tv Bloomberg Go Bloomberg March 30, 2016 7:00am-10:01am EDT
$200 million. be waitingnks could a decade before paying out some bonuses. welcome to "bloomberg ." i'm david westin, here with vonnien ferro and davi quinn. that i think it is fair to say that this market check is brought to you by janet yellen. across the board, futures up again this money come a 100 points on the dow, the s&p 500 up 12 points. a strip of world
equity markets come up -- switch up the board. the weaker dollar story, stronger yen. it is just the movement at the front end of the treasury curve driving the fx market. the curve more sensitive to what the fed may or may not do. rates stand low for longer. we are just getting headlines from valeant. -- it isonth comfortable with the current liquidity decision. airport in brussels will remain closed after last week's terrorist attack.
senting passengers will be to the hangers to collect their bags and the departure hall will handle 1/5 of the normal flow of passengers. according to police, the "what isasked someone's post do when he has not seen his wife and children someone supposed to do when he is not seen his wife and children in 24 years? " republican presidential candidates backing off their promise to support the party's nominee. he does not says feel beholden to the loyalty pledge because he's been treated "very badly." yellen, it seems.t urging caution regarding
interest rates, pushing back on a handful of colleagues who have suggested another move may be just around the corner. here's janet yellen and to fed presidents with different outlooks. : i consider it appropriate for the committee to proceed cautiously. especiallyn is warranted with the federal funds rate so low, the fomc's ability to use conventional monetary policy to respond to economic disturbances is asymmetric. >> we are still trying to make sure the data we receive on inflation are real, not a mirage. given that, we are very much on the right track. >> you can argue about global risk, gdp growth outlook as may be a little bit lower, but you can another strong job support, labor markets are improving, you can make the case for moving. david: it was just laid out for
you. what is an investor to do? janet yellen sending out a pretty dovish signal. other fed members singing a different tune. michael: janet yellen is in charge. two --nately, the other the federal open mouth committee. with good reason. it has been the source of uncertainty for the markets. they are not going to raise rates. jon: is she in charge at this point? we don't see the boats at this point. -- votes at this point. we see a lot of dissent publicly. michael: i don't think it shapes policy, but i do believe it shapes the markets. it has continued to do so. interested, thinking of
david running businesses. if you are in charge and there are people out there talking against your position, what would your reaction be? david: they would not be working for me. simply put. michael: this does not make any sense to me. vonnie: it seems like there's been a huge change. "stagnation" for the first time in the telegram. are the people really warning about the potential for a pitch up in rates very quickly? does anybody really know which way we will go? michael: nobody knows. lala land now, there is no historical precedent for where we are with respect to world central banks. we've never been here before, so nobody knows. for these talking heads from the
fed to speak with certainty about -- it takes my breath away, sometimes paid stephanie: you're confident that we will not have a lot of rate hikes anytime soon. explain to me equity markets. i'm not as clear on that. saying janet yellen she's not going to raise rates -- corporate rates are down, not up. is the: a 9% decline current view for the upcoming earnings cycle. knocks --s when alcoa kicks off the earnings. it will be the sixth consecutive decline. the only thing we have going right now is the fact that we have these very low interest rates. the price-to-earnings multiple is supposed to be higher. onre is nothing else going in terms of economic growth. we will talk later about china.
growth there, but that's about the only other place in the world besides the u.s. mood inside the fomc appears to have changed. back in december, they would emphasize, this is positive. i don't hear that anymore. michael: the message is changing with some of the talking heads. that is also disconcerting to the markets. you have major declines in the markets around the world in january. you forget about that. the china market today is the worst performing market your today, but it was up 12% in march. it is down 15% year to date. u.s. market again down 12%. you have these crazy market moves which are reflective of the uncertainty caused in part by these talking heads. jon: this is what is driving the market. two passengers just ride the wave?
michael: what happens is you get ion in thelate markets. they've withstood these ridiculous headlines for the last year and a half in incredible fashion. companies are doing ok. you look at some of the performance of the companies who have these large global mandates , they've been performing recently well given the craziness in political circles. there is a lack of leadership globally. you've talked about this ad nauseam. it's a fact. companiess largest and the people to manage them are doing ok. they are using technology come a lot of things they did not have five or 10 years ago. they had these headwinds. david: as an instor, how do
you separate out this signal annoyance? should not pay attention to chinese equity markets. there's a lot of moms and pops in there setting. --t you pay attention to these are the numbers i really care about. you approach it as a business person, you look at the valuations, look at the prospects, look at what the world looks like and then say, -- the the value security valuations around the world for the best companies are pretty attractive in a lot of places. the u.s. market is pretty full, but the best house in the neighborhood right now. as itina market is priced was in the crisis. incredibly low valuations. , asou step back as an adult
janet yellen is an adult separating herself from the , is this a good value here? that's i you approach it. -- that's how you approach it. streete wiseguys on wall , the lineup for the rest of the -- is your got advice to investors to sit here and keep that janet yellen speech in mind? michael: absolutely. she is speaking common sense. outnumbers that have come in the last few days, there's nothing there that would argue against what she is talking about she talks about this asymmetric response. the cards are pretty laid out on the table. for people to speak to the opposite, there is such a disconnect here between the reality of what they are talking
added items.d a positive spin from the company this morning. up by 4.38% premarket. job cuts are on the way at boeing, they plan on illuminating 4000 jobs at their commercial airplanes division. 1600 workers have elected to leave boeing under a voluntary program. corporation takata -- the worst-case scenario would involve 218 million airbag inflator's. they are still trying to figure out how the cost will be shared. a deal that brings together the main a similar of iphones with
the maker of japan's top television sets. struggling -- jon: have using the price point for tvs? i was in the market for plasma cometh 50 inch, $400, $300. back in the day, this was a really high-end item. it was $3000. you're not just buying a company -- it speaks to what the japanese corporate culture wants. devastating. vonnie: hardware, that is the point about hardware and technology and progress. video players whose to be expensive. jon: dvd players as well. forget about my bachelor pad. chinese bank earnings do this morning.
due out this morning. its profit growth is installing in light of rising bank loans. i want to get to our asia bank senior analyst. a lot of people expecting some bad figures. were they as bad as people thought they would be? francis: i think the results are coming in stronger than the consensus, especially on the earnings. the market has been focusing on the dividend payout cut. i have seen the bank writing off a lot of their balance in 2015. that's why you see the bad debt balance and a lower pace. david: are those two things directly connected?
they cut their dividends to have more cash to put into bad debt reserves? is that the idea? francis: in fact, it is more about the reserves. it has put pressure on their capital. the return on equity for chinese banks has been quite strong on the accounting basis. 14.4% through 2015. even with that kind of increment, they still don't see cutting dividend payouts, that is a warning for the banking sector. vonnie: we are high, but not quite at crisis level. is it good that bankers are rejecting this notion or bad? it is onlywould say a short-term relief for the credit problem for chinese
banks. theiry cannot serve obligations, how can we take the it is a very short-term measure. trying to boost china bank earnings. to support the government expanding in the coming years. for a lot of people, they're quite cynical about the data coming out of china. if i don't believe in the government gdp readings, how do i get a proper read? how do you look at financial stress? francis: you are spot on. the npr numbers you see for the , only thenking sector commercial banks, we see the balance growth. we do see many of the banks off their balance sheet
to some vehicles like asset management, vehicles set up by the chinese government to be "distressed asset managers." if you are trying to look at the in chinese banks, it might not be a good reflection of the credit quality situation in the chinese financial sector. michael: could you spend a couple of seconds talking about the current valuation? we have dire circumstances for the banks on the one end. on the other hand, vonnie hrase "crisis level." valuing thearket banks themselves? fairly inexpensive, i understand. francis: the biggest banks in
the kong has been hitting market low in hong kong. since then, there has been some rebound. a rebound for the chinese banking sector. it is still much lower than the 2011 during during the european sovereign debt crisis. now, it is the chinese crisis. it is not a surprising phenomenon. michael: the price earnings of the level generally right now would be what? times.: 5-7 michael: five to seven times earnings. 15 to 20 at some points in the not-too-distant past. the good news there, i been
investor for many years in the they have been not very much exposed to the banks. more recently had some exposure to the insurance companies pairing that back as well. a little different reason than we just heard -- the margins on the investment side, how much they can earn coming bookcases -- in both cases, continues to be challenging. thank francisto .hen and michael holland next, the auto industry's biggest recall ever. the costs could climb to a staggering amount. details next on "bloomberg ." ♪
plunged to a record low on rising costs estimated for the auto industry's biggest recall ever. the called -- the recall could be as much as $24 billion. honda motors also fell. for details, we go to craig in tokyo. i found is pretty stunning. they're been estimates of $7 billion before. now, it is to $4 billion. where did this come from -- $24 billion. where did this come from? raig: the stadium today scenario figure and not something set in stone. -- this is a doomsday scenario figure. november, after months and months, even years of the u.s. -- sayingmissing
we've lost confidence in takata airbag inflator's and we will give them a couple of years to say to us -- to show us that they are safe. up to this point, using regulators follow in moves like this. -- you've seen regulators following in moves like this. david: how much of this is a good faith estimate and how much is a negotiation with the automakers? if they had to pay $24 billion, they would probably be bankrupt. absolutely, this would definitely overwhelm takata's balance sheet. this is something that will have to be resolved both with takata and the automakers because takata will not be able to shoulder the cost burden itself. even if we do not get to the point of a total recall situation.
