tv Bloomberg Markets Bloomberg May 12, 2016 12:00pm-2:01pm EDT
>> from bloomberg world headquarters in new york, good afternoon. alix: here is what we're watching at this hour. zillow ushers in a new government after months of turmoil. in the acting governor turnaround worst recession we've seen in decades? scarlet: paul ryan taking steps toward party unification. casting doubt on the candidate's integrity. alice: plus, a rare sitdown. we're joined live in just a few moments. scarlet: we are halfway through the trading day and the u.s. stocks index are at their lows right now. julie hyman, second day in a row. julie: yes, and it has been accelerating here. oil prices are coming off the
highs we have seen. the nasdaq is the worst performer of the three major averages. being a tech heavy index, it is down 1%, twice the declines we are seeing in the s&p in the dow this point. we were seeing much more green on the screen earlier. health care in industrials have turned more deeply into the red. we have been watching apple in the selloff. it has been mirroring declines in the major averages. taiwan semiconductor shipments for iphone 6 s and seven, the shipments between june and december could decline as much as 70% to 80%. we are definitely seeing investors extrapolate what that
means for apple and other apple suppliers as well. we're seeing a ripple effect within technology. a lot of different kinds of chipmakers are following today. if you thought yesterday's decline in retail, that that was it you're in for a rude awakening. calls in particular are tumbling by 12%. comparable sales are down 3.9%. analysts had estimated a gain. consumers are not buying apparel and there are specific issues. from a marketing spec -- perspective, it has not been doing as good a job as they wanted it to. you can see other retailers are falling. it is hard for stocks to gain traction. oil would have been helping earlier in the day because we saw some gains for oil prices.
we see more supply coming back. that is putting pressure on the oil market. i want to look at currencies. we heard from the bank of england, making more comments that it would be a bad idea to leave the european union. the euro declining versus the dollar and the dollar gaining a bit versus the yen. that is putting pressure on commodities also. what we have seen over the past couple of years, we have not seen much going on. this is realized volatility. it has the -- it has been tough for security traders. this is notable. scarlet: bad volatility will no doubt show up. thank you so much. alix: they do not like volatility.
let's check in on the first word news this afternoon. mark crumpton has more. mark: thank you. the presumptive presidential nominee's arnold trump and the house paul ryan met against the backdrop of a party split after what ryan has called a bruising primary season. the speaker told reporters there is a policy difference but that he and donald trump share the goal of beating hillary clinton in november. mr. ryan: i'm encouraged and i've heard a lot of good things from our presumptive nominee. we have exchanged opinions everyone knows we have. plenty of republicans disagree with it other on policy disputes but poor -- but core principles those are the things we discussed. mark: mr. trump held back-to-back meetings on capitol hill. first, speaker ryan and reince previous.
then he spoke with kevin mccarthy. from plans a second meeting with gop leaders this afternoon. wall street is betting on a democratic presidential candidate. in the first quarter, hillary clinton $.70 of every dollar spent in the presidential race by employees of the six largest banks. a turnaround, jeb bush and his allies got the biggest share. brazil, it is now official -- suspended after the senate voted to impeach her. she called the -- the impeachment unfair and said she would fight the charges with all the legal tools at hertz -- her disposal. global news powered by 2100
journalists in more than 150 news bureaus around the world. alix: let's head back to las vegas where the conference is underway. standing by author of the book the black swan. >> thank you. good to see you. it is a pleasure to have you. people know you mostly for your work on probability. the black swan as my colleague just mentioned. we are here to talk about the importance of hedging, if you will.
why? >> one thing it took me 30 years to realize is the way we do performance is wrong. they take the alpha and they apply it to you if they invest in the strategy. if you have any points where you hit ruin, he will never realize the ignorance. >> the point where you can no longer take more loans. >> or if you need to produce a position. or a margin call, anything. the way we compute the return, 100 people welcome -- number 30 will not go bankrupt. it will continue.
if you will -- if you will take the same person over time time, probability, if you go bankrupt, number 29, number 30 will not take place or it will at a reduced capital. if you are varying your capital or you have this point, it does not work anymore. people underestimate how much protection they need. it looks like people who trade their own money, someone like warren buffett, quotes from ray who said i do not want a small probability of growing. i want zero. they know you will be wrong and it is just a matter of time.
warren buffett and even the chairman of goldman sachs. he says i am in the business of taking risks. this is something embedded in practitioners. they do not teach you that. >> the problem most people will run into, when they explore the cost of reducing the probability to zero, they find out it is not so cheap. >> when i tell you the insurance is high, you do not buy the car. you cannot afford it. it took me 30 years of thinking about the problem. i knew it in in intuitive way.
he is probably the greatest physicists alive. he looks and laughed and said, they are not getting it. the probability from the market unless you have protection and the people who got it are the people someone who got it beautifully but not explicitly who made the fortune and the market, -- >> if you need to build protection into the strategy, there is less alpha. >> at least you are guaranteeing some alpha. you cannot talk about alpha. people overestimate the level
of the uncle point, they do not know until they actually start losing money. blowing up does not mean everything. a lot of people in their 60's, they work all their lives and have a nest egg. >> let's turn this into practical advice. if you are an investor in any of the hedge funds, what should you be doing? should you be requiring the fund managers with whom you invest -- >> a little bit of both. if you have $100 and you allocate 20, you do not need risk protection. >> your blended return will be skimpy. >> maybe. it depends on how much risk you are taking with your money.
the more risk, the more it is necessary to be protected. >> why now? >> the government gave protection in 2008 and 2009. it now looks like you can use once, twice, three times, but it loses effectiveness. an analogy is drugs. two or three painkillers will help you. the next nine will not help as much per unit. you have a saturation and loss of effectiveness of the strategy. >> that is a fair comparison. the response of a human body to painkillers versus the financial system? >> the result is an accelerated benefit initially and then a flattening off later.
