Skip to main content

tv   Bloomberg Markets  Bloomberg  March 3, 2016 12:00pm-2:01pm EST

12:00 pm
from the bloomberg world headquarters in new york, welcome. i am scarlet fu. alix: iem alix steel. the service industry is flowing for the fourth straight month. the jobsush ahead to report tomorrow. scarlet: the u.s. energy is updated one day after -- was indicted. we will talk to the former chesapeake energy board member at this hour. herbalifees of stumble. the investor maintains that he is convinced it is a pyramid scheme. first, we want to get a check on today's market activity. let's head to julie hyman. we are talking about a drag on risky assets. tummy and a little bit
12:01 pm
lower and not showing much of a recovery. but the market services number, it came in below estimates. definitely trepidation in the markets today. in the u.s. economy in particular. that being said, not that much of a selloff today. more like a pause. if you take a look at the bloomberg, sectors on the move. materials are performing the best. tech arere and weighing down the major averages the most. in terms of the commodities, i wanted to take a look at natural gas and oil. natural gas has been in focus. it is trading at a 17 year low. we did have a brief turnaround after the report, it showed a drawdown in gas inventories but once again, it did turn lower. oil prices had a similar movement to natural gas. we size come down and now, it
12:02 pm
looks like little change on the energy front. even as energy shares continue to show gains. commodity with a killer breakout is gold. we actually are calling for a historic breakout in the market according to that nugent's agency -- to that news agency. back to theomes economic data that you mentioned. people are trying to hedge against a hold, it is considered to be safer. gold mining stocks have also been doing well. you have the etf which tracks the gold miners. and a number of different gold miners seem to be doing well. the gold miners have outpaced the gains in gold. gold is in white and the gold above, doing the best year to date, bouncing by
12:03 pm
almost 80%. of course, these stocks had been beat up more. so maybe not that surprising to see the recovery but still, the performance in gold itself is interesting. good stuff, thank you so much. alix: let's check in on the first word news. mark crumpton has more. the republican establishment is stepping up its campaign against front-runner donald trump. here onaw live bloomberg television, the 2012 nominee, mitt romney, made his case why donald trump should not succeed him. he has been critical of him for months and donald trump has returned the criticism. president obama will visit milwaukee today to highlight how his signature health-insurance overhaul has helped millions of americans gain coverage. he will congratulate officials on their recent efforts to help
12:04 pm
30,000 people gain coverage. the number of uninsured has dropped from 44.8 million people to 28.8 million people. the supreme court is looking at a federal world that target mercury pollution. it gives the epa time to fix legal problems and come out with a revision by april. 20 states wanted the court to block the pool while the government decided how to account for the cost. chief roberts turned down that today. north korea shows what it thinks about the new united nations sanctions. they were at it again, a testfired short-range projectiles into the ocean. global news, 24 hours a day, powered by our 2400 journalists. i am mark crumpton. back to you. scarlet: thank you.
12:05 pm
the u.s. economy is in focus. manufacturing has been in a rut. had beence sector holding up but its growth is slowing. leading to the first job cuts in two years. alix: for the employment component, it dropped last month which is something that economists will be taking into account before the jobs report tomorrow. dutta.joined by neil is this a cautionary sign or deepening weakness? a sign ofink it is caution but i wouldn't get too hung up over it. youb her being back here if weeks ago to talk about the manufacturing being elevated and how you are seeing a bit of a convergence. the manufacturing number looks a little bit better and the service number looks a little bit worse. market volatility helps drive sentiment.
12:06 pm
and the fact that the markets are volatile, it is a reason why the numbers have been week. you will notice that the actual data has been a little bit better. if people were nervous, they wouldn't go out and buy cars at a 17.5 million analyzed rate. you put all of this data together and you get around 175,000 four tomorrow. that is enough to keep pushing the unemployment rate down even the underlying labor force growth. it does keep the fed on track for rate hikes. scarlet: another think you pointed out is that they are notorious for pointing out false ingles. but when you look at the employment component, it has to be concerning as we head into a job market where perhaps a lotta people say we might have reached full employment. neil: we are running a high pressure labor market. that it willns is be increasingly difficult to find people.
12:07 pm
the rate of payroll growth is going to slow, there are not enough people out there. that if you look at the number, they do list commodities and what is going up in price? labor. when you think about the labor market, it is not just total hours marked -- total hours worked at how much people are earning per hour. it is really about the income coming out of the job market. jobs, hours and earnings. jobs and ours will slow that earnings will pick up. if earnings are picking up it means aggregate incomes are picking up. so spending has a good floor. core cpi topect actually hit 2%, the fed target, by the end of the year that you do say the risk is rising for a hawkish path. what is that? neil: if it was just about the data, the fed would go. reading, itnuary
12:08 pm
has takes down to 4.9%. core inflation has come in higher than expected. -- i don't think we should be talking about negative interest rates in this environment were speculating on further accommodation. he said if hitting goals and they should be patting themselves on the back. but the financial markets are volatile. the fed is taking a risk management approach. they are looking at the downside to markets and the risk to economy. in march and april, they are taking some insurance against the downside risk that they can throw the towel in on the recovery as a whole. so i think that some of their language will probably be more upbeat. that is what that means. scarlet: what can be fed do between now and the next hike to encourage the creation -- encourage the inflation? neil: they can do what they are
12:09 pm
doing now, take the threat of hikes off the table. show that they are more data ,ependent and not wedded mechanically. i think they have already done that. fedi want to be clear, the has plenty of things it can do before they cut to zero or go negative. i can think of several things off the top of my head. scarlet: most immediate? couldi mean, they basically not go for a long time and signal that they won't go until inflation is well above 2%. that is a price level targeting framework. alix: thank you so much. that was neil dutta. scarlet: coming up, aubrey mcclendon died from a car accident yesterday, one day after he was indicted. we will speak with a friend of his and discussed his legacy. alix: the university of texas investment management cover -- we will get an exclusive conversation with the ceo on the
12:10 pm
company's endowment investment. scarlet: china will release a five-year economic plan. what types of reforms will he be hearing? ♪
12:11 pm
12:12 pm
scarlet: this is bloomberg markets. second-quarter earnings trailed estimates. the stock fell as much as 3.5%. let's see what the numbers say in numbers don't lie about costco. the strength of the u.s. dollar and falling gasoline prices are hurting the comparable sales growth. the orange line tracks the fuel at a 5% clip, a drop from last
12:13 pm
quarter. the white line shows all sales, including gasoline, it has recovered to a 1% pace. it is with sanding has almost 700 stores in the u.s. and internationally. -- as a targeting primary source of revenue growth. co is dominant in the west and it has the potential to grow in the northeast. expansion costs a lot of money. their plan is to add 20 new stores a year. here is how it has increased capital spending. the forecast has more than doubled the $1.3 million five years ago. they can rely on a recurring revenue stream. at the end of the last quarter, they had 15.4 million representative memberships. fees and members paid
12:14 pm
they make up more than a third of the member base. investors are worried that the members may not be showing a slowdown in spending. alix: we will get a check on some of the other movers. julie hyman has the news there. costco is only one of the companies sharing numbers. shares are down by nearly 2%. morer shares are down sharply, they are predicting slower growth this year. also, it is still predicting positive same-store sales of 2.5%-three .5%. aoger has been an outperform but none the less, the slowing growth is causing concern. burlington stores, burlington coat factory, that company is forecasting earnings-per-share for the full year that may come in below analyst estimates. the midpoint of that is below
12:15 pm
estimates. those shares are performing today. we are also watching athletic apparel. this is after adidas fell 2% in trading. the predicted growth margin will narrow this year because pressures and cost pressures in asia -- we are seeing the ripple effect in the u.s. apparel makers. nike is trading lower and under armour is trading lower and lululemon as well. of higher movers have to do with oil and gas. they are unusual. oil and gas, as we pointed out, are not doing a lot today. chesapeake energy is higher after the cofounder was killed yesterday in a car crash after he had been indicted the day before. the shares were up sharply. they continue to rise today. as do shares of southwestern energy. both of these stocks have high short interest in the case of
12:16 pm
chesapeake. we could now be seeing something of a short squeeze. alix: thank you so much, julie hyman. let's bring in charles maxwell. he is a friend of the late aubrey mcclendon, he joins us on the phone. i am very sorry for your loss. i know that you knew him very well. what was your relationship like with him? he was a very sociable fellow. very well spoken. he was capable of speaking knowledgeably about energy in any context. , alert him to be quick and fun to be with. i will miss him. he had a very controversial life and we understand that. but he had guts and
12:17 pm
determination and he built a great company and the effects of building that company were felt through out the united states world as he helped to bring down the price of energy over the last 10 years. alix: what was your interpretation of how he dealt with controversy? he had quite a bit at chesapeake and he butted heads with carl icahn. was controversy about using his stakes to get personal loans and the indictment. how did he take these things? i don't think it is easy to sort them out. to give you a classic example, years, people have, for in the independent oil exploration area, passed the hat over them if they were young or ambitious to ask people to contribute to their drilling
12:18 pm
funds. and some of them succeeded wonderfully well. we have stories of all kinds of billionaires emerging. he was doing that, on a larger scale. they had been passing the hat for a long time. contributed to also passing the hat of his own company. taking his own personal wealth and putting it to work. now that is seen as a practice that we should longer follow. evil,think, to call this would be to be harsh on the history of how it emerged and what was, and he started in business. so i think we should hold back the consequences of these things, of being so sure and so
12:19 pm
conclusive, until all of the facts are in. what i do understand the government is going to let the main indictment go, which is the one colluding with other companies for bids. we need one thing that to keep in mind is that the business he is in is the energy business. you know the industry well. those of us who are not as familiar, aubrey mcclendon is described as a risk taker. give us a sense of the kind of risks that leaders in the oil and gas industry continue -- industry consider run of the mill? charles: that is a very clever and accurate characterization. -- it is a risk-taking industry. in fact, in many cases you are risking your company every time you drill a series of fields. and here was a man who was
12:20 pm
successful but to be successful, he had to risk everything he had , again and again. he was wiped out in 1998, wiped out again in 2008. but he kept coming back. and what he gave us was the greatest expansion of oil and gas results that we have seen in our generation, bringing down the amount of oil that we needed to import, bringing down the price of oil and gas around the world. talking quite a lot of extra money into consumers pockets, as the price came down and people -- it was less costly. so he did a lot of things of which can be proud and of which have helped the nation and oklahoma, along with other things that are not satisfactory with many people today. alix: the result of that is being felt all over the world
12:21 pm
with lower oil prices, in particular, opec. you have decades of experience in the energy market. --you think opec will see will freeze and cut production? charles: i don't think opec will give us relief from the problem that we have. that, theat to do saudi's have to be convinced their cutbacks should be -- that they should, once again, be the swing producer in the oil business. they will keep opec aligned by forcing their oil into the market and keeping prices low. the situationat is going to get better because we are not investing the money that we should in all the big oil companies, including chesapeake, for the same reason
12:22 pm
that with office down so much and profits off so much, they can't put the money back in the ground that gives them the new supply. and the result is that we are seeing the oil industry slow and stop and start to reverse around the world, for lack of capital expenditure. this willec knows happen. i think we will see a gradual improvement in the second half of 2016 and prices. and then a notable improvement in 2017-2018. scarlet: thank you so much. that was charles maxwell. life still ahead, herbal short seller will offer his reaction to the company forecasting customer growth. ♪
12:23 pm
12:24 pm
12:25 pm
scarlet: welcome back to bloomberg markets. i am scarlet fu. herbal life stock is stumbling today after they overstated growth in new members. they are down 7.5%. yet another headache for the company who is being investigated as to whether it is a pyramid scheme. this is a major piece of evidence cited on comments calls that their business was growing at a very high rate, around the world and in major markets. that those numbers were overstated. it puts a toll in management's credibility and in the internal control. as well as the story here that
12:26 pm
herbalife is a healthy, growing business. a major of evidence to support that storyline has just been demolished. dallas whitney case -- that was whitney tilson from kase capital management on herbal life. scarlet: coming up, opportunities staring us in the face. ♪ . .
12:27 pm
12:28 pm
12:29 pm
alix: from bloomberg world headquarters in your, welcome back to bloomberg market. thelet: let's start with
12:30 pm
headlines on bloomberg first word news with mark crumpton at the news desk. 2012 presidential candidate mitt romney unleashed a blistering attack on donald trump, saying the current republican presidential front runner is a fraud and a phony and the gleaner developer is not what he seems, saying a business is not.e mr. romney: if donald trump's plans were ever implemented, the country would sink into prolonged recession. a few examples -- his proposed tariff like penalties would instigate a trade war. that would raise prices for consumers, kill our export jobs, and lead entrepreneurs and businesses of all stripes to flee america. this tax lan in combination -- combination with his refusal to reform entitlements and address spending would balloon the deficit and the national debt. even though donald trump has
12:31 pm
offered very few specific economic plans, what little he has said is enough to know he would be very bad for american workers and american families. mark: trump has returned the criticism, saying romney ran a terrible campaign four years ago . trump will attend a rally in portland, maine today and is expected to speak in about one hour. donald trump is in but ben carson is out for tonight's presidential debate in michigan. carson issued a statement yesterday saying he does not see a political path forward. trump skipped the last debate hosted by fox news. maryland's highest court will hear arguments in several cases involving officers in the death of a 21-year-old in police custody. the court will determine whether william porter can be compelled to testify against his colleagues as he awaits retrial. five of the six officers are facing criminal charges in the death of freddie gray's neck was
12:32 pm
broken in the van as he rode in the back of the police transport without a seatbelt. lawyers for the national football league are asking the second circuit court of appeals to reinstate a four-game suspension given to tom brady. they say the lower court was wrong to will the penalty could leagueed because the mishandled an investigation of deflated footballs in 2015. if the league wins, brady may have to sit out the start of the upcoming season. if the union wins, he will likely play. for hours atwice day powered by our 2400 journalists in more than 150 news bureaus around the world. i'm mark crumpton. back to you. alix: oil is trading near its highest closing level in two months thanks to a slide in u.s. production. output fell for a sixth straight week and certain areas of opec are seeing declines like nigeria and iraq. scarlet: while there is no
12:33 pm
shortage of hiccups on the horizons, increased exports from iran, to name a few. there are those who say we have hit peak pessimism on oil. beyond wti hitting a hitting just above $26 in mid-february. guest: we are certainly not smart enough to pick the bottom and oil, but will -- but what we think is happening is that if it stays this low, supply will start to go away and sooner or later, that will lead to considerably higher prices. if you want to invest, you have to pick the company that if it is later they will still be around. for the last three or four weeks, we have been investing heavily in expiration and production. alix: you are not alone.
12:34 pm
is unbelievable because the rhetoric on the street is the capital markets were going to drop off and force oil to bottom, yet we've seen companies be able to access the market. which one do you like? is not all good news. it keeps the zombie oil companies live longer and prolongs a meaningful rise in prices that will come from a diminished supply. what we like are the companies that will definitely make it like eog resources. it's also a possible takeover candidate. we like devon, a great management company. the buckmore bang for and is a more speculative choice. triple andtually price just to get back to where it was. is your play in the balance sheet or assets or the managers leading the company?
12:35 pm
as a value manager, we look at the balance sheet first. it doesn't matter how great the properties are. if they have too much they -- too much debt, they are not going to make it through. we move on to prospects once they come back, but they have to make it. alix: devon has $13 billion in debt. chris: they have a big debt load and got rid of their dividend. we waited for all of those shoes to drop and they have some terrific properties up for sale. we think a short-term kicker will be when they announce in the next couple of months that they will sell these asset sales making the balance sheet stronger. how do you protect yourself from these bets? do you use etf store short other names? : hedging takes away your upside. patcht came to the oil
12:36 pm
over the last several weeks and our horizon is three to five years. devon may go down between now and then but in three years, they will be meaningfully higher and outperforming s&p when they performed so horribly in the last few months. alix: where do you stand on master limited partnerships? these were supposed to be the safe assets. they are moving oil from one place to another and page you see dividends to shareholders. that they just got routed. it has been a brutal year for these guys. chris: mlps require a special capability. i have a very strong feeling there are some terrific buys there because the baby has been thrown out with the bathwater. but the retail investors probably not as stable as the institution and those may go
12:37 pm
even lower and you could get some real bargains. you have to be careful because even though there are pipelines, they care about the volume and care about the credit worthiness of the folks shipping. it is complicated and i would go deep there and go slowly. coming up on bloomberg markets, an exclusive interview with the nation's second biggest brucer of endowments, zimmerman. his conversation, just ahead. alix: markets are paying close attention to china. we will preview the country's five-year economic growth map. scarlet: things are not looking good for donald trump for this is economic indicator predicting the outcome of presidential elections. we will look at the misery index. ♪
12:38 pm
12:39 pm
12:40 pm
scarlet: you are watching bloomberg. i'm scarlet fu. steel.'m alix this is your global business report. scarlet: the canadian prime minister defense's spending spree and says the rest of the world should follow his lead. alix: adidas makes a comeback, recovering from a sales slump. alix: uber brings a different rideshare to india, offering motorbike service and it only costs $.22. we start in canada where the prime minister has a message for the rest of the world -- let government spending do the work. he is urging global leaders to rely less on monetary policy to increase economic growth and is pushing a budget that will put canada into deficit. he highlighted the importance of infrastructure spending is a way to bolster the incomes of the
12:41 pm
bill class. alix: new pressure on mario draghi to increase to millis this month. euro area inflation is up again and it eurozone businesses are coming off their worst month in over a year. meets,k before the ecb mario draghi and his colleagues are considering if another cut is necessary. interest rates might squeeze banks and pull back on lending to companies and households. id does is off and running, expecting their fastest sales growth in five years -- adidas is off and running. they are still struggling to move up in key u.s. markets, falling behind nike and under armour, but the ceo says he expects the company to continue to grow despite headwinds. growth company. there's potential on the operating margins that we had influence from the currency
12:42 pm
because of a week euro and we consolidate everything in euro but never the less, there is definitely potential to grow in our operating margin. china'sre evidence anticorruption crackdown is hurting the cow. crackdown has deterred many highrollers from traveling to macau some of the only chinese city where gambling is legal. goldman sachs will probably join the list of banks sellhave agreed not to russian debt. the obama administration has urged wall street to sit a away from any russian bond sale, saying its counter to u.s. policy. to wheeling in india. the service will offer motorcycle and scooter service. bangalore,egin in india tech center with rights starting at $.22. scarlet: that is your global business report.
12:43 pm
go to abigail doolittle live at the nasdaq looking at some biotech movers. abigail: here is the nasdaq after a two day winning streak. the most -- the worst performing sectors are biotechnology and health care. biotech,ake a look at we are talking but the bear market in biotech and this bear ofket is the worst one several since 2000. it has been down as much as 40% from its peak last year. have we seen a bottom or is this selling going to continue? will the biotech bear market manage to pull the nasdaq into a bear market as well? biogenesis down on uncertainty of whether or not one of the country -- one of the company's partners may release data tomorrow.
12:44 pm
a neutral rating from suntrust saying the pipeline is fully priced at the current level. both of these stocks are down sharply as a lack of near-term catalysts could suggest the biotech air market does in fact have more to go. , abigailnk you so much doolittle at the nasdaq. the university of texas has the second largest endowment fund investing $35 billion. scarlet: erik schatzker interviewed bruce zimmerman at their 20th anniversary event in austin, texas. differentre are two streams. think about it as a very wealthy alum. we run a diversified pool of financial assets. if we were to not invest in things related to the overall
12:45 pm
well-being of the state or our system, we would not invest in health care. the ut system has six hospitals and we would essentially not the investing in 4% or 5% of the world gdp. i think that is how much texas represents. come adiversified assets broad range of natural resource investments that includes upstream, midstream and downstream. we are upstream investors and we don't attempt to try to play cycles. when things look frothy, we try to pull back. when things looked to be a better value, we try to lean in a little bit. energy the current environment as one of those where leaning in probably makes some sense. tok: but you're not afraid double down.
12:46 pm
pimco has been realistic and you have set an expectation this year. it's been a tough few months. can you get there? bruce: who knows. we don't try to project movements, soket we're probably not built for tv. we are a long-term investor and what we have found is when we signal a return in the 3%, that was before alpha, before the value add. what we were trying to signal as we thought we were in for a more difficult environment. we are required to make an annual projection. when we look at, we never get our annual projections right. half the time we come in too low, half the time we come in too high. we are free much delivered on what we indicated we would.
12:47 pm
you share the view that longer-term, those returns are going to be harder to find? bruce: we do think -- it depends on your definition of longer-term. we are and in perpetuity endowment. my job is to make sure we are around for hundreds more years. think the earth is an ongoing and there are incredible pockets of opportunity across the spec the room -- across the spectrum. medium-termover the , maybe as long as a decade, we are in a challenging environment. erik: what does the future of the endowment model look like? it's beginning to look like the others. do you follow the path seeing
12:48 pm
blazed by tension funds into real assets? is that the future for endowments? there are a couple of terms we should define. the endowment model is about embracing illiquidity risks or seeking to liquidity risks which -- and being long-term equity, which is private equity. an in perpetuity investor, that's an advantage we have. thatve seen you can overdo and become overly illiquid, need access to that market. we are happy to be aaa rated. endowment for public university, not a private university, so we are perhaps more sensitive to the downside
12:49 pm
because of we don't do a good job, hundreds of house and some and janeare dislocated and john q public have to step up. we like a diversified portfolio and real assets. in natural resources, we tend not to invest in the molecules themselves, but the value-added supply chain. theculture in india, where opportunity for seeds and irrigation and storage and typeing, we invest in that of more specific, directed strategy. scarlet: that was bruce zimmerman earlier on bloomberg today. alix: coming up, services data coming out of china has been disappointing as the nation shifts to a services and consumption economy losing some steam.
12:50 pm
12:51 pm
12:52 pm
alix: welcome back to bloomberg markets. scarlet: this weekend starts the china's national people's congress. all eyes are on the forms it -- the reforms expected to be announced. plus this, as china slowdown shows no sign of abating. for more insight, let's bring in bloomberg's intelligence director of asian research. we got the services dado rolling over and supposed to be what is leading china out of this economic melees. guest: true enough. it is clearly a disappointment. we saw the national bureau of statistics earlier in the week and whether you are looking at
12:53 pm
manufacturing or nonmanufacturing, they tend to give you a broader diffusion of smaller companies as opposed to the big companies concentrated in the official statistics. theer way you look at it, services number is headed down and to the degree we are dipping below 50 or close to 50, it is not good. scarlet: what does this tell us about china's attempt to shift its economy? some people argue it hasn't even begun yet. : we would take the other side that argument. the trend has been for slowing. inyou look at statistics terms of services versus manufacturing as a component of the economy, there is clearly ground being made from the standpoint of services becoming more and more of a piece. fromebalancing is going expert oriented manufacturing to
12:54 pm
domestic oriented services and consumption. ofare seeing the same sort thing you see in that chart where you have a shift toward consumption away from investment. it is a question of pace now. quite keyreform is for china, getting rid of the excess capacity china winds up having. you look at ferris versus non-ferrous metals and the investment that came into china, you can see and enormous increase in things like carbon, steel, stainless steel -- that needs to go away before china can truly rebalance. hear is thing we should the specifics of where we go for the next five years. is what gives us the next five-year plan.
12:55 pm
we get the final version on saturday and it will be widely discussed. they need to point out how they androm overinvestment excess capacity -- how do they consolidate those industries and push those companies, the big ones most notably, to be looking abroad commandeering from investment in things like nonferrous metals to ward things like technology, health care, education. scarlet: and travel as well. the number of people moving around the country spending money on services, does china have the capacity to manage that? thing, is an interesting if you look at what is going on with travel, this shows domestic and international air travel -- it has been soaring. it is not stopping. there are two points to make their. still happening.
