tv Bloomberg Go Bloomberg February 29, 2016 7:00am-10:01am EST
mario draghi for further stimulus. new technology is helping to reshape an old business. general electric vice chair beth comstock on the innovation that is changing the company's future. david: welcome to "bloomberg ." i am david westin, here with stephanie ruhle and jon ferro. trying to stanley things right on the heels of the g-20. fascinating, isn't it? china follows up with a rate cut, and then euro's on inflation -- euro's inflation comes up. only game in the town remains the only game in town. matt: but when you see china cut the reserve ratio, all this does for the market is signaled that it is thicker than you might
think. we like our morning. why? as david mentioned, beth .omstock of ge is here let's get you some first word news with vonnie quinn. cruz's warning tomorrow may be the republican'' last chance to stop donald trump. trump may be all but locking up the nomination tomorrow if he wins big in the tuesday races. he is urging voters to turn to conservative." trump picked up support from jeff sessions from alabama. a u.s. college students helped in north korea has confessed to what officials call a hostile act. he appeared at a news conference in pyongyang, accused of taking down a propaganda sign. all this is happening as the u.s. is threatening sanctions against north korea. after five nominations with no
award, leo dicaprio finally wins an academy award on his sixth nomination. he was awarded best actor for revenant." "the best picture went to "spotlight." global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i'm vonnie quinn. the markets now with matt. take a look at futures. down across the board was not huge losses. a stimulative move. markets typically like that kind of thing. asian markets were down and closed down overnight. if you look at asian futures, you can see them up across the board. he you can see the nikkei, the hang seng, and the footsie. and the ftse.
the dax is now down 1%. the cac down .2, and the f tse down .3 of 1%. if you take a look at my bloomberg. up rightart number 368 now. what this shows you is the headline inflation number coming negative, 0.2%. this is a core reading. i always think the core reading is the bear one because i have to agree with central bankers that energy prices are so transitive, i have seen them move so much in the last couple of years. but jon makes a point in his discussions with ecb members that they still like to look at the headline number, because even though when the oil price feel that muchot deflation in your pockets. when it rises, you start to feel
and think about as a consumer the inflation. those numbers are still important. let's look at the oil price and see what it is doing today. it is down but coming back up, so $32.73 a barrel. we were down to $32.30, so we are coming back up to unchanged. guilty stocks recover a little bit with oil. this is the longest streak we have seen in a year. obviously oil prices have gotten crushed, but the correlation is still strong. when they recover, the markets do as well. if you look at negative sentiment across industries, gold is poised to have the biggest monthly gains we have seen in four years. specifically because gold is there as a hedge. like things feels are going down, flood into that haven. upt: for the month it is
10%, the best month since 2012. year to date, it is up 17%, 18%. we are going to talk about these haven assets, off the charts, in 40 minutes. so does the, so do u.s. treasuries. night,e big story of the ofna reducing the amount capital that banks need to hold in reserve. another big move from china, enda curran is the chief economics expert from hong kong. the first thing i saw out with the headlines across the bloomberg was the timing, and not so much the g-20. but as tom aldrich points out, this is hot on the heels of one of the biggest months for credit growth in china. is that a story here? morning, jon. you are completely correct. this is both a significant prize and a significant move,
especially when you consider the amount of liquidity they have already pumped into the system. and in the near term this will add to credit growth in china, and that will help the economy .row in the short-term they have to wonder what picture, what signal this sends for confidence in china right now. it comes at a time when they are suffering from record capital outflows, largely because of downward pressure on the exchange rate. this will not help that cause. if anything, it will put further pressure on china's for exchange. they will have to spend money to prop up oil. in the near term, this is a bit of a sugar hit for the economy, but in the bigger picture, their problems going down the line. that is the balancing act that the pboc has going on here. david: you used exactly the right words. what signal is it sending? just 10 days ago that
they actually increase the reserve requirements to a lot the regional and smaller banks. on the outside world, i am confused about what signal they are sending. enda: if you listen closely, one of the points was that they do have the opportunity to reduce monetary policy if they needed. the problem is it came against sense from the g-20 that we should move away from monetary policy. to go to your point earlier, this aaa rate -- because of the amount of liquidity they pumped into the system, the market had to do that. they are now sort of injecting cash directly. we have had this sort of you turn by the pboc. what people are thinking about the direction of the pboc. there are competing signals of the time that china is trying to get a message out at the g-20. stephanie: there seem to be two
schools of thought here -- be patient with china, or this patient is really sick. beth: if you look at china, they are a very patient economy as well. they are trying to do a lot. for a company like ge, we believe in china. growth is not quite what we wanted to be, but it is still growing. certainly in the kind of industries we see, big infrastructure industries, think of what is happening with the energy economy in china. health care. continue to invest in these infrastructure plays, and the consumers are adapting. that is one of the things we are seeing, is the adaptation. tell us muchs about the underlying economy in china, and is it a net stimulus anyway? typically last year we saw the triple arc cut with headline rates as well.
supply credit and reducing the cost of credit. thecut the rrr and lead other two this morning? enda: they cannot relate cut interest-rate tout right -- they cannot really cut interest rates out right now. it's sterilized as their offset, the money pouring out of the -- it's sterilized as their offset, the money pouring out right now. sterilizes their offset, the money pouring out right now. we have not had any of the big indicators on the key parts of the economy yet. they will come out in the coming weeks. we have had some private readings on the business conditions and confidence. they have all disappointed. the movement has not gotten off to a good start. when you see policy make a move like this, it suggests they are not especially confident either that the economy has turned the
corner. that is probably the key message tonight, that it is a cautious move and is the step they had to take. stephanie: thank you. enda curran joining us from bloomberg hong kong. let's take a turn to the u.s. economy. over the weekend, warren buffett rejected pessimism over how the economy is doing. in his annual letter to berkshire's hathaway -- berkshire hathaway shareholders, he wrote -- stephanie: beth, do you agree with warren buffett here? two weeks ago, howard marks said the economy is not that bad. donald trump and --
beth: it is a little more sluggish than we would like, but it is not a disaster. i think consumer sentiment continues to be high. i worry sometimes, as someone who loves markets and looks at the behavior of the way people work, i think the behavioral aspects here are worrisome. if you start to say gloom and doom, you worry that people might react instead of seeing what is really happening. david: the u.s. economy seems to be one of the bright spots worldwide. what about emerging markets in other places? beth: i think if you are a global company, you get used to volatility. if you do not like volatility, you should not be a global company. i can point you to india, where things are going pretty well, after people hoping for a while that they would. then you have to come down and come up, and that is what a globalist has to understand. the headline data is
strong. u.s. gdp up, payroll solid for a number of months and years. but a fundamental question remains. can the u.s. economy decouple from the rest of the world? the boj is easing, the ecb is easing. the pboc is easing. it leaves the federal reserve standing alone. can it decouple? is hard to say how, in a global world, we do not feel something. we have to feel something. there are things the government is doing. we have seen this great consumer confidence. jon: beth is going to stay with us. stay with "bloomberg ." bad news for mario draghi this morning with consumer prices staying negative. more on that next. ♪
vonnie: i am vonnie quinn. delayt pharmaceuticals is releasing fourth quarter results. the drugmaker has been questioned about its business practices, strategy, and accounting. is returningearson after a two-month medical leave. three former executives of tokyo electric power have been indicted for the fukushima power plant disaster. one of those is charged with professional negligence, the chairman. it is a vote of confidence in alibaba's stock buyback. are ma and joseph tsai putting in their own money to buy bankshares.
20% in the fallen last year, now trading below its ipo price. big week for data, book ended by payroll on friday. and this morning, euro's own inflation data, painting a grim picture for the eurozone. falling belowrate a previous reading of just below 0.3% in january. i want to go to frankfurt, where paul golden is standing by. you look at this number out this morning, at -0.2%. ecb officials have been careful not to repeat and build up expectations too high. but the data is speaking for itself this morning, isn't it? >> it is very bad news. there is no easy way of reading it. it is negative inflation, so prices falling again. core inflation, 0.7%. for the headline is just under 2%. it has not been there for three years.
not a strong reading either. inflation expectations here are the real concern, and these numbers will feed into those. they are all down at record lows. it suggests the impetus for stimulus is building up. and theyleave the g-20 say that monetary policy is not the only game in town. just based on where we are right now with a rate of -.3%, what are the base case expectations for next week, going into the ecb meeting? >> investors are pricing in another cut in the deposit rate, at least 10 basis points to -0.4%. whether it might be increasing billion or 80 billion euros.
it is likely to be addressed in mario draghi's press conference. the e.u. expanded to corporate bonds, going through equities. what do you do? the most central bankers would agree, they cannot resolve a problem by themselves. governments do need to play their part, and mario draghi will reiterate that again strongly. of .43%.deposit rate that you can only buy debt with yield above that. the german curve -- they want to increase -- paul: i think it will be debated. it will be hard to know whether they will change. you cut the deposit rate or you will see bond yields fall anyway. it may be that many of them fall out of the loop once again. therefore, some kind of a tweak would make sense. it needs to be open to accusations of fiddling with its own rules, perhaps even monetary financing.
it does not want to go down, but it has to find a solution here. thank you for joining us this morning. a big meeting coming up, stephanie. stephanie: a big night in the u.s. the night people recognize achievements in the film industry. "the big short," based on michael lewis' book, won for best picture and screenplay. the director took a big shot -- stephanie: guess what, mr. mckay. there are no big billionaires financing the movie industry. next, how ge is shipping itself as technology involves. stay with us. you are watching ♪ "bloomberg
stephanie: tribune media is announcing they may be exploring options. it is a time where buybacks, innovation, possible sales are needed from many companies. that takes us to -- david: a very troubled company. stephanie: without a doubt. guess who is here with us -- ge vice chair beth comstock. a perfect conversation. toe we are in a very slow know growth environment or ge has been around for over 100 years. in terms of innovation and growing, how do you do it in a you have this? beth: to plan for it. it is a slow to know growth world. stocks, to rein in your
continue to plant seeds. we are looking at the digitization of industry. that is our future, our now, our tomorrow, and it could not come fast enough because some of the things you are talking about are exactly what the digitization of industry is going after. it is unlocking productivity. a lot of people talk about how the internet is great but it has not unlocked the productivity we sought. the time is now. stephanie: y? in terms of innovation, when we think ge and the lightbulb, not much has happened since thomas edison. two weeks ago, bill gates said we need to innovate much faster and much more. what is the holdup back out -- what is the holdup? a tough industry right now in a tough neighborhood with oil prices, but the innovation that has happened -- if anything, i bet this industry will come out more
innovative because they have had tough constraints. it has had to figure out how to make things work and keep at it and that is one of the lessons are you cannot stop innovating just because things slow down. david: i wonder how you turn around a company like that. you have thousands of software -- how different is the culture, the management of a software engineer as opposed to a manufacturing engineer? beth: from your experience, you do not say now you are going to change and everybody listens to you. you have to have the skills, you have to hire thousands of software engineers, scientists. we unveiled last year something generalreat it for availability. it is an industrial internet cloud for industrial applications brazil the fact that people can go and build their own applications -- you mentioned a lightbulb. it simply hasn't changed, but what is happening now with led's is you are -- what you're
looking at in the ceiling is now a minicomputer. david: can you compete with the silicon valley in hiring software engineers? beth: we are. the same skills apply. we did not know if we could do this. we showed up in silicon valley and said we are here. what am i supposed to do with that? you start to connect the dots. you want to help save the environment. that is what we are doing. we are putting data and analytics on jet engines to reduce the energy and emissions. those are the kinds of applications that are long ranging, our mission-based, and it is the same skills. we are talking an average jet engine -- one engine has something like a terabyte of data in an average flight. imagine if you are operating a fleet. if you are a data walk and you love data and are analyzing it, this is data heaven. stephanie: here is the fear.
sustainability -- you feel like the energy industry could come out ahead. how will that happen if energy goes down? with oil prices down, you will see a massive amount of defaults this year. what of sustainability goes by the wayside with companies that survive? beth: investing in sustainability has an ecological impact and economical. if we had not invested in wind in the last decade, we would not have the robust wind business that we have now. one of the things i am most excited about is storage. people are not sure it is going to happen, but it did. david: ge rice chair beth comstock. -- ge vice chair beth comstock. "bloomberg ." ♪
like china is a bit sicker then they predicted. we are feeling like we are in the green. beth comstock is still with us. tom keene is fresh off surveillance radio. bit ofet you a little first word news before we dig into the must read. vonnie: bernie sanders is far behind hillary clinton in nine of the 11 states that hold primaries or caucuses tomorrow, so he is focusing on states farther down the road with a higher proportion of white voters. russia says the cease-fire in syria is still in effect despite reports of violations on both sides. russian warplanes resumed attacks on the second day of the cease-fire. rebel forces resumed
antiaircraft fire, as well. demolition teams are about to start tearing down a squalid migrant camp in calais, france. several thousand migrants have been living there while they try to sneak across the english channel by ferry or the euro tunnel train. bloomberg news, 24 hours per day. i'm vonnie quinn. david: tom, you've brought your must-read. it is one of our favorites. it is from our colleague al hunt. tom: i'm going down to washington tomorrow. bring it up right now. the anger is more comparable among the gop, who assured in big congressional majorities for the party, expected to end the affordable care act, reduce the size of national government, cut taxes, and bolster national
security. none of it happened. what is so interesting to me particularly off of the clinton trouncing is that whatever happens with the gop, there is always that shift in the middle. i can't figure out the method to shift the party. strikes me is anger. mr. trump and others are tapping into anger. there are reports coming out now that suggest that trump, if he were the nominee, would appeal to some of the more conservative democrats. tom: i don't know. i'm trying to stay away from the horse race. i think there are 47 networks covering the horse race. i'm interested in the history of this going back to 1964. we have never seen this. what i don't understand is the of shift to
moderation. where is the mechanism? stephanie: what does the u.s. economy and what does the u.s. consumer actually feel? beth, when we have these candidates making us feel like we are in a disastrous situation and warren buffett is saying this is the greatest time to be alive, what do you really see in the economy? beth: it is slower than we would like, but we still see an economy we can believe in. in the u.s., there could be a lot more investment in infrastructure. people need jobs. those are the kind of things were companies play an important role. what does the u.s. economy and what does the u.s. consumer actually feel? beth, when we have these candidates making us feel like we are in a disastrousstephanies hate on companies right, left, and center. beth: but where are the jobs going to come from? david: donald trump is not an ideologue of the right. he is not very goldwater or ted cruz. he has positions on both sides of the aisle. warren buffett thinks he agrees with his tax policy and warren buffett is no conservative. sessionske what jeff
said in his endorsement. i'm fascinated how companies adapt to the cacophony we are in right now politically. do you just freeze? lt freezing? beth: i think he just keeps going. you have to focus on your customers, you have to know where your markets are going. you have to listen, but you can't let it stop you. you have to keep doing what you do. built things, invest in things. the point is that we have just had an irish election. tom: some of that election. jon: you have multitier record low yields. you have had a fiscal adjustment, a really big squeeze . you don't have an outright majority.
we sit here and say the s&p 500 has done ok. u.s. gdp has been revised tire. but what is unemployment doing? what is happening with wages? a lot of people are not feeling the recovery. stephanie: do we blame it on central banks? central banks have the markets feeling like everything is ok. we thought greece was on the brink of disaster. suddenly, bondholders think we are ok. if you walk the streets of athens, the immigrant crisis has them in a disastrous scenario. monetary policy is a blunt tool. it can only do so much. janet yellen was asked about this kind of thing. there was nothing she can do about the structural issues facing the u.s. economy.
she does not have the power to make this an equitable economic cycle. >> they have to leave it to other policymakers to even out that distribution. to tom's point, i think we need to look back to nixon's silent majority or the reagan era. donald trump is not purely a republican. look at his support in rust belt state. there will be some crossover appeal, even if he does not move to the left any big degree. tpp, forhet example. the average workers at the deals andok at trade they know jobs are being shipped overseas. that is why hillary has come out against the tpp. stephanie: maybe that is because they don't understand what tpp represents. president obama, at nike,
presented nine months ago. carl: he did not present it in detroit, for example. there was good reason for that. david: that does come back to al hunt's must-read. people do not know what will work, but they know what won't work. i think that makes life difficult. we are going to get to economic data that may clarify this. carl: a busy week. the main focal point is the jobs report on friday. the drumbeat up to that report. we have the manufacturing isn coming out tuesday. we have the advanced read on the unemployment report from the adp payroll survey. it is going to be all about jobs . there was a moment of reflection happening in the economy right now. we had this lousy start to the year. maybe the u.s. economy can muddle through. up, hisyment gains hold
household income holds up, therefore consumer spending will hold up. this is the big question mark. if we downshift further, then there is a real question mark. as long as consumers can spend, then we can continue. tom: after the best supporting actress won last night, then i got to a point when i could almost refocus. then i could focus on the ge commercials. it is a quality, fully-benefited job working for ms. comstock and the rest of the team. are we creating good jobs like the ge ads? questionre is a good -- big question about the quality of jobs being created. if you look at the unemployment rate by educational status, it gives us a good proxy for the jobs being created.
