tv Whatd You Miss Bloomberg May 11, 2016 4:00pm-5:01pm EDT
>> u.s. stocks closing low this afternoon and retailers low. joe: the question is, "what'd you miss?" >> we look at what is next for brazil's financial markets. joe: plus the new american home. shrinking inside and buyers want more density and less long. that is according to a new report. we have a chart you cannot miss. >> and the next step in the greek aside up. - debtbout that relief - relief? >> it has been a steady seller through the date with a net at their session lows. the dow falling more than 200 points. nine out of 10 major s&p 500 groups are lower and retailers
taking center stage. joe: across the board today, retail is the big loser. in the green, ultra safe utility stocks. eking out a .24% increase. a notable selloff after yesterday. >> i want to hammer home what happened in retail. what happened here was investors yesterday,this etf then we got macy's numbers which are all. it killed most of the retailers today -- which were awful. macy's down, one of the worst performers in the s&p. staples the second worst performer. the big deal there is it will no longer get to acquire office depot. the question is literally how do they survive? everywhere you look those names got hammered. joe: people do not want
retailers today but with they do want is government bonds. spain is going to launch a 50 year bond. for long-termer debt because it offers field. here's a look at spain's a 30 year yield. italy, they just sold one year debt at the lowest level at auction on record. another dissent into negative yield. which has a big super thursday tomorrow, 10 straight days of declines on the u.k. 10 year yield. where you look, u.s. yields were lower as well. you are seeing a thirst for government debt. commodity currencies really in favor today with oil prices rising. all strengthening as his brazil's ray out -- riyal.
we are going to sao paulo live for an update later in the hour. oil popping today. you did finally see a drop. but sugar, sugar was the story of the day. -- the highest level since 2014. the morer it goes, miller's do not want to sell sugar because they get a weaker dollar in return. that is creating a supply worry. joe: fascinating to see the ripple effects. you can find all of the following charts using the function at the bottom of your screen. >> i looking at retailers and the bifurcation in markets. target, walmart, macy's, and amazon. guess which one is amazon? it is this yellow line. macy's as well as gap are really
the losers. cap was downgraded to junk status. you have target and walmart not faring any better. but amazon keeps on grinding higher. that's me to the bifurcation. their retailers lunch and brick-and-mortar can no longer hide behind things like we holidays and winter weird weather. they finally just that is a mall traffic is bad. yet to get still market -- walmart and target earnings. ifll find out more about these big-box retailers are being affected in as the department stores. but a source is everything right now about what is happening with retail. i want to go into the terminal to talk a little bit about where our sentiment is now. despite the rally since a february, not a lot of optimism, that bottom chart there.
that is the s&p 500 rally since mid-february. the two lines of the top are to leverage etf's. leveragehe triple shares. the one going up is the leverage pro shares drop rope short s&p. even know we have seen as big rally in the market since february, we have seen more money flow into the ultrashort etf as opposed to the long one. if you look at baltimore -- look at volatility, investor cash positions, all the underlying data shows skepticism and this is just another example. people are more inclined to be betting ultrashort that ultralong. yeah, gold. despite the overall rally. one thing that is not supporting the market is by backs. we have talked about how there is a huge source of demand in
the stock market. the s&p 500 is approaching the when your anniversary of its record high here. pku, that is the white line. what you'll see is that it trails the broader market. low it hasfebruary continued. it has been fairly consistent with these by back he's trailing the broader market. what is the takeaway? the extra boost that by backs are supposed to be earning is not into perspective in masking weaknesses. is such a crucial thing we'll see if it tells -- trails off. in erict to bring shafter. on your with the ceo of soul is alternative management.
he is distinct from some of the others because he is not afraid of dumpster diving. good to see you. i want to begin with energy because you have been dipping your toe into energy. tell us about it. we were short energy left ear. we were concerned about prices coming down. i would say earlier this year, we saw a continued move the first month, month and a half of the year. a took an opportunity to buy few positions. it was a very short buying opportunity. the market rebounded dramatically. it was pre-must commensurate with the move in the dollar. but we were fortunately able to pick up a few positions. some a need your -- very low sense of the dollar.