nissan, also the american carmakers and some german carmakers, takata has many customers around the world involved in these recalls and will likely have to shoulder some of the burden. david: oil will be coming up after four days of losses. next, we will take a look at the energy names to buy. that is next on "bloomberg ." ♪
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weeks. energy, the miners lead in the gains this morning. tom keene joining us. good to see you. it was completely predictable and yet, boy, did the markets seize big-time. -- lunch was the worst don't get me going. vonnie: the u.s. will speed up its military presence in europe, toding an armored brigade reassure allies who are concerned about the threat from russia. take actionh to against iran for its recent missile test -- a new report calling the test destabilizing and provocative.
myanmar's first democratically elected leader in decades has been sworn in. he will begin his term friday. suu kyi was named the foreign minister and will lead the in -- will lead the entire government. tom, the morning must-read. china. tom: a lot of choices today. equities running up a storm. this one from professor roche at yale university. crisis economic identity , notwithstanding the unfinished business of consumer led rebalancing. china appears to be embracing yet another shift in its core economic strategy.
arehina, internal debates carefully subscript appeared nothing happens by accident. something has happened in the last 48 hours. how interview to interview, off-camera and on camera, all center back to china. it is clear that she is concerned about china, as well as oil. she sent a clear message. what struck me about this, why expect a shift to the consumer-based economy? if you really read carefully what they are saying, they say we have to start doing things from the top down. tom: a command and control issue there. i would suggest an overarching macro theoretical debate that of scares the debt debate that is really going on within financial systems. jon: another debate that happened about a month ago at the g20.
when you see a series of regional fed presidents come out , they were not there. janet yellen was there and she has come back and she seems to be putting this idea on the table -- it is fueling the argument that the world needs a weaker dollar. , we want ae ecb stronger dollar because we want a weaker currency. day or twothis a ago. s press conference 14 days ago, there is a single sentence in there about new hope in the fourth quarter. that was completely reversed yesterday by what we heard about global dampened growth. vonnie: exactly. dominik on this show as well sing there will be no fed hike this year. -- saying there will be no fed hike this year. it was very interesting how many
strategists pointed out the number of references to the global environment yesterday. we don't normally get that from the fed. it's a read from all the economies that china feeds. david: it's all about supply-side at this point and all time and again, with the quantitative easing, it is not working. tom: you can have supply-side supplynn hubbard is a sider at columbia, even he would shift over to a demand analysis. that demand is clearly dampened. david: that is what we are lacking in the end. tom: while you were gone on your 14 day vacation, it has moved down to what, 0.6? jon: he doesn't like people going on vacation. 0.6 or 0.4, i cannot remember. vonnie: 0.6.
i mentioned it earlier. talking about this inflation, let's go to the commodity market now. oil for the first time in five days is up. this signals lest support -- less support for the dollar, cushing asset management joining us now. don'tiew on equities depend on crude getting back to $70's.,s libby: even though we have seen this pop in crude, we will see companies in the energy space, they have to have $70, $80 crude. the way to play energy right now is through the energy infrastructure. these are companies with real assets, real cash flows and they
had the ability to survive and continue to grow even in a $40 crude market. tom: has the balance sheet adjustment occurred now? libby: the energy infrastructure companies do not have -- they have challenges to their balance sheet, but they don't have the distress you see in the producers. the producer stress will continue at $40 oil. david: the you see them as bargains because they've been taken down with the entire energy sector unfairly? libby: that is the great point. these companies have continued to grow their cash flow. yet, their prices have been hit just as hard as producers who have seen cash flows deteriorate. vonnie: it doesn't make sense committed they are the suppliers of the infrastructure and oil companies will be stopping production or maybe going bankrupt, why won't these companies suffer down the road? a volume business, but the reality is, even though
we've seen bankruptcies, that production will be taken over by the better producers. satisfied needs are majority by hydrocarbons. that is not going away. u.s. hasme in the grown by 500,000 barrels a day. where do you need to see production in the u.s. stabilize tomb make it -- to make it worth it? libby: weepy get 9.6 million barrels. -- we peaked. we still have a ton of infrastructure that is needed to do that. we also have natural gas. natural gas continues to grow and is surviving the 75% price the client. what the hell does worth the punt mean? thing? a rugby jon: i bet. david: a punt.
jon: the city of london doing this right now. libby: where's the punt in my world? tom: everybody is getting hammered and he wants a punt. --by: the speculation is not we have some charts that show how these companies have seen prices just completely role over when their cash flows have continued a steady pace of assent. david: do we have a chart here? there were go. there is the sunoco chart. libby: they are a crude and refined products player in oil and natural gas liquids. the orange line is the price action in the stock. the white stairstep is the growth and their distribution. this chart only goes back to 2012, but it we went back even
further, you would see in 2008, you see prices climb, yet they continued steady ascent. crude, energy storage company. when you are a washing crude oil, what do you want? you want storage. that's what these guys do. general in business, when your customers start hurting, you start hurting. businessle go along in and say i'm doing fine and their customers are hurting. sooner or later, it starts to hurt you. libby: there are two sides, the upstream, being hurt in a low commodity prices environment. there will be volume pull back. the downstream part of the in theseain is jamming prices. we are seeing big volume increases.
-- youvolume increase are having a good business to move and store product. tom: there's this whole mystery of where the prices. did you hear the idea that we bottomed? vonnie: there was no bottom there at one point. we are seeing prices go back down again. crude is now at $38.88. tom: the drama does not need to be there. can you form an investment landscape off three years or seven years based on a bottom? libby: you absolutely can answer and businesses. it's dependent on price coming back. with the bloated inventories we have come this recovery will take longer. that's why i say focus on the infrastructure businesses. their cash flows will continue as long as we need energy.
it's hard to imagine a scenario we don't need energy. jon: your point on storage capacity -- he will tell you that it is a very geographic thing. it is isolated. what areas are you looking at? very good point. now, because we are able to and the majority of the good areas will be gold coast, you want storage and strategic areas. just showed you, they have storage on five different continents and 31 million barrels of storage. -- 51 million barrels of storage. these guys will benefit because storage is important. vonnie: is consolidation a space you are looking at? libby: there will be. not so much on the producer side, but there is no question, weaker players in the mainstream will be shaken out. vonnie: where do you look if you want to find the winners?
libby: companies and the more prolific basins. the companies moving baseload crude or gas. they have baseload's and peakers . there is a baseload of energy, so those pipelines will always be full. those of the companies you want. mom and pop want to buy exxon and chevron. the midstreams on space. those are upstream integrated companies. the majority of their business is dependent on the price of the commodity. you don't perceive exxon, their cash flow as persistent as these midstream once? libby: exactly. exxon is a big, diversified company. they will definitely be a survivor. tom: but diversification is not the same as persistency of cash flow. libby: you will get that in the midstream because it is a peep or service.
we are going to. and posting for quarter profits that were better than expected. -- lulu lemon. they been trying to attract more hard-core athletes with new high-tech apparel. some clients of the second largest mutual fund company in the u.s. could get investment advice from an automated investment service learning today. it is aimed at younger, first-time investors. the program generates a recommended mix of mutual funds. the all-american beer maker budweiser has announced an unlikely source of growth. the king of beers is going to russia. 30% drop in a output your today. did it is viewed
as a cheaper alternative here in the u.s. jon: i spoke to guy johnson about this. the weaker budweiser. very different. the european banks are getting paid, which is what matters -- paying the biggest bonuses up front. ubs has posted the highest profits and's 2010, the only lender posting a 2015 bonus increase. joining us to discuss is michael moore from london. the story on the bloomberg, as expected, one of the most highly red pieces on the bloomberg throughout the day. this quote stands out from a recruitment firm. the furloughs were used in the past to stop people from leaving. today, it's to stop people from getting paid. is that what is happening here?
michael: there been a few .lements going on here a few different masters are trying to satisfy. the regulators want more pay deferred and sometimes the managers want more pay deferred in a sense of keeping people around or if they leave, getting that compensation. the employees want as much up front as possible. sometimes management once that is well because typically, you don't recognize the cost of they've left.ntil david: that goes right to the essence -- when is it best? later on and 150 today, when is it vested -- inhael: it is usually done
pieces. you're getting more up front for your typical employee in the european bank. for all of it, you have to wait a bit longer. deutsche bank come it was typically over three years previously. now, it is over four years in equal parts. to get 100% of it coming you are having to wait for years now. you are seeing people talking about even longer periods. lastays's deputy chairman month talked about perhaps as long as a decade. that is mainly to get employees to think long-term but also as a retention tool. vonnie: a decade does seem a little ridiculous. , postponing extent the non-cash portion might be a good thing given some of that will be stock. stocks are in the tank, right? michael: that is the hope. you get stock now at a very low
price and hopefully if you to turn around the bank in a few years time, you will see the rewards of that. you saw that at some of the u.s. banks. goldman sachs gave out options and those do not become exercisable until last year and that was a big payday for those employees that stuck around. jon: there's a big debate on variable pay. how much is deferred, how much is up front. where are we with fixed versus variable? after the financial crisis, there was this shift. where are we in that discussion? michael: that's also something where you have these conflicting desires from the regulators who want, especially in europe, want to see higher fixed pay, have put a cap on bonuses for two times fixed pay.
that does also give you a fixed cost basis. the bank would like to do more variable pay and shareholders becauseuld like that come in a down year, you have more ability to reduce the pay pool then if you are heavily reliant on the fixed pay. banks are still kind of tweaking that makes. regulators are driving a lot of that conversation. david: our banks competing with one another? will people decide where they want to work based on this pay? michael: it is a certainly a factor, not the factor, but a factor in two ways. you would like to get as much up front as you can for personal reasons. also, the more you have deferred, the more expensive you are for being poached. a lot of times, the new company
that is trying to hire you will have to match some of the deferred pay you are giving up to leave. that makes people in theory a little stickier. michael moore reporting from london figured up next, what is the one economic indicator janet yellen is looking at the most? that is next on "bloomberg ." ♪
jon: this is "bloomberg ." we are 90 minutes away from the open here in new york. futures positive in the u.s. the s&p 500 fresh 2016 highs there. dow jones up 106 points. the nikkei to 25 is shining bright red on the screen this morning. the other major index in europe, japan and the u.s. lower, down by 1.31%.
225.kkei stronger japanese yen pushing down japanese equities euro-dollar at 150. treasuries, the best quarter since 2012 potentially at the front and. end. the front that brought to you by fed chair janet yellen. matt: one of the things that surprised me yesterday's janet yellen said she does not know if the 4.8% is full employment at. was janet yellen said she does not know if 4.8% is full employment yet. quits, the blue line here, the trend is up. that means workers have confidence in this economy if they are willing to leave their job. they think they can find a job somewhere else.
job openings, the white line has risen above higher. there are more job openings then hires -- than hires. jon: if we were reaching full employment, would we be adding jobs to the pace of 200,000 a month now? matt: you probably would not come but you need to add jobs at that pace to continue to grow. we looked at inflation is getting closer and closer to the fed's target. if they were truly data dependent, they should be going. jon: coming up in the next hour, richard chilton. that is next on "bloomberg ." ♪
he is seeing signs of strength. turmoil in brazil as presidential -- as the president loses her largest ally before she faces an impeachment vote. welcome to the second hour of "bloomberg ." i am vonnie quinn. very lucky to be along with jon and david westin. stephanie ruhle is away. david: great to be back and great to have richard chilton here with us. chilton investment company is number 33 on bloomberg's best large sized hedge funds and we expected to move up next year. welcome. jon: welcome. in a few minutes, we'll get the advertisement before the big one
on friday, the u.s. jobs report. eastern, coming up shortly. before we get to that, s&p 500 futures up 11 points on the screen. dow jones up 98. s&p 500 index -- high for the of januaryf the mess and february. the stoxx 600 second day of gains, up by 1.34 percent. the ellen of fact, dollar goes lower, treasury yields go slower and treasuries heading for their best corridor since 2012. the weaker dollar and the euro at 1.113. vonnie: thank you. republican presidential candidates are backing off the party nominee. at the town hall, donald trump says he does not feel held to the loyalty pledge because he has been treated badly. ted cruz and john kasich also of backingommitting
the nominee. the president in brazil faces an impeachment vote in congress. the party has left rousseff ruling poorly and that may tip the balance is. they may follow the lead of the brazilian democratic movement party. the airport in brussels will remain closed today. and has been closed since last week's attacks. they will allow people to collect their bags and they will process only about 1/5 of normal passengers. global news 24 hours a day powered by our journalists and bureau's around the world. david: thank you. janet yellen is doubling down on her dovish tones, sending a message that rate interest or interest rates will raise that the cautious rates. how much does inflation play in? here is chil janet yellen and others. >> this assessment is only a
forecast for future fund rates that is necessarily uncertain. economic activity and inflation will likely evolve in unexpected ways. >> i think we will end up over shooting inflation. we have that in the forecast. that is what is going to happen. inflationk at the rate year ago the yield, it is 1.9% and moving up, so i think all these inflation measures, if you look at them, they are all moving up and they probably will go over 2% by the time we get to 2017. >> in terms of inflation, things we feel have been falling short of our 2% inflation gold continue to do that. i see encouraging signs in the data that things are moving in the right direction. david: we want to turn to u.s. the economist for bloomberg, just reading janet yellen's
comments, it appears that she is changing which is looking at to determine inflation. she seems hesitant about where inflation is. what is she looking at? thatsterday, she said inflation is far from perfect. i think that that key inflation risk is decided really, so inflation will go up or go down. a lot depends on the dollar, oil and they are very concerned about inflation expectations as well. she and also some regional presidents were speaking about that. level ofbout the low inflation expectation. this is something they are watching very closely as well. t, wrapped this together for us. matt: i have a chart that shows inflation. i was having an interesting conversation about what the fed really looks at. when you hear john williams talking and you janet yellen talking, it seems like they are
referring to core inflation. this 1.7% number. we also see core cpi at 2.2% and here, we have inflation expectation. this is just from the breakeven, but there is also surveyed expectations. what is the most important measure for them or is there one? yelena: there is no single measure. they are looking at different .inds of data inflation expectations is one of them. they are looking at both the based-based and those inflation expectations, which rebounded slightly as you can see recently. which is an encouraging sign, but probably not enough for them to push their hand. matt: if you want to use my chart in your report or if you want to use this chart on the 344 or find g #btv it in her btv log. , what do you make
of this inflation pressure? we are hearing rumblings that maybe we should be concerned. richard: i don't think we have inflation. when you think about cpi, 66% of the cpi is a wage. we have a little wage that has been helping, but think about where the world's right now, and think about where the united states is. i think the greater risk is deflation. since the great crash and all the debt buildup, we have not monetized any of the debt but added to the debt and moved it around. hasof the global autonomy negative interest rates, 7 trillion dollars. when you think about the havetionary forces, they commodity deflation, that is clear. but the internet is the greatest deflationary force in the history the world has seen, so it is ok to have a little bit of waiting. that is what is keeping us going. if we did not have wage
inflation, we would be in trouble. vonnie: what it ramp up extra fast and by then, it would be too late to hike up? richard: i don't think the velocity of the move will be as such because we're living under this debt buildup and we will not monetized that. is tremendously deflationary. i do not see it. lower foren going longer and i think that is what janet yellen is telling us. jon: how can the markets take advantage of that? ishard: running a hedge fund really difficult in this environment. last you, we made a lot of money on our shorts. the shorts we have seen since the february, the greatest e tablephy in crap cod companies since 2009, so the companiest really the and distressed companies is that
eventually, the fundamentals win outs. even though they had a move year, they cannot hide from it. david: i worry about the economy in terms of fundamentals. what he says is right about companies. sooner or later, if you don't run a good company coming will be out of business. globally, as richard says, we are growing the debt. at a private company, the week it out of debt is our more money to pay off. we need to be earning the money globally to pay off the debt. yelena: sure, and the concern of the united states is that companies are not making a lot of money. corporate profit is on the decline, so that is what concerns me domestically. this is a reason why companies should expand the payroll and that is what is key here. companies should make more money. jon: we have the voice of janet yellen in the equity market with the s&p 500, and the biggest
month since october. we all remember october. it is kind of like this month. it is coming out of january, and that was terrible, too. is that it? are we in good shape for the rest of 2016? a big move fast. when you look at the moving average, we are above the moving average, so i expect the market to come back little. 500ave been to a 3%-5% s&p and we could finish there. when you break down corporate shares and pockets like energy that have been affected, but there are a lot of companies doing well. you have to look at the have's and have-nots, and we are seeing the complicated market across a lot of sectors. there are a lot of names up solidly this year and a lot of that are not. vonnie: we were talking about the central bank divergent trade, and it seems like that is not going to be the traits a much anymore. not that the fed is not in the
mode but it is not in gung ho tightening mode anymore. richard: the lack of tightening brings back risk assets, and that -- so it has been an inverse movement since then with junk companies. you are going to see that. it is common. it is kind of open season for those. vonnie: so, we'll go -- we will expect the ecb to continue this once the fed does do this? trillionthere is $7 under negative interest rates and that will continue. the reason why discontinuing is there is no growth over there. david: matt, i think you up a picture on the spread? matt: i am looking at the spread and you cansuries still see that trade is going on there. i wonder what you think about how that looks going forward, especially since we just solve that germany has posted at least official inflation numbers as opposed to none.
what do you think about treasuries and bonds? richard: i think that germany still has [indiscernible] bonds diverse in their course anytime soon. the u.s., where we are, convened andve because of this lack of interest rate inflation, and quite frankly, the u.s. economy is good but not spectacular. a number of companies that would benefit from rising gdp like sharon williams and homebuilding -- sherwin williams and homebuilding companies. matt: what is the shorts treasury trade going to work? [laughter] richard: when you go lower for longer, it will take a while. we don't make a living doing that. for longer is not good for them. the trade today, if you want to
play quick thinking, is the perpetual preferred. wells fargo preferred, yielding 6.5%, i mean, they are steals. jon: i'm not sure many people are trying to short treasuries. richard chilton, ceo, will stay with us. , thank youyatyeva for joining. coming up, a key indicator leading up to friday's u.s. job report. it is the appetizer. they did the unemployment numbers are next. ♪ cash the add unemployment numbers are next. ♪
in the u.s. equities higher in europe as well. a weaker dollar in the fx market. yields pretty much flat, but the 0.8% of theer at two-year, and let's cross over to matt miller for breaking data. matt: we are getting adp employment change. we have added 200,000 to the private payroll report from adp and we were looking for 195,000, so a little bit better than anticipated. basically in line, not quite as good as the fourth two hundred 14 thousand. staying around that two hundred thousand level. i just graft adp in white and non-foreign payroll and pink. although adp is not historically a good predictor of non-foreign payrolls, if you take a big deal, and this is a 10 year look , this is the great recession, they track each other fairly well. adp is a positive 200,000, and
we will wait for non-foreign payroll tomorrow and we expected to be 200-5000. david: richard chilton, what do this?ke of one month number does not tell you much, but it is informative to look at the chart and see the trend. that is a pretty decent clip. it is greatly needed. we all know that the jobs number is probably the most inaccurate in the history of the planet. the number will be. something along those lines would be -- the market would like. the expectations are high, so it has to come into a level that it is comparable with to keep expectations in tact. that is good. it is healthy. there are a lot of job creations again done with the companies that we talked to. vonnie: a lot of these jobs are services jobs, 191,000 jobs of the 200,000 were goods producing.
this is a trendy will continue to see. does it really put pressure on wages? pressurewe are seeing on wages. california is going to $15 minimum wage in five years, so we are seeing that. we are seeing that because it has been mandated and the scarcity of the positions that are being recruited and that is keeping us going. if you look at your was getting the most out of the system, it $30,000 to $50,000 people. their pocketbooks are a lot better today than they have been over the last of and years with the oil dividend, so that is helping us and restaurants, retail, housing, and all key drivers of the economy because consumers are a big piece and so are housing. david: this is a puzzle you could help me solve. with that sort of job growth, which has been consistent for many months, we are not seeing the growth in gdp that that growth and jobs should be generating. where is the disconnect?
richard: part of the disconnect is that it is trade and part is manufacturing. seeing good consumer, which is a big piece of the gdp and we are seeing housing as a big piece of the gdp, but i will take the side that one of us was on an annual letter which talked about 2%-two .5%, that is not bad. i think we have to forget history, two percent-4% gdp growth. we are not going back in this inflationary world with where we are with global economics, so i , as longh 2.5% growth as it is hitting the right factors and getting to the companies are being able to be smart in restructuring their businesses to take advantage over the weakness is. hedge funds have acted pretty rough start for the year, so what are you seeing things right now given that there is not a lot of time on hedge funds?
richard: we are very focused on buying and investing. we are investors and not creators, so our average period is three years to five years and we let quality companies, all shapes and sizes, that are companies that have pricing power, higher returns on invested capital, and they can use the cash to give back. the way you are going to make money in this market is to buy the related companies at good prices and hold on. if you are going to be a trader, you have volatility that has been very tough. jon: on the short side, that is what he had made the majority of money last year, the discussion is a labor market. you have gone under companies undergoing creative destruction. how were you said that domestically? is that still the case and give me more details? --hard: created distract creative destruction has been around for a long time. i have never seen it more apparent than today. with globalization and the internet. the internet has been a very
powerful district of force. when you think about the whole middle-market retail and how the margins have been destroyed because of the migration to online, if you think about the organic food companies with all throughout the food chain, whether it be on the retail side of the distribution side, you know, the forces involved there with loaded prices dramatically. so there is a lot of critics in reinforcing out there at work. our job is to find those companies that are not making the returns, that are prey to this and to hold on. it is really important on the short side. vonnie: a lot of these companies that are in the creative distractive process are not making money, so where do you find ones that are? there are some companies we are involved enjoy taking advantage of this. look at a company like home depot or a company like autonation or some of the others were they are using this or dominoes, but it is mainly on
the short side. we like shared gainers on the long site and not shared losers, but on the short side, we are actively short losers. yes, wall street has given a pass like amazon, but time will tell. david: thank you. that is richard chilton, co-chief investment officer at chilton investment company. , crude snapping a four-day slide after janet yellen's remarks. we will head to the cnes for more on oil's next move on "bloomberg ." ♪ ♪
outperformed to neutral. raising price target to 130 five dollars from one hundred $25. he expects them to benefit from the iphone 7 launch and points out that the shares after the recent rally still traded at 25% and 30% discounts to large-cap tech peers in the s&p 500. blackstone also in the green ahead of the open after said the upgraded the shares to abide from a neutral. the first time citi has agreed to blackstone after more than three years. they are flat on the year. jon: we go to futures markets. looking at crude oil snapping a four-day skid after janet yellen's dovish tone waited on the dollar. despite the recent slide, we still are up 15%. joining me now to discuss the next move is market strategist at bull's-eye options. she joins me from chicago.
good to see you. 's dovish, crude goes higher, can that continue? >> we have been trading sideways. we are stalled between 38 and 42. we had a short squeeze people are looking for. what? editorship of that 42 hi can get some more upside potential, but you have talked about some tailwinds that will help out crudes most likely. you have the dollar that stop strengthening, which is a positive sign, and you have the s&p power. if i could play your chart game, look at the double we saw in the s and p in january and february and a coincided with the dollar hop at 36 in crude oil. jon: if we are going to experience some on the way down, if that does not continue, where does it approve? 36n: the support is at that reg out level. we have seen a series of lower
highs and we are back to that october support. it is very, very important, so you are seeing the s&p 500 index showing strength and that could trade crude oil higher. -- twoo iwatch the iwatch by cap company -- do i watch the rig count? you are seeing recounts go down, but it is easier to get oil production out of shale without that investment. i think that will shift that level. jon: alan, thank you for joining the program. next, we discuss the treasury secretary and his comments on u.s. economy and trade. ♪
there is a new push for the un security council to take action against iran for recent missile attacks. the u.s., u.k. and france and germany have come out with reports that say they are stabilizing and provocative. all of this according to the associated press. the man blamed for hijacking that the egyptian airliner was in court today in cyprus. see said he was trying to his estranged family who lives on the island. they described the man as psychologically unstable. authorities have been held for eight days while they investigate. in the united kingdom, the british prime minister david wants the u.k. to stay in the european union. positive version on the eu and he says remaining in there would be good for all people.
jon: thank you. janet yellen appears to have preached the shores of the u.k. and europe. a look at european markets. here is caroline hyde in london. it seems janet can do it marriott cannot. euro --: dataset 100 100 billion euros. to fire upn likes the european stock market. up 1.8%. this is the stoxx 600 digging into which industry groups on the move, minus leading the charge, up 4%. today, they are the top performers on the year. oil and gas behind about the percent. metals getting a popped and gold goes lower. up into equities and we have seen a downward trend in european confidence. index with overall
economic confidence and it is down, and a 13 month low. we have not seen 103 since all the way back in february of last year. their key concerns about the as thence, and even viewer's pension, mario draghi injecting further stimulus into the equation until march -- until april 10. even that extra bond buying of 20 year -- 20 million euros from stirmonth is not enough to confidence. remember the tragic events in intoum, not even factored this particular set of sentiments, so it could get worse. let's look at something that has caught my eye. it is the range bound trading. about 340 and up 1.5% today, but it is caught between a bound throughout march. the stock 600 has only traded within about 15 points, clear lack of volatility compared to
the previous set of moves we have seen month after month, so it seems to be some concern about buying into this rally and shooting it further on the stoxx 600. metro, a german retailer, a company that is splitting itself in two because they think there is more value. metro in germany is racing up to the highest november in 2013, up about 13% for the stock market. one side of the equation is food and the other side electronics. very much,k you caroline. federal reserve chair janet yellen made her case for keeping interest rates low. now it is time for treasury secretary jack lew speaking out about the state of the economy. let's watch. >> a lot of nervousness in the markets. i think it is a geopolitical situation. you look at the week global demand and there are a lot of things you could worry about.
when you look at the u.s. economy, i think we have shown that we have reached a level of strength that is quite real and sustainable. david: bloomberg's brendan greeley joins us. rate to have you back. brendan: great to be here. now denniston of washington, d.c. you know the washington state. we are hearing the difference between the treasury secretary and a fed chair. janet yellen cannot afford to be boosterish. sure if thee is not gains we have same, if they are durable, that was her word. and then you have jack lew saying, yes, it is sustainable. what matters to him is whether it is sustainable to november 4. eightnot know if i can wwig dancers. david: are they playing opposite positions they should be? we need some help from the
fiscal people and the monetary people have done something you. brendan: of course. they talked about that, didn't they? the need for fiscal stimulus? we actually have that. david: is that what he said to charlie rose about that? >> we need to growth of global pie. one of the things coming out of that she-20 was all policy tools, monetary, fiscal and structural. around the world, a bunch of countries have this faith to use fiscal policy more aggressively, including europe. wings,: if a frog had they would not pump itself and the problem with that is in all democracy, in order to get some fiscal spending, if your parliament coming up to get through congress. this year, we are not pretending to have budget hearings on the president's budget. when you look at a group like you could get
coordinated monetary stimulus added that but you cannot get corrugated discuss stimulus week is even what germany is calling stimulus, it is not running a surplus. i think that would be beautiful. we have been saying this for the last seven years but i don't see it happening. jon: i want to take your knowledge of politics, what happened to the g-20? is janet yellen chair of the global central bank now? watching a is like black hole. you can only see because things are moving around. it has seemed that the way she moved at the meeting and all the other signs that we have, the mario draghi is speaking now, they're really talking about expanding that asset buying program and said that diving further and further down into negative rates, so it does seem like they are looking at the divergence. the best thing to do is contain the divergence. i would say it is a little like market review. sometimes, it happens even if the companies involved in not talking explicitly.
