tv Bloomberg Go Bloomberg February 25, 2016 7:00am-10:01am EST
today. payment forpecial pay holders. tim cook is not backing down. the apple ceo says unlocking the iphone would be bad for all of america. welcome to bloomberg . i am david westin. it is awkward for china. >> that is not what you want. >> maybe it is time for a call to action. >> let's get started with the first word from caroline hyde. caroline: thank you. -- greek morning
officials announced a group led by austria to stop refugees into the northern border. european union is moving ahead with plans. the u.s. will send the united nations security council a proposal for new sanctions from north korea. the u.s. and china agreed to punish north korea for the launch of a long-range rocket. the chinese are north korea's biggest trading partners. and now, donald trump taking on mitt romney. he tweeted that mitt romney is a fool that is after mitt romney suggested that a bombshell may be hiding in donald trump's tax returns.
global news 24 hours a day in more than 150 news bureaus around the world. let's take a look at what is going on in the u.s. futures. we are up across the board despite losses. the same is true in europe. let's take a look at what happened in china. a month, itdrop in tells us something about the market and the volatility there. tightening lending standards, if you look, they have lost the trend. take a look at european banks. stephanie was talking about andd's bumping its dividend giving investors a special payout.f 10% -- special
up 10% right now. you also see the eu oil companies rising, including hotel, bp, royal dutch shell. all as the mexican oil minister said he would be willing to meet. back, the go important thing that has come theof lloyd's this morning, payment protection insurance is a big scandal in the united kingdom and lloyd's this morning signaled that it might be coming to the end. for is some positive news the investors and the u.k. treasury. is, what: the question matters most? when we started this year, it was the china slowdown that had all of us panicking. right now, when you see china down and european markets are -- oil started the day down what global factor matters the most two markets?
matt: the first thing i thought when i woke up was own oh, china is down. stephanie: that is the first thing you thought of? this is different. they are not correlated today. think the oil news, although you don't see a lot of price action in wti, it does change things. keep in mind how heavy they are. they are helping to boost european indexes. we have oil unchanged but we are 32.11 and we got positive signals out of mexico's oil industry that they are willing to meet with opec and they have met with saudi's oil minister. so there is some positive talk on that level. take a look, just to go back and talk about what is going on --
david mentioned japan. bond go undere 1%. under 1% for 40 years. more interesting than this is the fact that the japanese government since october has been paid half $1 billion. people have been paid half $1 billion to take their money which is unbelievable, but that is starting to happen. jon: good news for prime minister abe. the global markets, the chinese stock market lunging over 6% today. bloomberg is there. i want to rewind back to august.
it was personal for the government. you wonder how embarrassing this is. >> this is a real test for credibility. inn officials arriving shanghai representing 80% of global gdp looking for explainers from china in terms of market strategy. chinese officials coming into this. we have this big flare up again. big drop and a reminder how fragile things are toward financial markets. they still have a long way to go to win back confidence. you say it is embarrassing, it is also an own
goal. did they not see this coming? >> this is why people are wondering here at the g-20, there are sideline meetings going on. part of the problem is that china pumped liquidity into the system. excessively so. that is a difficult balancing act. we will have to see how the authorities respond and whether the national team has to come back in and support stocks outright. this will be a new test for the head of the regulator as well. >> is today really a look at the chinese market? speaking to chinese bears, they say that this is no new news. do notho are bullish speak about the chinese stock market, they speak about fundamentals as the economy is shifting. this is truly about their market and market technicals rather
than the overall shift in their economy. >> that is a perfectly fair point but it goes to the wider discussion about competence. there are conversations going on today that china are finding things more complicated. it is a much bigger market than it used to be. though there is a disconnect between the markets and the real economy, people argue that this would go to them finally it difficult to stabilize things right now even though they preach the message of stability. >> the numbers are bang in line with earlier estimates. digging a bit deeper there is a bit of concern.
jon will know this, it is entirely generated by domestic amount. exports fell by a second consecutive quarter. this is the big one. the biggest decline in over two years as well. it is all about the domestic consumer. will the momentum remain? great survey today from bloomberg. if we vote to leave the eu. economists that we have surveyed say there is a 40% chance that the u.k. will tip into recession. that is something to be proud of. u.k. gdp and consumption then the pti scandal. a lot of people have said that fivepi payouts of the last
years have had more effect on the economy than qe. it was more money in people's pockets and they spent. maybe that boost to the economy is over mark? >> a good point. this pti scandal is a big scandal. lloyds last year put aside 4 billion pounds for this payment protection and insurance scandal. aside $14hey put billion which is a lot of spending for consumers. today is a day of smiling for lloyds. today they have a dividend and a special payout and -- this is the lovely chart. 73.6 pence. government has already got rid of most of its stake in lloyd. bank that it needs to worry
about is rbs. rbs is trading at about half the price. this is a great day for lloyd and the shares are up by the most in five years. >> let's hope it is more than just a bright day for lloyds. they need more than that. mark barton joining us from london next. we will look at the oil markets. the keys to fixing it could be in the hands of bond investors. you are watching "bloomberg ."
business flash. americans are not tricking budweiser the way that they used to. pushled anheuser-busch to fourth quarter missed estimates. they need to complete their acquisition of sab miller which would allow them to expand into emerging markets. moody's has come out with a warning on u.s. investment banks and the oil slump. said that jpmorgan energy loans would increase by $500 million in the first quarter. stock content technology is preparing an agreement. the company says that it would like to review new information it received from sharp yesterday. sharp reviewed foxconn's effort. -- offer. crude is easing a bit
now trading at $32 and brent around $34. we have seen a lot of talk about opec. our next guest says it will not be opec at all, credit markets will stabilize oil. we turn to james west. thank you for being here. tell us about what if anything will stabilize the prices? to stepis unwilling into the market and cut production so the market itself must cut this out. equity markets which have been open are becoming recently closed and credit markets as well as the high-yield bond market is blowing out. companies need to raise capital. they are being forced to spend within cash flow. if you look at adjusted cash flow, all of them are outspending cash flow.
the industry in north america has traditionally spent 140% of cash flow and now it is down to 100%. that is why spending will collapse. that will hit production in north america. jon: you mentioned the hedges. they were hedged, 2016 they are swimming naked. is this the year they are exposed? >> absolutely. less than 3% of the companies in america are hedged. this will be the year where producers themselves are forced to spend within cash flow. absolutely we will see dramatic drop in investment. we are down some if you percent from peak levels in 2014. david: this sound like, restructuring, work outs. when will it happen? >> some are happening. we have a major restructuring business. what will be the key catalyst
are the determinations for the companies. as you saw with jpmorgan yesterday talking about the banks and regulators running $25 per barrel oil through their models -- that will happen around the world. that will cause credit lines to be cut significantly. jon: we talked about credit in the blowout and spreads but we never visualized it. >> we have been showing high-yield issuance off the carts to 2009. people say that's only energy. they have really blown out. how important is this to oil producers staying in business? >> that is a dramatic increase for the cost of capital and that will go further up from here as we have some one third of the company's public in north america that will go from investment grade rating to junk braiding over the next couple of weeks.
i want to point out, viewers using the bloomberg terminal what to visualize this, you can type in this to check out the spread. jon: the fact that a lot of this production is funded by debt, in the short-term does that mean they have to keep their foot to the pedal and keep pumping? >> they will try to but the problem is they cannot get access to it but it markets or equity markets. some ofstarting to see the better run companies come back and say our production will be flat year-over-year but exit rate to exit rate we are down. >> they are spending faster than they can get money in. but does the market see what you see and is it priced into the price of oil? >> futures no. they could be down on pressure
in oil prices. from here this recent rally has been more going into the g-20 macro type trade. further, $38 is not an unachievable number. the current price is probably indicative. jon: the yield on the equity, the prices come down. was a/of 40%there -- there was a slash of 40% for the european energy makers. are we going to see more dividend cuts? are we going to see more hype cost production come off-line? >> i think both. dividends do not exist in my service group at all anymore. i think the bnp companies you will see that increasingly happen. it is the majors that will protect their dividend as long
as they can. right strategy or wrong strategy? up to them to decide. but north sea certainly will be down as we go through this year because it is too expensive. we were cutting projects at $100 oil and now we are at $32. jon: that you for joining us. a dividend fort the retailers and the consumers? calls and wayfarer have just reported there earnings. that's next.
earnings. in the earnings season, retailers have outperformed the s&p and here is shelly banjo of gadfly. let's walk through what we are seeing in the retail picture. starting with wayfair, they are missing. >> the interesting thing about wayfair is that people were really expecting it to post its first profit in a long time and they still reported a loss. you think that they would really push it to show people that we can make a profit. >> the criticism is, wayfair is basically a similar basis to amazon. if you try to swim in amazon's pool you will get killed by the shark. >> it right because there are
such few publicly traded e-commerce companies. they keep going and customers keep coming back. >> another public company that there has been talk of going private, kohl's. they are finally getting into business strategy. >> they finally said today that they will close 18 stores which is a good thing for this company. when everyone else was closing stores, they were opening them. they are finally starting to realize that they need to right size this business. >> when did they say it is too little, too late. sears has been closing forever and their numbers are out and it is not working. kohl'ss does that -- does not have the same real estate as sears. at sales inooking terms of the retailers, they are
actually growing. in general, is retail the right play? >> a lot of it is safety. you're looking at walmart this price retailers such as tj maxx and ross. i think that people are worried about what will happen. they are still putting out a lot of cash and people are worried about everything else. stephanie: the next picture out brands.brae we have seen the ceo step down. what are they telling us? >> for ever they have been a cubby that keeps feeding and keeps feeding. these folks are really good retail operators and know how to operate a store. i do not know what is going on because is the first time in a
while that they have not been firing on all cylinders. stephanie: what do we know about the consumer? we have tough numbers of nordstrom last week, what does a consumer look like? >> i wrote a column that is basically comparing shopping to going on tender. if you find a store that is not perfect, you will go right to the next one. consumers do not have a growing money, but the have money. to the next if it. -- they will move on to the next if they don't. stephanie: you are watching "bloomberg ."
getting slammed. there is your close in shanghai down 6.41%. that is ahead of the g-20 in shanghai. the calm after the storm on cable at 1.3984. a stronger pound after the beating it has taken. year yield in japan. seven basis points. we will talk about this a little bit later. tom: i have it here, that was such a beautiful cross. jon: tom keene will stay with us. first were news with caroline hyde. caroline: the white house is trying to make it tougher for senate republicans to ignore a supreme court nominee. they are already considering a republican for the job, brian
sandoval. republican leaders have said they will not hold a vote on anyone the president nominates and think the next president should make the choice. >> a powerful storm system swept across the u.s.. houses and mobile phones were designed guest destroyed and damaged. has discouraged some of the country's biggest banks in helping russia. the government has told the banks that a bond sale would run counter to u.s. foreign-policy. russia is trying to return to the market for the first time since 2014. i am caroline hyde. me get right into it with a little check on futures. s&p futures and dow jones contracts both up 0.2%.
at the moversook in the market. starting with crude oil. is therewith crude oil is a positive spin this morning as mexico's oil ministry says they are willing to talk with opec members. as a result you have oil producers up across the board. we showed all of us you earlier. sales force is one of them. that company came with a better outlook for the quarter, the current quarter, and the year. they are doing better in the cloud business then all of its rivals. i should point out that salesforce is down about 20% year to date.
and restoration hardware are both out. probably an even bigger concern with restoration hardware representing oil and energy prices. stephanie: restoration hardware pointing to canada and texas. the issue could be what people are willing to pay. $100 cabinet knobs is not necessarily where the consumer is. it is a reflection of nordstrom. neiman marcus building a flagship store. if you look at aspirational pricing it is a concerned market. matt: not concerned if you are a holder of power secure international. that company got taken up. it is a 90% premium to
yesterday's closing price. a little m&a action. david, back to you. david:to tom, you have a morning must-read from 30 years ago when you and i were young lads. and this falls into brexit the united kingdom. this is paul lewis from the new york times. around the time when there were hugely important mission -- meetings among five nations. for the attribute in the pounds decline to factors outside the control. the monetary policy had been laxer than it intended. it is stunning how this time is not like that time. france was looking at 3%.
trying to get the yen down off of 200. tom: things have changed. jon: not only has the bank of england and the ecb which did -- going at that point back to the economic history books the plaza came about because of corporate pressure to do something. we do not hear that voice from the u.s. as loud as perhaps it might be. tom: what we tried to do is say, do we need to go back to a meeting held three blocks away. it was going to be the bergdorf but they had to move to lunch at the plaza. barry from berkeley says
elements of that era but that is what we get to in the morning must-read. the idea of that desire for some form of meeting. stephanie: we have the ecb coming march 10. we have g-20. wood of the perverse positives could be that all of this unrest could get them on the same page. there.d, we are not david: that is exactly what is going on this weekend. when i spoke to jack lew, that is what went on. >> my response is sending a clear message, do not expect a crisis response in a noncrisis environment. financialthe job of inc. governess to accelerate a crisis, but to avoid a crisis. in my conversations with
counterparts, i have a strong sense that there is serious attention being given to how to address the issues we are discussing and together, we can lead to better outcomes. does that mean you have point estimates of what each country will do? you rarely get that from a meeting like this. i do not think it is unreasonable to have the expectation that coming out of this will be a more stable understanding of what the future may look like. is an important thing. >> tom that is exactly your point. become g-20 could unified. there is an important difference, it is five, not 20. mayoanie: yesterday mike said the difference today between the crisis six years ago -- you had bad fundamentals and good growth. now you have bad growth and good
fundamentals. if you look at -- president obama said three weeks ago, anyone who says that united states economy is on the decline. jon: after the financial crisis it was china that brought the rest of the world with it. that is where the incremental global growth has come from. that is the challenge for the g-20 to. too.20, jack was very diplomatic and i wonder how much of that was aimed at the japanese and the ecb. they are all chasing a weaker
currency and he said that will not help any of us. tom: in the weekend literature is the speculative bet that the japanese will intervene unilaterally if the yen strengthens further. there is nothing that makes the jack lew's of the world sit up straight like unilateral intervention. that gets to the desperation. you have had villa bauder from citigroup and he is actually adamant -- he is absolutely adamant that until you get stability there is little need to act in a global manner. >> jack lew said he firmly believes in transparency. currencythe devaluations, beggar thy neighbor. he says that we have to get out of that. tom: the currency war has been timeless.
i would take it in brazil. hit onrtered pound-sterling is john dropping. they are going to shanghai realizing that the mothership has fallen off the cliff. is, governory carney took the inflation report and said he is worried about persistent sterling strength. the central bank did not do the weakness, the currency get it for him. tom: have you ever seen that read the case? jon: that is the budget. that's the chancellor. stephanie: i know they did not get it at bergdorf. tom keene, thank you. sending tom back to surveillance radio. up next, tim cook has weighed in on the apple battle with the fbi
for phones and tablets. shares fell in premarket trading. deutsche telecom posted earnings that have beaten estimates. in germany, deutsche telekom is trying to slow the loss of traditional fixed line connections. pretty soon, china could be the biggest market in the world for movies. industry analysts say that at the current rate china could overtake ticket sales next year. david: tomorrow is the deadline for apple to comply with a court order. in an interview with abc news, tim cook is digging in his
heels. he is saying the creation of the new software is the equivalent of cancer. >> the only way that we know to get information would be to write a piece of software that we view as the software equivalent of cancer. we think it is bad news to write, we would never write it, we have never written it. that is what is at stake here. >> for more on this rising at all, tim higgins joins us to take a closer look at the case. i would like to say that issue -- interview is remarkable because tim cook is usually only talking publicly about the next hot thing he will unveil. we are expecting that apple will be arguing on a couple of fronts. that it will be an undue burden for the company and baby a novel argument that it is a
first amendment issue. stephanie: undue burden, can you elaborate? >> the idea that the company would be forced to create a new code to allow the fbi to break into their iphone. that is ant would be undue burden. it goes beyond what the original status was. stephanie: couldn't one make the argument that technology has moved so quickly that one could expect that regulation is here, let's get our hands and head around it. we have seen the same thing in the banking industry. >> one of the issues here is that technology is moving so quickly and there is a suggestion that apple is already working on a next generation of security measures that would go beyond what the f is asking for. it gets to this issue of why apple and others say it needs to be a policy debate in the halls
of congress. for thea discussion nation at large to talk about the wedding privacy versus security. privacy versus security. electedally courts are to order people to do things our firm and of lay. -- affirmatively. said, what if the government went to abc news and said you have to create a new program to discourage terrorists. how would you feel? there is a potential legal problems asking them to go write code that they have not written. >> that is part of the issue for silicon valley. the big concern is not just apple, but all of the tech companies. what else with a government make us do that we are not currently doing? the techhan apple and community, tim cook went on to mention public safety.
d thats what strikes a cor it is not just about phones and hacking. >> we need to stand tall on principle. our job is to protect our customers. have incredibly detailed information on their phones. there is probably more information about you on your phone than in your house. our smartphones are loaded with intimate conversations and financial data. with thealso loaded location of our kids in many cases. it is not just about privacy, but public safety. stephanie: this point had people concerned because we do not necessarily realize all of that information on our phones. does tim cook realize the magnitude of what he has? >> absolutely. it is rather remarkable.
