tv Bloomberg Go Bloomberg March 21, 2016 7:00am-10:01am EDT
of 140 characters. twitter celebrating a milestone while many question its future. welcome to "bloomberg go." bloomberg world headquarters. i'm stephanie ruhle with jonathan ferro and david westin. happy monday. david: welcome guy haselmann. we have a lot to talk about capital markets. jonathan: this for day trading week. before we get started, let's get a check of the headlines. a look into pimm fox. david: welcome. made instory will be havana today. a meeting between the bomb and raul castro.
-- a meeting between president obama and raul castro. the president is expected to urge castro to seize the opportunity to improve u.s. cuba relations by expanding human rights and economic opportunities. for the second time since friday, north korea has conducted ballistic missile tests in the sea of japan. officials say kim jong-un's regime launched five short range missiles today. earlier this month, the united nations security council enacted sanctions to punish korea for another missile launch as well as a nuclear test. the german government says it took in 2 million refugees last year. a 49% increase compared to 2014. of those 2 million, 860,000 have moved to other countries. angela merkel has resisted measures to control migration such as putting a constraint on the number of refugees. ,lobal news, 24 hours a day powered by 2400 journalists in
more than 150 news bureaus around the world. i'm pimm fox. matt: thank you very much. good morning. take a look at markets in europe. the dax has turned around to big gains. the stoxx 600 turned around and gains as well. you still see losses in the ftse. one of the reasons for those gains has been the movement in basf.and you can see monsanto unchanged upthe premarket but byer 3.25%. take a look at u.s. futures. we see green arrows across the board but really little changed on each of the major indexes. oil has come back down again and oil has been determining the fate of stocks. right now we see nymex crude
-- still at a relatively high level considering the last few months where we have seen this movement. 38.95 per barrel. barrel coming down to 1248.90. to 1248.90.ng down sherwin-williams taking out valspar. jonathan: you might want to dig starwood says revised marriott 8536 dollars per share. starwood saying the revised marriott, $85.36 per share proposal is a superior offer. stephanie: everyone thought this thing was a done deal. we sort of forgot about it but you forget until these things are signed sealed delivered, it is not over. starwood inking a deal, the first major hotel operator to be operating in cuba.
they are taking the approach, being the biggest is the best. david: we had some this -- we had the ceo on set and it seemed to be a done deal. i would not be surprised if we did not hear -- jonathan: the conversation last week, a superior offer in terms of numbers or the company you are about to go with? for a lot of people talking about this deal it was going marriott because if you want growth, go with the company with the existing infrastructure to grow. gotshareholders, they the company they maybe wanted as well. david: how much is in cash and how much is in shares? stephanie: it is a sign for the global markets to see deal flow happening and to see some level of a bidding war when you look at overall market conditions, that is a positive. david: despite the slide in the dollar and drop along bets on the currency, goldman sachs is unmoved. itsfirm is holding onto bullish stance on the greenback. it is predicting three u.s. rate increases this year to fight the
fed's signal that it is taking a slower rate hike cap. guy haselmann, we have something of a divergence he interdicting the dollar. morgan stanley saying it's going to get weaker. goldman saying it's going to get stronger. guy: i think it's going to trot overtime. goldman could be right for the wrong reason if you do get three rate hikes the dollar i think will go up. we are the cleanest dirty shirt. our economy is the strongest there are main factors. one is some of the shale revolution has structurally changed our current account. our current account deficit is shrinking. the other that i think matters overtime is demographics. the u.s. has actually the better -- if we had that demographics, much better than europe, china and japan. jonathan: the core of this call for a stronger dollar is three rate hikes this year. unusual for a bank to be more hawkish than the federal reserve. you think the fed can fit in three hikes this year?
guy: i think it is hard to predict. i think the fed is sort of making it up as they go. they moved the goalposts on us last week. we are really not sure if they are focused on international events or the u.s. higher.n is not it is hard to know what the fed is going to do in terms of 2ether it is one, two or three. stephanie: what kind of sign is this? traditionally people are flooding into that u.s. dollar. is it that the dollar is not giving them enough? guy: i think it is more about regulatory rule changes. they hold less corporate bonds and more treasuries. i think treasuries are -- monetary policy cannot be as effective as it needs to be if they don't have the support of fiscal and regulatory agencies. the treasury yields are going to stay much lower, just because
banks -- not just because banks are hoarding them but because the fed has so many they are and theover at auction yield so much more on a relative basis than other countries. matt: i put together a chart showing what stephanie is talking about. here we see primary dealers holding a treasuries. 22to $111 billion, all primary dealers. the highest level we have seen since october of 2013. in red you see central banks or other foreign officials movements in treasuries. i should have put a zero line here. we come below the zero line. they have dumped more than $100 billion in treasuries in the first two months of the year, the months for which we have complete data. it looks like central banks and foreign officials are selling off u.s. debt. stephanie: if you think about investors they have been punished for sitting in u.s. debt. they have been pushed to the corporate bonds. the ecb spent -- said they are
only getting pushed further. matt: these are the punishers i'm talking about, not investors. i'm talking about the actual central banks. stephanie: and those investors are not incentivized to own government bonds either. in. i could jump i think there is a portfolio affect that is happening. countries' her currency started to fall and he wanted to support their currencies some of them may be raised rates like in latin america. others, the reserve managers would be selling treasuries to try to support their currency. the negative portfolio effect i'm talking about his budget deficits really got impacted in a negative way. saudi arabia and other exporters. when their budget deficits blew out, it was not just reserve managers but sovereign wealth funds that had to sell. they basically sell everything.
treasuries got caught up in that just like they got caught up and that is why tips sold off and risk assets had a difficult start to the year stephanie:. a lot of sovereign wealth funds were -- they just own so many treasuries. david: i would like to come back to the question about the dollar. we talked about federal reserve rate hikes. you said there are fundamentals like shale and demographics. how related are those? does one really affect the other? the fundamentals are looking good, does that mean the fed is more likely to raise or other becoming divorced? guy: i think this is more about the globalization and connected world. the dollar plays a very important role. i think when you are at the zero lower bound, the other major central banks when they do more stimulus or qe or cut even more, the release valve typically should go into detail going
their currency. , ihink what happened is think there is a negative affect which is why the currency didn't react the way it should have. in my opinion, the fed missed an opportunity to raise rates last week. if they were data dependent, they had the data to support that. the most important reason why i think they should have done that, they could have helped these other central banks drag themselves away from further negative rates. i think negative rates are really counterproductive ultimately. jonathan: just to pick up on something you said about the fx rate. how do you reconcile all time low yields in japan with a stronger japanese yen? guy: maybe it is years worth of carry trade's being unwound. now you can go into other currencies to do that trade. i struggle with that myself. jonathan: does that mean it is
getting harder and harder for these respected central banks to weaken their currencies even if they wanted to? policythink central-bank is not going to be as effective as they think. i think it has come to the point where it is counterproductive. it is hurting pension funds, insurance companies, negative rates are attacks on the sabres. -- are a tax on the sabres. savers. low rates have indebted the entire world, not just china with the central bank governor just said about china being indebted. we got out of this crisis because of massive amounts of debt that has actually been taken out. it has not been taken out for an investment in the future. it has been taken out for misallocation and speculation. stephanie: if central banks are not going to be as effective as they want to, what is going to
be the outcome on the economy? guy: my biggest concern is that the markets have this unhealthy dependency on central banks. they are powering risk asset prices higher but those prices are not being supported by the fundamentals. stephanie: what you do? guy: what happens is that the central bank of taken on too much. they will not be effective at -- if fiscal and migratory authorities will not help. what i'm concerned about is higher risk assets, what that ultimately means is lower future returns. all that debt has been taken out at some point borrows from the future to make debt today better. the longer central banks wait with policy that i think is counterproductive in the long run, it is only good in the short run. now i am even questioning that. they need help from trying to solve the root causes, which
really are in the hands of fiscal authorities. jonathan: guy haselmann, director of capital market strategies. you are going to stick with us. coming up next, china him of the governor of the pboc says he is concerned about corporate that. on the other side, margin trading gets loose. discuss contradiction, next on bloomberg go. ♪
pimm: the bidding war for starwood's hotel has escalated. thanid was valued at more $13 billion. --word if an important deal in the financial interest structure industry today area ihs and market have agreed to merge. ihs shareholders will own 57% of the combined company valued at more than $13 billion. the new entity will be called ihs markit and will be headquartered in london. monsanto is exploring possible crop deals with basf and they bayer ind germany. ferro.o over to jonathan goathan: in today possible we look at china as that shanghai composite rallied to a two-month high laid brokerages and -- led by
technology companies after policymakers loosened controls on lending. a conference organized by the state council. take a listen. translator: overall i think the view on china's reform going forward, china's economic future, and the remnant the exchange rate. if we can go back to normal, those discussions will soon be gone. we have seen evidence of that type of argument dissipating. jonathan: despite the reassurance is policymakers underscored their concern over rising corporate debt. jeff kearns joins us now from beijing. great to have you with us. it seems like somewhat of a contradiction that the governor of the pboc says he is concerned about corporate debt. not so concerned about investors piling on debt with an increasing market-rate. why is the corporate debt issue such a concern? definitely this is down in shanghai the markets up. green in every sector today.
in beijing, still a lot of questions for policymakers and it is not clear how they will be answered. being at a gathering of top of top officials in beijing. a second public appearance in the last few days where he specifically identified risks he has been seeing. this weekend he talked about the level of debt, 250% of gdp. something that signals they are watching this closely. corporate debt, he mentioned, 160% of gdp. this follows his press conference during the national people's conference a few days earlier where he specifically talked about the real estate market and banks and told them they need to know the customers and said the banks need to control the risks. he was also talking about this in the context of big real
estate price gains. that are diverging from different parts of the economy here in china. jonathan: before we get to the stock marketjonathan:, where are we in terms of nonperforming loans. great story on the bloomberg about how companies are taking so long to actually get the money they are owed. what is the story? jeff: that was a really great story today, really interesting to see that. duration since 1999 to get the bills paid. this is another signal of credit risk spilling out. theme of whater the government is going to do to steer the economy through this restructuring as they are wholeheartedly committed to the 6.5% growth goal for the next
five years. at the same time, how they are going to address the overcapacity and unprofitable government run industries and potentially get rid of millions of jobs. this is a natural tension we never really see resolved. we hear a little bit of this conference rest closing the people's conference a few days ago. he kind of left it saying they would be able to do both and this would be a win-win as far as doing the restructuring and keeping growth on their target. jonathan: jeff kearns, great heavy with us on the program. the governor complained of a corporate debt and the market rallies beyond 3000 points on the shanghai composite. somewhat of a contradiction in china. that is your story in asia. next up, we will talk about president obama, nine decades later a u.s. president touches
david: for the first time in nearly 90 years an american president is touring the streets of cuba. president obama arrived in havana yesterday expecting to lay out a vision of greater freedoms and more economic opportunity during his visit. margaret tallis joins us now by telephone. give us some sense of what it is like having president obama walking around the streets of old havana. margaret: before we even touchdown on the ground there was a sense on air force one of the excitement of the president and his team to be there.
in the pouring rain yesterday as the president made his way to the cathedral, hundreds of cubans lining the area outside the square, cheering and calling out his name as he walked in. a lot of anticipation about this moment although neither on the u.s. nor cuban side does anyone really know entirely what it means. a lot of possibility for the expansion of business and in theory for some of the freedoms that may come with that for the cuban people. still very much fledgling and its stages. david: let's talk about the business. one deal has been announced. starwood will be managing a couple of hotels. a letter of intent for a third. is that up and running? margaret: the announcement is a big deal but marriott is here as well. whatever is happening between marriott and starwood -- david: it was news about tournament ago about -- news
about 20 minutes ago about that. areopagus it is in the running. margaret: part of what president , and is doing here investment coming to cuba anyway, whether it is china, other countries that are involved in investment here. 90 miles off the coast of florida. owninggoing to be properties, it is all interconnected. you see marriott trying to get in on the game. starwood having a foot down first. airbnb, active in cuba. you see other ceos beyond the hospitality business. xerox is here today on this trip. we expect some deals to be announced. they have been pretty coy from the u.s. side about what those are going to be, trying to leverage this for maximum drama
in days to come. the embargo remains and as long as the embargo is in place there will be a limit on investment, as well as the cuban government and some of their approaches to human rights, communications, the ability to hire. talev in havana. thank you for joining us. richmond that president jeffrey lacher made some comments earlier today on his outlook for inflation, coming up next on bloomberg go. ♪
tom keene joins us from radio and carl riccadonna joins us as well. pimm: a suicide bombing won't did many people in istanbul. the donald trump presidential campaign will add security to his larger events. recent rallies have had outbreaks of violence, spokeswoman says the republican front runner does not condone any of the scalpels and says protesters have used profanity to provoke responses. drama is expected this week in brazil, the country's supreme court and congress are trying to come up with a way through the political crisis. 2/3 brazilians want the president ousted over
corruption. -- almost dads and e puttingn titans ar up $10,000 each while they put up money for march madness. texas a&m was down 12.2 northern iowa with 47 seconds left. to tie in managed regulation by going on a 14-2 run and won the game in double overtime. watching and weeping, most people got loan out why the michigan state game friday night. bigbasketball weekend and a morning here. in paris, people are getting together.
the esteemed president of richmond is here -- of closect inflation to 2% next year. i think it will generally be firmer of this year than last your. riccadonna is with us. favorite industry cbi which gets is way above 2% right now. how now is now? definitely seeing a gradual acceleration in inflation. we are finally seeing some emergence of the inflation pressures outside of the shelter categories. it's an important of element for the fed, giving them confidence that inflation resurgence is being driven by many categories.
central banks are ignoring volatile food and energy prices and they are equally dissatisfied with the inflation trend. tom: you should check out cleveland cpi. it takes out food and energy in cleveland chooses which one to take out. sometimes they take out bowties. fed, the debate at the you've got some saying we've got an upside inflation risk. the federal reserve as a consensus, tends to differ. hikes.ght do to rate fed looks at the environment now and they see inflation appears to be crossing above their targeted level as
measured by cpi. fore is not fertile ground a sustained flare up. the household income creation is not there and the economy is growing too slowly. janet yellen and company are looking at these developments and saying it may be overshooting but it will not last. they have confidence they don't need to panic and ratchet up policy too quickly. david: at some point, this may really tight them because they are dated dependent and they've got inflation going. where can they run and hide? tom: the other phrases actual progress. will speak in days to the economic club of new york. she gave a speech last talking about slack but does she used data dependency and progress? >> absolutely, she will continue lean on data dependency.
campaigns -- contains an implicit forecast for growth and inflation. economye -- in an growing at 2% or less, you're not going to have the inflation flare up. it's data dependency but it's also forecast dependent as well. how many angels on the head of a pin can be dancing? they are constrained what's going on with the ecb and to japan. stephanie: and oil prices, we had the benefit of a lack of andet volatility last week things started to stabilize and everyone jumped on that. down, that drags so many industries down. how can you choose which data you want to be dependent on? tochair yellen and team want move deliberately and slowly so they don't overshoot.
every economic cycle has a different fingerprint. they don't fully know the economy's reaction to interest rate tightening. the best option is to move very slowly and gradually. if they move too quickly, there could be unintended consequences. dudley in another speech said maybe we don't need forward guidance in the future. are these the phrases they use at the bank of england? john: very much so. bill dudley is worried about financial conditions. they haven't gotten back to where they were. the federal reserve is worried about financial conditions but they are the ones and exacerbating the problem at the same time. conditionalse off, -- financial conditions ease. can they be that concerned about financial and's additions -- about financial conditions when they drive them? >> it has a strong feedback into
the broader economy and that's why they move so gradually. they cut in half their interest rate profile. they are looking at the tightening of financial conditions that happened late august and early september. there was the economic fallout that transpired as late as q4 when the economy did not grow much. they are looking at the first six weeks of the year and saying a similar tightening of financial conditions but we have to be cognizant of the potential fall out. q1 phenomenon. by late rate increases in the second quarter, it's simply not feasible. that's why they had to ratchet back that profile. --n: some key pieces of data
gdp revisions on friday and those people are listening to this thing fourth-quarter gdp revisions is backward looking. why should they care? >> it's a four-day week for the markets but a five day week for economist because we get the gdp numbers on friday. this is the first look at economy wide corporate profits. normally gdp revisions get a yawn and corporate profits drive right at sector and 70. profits have been negative in three of the last four quarters. if we get more negative profit news, those -- that is more ammunition. profitsy got corporate totally wrong coming out of the 1990's when they revised them in 2001-2002. stephanie: even of it's not negative news coming out of earnings, you are not seeing corporate spending in any significant way. &a may be up but you are
sitting in a time of uncertainty. corporations simply aren't spending in a time of uncertainty. we had larry fink on this program and we asked him if the fed has ever raise rates in declining corporate profits and he said i don't believe so. can actually see corporate profits are in negative territory. that is often a warning sign of impending recession. it's not a guarantee but it's a dangerous signal. if there is no animal spirits in the private sector, the fed needs to tread carefully. looking at that chart, can you say this time is different? >> i don't think we have to. chart, there are very few instances where corporate profits turned negative and the economy can
pull out of that nosedive. it's not the majority of cases but it tends to occur. we have the blessing right now of low labor cost, low financing costs, and a relatively lean and balanced economy and that should give it the ability to pull out of this. it's not a foregone conclusion. the fed has to be careful. tom: there is an idea that we can take the complete economy and know the shared going to corporations is going to be five years from now, is there any research that sick just the share of the economy will migrate to labor? >> i think it will barring a recession. we will be in an economy with a increasingly tight labor market that will meet higher wage inflation and more of the profits will be directed toward workers rather than corporate earnings. stephanie: you mentioned to janet yellen and her team. we have a long list of fed
speakers this week. what is the risk that she sends out a message -- the rest of the fed presidents will come out with a different message this week's that's what we have had over the last 10 months. that is what is causing uncertainty. >> we sought dissents at the meeting. bullard is one of the hawks on the committee but has recently scaled back his hawkish inclinations and we will see how theely he is in line with others. i don't think we will have a strikingly new direction to the fed rhetoric but we will see how people fall in line. not enough hawks to steer things in a different direction than janet yellen. covered a lot of things here. tom: the only thing we haven't
covered is scarlet fu's bracket is an act of god. david: she's still in it? tom: she's like hockey girl. top.s the it's just stunning. stephanie: i wish she was playing in the bloomberg rackets. there could be $420,000 for her charity choice. david: thank you so much. riccadonna, thank you for joining us. tenures of 100 40 characters, twitter celebrates a milestone coming up next. ♪
david: i'm here in the green room with peter boorish - borsch. we will talk about china and what went on over there overnight arian . pimm: three american companies seven ounce deals in cuba as president obama was arriving on the island nation. air b&b and marriott says the government has approved their applications to do business in cuba. starwood said it would convert three hotels in cuba to their brand. american homeowners are finding it more difficult to trade up because of the widening gap between mid-level and upper level home prices. that's the conclusion of a study by trulia.
it says the mid tier homeowners cannot afford bigger homes creating sales stagnation and higher prices. havesh housing prices passed another milestone. for the first time, the average rice is now more than 300,000 pounds which is $435,000. home prices in the united kingdom have increased 50% in the last decade. that is more than twice the pace of earnings growth area that is your bloomberg business flash. stephanie: 10 years ago today, jack dorsey sense of the first tweet. he now finds himself as ceo in facing a barrage of problems navigating the next 10 years. user growth has stalled and felix at gillette joins us with the cover story of bloomberg news who sat down with jack dorsey for an exclusive. what did you learn? >> they've got a big problem and
jack dorsey thinks it's basically marketing and product. the user growth has stalled at 420 million users. many people of already tried twitter and decided they don't like it. part of the challenge is getting those people back. stephanie: what is his solution? >> part of it is convincing people that you don't have to tweet to use twitter. you can sit there and listen and twitter is the best place to listen to whatever world events you are interested in. it could be sports and politics or information -- or entertainment. stephanie: they need to make money at the end of the day. >> the advertisers like the product and advertising is growing quickly which is the best thing they have going for them but the advertisers want a bigger group of users. they want closer to what facebook has. stephanie: if you think about
facebook and the acquisitions they have made, you cannot compare it to twitter. whopping $86 million. are they in the game? >> jack dorsey has high hopes for her scope. he told along story about up huddle he watched over periscope puddlet it huddle - a that he watched over periscope. he said periscope can creates live events out of everything. you don't have to wait for the super bowl to get charged up. tears may a puddle of be. what does he think it will look like in 10 years? >> he thinks they will remain independent and they will get users back. he thinks the advertisers will follow. part of it is convincing people
that you don't have to necessarily be active on there. part of it is adding editorial controls onto this firehose they have created already. stephanie: you can actually say anything as long as it's confined to 140 characters which he is committed to. >> he is keeping it there. they also want to make it feel safer to people. spam and so much anonymous trolls. people it is convincing that it's a place your mom or dad can deal safe posting on. stephanie: how is he going to do it? they just had this trust and safety council which has 40 members but it's unclear how they will police this. not even at the point where
they are making it safer, they are just talking that it will feel safer. pick up this week's edition of business week. k is on the cover. he has trimmed that beer. ard. do not miss this issue. twitter is turning 10 and that is on newsstands this friday. we will talk about something next, a special tournament of champions. we've got updates on which big names in finance and business are leading our bloomberg racquets for a cause. weekend as mad this i saw michigan state go down. ♪
all weekend long, i was watching basketball. texas a and them had a big win in round two of march madness last night. they trailed northern iowa by 12 points with a less than one minute left before winning in double overtime. it was the biggest last-minute comeback in college basketball history. it was a wild game and is one of the reasons this year's tournament and our bloomberg racquets for a cause are off to a great start. special way to follow the tournament where titans from the world of business and finance take their best shot at filling out the perfect march madness bracket. we have got a total of 42 players including mike bloomberg. cubanot mark and others in each player is donating $10,000.
let's find out who's winning. i love seeing a woman in the lead. they have an impressive 83 points. danny meyer is right there behind with 82 points. many others are still in the paul tudorlluding jones and mike bloomberg and bob steele. they all have their final four picks and are still alive in the tournament. there is so much basketball left to play. sweet 16 games start thursday you can follow the action of our challenge on our website, bloomberg.com/charity bracket. you can click on the celebrity length. it's a great cause for great fun.
i know somebody would like to see notre dame when and somebody would like to see maryland win. it's time for off the charts. faerro is watching basketball. matt: i don't know about that but we are watching oil. you were talking about how excited you are that we added oner rig. john: it's the first time in three months and it shows that every time crude oil tweaks higher, guess what happens? matt: it's up 5% but has come down because of the rig count. shows the acre hughes rig count. it just dropped off a cliff in 2015. read his oil and green is the
dollar. as the dollar gets weaker, oil gets stronger the last couple of months. that may be a reason for the rig count to bottom out and turn around. john: total crude production has rolled over to 9 million barrels per day. you wonder whether that starts to pick up. what about the flexibility of shale? there is a natural ceiling in there. hour, we willext talk about all things china. ♪
rake down china. welcome. before we get to that, let's give you some first word news. here is the first american president in 88 years to visit cuba. he is going to meet with cuban castro to improve human rights and economic opportunities but that is not preventing criticism from republicans and some democrats that the president's meeting with the man who puts political opponents in prison. mexico is mounting an impreza tented effort to turn its permanent residence in the united states to vote in the election. hostingdiplomats are free workshops and how immigrants can become u.s. citizens. officially, mexico says it has no strategy to influence u.s. politics. for the second time since friday, north korea has launched a ballistic missile test into
the sea of japan. north koreasays launched five short range missiles today. the united nations security council issued sanctions to punish them for another mitchell launch. -- missile launch. matt: a quick look at futures that are very little change but green arrows across the board. europe was down across the board earlier. it turned positive especially in germany. i just pulled up the anr function of valeant.
we can see that all of the analysts we are tracking still expect a price for valeant higher than the actual share price. stephanie: that could be about a trade because we are now seeing them down another dollar and i may not have a long-term positive view. bill act and is in this trade in the height 100. they are trading with a five handle so it's a different story. at $26 98re trading and analysts are looking for $56.38 so they are $30 above where we are trading. what's more likely is a majority of the analyst of not taken down their price targets yet. 1 stephanie: it has moved so swiftly. analyst, when you see the share prices down this much, you have to ask if they are in acquisition target. either that or there is so much
stink inside this company led by mike pearson. people are questioning what the real value is. matt: barclays cut their price target from $130 down to $34. thisnk that's why you see yellow line. taking a look at other stocks, arriott and starwood have chinese bidder that came in for starwood and marriott has improved its bid to $82.36. monsanto once you did for the agricultural chemical business.
monsanto is unchanged in the premarket. big gainers. are you see the dax swinging to positive territory. there are five or six deal today. et are in a deal valued at $13 billion. there is not much movement in the stock but to have the dealood deal and the ihs and wilbur ross. what am i missing? there is a ton of deal news today. i think there are six deals so far. david: sherwin-williams? yes, $11 billion. john: in china, the shanghai composite is running above 3000 points for the first time in three months after they loosened
controls on margin lending. over the weekend, they are worried about corporate debt but they don't seem too worried about the margin. >> it's fun to watch people trade on margin. it makes it more exciting to lose money more quickly. we have had the market down and we have a rally back to the break down point. i like to say price makes news but not the other way around. we have a rally so we have news around it related to margin buying. years,over the last few i don't think that will add tremendously to aggregate demand for chinese equities. if you look at chinese equities versus margin lending, it tracks the shanghai composition. you can say this is not based on fundamentals. do you just follow the trend?
what happens at inflections is there is diversion says. the likely scenario is there is a shorter-term rally and it diverges from the increase in margin lending and that will put more pressure. if you think about the next leg down potentially, it will be faster because of that margin buying. if underlying markets have to move because of on the metals and economic growth, what we are seeing with these mergers is you cannot grow. if you goo simple -- in a lake and throw pieces of bread in there, all the pigeons come down. the bread right now is global economic growth. the pigeons are the central bankers from around the world. fastest agents get the bread. ultimately, growth is not there and you have to have more bread and growth otherwise the pigeons will go after each other which is what we do with a series of
competitive devaluation. we don't do anything in the dollar sells off and the yen rousey in the nikkei sells off. 90.are still at 1. 1.25 go to 2.50 or first. warned aboutor jo corporate debt saying it's 160% of gdp which is corporate debt. i think overall debt is 240%. how worried should we be about the credit situation in china because they have been borrowing to fuel growth? >> when you borrow at a rate that's greater than your rate of economic growth, there should be concerned and i think you are correct that you should be concerned about not only in china but another countries. i cannot figure out how you solve a debt problem by issuing more debt.
that's what's happening everywhere around the world. stephanie: there is this battle going on between nations to continue 2-d value one's own debt. how does it end? who wins in his battle? dayhose that have police long u.s. treasuries. we think the likelihood is that they go down, yields go down and bond prices go up. the bond value wins because there is price pressure and therefore you have very little inflation and aggregate demand stays slow. if i am an investor in equities, what does that mean for the stock market? on february 11, the world was coming to an end we had this low and now we are six weeks later we have had a nice rally.