sometimes, everyone understands what needs to be done and does it. it does seem a bit accord needing one way or the other. vonnie: what to say about the u.s. dollar because one of the problems for the u.s. is trade and the only trade partnerships are happening and the dollar is getting in the way of that and other countries are benefiting with weaker currencies? brendan: i think janet yellen has been worried about that for a long time and she has been explicit about that for a while. i think with trade we have a bigger issue. i have been focusing on right about politics and economics and that means trade. i think the consensus we are college we all went to about trade and industry longer accepted by the electorate. the electorate is kind of pride and economists are saying, we have winners and losers from trade and it is time to pay attention to the losers. jon: the issue of policy and economics of trades and does that dominate the discussion now? brendan: absolutely, but they
have always said that they knew there would be winners from trade and losers. there was a moment of hope in the late 1990's when we got that things would work out that way. that is not true. politicians have never been willing to say, yes, some people lose and then deal with the losses. economists say, if you that it out, it is fine. it is the politicians job to enact it out and they're not doing that. deal: so a specific trade -- so the pacific trade deal is not getting done. jack talked to charlie rose about that as well. jack: that would open markets to u.s. goods and services and take the standards that we hold dear in the united states and markets around the world. david: i have talked to people in washington, people of authority, who make the case that given both the democrats and republicans running for president, if they to get this done now, it is not going to get better down the road. amazing to watch.
there was one consensus in washington on trade, and everybody did the right thing to get the tpp pass. the president did the right thing, the republicans objected but then they went to that handle and pushed it and nothing came out because it will not work this time the way it did before. politics are not the same. you have the chamber of commerce desperate to get this thing past , and it turns out that again, john, as you were talking about, the economics of trade are very clear. we have pockets of concentrated lost that have been neglected by politicians, and they are finally saying, look, i don't care how good this deal does, you have not done what you have always said you would on trade, which is take care of the losers. vonnie: brendan greeley all the way from the foreign land, washington, d.c. jon: it is getting to him. brendan: i am relaxed, getting genes. vonnie: i like the hairstyle. [laughter] vonnie: it is this town.
matt, you have morning meetings for us. matt: thank you. we will look at what banks are talking about, key recommendations. global head of managed investments at citi private bank, they are watching the market. david, you say it sovereign bond markets, there are many sovereign bond markets were yields are truly unacceptable. are you talking about those with negative brits because some people are buying them? david: in terms of idea, we look at this and an asset allocation standpoint and where you are being properly compensated for risk or not. when you take a look at japan or germany where 10 year bonds are -10 basis points over in the case of germany, around 13 basis points, we see no compelling reason why an investor, especially high net worth investor, would be putting their money there is part of their allocation policy. they could have their many virtually anywhere and are
nothing, they could have it in their brokerage account, etc. we see a lot of activity in opportunities in the united states and australia. we have just increased are waiting to ask -- latin american sovereign debt and decreased it in south asia, but investors are looking for positive yields in their account. they're willing to take currency risk to get it. a lot of folks have moved money into the u.s. dollar, so what we are looking at in terms of what we say is unacceptable is from an acid allocation standpoint when you're getting paper risk. that is what we are talking about. matt: your investors are looking for yield. there is at least one of the why you would buy a bond. it is possible -- you are not actually paying the japanese government when you get these bonds that have negative rates, right? and you can make money on them, even if they are this tasteful to you. david: i understand your point. i guess our clients are really not trading. what we are talking about is where you should allocate your fixed-income assets to. what we look at our these
relative yields and we look the on that i what someone should do in terms of corporate debt. we are looking at increasing our critic quality and incorporate that in taking risk in the high markets, which are trading a great premiums to the sovereign markets, so to address your question, you are right. the question is, what debts to our clients actually holds? and we would rather see them in positive field categories in the united states than in germany or japan. matt: you mention corporate jet globally. on friday, the ecb will kick off their purchases of non-bank corporate debt. does that offer an opportunity or has that offered an opportunity to investors? david: i do think it will offer an opportunity. i think they signaled what their monetary policy is going to be and how it will impact the corporate market. we have seen that take place several times before, so this will be a deeper level of buying. in general, what we care about is the relative rates and the will havelity, so it
an impact, but i think from a client perspective, we will hold are overweight and corporate paper, regardless of what the ecb does. matt: excellent. david, i appreciate spending time. david: thank you very much. matt: coming up, brazil president just lost a key ally. is this a sign that impeachment is inching closer? we find out, next. ♪
vonnie: here is your business flash. i am funny quinn. companies in the u.s. added 200,000 jobs in march, that number from adp research institute. the government releases their job report on friday. euromic confidence in area's has fallen to the lowest level in 13 months. out and saysmes european central bank is preparing to ramp up the bond buying program in an attempt to increase growth. that is your bloomberg business flash. david: traders are betting the likelihood that the new president in brazil will mean a change in the interest-rate policy. for the first time, the trading shows that investors expect the central bank to becoming borrowing costs this year, shifting on the news of brazil's largest party that has left the governing coalition. this delivers a major blow to the president rousseff. we are joined by our bureau chief, julia, what does this
mean for the impeachment? where are we in it? julia: the impeachment process is be analyzed by a commission committee in the lower house. they expect to become within 15 days and put it to a vote. the president of the lower house pass of the vote will likely take about three days. he wanted to initially do it on sunday and we are not sure that will happen now. once it goes through, if it passes the lower house, it goes to the senate and the senate has to approve. if the senate approves, rousseff has to temporarily be removed from office while they decide to prove the impeachment process itself or not. david: why does the withdrawal from the coalition make such a difference in the likelihood of the impeachment going forward? lia: they are the largest party in brazil and have been part of the coalition since 1980 five, when we return to democracy. they have the president of the
lower house, the senate, the vice president of many, many lawmakers, ministries, and they had seven at the beginning and now they have six because one resign. it is a huge and big support for her. until yesterday when they formally quit. david: i want to talk about the markets, but what would happen if there were in pitchman? what -- what if there was an impeachment? who replaces her? julia: the vice president, who was from pmdb. he is said to be in talks with several of the parties. he are the has talked about what you are due to the government. there are some of his aides and people close to him saying that the government would probably look like this and not cut social spending, which is a big issue in brazil, so we had been seeing talks of this beginning. david: tell me about the markets. you just mentioned the
speculation of perhaps a cut in interest rates. why is it that interest rates of the cut if they were impeached? julia: the hope of the market -- markets have never particularly liked rousseff's government, ever since 2012 when she started intervening in the energy sectors, a lot and it -- not leading them raise gas prices, so the markets, any sign that rousseff might not be in power is seen as positive for investors. anything that comes next would be better. it is all part of that. oustingidea is that her would bring the confident shot that priscilla change directions and get congress back on the table to vote uneconomic policy and get us out of the recession. david: how i'd equity markets doing today? -- how are equity markets doing today? julia: they open in half an hour. he had been getting back a little bit of the gains, but rizzo has been a bull market in
the middle of the recession with interest rates and inflation high. david: what about the real? is thereal best-performing currency this year, up 9%. it had an awful year in 2015, down 30%, so it is all reflecting sort of this political outlook or hope for a better political outlook. julia's sao paulo bureau chief. thank you. next, tracy miller takes on matt miller in battle of the charts. ♪
terrestrial. tracy: we are at the derivative market. you have been talking about the risk rally all morning, spurred by janet yellen. i went to take you over to the term structure. these are curves, and basically what they show you are just seven weeks ago, a member during the deep dark days of february, when everything was going to plots, investors were paying a lot more money for vix futures, so front and protection on stocks. now, fast-forward to today, about one month ago and a couple days ago, yellen spoke yesterday with all the dovish comments and look at where the term structure is. basically back to normal, upward sloping and markets expect all activity to increase in the future but not soon. vonnie: we all thought that was matt's chart because of the size. matt: i vote for tracy. [laughter] that is fascinating.
title, -- beyond the title. how did you do this? ccrv? pretty amazing. matt: what i did, and i see we because my terminal helps me out. look at one of the things that janet yellen talked about so much yesterday. she says the drop in productivity, a huge uncertainty for the fed and they do not understand why this is happening. however, without understand why it is happening, she is pretty sure it will recover. if you look at the five-year average, i cannot make the pink line thicker, but we have fallen to the lowest five-year growth since the period ended in 1982, so i realized the lowest five-year average productivity life, even before his parents met, so that is pretty low.
the idea that janet yellen and the fed thing they can turn that around is pretty difficult. is around andrro americans are protected anymore. this is number seven 4g in our library, sochi #btv 740. vonnie: it almost doesn't matter because matt has voted for tracy. i think the scale tips. tracy: my hundred percent record. matt: fascinating chart. i love the function. vonnie: indeed. david: i love tracy's chart and not just the title. i have to say, matt, this is a bugbear of mine with productivity because we cannot grow it domestically and globally without growth and it also shows when jon was born. vonnie: i actually built for matt, too. based on fundamentals this time. jon: i like tracy' is chart, but
matt gets my vote because it faces policy that they are facing right now. matt: i think this is the first time i have won in four weeks. david: tracy, you have got to come back, 1-2. jon: tracy, to after joining the program. high-heeled with fixed income chief investment officer. we are about 34 minutes away from the open. futures are higher going into the open. s&p 500 and dow futures up 104 points. ♪
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micky dolenz, the monkees lead singer and cruise host, the 5th dimension, the lovin' spoonful, rare earth, spencer davis, three dog night, and many more! imagine enjoying all that great music on the fabulous celebrity summit, leaving fort lauderdale and making ports of call in jamaica and the bahamas. you'll be back in the days of bellbottoms, peace signs, and so much more, with special theme parties and 20 fun-filled celebrity interactive events. cabins are filling up fast, so come on, relive the era you remember so well. the flower power cruise, february 27th, 2017. let your freak flag fly. don't miss the grooviest trip at sea. ignitesish janet yellen global stock rally. u.s. futures look to set to extend the high for the year. longtime business partner says he regrets leaving chesapeake
one decade since the departure. more from that interview with chesapeake cofounder. and his treasury head, joining as for the hour, more than 250 billion dollars in a u.s.. we are about 30 minutes away from the opening bell in new york. this is "bloomberg " counting down for the open. i am jon ferro along david westin and vonnie quinn. is a three-hour program brought to you by janet yellen. jon: a global market rally brought to you by janet. david: with this for the hour, cheap investment officer with more than 200 $50 billion in asset management, so
it janet yellen says -- chief investment officer with more than $250 billion in asset management so what janet yellen says matters. doug: it certainly does. for today, that is good news, but the longer term, it is scary. goes back to that volatility chart, so we are seeing not only of the markets dependent upon what central banks are doing, but it also increases the volatility of volatility, so we will see cops and downs. i would not be surprised if we are back here in three months and that charges back up to where we are not too long ago. jon: futures going into the open, pushing higher as they ever have been all morning. s&p 500 futures up 12, dow up 110 and you will notice that the by ai in japan was lower couple of percentage points. the weaker dollar fitting into the dollar yen and down by .1 of
1%. this really interests me and we will talk about it with the. -- with doug. want to wonder if that is the story in the months ahead. up by 2.4%. that is your market groep. let's get to vonnie quinn. vonnie: the republican presidential candidates are retreating after the early promise to support the republican nominee. donald trump says he does not feel held to the loyalty because he has been mistreated. ted cruz and john kasich refused to commit to back in the party's nominee. appeals court judge merrick garland, president obama's nominee to the supreme court, is meeting with two more senators, both democrat. minnesota and new york will meet with garland.
yesterday, he met with the fresh republican. -- with the first republican. is french president provoking -- [indiscernible] the bill would have strengthen france's state of emergency. they submitted the proposal days after the attack in paris that left 130 people dead. global news 24 hours a day powered by our journalists and news bureaus around the world. david: two you are carried it is time for the three stories that matter to the markets. hewitt this is doug peebles. the number one story, janet yellen's message of lower for longer. taking chair yesterday the calls the fed's message to a gradual approach to raise interest rates. features so traders expect no chance of rate hike next month. good news in the short term for the markets. it is a risk on. the thing that strikes me is
what she is saying is actually, the futures look that great and she will not raise rates. doug: we have reached a point where i do think the fed is following the markets and perhaps too closely. i think that the key elements to focus or the key questions are, what are the intended consequences and what are the unintended consequences on the policies? intendedhe consequences by everybody, first of all, get to currencies weaker. that is basically what they are trying to do. so far what we have seen in the most recent time frames, the ecb and boj have not been successful in doing that. as of yesterday's announcement and the previous more dovish fed, the dollar has weakened from the high, so i think that has been a positive because i don't think the fed once the dollar to be the strongest currency in the world, even though it probably should begin the economic outlook for the u.s. relative to the rest of the world. to stick to fixed income,
looking at the treasury curve at the moment, just because of the day did the came out this monday, the front and stays pretty anchored. i we about to see a steeper yield curve? doug: as far as it relates to so.market, i hope a steeper curve is a good signal that things are getting better for the economy. around 100as been basis points for a while and you are right, that probably steep and a couple of basis points. as it relates to high-yield, i hope that is correct. i am surprised it did not the bit more after the dovish comments by chair yellen. vonnie: ab is basically recommending high-yield. you are going more entire yield and taking on the debt of energy companies right now comes you are going doug: with that. i think what we are doing is taking advantage of the selloff we had in the first six weeks of the year. going back to that volatility
chart, we had according to our calculations, we had it forced standard deviation selloff in high-yield market in the first six weeks. that sounds shocking, right? we had a five standard deviation valley in the last six weeks, so this risk on, risk off, while i fully believe we are in that style of the market, i think that the quickness of which the pendulum swings back and forth is frankly astonishing. was attracted to us now, and high-yield had a pretty big sellout for the last 18 months. us, from a valuation standpoint, particularly against s&p 500 index, in the very cheap. david: i am curious about this quickness you say. are there?structural changes in the marketplace we now -- either structural changes in the marketplace? algorithmic trading, what is causing the change? doug: one goes back to the
dependence on central bankers, so coming into the year, they've got the fed would tighten. the fed told us they would tighten four times. the market was scared about that. the market has essentially been scared since the fed stop doing their key leading in july 2014, so that created an environment of brisk off, particularly in high yield. all of a sudden, the fed has become more dovish, the ecb bojeased their qe, the moved to negative interest rates, so there was a thrust of monetary hope. the real question is going to be, are we going to go back to a situation where this monetary trust helps the real economies? so far, it has not worked. david: it goes back to the productivity check. it was a great chart in bloomberg businessweek this past week, which shows investment in has gone down as more money has
gone to the markets. doug: i think that is right. a lot of the debt it jewish -- a lot of the debt issuance, and we have had a lot, has been shareholder friendly debt issuance. you are buying back stock or increasing their dividends, and at the end of the day, finally, the bond market, myself included, said, hold on. we are all for higher stock prices, but not necessarily if they are just generated by financial engineering and not backed up by stronger growth in the economy and stronger earnings. jon: let's go ahead of the open, perhaps one of the things benefiting from janet yellen's dovish remarks, the dollar. anis tracking and seeking to 8.5 month low. benefiting from the dollar decline and heading to the best month since 1998. snapping a four-day losing streak. my question about the dollar,
the question i asked earlier is -- is the weaker dollar bud up with global financial markets at the time of the ecb and boj are hoaxing on something else? doubt that theo weaker dollar is editor financial assets but what does mean for real economist? the financiale crisis, we have had a divorce of those two elements. the financial markets and the real economy. to whole idea behind qe was get the fed or the fed's view was to get the asset prices higher and the real economy will follow. well, i have done this for a long time and that is not the right order of the cart and the horse. if you get the real economy going, the financial markets will follow. at the moment, we have had financial market increases in certain areas. you mentioned emerging markets clearly not there, and yet, the earnings power globally has not really justified the stronger gains in the financial markets. jon: in europe with the ecb
making a pivotal weight for the fx markets, is that but for the underlying economy? doug: i think it is, but the ecb has two important elements. first, monetary policy. policy.regulatory regulatory policy is very tight at the moment, particularly on the banks. you talked about it earlier. the interest rate policy is not helping the banks to get their problems solved. to expect that the banks, who are capital starved at the moment, certain banks, to increase their lending at the time, which is what you mean by the credit magnetism, at the same time that they are under regulatory pressure is a bit too much to ask. vonnie: for them, maybe, but maybe it benefits ab. [laughter] that today.hing the survey of executive consumer
confidence was adjusted. the reading comes as you are saying, asked the ecb prepares to wrap bond prices. what are the large businesses you have ahead of friday? friday is the coin toss. we will probably see the continuation of the stronger job gains. we are more bullish than the consensus on the u.s. economy and we expected to be about 2.5% growth in 2016, which would indicate that if the fed does nothing for the rest of the year, they do risk falling behind the curve. we can't ignore the fact that you just mentioned that the ecb is fine $80 billion or euros every single month. do you think they are terribly price-sensitive over they will buy those securities? i don't think so. neither is the boj. i think that for risk mitigating bond portfolios, i think you have these price sensitive buyers which should continue to increase the price of securities, even though the valuation is challenged. vonnie: they cannot go to
negative. doug: they have a floor for yields not, but if they don't get the inflationary targets, you think they will hold up lauren yields? that: what distortions or level of acquisitions of bond make in the marketplace? doug: huge distortions. you mentioned consumer confidence levels are low. the eurozone has the largest savings rate in the world. which means there is a lot of money in bank deposits. this bank deposits arguably now are coming under pressure of no returns and possibly even some sort of penalties. if i am a consumer in the eurozone and i saved and i like to put my money in the bank and no it is safe, and in essence, that savings is going to shrink, i am not sure how confident i would be about the state of affairs of the marketplace. i think the ecb, by moving to these big negative interest rates, has this sort of thing in the eyes of the consumers. is i would say to mr. draghi
that if nobody was really doing any massive investments and borrowing to make a play on the economy when rates were zero, to you really think that they made that decision because rates were too high? negative, them to snap, i will go make that investment right now -- i don't think that is how it works. we will come back to talk about more high yields, but these at the stories that matter to the markets now. much more ahead on "bloomberg ." about thatk more in the next hour. ♪
latest business flash. applications down for the third straight week in the morgan bank association says applications the 1%. lastly, there are down more than 3%. refinancing also go. average rate for a fixed rate 30 to 3.49%.has gone selling out lending obligations. expected to happen in the third quarter. the process of seeking a waiver. liant said they would delay the year financial statements. they are facing investigations. that is the latest flash. fromabout 14 minutes away the open. let's get you up to speed on features. 14 points up on s&p 500, closing at a high yesterday.