5, 6, 4. erik: the market is telling us that is not money good. why are you in these bonds? we can create some value for those bonds. companies that have issued debt, secured debt that were not able to last a preferential. . preferential- preiod. bondsies actually issued and had to wait that long before they filed. weing that period of time could pick up a coupon which is a significant portion of our money back. also these companies have some cash, sometimes significant cash on the bounce seat. -- balance seat. away.urposely move it erik: they're not supposed to do that.
chris: but they are going bankrupt anyway so it doesn't matter. erik: this is where the opportunity comes in? i see. the company is going to get restructured under back of the protection and you as a creditor participate. cash is as much ours as it is any other creditor class. will probably end up signing a restructuring support agreement and agree to a certain amount of cash. we will sign on and join the plan. it is not, you are buying oil, you are not? most of the situation is there will be residual equity that we will get. erik: in the bankruptcy? --you end uplder being a shareholder. what is the difference in the --
the investment-grade market and also the high-yield market, all to a certain extent are driven by inflows. when we saw the big rebound in oil prices, money coming back into many of the credits being sold, a lot of the investment-grade names traded back to their previous highs in terms of the yields, the previous close. they areck names, 4%, andbetween 3% and $65y are low levered at oil price. it doesn't get anywhere near that level. that is an interesting arbitrage for us. we are buying these other situations at much lower levels. more like on the strip. erik: in line with the current.
-- the curve. chris: correct. we will see significant trading down in those investment-grade bonds and of the names we own will also trade down. erik: when you supertex, you are shorting those names? chris: correct. erik: that is correct. chris: it is kind of like a second stage opportunity. as a distressed investor you want to go long and let them trade up. erik: you are a distress investor. people talk about a distress cycle. that is what will happen when credit turns. what you see? chris: when i look back over my career, it is the industry's the fall into distress. it will be individual companies over lever they go into bankruptcy. there is not a whole move with the entire market goes --no, i do not.
erik: do you think it is richly valued right now? chris: i would not invest in it. as a high-yield investor, you are taking a portion of equity risk only portion of credit risk. the private equity firm or whatever the case may be is and what theyyou are paying you for what you are getting compensated. it does not make sense from a risk-adjusted return. i have felt that way trouble with since the market has done well, but i felt that way since the recovery of 2009, 2010. it is not worth the risk. -- withcreasing because the inflows we are seeing both in the high-yield market and the bank loan market, we are seeing less scrutiny on the credits and the structures are not as good. covenants, structure, all those
things. they are all very important for an investor. erik: this is because of the reach for yield. chris: that's right. a craze too many buyers were not enough assets. what -- tocreated to build -- to fill the void. the structures are not going to capture the companies and stop them before they really get too far gone. therefore, the secured creditors likely get the company and not secured creditors will likely get nothing. erik: chris, always great talking to you. thank you so much. the news for the rest of us is beware. >> thank you. coming up, a strange rift is emerging. it is pink large caps against more nimble small caps. ♪
♪ house speaker paul ryan says the white house is within the gop's grasp. a day before he and republican leaders meet with the party's presumptive nominee donald trump, ryan said there is a path forward. begin we are unified without unifying, we go into the fall half strength. that means we need a real unification of our party. mark: rhinestone of the world less unique when he said he was not ready to endorse mr. drums little bit. at the -- the fbi director is speaking out into the
investigation of the private e-mail account hillary clinton used. , quote, iporters remain close to that investigation to ensure it is and has the resources it needs. abc news reported last week the fbi was seeking to interview secretary clinton soon but a clinton spokesman says the likely democratic preventable nominee has not received an invitation from the fbi to answer questions. a significant portion of west virginia democratic primary voters say they will vote for donald trump in november. that is according to an and beast -- abc news at simple analysis. about a third of democrats say they will vote for mr. chuck regardless of who wins the parties nomination. of democratic voters say economy and jobs of the most important issues. north carolina's bathroom law could cause the state $5 billion annually. the study found the state could 4.8 billion in
contrast along with businesses that have withdrawn. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i'm mark crumpton. back to you. >> a growing divide in the u.s. stock market is pink large companies against a small cap and investors are choosing the losing side and it is costing them a lot of money. revenue of the biggest u.s. companies are retreating you know prices are near all-time highs. what is behind this situation? he is here to help us figure this out. what is driving this? >> the big answer is everybody said passive aggressive.
people befall to passive investing but as that strategy becomes more popular get broad-based investing. that clearly favors the price. what is happening here is a breakdown in sales on the large-cap companies even know the prices are actually higher than small caps. small caps have been able to retain some sales growth and what you have here on this chart is looking at the price to sales ratios for both. you can see here, the price to sales ratio on the 1000 is quite a bit higher of the 2000, the small cap. that is because of the sales. thes have gotten smaller large-cap, so that is running the ratio up. the prices also remain flat the past two years -- over the past year. the small caps, even though they have been able to retain some , people still want
to be in the large-cap company. they could also be investors receive them as the safer it if there are fears about equity risk, that i want to be in exceed company and they conflate that was a big company here is interesting, people are diving down. joe: is this inflation justified? quality companies, earning stability. is that right, that large companies ensure the fundamentals --if you want stability that is the place to go? oliver: this is been one of bank of america's points is the larger, safer companies. i think the way they see it is the earning stability, and also the volatility element in the amount of stock that has traded on a daily basis where you can get in and out of those bigger companies quicker. ultimately, when i spoke to her as well, ultimately what happened is you talk versus --
earnings versus sales, if you are a big company people put more emphasis on earnings. we have this chart here to put the emphasis on the sales discrepancies. the blue line is the percent year-over-year change. the average year-over-year quarterly changed since 2014 in the 2000 small cap. orange is big caps. every index except for total communication services, the growth and sales for small caps has been better. it is dividing the market and it talks to evaluations, where investors are rising and what they are putting emphasis on right now. they're going for the big ones. >> i feel it also has to go -- deal with the dollar. the dollar has come off a bit. sales picturet change as the dollar does not make new highs? good point. is a the interesting part about that
is you have that weakness in the dollar, it does favor the multinationals. if that continues, maybe that will help. there is an incident -- interesting point, and that is the idea that while everyone talks about how a strong dollar and 50 small-cap companies, perhaps that is whether sales have held up. but this ties back into the liquid -- liquidity aspect. if you are a foreign investor and you want to get broad exposure to the u.s., if you are going to do that would log -- largest wads of money it will be easier to do that would large-cap stocks. perhaps that is also a factor. coming up to the three charts you cannot mix on today's retail stock action. ♪
♪ retail stocks getting hammered as macy's stocks fall. retail stores having trouble keeping up with amazon. amazon is set to take the lead in retail. think they will beat number one by 2017. there are 40 to 50 million amazon prime members. amazon get you what you want, when you want and where you want it and it is frictionless shopping. that convenience is a factor in driving a lot of success here at --success. this is the return on invested capital for four retailers. you can see they generate three times the revenue of macy's
which is along the bottom. this wide gap stems in part from lower expenses. you have simpler pictures, simpler displays. joe: macy's are getting squeezed. amazon on the one hand and -- alix: it hurts macy's but is good for tjx. this is all good for jeff bezos. billion.th $67 despite the fact nasdaq has slumped. that is amazony or bust. macy's will be replaced at the number one apparel retailer by 2017 and we continue to see amazon move up. joe: it is wild how -- his surg e. i was looking at macy's chart
and what happens during the month that macy's stock peaked? that was the month cut tries -- ties with donald trump. i was very amused by how nicely that timing worked out. what else is there to say? i think donald might claim some credit for this. i tried to tweet at him but he has not taken the bait. >> right now the brazilian senate is currently debating the fate of president dilma rousseff. a live report from sao paulo next. a vote is scheduled for 7:00 p.m. the clock is ticking on dilma rousseff. ♪
you can never get enough of it. change the way you experience tv with xfinity x1. ♪ >> let's get a market recap. closing at their worst levels of the session and retail was the story because of macy's and disappointing outlook. gap also came out with disappointing numbers. it reminds me of last year when there was a big scare with all the media. that is what if elected eight with the old-line retailers. only amazon rallying among retail stocks. everything else today was, is this the end? >> it is a question of how will
they continue to grow? for staples and office depot and is absolutely the right question. $194 milliont tuesdaynto the etf on that macy's came out and look at what happened. joe: whoops. >> no longer can they hide behind whether or holidays, the weakness could not be spared. we're keeping an eye on the weaker dollar and commodities as well. one think markets would tracking closely into tonight is a vote by the brazilian senate. it is debating whether to force-out president dilma rousseff and into an impeachment trial. we're joined now live from the city to give us the latest. how many more hours we have to
go until the vote takes place? >> the process is moving along very slowly. i started at around 10:00 a.m., there are around 70 senators scheduled to speak. we are now on senator 20. still a long way to go into we get to the boat. -- the vote. joe: there is not really any uncertainty about the vote. correct? and assuming they do vote to impeach, what is the next step? the next step is she would be notified by the senate leader. he said he would give details directly to her after the boat is over. she would probably leave tomorrow morning, depending on how long voting goes. she would leave tomorrow and the vice president would then take over. happens, there is
as long. including getting through the different senators speaking. what we know about the stepping down process? will she be able to do very much during that time that she is no longer president but they still have to carry out the trials? this has not happened very often thankfully, but she would just step aside. we do not know if the attorney general would continue defending the president but she is a justlly -- essentially and waiting boat. there is no sense that she would ever come back from this. joe: that she keep her salary, residents? what happens to those ceremonial aspects during the trial? a goodthat is actually question and we do not know the exact answer. the senate president still need
to inform her of these things. we have heard she will keep part of her salary and she can still live at her residence. she cannot work on the presidential palace anymore. what happens also is that she loses her leverage. trade withlonger politicians to try and help win over an impeachment vote. -- so what does so do? julia: she said she will fight it every step of the way. they likely's appeal to the supreme court yet again, but there is not a lot she can do once she is removed and we getting new ministries. >> this is not the first time there has been an impeachment in brazil. we have seen this happen before. take us back to what happened in the 1990's. he was also temporarily
removed it, he resided the senate convicted and. in the middle of the trial he resigned. he was impeached and loss of political rights for eight years. he was in a limbo for the duration of the trial. he was at the official remnants -- residence and trying to work in little bit but not really getting much done and with fewer and fewer allies of visiting, just waiting it out. is the speculation that bruce f will make the same sseff will make the same choice? what are the odds of that happening? julia: we have no indication whatsoever that she will resign. she has said again and again she will not resign because this will give legitimacy to this coup she says she is under. even yesterday she was saying she is never going to resign. >> i want to point out how much volatility we have seen.
this is the u.s. dollar versus the rial and the mexican peso. is here in the blue line versus the red line which is the peso. look at how different it is. joe: that is a great chart. there'll be a lot of jockeying in a next couple days. has the former come out and said anything, to any influence this in anyway? either the boating or the followthrough afterwards? julia: he has been very quiet. we have not heard from him in a while. apparently there were reports he mondayled into intervene when there was a brief cancellation of the appeasement and he refused.
mitsubishi is blaming overly ambitious charges. sales have plunged since they admitted overstating fuel economy. they have sold assets to what cap resources for $463 million. the company is working out a number of deals. that is according to people of knowledge of the matter. s&p says they issued $16 billion. the investment group portion of the debt will be priced at next week. and that is your bloomberg business flash. when it comes to housing, bigger .s no longer better served
the average home sales has been holding around 2200 square feet over the past 10 years. change.l part of a the two shifts that are happening demographically that is driving the change. stephen: you have the two biggest groups being the biggest -- the baby boomers and millennials. the you have seen is that baby boomers have entered a wave of downsizing. that is the reason is happening now, probably the most important one is that they home equity is now whispered -- restored. you have a junior finally moving out of the basement so they are free to downsize. at the other age of the age spectrum you have millennials who are actually saying, i'm going to wait longer before it by the when i do them i'm not going to go so far out like people before he did.
i'm going to buy some nicer. i'm a little older so i can afford something nicer. they both now want something similar. it has pushed prices up as well. the average price for a starter home is no longer quite what you would expect, but it is actually gaining. that is a price point which is seen the most action for first-time buyers. the average home price in the u.s. is about $225,000. joe: another trend we are seeing is a rise of multigenerational leveling. what are the economic forces behind that fact? would pointe people to a demographic shift in terms of foreign nationals. you more for nationals living in the u.s. what is more important is that you have got a wave of
downsizing and if you think about it, a mother-in-law or father-in-law going to live with you is actually a form of downsizing for them. another way to think about it is you have had difficulty for young folks to get a job. when they come back and live, that is another generation coming into the household that you thought you are free of. but it is really i think, a function of the parents of the baby boomers moving back which is a form of downsizing. joe: one of the things we have written about is how tout care costs are surging in a lot of cities, multigenerational families could help deal with that. is that a force year to you think? task force here do you think? think?e here do you stephen: they have indicated they believe it is the responsibility of the parents to give something back. whether that is inherent or other means of providing a bit
of back-and-forth, i think you could be seeing some thing like that. >> chapter, laundry, cooking. you are saying that baby boomers and millennials are looking at the same kind of property right now and they are looking for a price point that is higher. what does that mean for the homebuilders? >> across the nation, you are seeing a more rapid shift in how people want to live. unfortunately, the housing stock can't change that. it can only change when percent a --1% a year or so. what we think is going to happen, you will see builders capturing a lot of this change in preference. you have seen it showed up in the new home price premium. one is the fact that if you can't find what you want in the existing stock, you will pay a little more in the new market. m willt: that new premiu
still stay above. that is good news for certain types of home builders. you talk about how people are shifting away from the suburban houses in the cul-de-sac, that previous generations may have favored. talk about which areas are likely to benefit, and which are likely to be set back. >> we are seeing a change in the preference for today's buyers, where they prefer walkable communities. communities that have a little less lawn. people have decided that mowing the lawn is that fun as they thought -- isn't as fun as they thought 20 years ago. and amenities with shorter commute times. this suggests that the communities where we saw mcmansions gets produced were not as en vogue as they once were. you have seen a decline in the intrinsic value of some of these cul-de-sac. communities i don't think it's going to be a
clad a cosmic drop in value. the country is still growing. i believe on a relative basis, those kinds of homes we used to think of as the ideal, the lawn on a cul-de-sac, it's not as much valuable as it once was. joe: if people don't care about lawns anymore, are they building out the house further to the edge of the land? >> they are, but also the square footage of the home itself is also shrinking as well. people were also seeing a more innable to renting, living multi family type communities. alix: what stocks do well in this environment and what stocks do not? >> it is a bit surprising. certainly some builders will benefit. i also believe one of the major beneficiaries will be the remodeling industry.