is unemployment rate extremely low for folks with a college degree or more. in every cycle, there are both good and bad -- i shouldn't say that, good and lesser good jobs being created. stephanie: help us understand this narrative and the importance of corporate america. when mitt romney said corporations are people, he got filleted. are youd of jobs creating and should we be looking more kindly on corporate america? we talked about the digital kinds of jobs. there are also jobs going on in manufacturing. under a major transformation. 3-d technology is offering -- group ofin a whole new jobs. in north carolina, we put in advance carbon fiber plants. stephanie: how hard is it to
create those jobs in the u.s. though? beth: there are great capabilities in the u.s. some of our most sophisticated manufacturing jobs are in the u.s. in ohio.aviation incredibly sophisticated. jon: what does this mean for the federal reserve? payrolls or read a consensus forecast. consensus forecast. where is the emphasis? the fed has to be very sensitive of the strength in the currency. the jobs will not be created if the dollar is on a tear. jobs are being created, consumers are spending, so the fed can be tightening policy in little bit more later this year. i suspect two rate increases. the market is starting to reevaluate that. december is now starting to come
back into play. stephanie: two weeks ago, some people were saying we may be easing. carl: they need to refocus on the consumer. david: i want to come back to tom's important point about the nature of jobs and benefits. as you go into silicon valley and you are competing with companies who don't have to provide benefits, how can you afford to have fully loaded employees in the traditional way? beth: you have to be able to offer what employees need. how you remain competitive. it is not just the benefits, it is the quality of work. david: but it is more expensive for you. beth: it is what companies like ours do. carl: what i hear his economic security. stephanie: shareholders have so much more demand on you than on your silicon valley brethren. they don't give you the latitude of not worrying about profit. beth: as you see those companies scale up and grow up, they are having to face into those costs.
[laughter] we are looking at the share of money spent on either everything else or food or .nergy back in 1960 when tom was playing hockey in rochester, he spent 73% on everything else. everything else, has it gotten more expensive? or is it because food and gas of gotten so much cheaper? carl: there are two things happening here. think of what the average household looked like in 1973 versus today. the gadgets and the widgets in the household are very different.
coach is up more than 40% over the last year. when retailers and luxury brands of gotten smoked because of international issues, what are you doing right that no one else seems to be? >> we have become very focused on transforming our business over the last three years. as of the retailers and other goods companies have hit some of the dynamics and the changing market today, we had already begun positioning our business over the last several years. stephanie: how specifically? what are you selling that we want to buy? i'm looking for your hand back and i don't see it. stephanie: we don't keep it on set. jide: we are focused on really .nnovation we have a new designer who has
been really terrific. the consumer today is very focused on product. we have been quite focused on the environment. the store environment, the online environment, the shopping environment. the third is marketing and positioning our product. it is a lot about authenticity and about the product is that you are bringing to your consumer. stephanie: what were you doing wrong before? why did it need a transformation? jide: what we were doing before, which we were not alone in, was aat we were driving or riding single brand, a single product, a single brand too hard. we put too much in terms of growth expectation on a single brand and we have stepped back from that. we took a lot of difficult decisions in terms of bringing the business back, reinventing aspects of the business, and being very focused on the core brand.
stephanie: you bought stuart weitzman. that is not the core brand. jide: it is a wonderful business. it is in line with our product. it has a very authentic brand proposition and it is a very clean brand. it is positioned at a level that aspire to.sumer can david: how much of your success has been driven by the u.s. economy and how much overseas? our business is about two thirds u.s. and north america. one third overseas. a lot of the growth is coming from overseas in both china and some other geographies. a lot of the growth is also coming from product, such as mens, which has grown substantially. we have ample growth beyond that. stephanie: do you have a view on china? many people are concerned that
things simply aren't selling and inventories are piling. jide: you would have seen our ceo after our last earnings announcement, who talked about how we have seen double-digit growth in china. driven byly distribution, but also continued to be driven by comp store growth. china continues to be our most substantial market other than north america. what you need to do when you think about china is not solely focus on mainland, you need to focus on the chinese tourist, and follow her to europe, to japan, with the week yen -- weak yen being a real attractive proposition. stephanie: do you reap the benefits that your price point is not true luxury? pointuper high-end price may be out of reach well the
economy slows, but you are on the aspirational level. jide: we would like to believe that our product is truly luxury, but that our price points are much more accessible, absolutely. to bellows for it accessible to a broader swath of consumers, while much more consistent with where the millennial consumer is going today, which is value. they are getting the quality -- in fact, arguably better quality than some of the traditional luxury houses -- but at a price that is much more representative. stephanie: there is value and values. values seem to be so important to the millennial customer, but also important to you. can you speak to that? jide: let's talk about the millennial consumer. she is still buying. despite a lot of the histrionics about is the consumer, u.s. consumer, still buying, she is
still buying. even though the dollars are more modest in terms of growth, the volume is substantial, in terms of growth. her focus is very much on, she wants authenticity. she wants a brand that stands for something, that is not simply famous for being famous. , if she finds that brands that is consistent with her values at a price where she feels she is getting a good value for her price, there is real interest. david: you talk about values. you came here, if she to talk as group of ceos you represent. jide: that's correct. david: give us a short talk on that. jide: i have a meeting on that along with 50 other ceos and , 100s of 200 corporations 50 ceos, although 50 will be there today for a closed-door discussion talking about how business can impact society and can invest in society and how that is good for society and it is good for business. stephanie: what is the name of
the organization? jide: it was founded by paul newman 16 years ago in collaboration with a number of other ceos. stephanie: you should invite some of those presidential candidates who think big business does not do good things. jide: they should have read warren buffett's letter this weekend. david: thanks very much. next, we are going to take a look at the month in review with matt miller in "off the charts." ♪
down for the month of february. the stoxx 600 was down not a little bit. take a look at the stoxx 600 here. look at the gr our function and take a look at how the industry stuff did. the only winner of the month was basic resources. we have been hearing very bad news. , they have been the out performers and were the big losers of last year. jon: that is the big story coming into 2016. for me, the banks. aboutwas so much optimism the banks and you can flip that on its head. the bank stocks are down 5.9%. matt: u.s. banks also have a very weak february.
there is a chart that bloomberg news made today or last night that shows you just how aggressively gold-backed etf's have done. if we can pull that chart. 369. that gold-backed etf's have done incredibly well compared to the all world index. jon: the assets already 2014 hi. -- high. matt miller, thank you very much. "bloomberg " continues in the next hour. ♪
ceo returns from leave. company will delay relaying fourth-quarter results. a warm welcome to the second hour of "bloomberg ." i'm jonathan ferro. david westin and stephanie ruhle are my colleagues. stephanie: we are focused on china. will we see policy action like this that signals to the market that things could be getting worse. that is not what the market wants to hear. we are in leap year mode. people want to have a great end to their month. they want to window dress their books. focusing on aalso conference call that has been
postponed by valeant. stephanie: the ceo has been out for two months and is back from a medical leave and he is saying, we are going to hold off . won a: moderates have majority in iran's parliament. ae prime minister needs majority to push through reforms. the money keeps pouring in for bernie sanders. sanders raised on a million dollars in january. hillary clinton picked up almost $15 million. the leading republican fundraiser for january was ted cruz. north korea says a u.s. college student officially confessed to a "hostile act."
