tv Bloomberg Markets Bloomberg March 10, 2016 10:00am-11:01am EST
vonnie: we want to go from london to frankfurt in the next hour. ecb president unleashes a comprehensive stimulus measure. will it be enough? mark: and an exclusive. we will hear from the chief executive hunter harrison from his farm in connecticut. we will get the latest on his deal wealth northbrook southern. andie: former ceo john mack died at the age of 86. we will up back at his amazing career. desk go to the market where julie hyman has the latest. julie: i will start in europe
where we have to start following this huge package of stimulus. looking at various annulus -- analysts, on the one hand, you get this big package of the rate cuts. the deposit rate cut into the negative. bond purchase are in the negative. now, mario draghi is also saying no more cuts will be happening. investors are still wondering if this will work to help the economy. we saw the euro fall and then recover. now, we're not quite at the high of the session. nonetheless, where in the green very strongly. if you look at the intro date, you will see these changes as investors try to decide what to make of this. if you look at this sovereign debt, we have seen the biggest beneficiaries coming in through spain and portugal where we have
seen yields climb. the effect has been more muted in places like germany. here.e a look at stocks we have seen stocks rise for the high of the session. it looks like there is some level of optimism making this work. ,f you look at sovereign debt here, we have an increase in yields. .e have all of the gyrations 1.9 percent is the yield on the 10 year. also interesting, as stocks are rising, people are also buying gold. that indicates that there is some kind of view here that you could see inflation. there might also be a little bit of nervousness here. also, we want to look at crude. there does seem to be some pessimism coming into the market about when the meeting might occur between russia and
production free oil. vonnie: thank you. such an interesting day. let's check on the bloomberg first word news this morning. thank you. president obama is meeting with canada's prime minister. that have already announced efforts to cut methane emissions. industry is expected to fight that plan. conferencent news you can start 11:40 eastern time. five days before the florida democratic primary, hillary clinton and bernie sanders are talking about immigration. here is clinton's take. >> i think our best chance was in 2007 when ted kennedy was in charge. we had republican support. we had a president ready to sign
it. i voted for the bill. senator sanders voted against it. he criticized her for supporting the policy of deporting children. a big sarris will have get out the vote campaign aimed at the latino community. and othersaid soros liberal donors will spend $15 million. they have republican political rhetoric. global news 24 hours per day. it is 150 news bureaus around the world. back to you. mark: let's get to the big story. the ecb today pushing beyond expectations with the release of more stimulus. the market pullback on the initial optimism. rates will stay low. very low for a long time.
well past the horizon of the purses. from today's perspective, and we support of our measures, do not anticipate that it will be necessary to reduce rates further. get to paul from bloomberg news. heis fair to say that delivered and brought out the bazooka? put and aertainly rupture in through the market. the announced all the packets along with the rate decision. you are correct. one of the key focuses was that comment were he said we do not see the need for further reduction in interest rate. that seemed to signal that before had been hit.
he seemed to signal that things had been changed. it would stay at the present or low. the euro is often falling. there is a bit of confusion in the market. certainly, a big package. there is a big debate in the meeting. mark: yes, the deposit rate was cut. it was expected to hit minus. what was the expectation? paul: this was quite an interesting key to the idea that maybe rates cannot fall further. he said the issue was the complexity of the area. the decision in his system is that they did not want to send a signal that there is no limit for how low rates can go. they do not want to hurt banks so much that the transition is damaged. so, the tiered rate in the euro,
which is a very complex jurisdiction, not unlike switzerland or sweden would be a hard one to implement. that tells you, as he suggested, the unconventional measures are the way forward. vonnie: what channel was the ecb targeting today? most likely it was sovereign yield curves? paul: the ecb has always insisted that it does not target the euro as a policy rate. it is well aware that the euro is one channel. they have lower rates. and, it stimulates people to get out and start spending money. also, you will notice, they have the targeted lending program which could actually pay banks to take money off the ecb. it is quite an interesting innovation. that is one of the key challenges. vonnie: thank you so much.
the pressr conference. very interesting. now, let's go to tim adams. ceo of the institute for finance. decision. what stands out most to you? know, in 2012 when the president asked about doing whatever it takes, he said in the back of his mind that today is another example of him hitting a shot of adrenaline into the market. you know in your setup that and currencies are all over the place. i think they have produced a very meaningful package today. vonnie: if you look at market reaction, it makes sense. we look at yield currency are coming up with what the federal reserve did in the
united states. tim: the big announcement was moving in through the corporate. debt, itexclude thank is about 600 euros worth of targets. we have seen corporate debt move this morning in response. mark: they are moving through the asset portion program. what does that tell us? tim: it tells us that they are running out of assets. a told us that the program is moderately configured. generally, we have to try to figure out the asset of each marginal move. they're getting to the bottom of the toolbox. structural need a form. the need fiscal policy. the central banks cannot change the world but himself. mark: you have 500 members from 70 countries. what are banks thinking today. they have this new tiered system
. that is because of the complexity of the system. because of the target locked down low, banks could essentially be paid to borrow money. the stock market would say yes. tim: anything that officials can do to help support these demands and get growth and inflation up, will certainly help the system. most importantly, we need a proper financial system. banks are 80% of the mediation. withoutbanks, supporting demand, does not make much difference. we have strong banks and good demand making a difference. it having ayou see bigger impact in germany than in spain or portugal? tim: there certainly regional. i think the president alluded to that.
they have different impacts depending on the country. we see pick up in the ireland market. are trying to craft a policy for all of the different economic profiles. it is a very tough job. vonnie: is there an out of measure now? if we do not see unemployment drop through 2019? tim: he sounded like a man who was continuing to support his initial statement that he will do whatever it takes. said, there is only so much that the central banker can do. we really need structural reform in europe. we need fiscal support. hopefully, the other tools, the other mechanism will come to the forefront. with us.im adams, stay we are to continue this conversation. tim, with the institute of finance. coming up, we hear from jeff daily on his investment
vonnie: you are watching "bloomberg markets." mark: i am mark barton in london. they are already receiving strong interest in the banking index. that is a week after announcing the intention to sell. that is according to jeff daily. he spoke to eric earlier today. he also talked about a pair of difficult decisions he has had to make in his first 100 days of chief executive. one was to sell to a noncontrolling position in africa.
we have been in africa over 100 years in places like kenya and uganda. to make that decision has been hard. the investment banking industry. our plan was to be a transatlantic consumer bank. with our banks being in new york and london. the two largest banks of the world. the investment industry does not cover the cost of capital. if you look across all the investment banks, on average, they do not generate a sufficient return. that is a fundamental flaw in the system. it is a tough question to answer about when will that change. i'm surprised you did not talk about the dividend cut. it came as a shock to many shareholders. why cut the dividend? at half ao be roughly
million dollars per year. there is such a strong civil reference in the u.k.. more so than the u.s.. jeff: we will continue to pay the dividend. expanded by roughly 15% in two years. ofhave a core franchise consumer credit card business of corporate ranks and investment banks. generally, it goes through about 11%. we have a very large business. we are doing with all the retail banks. we sold all the banks in italy, and spain. gotten the investment bank out of all the emerging markets. we closed nine countries in january. to do that, it is very expensive to close and sell all of these businesses. businesso get that behind us in 16 in the early part of 17. in order to do that and have no
constraints, we reduced our dividends for two years. when we come out of the process, --have the ability to bay pay a significant portion. erik: your core business generates 25 billion pounds in revenue. it turns a pretax profit of almost $7 billion. i do not think you can sit here and tell me what you will earn on a pretax basis. that is difficult. so, why when you take the other side, we're talking about not that much money. why are you saying we will not cut the dividend. maintain the support of our shareholders. , i will do awrong small capital raise. insignificant.ot we do have conduct issues. sure that the management of barclays has all
the resources they need. financial and otherwise to get the banks. -- to get them in a position where the results will drive stock to a level over book value. jeff daily. chief executive speaking with eric. he is talking to the president and chief executive of the iis. thank you for joining us. jeff daily, he is standing firm with the investment bank. he is timeout they cause to other sell a stake or sell it off. did you feel sympathy for his down point? tim: i know jeff, he is a great banker. tohink he has been a guy move into better places. i do not would you comment about them specifically, but, we do see a retrenching from several markets. for the implications capital borders. we need positive banks. we need intermediation so that
we can grow businesses and grow the economy. i thought about what he said about they are not earning their cost of capital at large. that is a policy that people need to be concerned with. mark: when can banks be profitable and useful in the future? right now, they are facing sony different challenges, one of the reason why equity costs in dealing with further capital charges and a possible dilution. i think that we need to get to the end of the regulatory agenda. certainly at the fsb they have called for that. in respect to what banks will look like going forward. vonnie: one of the things he was trying to do today is 60 supply-side of credit. will we see more corporate intervention?
the what did he do with proceeds? do they just put it in a balance sheet? do they do it to buy back stock's." we have seen in the united states were a rates have generated capital expansion. they are not confident about spending a lot of money. vonnie: is there a possibility that equities go up, but the qe is not welcome? tim: that is a challenge they all face. but, you have to plot them for doing what they can. there is no guarantee that it will work. , we need otherid policymakers. other tools coming to the floor. vonnie: tim adams. president and ceo of international finance. still ahead, he was seen as a legend on wall street. he was one of the most profitable banking firms. we remember john goodman, next.
vonnie: let's look at the life of the head of salomon brothers who died at the age of 86. ofd friend became the head the most profitable banking firm. he lost a job in 1991 because of a trading scandal. tom keene, my esteemed colleague. anyway, we want to remember the legend. think that he invented the modern age. he thought people might remember him with a negative taste. tom: let's bring it up from mr. lewis.
on mr. gutfrund. he was going around and asking questions. he was the last person that the trader wanted to see. that was from a wonderful book. he said the world changed in many places. most of us were not on top of it. we get dragged into the modern world. tom: i think that was beautifully put. whateund will say that people forgot was the tools for theythat they had as invented wall street. they did not have the same mechanisms. have the derivative trade. what is so important is that it is no different than bob dylan picking up a guitar during the folk festival. it is when he did it. forget that heot
high-fived mark bloomberg. tom: i was not going to bring that up, but you're a brave guy. for his time as salomon brothers, i would suggest that we heard the fabric of the past, columneally taken by his . like being a doctor or lawyer. if they wanted to take modern wall street back to the fabric, they know that mr. gutfreund knows that what struck me. mark: you know, he was part of the famous book where he said it made michael lewis, but ruined him. tom: i would take that as an immense graciousness. i member a few times here in bloomberg, he was immensely
gracious about how things had ended up in his public service forward. which was really of the social fabric of new york city. he went from where he was through to the collapse of his career. he made something of it afterwards. it was very important. vonnie: it made people like john mayweather and all these other wall street legends. always. thank you so much. we will talk to you another time, tom. he died at the age of 86. next, we sit down with the ceo hunter harrison at his farm in ridgefield, connecticut. ♪
london, i'm vonnie quinn. barton.d i mark let's go to ridgefield, connecticut where our very own erik schatzker is standing by with the chief executive of canadian pacific railway. mark, thank you. as you say i am here with hunter harrison. he has been trying to straighten a deal with norfolk southern valued in the tens of billions of dollars and, hunter, let's start with that. you are still pursuing norfolk southern. you made overtures to csx, another railway you had potential talks with in the past. there's a little confusion as to who you want more. i will put it in terms i know you will understand. if i am making moves on to the girls on either side of the dance floor and both of them know about it, neither of them
is going to be very pleased with me. what do you do? hunter: you do it very carefully. erik: [laughter] we have said both of our organizations in the east would work with our franchise. there is not a favorite. one has this advantage. one has that advantage. we think we could fit well with either one. but neither of them think that they would fit well with us. so, i have a sewing job to do for either to be successful. are: is it a sign that you running out of patience with norfolk southern or the prospects of getting a deal done are deteriorating? hunter: no, i don't think so. if you go back, we had the initial conversation with csx -- and i should clarify something. like we made an offer
and were rebuffed. erik: you have not made an offer? hunter: no, no. reputation for being a fast gun, but i'm not that fast. we spent an hour and a half with them -- erik: this goes back when, a couple months? months no, five or six ago. the initial talks did not work out. we stepped back, looked at other alternatives, which was clearly norfolk southern. we ran the numbers there and looked at it. it looked too good also. so, there's not a favorite son. but you considered csx first? hunter: yes, but it could well norfolk southern
first. it could have been a phone call. then we have a meeting with norfolk southern. there was an unfortunately. i called to apologize over the weekend for the leak, and they said, well, i knew it 10 days ago. i think i was the last to know. here we are today. where do things stand with csx now? hunter: i think to be fair neither one of them have been very excited about the transaction. erik: have you talked to the chairman? hunter: yes. erik: most recently? hunter: not the most recent meeting. erik: how come? hunter: there was another member of the team. tok: if you want to get them the table, is it necessary to do ceo to ceo? it's a littleut complex. it kind of goes back to your story of the girls at the dance
spirit you have to do it very carefully. girls at the dance. you have to do it very carefully. erik: let's talk norfolk southern. there has been little progress. you have done your best to make progress. they're not budging. what has surprised you more -- the intransigence of management or the passivity of shareholders? because you do not hear anything from norfolk southern shareholders. ofter: i guess that is some our frustration. clearly, realistically, we strongly believe we can get a trust done, but we can't do it by ourselves. if we do not have cooperation from them, it's not going to happen. so, this most recent resolution is to try to get the shareholders engaged and maybe they would have influenced to say, talk to him. it is a nonbinding resolution. i don't think we understand what
it hurts to sit down and talk. maybe we are missing something. you have said repeatedly and again yesterday when you analysts,nvestors and you're not going to go hostile. -- now going hostile would give you leverage. why gu insisted the a gentleman's game? -- why do you insist it be a gentleman's game? hunter: we have to look at the end game. you want to serve customers and value, andeholder when you go hostile, it does not create the esprit de corps to get those things accomplished. that is a step along the way. back 5, you were to go 6 months and review every step you take -- csx, subsequently with norfolk southern, everything that has happened -- what mistakes have you made? what would you do differently?
a little softer approach. maybe one thing with csx and another thing with norfolk southern. we made an offer with norfolk southern with a letter, pretty extensive offer. four, five page letter. maybe we should have gone in and shake hands and talk first. i think the impression was we were trying to back them into a corner and that was not our intent. so, you know, something happened. a niceith mr. squires -- man. i have a lot of respect for him. we had one meeting for a couple of hours, and originally, he was going to be both of us and four or five lieutenants, and then it changed just to a one-on-one. and we had what i thought was a rather pleasant exchange. i mean, no commitments.
we did not make a deal. and then for what ever reason it started to turn a little adversarial. and i'm not sure at this point i can re-struck -- reconstruct to be situation and say what happened. but maybe that will all come out and we will get this thing accomplished. again, hindsight is always 20/20, but should you have taken customers to sew up complaints so you do not have companies like fedex saying we do not want more rail mergers? hunter: i do not think it is about customer complaints. if you look at the polling on the website, we are ahead three to one. we are behind, we say one thing, we are ahead, we say something else. the customer just wants to see
and understand the transaction we are going to do. it's clearly procompetitive. and some ofstand the associations are taking a different position, but the mandate of congress if you go with the staggers act is for this not to be a political process, not to be a referendum. erik: it's becoming a political process. look at what is going on with union pacific, bno, both larger railroads than yours, maneuvering to try to prevent further consolidation in the railway industry. what you going to do about that? it depends on what the next step on their parties. we think it is a little orppropriate that after 15 20 mergers, now they have this monster in the west and they do not want any more mergers. erik: that is kind of human
nature though. hunter: it's human nature. it is going on in a lot of places in our country and it's unhealthy. things are being politicized and issues with lobbyists and super pacs and behind the scenes, and that's not what congress had in mind. listen, if congress does not want mergers, change the law. do not wait until the transaction comes up and then start to say, well, mergers are not healthy or good. what are your options though? do you have recourse in court? hunter: i don't want to go there yet. look, several weeks back we asked the judge's this -- justice department to look at what had transpired so far and be sure everybody is playing by the rules. two senators came out yesterday, the day before and said they
asked for a review by justice. so, if you read the press reports, and the press reports said that for railroad set down together and their goal was not to have any more mergers, they all agreed upon that. that starts to raise issues. erik: but you're not saying yet how you are going to address it? no, it is likely hostile. we do not want to go hostile. the end game is where we want to be. --k: hunter, you have had you have said several times you don't have to do this, meaning by another railroad. but your actions suggest you very much want to buy another railroad. could you see yourself walking away and going back to alberta. -- all berdych? -- going back to alberta? hunter: calgary. erik: well, calgary is in
alberta. we want to influence shareholders to say, sit down and talk and see what shareholder value can be created. and more importantly, what can improve the infrastructure in the u.s. in the mississippi -- erik: it makes people wonder what are you going to do? hunter: you mean now, afterwards? erik: if you walk away, what is hunter harrison for legacy? i'm not worried about my legacy at this point. ,n spite of what others think it's not about that. is to theobligation shareholder. that's our responsibility. we are not going to take our eyes off the ball. we were running a hell of a successful railroad before we
entered this freight, and if we are not successful, we will go back to alberta, calgary, and we will run a hell of a railroad again. our track record is pretty good there. erik: hunter, this game has been playing out for longer than i thought it would. i do not know how it will end, but i hope that we will have many conversations. that is hunter harrison, the chief executive officer of canadian pacific. we are at his house in ridgefield, connecticut. mark, back to you. job. erik, great speaking with hunter harrison. vonnie, how is it looking? as much aswere off three quarters of a percent for the dow. and thestill positive nasdaq down fractionally. we had a four figure swing for the euro versus the dollar. 1.08.e almost breaking
marketst is been in the for 30 years, hasn't he? , alan, thank you for joining us. it seems to be a scene this on how things change and grow with the times -- obviously with the death of john gutfreund yesterday -- it your first company takeover was a hostile takeover and he went on to control this company. explain how that happened. were very successful. that is how we attracted attention. people said go back into business and we will give you money. i said ok. we went up the streets when the deal was completed. rented a small office, got a telephone, had about five people with me from the company and said, we are in business and we want to buy hospitals. yes, hospitals, neighbor
care centers, nursing homes -- no nursing homes. mental health and acute care. vonnie: will there be more consolidation in the industry? guest: there may be. we are more than prepared to help the consolidation. we have been buying. we have been building. we have been lowest debt equity in our industry. we are poised to take advantage of any opportunities that come along. mark: how do you explain the share price depreciation for yourself and the end astray since last december -- and the industry for the last -- and since last december? i do not -- i did not understand the question. vonnie: mark, can you repeat the question? how do you explain the
rationale? alan: the market is very nervous. we have had a very solid year. we reported earnings. we reported our guidance for the next year -- very solid, very solid. the market is nervous. as a matter of fact, we have increased the amount available stock buyback, so we are not unhappy with the current situation. care?: what about obama how did that change your industry? do you still consider it to be a might goat obamacare away? alan: let me start with the end of the question. republicans have been talking about repealing obamacare. i do not think that is possible. goodcare has a lot of features.
the something like 20 more million people covered. it is expensive. much more into for the country than hadremium payers been anticipated by a lot of people. the question is, how can it be moderated, modified, bring some of the cost down? one of the things people have been talking about, the high cost of prescription drugs and there are various suggestions about how that can be done -- medicare negotiate with drug manufacturers, which i am sure they are not very happy about. and other things like that. the cadillac tax may be repealed. there may be moderation, but i do not think it will go away. given the competitors in the space, and is extraordinarily competitive, the is consolidation a good
thing? do you see huge conglomerates of this type of company? there are a lot of hospitals in the united states. there are a lot of networks. there are six or so for-profit companies of size. there can be a lot of consolidation before it impacts the industry overall. vonnie: i know that you have your eye on the targets. our thanks to the universal health services ceo alan miller. of the bige wake bazooka from mario draghi, cutting rates, non-bank debt, and new series of four-year long-term loans -- look what happened. fell,e the bond yields now they are rising. check out the euro, which was down as much as one point 6%.
in today's pursuits, we're looking at the red-hot luxury retail market. , cooling off just a little bit, but only at the luxury level? the luxury level, at least in new york, you're seeing a lot of building. that is the price point where things have to be built. and now a lot of other global phenomena and are happening. currency changes, changes in europe, and you are seeing a lot of demand and supply.
>> kevin, i want to turn to you. what do you define as a luxury property? kevin: we're looking at prices $4000 to $10,000 a foot. vonnie: does location matter? kevin: of course, location, location, location. mark: kevin, tell me about this expensive luxury condo in soho. you split it, carved it into two. will that increase the chances of finding a buyer? kevin: of course it has. we have seen traffic pick up since we made a decision and filed with the attorney general to make that change. it's just a reaction to the market.
for that location, for that point, we -- gross price point, we felt that we were out of the market. change physically. we reduced to the price of the penthouse by 30%. it brought the gross prices down . that is the perfect price. it was a reaction to the market, a softening at the high-end. vonnie: i want to break in here ad say -- we have bridgwater hiring jon as the co-cio. -- bridgwater hiring john rubinstein. does this mean luxury rentals are becoming more attractive? oshrat: we have a story out today on bloomberg. so, what new york is seeing, a
large number of luxury rentals at high prices, $20,000 and above. you are saying luxury rents go down. we do have a choice of fantastic apartments. oshrat coversght, real estate and kevin maloney. and once again bridgwater is said to have hired john rubinstein as co-ceo. you can learn more about luxury real estate on bloomberg pursuits. the had to ni pursuits on bloomberg. still to come, more reaction to the ecb's moves. ♪
headquarters in new york, i'm vonnie quinn in for betty liu. and i mark barton. this is the european close. and i am mark barton. this is the european close. we are going to take you from new york to london to washington. here is what we are watching. mark: the latest on how markets reacting to mario draghi. and just trudeau visits for the --ouse white trudeau visits the house for the first state visit by a canadian leader in the years. and we talkmark: