markets this morning with a sea of red in europe. stocks are tumbling to the lowest levels since 2014.
there you have it, across the board. we will dig into why next. european banks took a hit last week. what does it mean? and stocks are not all that low this morning. here is the low. the panthers last night at super bowl 50 -- i do not like this one bit. david westin, you know i am a cam newton fan. he made headlines at the postgame news conference last night. it lasted all of three minutes when he got up and walked away. , 24-10, to thest denver broncos. better to be a good sportsman than to be good at sports. there will be no cam newton jerseys worn in my house for quite some time. we are taking a break. you are watching "bloomberg ." ♪
vonnie: welcome back to "bloomberg ." tim geithner has a credit line from jpmorgan to help with his new career in private equities. able finance personal investments and funds by his current employer, warburg pincus. apple is on track to open its first retail stores in india according to a person who acknowledged the matter. tim cook wants to grow the company past business in india with 1.3 billion people. atnot plan on an early lunch chipotle. restaurants across the u.s. are opening later than usual so employees can meet about the recent food safety problems. 36% after sales fell
the e. coli outbreak at chipotle. stephanie? stephanie: all eyes are on europe this morning as markets reach lows not seen -- get your head around this -- since 2014. matt miller, i will give you a little global go today. i am looking at the german stock market, down 25% from the highs of 2015. matt: a big bear market. let's take a look at what is going on this morning. as we kick off the week in europe, down more than 2% on the 600, their stoxx broader index. the dax down 2.5%. the foot is down 2, and the cac is down 2.5 as well. the broaderat index. we saw a turned down in oil, and that may have faded that that may have affected the intraday trade of the stoxx 600 as well. it has been down throughout the entire morning.
it has been a rough day, a rough year for europe as well. if you look at the major indices, you will see they have been down hard this year, 13% for the stoxx 600, and the dax is the biggest loser, down 16%. you can take a look at the euro-dollar. the euro is up 2% or 3% for the year. now it is down about one third of 1%, 1.17. i heard a staff this morning sovereign bonds are showing a negative yield right now. the german two-year giving you a negative yield as well. let's take a look at the banks. you can see deutsche bank and credit suisse trading down premarket, and they have had a rough year as well. deutsche bank, there is no doubt that they need to be focused on deleveraging than raising capital. stephanie: let's break that down
for a moment. the note they put out talking about the situation deutsche is in, they are not getting out of it anytime soon. we have seen them cut so many jobs. it is clear investment banking is where they need to big -- where they need to make a bigger push. it is not going to happen. a precursor from what could be happening there, i do not know what else is. matt: you saw also, credit suisse not taking a bonus per ubs said the targets for 2018 are at risk. that is a problem there. let me show you -- on any day next that on any index you can type in grr. that will show you what the different groups are doing. it is a sea of red here to date -- but if you change it month to date, the last five days, you can see some groups are bucking
the trend now. over last month, the basic resources, oil and gas are the only two. david: who is at the very bottom? matt: banks. but also automakers and auto parts. as they have this rebound in europe, investors do not care. they sell the stocks in the u.s.. david: the bottom three or four are financial. matt miller, thanks very much for that global go. we will look at inverse -- at investors diverging views on where prices are headed next. on "bloomberg ." ♪
joining us from london is the president of an energy firm. what is justgh not happening today in oil but in a larger trend, where is it headed at this point? the think this morning scenario was laid out that i think it is exactly right, which is that oil prices will be down for quite a while. what has happened is there was a fundamental change in the theory driving oil prices. for 40 years, the middle east produces all thought that oil prices would continually rise. oil on the ground was worth more than money in the bank. due to global warming, the saudis came to the conclusion about two years ago that some oil was going to be left in the ground, and they have acted to make sure it is not theirs, that it is venezuela's or somebody else's. so we will see oil prices, especially with what larry
-- has has discretion discussed. we will see low oil prices in the next decade. stephanie: many who say we have not been able to trust what comes out of opec, how tight is this to china? oil turns down at the same time that the industry report was out saying china demand fell. when we see china falling and oil falling, it makes you feel like it is one to one. david: but i think phil is right . a lot of it has to do with the politics of the inability of the producers to get together, so many of them feel they have to pump out money. it is not just saudi saying we do not want to be left with stuff in the ground. it is russia, venezuela, nigeria, brazil all needing money fast. they have a huge incentive to get stuff out there. but also it is about the supply change. it is about the fact that the u.s. has become to some degree the marginal producer and they can expand supply when they need to. stephanie: earlier bloombergtv
spoke with ian taylor. this is a big crude distribute it. here is what he had to say about rice. a 40we were probably see to 60 time band. stephanie: this is what you are talking -- david: this is what you are talking about a moment ago. there, and ifing there were, would it make a difference given all the other sources of supply, such as the united states, that adam talked about? philip: russia and saudi arabia and venezuela can talk all they want. saudi arabia is the leader in this. it is the world's largest producer, other than perhaps the united states, and saudi arabia will keep producing unless they can get an agreement where other producers cut three barrels for every barrel they cut. suggests thes, saudis cut production. they cannot or prices will go up.
saudi income will go down. the saudi arabians need to have cooperation from others. i keep saying oil is now the new corn. saudi arabia is a large producer, just as there are some very large producers in i/o and some small producers in iowa. but saudi arabia literally has no market power. so prices will stay down. given the cost production that we are making and everything, prices can go down to 20 or 15. stephanie: i hope in pickens is not listening to that. back with more, talking janet yellin and the jobs report when we come back. ♪
we will start with vonnie quinn with the first word news. 's key: two of the senate voices on defense say maybe we should consider delaying the deploy of, chips. -- of combat ships. after three rounds of talks, there is no progress between the two sides on a new military aid package. netanyahu is going to wait for the next president to take office. the u.s. warns israel will not get a better deal. iran has honored -- honored its -- the agreement brought about the lessening of economic sanctions last month.