he is accused of taking down a propaganda sign. the u.s. is threatening more sanctions against north korea. bloomberg news, 24 hours per day. i'm vonnie quinn. a look starting with european markets right now. we see a real recovery here. 1.5%.t had been off the dax is down. i sent p futures are down -- s&p futures are down. nasdaq futures are down about 0.3%. take a look at the intraday chart. you can see the recovery of s&p 500 futures. the same is true for oil. oil has come back up. nymex crude is trading at a gain
of $.13 per barrel. gold futures are still up, even if the trade ships from a more risk-off trade. you still see a gain in gold right now. down as people buy bonds, but only down by one basis point. here, you see gold futures for the month. it has been incredibly strong month for gold. up 10%, the best month since january of 2012. that shows you that it has really been a risk off month. people are looking for a safe haven in things like gold. people pile into gold when they are scared. they are cutting the amount of cash the nation's lenders must lock away. enda's life in hong
kong with the latest. >> a surprise move by the central bank to cut the ratio, the amount of reserves the bank must keep on hold. the move will be seen as a confidence booster. it is seen as a positive. the central bank gets more bang for its buck. it may help accelerate capital outflows. this move by the central bank of china is quite a surprise, at least the timing of it, and it is going to demonstrate the china has to carry out to stoke growth and an easing up of policy too much could pressure the exchange rate. in hongre is enda
kong. dale, big story of the last couple of months has been chinese companies acquiring foreign companies. would you expect to see more of that? dale: we do. there has been a significant uptick of outflow of capital from china buying companies from all over the world. what has been different about what is happening is that historically there was a lot of asianment in other economies. chinese companies are beginning to invest in europe. the nature of the things they are buying is quite different. it is not just mining companies, it is no minerals, financial services, it is a very robust diversification. david: movie theaters and production companies in hollywood. dale: i think the news we just heard what encourage you as a capital holder in china and in looking for places to invest to deliver a strong return and i think my currency is going to be
weaker in the future, i will be looking externally. stephanie: isn't that a negative on china? if we are feeling more concerned about the chinese economy and chinese companies are not spending their, what happens? dale: in terms of m&a, we are going to continue to see a situation where there is large growth in outbound m&a for europe and the u.s. and lots more diversification. david: mergers and acquisitions around the world. 2015 was a record year after a robust 2014. how is it looking now? is the market news affecting m&a? dale: fundamental drivers of a great m&a market still exist today. we are looking where organic growth is going to come from and uncertaintyot of about that. we are in a situation where there is an overabundance of capital. if there is uncertainty, if we
are thinking in vain about destabilizing factors that could take us out of the momentum we are feeling, there are a couple. risk spreads are rising. stephanie: what does that mean? dale: there is some distress for u.s. high-yield energy sector debt. [laughter] stephanie: yeah. dale: if you pay close attention, it is still a tale of two markets. high-yield energy debt is expensive. non-energy debt is not. there is a technical set of events where that risk that spread, but that is just something we are keeping an ion. -- eye on. stephanie: do you yield -- leave the high energy yield sector for dead? what do you do about the energy which, a year ago, was
30% of the high-yield debt market? dale: that is a great question. [laughter] dale: that is a very distressed place right now. stephanie: if i'm carl icahn and i have big positions in chesapeake freeport, what do you do if oil prices are going down? dale: again, i don't think there is an easy answer for that. which, a year ago, was 30% of the high-yield debt market? this is a sectoral challenge for with their -- which there is no easy answer. david: you say the conditions are continuing, but it depend use -- depends on where the price is. of twoou know, we are minds about valuation. valuations are high. that is a pretty safe thing to say. most economists would tell you the same thing. however, the valuations themselves are tied very closely to the availability of capital.
there is still a massive amount of dry powder on balance sheets in the form of cash sitting on organizations' balance sheets. that has the potential to continue to drive value or drive m&a. what i think is missing from this discussion is the implication of that in terms of the complexity of deals that are happening in environment where valuations are high. what matters to your business is really investment-grade. if you strip out that, issuance is down 12%. there is a fantastic story on ig issuance. is that becoming a problem? that thet we see is cost is sort of the cost of debt or capital that will more closely reflect the underlying risk of the asset -- stephanie: that is a positive. dale: absolutely.
it is more of a correction so that it depends on the more particular deal that is being done and the risk presented by that particular deal. stephanie: if the fed raises rates, what does it mean? ale: i think the fed is doing pretty good job of signaling right now what their intentions are. i think that is the most important thing. if there is one thing that destabilizes the m&a market is that -- when there is not a lot of visibility. will sit at that corner of the table and they will say it 25-basis point move is not going to change my mind about whether i acquire a company. does the fx market start to frontload acquisitions from china? i could see a scenario where, if i believe that my currency is going to be weaker in the future, if i believe that an acquisition is going to be more sensitive for me in the
future, that i would begin to act more aggressively. david: with currency fluctuations, are those problems for you in m&a? mexican companies, are they cheap right now? dale: i think this comes down to visibility. i think about this and microeconomic terms. ofhink about this in terms an m&a analyst at a big company doing a deal and they are putting their spreadsheet together to define the value of the company -- i need to have good visibility into the critical elements that define the value. if i have good visibility and good insight into the next 18 months, then we can negotiate. so long as we both have visibility into the next 12 months. stephanie: what i don't understand is that when you look into market participants, the reason they have been sitting in cash increasingly all your long is the lack of visibility. they cannot figure out if we are heading right or left. why the you think there is so much visibility? dale: i have to debate the premise. trillion of deal
activity that happened last year. for the end of the deal, we were beginning to see some of the end of the stability. stephanie: and there are no ipo's happening this year? dale: that is true. however, there are still some relatively large deals that have been announced in the first part of this year. deal is one versa the top of the mind for folks. activity is concerning. jon: coming up, what is the big deal with honeywell's 100 a dollar per share bid for united technologies? will it change the balance of power? we are one hour and 15 minutes per day of the opening bell. negative margins down. all of this despite a rate cut. let's take a look at the board very quickly. the china enterprises index is
the company says it will review the offer. iseant pharmaceuticals withdrawing its financial forecast and will delay releasing fourth-quarter results. ceo michael pearson returns after a two-month medical leave. david: thanks so much. deal?"r "what's the big with jeff mccracken. dale stafford is still with us. jeff, you are going to talk about honeywell. jeff: there has been a lot of back-and-forth. it is the deal that probably won't happen. utx is kindnd of -- of burned the bridge with their concerns about regulatory issues. that has already signaled that there are a lot of things to take a look at. david cody at honeywell really wants to get this deal done, but
it looks like utx has decided .here are regulatory issues david: he claims that it is going to be a good deal on its face. is there an issue about who is going to run it? jeff: in 2000, these companies discussed doing a deal. ax approached honeywell about deal. in september, honeywell said, let's do a deal, but we will be the buyer, not you. i think there is definitely some ego going on. stephanie: the fact that there is ego going on makes me think it is not a regulatory can turn. [laughter] stephanie: baloney. have three law firms that say there are regulatory issues. matt: the ceo has been selling a
lot of stock before this bid. if you go to the hds page, you can see all of the holders. you can see not only their holdings, in green, but also the share price. we know there is only one reason to buy stock, but there could be a million reasons to sell. hasne knows why, but he reduced his stake in the last two quarters from over one million shares to 350,000. i think it is an interesting development. jon: not an insignificant amount, either. matt: he still has a fair amount of shares. stephanie: again, we don't know why he is selling. right around this time last year, he also sold a significant amount. we can't really dig into that. last twor the quarters, he has sold about two thirds of one million shares and he is still sitting on a third of a million. jeff: which reminds me about a big health deal.
i can't speak to the specifics, but there was a similar massive, of a multibillion-dollar deal, where there were lots of regulatory issues, lots of concerns still unfolding and a very similar situation where the leaders were sorting out who was going to be the leader. target,ut if you are a you've got to be careful about announcing that there are regulatory problems. it is almost like a poisoned dart. dale: right. david: the first exhibit in the lawsuit is going to be what you said. >> and not just about this deal. u iftx does a deal down the road -- if utx does the deal down the road -- and maybe that is the decision. stephanie: that means we can be the boss.
>> i always put myself in the ceo's position, the buyer's position in this situation. if i'm the leader of honeywell, what other options do i have to create $3 billion of value in synergies? what other value options do i have? stephanie: we have to leave it there. what a great conversation. staffordacken and dale , you are staying with us. next, we are going to break down the trending stories on bloomberg and we are taking a quick shot at markets. futures are in the green. ♪ in focus. for futures let's talk about what is going on with gold prices. climbing this morning. gold is that it's for its -- headed for its biggest monthly gain. this is the year's best-performing major asset. here to discuss gold's next stop is bill baruch. bill, what do you think about this? is this purely a fear trade. is this just a haven asset?
