tv Bloomberg Markets Bloomberg April 27, 2016 3:00pm-4:01pm EDT
david: good afternoon. here is what we're watching. the fed keeping interest rates unchanged despite highlighting labor market improvement and thoughlobal risks, growth of janus capital joins us next with his reaction. -- bank of japan pushes their interest rates deeper into the red. what to expect overnight. the outgoing ceo drugmaker facing the senate today over the pricing practices introduces testimony live. we are one hour from the close of trading. julie hyman is standing by to get reaction from the fed statement about an hour ago. julie: generally being read as hawkish in terms of june now be on the table in terms of a potential interest-rate
increase. stocks are holding up well in the face of that interpretation. we have seen them gyrate in the wake of the state. the dow remains the best performer of the major averages. the nasdaq remains in the red because earnings are very much a part of the equation today. the s&p 500 over the last hour or so. you see some gyrations here. immediately after we got statements, stocks came back down again and are now back up again. all over the map. i want to look at other assets and see how they have reacted. the u.s. dollar is little changed. it is not necessarily what you would expect, and if you are expecting the fed to raise rates for the dollar, to not do much of anything. overall, not much is changed. as for the rates market, let's take a look at the tenure for the treasury market. we see a little more of a
dramatic reaction. it goes against the hawkish interpretation where we see the 10 year yield dropping off and now 1.86%. in context, we had seen the yield going higher for several straight sessions before today. the bloomberg looking at the fed funds probability, futures and the probability they are pricing in future increases. at 21%e meeting only here and it does not go to 50% until november. yesterday'date and compare it to today, the numbers are lower and a little further out for today. financials is one group we tend to look at when we hear a commentary. financials have performed well when the perception has been in the market that rates would go higher. that is initially what we saw. are now seeing financials come off a little bit as investors tried to interpret the
spirit if you look at the banks and what we're seeing, it was a similar move to the upward move and then a downward one. not much change at this point. finally, where we are seeing change has to do with news that has nothing to do with the fed. earnings. these stocksple, remain lower because of a fundamental earnings news, profits flagging for the companies. the micro trade is very much in effect. david: thank you, julie. let's get a look at the headlines. news from ourhas news desk. carlyted cruz 1:00 a.m. fiorina as his vice presidential candidate. that is according to people familiar with the situation. fiorina dropped out of the race earlier this year and endorsed ted cruz, who cannot get the delegates needed to clinch the republican nomination. he and john kasich have joined
forces to try to prevent donald trump from getting necessary delegates. ted cruz plans an announcement about one hour from now. television will carry the event live. in a rare formal policy speech, mr. trump to put american security above all else if he is elected president. he want allies they would be left to defend themselves if they do not pay their fair share. he called for an easing of tensions with russia. to rescue public officials for corruption. suggesting they will overturn the conviction of virginia governor bob mcdonnell. cash and $175,000 in gifts the governor and his wife received. the santa clara california sheriff's telling abc news a body found on the apple campus was an apple employee.
matt keller cites the santa clara's sheriff spokeswoman. no one else was involved in the incident. a trust company has been appointed to temporarily oversee prince's multimillion dollar estate. administrator after a telephone conference with some of the possible heirs and the judge. he will act as a special administrator for six months or until a personal representative has been appointed. the value of his estate is not known. global news 24 hours a day powered by our journalists in more than 150 news bureaus around the world. i am mark crumpton. back to you. david: we kick it off with the fed. leaving its main interest rates unchanged. joined now by the capital funds manager bill gross. mike: thank you for being with us.