12:56 pm
the growth in consumption is still happening. the mass market is still growing but there is good infrastructure that needs to be put in place with rails, with airports that will continue to feed that story. it is the opposite of where they were. very much. you good to have you over here in the u.s. scarlet: coming up, we will take you live to portland, maine where donald trump is holding a pep rally. how will he counter mitt romney's statements? that's coming up. ♪
12:57 pm
12:58 pm
12:59 pm
alix: it is 1 p.m. in new york. -- welcome to
1:00 pm
bloomberg markets. from bloomberg world had gores and your, good afternoon. i'm scarlet fu. alix: here is what we are watching at this hour -- u.s. stocks falling as we parse through the data services. strategistr from a how he is positioning himself prior to this report. scarlet: the head of the world's largest hedge fund says expect lower returns to volatility in these kinds of work its, but it's not going to be anything like 2008. alix: mitt romney bashes donald trump in his bid for the white house. using an accurate economic index, we will show you trump's chances in this election. scarlet: first, we want to head to the markets desk where julie hyman has been tracking the isn service numbers coming in higher
1:01 pm
than expected. certainly one reason stocks opened lower than normal. julie: stocks were not doing that great coming in. we have seen late date changes when you have a narrow range and as we gettic moves later in the day. that doesn't appear to be happening. the nasdaq leading the declines and one of the more potentially bullish signals i want to point to is the smart money index. here and thert smart money flow index looks at trading when you tend to have the most institutional deal flows. it has been on a six week winning streak. that has only happened 45 times before this. return three months later after that kind of streak is 3.6%.
1:02 pm
talking about the s&p 500, which is at the bottom of this chart. we talk about these indicators and this is just another one. in terms of the push and pull we are seeing, i want to talk about two individual stocks contribute into the advance and declines. atney, which was upgraded piper jaffray today, saying concerns over its espn business will start to fade. disney shows affiliate feed growth and the kleins in subscribers. microsoft has been declining today as well. moveve seen big cap tech and intel is apparently trying to come up with a competing virtual reality product. maybe that is contributing to the decline. alix: the dollar suffering its worst drop in a month. that could be pinned on
1:03 pm
the economic data. we see it versus a basket of currencies and at the same time, if you look at what is going on with commodities as we see the dollar fall, i want to start ,ith gold as we see it up trading in reaction to the economic data. continuingural gas to trade at a 17 year low. crude has turned around little bit and is slightly higher. so much,thank you julie hyman, with the latest on the markets. alix: let's check in on the first word news with mark crumpton at the news desk. mark: the republican establishment is stepping up its campaign against presidential front-runner, donald trump. today, mitt romney made his case why trump should not be the party's standardbearer. in a speech at the university of utah, he called front a phony
1:04 pm
and fraud whose promises are worthless as a degree from trump university. returned the criticism, saying romney ran a terrible campaign four years ago. trump will attend a rally in portland, maine in about 30 minutes. in michigan, bernie sanders is attacking hillary clinton's record on trade, calling it a disaster. the vermont senators trying to make the case families have suffered because of ms. clinton's policies. sanders is desperate for a victory on tuesday. michigan's governor, rick snyder, has hired to lawyers in connection to flint's water crisis. they will assist in the search and process of e-mails. they are representing governor snyder and others in the lawsuit filed in flood. michelle obama says she plans to spend her final months as first lady visiting gardens inspired by hers.
1:05 pm
she's made to surprise visits to district of columbia elementary schools. intoroduce garden evolved let's move, the anti-childhood obesity initiative she launched in 2010. 24 hours a day powered by our 2400 journalists and more than 150 news bureaus around the world. alex, scarlet, back to you. scarlet: let's return to the markets. our next guest says we may not be and a bear market but it's more of a correction. alix: he's the chief investment strategist at fifth third bank. he joins us now with more. does that mean you expect a significant decline from where we are now? in many ways, the opposite. it different than a traditional correction. you get a quick snap back in
1:06 pm
valuations when it becomes clear we are not going into a recession. this time, we think there is a different dynamic. while we continue to grow on earnings and economic progress, we will not get that snap back. scarlet: so there is a repricing of risk. is it oil prices? we think it is more fundamental than that. we think investors are looking out saying should we hit a him on the road and it's plausible to get to that place, what policy responses are left? our view is the benefits of monetary policy have run its course for all sorts of reasons. you cannot see meaningful fiscal policy, so what is left? while you could argue there's room for pro-business policies and we will see that in china, in the u.s., not in a presidential year. scarlet: it is like a lot of
1:07 pm
financial markets are shrugging their shoulders. the: one analyst says as fed is pulling back any sort of monetary stimulus, markets have to reprice the fact that asset prices can no longer match up to their cash flow. that is why you are seeing a re-rating. what do you think of that? guest: that is one of a host of arguments. markets are about the future -- you have the class -- he of the cash flow issue but you have what policy options are out there and puts a greater downside risk investors need to price into equities. you talk about how the global economy is in one big muddle through. how do you separate the long-term muddle through's from the short-term opportunities that would give you some return as you wait for it to clear up? guest: i think it is country by country and area by area.
1:08 pm
we tend to like reformers. to some degree, the markets have painted a broad brush. a difference in those countries embarking on reform. a simple more upside and then there's the traditional balance of what price are you paying for it? alix: what do you like? we are hunkered down against our benchmarks. don't go to cash, don't run to bonds, stay with your disciplines. we think that's the long-term key to investment success. that being said, we have cooled off on developed markets, particularly europe as we do not like the regulatory policy. scarlet: does it work anyway?