stephanie: paul riccadona is here, but first we have to share this morning's must read and it comes from our guest host. we have official date of the companies with more women in executive positions perform better. results fromm, the a survey suggests promising directions for understanding both the impact of dinner -- gender diversity on firm performance and the underlying drivers of diversity itself." adam: walk us through the study. authors put together an enormous data set using publicly available data. together2014, they put
just short of 22,000 countries and brought in different factors and found conclusive evidence that says moving from zero women to companies that have 30% women raised profit by 6%. i don't mean 6% on the original number, i mean from zero to six. this is an enormous change in revenue. we went live when you guys had me. people can look at all the data, go through and check our numbers, but the keep in about this study is that while we had a lot of good people like others try to talk about this, nobody has tried to do this scale of data. the second thing that we think is important is what you just said, it's about women in top management. it is not just about symbolism
of boards or ceos. we find weak evidence that having women on boards helps. it certainly does not hurt. but we find is that having women throughout -- stephanie: in defense of the study, can we make an argument on who are on boards across the board? is, what isality more important is to have a pipeline of women who are up there and recognize women and use their talents in a proper way and are not bound by biases. one other point, the issue is we find that it's correlated a lot with education of women, women's access to mathematics education, the treatment education and paternity and maternity leave policies. david: the important question is, correlation and causation. they are correlated, but does
that mean that if you bring in more women, you will have more office or is there some other factor? and: it's a fair question you are longtime consumer of these kinds of statistics. first, we are trying to get from ui and others to do multiple years so if you can see companies moving up through the years getting the same change of performance, then that is a stronger case for it to because elegy. the second reason is because we controlled for industry and kind -- country, it is hard to say it is not just some other factor. have been they ringing the spell and making this argument for quite some time. who are the companies who are paying attention to this kind of research because again and again, we love having these conversations but we never see any changes. adam: that is what we are hoping
to contribute to the public debate. what is interesting, there are sectors of countries that do better than others. a lot of very montreux sectors like energy and chemicals don't do as well compared to say some of the more modern sectors of finance. stephanie: like retail. adam: not just retail in that is important. d.c. women succeeding in hard see womenrs -- you succeeding in hard tech sectors. there are countries including emerging markets that are really far out and the big lacquers are japan and korea. rich andng for help diverse they are, they are really behind on having women. david: is the real audience for
your study institutional investors? adam: that is a good thought. i would like to think so because there are always some institutional investors who say maybe it is tokenism or that it does not matter. it does matter, so it would be great if you want out there and our friends around the corporate world and say investors should look at. this the second thing is we think there is a role for government working with business. it's about the long-term things that make it more feasible for women to sustain their role in the workforce to be promoted, education for women in math and in general and when you look globally but -- beyond the u.s. and europe, values that say women should be treated equally with policies like paternity leave. stephanie: david: thank you for bringing it to us. time now for the conry con a look at the week ahead and the key economic data. riccadonna is breaking it
down for us. it is a bit of a slow start for the week, so we are still looking the wounds so to speak from the jobs report on friday, but the big three events, first of all, janet yellen at capitol hill as she testifies before the house financial services committee on wednesday and the senate banking committee on thursday. coming up on friday, we have retail sales for january and consumer sentiment for february. those are in focus because we are so critically watching consumer activity where business investment is sluggish. housing is doing ok, but it's too small to move the needle, so we need to know are can tumor spending, retail sales will tell us that. second report, on sentiment,
it tells us a first data point heading into february and will give us an indication if they will continue to spend. stephanie: is not the market that janet yellen should be following, but it's a look across global markets whether we are telling -- talking about u.s. equities. carl: she is not happy. stephanie: how could you possibly stay the course? -- how could she possibly stay the course? two: they certainly have respond to the economic consequences of development and the consequences do not look good. it hurts business confidence which impacts hiring and business decisions. it impacts household net wealth. i think what she is going to do and she is testifying on behalf of the broader fl -- fomc. bit ofust a little daylight between the two, but she is going to at least start the process of walking back expectations. the fed cannot deliver for rate
increases this year or there will be disastrous consequences. david: adam, you and the past said we are underestimating the rate hikes and i said is it impossible to do for?. i did not say it because it was a good idea, it was because i think they made a commitment and carl made really important points. the distinction the chair and the fomc have between the economic impacts versus running the markets and that is why i think we should not focus too much on that because in a sense, they are happy to see some air come out of the stock market. there is always talked of a bubble and excessive pumping up. the fed has a looking for an opportunity to show that they will not always turn tail whenever the markets turned down. data points you want to focus on our labor force
participation, is that going up, and the dollar. how strong is the dollar? stephanie: if i'm janet yellen and regard to what you said panic behavior, if you are janet yellen, what position are you to take when the markets are panicking, when they are making moves based on market technicals and not on overall fundamentals because she is put in a tough spot. adam: the key recognition that she has to make on the fomc, which they won't publicly knowledge, is that they were mistaken to go in december, but they were mistaken because this was already baked in. carl: this puts her in the position now where the cost-benefit of backtracking on that rate increase is significantly outweighed to the negative. if they backtracked the psychological signal to the market a lot -- is a lot larger
then the benefits of 25 basis points. upphanie: 10 year yield is 1.80 5%, you are making no money which pushes you into a year out for you get smoked. carl: it is not just taking money out of the stock markets, it is a general tightening of conditions. ,att: we had alan krueger on last weekend and he was talking about labor force participation falling and that was more of a general trend. we do see labor force participation coming up a little from the fourth quarter of 2015, but if you look -- this is only a five-year chart and you can see how severe the downturn has been. your if you were to work bloomberg go magic and go back 10 years, you would see it is basically flat until 2009, then there is the huge drop. it turned up as wages started to park up.
matt: you can see the flatness. adam: the senior staff at the that this is mostly driven by demographics. you are seeing some spots -- response to wages but not too many people are going to come back into the labor force. too manyn't have people coming back in, the unemployment rate keeps going down, wages go up but that makes the -- the fed inc. we are getting to all employment which brings us back to why they were talking in the first race about raising. stephanie: we go back to d.c. and talk about ec -- policymaking when we come back. adam is not going anywhere. we have to talk about saturday night republican debate -- saturday nights republican debate. when nobody made it onto stage.
in a matter of minutes according to a moscow-based security firm. the russian language hackers use a virus that allow them to place five lan dollars in orders. volkswagen may have to plead guilty to criminal conduct in the emissions scandal. the justice department may treat them more harshly than automakers who have killed -- automakers whose cars have killed people. kung fu panda three took in $21 million in the u.s. and canada. that is your bloomberg business flash. stephanie: that is a deep discount in terms of hail caesar. governors one saturday's republican debate. standout performances from john kasich, chris christie, and jeb bush. >> it is abundantly clear that
he did not. the fact of the matter is, a leader must fight for what they believe in, not handicap and city because of old when this one, i won't run. out of nowhere, the governor of new jersey -- that is what kept me in the house. i was walking out the door and i said who? he finally showed up swinging. i want to bring in mark halperin. your report card was my sunday morning. how data is the damage for marco rubio -- how bad is the damage for marco rubio? mark: it is bad for some voters, but will it be bad to keep him out of second? not even his rivals will predict that. this is a tough, tight fight for second and rubio is damaged, but not enough. stephanie: take us through the
report card. give marco rubio a d. he hasn't these and moments in the debate, but this debate had one main story that got covered in new england and new hampshire which was, is inexplicably robotic performances. chris christie criticizes him for being callow and repeating talking points and in response, he repeats talking points and ask callow -- acts callow. a largehere tend to be group of undecided in new hampshire that break at the last minute. is that true this year? mark: if there was going to be a surprise, i think it will be either jeb bush who i gave a b plus two or chris christie or john kasich who also got b pluses. one of those guys could surge into a solid second-place, that would be a bit of a surprise
given that they have been lighting behind rubio and trump and i might give one of them a leg up going into south carolina if they create enough distance. stephanie: let's talk about fundraising. when you think about who has backed candidates like chris christie in the past, they had very big wall street backers who somewhat held off and said they will sit on the sidelines because it is unclear what's happening. when you see chris christie come out swinging, is it likely you see wall street step up again? mark: they might and chris christie has a super pac keeping him afloat, doing most of the advertising. the establishment guys, ted cruz has some wall street support, trump is mostly self-funded. financialave some support from wall street but as you suggested, people are holding back. rubio looks like you my consolidated, but establishment
winner out of here, there may be one or two or three with another chance to go back to wall street . all four of those guys are going to have money problems in matter how well they do, because it is hard to go campaign in south carolina and go to fundraisers. david: it sounds like former president bill clinton at the gloves off going after bernie sanders. mark: he does not want to lose the new hampshire primary, he at least once to close the gap between his wife so that they can claim a moral victory. last night after being relatively soft on bernie sanders, although he talked about him as his wife's opponent, he ratcheted it up and run of a number of issues, not just two slot -- try to slow sanders down but try to frame things up for the subsequent hampshireter new
where hillary clinton is going to sorely -- these sorely in need of a win in new hampshire where bernie sanders is going to be doing very strongly. stephanie: many of us scratched our heads at the end saying anyone -- this is anyone's game. going into tomorrow, how decided were voters? mark: there are still a lot of undecided voters. you hear people say they are thinking about kasich and bush, rubio and christie. of -- there is lots of indecision and historically, there is somebody who has a chance to consolidate that. with christie's strong debate performance and rubio's week one and bush and kasich pushing along, you could see everybody get some of that undecided vote ,nd you have a big matchup
three or maybe even four guys roughly tied for second and nobody can tell you what that means going forward. bookanie: i tell you who's of business this is good for, yours. duecan catch mark with all respect, live from new hampshire, tomorrow night at 5:00 p.m. eastern. adam, thank you so much for joining us. what an hour we have had. when we come back, we tell you how much this super bowl ads cost and if they were really worth it. seconds, isor 30 that worth it? -- it dide me want not me want to eat doritos, the commercial they put on made me lose my appetite. we cover that and a whole lot more. markets are in the red.