said to me earlier that stuck in my mind. i can tell you what the fed should do or what it will do. before we talk about what the fed should do, did you learn anything today about what the fed is going to do? >> not much. to me, much ado about nothing. they did downgrade the global condition and they did not mention june. that has given heart to the long bond by three or four basis points. i think we will know more over , as globalnth or two equity markets and risk markets are stabilized. to me, that is a key for janet yellen. she has assumed the role of global central banker in the last few meetings, indicating global is not just domestic rish's -- risk markets are critical. this may stabilize the stock market and bond prices, it is a
sad commentary about the artificiality of yield and the repressioninancial going on for almost six years now. >> you have got to wonder how much control she has over markets. if they do something that moves the dollar, instead of moving atital markets in general, this point, is it just a circular effort by central banks to do more that keeps economies from breaking out? i think that is true with the boj and the ecb. we know the raise in interest rates, it suggests they might again given certain market conditions. i would agree the boj meeting to night is important. it has gone off the deep end in terms of quantitative easing. we will see tonight whether or not the extent that. the balance sheet
to about four joined dollars over the past year or two. they have negative interest rates now, and they are buying corporate bonds and stocks. this, thatnated by the large kept japanese stocks of the 10 largest holders of these, the boj is a holder of 90% of these large-cap stocks, one of the 10 largest holders. it indicates to me that the boj is really in this to win it. i am not sure they're winning it at the moment. >> is there a trade you can put on at the head of the bank of japan? >> yen dollar related. even more in terms of more significant corporate and an extensive end to the stock market, that it would affect the yen dollar
relationship. as you know over the past month or two, what they have been trying to do in terms of more stock purchases, it backfired and the yen has strengthened as opposed to weekend. up for grabs, i would not safely put on a trade overnight based on anything they do because the market seems to be going in inerse relative to forward terms of what the boj wants to do. >> do you think the boj and the fed are in the same boat in terms of what they are trying to do? i know you do not think the fed is doing the right thing. you have written that investors cannot make money when money yields nothing. that is true. i think they're concerned about 2% inflation, fixated. they have moved above the zero line. whether or not insurance and savings institutions are getting a fair deal, with negative interest rates, an artificial
market in most aspects, i do not think that is their concern. it is fighting demographic deflation and global deflation and commodities that has placed their future growth in jeopardy. and they are all in, certainly like drug he has -- mario draghi has suggested. will try to get 2% inflation, whether or not they could safely do that without expanding the balance sheet so significantly, i am not sure. are the fed trying to get to 2% inflation? when would they actually move? i think they do mention significantly inflationary expectations. in the bond market, basic, everything from two years out to 30 years had an inflationary
expectations component of 1.5 or 1.6. it is amazingly flat. assessment?correct the fed hopes it is not because they want to get to 2% very quickly over the next several years. i think that is their objective and they know they need a nominal gdp growth like perhaps 3% to 4% to stabilize asset prices and corporate profits and stabilize employment. but we are seeing tomorrow in terms of our own gdp numbers, with very little inflation, far from a 4% nominal gdp target, which is concurrent with a 2% objective of a more publicly announced. david: how much risk is in the world right now? the fed took the statement about risk out of the statement today.
is it still a concern? you have made big that's on brazil not defaulting. are there concerns about systemic problems around the world still? >> for sure. and those brazilian bets were .hort maturities afor 1 am concerned about global marketplace in which prices are artificially high. i'm concerned about debt levels in china that are increasing at an almost geometric pace relative to gdp. the expansion of debt relative to gdp, not just in china but elsewhere, is really simple symptomatic of the risk we have for financial markets to the extent that investors can be assuaged, can be convinced, that they are relatively riskless, as in the ecb buying corporate bonds and the japanese buying corporate bonds, and stocks as well.
let me put it bluntly. investorstelligent know that there is something very wrong with the system. they also know over the next year or two, they need to provide a return for investors or else they are out of business. the guessing game becomes one of musical chairs, in which we all system, thethis artificial system, might implode. for the most part, the guessing 2017, 2018,nded to and 2019. coulde point, the system suffer an implosion. >> we will keep talking then paired bill gross, thank you for joining us today here on bloomberg. david: thank you. more is coming up here after the break.
