tv Bloomberg Go Bloomberg March 14, 2016 7:00am-10:01am EDT
the markets. protesters take to the streets in brazil, as millions call for president dilma rousseff's impeachment. david: welcome to "bloomberg ," i'm david westin. here with jonathan ferro. but i am is out, delighted to say that vonnie quinn is here. jonathan male joins us come after another is the weekend. matt: we have a -- vonnie: we have a packed hour ahead. turkey striking back after the suicide car bombing after it killed 37 people. turkish warplanes hit kurdish in northernps
turkey. in germany, chancellor angela merkel suffered a political setback. the anti-immigration alternative for germany party made strong gains in preset elections that were dominated by the refugee crisis. support for her democratic union fell across the board. donald trump is trying to counter a late challenge from john kasich and ohio. polls show john kasich a be pulling ahead, and days before the primary there. his campaign has been overshadowed by growing violence at his events. activist groups and supporters of democrat bernie sanders. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus and now to thed, markets with matt. matt: take a look at futures. we are down across the board. not huge drops, but a loss of 15 points on dow jones. if you take a look at the indexes, or let's take out the s&p and look at your-to-date,
you can see we are at a level to almost where we back to were at the beginning of the year? . being unchanged for the year, which is considerable, if you remember how far down we were in january, with the worst start to a year since 1928. it was pretty rough. take a look at a cross asset check of oil, gold, and the 10-year. these are things that have been moving markets, especially oil. oil is off a little bit today. we have seen gold coming down a little as well. oil is down 2%. 37.76.ow, back to gainsg for the year, gold up 20% -- up 22% now, from lows in december. the 10-year yield, coming up a
little bit. down just a bit as buyers get into it today. s.want to take a look at dot it is a new function that you can use on the bloomberg to check out the fed's dot plot. this is the forecast out for rates. if you look at the fed's plotsst, the median dot are higher than the market forecast for futures. dots is a new function that i am sure will get a lot of use. i want to take a look at oil year-to-date. there was a big drop, now we are back up to 2% for the year. , atook at opec 8:00 we will see the opec monthly oil report.
for february, 33 million barrels a day. we will see if that number grows or falls. there are a number of interesting details that we will pull out of the port -- out of the report. jon: thank you very much. a big weekend for china, a lot of data. pressure is already mounting a couple of months into the year to reach the gdp target of at least 6.5%. over the weekend, the central bank governor said there is no measure tomajor boost growth. recent data points to a slowing economy, but china's industrial output and retail sales, slowing in january and february. enda curran joins us from hong kong. how do these figures, these data of the week, playing into all of that? enda: like you say, we are getting a decent read on how china's economy has started 2016. notwithstanding seasonal , it is an
disappointing start by all accounts. we are seeing sluggishness in an area where we were hoping for traction. hading into this year, we interest rate cuts, heavy fiscal stimulus, and a sweep of measures by the central banks trying to get lending and credit loans through the economy. retail sales are heading .ackwards some silver lining on residential's real estate sales, they are picking up there. vonnie: we never heard from governor zhou much before. how much influence does he have on you collect bank governors and business leaders in china? enda: he is a very powerful man. we are seeing more of him, and that is a deliberate strategy on their behalf, both to improve
communications and sell a message. china is selling a message of stability. over the weekend, he was trying to maybe manage expectations a little bit. but when you consider the growth target that they have set notselves, few people do really think that the central bank will not have to cut rates more. one problem that he faces among convincing his fellow officials in china, is that interest rates are not really having the impact they once had in china. the transmission mechanism is not flowing through the economy the way it once did your it even though the central bank can cut interest rates further, it is not necessarily having the impact because of the high debt levels and the excess capacity in some of the key indexes. is on the government to do more, and they will have to take the surgical scalpel to areas in the industry like coal mines, trying to shut those down for heavy debt.
he is very powerful and influential, but his problem is that interest rate cuts are not what they once were in china's economy. vonnie: thank you so much, enda curran, coming to us from the hong kong bureau. boston is vince reinhardt. i will start with you. what do you make of the latest comments from the governor, and successful? >> you should always beware when central bank governors become cala genex. that means they are either .orried about a problem the problem is pretty evident. chinese officials coming out of the party conference recognize that growth is going to be slower. they are trying to execute a difficult transformation, which they put under the general rubric of supply-side reforms.
from the central bank's standpoint, that means you are being dealt a hard hand to play because there are forces at work like the need to recapitalize, get assets off bank balance sheets. that will make the monetary transition mechanism have less traction. over: as i read the news the weekend, it seemed mixed. looking this morning, the stock market is really up, one point 75%. -- 1.75%. >> that is because the retail investors in china take their cue far more from sentiment than they do from the fundamentals. sentiment is improving. chinese officials are improving their game, communicating more effectively with the market, and andng to restore confidence credibility, which are enormously important. but it does not change the fact that fundamentals are week. at some point the fundamentals
are very serious and structural in nature. david: i wonder if consumer sentiment is not becoming one of the fundamentals, as you shift from a production economy to a consumer economy. at some point consumer sentiment counts. >> the consumer numbers are still healthy. retail sales are still growing at 10.1%, down slightly from 11%, but this is not a bad number. is not going to be reacting as much as we might expect in a western economy to interest-rate cuts. the interest rate cuts will be more geared toward the industrial sector, and there we have a problem. cutting interest rate will not induce people to borrow when you already have overcapacity. jon: the chinese securities regulatory commission is already saying that -- equities were really given a boost. to cross over to you, looking at
the governor of the chinese central bank, the people's bank of china, the conversation where having this morning is, their ability to stimulate the economy -- are they having the same impact, the same effect? have lots of also tools. they cut interest rates, reserve requirements, and there are lots of channels of monetary policy influence. the governor appears willing to use whatever letter necessary. i think the more -- whatever lever necessary. the more fundamental connection is between supporting growth and exacerbating concerns about financial stability. the code word there is when the governor was talking about the prudent, slight loosening bias, he is saying there is a need to support aggregate demand, but there are intermediate and, challenges, problems in markets. both in setting
monetary policy. matt: when you talk about exacerbating financial instability, i wonder what you think about the currency. i have a screen showing the most active option contracts, and you .nd this with moso you see green dots, blue dots representing calls. the majority of the active options contracts we are seeing indicate that traders expect the currency to depreciate even further. how should the chinese go about letting this currency depreciate? should they just float it at some point, or do you think they have to continue keeping a very controlled and stable depreciation? there are two issues at play. part of it is not about the people's bank, it is about the three other nodes of international financial system, the federal reserve and the ecb and the boj.
two of those centers are going in toward a race to the bottom in terms of competitive depreciation, while the federal reserve is going to be inhtening monetary policy 2016. the chinese have to worry about competitive depreciation if the yen and the euro are depreciating relative to the dollar. ,he second aspect about that is you know, a sense of maintaining financial order and stability. you cannot go to a flexible exchange rate until you have internal market spirit china does not have internal money markets and financial markets to abandon the main mechanism of aggregate demand. one of the stories of the last week or so has been u.n.