stephanie: the super bowl is not just a big night for football, clearly for advertisers. nearly $5 year cost billion for a 32nd ad. peyton manning gave some free airtime to the king of beers, not once but twice, plugging budweiser in interviews. dimensions were equated to $3.2 million in free advertising according to a marketing group. he said it twice. early on he said it to a cbs reporter and there he was on the big stage saying he was going to spend time with his family, think the big guy upstairs and drink more beer. rule youthought as a
were not supposed to have a player endorsing alcohol beverages. he may have meant beer, the same way when you mean facial tissues you say clean a -- kleenex. david: maybe he likes budweiser. if you're a multimillionaire super athlete, why would you not drink a good ita? -- ipa? stephanie: i think somewhere in there, he is surely getting paid. coming up, we are watching markets in the red. ♪
real estate as well. the scoreboards won't tell you all the winners, we look at the best and the worst of the super bowl ads with demand responsible for four of them -- with the man responsible for four of them. ♪ it is 8:00 in new york city and 1:00 p.m. in london. stephanie: here with us throughout the hour, real estate [-- richard la frack. let's get a check on the markets with matt miller. i'm looking at nasdaq futures, down 150. if this is not look like bear market territory, i don't know what does. matt: we have seen these big
drops in futures. take a look at wti, here they look at brent over there, you can see it really turned down around 5:30 this morning after a report came out from plaques saying that demand for oriole -- oriole in china is down this month. 29.61.down 4% so when you chart oil in terms of dollars, we are the lowest level we've been since 2008. in terms of gold, we are the lowest level since 1988. there is a chart hillary made up for me, it shows me what oil is priced at in terms of and out of gold. one barrel of oil right now costs about 2/10 of a -- two hundredths of a percent of an ounce of gold and is the lowest
since 1988. part of the reason is that gold is climbing. -- $24.p about 15, $1182 a troy ounce and investors look for a place to hide, the equity markets have been coming down. the european equity markets are down six days in a row. investors are also looking at debt. taking a look at bonds right now, you can see it is pushing the yield down below -- a lendingat you get your money to uncle sam for 10 years, not a huge coupon. futures are down across the board as far as the u.s. equity picture. nasdaq futures down 89 points. 1.5%.tures down a couple of losers to show you.
bringing momentum forward, negative momentum, tesla was down 4%. apple was down one and two thirds percent in the free market and alphabet a shares down 3%. news. your first work vonnie: -- germans chancellor says she is outraged by the human suffering -- forced thousands of syrians to flee to turkey. she said turkey shouldn't have to bear the burden of handling refugees by itself. is insudan's population need of food aid according to the u.n. which as police 40,000 people are on the brink of catastrophe. too million have been forced to
flee their homes. iran has honored it's a team on the landmark nuclear deal. the president awarded medals to the foreign minister and defense minister and nuclear chief. the agreements brought about the lifting of economic sanctions, last month. david: more on the markets now. seven of 21 strategists we track at bloomberg have lowered projections for the s&p 500 close. we are joined by sox reporter joe -- stocks reporter. time that's happened at this early any year since the iraq war in 2003 which was not a great year as i recall. joe, how much importance should we give to this adjustment in the forecast? joe: we are seeing a big thercation in -- as well as
325 point range we see in the most bearish forecaster. there is a lot of uncertainty going on and it boils down to several things. first you have the slide in oil, down 15% from last year. you have the slow global growth from economic data from china and you also have a third straight quarter of -- we are currently in the middle of earnings and we see weakness in the tech sector at the end of last week. stephanie: with more analysts saying they are scared and there like goldman saying was only a 25% chance of a u.s. recession, how do you make sense of this? worldd: i don't see the in short-term snapshots, i see it in very long-term because my business is a long-term business. if i'm planning a real estate project, it's not going to happen in a day, or a week or a month, it's going to happen over years.
the cheap cost of money makes my business super attractive, because i can go out and borrow 1.8% and borrow long-term capital under 4% and that is very helpful in the development business. stephanie: for you, it does not matter if the u.s. is headed or a recession? richard: it matters because the psychology of people changes and they get a little negative and it is going to hurt the retail offices willmaybe be a little slower because corporations are not owing to take on personnel, all of those things hurt, but remember, this is a point in time and the things we do take years to do, and then they take their assets that have durability and will last 20, 30, even a hundred years. i don't think about things of the moment. david: rua getting quite a few
of these points in time, at one point to all these indicators start to make you inc. twice about where we are headed, longer-term and global -- longer-term in global growth? richard: i don't believe that for one minute. i don't believe that these momentary market movers indicate anything. my business is a business of people, is the population going to get smaller as a result of the move in the market? no, it is not. these of events -- warren buffett famously said if you own there was an incident in someplace around the world, would that cause you to sell your farm? if you own a house, people stopped paying rent because there is a war in pakistan, so i don't believe any of these things are moments but this is
the trading mentality of wall street and that is what you have. the trading behavior of wall street, if you like these companies last year, you should love them now because they are cheaper. joe: that is a good point and we saw a bunch of tech companies that we thought were overvalued selloff big-time. the nasdaq ratio it is -- is at able to your low. the high-quality companies are outperforming,re this year, there are not enough of them to prop up the markets marketecret of the bull is the companies with the most leverage and the weakest balance sheets are the ones -- richard: i would say that if i super deluxe condominiums in manhattan, i would be nervous because my buyers would not be too happy about writing big checks.
that is just a tiny segment of the real estate business. stephanie: how do we protect the economy, these companies, their earnings and employees from short-term trading? richard: it is up to the management to protect them and the board of directors to protect them. if they keep their leverage ratios down, it they have strong capital positions, if they have proper balance sheets, these things will be whether it, these moments will be weathered. there are businesses that are being outmoded every day, it is time to look into something else. back to youro go piece, these predictions with the market came out with in the last 60 days, they are not secure projections. i can't think of any major events, it is more of the same.
china is slowing down, oil is slowing down, europe was struggling, this was all true the this was all true, before. joe: we talked about the strong dollar, earnings for multinational companies, the dollar is still going up and the china situation has not shown signs of improvement. we have not gotten extremely good economic data that the fed might want to do in interest-rate hike, there were a lot of things coming together all the ones that are causing uncertainty amongst investors and that is why you see such a big range of strategists. i guess-- stephanie: the question to investors, find a view and take a position. richard will stay with us for the hour. david: richard will share the best places to invest in real estate, coming up next on bloomberg go. ♪
vonnie: welcome back. toymaker hasbro posted its fourth-quarter profits. star wars and dress it world toys boosted sales. timer treasury secretary widener has a credit line from jpmorgan to help with his new career in private equity. it will use the money to finance personal investments and funds asserted by his current employment -- current employer. they especially respected to invest millions of new funds to show their interest are aligned.
to bully restaurants across the u.s. are opening later than usual. afteronth, sales fell 36% an outbreak of e. coli atchafalaya and some cases of nora virus. later this week, the conductor latest marketing campaign, yet -- they kick off their latest marketing campaign, yet. stephanie: we turn our attention to the impact of market volatility on investors in less liquid assets. we have one of the biggest developing in the tri-state area. richard, as you said earlier, you don't have to be concerned about all the mark -- all the market volatility. when you look at your projects, specifically in new york or miami, cities that are flush with cash but also people who are connected to these markets, what do you see happening?