and by democrats and some in the press. it has been a relatively standard speech in some ways, the republican orthodoxy on a lot of foreign-policy issues, criticisms of the current democratic administration, and some of trump passes a comic plastic issue -- opinions, on trade and nato. on rhetoric and presentation, it as you traditional event have probably seen trump doing terms of his demeanor and format. it was delivered before a serious foreign policy group and he used a teleprompter and he talked about, in a heartfelt way, his a vision -- his vision of america around the world. david: he was reading. was the speech in the works for a long time or was he waiting until he got the kinds of results he got last night? >> donald trump is talking about doing serious policy speeches for a long time to how much actual preparation went into those is a different question.
now dating back a little over a week, when we started hearing the notion that trump would try to be more presidential, and take on a more presidential demeanor, would doom more things like this. a sense was this was not speech once in the making, but days in the making or enough for me that had been in the works in a serious way for a long time. certainly did not go back as far as when he was promising a foreign-policy speech. news thatwoke up to ted cruz would make a major announcement this afternoon as the day went on. he heard from an abc affiliate that he would be -- he would pick carly fiorina to be his running mate. how unorthodox is this for him to pick her this early in the game? >> very unorthodox but it has been an unorthodox cycle. they have been -- they have become allies. she campaigned a bit for him in wisconsin three weeks ago. he won that with a resounding
victory over donald trump. expectedw going to be to join a potential ticket. given trump passes wins last night, ted cruz is not the most likely nominee. it is not unprecedented we have seen recent examples where there nominations,tested the party, two for the price of one. if you want to vote for ted cruz, this is who he has put on the ticket. she has been out on the ticket with him. what will this do to ted cruz's campaign? >> i think virtually nothing. in the sense that i think it is not the conventional wisdom, but the reality is presidential politics, a lot is made of feist residential collections in general and they tend not to have a major impact -- except in rare circumstances are people talk about winning states and winning demographics, that in the end, actual presidential elections, with actual running mates, people vote for the top of the ticket. a is hard to imagine
hypothetical circumstance it will make that big of a difference for ted cruz. he may win indiana but it does not strike me he will necessarily when indiana or be able to attribute the performance asked week in indiana to the addition of carly fiorina. it might give a little energy and it will help him change the narrative because people will talk about it a lot. in that sense, another act of desperation along with john kasich, a relatively desperate man. in the end, if he wins indiana and states after it, he will do that on his own or not. uphillary clinton picked four of five states last night and she will split the delegates in rhode island with senator sanders who did not get the majority of them there, 24 delegates in total i believe, what is the plan going forward here? >> he has got to figure out how to stay in the race, even if he does not become the nominee, politically unlikely to go to the convention and fight for
things he cares about in the party platform. the goal is to avoid the elephant in the room, avoided discussion about the fact that, why are you running if you cannot win, because he wants to keep accumulating delegates. the reality is, what he said today is true. anything can happen in politics. he does not want to end the context -- the contest unless he has to. he is playing for keeps going forward. the odds after last night become even more. a reminder to catch mark and john on with all due respect tonight at 5 p.m. new york time. ♪
from chicago. the big topic of the day is the federal reserve and the commentary we just got out. in the wake of that, i am looking at stocks. place. been all over the stocks are at the highs of the session. the vix have gone down. what do you make of it and what are you seeing in the options market? the initial reaction was a little bit of a selloff. they may be looking to raise rates. as they delved in deeper, i think everyone is reading it as, they are on hold for maybe the rest of the year. you saw golden oil and everything where pirate here. right at the 2100 level. interesting to see if we could finally break out of it. the vix behind me is very quiet below 14. options prices, complacency kind of raining here. despite complacency, we
have seen a lot of folks put on death that they will not laugh. even if you're talking about futures out a month ago? way tong vix, another get long via -- volatility. given the fact that valuations , someretched here, money protection here and doing it, the trade makes sense with the vix new the lowest of the year for certain. looking at mcdonald's which are he came out with earnings, the stocks are near high here. >> i like the probable trade here. two percentile implied volatility. over five years, i like that
five years. 25, normallyune 1 i like the spread with volatility so low, by looking for a pullback on the overall market. >> your risk here, it is essentially just what you paid for the option, right? >> absolutely. the best performing dow stock over the past 52 weeks. a littleactually were bit lighter here year over year. the stock is up about 35%. are getting stock valuations, chief operating items. >> thank you. we will be right back with more. ♪
of one percentage point. the nasdaq is down .4%, 22 points. breaking news bill ackman's tested -- testimony is out getting underway in washington, d.c. laterl committee on aging in the afternoon. two panels on pharmaceuticals business model. bill ackman's entering into the record to he will say today he 2014,met back in early first invested in the company because of a highly diversified product or to folio but since then, valeant has made significant mistakes and suffered great damage to his reputation and the hedge fund will take a much more active role of the company's board.