everything is great. is in between. we have to look beneath the surface at the polity of the rally. we have seen the yield curve continue to flats in which is not been very good for financial services stocks. we have seen those stocks that actually are the weakest and have rallied the most. in the short run, it's a supply and demand for money. , nowink the likelihood that we've had this nice rally, that there will be a pullback. oil.just like an nothing goes straight down or straight up but we say oil is down so it has to go lower. now oil is back to $40 and it has to go higher. no, it doesn't. the fundamentals will win but in the short run when it comes to trading, there is more dynamics taking place. in the case of margin in china as an example, you say there are some shorts and there could be aggregate demand and i will cover that.
can we go higher, yes? do i want to buy for the next 12 months, no. david: how do you investor or trader in the fundamentals rather than the froth, rather than the noise? group try to have people who can maneuver the speed votes around the big wakes of these larger capital pools. we are trying to navigate over the shorter-term. we are not long-term traders. we don't think there is value added that we can bring to that. valeant where always harping with egg moves happening from oversold conditions. they have gigantic declines. you look at the individual stocks but trying to pick a bottom is not a very good strategy. about we will now talk
cuba with president obama meeting with castro in havana later today. it marks the first time in nearly 90 years a sitting u.s. president visited cuba which is 15 months after president obama announced the restoration of diplomatic ties. david muir spoke to president obama in cuba. >> obviously, our intention has always been to get the ball rolling knowing that change was not going to happen overnight. what we have already seen is the reopening of the embassy. although we still have significant differences around human rights and individual liberties inside cuba, we felt maximizeng now would our ability to prompt more change. david: it's hard for some of us to overstate how dramatic this is historically. i can remember the cuban missile
rices but i was young and i was afraid that we would have thermonuclear war and do have the president down there is extraordinary. stephanie: it's not going to be withou some level of conflict. in 1959 when the revolution happened, you had americans completely shut out of this country. millions of acres of homes and businesses were shut down. assetsue of all of those that people just wrote down to zero, what is that value? does cuba oh americans that money or is this a time when we say water under the bridge? john: there are many ceos going with it. the question is whether the political progress but the step forward over obama has taken,
can that be unwound? does that make it even more difficult politically for whoever gets in office to take a step back again. it willt feels like almost be impossible to unwind it. stephanie: this is a new step forward. lostabout all of those who 60 years ago. there was a massive amount of investment so do we brush that under the rug? david: who owns bacardi rum? stephanie: that is a perfect example. i'm sure republican candidates will have a view on this. marriott and starwood are taking a claim in cuba. that pending deal is next. ♪
pimm: this is your bloomberg business flash. in the financial infrastructure industry, data company ihs will acquire market in a $13 billion deal. monsanto is exploring possible chemical deals with basf and baer of germany. monsanto lost out on their last deal. hedge fund managers cannot get enough pork. they are the most bullish on hog here cheers -- hog futures in two years.
hog futures are at a nine-month high. that is your business flash. breaking this morning, starwood says the marriott terms are better than the counter offer. have our bloombergs deals reporter. it seemed like a slow start to the year and all of a sudden, it's a tsunami. 2014 have that sluggish start of the year. it may be the same thing happens this year where we have lack 70 in the first quarter but now it's picking up. >> starwood/marriott. marriott is now ahead by a nose. about $600 million. they were at originally and were behind it now they are back ahead and they had the original deal. nowhere withut of
a superior bid. comfortable that they could finance the deal. they said this is the one we will go with and this morning, they said marriott has come back with a better bid. enbank bid was all caps? >> it's still cash and stock, this deal and the break fee has gone up in the overall price is 13 billion dollars from enbank. david: will we hear from them again? >> they could come back. these guys have shown they are ambitious and they want expansion in the states. i wouldn't rule it out.
david: sure and williams was a big announcement. sherwin williams was a big announcement. >> this is interesting. the way they structured it is interesting. if there is forced investors and they are over a certain threshold, the value of the deal falls. it's almost unheard of. if they have to sell $650 million of assets, i think the price goes down $10. about ihsjust heard markets just announced. what's driving that deal? be thersion seems to
theme behind this one. the acronyms are getting together in the financial market ice.deutsche boris a and want ther here is they added tax benefit. david: regulatory issues? >> they are probably fairly limited. there are many other players. it's hard to see that they will get blocked on this. maybe there will be some downsizing because there is a lot of overlap. david: thanks very much. john: up next, gold continues
we saw mike pearson stepped on a medical leave but he is back. that: we heard last week they want all the demands from the lenders to waive a possible default. they are in default on their loans. stephanie: by the 15th is when the lenders have the ability to say we need to look inside your book. sec is looking at the books to review the lines of their business. it's interesting they would reinstate mike pearson, making the argument he knows this company best. wood isis under the foul play, it will be bad. this is massively bad for bill ackman. they will get rid of all the goodwill.
one has to assume as that goes away, then you have this spiral related to the lenders and the filing and where is the marginal demand going to be. buyers are usually higher and sellers are usually lower which is the opposite of what people think. we have been going lower so you will actually have more sellers. they lost the head of dermatology two weeks ago and the entire business model has beenm&a. that is off the table. pershing square is down and we will talk about this after the break ♪.
whether it is barclays or mizuho, now downgrading the company. they have not gotten their 10k out and by not having it out it puts into question the relationship they have with lenders. mike pearson, now back in the seat as the ceo of the company but it does not seem like they -- seem like their houses in order. we will be talking about valeant through the hour, really through the day. the stock being halted is huge for massive shareholders like pershing square. a lot to cover. we will get you some first word news. here is pimm fox. pimm: thanks very much. in havana there will be a historic meeting between president obama and cuba's president raul castro. president obama has become the first u.s. president in 88 years to visit cuba. expected to urge castro to seize the opportunity to improve relations by expanding human rights and economic access. in belgium, the prime minister
warns the fight against islamic militants does not end with the arrest of one of the suspected paris attackers. sala abdeslam was arrested friday in brussels after a four-month manhunt. the prime minister says there are hundreds more radicalized people in belgium. the numbers are in. germany says it took him 2 million refugees last year. a 49% increase over 2014. of those 2 million, 860,000 have since moved to other countries. german chancellor angela merkel has resisted measures to control migration such as putting a cap on the number of refugees. it is being described as the largest last-minute comeback in college after both history. texas a&m was down 12 point the northern iowa with 44 seconds left in the second round at the ncaa tournament. tying in regulation by going run and won the
game in overtime. i would what did the bloomberg brackets. starts wednesday. but go to julie hyman. .ulie: an update on valeant shares fell about 4.5% in the premarket before being halted. and have an i on the terminal trying to wait on whatever news will be coming out. the year to date chart of the stock, 73%, plunged. as you heard stephanie allude to , insult to injury with a couple more analysts downgraded the shares. mizuho and barclays. $18. it had been $70 so it is also quite a cut in terms of magnitude. after careful consideration, three-year growth court -- see the business as contracting. valeant cut equal weight over at
barclays read the price target is $34. it had been $135. still waiting for whatever news may be coming out from the company. looking at tesla, those shares are upgraded to buy versus hold. 330 threetarget, dollars. shares of a little bit this morning. the analyst says the company has made progress in addressing its production shortfalls are you and that has been widely issues for the company as well as cost overruns. the new batteries for the company and battery production should be positive. it is poised for stronger performance in the coming quarters. intel getting a duo of negative comments. shares down about 1.5%. cut to underperform over at bernstein saying the company is not making a first quarter preannouncement does not mean it is out of the woods. it is possible the quarter is going to come in below guidance. deutsche bank saying first quarter result will likely come
in at the lower half of guidance because of the weak market for personal computers. ecb is poised to encourage more lending. charging banks interest does not seem to be working. access by eurozone banks have jumped since the introduction of negative interest rate. weber discussed concerns. >> the ecb has extended purchases. it has a program in place of 60 billion now. they added 20 billion. the main focus of what they are still doing and continue to do will be purchases of assets and that will provide a lot of impact for taking risks in the european economy. it will impact on the euro. they claim it is not their main objective but it is an important variable that can help bring growth back to europe. jonathan: that was ubs chairman
axel weber speak to bloomberg tv earlier this morning. joining us now is tom michaud. peter borish, still with us. a report this morning discussing how to unlock the value of citigroup at a time when everyone is looking at european banks scratching their heads. thinking how much worse can this get. how do you unlock value a company likeciti? american bankse are very far ahead in terms of the recovery and frank we had an extraordinary amount of capital. they have so much capital that i think the discussion is moving toward what to do with it or how possibly to return it to shareholders. in the case of citigroup, that stock has traded at 80% of book value for the last 5.5 years. what we think is happening now is there is a good discussion happening at the board level about how to unlock this value.
our analysts came out with a 30 page report this morning thinking there are ways to exhilarated strategy that could have a meaningful impact in the share price. stephanie: selling what? some of theed at a parts which is to take all of the businesses and value it. if we do that instead of $45 per share we pick is worth 62. i think the real how is to break the company into two businesses. consumer and institutional. we think if you do that they will be able to unlock some of the global tax or higher regulation on these banks. we think it is a logical decision for the company to make. david: so it is no longer too big to fail? tom: it may still be a global study. the fourth-largest bank in the united states even after the split. one of its pieces will still be the fourth-largest. we think it is the beginning of the process, maybe not the sole conclusion. peter: you don't think when you look at all of these financials
the world equity markets are telling us there is excess capacity in banking and there needs to be some mergers or acquisitions or some of them are going to have to go away? tom: that is a great idea. one of the key themes of our firm has been to look at the industry in total. -- these are the banks that the world regulators thanks are too big to fail and they had an extraordinary amount of capital requirements. dodd-frank rules that restrict what they can do. i think none of those banks will be allowed to be bigger because of consolidation of other banks. when you go below that you are going to see a lot of consolidation and i think that is for a variety of reasons area consolidation is here for regional banks. i don't think these two big to fail banks are going to be made bigger. they have to figure out how to get shareholder value out of them in the meantime. david: different kinds of consolidation. i was with a friend over the weekend who is with one of the big banks who says he believes
we are on the breaking point of huge restructuring along the banks, which is not them coming together but to get out of some businesses, for some people to buy other parts of businesses and reallocate all of these businesses european and u.s. tom: i think it will be redesigned. when you look at this era of regulation, the rules and capital requirements are so high that these banks cannot earn an acceptable return for shareholders, nor can they in some cases, earn their cost to capital. the logic says that as a company like citigroup -- which i actually think has some terrific businesses and is a fine company, but that stock traded at 80% of book value. the board has to saying what is the right decision for shareholders and we think it is to continue the course they have been doing and maybe make themselves faster and do exactly what you said. they exited 20 countries in the consumer businesses since the crisis.
stephanie: are the big banks really being run for shareholders? i would say no. tom: meaning the regulators -- stephanie: i mean in terms of decision-making. when you think about cutting businesses, changing what their business lines are, are they actually putting their shareholders as number one? historically that has never been the case. tom: my view is a couple of things. .he stock price is a fact the stock has been at 80% of book value and you have to do something about it area that we are in an era of increasing shareholder activism. there have been numerous reports of how activists are moving up market cap. stephanie: but they are so rarely touching financials given how complicated banks are. how much of a threat really are activists when it comes to banks? peter: how has activism worked out lately? tom: in the financial services industry, it has had a better than 50% success rate in terms of if you measure success being
did the company do something in line with what the activist was requesting. that has been happening in financials. we have seen larger companies. comerica, they have had activist investor. cit has activist investor. stephanie: those are cleaner business to go after than a citibank. tom: one thing i would say with sifi, whatever happens -- i would imagine that anything that happens with these companies happen slowly. i would grant that. jonathan: this is what regulators want. if the regulators took a step to one side would you think this is the optimal way to maximize value at a place like citigroup? tom: first of all, we are kind of geeky about this. we read all of the testimonies and the chairwoman of the fed actually said, we have set the rules and if the banks decide to break up, so be it. i think that the bar has been set too high for these banks to
keep the current business models. citigroup is the first one. now we should be asking other companies that have subpar are a we if they will be on the list. you could go down that list and look at someone like bankamerica and morgan stanley who will have to answer the question, what is an acceptable return for shareholders. right now it has been slow. stephanie: would you say it has worked at comerica and cit the share price? -- i don't want to say invasion pressure. i would argue it has not worked. tom: i think it is too early to tell. all i can tell you -- frankly i have read the activist report and they said that they think their efficiency ratio is too high and they think they are an asset sensitive bank and they have been waiting too long for interest rates to go up. i do not think that is news. stephanie: if it is too early to
tell, why would activists want to go after an industry that is so collocated with so much capital trapped in there with what the fed requires them to do? when dan loeb writes a letter he wants a return yesterday. tom: i have to tell you, the banking industry, when you are a regulated industry and regulators are your partner nothing happens overnight. i think the other part of that activist letter in comerica, comerica trades at 80% of book value. i think the letter said the average is 120 a book. i think for their pure group is probably lower. in any case, it is higher than 80%. i think what happens is they are trying to call a spotlight and put it on top of management to get them focused. i think there will be some response from comerica to this activity. whether or not it leads to sale, i don't know. peter: i want to throw my hand up and not let the regulators be a simple punching bag.
if you play football, nobody likes to have a referee. they want a free shot at the quarterback. thanks in general would like to have a free shot -- banks in general will like to have a free shot at leverage embedded. we saw how that worked out in the mid to thousands. mid-2000ators -- the the regulators should not say we are a punching bag here. there are other underlying reasons which is incredibly slow global economic growth. that's what we need to pick up from a policy perspective for all of these other financial institutions -- tom: i would agree with that. the banking issue is not built for near zero interest rates and that's what we have today. technology is a threat. a lot of different threats going on. the regulators have altered the cost, not been the sole game changer except for maybe the is, it has been
meaningful. david: they clearly want smaller banks. had they thought about possible competition from overseas? how big are chinese banks at this point? may we end up in the world where we have made european u.s. banks smaller and huge amounts of money are going through chinese banks and how will regular readers feel them? -- feel than? tom: chinese banks have not made an entree into the u.s. banking system. i'm not an expert on it but i know there are a lot of designations that the fed and other regulars make. i don't think we have been talking about the chinese as buyers of banks. they have been buying insurance companies however. stephanie: great to have you on, tom showed, chairman president and ceo of kbw. we're not letting you leave just yet. we will take you to morning meeting where bank of america merrill lynch research analyst lorraine hutchinson joins us with a look at retail. how is a brick and mortar business doing compared online?
we talk about this thing brick-and-mortar is getting killed. we are just seeing people buy more. lorraine: we hosted a retail conference last week and because of the pace of change in the industry we changed the name to retail technology company and hosted a number of innovative panel discussions with some of the cutting edge private companies. the answer to the question is, people are not necessarily buying more but they are doing it both places. doing research online, going to the stores and i would say the most interesting take away from the conference for me is we have this panel for an army channel technologies panel, leading retailers online only. only one that all they wanted to talk about was opening stores. i think the world is changing but maybe not in the way we thought it would. i think many of the online only retailers are finding that they need these stores for marketing
and try on. they need a place for the customer to go to try product. stephanie: here's what does not make sense to read all of those major stores, i look at macy's, they have more stores than anyone in terms of department stores. and they are hurting. who in the premier online space thinks retail is the answer in terms of brick-and-mortar? lorraine: i don't think any of the small retailers will tell you 800 stores is the right number for them. they are talking about maybe a total store number of 50 and using them as more marketing shops. it is not your grandmother's store. some of them do not have inventory. some have interactive fitting rooms driving conversion once you get there. i think they are trying to innovate the retail experience to drive growth that way. their online sales penetration will be much higher than those
with a very large store base. stephanie: don't they run the risk that you have the store you submitted, showroom? we love to have the store experience but with the advent of smart phones and other technology, we can say, thank you very much for letting me try on now i'm going to head to amazon to buy a cheaper. lorraine: absolutely. that is why protecting your brand is critical here. what macy's and a lot of other retailers are trying to do is increase the amount of exclusive product that only they have. whether it is private label brands, exclusive products from some of the larger brands, they are really trying to give you a differentiated experience and provide product that is one-stop shopping you can only get there. stephanie: lorraine, i think back to the images of the lines around the block for the lilly pulitzer target collaboration. lorraine hutchinson joining us this morning from bankamerica merrill lynch talking retail. here we are not talking retail, we are watching big pharma. valeant, now halted with news pending. we will bring live updates as
they unfold. a one-way track for valeant over the last two months and now maybe it has come to the end of the road, at least while shares are halted. as iphone sales are leveling off , apple will unveil its new phone later today. will going small help apple p going? shares are not moving. we will find out why. ♪
go,d: and today's tech apple is in and -- in enviable financial health. for the first time ever, iphone sales are excited to decline this year. she rolled today explains -- what apple needs to do to fix the trend. >> apple has a bit of a crisis and it is hoping a new kind of iphone will help fix it. apple sold more than hundred $55 billion worth of iphones in the year. when steve jobs first show the iphone to the world nine years ago apple stock was at just $12. shares zoomed to a high of $133 mostly because of the iphone's wild success since then. the iphone empire is in trouble. sales have flipped from exploding to an expected decline this year for the first time ever.
fear of that decline has cost stock to tumble to its lowest $93 and change. what's wrong? apple is running out of new people to buy iphones now that half the world's population use a smart phones. phone sales have been hurt by economic troubles in countries like china, russia, and brazil. apple is looking for new ways to get more iphones in people's hands including places like india where more than one billion people are just starting to catch the smart phone wave. getting new iphones into our pockets is apple's key to selling us more apps, apple watches and potentially future products like cars. tim cook does not want people to think of apple as the iphone company. but for now, it is. the iphone generates two thirds of apple's revenue. if the iphone cannot grow again, the panic about apple will not end anytime soon. fromanie: that is
bloomberg's cap lie. thank you peter borish. peter joins us from quiet group. we have a lot more to cover. at 1:00 p.m. today come a bloomberg tv will be airing a one hour apple's road ahead special. it is around apple's latest product announcement. something else we are covering now and all day has got to be the breaking news out of valeant pharmaceuticals. officially halting trading for news which we are still awaiting. we will be updating when it comes in. last week the company saw a massive drop by 50% sparked by lower forecasts. here to discuss this with us, drew armstrong. you have been with valeant with us on this for months. what do you make of this? drew: i thick everybody is keyed up about what this announcement is going to be. a few things going on. valeant has said it will be talking to lenders about
possibly renegotiating some of the agreements on debt. we know that has been happening. there has been some disagreement on the board prior to mike back.n's coming whether or not he was the right person to lead the company. i think people are anticipating perhaps there could be -- we have no news to indicate. the company said it will be doing things to cutting costs to try to get expenses under control and restore profit ability. they have this internal investigation being done by a board committee that has been waiting on results. they have been looking into the company's business practices. all of those things are possibilities. stephanie: current market cap is $8.8 billion after today's drop. less than 40% of the total price they paid for their two largest acquisitions. this means they are going to have huge write-offs if they have those write-offs how could the company survive? drew: i think we are talking right now unless they can do some thing to turn around the shares.
serious questions about what the future of this company is. talking about selling some non-core assets. a significant amount of debt repayment they have to do. people have been raising this question and analysts in the investor community, does this company end up getting broken up at some point to service the amount of debt carrying. $31 billion worth of debt right now. it is a ton of questions about what they will be able to do next. jonathan: mizuho, barclays, the latest analysts to cut barclays. ubs -- this is such a difficult company to cover and give any kind of rate into at this point. drew: just a stampede for the exit. they have been running for lower price targets at this point. david: as of this morning, 23% of analysts still have a buy on the thing. drew: the stock is so low at this point people are wondering if it cannot only go up but it was down in premarket trading
again this morning. this rush to finally put so ratings on to reflect what happened in the shares in the last six months. david: when will we have an announcement? drew: if i had to take a guess manon :00 seems a nice round time. we really do not know yet -- 9:00 seems like a nice round time. we do not know yet. jonathan: drew armstrong. thank you great much. we will watch this throughout the program ahead of the open, about 34 minutes away. wall street's pile of unwanted treasuries exposes possible cracks in the market maybe. that is next. ♪
starwood accepting an improved takeover bid from marriott. for valeant ceo mike pearson. another wave of analyst cuts and shares have been halted pending an announcement from the company. ♪ david: just under 30 minutes away from the opening bell in new york. this is bloomberg go. i'm david westin here with stephanie ruhle and jonathan ferro. manages 450is team billion in fixed income assets and bloomberg deals reporter at hammond joining us. we will talk to matt miller in a moment but we have to talk about valeant. replaced theeant ceo. it names ackerman to the board.
valeant to replace the chief executive. byected to file the 10k form april 29. stephanie: you have to put into perspective replacing mike pearson. before he went out on medical leave in december he was the chairman and ceo. during that time the board had a supercommittee reviewing management and even though there were questions, should we bring mike pearson back? that is the guy who created the business model. the guy behind the partnership with phil adore. is now to replace him, this wow. david: most in or had they brought him back that he took down estimates while on the earnings call. there was a typo in the earnings call. stephanie: he said we will not come out with our numbers two mondays ago i needed to figure out the company. instead of doing a broad-based call immediately he had individual conversations with analysts who previously liked the company. this has been a hot mess. in the past they said it is a pr
issue. pearson, out. jonathan: let's whip through some headlines. valeant as improper proper conduct by former cfo and corporate controller, material weakness exists in internal controls. the cut reported 2014 revenue by $58 million. this statement, the cut reported 2014 eps by nine cents. corporate controller placed on administrative leave. the big red headline, replacing the ceo, naming ackerman -- namingackman to the board. david: it looks let they are cleaning house. the debtholders have specific covenants coming up by not filing their 10k they could be in default. stephanie: mike pearson is bill .ckman -- he is their guy
to replace mike pearson and say bill and jeff are in the house, i'm not sure how that solves anything. david: you have decimate actually run the place who can go in and clean up and running. -- they do not know how to run a place like that that is really falling apart. you need someone with managerial experience. matt: i think it is interesting that they have asked howard schiller to step down. in a statement they asked the former cfo to get off the board. he is refusing to do so. at least until now it looks like howard schiller remains on the board although the board has asked him to leave and they put it in their press release. the drama continues here. obviously shares have been halted but they have gotten crushed and they were down 5% in premarket. stephanie: one of the reasons we did not see analysts go negative on valeant is when we heard they
are saying it is ok for schiller to stay in his seat, welcoming mike pearson back are you the board put together the supercommittee in october to review management if they had said, the place must be clean if they are letting them stay, two weeks later, i guess not. jonathan: another headline. valeant says the 15 misstatements boosted eps by seven cents. first quarter 2015 and 2014 in its entirety breaking down what is going on with the company and what the numbers really are. matt: first quarter boost of last year by seven cents. that is going to skew the entire year reporting. david: they moved some earnings. did not properly report them in 2014 as i recall. because of recognition rules. this is from a couple of weeks ago. jonathan: i can see it. you can see premarket before it was suspended down about 4.5%. looking at pershing square,
actually in amsterdam, raising some losses this morning down around 1%. read into that as you will. matt: maybe bill ackman will have a bigger say on what valeant does going forward. he has suggested getting rid of the gushing among currently it is suspended because of this announcement that mike pearson is out as ceo or he will stay on until they find a successor but they are searching for a successor. stephanie: if you are looking for a reason to see the stock move up this morning, is mike pearson -- if mike pearson and shoulder are the bad apples, they are not announcing a successor so it's not like they have a plan in place. matt: the board has asked schiller to leave and they say that in a statement they also say they think mike pearson and will miss him as a colleague but he will stay there until they find a successor. it sounds like some bad blood with schiller that does not really exist with pearson. take a look at futures and see
how the overall trade is doing. we had been positive across the board. we are now down although almost a no change. you see red indicators as opposed to green. i think the interesting movement outside of valeant has been in the 10 year. u.s. government treasuries here. you can see this huge spike that has happened as investors sell off treasuries. you also saw a reversal of the crude oil trade. crude was down this morning. the second day in a row that we had crude down because of the rig count. at least partially because of rig count coming back up in the u.s. now you see crude swinging back to a game. 39.57. crude has been the stock. that would argue for a bullish day. selloff in treasuries would argue a bullish day but futures are still down. m and a action. a lot going on over the weekend
and sherman -- sherwin-williams buying valspar for $13 billion, up 25% here. a big deal for them. big deal in the paint industry and you have deals going on in hotels. ongoing saga with starwood. marriott raising its price to $82 in change -- $82 and change. starwood rising up to 80 47 -- 84 .7. maybe investors and starwood are looking for more of a bidding war with the chinese company that wanted to take them out. i want to go to bloomberg's first alert news with pimm fox. pimm: president barack obama is in havana today where he will meet with president raul castro. the first u.s. president to visit cuba in nearly 90 years and tomorrow he will make a major speech that cuban officials say will be carried on
television. the president went to meet with political dissidents before traveling to argentina. russian investigators say they cannot read the data from the flight recorders of the dubai plane that crashed over the weekend. officials say the black boxes are severely damaged. plane nosedived and exploded in a fireball after trying to land a second time in strong wind. all 622 people aboard were killed. -- all 62 people aboard were killed. primary star malcolm turnbull is threatening to call in early election. turnbull says militant union activity is slowing down growth. he wants lawmakers to pass bills to restore a building industry watchdog and regulate unions. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. i'm pimm fox. stephanie: we will get you to the three stories that matter to markets now. aside from those, because we have to talk china, oil, overall markets.
we are looking at valeant this morning. ceo mike pearson is going to be replaced. howard schiller, former cfo, has asked -- has been asked to leave the board but he says not yet. they will be restating their earnings. --have heard that they are that the company had been doing everything they could to fly straight. the fact that shares are halting and we are going to get more numbers on the heels of barclays downgrading, this is an extraordinary morning. a big morning for bill ackman. one of the largest shareholders of this company and today he joins the board. we will cover this throughout the morning. jonathan: ahead of the open that is the number one thing we are watching. shanghaio was in asia, composite rallying above the 3000 point level for the first time in two months. this after policymakers loosened controls on margin lender and. brokerages and tech companies led the gangs over the weekend. pboc governor sounded the alarm
over rising debt levels. david, i know you follow this but it seems such a contradiction that the government comes out and says i'm worried about this and on the other side for investors, load up on margin training again. david: it really underscores the question about whether the chinese authorities really can control and manage and direct this economy. whatever the individual decisions are, do we have faith in these people that they can manage this difficult transition they are going through? mike: i think discussing china has macro invocations. i am a boring bond got and i love talking about valeant. i think this move in china and answering the question about chinese policies will drive markets. i think in the short-term, china still has a number of arrows and its quiver to be able to stimulate the economy. adding more debt to the economy is probably not the best solution. if you look at problems in china, it is a massive growth of debt without an increase in gdp
to coincide with it there is a mounting debt problem in china that has to be dealt with. in the near term i think policy can drive markets in the short-term but following policy from an investment standpoint is not a good long-term investment strategy. jonathan: is it possible to sustain growth without boosting debt any further in a big way? mike: it comes down to they have to spend. an enormous savings glut in china and they have to create an environment where people are confident and spending three it's not going to be driven by policy. they really have to change the structure of the economy to more of an open market economy. an incentive for people to spend their money. right now we are in a big concern for us. a lot of money is fleeing china. we think the currency is going to continue to depreciate until you get a better environment for growth. one,: if valeant is number
china is number two, we are up to number three. for $5.5ying markit billion. starwood hotels is excepting an improved bid for marriott. monsanto is said to be exploring deals with the asf -- with basf and bayer. ed hammond, a lot going on in your area. ed: valeant is the sexy story. a lot of mergers on this monday or speculated about deals. david: something of a depressed market for m and a this year. what was holding it back that might have changed now that triggers this on slot? ed: it is common that we see a depressed m&a market and things kind of pick up once people know what is going on and have a clear picture of the macro environment. it has been sluggish this year. we came off the back of an incredibly strong 2015. i think all-time record in terms of global m&a values.
one of the things that is driving this is this huge inflow of chinese capital into both the u.s. and europe. activity lot of the going on in the hotel space right now. we are seeing there was a smaller deal which almost got busted up over the weekend. companye backed u.s. came in to try and break up a deal. david: has there also been some difficulty with the credit side to finance these things? we heard reports of difficulty particularly leverage loans. mike: it is hard for bond people to talk about exciting things but this is a time where we are talking about things that are exciting to bond investors. there has been a massive increase in leverage in the corporate market. bond investors are cautious about it in concerned. as a result, when you have had, you have seen a widening of credit spreads. it has been
tougher for companies to support and in a activity. -- support and a day activity. -- support and and a activity. back to the valeant situation, fraud is a signal of a late stage of an economy. about not overly excited landing the companies that want to leverage six or seven times and that is what you're seeing now and we are concerned given the state of the credit cycle. two years ago where we still had the economy growing and earnings growing these companies could support increased debt load. at the end of the cycle where earnings are more challenged we are concerned about leveraged deals. david: those are the stories that matter to markets now. thanks to ed hammond and mike swell. there is much more ahead including a look ahead to apple's product launch event. the company said to be introducing a smaller cheaper iphone. .e will keep watching valeant
pimm: you're watching bloomberg go. it are investor wilbur ross is buying control of seo solutions holdings are you $1.6 billion. wl ross holdings is buying the company from tpg which will retain a 35% stake and the deal is expected to close in the second quarter. monsanto is exploring possible crop chemical deals with basf andbayer of germany. monsanto lost out in the battle force and
three american companies have deals in cuba. this coincides with president obama's historic visit to the island. airbnb and marriott say the u.s. government has approved their applications to do business there. starwood earlier said it would convert three hotels in cuba into starwood branded properties. that is your bloomberg business flash. jonathan: just breaking news. ceo,elecom italia suspicion over the weekend that he would be stepping down. he is. there was back and forth with their biggest invensy investor. ceo ofs the italian telecom italia is stepping down. he has resigned. that does not get to the top of corporate news. valeant. shares of valeant halted in early trading.
the company searching for a new ceo as mike pearson, who just got back into the seat a little over two weeks ago, stepping down. zack tracer is with us this morning. david and slum, senior research analyst at piper david, i said earlier it was bill ackman who said -- i believe he was saying a portion of that maybe should ipo. the question is, where is the value in this company? not like pearson who built it who led the structure. , wheres not still adore is the real value here? it is hard to know because there have been such deficiencies in the company's financial reporting and internal controls. they have been so aggressive on price increases and presumably that applies to bausch & lomb product.
i think when mr. ackman makes a comment about spending up bausch & lomb it sound like he is referring to the bausch and loam that existed before it was acquired by valeant. i don't think you can make the claim now that the bausch and lomb that exist now is the bausch & lomb we knew several years ago. david: it seems to me we do not know what happened but there seems to be a common theme which is accounting. we have heard they have to restate some earnings already. questions have been raised about what they have done with some of their accounting. they have some accounting challenges here. david a: significant area what was interesting was when they originally announced the restatement a few weeks ago i think many people were downplaying it and saying it is
a small amount. my thinking was, here is a company that has been aggressive on acquisitions. a lot of accounting complexity. my gut reaction is there is no way it is as simple as a little million.8 now we are hearing and seeing there are more issues. what i found interesting is the press release pointed improper behavior on a cfo. it sounds to me the issues are pretty deep and it almost seems as if a circular firing squad is emerging within the company which is not all that surprising. stephanie: if you actually look at the release, basically officially stating it is at $58 million restatement. you have this ad hoc committee overrice waterhouse poring one million documents. is it we need to digest this because i do not see a number bigger than the 58 million and
that is not actually a huge number. david a: it is not a huge number. when we are talking about deficiencies and internal controls, when we are talking about bad behavior, talking about issues at the top related to potentially perverse incentives, these are all things that were alluded to in the press release and those are things that are not just quick fixes and those all matter. matt: we look at the stock price here but i want to look at the debt for a second. specifically how much is due. $31 billion out, 4 billion coming in 2018. if you take a look on the bloomberg, default risk, you can see that valeant's default risk which is here in blue is absolutely soaring. i wonder if there is any chance that this company actually has some real debt problems as now it is only worth about one third, $9 billion in market cap.
that is abviously major issue. it is not just a question of the financial maintenance coverage we have to think about. reportingancial governance we have to think about later in the year. risk,relates to default these are things that are not going to go away and that continues to make the stock radioactive. again, no quick fixes here. our major questions about the sustainability of the business going forward. callhan: if you got the asking how that is going to go this morning, what would you say? david a.: it is going to go down. i do not see the stock as investable. stephanie: zack tracer, let's
bring you in here. an extraordinary story for bill ackerman that he -- bill ackman that he is surrounded by accounting issues. he believes herbalife should be valued at zero and here we are with accounting issues. what you make of all of this? zack: bill ackman joining the board today on the heels of these accounting issues. a lot of cleanup work to be done. you have mike peterson leaving. it seems like ackman is taking a look at this company, owns about -- stephanie: how is it that two weeks ago mike pearson was the right guy for the job and just two weeks later he is not? if that does not cause short-sellers to push this but anyone to scratch their heads and say what could've been discovered in the last two weeks since this ad hoc committee was put in place in october. about five law firms poring over every document in the joint. zach: that is what folks are
asking today. the stock down six the 1% last week. between mike pearson's return and today, a lot of bad news coming out. if you look at statements from the company this morning about material weaknesses and internal controls, folks cannot be feeling good about that. stephanie: we actually have a bit from mike pearson on the last call, being the right ceo. >> i guess the question is a my the appropriate person to lead this company. that is up to the board. i do think we have a great board. we made a number of new additions that will provide even more. incentives. we have to representation from two activist investors. stephanie: if you say this stock vestable, doesnin
that mean the company is not even an acquisition target? david a.: i'm not going to say it is worth zero but i'm going to go back to my previous comment which is that you have essentially a broken business model. i don't even think the company really knows what it's business model is and i think it makes sense to break it up. that is going to be an unwinding that will take some time. i think ultimately that is the best way to extract value here. keep in mind that over the last several years this has been a business that, in a large sense, has been opaque. stephanie: we do have to leave it there. david amsellem and zach tracer. ♪
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director of spotlight advisors. also with us, mark, head of global fixed income at goldman sachs. stephanie ruhle beside me and david as well. let's get you up to speed on valeant. looking for a new ceo to replace mike pearson. the company says it misstated results and that is former cfo and current board member acted improperly. the company says the corporate controller also acted improperly. there are so many headlines. i do not know where to start. stephanie: many have said as you look as this is pushing closer, could they see a default? they said putting or restating their numbers will officially keep them in compliance. remain in compliance with all in the credit facility at the end of the affected quarterly time. putting out the official restatement keeps them compliant which this company needs.
the management which i would like to point out, they put my tears and back into the seat 2.5 weeks ago. he left the company on medical leave at the end of december. millions ind over documents and they had made the decision to .5 weeks ago. howard on theping board, clearly a different game now. i am sure they are right, but ultimately, they love decide whether they have met it or not. >> investors will decide eventually who will open the companies. jonathan: i said to him, where will this open up. he said it is not investable. matt miller, where are we? ackerman isbill going back in.
