tv Bloomberg Markets Bloomberg May 11, 2016 2:00pm-3:01pm EDT
david: from bloomberg world headquarters, i am david gura. u.s. stocks falling after the biggest gains in two months. the dow losing 150 points after we can earnings from macy's and cap, now talking about the strength of the consumer. over 3.5%prices today. andet the price outlook production. all is not well in the magic kingdom. shares of disney tumbling after the missed estimates for the first time in five years. the markets close in two hours. ramy inocencio has the latest. ramy: we are at session lows. ,he dow is down 260 points
accelerating losses we have been seeing over the course of the day. 0.6% areas down corporate earnings continues to be one of the biggest weights today. 90% of s&p companies have reported earnings growth. .7% year on year. global concerns are another factor. let's take a look at what is happening with the s&p over the course of the day. you can see there has been general volatility trending to the downside. disney earnings after the bell yesterday along with macy's today, that is pulling down the s&p lower. we did see unexpected declines in u.s. oil. that brought up the s&p of this. but we are going to session lows now with the 2:00 market now down 0.6%. i want to show you the s&p sectors general health. this is the imap function. -- sevenee six of the
of the 10 sectors are currently in the red. consumer discretionary, as it has been throughout today, is down. not the most, down 1.7%. retailers we have a talking about all day, they are falling. macy's, nordstrom, you name it. 10 out of 10 were all in the retail sector earlier today. fall downsurprising 3.4 million barrels when there was a rise expected. the news came out yesterday. in after-hours trading, it had pulled back on that during the active market day. you can see it has been scraping the bottom throughout the course of today. down.about now 4.3% it is paring some losses but not
much. expectedell worse than 200 million dollars worth in forecast. aboutdem we have to talk disney appearance in the media. , a lot of it is espn, with others 13% fall. 1% toarner, all down on 2%. investors may be afraid of what happened last time disney miss earnings which was in 2011, a free market -- three-month market set aside. let's go to first word news. mark crumpton has that. mark: donald trump has narrowed his list of potential running mates to five or six people. he is also leaning against accepting public money to finance a campaign against likely democratic presidential nominee hillary clinton.
he told fox he is thinking about setting up a terrorism commission, possibly headed by former mayor rudy giuliani. he was in south texas today. as he entered hail, strong winds and intense rainfall. san antonio was hit hard as cars were submerged in the floodwaters. the islamic state is claiming response ability for bombings in three baghdad neighborhoods. the blast had 93 people dead and 160 others wounded. this included an outdoor market and the police station. the justice department will not seek the death penalty for the chief suspect in the deadly attack in benghazi, libya. awaiting trial after pleading not guilty. for americans died in the 2012 attack, including a u.s. ambassador. federal prosecutors offered no excellent nation for their indecision. in brazil, the senate may
decided whether today marks the end of the line for dilma rousseff. if they give their approval, president rousseff will be required to step down temporarily. then she would face a trial fromy to lead into removal office. she is accused of illegally stepping -- tapping state banks. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. david: thank you. let's go to las vegas for the sky reach alternatives conference. eric is there with an assistant interview with the co-ceo of partners manager, $123 billion in assets. he's not just co-ceo, he is one of the most accomplished credit investors. that is where we are going to
begin. it is a high-yield rally. >> i am worried about a high-yield rally. it is a little overdone. if you look at the index, which has moved something like 13 points since a very 11, you have to -- february 11, you have to wonder what is in it. yield look at the 7.5% and you say, that looks attractive relative to zero ,nterest rates glop -- broadly you can look at negative interest rates, and treasuries, that is appealing. but then you see there is not many components of the trade at the level of the index trade. what is comprised of is a number 5% of all, 4% or sorts of risk because it goes up. for individual credit, volume. at the other end, things are trading 15% or 20% which is more theoretical because people know they are not going to be paying
15%. eric: what will shut the rally down? joshua: the pullback seems to be driven by flows these days. you can track them pretty closely with respect to mutual funds and eds. eric: what we saw in january and february was pretty much liquidity issues. it was a buyers strike. what will motivate buyers to go on strike ? joshua: you have 5 billion of outflows. we will monitor the outflow structure, it was very different prior to the financial crisis. precrisis you had 10% of the market existing of daily liquidity and etf funds. that is now a quarter of the market figure. that event, you had investment banks and other traders regulating bankers who are making markets and posing a lot of inventory and making a
smooth. today you have got almost four times as many dollars held by mutual funds and atms, and if they get a redemption, they have to sell. you have a lot less capital being devoted to market making, so the price volatility gets driven by flows. eric: so a firm like yours was built to invest in markets like these. what about these usual funds? joshua: the model has created a greater mismatch of that. if they are interested in doing credit investing, i have probably seen at any time in my career since 1990. eric: you have been running since 1990, and then the address before. joshua: it is about liquidity. i read a statistic of over 30% of the high-yield market were names that had not traded at all this year. percentage, a larger
percentage have not traded in the last month. equation ifetty bad your a mutual fund manager and suddenly you have to reorient your portfolio because you have redemptions, or you have to go by things. eric: does that mean we will see more third avenues? i think it is possible. you'll get securities that are completely disentangled with credit quality. it will have little to do with credit quality and more with flows. eric: so what do you see now? bifurcationribe the of the high-yield market to those prices? are they credit fundamentals, strong or weak? joshua: it is a strange mix of things that are trading too tight and things that will not get paid off. the whole composition of the market, realize what growth is. you have to go back a little bit. you have got many, many people
with fixed incomes we used to put money in bond funds and expect to get a yield from those and would live off of them. in a kind of a market, it is not surprising money would flow into high-yield funds because nothing else has any other yields. and within those high-yield funds, that encouraged issuers to have that money to borrow, and particularly that lower grade issuers periods of the partsion of the triple c of the market, people are seeking yields. eric: and covenant erosion. joshua: and that as well. cere are now over 1300 triple . covenants get bad when money is competing. eric: what will change that? as long as we live in the zero, low u.s. or negative rates as we have seen in japan and europe, and investors are reaching for
yield, what is going to change that? what will stop covenants from eroding? joshua: it is that triple c issue. you see people trying to have a fund that will work hard and his high yield, and it goes down and reverses quickly. the unwind over let's quickly. it was pretty severe. high-yield market was down most of 5% last year, and then another month and a quarter this year. it can unwind very violently and unpleasantly. eric: is there anything attractive in this environment? joshua: it is a credit figures type of the market. picker's type of market. you have to be quite careful. there is many areas that were very cheap.
some of them are still cheap. others have bounded and are not cheap. eric: what about energy? joshua: the things that have driven the market our energy crisis and flows of capital. energy crisis, the problem historically was a lot of high-yield issuers, but not high-grade. the high-yield issuers get into markets and say, a year ago, in many cases those in securities probably stacked up poorly. you needed good commodity performance to make a lot of those securities perform. gothen oil went down, they crops. and then it rebounded. it is still questionable. the higher end of that market is still quality. eric: what about volatility in general? if you look at oil prices, you , thethe kind of volatility
wrap and rebound we saw in the first quarter is going to become more of the norm? think so. you have an economy where people ,cknowledge it is slow provisions have been down and not up. you have all of the questions about china and the effect slower growth might have on the u.s., and you have a very rapid pace of technological displacement of certain industries. ,he big issuers of high-yield those businesses have changes in their models. eric: are you buying or selling on balance? joshua: we were buying a lot prior to february 11, and we have been selling more recently. eric: that is josh friedman, co-ceo at canyon partners. david: coming up, we go back to las vegas with t boone pickens. ahead, macy's is cutting
will end the sponsorship with chelsea london football team. talked about an undisclosed amount in compensation to boost the four-year profit forecast. the decision was reached by mutual agreement and the partnership will finish on june 30 2017. let's go back to the markets where remy is looking at the macy's news. sticking to retail -- ramy: sticking to retail, it is down on the order of 14%. actually if you look at this curve, it is fighting down as we close the end of this. earningsfirst quarter actually beat. the only positive thing. everything else was on the negative side. source fell 6% and revenue fell short of investments about $160
million. in a statement, macy's said we are seeing continuing weakness with consumer spending levels and they cited headwinds only from a second consecutive year of double-digit spending reductions from international visitors. they actually gained against the basket of currencies. macy'sake a look at suppliers. at least 12% of their revenues from macy's. g3 apparel down 10%, and michael kors down the most by 4%. -- 12%. hurt, getting some weakness from fossil earnings for the computing watch sales. i want to see how macy's gets its sales numbers. you can see the orange is accessories, which is under 40%. buy. s a quarter of the
women's apparel is 23% and men's is the least. if you add accessories, which is mostly women's, you get 61%, roughly two thirds of the sales coming from the retail sector, which is seeing that women are not going back to stores. still ahead, s&p growth. dell is planning a big sale. this could be the top of the corporate bond boom. ♪
the corporate bond boom signaling the top. we have the reporter from within the fixed global income team at goldman sachs. comment on the size of that and where we are in the cycle as you see it. seeing many signs of late stages in the credit cycle. also of issuance, mna, and the increase in leverage not supported by earnings. we are getting concerned credit mighbe overdone. one interesting sign usually to bring up new deal in the bond market similar to what dell is trying to do, you need to give a concession to investors. incentivescessive -- for people to invest. right now there is so much yield, you actually have to pay. you get less yield. about i may ask high-yield. a littlehe rally was
overdone. do you agree with that? michael: a little more than overdone. we are in environment yielded six really important -- is extremely important. investors and their money have to pay to keep their money at a bank. we are in an environment where everything is possible for investors. we are concerned there is too much money chasing assets. if you look at the high-yield market in particular, high-yield markets. of two you have a lot of companies yielding very little, 4%, not very attractive. and others a part the high-yield universe are energy companies that you see 15% yields, but investors know [indiscernible] investing, you are going to be exposed to commodities, and they will remain of agree -- a degree above volatility. we talking about
inflation popping up across europe. what is the significance of that? michael: it is another sign of demand for yields. you have the ecb has been sucking everybody in saying, we what drives yield down, we will buy everything, so go ahead and make loans to country like spain and italy that are much more and challenges from an economic perspective versus germany. they are enticing them by saying go ahead and buy it, because we will make money. you can get it and very cheap rates. now your talking about a 50 year bond for spain. i don't think the ecb is going to buy 50 year bonds. you are actually relying on the credit quality of spain. david: do you think we will see that in the u.s.? michael: there have been longer issuance.
mr. -- mexico, other countries. , it makes a issue lot of sense for countries with rates so low to take advantage of it. not stays., rates will down forever. it is a good idea for the treasury to extend. david: what are your thoughts on market complacency? we are still focused on china and europe, a lot of undermining factors. forael: yield is not free investors. usually give something up or take a risk. if you invest in u.s. treasuries, investors outside u.s. like them because they are positive areas but there is risk. you look at the job market, we are starting to see wage pressures in the u.s. economy and the fed looking to continue to raise rates albeit relatively slowly. that is nothing to be a great
investment -- that does not seem to be a great investment when you have those yields behind you. so the investors are not factoring in the risk. on the corporate side, there is factors.other significant leverage, earnings slowing down, and you have an environment where the economy is growing ok, but it is not supportive of significant growth. we think right now, the people that are continuing to invest in the corporate credit environment will be in the future. david: thank you so much. sachs.rom goldman commodities close coming up. ♪ [ soft music ]
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says the house is within the gop grabs. a day before he meets with the present of nominate donald trump , speaker ryan told reporters there is a path forward. >> without actually unifying, we go into the fall at half strength. this election is too important to go into an election at half rate. we need a real unification of the party. he stunned the world and he said he was not ready to endorse the domination. fbi director james comey out on the investigation into the private e-mail that hillary clinton used as secretary of state. he told reporters i remain close to the investigation to ensure it is done well and has the resources it needs. reported last week that secretary clinton would be interviewed soon. a spokesman says the likely democratic presidential nominee
hasn't received an invitation from the fbi to answer questions. in south carolina, a white of the police of is or is indicted on federal charges in the shooting of an unarmed black man. the shooting of walter scott was captured on cell phone video. michael slager shot him as he ran from a traffic stop. fired after that incident, and faces a state murder charge. he made bond earlier today. the chamber of deputies has granted legal recognition to civil unions in italy. -- it is six to nine significant because it allows last holdout in western europe, to extend rights to gay couples. and it may be the end of the line for president dilma rousseff. lawmakers in brazil are debating impeachment. she would be required to step down temporarily and face a
trial likely to lead to her removal. she is accused of illegally tapping state banks to high budget deficits. 2400 -- 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. commodity markets closing in new york. let's look at raw sugar. it has 18 month highs. the turmoil in brazil is leaving traders reeling. delivers that faces a possible impeachment vote. the brazilian riyal could threaten exports from the country. hasbiggest copper producer prices rising to the end of next year. crude oil also getting a big raise have a government inventory declined. at $46.13. 3% of -- togo back to the fold
the salt conference. we are here with ben pickens. thank you for what -- being here with us. you know a little bit about it. it may be the only thing. let's talk about where we are right now. fairly aggressive and predictions about oil prices. it has taken longer. where do you think we will be. t. boone pickens: we will be 5060. -- 50-60. watch the drilling range. the high watermark november 14, today they are 342. i can tell you you put 300 on a rig out of the drilling, and you are going -- shale wells decline rapidly. they declined 40%, 50% in one year. david: but the technology makes
it possible to come back online with a lot of oil very quickly. if it goes to 60%, what happens to oil pressure? t. boone pickens: it is often oil. these have been producing. now you need to drill more. you want to turn it on, you need to put the rig back to work. have can tell you the rigs been down. those crews and other jobs. they have not been sitting around. and the women run the oil field. that? u mean when i say when a guy comes, they lay down the rate today, when are they going to work? he will go to work in another two months. he said there, he has a six pack, watches television. that goes on for a week and she says, listen, get your ass up and get a job. she is not getting. so he gets a job. when he goes back to work, ok, the rig is going to work, where?
75 miles from here. 75 miles. so you are driving 150 every day to work. andkeep the job you have get a rate closer to home. david: so does that mean we see a longer-term structural decline because of the prices? t. boone pickens: yes, you had declined, today you are done 80,000 barrels for the week. that is a big down. we have dropped from 5.7 million to, -- a day now down excuse me, 9 million barrels down now to 9.1. i the end of the year, you will be down to 8.5 or 8.6. reporter: so where is bob in terms of number of rigs? t. boone pickens: hopefully you are there, but i have said 300, three and 42. david: so you think he will keep
shutting them down. around the 300 range. t. boone pickens: for the oil price recovery. this mean fores investment companies? are you looking for default and consolidation? t. boone pickens: yes, and oil prices that recover quickly. but you hit the bottom at $96.19. that was in january. you are now back at $45. so $20 is a lot. and i think you are going to be up $20 by the end of the year. you have got six months to go, and you are back at 20. you could be there soon. soap minor policy has kept it low, and money has been available for these companies. when we have been better off if they had gotten out of the business? t. boone pickens: how do they get out? david: sell, merge.
t. boone pickens: it would be a lower price if they had not sold a year ago. of 2015.ell on in may the price of oil was $51 a barrel. that well was on. it paid out in december. months. the oil price was falling all the way. now i will not go back and offset that well. i will wait until the price gets back to $50, $60. i will not offset the drill. david: i want to turn to politics because you have been outspoken about the oil drum. from.t else we do not know what he is going to change to. it has really taken us to where we would be? t. boone pickens: i understand the question, and i have doubts. but if i do not get donald trump
, not knowing change, what is, i am going to get hillary clinton. ok now tell me who are you going to vote for? there is no way you can vote for her. she has already told you, every day, she says, it is march 16, i remember very well. i will shut down all the coal fossilnd get all of the fuels out. most stupid statement on energy i have ever heard. you are producing 95 million barrels a day and 70% -- 95 million for the world. 70% goes to transportation fuel, and she was to shut down also fuels. say she can't do it, nobody can do it, but let's say she comes in a pot -- shot down fossil fuels, you will stop the world. 70% goes to transportation. she has said she went too far. she done --
t. boone pickens: she said that on the coal mines. david: what she is saying, and what i do not want to stay for you against fossil fuels? she wants to reduce the dependence. t. boone pickens: i don't care, that is fine. she said, i am sorry. it was a silly statement, i did not mean it. but what is she going to replace it with? what will she replace it with? david: natural gas? t. boone pickens: that is the fossil fuel, you know. david: i want to talk about tax policy. president obama and hillary about the wealthy needing to pay more taxes. they are not paying their fair share. you have thoughts. t. boone pickens: mine are unusual.
i made more money after i was 70 years old than i ever made before i was 70. after i was 70, i paid a hundred million in -- $771 taxes. was 70. and i have had people say, don't you feel you have made enough? and you know what the thinking is. they think if i make $1 billion, somebody loses $1 billion. that is not the way the situation works. make $1 billion, i employ people, the economy goes forward. if i make money, somebody does not lose money. i have also had people say, why don't you step back and let someone else get up? the feed trough in america is infinity. it is there for anybody that wants to work hard. they don't have to have that good an education. it comes in handy.
but if you want to work hard, you are innovating and everything else. david: would you say you made more money after 70 than before? the last eight years has been the obama administration. why do you want to change from that because you did so well? t. boone pickens: i made a great amount of money and lost money in 2008 and 2009. but i did make a lot of money in the obama administration. 70.as after i was so i was 70 years old in 1998. toi made it from 1998 really 2008. david: thank you so much. period pickens joining us at the salt conference. david: thank you very much. we have the management from why he is betting against the media company. ♪
♪ david: this is "bloomberg markets." one company is betting against dish network. they are using $100 million in a new fund aimed at shorting a single stock. bloomberg broke the story last week, shares of dish have been on a tear. they are 60% to 80% to time -- too high. >> i am here with the founder and cio of paris field capital management. let's look at this serious short. what is your reason? >> why it is worth so much less,
most of dish's value is from a spectrum. it loses the spectrum in three years. so the company that is valued based on one asset, loses that asset. so two things will happen. it you loses this force spectrum in march 2020, or the buyers, at&t and verizon, they don't need that spectrum, they will waited out six to eight years, they will bid it out much lower than what the market currently sits. so the stock's work a lot less. -- is worth a lot less. this is basically technology that has not been developed yet. or value.ing off how can you talk about spectrum for something that is not a this? sahm: it is nonstandard.
twos getting built in systems. dish is the only company that owns this type of spectrum. bought it fromn makers and build out the ecosystem for the spectrum, but they know it, and they've been much lower prices for the nonstandard spectrum than a standard spectrum. w cfen at&t bought the spectrum, it became different. you see stock prices in the low teens and high single digits. alix: say they will need that, but they do not need to pay a premium to get it. sahm: and dish will get that spectrum -- lose it in three years. the carriers to purchase that spectrum. and we lay out why this deadline is real on the website www.m
akespectrumgreatagain.com. thaty of the alternative they will extend their own deadlines. in 2012, they spectrum,satellite to the problem with the fcc was that they would build it out. it has not been either of those things. it has been, the thing that might occur, given the eight year deadline to actually build up the spectrum or it would go back to the government. and that deadline will be stuck, and this will not be able to choose 70% coverage in the united states is the next 3.5 years. alix: but that deadline is not new. there may or may not be a buildup. even if they were partnering some kind of infrastructure, we would not know about it. so has that moved? sahm: it is certain to creep up
on people. , fiveears ago, four years years before deadlines, four years before the deadline, the market can be more complacent. but now it is creeping up. and now there is only two buyers, at&t and verizon. they do not need to spectrum, and the deadline is around the quarter. the thing is, there is a lot more to erase if dish loses its spectrum. alix: but don't they need to spectrum? today with the burgeoning lte, probably not. that we are not making voice calls. i am creating a video and downloading it and sending it to you. it is a whole new world of spectrum. that is what dish really has. sahm: technology has caught up to me that. you are seeing lte today at a lower spectral efficient technology than previously.
phones are fast. we are getting speeds we do need. a lot of spectrums carriers are getting. things they were tired and old legacy technologies, they are now free for lte use. you have the wtf spectrum, the other option coming up. forseeing a lot of spectrum the carriers to use. they want to lay out the five-year plan. they are reforming, going to purchase. it is difficult asia and in terms of small cells, at&t and verizon have five-year plan tilde. that is why did you not need this. target? the price all right, thank you very much. the founder and cio of capital
getting them to move to boston. it was a little controversial. there was a package worth $150 million. some people thought he did not get a fair deal. i did ask him, at what point will he know if it was worth it? >> i think it is already worth it. they movet this, you into the global headquarters in the city of boston, and we are already seeing the benefits of that. the chatter in the city of tech companies being here, companies wanting to stay here after the were grounded. emily: he said ge will be putting pretty $5 million into the education system. a lot of that money is focused on stem. another thing he pointed out with the boston chamber of commerce, and the governor who is republican and the mayor, a
the sellinge of points for ge coming to boston was that this governor and the mayor could get along you know they were from different parties . and in this landscape, that is saying something. david: marty walsh also dealing with something else other mayors are dealing with, a petition and the existing taxi system. how is he navigating that? emily: we talked about how they are leaving often, and it is not unlike struggles facing in other cities. i went to college here a little while ago. are king. high acid happy with car sharing , services, what he had to say. up inm not getting caught this conversation happening in some places. or taxis. take uber we can make adjustments in both of them. they exist here. we need more regulations to show people they are safe.
we need to make adjustments in the cavs too. emily: he considers himself very progressive, very friendly to technology, touting the way boston supports and encourages entrepreneurship. they say the data is important, it has informed a lot of policies. it is interesting hearing what he had to say. david: i know you are checking up the m.i.t. storage place. still very important in technology. emily: yes, we are on the deck of the m.i.t. media lab which has played that -- it is a beautiful day first of all. lab hasm.i.t. media played an incredible role in moving technology forward. it is probably a little bit underrated. things like touch screens and wearable devices are all here at the media lab. they are working on things like tronics.
what should the camera work and feel like in 10 years? a lot of the faculty is very entrepreneurial themselves. they have 70 or so faculty that consider themselves serial entrepreneurs. they have a patent or invention to their name most of them. we are talking to people involved in the media lab, companies that came out of it, the president, and a great show coming up on "bloomberg west. " david: the president of m.i.t. is among our guests. that is at 3:00 eastern. the dow is down to under 12 points, 1.2%. ♪
vonnie: markets taking a turn it soul in ar, having to few moments to see us to make managers -- to see what top money managers think about this. in brazil, the country will determine if the president will face an impeachment. the vote could end with her immediate suspension from office. gap's poor after results, macy's also has a glum outlook. they are looking at consumer companies in general. are one hour from the close of trading. let's go to the markets desk. remy has the latest. ramy: i am looking at the numbers, we are at session lows across the board are three major indices. the dow is down more than 200