richard: there is no question that there is some effectiveness in the high-end of the condo market. probably for different reasons. i think new york, the top end be averbuilt and that may symptom of a bit of a bubble. in miami, the market is somewhat dependent on the dollar exchange rates. a lot of the customers come from latin america and a lot of them are now suffering, especially economy,rom poor local so everything is interconnected in that sense. serving that people, then you will feel it. stephanie: how does it correct itself? land prices are so high that you have to build luxury, how does that change? when the absorption
disappears, people will rethink it and the land values are residual, done through residual analysis, so prices will come down. the interesting phenomenon is an epic think part of this is the millennials, they go everywhere, they don't confine themselves to community, so they are more open-minded about where they live as long as they can be together. you've seen this kind of emergence of the waterfront in adjacent to new york, queens now is getting a lot of attention. the markets correct themselves, that is what they do. there is population growth in new york. there is job growth in new york and so, there will be demand for housing. $10,000t demand be for
-- condominium on the 100th floor? that is a particular thing. your colleagues seem to focus on what i call real estate porn, because that is what they want to read about, but it's not really the mass-market that most of us work. david: expand it out across the country. you are obviously big in new york and southern florida. you also have some on the west coast. richard: i own 4000 apartments on the west coast. seattle, los angeles, they are the cities we concentrate in, and also have some in san jose. david: what do you see as the big growth area in real estate? richard: the rental apartment business has been unbelievably good and will continue to be good. part of that is because we are benefiting from the twin demographic bubble of the baby boomers and the millennials, all
of whom seem to be interested in organizing, interested in living leaving the suburbs, leaving the house. you've seen that homeownership has gone from 70% to about 64%. cities have benefited from that. rental markets are very good in those cities. there is not been a lot of oversupply in terms of housing. the upper enders are now getting adequate service in that area, but the middle and affordable could certainly use a little help. stephanie: are people more keyed to rent because we are not seeing growth? a big part of it is affordability and the labor market. this whole notion of living in the suburbs may not be that
appealing to some people. they like the urban life. >> those have been the factors that have contributed to this golden age of rental. we've had about four years of that so we are seeing some indicators that rent has grown far faster than wage growth and income and people can't afford the high rents anymore. how much longer can rent continue to climb? richard: i think new york rent is going to flatten and you will see some of the condominium inventory turn into rental inventory. you will see some flattening out of that trajectory, and there has been some production. you are in the market of over one million rental units so 20,000 is not that dramatic. since --some obsolete obsolescence that takes place. to thehe issues relate
fact that some of the paying jobs are being replaced with less high-paying jobs whether it is hospitality, the tech sector, where people don't quite make the same money, or the media business, so we will see if we can afford the double-digit or larger rent increases. david: we also want to talk about energy because you are heavily invested. about -- you are responsible for production. are you seeing your investors curtailing production? richard: we cut our cap ex budgets way back in that business. well, drilling maybe one but i am actively looking for opportunity in the energy sector. david: productivity is another thing is we have seen people are
pumping just as much. richard: you have some courses -- sunk horses. companies are burdened with a lot of debt and they have to push out whatever oil they can to pay their bills. cost,nie: if it's a sunk do you not lay people off? richard: my staff was cut back, somewhat. said, right now, i am actively engaged in trying to find opportunities because if there was ever a great time and energy business, it is to buy it when gas is selling for two dollars and oil is under $30. where specifically to five, to acquire some of the producers? richard: i'm not interested in buying companies, i'm interested
in buying assets. stephanie: what does that mean? richard: mineral rights, because that is where you get the pleasure without the pain of cap ex. we have always been involved in that, the business of owning minimal rights. it allows you to participate in whatever comes out of the ground. stephanie: have those opportunities come to the market has there been a come to jesus moment about what the actual value is and the right price to sell? richard: not yet, but you can see that it is starting to emerge because companies now have to sell what they have. stephanie: the smell of desperation is in the air. richard: if i can buy those assets, based on the current pricing, then i'm buying it at what i think is a fair price. david: wendy you think that these companies will have enough
pain that they are providing you the assets you are interested in? richard: they are getting pain every day. when -- whenext is that happens, they get the call for the reduction in their oil amounts and they want those loans reduced. it is not too far. they are scrambling. the fiction that oil is going to be $60, tomorrow or something is going to happen to save them, the hail mary is coming out of the system. stephanie: we are putting you to work. market volatility, real estate, oil, that you for joining us -- thank you for joining us. let's look at what is trending on -- the most important stories in the market.
there was what's trending on the terminal. china, oil, the drop in equity prices in europe and a look ahead to where the market is. what matters to you, richard? richard: yeley thing that matters to me is the price of treasury. that is the one thing i look at every day because that is the standard from where i do my borrowing from. i like to think the stock market is going up and that people were more comfortable about their financial system -- situation, but the one thing i look at every day is the 10 year treasury. stephanie: the one thing that stuck out to me as we look across the board. goldman sachs has stuck out and said hold off. as far as a u.s. recession goes, they don't think we will see that. richard: i agree because i think the fundamental they run is not that terrible.
you have a lot of people who have been put to work, the unemployment rate is under 5%. things aren't so great in china, maybe, who knows and you have volatility in the world. a lot of the fear, today is coming from the political scene. we had this well election -- wild election. think america is accepting all of this. stephanie: is america accepting the candidates? see yoururprise you to competitor in the world of real estate possibly as your next president? richard: nothing surprises me with donald trump. david: you knew him. richard: for 50 years. david: what does that tell you about what kind of president he would be? richard: he has some great leadership qualities, he is
charismatic, great communication skills. i think there is some question people have about his, let's say, his brashness. we have had others like that in the past like teddy roosevelt. some say he is ruthless but lyndon johnson was ruthless. there are a lot qualified people that are running for president and there are a lot of out of the box people running for president. it is strange in my mind that it is how this is still down to that. david: very diplomatic. stephanie: thank you. ♪
would tumble in debate against hillary clinton. tomorrow's bloomberg "with all due respect to escort will have a two hour special on the new hampshire primary. now we are heading over to the markets. look at a couple of the stocks we see moving in the premarket. outlo group getting taken for $9.50 a share or $1.1 billion. this is the college paid education stock. getting taken out for nine dollars 50 since a share. , the stock issler down right now 7.3% in the premarket after nhtsa on saturday said it is going to look into or widen the probe that it has already on an issue that chrysler cars have where
you think you put it in park and it is not really in park and then the car rolls. 900,000l look at almost chrysler vehicles, mostly jeeps. that hurts the stock in the premarket. there have been some earnings out from lowe's, from cognos sense, from hasbro. lowe's had a $.58 per share loss. cognizant disappointed the market. i.t. companyan that does work for most of the big banks. hasbro beating the street estimates with sales of toys connected to star wars. still missing a little on the my little pony business can star wars is a winner for hasbro. an analyst came out and said a couple of calls made last week
were right. he thinks they will get event worse. candor morgan could fall to $10 or less. chesapeake he says falling to zero. this is a hedge analyst in behrens over the weekend. let's turn to our morning meeting. that, we are going to talk with a cohead of global economic bankamerica merrill lynch. he will discuss the outlook on the economy and the risk of recession. thanks for joining us. where do you put the risk of recession here? if you take a look at stop charts, it seems things are pointing in that election. even bonds are selling off when we have an equity route. what do you think of the head? ethan: the stock martha and -- is signaling at high risk of recession.
a 25%n view is about chance in the next year, which is higher than normal. obviously, the economy has slowed down a lot. but we don't really have the normal preconditions you have to go into recession. matt: you have your full-year gdp growth outlook, from 2.5% down to 2%. why is that? year and you go back a a half ago, many economists were looking at 2016 as being a pretty good year for the economy. the idea was that you would have an end to some of the crazy brinksmanship in washington and in and to the post crisis deleveraging of the banking. but we have had new headwinds come in. we had the dramatic strengthen the dollar, weakness in growth overseas, some stress in financial markets. all of that has really cut into our optimism.
a year-and-a-half ago, we would have that many 16 would be a 3% year. now it looks like a 2% year. matt: the drop in oil, people say that net net would be positive because it would put money in consumers pocket. be a strong tailwind for us. it doesn't seem to have worked out that way so far. ethan: i think what has happened is not that oil has hurt the economy. it just hasn't given the normal boost. that really isn't that big of a surprise. we knew coming into this period that american consumers are more conservative than they were, say, before the 2009 crisis. we did expect consumers to save a lot of their gas money. stimulus from oil gas prices has really been quite small. and it has not been enough said, the dramatic surge in the
dollar, which i think is the main thing holding back the economy. matt: thanks, ethan. ethan harris, cohead of global economic research at bank of america maryland. there are 65 s&p 500 companies reporting their earnings this week. many of those are media companies. here to help us is paul sweeney who knows all things media as well as jason deland who is partner of anomaly. disney is coming out. what will you be looking at? paul: for a lot of these media companies, investors will be looking at the cable network business. that is the part that spirit people last summer when they said, this court cutting thing is starting to affect our business. we are certain to lose subscribers on the margin. even espn disclosed loss of subscribers.
