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tv   Bloomberg Markets  Bloomberg  May 5, 2016 12:00pm-2:01pm EDT

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scarlet: good thursday afternoon. alix: here is what we're watching at this hour. oil is driving the market moved today, energy producers lifting u.s. stocks higher. scarlet: a different story emerging markets. alix: elon musk promises to reduce half a million electrics starting in 2018. will he be able to deliver on his promises? scarlet: let's head over to the markets desk. alix mentioned oil prices rising, giving equities a lift off of its three-week low. julie: right. it is a bounceback affect. even though we are gaining along
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the oil part -- along with oil prices, it is not a big rally by any meaning. all three major averages higher but none of the region -- reaching for tense or even half of 1%. even as we have seen this big recovery from the lows, if you look at the bloomberg here in the s&p 500, we have not re -obtainedattained that level. i also wanted to point out what is going on with bond yields. this is wb, which lists bond yields across the globe. i want to show you this column if you can see it. this was the topic of discussion at yesterday's zone investment conference.
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we heard folks criticizing the negative rate regime. we heard stan druckenmiller saying that people should be selling stocks and buying gold because of concerns about global growth. if you look here in the united states, of course, we don't have negative yield at this time. the 10-year note today, going back to markets, we have not seen a lot of activity either way. if you look at something like the dollar versus the japanese yen it is actually rising for the third straight session. it is up three tenths of 1% today. people are looking to tomorrow's jobs report and perhaps giving a little more direction to the market and clues as to where the fed maybe going. the euro down about .3%. alix: are we getting closer to a
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change at the top in terms of individual leadership? julie: maybe. apple is what we are talking about. it is continuing its decline. over the past 11 sessions, it is down in 10 of them. that has not ended. so the leadership we are talking about is in terms of market cap. this is a custom index we have created that subtracts google's market cap from apple's market cap. and you can see the gap between the two. this is the strip -- the spread between the two. it is getting smaller and smaller. it is about $25 billion right now. if apple keeps going down and google keeps going up we could potentially have a new biggest company. alix: whoa. we need a bell for that array banner. julie: we'll see. we still have $25 billion to go. alix: mark crumpton has more from our newsroom. mark: the bush family is closing
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ranks and refusing to endorse donald trump for resident. a spokesman says that the 43rd president will not be joining in. his son george w. bush is also not supporting donald trump. his refusal comes as no surprise. the michigan house has approved a nine -- a 500 million dollar restructuring plan from the detroit public schools. it is designed to guarantee that teachers are paid and the district pays off debt. teachers held a two-day sick-out this week. turkish prime minister says he is stepping down and will not seek reelection at a party convention this month. >> i believe that, instead of
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changing the associate, it would be more correct to change the leader to maintain the unity and the solidarity of the party -- of ak party. mark: he said the decision was not his choice. there is a struggle between him and the president. winds at the airport are long and will get longer the summer. officials -- lines at the airport are long and will get longer the this summer. the tsa says it is doing the best it can with of the budget it gets from congress. scarlet: equities, treasuries and the dollar in the green
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today. but are they moving with any degree of conviction? the s&p 500 fell to a three have wicklow. -- three-week low. alix: the bar on the left shows what would have happened if you invested $1000 in the s&p on generate second, 1980, and held it through 2015. the next two bars show what would have happened if you adopted the old buy in may and sell in october strategy. joe: yeah, it doesn't work. it is not constant. what that idiom really ignores his reinvesting of dividends. we as investors have to understand that 40% of the return of the s&p 500 comes from
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reinvestment of dividends. so over time, having that 2.5% to 3.5% spread even over six months makes a huge difference. it has tripled. if you sell on may 1, you give up or you are reducing your return by one third instead of being fully invested. scarlet: they look at the charts and say we are stuck in this range and we cannot get out of it. so those who cannot resist that temptation to sell in may, what you have to say? oliver: a few things. in the environment we are in it's all about the u.s. dollar and how that is driving commodities and other things. six months ago, the big story was it is an earnings recession because of oil prices. now it is because of the strong dollar. and there will be another story in a few months. ultimately speaking, what you want to see -- and we have had some good fortune with the ecb a
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negative rates because it has not worked. so it is keeping the fed from going negative. you need gdp growth. and what will drive gdp growth? it's going to be about rise in employment and rise in inflation. in tomorrow's job report, pay close attention to the participation rate. no worry about if it comes in at 200,000 or 180,000. it is about participation rate. if those go, that is a plus for the u.s. economy. alix: which means a stronger dollar. we have seen an intense interest correlation between u.s. stocks and the dollar. i am looking at the bloomberg dollar index, the blue line versus the white line, which is the s&p. right around there for, you saw the inverse correlation kind of take off. to have a call on stocks coming have to have a call on the dollar. oliver: but the real monkey
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wrench and all of that is that the fed has been consistent and so have all the fed speakers in the last two months of being keenly aware of what the strong dollar is doing and their interest rate expectations global growth, right? so what they are really worried about is negatively impacting china and having that -- i won't use a word collapse but certainly having that gdp strength further. and all the issues they are having with regards to nonperforming loans and the banking crisis. it is a mini banking crisis. if you see -- unless you see a super, super -- you will not see a rate hike and that will take it off the table for the rest of the year. scarlet: really? alix: so no june. scarlet: that's it. we were one and done in december. let's talk about apple.
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you put more of a premium on value stocks and growth stocks. you like apple when it is out of favor. oliver: it is out of favor. [laughter] scarlet: so talk a little bit about what carl icahn's the vestment of his stake means. all of her: it is not a bus, but the company is struggling. if you look at it on a valuation basis look, apple is on a relative basis relatively cheap. they had a lot of cash. while everybody is talking about there's been a first time slipped in iphone sales, that was inevitable. you've seen the apple watch outperform expectations. they have a lot of cash. what will -- what we believe is investors on a long-term basis is we have been long-term holders and we continue to be long-term holders.
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we think they will continue to raise the dividend. they will continue share buybacks. and they are going to innovate. whether that is through organic innovation or acquisitions. we are going to see that. and some of the acquisitions they made haven't been fully realized in terms of their potential yet. from our perspective, if we are going to have a core retail/technology holding we think apple is much more interesting and much more valuable than an amazon or google or a netflix that is out there. alix: you also like exxon. it is one of the leaders in the integrated, but what kind of oil prices you think the shares are pressing in now? oliver: i think it is right where it is, the mid 40's or so. i think the story with exxon to us is it is just a global superpower and they will figure it had to make money. with all the dynamics occurring in the middle east we are a crisis away from having a spike in oil prices. that could translate very well
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3.5% dividend i think they have right now, somewhere in the threes, depending on pricing, which is fairly attractive. it is a nonslip google stock -- a non-cyclical stock generally speaking. it is just part of the conservative equity-based portfolio. scarlet: thank you for joining us. alix: coming up, it is our mistress talk of the day. after a nice run over the past month, shares of this company look winded after taking on the jaw after earnings fell. ♪
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scarlet: let's head to the markets desk julie hyman who has the big reveal. company shares look winded. julie: sometimes we allude to competitors. there are no rules. it's fitbit. the stock is down a lot today after the company came out with numbers in particular a forecast that was short of estimates. fitbit has really run into a lot
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of trouble this year. the company's profit forecast of particulars what fell short. what is going on here is it is spending more on developing new features to keep the growth up. there has been a lot of talk about user engagement and attachment to its devices. do they keep using them after they buy them? it sort of has to feed the beast and come up with new technology and new devices in order to keep it going. it's been spending more to do so. the sales forecast was above what analysts had been anticipating. intersessional loan, it is down 15.5%. i want to do a quick survey with other companies that are falling on earnings that have missed estimates. the number four oilfield company has cut its free cash flow forecast. some say it has renegotiated its credit line.
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elle brands coming out with a preliminary number for this current quarter that was below estimates. itt also missing as did sprouts farmers market with its comparable sales. scarlet: thank you so much. alix: the bull market in stocks is very much alive. scarlet: but investor stan druckenmiller says it's different. excessive borrowing from the future says that the bull market is exhausting itself. >> i think blankets to him is like that are a little dangerous, especially in areas like financials, which we believe are probably the most under owned sector in the world in terms of u.s. and canadian
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financials, which continue to throw off a lot of cash. and by the way, are just now beginning to pay dividends. in america, we are cowboys. we haven't paid dividends in a long time. payout ratios are very low. we are beginning now deceased types of situations. tom: we look at the numerator and the denominator, part of your constant is that the denominator will pick up. >> that is the call in terms of really 17, 18 and 19. we will see a resumption of revenue growth. the bull market is still very much alive in terms of our call. 2015 is the reset. 2016 is going to get going again. markets are never living -- never linear for long. scarlet: everywhere i look am i see risk. the bull market really has to
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run on something. i would argue that it has to run on good quality growth. we are just not seeing that around the world. we are even talking about possible helicopter money, monetary policy reaching its limits. >> this is three months removed from the end of the world in january when people were talking about contagion. there is no analytical substance with regards to contagion or recession. francine: give me one optimistic view of the world. >> the u.s. economy is the worlds largest economy and it continues to improve. that is what you need to sink your teeth into. francine: america is not raising rates. what is it waiting for? >> its may. stick around until june. we will see what happens then. francine: but it is not pricing the markets. >> the 15 year manager remains
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very negative and they will be surprised. remember, the circle of life is that the the earnings go up, the stock market goes up, the economy goes up. we forgot about that. and we will get back to fundamental investments. scarlet: that was brian belski calling for a fed rate hike in june. alix: also ahead, m&a action are we finally saying a turnaround? we will break down some recent deals straight ahead. ♪
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alix: is dealmaking in the energy space from a coming back? the oil glut helped to shut off the m&a's big it.
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-- the m&a spigot. is the turnaround finally happening? eqt has been booking up on assets buying stat oils appellation assets for $407 million. is this the beginning of m&a in energy or is this unique to the eqt dea. ? -- deal? >> we haven't really seen this substantive transformational corporate acquisition we have all been waiting for since the peak in prices back in 2014. what has really happened is you have a buyer and seller disconnect. that has been more pronounced and now that we had this for osha's rally off the one kilos.
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the denture -- off the one q lows. alix: the idea that we will see asset sales and guys that are not loaded down with dead be able to pay for the assets will be the future, right? vincent: that is likely going to be the case. we have seen asset dispositions across the board this year whether it is chesapeake, whether it is devon, whether it is marathon as well. many acid deals giving operators it an opportunity to the bulk up on existing position sizes, allowing them to gain efficiencies of scale across their geographies. alix: what is fascinating to me about this deal is how, paying for it, they raised equity increased the offering by a
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million shares in february and also had an equity offering in the shares when higher. the capital markets are open and happy. benson: last year, the capital markets provided an opportunity for them to stay in the game. but the equity capital markets have remained open and this for osha's rally off the lows of 1q have allo -- of 1q have allowed them to post equity. alix: that really blows my mind. we were going to see these mega acquisitions. why hasn't the capital market closed yet? vincent: it is the opportunity set put forth. you had prices below $30. you had this massive rally in the e&p companies took advantage
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of that. and we have seen this price appreciation for those equities. alix: really appreciate it vince the outset -- vince p iazza. ♪
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markets." mark crumpton has more from our newsroom. mark: we have breaking news at this hour. "the washington post" reporting that mitt romney will skip this year's republican national convention in cleveland in july. again, that is according to "the washington post." it was back in march in salt lake city, utah, that romney gave a scathing speech, criticizing donald trump in which he called the the front runner a phony and a fraud. meantime, outside political groups spent $690 million this season, a 50% increase over the 460 million dollars spent in the 2012 nomination fight which mr.