suddenly, and without justification. ensuring this approach is never repeated. you can watch that on bloomberg.com/live. in washington at that hearing, she joins us now. anna, what do you expect to learn today. perhaps we learn a bit more. the think that one of things the committee is looking to try to dig into is exactly what was the justification for raising the price of these drugs . we have seenioned, outgoing ceo of valeant mike peterson come out and say they have regrets and i probably should not have operated this way and raising the drug prices. the committee is really
interested in digging into that justification and figuring out why it happened in the first race. that is something we do not feel like valeant has been upfront about yet. andenator susan collins claire, we have this contrition, people expressing contrition. what has changed measurably of valeant? hearingthe house had a in february, there was talk about how valeant would change. this time we are getting a little stronger of a statement from them and also bill ackman, how they are going to make sure this is not a strategy pursued has a goodand ackman number on the board at valeant. to make sure patients are taken into account
when drug prices are considered from here on out. the outgoing valeant ceo said the company was too aggressive. i regret pursuing transactions where the -- it was a plan increase in the medicines. this is being billed as a bit of a showdown here. what to expect in terms of what the gentleman will say? beenlot of it has expressing regret. i think what we expect to hear they are as if apologetic as they say they are and if the company does plan to change its way, moving forward, spend -- some of the analysts we talked to, expressed disbelief that this would be more than
moving on and keep doing business as usual. see if be looking to there are any strong proposals on how they planned to actually go about changing the way they offer it. david: expected to end by 5:30 p.m., a much longer deposition, camehours in length, what out of that? i know it was behind closed doors. >> right. he did not make any comments when he came out at any point in time when he left the deposition. lot thatms to be a committee staff wanted to ask him. maybe will get a better peek into some of the pricing strategies, where they came from, and who they came from.
david: let's move on to the investor perspective. there saying a few moments ago that a lot of analysts you talked to were in disbelief we would get anything more today. what are you looking for two coming out of -- to come out of the hearing? >> i am not trying to sound cynical, but i cannot help but sound cynical. it is most regretful that he's being called out. he got caught as opposed to really believing he made a mistake. there was a strategy set in motion years ago and he executed on the strategy.
david: i am sure he was happy or hoping the spotlight was shift somewhere else, valeant naming its new ceo. how much are each year by the announcement and how much do you think he will change? >> i am cheered at all by the announcement. where he at been ceo for nine years. a major acquisition in 2015, the company convinced enough shareholders to vote against the takeover bid, that would have valued the stock and over $200. now less than half of that.