david: didn't i read there was a correction from dustin on espn numbers. there was a problem with the boxes. paul: there is a debate between disney and nielsen. court cutting is occurring. they are losing subscribing best subscribers. they actually gained video subscribers in the fourth quarter. what i think that did for a lot of media investors, ok, court cutting is real but the pace will not as fast as some bare spot. stephanie: jason, we like to talk about will approve or not so bulletproof espn. if you look at college football playoffs, down. ad givebacks. super bowl ads happen but once a year. at dollars are so important. for a company like disney, when in collegeing football, what does that mean for ad revenue?
jason: court cutting israel. there are -- court cutting is real. for note millennials watching television the way their parents did or their grandparents did you not even close. in addition to that, outside of sports, you are also seeing major pieces of content he created that have hold-like followings that exist outside of the traditional keller -- traditional cable television audience. the erosion comes from both a bottom up, because of the content and from the top down because people are sniffing the cord, because they can. this is the disruption in technology. stephanie: as long as disney owns star wars, just slap on r2-d2 and you will do well. jason: it is all about content, but there is a massive, massive, massive horse. people are watching this television. david: they are going to start creating original content for
their over-the-top service. they are going to start competing with themselves. paul: netflix is the great story of the last several years as you see over 70 million people globally paying for internet delivered service. never did anyone think that was reasonable for years ago. was likened to the albanian army. he has to take those words how ecosystem by our going over the top? stephanie: does that mean native advertising? you are a content creator that will have a bigger role in the role of television. we are going to create more content. how about making it sponsored? jason: sure. you have to see a few things come together. you'll have to see how technology evolves, how people want to receive the content, the
habits of those consumers. and then what are content producers going to be given -- giving them that works in a digital age. sitting in front of a television for two hours or three hours isn't the same anymore. stephanie: that takes you to twitter. we are tweeting up a storm. but look at twitter numbers. it is a disaster. jason: because people go to wear a new platform is. they migrate to it. it is cool for a while and then gets too big and then it is less cool. paul: they have to grow their users and they haven't. it sounds like a place where advertisers would want to go. but what we are seeing online for digital advertising, you have to be at least a billion users. you talk to facebook and they are over a billion.
snapchat is approaching a billion. messenger is approaching a billion. that is for digital advertisers. david: it's also engagement. if you look at engagement of twitter versus race book, how many users come on daily? there is a big gap. jason: facebook keep innovating off of the platform can bear going into the cloud. they will probably into business to business enterprises soon. twitter needs to do that. they have a big audience. it is a single product that form, if you will. i know they are trying to expand it to look like some thing like timeline. but this is what twitter has to do. this is what technology companies have to do. snapchat will be in the same boat in the not-too-distant future. if they don't innovate off of the platform, they will get really big and then they will atrophy. this is something i think -- facebook has figured out and google has figured out and they are buying companies left right and center. they are innovating for the
future. stephanie: time warner reporting this week, giving the -- given the strength of the dollar, they could take a day. call: 20th century fox is the most exposed to currencies. it has been an issue for them. when you look at time warner, it is about the externa content they have. just be has slimmed down his company. how has hbo now doing? people want to see if that will be a real business for them. they want to get somewhat of a netflix valuation. david: it's almost a tale of two companies. paul: the turner networks historically paved the way for the global cable companies in this country. what we are finding at time warner is they have to spend more and more money creating original content just to be relevant -- stephanie: take a look at the valuation. it is on another planet. good luck with that. maybe jeff bezos could put you
vonnie: apple is on track to open its first retail stores in india. tim cook wants to grow the company's business in a nation with one eye 3 billion people. -- with 1.3 billion people. the sneaker company sketch or has extended its a deal with the marathon runner and he will be running in skechers through the year 2023. he won the boston marathon in 2014 and will run the olympic mile this saturday. stephanie: what is the perfect recipe for a super bowl ad? could it be babies, puppies and monkeys?
paul sweeney, jason the land here to break it down. here is the guy who creates this magic word paul, is it worth it? paul: for most advertisers, it is worth it. if you are a big brand advertiser, car company, beer company, you have to have your brand out there in the biggest venues. of course, the super bowl is the biggest of all venues. that is all about branding. every year, we have these tech companies or companies that come out of nowhere and try to break through the clutter and blow the entire marketing budget on 130 -- on one 30-second spot. there are a good jillion places to put your ads. the super bowl still works for a lot of people. david: jason, you had four ads. is there ever a time where you could say, you know what, it is not really worth the money?
media andnking about how much media there is, the super bowl is unique. worth it. is people will say, well, you get 120 million people sitting there and watching. yes, you do. anticipating,hem talking, looking, wanting the ads. everyone watches the super bowl once. beautiful ad. but tell us truly. does this sell more beer or is it peyton manning saying i am going to thank god and drink more bud? is about budweiser coming out and saying we care about the beer that we brew. we care about the entire ecosystem of budweiser. and we are going to proudly say that. in a time in america when i quite a -- quite friendly think that it is easy not to care.
are really fired up and it does great things from the brand your we saw it happen in the twitter sphere. david: i looked at these two budweiser ads. that is helen mirren. a wonderful lecture about not drinking and driving. me skewedse looks to male and the other looks skewed female. jason: that is a journalist analysis. it's not what we intended. you.y this but it is for the first thing we are going to talk about is who bud is. the next thing we are going to talk about is who you are and how we care about you. so a message like putting helen mirren on the super bowl and talking to people, we are trying to end drunk driving. clearly budweiser, the super bowl, they are connected and bud, they've got the dollars.
jacket, whylie mae does it make sense from a marketing perspective to spend that kind of dough? jason: i theyasi -- think they should've to a party they cannot afford to the and. -- to be at. is that where you say it is just not worth the money? jason: it is not all of america. i think there are smarter channels to go into and have a message like that. stephanie: i think that takes you to constipation. the pharma company showing up last night makes no sense. --id: people who use opioids jason: i think it is a big mistake to talk about that sort of subject in the super bowl. they blew your -- they blew their money, to your point.
stephanie: put your dukes up, bloomberg go fans. it is time for a very special series. i said we've got to have this in the morning, the battle of the charts with our very own matt miller going global taking on mark art and from the london bureau to see who can be the most innovative with their charge. matt: who gets to start? stephanie: mark, you kick it off
your mark: what we need in this show is some technical analysis. gap between that and the 12-month price estimates of the analysts we surveyed out bloomberg is 20%. this chart is not positive here the stoxx 600 is trading below the 50-day moving average and the 200-day moving average. the 200-day moving averages above the de-day moving average. when that happens, and it happened in the middle of september, it is called a debt cross. we have fallen by 10% since then. if the index over boards or oversold. the rsis 32. any figure below 30 means it is oversold. not quite. is it time to buy european stocks?
david: you put the pressure on. matt: i like technical indicators. i like the rsi. but i have a tas navigator here. check this out. jpmorganhe bloomberg asia-dollar index in yellow. right around 2007-2008, we have that crisis. this monthly trendline has been the bottom support ever since then. we didn't cross below it then and here we are crossing below it now. that could be a concern for the global economy. this index is 41% chinese you want, by the way. down here is the tas navigator, a technical momentum navigator. we are peaking at the downtrend. it could turn around here. but the question is -- has it already broken that support? is it too late for the global economy? david: time for the judges to rule. stephanie: i am going mark barton on this. matt, i love what you do
clearly. but i like what mark delivered today. -- a this is a color for colorful chart here. and any time you bring in china -- david: i have to break the tie. i have to let down the home team. it shows that analysts don't know what they are talking about. they are off 20%. a were off the whole time in that chart. stephanie: finally, analysts have to stop looking at momentum. so many are fundamentally bearish to say i have to go long . this is the year they are finding jesus yet again. winnerrton, you are the of today's first-ever battle of the charts. matt, you still get to stay. thank you, paul sweeney. ♪
solomon. he is codirector of the berkeley center for law. we have a lot to cover this morning. we are really focusing on markets. we have watched futures steadily fall over the last few hours. remember last week when we saw oil tick, we thought we would see equity follow suit. but it did not. there is concern that sellers sitting in fear. really help you if you want to see green on the screen because we are not seeing that today. s&p futures down 1%. contracts down 71 points. nasdaq futures down almost 2%. so tech really selling off today. i can't you we don't typically see this in february. there is a heat map function on the terminal that allows you to look at any index or stock or commodity and give you seasonal
trends. february is a green month, with the exception of 2008-2009. since then, we haven't seen a loss. now we are down 3.1%. and it will be more when futures open. take a look at the year-to-date losses. they have been significant. 8% on the s&p year to date. and we are only at february 8 and dow jones industrial average down 1220 points. the nasdaq, the biggest loss. tech stocks getting walloped this year, down 13%. take a look at -- stephanie mentioned oil. when we saw -- when we thought oil turning around would help us last week, it does not seem that correlation is holding anymore. now it does with oil down. it has been done a lot more. we saw down to $29.60 earlier.
we saw a 25-point gain in gold. $1182 an ounce. right now, the bloomberg dollars spot index is up about a quarter of 1%. investors are hiding in the 10-year. that is where they are finding a little bit of safety right now. that pushed the yield down below 1.8. we are now at 1.81. very interesting to watch the selloff in today's markets. it looks like it will continue into the open. hampshire votes tomorrow in the presidential primary. bill clinton is ticking off the gloves. yesterday, he accused bernie sanders of intentionally deceiving voters and he went after the senator supporters for
attacking his wife's backers. tomorrow, bloomberg's "with all due respect" will have a two-hour special. another dispute between benjamin netanyahu and the obama administration after three rounds of talks. there is no package -- there's no progress on a military package. netanyahu is willing to wait for the next president to take office. 50, cam newton giving the broncos a win. peyton manning is 39 years old good last night marked his second super bowl history -- victory. he said he will take some time before deciding whether to retire. stephanie: news around the world. it is time to give you the three stories that matter to markets now. i will give you number 1 -- wall
street strategists are losing their resolve thanks to the market turmoil. the pessimism has even hit the street's biggest bowl, tony dwyer. his s&put his smp -- 500 target. scott miner, a guy who really knows high yield and leveraged finance is saying the nasdaq will tumble before -- below 3800. last year -- the last six years have all been about momentum. should we go strong and ride this out? what do you do when investing luminaries are saying "hold on a sec"? stephen: the air is coming out of the bubble. people are worried about politics, about china, about oil. but the economy is fundamentally sound. this is a crisis of confidence, not actuality. david: why didn't we have that
same crisis in december when we were making that prediction? that was just six weeks ago. nothing has really changed in the world, has it? stephen: markets have changed and markets move on fear and sentiment and sentiment has changed. that is why you have to look at the fundamentals. you have to look at where the economy is going. we may be heading into recession, but if we do, it will be a recession of lost confidence, not fundamentals. but there are no factors that will cushion this. if you look at equities, we will come out of the buyback lack of period. normally, shareholders like it. companies are losing and losing more when you look at their share prices. not likely going to buy back shares. you don't have banks cushioning falling prices. what will turn this around? stephen: we will see some political deal reached in oil may be that stabilizes the price. people know where it is. we get some transparency on where china is going and what is happening. and we get past the election.
but that is a bit away. david: but how much of it rests on the shoulders of the u.s. consumer? stephen: it always rests on the u.s. consumer. that is with the u.s. economy does your it goes on the u.s. consumer. the u.s. consumer has been buying. companies are still profitable. they still have lots of cash. buybacks in the works. the trend is good. the question is whether a -- the said was a damper on it. stephanie: the argument you are saying, wait for this, wait for that, there is sitting cash. if you go out of the market and you're sitting on cash, that will cause one thing to happen -- the market will go down further. catch,if you're going to you're going to lose. in the market, you might lose for a bit, but that comes back. that is what we thought in 2008. abel sold after obama's election and sat on cash. they are not happy people right now. stephanie: so the second story goes -- david: so that goes to
the second story. goldman sachs and says don't worry. they see only a 25% risk of recession for the developing -- the developed world in the coming year. so where are you on this question about a likely resection in this year? stephen: i am with goldman sachs. i think the fundamentals are good. i think the fed will hold off on raising interest rates. i think we will see some stability in oil worldwide. perhaps a deal might be worth it on oil. i am optimistic. but i just bought a house in san francisco. stephanie: the one place where things seem to be working out. i will give you number three -- we have to talk oil. oil falling for a third day. wti at $30 a barrel. the ceo of the largest oil
predicting crisis between $40 and $60 for a decade. what gives you comfort we won't see any deal reached? clearly going is to be blood. there is already blood in north dakota. this is a market that overshoots. we have had $10 per barrel oil. it goes way down. all the investment dries up. then four or five years later, we should rack up because there's not enough supply. unless there is a fundamental change and everyone starts to put solar cells on their houses, that is what is going to happen. david: who would have to be in the deal to make a real difference? it's more people than it used to be. the saudi's can't do it alone. does russia need to be in? does iran need to be in? venezuela? stephen: this is a market of fear. the saudi skin give confidence back and the price will rise up. that is what needs to happen.
the saudi's need to get -- need to come to an agreement with a couple of players. they're not willing to do that right now. their budget does not work at $30 per barrel of oil. stephanie: we have been saying "have to" for a number of things the last year and a half. what if they don't do for which an? stephen: than oil -- what if they do not come to fruition? stephen: than oil will drop. the market overshoots. we are seeing the volatility right now day by day. to," therey "have has to be something here. these countries cannot exist at $30 a barrel. stephanie: there is a reason why they are here. stephen: it is a classic warren buffett. when there is fear, that is when you buy. stephanie: when you've got warren buffett flavored money flavor locked up for a
and a day, you don't have that luxury. stephen: that is when you should be buying. when you are worried about going to cast him a worried about stockings or christmas, that is the time to buy. this is when the retail market gets slaughtered and it is being slaughtered your this is when the hedge funds come in and make the good money. powers where the good behind private equity, they will step in and buy apple oil companies left and right david: we don't see the buying happening yet. those are the stories that matter. next, we will take a look at the futures. they are in the red and ♪ -- they are in the red. ♪
there: hasbro says fourth-quarter numbers beat analysts. they overcame weakness in my little pony. a credit lineas from j.p. morgan. he used the money to finance or so investments and funds started by his current employer. india says it's economy grew 7.3% in the final quarter last year. that is a rate of expansion that puts it ahead of china's 6.8% official growth rate during the same period. and yes to mates annual growth 8.6% boosted by its
financial sector, tourism, and manufacturing. at somet's take a look of the stocks moving in today's market kicking off with some of the tech stops -- stocks. saying -- this is not a fang stock. facebook is down 3%. -- 3.75.s down 3.20 5 twitter is at the lowest level it has ever been. it is down four months in a row. that's why see nasdaq futures more than the other two indexes. take a look at tesla. there is widespread concern tesla will not be able to make 2020 becausears by of the low price of gas. you see here it is down 3% in the free market. and also some of the travel stocks, like royal caribbean,
expedia, american airlines -- all down on concern for the zika virus. the president will spend the next or one point $8 billion to try to help combat this as it becomes a global issue. billion to, -- $1.8 try to help combat this as it becomes a global issue. aboutnally, the concerns drugs going off patents, gilead and celgene down a little bit less than 2%. and chesapeake hires a restructuring attorney. news of that has drilled bus that -- drilled bus stock. down 20% in the free market. that is something you want to keep your eye on, chesapeake, this morning. can they overcome these down markets? more with a "new york times" deal professor ahead. ♪
factors that make it more difficult for activist shareholders than it used to be? stephen: it is mostly the down market. activists invest in trouble companies. no room for error. there is no room for mistake. and we are seeing the activists are getting slaughtered. bill ackman is down significantly. carl icahn is down significantly. all of them are down. stephanie: why? is it that when an activist comes in, those companies pop up and they shouldn't? if they are there to turn these when we are tod, fundamentals, they should be positive. a rising market. you come in, slip the company, normally a pop right there. or you sell the company and there is a pop right there. in a down market, it's much harder to do, much harder to sell. split.rder to arrange a ceos are scared. they don't want to engage in
risky transactions. it becomes a much harder strategy. a lot of these companies are hedge fund hotels. a lot of the funds parlin. when things go down, like valiant, it becomes a roach motel. stephanie: how do we get out of it? whether we are talking about valiant or herbalife, pick your poison. they are in the hotel. the market is not getting better tomorrow. what is happening here? stephen: it is not my problem. it is the hedge fund millionaires' problem. theill see what happened in financial crisis. we will see a lot of plays shrink. we will see some leave the market. they will still have huge of florence. when they take a position in the company, companies will listen. they have to listen. the shareholders want them to listen. we will see less activity and we will see quite times for the next couple of years as we stay in a down market. turn our: let's
attention to unit course. if activism is going to get white, let's talk about private investing. in the last couple of years, it has been all the rage, everybody rushing into silicon valley to get into that uber game. more more people telling us that unicorns are going to die this year. stephen: it means very little for investors. it means a lot for the bay area. these unicorns overreached. it was such easy money. you could get a billion-dollar valuation. you could tell your grandmother afford a you are worth all this money. but at the end of the day, they have not come about those valuations. having a rapid shrinking of valuations, foursquare, other companies, billion-dollar companies that are now half that, a quarter of that. they will be slow to die. this is like 2000. they have a lot of money. they raised a lot of capital. they are going to have to work it out. who really gets hurt are the companies that did not raise capital before this. the companies that are trying to raise capital now are getting