cruelly home depot -- clearly home depot and lowes will be beneficiaries of the trend. if you have to renovate your home, or you can find what you want in the existing market, you will probably renovate your home more than you would have in the past. we think home depot and lowes would be benefiting from this trend. alix: thank you very much. scarlet: mitt romney warning about a possible bombshell in donald trump's taxes. postormer nominee wrote a on facebook second it is disqualifying for a modern-day nominate to refuse to release tax returns to the voters, especially once not subject to public scrutiny. there is only one logical explanation for mr. trump's refusal to release his returns, there is a bombshell in them. donald trump told the press he doesn't exprc -- joe: in 2012, harry reid made
greece, nick joins us from athens. thanks from joining us. there seems to be some optimism that the deal won't go to the last second, that the ecb will loosen the screws and little bit from greece. what is the latest? nick: there are two reasons for this latest bout of positivity. one, on sunday, the greek parliament voted 2% of gdp in new fiscal measures, 1% coming from pensions, the other 1% from income tax. that happened a few hours before a eurogroup meeting in brussels on monday. everyone came out of that meeting making relatively positive noises about the possibility of greece and its lenders reaching a deal on this bailout review, which has been pending for months, in the
coming weeks. there is another eurogroup coming up on may 24. they are trying to get a deal done by then. greece still has work to do. it still has to parse another 1% of gdp in other fiscal measures. it will mean direct taxes and increases from the top rate of vat from 23-24%. there are other things to do on nonperforming loans and privatization. we still have a long way to go. alix: what about greek banks? it seems they are inching closer to tap to refinancing tools. they really need that to continue to survive. what are the chances they will get that sooner rather than later? nick: if we clear this hurdle, the bailout review which has been hanging over greece sent last fall, then the greek banks will be able to borrow again
from the ecb using greek bonds as collateral. it is a vital step. the other key issue is that debt relief has been put on the table. came on as a key issue. there is an agreement to discuss how to provide debt relief to greece in the future, in three stages. the short-term, the medium-term, and the long-term. there is nothing concrete yet, but again positive noises. joe: on the debt relief front, every day i feel like we have seen headlines from some german official saying no, that relief is not going to happen. and yet there is this view that it is getting closer. has there been any sign that the stalwart opponents of debt relief are softening, or willing to engage in something that i that relief in all but name? how is that going to happen? nick: two issues here.
one, not just the germans, but all the lenders on the european side or ruling out a debt haircut. that is off the table. we are not talking about that. until monday's eurogroup, the germans and key players in the eurozone did not want to discuss the issue of debt relief before the review has been closed. there was an apparent concession from berlin. they are allowing discussions take place. this is a small step back from the german side. the issue is, by slipping it into 3 waves, the short, medium, and long-term, what we are talking about in the short term is minor intervention. the sort of tinkering on the sidelines, expanding maturities, lowering interest rates. for any greek government, that could produced hundreds of
millions in savings. when you are under pressure to squeeze more out of your economy to reach primary surplus targets, that is useful, but it is not the whole ballgame. there is still a long way to go in this debt discussion. joe: real quickly, how is this standing at home in terms of popularity in the balls? how is it viewed by the creditors? is this something that they can still work with in good faith? nick: the indications on monday after the eurozone finance ministers meeting was that lenders seem relatively satisfied with how things are progressing. obviously this review has taken a very long time and are have been problems along the way. they are getting closer. they seem to think that after facty's vote, despite the that his government was voting through percent of gdp on austerity measures, popular
measures that had sparked months of protest and strikes. his coalition emerged intact, all 153 out of the 300 mp's voted for that. that was a boost for him. he was relatively pleased with what came out of monday. he is certainly thinks in at the moment. alix: nick, thanks so much we have to leave it there. thanks very much. scarlet: coming up, what you need to know to gear up for tomorrow's trading day. ♪
john: i'm john heilemann. mark: and i'm mark halperin. "with all due respect" to donald trump, who called senator sanders "crazy bernie," i think that nickname is only taken. >> crazy donald. mark: on the show tonight,'donald trumps data shrug and hillary clinton's email mug. paul ryan's to limit to -- ryan 's dilemma to hug or not to hug. the gop presumptive nominee has a series of meetings scheduled, but focus will be trump's tete-a-tete