in late 2014 the national discussion was about how icloud accounts of celebrities were hacked and nude pictures were out and apple was saying we are pretty secure and it was after that that they came out with tougher encryptions. very strong onen but even of argument beyond that saying that he takes privacy and the protection for that data very seriously. trying to make it a point that some of his competitors make money off of their users data. david: it is fine to talk about privacy but he has one problem. his customer is dead. not only did he kill 12 people, but he is dead. you do not normally have reasonable expectation of privacy after you are dead. >> the facts of the case are where apple has a hard time with public opinion where they are
standing up for the phone of a dead terrorist. the issue that they have is there so that is why they are trying to broaden it. david: you referred earlier to congress. there is a move afoot. two congressman have a bill to have a commission created. where does that stand? >> there have been invitations at congress for apple and the fe i to come to the hill. there is legislation debt -- and the fbi to come to the hill. there is legislation being prepared. you will see reluctance on some signs to have a meeting of the middle. it is a fun topic to hit hard on the campaign trail. you southern donald trump has called for a boycott and he told bloomberg news that if he were president, he would come down hard on tim cook. it adds to the heat of the issue. stephanie: donald trump would
come down hard on tim cook. you have written one of the smartest pieces we have seen thus far out on mr. trump who is trying to deflect attention from his business dealings. just last night, mitt romney was calling for a peek into his tax returns. breaking down the latest out of apple. you had better come back tomorrow to talk trump. we have to take a quick break. find out more during off the charts. anheuser-busch is down. light down in the last quarter. this rise of craft beer is hurting the beer maker. and we mentioned restoration hardware down. they did not get their sales right over christmas.
jon: welcome back to "bloomberg ." do when the japanese 10 year yield is in negative territory and the 40 year yield drops below 1%. matt miller has the answer. matt: i have this picture in my head of japanese people fleeing the island searching for yield anywhere that they can because the godzilla of negative rates has arrived. you want to take a look at this chart on your bloomberg. what it is, the japanese government takes data about what all their investors are doing as far as the treasury markets are concerned.
this week they have purchased more u.s. debt than any other week in recorded history. you cannot find yield anywhere. >> is that white line all debt? matt: these are japanese buyers. in the u.s. treasury market. the blue line is the japanese 10 year. you can see that it goes to a negative 0.07%. but john and i were talking about this yesterday, the u.s. government can take advantage of this and fix the roads and prevent -- bridges. stephanie: have you been to laguardia? japanese policy, the
idea of negative rates is meant to push you for their on the risk curve. they're are also going down to sovereign debt abroad. what they would like to do is invest in stocks, invest at home. that foreign debt, 67% of which the estimate is treasury. stephanie: but that is the opposite of what they are doing, investing in treasuries and sovereign debt is like holding a security blanket as opposed to buying equity. completely different behaviors. what an off the chart. --the next hour, shales shares of salesforce are up this morning. ♪
forcefully to stimulate growth. jack lew says do not expect a crisis response. says's simpson -- tim cook he is willing to do if he is forced to unlock that iphone. ♪ welcome back to the second hour of bloomberg . thisanie: here with us morning is michael, founder and chairman of the lead wealth management club, tiger 21. the club does not have an on band or a badge or a secret handshake. good morning, julie hyman. greece is trying to end
its growing -- refugee crisis. it wants theounced european union to go ahead with plans to relocate refugees across the continent. the white house is considering one for the job. republican leaders said it would at thed a vote on anyone next president should make the choice. trump did not want to a debate to get into an argument or he tweeted mitt romney is a full who blew the 2012 election. that is after romney's regulated a bombshell may be lurking in trump's tax returns. global news 24 hours a day.
now to matt miller on the market. matt: we see futures up across the board right now. the s&p futures only up two points. the dow jones up 23. as far as the month, february may not look so bad. for -- the worst start of the month in years. a chart of the s&p here, you will see if we have a good day today and if we gain half a percent today, which futures are not indicating now, but you can see markets turn and climb -- turn and climb like yesterday, then we will the month on a positive note. it is only the 25th. the trading month looks like a good verge on the positive
today. let's look at what could push us the stoxx 600 in the the banks, big heavyweights, all of big. good thinguse of dividends. even though the price of crude right now is little changed. stocks. heavy chevron and exxon rip are in that could boost our index as well. oil month to date. it is still negative but getting closer to closer -- closer and closer to a month gain. here, you see nymex crude from the first of february. if you measure from the first of february rather than from january 29, the last trading day of january, you have a 1% gain.
has been on its there, up 17% so far this year. the first day of the month, up 9.6%. commodities have been the big driver so far this month. john: it is hard to reconcile yields in japan on a 40 year 9%.w 1% with gold, up that is an investor saying for i will take 95, basis points. if that is what you think will happen with growth and inflation four years out, guess what. matt: i think it is because of the incredible volatility we saw rather than inflationary concerns. ande the end of last year as far as current year's are concerned still, so that is why
we are looking to put money into gold. stephanie: volatility is being exaggerated because of so many investors adding in cash. soy are without conviction they are not trading or investing. without investors there to catch the falling knife, money managers are simply waiting in that causes the gap in trading we have seen a year ago. john: the shanghai composite posting is biggest drop to reassure its economy at of the g-20 summit. down this session, 400 stocks limit down 40% of the market. ugly. >> it is pretty and they're nursing timing. when officials are arriving in shanghai to address 80% of the gdp, they're
looking for an explanation on where the economy is going and whether they're able to study things again. here we are seeing yet another , theup and a reminder fragile sentiment is toward the chinese economy and the market. it shows you how difficult the task is to smooth things out and win back the credibility. that is probably the key issue here in the coming days. michael: i think when you talk about inflation and then look at gold, gold has historically been an instability hedge and not an inflation hedge. that is what we are talking about. >> they just do not want to lose their money tomorrow. i want to come back to you and ask, how much of this reduction in the shanghai composite was because of the money market increase overnight.
they're looking not just for an explanation. it feels like an abrupt change. >> it is a fair question. what happened is the central in. pumped liquidity they need to soak some of the money back out. it is a difficult thing to do. there is a suspicion that that is what caused in the problems that when we are taking the money out of the system, that is what happened to market rates. we have to see tomorrow whether they punt money into the system, the bigger question goes to how in control china is of its markets. china was famed for its ability to run things, but it is getting more cap located in a bigger financial market. more banks and more brokerages.
it shows you how difficult the task is for china and to free of america all at the same time. stephanie: there are more and more avenues and platforms but less and less who feel comfortable investing in the market right now. the chinese retail investor is not jumping in either. we will get a quick check on the u.s. futures. let's take a quick look here. down across the board. here we are one day ahead above and. sis when you see u.s. hedge fund -- theys, insurance have got to market their books tomorrow. this is the day when they are to strong-arm things ahead. it isou see oil down, just not that easy to do it. talk to us.
tiger 21, how have your members than acting? it is about capital preservation. that is not investing. moved to athink we barbell strategy. in the zero interest rate environment, we need to take but we generate income are also concerned about safety. of cash at one end of the portfolio and private equity investments, which are riskier, but within our wheelhouse on the other hand. gaugei am interested to what is happening here. so much debt now in the european union. it is amazing. it is phenomenal. sensual ins of dollars of debt with negative yield. .hey want to go to cash can they actually go to death? michael: real question we ponder is when you're trying to be, is investment -- the
safest investment? reits are marked to public. if you can buy real estate directly, mlps is really interesting. it has had a disastrous last year but historically, this was another income producing item. so it is a shift to security and liquidity. david: how important is liquidity and is it more important today than yesterday? michael: china had increased set of reserves. they are damaging -- hemorrhaging. when you have a shift of perspective, safety takes on a new thing.
you can touch and see and feel through private equity investments. that is where their expertise is. stephanie: one we see an announcement that they are it is clearly capitalizing on possible bankruptcies and restructuring the past year. known for being a macro guy. what does that tell us about investors today? michael: people are searching for answers in a complex environment. part of the process and part of the tiger 21 is to understand how to look at managers and style just is one of the biggest concerns. what are we doing
today? leaving a 20%t open amount for anything we want to do. it was more negative than anything i have seen. you wantming to us and to be in the biotech space or the health care it you believe you should have 20%. i do not want you managing 20%. do what you can do better and less on us do it they can do. stephanie: there you go. you do not need to be all things to all people. michael of tiger 21 is staying with us next. a new version of atlas, you have got to take a look at this. if it does not give you nightmares or excite you, i don't know what does it operating outdoors and indoors. looks like iron man in the snow. we saw this released, it just came out last night. a rated robot. picking up boxes, opening doors. 5'9", weighing 180 pounds.
fourth-quarter profits fell almost 8% at best buy. the largest electronics retailer we demand for phones and tablets here the ceo is letting an uneven turnaround since he took over more than three years ago care shares falling in premarket trading. telecom posted fourth-quarter earnings in the meantime at the estimates. the u.s. unit t-mobile added more than a million unit -- users for the sixth order interrupter teleconference low and it is investing in
new broadband services. two of the best-known beers in the u.s. are dragging down profits. that led the company to post fourth-quarter profit that missed estimates. earnings underscore the company's need to complete the acquisition of miller. i would allow them to extend in emerging markets like after that. not jerking enough budweiser? david: i like bud light a lot. financial leaders will descend for a meeting and plunging commodity prices. treasury secretary lu said we should not expect anything on global growth. >> i do not think this is the time we will see individual companies make specific commitments marked by a real crisis. this is not a moment of crisis. have a moment where you
got real economy is doing better than market think in some cases. >> the imf came out with a statement calling on the g-20 to act forcefully. which will it be? we are joined by our colleague and it is your responsibility to explain this to us. >> the u.s. could actually do something about the global economy. and she will have to pick up the pieces. right now, he is right. it does not necessarily mean there will be a global economic collapse. yes, it is not an emergency in the way the imf is shown with this document. it is like an old movie where you see it coming a mile away and you are like, how can we stop the? if we can pull up the pmi data the imf showed, what they looked at was was longer-term of
developed and developing market purchasing managers index. we see a long and slow decline. it is not, obviously we have an emergency for financial market but this is what they are following. developing markets below the 50 point mark. not that much healthier. that is what they are worried about. what the imf is suggesting is a bunch of tools he always suggest for the u.s. extend the tax credit, doing infrastructures spread. these are things we have heard before. john: when the economy is on the downturn, expand fiscal stimulus. it is a huge problem. >> says that she is asking. she says if you can afford it, spend. we would like it if you do it in infrastructure spending. what i got out of the jack lu
quote to you was, that would be nice that is not happening in the u.s. >> i think he is saying three things. number one, when we talk about stimulus, it varies country by country. one-size-fits-all -- that's all for this. it is hard to get 20 countries to agree on anything. with theis a theme imf, lower potential to we are failing to spend on him for structure and failing to invest. overtime, the imf has a problem. this never looks like an immediate catastrophe, but there is a slow burn that is dangerous. you can get governments to work together like in 2008. they are trying to manufacture an emergency.
the output gap, the longer it stays there, do we see a permanent shift lower? is that what they are worried about? >> there is a chicken and egg which is that labor is so cheap that employers are not because it capital is easy to hire cheap labor. to that no solution unless there is economic growth coming from somewhere else. see his writwe large globally here they are not investing as much. and yes, eventually, that takes a whole growth curve and visit down three notches. the -- john: global manufacturing is up.
>> are is a slowdown in global trade and that affects the markets more because you actually have companies that make goods that are overrepresented in equity markets. we are seeing the slowdown in global trade affected right now in a last months. they showed the composition of growth in the u.s. from different kinds of economic activity and all that is left right now is services and domestic consumption. that is all. john: thank you very much for joining us this morning. where are we for futures? futures of this morning, positive but barely. the european session over at europe as well. the u.s. trading day just yesterday. the deal of the deal of a decade is coming up next. ♪
stephanie: taking a look at the top trending stories from bloomberg. you can find these by using the function read go. european stocks are moving. trade of the decade. we know investors are desperate for returns and will be paying attention to this to the trade andhe decade is coming out saying you merge and market assets are so cheap, they may be the trade of the decade. we heard this just yesterday. goldman and not just pimco. turning bullish on emerging markets after three years of underperformance. what do you think? michael: how often have we heard the trade of the decade before. it is a return to the mean analysis.
it is saying it is under -- underperformed so much it is going to return. there are a lot of bombs, not least of which what we were just talking about. we have maybe a disinflation isironment and china careening out of control. that will weigh heavily on emerging markets. john: this morning, we had another euro zone inflation revised lower to 0.3% from the month of january from zero point 4%. the ecb will meet in a couple of weeks time. the expectation is they will deepere positive rate into territory. getting rid of high denomination. you get rid of negative interest-rate policy, it has more bang because you may store its costs a little higher. i wonder how much your members are talking about that.
michael: i think that is ridiculous honestly. we are either in a low inflation or perhaps a disinflation or environment. most of the central banks have shot their bullets. left to go.hing we in uncharted territory. japan existed for a long time in a similar environment. the global economy is in new territory. that is what is going on. european banks are weak and they have not gotten a strong as american banks. the world isean coming to an end. it just means people have to pay more attention to these risks. >> coming up, we will take a look at big pre-market movers coming up next. ♪
the big gain or there adding 20 points. let me give you an update this morning. up 140 point. just waiting for breaking u.s. economic data coming out any second. matt: we are looking for initial comess claims, here they at 272. just a hair above the estimate and about 10,000 above the prior week. can see over the last five years, the trend continues to be down. the question economist have now is how much lower can we go? you expect some kind of turnover in a job market as they get the united states of america. that is a pretty low number already. stephanie: many of the jobs being filled are for people between 18 and 32. , low-wage jobs
and those are not driving the economy forward. they are not in apples of what we're doing in terms of pushing. they are not manufacturing jobs and they are not tech jobs here at matt: week sinew to see wages go higher. he thinks after we built the base of low-wage jobs, who climb higher. 4.9% was the number. 2.9% was what we were looking for. if you take out transportation, it was 1.8%. really a big the as far as durable goods is concerned and initial jobless names coming in line. let's look at how the u.s. futures market is reacting to the durable goods number is strong. we have seen a turn back to the positive. it has been fluctuating around gains and losses little changed in u.s. futures this morning. are right now up about two
points on the dow jones industrial average. i want to take you through u.s. macro market check here. i will throw in brent because rent and wti have both come down. down to the lowest level since 1999. the correlation between oil and stocks has been very strong, but it is falling off a little bit. maybe this does not mean a bad day for markets. inphanie: it is a positive terms of getting back to fundamentals. durable goods orders can and are often canceled. it is considered one of the more volatile series. you could see the number go off a lot. traders want things to push up today.
matt: that is right. windowdressing. the 10 year yield coming down 1.74%. not a lot of activity there, but you saw people getting out of oil and to some extent, you see people getting into bonds. it looks like more of an off day. let's take a look at metals. we have seen the trade. gold is actually turning down. gold has been up a little bit earlier. 16% year to date. aluminum is up a little bit and copper is down a little bit. we are not seeing big moves as far as macro indic eaters are concerned. should investors allocate their portfolios? let's do our morning meeting.
today is not exceptionally volatile, but let's talk to the manager of electronic multi-at income fund michael. i appreciate your time. let me ask you first about the trends we have been year with a focus -- been seeing this year with a focus. reaching intoors much higher yielding assets. hat are you talking about? >> that is the primary market or income. we are seeing a lot of other investors and wealthy individuals and private banking and institutional clients even more at higher income generating strategies. part of the rationale is they look at capital markets assumptions. what do we think global equities will do in the next five years and in many cases, the answer to that is its percent. two from dividends. skepticism andof
they are therefore looking at other income producing asset .lasses you do not have to rely on prices going up here at matt: it's part of your strategy, because you are getting into european yield assets, that you're going to get the yield on that. saying out of the energies base as far as i know, but more and more people are coming into the space who are not typically there. >> there is legitimate upside potential in the higher yield segments. you look at high-yield bond out of the commodities space. bonds were at 1.18 months ago priced at 1.5 on average. the mid 90'sack to to the high 90's. not only are you clipping upon also have6%, but you price appreciation potential is markets settle down. matt: you lower your exposure to equities to the lower end of
historical range for your fund. why's that? that came into the year when we think about stocks, we think about some of the longer-term trends that are really weighing on earnings growth. the upside versus downside we did not think was nearly attract -- as attractive as it was in the last two years. up cash inn building with that cash, we have been of theto take advantage dislocations we have seen in fixed income. a big shift for us below the 20% range of equities. matt: doesn't it look tantalizing as equities fell to the lows for the year, per unit, i should say? >> for the pullback, i think range bound trading will be a way to generate extra return this year. think there are ceilings on prices and we think there are floors on prices and we will bounce around the range. like to trywe would
to sell a little bit to these higher levels to we are approaching what we think is a higher level right now and we look to add on weakness. in general, we think there is probably more bad news raised into fixed income market than on the equity markets at this point. matt: there is so much bad news priced into energy, do you not want to wait back into those waters? i see a lot of financial advisors that own financial partnerships. mlt, a greated example of the breakups you have got to think through where the yields are pretty high but they face a lot of challenges. look at the 30 day volatility on mlp. it is over 80%. for most individual investors, they cannot stomach that. thinkions are low and i it will be a bumpy ride. it is not for us. appreciate your time today, michael. portfolio manager at the blackrock multi-asset income fund. news there is so much bad
priced into the income market that you have to subscribe to one narrative. is that the correct news to the fixed income market and therefore, is the fixed income market right and therefore equities has got more to sell off, or is it wrong or vice versa? it is a complex situation and everyone will try to digest it. everyone was trying to figure out with regard to is thislds, saying, equities, if you look at higher money managers now, they are looking at this as an opportunistic buying opportunity. do remember where you are in the capital structure. like,d the company you and find them in the fixed income markets, you have got a lot more safety given where you and possibly time to write through the volatile storm. john: a lot more homework. it turns conventional knowledge on its head. if you do not take those indications as signs you need to
get out, if you take a but -- a bet against it -- john: credit is a leading indicator as well. stephanie: remember all the brainpower in the talent funneled out of banks. leverage finance distressed in the corporate bond market. the idea generation, they are not even in those is anymore. matt: let me take you through equity movers you are watching. one of them, for me, is best buy. gas restoration hardware we have been talking about this morning. obviously, it had a rough time of it. the most interesting thing there, we have singled out the fact they are having trouble boosting sales in markets where energy is a source of income, like texas. stephanie: they are blaming texas. hot markets for them. it is interesting. what are they going to say next? that it was not cold enough? the
weather is my favorite one to blame. >> best buy had a problem. i'm not sure if the weather is what they are blaming there. adjusted eps, $1.53, we were looking for $1.39. down 1.7% and we were only looking for 1.3 percent. stephanie: they are still suffering from the show room problem, living in amazon country where people are walking into best buys and buying online. even senior citizens. it is not millennial's anymore. people can price compare and they are not doing it in the big andes like circuit city radioshack. look at radioshack. matt: transocean is one that had incredible volume in the premarket. you can look at the market movers or post-market movers and can arrange them by losers, winners, or volume.
transocean has been at the top of the volume list in the last couple of days. it yesterday said it had gotten -- a contract for a summary and it was operating. last night after the market closed, it said its fourth-quarter earnings beat estimates because of a surge in cancellation fees. are canceling their services and leaving their money was transocean p that may be a good sign for now but not a good sign for the future. stephanie: i want to give you a factoid we saw this morning. about carlo much icahn's energy exposure. guess how much money he has lost. $3 billion. he luckily does not have too many investors hanging down his he cand i am pretty sure stomach greg p when you look at the price action, it is bad news bears. four -- missed estimates has sales sort of flight for its two flagship
brands, but an but i have always thought of them as one brand. do we think of those as to brands? there are deftly two brands but the fact that the whole but complex is being hit by craft beers. feel about bud light lime. matt: if iphone to the point low enough that i will drink a but, i do not care if it is right or bud light. just give me whatever is in the can. >> there was a report that came out and it caught my eye. south africa may hold up the the unions inause south africa are hops growers and they are lobbying hard in south africa and the regulators may hold it up for as much as 18 months to two years. you ever wanted to see a justification for a deal because you cannot generate your it is sabc growth, miller. it is in the numbers this
morning. stephanie: whether you are talking heineken or budweiser -- or budweiser, growth strategy. place is like haiti and the congo and when they do not have growth opportunities, they have got a problem. they are not growing that market. >> the deal is to buy growth. matt: we could talk about the beer all morning, but i want to talk about the really interesting stuff, the bank in england, in case you've never heard of it. it is a $50,000 market cap moving markets today. john: it is moving markets, a big move. it is up 12%, the biggest move in almost five years. the reason i think this is important is it is a domestic facing lender. and likewise, they have been hit by the same situation domestically. the scandal over the last few years. the fact that lloyds is signaling an end to that, is giving a nice list -- lift. across the board
in europe. i want to point out to our viewers in the u.s., this is not the group of rich british guys standing around smoking cigars waiting for the bell to ring to make sure the ship is out at sea. that is a different one. a lot of people do not know that. stephanie: this is the best day lloyds has seen since 2010. all the issues we're facing around the world, this is the best they have seen since 2010. that is a traders day. >> are they ahead of other british banks in terms of getting this behind them? >> before the government, the big problem is not lloyds so much with a 9% stake that has been sold down aggressively. it is rbs. matt: one more stock that john pointed out to me this morning, i put a chart in for you, so you could check it out if you want. the sponsor and the world , thaton honda racing team
is the only way i know it except for the fact i fill up with -- stock is up 4.5%. what is the deal? >> this is the big dividend payer, the biggest yields for the whole energy sector in europe. it got/this morning. morning.ashed this it is the real reality catching up. matt: bloomberg users can access this. 327, check it out. these are big oil dividend yields. .ight up at the top huge dividend, and then boom, a big cut. do we see the rest of these? do we see shell, bp, having to cut dividends? it looks like they are here down at the bottom, only yielding six and a quarter percent. the 8% yields may be at risk. it.d: there you have
joining us now to break it down is bloomberg editor at large, cory johnson, live. i am glad we are breaking down sales. you have been a naysayer before. how do you fight the numbers? cory: the numbers are strong. the revenue growth still growing. albeit a lot slower than it was a year or two ago. we were looking at better than four or 5% growth. it is still strong for this company. they did it by spending money and marketing. spends so much money on sales and marketing. they spent $3 billion last are on sales and marketing. so much more than they had previous years. you compare that to other ispanies and software, there
no comparison. you name it, oracle, some of the , and you look across the board at other companies, they are spending about 49% of revenues on marketing. 49% of revenues on sales and marketing. the amount ofen money they have generated, they have the latitude to do it were or might not be in that situation. cory: any kind of software companies. fast-growing, slow-growing, they are growing so much in marketing. hen he talked about how well -- they did, listen. the best quarter we had ever seen. we would never expect to see every product room in every our business exceed our expectations. that is what we saw in the fourth quarter. so greatse results are that if you look at the top line
. if you look at the bottom line, it looks like they lost money. if all that matters is getting revenues and not having any profit, it was fantastic. stephanie: i want you to back us up to when they lost my. a beautiful story. mark raised the flag better than anyone. walk us through specifically where they lost money. they were not spending so much money on marketing, they might not have spent the money. this would be a profitable company. if you spent all the money on marketing, why do you have to spend so much money? product is fantastic. $.49 on every dollar and pile that back into marketing? it is working in terms of boosting the top line. they are guiding the analyst toward that number. it might matter someday but it does not yet in salesforce.
from recession to rising 7% year on year. it is the strongest european economy. why isn't it projected to win? general dissolution over incumbent parties. that is the quandary. >> i have a chart that could possibly make investors money and they could get the chart at 324. what this shows is european ireland, the profit margins have risen up into 2015. but now dropped. it has been a horrible earnings season for european banks. the question is, what will happen to dividend yields. the dividend yields are up at 5.5%. our the price is going to have
to cover to bring the dividend yield back into a normal range? >> this is the political dilemma across the eurozone's now. spain struggling to put together as well. really difficult. for the vote, turning my back just a little bit. i think dividend income is such a big story right now. matt miller gets my vote. stephanie: the irish are very concerned. they are sensitive if england were to leave the eurozone, it had a huge comeback. mark wins it. ♪
oh of sky bridge capital and later this hour, we will speak to the head of the hedge fund in 2015. ♪ ♪ john: 30 minutes away from the opening bell here in bloomberg city. i am jonathan ferro. stephanie: joining us for the hour, comanaging partner and cio . lot ofo dig into the a bloomberg this morning. let's get you a check on the markets. matt: you have futures that are very little changed. futures,ows for s&p nasdaq futures, but not big moves. let's look at the s&p futures
over a couple of days to see any trends here. so flat. we have been down and up but not a lot of slope to this line. we did see oil come down. still looking at s&p futures. we see it come down. a little bit of a bounce back up. that is typically what drives stock markets over the last two months here over the day. the brand is rising up now, a gain of 2%. this is the last few days, a correlation between u.s. stocks
has been much higher between the correlation between u.s. stocks and oil. chinese stocks, which move markets, that correlation feels like we have finally broken the shackles of the chinese stock correlation. i want to look at the british pound. we have been following it closely and i want to take a vacation there. it is very cheap for dollar holders to go in there and buy pounds, or anyone, really. it remains steady at this level. if you have gold, you could buy more pounds. it is up a quarter percent year to date. it is not very changed today. it is coming down a little bit today but year -- year to date, gold has been the play. now, here is julie hyman. julie: the white house is turning of the heat on senate republicans to consider a supreme court nominee. is said to betion
considering a republican for the job. they would notd hold a vote on anyone. they say the next president should make the choice. movedmany, parliament has tighter rules on refugees. this is after angela merkel brokered a deal with her three party coalition. the measure would speed up opposition of asylum request. the record influx of refugees has caused merkel political problems. global news 24 hours a day powered by 2400 journalists, more than 150 news bureaus around the world. now the three stories that matter most to the market. chinese stocks are plunging the most in a month. the shanghai composite index is falling 6% led by tech companies. g-20 financemes as ministers are gathering in shanghai. european stocks are ignoring the losses here they are in the green.
is this a moment where we start to say, the global impact in oil, elections here in the u.s. or china, we are starting to break things up a little. as that as things look in china, the global markets are not necessarily feeling it. >> that was a big driver coming in this year. how does that really impact the western economy. import to china. -- the visit would depreciate the rest of the year. the question is by what magnitude. at the mercy of what happens with money markets. it could be manipulated by the chinese finance ministry,
government officials. how do i shorten you out? or do i go to do that? markets,n use future trade with the banks. they also control rules to a degree. big player in that. a lot of money left in the reserves to buy you up on the offshore. they have shown a propensity to off-balance on purpose. they do not like the speculation. a big opponent there. >> you are. that is the real gain here. the chinese would like to cad evaluation and they have seen the dollar strength. they want to manage it on their terms and bring it down in their own way and they do not want a
group of regulators to do it for them. they know they have the positions on and they do not want to hand them a gift. they will continue to see a cat and mouse game back and forth and it will take longer to get to a modest currency. john: i can see that in the japanese bond market overnight. let's see the way they traded in japan. the first yield is intensified. the 40 year yield drops 10%. the 10 year yield into negative territory. investors are going abroad. 17.5 approaching $20 billion worth of foreign debt. the bull case for treasuries. the case goes back to story number one. we do not know what the pboc is doing in terms of the composition of their reserves.
we know what they are doing with reserves. but is it a treasury? is that the barricades for treasury? some days, that does not happen. >> decides chinese selling not only treasury holdings but mortgage bond holdings, equity holdings, to defend the current the, you have saudi arabia, which has large holdings as well and they try to offset the lower and bring back dollars as well. you probably get the condition there. the flipside is there is that flight back into u.s. treasuries. you have a counterbalance. to show the chart we showed earlier, japanese investment has risen to a record high at least since they changed the way they measured it back in 2014. these are assumed to be 60 or 70% treasuries just to clarify
what we talked about earlier. this is chart number 322. people have asked me for the chart today. 322, i think it is one of the most interesting charts we have seen so far today given what is going on japan. you cannot get any yield there so they are forced to look for bonds somewhere else. john: we talked about it earlier. you look with that chart. they want them further out in the risk curve. they do not want to go abroad buying treasuries in bonds. it is difficult for central-bank policy. >> it really is and it shows how interrelated all the global and whyhave become central-bank policy has become integrated here it is one of the things the fed has to keep in mind as we talk about are we going to get more rate hikes this year, because what are the implications of that for the rest of the world? >> your point is powerful.
instance, youic may not have the power you think you have. because of the international global ramifications come you do not have a closed system. you can stimulate your economy to link the 30 years ago. stephanie: it begs the question what are central bankers job functions? with christine lagarde, they probably begged janet yellen to pay attention to the situation in europe and globally, we that here and said, that is not janet yellen'job. what is her job? none of these operate in a vacuum. >> that is exactly right. if as job is also to keep employment growing and keep inflation under control. i would argue they are still more worried about deflation and the disaster that deflation really brings on an economy and a society and all of these are deflationary policies abroad and the fed has to react to that under their mandate, which is u.s. centric, but it is impacted by the rest of the world.
>> to go back to the internet you -- the interview with the treasury, they need to do more. the reform package has not come. the economy fell off a cliff. do we need to see more from the prime minister? >> one of the biggest problems they have is a demographic problem and they have to grow the workforce and the labor force. they have not used to that arrow, so to speak. they have talked about it but you have not seen it yet, not dissimilar to the u.s. where it is all monetary policy all the time and you are not getting the fiscal pols the out of washington and you are not getting the other things you need to do in the broader economy of growth. >> it makes it seem like a long way but it may not be that far. traders have no answers on how to prep for a pass voting of president from here it david rubenstein said the uncertainty
around this election has been the biggest question he has getting. it is a very scary year. stephanie: last week, helen of oaktree said if donald trump's fear mongering is spooking americans and spooking the market. is the fearsure it mongering that is doing it. it is the fear of, are we really going to have donald trump running against bernie sanders and what of that ultimately mean reactrket and how do we to that? the market is trying to grapple with that outcome. stephanie: paul krugman could be this -- the treasury secretary and don't trouble just take all the jobs. socially, he has made a lot of headlines. fiscally, his fiscal plans are not that out there to cut corporate tax to get big u.s. institutions to bring in money back to bring in money back or i will put you on the spot. would youal policy want out of bernie sanders and donald trump? >> i would have to go with
trump. straight up. donald has shown a tremendous ability to pivot and tilt on a dime and pull it off. seen hasse i have pulled off the shifts he has made. he is resonating with people and i think when he gets there, he will surround himself. stephanie: from wall street's perspective, it is not policy, it is political risk. diplomacy, foreign policy, that is what has people so concerned. are is what investors scared of today. >> typically, presidents are elected on domestic issues, not foreign policy. if you look back through history. agree 100% with that. the foreign policy side scares everybody. scares me to what will we get and what will the reaction be to world leaders come world thelems, and i think on business side, people could get comfortable with him on the business perspective.
>> that is interesting. matt: i just figured something out, how many clients and users .re searching for donald trump the first step was to go to the m.v.p. page, the most viewed people on the terminal. donald trump is on a 10 here. if you click on this, it gives you his bio. bio hillary clinton or bill gates. you could see how many views they got from bloomberg users. 284 already today. for the month is 350. if you look at hillary clinton, it is my 28. bernie sanders, 33. stephanie: he is a newsmaker. it does not mess is rarely mean he will be the next candidate. matt: he was on the program at couple of days ago. stephanie: number two is jim
reed, a strategist out of deutsche bank. a year ago washo most bearish on the economy. he came out today saying he got leapfrogged. he says he might be slow to the party. if you look at geopolitical risk, more and more analysts are saying that things look bad. cool thing is, you can see how many people viewed his profile. 500. if flatlined before a couple of weeks ago. stephanie: an early there are now looking like a cup. storieshose are the that matter to markets right now. coming up, we will be to joe, who had the top me hedge fund in 2000 and according to our bloomberg rankings. stock, lookk of one at this. sales up. having a good day so far. ♪
julie: i am julie hyman with a bloomberg business flash. jobless claims rose last week after hitting a three-month low. the number of americans applying front implement benefits was up to 272,000, slightly higher than estimates. for almost a year, jobless claims have been below 300,000. thatmists say that level includes nonmilitary equal than military -- that is the most in almost a year. an affiliate is buying a shopping mall owner ralph operatives. the deal is valued at $2.8 billion including debt.
brookfield will acquire all of the stock at 1825 per share. that represents a premium of 35% . that is the bloomberg business flash. matt: i want to look at the movers we have in the premarket. down two and three quarters percent because it missed earnings estimates and sales estimates also missed, only up about 6.2%. distributorsu.s. actually fell. we are looking at again here in the u.s. we lost market share in but light even though they spent more money on advertising and the beer market has improved because more people are drinking craft beers. look at other movers this morning. salesforce.com not only raised its own and beat the street as far as the fourth quarter, then raised its estimate for its
outlook in the first quarter, the current quarter, and the full year, and beat the street on those numbers. salesforce in the cloud doing better than any of its competitors. the stock is up 10% in the premarket. it is still down 20% year to date. thes look at some of retailers. we have missed restoration hardware. real concerns about delivery dates, about sales, especially sales growth in places where oil income is important, like texas. restoration hardware not hitting it out of the park. shares are down 23%. best buy actually beat on earnings, but missed on sales. it looks like the market could forgive that for now. same stores was down 1.7%. a drop of only 1.3%. earnings eat as the company cut costs.
monday and nothing happened. yesterday down 200 and up to 50. a50 point day was not too bad. i think of this really started going back well over a year ago and it accelerated last summer and into the fall. risk our portfolio coming out of q4 and we cut the equity data is that in half. stephanie: what does that mean? >> yes, we redeemed capital from our act -- activist equity guys, they have a lot of that type of exposure. they were not capitalizing on the opportunities there. record m&a activity there. it is hard to find people in that space who actually made money. up to welatility is made the decision to exit and we tend to be tactical and dynamic when we run the portfolios and began the process.