strength. if you look at the basket currency, the u.n. stealth decline is actually weaker against the basket or it which one are you tracking at the moment? vincent: generally, you should inlow what the pboc says terms of understanding their stage rate policy, so i pay more attention to the basket. dollar tells you what is happening to the dollar vis-a-vis the yen and the euro. david: come back to the transmission mechanism. how you if you are zhou can give money to the companies that you want to give money to and not support the ones that are not productive. you can prolong the restructuring needs and make it more difficult for the economy in the long run. simon: that is a big concern. you have seen comments from zhou that they want to transform some of the debt that is being held
by interbank equity. that is kicking the can down the road. it does not address the problem that ultimately these are companies that are not valued, not viable as industries. that is going to take very difficult decisions to close them down. everybody says this is a small amount of employment in china, but it is still millions of people we are talking about. another very important point to be aware of is the transmission can it assumes -- the transmission mechanisms have changed. was the anticorruption policy has come in. that incentive to local governments to do has the central government saying that it is very strong in the expansionary phase. now we have the incentives being slightly weaker when there might not be so much in it for the local governments. if you are a local government a large, closing down industry -- i imagine the local governments will drag their feet
in that regard. david: thank you to vincent reinhart and simon male. starwood is getting another offer at $76 a share. remember, starwood and marriott had already agreed to an offer at about 67 dollars a share. $63.74 ark it out, share. marriott has given starwood a waiver now, and the new group intervalo be ilg, leisure group. by libertyheld media. david: i do not think of him as being in the real estate business. matt: it is a very interesting to deal -- it a very interesting deal to look at. david: thanks, matt. protests are up in
david: millions of brazilians took to the streets over the weekend to protest corruption and call for the pitchman of dilma rousseff. julia, what is at stake -- and call for the impeachment of dilma rousseff. julia, what is at stake here? julia: we were waiting for these protesters to gauge popular support for her ouster, and the
protests ended up being much ward -- much larger than the last protests, and the biggest ones we had from a year ago. this could be a game changer, to stop and say what do we do. david: will it affect the vote on impeachment? because that is really the issue, whether she is impeached. julia: that is a big theme in brazil, and congress is expected to resume impeachment proceedings this week, after a few months of waiting for the supreme court to decide on the guidelines they are supposed to follow, which we expect them to do on wednesday. the president of the house has said he will restart the process . it could be as early as thursday. david: car the markets reacting? last week the markets were bouncing up -- how are the markets reacting? last week the markets were bouncing up. julia: the markets have been doing very well. currencyis the best
among the largest trading once. the stock market is in a bull market and everything is up. the government sold bonds last week to take advantage of this rally. now we are waiting for the next developments, to see how sustainable this rally is. david: one name i have not heard is mr. nevitt's, the senator who narrowly lost to dilma rousseff. where is he? julia: he attended the protests yesterday veryte briefly. overall the protesters were not happy to have politicians, whether it be opposition or non-opposition in the protests, so he made a brief attendance. brazilians are sort of fed up with any sort of corruption in any sort of politician. they just want something new. ,o he had been on the sidelines but not really emerging as a strong political figure at this
jon: crude is falling on news that iran plans to boost crude output. country's oil minister said, "leave us alone until then." joining us now, energy analyst andy cosgrove. great to have you with us this morning. thellion barrels a day is high. is that news to you, or did you expect it? andy: i do not think this is
much of a surprise. it should not be much of a surprise to anyone who has been following what iran has been saying, that they want to get from 3.9 million to 4 million couple of weeks ago. they said they wanted to get to 3.9 million by august. the market has run up quite a bit, and i think you're seeing the market looking for a fundamental reason when we are technically overbooked to sell off a little bit. jon: the market is also looking for opec producers and non-opec producers to freeze all output. you wonder what the impact of that really is. the russians and saudi's will only agree on it when they already have output near the record does the freeze make much of a difference? think it is a moot point, and the proof is in the pudding. russia is more or less near the top of their range. it will interesting was saudi arabia does in lieu of the summer peak demand season, when there will be an additional call
performance of 4 million barrels per day. the base case for the consensus right now is expecting iran to max out at 3.4 million or 3.5 million by the end of the year. orthey do get to 3.9 million 4 million barrels per day, that would be a bear signal. jon: reaching an equilibrium between demand and supply, given what you see from the likes of iran, what will that take with u.s. output with more than 9 million barrels a day to just under 9 million? y: you saw the iea pull back their expectations, pulling it -- the supplyut and demand work we have done, looking at the iea, we're still looking at a surplus persisting through this year. it could be pulled forward a bit, but you still do have close
to one billion barrels of inventory that you have to work off, and if you look at prior cycles, it has been very volatile toward the bottom. the 1998 cycle or the 2008-2009 cycle does work as a precedent as you look back at how we can rally up the bottom here. andy cosgrove, bloomberg intelligence analyst, thank you. barrel.ops below $40 a coming up on this program, a big week for central banks in the bigger bank of england. that is next. ♪
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and equity rally for the bowls with four weeks of gains. before we deal with the economic essentials, let's get to vonnie quinn. vonnie: starting with brazil, millions joined in the biggest protests in the country demanding the removal of the president who has been linked to a corruption investigation. plus, they are mired in the worst recession in more than a century. we are waiting on new economic activity data which should show that. militants linked to al qaeda said they carried out an attack on a resort town on the ivory coast. 22 people wrote killed and it's the first attack on the ivory coast were the population is evenly split between muslims and christians. earlytrak train derailed today in southwest kansas. five train cars are on their side.
to theengers were taken hospital and the train was traveling from los angeles to chicago. it's that special time of the day for the morning must read. vonnie: can i jump in? we got the brazilian economic 1%.a, -8. tom: those are big numbers. those are ugly numbers. >> the downside potential for is notzilian economy establishing any floor just yet as the recession gets worse. they still have high inflation so the central bank is in a tough place. david: brazil is a mess. we have been watching the central bank and watching the markets but you remind us that geopolitics counts. tom: yes, this is richard haas -
this is his new essay -- just a sit just it's hope because foreign policy is not really on the radar. david: a lot of the issues being raised hinge on foreign policy. inboxd he used to have an hard boxocks and a too and that's not an option for a president. tom: the distinction he made was the uproar 11 days ago when mr. trump was briefed by richar h aas. he will brief all of the candidates. david: it's been reported that
he was advising trump and ted cruz said that's awful because richard haas is a friend of hillary clinton. n: it's remarkable how this is playing out in european politics. we saw that in germany. there was an anti-immigrant party but you see a fragmented backdrop. i am working up a chart for that,ow which is 30 years real gdp was under 4% just barely. now the regression is under 2%. so much of this links back to economic growth or the lack thereof. going back to the focus on domestic issues, it goes back to peoples disappointment and economic performance. people are still feeling underwater on their houses and stagnant wages and the amount of
economic improvement is not really being felt on main street. that has big implications. it strikes me that everyone has a domestic issue in germany and great britain and there are many people who are disenchanted right now with their economic future. typically, you would associate germany with a low unemployment rate. they have a jobless rate of 10.8% and you do not normally associate that with germany. economically is favoring political consequences. tom: the optimism of u.s. or ireland and spain together are these outliers of success. they have to replicate that. ireland is not as
good in gnp as gdp. many american companies are going into ireland. david: even in ireland, the current guy got voted out. vonnie: when it comes to the german elections, this is the first time germany is no longer immune. europethe stalwarts of but now that is not the case. did thierry fortunes in germany are in issue. they are the exporting powerhouse to the world and now china is the valuing their currency. -- d valuing their currency. japan as well and they are competing with germany in the international market. weakeningo is not than that has a big problem. --may not admitted but
tom: ecb last week at all the headlines. bank of japan and then england. are they going to do anything? at the end of the day, is monetary policy simply exhausted? >> i don't think it's exhausted that we are finding out which tools work better than others. there is real questions around the efficacy of negative rates. in terms of what the fed does, this week is a no go. pause.e on a temporary they will deliver later this year so this is their opportunity to revise their forecast. i don't think you'll see a big change to growth or inflation, the same things of lukewarm growth and underperforming inflation will persist but their projections for unemployment could push even lower which would be a direct indication of how much they are willing to allow the economy to run hot before they truly normalize policy.
plot andget the dot they previously signaled for hikes this year. i suspect they will dial that back. i still think we only get 2 hikes, one at midyear and one at year-end but the ad will not know that are wednesday. is that realistic? is three hikes realistic? >> it's realistic if the economy surprises to the upside. maybe 2.5-3 percent growth and strong job creation. i don't think that will happen. as i set him a day of liftoff in december, they will only be able to deliver two. game of thrones season five, the number of people killed.
the red wedding. lott: we now have the dot p available and it shows you the diversions. these lines are converging so the green line will go a little bit lower. >> they will update wednesday in market expectations are pulling back to the high side. they are reconciling. a couple of weeks ago, the market was not looking for a single fed rate increase out until the first quarter of next year. 50/50 on some the june meeting. david: we will actually get some data this week. >> not necessarily good news because we are focused on consumers saving the economy. david: good are bad, i like that. >> it will probably be bad because february retail sales don't look right and gas prices will take a toll on the headline and auto sales were flat and underlying growth was not great so retail sales will set us up
for a disappointment and the focus will concern to -- will turn to consumer sentiment friday. tom: can i ask a dumb question? david: you never ask a dumb question. tom: do we know who the dots a re? >> we will publish who's who. if you go to the bloomberg terminal, you can see our prescription of who is who. it's an educated guess. vonnie: janet yellen always says don't look at the dots. >> the market sometimes gets more upset with the -- obsessed with the dots. don't have them in the same way, they have the fan charts. march can't happen. the next one is june and the one after that is a timber and the one after that is december. by my calculation, let's pretend
they will hike when they have a news conference. they say that's not the case but the market assumes otherwise. there is an election in between there. doesn't that complicate this? back in the election of 1992, clinton and bush senior, and greenspan raised the rate before that election. a lot of folks lane greenspan for turning the result of that election. this factors into policymakers mines. they don't want to create the appearance of going or not going due to the election. the decisionegraph of doing what's right for the economy. certainly, both sides of the political spectrum will claim otherwise. david: whatever they say, it's june and december as the two options. -- they will not do it between the conventions in the election. there is no way. >> there is a lot of sensitivity moving in that area. it would be viewed as janet yellen aiding the democrats.
tom: when is the next meeting after march? >> it's april 27. tom: if they raise once this suggesting out farther? not sure where but if there is just one move, it's probably after the election. tom: exactly. up sohink wings will heat much because we see decent job gains and will see a lower unemployment rate. the fed will not have the luxury of waiting that long. we will go into next year and we have a fed funds rate just barely off the zero bound and the economy performing quite well and a low unemployment rate. if they say they are data dependent but are not actually, >> i think they are. that's why they will have to move ahead of the election and by year end. the real driver is going to be the unemployment rate which has
been moving steadily lower an overshooting the fed's expectations of year after year. they say the unemployment rate will end the year around 4.7%. we are falling at want percentage point per year which means that at one percentage point per year which means they could be closer to 4%. vonnie: thank you so much. for more on the economic week ahead, follow a sum the bloomberg terminal. we will cover the fmo see decision beginning on wednesday at 1:00 p.m. eastern. up next, donald trump says professional protesters other ones a stirring up his rallies, not his fiery language. more on that ahead. ♪
david: i am here in the green room and here i am with peter or zag. on "bloomberg ." vonnie: the trial over the faulty general motors switches starts again today. it may lead to the second round of lawsuits filed. they recalled more than 30 million vehicles in the first trial and because of questions over whether the plaintiff was telling the truth. directors of astrazeneca are trying to pay executive -- tie an increase ino profits. more than 20% of the shareholders may reject this.
the british government will allow driverless cars to be tested on u.k. roads starting next year. i want the technology available by the end of the decade. the exchequer says driverless cars could be the answer to helping congestion. john: donald trump is taking a defiant tone in response to criticism that his fiery language is inciting violence. >> if you go to a bernie or hillary rally coming go to one of these rallies and you protest, you will be in trouble. they will lock you up the rest of your life and give you the electric chair and say poor, bernie. he had to endure this. john: megan murphy joins us now. approaching the weekend, we have been talking about the town coming into the republican debate.
the weekend happen and it seems we're back on trend. yeah, i think it was a moment of sanity in a weekend that devolved in something u.s. politics is not seen it decades. this is going to be the week when the future of the republican party is really going to be decided in races in ohio, and florida to see what happens with donald trump and whether he will take those states and the scenes we saw at those rallies and whether they are scenes we may see over the next month leading into november. watching the coverage, it occurs that this is a risky time for donald trump. he has been very outspoken but now people may be getting hurt. it seems that a lot of leadership was pulling back and saying this is frightening. one person describe it as the most human moment they saw it. marco rubio was asked if he
would support donald trump of he was the nominee. he took a real pause before answering the question. he got quite emotional before saying yes for now but he makes it harder and harder. donald trump will have to decide what he wants to do. does he want to condemn this violence and condemn the kind of hatred we have seen him both sides of these rallies? or will he continue to play it off as we saw in that clip? the establishment will push them to condemn it more strongly. it's just not in his nature. he treats it as part of his routine. people respond to that. he is taking a more seriously in the immediate aftermath that now he is just laming bernie sanders. what about security arrangements for tomorrow in the country? what will happen? >> he has his own security detail. he also has secret service protection. he has been focused on that and
he says he coordinates with police in advance and says nothing is done by surprise. --y counseled the rally inch they cancel the rally in chicago when they saw the violence and he realizes this could be a negative. he realizes that scenes of real violence -- someone rushed the stage at him this weekend so there are moments reported that reporters feel quite uneasy. he will have to make a decision about whether he wants that to continue. this is something that could hurt him going forward and he is beginning to realize that. for you, who can take advantage of what happened over the weekend? >> i think john kasich has the best that to take advantage. he has a six point lead in ohio and if he wins there, there will be movement toward consolidating behind him. maybe a john kasich/marco rubio ticket but donald trump is a 20
point lead in florida and the republican party is trying to go over the will of their own voters to go to a brokered convention. that is unprecedented. we will see whether the establishment will take that option over a possible splintering of their party threatening the senate and the house. that will be the decision they face. david: i saw the polls had john kasich knowing ahead of donald trump in ohio. if he took ohio, how much more difficult is it make it for donald trump to go into the convention with a majority of delegates? >> even if john kasich wins florida, he he wins still has the most credible pathway. it's not an easy one. i think we will see establishment go to try to stop donald trump and take it to
a brokered convention really hope a nominee that is more palatable to the establishment as a whole like john kasich would then go forward. the will ofg to be the voters clashing with the will of the party elite. it will be difficult to sell and difficult to keep the party together. vonnie: on the democratic side it seems bernie may have regained momentum. how will the play out tomorrow? >> he had a funny town hall meeting last night and did well. he will look to ohio and illinois and try to pick up states like that huge win in michigan. we will see if he can pull off a huge surprise tomorrow. francinedavid: thank you for jo. to saves are flocking haven assets but will there be anywhere to go when the supply runs out? we dive into this issue next are. ♪
david: there were no surprises among the top or seeds in the acc championships. the first round of the determinant starts thursday we will have a surprise when stephanie announces brackets for the ncaa. michigan made it so that's all i care about. matt: i don't even know but i hope the buckeyes must have made it. david: they are definitely in. we will follow that. morgan stanley says 2016 could be called the year of the bull for treasuries. a lot of economists had not forecast another continuation of the bull market. notes that is other central ranks pushed investors toward treasuries, it does not look like the fed will
raise rates until december. wage growth has turned over and inflation expectations as measured by the live your breakeven have turned over as well. 2. fed is looking to get to this is a useful chart if you follow fed indicators. the fed does not raise and everyone else is cutting to negative rates. investors flood into the u.s. treasury market. ro hedge has talked about the shortage in the u.s. treasury market. if you look at another chart, 566, this shows you treasury fails. these are people who want to buy the bonds but cannot. matt: that's right. on 10 years. you can see a graph, the 150 day moving average, the slope is up. treasury more and more
fails because there's a shortage in this market. david: when you have no supply and there is too much demand, what happens? matt: the price goes up. the reason we don't have enough supply is because the fed holds a so much. david: thanks very much. vonnie: thank you. coming up next hour, former office of management and budget peter orszag will be with us. that's coming up on "bloomberg ." ♪
concludeseting tuesday and the fed weighs in on wednesday. how will the stimulus package shape policy? oil drops as iran says leave us alone. the country's oil minister promises to boost output. ♪ welcome to the second hour of "bloomberg ." we will talk about changes around the globe. we will talk about the london stock exchange. david: witness for the hour is peter orszag. let's get started with first word news. showed in ohio, the poll
governor john kasich is pulling ahead of donald trump. he moved a scheduled rally from florida to ohio. leads roughly a 20 point in florida over marco rubio. in brazil, millions joined in some of the biggest protests in the country's history and called for the removal of the president who is in a corruption scandal. reception the worst -- recession and more than a century. turkey has responded to the suicide car arming. it killed 37 people in turkish sh rebels. hit kurdi matt: we have a slight drop in futures.
the dow jones is down 31 right now. ftse is up half a percent of the dax in germany is up 1% so a little bit of gains over there. we will see what happens with the euro. we have $1.11 on the euro. the day the ecb surprised us, we saw the drop to $1.08. we are now at up to $1.11. taking a look at the 10 year, morgan stanley says it will be the year of the ball and the price is moving higher pushing the yield down. have been a lot lower on the yield over the last month. will gotanley says we down to 1.45%.