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romney won. the gap is sure to widen because the campaigns have not reported their april spending yet. islamic state forces used a bulldozer and homemade guns and trucks to stage an assault that killed a u.s. navy seal in iraq. that is according to the u.s. military. the seal was part of the team sent in to extract american advisers from the fighting. about 4000 american military personnel are in iraq and in canada, alberta is under a state about -- state of emergency. fires have already torn 600 holmes. there are 49 wildfires burning with seven of them out of control. more than 80,000 residents have been forced to flee fort mcmurray. no injuries or fire-related fatalities have been reported. products containing tobacco will receive the same food and drug
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regulations including age restrictions and health warnings. alix: comcast is setting itself up to be the next disney. last week, comcast announced its $4 billion deal for dreamworks after the u.s. closing bell today. dreamworks is the focus of today's "the numbers don't lie." it comes in closer to disney's more than $7 billion deal in 2006 for pixar with a high price, partly on dreamworks focus on animation.
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this genre really makes a profit. animated films like "shrek" had the highest net profit margin among films from 2004 to 2014. the size animation dreamworks offers comcast exposure to the more stable tv production and new media business. dreamworks has double down on non-film sales to help drive this revenue growth. part of this effort, the volunteer nature of hit or miss films, dreamworks has focused on putting out only two a year in theaters. this year will include -- this quarter will include one of them "kung fu panda 3." dreamworks owes 45% of oriental
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dreamworks, a joint venture that produces films and consumer products and develops theme parks in china. the yellow bar is china's box office growing steadier and steadier. it looks to become the number one movie market in 2017. and we will be keeping an eye on all of this when dreamworks reports its earnings after the u.s. closing bell today. scarlet: let's go to abigail doolittle who is live at the nasdaq where she is checking out some tech move air's. -- tech movers. abigail: dreamworks is one of the top stocks this year at the nasdaq, up or than 50% on that comcast takeover. big premium, full valuation, but most seem to think it is worth it. paul sweeney says this acquisition will put comcast squarely and improve its acquisition business and strengthen its movie business
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and increase its intellectual property. dreamworks does report first-quarter today after the bell. but it is irrelevant into the takeover. scarlet: what about tesla? abigail: the stock is lower. tesla is now down six out of the last six days, down 10% this week alone come after the company reported an in-line first quarter report and also reaffirmed a full-year target. elon musk even said that tesla aims to produce one million vehicles in 2020. so quite a ramp. but there is a huge debate between the bowls in the bears. the bowls debate is that tesla will turn profitable and hit and raise reduction targets. while the bears, the 20% short interest in this stock, they cited the high casper and along the increasing debt, the possibility of production issues, all which could cause
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the company to stumble around its production target. only time will tell which side is right. in the near term, the shares are back below the 200-day moving average, something that could be a bearish signal. scarlet: some excellent technical perspective. stay with tesla bloomberg caught up with david whitsitt this morning. he made a bold move in february calling for a buy on the stock at the literal bottom. the stock didn't fall further after the call. the bloomberg go team caught up with david this morning. david: last night was a genetic turning point in the tesla story come in terms of potential which is already skyhigh. a lot of execution, of course. but coming out last night and saying they are accelerating their timetable elon throws out the million for 2020.
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that is a tremendously production from what they are doing now. so you're talking about going to half a million by 2018. if they can pull that off, there is a lot of upside to the stock. obviously, you need capital. there are always cyclical risks. one risk that doesn't get talked about enough is, right now, they have an axis of domain in high-end, pure electric battery vehicles. there is a lot going on here obviously. >> if you look at his track record and his other -- you are paid to make decisions about what happens next. what do you think happens to tesla next? do they meet this timetable?
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david: he talked a lot yesterday on the call about how the model 3 is going to be more easy to make than the s or the x that reflects the large delay they had, especially with the x. it won't be as somatic as for the first two models. i have been thinking 2018. i'm starting to consider giving them or the benefit of the doubt. and if the economy holds that. there is a potential here for me to increase my fair value. i wanted to give it more time to digest the numbers in my model. david: if they could deliver on this, it would be truly revolutionary. but steve case was said that a vision without execution is an
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elucidation. at what point do is to to question management if they consistently overpromise anddavid: it's tricky, too. because they have missed on timing. but that model 3 is an awesome car. me, i would like to drive more than 215 miles on a civil charge. i think there are more surprises coming to it. the price isn't quite as mass-market as people make it out to be, but it is a price point where it could do some damage to an audi or bmw. carol: maybe it shows the commitment of a creator of a company to his company. but why does he need to do that in order to get this done? david: fair point. it seems like he is not going to do that much longer.
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i think from the outside, my observation is he is a micromanager and he is hyper obsessed with the control in the process. and rightly so. you want the product to be perfect because you are up against formal competition. if you have quality problems you are going to died. tesla has been able to buck the trend. part of that is marketing. part of that is tremendous product, too. you have to stay on that. the model three has to be ahead. i think they are on their way. it looks fantastic. but there's still a long way to go. but my point out competition earlier is a valid one. we just haven't seen formidable competition yet. scarlet: coming up later on on bloomberg markets, the chairman and ceo of mgm resorts, james ameren, will be breaking down the company's first quarter results at 2:00 eastern time. ♪
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alix: here is your global business report. alibaba sales are soaring to start the year. you will hear the vice-chairman about how putting money back into the company will help a the road for even more sales . scarlet: and a power struggle in turkey leads to the step down of the -- senofi says shareholders has signaled support for the deal.
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people familiar with the matter say amgen is also considering a bid for medivation. alix: alibaba is bouncing back. it shrugged off a slowing economy with promotions to lower cash-rich consumers. joseph tai says the government will keep investing to pursue growth. >> we are prepared to continue investing in high potential businesses that are highly strategic to alibaba. from digital entertainment to local services to international expansion. these businesses contribute to losses in our -- our current income statement. however, we invest in them so they can graduate to emerging traction and then onto core cash flow businesses in the future. alix: robert iger had a rare
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official meeting with xi jinping today. the shanghai disney resort, the company's first theme park in mainland china, will open june 16. the head of the chrysler says the new deal with google will jumpstart the self driving car business. they have agreed to build a driverless minivan. >> i think anything that is done in collaboration with summary of the caliber of google is by definition going to expedite the development process. we are giving them a state-of-the-art. car and they are giving us state-of-the-art technology. that commendation is bound to accelerator thing. alix: but the deal with google is not exclusive. he says chrysler is open to other partnerships, including one with apple. scarlet: it is time now for our bloomberg quick take. after six months in office turkey's prime minister is stepping down after a widening rift with present or to one --
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president orderurduon. the ruling party was swept back into office last september. this leadership crisis has rattled investors, sending the lira to record lows. erdogan is battling to defend the inner circle from corruption allegations. the opposition is fractured. here's the background. turkey has been part of nato since 1952 and an associate member of the eu since the 1960's. under erdogan is pushing its role as an islamic superpower.
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opposition groups have called erdogan a dictatorial leader. foreign investors pouring of a $50 billion into turkish stocks and bonds. he argues that making his office more powerful is the best way to ensure turkey's economic success. ♪
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scarlet: financial leaders from around the world continue to criticize hedge funds. >> the model is broken.
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for large is the additional investors, it is off the table. >> if they charge to much, they ruin the idea. >> the rates of return in a hedge fund business and the fee structure has discouraged some investors. >> investors are going to go with their feet. they will redeem the hedge funds if they don't feel they are giving them something worth the fees they are paying. that will either force hedge funds out or force them to lower their fees. >> it is highly probable that the asset class will shriek a bit. >> i think people should yell at them. they deserve it. but they are yelling at them too much now. alix: joining us now is simon smiles. scarlet: you were at milken. 20 you think? this conversation -- what do you think? this conversation was circling
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around. simon: hedge funds have underperformed expectations. on a relative basis, it has been tough markets year-to-date. european equities have still [indiscernible] and with hedge funds that are not buying the index. they are buying a selected group. scarlet: not losing faith, but there is a lot of skepticism. how is the hedge fund industry responding? simon: if i look at the behavior of our clients, traditionally, private lines have not the high-profile manager and the name. that behavior is knows of a changing. we are seeing an incremental allocation a positive change in allocation to hedge funds. but how this is manifesting again, is changing them. it is focusing more on
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portfolios. so a kind of strategies, what kind of diversified, nation strategies and common -- and the first side -- and combination strategies and combination managers are there? the rise of premium risk factors, smart data continues. i'm not sure it necessarily poses an existentialist threat to hedge funds as a whole. i think it is a component, potentially driving off a through a portfolio. again, it is in concert with markets. alix: i talked with some hedge funds got to them say, look, i will do my homework.
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but if i see my buddies are invested in that stock, i will not be buying that stock because there will be no one left to buy it when you want to sell. have your clients change their strategy in who they want to invest in and crowded trade, like shares like valiant? simon: we look at some of the widely held macro positions, the u.s. dollar went completely against expectations. that smashed a whole range of asset allocators. i could go on. so single name credit positions have been at risk. single crowded positions in the macro space have been problematic. what we say to our clients is not a single acquisition, but they are looking for differentiated strategies, a wider profile and a broader range of strategies and a traditional focus on high-profile equity manager.
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alix: you also like european high-yield credit. that has been an enormous rally. do you still like at these levels? simon: we are not necessarily expecting a further compression of spreads. but in a world in europe, we have 70% of the boone market offering negative yields and the ecb buying investment grade, nonfinancial, domestically focused credit, the squeeze of investors enter a high-yielding fixed income we think will continue. us, we are in the early stage of a credit cycle. -- plus, we are in the early stage of a credit cycle. scarlet: what is your comfort level with risk now versus before the ecb and the boj adopted negative interest rates? simon: negative interest rates we can talk for hours about the unintended consequences.
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more broadly, we have been living in a world of quantitative easing for the best part of seven years. against that backdrop, think improvements in the economy we are seeing in the u.s., china and europe, across all of those areas, they have been underestimated by the markets. even within the disappointing first-quarter, .5% growth, we saw in the u.s.. you look at pm eyes -- pmis in china and the u.s. turning positive in march. the u.s. continues to grow. we talked to private entrepreneurs globally and they seep positive trends in the u.s. and europe. 59% of them last month reported an even better outlook than they had the prior month when they were seeing positive trends. even within energy materials. 67% of the clients in those areas were signaling a positive
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surprise in terms of topline growth. alix: nevertheless, the single biggest worry you hear from your clients? simon: it is different depending on where you are. in the middle east, even within countries, the concerns differ a pair broadly, it is oil. you talk to people in saudi arabia, though, it is the reforms in oil. in the u k, it is all about brexit. and in the u.s., it is about the presidential outcome. alix: coming up in the next hour, a huge interview you don't want to miss. the chairman of tribune publishing will weigh in.
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alix: this is bloomberg markets. scarlet: we have breaking news. let's bring it over to julie hyman. julie: metavation is rejecting
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sanofi's offer. you can see the shares are not doing much but they are trading substantially above that offer price at $59.62. that seems to imply that investors believe there will be a higher offer either from sanofi or other names that have been floated as possible acquirers. medivation says the letter restates and inadequate proposal that they have determined undervalued. just kind of going back to what it had been saying before. the sanofi shares trade in the united states -- maybe they do. yes sny is the ticker and the
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shares were lower and they are not doing much in response to the headlines. we will keep you posted and see if they come back with a higher bid or of someone else steps in. alix: pfizer reported earnings and that was a company rumored to be looking at it. it's interesting to keep your eye on that. julie: we are seeing a little recovery today in the markets but losing a little steam as we get underway -- further into the day. the s&p 500 has cut its gains not in half i at least 1/3. energy remains the best performer but it has just about halved its gain and housewares and industrials as well and materials are switching into the red. we have been watching earnings related stories today. we've all state and those
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results beat estimates and abide back. occidental had a report that is typical of what we hear many energy companies. it's cutting costss and doing asse sales. ali baba is another we have watching with a 39% surge in revenue. jim cheneyenos reiterated his short in alibaba. scarlet: thank you so much. alix: let's check in on first word news with mark crumpton. mark: moore signs of unease among establishment republicans about the increasing we likely coronation of donald trump. mitt romney is planning to skip this summer's republican
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national convention in cleveland. he is citinghe has been one of donald trump's fiercest critics delivering a point by point indictment of them in a march speech in salt lake city. mr. trump paid for his run for the republican primaries but he will not self fund his general election campaign. he named the national finance chairman. it is the ceo of dune capital management and a former partner goldman sachs and has them the is ms. with donald trump in the past. israel says it has uncovered another tunnel from the gaza strip. they have an used to attack israeli targets britt word of the discovery came as israeli and palestinian forces fought along the border. the militants fired mortars as israeli -- at israeli troops and israel responded with artillery fire in airstrikes. the powerball jack ott has grown larger. there was no winner so the price estimate goes from $348 million
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to $415 million which is a far cry from the 1.6 billion dollar powerball prize shared by three winners in january. that was the largest ever jackpot drawn in the world. no one has wonderful jackpot since march 2. powerball says the odds of winning the top prize are one in more than 292 million. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. scarlet: thank you, economic data this morning showed allocations for jobless benefits climbed to a five-week high even though they remain near historic lows and this is a day after adp data said it added fewer workers than projected. alix: the focus turns to the job report tomorrow and according to the forecast, employers added 200,000 jobs last month.
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what is your number for tomorrow? >> we have 190,000. it's only slightly lower than the median forecast and not enough to say there is a difference. the retail sector has been good lately them at will start to cool off. what's interesting about the payroll is how strong they have them. the economy has taken a big hit in the last two quarters gdp growth has slowed quite a bit because of cutbacks in the oil sector. the economy has taken a big hit the payroll has not. it has been moving along at 240,000 jobs per month on average for the last six months. there is a disconnect between the labor market and gdp growth. scarlet: jobs growth and labor market metrics are a lagging indicator and will catch up with gdp because it takes companies a while. >> this is what people want to figure out if it's a normal pattern or is something else
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going on? i think it might the something else. the reason gdp slowed is the near collapse of business investments particularly oil and other commodity sectors. it is fallen for two consecutive quarters which is unusual in an expansion. the slowdown and the economy is concentrated in only a couple of sectors. the rest of the economy continues to grow. we look at the total output and it slowed because of a really big drop into sectors. otherwise, the economy are to be growing. we will see how it plays out over the next few months. alix: the corporate profits are down but jobs are higher and you have a lot of money going into hiring labor but not into business investment and productivity is down so much because you have those sectors like retail doing well but not manufacturing. how does gdp wind up growing at all with those kind of criteria not working? >> gdp will grow with more employment. people who work produced.
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alix: only and mcdonald's. >> when someone comes in and buys the product the employees are creating the output of that moment. when employment expands come output expands. if it only expands at the same rate as employment, and we are not getting productivity growth. what has happened to productivity and we're not getting much because of the lack of business investment spending. that is the issue. why aren't businesses investing more? they don't see the need. they can expand with the capital they have by adding more employees. more employment and more income is good. it's an issue because in the long run, there will be problems meeting the promises that have been made on things like pension income and medical benefits because the income will be there to provide that. a lot has been promised and it relies on strong gdp growth. that's an issue. it's a longer-term issue but right now, tomorrow's payroll is
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likely to show a number of positive indicators. numbers are good for the month of april and job growth is up and the ism and non- ism index point to gains. it looks like we are still continuing to show good gains in the labor market. scarlet: will the job report move the needle for the federal reserve in june? >> the fed has told us they are concentrating on inflation now. they want to see actual progress toward inflation goals. it's 1.6% year-over-year. the target is 2%. if they saw a sizable pick up in wages, that might strengthen their confidence a bit that we are headed toward the target. one month will not be enough. the wage data shows us 3/10 it's not enough one month, we have to see successive months. alix: you mentioned the consumer
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holding up in what you think about the bounce back in april in auto sales? do you feel the auto sales is telling consumers they are good to go. >> i think so. the employment gains we mentioned the steady growth of income financing, balance sheets are in good shape, it's likely there will be steady gains in consumption spending. it seems like the economy pulses and slows every three months we know the concern that consumers are slowing down again. they are really speeding up in a goes on like that and it has been like that for a couple of years. i am not worried about the consumer. alix: we appreciate it. scarlet: coming up, donald trump's fundraising flip lot -- the presumptive gop nominee says he will start raising money for one of his core promises was to refuse contributions. will this change his image and will his supporters care?