dow jones up 111 points and the stock 600 on a two-day winning streak, although most 1.5%. let's tailback indexes and go back to matt miller. ticket off with a the stock shooting higher after the upgraded shares to the $46 price tag. the analyst at shake shack current violation represents attractive points with substantial long-term store growth upside shares that are down 12% this year. up 4% in the premarket. cabela's is the focus with his by, upterating to a $65 share in the takeover, it a buyout. this comes after a thursday report that the retailer is opening their doors to suitors. they have declined to comment on the possibility of a sale. shares in cabela's are up 5% since the post report.
lastly, low macro volatility has led to appealing single stock option buying opportunities in tesla, according to goldman sachs and the weekly u.s. options watch, goldman believes the model revealed this week will be a major catalyst to buy -- that is a new by calls and puts maturing at the same time and strike price. soaring on high yield as spreads tighten. why they are hanging in there, next on "bloomberg ." ♪
you don't think it is time to get out. doug: i think there are two ways you make money in high-yield. number one, the price movement, which we summarized through spreads, and the other way to income. if you look over long periods of time, the income dominates that. i am looking at the world today where people are starved for income. we have a product, our high income fund that office income, lotit just got a heck of a cheaper over the last 18 months. i am not saying we did not have the rally, i talked about that earlier, but all he really did was take back the selloff we had since 2016 started. i don'tis that, look, think that the typical retail investor should be trading high-yield. i think they should i high-yield, own it, and according to the chart we looked at, you are somewhere in the vicinity of around an 8% yield. if we look back over any five year period in the high-yield market, the yield that you buy
in a portfolio today is essentially the return that you get over the next five years. -- it isld lock in high-yield, so there is no locking -- but if we could buy a portfolio that on average we think will be plus or -100 basis points is so around 8%, i will take that all day long. david: let's take a look at the yields. matt: this is a chart we're looking at in the commercial break. the blue line here is the bloomberg high-yield index. it has yield to maturity and the white line is s&p 500 stocks yield. it is a little past 12 months growth, so the pink line is the spread between the two. this is a five-year look. come up substantially, and it has come up in the past few days and weeks, but it is almost -- about 7.5% right now. doug: i looked at the blue line in july, the middle of 2014, at is when the fed stopped doing
their qe. in my opinion, that is when they started tightening. it is a different world. they did not have to raise interest rates to start tightening because they stop the qb situation. that is what helps and enables the selloff that we saw over than last 18 months. if you look at the pink chart, notbout to face -- i am saying that concentrated equity portfolios should not be a good and consistent part of investors portfolios, they should -- however, if you look at where most of the money has gone in passquity market, it is to the s&p 500 portfolios. from a valuation standpoint, this tells me that i like the blue more than i like the white, and by the way, if i am wrong, ,ou are going to do really well so it's s&p 500 continues, let's say it is up 10% this year, i think high-yield will be up 10%. about, when wonder
their default rates here? this is great as long as you have a steady default rate, but if it is i mean, that would make sense and that would also explain this climb in the yield. doug: we have seen a small increase in the default rate and we have seen a huge increase in the pricing in the future default rates. that is what happens, so if you look back in time, the correlation between the actual default rates and the written on nonexistents almost . the market realizes that there is a scare into energy and in the mining space, therefore, it has reduced the prices of energy and mining names. by the way, the baby got thrown out with the bathwater as well and that is where the opportunity is. all of that information, if the end of qe was a pivotal moment for high-yield, what to the remarks of janet yellen main? doug: i think there are two things, with the end of qe meant
is that the $80 billion a month that the fed was putting into the marketplace, the real economy certainly did not need the $80 billion, so it flowed into financial assets, both within and outside the united states. that was the situation that we had. the market has reacted to that. i think a couple of things have happened. number one, the real fear of the market was not only were we going to get this with drawl of liquidity, but we were going to get significant rate increases. that would have been a turbocharged tightening of policy. i think now, the market is saying, we can live with his pending a policy that we have seen so far, as long as those interest rates are not gapping higher. a risk mitigating return and seeking, and the return seeking would be part of that. for the risk mitigating, are you seeing people place equities and buy that places?
doug: we have seen more money around the world in the u.s. and outside flowing into the high income space, which is our global high-yield fund offshore and high income fund on shore. because they need income, so there is a desire. the risk mitigating side, i think two things are happening. when we go risk off, people flock to that, right? thatnk the other thing is institutional investors, forget about retail investors, insurance companies, pension plans, they are dying for high-quality income. jon: doug peebles is staying with us. we are under four minutes away from the open. this is "bloomberg ." the market open is next. ♪
oh, hi! micky dolenz of the monkees here, getting ready to host the flower power cruise. (announcer) we're taking the love generation to the high seas and reliving the '60s. we'll celebrate that unbelievable era with the music that made it so special. there'll be over 40 live performances featuring eric burdon & the animals, micky dolenz, the monkees lead singer and cruise host,
the 5th dimension, the lovin' spoonful, rare earth, spencer davis, three dog night, and many more! imagine enjoying all that great music on the fabulous celebrity summit, leaving fort lauderdale and making ports of call in jamaica and the bahamas. you'll be back in the days of bellbottoms, peace signs, and so much more, with special theme parties and 20 fun-filled celebrity interactive events. cabins are filling up fast, so come on, relive the era you remember so well. the flower power cruise, february 27th, 2017. let your freak flag fly. don't miss the grooviest trip at sea. jonathan: moments away from the opening bell. this is bloomberg . columnist lisa
abramowicz. futures pointed to a higher open. up 105 points. in europe, a two-day gain, up 1.5%. you will notice japan closed lower. a big trade happening here as you hear the opening bell. george lowes -- george lopez. the euro, 11308. the 10a little higher on year at 1.84%. let's peel back these markets a little bit further. the fed chair, janet yellen rally. is that what we are calling it? matt: absolutely. that is what we are seeing here. take a look at the indexes. the markets move in the next few minutes. we are's eating this happen here. -- we are seeing this happen here. third day in a row of games for the s&p. day of be the fourth
games for the dow jones industrial average, up 65 points. year to date, we had the highest levels of the year yesterday. the dow jones industrial average, we continue to climb from there. a gain of 1.5%. the nasdaq is still down for the year. we have not had a lot of big swings in march. we saw huge swings in january. we would get 6, 7, 8 days in a row with more than 1% swings. sometimes more than 2% swings. concerned, weh is have had three days with swings of more than 1%. i want to talk a minute about what john said today. being strongly influenced by the fed and we were yesterday as well. chart,look at a dollar you can see markets were prepared. this is a three-day chart of the bloomberg dollar index. mark is were already getting teed up from what they expected from janet yellen.
with theit and ran ball here. the death has come down significantly over the past days and has been up for six straight days before that. the today yield. the same situation. let me switch over to the two year yield. we knew what to expect. showed us this with her euro u.s. dollar chart, one chart of the day on monday. we knew it was coming and we got it and ran with it. yield and dollar just coming down. thank you, matt. we're joined by doug and lisa. as executive charge of the message or whatever the other governors are saying, she is wearing with the ball. around the world, equity markets up. they like the message. they are enjoying this. is she on the right track # europe was up. >> japanese equity markets not doing too well.
i think that shows their qe policy and negative interest rate policy, and their ability to weaken the yen, has been compromised. therefore the equity market does not like that. the is a game of where markets will do well and where they will not do well depending on who is trying to drop their interest rates and weaken their currency. >> you tell me where the dollar is and we spent the last three months saying, please let the correlation breakdown. when will that happen? >> the markets are dependent on the central banks. 2014, that at july is when the fed stopped doing qe and that is when the oil peak. in dollars.riced there are a lot of other things going on the oil market. all these things are related. i would not expect the correlation. vonnie: going big into the oil
and energy business, you are obviously liking that. >> i think there are opportunities in this. whenever there is uncertainty, we want to seek out for our clients an opportunity. important to say what is your timeframe on this? we're not watching a mutual friend -- fund with daily liquidity. invest -- investment would be a long-term product. we think we have neat proprietary research in the space. this is not going to be a $10 billion product. this will start out small. i cannot imagine it heading more than 500 billion dollars. >> we like to talk about fundamentals. has the main fundamental been what janet yellen says? martin --u look at market movements, it seems that way in the u.s. we saw economic confidences in
its lowest level in 13 months. you see the japanese yen strengthened against the dollar, which is mind-boggling considering the fact that 70% of the bond market now carries negative yields. it seems like the policies are not generating the growth and confidence of what they are supposed to be doing. my question is at what point do people stopped trading when going to work? twice in certain instances, they already have. central bankers can have a lot of influence short-term. they do not create any real growth. the market is dying for. so far, the market has said, we will have aggressive central bank policies and that will move asset prices higher and growth will follow that. is to see the growth. we have not seen the growth. the victory in the markets are struggling with is how do we get
nominal gdp growth higher in the world? lisa: there was a report your colleagues wrote. policyge said negative derails growth. can you talk about how it has detrimental growth and how it could actually cause the demise? >> let's go back to japan for a moment. the anecdotal story is sales for people's houses are going out because they're taking the and out of the bank and putting it in a safe. think about that. if you deliberately go out and buy a safe and you go to the bank and take the money out and put it in your safe, how confident will you be in your economy that you are doing that? helping think it is things. people were not borrowing money in japan when rates were zero. now the rates are negative. it does not really spark a need to borrow money.