that gets us closer and closer to the all-time low of 1.3%. oil, this will give us some direction. we are off 1% on crude oil. we will get the opec monthly oil market report any minute. back and move the needle on crude oil. out for you when it comes. mentioning a couple of stocks, one mainly is starwood hotels. it might be a white knight better coming in at $76 a share. led by -- what is it called? ilgrty media owns 20% of and then marriott says enbang is
injury -- is interested. they bought the waldorf-astoria. david: this is technically not a white night because it was not a hostile takeover. matt: marriott has given them a waiver until the end of st. patrick's day if they are sober to look at other deals. we will keep a close eye on this. ohn: i'm guessing management will be sober. thank you very much. chinarial production in slowed in february as well as retail sales. it highlights the pressure that leaders face to meet the annual growth target even if the central bank governor says major stimulus is not needed. we have more from hong kong. >> we have had our first good look at how the chinese economy is in 2016. we had a slew of top-tier economic data saturday. when you look at retail sales
and industrial output, it's not a great story. it's a sign of an economy trying to gain traction. central cuts by the bank since 2014 and they are trying to get lending knowing and a big dose of fiscal stimulus by the central government. -- taken whether together, it's concerning that the evers by the authorities are struggling to get off the ground. it's likely the government will have to step up their efforts. we will see more on the fiscal spending spied -- side would mean more are a wing and lending. they need a circuit rake or in terms of the chinese economy to get growth off the ground. look for more for the central element and the fiscal side and in terms of hitting infrastructure projects off the ground. that might be more effective than rate cuts but only time will tell. david: thank you very much. , talk to us about
china. you have been there and have studied it. how concerned are you about the effect that the chinese slowdown will have on the global economy? clearly has a substantial effect on the global economy but we need to talk about what else the chinese authorities need to be doing. the big missing piece is you have a substantial buildup of debt especially in state owned enterprise. ratio has- the debt gone to 200% the last several years. that debt is basically bad debt and knees to be written down in the financial intermediaries need to be recapitalized area there is an announcement over the weekend that the central bank will allow some of the bad debt to be sold to private investors and that's fine. thein terms of attacking problem, that has not been front and center.
the history of trying to close your eyes and hope that debt will magically disappear is not an inspiring history. is it the growth of their the most? >> it's a weird concentration. another problem is what is the classification system of turned a low performing. if you look at the growth status , i would focus more on that in local governments. there is some given the accounting in terms of what's not performing. john: what we are seeing in the property market is concentration in the top-tier cities, a huge boom in housing prices. what do you make of that in what does it mean for financial stability? >> again, you are right that there is this juncture.
we see it in other places around the world but in china specifically, the junction between hotspots and property where there is a lingering debt and other problems. presumably, a big part of the boom in the hotspots is people looking -- used to have a lot of corrupt money flowing into assets that were easily transportable out of the country. that is no longer an option. the money has to go somewhere. how can you shake out the bad loans and bad credit and not tighten the economy? as soon as you open up the credit, some of the money is going to places you don't want to go. >> this is one of the central dilemmas and is what the united states did pretty well but europe not so well. japan has done horribly with this. a stall tove
vacation in the banking and lending system, you need to clear it out in order to generate more lending. if you pretend it's not there, it's not going to work area at you need to recognize the bad debt and cleared out of the way and encourage new lows. there is this overhang of old bad debt. vonnie: in an ideal world, china would take care of its mass but how urgent is it that they do this immediately? it has the ability to service its overall dad. the yuan will probably appreciate more. >> if you're goal is to regenerate better growth, this is one of the key structural intensive getting this done. you will not get the growth you want as long as you have all of the legacy issues. it's related to the ongoing
ofort of shrinking the size the state owned enterprises in the chinese economy and encouraging private enterprise which has been happening to a degree that many westerners don't appreciate over the past 25 years but it needs to continue. john: is there an example in that ends welly for china in this regard? can they transition to something better? >> it does not and well for those who want to ignore the problem. you can address the problem head-on but the bigger challenge for china -- i wrote about this for years -- it is natural that an economy can slow off of a high rate of growth like the chinese economy has experienced. the dominant factor global growth across countries is reversion to the mean. if a country has been growing slowly, it can start growing
rapidly and vice versa. the major challenge for the chinese which the leadership recognizes is the transition rom a very high rate of growth to a still high but not quite as high growth rate. i think that is inevitable. david: how to their demographics help, the urbanization of the population and the middle-class movement? >> that does help but the chinese economy is aging rapidly. it's more rapid than the u.s. economy. that demographic does not help in the long term and the one child policy, the recent changes to allow more than one child don't affect the labor force for two decades basically. it might curtail or subtract from it.
there has been the benefit of moving people from agriculture to manufacturing in urbanization turninge is the lewis point in economics where that process no longer adds to aggregate productivity. for years, specialist at the world bank and elsewhere say the chinese are close to that point. productiveo could be in a modern factor has already moved. you had a huge wind at your act from exactly the process you were delineating over the past two decades. it is now dwindling in a makes growth harder. ons why growth has to focus technological innovation. the chinese have been investing a huge amount in higher education and sending people abroad. it's a different model. we have not discussed stability in people say all the reforms will not happen because they ultimately need growth for boom in sake for the
employment and maintain social stability. does that hold any traction? >> i agree you need growth for social stability. we are debating how you get the growth. you cannot just get growth over two or three decades by saying we will have growth. do the hard things that will lead to the growth that reinforce the social side. vonnie: we are talking about more social safety nets? absolutely, when you can make the transition to high-quality social growth. coming up next, the bidding war for exchanges in today's watch, the big deals. futures are in the red over the last hour or so. crude oil is just rolling over. ♪
vonnie: you are watching "bloomberg ." who willa battle over end up with starwood hotels. one group is offered $76 per share. the chain had agreed to be bought by marriott. mariette has given starwood permission to consider other offers. the chinese company agreed to buy 16 luxury u.s. hotels and resorts. trial over the faulty general motors switches and it and the second one starts in new york today.
there are hundreds of lawsuits filed. gm has recalled more than 30 million vehicles. the trial ended because of lessons over whether the point of was telling the truth. british prime minister david cameron will announce a new plan to help workers save money. it will give them a 50% bonus on their savings if they set aside $72 per month. he will raise minimum wage for those between 18-24 years old. ohn: deutsche buersse will make a bid for the london stock exchange. i can't keep up. when are we going to finally get that bid on the table? >> deutsche should be out
tomorrow or wednesday. over the weekend, it got delayed. said, we find out in the next week or so when intercontinental goes ahead with their bid. 29 under until march the takeover code. they will have their bid then. at some point, bob up -- probably by the 29th, we will find out if the chicago mercantile will make a bid and they are more unknown. they had a board meeting last week that evaluated if they should go ahead. they decided to hold off and see what deutsche boerse and what ice come forward with. : what is the ball park figure and why is the london stock exchange getting so much interest? >> from the standpoint of deutsche boerse, they think they can compete against other people
they can compete against. tanker soa former everyone knew he would eventually make a run at this. i don't think anyone is surprised he made the bid. the timing might be more accelerated than people anticipated. they expect this might've happened at the end of this year or next year. the valuations are very much in line with what people expect. there are knows of prizes right now, is just a matter of how competitive or aggressive bleach bitter the. questionen the brexit ,nd london as a finance capital does that factor into any of this? boerse the deutsche standpoint, they want to make sure that london remains important in this deal.
i think it will be harder if you are a u.s. that are. -- bidder. that will play into this. sometimes regulators will it now just will allow that nationalism to sway how they will vote or their views on things. that could play into all of this in the weeks or months ahead. ofn: we've got a couple errors on the table potentially chasing the london stock exchange but joy jet boerse is looking to create -- but erse is looking to create a european giant. they have competitors that are trying to create -- to prevent the european powerhouse. it becomes a bit of a nationalist fight. we will see how it plays out. john: you are a busy man this weekend i'm assuming you will be back. thank you. iran hopes to raise protection
what are you seeing in the marketplaces? >> right now, i think we have reached a level where we will have a little volatility, maybe 2% ranges. level on theis $37 crude contract and looking out further in the curve, you'll look at this curve of $37 and change up to $42. that's a pretty safe estimate right now. david: how much activity is in the marketplace? we have seen a little bit of a pullback. there are so much uncertainty. you mentioned iran and they said they would continue to beef up production. last week, we saw the data showed that iran was not actually producing as much oil as they had they were going to produce or bring to market. we are getting a lot of mixed data. and the clients i
have talked to who are interested in jumping into the energy markets, we are looking at this range is a making sure they can all be levels at $37. that's what we have been discussing. david: any momentum one day or in -- one way or another? momentum will start picking up for the upside especially going into the march 20 meeting with the opec-non-opec and whether they will do a freeze or not. right now, i am looking for the upside. we will look at resistance coming in around the $40 mark on the front crude contract for it it looks like the forward curve in the next couple of months are looking to $42-40 three dollars. this is a very technical market. i'm doing it with smaller size portions. david: what else are you looking at? what else could affect your
market price? material thisng weekend about the shale producers. that has pulled back dramatically from the height of the oil at $70, you see shale producers producing about 9 billion -- 9 million barrels per day. if $40 can hold come i think you'll see some of the stronger shale producers continue to bring oil on the market. that's why we are apprehensive about betting too far on the upside. david: thank you so muchjohn: next up, its central-bank weaken the central bank of japan will lower rates while the fed will weigh in wednesday. it's coming up. futures are negative ahead of the open. ♪
peter will be talking to us. here is vonnie quinn with the first word. vonnie: linked to al qaeda. they say they carried out a deadly attack in ivory coast. the government says at least 20 people were killed. it is the first attack by islamic militants and a come -- in the country. in maryland, a police officer was killed in what authorities are calling an ambush. opened fire in a police station in washington, d.c. a shootout left the officer dead. two suspects have been arrested. amtrak rain the rate -- amtrak train derailed. 29 passengers were taken to a hospital in dodge city. the train was traveling to chicago. 24 hours a day powered by 2400 and journalists. the ecb surprised investors by expanding the bond purchasing program to include corporate debt.
people are asking has monetary policy run its course in the euro area? .est discuss thank you for joining us. let me ask first, i am assuming you do not think the central bank in europe has run out of tools? >> no. i think the ecb last week, it is somehow not empty. they refrained from pushing things too hard. they could have been a bit more forceful on how they would conduct to the purchase of bonds. -- there isave still quite some stuff they could do. corporate bonds that still need .o make things a bit clearer in general, what we had last an important, long-term
commitment of monetary policy for long-term support. changes in the ecb last week. notion essence inflation has undershot for a while, they could accept some overshooting for the future, telling us we really want to bring inflation back and even if we start seeing upside pressure, we will continue to be a kim -- accommodated. that is a big change close to targeting the level versus targeting the change in prices that basically ensure that immunity in europe against any type for a very long time. the details can change. i still have technical issues to deal with. week isage we got last very powerful. matt: you do not think they have to cut out anymore. mario draghi based the said as
much. he think they will not have to go to the drawing board, they will not have to reverse course or try any new tools, that this is a plan they could put into motion and let it stick. in europe, you never say never. on the one front, they really had to stop. it was completely counterproductive. the market learned to have a hard look at that. they discovered it was probably counterproductive in terms of trying to spur lending in the area. this was done quite skillfully last week and that is a positive. the other stuff, asset classes, if things turn sour, they have other options, which would be the natural step followed after. i do not think they need to.
in environment that was consistent with bank lending, but also could consistent -- consistent with this single push in european countries. even if you accept the idea that maybe military policy is at the end, what they created would allow fiscal policy to become the main tool in europe. thank you very much. john: the ecb to discuss tuesday. bank of japan decision, thursday, the bank of england decision. a bloomberg view columnist's most recent piece on what the fed will and won't do this week, he says the bank will note the continued recovery reiterates concerns and leaves the fed's interest-rate structure as it is.
things, is itsee about what they say and not what they do this week? ignore what they do because they will not be doing anything. peter: correct. everyone will look at the town. -- tone. it is like the car is not working well and we are debating whether to put premium gas in the car. you could have a little bit but it is not the core problem. the core problem is demand and the monetary policy changes have marginal effects on that. fiscal policy is nowhere to be seen. in country after country, japan they aret example, committed next year to going ahead with a consumption increase, the wrong thing to do when you're trying to boost consumption. >> what is the alternative?
>> that is my point. it overwhelmed the impact of everything else they were trying to do. if it did not work, let's try it again. it has even less effect on the fiscal authorities. what are you supposed to do? take their hands off the wheel? policymakers,onal there is a broader responsibility not being addressed at all. directed to do is when interest rates are so low, to couple a lot of short-term, additional demand. reduction, deficit it is by far much better for all the leading economies than the debates we're having over whether the central bank says this or that. theie: potential marks of boundaries of their mandates, you see the ecb buying corporate bonds, for example. trying to dore
what they can because the thing that should be happening is not. they are stretching the boundary of what they can do in order to be as helpful as possible, but ultimately the problem is they cannot solve the problem. >> on wednesday, the guidance of whether they will hike four --es this year, disjunctureve a between what the fed has been signal, thating to would entail moving the market toard what they're trying signal, meeting somewhere in the middle. president draghi decided he needed to -- 20 more bullets. what should janet yellen be looking at?
the united states is 10% above the previous session. john: such a -- that goes without saying. what should monitor policy be doing as far as you are the problemster: with the u.s. economy this point do not have to do with monetary policy. graduallymalization over time, i did want us to get off of zero because there is an unhealthy obsession with that. going slow i think it's fine slow gradual increases. there are issues in the u.s. economy. has slowed mostly because of demographics but we have major problems that need to be addressed. there is a growing body of evidence that the dynamism in
the u.s. economy is down. half of what it was 20 or 30 years ago. new business formation rates are down. all of these are problems that feed into productivity, which has been low. none of which has much to do with janet yellen. david: the issue of going over to the fiscal side is not a new one but a lot of people are talking about it. china, saying we will increase fiscal stimulus. we have a present election -- presidential election going on and i do not see one candidate adjusting this. peter: maybe bernie sanders. people can talk about it but if , the house the u.s. of representatives will remain republican with virtual and that house is not particularly interested in a lot of short-term stimulus on the fiscal side. it is very likely to happen.
to a certain extent, we are and to a certain extent, we are not. when you're talking about inflation expectations come you look at yield. it is all interlinked. we have some internal momentum but not an island in the middle of nowhere not connected. there are clearly linkages. the 10 year yields and a japanese 10 year yields are somehow moving in tandem, when will that happen? it is difficult to generate high inflation in which i think is your point and it is right. presidentiallast race, it came down to something as simple as well it happened to
ben bernanke over obama. literally for the markets it came down to the republican government would put forward much moreo had monitor policy p what do you think it would come down to for the markets? play: it is really hard to through the scenarios. a lot of people are saying a lot of things. if you do not ask what will actually happen in early 2017, a president clinton or a president sanders facing a republican house, what will happen there? a is not clear if there is president trump, what the policies would be. there is no detail. markets are confused. you cannot go from a to b as clearly as you usually can. david: i learned over the weekend that fed employees can
make direct contributions to political campaigns and there was a report out that has right now skewed heavily toward the democrats. governments -- toward hillary clinton. you are not allowed to solicit converse -- contributions. governorsure, fed would think very carefully about making political contributions to presidential campaigns. david: nothing is really private in this day and age. peter orszag.u, he will stay with us. ahead of the market open, about 15 minutes away. negative,e largely
the green here in room. premarket movers. i will take on tracy alloway in battle of the charts. good luck. tracy: we will see. i am vonnie quinn. feedback on the behavior of guests who rent rooms to airbnb. the company will roll out the feedback soon in japan, its fastest moving market. it will go global in a few
weeks. neighbors have complained of party houses that attract rowdy renters. it is working with japanese governments to make hydrogen from wind power. emissions running on the power created to make water. pimco may not win a click and by cofounder bill gross. after he was allegedly forced out. pimco says there is no agreement it is guaranteeing, but the california judge says the page can go ahead. now to matt miller with a look at stocks. matt: let's look at big movers starting with starwood group. i want to make a little bit of a correction. i was looking at a group earlier.
28% by john malone. they are not part of the buyout a spinoffe is starwood holders would get a steak and even if it goes with marriott. group, aacation timeshare kind of thing, and it will be 550 per share for each share you on no matter which deal goes through. it has not named the group of bidders. that is why there is confusion you see the shares of the premarket trade. now valued at less than $64.
it says it supports the marriott bid. we will see how they reconcile the price difference. let's take a look also at the apollo group making the purchase. it is a grocery store chain, a premium and about 25% trading up to that. maybe he will mention this as well. i want to talk about tesla. he downgraded in october because he was worried about the production. tesla is having reported troubles living up to the production expectations. have any of you mortared --
ordered a model x? it is very cool. ok. if you do order one, you may get it sooner than expected. tesla is ahead of schedule, good news for all of us. skepticism was overplayed. >> forbes is 55. -- $55 billion. it is off the charts. evaluation is so high. matt: fiat chrysler is 10 million and tesla is worth three times. sheep, ram, dodge, chrysler, fiat. >> you have to believe in the bright future for this company, tesla. matt: it is an amazing story.
withcompany is coming out a treatment for procedures. it has gone through testing and found the treatment for procedures actually works and reduces seizures in children. i'm guessing it is not the kind of thing that gets you really high. it just came out this morning and that is why the stock is soaring. it has doubled. takeint is i know you can these medicines and use them for medical purposes and a way that would make them worry. it could prove to be medically. i read a lot about it.
it is a fresh market to look into. john: i know where my is -- my vote is going already. we are about 40 minutes away. futures are negative. the dow futures, negative five points. a rally in europe we need to discuss. 1.5% higher after caught tro weeks of gains. the stoxx 600 the longest winning streak since march of 2016. 37, 45. ♪
us to take on matt miller. we will go with matt first. matt: i don't even want to because tracy is one of my favorites. ok, i will destroy you. you can access the entire library of charts now. you can see all of them. shows you is something simon was talking about earlier in the program. he was saying you might think that you want has strengthened a lot this year. versus the u.s. dollar, it has come back to where it was beginning of the year. it may make you feel like the one was very strong, but versus other currencies, the one has fallen to its weakest level since back in 2014. yes, it is stronger versus the dollar over 2016, but versus the
rest of the world, it has gotten a lot cheaper. is what the pboc is trying to do their they are trying to move. we are showing how they have done. tracy: it is an ok chart. it is decent at it does not have data from space. this is the china satellite manufacturing index. it collects all the satellite data of factories in china and typetes it into a pmi index. it is contracting. are these worries about whether we can rely on the official stats. is an independent third-party index we can look at to get a realistic sense of what is going on in china. and it comes from space.
you can see the satellite index is about one less than the official pmi and white. john: you have got to wrap this up. who are you going with? data from space. it is too easy. >> tracy has already won. >> a big thank you to the bloomberg view columnist. thank you very much. next up, only one keeping the bull market alive. that story is coming up. ♪
concern over potential declines. shares of starwood hotels are searching the premarket after the company gets an unsolicited come eating bid from a group. 30 minutes from the opening bell in new york and i am vonnie quinn. stephanie ruhle is off today. john: the refugee crisis really hit her party support over the weekend. . lot of politics to talk about here with us is the chief
strategist for silver crest asset management. let's get a quick check on the markets from matt miller. matt: futures. we are still down across the board with futures down about five points. nasdaq futures off just 10 right now. if you look at my terminal, i have got it interesting chart up . we have a story, the number one most read story on the bloomberg terminal that said basically the only big buyer keeping the bull vivax.alive is corporate you have seen this story and you can check it out on bloomberg or the internet. it shows over the last year, companies that have high dividend payouts rather than ratherrporate buybacks than corporate form spirit
dividend index in blue, it shows companies that raised index for 25 negative years. off more in the last five years. we will talk about this later in the program. that is true. discussioninto the later in the program is a major indexes year to date, we have almost recovered the losses we saw in january. is down 1% in 2016. the dow is one and a quarter percent. the nasdaq is a bigger loss year to date. we have done a lot of research. stocks get hard. we will talk about that. oil, the correlation has been climbing again with oil and stocks. oil is down right now three
dollars -- 3% per barrel. opece waiting for the monthly oil market report to come out. it would typically come out around 8:00. cross, we wills bring them to you right away. iran is saying it will boost its production to or million barrels per day and that is not helping deep prices supported in any way. let's look at the euro quickly. $1.11, it shocked me to see that even after the ecb moved last week. he continues to win in long-term bet on the fall over the euro trade, which i thought it would. morgan stanley say the 10 year byld will -- has gone down
the end of september. points,ly down 31 basis a nice move for morgan stanley's call. you can see this is a year to date chart, not a one-day chart. it is an interesting chart to look at one morgan stanley is calling for 1.45%. bloomberg's first word news with vonnie quinn. vonnie: governor john kasich pulling ahead of donald trump the day before the republican presidential primaries. trump has about a 20 point lead in florida over senator marco rubio. ohio and florida are among five date starting tomorrow. expected toama is bid for the supreme court earlier this week. a campaign to attack the president passes choice and target vulnerable democrats.
the top-ranked team overall in the ncaa basketball tournament. tournament winner more north carolina. global news 24 hours a day powered by with a 150 news bureaus around the world. we will have to give you a tutorial in march madness. let's move things on a 25 minutes away from the open. the top three stories that metal -- matter who market right here right now. the s&p 500 companies poised to repurchase as much as $165 billion of stock is quarter. fund outflows running at almost the fastest rate ever. your view on this in terms of sentiment, you can take that status and say this is bearish
but you could also take it and say this is bullish. where do you sit on that debate? >> with the buyback situation, it has been an ongoing story. companies are sitting on a lot of cash. it is not surprising that has bolstered evaluations. what is surprising is it has translated to more m&a activity. it hasn't listed small-cap stocks more. do you want to have a view of the economy? a lot of the negative sentiment has recently in in the expectation the numbers do not seem to be wearing that out. >> a lot of ceo's is deciding they have nothing better to do with their cash and stocks.
classic points to the issue of revenue weakness. growve seen profit margins but not on the strength of revenue. we start to see wage pressure, it may translate into a more even kind of, it puts downward pressure on profit margins but it may translate into better revenue growth. forward, if we see two more rate hikes, will that make any difference? patrick: the rate hikes will only take place if you see strength in the economy and that may shift sentiment. the other thing that may be troubling as we know corporate -- leverages will go up now if it is cheap.
patrick: yes. the point of, we are not in qe anymore, interest rates really benefit equity holders at the expense of fixed income. in terms of your fixed income return. maybe we will see a continuation. john: one of the worst months for the s&p 500 was a time where there was a blackout. corporate vivax, does that increase volatility as far as ou are can turn? patrick: i think it makes people edgy if they do not know whether it will continue. i do not think it is excessively
priced but it is risk elite priced. -- it is risky priced. any performance, the fed's actions and potentially raising interest rates, questions about the future of buybacks i think undercuts the comfort level with those evaluations. vonnie: morgan stanley says bonds are set to -- the bond yield forecast, u.s. 10 year september --end of stanley, to morgan until september before raising rates. germany is 55 basis points from the forecast. everybody depressed about global demand and global growth. current -- see
recurring episodes of pessimism. a couple of components for you are people rushed to a safe harbor, to bonds, because they are afraid external weaknesses will be translated. i do not think we see the numbers bearing that out. in the expectation of weaker numbers, people expect the fed to hold back. we felt the fed would be patients. it is possible the fed will not raise rates in the first half. i do not expect the fed to be entirely passive if we continue to see job numbers. people do not discuss this, but the money that exists does not stay put.
it tends to keep interest rates in the united states to press. david: there is another factor. matt: low supply. we were showing this before in our off the charts segment. timeis the about of someone puts in an order and doesn't get it filled in the 10 year. you can see one of the reasons there is low supply is that the fed's holdings so many of his 10 years and they are not trading them, obviously. japanholds a ton and holds a ton. all the countries around the world are holding the 10 years and banks are not trading them. mohammed was here last week and said there was a problem playing in the game. that is what the central banks are doing when it comes to the bond market. patrick: you mentioned china.
china has been selling off foreign exchange reserves, and that means selling off treasuries. a lot of people are saying that will cause interest rates to spike. to meet payments and meet capital outflows, those dollars go somewhere else right into somebody else passes packets. disappear. do not the federal reserve is --nvesting maturing shouldn't they be contracting the balance sheet? patrick: they would have to tighten it significantly to have an impact on any constraints on lending. this is the real challenge going
forward. the normal mechanisms the fed has to raise rates, they could not train the pool fast enough to have an impact. they have to rely on alternative mechanisms with -- which is essentially paying banks not to lend. that is fine when you pay them 25 basis points and 50 basis points. paying themrt hundreds of basis points, that gets interesting. i am not sure that ends up looking like. chinese stocks climbing the most in a week after the new head of securities signaled he will keep propping up the markets. , without central bank too much stimulus. either to the securities regulators, what is going on?
patrick: they reacted positively to the idea they will probably is in places where they do not belong. it is the main reason why chinese stock market is not falling down to it started. i do not think that is healthy at all and it is not based on fundamentalsted to in the chinese economy. the chinese economy has been in a downturn for the past two or so years. i do not think any kind of stimulus will change the direction of the downturn. john: a conversation we had earlier on the program was about social bailey. about -- how much was the statement about maintaining social stability? ?hat are your thoughts patrick: it is about trying to maintain control over markets and market outcomes broadly. they say one thing, we will let the market be decisive as we
know that is essential for the long-term health the chinese economy. they turn around and say, we do .ot like the market outcomes it is a dangerous situation for anybody who plays the game. david: patrick will remain with us. let's look at the stocks we have been watching. starwood. $76 per share from a group of companies, a nearly 8% premium to its friday closing price. more on that later in the hour. ♪
matt: star wars forward -- starwood's hotel is getting a bit from a chinese group that bought the lobby -- waldorf astoria. wasiott still had its bid less than four dollars per share. we will see how the price discrepancy works out. they say they want to stick with the original plan but have until march 17 to look over the new bid. the fresh market is getting taken out by apollo. shareholders will get 2850. fresh market has risen almost to the level here. johnson & johnson got an update for neutral attractive on goldman sachs.
almost 10%. focusts see the increase to my investors and the media to make a transformative change including may be a breakup strategy. it is interesting goldman sachs had rated the country attractive/sell, which seems to me to be a bit of an oxymoron. .ake a look at holdings here after conducting an analysis of trends, labor costs they raise their price targets to $85 per share. you can see hd is trading right there. more of the chinese yuan surprising resilience and how bearish hedge funds are getting burned. ♪
david:david: further declines of the one getting burned. surprising hedge fund at least 500 sisi too many dollars so far in failed options since last august. silver crest asset management chief strategist is here with us. patrick: most of the hedge funds are looking at it as a classic emerging-market debt crisis. but it is not. is more like japan and a 1990's. the crisis japan faced went from high-growth to low growth. it had a meltdown in its stock it was a chronic surplus country with a lot of reserves.
china is in much of the same position. first of all, what does china have to do? do,also, what it should china needs to send a signal to save and produce less. china needs to consume more and produce and save less. it needs a strong currency to send the right signals. at the very least, it should hold the line, especially against the u.s. dollar. that is the price signal. why is this downward pressure? . the reason it is slain china is because china has not just that it's economy. in order to adjust its economy, that is one of the key components. matt: i am not sure if you
witnessed battle of the charts earlier. chart pivotosing data showed the same as government data when you look at chinese manufacturing. you see the yuan and our headline said surprising resilience. yes, against the dollar, but not terribly resilient against 13 currency is want to move closer and closer toward and it has fallen there to the lowest since 2014. what do you think of this discrepancy here? patrick: it was to allow against a strengthening dollar. they were afraid if the fed raised interest rates, they would basically catch a ride on an appreciating dollar. so they have been depreciating and the dollar went down 5% last year. there has been little volatility recently given the prices of
dollar relative to other currencies. that is trying a strategy to depreciate against the dollar. john: the point for you is even though it has declined, that is got -- not good enough? that still an objective to weaken against the dollar? patrick: they do not like any other options. they do not like the choices involved and the implications involved. i think a lot of them realize devaluation will not help them especially if it triggers competitive devaluations from other countries. i am not saying china is healthy, but i am saying china passes problems are deep enough that devaluation will not help them. there are people who realize that, part of the solution. around 6.5 or so
for the u.s. dollar? not think there is a defined level. a lot of people say, including the imf and the u.s. treasury, that china should have just let it go because that would be the market-based exchange rate. it is not the market-based exchange rate as long as china is holding anywhere him $3 trillion to $4 trillion worth of reserves. they need to draw down those reserves in order both to unwind their position and also to generate global demand. john: a great pleasure. thank you for joining the program. futures are slightly negative. ♪
bloomberg stocks reporter joe teal we c. on the morning when volatility seems to have subsided, tech stocks are in focus. why? joe: the premium is at a six-month high versus the reachr s&p and it is only this level two times in the bull market that started in march of 2009. this is really reflective of this sort of momentum nature of the tech sector or at least the large-cap tech stocks that are so notable in these big indexes. if you were to look at the performances of these tech stocks since the bull market started, they increased about 30% faster than the rest of the s&p since the start of the year. they declined about twice as fast. store double-edged that you deal with with tech stocks.
jonathan: a lot of people focus on text box, but maybe for tech stocks, so what does this mean for your world? >> this probably about 100 tech stocks trading five times above revenue. our focus is slightly different where we see slightly different dynamics unfold. we focus on companies under 5 billion and market captured it's a very large market. and two thirds of the companies that we focus on have two thirds value under revenue. atspend our time working the stocks and our dynamics are quite different. david: what's going on with the markets? matt: i am looking into what is going on. you see the index is down just a bit as we saw in futures. the s&p down a quarter of a percent. the dow jones industrial average
191. to 17,00 as we showed earlier, the nasdaq is down 5% year to date. the other two major indexes are eary down 1% your toda your to date. i use this function to see how we are doing compared other months. we are in the middle of march and so far, we are up 4% for march. march is typically a strong month as far as stocks are concerned, at least over the last 10 years. we have seen three negative months for march. let us take a look at oil. this could determine how stocks go for the day or for the month . .ntraday, we are down $1.13
$37.36 is the price per barrel and we are waiting for this opec monthly market report for that could move oil and could move markets. i want to look at some of the merger acquisition we are seeing. i hate to use the term merger because they are all acquisitions. there's no such thing as a merger at least in my lifetime. the 10 year is down by two basis points. starwood and now marriott right now. starwood is up it percent at $76 a share. it says it has another offer led by an unnamed group and that marriott came out and said companyis led by chinese interested in acquisitions lately. says starwood still supports the offer. maybe marriott is going cap
come up and match that price. let's go to abigail doolittle live at the nasdaq, . abigail: we do have a stock that has doubled. gw pharma is trading back above $80 after the biotech company met a primary endpoint at a study showing that a drug reduced convulsive seizures in children. newsarma is now on this trading back toward its highs. another stocks sewing is fresh mark, after apollo global says it is buying fresh market for on $1 billion in cash. itsapollo global, this is third greater than $1 billion deal this year. vonnie: thanks, abigail doolittle. tech shares have been hit
harder and it is holding steadily higher than other industries. it is hedging the s&p 500 and it has reached a six-month high level. it is only hit twice before in this old market. mehta looks for value and underappreciated tech stocks along with joe. of insuring against tech stock losses is much higher than it has been for except for two other occasions during this old market. is it skewed by these unicorns that we think are about to really come back down to earth? the volatility in tech is across all these investments and something driven up by the fact that you have about 100 companies that are trading at astronomical valuations. at remaining 900 are not those high valuations, but when something like a linkedin has what happened, the ripple effects felt across everywhere. vonnie: how many stocks are we
waiting to reach regular levels? amish: i do not know when some of those stocks will ever reach regular levels, but most of the market is not that overvalued. david: as an investor, you see this sort of volatility on the tech stocks specifically. is this a great opportunity? how do you get the best of the volatility and leave the bad behind? amish: i think it's impossible to time the volatility over a short time. is on a way we invest two or three year time horizon. that's for small tech stocks. if you do it, it will be very expensive. if you take a two-year or three year time horizon and through deep fundamental research develop of you that these stocks could be 50% or 100% upside stocks into year or three year
time horizon, that is how we think one makes money and small-cap tech. jonathan: can you stomach that kind of all til volatility? could you stomach a loss of 50%? how difficult is that? amish: the hardest part is at the start to raise capital when people know this is your strategy and it skewed to have investors aligned with that viewpoint. getfocus has been to endowments and other longer-term oriented investors that understand these are the dynamics of tech stocks and structure fund accordingly. only with that capital base, can can one approach a two-year a three-year horizon. david: is this something you see would be to be companies? volatility is really driven in the mid-cap space where buyer strikes happen where no one is buying on risk off days. matter whata
type of company you are. take over ass opposed to anything fundamental with the company and you need to view that as a buying opportunity. joe: we are seeing value stocks come back in to vote. at thewere to look best-performing strategy factors of 2014, value would've been one of the worst. there is data that showed it was the worst of one point. that has been flipped on this year and value is really coming in and people are kind of looking around at some of the thatage of these traits these stocks sold off that we got to our worst start of the year since the bull market could there are some values to be had. jonathan: this growth versus valuation play -- there are companies that straddle the two. this is a growth company anymore or is this a valuation play?