1:09 pm
: driving down long-term yous is positive but when are squeezing your financial system because they cannot pass on negative interest rate to depositors, that is counterproductive. a question earlier about mlps that deal with transporting oil and natural gas. what do you think about those? jeff: i'm not sure they are a retail favorite anymore. inare very constructive and truth, we have written it down more than we would like. this is a sentiment driven market and the fear is massive distribution cuts. we don't see them happening in the broad-based indexes we invest in. street is running the wrong direction. they are looking at distribution on mlps versus energy prices. the last time energy prices were this low for a sustained time,
1:10 pm
there a much smaller infrastructure. if mlps, particularly the are toldcompanies roads, we are comparing this to a time before the toll roads were fully build. if you look at distributions and u.s. oil production, you see there's far less risk to those distributions which means to us how is externally values in that space. alix: thank you very much. in next 20 minutes, can the markets predict our next president? a look at an indicator with a fairly impressive record of forecasting outcomes and why it's not looking so great for donald trump. worried of ase 2008 crisis, we have a forecast for the economy and the fed pasta next move. scarlet: and more on donald
1:11 pm
trump later this hour. he will be holding a campaign rally in portland, maine. we will bring you there at 1:30 eastern time. ♪
1:12 pm
1:13 pm
alix: welcome back to bloomberg markets. has more than mitt romney to worry about. an economic indicator shows the chances of him winning the white house are slim to none. has at: the misery index pretty successful track record of printing presidential election track record of points to hillary clinton or bernie sanders victory. the misery index is not made up. it is an actual thing. it came to popularity in
1:14 pm
the 60's and 70's when we had high unemployment and the stagflation very era. ary era.lation it is what ronald reagan said are you better off now than you were four years ago. these core inflation, so it is less volatile and you look at whether it is moving up or down. surprisingly, the movement in this index in the year up to the election is a reliable predictor of election outcomes. 11 out of the last 13 presidential elections, this index has called the outcome. there's too exceptions. one being jimmy carter and gerald ford in 1976 and that was really a referendum on watergate. , 1992,urprisingly theton versus bush -- economy was just coming out of
1:15 pm
the recession, so it did not feel like a recovery yet stop the recovery was only starting to move lower and inflation was due to the recession and the economic message had not hit home yet. alix: that kind of encapsulates what is going on with the country. you have a lot of disenfranchised individuals upset about their jobs who are not making as much or working as much as they want. we are not at full employment and haven't seen wages rise enough. the adage from the theton campaign, it's economy, stupid, very much implied that -- very much applies here. historically, when that happens, wage pressures per cup. we watch average hourly warnings in the -- hourly earnings in the jobs report. range,'s in the mid-4%
1:16 pm
it's about one percentage point asked her. feeling, households are wage pressure starting to improve. , it has tourse happen before november. scarlet: i would update that and say which part of the economy. in aggregate, the unemployment rate is looking better overall, but if you slice and dice it, then it is a very different story. guest: i'm not trying to pick a winner. this is a joe friday, just the facts kind of analysis. is projected what for the economy, we have a very slow acceleration and inflation. what will be more dominant is if it starts to move lower, that will determine the election. scarlet: thank you very much. within the half-hour, donald
1:17 pm
trump will be speaking. we will take you live to portland, maine, where he will be holding a campaign rally. that is a live shot of the podium where you will be speaking. alix: time now for the bloomberg business lash. deutsche bank employees earning bonuses of more than $220,000 will have to wait to get the full amount. people with knowledge of the plan say the bank will pay 75% of the bonus over four years. employees with less than $140,000 will be paid immediately. alix: the bank of china is giving does prom a loan. the deal comes as the largest loan agreement from a single credit institution. beijing has been investing tens of billions abroad to help develop natural gas resources that can be exported to china. is doubling amazon down on at go.
1:18 pm
the company is unveiling two new versions today, the $90 version lets companies -- lets customers hook up their own speakers and the $130 version is a portable, battery operated version of the device stop -- of the device. that is the bloomberg business flash. alix: my daughter would buy a lot of bananas. still ahead, the environment for breakups and other forms of construction is good news for advisors. we will hear from their ceo. ♪
1:19 pm
1:20 pm
scarlet: this is bloomberg markets. i'm scarlet fu. alix: i'm alix steel.
1:21 pm
a fun that in this is in special specifics invest in circumstances rather than the fundamentals of stocks. scarlet: the current environment in europe he says has created one of the most compelling times he has seen. carol: we welcome everyone on bloomberg tv. this is the bloomberg advantage. the chief executive officer at evermore global advisors is with us. i love having you back with us to talk about special situations. we are talking about m&a activity. there's so much happening in europe, spinoffs, ray goff's -- there is so much happening and investors are not focusing on the fact that there's a lot of value creation underway. special situations are by
1:22 pm
definition special situations. that kind of ruins the impact of that kind of investing. what is the screening process when you are looking for companies to market has miss valued when you are looking at places where the data is not as available as it is in u.s. markets? we are looking for companies going through real strategic change. a perfect example is the vivendi. want to investors don't waste their time looking at it but you see it owns universal music, the biggest he's a company in the world. just a few years ago, this company had $15 billion of net debt and today, it has about $7 billion of net cash. they are paying out bonus evidence and restructuring the business, looking for ways to redeploy their music catalog. looktors usually want to at these companies after the restructuring and after the turnaround.
1:23 pm
that is when it's not cheap anymore. carol: that is a missed opportunity. it is funny you bring up the vivendi. there's a story today saying the ceo of telecom italia is being reviewed by vivendi because they are becoming impatient with what they are doing. is this a time when investors want to be looking seriously at these names? absolutely. the chairman of vivendi is a very aggressive, ruthless value creator. he runs his own company that is almost a 200-year-old family business. he goes after undervalued companies. that was the beginning of the change. the first wave is done, but then he had it by 23% of telecom intoa, giving him entree
1:24 pm
the company which was mismanaged for many years, so he's pushing him to restructure. we think it is remarkably undervalued and it is one of those things where the tip of the iceberg is that it is an italian phone company. and there arethat a lot of pieces there. the key is to dig deeper and you find inside these companies, there's more and more value. there are skeletons, so the key is to clean out those skeletons and redeploy the capital toward the pieces that have the most value. a lot of investors don't want to deal with it and that is when multiples are too high. that is when it is a normal company. cory: what you are describing our companies where most of the numbers you would look at are going to look crummy. not just top line numbers, but
1:25 pm
free cash flow generation. fort going to be there those companies? it's hard to imagine they could be better. guest: therein lies the opportunity. we are betting on the people managing the companies, so we spend a lot of time getting to know who is driving the ship. you have a lot of companies, especially in europe, where you have good business is buried under bad businesses. as they peel off the weaker, low are --businesses, they it is like vivendi where you have universal music it was surrounded by these underperforming telecom assets they have been selling off. anotherlevator pitch -- when you are looking at.
1:26 pm
guest: this is one of the largest salmon farming companies in the world. they have been rationalizing whole industry. multiple andy low at a high dividend. carol: we love talking about these situations with you. thank you for coming in today. carol massar and cory johnson of bloomberg radio. , we are going to go live to portland, maine where donald trump is holding a campaign rally. we want to see how he is responding to mid romney's harsh words. that romney calling him full ran out of step with america. you see the podium right there.
1:27 pm
1:28 pm
1:29 pm
hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business. you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. alix: welcome back to bloomberg markets. scarlet: and i'm scarlet fu. they have to separate the
1:30 pm
stake in alibaba. their timeframe is nine to 12 months. they do say it is taxable and are working with advisers to do so. scarlet: they also made some comments and operations. they will continue to look at cost. of itsis very mindful cash balance and has taken up 20 offices in the last few years. -- the all the dharma drama, 99% of the company is focused on the fundamentals of the business. alix: this on the heels of "new york post" article saying that with! will have a sit down star board. jeff smith is demanding the sale of yahoo!
1:31 pm
he says they have gotten 40 expressions of interest. i don't know what that means. nevertheless, the continuation of where yahoo! will be in five years. scarlet: the debate continues. 2012 republican presidential nominee mitt romney released a bolstering attack on donald trump. republican current presidential front-runner is a fraud and a phony and is not what he seems. romney: if donald trump's plans were ever implemented, the country would sink into prolonged recession. 35% tariff-like penalties would instigate a trade war. raise prices for consumers, kill our export jobs, and lead entrepreneurs and
1:32 pm
businesses of all stripes to flee america. his tax plan, in combination with his refusal to reform entitlements and honestly address spending, would balloon the deficit in the national debt. so even though donald trump has offered very few specific economic plans, would it -- what little he has said is enough to know he would be very bad for american workers and american families. mr. trump, who will be speaking live momentarily in portland, maine, returned the criticism, saying romney ran "a terrible campaign four years ago." donald trump is expected to speak at any moment. endorsing herald" is marco rubio for president. florida has 99 delegates at stake. .he newspaper had this to say
1:33 pm
"the only way the nominee can win in november is by unifying the gop and appealing to democrats and independents. the best candidate to fill that role is senator marco rubio." susanna martinez is also endorsing senator rubio. president obama will be in milwaukee today. he will congratulate officials on their recent efforts to help about 38 thousand people gain health coverage. the number of uninsured has dropped from 44.8 million in 2013 to about 28.8 million. a meeting tomorrow to discuss the cease-fire in syria. the french foreign minister is convening the meeting in paris with his german and british counterparts.
1:34 pm
and volatileurns financial markets, that is what investors can expect according to bridgewater associates. one thing he says we won't see is another 2008-style financial crisis. scarlet: what does this road ahead look like? erik schatzker sat down with dalio.eo in texas -- ray mr. dalio: rise in basis points. another move would have to be toward quantitative easing rather than a big tightening. so the next move could be
1:35 pm
up, could be down. lio: it could get an uptick. i think it would be a serious mistake. i think the federal reserve has come around to the notion that we are living in a world economy and that the circumstances that are now happening are surprising them, have surprised them, because they are not paying much attention to the long-term debt cycle. there is a reason that their attitudes have changed. i think it's great that their attitudes have changed about that risk, but if you look around the world, our risk is not inflation and our risk is not overheating economies. erik: so you still feel the same way about the directory -- the trajectory of the federal reserve. if the risk we talk about our asymmetrically to the downside for the global economy, for the effectiveness of monetary policy because of the compression, the spread between the return in
1:36 pm
fixed income and risk assets, what does that mean for asset prices? : it means passive where correct to a form prices come back. let me be clear. i'm not bearish on the stock market. have isng that what we -- as you have those risk upmiums -- i expect stocks about a 4% return, long-term return 4%. erik: and pension funds like the university that we are at right now. dalio: it's a big problem like a slow-growing cancer. .t will not happen overnight but it will mean that we will not have enough money to fund those things. make aless, investors choice of assets and their choices are cast, which have --o return, avon, which has
1:37 pm
a bond, which has less than 2% return, and equities which has about a 4% expected return. when you look at those assets, they selloff. it has the effect of making those assets more attractive and draws us in or draws others in. the issue we are dealing with is the possibility of the negative feedback loop that comes from that and the ineffectiveness of monetary policy. it has aks go down and negative wealth effect, that has a negative effect on the economy. and when that has a negative affect on the economy and you don't have the ability to ease, what i'm worried about is, should the situation become weak enough in the economy, like japan's situation, like you said, two decades, you will have a situation where they have to do something else. erik: if the long-term annual return for stocks is 4% and obviously it is less for government bonds and cash at the
1:38 pm
moment is zero, what makes sense as an investment strategy? what do you buy? what do short? what's going to work? what is working today? dali i think there are two wayso: that the average investor should think of investing. are you going to create a good allocation, a balanced portfolio, which means you are not going to go to the betting investor and that against active investors like me -- and b againstet active investors like me. it is difficult to win in the markets. you guys have an externally track record of winning. is it harder to compete in the rock -- in the markets today than when you found it bridgewater? dalio: not the way we do it. i think for a lot of people, they are systematically long
1:39 pm
everything. we have a world in which, when the world gets bad, it's bad for them. in 2008, it was great for us. we had nearly 10% return in 2008. so we have the opportunity to go the other way. we just may be wrong if we are wrong. i'm so scared about being wrong that it has helped reduce my chances of being wrong because i'm so scared. i don't take it that's the knife -- we don't -- i don't take bets that i don't feel good about. don't compete against pros like ourselves are other people. allocation bet arounds. have to have a balanced portfolio. think about how you are going to have a balanced portfolio. look at the asset class as a whole and how it is going to
1:40 pm
outperform cash. if they don't, you have a depression. to know how to achieve a balanced portfolio, that is a whole other subject. if you are talking about tactical vents, in other words, i can come on the show and say i think this is good. come on a month later and change my mind because something has happened. then i am going to mislead people. so the tactical bets are not going to be helpful. i would say we are in an environment in which it is very important to be well different spike -- well diversified. maybe a little bit of gold in your portfolio. try to achieve balance in various ways. that is a whole subject on how to do it. at 5% to 10% of your portfolio would also be a prudent thing to do.
1:41 pm
prudence is the important thing to do. the reason i am also referring to that is we have a situation where debt is money. we have a fiat monetary system, too. we have a problem as the central bank separate. think of it as another form of cash. ratecash has 0% interest or less, think of it as one of those possibilities. how do you create diversification? alix: that is erik schatzker's rayusive interview with dalio. waiting forre donald trump who will be speaking in portland, maine. we will take you there when it begins. ♪
1:42 pm
1:43 pm
1:44 pm
scarlet: this is bloomberg markets. alix: let's head over to the markets dekes -- markets desk. julie: barnes & noble came out with earnings today. sales out with year-over-year of 1.8%. it was roughly in line with estimates. the company says that it retail 1.3%.omp sales rose by adult coloring books has been a hot trend. games and music and gifts. angie's list coming out with its , is forecast below estimates for the year. are up 4%. shares that is because angie's list said it will remove membership get -- to axis reviews.
1:45 pm
accesss like -- to reviews. american eagle out with its numbers. abercrombie & fitch was out earlier in the wood week ended well. -- in the week ended well. that's not the case for american eagle. underline the numbers here, it got a boost from a better tax rate. so gross margins did not improve at the company. one analyst said the gross margins missing because of increased markdowns in january, declining mall traffic, unseasonable weather, and a competitive retail environment. that has been affecting your letter retailers. , this company's full-year estimate well below.
1:46 pm
obviously, it is under pressure. trudeau isstin urging global leaders to rely more on government spending and less on monday terry policy to spur growth. this as he promotes his budget. trudeau is different from other politicians in the world. what was his main message? his main message was essentially readying canadians for the type of fiscal outlook balance after spending -- after the financial crisis. so there are critics certainly around this. message is this --
1:47 pm
so he goes on to say balance the books when feasible, but don't miss an opportunity to grow your economy. he also adds in, if canada's jet was inda's debt to gdp the shape of other countries, then this type of spending would not even be considered. scarlet: he is also earmarking spending for climate change. they have a lot of spending plans in place. pamela: they do. $75 million to fight climate change, that will probably come out in a variety of programs. one of the big things canadians to watching is a bailout bombard ea. minister praising b
1:48 pm
ombardier. the near jets are the growth for the company going forward. they need to bailout this particular program. he says that looks more likely. it is a hugely political hot potato, but it looks like it's on the way. scarlet: thank you so much. alix: more bloomberg markets just ahead, including donald trump. he is set to speak live in portland maine at a campaign rally. we will bring that to you live when we return. ♪
1:49 pm
1:50 pm
alix: welcome back to bloomberg markets. scarlet: while and china, the two big drivers for global markets. spoke with bob cinch
1:51 pm
and asked him if these asset prices have finally turned the corner. guest: the shanghai composite is a volatile market. suddenly, these negatives that were plaguing risk assets earlier this year, one by one, seem to be going away. that would certainly open up the potential for a much better environment for risk assets. that bad data from the pmi. do you feel like there is a decoupling here between the asset classes? on badwhen markets go up news, that is an indication that markets want to go up. earlier this year, when we had some relatively good news, markets were going down and going down and going down amidst concerns about the unknown, the
1:52 pm
unknown of where the bottom will be on oil prices, the unknown on economy woulde get. thingshings were driving lower even though fundamentally the data had not gotten that bad. theynk that is what markets are telling us, in fact, the fundamentals aren't that bad. and one by one, these big negatives are being moderated. bankst: so how do central take this into account and folder this into the decision-making? yes: they say they are data dependent. they ought to be data dependent and not reactive. that is one thing they are beginning to learn from the fed. said officials were pretty straightforward in saying we are concerned that markets are volatile. but you know what? we are going to look at what actually happens to the data. we do not know if the forecast is going to be accurate enough, but the employment data looks
1:53 pm
good and auto sales were pretty robust. maybe things are that bad. market volatility is market volatility and the fed needs to get on with normalizing policy. alix: what about the ecb? guest: i'm a little concerned about the ecb. they overwhelmed markets with her easing back in december. . think we face another the economy is slowing down a little bit. expectations aren't that the ecb is going to do something. however, ecb officials are saying we are a little concerned about the impact of negative interest-rate on the banking system. we are having difficulty buying as many securities as we said we would because so many securities have gotten so low in yields that they don't meet the requirements. suddenly you say, great, the ecb should do something. what exactly can they do? do they want to cut rates a lot more? can they find enough securities to purchase for their asset purchase program?
1:54 pm
next week, the ecb may be underwhelming again. sheet is ecb balance way below that of the fed. they have the firepower. whether or not they can actually execute is the problem. -- talkingd you have about the banking sector. negative rates are complementary to our asset purchase program which clearly has had positive effects. but this has to be set against the direct cost from our measures. the ecb has to be more mindful of central banks given the issue at its own banks. guest: yes, and the eurozone economies are much more dependent on bank financing than the u.s. economy, which is much more based on capital markets financing. there isn't as much capital markets activity in the eurozone. as we know, the banks are still struggling.
1:55 pm
there have been concerns recently about different banks and their stability. when you start putting negative interest rates into the equation, it creates more risks. so i do think the ecb does have a bigger issue with the banking sector, particularly with negative interest rates. that hens in what they can do next week. alix: so the ecb may disappoint, but, on the flip side, we have stocks and oils that look to stabilize. guest: the interesting thing would be, suppose the ecb does amber well does -- does under well and the markets are stable and continue to rebound a little bit. that would be another sign that markets are rebounding on bad news. that could be an interesting test of this improvement in risk appetite if you have bad news from the ecb next week but markets continue to stabilize and move higher. today at 4:00 p.m., we
1:56 pm
davide talking with bloom, really looking into the will happen after the break's it -- they brexit v ote in june. you are looking at the podium as we await donald trump.
1:57 pm
1:58 pm
1:59 pm
alix: welcome to bloomberg markets. carol: welcome, everybody. tracy: here's what we are watching at this hour. growth in the services sector dropped, prompting job cuts.
2:00 pm
tracy: we will hear from the donald. he will respond to mitt romney, who is pulling no punches today. mitt romney: here is what i know. donald trump is a phony, a fraud. his promises are as worthless as a degree from trump university. call ray daliot

66 Views

info Stream Only

Uploaded by TV Archive on