the initial reaction i had was is this the best valeant could do? i am almost certain they vetted number of candidates. approach theely number of highly expected credible people in the industry. many folkse ice that are not interested or did not want to take on the risk. from joe's perspective, given what has transpired -- transpired, there is no downside from credibility. they would not be blamed if things get worse before they get better at valeant. there is really no downside. david: bill ackman in these he says hemarks,
will he a more active -- .ctivists investor >> i would argue ultimately, we a play in the significant role but the reality is it does not have a significant amount of experience in the industry. -- what i'mbting --ing to say is he came in if he did not know it, then he should have known. wellinly it does not speak of his position in valeant. kenny effect change personally, i was a the answer is no. it remains to be seen. to my earlier point about joe,
that is not something that necessarily should change one's opinion of the future of valeant. >> how much time do give joe in order to trim this around. over the next six to 12 months, to the extent that there is destruction, i do not think he will get the blame. he comes in essentially immune from any blame or responsibility over the next six to 12 months. turn the page 22017 or the back half, where he has really put his fingerprints on the organization, then he has to be held accountable. there will be a lengthy honeymoon time, and -- >> what is prime -- priority one for him? >> it is bringing in the right people. ultimately, these products do not manage themselves.
you have to have people who want to work at the organization and want to be there and want to build something. people say, the first order of business is to prepare relationships with customers, that is probably the second order of business. the first order is to get people in the organization. david: thank you i appreciated. for the rearview mirror in an hour and a half. the bank of japan meeting. google discussed that next. ♪ -- we will discuss that next. ♪
of rebates.caid ruled findingdge -- withoutrce giant parental consent. it allowed android or ios users to provide content within the app. resettled, but sued amazon when it refused to settle. elon musk could have a spacecraft on mars 2013. according to a tweet, the first time the company has given a timeline for mars. land payloads on the red planet, designed to land anywhere in the solar system. is your business flash update.
let's move past the fed decision and turn the focus to the bank of japan. a lot is riding on its latest monitoring policy move. joe weisenthal will be covering this in the next hour and he joins me now. i do not want to move beyond the fed meeting just yet. i want to ask how it might contribute to this happening in tokyo. not veryd say probably much. the markets today are barely reacting at all. we have seen a lift across various asset classes, but this fed decision was pretty well in line with expectations and you can see by the relatively muted reaction across markets that it just did not change the calculus very much at all. >> reading up on the meeting, the bloomberg news story says the focuses largely on the state of the financial markets. that is what the bank of japan will be focused on. >> yes, it is funny, for a long time, the goal of the japan stimulus was to boost the real economy, and boost inflation.
what happens is central bankers start to look within financial markets about how well the policies are working. last time the boj moved and went negative, they got a pretty severely unpleasant financial market reaction. japanese banks did not like the movement to negative rates. the end moved in exactly the wrong direction and they would have liked. so that they bank of japan would probably not like to see a repeat of that. one thing bloomberg has reported that is likely to happen is some sort of more encouragement, direct encouragement, but it would probably need to be more than that to get some use out of financial markets. >> what are they weighing at the bank of japan? >> good question. after all the time and still coming up short on inflation metrics, you hear people talk about them and their like, they are really in the corner. people think the fed is in a corner, which seems ridiculous
come but the bank of japan, maybe that works, or maybe the criticism works, but you look at what the ecb did last time, where it said it would buy corporate bonds, that could be that theof discussion, be part of the discussion, buying equities out directly, boj owns etf, unusual. a lot more government debt is out there for them to buy. it could go much deeper into the government debt market. there is probably further room to expand the balance sheet. ,> blackrock ceo larry king let's take a listen to what he had to say. >> the whole process of what japan was trying to do was to re-stimulate the economy through aggressive monetary policy, but the second phase, what option do you have right now? >> they have to cut -- go talk to the pie mr. say, iran out of runway. >> the governor known for being
patient, not reacting to quickly. do we expect to see more patients this week? >> i don't know. it is a surprise and people do not know what will happen, exactly what you said. what he is suggesting is there needs to be similar coordination , that the fiscal side needs to do its part and that has become a dominant thing people are saying all around the world, europe, u.s., or japan, that the central bank cannot do it alone and the boj seems to be the prime example of a central bank that has not reached the limits of what it can do. it needs to be courted in some way. i want to ask about backdrop. growth and price outlook. how important is that? >> is crucial. japan has not achieved the goals it set out to do in terms of