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alix: you are watching bloomberg markets. scarlet: let's go to the markets desk with julie hyman. julie: i am looking at a retailing consumer because we have earnings news out today. limited brands has preliminary profit that missed analysts estimates. it talked about victoria's secret comparable sales in april which fell 1%. analysts anticipated again in the shares are down by nearly 10%. we are seeing a general decline and other retailers. if you look at the spread between different kinds of specialty retailers like gap in
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urban outfitters and clothing manufacturers on the gap and look at its put/ca;ll ratio that is going into monday's report of comparable sales for the month of april. the company tends to give preliminary numbers for its earnings. the full earnings report is out on may 19. the ratio has been rising going into the report. in consumer related stocks, we're watching whole holds and sprout which is their smaller competitor. whole foods had earnings that beat estimates largely because it is cutting costs. sprout is seeing that the coin in sales. the comparable sales are falling and that means it's coming in short of estimates. it's rising but short of estimates and now it has been weighing on the shares. on whole foods, they made a
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remarkable turn in its comparable sales. this goes back five years and looks at the order by quarter comparable sales for the company. whole foods was viewed as a growth stock not so long ago. it was seeing strong comparable sales growth but that has melted away and has now gone even more negative. the sales decline is not good news. scarlet: thank you so much. alix: one of the top promises of the donald trump campaign has been his refusal to accept contributions from special interests. he said he would sell finance his campaign to remain independent. scarlet: how does he explain to his backers his decision to accept contributions at a time when the party has fractured over his candidacy? joining us now is a political
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analyst. >> donald trump is in a position where is the presumptive nominee of the republican party and his job is to keep the excited voters he has accrued but also unite the party and his focus is in that second part. this is one of the ways he is trying to do this. he says he will raise money and help raise money for the party down ballot candidates also running in 2016. and partner with the rnc in a joint fundraising committee to do this. he will tap on his golden rolodex. in some ways, he is doing this as a gesture to show that he wants to sell fun and he could but i'm trying to bring the party together so unwilling to help out and that will be his message. scarlet: will people drop out of his campaign for not self funding? >> we have been surprised during the primary much he raised without trying. there were people who donated to
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his campaign. he was not holding fundraisers but he could probably fundraising he wanted to. that's an olive branch he is giving over to the republican national committee and saying i'm going to be a team player. alix: what else has he done to unify? >> we have not seen it yet week as he's only been presumptive for a couple of days. he is going after hillary clinton more. in other ways, he is doing -- he is sending a lot of signals by the people he surrounds himself. this started a couple of weeks ago when he hired paul manefort to help run his campaign. today, he hired a national finance chair who has ties to goldman sachs and is considered to be an inside player in wall
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street. these are all signals that he is sending that i was an outsider and still am but i am willing to bring people into the fold. scarlet: he is rounding out his team. the most concern is who he will round out the team with as far as a vice president. many people say the likely pick will be someone from the 2016 presidential field. maybe john kasich? >> he was asked about this and he put it at a 40% chance that someone ran and the race so he is downplaying it. scarlet: that's still pretty high. >> it really is in the things -- what we know is the things he said is it will be somebody who understands government someone with legislative experience because he will need some help writing legislation and working with congress and things like that. there are number of people around the race who fit that. donald trump is in a tricky spot because he said some mean things
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about a lot of these people. he has a shortlist and is looking at a lot of people right now. if there is one thing we know about donald trump is he cannot or take -- he cannot predict what he will do next. scarlet: a quick check on u.s. stocks, the major indexes has just turned negative sprin. nasdaq is the biggest loser but that's only off by seven points. we are keeping an eye on the moves in the major indexes. we still have treasuries rising with yields coming down and a euro is weaker versus the dollar. ♪
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scarlet: this is bloomberg markets. alix: takeover talks continued to dominate the headlines. we learned that french drugmaker sanofi is reconsidering its
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takeover offer. it said no a yen to the $9.3 billion offer. scarlet: a new report shows companies and private equity firms expect you like entity to stay strong or ramp-up. let's join radio. matt: i am here with russell thompson who is from the lloyd at merger and acquisitions. he will talk to me and corey on radio and television about the outlook for m&a. we had a record year in 2015 and you expect it to be better this year. >> that's correct, 2015 blew through the historical records. you are right, we just did a survey atdeloitte and the respondents 87% said despite the sluggish start to this year, they expect m&a activity to be very robust. matt: how much of this will be
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driven by energy companies finally getting together? i saw we have not had the energy company consolidation one would've expected after the big drop in oil prices. if it does not go back up companies will go out of business. will there be a wave of consolidation? >> we have been expecting oil and gas company's to be active. the survey identified that as the second most likely area to drive activity in 2016. technology was number one for the nerd year running. many of the respondents felt that oil and gas would be active in 2016. cory: who to use survey in this and who tends to be optimistic and who was more skeptical? >> that's a great question. over 2300 respondents to the survey and it cuts across meaningful roles in m&a in
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public corporate and private corporate's and there were more than 500 heavily involved in the private equity side. it cuts broadly across the m&a spectrum. matt: i wonder what you see as far as international deals. the fx story has been driving so much. does this play a role in m&a. we have seen real dollar weakness to kickoff the year. >> it absolutely does come across order -- cross-border was big in the expectation came through loud and clear in the survey. it was 3/4 of the respondents that said they are likely to be looking in foreign markets for m&a opportunities. the three cited word china canada, and the u.k. matt: you're talking about u.s. companies looking in those foreign markets? >> and vice versa. matt: because of the dollar
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strength. >> correct. matt: what about the tax implications of merging with somebody in ireland? the u.s. company see that as a beneficial thing? >> there are a multitude of reasons why any activity is hundred taken. dishes undertaken. there are many different factors. you talked about the strength of the dollar being an important aspect. another key area that has been cited is valuation arbitrage. lower valuation multiples in certain markets around the globe where people are looking to see if there is arbitrage there. cory: last year was notable because of the size of the deal being unprecedented. they were megamergers in health care and beyond. is there any expectation about acquisitions or are these really big deals? >> last year, we blew through
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all of the records in 2015 largely driven by these mega transactions. i refer to that as $10 billion or more. in 2015, there were more than 50 of those acquisitions which eclipsed any previous peak. it was almost double what we had in 2006. in this survey, what came through as one of the top strategic focuses was smaller deals. it focused on deals less than $500 million as a primary focus area. matt: i can look at the average premiums and the third quarter had massive remains and went back down and came back up. will we see big premiums this year? >> surprisingly enough, given the very sluggish start to 2016,
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i would have expected premiums and valuations to have come down more than they have. they have not come down as much as many have expected. i think there is room there. matt: we appreciate your time. i will toss it back to you in television. scarlet: thank you so much. alix: next, we will speak with the chairman of tribune publishing about why the board rejected begin at -- the g annett 14 billion dollar offer -- $14 million offer. ♪
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call or go online and switch to x1. only with xfinity. show me movies with explosions. show me more like this. show me "previously watched." what's recommended for me. x1 makes it easy to find what blows you away. call or go online and switch to x1. only with xfinity. alix: from bloomberg world headquarters in new york, you're watching bloomberg markets. scarlet: let's start with the headlines. mark: donald trump may visit
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capitol hill as soon as next week according to politico which reports aid for alabama senator jeff sessions are working to set up meetings that may include one on ones with republican leaders. the turkish prime and says he is stepping down and will not seek reelection at a party convention this month. in a televised speech he said it was not his choice to cut short his term as premier and party leader. the decision cap the power struggle between him and the president. four out of five americans say islamic state is their biggest international concern according to a new poll from the pew research center. all most recorders of republicans say they are concerned that the u.s. will not go far enough to stop them. more than half the democrats are worried the u.s. will go too far. nyquist is the favorite in the kentucky derby and exaggerator
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is the second choice in the field of 20 horses. nyquist or number 13 as it tries to win the first jewel of the triple crown. the race is saturday at churchill downs. global news, 24 hours a way powered by our 2400 journalists in more than 150 news bureaus around the world. alix: thanks so much tribune publishing was owned the l.a. times and chicago tribune is making headlines itself projecting an $815 million takeover offer from its rival gannett. scarlet: rejection of the proposal comes as the newspaper industry tackles declining circulation and high cost and shrinking advertising dollars. how does tribune plan to remain independent? let's ask michael ferro. before we get to your plan to stay independent many people question how committed you are to growing tribune on your own.
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what is your response to those who believe this is a dance in your holding out for a higher offer? >> i have only been at the company three months. we see such great potential. the company has 60 million unique readers. [no audio] scarlet: we have an audio problem. there we go. we can hear you now. >> awesome, i was saying we have users of over 60 million monthly. we have great content with pulitzer prize winners. how do you monetize that content question mark facebook makes $50
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per year. we are a little over one dollar. we have already seen great improvement in days and weeks as we bring our intelligence and create a division called trunk where we pool our resources to push content monetization. we want to get it up to five dollars and more over the years and then our business will change. alix: the premium that janet wanted to pay was 63% of your closing price. everybody has their price. the average premium for a media deals is only about 50%. what kind of premium would you have to see to rethink that business model? >> the reason it looks like that premium -- i love gannett and i understand them, we had not reported our numbers yet. we had only been there 10 weeks. the company had a material
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weakness. then they stopped their dividend. that created a lot of downturn spiral in the stock. our analysts had our ibitah much lower by $20 million so it was not a true share price. i understand what gannett did it. we expect it to be trading where we are now once we get our earnings call. that was the reason for the rush on their part. we are a great deal for gannett and it would be great for their shareholders but the offer is not good for tribune shareholders and that's who i am responsible to. scarlet: has the board engaged in any discussion with gannett? >> i have always been willing to discuss anything with anyone. the bride -- the board has run into advisors and have spent a lot of time on this and reviewed everything. the board wants us to do the strategy.
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alix: gannett doesn't want to go quietly into the night and they don't want to let you guys go. what do you do? how fast do you need to prove to shareholders that you don't need gannett? >> you have to prove that every day but at least every quarter. we have to do this anyway. tribune has to put in technology and content management systems to improve monetization and that's how we will be judged is quarter by quarter. it takes time but we are prepared to string quarters together and show our revenue. i think we understand that. alix: that's hard for any company when they change themselves around but it's harder when you have a buyer breathing down your neck. how do you spin it off in the meantime? >> the shareholder meeting at gannett is already set and they
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can talk as much as they want. our board is where we are at. we don't have to do anything other than perform which is what we will do. scarlet: are you confident that the nominees will be elected at the june board meeting? >> the way it works is that gannett or anyone else can come in and do anything. gannett doesn't have the right to vote at this meeting for their 1000 shares they own. that's pretty much done. 2017 is a different story. if we don't perform in the shareholders speak out loud, they can do what needs to be done in 2017. scarlet: you have a built-in deadline. >> yes, we have about 18 months to make sure we are hitting it. you are correct. alix: have you had any other offers or conversations with anyone else? >> we have had so many people approach us. so many people love this
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industry from billionaires to private equity who want to invest in the company or partner with us. we are partnering with washington post right now to take their content management system and use it at our company. we are working on nucleus which is a joint ventured to work together to do advertising sales. we are partners would gannett. we are fond of the company. scarlet: what is jeff bezos doing and how does that inform how you will pursue your long-term strategy? >> he is like thomas edison, one of the greatest as news people of this era and he understands. his ideas to get content of the world and he is doing the same thing we are, creating great content. we have a bigger platform but he is getting his content all over the world. that's a week plan to do with our l a times brand.
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the l.a. times has great brand recognition in a bunch of countries and south america. that's what we are planning on pushing. scarlet: it's definitely not a local paper. >> we have over 10 million international users. scarlet: you said yesterday you are breaking them out from the rest of the company. is the goal to make the l.a. times look more valuable to potential higher's? >> we are making sure we have the leadership in the company. the l.a. times is a different brand. we want to show growth. as other brands may have issues because they are print dependent on the l.a. times is not. that rant is a trusted brand. does that brand is a trusted brand. we have the worst monetization at a dollar per user per year. if we can show that growth and know we are doing a good job, figuring out how to get the
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brand higher, suddenly, it's a great business. alix: those who say you are doing it to attract a higher premium, that's hogwash? >> i am an investor locked up for the next three years. i came in as an investor. i believe there is a time of value in his company. scarlet: another thing that is not discussed with newspaper publishers is culture. it's vital to any dealer partnership or alliance. what is the culture at tribune and how does it fit or not fit with some of the other big players? >> we are a content first culture. that means that like we announced yesterday, while everyone is cutting, we said we will be giving raises to our journalists opening offices around the world. we want to cover entertainment,
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lifestyle, media in the media capitals because people are interested in what's happening in fashion and restaurant and film and theater and seeing how they compare to each other. we see that as our growth in our brand in los angeles. the other thing that we are doing is trunk. alix: you mentioned opening seven international bureaus where you have the new york times paring back their international business. why du see growth for everyone else is cutting back? >> if you're going to just print a paper, it will be tough but we create content so economically that is not our issue. the content creation, it's not that expensive. it's a good investment. our roi could be 10x over the
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next few years by investing in bureaus. everyone wants the l.a. times badge. if you are in nigeria or korea you want to be able to do that to go to film previews or gallery openings. it's a big brand so we can attract a lot of great talent. alix: going back to gannett, bloomberg news has learned that they have been hearing that gannett recently purchased 600,000 shares of tribune and the company is trying to solicit with votes from stockholders to undermine the board. can you respond to that? >> anybody can buy shares. they can go make noise. the issue is that we have to do the best thing for our shareholders. they can do what they need to do and i understand that -- why they want to get the company at the lowest price. the message is not not for sale
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but we have to protect our shareholders and i am open to talking with anyone. scarlet: not for sale yet. >> i'm saying we have to create the best value for shareholders. scarlet: got it, thank you so much for joining us. alix: a pleasure to have you. coming up, we will be right back. ♪
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scarlet: this is bloomberg markets. alix: let's go over to the markets desk with julie hyman. julie: i will look at snies that have come out with earnings today. let's start with zynga who is foreseeing a second-quarter loss. analysts were looking for them
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to break but first-quarter numbers beat estimates and average monthly unique payers rose by 18% quarter over quarter to one million. and analyst pointed out that the gains pointed out that it came from people playing words with friends and they would like to see some new games to catch on. the shares are up by 9.5%. we are also looking at go daddy. they came out with earnings. we saw a miss so the shares are falling by a little or than 3% today. alibaba beat estimates, they had a 39% surge in revenue and will now start providing annual forecast which they have not done before in the shares arising by 4%. trip bad visor -- trip advisor is following on the heels of priceline coming out and missing estimates. the shares of bounced around today. they have not been straight line
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down. they have been experiencing weakness but they felt yesterday along with priceline. we see declines going into this earnings report. scarlet: thank you so much. in global headlines, the north koreas most political -- most important political meeting gets going friday. we get a report from the capital as to what to expect. >> the north korean leadership is putting on a show and everyone is expected to be in lockstep even the kid. the seventh party congress is likely semantic jim john un's leadership and loyalists will begin in top positions in the party. it's a chance for the 33-year-old leader to present a united front to his people and the world. we had hoped to report in the
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economy but the government is cutting here in john yang's -- p on yang's children's palace. there is no proof he is for filling his promise to improve family living status but his policy is to do that as developing nuclear missiles. across town, we were driven to an old armory, reminder of the army's central and consuming role in north korean life. we have been taken to see some military history in pyongyang. hitting economic targets will be hard because the party man i reforms to formalize the market economy. a new middle class has rung up in parts of the city but much of
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the population remains poor and malnourished. sanctions against north korea are the toughest in 20 years. weak commodity prices have hit with a export and the government continues to rely on china for aid. most will have to wait for the curtain to come down on this piece of political pageantry before we get a clear insight into the future of north korea. alix: that was tom mckenzie. scarlet: coming up, a wildfire across northern alberta causing the biggest evacuation we have an up date from canada. ♪
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alix: this is bloomberg markets. it's time for the bloomberg business flash. the fcc has approved charter communications 55 alien dollar takeover of time warner cable. -- 55 alien dollar takeover of time warner cable -- $55 billion takeover of time warner cable. scarlet: it's all the food that's fit to eat. the new york times will sell ingredients for recipes from its cooking website and the newspapers looking for new revenue sources. it is partnering with chef which will send ingredients within 24 hours. alix: general motors and lyft will test self driving cars on public roads.
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no word on where the testing will take place but customers who prefer a living, breathing driver will have the chance to opt out. gm invested $500 million in lyft. scarlet: bob iger at a rare meeting with the chinese leader today. they are proposing a theme park in shanghai. the shanghai disney resort which is their first theme park will open on june 15. alix: walmart will do put greeters to its entrances and exits which is a move to stop shoplifters and improve customer service. it expects to fill the positions with existing employees so the headcount will probably not go up. that is your business flash update. scarlet: let's turn to canada where a wildfire in northern alberta in fort mcmurray has forced 80,000 residents to evacuate. companies like suncor and royal dutch shell are cutting back production and opening work
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camps for fleeing residents. alix: our canadian managing editor joins us now from toronto. these pictures and videos are unbelievable how fast this thing is spreading. what is the latest? >> the fire is contained. the province has updated us and they say there are 49 active fires including seven that are out of control. it shows you how bad it is on the weather is not helping. we've got temperatures around 30 degrees which is 90 for you guys. strong winds are disturbing the fires in making it difficult to control. there have now been evacuations in some of the smaller towns around fort mc murray which were safe yesterday. there is more dislocation and more evacuations going on. we talked to people who literally had flames hitting their car wheels as they leave town so it's been a dramatic week in northern alberta. alix: it's unbelievable.
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scarlet: and the pictures are stunning but this is part of the annual wildfire season so tell us how it spread so quickly? >> these fires tend to start much later in two later may and june and july. it has been a very dry and warm spring. we had the el niño affect that led to a milder winter. these things are generally started by lightning. the problem with this one is it was so close to town and the wind picked up and it literally invaded fort mcmurray which has a thousand people. alix: what is the damage estimate so far? >> it is early days but we are seeing estimates anywhere from 2-9 billion dollars in insurable losses. if it's in that range, it would be the worst ever in the history of canada so it's quite significant. scarlet: what kind of federal support is being discussed right
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now for alberta? >> the prime minister trudeau has come out again and saying he will do everything he can to provide support. they are lending helicopters in the army is lending support. the challenge for alberta's they are already in recession and they are running record deficits of $10 billion so will be difficult for them to pay for these things. you would expect some federal support for sure. alix: also the industries that operate their are shut down. what are the big oil companies doing there? >> it has had a significant impact on production. it's not because the fires are directing the operations but the people cannot get to work. they have to curb output in some of the theater pipelines. we are seeing estimates of $500,000, up to one million barrels of crude oil is not being produced which is 1/3 of
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output from the oil sands and all the big players are affected. everyone in that region is having a tough go right now. scarlet: david scanlon, thank you for the update and we will check in as this continues and hopefully it will be contained. alix: coming up in the next hour, we will hear from the ceo of mgm resorts fresh off their first-quarter results. you don't want to miss the gambling man. scarlet: that's up next. ♪
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from bloomberg world headquarters in new york city, good afternoon everybody, and carol massar. crude higher but also giving up its gain. that wildfire in alberta may reduce production by more than one million barrels a day. engine resorts reporting a 61% drop in net income. that still came in ahead of estimates. the stock is pushing higher. the company's ceo joining us from las vegas. betting on the white house and having the means to do so -- donald trump hester did reaching out to republicans just days after becoming the presumptive gop


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