consumers are not at all confident in the situation. i think we are at the end of the road for how monetary policy in certain parts of the world can be effective in influencing nominal gdp. david: to the question about banks, you had two questions. the other was what does it do to the bank. negative rates, it has not destroy the bank of switzerland, it has not destroyed the bank week and then places like that. why? >> doj and the ecb -- sweden, denmark, and switzerland were trying to prevent currencies from dwindling. arguably, you should be able to prevent your currency from strengthening of the -- interest rates.
i think the real notion as it relates to a desire for banks to lend an increase the net interest margin, it is not good for having negative interest rates. what happened is the curb flattened in those countries with negative interest rates. the thanks are sitting there with a big portion of assets in bonds not giving them the yield they want. if the banks and investors have not resulted in pushing them out, what does that mean for high-yield? high-yield is attractive because it sold off by so much. valuations matter. things that if nothing happens, i make money and my clients make money. of those yield levels, 800 basis points or right around the area, i think our clients will make money even if nothing happens. are there emerging
markets or any other places in the world we are incentivized to buy into? >> there is some emerging market opportunities because they have sold off by so much. the brazilian riel has done to the point where it is now taken all of the bad news of what is happening in brazil politically and economically, and it is not weakening anymore. weakness hasevere enabled brazil to stop running such a huge trade deficit. at the end of the day, that is very important for current evaluation. lisa: because you do have a dire view on these banks, are you avoiding bank debt? >> i think the dire view is a little bit overstated. what we are concerned with in is that the wrote central banks through the
monitor policy job and the regulatory job are sort of contradicting each other somewhat. regulators want balance sheets to shrink and they want more capital in the institutions. policy isst-rate flattening the yield curve and preventing some of these institutions from earning more .oney with a steep curve because many of the european banks, the equities trade below book value, they are not interested in beefing up their capital position through issuance of new equity when the price book is negative. what they are instead left with is can i grow my equity capital base through these earnings and the policy on ancient trade that -- i do not think policy is one collectively where they say let's go out and run the money. david: thanks to lisa
vonnie: a new report says u.s. companies out of 200,000 jobs in march was higher than expected. area, fallen to the lowest level in 13 months according to commission data. bank hast comes as the an effort to increase growth. boeing plans to limit 4000 positions in its commercial airplane. workers to leave under a voluntary program. that is our latest bloomberg business flash. jonathan: 15 minutes into the session in the u.s., the alan risk on rally continues. matt miller peeling back the stock market and movers.
dot: they have nothing to with the fed driving the rest of the trade. valeant is one we saw the headlines break in the programs after offering is lenders. one time fee and interest on its loans in exchange for waving a technical default and loosening restrictions on its debt load. you can see the shares are up almost 3%. cheap after a recent rally according to jpmorgan. analyst raised his target to $100 from 71. the stock is an cheap following the recent rally that he has q1, 2016 estimates that reflect .olid trends we also of casino gambling february.sing 7.3% in
those numbers just crossing. aig was raised to a buy. you can see the shares are up more than 1%. david: let's go to abigail doolittle live at the nasdaq where she is looking at two movers here in early trading. abigail: apple is trading higher after shares were upgraded to outperform. saying he believes iphone estimates have bottomed. and of the stock could benefit from the launch of the iphone seven later this year. the theory could be worth listening to. he downgraded shares of apple ahead of the big drop saying iphone estimates looked too high. 20% upsidere than a of $25 per share. another stock after the company beat fiscal court debt fourth-quarter estimates despite
a mixed forecast. first quarter outlook looks conservative, he is saying lululemon shares should be bought. vonnie: thank you. about a month has passed since chesapeake energy's -- died in a car accident. allegedly teaming to leak drilling options. in aofounder of chesapeake bloomberg exclusive. alex joins us now. alix: this was a wide-ranging interview. the two met when they were 23 23rs old and worked together years at chesapeake. and unbelievable relationship. started a newand venture. this is what he had to say about starting at.
were better together than we were separate. an extraordinary example to me of being able to raise capital. very heartfelt and quite open about their relationship and he said it was hard for them to compete against each other. they were going at it and bidding for the same kind of land. classy put it delicately that he left. he was forced out of the company under questionable circumstances. >> this has to do with the fact he was allowed to privately purchase the ownership of the well, the chesapeake drill, totally legit. he had borrowed so much money to do that and they had bar of money to a bank also related to chesapeake or they were connecting the dots, little dicey. he launched millions upon millions of dollars and had to get more from to pay off the
debt. he wound up starting his own company. this leads us to what happened before his death. click this link whole point of the indictment. they may not have been had to head. >> the indictment was there were two parties. one was an unnamed company working together to rig land leases. they would go buy the land on the cheap and not have any competition and siphon off and give the company for the same price. knew at the time of the death, he was indicted and facing potential jail time. they are thet other company in the indictment and have been subpoenaed for investigation. unrelated to the indictment but with the same kind of idea behind it. some royaltyued by
companies and i asked him about it and he would not comment. he greeted the bidding is very common in the industry as you fight share. he's a that is not unusual. kleist price collusion in some way is what was leveled against them. >> right. he did not obviously specify any sort of price collusion there. class of course. >> the indictment, i do not know that information. >> still investigating. >> will it actually be indicted and go to work? i wanted to also get a lot of what he thinksut about natural gas and particular. i asked him, do you really feel investors will let energy capitals out flow spanish is again. >> i do. >> why? >> most investors agree.
as prices move up over time, it will be time again to invest in the business. it might be years. >> in the meantime, what do you do when you are waiting for capital markets to open and waiting for the natural gas, how do you stay alive? >> if the company is well positioned, it is a perfect time to buy. if you are a major, this is the perfect time to provide acquisitions that you do not have to pay for. it is a struggling time. it is difficult to predict when things will turn around. never seen a market like this. even in the 1980's, there was not nearly as much debt as today. it is a different type of market. >> fascinating he thought the credit market would stay open and he was going to sell and buy stuff there he is all over the place with that. fantastic. thank you very much. coming up, bloomberg markets
with eddie lou and vonnie quinn. what have you got? >> she is very busy. we have got scott joining us, the global equity strategist at wells fargo. he is cautious on the markets. he says in the volatility, there are buying opportunities and we will pay him down on what those are. what about the electric car, the model three tomorrow. bloomberg joining us with 17 things you need to know about the new tesla model three. finally, this is in your neck of the woods in germany metro. splitting of its consumer electronics and its food so the big grocery retail conglomerate, liza doing that? a lot of people are pointing to amazon. isinance around the world having an electronics retailer
jonathan: let me get you up to speed on where stocks are trading. a three-day gain, 2016 highs. the dow jones up 139 points. it continues in europe, up 1.63%. fed chair janet yellen sparks and equity chair rally. a lot coming up in the day ahead. >> here is a look at what is coming up in the day ahead. schatzkert hour, erik will speak to canadian finance minister bill on the impact of
canada's's finances. question a lot to us tomorrow as we build up. he pip oreurozone numbers there, and friday, the big one. friday. janice will help break down the latest jobs report. fed chair janet yellen did not disappoint. >> there's a menu from vonnie quinn. david, vonnie quinn, and myself. thank you very much. that does it for bloomberg . bloomberg markets continues next with vonnie quinn and betty liu. ♪
oh, hi! micky dolenz of the monkees here, getting ready to host the flower power cruise. (announcer) we're taking the love generation to the high seas and reliving the '60s. we'll celebrate that unbelievable era with the music that made it so special. there'll be over 40 live performances featuring eric burdon & the animals,
micky dolenz, the monkees lead singer and cruise host, the 5th dimension, the lovin' spoonful, rare earth, spencer davis, three dog night, and many more! imagine enjoying all that great music on the fabulous celebrity summit, leaving fort lauderdale and making ports of call in jamaica and the bahamas. you'll be back in the days of bellbottoms, peace signs, and so much more, with special theme parties and 20 fun-filled celebrity interactive events. cabins are filling up fast, so come on, relive the era you remember so well. the flower power cruise, february 27th, 2017. let your freak flag fly. don't miss the grooviest trip at sea. betty: i am betty liu. live from london, i'm
caroline hyde. ♪ betty: we'll take you from new york to london in the next hour. here's what we're watching now. half hour into the trading session in new york. the janet yellen rally has resumed. the dow and the s&p hitting the highest levels of the year after the federal reserve shale -- chair expressed caution. on pay for the biggest monthly gain since october. caroline: then are bloomberg exclusive with bill about how he hopes to start economic turnaround after the nation was hit by plunging oil prices. finally here, tesla getting rate unveil its most important car yet, the model three.