i wonder how you differentiate the two. how do you take the two? amish: we look for companies that have at least one of the following two factors and ideally both. the high is the highest free cash flow yield. in the eurozone 500 companies earlier on, we were able to find those. the second factors toy percent loss sustained growth and we are will to find those. we are able to find those and average valuation of two times on the price value of revenue. some of these other hundred companies that mentioned are at five times revenue plus. looking at 20% growth is where we find two times press undervalued revenue. david: i want to thank joe ciolli and amish will stay with us, including his three current stock picks next on "bloomberg ." ♪
to have a totally clean supply chain, hydrogen must be cleanly made. federal reserve policy will convene this week in washington. they look at the benchmark interest rate unchanged. for full coverage across all of bloomberg's media platforms, it all begins wednesday i want a clock p.m. eastern. eastern with the fed decision to happen at 2:00 p.m. eastern and janet yellen's news conference at 23:30 p.m. the unsolicited bid for starwood. jeff mccracken is here with ore, the let's go to a mish with his type three current stock picks. amish: we like an tct. that scout is a company that
helps manage the performance of mission-critical networks such as goldman sachs trading system. they have hundreds of customers around the world for what they do. the company has been built up by a great ceo with about a billion dollars in revenue through organic growth and acquisition. he is running a 30% margin. vonnie: what kind of return are you looking for? amish: 50% plus upside is what we typically targeted. even if it just stays at these levels, based on the free cash flow generalization and the synergies of the acquisitions completed in 2015, you can see the stock price appreciating by at least 30%. if multiples were to revert where it has been trading over the last several years and is recently as 2015, you have a double right there. it was a $40 stock down a $20. david: how about a second stock pick? amish: incontact and 59 both in
the cloud contact management center space. they are growing at 25% a year and up and growing that way for a long time. great ceos are running these businesses and hundred percent recurring revenue. loss growth and both these copies trading at two times net revenue growth each. what is attractive about this particular company given the way it trades at the moment? just fundamentally, given its exposure to the finance industry , how exposed is it to what is happening with the likes of jpmorgan when these banks are really pushing to cut costs? amish: the company has got customers across the entire spectrum from financial services to carriers to walmart and starbucks. it is running mission-critical networks for them. i do not imagine that
maintenance contracts are going to get canceled for these types of products anytime soon. we feel very good about the stickiness and the stability of the revenue. the reason as traded down so much over the last six-eight months has been uncertainty around verizon and at&t spending with netscape. it tends to be lumpy and we do not deny it will be lumpy. we see this company having multiple sources of revenue, 40% of which is recurring, double allow it to grow 5% or 10% a year . matt: i'm looking at netscape sales and them taken off from basically $100 million to $300 million in just two or three quarters. at the same time, the company's per-share profit, which was half a dollar a share, is now down to a loss of $.25 a share. what is the story here? are they paying to boost revenue? amish: this is what i love about
small-cap tech investing where bloomberg charts cannot adjust to the matter of what's happening. the company acquired a lot of assets and that chance a direction closed in 2013 -- transaction closings way 13 and that is missing the numbers. yet the look pass it to see what's going on. it's acquired revenue come yes. vonnie: it's a lot of chinese companies though. space on a a crowded global basis, but on the tier ,ne level, tier one providers fortune 1000 corporations, those are buying that scout products and services. mehta, thanks very much for being with us today. starwood shares are moving after the company received a rival unsolicited bid by give up companies led by an insurance group in china. bid valuer share billion.at $29
joining us now is just mccracken. what do we know about this deal? saturday, i was shocked when they would announce they would buy strategic hotels from blackstone coul. this was one blackstone closed on the acquisition of strategic. i thought this was another example chinese company's making inroads in the united states. this announcement was another shock to the system. $13 billion on top of 6.5 billion couple days ago and thei they're putting billions of dollars into hotels in the country. david: why does marriott not have this locked up? jeff: they thought they had a locked up and it will be hard to top. i think that eases the pain a little bit.
they're going to spend the next few days or weeks with their bankers and lawyers trying to figure out whether they can top anbang and in other chinese private equity fund with this all-cash offer. it's a big jump from what marriott was offering a couple months ago. jonathan: this is big money coming out of china and looking for a big place to park it. is this what's really driving it -- money looking for home? insurance is an company and we know it's an insurance company that goes to what buffett has done through the years. they have a a lot of capital they want to put to use and they feel like this is a long-term investment and they can drop a lot of money in. it will be help for overtime, but chinese companies and other things we have written about this year -- china is looking to diversify outside of their country. they're looking in europe, but they're mostly looking in the united states could vonnie. vonnie: what about regulators? will it be difficult for the deal to go through and what
about investors? jeff: this is seen that's something will get through. remember walled off a story of that john bang but earlier because there was hesitation because the president used to stay at waldorf, but no. vonnie: vonnie: this may be better for the consumer after the deal is done. for peopleis better who work at the starwood hotel chain because they will not be merged now with marriott so you do not have overhead and overlap where heads will be eliminated from i.t. nhr. that is going to be one of the argument. will be ableompany to say we are going to keep u.s. jobs and not illuminate them. jonathan: i said we were going to have jeff mccracken back because it's a busy week, but he's back earlier than we thought. jeff mccracken, thank you very much for joining us. coming up his "bloomberg
markets," mark barton, the dax ripping away. >> the post ecb rally is still in place. we have some cracking guests for you in the space of 10 minutes time. this is my quote of the day. the entire fed should resign. they are doing a horrible job. david stockman, former director of the omb, joins us at the top of the hour. leading asset the manager in the real estate and hospitality industry, will be talking about the big news in that space today. ng launching the offer for starwood. john will be talking about the quad sector. you know it's a big week for central banks. fed, thehe boj, the credit suites, and the bank of england. trifecta -- it is all about the quadfecta.
i'mr a four-week absence, excited. jonathan: vonnie quinn is excited. trifecta is manus cranny's favorite word. i know the fed has critics, but i've never heard anyone say they all need to resign. >> we shall see. not everyone thinks the fed is doing a terrible job, but david , whichn has a lot of use i know that you will be listening to, as well as the founding director of the brookings institution. quadfecta -- bring it on. david: i don't know what to say when surrounded by all these europeans. you get so excited. let's go back to matt now with a look at the movers. matt: take a look at apple downgraded its
estimates for people who are going to upgrade. i had to upgrade because i left my phone and in it were on saturday night. ubs do not think many people will have to upgrade from their current apple iphones because of the timing of the new release. nonetheless, apple shares are up a 10th of a percent in the early trading. take a look also at 3-d printing. that company came out with an almost $600 million loss in the fourth quarter on revenue of almost $200 million. 3-d systems nonetheless of 20% because if you take out all the accounting or if you add in some of the accounting tricks to make earnings per share adjusted, it was $.20 rather than eight cents that industry was looking for. tesla, we have been talking about the upgrade of tesla with the $300 price target saying the company is going to cheapen batteries sooner then it may
is "bloomberg markets" on bloomberg television. ♪ mark: we are going to take you from london to silicon valley and new york in the next hour. here's what we are watching for you today. we are half an hour into the trading day. u.s. stocks are lower because of dropping commodity shares. a rally continues for european stocks following last week's big stimulus moves. betty: we have more eagerly awaited announcement including the fed and the boj. what that can mean for investors. shares of starwood hotels are searching this morning after the company gets an unsolicited rival bid from a group led by an bang insurance. what will