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tv   Bloomberg Markets  Bloomberg  February 23, 2016 12:00pm-2:01pm EST

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>> good afternoon. i'm alix steel. here's what we're watching at this hour. the world's biggest names in private equity and venture capital are gathering in berlin for the 2016 super return international conference. we will go there live for an exclusive interview with ken mehlman. are they good times over for google and amazon stocks? some say yes. macy's is trying a new strategy. the company is turning several stores into discount outlets. will investors warm up to the retailer again? for more on today's activity, let's go over to julie hyman at the markets desk. it has been about oil and stocks again today. lows oftocks near the the session still as oil also
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made those lows. bouncing off the lows a little bit. this is as we see oil pretty much plunge today. we had the saudi oil minister at a conference in and confirming that there are no plans for a production cut by saudi arabia. oil is off by 4.5%. onto the april contract now. that is why the price looks higher than yesterday. we are still seeing a daily decline in the price of oil. i have the oil versus s&p 500 today. closen see the correlation today with oil going down around the same time that we saw the s&p 500 make the lives of the session as well. that means that volatility is continuing to kick up. as weoil trending down see volatility at its highest and about seven years.
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higher than it is for the stock market. stocks, energy shares are down the most. materials are down as well. seeing the groups that have been so sensitive to the push and pull of the markets doing poorly once again today. banks and big -- cap tech. alix: is it a rotation into the risk of assets? julie: yes. at treasuries, over the course of the day, we earlier had some selling and treasuries going up and now we are seeing buying resume. it is quite a small move. we are seeing buying in gold. the move is more substantial.
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also seeing some buying of the japanese yen, which has been seen as a haven as well. alix: thank you. let's check in on the bloomberg first word news. mark has more from the news desk. mark: president obama is sending congress his plan for closing guantanamo bay. , the president said guantanamo undermines national security and american values to the white house does not have much confidence that congress will approve the proposal. it calls for transferring dozens of prisoners to a site in the u.s. says his party will not permit a vote on any supreme court nominee submitted by president obama. instead, the senate will "revisit the matter after the presidential election in bigmber." senator mcconnell knowledge the president is within his rights to nominate a
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he addednt, but republicans controlling the senate would exercise their rights to "withhold consent." republican voters in nevada head to the polls today for the presidential caucuses. donald trump is hoping for a third consecutive win. the battle for second place could be close between marco rubio, who is counting on support from mainstream republicans, and texas senator ted cruz, who was the winner in iowa. bill gates says he is disappointed with a recent report suggesting that he supports the u.s. government in its class with apple over unlocking an iphone. he says it doesn't accurately reflect his opinion on the matter. he spoke earlier on "bloomberg ." >> i was disappointed because that doesn't state my view on this. that with the right safeguards, there are cases where the government, on our behalf, like stopping terrorism
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which could get worse in the future, that is valuable. gates said there have been many cases where the government took information and decided they would not -- at least in the expected way, use it in unexpected ways. day.l news 24 hours a i'm mark crumpton. alix: the world's biggest name in private -- r gathering in berlin for the 2016 super return international conference. jason kelly is standing by with an exclusive interview with ken mehlman. former chairman of the republican national committee. jason? it's great to be with you. a lot of buzz here in berlin. -- this is a big
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big conference. the biggest pension funds, the big names in private equity. they are gathered here to talk about what's going on in private equity. the mood is pretty optimistic. i want to turn to ken mehlman. welcome. >> thanks for having me. >> talk about that optimism. greats a time of volatility in the stock market. people are pumped up. >> no question. there is a lot of volatility across lots of economies around the world. the reason people here have an optimistic view is if you think about it, the people in this room combine first patient capital. so we have capital for a long duration. we measure success over a longer window of time so we are not worrying about quarterly returns. have a proven ability to
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improve in the companies, help them grow. that is something that is very much needed today. and there is ability to invest flexibly. this volatility and capital is needed, if you walk in with long-term capital that is patient and can add more to the companies and you can invest flexibly, it's a good time to invest. >> any surprises for you? focus is on the energy space broadly. i thought it was interesting and noteworthy to participate in a full day focus on environmental social governance. that is how we as shareholders can better engage with stakeholders who were infested by the -- affected by the investments we make. talk about that.
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a full day devoted to it. opening keynote this morning was al gore and david lodge -- david blood. a lot of people talking about that. it is very new this year. what triggered that? >> i think it's a reflection of where the world is going. if you want to be a good investor today, there are a number of things you have to do. one of those things is an ability to understand where you are operating. to understand public policy and regulatory issues. and to understand the value that can be created if you can engage effectively with stakeholders. think about the world today. there is a need for infrastructure around the world. that satisfies the return profile of a number of firms like ours and it can help solve problems. kkr has invested in three different municipal water systems to help make sure that they are upgraded, ready for the
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21st century, doing it in a way that is environmentally positive. and as we saw in flint, that protects the people who live in those communities. that's an example of the opportunity. take advantage of those opportunities, you need to understand the people in those communities. had to engage with the municipal unions and others. all those are what you consider esgn you think about y >. >> this is a change in tone from the last many years. that shift has been meaningful. does private equity have the right regulatory structure in tohington and here in europe enable it to do the sorts of things you feel like you need to do? >> in terms of a savior, i hope
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i'm not explaining us as savior. i think what we can be is solution providers who help build better companies. in terms of regulatory structure, i think a lot about regulation and so do the people in this room. we are regulated in the united states and in europe. we should be regulated. what's important is that regulation be tailored to the business model we have and we think it is today. to be totally honest, when i go see a government official or a policy maker, most of the time it is not saying, do not regulate us. it is saying, what do you need help with? is there an area where we can invest and solve a problem? i mentioned the water system. ier the last several years kkr, we have invested $5.2 billion in companies focused on getting the returns are investors expect. but the way they're going to get them is by solving important
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societal problems. for example, food safety in china. he saw the tragedy a few years ago with dairy poisoning. we have made dairy, chicken, pork investments focused on bringing the kind of standards we would expect here in germany or the united states to a chinese food producer. so that chinese citizens know they have the right approach. that's a great investment. water is a critical issue. , and security, scarcity reliability. we have invested in that space. there are many firms around the world that are similarly looking and saying, one way we can by solving important societal problems. you are working on a book that's going to come out in april. it's about the rise of the fitness and wellness industry. the fact that so many people are focused on how to be healthier today and invest in their own
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wellness, is a great thing, but it only works if there is capital involved. we have made investments in that space. even in our traditional investments, we have a partnership with the american heart association focused on learning best practices for promoting wellness. >> you chaired the rnc. this is the craziest election cycle we have ever seen. what is your take? >> i am very happy to have traded super tuesday for super return. out of politics. it is a crazy cycle on both sides and around the world. i seriously think we are seeing something we think about a lot. andvel of populism institutional distrust around the world because growth is somewhat uneven and not as
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strong as people want. people are not satisfied. -- you are aou a political leader or business leader, a huge part of a mission needs to be, how do we interact with society more broadly and solve those problems? we need leadership that can provide solutions. >> thank you for being with me. back to you. we'll be back in a few minutes with a another guest in berlin. alix: thank you, jason kelly and ken mehlman. theill bring you more from super return conference in berlin later in the hour. coming up, our value stocks coming back in fashion? google and amazon may not be the saviors they once were. why value managers are starting to smile. shary suki cut all ties with the energy company. from the board of directors, saying it's time to
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move on. he tells us where he goes from here. and michael smith, the copresident of aris capital company will join us for an exclusive interview. now? is he putting money ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. julie hyman has a check of earnings. julie: let's start with fitbit. this is a pretty terrible example of an earnings report. shares are down the most in a single day ever. level, itose at this will be a record low for the stock as well. the company forecasting revenue and profit that fell short of estimates, facing more competition from companies like
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apple and samsung. xiaomi is also seeing new watches introduced from other companies. there are questions about the people who buy fitbit devices, how many of them hold on to them and still use them after a years time. also some analysts are saying that the declines we have been seeing are tied to the expiration of the lockup on a secondary offering. that could also be putting pressure on those shares. we are looking at frontier communications. that company is in the process of buying some landline assets from verizon. that is something in the background of what's going on with this company. it did post an unexpected gain. earnings coming in at five cents and the estimated loss was three cents. come in slightly below estimates.
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this is valeant pharmaceuticals. it did not report earnings, but it restated some of its past earnings reports. it did not say it was going to have an actual earnings report. to discussd a call fourth-quarter results. the shares are actually higher. analysts are split on whether it is a good or a bad thing that they are getting this past them. it has been a rough year for that stock. when will investors returned to value stocks? we are talking amazon, netflix, or some of the topics for investors last year. at what point will that momentum run out and bring volume back into vogue? dani ask danny berger -- burger. >> a lot of these hedge fund darlings have taken a hit during this route.
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. thattors are hoping momentum is going to fall out of favor and investors will start looking towards value again. the only problem is so for those calls have been pretty premature. value isok at the s&p, down 5% versus growth which is 6%. it is doing better, but it's not that big of a difference. it seems like a are falling faster than the underlying stock price and that's the problem. so many of the investors i've talked to have a sense of optimism. valuations are falling. at the height of last year and alive -- july it was 19%. we still have another five percent before they are at the average. value investors are saying, we
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are hopeful valuations are coming down. the fundamentals do not look good enough for us to jump back in. they are sitting on a lot of cash at this point. alix: what do jpmorgan see in the markets? their analyst has written about this a lot and continually called for value to outperform. he is saying that there has been a bubble in momentum stock, especially with passive investing. the s&p is heavily weighted towards momentum. there's a bubble forming and soon we are going to have momentum go down. value is going to start to outperform. alix: what are the fx when the bubble winds up bursting -- effects on the bubble winds up bursting? >> these are a lot of hedge fund darlings with momentum.
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held up the s&p. i think there's a lot of volatility we can expect when that bubble does burst. you hold risky value names along with hedging with gold and the vic. alix: thank you very much. still ahead, the former ceo of cheniere charif souki. cheniereans on beating at its own game, coming up. ♪
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alix: charif souki is doubling down on liquefied natural gas, two months after the ceo of cheniere energy left the company. he is teaming up with martin houston to start an elegy company. i spoke with him earlier today. he has been a terrific
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partner to me in the past. between the two of us, we represent something like 80% of the liquefaction product -- projects. we can work with them as opposed to competing them. that has worked out extremely well for both of us. alix: if you go to your 10 million tons of liquefied natural gas, when you scale up to as much as 40 million tons, do you have an estimate of a budget for that yet? >> they will be in the toghborhood of $25 billion $35 billion. alix: what is investors take on your new project? >> we're just launching today. why don't you ask me next week? alix: i will. >> remember that my investors have done extremely well with cheniere in the past. we have created some goodwill. i would be surprised if the money is difficult. therewhat's different is
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is so much more competition in l&g export market. the capital markets in general seem to be seizing up. what do you see? >> the first thing that is different as i am richer than i was seven years ago. [laughter] so i have funded things myself . i have not had to rely on anyone for the time being. i have a very different view from the accepted public wisdom that the l&g market is going to dry up. 2-4 yeue that there is a ar period where -- come on the market very quickly. in the global context of how much natural gas we consume on a and how much growth
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in the natural gas business, which is the fuel of choice. if we are successful with 12 million tons, that represents about three months of growth and demand. if we are successful with the full 30 million to 40 million tons, he represents one year of growth and demand. that is not very significant. this is a long-term business. we are talking about things that would be delivered at the earliest 2021. alix: charif souki, former ceo of cheniere. just ahead, michael smith of ares capital in an exclusive interview. stay with us. we will be right back. ♪
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♪ from bloomberg world headquarters in new york, welcome back to bloomberg markets. i am alix steel. let's start with the headlines. mark crumpton has more from the
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news desk. mark: thank you. president obama has sent congress a plan to close guantanamo bay in cuba. the proposal was sent anywhere from 30 to 60 inmates to the united states. the presence of the public have been scared into thinking that closing the prison would make the country less safe. president obama: for many years, it has been clear that the facility at guantanamo bay does not advance our national security. it undermines it. still, the white house does not expect congress to go along with closing the prison. today, the nevada caucuses and day after ted cruz shook up his campaign. yesterday, he fired his communications director for tweeting a story about marco rubio disparaging the bible.
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a culture in is that no light is today. most polls favored donald trump in winning today's caucuses. the syrian government has announced it except the u.s.-russian cease-fire. the announcement came after the white house and moscow agreed on a truce. italy's foreign minister following reports that former prime minister -- a former prime minister was spied on. the italian media site wikileaks files that allegedly show u.s.
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national security agencies spied on him from 2008 to 2011. global news 24 hours a day, powered by are 2400 journalists in more than 150 news bureaus around the world. alix: we do have some breaking news for you regarding viacom. the company has been approached by investors. julie hyman is looking more at the highlight -- at the headlines. we saw the spike in the shares. when you see a big movement, a big rapid movement, you have volatility triggers. the circuit breakers kick in. it is caused -- paused. again, at a media conference, saying, we have been approached by investors, selling a stake of paramount would be of great benefit to the company. viacom, like many of its competitors -- many media
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companies have been suffering as of late. i'm looking at how much of its revenue comes from paramount. it looks like a relatively small amount. if i'm reading it correctly, about 6%, or so. be a relatively volatile area for the company. looking at the shares, they look to be halted. they rose 3% over the last year. we have seen a lot of these media stocks underperform. we will continue to monitor these comments. he says, we will continue to control paramount's. we have engaged partners to help paramount. it would be a cell of the state stake of of a the company. is live withelly an exclusive guest, michael
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smith, the copresident of areas aries company. jason? here with mike smith. it's interesting how much of the talk here is really optimistic around selling. it is a nice segue from those comments. the private equity guys are really starting to get excited about a very volatile market. i want to talk a little bit about the area where you work, where there is also a lot of activity in the debt side. >> you have been part of this conference over the last couple of days. on monday, a full part of the conference was focused on private debt and private lending . we have a large credit business within aries. that type of credit is usually intermediated by the banks.
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what people don't know is we have a very large private lending business. both here, and europe, but also in the united states, where we are making loans to middle market companies. do your point, it is very much a hot topic this week. give us some numbers, in terms of how big is the market, and what's ideals are we talking about? >> the companies we are financing -- a lot of things are providing credit facilities and some debt to these companies, but they have matured past that, bring get into institutional capital, like i said, to help them achieve their growth objectives. somewhere between $10 million and $100 million are the companies we are focused on. you look at the
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market out there, obviously the high-yield i get has been volatile, effectively shut down in some cases, how does that play through to your business? >> i think there are couple of key drivers. you hit on one of them, volatility in the market, and irrational behavior by the banks . they open and close based on some of this volatility. a lot of that is being driven by the regular joint -- regulatory environment we are seeing. more and more, they are shying away from even underwriting the loans, and looking to large-scale players in the debt industry, like aries, to underwrite and disseminate that risk, instead of taking that risk. we have seen an enormous growth in our ability to do that. secondly, sponsors need more flexibility. bridget requirements around
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capital spending, around capital .nfusion into the business in order to achieve those objectives, we provide that flexibility. we appeal to those buyers, and are providing that flexible capital that they need to achieve their corporate objectives. jason: you are in an interesting position because you have your clients, which you mention, but some of the world's biggest investors are here. what is their mood, and attitude toward debt at this moment? monday was great. we were talking to the lps about the asset last, and how we are driving risk-adjusted return to our investors. providing senior credit facilities, junior capital, in the flexible manner that i modested, and with leverage, we are driving what we think is very good risk-adjusted return.
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they are really excited. we have seen a seismic shift in their attitude. you talk to lps, and you're not sure whether to talk to the private equity guy or the fixed income guy -- over the last 10 years, we have seen them now asset allocation into the private debt market, and really the acceleration happen in the last 2-3 years, where people understanding what we are doing, the risk-adjusted returns that we are driving, and really getting excited about the asset class. jason: your returns, where do they sit in the spectrum? we try to drive a percent-10%. again, it depends where you are on the balance sheet. if you move down the balance sheet, to your point about the high-yield market being close right now, or having a hard time ss thatto acce
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market, their opportunities for us to move into that slot. i want to make sure we get to where the opportunities are. energy seems like a no go for almost everyone at this point. is that what you are saying? -- seeing? >> if i heard the words high-yield and "no," 100 times together, that is the thought pattern of this conference. as the industry avoidance. we haven't been investing in energy sector. credit platform, we have very little investment in auto, home, really high-tech type of stuff. i has been a thesis for the last 7-10 years as we have built aries. asset allocation and avoidance of those kinds of industries. we love consumer, consumables, food and bed, software,
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non-technology related stuff. we are looking into those low capitalicaly investment businesses. industry is bright for consolidation -- ripe for consolidation. jason: that is a wrap here from berlin. alix: thank you so much, jason kelly. and, michael smith of aries capital from the super return conference in berlin. we want to check in with you on two things. the breaking news of viacom. that stock has resumed trading. it is up by about 5%. the company says it has been approached by investors to sell its stake in paramount pictures. this is all the drop of viacom tried to combat the falling of the stock price. also, take a look on oil. it has been another rough day
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for the commodity. another decline of about 4.5%-5%. the saudi prime minister said a production cut for saudi arabia was off the table. comment disappointing investors. much more coming up. we will be right back.
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♪ abigail: welcome back to bloomberg markets. it is shaping up to be a seesaw market. a big drag on the nasdaq is the
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biotech sector. the biotech index is down more than 1% itself. the nbi's off about 35%. the question remains whether or not this will lead into the nasdaq overall. one biotech plunging today. ptc therapeutics after an application for muscular rug was refused. this doesr in saying not include the data, and is defending the stock. it could be tougher ptc therapeutics to recover. now more bloomberg markets. ♪ alix: you're watching bloomberg. i am alix steel. this is your global business report. here is what we're watching. the bank of england says the bank could raise interest rates in the aftermath of the brexit
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phot. he is not making any predictions. intercontinental hotels group investors.y back to broken promises and canada. breaks aister trudeau campaign pledge. he said that is the best thing for the country. .e start in london the bank of england saying it is preparing a contingency plan for the results of britain's europeanum on union membership. he says that central bank has the room to loosen policy, if needed. taker approach is to developments in market, and confidence indicator service has given -- as given, and feed those into the forecast. we are not making a judgment,
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but the potential outcome -- which side would win -- or potential assessment of the consequent is. alix: the pound is at the lowest dollar since the 2009. this after london mayor announced his decision to campaign for leaving the eu. meanwhile, the leaders of britain's top companies have signed a letter in support of the u.k. staying put. it appears in "the times of london." that staying in the euro bloc would be best for the british economy. enter condo hotels is giving -- intercontinental hotels is giving investors a reward. specialany will issue
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dividends. on top of that, the regular dividend is being raised 10%. all of this comes after the chain sold hotels in paris and hong kong last year. from good to bad. there was a surprise full-year loss at standard chartered. standard chartered was left with loans when the commodity market stalled. growth it was the first annual loss since 1989. for the first time in 30 years, canada is going into the red. with falling oil rises eroding the base, newly elected prime minister justin trudeau is fully embracing the deficit. his newly elected liberals will release a new budget next month that dole's out more money for every structure, family allowances, and more, all financed by borrowing. for more stories, visit bloomberg.com.
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a larger than expected cut to dividends. the largest mining company is lowering its payout for the first time in 15 years, cutting it from $.62 to $.16. pro profitsnt plummeting. us earlier.ed we have been an oil since the 1960's. we have made a huge amount of value for our shareholders. we have got a very, very good operating capability with the best resources both onshore and .ffshore certainly, the accommodation has worked very well for us in the past. we see that oil prices will recover before metal prices. with that capability, with that
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resource, this will continue to be a fantastic business for us. >> this is critical. if you get oil to do your strategy, cannot support the dividend and actually true dividend growth? >> absolutely. it is all part of it. we have for businesses. oil is a core part of that copper". ist is very important here we will see oil will recover first, then probably copper, then you get into the boat materials -- bulk materials. that is the essence of a very well diversified portfolio. we can therefore allocate capital from one business that generates capital into the next, as we see, before the turn of the cycle. itt is the essence of why
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is diversified. spending cuts and dividend cuts, do you still have opportunities to buy? commodities at a very attractive price. >> honestly, for us, it is very difficult. we have a very focused for portfolio. when people get a hold of the assets, they hold on to them. yes, we are on the lookout. not many are going to come to market. they have to come to market at the right price. it is not enough to just have the opportunity, you have to buy at full value. the probability of us pulling something out, probably, dowdy, on the low side. ceo. that was the bhp
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we will be talking energy with cheniere.r ceo of 10 received is getting a boost from the winter weather. we will explore after the break. ♪
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♪ alix: muslim back to bloomberg markets. i am alix steel. there are signs that macy's may ts pulling out of t in slump. a surge in demand for codes and boots posted sales. gaslights is bloomberg columnist. the results were not as horrible as we thought they would be. macy's has a lot of work to do. what is first on the docket?
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>> the problem is they had too much on the docket. a laundry here is list of things we want to do. we want to build new stores, close some stores -- the issue is they need to get customers back in their store. alix: macy's ceo said this was the number one problem he's the. -- he sees. >> the problem we all face today is traffic in the malls. the top third of your malls are great. no problem. plenty of traffic. there is also a group at the bottom that will not be fine. we have announced that we will close stores. we are taking action, closing more stores next year than we have in the past because we think that is the right thing to do. we can see the writing on the wall. some old are week now will get weaker. >> i think he is right about the traffic problem. the whole idea behind macy's
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is theynt stores are the ones supposed to bring in the traffic. the anchors. they're going to have a problem at macy's, and throughout the mall. discountt about the side of macy's that they seem to be putting some way behind? >> they said they are only opening one more off-price new store called "backstage." the question is why are you only opening one-story? they said they are still in pilot mode. what that said to me is they are not quite ready yet. alix: isn't it kind of cannibalizing their main five gshipstore -- fla store?
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>> that is a major concern they have. alix: how do they deal with the fact that consumers are spending less. a shift in the marketplace. think consumers are still spending, but a shift and where they are spending. macy's must make sure they are in the right categories. they are super big and apparel. maybe people are pulling back on apparel. they are starting to have electronics in their stores. people are not spending as much in electronics. people are spending on home and furniture. this is something that macy's is addressing. they are launching in the wedding business, and try to get people to spend on that. alix: shelly banjo, thank you so much. we will be right back. ♪
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is 1 p.m. in new york, 6 p.m. in london and 2:00 a.m. in hong kong. welcome to "bloomberg markets."
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from bloomberg world headquarters in new york, good afternoon. i am alix steel. the bank of england is not waiting for the result of these referendum.exit the boe is making contingency plans for both results. buyers face a dilemma -- not enough inventory. will this go down as the europe the great energy debt crisis? thanks in the hole and it could -- banks in the hole in it could be a problem for the broader economy. let's go to our markets desk where julie hyman has the latest area -- has the latest. hi, julie.
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julie: we are seeing a pullback. it is pretty broad based. take a look at the s&p 500 over the course of the day. you see it has been bumping along the bottom. hitting the lows of the day around midday and staying there more or less. a similar situation with the oil price, the action we have seen today area you see the downturn -- thehe oil minister downturn after the oil minister underlined there would be no production cuts. also as the arena minister called the freeze proposal ridiculous. alix: i have seen that movie now. [laughter] i never thought i would be able to say that ever. let's look at viacom. she is talking
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about. the chairman and ceo saying in a conference the company has seen buyers intentionally approach for a stake in paramount studios, if not feel studio. viacom for- leicester earnings support, revenue down 15%. you can see the shares spiking on that news. much as 6%y as earlier. look at the other media companies, too. they have been struggling. they are suffering from issues with cord cutting and declining film revenue as well. other media companies are not seeing a lift today. also market share. of that is important to point out about paramount. paramount is the last of the big some companies. here you see 20th century fox,
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buena vista, and paramount at the bottom with 12%. some of theates issues. the viacom has, by the way, to sell thattners stake. alix: let's check out more of the news this afternoon. mark crumpton has more from our news desk. hi, mark. the u.s. justice department has asked that apple unlocked iphones at least nine times since october. earlier on cbs this morning, attorney ted olson told charlie rose the one time encryption argument is bogus. >> there is nothing to stop this government or another government from doing the same thing tomorrow or the next day or next week. in fact, in answer to you,
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charlie, i think it was last week, the district attorney of new york said he had 175 phones and he was trying the same technique to get into those phones. mark: apple has been fighting a justice department request to on lock the phone used by one of the san bernardino shooters. fierce opposition from congress, president obama is for closing the military prison at guantánamo bay, cuba. the detention facility undermines american security and values. terroristso transfer a potential terrorists to site or sites in the u.s. john kasich is trailing gop -- front runner donald trump in the buckeye
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state. texas senator ted cruz is in third. ohio pro primary is march 19 and a win is crucial to john for winninges the white house. representatives of afghanistan, and the united, states met in the afghan capital for a fourth round of conditions, setting for eventual peace talks between kabul and the taliban. global news 24 hours a day powered by 2400 journalists in 150 bureaus around the world. i'm mark crumpton. alix, back to you. alix: the possibility of a on theed brexit weighing pound today, which is at its lowest level since 2009. governor said that the bank of england is preparing
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contingency plans. joining us, our guests -- what is your call? brexit or no? guest: in the end, i think it be abe no, but this will choppy ride, as we are seeing in the market. we really have no idea if the british people voted for brexit what it would look like, who would be prime minister, who would be negotiating, how long it would take, and this will the marketimpact on and mark carney recognized that and said they are going to make plans. a global event and might well have an impact on global financial markets. six months ago we were talking about the possibility of rate hike for the bank of
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england. if we go inside the bloomberg, i am looking at this function -- it looks like a hike is off the table for the year, but the possibility of a cut. what will we see first? a hike or a cut? first of all, it has never been me saying there would be a rate rise. i have said we would not see a rate rise for a long time. we have seen two governors talking about the possibility we could make a cut and the latest said he sawe -- enough risk on the downside that vote would the next be for a cup. we see members of the mpc saying that, the downside suggests that a rate rises off the table. i think they are off the table in the u.s. as well, and perhaps we will see rate cuts and more qe.
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in england, they could perhaps maneuver without going to negative. that was the talk today and markets probably got it right. alix: how does a possible brexit propose a risk for financial markets? danny: we may see concerns about the city of london, a major financial institution, perhaps in some measures comparable to new york -- what happens there? do firms stay there, do they move? do they see this as a downside -- of activity in europe? you are voting for a brexit, but you have no idea what is on the other side. a number of ceo's wrote into "the london times," saying, you should not do this. but as they warn of the dramatically bad consequences,
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trying to prevent people from voting for it, that could potentially cause major turmoil and markets. moody's said brexit would be a credit negative event already. we do not know. this is not positive to the upside. alix: chances we will see negative rates at any point in the u.k.? i think there is a high probability we will read especially as the danes, the swiss, the swedes are in the negative. we will see. the falling of the pound is having a positive impact on the economy, but i suspect we are in skirmishes,qe currency skirmishes, interest rate skirmishes, if you like. i think it is on the table for 2016. alix: thank you, professor danny blanchflower. sec done a- has the
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good enough job policing eps and protecting investors? we will ask a senior managing director of etf's. home values are not through the roof, but they are steadily higher. we will hear from zillow's chief officer. ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. let's headed over to the markets desk where julie hyman is looking at company movers. julie? thee: i wanted to look at biggest movers on the company averages and is familiar names. we saw these stocks rallying
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yesterday. now they are falling back once again. microsoft, apple, i'll for that on that list, the biggest drags on the s&p 500. jpmorgan having an investor conference today, jamie dimon salking about the bank' business, saying that corporate earnings have not been very strong. also measures they would have to take in a theoretical scenario where oil remains at -- $48 a barrel for 18 months. energy stocks are down, as he might expect, with oil prices pulling back sharply. large-cap companies and major drag -- large-cap companies a drag on the major averages. u.s., shares traded down 5% and they appear to be having an effect on an that hisd area, and
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fertilizers, the agricultural makers down today. bhp, which among many of the things that mines, mines the materials that go into for eliza. that is a reason we are seeing pressure on the stocks today. thank you. the uncertainty in the global market has been a bill and for some bond investors. japan's moved to negative interest rates has stemmed that appetite. how long is it going to last? senior and head of training at -- trading at cantor fitzgerald. welcome. what are you looking at right now? guest: as oil goes, so goes the market. are seeing a lot of short
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trading in etf's, so there's a lot oftreasury etf's a short duration 123 year cuts. alix: but that should not be happening. that is not normal. reggie: that is the million-dollar question, alix. there is a lot of fear in the marketplace. until we find a floor, i think you will find folks just harboring in areas that are for safety. also utility etf's. a lot of people are flocking to low vol type instruments. etf's took on way more than mutual funds lost in assets. where is that money coming from? the market is booming for etf's, because asset managers are losing the assets. if you look at pimco, the trend
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where investors are using exchange traded instruments a moving away from active mutual funds, for example, so easy a's are a beneficiary of that, and it's really self-directed -- so etf's are a beneficiary of that, and it's really self-directed. you look at 3rd avenue and all the things that happened around not being able to get out of certain mutual funds, that could have been the driver for etf's. alix: you don't have the issue with etf's? reggie: no, we don't. alix: it used to be you would buy one etf a day, call it away. what are we saying? reggie: if you look at interest ates in japan, there is conversation with currency or currency hedge, and i think we are seeing out of china, out of korea, and to other emerging asia countries, the marketplace
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unfortunately has been a stock picker's selection, understanding what you want and how to get those exposures as cheaply, as efficient as possible. alix: the resmed a lot of concern in the media about high-yield lawns and an inflow -- high-yield lawns. and in inflow. you have a front row seat. reggie: i do have a front row seat. at i think etf's are being scrutinized i regulators. ist growth they have had amazing. you are having the inspection of all parts of the industry. high-yield particular clique? -- high-yield particularly? it is new. 30% of those bonds, them, have oil behind them, are
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oil denominated. any exposure to the marketplace is good for us. you have foot traffic voting against them. etf's, -- alix: that is a different story. reggie browne of cantor fitzgerald. we will have more on the markets with a chief strategist from goldman sachs today at 4 p.m. -- the industry key keep prospering? that conversation next. ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. home values studied last year,
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putting residential real estate on stronger footing. the case schiller index increased 25%, and nationally, prices rose 5%. joins carol massar and cory johnson right now. hello, everyone. this is the "bloomberg advantage ." great to have, you with us. tell us about this data, the housing market seems to be on steady footing, firm footing, what? seeing higher than percentages,alue and we are definitely seeing a
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lot less inventory, so it is a challenging time for buyers to go in the market, where according to zillow data, there's about 9% fewer for-sale homes in january and february than there were last year. that makes it a challenging market for buyers. cory: is it a chicken or an egg problem? is the lack of homes driving up enough or are there not sellers? stan: there's a grab bag of factors. we not seeing the amount of supply that buyers can go look for. we have high prices. we have a strong dollar that is starting to constrain foreign demand coming into the marketplace, where as if you look at home prices, zillow's index, at 4% below last year, it looks like a 25%
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appreciation, and it looks like a 50% price jump. these stronger dollar is definitely having an impact. you have those issues to deal with as well. when you look around the country -- i like breaking it down by cities -- temp i had the biggest increase, almost a full percentage point. -- tampa have the biggest increase, almost a full percentage point. what are you seeing regionally around the country? stan: you have a strong east-west bias, with the houston market seeing higher appreciation, denver, seattle, sacramento, the bay area, you see very strong home value appreciation. the other set of the country, philadelphia, baltimore, orlando
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-- those are markets where buyers have a lot of negotiating advantage because homes or hanging around the market longer. there is an east-west flip there. then you have what is going on with the oil markets where if you look at dakota, alaska, thes, we are seeing softening of home value appreciation and more acutely, rental appreciation driven by the price of dollars, which helps the communities, but it helps them. cory: and those big purchases by buyers,buyers, foreign you have the correlation with the all-cash deal and i wonder if we are seeing any impacts in the numbers? there is the specific focus on high-end deals, the focus on new york and miami, but i wonder if there is any impact when it comes to foreign buyers paying all-cash?
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does it smell less than fishy, shall we say? stan: i think it has been too soon from the start of those investigations in the monitoring of that to see an impact. you have to remember, that was really targeted to the high-end of market in mind hadn't and in manhattan and may miami. moveally those markets independent of fundamentals. it's not priced to income ratios driving those purchases and they are not, frankly, material of the larger markets because they are such a small percentage of sales. manhattan, if you look at the new york overall market, 22, 24 markets in the counties of the new york metro, it looks sluggish, but you get closer to the statue of liberty, it defies expectations. home prices are on a terror again. andl: based on what you see
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the jobs market, is there enough to keep the housing market moving, just quickly? feel good about the sustainability of the recovery. we are glad to see home prices set -- slow down. carol: got it. we've got to run. stan humphries, always good to check in with you over a zillow. alix: thank you, bloomberg's carol massar and cory johnson. coming up, an exclusive interview with ill and melinda gates. their thoughts on energy solutions, the race for the white house, and energy equality. ♪
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when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. from bloomberg world i'mquarters in new york,
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alix steel. let's start with the bloomberg first word news this afternoon. mark crumpton has more from our news desk. ? .ark mark: thanks u.s. secretary of state john kerry says he cannot be sure that the cease-fire in cereal will work and will lead to a long-term solution. in testimony, he said it is the the war.tion to end senator bob corker says that russia is using refugees as a weapon of war against syria. president obama has sent a plan to close the military prison housing terrorists at guantánamo bay, cuba. the plan would take anywhere to the to 60 inmates united states. the president has said the public has been scared into thinking that closing the prison would make the country less safe. president obama: of the detainees, more than 500 of the
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transfers occurred under president bush. since i took office, we have so transferred 147 more, each under new, significant restrictions to keep them from returning to the battlefield. as a result of these actions, today, just 91 detainees remain. mark: the white house does not expect congress to go along with closing the prison. in other news, the michigan senate has acted quickly to finalize legislation offering $30 million in aid to residents of flint. billsney will pay associated with the water crisis. it now goes to governor rick snyder for his signature. 800,000 has more than miles of leadpipe running to homes and businesses.
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the conclusion of a study published in the proceedings of the national academy of sciences warns that eventually rising oceans could lead to coastal cities being abandoned. global news 24 hours a day powered by 2400 journalists in 150 bureaus around the world. i'm mark crumpton. alix? much, mark.you so bill and melinda gates have released their annual letter on philanthropy. the question posed this year, if r, what woulderpowe it be? anchorsrg " stephanie and john interviewed them on the latest initiative. we see the decline and childhood death around the world , we see when we traveled to the developing world -- which we have been doing for 15 years --
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life is getting better. we see a rising middle class. there is so much potential and ingenuity. the headlines are negative, but when you read what is going on, life is getting better for most people around the world. not everywhere, but in general, it is absolutely getting better. stuff inis a lot of the letter that is actually depressing. when you look at africa, you see nothing at night other than darkness because there is not electricity. you talk about the idea this could be the message to teenagers -- you have to come up with an answer to that energy problem. which of the particular energies do you put the most amount of hope into? amazing we have 80% of the world using electricity and almost taking for granted the magic idea that you flip the switch and the light comes on are you set the temperature in that works. we want to get that to everyone.
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getting the price down by better science, better innovation, and and now weaint cannot him it greenhouse gases -- >> you talk about needing a miracle. bill: we need a scientific breakthrough. we need a miracle like the personal computer or the mobile phone. we need young people saying this is the science that will make the big difference and we need r&d money that drives it forward. energy, theean supply of innovation, the r&d increase, people are just now beginning to talk about that and we want them to follow through. to bring: you want electricity to a billion people. it's like electrical bringing power to the people. let's say the lights go on around the world. what does the world look like in developing countries?
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system, an education health system, jobs for these people to have? that there is no doubt their work has value. health is our area of expertise. there we see improving childhood nutrition, reduced death rates. improving a country to being -- weng education country are trying to make sure in africa the right things happen to help them get those four elements right. ethiopia, if you traveled there a decade ago, versus today, the second largest country in africa, you would not recognize it. a rising middle class, people moving into the city, starting to use more and more tools. places like tanzania and kenya, you have things like digital money at scale. people are saving small amounts phone.y on their
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they are leapfrogging to cell phones. that has huge power, if they can get digital money in their hands. so the basic gospel of free trade and capitalism, that works -- goodda: if you have governance in these countries, consistently good governance, then you start to see the rising ddle class because they make these improvements and it goes from there. bad governances and that capitalism that has so many people in the united states frustrated. two students, what is the message when they say, why not help us? why not help us get jobs? we are facing a student debt crisis. the school that we were interviewed in is a great example. we could not have been more
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impressed with the way that teachers are using their new curriculum, the way teachers are learning from each other. that we spend in the united states is entirely against the educational system and we are seeing strong points of light like kentucky started four years ago with these reforms. stephanie: does it not surprise you that in this presidential race there are outliers who have gained so much popularity because we have a disenfranchised country? melinda: i think they are disenfranchised from what is going on in politics. but when you're on the ground and you talk to teachers and students and talk about what is abouton, they feel better what is happening locally. they would be surprised that you're not america's leading businessman. there is a mantle donald trump. [laughter] the: he is certainly in
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news. he generates a lot of talk and interest. >> he does not look as if he will get your vote. foundation has done a good job working with democratic and republican presidents. george bush did the huge hiv program, president obama has been very good on foreign aid and being supportive of that. in the 2008 campaign, both candidates, mccain and obama, contributed to generous foreign aid, making sure things like malaria would get lots of resources. we have not gotten into the specifics yet. about one thing about the areas you focus on, the areas to do with unpaid work , the vast amount that girls and women do -- the one very obvious thing that i found shocking, what is the solution to that? we do need to have a good policy nationwide. we have it in three states --
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paid family medical leave. california lead on this. you have new jersey and rhode island. i am encouraged about in this election, both sides of the isle are talking about it. i think there are different ways of getting them. we are behind. look at western europe. they have amazing paid family medical leave for minimum women. you can take time off to care for the elderly or care for a child. that makes a huge difference in terms of keeping women in the workforce and we want women to balance timeout home and at work. and there's all of this unpaid work that happens at home that we do not even call work around the home, and it is. that is a policy thing that will really help in the united states. are you afraid, if we are headed into a recession, the r&d that you say is so massive changes, couldy that fall by the wayside in a time when companies need that to
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survive? is a more negative view of the u.s. economy than i have. stephanie: what is your view of the u.s. economy? in the tech sector, the health sector, innovation, the energy and materials sector, real opportunities for breakthroughs. we are able to understand the physics of materials and catalyst's. >> it's interesting you say that. you and i have argued about this a long time. we talk about energy and we keep open for this thing to come through. the reason that you call it a miracle, the things that we hope will change, they have not really come through. energy seems to be an exception. climateonically for the challenge, the hydrocarbon area has been the most innovative. particularly when you have slackening demand, the cost
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reduction work they are doing with all of the input makes the bar tougher for the clean solution to come along. but energy is cheaper. because i see so many paths to i thinknergy solution, the chance that we get the breakthroughs is very high. that is an optimistic the you, but it it -- that is an optimistic view, but is based on my view of the science. alix: that was bill and melinda gates of the bill and melinda gates foundation on "bloomberg earlier today. the canadian prime minister just introduced a plan to keep a rate cut off the table. we will discuss. mortgageeat of the crisis of 2008? we have a debt check. and viacom shares rising on news that they have been approached by investors to why a stake of
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paramount. slide.ces continuing to you have the saudi arabia oil minister saying that saudi arabia will not be cutting production. you also have the irani and oil minister saying that a freeze -- freezing oil proposal -- is completely ridiculous, both of that weigh in on the oil price today. ♪
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alix: welcome back to "bloomberg markets." 'm alix steel. it's time now for the bloomberg business flash, a look at the biggest business stories in the
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news now. spotify is moving to the google cloud platform. this will allow users to stream faster. spotify has used its own data centers for the last decade and has moved about 250,000 user accounts to the google service. the switch is said to be complete in the next 18 months. saudi arabia says it will not be cutting oil production anytime soon. they will be unlikely to assist in restraining output. -- -- theree ie aa was a surprise in residential real estate last month. homesin previously owned rose to the second highest pace since 2007. mortgage rates will remain near record lows. that and steady gains in the labor market are encouraging buyers. bloomberg business
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flash update. let's head over to the markets desk where julie hyman as a look at some of the winners today. julie? yeah, even on this down day we have winners worth mentioning. a lot of them have to do with earnings reports. a very diverse group, from motorola solutions to nordstrom, america.ed stay all of these stocks rising on earnings that beat estimates or forecasts they have them room to beat estimates, among the winners big and small we are watching today. industrynners in the as well, this having to do with earnings, macy's rising after its sales fell less than a anticipated. earnings per share at 14%, comparable sale down for 8% and the earnings-per-share forecast for the year a little ahead of estimates if you look at the mid-when of it.
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home depot also doing better than estimated. we see people continuing to spend on their homes and dillards coming out as well. risingy shares are also today. it reports earnings on friday. it is gaining ahead of those numbers. risingk's sporting goods on news from ubs. thank you very much. an update from canada's finance ministers says that justin trudeau's government will likely run deficits in the coming year. it is triple what the prime minister langdon the election campaign. i want to bring in pamela ritchie. pamela, does this take the heat of the bank of canada cutting rates? guest: thanks, alix. blackrockto pimco and
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, it does look like it probably will take the onus off the shoulders of the bank of canada to make any sort of cuts. .5 percent, not quite an all-time low, but pretty low, and there were many thoughts that further cuts would be on the way and negative rates were not off the table. they were a tool. the marchike for meeting, investors and traders cut,ining up for a rate lower than expected. it does show the effect of fiscal spending in canada. the government, it appears, was setting up canadians for sticker the deficitectation for the canadian dollar, that is the deficit from not having as toy revenues as they used have, that they used to count on from the oil patch.
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more than the $11 billion in spending that was part of the platform campaign and they were the only party in that campaign promising to spend. aboutly, that comes to $30 billion in terms of deficits, starting on april 1 of this year. ae budget should come down month from now. this was to prepare people for that. they doubled their amount of red merchants the cash. they have to make sure that they have extra money for natural disasters. alix: the bank of canada has a potential growth rate of 1.4% to 2.2%. does this help canada get to the 2.2%? in theory, it should. the question is and the balance in the spending, for the government, they will have to look at how they want to see the economy grow and is that project ready? do they tried to create --
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they try to create new parts of the economy, which many argue should be done after such a focus on the commodity side of the economy? do you go by the quick, shovel ready type of things and see faster growth or do you look into long-term building? alix: pamela, thank you. pamela ritchie, bloomberg tv fell canada anchor. banks may be holding bad loans from energy companies. is this the mortgage crisis all over again? we will explore in debt check. ♪
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alix: welcome back to "bloomberg markets." alix steel. $123 billion. that's the estimated amount of money big u.s. banks have lended
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to the energy industry. if the energy industries suffers losses, it may have been the -- it may affect the broader economy. this will be -- will this be a repeat of the mortgage crisis? joining us, lisa abramowicz from bloomberg gadfly. of money.s like a lot put it in perspective for us from 2008? guest: my colleague and i went around and looked at the analyst reports they are putting out in response to disclosures by the biggest u.s. banks and we tallied up the exposures -- jpmorgan, citigroup, and we came billiontally, 123 dollars of commitments that were energy related. it is bigger than the gdp of ecuador. but with respect to these bank''
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books, it's not that big. it's a couple of percentage points. it looks manageable. the more they disclose, the more manageable it works. that isat amount of loans related to junk related companies? how bad are those loans? bank.it very's in a fargo's ceo came out conference call and it said the majority of their loans, $17 billion of exposure is to junk rated companies. they specified they had deep experience dealing with these companies and they have a lot of faith they would come through, there's a can see, jpmorgan aunt for morgan stanley. what is the exposure exactly?
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are the loans outstanding? alix: also are they reserve? if you are stuck with a well, at some point it is ok. at some point you will end up recouping that money. lisa: tom keene asked that question. andsimilar is this to cdo's those products? its aaa, it's a good product. you have first lien loans. the ability to go get the assets should it come to that. but to your point, what are those assets worth? if oil prices remain around $25 a barrel for 18 months, they 1.5 billiono post dollars in reserves to compensate for additional reserves. but the analysts i have spoken to have said that it
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is not a repeat of the mortgage crisis. it is a fraction of what it was in the mortgage space leading up to the crisis. not only that, but it is the bigger, much broader mortgage exposure in the long run. etc. good consumer, lisa, great to have you. lisa abramowicz, of bloomberg at like columnist. -- we will take a deep dive into the markets kostin fromoston -- goldman sachs. "bloomberg markets" will be right back. ♪
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when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. "bloombergme to markets."
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>> from bloomberg world headquarters in new york, good afternoon. here is what we're watching at this hour. the saudi oil minister announced -- what is jarring financial markets as we near the close? clarifies a report that he sided with the fbi in that battle with fbi. dimon sayso jamie the u.s. consumer is winning thanks to lower oil and gas. we kick things off with a check of the markets desk. we have the declines resuming in today's session.

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