really stoking inflation and expectations and so forth. fine but nots taking off like people would have hoped at this point. these are the data points that judge whether it is working or not. david: thank you, joe weisenthal. coming up, the close of trading is minutes away here. let's take a look at the averages. the dow up. the s&p 500 up about one third of 1%. the nasdaq is down about one third of 1%. treasuries rose for the first time in eight days and crude continues to climb here above $45 per barrel. morris coming up here after the break. -- more is coming up here after the break. ♪
we have seen markets all over the place throughout the course of the session. it looks like we will close near the highs here at the interpretation of the fed has sort of evil. we have had investors go a little further into the statement and it now seems as though it is somewhat hawkish but still gradual the urging other words, it allows a stock to rally and it allows bond yields to come down to some extent. we see the nasdaq as the worst performer. low at least down by more than 1%. the s&p 500, if you look at the trajectory over the course of the day, we see a tight range for must -- for much of the session and breakdown -- breakout in half the session. we saw a climb and then a zigzag back down and the climb once again in the wake of the statement. we have seen still has something to do with earnings as well. some of the best-performing in the s&p 500 and biggest contributors to gains are
because of earnings. at&t rising. boeing, all of these companies reported earnings and while not all of them beat on their bottom partsthere were various of the earnings that were causing the stocks to go up. as for apple, which we have been watching today and which was casting much -- over much of technology, look at apple suppliers. series logic came out today. he gets about three quarters of its revenue through apple alone but earning revenues were better than estimate. lower, they have since then come back. effect hasple dissipated to some extent. looking at treasuries in the wake of the fed, we are seeing a decrease in treasury yields across the board. going into the 30 years particular, yields are having their rising streak, the longest since to that -- since 2006. earnings season continues
to roll on. next up, senior research analyst --e bloomberg intelligence at bloomberg intelligence joins me now the preview. with twitter yesterday, the focus was on user growth. facebook with 1.5 billion users, i imagine does not have to worry about that as much. the quarter,k at the expectations are strong. looking at instagram and video growth, ramping up it should be fine. the core business, swinging over the last couple quarters, that is where the focus will be on. if they can alleviate some of the investor concerns, maybe the core business platform is by printingewhat good engagement numbers and showing growth in users, that would be really helpful. >> our users spending less time with the platform? for core seeing time
facebook. instagram and other properties. this is still an incremental opportunity. we will get insights from that today. >> have separate are the two environments, instagram and facebook? now, if you look at revenue expectations for instagram, it is $1.6 billion. in a fraction of facebook revenues, in the near term, it is not a big worry, but longer term, yes. we have to see the trajectory. moving to gauge that. >> how does video perform for facebook? >> if you are looking at google and twitter's results, video growth has been pretty strong. the only thing that has been the opposite side of the equation is
the pricing is down so pricing for google and add pricing for twitter, it has been sort of hampered by increasing video growth. the volume should take care of price declines. do expect much in regard to virtual reality? >> i am not sure. the financial impact expected for this year on facebook is sort of low. it is a long-term strategy here. more focus will be on expense. they keep on spending, ai, and also investor in dutch investment semester, not yet monetized yet. growth may continue, but the financial impact in general for this year is expected to be low. talking about the money amazon's spending on, obviously, we see that at google as well.
our analysts and investors going to want to -- how much the company's spending on what is next and how well that is where you out? >> if you will get facebook's 10 year plan that they have fromed, the revenue ramp other revenue streams is longer. if they are disciplined, spending in the near term and balancing those expectations with a core business, that is looking for.s are david: you can find bloomberg intelligence full analysis on various sectors and companies. that is it. the market close is coming up next. ♪
♪ closing mostly higher. joe: the question is, "what'd you miss?" reserve did the federal leave it open for a june rate increase? joe: plus, this earnings season has not been kind to some tech stocks. can facebook defied the trends? druget: a hearing on trafficking. we begin with our market minutes. negative, treasury to extend their gains after the fed. other than that, a lot of people shrugged t s