we continue some of it here in q1. we have been migrating the capital largely in the structure credit. rmbs where we get great carry out of those trades right now. >> is your type of investing toxic in the environment? every investor we speak to talks about the important -- importance of capital. you sound like the opposite. go back to hell on we were in the activist trade. it was a multiyear trade for us. fundink the hedge strategies have cycles just like the markets, coming out of 13. we moved in to the more event oriented, higher strategies iran that for a couple of years, so you have a combination with the opportunity set to getting to wane. we will draw capital and we will not sit in a strategy for 10 years just because you want to
be there. john: markets falling off the cliff and a lot of people say nothing has changed and everything is ok and this does not make sense to me. >> i agree that fundamentals have not changed. we can live through all the noise. growth feels like it is on the cusp. a recession's earning is largely going on. i would argue you have a full-blown recession in the energy space, which is 11% of the u.s. economy. the underlying fundamentals are i do not think we are going into a recession and i we could avoid that. our main driver was we were looking at the performance we were getting out of funds in that space and an expectation we would continue to see heightened levels of volatility. with that heightened level of
volatility, we wanted 2-d risk. at the same time, you have a spread product getting a lot cheaper so you had a much better opportunity set elsewhere. so we made that pivot. john: coming up, the open, the cash open. morning, up a couple of points. doubt futures up 22 points. a big session over in europe and an ugly session over in china. on thenghai composite closed today, 6.41% in the red. a japanese government bond yield, a 10 year yield at negative spaces points. -- basis points. ♪
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from the opening bell. look at a couple of stocks moving -- anheuser-busch, down. sales of bud and bud light getting hit with regulatory hits . emerging markets are the growth play. restoration hardware taking a huge hit, citing oil prices affecting bigger markets, canada, texas, and saying, basically, they did not get there sales right and suppliers are failing to deliver. we are back with ray nolte, skybridge, and i would like to congratulate joe edelman. science bile fund focus performer.ber one joe, before we get to the markets, you returned over 51%
last year. how did you do it? stockelman: with good picks, principally. drugd narrow tin with two that look like they work and are approvable. we have an orphan-stage company. cereplast, which has a drug for muscular dystrophy. finally, we did well with a private investment, a company called assertive. they have a drug for them for me -- four lymphomas and leukemias. it looks like the best in class, and that company was bought by astrazeneca. stephanie: help us understand how long you were in these positions, because in terms of rnd and investing, it takes a lot of time, sort of the opposite model of valeant.
mr. edelman: it takes years. we are more careful, obviously, in picking these things up front, but unless something changes -- and it's something changes, we are perfectly willing -- if something changes, we are perfectly willing, and i will talk about that, to get out. these are gone quite well with our expectation, so there was no reason to sell. stephanie: last year, but what did it look like before last year? mr. edelman: the positions? stephanie: yeah, because waiting is the name of the game in life sciences. this foran: i have had several years. these are really long-term positions. we have over 100 positions. there are some that are a little smaller. it is a mix. our focus is biotech. we also have some spec pharma.
we have done well with a company that is a more recent position. we have a broad -- it is a diversified portfolio. stephanie: we will talk about that. over 100 positions. that is the opposite of a hedge fund hotel. we will look at stocks. they open three minutes ago. up, in the green. matt: in the green, and solidly sell. the dow jones industrial average adding about 50 points this morning. chart, a month to date the last trading day of the last month -- from the close then until now -- stephanie: it is a leap year -- i made a mistake. matt: we all make mistakes. we are down .2% this year. since it is leap year, we will trade tomorrow and monday as well. an actual gaint
if things continue to go well. look at treasuries. i saw something earlier i thought was pretty interesting. here is the 10-year yield down three basis points as people buy, and you do not see as much of a game or a drop in yield on the two-year yield. in the terminal here, in my bloomberg, i have a chart. you can access it with the v333.nd g #bt it shows the spread between the two-year and the 10-year. in red, we go below the flatline, negative, inverted. right now, we are at the lowest level, the flattest we have been since 2007. interesting to take a look at. that may look at a couple of movers. i found something fascinating before i came to air right now.
stern lugar, the gun maker, came out with earnings that beat estimates by a long shot. sales beat estimates by a long shot. it has raised its dividend higher than the street was expecting, $.33 a share. the copy says gun sales are doing well after a decline. smith & wesson is moving in sympathy. conceals are doing well. after a decline in 2014, they said national instant no background checks rose 9%. stephanie: last night, when they were up 6%, that was an all-time high, so we have gone even higher. matt: that is right. i pulled out this data -- national instant criminal background checks -- we have that on the bloomberg. i graft it. you can see since 2010, this is a background check. this is one of the ways strum ruger gauges growth.
we are higher going into 2016. i want to look at power. power secure getting bought out. a 90% premium by southern. i thought that was interesting. a small stock, but a huge premium. today is one of those days where it is really interesting to look shows amap, which breakdown of industry groups moving higher and lower. tech.e some read in everything else is in green. financials are leading the pack with lloyds. health care and industrials bringing up the rear. to let up atbigail the nasdaq looking at lending tree. abigail: shares of lending tree are soaring after they beat earnings and revenue estimates. the earnings beat was huge, 274%. the company made $2.59 a share.
each beat. they raised their outlook for the full year, and added to the company buyback. good stuff. the ceo said the growth is being driven by all areas of lending. the stock is down slightly year to date, but up more than 50% over the last 12 months, outperforming the nasdaq overall by a wide margin, probably to the frustration of investors in the high short interest of 25%. stephanie: thanks to our own abigail doolittle. we are joined by ray nolte and joe edelman, founder and ceo of perceptive advisors. you are clearly focused in one certain sector. ray, you have a broader scope. when you look at the market of today, does it affect you, does it affect what you are doing day in and day out? mr. nolte: yes, of course. while tech and health care tends
to move with the market, but on the other hand, they are recession-resistant. to the extent they are predicting a recession, it could be an opportunity to buy the stocks. stephanie: you look at the market in the last six weeks as a buying opportunity? mr. edelman: i do, because biotech is off close to 50% from its high, for instance, and the reasons, i think, are excessive fear about drug pricing and price controls, which i really do not think, particularly with the stocks we invest in, are much of an issue. i do not think they are significant. i do not think they will dramatically impact the industry. stephanie: that is interesting. they are recession-resistant, but are they regulation-persistent -- regulation-resistant. there is a natural ceiling. they cannot keep growing forever. mr. edelman: well, drugs, for
instance, are a relatively small part of the overall health care costs, and in many cases they save money. biotech take out the and drug sector, a lot of the concerns are somewhat misplaced. and, you know, it is sort of an investment by society, too. if you want good health care, there is a lot going on that is very positive, for instance, in the biotech industry, that i think is going to have a positive economic impact. it can keep people out of the hospital. it can keep people productive for longer. so, you know, at some point, if treatments -- if the price of, you know, controlling cancer is $1 million a patient, it is going to be an issue society will have to face, but we want to have a chance to get there. stephanie: you are clearly more diversified -- if biotech and life sciences are
recession-resistant, where else do you look, because macro had a brutal year. you have pulled out of activists. point,te: yeah, to joe's if you look at health care, a lot of the started last august around a certain individual who decided it would be a good idea to raise drug prices ended created this washington focus. it is easy for washington to push blame back to the drugmaker. before that, bill ackman, had all of us focused last spring. mr. nolte: it was. i think that is very different than the biotech space and i think that joe's approach to having a diversified basket, because you do not know which of those will pay off when, but i think we are on the cusp of a immunotherapy, and being in those companies will eradicate and get bit of cancer, probably in our lifetimes, and it will be a huge cost-savings for the health care
industry. jon: he will talk about that in a moment. whenever i hear well-performing fund from 2015, i hear the term "stockpicking," but nobody elaborates. at, metrics are you looking which stocks are you going to, and why are you picking them? talk to me about your dashboard. what are you looking for? mr. edelman: well, a lot of the stocks we are in are heavily discounted for the risk the drug won't work, won't be approved -- this sort of thing, won't sell. those are the three things you are trying to answer. does the drug work, which you get answered by phase three clinical trials, will the drug be approved, and finally, will it sell more or less than investor expectations? the stocks are discounted because nobody really knows the answers to that. the ones we are in, in particular, we think, are
approvable, with at least meet, probably beat expectations, will be approved. so, i do not worry too much. the stocks have come down. i think they are a little below the market multiple. it depends how you measure them, but the nbi is down over 20%. the order of 30%. i have not looked at it in a couple of days. that is a big decline. the leading names -- i also look at the leading names -- when they are not that expensive, that gives you comfort they can move higher. stephanie: as you are looking -- as you are looking toward investment, how much do you pay attention to market globally? not tend to i do predict the market too much, but i tend to get more defensive fifth the market is weak. it is a paradox of investing
because my investors expect i will decline less than the market. some that, i have to take chips off the table if it is going down. i will modify that a bit by my opinion. i do tend to have a view of where the market is going. in this case, i do not want to sell too much because i thinks the -- i think the stocks are inexpensive. you can take defensive action with stocks as well. as it recovers, we might look at the technicals, for instance, as well, i might jump back in. particularly if there is a trend in the market, it works well for us. on, everyones j keeps saying it is a stock picker market, but february will be brutal for long, short equity managers. does that mean it is not that hot? mr. nolte: no, i think it is the environment. the graphic showed it. nothing happened this month. the did is chewing people up.