he loved it at 180. it is up about 4% at $28 per share, trading up a little bit. possible the board thought about keeping mike pearson on until they were fully done with it. mike pearson takes the fall for most of it. stephanie: that is ugly to put him back in that seat, have him make around scum be the ones to say we will delay putting that out. it does not make sense. it looks like there is more unrest. we are digesting the news. this has not one but two activist investors. i want to say they have been there for almost seven years and though ackerman for about 10 now. like the tick by thick
we had up a second ago. you can watch valeant trading live here it is trading up. let's see how the major indexes are doing. a little bit of a fluctuation. as far as dowange futures and nasdaq futures. very little change as far as the cash trade. 1.5 points down. down 5.5 points. movement there. we have seen a lot of movement this morning in treasuries. the 10 year is getting sold off all the sudden and spiking off. four basis points at 192 on the 10 year. let's look at oil. another place where we saw movement. it is down earlier this morning after the count came out for the first time rising, the first time in three months. movement.sitive
then oil's turnaround as treasuries did. only $.21 per barrel but 3965 $40 ever closer to the level. 9.3d points out it is billion dollar deal with $2 billion. that brings us to 11.3 total last tag the same as sales year. a 24% gain last year. getting a bigger bid, actually $84 and $.36 including a five dollar and change consideration for the part of the deal. starwood is trading up almost to there.vel but not quite abigail doolittle is watching. abigail?
lower totrading underperform for market perform. looks at risk,er he says the second quarter littleus members looking bit high. deutsche bank is out with a note with a similar sentiment with an analyst saying he thinks the hotel was at the low end of guidance for the first quarter. it is worth knowing that guidance was lowered back in january by management. it appears intel may have a very tough time turning around its losses fully on 2016. david: i want to turn back to greg, chief investment officer at spotlight investors. that is a mouthful. a lot of titles. investor. activist this all began as far as i was concerned with an activist sending out a messenger. about thethis tell us role of activists at this point?
it is incredibly important we have investors analyzing companies carefully, being willing to express their views and divergent views. by whole mess was uncovered an investor who spent a lot of toe, money, and effort uncover the relationship and unmask an audit committee that was not doing their job. valeant first came into our viewpoint in spring got -- when phil ackerman involved in a possible merger web -- where bill ackerman was going to win in a big way. activists who simply want short-term gains. it is an interesting
company run today. not unlike enron. global heads of practices in their industry. running it in a way that was different than other participants using financial gainedring, insights you . what are the expertise in terms of operating the company? activists are the guys who understand engineering much more than they know, i bring a company whether it is an oil and gas pharmaceuticals were anything else. greg: the issues at valeant were uncovered, i'm not sure in the first instance but they did add into the mix. and uncovered some of the issues. i believe you are
defending activists. greg: i'm not defending anybody. it is good for the capital market that investors in time, do work, and are willing to express them publicly, whether on the long or short side. the issue might have gone on for him -- for a long time. the board believes it was providing information to the auditors, sitting on the board and continuing with that information, but for investor diligence, they are to be applauded. not everyone loves activists. there are senators who had proposals to really try to curtail it. do you want to tell us about those? greg: it is the one thing that can create incredibly strange in washington.
sanders --rnie management teams from investors who have a point of view. a strange bedfellows for sure. activism we talk about predominately from the equity side. bond holdersical protect the rights of their investment. what we have done it goldman sachs asset management is we have increased our focus on the environment given that you have a significant higher probability of defaults really protecting rights as a bondholder. advantage of the environment. enormous amounts of time with 80 people on our credit team globally that read through the multiple hundred pages of perspectives to make sure what our rights are. typically we discussed credit and the conversation goes
something like this. non-bank investment-grade corporate debt, given the credit, it is very top-down. you look at a company like alley and, how much time do you stand looking at individual credit? >> massive amounts. individual people focusing on credit or beyond credits, you have equity investments focusing on the credit, the industry come the key macro issues that affect companies. as bondholders, we want to get paid back at the end and know that our rights are protected. you have companies that issued perspectives that go on for hundreds of pages. we need to understand them and to understand that there are certain issues companies will issue, debt in one issue and in another entity and we need to know what our rights are. clearly, if an activist gets a board sheet, he cannot get off the board. takectivists that do not
board seats, should there be imposed holding periods ? >> no, that is crazy. stephanie: why is it crazy? the wrong ceo lied on his resume he sold out of his position before her work id was even in operation. >> he has got an a -- a responsibility to make the call and sometime -- sometimes after the slogan right and sometimes they do not. a top-down regulation of what can be held by investors, it seems to be too much government involvement in the judgment calls made by investment managers. not enough freedom for investment managers who made the decisions, doing the hard work to foster these points of views with companies and make changes what appears to
be a board that was not doing his job by financials. stephanie: there is so much i want to cover right now. i wish our producers were not telling me we have to go to commercial. mike of goldman sachs, thank you for joining us. we are not letting greg taxin leave. a quick look at valeant. we predicted it would open down. it did not. it opened up. we are seeing things level off at this moment. volume is up this morning. we will also talk apple unveiling the new iphone later today. smaller is better. we will give you that next. you're watching bloomberg . ♪
matt: a look at it :00 a.m. eastern. -- at 8:00 a.m. eastern. fox with them pimm bloomberg business flash. a move to resign comes after he failed -- monopoly fast enough in order to satisfy his biggest investor and his chairman. two people with knowledge of the situation say the top candidates say the chief executive of high-speed chain operator. in a lawsuitourt involving thousands. the video game maker must now face claims that it owes money --images
>> cannot get enough pork. they are now as bullish as they have been two years. americans are expected to give the most pork since 2007 this year. hogg futures are at a nine-month high. that is the bloomberg business flash. stephanie: from pigs to wales. we are bringing back greg taxin. we want to turn to some of your own work making headlines in the last few days. seaworld. you owned 4% of the stock, saying it is undervalued. following blackfish, the documentary saying the killer whale show is not what they want to be a part of it you are not supporting this because you are a conservationist. greg: i think the stock is undervalued. the company had the benefit of a
new ceo who came down year ago. really changed the tone and the approach of the company. .e is doing a fantastic job he recognized early in his tenure that seaworld is on the wrong side of history and want as awhat we society is to see conservation and preservation and environmentalism and not see big will suck in tanks. i think he is pursuing a positive impact and will attract more families and better branding and messaging. by virtue of the announcement he made last thursday, which i commend him. it is undervalued relative to two sensible peers. it traded at much higher multiples. a brand overhang at sea world. people are worried the well fore will dampen attendance
a long time to come. i think with the latest announcement and with the new focus on education and conservation messaging, the company will grow from here and ought to be valued in line with six/. united. talk about >> i do not know how much conflict it is what is happening at united is two long-standing at united have concluded that the last five years of underperformance is not acceptable and that the board composednot very well for the challenges the airline faces and for the injuries it berates in, it needs to changed. they have exercised their rights as investors, as people who have over $1 billion invested in the company to nominate six people to the board.
>> they specify that he has to be share. i do not know if they said that. they have not said it publicly. a board today with no airline experience whatsoever. is thethe nominees former ceo of continental airlines, a respected airline executive. it would be natural to think that among a banking executive -- >> he has said publicly he would not take the job. >> i do not know what he said publicly but the job is one that by shareholders. in the board room, the board determines who the chairman will be. stephanie: we are seeing board composition change across the board. what has gone on in terms of lord composition? even if you look at seaworld, they changed the ceo but was the board of sleep -- a sleep for
all these years? greg: yes, and we think it needs to change. not well suited for the challenges, with no experience in areas we think are critical. little experience, really no experience in the airline business, not much in marketing and key areas of consumer branding and technology that is seen as just critically turning that around. both have not done a lot of refreshment on their own. sportsie: were those comprised almost entirely of over the age of 50 white males? we talked so much about the importance of diversity and yet we look at them and they look all the same. some might say old, male,
and stale. united has some women on board but like most corporate boards, they are overwhelmingly old white men. we think the challenges consumer brands face deserve more diverse boards that have life experience and operational experience with relevance to the company. greg, thank you for being with us. we are going to the bloomberg markets with vonnie quinn. tell us what you will be covering. vonnie: i will speak with already in savannah. -- have on up. we will be speaking about the president's trip and marriott in cuba. obviously, the revised offer for star wars and whether it was either might be a better chance maria it would take star wars out from under.
the electronic marketmaker on lower volumes and lower volatility at exchanges and what that means for the company. a little market tech with david as well. >> lookout for this as well. apple, the new iphone sce later today. the model is secret -- featuring a smaller screen, targeting users clinging desperately to the compact iphone 5. a historically slow season. cory johnson joins us now. one word, of grade. years since been 15 apple has seen a year-over-year decline in sales. new products to be announced and perhaps a new ipad, a smaller iphone. context of ain the business that has grown to a massive scale.
and yet the company is facing its negative sales growth for the year. shrinkage. shrinkage is a bad thing. >> price point. cory: interesting for the model. when apple was at the way the users have used the phone, a lot of people are paying onto iphone 5 and iphone 4. the models cannot even handle the upgrades expected from the company. we want to make sure as the users finally transition, they transition to another apple phone. that on the have low-end even as the performer to be a little better on their phone. stephanie: cory johnson. it was little chilly this morning. he will be with us all day. bloomberg tv has got a one hours actual on apple's latest investment 1:00 p.m. eastern right here.
mark: i am mark barton. this is labor markets on bloomberg television. ♪ vonnie: we will take you from new york to london to silicon valley. here is a we're watching. stepping down, the news coming this week after he returns from medical leave. bill ackerman, will join the board. the market is loving what it sees. a half-hour hour into the trading day in the united dates, fluctuating after five the -- five weeks of gains. european shares were trading today. energy stock slides. vonnie: