tv Bloomberg Go Bloomberg February 16, 2016 7:00am-10:01am EST
and uncharted territory. what antonin scalia's death may mean to cases involving big business. welcome to bloomberg . i am david westin. stephanie ruhle is off but here is erik schatzker. it is a good thing that i am not an olympics sprint or because i would not be able to do that. it is good to be back. and we have helping hands today. we have jack rivkin. and we have christine harper. always a pleasure having you this morning. we have a lot to get to. let's bring you vonnie quinn at
the first word. vonnie: welcome back. it will be a major fight in washington. to actns are valid not on any supreme court nomination by president barack obama. within weeks, obama is scheduled to name a replacement. , according to mitch mcconnell, shouldn't be filled until we have a new president. george w. bush is campaigning for his brother, jeb bush. he didn't mention donald trump by name but he said the loudest person in the room is not always the strongest. swift us angeles, taylor 13 grammy awards last night of the year.um she is the first solo female artist to win that award twice. awards, thear 15 most for any performer. he won top rap act. global news, 24 hours a day. i am vonnie quinn. let's take a look at
futures. we are looking at solid gains across the board here after global markets rallied yesterday. the u.s. is playing catch-up. we ask a created $831 billion in market cap globally while our markets were closed. the dow jones futures are up. gaining almost 2% this morning. take a look at s&p futures and see that we have come down a little bit this morning off the high. but we are headed back up as we get closer to the opening bell. take a look at my bloomberg. canou use bloomberg, you type this in and then you can click on any of these tabs. the biggest changes in the premarket show the biggest volume. and you will see some big names here. , citigroup, morgan
stanley -- they are all showing big gains. he also see oil here. and marathon mobil oil. so banks look like they will help drive the markets today. also, oil companies. oil right a look at now and see how nymex crude is doing. only up to .2%. $29.78 a barrel. brent crude is rising a little bit more. u.s.he dollar here, the dollar index is unchanged so it may not have a huge effect. let's take a look over the past few days. from $26.98 upof on the news that russia and saudi arabia is going to freeze their production.
if you look, opec go is a function i like to use a lot. we can see that freezing production at these levels are not a cut. we are already at the highest levels that we have been in history. so they are producing 33 million barrels a day of oil and it is not a cut. it is not a cut. we will follow oil closely today and see how the correlation with markets holds up. david: and that is opec. matt: that is right. saudi arabia dominates that production. erik: let's dig further into this production freeze. it is agreed to by the russians and the saudi's this morning. blas is with us. aguess we will start with basic question. how important is this agreement?
>> is less important than the market wanted. but it is quite significant. it confirms where we were coming from. ago, saudi arabia and russia were fighting for market shares in eastern europe and in china and they were fighting a proxy war in syria. russianse saudi's and got together and have a preliminary agreement. that doesn't resolve the oversupply but it will help. of opec and russia saying we will let the markets decide the price and we will not do anything about it, now, opec countries have decided to act. >> it is easy to freeze production when you are at peak production levels. it doesn't selma get big deal at all. production was going to
increase in the next few months. produced 10.6y million barrels and now they are producing 10.2 million barrels so that does not mean we are going to see a saudi increase. it will trend up in the next pew months. but now that. . take today's agreement as the final agreement. just take it as what the oil minister said. it is the beginning of a process. and ideally, it is a good announcement. david: if you are putting together a cartel, do they have enough people in? what about iran or iraq or the united states? javier: that is the biggest point. iran is trying to ramp up the nuclear plant. it will be very complicated.
of course, what about the u.s.? north dakota, texas, oklahoma, they will be back into trying to increase production. so yes, i think that opec and russia are maneuvering to bring prices up. but there will be a cap. reached ata price is $40 or $50, then shale will dip again and saudi markets can do nothing about it. matt: we have a great chart here of oil production momentum. a fiercely, this is a five-year chart. over the last year, momentum has been going up and they are producing more and more. the interesting part of this chart is the u.s.. down here, we have the u.s. production momentum.
he have fallen into negative territory. that is so you can see this on the bloomberg in the office at home. wehave come down so far that are cutting production and you will be interesting to see if we turn around and ramp it up. prices return to $50 we will see u.s. production. matt: that is a big if. david: that leads me to my final question. when we look back six months from now, is it possible that the best thing to say to the agreement is that it put a floor under oil prices? javier: yes, you are absolutely right. this deal will put a floor because it increases that. anyone who tries to floor the market needs to know now that opec and other countries are negotiating in secret. it puts a floor in the market and it will be difficult to orchestrate this going forward.
it stops the momentum going down. that is what they were trying to do. goldman sachs was already this continues, we will go into the teens. when the increase the price, that is a big question. javier blas is coming to us and now we turn to china. we have had a lot of data coming in to us. nonperforming loans have risen to the highest in a decade. enda curran joins us now. talk to us about the credit issue. enda: good morning. it is obviously another negative for china's economy. bad,the loads are going they won't want to lend and that is not the situation the government wants to have. tose banks who are prone
steel makers and the call miners in particular, they are getting hurt. the government is trying to get ahead of that curve. they are considering ways to ease the provisions for banks. at the same time, the government is taking steps to get the other economy going here. they're looking for ways to introduce infrastructure spending. moving to feeta here in china since we have come back from the lunar new year. we had the chief yesterday who came out and said that china has a take policy tool kit at its hands and they can do more and they are trying to get the message across. me, but juste hearing this, they're reducing the reserves and it seems like they are riding a horse in two different directions. enda: this is the quandary.
they have not made a formal decision yet but there are considering easing the provisions on the banks. it should be pointed out that the reserve freight is actually quite high by global standards so there is room to ease pressure on the banks. and ultimately, that is what the government wants. they want to fund the infrastructure project and have a great rebalancing act which, so far, has been sluggish. jack: it appears that a lot of companies are actually borrowing in you on and paying down foreign debt. that is some indication that what theconcern about currency is going to do. but that does sound like a good thing. not a bad thing. enda: that is exactly right.
it would be a significant liability for china's economy real estate sector. and what they are doing is borrowing from a bond market which is how it develops and deepens their own bond market. this is a net positive. so all of this is seen as a silver lining. how did bank stocks respond at all? about the potential cut in reserve ratio? banking team -- they're being told you can layoff on the provisions for bad loans and ease up on the provisions. it will get banks back in the economy and get them lending again. so it is considered an overall positive. bring jack back
in the conversation. a short-term boost by loosening the reserve requirement at a time when rank loans are getting to be a growing problem? is this is the inevitable? jack: you have to read the numbers more carefully. loans are going up because they are not ending as much. you have to be a little bit careful. is this simply what is in the works here? the ntl is high. -- n't know if this is david: that makes the ratio go out. if the bottom line is not
europe's biggest car manufacturer is boasting a 19% boost in earnings. dividend tosed its buy more than analysts had estimated. that is the latest bloomberg business flash. erik: now to global go. today, we are looking at anglo american, the london-based minors. it is shrinking. we spoke with bloomberg television about the plan. stripping matter of us back to the core, rebuilding the base and making sure we are fit to go forward in the most positive way we can. and i think we have been making changes over the last 10 years. it is time for a bold step out. we have been working on that strategy over the last couple of years. and in this market, the opportunity is there to reach that.
>> we can make some bold moves. ?re you on a short leash if prices don't stabilize, will you have to put further assets into the field? will you have to do more than this? >> we look at all of those issues. have donehat we today, we have gone ahead of the curve and we have gone back to the core businesses that we think we have got a competitive advantage in. we have leadership positions with great assets in corporate -- in copper. are some good assets for sale that will help us reset the balance sheet and create a different view. a different group for the future. we have gone ahead of the curve and we have needed to that for the past couple of years. we are there and we are there and we're making the tough calls. we are making significant improvements. we have a 27% reduction in cost.
we are setting the business up for success. stocks traded down in the past couple of minutes, it is volatile this morning. what message would you try to give to people who are figuring out what your business is worth this morning? up and down and up and down. is anglo american a volatile business right now? i would say that the mining industry is a volatile industry. if you focus on diamonds and platinum business and the copper futures -- the long-term shows that people will see a good story. and that is what will impact people. thean you 100% rule out rights issue? view, weur point of
don't believe we needed because we are generating cash and we have got assets or capital expenditures that are starting to fall so we have cash flow improving in 2017. we have identified the right disposals where people will be willing and have demonstrated a willingness to give real cash for the assets. so we are in a good position. we don't need to get the rights issue, it is a self-help story at without liquidity we have time to put those pieces in place. >> give me the timeshare schedule on this. you talk about having time. how do you measure time? weeks, months, years? with thewill be broken work that we have outlined in 2016. clearly put, we generate cash in 2016. we invest in our process by selling assets that we expect to see $3 billion or $4 billion.
and within a relatively short amount of time we will be down around $6 billion off the core portfolio which, in today's term, would be generating $2.5 billion. we are in good shape. he timetable has been set up clearly in the conversations. blue bricks guy johnson speaking with the anglo american ceo. when we come back, we will so you have spies are finding work. ♪
been spending a lot of money to make sure their clients have regulations and that they aren't going to get into the legal trouble. hiring military intelligence veterans, people who have been chasing a terrorist around. not to prevent a threat from the actually to monitor their own employees. to try to get out a rogue employee in case that could be the next libor manipulator. david: with this catch the london whale? >> that is the hope. if you believe that these problems in the past have been broke and that the management has been unaware of them, which is a point that is debated, if you believe it is truly rogue actors then what the big managements want to know is, when is that happening? we had a story last year about the surveillance tools that are
being employed. it is a terrific look at the actual human beings who come from war zones into the banks. erik: what kind of a title do they get these people? are they taking normal roles but they have the extra thing? >> it is a security role. we know that banks have long hired police veterans and things like that. that provide security for their staff against external threats. the difference now is that they are actually monitoring their own people. so if you work at a bank, i don't know how that makes you feel. erik: another story published on bloomberg that is popular has to do with european banking and the fact that we are witnessing day by davy the deterioration of the european bank with stocks and credit. but it is far from over.
and a colleague first challenged people to ask, when was the point of no return? -- makes the case that it was the moment when -- stepped in front of shareholders. >> and got only 60% support. that showed how unhappy the investors are with the banks. erik: how dismal is the outlook? jack: when you have negative interest rates, it is very tough. let may put it that way. erik: jack and christine will stay with us. back in a moment. ♪
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russians agreed to freeze on our production at current levels. freezeot a cut, it is a and the market was anticipating something different, but oil is still trading higher. let's take a look at equity futures and show you that we will continue the rally after this holiday weekend. change and300 and now it is pointing to an open in the 200s. christine harper is here and now joining us, rich camera on. also tom keene. tom: good to be here. in syria, and a rate i hospital tilde killed at least seven people, eight others are missing. syrian rebels say russia carried out the attack. airlinesalaysia jetliner is approaching a
milestone, just weeks away from becoming the nations biggest unsolved -- history -- unsolved mystery in 80 years. boeing 747rt of the -- 777 turned up. -- do not just what of indigenous people. he has to the center of an area of trade -- david: tom, you are here with your morning must read. it strikes me as an important one. tom: just out, it will be the reading topic well into march and april as well, it is on growth. flat global growth and this is just one idea.
because it is demographic economics, the one percentage point declining growth rate will lead to , anomic gross -- growth collapse in the growth rate of the working age population was already underway before the financial crisis and the trend explains a good chunk of persistently disappointing recovery. this is demographics within asia but also comes right over to america as well. david: in particular, it was china and it strikes the now the chinese have changed their one child policy, perhaps it -- perhaps exactly for this reason. d kaplan in the same issue emphasized the ramifications of china and russia versus a better position for the united states. rich? what do you think about demographics? ch: you talked about it
earlier on the show, a little bit about secular stagnation and demographic lay everything and that. 1938 -- 1039 when he published that article first commenting on demographics. >> their were absolutely the u.s. in terms of the working population. that is more of a demographics story and all this noise about people leaving the workforce and this sort of thing. stephanie: is there a difference between how population growth -- that there have to be a birth rate or can there be immigration? jack: the evidence is immigration. stephanie: many europe's and not be so upset. it looks like germany really got this as a message, and before they got the want of better education another focus is on training them.
has to come from somewhere. piece, but ithe focuses more on global growth so immigration, unless it is from another planet, it is not help. what would be helpful is growth in china and the end of the one child policy could signify more growth to come. , itcan access this chart shows the death rate which is actually rising in china, but the birth rate has turned around as well. up can see the slope is now and the one child policy being finished means that china gets to accelerate its fertility rate. you could see more growth rate from their. david: coming back to immigration, it does not help global but if you are a country trying to compete, -- do a little mental exercise, if those undecorated aliens had never come to this country, where would our growth rate have been? tom: it would have been less. in the u.k. a million
years ago, the immigration debate in the u.k. is totally different then the u.s. and if you go to congress or parliament, you hear two different dialogues. frontk. is absolutely out on working age population tell us, where we couple of years have had a lessening in that trend. david: going back to alvin we as an- didn't economy, the american economy, learn the lesson ultimately from henson that the clamp down on immigration authorities plus the flu pandemic which we are not dealing with now were responsible in large part for this secular stagnation and when they were first the impact of the second war, we ended up with a baby boom and the strongest
growth of the 20th century. rich: you're assuming we had a fiscal policy that, we don't have one, today. we have not had a fiscal stimulus, that is a problem. we are seeing it in europe and everywhere we need you only have one tool, monetary policy and whether you accept it or not, it is pretty much impotent at this stage in the game. you don't have any fiscal policy, then you are just a regular -- a rudderless ship. this is demographics and its with us, now. everybody go out and have babies or what? this is it, we are set for a lower growth rate or something else can happen. is it is every nation for themselves. debate is totally
different from germany's debate, it's totally different from our debate. it is almost nation to nation to make sure -- make that component of growth. christine: it's hard not to point to the contrast between china and japan. those are two very different economies and very different rates of population growth. david: the other point is not just population growth, it is productivity growth. the real issue is are we getting the growth and productivity that we need? tom: that is the mystery going into this year. rich. to give you credit, you were way out front. do you buy the idea that it is unmeasured, right now? rich: i think it is the most miss measured economic data we
have right now. back in the 50's when we were a industrial behemoth, we measured output very easily. we measured our works -- hours worked by talking in, today it is a service economy. you cannot tell me how much output someone is doing in the services sector. it is very difficult to measure. christine: that is the problem with china's economy, as this was to more services driven. their services are now more than half of their economy, that is a big deal so it is tough to measure what is going on in productivity. right now, it is time for econ recon. our look at the week ahead. is here to tell us what investors will be paying attention to. rich: it is a great week to be an economist. erik: when isn't it?
[laughter] we have the fed minutes, we have a bunch of industrial production data, we have regional head, housing, i think the key to watch this week is going to be the industrial production report. tom: he is too modesttom: to mention this, he has the single best book on these technical indicators and economic indicators by far. there are 47 of these books and he has the one that is in english. why do i care about industrial production in a service sector economy? rich: you can usually do a lot of services without the manufacturing sector. -- can't usually do a lot of services without the manufacturing sector. production is an excellent indicator, particularly if you look at the
consumption -- production of consumer goods. -- tells you where the david: why don't i care more about the jobless claims? it seems like if there is hope, it will be in the consumer and whether the jostled out. important is the most economic statistic, employment, not just that if you don't have a job, you don't have an income, but also social consequences. to lack of employment or unemployment leads to crime, depression, divorce. social consequences in addition to economic consequences and more should be paid attention to that, probably neglected because it is a weekly high-frequency indicator. tom: i look for employment in the banking world. christine: it is not good.
tom: do you have an account? -- in the it is the hundreds of thousands since the collapse in 2008. there is no big bank that is hiring. many more are laying off workers because the revenues are so depressed cousin profitability is constrained by things like negative interest rate or the threat of negative interest rates, compliance, changing dynamics and the commodities sector. been true that some of the jobs have gone to other sectors like the hedge funds. even there, it is harder now, a lot of them are shutting down or converting to emily offices. it was interesting to see the latest jv report showed the wage but itr jobs number,
almost seems like the reverse is happening. all the jobs are being created on the services. tom: -- david: is that right? tom: the economists are nuts. they are much more in christine's view. they are low-wage jobs, they are not happy, there are two different discussions in two different worlds. david: people lost their jobs and they could find jobs to replace the income. tom: i have to commend -- i don't know if you were involved in this, but edward robinsons banking story on eubank is fabulous. david: thank you very much for joining us. jack will stay with us.
they have quit building the set-top boxes which were part of a plan to compete with cable tv. books like and is still losing market share in the aftermath of its emissions scandal. sales fell 4% last month. they still have about a quarter of the market, but they are losing ground to general motors. gulfstream says it cannot keep up with demand for its most expensive private -- private jet. that is your latest bloomberg business flash. thed: many were shocked by sad news of antonin scalia's unexpected death. that will ship the balance in the supreme court and for more on the impact of the high court vacancy, we turn now to bloomberg's greg store who joins us from washington. first of all, good morning.
here is a important one where it almost certainly will have an effect, there is a union case the court is considering. the way it works is if the court divides 4-4, it leaves in place the lower court decision but does not set it as president -- president -- press event -- not to have to contribute to the union that is representing them. it seemed like there was a good chance the supreme court was going to say no they don't have to contribute to the unions. now it looks likely there will be a for-four split that would leave in fact the status oh and laws in 20 plus states that say workers must contribute to the unions. david: normally we really don't know how the supreme court is going to come out, but this is
as close to a done deal as you ever get. greg: it is, there was a cut -- a case a couple of years ago that raised flags that were on it, this is one where we had some strong indications. david: there are a couple of other cases that have at least tangential importance to business, one being the immigration case concerning texas and perhaps the other being the informal care act opting out case. for those the ones you would point to -- are those the ones you would point to? a couple ofare also class action cases that are important to businesses. they were hoping to put new limits on class actions in the case involving tyson foods, a data broker called spokeo. were intended to be 5-4 decisions and now it looks unlikely that they will have significant new restrictions on those. going forward, we have things like obama's clean power plan. call --uts turned to let's turn to coal.
they thought they had five votes to overturn, but i wonder if they will have that, now. greg: it shows how important timing is. the court could have waited to issue that order. if so, they would not have the votes to. block the clean power plan. as it is, the plan is blocked and that will not change in the short term, but where it could matter is going forward. the timing of it is such that the court will take up this case in one form or another next term without justice scalia if president obama can get a nominee on the board. suddenly the prospects for his plan look much much better. david: on the cases you talked about, i think the there is another alternative besides a 4-4. they could also deferred visa next term, hoping that they get a full complement of justices. greg: that is exactly right.
certainly with immigration, that is a possibility. in that case, if the court divides or-four, it would bar the president from his plan to inter -- you would not set a nationwide precedent. there might be a nice justice and sternum and you might get a ruling either way -- ninth justice next term and you might get a ruling either way. jack: you are talking about a major shift in a lot of these decisions, which have implications financially but also major social implications as well. greg: absolutely. i mentioned class actions and the issue of whether consumers can sue companies or get forced into arbitration. can easily see the balance of the court shifting.
we're talking about abortion, gun control, we are talking about the death penalty. sayd have five justices they want the death penalty to be -- they think it is unconstitutional. when we come back, currency forecast has been far from accurate, especially when it comes to emerging markets. we break that down for you, next. ♪
function where forecasters but it would go in 2014. we set this to forecast and put it back a year to worry of 2015 and you can see that forecast spot returns expected mexican peso to gain 5% over the past five months. with forecasters and the pros of the peso would be where you see all the growth and currencies versus the dollar. that did not happen. take a look at my panel and you can see that one dollar buys a heck of a lot more pesos this year than it did, last year. 30% although we have come off of that a little bit. of the main reasons is that a lot of market participants are shorting mexican peso and using that currency as a carry trade. it is very liquid so they like to do that. it is a lot more liquid than the u.n.. a lot of investors have gone short on the peso and are using that money to buy other assets. the question is, what happens we
have to cover that short? forecasters this year are expecting the peso to be a gainer. if you take a look at this terminal screen, you can see the path of the peso as it is now the forward curve and forecast. the question is if it turns out the same as last year and the short-term covered, you may not the the growth as forecast. david: that makes it a bargain to lie -- to buy. into that we have inflation taking off in mexico and in the past historically, it has been really bad news for the economy. jack: that is the problem. mexico's economy is moving along reasonably well. what is going on, there are so many macro bets being made out there that had nothing to do with what's actually happening underneath, but it is a great carry trade.
it has been and odds are, it may continue for a while. we have a lot of macro bets seeing made which are being pressed and we will have to see. david: and if oil came back. jack: it oil came back, that would be good for mexico. i don't get this whole thing on oil coming back, though. it is not necessarily good for the global economy. jack rivkin, christine hartford, it was great having you this morning. bloomberg go is back in a moment. ♪
it may be the only thing more volatile than wall street, we look at the impact the huge market moves have on the presidential race. ♪ good morning. it is the second hour of bloomberg go. is steveining us reimer. let's start with vonnie quinn and the first word. a russian air raid killed at least seven people. a spokesman for russia's president says those who blame russia cannot's -- backup their claim. fewed nations has a
controversial methods to get rid of mosquitoes spreading zika virus. environmentalists have criticized genetically modifying mosquitoes. bushr president george w. is campaigning for his brother in south carolina. he mentioned that out -- he did not mention from a donald trump by name but said that the loudest person in the room is not always the strongest. to the markets now with matt. the: futures up across board after big rallies, yesterday in asia and europe, we were closed. was billion in market cap created around the world as we celebrated president day. we are playing catch-up with s&p usurers, down joe -- dow jones tutors up. let's take a look at some of the
indicators we have been following along this year. we've seen strong correlations with crude oil and other we had opec talks between saudi arabia and russia and agreed to freeze production at the record high levels, we have oil bouncing a little bit, up one point -- mark, still at that $30 evil are at least encouraged by leastlks -- people are at encouraged by the talks. as the dollar index gaining a little bit of strength. take a look at some of the stocks moving in the free market, big oil with that move in crude rising so exxon mobil and the free market up 1%, congo phillips of 1.5%. you are seeing a lot of refiners show big gains. we seasons as well,
of the big banks putting up gains, goldman sachs of 1.8%, morgan stanley up 3%, bank of america almost up there as well after he really getting crushed last week. finally, tech stocks are getting a bit as well in the free market. google shares up one and a quarter percent, netflix up and apple up very heavy. it makes a big difference. us, wtis not just told is up as will as brent and that is after saudi arabia said they came to an agreement to freeze oil output at january levels. how the laws joins us from -- -- do youir -- and length think that is right and if so, what are the chances they can make that work? vier: they are trying to
change the narrative of the market. only a few days ago in london, we had goldman sachs saying that the market could go to the teens and bring could fall below $20 a barrel. saudi and russia were scared by that sentiment and they tried to change the narrative. this is not a cut, but they are signaling that they want to intervene into the markets and change the direction of oil prices. they said this is the indication of. progress and is opening the door for doing more. that could involve production cuts. ago, we had the last opec meeting back in december. erik: given the fact that goldman pritikin that oil prices could fall into the teens and you have other people forecasting that oil would drop do we have any, sense of how much money is lined up on the other side of $30 a barrel and if in fact this agreement puts in a floor
somewhere around $30, how much money is going to end up suffering losses? trade --he majority of we will see some unwinding, but i think what really change the narrative is that it is very difficult to attack the market and prices are going to go down. the major oil producers -- andrevious thought national you think about the political relations between moscow and -- was really bad, putting on different sides in the syria proxy war. the market printed that it would be impossible that these two countries come to any agreement. what happened today demonstrated that they could talk and that the financial pain they are suffering is more than enough to bring them together. what changes is traders will hesitate going forward. david: i don't know how many
cartels steve has been involved in, but you have seen them. steve: i've been to a lot of opec meetings. david: in order to make this work, they have to get enough people in, to they have enough power without the u.s. or iran? steve: iran is one of the sources of increased production that is coming along. essentially, this is a signal for the market that may affect trading levels but fundamentally, you have 2 million barrels a day in balance billion -- a 92 million barrel a day market. freezing levels does not solve the problem, what it does not make it work -- make it worse. saudi arabia and russia were at full capacity anyway. it is clear they don't want to see oil go below $30, but the market will ultimately decide that. david: if you held it firm, sooner or later you will catch up. increasing about 1%
or something like that and you have record inventories going on at the same time. the fact that the futures market has reacted relatively benignly, this is a relatively small move to the futures market, it tells you they do not think it is that big a deal. erik: one of the odds this agreement is going to actually stick -- what are the odds this agreement is going to actually stick? the require the participation of the qataris as monitors to even get anything done. key act ishink the going to be whether iraq and iran join into the deal. they will probably be offered a special term. it happened back in 1999 with saudi arabia was able to accommodate a high level of production so they probably have a plan to bring them on board. is actually russia delivering.
said on two other occasions that they would -- in both cases -- cases, saudi arabia realized it was not actually the case and nothing actual happened. in one case, russia actually increased oil production. if they begin to perceive that russia is not keeping his word and increasing production, that is when the deal completely unravels. david: thank you so much. we make it turn out to emerging markets were cheap oil has been a mixed. lusting. we did season data out of china on the number of loans issued last month over the weekend. we got a great deal of information out of china including imports and exports. is with us from boston. about china's role in emerging markets right now. it is the gorilla in the room,
the global market -- global economy and not just the emerging markets. datarey: the most recent is a desire to calm the markets down. the currency has rebounded and i think that is a good piece of news that we've had out of the markets, recently. there was also some reassuring , thents on the pboc central bank about the currency not being overvalued, the capital flows being outflows being under control. i think everyone has had their nerves calmmed. ofyou imply that the start your question, china is so enormous these days, not just for emerging markets of for the world economy. i'm sure we will keep watching it closely. erik: is this reversal in the u.n. necessarily good news?
the word of the governor of the pboc about the state of china's economy and the degree to which the u.s. is or is not overvalued, it is just words. geoffrey: it is a very complicated question because what the chinese did in december is to move from monetary -- monitoring the currency to monitoring the currency against the basket at which the dollar is only about a quarter and i'll be enough, around that time or a few weeks afterward, the dollar started to go down, so now what is happening is they have hitched themselves to a basket of currencies which is now stronger than the dollar is because the dollars are to all in the application process. we happen to think the real exchange rate in china rose sharply over the last couple of years and we think some decline is merited or warranted against the dollar. 6.8 is a call of the year. there may be further declined to
go, but we think it will be patrolled other does not have to be a more dramatic because the dollar outside pressure has subsided. we always look at the onshore offshore spread and historically, offshore yuan -- has turned around in the last couple of weeks which is fascinating and maybe a reminder of the incredible volatility that we have in this currency. my question is, wouldn't it be better for china to let the market price its currency as one currency rather than constantly using capital control to try to control the devaluation, or would that be too dangerous with such an abrupt move? david: steve do you want that? be tooi think that would dangerous, to go from a tightly controlled currency and capital lows exchanges, markets, everything to suddenly say let's see what the market wants the
price to be. there is also the school of thought that for developing countries, and china is not fully developed, having floating exchange rates and no p trolls can lead to huge swings in capital movements in and out of the country that can be destabilizing. i don't think the end of a great job of this, but they are vaguely in the right direction -- i don't think china has done a great job of this, but they are vaguely in the right direction. david: geoffrey dennis, go ahead. geoffrey: don't forget, they are reporting a -- generating some inflows. i believe with what steve said on the exchange rates and capital flows, but i do think a floating exchange rate for with somearkets
control of capital here and there is a far better scenario than a fixed peg which simply blows up and that's what happened in asia in the 90's and russia and 98. like the idea of the current currency flow but it seems right for such a crucial currency in the world him economy, maybe somewhat disruptive, i think they have to go gradually. david: geoffrey dennis, thank you very much for joining us. steve ratner will be staying with us. we will break down the future of america's highest court, coming up next. ♪
vonnie: the latest bloomberg business flash. apollo global management has agreed to by edt. the price is $6.9 billion. they plan to merge abg with protection one -- adt with protection one. the parent of mercedes will lay off more than 1200 workers at factories due to falling demand for commercial trucks. that is your bloomberg business flash. david: the supreme court hangs in the balance after the death of justice scalia over the weekend. let's talk about the highest court and how much difference you think this makes to the republic? steve: it is a huge difference.
we have a very closely divided court at the moment, scalia was a leader of the conservative side, there are a number of important cases up this minute. i think presidents have learned that they want to appoint younger people, so you want to appoint someone and it is a huge deal. david: does that mean republicans will do whatever they can to make sure the president cannot do this? steve: it's not much, they can neverote it down or scheduled the hearing, they hold all the cards. david: isn't there a political price to pay for that? is a smallink it price. publicans are not going to be willing to take that chance. erik: in principle, broadly acceptable should be what we want so we get participations from -- for dissipation from
democrats and republicans in the frome -- for participation democrats and republicans in the senate. have thoseou don't two things, you have to compromise and you have to find someone who is somewhat acceptable. erik: it was going to be the sacrificial lamb? steve: david has a theory. theory, aave my own judge on the d.c. circuit. highly approved, 97 to nothing by the senate. indian-american and a very able fellow. steve: marco rubio asked about that was asked about his vote for that guy and he's had that was then, this is now. erik: given the fact that he seems on paper to be such an appealing candidate, with the white house want to put him up?
tar him inevitably with the political fallout? david: if i were in the white house, i would say let's put the one credible and respected and put that and make them vote him down. steve: that is what obama said he would do. the constitution says he should nominate somebody. steve: in fairness to what the republicans have been saying, there is only been one nomination put up an election --r in the last eight years in an election year in the last eight years. david: it is not unusual. the supreme court is an important decision and it's become so politicized. it has been so politicized. steve: if you look at the public opinion tolls -- poles, i think since the bush versus gore,
tom: it has been six years -- david: are the banks still too big to fail? steve, some are calling to break up the big banks. steve: this has been a political in the sandersly cap and hillary clinton is calling for more effective regulation of the banks and i think if you look at the backs, you'll see that the big banks are not as big as people think
they are. our banking system is less concentrated in the banking of ourin most competitors, in canada and japan and germany. and all those places, the making system is more concentrated than it is here all stop the biggest .anks in mexico and smaller when they took over some failing institutions, when wells took over my cobia and so on, but if you start from after that round of a rescue acquisition, the have actually shrunk a little bit. banks smaller than $500 billion have grown significantly. enhance realtor is brittany and so on. erik: part of the problem including bernie sanders is people may not know what they are talking about when they say break up the big banks.
there are three ways to make the banking industry smaller. on the impose a hard cap number of assets and defined how large a bank and get and you can take the approach of the federal reserve which is a sort of soft higher -- the bigger you get, the higher the penalty you pay. you can also break them up by activity, and have something commercial and one bank and have investments in another. steve: glass-steagall is a red herring. what it did and did not do when it was repealed, it had nothing to do with financial crisis. one of the first five institutions that failed to banks, not of them were banks. the activities of the banks that in trouble for more activities that they could have done before glass-steagall and after glass-steagall. that did not change. banks, of the related
bank holding companies were allowed to own this mortgage paper -- paper. erik: i think it would've been difficult for bank of america or citigroup to warehouse securities and package them into cdo's the way that they did. steve: they could not underwrite, that is the one thing they could not do. ,avid: if you look at europe isn't there a breaking up of the banks going on because they get rid of the investor banks because the regulations done so onerous and might that happen here for the banks decide on their own, like aig? they are intensely jealous of our banking system because their banking system is such a mess. they never fix their capital problems. the regulatory hammer that they live under is far worse than anything anybody lives under, here. they are talking about taxes on financial transactions, they're
talking about caps on bonuses which sounds good but if you want to get the best people, you had to. pay competitively. to making system in europe is a terrible mess and his police often flicked the regulatory apparatus. erik: jack: to u.s. regulated -- do u.s. regulators understand this and want american banks to end up in a much younger position than european banks down the road? steve: they do, but i had a visit from a small bank and he was telling me what the regulatory hell he has been in and the scrutiny he is under, his long book and he made a guy a loan for solar panels and -- erik: we have to hold it, we will be right back. ♪
global news 24 hours a day, i'm vonnie quinn. >> we are up on markets that rally yesterday. it plans to provide with another security company that it owns. that is a 56% premium to the closing price on friday. we are trading to almost $42 level, which is one of followers offered 2100 56 million shares. -- for the 156 million shares.
2.5%inancial index fell last week, 3.5% the week before. we are finally seeing the balance here. 2% of a fake of america 2% this morning. these are very heavily weighted companies in the index. freeport-mcmoran gaining on .sset sales the price of gold is coming off. let's take a look at old, let's take a look at copper. gold down, more of a risk on day. cover has been on fire that has four weeks. i want to touch finally on oil. we have seen big gains in oil, we have seen one percent gains in oil this morning. this is a five day chart. we have seen a drop in oil today
, so we're still a 5.2% for the last five trading days and oil has given up its gains. watch for markets, because those are very closely correlated. not getting a lot to the deal between the saudis and the russians to freeze productions that already record high levels. let's talk about an impending macro slowdown. it may have negative impact on u.s. consumer spending. dollar stores have proved to be resilient in times of economic downturn. we discussed that further in our morning meeting this morning. morgan stanley analyst joined us. let me ask about your view on the economy. you like dollar stores, and you upgraded them this morning that means you must see a downturn for the u.s. economy continuing. >> thanks for having me.
we see improving risk reward them and that is the key, for both dollar general and dollar tree. based on the sectors resiliently to particular micro downturn. we are not calling for a recession, but we have aligned an integrated framework with our morgan stanley economist. we have integrated macro as well as micro scenarios on the economy, which brings us up from our mayor to larval cases. the most likely scenarios are somewhere between our bear and basic cases. >> 20's evaluations trending for dollar stores? continues on an upward slant great if we see a leveling off, where do you see valuations of dollar stores? >> in terms of valuation, pretty asractive versus history well as a few group that we have in our note.
if you look at a pe basis versus the markets on that relevant basis, right now they are trading just a kick above the 10 year average at 1.2 times. 1.1 over the past years. we do not think we are heading into a scenario like 2007, 2008, 2009, but early on, that devaluation from .8 times the market to 1.6 times the market. but more importantly, our mold cases here -- ball cases here that are a much more mature industry today. >> general ordollar
dollar tree struggling? >> we continue to choose dollar general over dollar tree. -- hasl has very out varied outcomes. very consistent topline story, paying more attention to capital return. i would suggest one other thing to add in there, in terms of the view, we have proprietary leading indicator that we developed here at morgan stanley. what that is showing is the upcoming quarter, which they will be reporting in a couple of weeks, points to deceleration in same-store sales. but the following quarter does white with inflection of does point to inflection of war. >upward.
>> thank you. >> dollar general and dollar tree are not the only ones were talking about, walmart is up and so is the burlington coat factory. how is it -- matt talked about the linkage between discounters and the economy. that is fair. but out of limit is 4.9%. wage growth is 2.9%. both of those are strong to relative to where we have been the past seven years. how does it all work? >> i think it is a couple things going on. we mentioned wage growth at the low end. at the low end you are seeing raising wages. you might think it is investing for these companies, and it means for the low-income customers have more money in their pocket.
on the macro level, there is talk about recession concerned, so they are looking for a place to put their money. discount retailers are a good place to make your bets. way, the lower income customers are not going to be able to trade out of these companies, but you might see the higher customers trade down. and that is what we saw in 2009, the target shopper was at walmart and the dollar stores. >> we saw a retail numbers that were better than expected, and they revised up. at the lower end, are they doing better relatively to the upper end? >> we will get an interesting cents on the question later this week what walmart regarding. we have seen a bit of improved string -- improved strength in the lower adverse the lower and
always feels like they're in a recession. things are never great for them. but you do have some improvement. the key is the low end. we have seen bad business investment, sectors have been hurt by the high dollar. the recession talk has people nervous, but it is not in the data. we have seen household consumption hang in there. late 2000 innovate in in the fourth quarter. we will see what the first quarter look like. end, but we getn the wage gains as employment, i am not concerned about a micro areturn in the real issues the minimum wage increases that are popping up all around the country. things that are coming up in the policy world, not the foundation of the economy. >> real issues, why? >> if you look at historical
hurt the places that get by minimum wage or retail and bars and restaurants. by this where the low skill, low-wage workers are. news if you'reso the person who keeps your job, but there are a lot of people who will not get a job. are they debating about the impact? the think a fair read of literature is the closer you look at the sectors retell, he places the kind of worshipers, low-wage little skill, low experience, the more you see this impact. if you move the marginal people the most. québec to the discount retailers. if reducing the amount wage increases and the low-wage worker has more money, where will they spend it? how much more will he be able to eat out, spend it at places like walmart, dollar general,
rent-a-center, the places where they can get a lot for their money. that makes it a better defensive move. is early, but it sounds like walmart is pretty positive about how this is working. >> they say when they look at their data and metrics about customer satisfaction, quality of the stores, they have seen an improvement. so they are sticking by this was a worthwhile experiment. the basic question is, are we really going to see gdp rollover? i think we sometimes do not see the forest for the trees. incredibly basic all caps on of gdp, i have grafted here on the bloomberg.
this is over five years. we had a downturn in 2009, but the flow continues up. if you look at the next picture, which is very interesting, going out 70 years, do you see this rolling over as unemployment falls, wages rise, gaskets cheaper? what is going to roll us over? >> i do not see the recession. i hear all the chatter about it, as it is coming from the financial markets, and if you look around the world, there's good reason to be concerned orut financial institutions that these economic growth in china and other places. but if you look at the u.s., there's no reason for u.s. equities to be pricing a real downturn. it is not there. >> i want to come back to the minimum wage issue. you think it is a mistake. do you think it is a mistake for walmart? businessthat is a strategy. there are some businesses that say if i pay my workers better, i will get better performance,
and that is what shannon is talking about it will take, and i will work with definitely worth it. one-size-fits-all, $15, especially $15, as it is way out of the store call norms. data out of historical norms. that is a big jump. we have never seen the statement that big by itself, and who out? how that would turn >> the day's pay for a manager of the electronics department in walmart is $15 an hour. so the manager of the electronics department makes $15 an hour, all of a sudden the cart pusher was making $15, think about where that would push that? >> if you raise the minimum wage to $50 in the u.s. can you affect the 5 million workers. it is not just the minimum wage workers, the relatively few of them, it is the rest of everybody else. >> thank you for being with us
business flash. the canadian government that owns a working has posted fourth-quarter profit estimates. menu items like milkshakes and chicken fries pond sale at the burger chain. the restaurants are down by 14% this year. american minor anglo has posted its fourth-quarter loss for the year. the company is speeding up plans to pull out of coal and iron ore. american action for a president douglas holt is with us. we have an election coming up this year. you may have noticed we want to get your take on hi president obama's economic track record. what will history say? >> they will give him a
at best.'s c he has not had the best track record. will inheritident that, no matter if they like it or not. >> they didn't wreck the economy. the economy came back. the job growth has been remarkable. they save the auto industry, and a lot of jobs there have been some notable successes. >> unless you want to give them credit for what they did in the crisis. they think they deserve a lot of credit for the recovery act in stimulus. any president would have done something like that great the circumstances were extraordinary, and there was going to have to be some pretty dramatic moves. should getink they
credit for having done something, i think we should grade them on the quality of what they did. i'm not a fan of the recovery act. it was poorly targeted. it was not in the list. matt: what about all the shovel ready projects? aboveaid want to back up labor market improvement since the president office. we are getting into a real sweet spot. d, openings in good ift looks pretty you are a worker. >> eight years to get to that. what then did he do? the affordable care act? there is a real growth package
right there. everybody agrees there had to be regulationial reforms, that is not a response to the actual crisis. it is really hurting smaller industry. >> auto industry? >> i'm not a fan of bailouts. >> a lot of people living in michigan are. they are grateful. we handed the company to a union, but that was politics not policy. if president obama would have gone in and in by your scorekeeping, what would he have done? the fundamental issue is philosophy. if you want to have growth at every point in your ministry betweenou pick fo
environmental goals and growth, he should of picked growth, he picked an article. from that point forward, they prosecuted in and to that did not help growth. nobody think the labor market has been taking longer for seven years. we have out of lenses that has been pretty high. we had will recovery in wage growth. we have a low fraction of the population that is actually working. there are a lot of her seasons to say that this is not great. erik: the president is going to be speaking this afternoon. probably. in-swinger criticisms directly. yourobably not answering criticisms directly. but you will be a watch right here on bloomberg television. we will be back in a moment.
david: time now for our new segment, battle of the charts. matt miller will be facing off with mark barton in london. mass killing you to go first. we need to talk about the performance of the markets. , andto 300 million people effects what happens in the world. you can see since the fed increase rates, the orange line here is stocks will white line is on field. they just come down as investors go risk off. the green here is the spread between high-yield debt and treasuries. you can see it is blown out here.
mark: everything you need to know about the u.k. economy and three beautiful lines. the most in a year from one have not had 2% inflation here since december 2013. average earnings, growth is slowing. we're down to 1.9%. weekly in july, 2.9%. this is keen for the bank of england, which leads to perfectly the final charge. morgan stanley's charge showing when the first u.k. rate hike will happen, 41 months they say.
it was in nine months. what is happening with the u.k. economy? david: now we can devote. which was held the better story? >> i think we have a much better story over here, but i'm like mark's colors. david: you think mark barton has a better story? >> i don't think you get points for color. erik: i think it is to mark, purely on performance. david: i was with you, matt. sorry. up next, assets. ♪
of high-yield at bernstein. before we do that, let's get a quick check on the markets. take a look at futures, up across the board. we are playing a little bit of caps off, with global markets. european and asian markets created $831 billion in market cap. we were closed to celebrate presidents' day. futures of 21 points. also -- here is a chart of s&p futures throughout the last 24 hours. you can see we are off the highs of the session. big gains earlier. now we're out 1%. we had been up to 3150. we are now i-29 71 now we have
the news this morning that the saudi's have met with russia and agreed to freeze their production levels, but their production levels are at record high. so the market does not seem to thrilled by that. take a look at european markets. they were up across the board earlier. they have turned down. yesterday they had a phenomenal day, friday they did a phenomenal day. the dax is down and the ftse is gaining. very difference to the swings we have seen over the last weeks, completely unchanged. a strength against a basket of 10 currencies right now. 9661 is the level on the index. gold and copper, you can see gold futures coming off as it looks like more of a risk on day in u.s. equities.
copper continuing their game. let's get first word news. battlelines are being drawn in what is shipping up to be a major political fight in washington. republican senators are vowing to act on the -- all wrong not to act on any nomination by president obama. mitch mcconnell says that the vacancy should not be filled until after the presidential election. it is a new campaign focal point for ted cruz. the texas senator says it is crucial to replace justice scalia was another conservative. that the current hype wars is out of control. before becoming a u.s. senator, he argued before the supreme court nine times. and harassment 13 grammys last night. she is the first solo female artist to win that award twice.
global news 24 hours a day, powered by our 2400 journalists. thank you. it is time for the three stories that matter to markets. oil erasingit off, earlier gains. it is the first significant cooperation between opec and non-opec producers in the teen years. -- in 15 years. it is not convince the market. the saudi say they are open to further action, but we do not have the iranians participating in this. we do not have the u.s., even though our production is turned down. what you think about the oil situation here? over the last few weeks we have reports about talks that has encouraged the market. but when we get a result, it is not what the market wanted to say. you agree with what point
have been making all morning, but add to the list russia does not have the greatest track record on following through on what they are going to say. but let's take a step back for a second. i'm perplexed by this. why have the markets become convinced that higher oil prices would be a good thing? granted, for certain oil-producing companies and countries it would be a good thing, but the overall economy, it would be a drag on global growth. many moving parts. it is so hard to figure out all the different political angles, supply and demand. when oil was at 90 or 100 and couple years ago, nobody knew it was going to 30. now we think that everyone knows where it is going to i'm perplexed. david: i think people are thinking it is a surrogate for global growth. they think that if there is global growth, oil demand is going to go out, and so the price is going to go up. certainly, that could be the
case. i think you would have to go up quite a bit before we got a signal. as a double edged sword. before it hurts growth. matt: the first point is debatable, because you could see it that the way you originally printed, that lower prices are good for global growth. on the second point, there is no debate. no one has been good at forecasting oil out to readers, let alone one year. feel likehat we all we are going to stay at $35 a barrel for the next couple of years is a little bit silly. >> what people do not understand was shale. there was a revolution going on in technology and the united states would become an oil order. but they do nothing with the saudi's reaction to that would
be. >> i think you are absolutely right. you can throw it to interest rate, or currency movement, or equity markets. it is hard to forecast these things. but we should point to how we should have been able to forecast it. >> let's turn to the number two story. anglo american is rebounding in london after miners are speeding up their plans to pull out of coal and iron ore. anglo has nearly $13 billion in debt. moody has cut the company to jump status yesterday, becoming -- london-based lawyer to pull out. moody is taking the approach that there are structural changes going on in commodity-based sectors. is another example of a company that just took on way too much leverage when times were good, and they have a lot of wood to chop right now. can they get a deal done that
will bring down their debt from 18 billion to $7 billion? we will see. it would be better if they could do in equity raise. credit wonder about your rating agencies effectiveness. they improved? the answer is no. you're going to get me in trouble. [laughter] matt: and we look to? asset managers like ourselves. we try to be an objective manner. we do not get it right 100% of the time, but you cannot just widely blindly follow the readings. you have to do your independent research. do the institutions
that rely upon these ratings put up with it? why don't they demand a better service? there is a general perception that they do not really believe and one of the ratings. >> it would take such a long ofe to undo a lot regulations that are based on that, especially when it comes to insurance companies are there is a question there is restoration, but it would take a lot to uproot them. the basic theme is you do not pay moody's to give you ratings on anglo american. anglo pays munis to break it. >> which is part of the problem. to be fair, it ratings are supposed to be an average all the things that could happen. there are a lot of things that happen in commodities that are not on people's radar.
go back to envelope for a moment bradt. to try to sell assets, they have to deleverage. >> that is one of the policies i hear all the time about markets. -- fallacies i hear all the time about markets. people are buying things. is surging in premarket trading. the home security provider has agreed to be bought by private equity firm apollo in a six $9 billion deal. a premium from the closing price on friday. it is the fact that we are seeing a lot of deals and such big premiums. you were talking to a health care company last week that paid 100% premium -- a 92% premium. we're seeing 56% here.
are we going to see consolidation in this market? is very interesting. i have been speaking to private equity guys over the past year, and i have been saying we are not going to stretch. we're not going to compete with strategic acquisitions. we are only betting on multiple expansion. this is what happens after two or three months of sock equity prices -- soft equity prices. i will remind investors that a lot of things that went bad for these large lbo's. david: i also wonder, and this is just wondering, if there is a tech play. if you look of the internet and the home committee your adt, that is a natural place to go. this becomes a growth industry, to have internet control of your home. adt would be a natural place for that. matt: i would like some improvement to my home alarm system.
it seems so basic and does not work half the time. it works very well. don't even try to break into his house. [laughter] david: you are sticking with us. much more ahead on bloomberg go. headwe will speak to the of credit strategy at barclays. we are about 19 minutes away from the market open. u.s. stock seven open all morning long. up.res are ♪
>> here's your latest bloomberg's flash. capital to shareholders. a multibillion-dollar share offering, with the dated bonds maturing in 30 years. apple issued a billion dollars worth of bonds back in may. another first for worn off and. annual meeting will be webcast for the first time this year. the lifestream will appear on the finance page of yahoo!. two thirds of those surveyed say their company financial .ituation is good
bloombergr latest business flash. matt: thank you. i'm taking a look at stocks that are moving. we saw pictures of across the board. let's take a look at what is driving that. we have textures putting up decent games, but keep in mind how heavily weighted to these companies are. the same is true with google shares from 1.4%. closed yesterday and global markets rallied. bank stocks to rally big on friday as a collective group they had their biggest one-day gain in four years. to be continued today as goldman sachs, morgan stanley and bank of america almost 2% or more. citigroup is up there as well. all of the big banks is rallying today and that is going to move the index as well. take a look at oil stocks.
what is happening in light of oil falling from the gains earlier. in the morning, and now it is unchanged. as a result, oil stocks coming down a little bit. exxon mobil a little up over 1%. conocophillips of 1.6%. market,ook at the oil refiners are doing the best today. a quick check on adt shares they are up almost $41 a share. is offer price from apollo $42. that 56% premium, we should see shares get closer to that the market thinks there is a white tonight out there. community health had positive results for the most recent quarter. but the shares down 25%. the market sells off that stock as we go into the open. of next on bloomberg go, with
bonds to the rest portfolios. explain that. >> we think of high-yield as part of our fixed income allocation,. it is supposed to be a part of that holds up really well when markets start selling off. you introduce high-yield, and that is not what people want from their fixed income. especially today, that is the wrong way to think about it. high-yield is a risk asset class that has a correlation to the s&p. are there forns high-yield to return as much as equity is going forward, perhaps even more. as we've seen so far as your, equities down about 8%. david: as you see markets around the role, it seems like it is almost gone, risk off to money flowing to the yen, the treasury bill, or equities. but the spread on high-yield has
grown. isn't that telling you it is riskier? >> it is missed through the treasuries,uality volatile.known as comes down notice much in the bad times. people say that equities will struggle to get six or 7% in returns. rout in sturdy neil is a pretty -- starting yield is a pretty good indicator. i have brought up my short again.
where do you expect to see ms. a year out for six months out? >> you cannot predict where spreads are going to be. jpmorgan put out a note this morning saying that every time spreads of god about 800, you have never had a negative return of the next 18 or 24 months. the average return was in the double digits.
you start with how you and you will get an average loss rate. offsetting that, companies that do not default, which is the majority, end up paying a premium to take out their bonds. that happens to average around three points overtime. that is why you are left with your yield. i feel pretty good they will be high single-digit over the next. matt: if you want to go into high-yield and your concern is about the energy sector, which sector do you think are the best for investors to look at? >> the baby is gone thrown out bathwater.
low oil prices are very bad for most oil companies. they're not bad for the rest of the market. there are a lot of other things you could invest in. matt: what is your energy exposure? >> and is pretty low. a lot of indirect energy exposure, and a lot of things that have been it from lower energy prices. david: how different would turn else's behavior that there was a chance of recession? >> we would be calling for lower returns, but it would not change the relative value of equities versus high-heeled. if we are going to recession, equities are going to be down a lot more than high-yield. that is why i think it is so important. people ask when the bleeding and high-yield will stop, and we have actually had a pretty good
year and high-yield if you're framing against the equity market. high-heeled does not behave like the rest of the fixed income. you need fixed income securities, mortgages, high-quality corporate, to offset your risk. high-yield is not do that. raisingw you a high that how does the high -- how does the high interest rate market affect this? >> i would give you the same answer as the high oil. growth is better, less problems, and i expect terms to go higher. fed is really, by all indications, on hold for a while. and high-yield had four return. -- poor returns. david: two-putting budget on this, what are the markets telling you about the likelihood of recession? >> always hard to handicap.
a greater percentage that we have had in the past. it is important to remember that high-yield does best in areas of slow growth. in fast growth you see a lot these adt type transactions, and a lot of leverage on the balance sheet. matt: thank you for joining us. a pleasure having you here. theill stick around for rest of the program. much more ahead on bloomberg go, including the head of credit strategy at barclays. the opening bell is next. ♪
goldman sachs up 2%. this is after friday, the best one-day gain in four years. there you hear the bell. the corporate bond market is sitting clear and ominous signs about the u.s. economy. the credit market is indicating a 25% chance of a recession. >> i'm only going to speak about the martin markets. look at investment grade, it is selling you we're going into recession. it is telling you that we are priced for a relatively mild recession. for a mild recession, we are priced for it. kershaw still have here, the director at high-yield . in joining us
do things look a little bit better today than i did on friday? >> i do not think you should let a day or to change the answer. but that does not feel too far off. i think everything has been looking at high-yield. that has to be the barometer we are potentially heading into recession. if you look it high-yield historically, high-yield projects to out of everyone recession. this levelou get to of strength, and capture everything else in, you are not facing that alone? >> bloomberg news this morning --s it is not burdened. >> in his last great usually signal something is not going great. there is this question of yield at 10%.
investment-grade market is a little bit different. it got to 200 spread this week. if you want to put that historically, three times it has been crossed before. you go back to the great , but gilder not that big. matt: it is because treasury yields are moving down so much and so quickly. not because corporate yields are moving. >> both, but it is a big factor, what you mentioned. you're only getting high 3% yield, when it comes to investment-grade credit is not a number that is eye-popping. that is a lot of spread. probably too much spreads. matt: we were talking with
kershaw and about the rising interest rate environment. david asked me if i had been paying attention for the last couple of weeks, because i clearly see is not happening in time soon. but janet yellen clearly doesn't want to raise rates. at some point this year. what's that mean for the credit market? >> i am not worried about the accurate or things i am more about, but if you think about where rates are today, if you look back at historically, kershaw and was talking about high-yield there's almost no sensitivity to rates. anytime the rates go higher, sprint lower. at this level spread, you're not too worried. and investment-grade, i would be worried. lose amount, you do of total return. you only have three other data points there. i worry a lot less than i would have historically. at what point the tightening of the credit market
actually affect the underlying economy? >> i think it is doing that already. it goes in stages, there's no question about it. going back to the recession, it is very important to recognize successful investing is about figuring things out before they are priced into markets. you are already seeing spreads widened. isaiah recession coming, i see a problem with financial market systems. his friends were at 240. 82 we are out to 8, 900 and we do go into recession, as long the, i would be more worried about the equity markets. david: are you worried about tightening effects in the underlying economy? >> if you look at all these metrics that we try to affect .omplex models
am i concerned it will affect the economy, a little bit. but in 2000 and everybody was worried about the maturity wall. companies have been able to , but over a short. of time they have not been able to do this. the drop in oil is bad for most people in the energy sector. it is good for other companies, the majority impact. how does the low price of oil affect the credit market? >> it is good for all of us. for: i was down in dallas the weekend him and his was one
dollar 26 a gallon at the quick trip. trip.26 at the quick >> really? i am an economist, and if you look last year, we had 3% consumption growth. that is a pretty good number great a loss of that is because you were paying less at the pump . it was good for the rest of the economy. the problem is is that the manufacturing sectors are struggling. that's manufacturing may only be in the not low teens of gdp. but, you look at the credit market, and that is where you can get some like and how credit markets react versus the rest of the market, the rest of the economy, because a much higher percentage of credit markets are those manufacturing businesses. there is a lot of other sectors you could say. that rate on the credit markets
and little bit. i do agree with this point. david: it has been years since anybody has said that. >> mike firn has been that every time i start to ask about that, as the time you're supposed to be buying high-yield, not telling it. comes between one and four years to between maturity. it gives companies time to access markets. just like when things were going well, we cannot possibly see how it would turn. now when things are terrible, we do not see how it can better, but that is just a piece of time. david: thank you for being with us today. matt: let's see where stocks have opened for trading. we saw futures pointing out all morning. but not as strong as they had been earlier in the premarket trade. here you see the s&p 500 trading up 1% to 1884.
the dow jones industrial average trading to 16,119. let's take a look into the market and see a couple of the individual movers. the market likes it, the stock is almost up 12%. sales, orf asset stake sales, alibaba taking a 5.6% stake in groupon. the market likes that. 335 and but% to alibaba rises on the news as well. 5.9%. made in the market is letting it is enough money to put the market out. gogo has been sued by american airlines, the provider but incredibly's snow internet service. but in any case american airlines in a lawsuit, saying they have found a faster isp.
you look forward to that when you fly the friendly skies. finally, a couple health care stocks. let me issue a bloomberg go correction. i did not put it to correctly when i was talking earlier about the united health services stock. hospital stocks are having a rough time today because of community health a loss, unexpected loss in the market. that is why saw community down 24%. the rest of the stocks are following and submit it. now with whatever you do little live from the nasdaq with the latest there on qualcomm. >> thank you. shares are higher this morning after the number one rated some a conductor upgraded welcome to outperform from market perform. to reward profile is attractive know that the stock has fallen so much over the last year and a half or so. he also has more comfort around the long-term royalty rate protect right after last week's analyst. the stock is down more than 20%.
trading at a nearly 40% discount. perhaps they do have a shot of rising 20% to wrap in the new price target. >> thank you very much. , the chief executive of airbus versus the fears of a downturn. he says the growth of airline passengers is likely to remain strong despite concerns over the global economy. that's next on bloomberg go. ♪
president enjoys us to discuss the fate of minutes. you do not want to miss that tomorrow at 8:00 a.m. i have your latest bloomberg business flash. the private equity firm apollo management has agreed to by security firm adt for $6.9 billion. that is a 56% premium despite the closing price. this would add to the security companies it already owns. the wall street journal says the mercedes parent will lay more than 1200 workers this week at the u.s. factories. daimler makes freightliner trucks and the night is dates. -- trucks in the united states. cost and as cut taken advantage of lower raw material prices to boost profits. that is your latest bloomberg
business flash. matt: thank you. asia's biggest airshow is underway in singapore, and minutes turmoil in global markets. of that bytell any looking at plane orders for airbus and boeing. about theo airbus ceo growth probability, profitability, and future of airbus. >> many people talk about it, but we do not see it. boeing does not see it. but the reality is we have never had so profitable. it is true as well that the industry is very dynamic, there is a lot of growth. there is a big fight among competitors. all in all, i can confirm that we see the growth, and asia now counts for 40% of our deliveries last year. this is the area growth, and it will continue, except if
everything collapses. but this is not what we see. >> i came off of one of your brand-new a350s. a little bit upset about his a320 and the delays with the engine. he wants compensation. with that comes from you or pratt & whitney? >> he is right. we have to look at this. will a slow start, but we catch up the second half of the week. every customer will be very pleased. >> are you seeing indications from customers, that the new generation engine are not as welcome what the new low price of oil? >> no. it is clear that we have to look at that, but the projections of our customers are not based on
the current price. even at $50 a barrel, i can tell makehat these new aircraft a difference. airlines who are looking for the new generation aircraft >. >> where are you going to find the customers for the new a3 80? asian customers have not come back to the table. >> that we have all different airways. commitment for 12 aircraft. as the market doubled in size every 15 years, i am sure we will need more and more bank aircraft from the big cities like singapore, like hong kong, like london. 54 landing there are and taking off every day of the
a3 80. another manufacturing is tempting as on-time performance. if you have the time to wait for it and $65 million, gulfstream senior advisor spoke to bloomberg about the future of the company, and it's highly sought-after g6pd. very solid year in 2015. we had strong market share in all the regions which we compete. we had a good year in asia pacific. it was are from his mark outside the united dates. ? >> how much visibility do you have in 2016? >> we are well positioned for success in all of our markets. we are a financially strong company, and we haven't heard company in journal dynamics. we are positioned well. >> you are taking market share. where and who? >> from our competitors all of
the world. >> is a you have garnered this market share. >> we do not give marketers specifically, but in all the organs which we compete, rg 650 has ticket market shares at the top end of the market. it has created a new market to itself our aircraft in the middle of the product line, g550, g4 15 can have a leading market share around the world. >> why is this so resilient? >> i think we have a strong product line, and even though you he changing conditions around the world from time to time, we are positioned well. we are a strong company, we have a product line that helps people travel and do business internationally. our airplanes are doing what they say they will, and we're delivering them on time. >> what do the wealthy individuals want? roomier, more luxury? >> performance, comfort and
safety. and they want airplanes that deliver on time. --y were airplanes that say do what they say they will do. we have been building, selling, and supporting airplanes, better than anyone else. now that there is no longer the stigma of the jetsetters to have their own airplane, have you seen a reversal in attitudes? have you seen a hike in demand? >> we have seen a height and demand. people seen a shift in understanding business aircraft are for business and that private companies and individuals cannot do this without the aircraft that allows them to travel on their own schedule to get into smaller airports. it provides flexibility and illness to run an international business.
we have been talking about congested space in asia. what is your strategy? >> we will continue to invest in the region. we have invested significantly through service and support. singaporecompany in with authorized maintenance facility. support mroroduct in beijing capital airport. we have positioned about $65 million worth of parts in the region to support our operators. we are well-positioned with people and parts and support to pursue support our own operators in the region. plus those that may transition through. gulfstream was senior vice president of worldwide sales. i was with a buddy who had the g5, and we were near the 650, and he was drooling over it. he saw anything different -- the
big difference. matt: it will be cheaper for them to operate. i'm looking at the jet fuel prices. over the past five years they have dropped by 70%. we have seen the price and oil come down, let me take a look at my lover, you can see jet fuel prices coming down as well. if you're looking for those new g6pd, you can rest assured that at least fuel cost will be lower. >> we should think about buying one. matt: stephanie: we would have to go in on it together. david:, we will be looking at highlights from today's show. ♪
strong as a few hours ago. s&p 500 gaining about 15 points. the dow jones up 100 and change. if you take a look at my bloomberg terminal you can see the imap that i have pulled up. starks, consumer discretionary, and i.t. stocks are doing the best today. telecom and utilities coming down a little bit as investors go risk on. withmaybe halfway on today the gains we have here. david: let's take a look at today's best conversations. >> the loans are going up because they are not spending as much. it is like the nonperforming loans are catching up with the top line. you have to be careful. is this new bad loans, or simply what is in the works? >> i think mexico is actually moving along reasonably well. but what is going on, there are
so many macro events being made out there that have nothing to do with what is actually happening underneath. rry trade right now. have 2amental you million barrels of imbalance, and a 92 million barrel market. simply freezing at current levels does not solve that problem. people are trying to get their money out of china because they perceive they want to devalue, and they want to be in another currency. concern about a macro downturn. the real issues for this sector are the minimum wage increases that are popping up around the country. kinds of things that are coming out of the policy world, not the foundation of the economy. >> one of the markets becomes convinced that higher oil prices will be a good thing? four certain countries, it would be a good thing, but for the overall economy, it would be a drag on global growth. matt: that does it for a
bloomberg known tomorrow we are joined by the ceo of wpp. i am excited for that. he joins us at 8:00 a.m. i love seeing this cartel that doesn't quite against itself together in oil. markets, so it is interesting for me to see what happens to the u.s. market after we have enclosed for a day. but the story for me is still the supreme court justices. .avid: join us tomorrow that is on bloomberg go. ♪
brendan: good morning. i am -- i'm in for betty liu all week. russia and saudi arabia freeze oil output in january levels. the market is struggling off of the first significant -- we will look into why. also, it used to be they can't miss recession predictor. be skeptical of the signals you get from the yield curve. high drama out of the high court. how the death of antonin scalia will have a huge impact. housing data. julie hyman has the latest. julie: a reading of 58,