ill: there is a fear trade here and a safe haven bid. yields around the world are plunging and central-bank confidence is plunging. this is not only the safe haven bid. we have seen this chart on a technical basis becoming very constructive. the pattern we are seeing, the market does seem like it wants to go higher. i do think we will make a move to 1300 as early as the next couple weeks. the one thing over the past week -- evenhave really seen though the s&p has moves 9% from in lows, we have seen data the united states come out, durable goods. headline gdp moved up. gold has held up very well. this week is going to be huge as
we look at jobs and data. we will have a clearer picture at the end of the week about what to look for from gold in the near term. matt: thank you very much for that. bill baruch joining us from the cme. stephanie: now let's take a look at the top trending stories from bloomberg. no surprise across the board. china, oscars, a little super tuesday hitting the top five. i want to hit super tuesday. john, i'm going to lead with mine. super tuesday -- it appears donald trump is unstoppable. hp ceo meg whitman said chris christie's support of donald trump's political opportunism. many people have come out swinging. i want to turn to you because mitt romney, someone you know very well -- >> and meg whitman was a colleague, as well. stephanie: give me what mitt
romney's platform was. how is it that donald trump has been able to pivot and use it as a strong suit? he called mitt romney a loser last week. [laughter] i'm not a politician and certainly not a political analyst, but i think a lot of people are attracted to the confidence of donald trump. i think there is something really fewer and special and he has tapped into something unique. stephanie: what about is a businessman? dale: i think about the ways in which this could affect m&a. i think about the ways in which this might affect regulatory posture about some of the large dealsi that have slowed down or stumbled in the last couple of years. staples and office depot did not happen. the ge, electrolux deal did not happen. david: it sounds like you are liking donald trump. dale: i like for m&a, an environment where companies feel
confident and have visibility as to whether or not their deal is going to get done. david: especially as you see people going from, this is ridiculous to, i could live with this. stephanie: crazy point. david: even with the republican traditional establishment right now, people are saying, can we stop him or do we need to get on the bandwagon? you have chris christie and various people stepping up. gainhis social policies all the headlines, but the policies, a lot of businessmen say it is sensible. do you like what you are hearing from the democrats on fiscal policy? dale: going back to your previous question on donald trump, i'm not exactly sure what his fiscal policy is. i don't feel it there is a lot of clarity about what he stands for. i think we can all agree that in terms of the clarity of his platform, it is pretty vague, at this point. jon: let's look at this -- in
versions. we know donald trump would cut -- rateorate tax break to bring the company's home. hillary clinton would want to stop the inversions. oryou hire the barriers lower the barriers to bring the money home? dale: i live in washington dc and i have a lot of folks in my social circle who work around the hill, so this is a topic that we talk about quite a bit. there are a lot of liberal and conservative ends that could be served by the corporate tax codes. it does not have to be a political issue. it exposes the fundamental breakdown of the process. ,hen companies do in versions there are strong incentives for them to do it. it makes sense to do them. david: sure. i think everyone is for
corporate tax reform. do you do it by itself or does it have to be part of a bigger deal that includes personal tax reform? dale: my personal experiences that monumental changes on the order of the affordable care act come once every 25 years. jon: thank you very much for joining us. coming up, the pre-market movers and a breakdown of the market, just over 60 minutes away from the new york open. futures are slightly negative. ♪
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tomorrow maybe the republicans last chance to stop donald trump. lockoutrump may all the the presidential -- lock up the presidential nomination if he does well on super tuesday. in baghdad, back-to-back suicide bombings killed at least 73 people. islamic state claimed responsibility. the attacks occurred in the shiite muslim part of baghdad. teams have started tearing down a squalid migrant camp in calais, france. several thousand migrants have been living there whether try to cross the english channel by ferry or english tunnel train. bloomberg news, power 24 hours per day. markets now with matt. matt: thank you very much.
markets are getting closer and closer to unchanged. are only off one point. dow futures are only off 16. take a look at what we have .onth to date leap day is the last day of february. the s&p 500 actually looking at a year to date or month to date again, i should say. 0.4%. oil is still off for the month of february. it is only off about 2.3%. this is the fourth straight drop for oil in the month. it has been a rough slew of months. it is the worst string of losses
we have seen in a year. gold is on pace for its best gain since january 2012. gold is up $10. bill baruch said he thinks we could hit 1300 in the next couple of months. let's take a look at the 10 year. since it has been a month for haven assets. it has been a rough slew of months. itthe 10 year yield has dropped7 basis points down to 1.75. people have been buying into u.s. debt. volatility and central-bank actions swoop in around the world. it is a gain two months in a row. january was a rough month. 2014has not happened since , back-to-back monthly gains for u.s. treasuries. going aroundout the world. optimism regarding the future price of oil has given emerging markets some relief. we discussed that in our morning meeting with bank of america 's alberto.ch' let me ask you about your reaction to chinese, the rrr in
china. alberto: it is a bit of a surprise. a month ago, they came out saying that they expected no additional rrr cut because of concerns on the impact that would have on the currency. this sort of signals that they are more confident in their ability to stabilize the exchange rate. that it isesting happening only a few days before the opening of the national people's congress in china. it is sending a signal about the willingness of the central bank to use countercyclical policies to support growth. we actually expect more of that coming from the npc, quite likely an increase in targets for money supply growth and an increase in the fiscal deficit target to 3% of gdp this year from 2.3% last year. it looks like all of the authority providing support to
the economy and to markets. does it change your outlook for investing? alberto: we still see a tendency depreciate.inbi to we see the currency closing weaker this year. we other think -- we also think other currencies will weaken. david: how do you see other --matt: how do you see other emerging markets? otherwise, you think we are in good shape area over to -- in good shape. alberto: i think we have be specific about what good shape means. there are two views. one view says emerging markets are going into a major crisis
with debt servicing problems and increased support from the imf. that would have happened in the 1990's. it is a painful adjustment. eventually, emerging markets will benefit from the weakening exchange rates. currencies have dropped to levels very similar to 2002. eventually, that is going to exports andort to growth. we still see a difficult year in 2016, probably with the second have been better than the first half. but we don't see a generalized crisis in the emerging markets. matt: you are still looking at about 4.2% growth. it is not phenomenal historically. exactly. we are seeing 3% growth ex -china. it also makes sense to strip out china from the average because there are so many questions
about the chinese gdp number, as you know. we are seeing 3% growth. if you go back to the 1990's, we had a crisis every couple of years. if you vote -- go back to the 1980's, it was the lost decade for yen. about on average was 3.3%. 3% this year is pretty mediocre and that is up from about 2.6% last year, which was very weak. matt: thank you very much for your time. the cohead of global economic research at bank of america merrill lynch. awaywe are just an hour from the open in new york city. stocks to watch. valeant is down 5% in the premarket. there it is on the screen. 5.15%. people don't like it when you can't provide them in the numbers from the previous years. they hate it when you take away
guidance. stephanie: exactly. ceo.pearson is back as the the business model is an monday. m&a. how do they stay in the m&a game? >> i don't think they do. 50 deals. tens of billions of dollars worth. they have said, we've got to slow that down. they are going to be heading into cash flow issues. we don't know if they are going to be able to pay down that debt. stephanie: may i share the iron he? if they don't have the -- irony? , theyy don't have m&a
have to be reliant on sales of drugs. what is the best drug? and here it of a bowel syndrome drug. [laughter] >> the got to get to the bottom get past item and somehow. is the problem worse than we think it is? >> i think one of the things people are really concerned about is that mike pearson is coming back, but there is this ongoing board investigation by this committee they set up to say, what led to all of these problems? stephanie: the guy running the company is tangled within them. >> have we found every last skeleton in the closet? and he is coming back before they have wrapped up the investigation. there is the potential for it to be, he's back and then he is in trouble. stephanie: if your business model is in m&a and you are through the kind of
branding -- if you're are going through the kind of reputational slaughter that they are, what could their m&a outlook be? this particular company, i'm to talk about specifics, but let me talk about a theme. and m&a strategy without focus is not a particularly good strategy. it is not a great strategy to go out and buy things. we talked about category leadership in pharma last time. bringjective is to together a category of assets to lead a category -- that makes a lot of sense to me. stephanie: brent saunders has had a lot of success in that way. dale: when you do a massive number of deals that don't belong together strategically, then what when you take costs out? david: it is that winston churchill line.
--is putting has no theme." "this pudding has no theme." [laughter] royal caribbean had a second cruise liner hit a storm. there was also an ap exact on board who was tweeting or reporting about the fact that the nora virus had been on the rise on the ship, as well. [laughter] stephanie: hold on. take this specific ship out of the mix. two weeks ago, the cruise industry is worried about a tourism slowdown. it is not just this one off ship for a couple of weeks. carnival says they are making a big investment. and the market hated it. matt: i was just trying to graph on the bloomberg a chart of half of your cruise ships launched versus global warming. it seems to me there are more
and more incidents at sea with this and clement, volatile weather. also take a look at lumber liquidators. we have been talking about this the last couple of months. u.s. regulators found much formaldehyde in the wood. lumber the flooring liquidators are selling. lumber liquidators posted a fourth-quarter loss. sales missed estimates by a mile. they are saying they cannot give any guidance for 2016. stephanie: with sales down 14%, even if the cdc pulls back, with so many options out there, are you going to get customers in the door? does not seem to be the case. the ceo is also sick. they have some leadership issues. matt: all right. those are some of the movers we are looking at. jon: too much uncertainty to provide a forecast. it is a little bit of a theme. stephanie: on what would still
you have a very important interview. francine: we do, david. we are going to talk about policy.central bank for more on china, we have mark mobius, the executive chairman of the investing group. great to have you on the program. day to moveresting on reserve ratios. should we be worried about industrial production slowing too much in china? mark: it is a natural development. if you look at the numbers, the and service part of the economy is the one that is growing. this development of the slowing industrial index for example is something that we can expect will continue to go forward. francine: are you convinced by the messaging china has done ane economy is the one that is growing. and will they actually have to put a lot more stimulus? mark: i think they are going to
have to put stimulus. you have a situation in emerging market where there has been a slowdown. they want to stimulate their economy. the biggest markets are in that part of the world. francine: do you believe them when they say they will not devalue the yuan? mark: they are looking at a basket of currencies. you see a steady move against u.s. dollar downward. francine: do you believe that china has improved its communication? mark: i believe china is relatively open now.
it is difficult to understand china's command from the top. the details is what is really important. that is not revealed transparently. francine: given the volatility we saw in chinese markets, are you still a buyer of chinese stocks? do you understand what the end game chinese authorities is? mark: we are a selective buyer. so, yes. take whenwhat is your there is no growth coming in from anywhere? mark: when you look at some of
the bond areas, i just connect from brazil. people are really down and out, .hey are very sad area brazil is not going away, they are going through a lot of reforms. because it isn, cheap. there is still so much uncertainty. it may not be a good time to invest in brazil. mark: there is no question in my mind that the political will change in brazil. it may take another year, but the markets move ahead of these kinds of developments. it is something to look at. i was in buenos aires. the mood has changed dramatically. the market is doing very well. francine: what exactly do you want to buy around the world?
in brazil. mark: we love this time of the markets. things look so bad and it is usually the time to be looking at these markets. we are looking at the strong consumer-oriented companies. they are growing their market share as a result of the services and their industry. they are buying their competitors. their competitors are going out of business. this is across emerging markets or specifically in china? across emerging markets, but particularly in china. in have not seen much of it china yet, but you will be seeing it as we go forward. francine: you don't think there are asset bubbles in china? that there is something not more sinister going on? there are a lot of people
in china who would like to get money out. they have a huge program to stop the corruption. that results in money flows trying to get out. on the other side, many industries are doing white well in china. the company is going through a major correction as a result of the consumer areas. francine: we don't exactly know what the chinese authorities are thinking. you would rather play it for stockton currency? mark: yes, that's right. i don't think the chinese currency is going to result in a massive devaluation. there will be a slow devaluation. they are not worried about the currency crashing down. mark, thank you so
much for joining us. mark mobius joining us from templeton. hisas interesting to get take on buying chinese stock instead of playing it through currency. jon: very interesting that investors are buying into futures. dow futures up 22 points 39 minutes away from the opening bell. you do not want to miss this. a battle of the charts that involves a certain oscar winner. ♪
time the s&p hits a six-month aw or worse, you see corresponding gain in the s&p of about 10% on average. the tick data is here. on thes minus down ticks new york stock exchange. forre at a 12-month high that. on the s&p 500, we did hit a 22-month low. if this is theng has been the last 26 years, you will see stocks move up. if you want to play with it at home or at the office it, you can do that. stephanie: i thought we were talking about the oscars. dicaprio, well done. how can we make money out of mr. dicaprio. at the s&p 500 in
these years, you would have made money because his first year nominated was 1993. then he was nominated for "the aviator." then "blood diamond." wolf of wall street." if you buy the s&p 500 on the nominated, you are sitting on gains. if you bought it the year he was born, you are sitting on a 30% loss. , the s&p iswon down. buy onal of the story is the years he is nominated. stephanie: the moral of the story is buy leo all day long. >> i love when people can connect random dots into a line --i'm going to give it to mark. jon: the lesson is correlation,
not causation. i would have voted with you. matt: he was nominated this year and the s&p is down. >> it is not a trend. it is one data point. it is not a trend. thed: you're too charts say same thing. the s&p is going to go up. i think they are both voodoo, but you could be right. stephanie: 3-1. i'm going to convince these guys. mark barton, off the charts. thank you. stafford, thank you. we will be back with more. ♪
strongest,the delaying the release of its fourth-quarter results. and we have a couple of guest this hour. ♪ stephanie: we are 30 minutes from the opening bell here, you're watching bloomberg , i am stephanie ruhle. vice-chairmanthe of the luna sales bond fund. there's a lot to cover this morning. big winners, big losers. lumber liquidators, royal theibbean and valued --
drugmaker value to having a rough day. huntingave this pressure that will be on mario draghi. thehanie: maybe this is point where we will see less contagion because when you look at u.s. futures finally turning in the green, you say cap the u.s. economy separate itself out. the first both give you a check with matt miller. matt: we have seen a recovery now. green arrows across the board, 244 -- 3.25nt points. let's take a look at nymex crude. jumping up 1.3%. this recovery and the correlation we all know so well
really pushing up stock. gold has been a haven asset. it was a risk off trade this morning. we saw money title into gold, and it has come out a little bit. gold has had an incredibly strong february, up 10 percent graded has had a great here as well. the miners have had an even better year. here is called actually priced in oil. oil, now you in could buy an ounce of gold for 36 barrels of oil. that is an interesting chart to look at. let's get to first word news. and and tou parent
hardliner control of parliament. the vote counting is over and arabian moderates won the majority. provost -- opposed to deal with the new world powers. bernie sanders is working on working voters to keep them in the race for the presidential nomination. he is far behind hillary clinton in nine of the seven states that hold caucuses tomorrow. meanwhile, ted cruz boards tomorrow maybe republicans last chance to stop donald trump he say that trump made lock up the presidential nomination if he wins in the super tuesday races. trump has picked up a key endorsement from senators from alabama. google news 24 hours a day powered by our 100 news bureaus
around the world. david: we want to turn to the story that matter to the markets right now. the first one has to do with china. the central bank stepping up its efforts to turn around a slower economy. rates effective march 1. stocks fell in reaction to that. this is what i would like to talk to you about. this question of divergence. we see china stimulating. we see apparent pressure on mario draghi in europe to stimulate, and in the united states we're getting economic numbers that tend to point in an opposite direction. what does that do in your business? >> it creates life. it complicates life particularly for the fed itself. we have a domestic mandate, our central bank has a domestic mandate. the problems are international, the funds flow from southeast
asia via japan, via others. it is strong. that cripples the world economy. number one,iness, money is coming towards the u.s. dollar. not just the u.s. dollar, the dollar is in the middle of the pack this year. that is as far as currency poll and relatively action. yen that ispanese the strongest, but there are a whole bunch of others. even the canadian dollar and norwegian krone are often versus the u.s. dollar. this money is spreading out, and that is sometimes -- with all the problems in europe, why is the euro of slightly against the dollar? is leaving southeast asia, it has already left eastern europe, the middle east. it is flowing elsewhere. can the fed raise rates against that, encourage?
i do not think so. you have to look at their mandate. t is a domestic mandate. how do you balance these factors with the bottom-up factors when you construct a portfolio? >> delicately. [laughter] you have to take the top down. i take the top down as the first priority. in cases of a bond portfolio, credit thinking is very important. it is affected broadly by the top down. the most obvious is the price of oil and the effect that has across number of industries in currencies. that is the big one. i think that topped out is the most important thing.
mostp down is the important thing. over time, in the u.s. dollar, within north america, the credit selection downgrades over time. short term, the top down will dominate. over time, relative to other , thedollar denominated item picking up on the will -- i picked, the pecking will dominate. they have shown the inflation picture in the eurozone deteriorating in february. declining to .2%. this data is another headache for mario draghi as the policymakers meet next week. look at the situation in the eurozone. the g-20 you're talking about the limitations of military policy, and then here we are is
-- we are talking about monetary policy again. >> how low can you go? amazed by your bricks -- by negative rates. they did not cover this in business school. it is a pretty good deal for a them payou can have you, but it does not work that way with the bank. it is the government. i do not know. what i do know is that you do not want to have your money in the government wants where your -- were you have to pay the borrower. that takes money away from the eurozone. the brings money towards dollar. it actually send some money back to asia, to japan.
money to the outer borders of the euro. portugal benefits from researchers friends in germany -- interest rates in germany. it pushes you towards credit risk. that gets you cautious. it has caused me to back away from the euro denominated, even though some of the yields there are attractive. there are attractive on the outskirts. what happens if the overall situation weakens further? you want to be on the outskirts, i don't think so. pictuream painting a here. i looking at euro area inflation. i have added in a zero line or the headlinee that number has now gone negative again. we got a reading of -0.2 today.
the core number here is still positive, boat only had a 0.7. we had a debate going this morning, how do you pay attention to core numbers versus headline numbers? energy costs are transient, and a smaller and smaller portion of everybody's average daily spend. >> in my mind, the situation in europe is this is an important perspective. the real thing is political continuity. , jarring a tremendous risk to the overall political cohesion of europe right now. you have the northern problem with grexit, but the real one is the refugees coming in from the south, and the strain that has put on european union as a whole. it is not good.
i pray and hope for the best. that is not the way it is trending. i have gotten much more cautious on europe. i am disappointed, because i was so hopeful. enormousunion's under political stress right now, that is a top-down. it is a severe top-down. price of oil ties into it, certainly, because where is the disruption? the disruption is in the middle east. is a real problem that is driving the people out. it also threatens, in an extreme case, you could always have an upset in the primary source of exported oil. plug my chart for those watching in the office.
i will do a little experiment. i will do an annotation to make his chart look better to you can use it in a presentation. stephanie: number three gold getting it was from haven demand. the metal is up-to-date and heading for its biggest month we gave in four years. years best-performing major asset. if you look in the etf backed by pulling on we have more holders and we have seen last year. you're more cautious on europe, but global investors are simply getting scared. >>. i think so. ald it's self is not productive asset. it sits there pretty put in effort to get it out of the ground.
put it into a wedding ring, that is a good thing for you stick it into a vault. stephanie: aren't we capital preservation of? more and more investors are saying i am just trying to preserve. isn't that what gold does? >> we are in a deflationary environment. but what happens when the political unity of a major area such as europe starts to weaken? europe the history in when political situations does all? -- situations dissolve? rapid deflation. >> yes, it is hard to reconcile deflation lowballer tilde story with what is happening in gold. when you think about it like this, the wealth preservation
mode, if i'm going to get a negative rate on goods after nine years, the deflation situation at the rate story there is when my wealth is wealth. so i go to gold. the textbook is being rewritten in that sense to some extent. has manyney, purposes. one of which is stored value. if you are worried about future the money of the big, the vault, or your pocket, you will worry about inflation. if it is deflationary have some money there, it is a wonderful way. to pay less in the future. think of the german experience of the extreme. what happened in the late 1920's and 1930's? .our money was worthless
jon: say i have aliens, and i cannot put it into cash. at the same type of they are threatening to take away the hundred dollar bill, that the bills in europe. that is pushing me to go to gold. given what is happening on the monitor policy side of things who is pushing the out of cash. >> agreed. that is exactly what is happening. it will push you, not necessarily industry charities -- necessarily into securities, government bonds. he got a government bonds for safety. but what if the government cannot stand behind the currency? it is paper currency. i do not think that is coming. but some people do. stephanie: without a doubt. dan is a sticking with us.
much more ahead on bloomberg . i am looking at one stock moving in the premarket. valeant. we thought we would get more on their numbers, but that has been held off. there sayinglan that td securities are moving down from a buy to a hold. is a bloodbath for those major shareholders. can you get through seeing a market move like this? you're watching bloomberg . ♪
business flash. activist investor carl icahn owns 82% of automaker moguls. the company says it will review the offer for the of the company. wgn america cable network, shares are down 15% -- 50% the last year. luxury low prices in central london fallen the most in june 2009. june 2009. that is your latest bloomberg business flash. have some big movers here. consol energy, i will kick it off with cmx and that is going -- it's theo canon
canon assets. -- are up are all almost 10% in the premarket. general motors was hit last week positive note from adam jonas at morgan stanley. they have to downgraded now by saying slowers, auto growth is weighing on gm and u.s. vehicle sales is going versus 16%. he does not see very inflation coming. we have been talking about this the u.s.ing with inflation. no near-term movement to steve in the yield curve. as a result, this is year to
david: you are watching bloomberg. fuss, andus is dan you said there are bargains to be headed high-yield. he said this was true for inergy if he knew what you were doing. do you still think that, and how did you know what you're doing when it comes to high-yield energy? [laughter] >> sort of. there are still bargains. in my opinion, the high-yield market did a double bottom, along with stocks.
january, two weeks in here is came. anything seemed like relief. then february, maybe a little bit lower on the incremental prices. less volume. the very strong recovery. and what is for sale. there's a lot less for sale right now. stephanie: is that because companies are simply not being realistic about what the right values are today? >> is funds flows. funds flows in the etf and high-yield mutual funds. they have gone positive. stephanie: because they look so cheap? >> yes. they have gone positive the new
issues have not responded as quick. one of the things you can be sure on, they well. as for as the credits themselves, incremental news has not been good. out righter to sort now in the energy space than it was a couple of months ago. the bureaucrats and others have taken action that puts the value of assets that is quite a bit higher. jon: the ultimate hate from the last three years has been treasuries. yields must go higher. isn't it a little part that you have to have this at the moment?
purposes the the treasury market is the ultimate market went money goes to safety. market when you get there anything i might put my money in short-term treasuries and then you discover your income is much, as it is positive in this country. then he started without the yield curve. yieldare spots along the curve, and you say why don't i go to 30? bonds.xt up, more on jeffrey sherman joins us. we are a couple of minutes away from the market open.
by 1.2% after that surprise rate cut. cutting by 50 basis points. dollar yen still strong. down 7/10 of 1% this morning. it weaker euro this morning after that ugly inflation. everyone is still talking about china. his stock to watch in the opening the market, value down over 5%. one thing investors do not like, uncertainty. financialy pulled its forecasts and will delay releasing its fourth-quarter results. drew armstrong is here with more. all of this is reminiscent of tesco in the u.k.. it takes a long time, not only to find out what they work about that to give guidance as well. how long will we be waiting? >>
this point of uncertainty and that the seemed to be the issue that investors are concerned with. these results will be what people pull ahead. putting these on delay even further. --the middle of having ego the ceo, from medical leave, it will not give them more confidence. that is being reflected in the stock price right now. we do not know when they will release these results. they said soon, and they have some regulatory deadlines that are coming up on that. right now, we do not have an answer. thed: the ceos coming after medical leave, but they will not be chairman anymore. what do we understand about the? a think a lot of governance experts would say that it is not ideal to have your chairman also be your ceo or vice versa. given the problems that valeant has had, the issues of price gouging, communications,
restating financials, if it seems almost a matter of course that they would do some stuff to improve the governance of the company and separate those things. we do not yet have the inside story after this broke late last night. stephanie: was to blame for holding off on restating the numbers? if it was me auditor, it was price waterhouse is motivation to make sure they have every team crossed and i doubt it. bei suspect that they will making sure that things are really in line, all the ducks are in a row with they go ahead and finally file with the the that everybody has been waiting for. in the meantime, the board does have an internal committee investigating strategy. even though mike pearson is coming back we have not finished of that investigation. there could be more coming out. that the auditor will be wanting to handle that as
well. david: there were also to criminal investigations into possible problems with their charges to u.s. government. do we know anything more about that? heard about that and we do not know if there is an sec action or not. those taken much longer timeframe than we typically operate on. or eight yearnths or more before we end up finding out what is happening. they are going to take their time, built in the case that they might have, and announce it when they are ready. they tend to not be on the same timeline as investors, and the media. us.d: thank you for joining let's see with the market is after three half minutes into trading. matt: we are down across the board. not huge losses. he could hope call the s&p and dow unchanged. but littleare red,
drops across the board. this is what an eye that this is when the imap function is really useful. you could break down the gainers in greek, the losers in red. you have consumer discretionary stocks that are rising a little bit. you have more defensive health care utilities and telecoms that are down a little bit. let me go ahead and show you my correlation chart here because as goes oil, so go stocks. that has been the mantra this year. you can see a genuine had a correlation of 0.96. right now we came off a little bit but we are back up to 0.8. this is a 30 day correlation. i used the hs function to pull this off. we are right back up as far as oil and stocks correlated. gold has been having an incredible run.
quarter --ne point 1.25%. gold is also out. a 10% rate. it has had a great run this year in fact. let's take a look at the 10 year as well. we have seen back-to-back months on gains in the ten-year price declines in the yield. investors by bond rates right now, but we could see that we have been out but we are now down at 176. finally, my longtime stocks producer is back from maternity leave. you know how much he loves to look at world interest rates p is histy w.a.r. favorite chart. you can see here the chances of a rate increase in march are only at 12%.