people are getting hurt on that. what you have been saying for the first time in a while is more net managers running long and short are seeing more dispersion between stocks. this version is coming back. you are starting to see better performance coming out of your market neutral ventures versus people that take more ets and they are getting forced out of positions, chewed up in the market, the market-neutral, equity guys, are faring better. there is dispersion in equity and stocks and you're not seen that since the financial crisis ended. stephanie: except, of course, for joe, who crushed it last year. we have to take a break. thank you to ray nolte. joe edelman is staying with us. next, this top for forming hedge fund manager -- this top performing hedge funds manager will give us strategies. earlier, kyle bass pulled out of his strategy.
the business flashsears sales fell almost 7%. eddie lambert has been selling off and spinning off assets and investing heavily in online and rewards programs. venture to buy generators in the u.s. -- the price tag is $3.3 billion, less than the cost of building new plants. dynegy will own 36% of the atlas power, and control day-to-day operations in the east, midwest, and texas. the ceo of hugo boss has resigned after they cut their profit outlook. he will leave on monday. the hugo boss board says they will find a successor without delay. he was ceo for eight years. that is the bloomberg business flash. stephanie: we are joined --
david: we are joined by drew armstrong and joseph edelman of perceptive advisors, the top performing hedge fund of 2015. we have been talking about biotech's. this is an area you know terribly well. how'd you make the decision -- how do you make the decision of where to go to my particularly since you say you are in the long haul, for the most part? mr. edelman: our biggest successes have come with earlier stage biotech companies where the predictions we are making -- we are essentially assigning probabilities to this, whether the drug will work, whether it will be approved, and whether it sounds more or less. david: to be more specifically, how far -- to be more specific, how far in the testing do you want to be? we are pre-clinic, from animals -- i have increased the scientific depth.
we will go from play clinical to commercialized companies -- three clinical to commercialized companies. it is still looking at the product themselves. ofphanie: the valeant model cut, roll up, what is your take, because six months ago it was jour?rategy du mr. edelman: we do not have a position in valued at the moment, but i'm open to it. it is not our, sort of, bread and butter, because you really have to predict the quarters very accurately. there is so much turmoil there now that it scares me a little bit, -- a little, even though it looks fairly inexpensive. it has a great deal of debt. you have to wonder a little bit about new management. if mike peterson does not come back, if they run this more
conservatively, will they be able to satisfy what investors expect traditionally of a company like valeant? was reading some comments about the political situation, and you mentioned valiant. i am wondering if you think a model like valeant can continue to exist where there is scrutiny seempoliticians, the pbm's to be cracking down in the spec valeant has, and been forced to back away by other players in the health care system. is that anything that can exist in the near were mid--- or mid- term? mr. edelman: i think so. if you are referring to drug prices in general, i think high drug prices are a good thing. i have a different take than most people. valeant may be an exception to this, because to the extent that they are a good thing, what
motivates that statement is the more we were there is, the more drugs will be developed, and the more risk that will be taken. some drugs are very risky -- particularly novel drugs. to get people to develop them, they have to be rewarded. stephanie: this takes us to a question that has come in from twitter -- your view of how higher prices are good. presidential candidates seem to disagree, as does populist opinion. what happens as there is sustained pressure for drug prices to get lower? what will happen to biotech companies as investments and their ability to raise capital? mr. edelman: i do not think it is reality. name perceptive comes from perception and reality -- not that we are perceptive. perception and reality are important. i think it will pass.
the general thinking is to the extent that the government does something about drug prices, it might be, for instance, medicare will be allowed to negotiate. insurers already negotiate drug prices. particularly with the kinds of stocks we are in, where they have these big risk discounts for whether the drug works or whether it will be approved, this is a the minimus factor. valuations see having come down substantially over the last year, and this is i index. you can see we are down to a pe of about 33. --is twice as pricey as he as the s&p 500, but it is a different universe. stephanie: you have to take you to d.c. for breaking news where james comey is being questioned specifically regarding apple. stephanie: james cap --
david: james comey to the fbi director. mr. himes: it is my understanding the position of the fbi is a narrow one. there is a legitimate worry that a decision in favor of the fbi could be the narrow and of a shift asked about the legal domain of the cases to which this might apply. about authority. if the fbi prevails, apple will be required to write code at the behest of the government, my question is where does the authority end? is it the position of the fbi tot it has the authority have code in a new device? can you tell us where the authority ends? cancomey: i do not think i
by virtue of expertise, or should by virtue of my role -- i think the lawyers are best situated to do that. these are reasonable questions because judges on both coasts to other places will have determine what is reasonable assistance. i am not so many to offer you a good answer to that one. mr. himes: ok, so it is not, at this point in time, a belief of the fbi that the authority could go beyond what it has requested in this particular case? mr. comey: i actually have not thought of it. here's the way i think of it -- the fbi focuses on case, and then case, and case. i have said this to folks because it is true -- the san bernardino litigation is not about us trying to send a message or establish some precedent. it is about us try to be competent in investigating something that is an active investigation.
i do not know how lawyers and judges will think about what is the limiting principle on the legal side. i just do not know. mr. himes: thank you. my second question is about a different way to think about this. we're having this conversation about the tension between privacy and security, but there is a different tension, which is security versus security. if you prevail, and the code is written, presumably, as mr. shift pointed out, will be the request of other law enforcement, and the code will exist, presumably, on a server at apple, and that creates a threat. if the code exists, it will become the target of sovereign adversaries, criminal enterprises, of terrorists, and you do not need to think too hard to spin some ugly scenarios if the code gets out into the wild. now a terrorist entity knows my precise location, gets photos of my children. i wonder if you can give us a sense, in taking the position the fbi has, how did you think
about the trade-off between the very compelling desire to get the information on this particular san bernardino case with the risk that will be posed by the existence of this code, should it exist, and ultimately, perhaps, get out into the wild? mr. comey: i think that is something the court is going to sort out, and i will be cautious in answering because i am not an expert, but what the experts have told me, and i'm service we sorted out by the judge, is that the code that apple has been asked to write only works on this one phone, so the idea of this getting out into the wild, at least the experts tell me, is not a real thing. the code will be at apple, which i think has done a darn good job of predicting that protecting its code. protecting its code. did a good job of unlocking any phone.
mr. himes: thank you. i wanted to thank you for raising the issue of cyber security in your testimony. agreements were made when the chinese president visited our president. i wonder if you could characterize if they have been effective in reducing the espionage we have seen out of china? go intoper: we could that in a more detail on a closed session. as i indicated in my earlier remarks, the jury is out. we have seen some reduction, but i cannot think we are in a position to say whether they are in strict compliance, and we can go into that in more detail in closed session. >> the gentleman yields back. mr. king. mr. king: thank you. i have questions to direct to on apple ---- comey
were they helpful? mr. comey: they were pretty helpful. we just got to a place where they were not able to offer the relief the government was asking for. mr. king: secondly, just to knock down a media story, i have heard several people say the fbi could do this if they want to, but they are trying to establish a case here. it is a product of people watching too many tv shows. i do not mind tv shows about the fbi, sometimes we're not as attractive or technologically effective as we appear. >> thank you. diving deeper into the ukraine and russian -- i do not know who wants to dive into this first --
obviously the impact of sanctions is dramatic to their economy. is this, i guess, a frozen conflict, and what else can we anticipate? what has had a greater impact on the russia -- russia's economy is the precipitous drop of oil. 37, 30 eighting at dollars a barrel, if that, and the planning they have used is $50 a barrel. so, sanctions have contributed to that, but the major impact has been with oil. considerhe russians the ukraine little russia. i think it is deeply steeped in their history and their culture, so they are going to attempt to sustain influence, particularly in the two separatist