hurt on valuations. what if i invested in one of these companies when it was not a billion dollars and now it is with a billion on paper. as we are all racing to get out the door, how does that even work? stephen: there is no buyer. this is a private market. vcs are in it. there are some trading market in it. uber may have some capacity. the last one out the door. but you are stuck if you are in this company and you are hoping there is some value there or you have another unit on that turns out to be gold. there are other investors thinking this would go up, just like the housing market and then you had another round coming in that has a higher valuation of paper. your investment looks like a pretty good investment. nophanie: chris myers is longer in business to buy your company. david: that's also true. nostephanie: marissa mayer's
longer in business to buy your company. david: that's also true. stephen: the private m&a market is drying up. it's going to be lean times in silicon valley for a web. stephanie: break down mercer mayer. when you say whatever she is doing, we are also tried to figure that out. what do you think she is doing? has been athink it disaster frankly. she had a huge compensation package. she was going to turn his company around. instead, she frittered away $10 billion on stock i backs and purchases that did not work your -- did not work. david: the compensation packages have been in stock options. incentives are for you to make more money for your shareholders theif you are riding alibaba crest, you are giving the large brands to your senior
employees. a forn: this is exhibit why people hate large compensation packages. made $100 million because alibaba stock went up what she was ceo. she has no value in yahoo! she tried. she does not deserve the money she is going to take. stephanie: so then what happens? many people have said, marissa had a tough job. that is what she was paid all this money. now it happens? yahoo! is in this quagmire. they have complicated morale issues. that's like a marriage issue. what actually happened? stephen: what happens is the complicated morale issues turn into really poor performance. employees there are probably now very happy and they are what about their job. they are worried about the future. they have a board that come in
the best of times, is never strong. it is tough to see them holding their cards and selling they can. david: what is wrong with our corporate governance structure? this is their money after all. anphanie: remember, it was activist investor, dan logo, who put her in that seat. david: and then, as i recall, sold. stephen: in less than a year. some he bought his shares. starboard is probably going to run a proxy contest. right now, the company is worth more if you just liquidate it. the best thing they could do is close up. we will soon happens. stephanie: i just want to go back for a minute. into theseeeper private companies. these investors who are looking at the market, who are experiencing pain across the board who want to get out good how is that actually happening today? stephen: they are not.
you sound like you feel bad for them when you shouldn't. they invested and they knew what they were getting into. even in the best of times, 20% of investments and out. they are going to lose money. stephanie: could there be in fighting between investors and companies? stephen: absolutely. the lawyers are digging out their files from 2000 and there are things called liquidation preference that guarantees the new investors money over employees and nothing else. so investors will have more pain. stephanie: takeaway -- lawyers always get paid. back, we are talking to steph masters. ♪
opening bell, futures in the red. it seems like the pain train across the board for everyone except for cbs. overall inest rating history. i hear the opening bell ringing. cbs, like the rest of the market, down. will we get back to fundamentals, looking at companies doing well? we have to talk about global markets because we are seeing signs of distress. european stocks are down for a six straight day. with me now is set masters from bernstein. they have $7 billion under management. h masters from bernstein. we think there are couple of important things in this environment. be active in your decisions. when you have these big swings,
just as you said, valuations can deviate significantly. aat is top if you have process to find good stocks. and a longer time horizon helps. that is important to stick to it. and it helps to be nimble. we have an allocation strategy that allows us to move our portfolios around. right now we are underweight in u.s. stocks, overweight in some places like japan. stephanie: that sounds like a conflicting time horizon. seth: you need a strategy to stick to in the long run, but in the short run, markets are volatile. if your goal is to have a certain level of risk in your portfolio over time, you have to adjust your risk level down to have the same risk that you want to take. portfolio, if you have not adjusted over the
summer, your portfolio would have had a 20% more volatility than you would normally take in a moderate portfolio by backing off. we have done that without reducing returns. david: so you are managing to a constant level of risk. you are getting out of riskier investments, selling those, and going into less risky investments. seth: if there is a huge return premium for taking risk, sometimes it is worth sticking with. right now, in general, most assets don't have very high returns relative to their history. this is especially true for bonds and even stocks right now are delivering lower prices. i have a chart that illustrates this well. the white line is the s&p. the blue line is the debt spread to the 10-year. it is flipped.
going the same direction in yield. you can see the spread has blown out since the end of 2014, where the s&p has remained flat. tell yout markets there is something afoot, and it's not good. it's taken a while for the equity market to catch up. what does it mean as a practical matter to move away from risk? real estate is very illiquid. what are the places you can turn to in this market? we are close to neutral based on what people's long-term targets are. today's prices are not far away from where they need to be. but we are making a lot of little decisions. within geographies, there are some places where we think you should be underway. some of the emerging markets,
especially energy sensitive markets, china, countries that are more commodity sensitive like australia and canada. overweight other countries like japan, who are diversifying. the central bank is trying to stimulate. when you can do is try to balance the risks in a portfolio so that they end up being a little smoother of a ride. there is no way to protect yourself completely. the biggest mistake would be to retreat into cash, which we know right now has a negative real return. that is not a good idea. stephanie: but that is what everyone is doing. individuals are selling, you are saying it is not your clients? not. definitely we were able to keep our clients invested from 2009 through the 2013, when the rest of the
industry is doing what they are doing now, and huge amounts of wealth effectively passed by most investors. we think the risks going forward are sort of the same. >> are you in indexes? if you are in the u.s., where do you invest in the stock market that can save you? seth: you have to think about companies that are well-positioned, even though there is disruptions. energy prices are incredibly low. we don't think they will stay there forever, but they will be there for some time. a number of companies can benefit from that. some chemical producers, for whom natural gas prices that are so low, oil prices being alone, is increasing their margins for the future because they are selling global commodities. things like ethylene or fertilizer. in north america, the cost of making that is a fraction of any
else in the world. that won't last forever, but while it's the case, you have an opportunity in those selected areas. i just want to be sure i nail this down because you are giving us a look backward. for the most part, every investor that has been in your seat has told us they are more heavily weighted in cash today than in the last 10 years. you are not in that situation? would have been two months ago, but the markets sold on significantly since then. we think at this point, things are closer to balance. what point does the data tell you that you should shift the strategy? we are living in a time of unusually low interest rates. increasing questions about the central banks ability to keep this going. at what point do you rethink this? seth: we debate this all the
time. we want to address our thinking as the world unfolds. rightnk what is happening now is mostly driven by sentiment as opposed to fundamentals. some people call it a risk on, risk off market. the fundamentals are mixed, as they often are. sentiment swings tend to exaggerate small developments and can sometimes loathe them out of proportion. over the summer, people misinterpreted what the chinese central bank was trying to do, making it more sensitive to a global basket of currencies and trying to position themselves to get into the sdr basket later this year, which they were successful in doing. they executed that poorly and communicated worse. that led to an exaggerated selloff around the world. we think that was really
discounting the worst-case an era that did not happen. thosethen, you have seen kinds of issues continue to unfold. i think we will continue to see that. i would expect to see continued market choppiness. if you look over the last few months, the frequency with which we have seen 2% intraday swings is about once a week. today could be another one of those days. in the last 15 years, that is the norm. the on behavior of markets is what was happening in 2013, 2014, and last year. that was the result of the massive central bank intervention, which was designed risk and may be created too much complacency in markets. what is happening now, while uncomfortable, is more than normal in the long run. stay with us.
it is time to see where the equity markets are going. trading very normal today. s&p is down 30 points. 1.7%. dow jones is down 240 points. still half a percent off of that 2% mark. still what i would consider a big drop to the nasdaq as well, 2.2%. i know we have been seeing these moves every day, but they don't fail to discourage a lot of investors, and people are selling out of stocks that they previously would be putting money into. apple, microsoft, and google have been momentum down. apple turned around after it was crushed with the rest of the tech stocks on monday. microsoft is up 3% in early trading. if we look at the sectors getting hit. it is a sea of red.
everything is down with energy and consumer discretionary as well as i.t. getting hit the hardest. oil is pulling down the energy stocks for the most part. we saw oil up this morning. we went into the morning meeting, and it came down. 4.5% at one point, 2%.now we are down about if you want to see a real drop today, look at chesapeake. we were looking at this earlier. it is getting ever closer to zero. trading,p in early $2.28 a share after it was reported that they hired a lawyer to restructure almost $10 billion in debt. the stock has been crushed over the past few months but now is down to its lowest level since march 2000. stephanie: i just want to point
than that, the s&p is down 1.7%. it is on track for the lowest since april 2014. when we say it is yet another day, this is a data point that makes investors take pause. seth: i think you will definitely see people react because the market is down. thatuestion is how much of is due to fundamentals being objectively worse. if you look at the numbers, on the economy level, the economy is growing at a moderate pace and the consumer is reasonably healthy. the problems are overwhelmingly in manufacturing, where many parts are in recession, around the world, not just here. you have to be very selective in how you think about the market. , a lot are seeing today
of things are tarred with the same brush, and that can mean opportunity, if you are disciplined. i thinke: when discipline, i think matt miller. matt: that is kind of you to say. let's talk about valeant pharmaceuticals. bill ackman and pershing square have added 5 million more shares. they now own 21.5 million common options9.2 million call . not paying off yet. stephanie: and it does not seem like things are turning around. to hand it over to abigail doolittle who is looking at facebook. >> shares are down sharply as looking at as decision in india around that the trilogy. investors may be using any reason to sell some of these tech stocks in this jittery
environment that you are talking about. momentumthat the stock may be reversing. the nasdaq is 2% away from an official bear market. what makes this surprising with facebook, last week, it was one of the only stocks to be up your today. now it is down your today, heading toward its 200-day moving average. the question is whether the buying support will hold or not. next, we will again the value propositions. if another flash crash happened today, would regulators be ready? we will take a look at that next. ♪
matt: welcome back. tomorrow on the show, we will speed to aberdeen asset management ceo martin gilbert. ♪ >> investors are buying apollo education group and taking it private for $1.1 billion in cash, a 44% premium over the closing price the day before the board said it was pursuing strategic alternatives. the coo will become chairman after the transaction. chipotle restaurants are opening later than usual today so that employees can discuss recent food safety problems.
36%.month, sales were down later this week, they kicked of their biggest marketing campaign yet. "kung fu panda 3" was number one at the box office is this weekend. ,t number two was "hail caesar." stephanie: it is time to take a look at today's value proposition. here is a question posed by bloomberg. given renewed market volatility, if a freak of event like the flash crash happened again, would regulators have a better view of what was happening, as they did back then? are still withh us. essentially, the sec has
bought more data, set up an apparatus to do it, but they still don't know what is going on in the market. they don't have the technology to track the trades, like they should. we are waiting for them to do more. david: was it a freak event? after the investigation, i know there was a spoofing issue. it was a freak event but there is still the need for a lot better supervision in the markets. i think it was important to put this in context. i have been at bernstein for over 25 years. in that time, the cost of trading stocks has declined 80%. a lot of that cost reduction and increased liquidity in the markets is due to technological improvements. but here is the cost of that. every time technology improves, clever people figure out a new way to take advantage of that technology, which is not always in the interest of the client,
who is supposed to be the beneficiary of all this improvement. that cat and mouse game is a convert effort -- constant effort to control for the regulators. stephanie: there is one regulator out there who said, it is like using bicycles to catch ferrari's. when the regulators came into , andgan pre-london whale you have a guy with a clipboard that is paid only 1/20 as the traders. the technology is there. block train technology will become a reality. that will become an important tool for the sec to know what is going on after the fact. technology may be the savior of the sec in this situation, but we will have to wait. david: how many of those efforts are dedicated to finding out
after it happens, as opposed to preventing it? i think the sec is vigilant in monitoring the market but new things happen all the time. said, people are clever, they have a lot of incentives to game the system. the sec will always be playing catch-up. stephanie: breaking news? ceo has beengle million stock grants. for those of you that are numb to big numbers, no big deal. but it seems like a pretty large want to me. awarded 273,000 class c shares. he does have to stay there for at least three years. david: but it is not performance
related? gone throughnot the complete award. i'm sure it is. stephanie: that is a record number. they gave it $200 million grant to their chairman before. they have a history of doing this, but they have created billions and billions of dollars. it is much better than marissa mayer. stephanie: in this case, you are arguing it is justified. >> look at the stock grants that apple gave to their new ceo after steve jobs. this is not aay, big number in silicon valley relative to everyone else. sad but true. sad for me. stephanie: sad for who? remember when eli manning got $100 million for five years? he just throws a ball around.
stephanie: you are watching bloomberg . let's take a look and some of our conversations today. >> when they devalue is when they stabilize. that will be the fact that they have taken control of the economy, there will not be instability being pushed out of china. they will make a one-time investment to stabilize things. >> that will scare a lot of people. onehis goes to
stephanie and david was saying. you can put up whatever stupid acronym you want. the word is panic. people should be buying now. the rental business has been good and will continue to be good. part of that is because we are benefiting from the tween demographic bubble of the baby boomers and the millennials, all of whom seem to be interested in urbanizing, living in cities. >> this is fear. basically we have had a long bull market and the air is coming out of the bubble. about are worried politics, china, oil, but the economy is fundamentally sound. this is a crisis of confidence. >> cord cutting is real. there are 74 million millennials that are not watching television the way their parents were.
it is not even close. let's get a final thought from stephen davidoff solomon. >> don't panic here in markets go down, marketscope that. you have to stay with your fundamentals. we have heard this morning, fundamentals are pretty good. there is volatility, but do not panic. david: don't panic button over us. stephanie: thanks for joining us, stephen davidoff solomon. codirector of the berkeley law center. come back tomorrow. mohamed el-erian will be with us. and the one and only david stockman. it will be a big day. ♪
from bloomberg world headquarters in new york, good morning, i am brendan greeley. we are a half hour into the trading day, the route that set the nasdaq to its lowest level in october 2014 is deepening. oil also resumed its slide today. chief executive of the world's largest energy trader says low crude prices could persist for a decade. voters in the nation's first presidential library -- primary heading to the polls. we will have more after this weakens contentious republican debate. let's head to the markets desk where julie hyman has the latest. bad news on both sides of the atlantic. isie: the market selloff deepening. if you look at the three major averages, we have the nasdaq leading the