we do not get above 50% until december of this year and february of 2017. but it interesting chart to keep an eye on. jon: if you want the real story go to the jittery first and show how much things have deteriorated over just two --ths and we if you do that, what you will 19.3% we have gone from all the way down to the 50's. for sure, things have picked up, but the last two months have been absolutely little -- absolutely brutal. will show hillary how to use it. we will go to abigail doolittle at the nasdaq. she is looking for a possible game for the fourth straight session. >> we are looking at two
back-to-back weekly gains. we fluctuating between smoking that losses. it will be interesting to see where we close. one standout is united natural foods. and real next back there. some investors may wonder what this means for whole foods. united natural foods their largest distributor. in fact to united natural foods you develop 34% of its revenues from whole foods. perhaps the single some trouble there for that market. that ceo is saying the results is reflecting near-term dynamic. but now united natural foods is down on the year. stephanie: earlier this month howard marks told us on bloomberg that one of the best decisions he made was
spending $20 million for a stake in double line. had no reason to expect it would go as well as it did. double line which he formed in late 2009 has probably the greatest success story for a new money manager. they are at $85 billion under management i believe. here we are six years later. stephanie: joining us now is the manager, who also: manages the schiller enhanced fund with the founder. it is the top performing large phone on morning show. you have it -- what it takes. , not just andoing individual stocks, but in sectors. tell us what you like. >> the profits we follow with the strategy is simply one that uses the ratio from professor shiller, and using matt not at
the stock market level but instead looking at the relative valuation across the sector as a large cap space. means is to do you want to look at the markets and you want to find a cheaper markets of just parts of the market. we think we are talking ended this credit cycle. as you go toward the cycle you , and wwhichxposed rick of massive overvaluation paid to answer your question directly, the sectors of the market that the schiller product is in today is the material sector, industrial, health care, and technology. a visit of mine in june 2014, and we talked about it in the commercial break. i remember sitting at the table, and they were at the highest financial crisis.
did we ever get back to where we were? cleansing.o do some if you look at the bottom market across every single risk sector or spread sector, everything is a significantly wider thing from those levels it was a gradual move from june of 2015. something changed. in july, the equity market fell down, credit showed cracks, risk showed cracks. the equity market bounced back, but the market has not. jon: the equity market was sleeping through much of that correction. credit leaves equity. do equities have to reconcile lower sales? >> one of the markets is wrong either wrist askins have to really today's levels. we have under weighted credit
for a long time. it is supposed to be 100% invested in the market. we have that. we stay relatively fully invested. but when we looked at the credit market we started peeling back risk last year. judith 2014 was on our radar. people woke up to the debt overhang in corporate america. and he still see that today. we think it is a very more rally at this stage. we think there is a degradation in fundamentals. specifically, the lower rated credit segments of the market. david: how do you take advantage of the? how do you position yourself? >> it is too full. when you look for opportunities sets, the risking is part of it. the bond market will you look at it is one of those workers the benefits of diversification.
you think of high-yield in rates, they are negatively correlated overtime. from that perspective, if you can de-risk at the right time, he can do sector rotation, which is our expertise. it is not just drive however, the selling assets that look overvalued. if we have a risk off environment, that is selling treasuries, things that are higher quality and rotating down the time comes. but i do not think today's the day for that. probably the point you will see a opportunity to step into the risk your seconds -- riskier segments. stephanie: is that even possible at this point of them have been cap addicted to central bank intervention? investors go cry on her doorstep. the credit investors go cry, but the equity investors are not. you see divisiveness between the central bank and the rest of the world. stephanie: that is right. is strange that the fed
continues to talk about hiking for types in 2000 steam with the overhang we see, but the equity markets is sloughing a lot of this off. there are different markets. it is a different ball game. but i think investors need to look at what is signaling. it is a large market great there has been a lot debt issue with a corporate america, the corporate bond market rate is risk assets. it does not matter where you look, if you look at the lower quality committee has significant weakness. coachesit in clo derivative of the day: it. you see it in anything that has a lower rating. we still have a 20% yield on that market. that is for an index greater that is not just an energy story. a credita problem with in corporate america today, and
the bond market is repricing that default probability. stephanie: and they flooded into that market in the last few years because of where interest rates were. >> we heard about the bond bubble, as with the focus was was u.s. treasuries. rates are too low, there is a bond bubble in the treasury market. but what that did was create now investment. your point, it investors search for yield. they which parts of the sudden there has been a repricing now. this is not just an energy story. i know a lot of people want to attribute it to that. small investment committee for this of capital. the decline in energy prices has exposed was having a high-yield energy. we are still looking elsewhere. where is that misallocation? >> what happened was that it was not just energy. energy was an overload renaissance story. if you go back to the history,
it was the telecom sector. there's a limit little bit of fraud in there and everything, and perhaps there is fraud in the energy market. that is not what i do to save but we don't work is getting into one direction on the trade, ultra high net worth individuals, everybody piled in on the energy story. it was this over believed story. --is an energy or south, energy renaissance, but just the telecom sector you will have a cleansing. this is where we are 16 years later it is a great investment. the same thing will probably transpire, it is just too early. we need to have cleansing of the companies, and that is with the bond market is telling you. stephanie: jeffrey is staying with us, so get back quickly, because we have a lot more to cover.
performing large on. 5, he said it is time to start betting against the dollar, and a good time to buy gold. we have been talking about gold all morning. do you agree that that is true? >> absolutely. when you look at the strength in the raleigh, it is coming off about a thousand dollars and out. when i believe is that is a renewed lack of faith to be able to tackle this crisis. had to say they will raise rates, and the bond market is not believe it. essentially the dollar market does not believe it anymore. you sound so all these things in january, once the faith in the u.s. being able to achieve those goals. ultimately what we see here is futileld will have a
trade here. the dollar was on a tear, and essentially that market was frontrunning centrally a fear. what you have seen in all of these three markets is effectively the markets not believing that the fed will be able to achieve this goal of getting off of this 37.5 basis point. jon: everyone is trying to find the sign that we reached the bottom. you brought up the wtr. the spread on the front end, what is that tell you about the vti and the oil market? >> it is an extremely oversupplied market. if you are a futures investor, you do not hold physical oil, you go out and buy contracts. priceells you that if the for oil does not change, you lose money. andenter that at $35, $25,
when you roll it down, you will sell it at $33. they have a negative carry. the opposite of a bond. you have to overcome this to just break even. call me old school, but i do not like i'm things with negative yields. -- buying things with negative yields. this is an oversold market. taught to buy the dip. people have been burned on this trade for many months now. if you look at the open interest , they are trying to make a call. if you corroborate what is going on in the futures market with the spread, the bond market is not believe we are getting out of this low 40 range. week, maybe last two weeks ago, the fed said that the inflation market is wrong . they are saying the inflation market is implying that of ati
to zero for the next two years. there is a little bit of hubris and that, because there will be no other source of inflation, only oil driving at, and because we will get the score numbers up to our targets, ultimately oil has to go to zero. maybe core inflation has to go down as well. the bond market might say something different. with my thesis is lower for longer. it is too early to buy these high-energy yields names. david: very slow growth, and a fair amount of volatility. in that environment what is the sensible thing to do with your money? financials portfolio always has erosion. we saw the cpi numbers. that is assuming no bedbugs as well. sometimes risk is not what you want to buy. sometimes you to play defense. , asee a macro environment
spike in inflation. -- nothingng again significant. but what we look at his earnings growth here in the u.s., with these lower quality names, it is looking to be negative after from energy. out energy.ipping there are some places you can be careful. but for broad-based market exposure, i still think that they high-yield market has a little bit more pain in the near-term. stephanie: if you could only one thing, what would it be? >> my mutual fund. jon: let him have that shameless plug. 23 minutes into the session. the s&p 500 of four points, the dow up by 40 points this morning.
off the week here on bloomberg go. maybe it is the moment of decoupling. we started the day talking about the pain out of china. but now the u.s. market open feeling the green. jon: we are up about 17 points on the dow. the s&p 500 up marginally. not enough to really getting rally going. david: european members are disappointing. jon: that is going to be a big story for the next week. that does it for bloomberg . tomorrow we are joined by the cio in manager of the international fund on bloomberg . ♪
>> from bloomberg world headquarters in new york were good morning. here is what we are watching at this hour. we are about a half hour into the trading session. stocks are fluctuating after china takes steps to cushion the economic slowdown. time to look for bargains, according to mark mobius. up, including his views on chinese stocks and the chinese currency. another investor to listen to, billionaire warren buffett, reiterating his stance that america todayin are the luckiest in history. why he says -- ignore the negativity from political candidates. america is actually really great.