tv Bloomberg Markets Bloomberg February 23, 2016 2:00pm-3:01pm EST
>> 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.
the opposite playbook of what we saw with the rally last week. .il leading the declines all three major averages close to the lows of the session. they are falling along with oil today as we see that correlation come back into effect in today's session. oil down by 4.5%. we have the saudi oil minister speaking at a conference in houston earlier today saying no plans to cut production. there did not seem to be high expectations. there is disappointment that appears to be affecting the markets. the saudi's welcome the west show business and they are happy that there are exports that would allowed that will be allowed from the unite states. -- you note about oil
see $31.90 which appears to be a higher price than yesterday. on the day, oil is lower near that april -- some of what we are seeing -- if stocks are down, people are buying stuff they view as safe. it has not been that straightforward today. yes, we are seeing a bit of buying of treasuries, but it is a very little bit. earlier today come we were seeing selling of treasuries. again, we were seeing this flattening of the yield curve. looking at the difference between the 10-year note and 2-year note. we are at the lowest, the flattest since february 10. this has been closely watched for a number of different reasons. some of the implications for the banks and its predictive power
for recession. safety back to other areas, gold is one area where we are seeing this unambiguous trend today come up by 1%. i want to talk about the british pound as well. the pound is falling for the second straight day, down another .9% today after that is that the london mayor would be supporting a u.k. exit from the eu. carol: thank you so much. tracy: let's check on the first work news. mark crumpton has more from our news desk. mark: the republican presidential candidates are making their final pitches to voters ahead of today's caucuses. anald trump is hoping for third consecutive win following victories in new hampshire and south carolina. 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. mitch mcconnell says his party support a vote that they will revisit the manner after the presidential election in november. mcconnell in knowledge that the president is within his rights to nominate a replacement. but said republicans in the senate will exercise their rights to withhold consent. bill gates is taking issue with a recent article suggesting he supports the u.s. government and its clash with apple under dutch over unlocking iphones. he says the report does not accurately reflect his statement on the matter. >> that doesn't state my view on this. that with the right safeguards, there are cases where the government on our
like stopping terrorism, which could get worse in the future, that is valuable. have beens said there many cases where the government took information and used it in unexpected ways. the national park service is the washington monument is now open. it was closed for several days for repairs to an elevator control box that was inadvertently damaged by a contractor working on an unrelated issue. global news 20 for hours at a powered by our 2400 journalists in more than 150 news bureaus around the world. the bears are marching in globalnd it is not just oil supply shock and all. china still has a global index. >> every countries devaluing
against the dollar. you go to the eurozone and bank of japan, they are deliberately trashing their currencies. they do not have strong domestic growth. we will do it with exports. how do you get more exports? .heaper currency china, we will not be left in the dust. we will do better, too. carol: for more on what's weighing on today's trading session come let's bring in oliver renick. an interesting trade today. what is going on? there was a lot of short covering happening. what is interesting today is if you look at the rebound we pad the past week or so, the volume has been pretty weak in the markets. bottom11th, we had that
-- it has continued dropping. we have not had a huge bull move on the updates. that speaks to the bearish sentiment that is still out there. has changed in terms of the fundamentals? oliver: not a lot. what is happening today? you got currency issues, the evaluation going on. -- devaluation going on. it is not huge compared to the songs we've had. that's swings we've had. this is speaking to the bearish sentiment out there on a day like today. the poorly rated companies in the s&p are performing a bit better, which is different than what we've seen. when you look at evaluations -- the companies whose bonds are rated below investment grade are doing pretty solid today. investment-grade companies are
losing more. carol: i want to take everybody inside the bloomberg terminal. we have a chart of what we've seen in terms of volume going back to the beginning of the year. . oliver: it is not a great picture. that speaks to the lack of conviction on the bullish side. hedge funds that are net short whether it's direct on equities or synthetic short where they have taken up connection on the s&p. -- taken out protection on the s&p. look at what is selling today, the best value with the lowest pe have underperformed today. there's not a lot of big bigotry happening today. tracy: that kind of trend coupled with the low volumes
just something like a relief rally or short covering. oliver: i think that is definitely right. .t is hard to ignore the short total short on exchanges got really high. people have been adding shorts. basically a line that updates twice a month. total short interest as a percentage of low on exchanges -- it got real high in august and september during the route and got high again this year. you saw the low valuation stocks outperforming during the rebound. that indicates maybe they indeed saw those price bubbles and decided they want to buy up a little bit. what is needed to end this cycle of volatility? oliver: it is hard to say.
the fed -- carol: they've been transparent. oliver: they have not changed their language. gettingimportant is th some type of balance in these traits that have come undone a bit. talk about currencies, talk about the dollar going the other way as these currencies strengthen against the u.s.. to get some kind of clarity from the interest-rate picture, some calm in the currency market, that will -- carol: give certainty on the global economy. thank you so much. oliver renick of bloomberg news. georgeur interview with hughes. that is coming your way at three clock p.m. on boomer radio. -- 3:00 p.m. on bloomberg radio.
for a long time but he says low oil prices may help consumer spending in the u.s. he still believes in his bets on apple and general motors. and is recalling candy bars 55 countries. the reason, plastic was found in one of its products. the voluntary recall affects products produced early this year in the netherlands. the affected brands include mars, milky way, snickers and min. i mix. has heardher of time a presentation from citigroup, yahoo!'s thinker. -- banker. that is your bloomberg business flash. julie hyman had to check on some of the movers. julie: after the news from viacom today saying the company
has gone expressions of interest in its paramount pictures unit. investors have been agitating for from the company and viacom has --ed partners to advise them they would just be selling a stake in the film unit. --amount's revenue phil 15% fell 15%. , sharesing action spiked up 6% but have paired that gain all the way back to 1.5%. other media shares have been trading lower along with the broader market. paramount's trouble also has to do with its market share. it is at the bottom of the six major studios at 12%. 20 century fox largely on the success of deadpool.
these stocks have really struggled. i've made a chart of the s&p 500 and purple versus disney in white and by, down here in yellow. these are adjusted for percentage changes. -- viacom down here in yellow. concern about the effect of cord cutting that now appears to be becoming more of a real phenomenon, that is been weighing on these media stocks. -- that has been weighing on these media stocks. we've seen these media shares underperformed since the last earnings report when you saw that big drop. tracy: thank you so much. let's get more on viacom now. paul sweeney joins us. you've been writing about this potential deal even before
today. paul: this is a stock that has been under pressure. the weakest performing of the big media stocks. aty've had a lot of weakness their core cable network business and the paramount studio has had a couple of years of really underperformance. we can see that in the market share. by thef underperformance operations of this company. management is taking the brunt here and there has been building to doure on them fo something. it,l: people are tired of he estimates in quick moves to get investors back on his side. paul: the media business is littered with exceedingly well paid ceos. couple that with the underperformance of the business the management-
team is clearly under pressure. the fact that they've said that they've been approached and they look to do a deal by as quickly as the third quarter suggests that maybe they are far along with some discussions here. majorunt is one of the hollywood studios. a great brand and they do not come on the market very often at all. to the extent that someone could get in their door, one of the decor major studios would be an extra in area opportunity. -- one of the core major studios would be an extraordinary opportunity. andy: you saw the shares spike and come back down. how impressed are people going to be by this? paul: it depends on how much they sell and what they do with the cash. some combination of paying down their debt,
returning some cash to shareholders, but they also have to invest in their businesses. if not invested in their businesses consistently enough. we see that with greek waiting -- week ratings in their cable business. the two main businesses here are their cable network businesses and paramount. the cable network businesses are the most valuable assets in the company, but they have been underperforming. in the right hands, they could do a lot more with the cable networks. i don't think viacom's at that point now when they want to part with their crown jewel. carol: we will see what the end up doing. still ahead, bill gates and sounding off on the iphone privacy controversy. why he is disappointed about the way his views have been portrayed.
carol: let's turn to the big story in tech right now. overs battle with the fbi cracking the iphone used by the san bernardino shooter. bill gates pushing back against reports that he is siding with the fbi. it is a challenge to update the policies come including those issues of when does the government have a right to know. having a really good debate about when is that appropriate in the extreme view that the government always gets everything commendably supports that -- nobody supports that. whether it is this particular case or a few others in the
court -- >> i saw headlines and saying bill gates asked fbi. >> that was disappointing because that is not state my view on this. -- backs fbi. there are cases where the government on our behalf, like stopping terrorism, which could get worse in the future, that is valuable. but striking that balance clearly the government has taken information and used it in ways that we did not expect going all the way back to the fbi under j edgar hoover. i'm hoping now we can have the discussion. i do believe there are safeguards for the government should not have to become legally blind. >> what should be done in this case? >> the courts are going to decide this. apple has said whatever the port best final court decision is,
they will abide by. this gives us the opportunity to get the discussion these issues will be decided in congress the patriot act, how that gets involved. you don't want to completely swing away from government access. you want to strike that balance that the united states leads in setting example. it's one of those issues that people working at microsoft and apple will see is fundamental. as greenery was to a previous generation. >> everybody wants to feel like their information is kept private, particularly because more of your activities are in that digital log.
people are empowered by technology in terrorist activities, it is not just that they can kill a few people. they can kill a lot. we want government out there trying to stop those things from happening. it is not completely in one direction. the 19th-century century liberals refused to open people's letters. they were frightened that would be somehow illiberal. is this the definition of what liberal is? always beens there to try to maintain order. you have some awareness of what's going on. the u.k. strikes a different balance than the u.s. because there were some degree of terrorist activity, the idea of having cameras in london, people are comfortable with that. i don't think that is likely to
happen in the u.s. the u.s. will always be wanted to make sure the government does not overreach more than most places. bill gates speaking today exclusively on bloomberg television. still ahead, oil prices tumbling after the iranian oil minister says an agreement by saudi arabia and russia last week to put is ridiculous. let's take a look at the major averages. oil equity correlation happening. and 1% onn the s&p the nasdaq. ♪
markets. mark: u.s. secretary of state john kerry says an accord between the u.s. and russia to curb the violence in syria is the best opportunity to keep the troubled country intact. he told the senate foreign relations committee today that time is running out for russia to support the transition to a government that does not include bashar al-assad. >> there are forces out there that will never stop fighting. if you want peace, by definition, we believe it has to be without assad. the civil war has displaced 23 million people. this by fierce opposition from congress, president obama is sending lawmakers his plan for closing the u.s. military prison at one time of a that guantanamo bay, cuba.
the plan calls for transferring dozens of terrorists at once to a site here in the u.s. spanish and moroccan police arrested for suspected members ell thatihadi c sought to recruit fighters for islamic state. one is described as a former guantanamo detainee. spanish police have her arrested when hundred -- police have arrested 100 extremists in the last year. indicate part of the building collapsed. one person is dead and five injured and three unaccounted for. it happened and an old coal and oil field plant that has been closed since 2013 and is scheduled for demolition. global news 24 hours a day powered by our 2400 journalists in more than 150 news browse around the world.
news bureaus around the world. carol: commodity markets are closing in new york. fortart with gold gaining the first time in three days on demand for a safe haven. investors buying the middle, up at $1222 an ounce. oil to win today after the iranian oil minister said oil producers agreeing to a freeze was ridiculous. they greeted to a cap as long as other producers agreed -- down 14% this year on speculation that global glut will persist. will and oil freeze even help? the freeze will allow the u.s. and iran to fill the gap.
colin come a great to have you here with tracy and myself. todayundamentally changed when it came to the oil trade? >> thank you for having me on the show. hadthe past week, we've this agreement suggesting there was going to be some kind of supply-side factor that should make oil prices go higher. volatility,'ve seen the date to date change in prices be the story. it happened before the agreement . two weekends ago, we heard secretary clinton promised to and gasuction of oil from all federal lands. the question of whether there is going to be some sort of policy change in the united states. tracy: can we talk about that
drilling ban? what impact would that have on oil? colin: huge did the amount of production coming from federal lands is 2.1 million barrels per day. is only 1.5urplus million barrels a day globally. that's about 80% of production from the largest the goods producer in the world. liquids producer in the world. the elections have been full of a lot of surprises. how likely could she get that through? this congress have to weigh in on that? -- it does congress have to weigh in on it? quotedshe basically was giving this statement up the , we are off the stage not sure on the timeline and so on.
she is a leading contender for the democratic nomination for president. she might have a 50% chance of winning. i have to give a 50% probability to 2 million barrels. that is one million barrels. the market has to take it seriously. tracy: is there anything in the world that could get all these disparate oil producers to work together and cut production? colin: i find myself having to agree with the iranian oil minister. it is ridiculous, not going to happen. parties that are simultaneously negotiating that deal on the syrian battlefield and then to somehow have this agreement on the site about oil. it is extremely unlikely. we are already getting a private sector driven supply cut in the
latest data in the past week shows this month, we are down 300,000 barrels per day per year in the shale fields. carol: we've got crude at $31.87 a barrel. where do you think it will trade over the next six months? colin: you are making my job easy -- at 100% volatility market, it will go in both directions. that i'm sure of. the most likely outcome is we have to resolve this question of whether or not we are in a recession or heading into a recession. we probably already are in a mild recession. view that we should expect a significant bounce later this year towards the high 30's and 40's is a good bet. the key point is higher in the medium-term. carol: colin, thank you so much.
back in business just months after he is removed as the ceo of tamir energy. how not gas may not be drying up anytime soon. >> the core business is extremely simple. today come you can buy american gas at two dollars. i don't the kenny one can argue oversupplyxpect the to dry up anytime soon. -- i don't think anyone can argue. the ability to improve the technology in louisiana and texas, there is an abundance of natural gas. at very low cost. the second thing is a -- compared toue
2500-3000.ition at we are at an advantage. you put that in position, that means we can deliver possibly gas to europe for a very long time and we can do the same thing in asia for a very long time. those are numbers the world was not used to. we're talking about oil in that station at 100 and natural gas delivered to asia at $15 and deliver to europe at 11 or $12. what is happening in the u.s. is having an impact on the global nature of the business itself. alix: does that mean you don't
need the long-term contracts? >> absolutely. long-term contracts would be significant cheaper. withll be very comfortable $2.50. view ofleaving the europe at six dollars. mark hasher question to do with demand. asian economies going back to more nuclear energy, coal becoming more cost competitive. you have really cheap australian and asian lng prices. how do you see this impacting the short-term and longer-term dynamics? >> on a cost basis, the u.s. competes with anybody very favorably. when you are talking about wellington australia, sure. -- volumes in australia, sure.
when you talk about justifying the construction of a new project, whether in east africa or australia and you are looking at construction costs at it after a few times to three times higher than what you can do in the u.s., the u.s. has a permit is competitive advantage. -- tremendous competitive advantage. lix: the real question is, what does $30 oil prices mean for global lng demand? at some point, it will make the u.s. not as competitive. that is the question in the lng market right now. prices come alng really low. australian gas prices or russian gas prices come all of them are linked to oil, they are all pulling -- they are all falling. this is a longer-term bet.
2020, 2040. carol: an interesting time for him to be doing this. he is raising capital to do it. alix: he said i have a lot of money. edge of completion will cost anywhere between six and $8 billion. the next one is going to go up to about 25-30,000,000,000 $25-30 billion. he says, look, i have a lot of money. he does have a very good track record of being able to convince investors to give him money. should near was an import terminal, never turned a profit and when to investors and said i will change my business plan and they still gave him money to complete this project.
tracy: let's go back to the link between lng and oil for a second. with oil prices this locomotive does that mean for lng and exports? alix: that is the key especially if demand does not hold up. it is like sucking in all global lng demand. if demand cannot hold up or other lng is more competitive like that coming from russia, does that back out any potential lng exports from the u.s.? theid learn today that short-term contract will go to petrobras in brazil. longer-term contracts are more europe focused. that is the question in the short-term. whatever. longer-term, you need demand. carol: we will have to see what
happens in the longer term. alix: his first leg of the project is about 12 million metric tons, $8 billion. $30-40 billion. carol: thank you so much. still to come, j.p. morgan chase ceo jamie dimon making closing remarks at the bank's annual investment that. the close in one hour 15 minutes. stick around. ♪
carol: you're watching bloomberg markets. time for the bloomberg business flash. spotify says it is moving the technology that powers its service to google's cloud platform. spotify has used its own data anders for the last decade has already moved to 50,000 user accounts -- 230,000 user accounts to google. saudi arabia says it will not be cutting oil production anytime soon. the oil ministers has other countries would be unlikely to assist at restraining output, leaving the burden with high-cost producers. the current oil collect will persist into 2017, limiting any chance of a short-term price rebound.
sales of previously owned homes rising for the second-highest pace since 2007. an annual rate of almost 5.5 million. that along with steady gains in the labor market are encouraging buyers. tracy: let's head to the markets desk. julie: looking at the etf's xhb is the homebuilders etf. this is the year to date chart for the xhb, bucking the downtrend today and actually rising. ,n terms of today's session toll brothers is leading the gains, the largest u.s. luxury homebuilder. an 18% increase in orders.
they talked about the average 12%.ng price up contracts assigned this month were little changed from earlier this year. on a conference call, the ceo said that gave him recent prop to miss him. -- reason for optimism. on the housing related front, home depot out with its earnings that beat estimates. the shares paring their earlier gains. strongest u.s. cover both sales growth going back to 2013. -- comparable sales growth going back to 2013. pier 1 imports seeing a big lift. we were just talking about this residential real estate existing home sales -- here's the five-year chart. we did see this bounce here.
we got the case schiller home price index. we saw a steadiness in those home values come up 5.7% compared with december of 2014. strongest gains in portland, oregon. a lovely place to live and you have to pay up to live there. carol: who knew? julie: it's great heard a lot of craft brew and tattoos. carol: it appears yahoo! has another suitor. time and showing interest in buying yahoo!'s core business. we find out what that means for some i are. -- for marissa mayer. jamie dimon will be speaking at investor day. ♪
tracy: welcome back to bloomberg markets. at time to the list of those interested in buying yahoo! square business. the publisher has heard a presentation from yahoo!'s bankers. they would be competing with verizon and at&t. for more on the story, we turn to emily chang. time is clearly the underdog here. do they actually have a chance of making this work? emily: it could work because yahoo! might be attracted to the tax avoidance part of a potential deal. time inc. is slightly smaller than yahoo!. there would be some beneficial tax implications if this works. they would have to do it under a reverse mortgage trust where time would merge with yahoo! and their core business is the only thing that time is interested in.
yahoo! would be more interested in a cash bid from a bigger company like verizon or at&t. verizon has been consistently interested in a potential deal with yahoo! initially, they said that they were getting the cold shoulder. now, that has changed now that yahoo! has hired bankers and set up an independent committee of directors to explore the potential of a sale. seen some not so flattering headlines about this potential deal, one singer could be the time warner aol merger of the teens. -- one saying it could be the time warner aol merger of the teens. carol: are we looking at a potential bidding war for yahoo!? mark: that's interesting because yahoo! shares have fallen 30% over the last year.
notconcern is that they are going to get a fair price right now because they feel yahoo! is undervalued. it looks like there is interest out there. interest is a lot different than an actual offer. we will have to see how this plays out. there's a vast disparity in the yahoo!ople are valuing activist investors and sing the core business is worth less than nothing but i've seen analysts saying as high as $8 billion. we will have to see what people are ultimately willing to pay and that will depend. carol: thank you so much. emily chang in our san francisco bureau. at sixto bloomberg west clock p.m. wall street time right here on bloomberg television. jamie dimon beginning remarks at the bank's annual investor day in new york. clients, more connected
to more venues. for the most part, you can look -- i would not use the word "speculative." it's not like we're making a big bet. we are going to do it. i'm convinced we will earn back what we spend on it. >> daniel just said he is obsessed with market share. how much are you willing to use pricing to gain additional market share across the board? said you are willing to accept a mid-single-digit roe on commercial loans because you sell so much and make it back on your overall relationship. >> it's always a little different.
in other businesses come i would was-- if we thought that the better thing to do for the shareholder and the long run, we would do that. you seen us do a little bit of that in merchant acquiring. at the margin, it is all profit for us. that is called capitalism. that is what companies do. to get your client faster, quicker, cheaper. >> what other areas? >> the business has been competitive for years. this prices have been coming down a bit every year. -- those prices have been coming down a bit every year. we touched briefly earlier on what's going on in europe. the banking environment is more stressed.
they have bigger financing needs going forward to it i'm curious how you are thinking about your exposure to them. the markets have concern -- majorp in mind, the political market counterparties, think of the major banks, for the most part, clout each other every night. -- fore something moves the most part, they do that. you manage that day-to-day for your risk. you may price result out doing more business with them. you might end up in wrong with possession. goes wrong there, it puts you in double jeopardy. we are comfortable. >> i understand you guys are not
concerned about significant deterioration in c and i be on energy -- cni beyond energy. could you help us understand time you think about that and how you control that risk within jpmorgan? -- we are super prime. it has never been better. we look at everything through cycle. we price it to the cycle. mortgage has been very good. credit cards as good as its ever been. large corporate credit has been virtually zero. to maintain the same credit standards, you lose your business when goes beyond your credit standard. that is when you have to have the guts to walk away.
we are willing to live with a normal cycle. we are not going to sit here and guess the cycle is terrible, let's go way back on the credit card marketing. we did the opposite. in 2009, we did more credit card marketing and came out with sapphire and slate that your. that is where we are focus now. -- that year. we do expect there will be a cycle and our losses will go up. >> you talked about adding a total of $600 million reserves the first quarter. --there a leaf >> very small. where virtually done with it. >> i assume the best case would
no additional reserve build if everything stays where it is right now. >> yeah. -- we willtoday decide what we really think at that point in time. and she said 600 give or take. do not sit and say, 700. if the curves stay where they are today, it should not be much. question, market activity, are there any early conversations with clients looking for plan b? instead of issuing bonds and coming back to the bank market, instead of ipo, those conversation starting?