>> you believe quantitative easing, extraordinary monetary policy negative interest rates in japan and europe, why view you not believe that will work? >> monetary policy is interesting. nomura and novocain -- it is a painkiller. you have to fix the system. it has more debt now switching from private to corporate to the governmental sector. >> if the fed or the ecb or the bank of japan has run out of bullets, whatever they are doing is not effective any longer area what then happens? -- longer. what then happens?
>> i think a lot of things can happen financial markets, bond markets, some sector can be dramatic. the other problem is what if we do well and decide to raise the interest rates because think about it, there is no evidence that 0% is better. show me the evidence. they may realize 3% will decide -- go back and forth to 3%. greenstein i-74, he raised rates abruptly. in 1994, we had two ears of problems. people do not realize the italian bond market took a hit vastly bigger than the hedge fund market. >> your concern that janet
yellen'said in an effort to normalize interest rate i'll see, is courting another disaster? >> are aware of it now but they have no choice. they are stuck where no matter what they will do, it will increase the risk. that is the price you pay when in 2009, they eased too fast without realizing that perhaps it could have been probably, you know, substituted with something more measured. she has the worst possible job in the united states today. she is caught -- it is the worst position. she inherited all of the side effects of her two predecessors, most of whom had no clue what was going on.
she had much more a clue. as mario draghi's job worse? >> they all have the same problems but in america, she has the worst job. she is a very competent person and she understands. a lot of people would not have noticed but she is competent. >> there we go. we know him as the author of the black swan. he is a philosopher and traitor and always fun to talk to. >> find the out that skipping breakfast may not be such a bad thing. shares are sizzling after better core -- quarterly numbers.
scarlet: this is bloomberg markets. it is time for the big reveal of our ministries.. let's review the tips here. our mystery pic is toying with the best gain in 29 years. chairs are sizzling after it popped out better quarterly numbers. alice: a commendation of the business and its name. we are talking about jack-in-the-box. sizzling refers to obviously what they do. not serving breakfast, there was concern about competition from mcdonald's serving breakfast. and of course the
jack-in-the-box. the company was coming out with quarterly earnings that topped analyst estimates. there have been concerns about the fast food industry generally and most of the commentary i saw boiled down to, it is not as bad as it could have been for the stock. you specifically see the reaction to the numbers we got. overall, sales would -- were not changed. jack-in-the-box also owns the mexican chain comparable sales up 2.1%. in the second quarter and for the year, it may not a big game in sales. a reassuring report in the eyes of investments here. the biggest one-day gain in seven years for jack-in-the-box. scarlet: thank you. i would not have guessed that. alice: me neither.
credit spreads have widened this month after a huge rally since february. spreads widened over 6% for european investment grade tightening 30% since february. u.s. investment grade and high yields. is this a fake out or a new trend. i want to bring in the global credit strategist live from london. is this a shift in investment -- investment sensitive -- incentive question mark >> i think it is. we have had the new issue market on fire. deals have been overprescribed a more discerning sentiment coming into the investment space. given the speculation and macro uncertainty that is still there, we are probably ahead of ourselves in terms of risk on
over the past couple of months. alix: why are we seeing a huge pickup in new issuance in europe and the u.s.? we have billions of dollars coming into the market. >> if you look at the chart we started off slowly at the beginning of the year given concerns about the oil price we have gradually trying to be concerned 6% sure relative year-to-year in 2015. that is being fueled since february by the ecb corporate bond purchase program spurring a lot of -- to tax the market. european as well as u.s. borrowers to dig into that give her pocket of money when the ecb starts buying. alice: does that turn off if we continue to see spreads widen?
>> i think it will turn off for the more opportunistic guys look the real cheap funding, as prices normalize, the stronger balance sheet guys are the ones who will still need to come and refinance. alex len if you see there is a widening we're seeing, -- alix: if you see there is a widening were seeing, how long will this go? >> last couple of weeks, we are susceptible to headlines. there is a huge amount of doubt although the words we had earlier today had little impact. the risk is priced in already. we have many headlines to trade through. i think volatility will pick up in the short term.
alice: most risk, europe or u.s.? >> i would probably by the european debt because of the package in june. longer-term from a fundamental perspective. alix: good to have you. still ahead, another intense 24 hours in brazil after the senate most to suspend -- and the vice president named acting president. the challenges he faces in terms of turning around the troubled economy. ♪
mark: thank you. donald trump and paul ryan emerge from the closely watched a meeting today. differences persist but they pledged to work together to beat hillary clinton. first speaker ryan and then reince previous. tromp sat down with other members of the house leadership including kevin mccarthy and whip steven pare in mr. trump plans separate meeting later today. mr. trump is considering newt gingrich to be his vice presidential candidate according to people familiar with the matter. the likely nominee has been asking confidence to give in destin input on newt gingrich. a judge's rule said the man accused of a deadly shooting rampage at a planned parenthood clinic is mentally unfit to stand trial. robert is heading to a psychiatric hospital for treatment and his case will be
reviewed again in 90 days. three people were killed or the shooting and nine others were injured. he says he is a warrior for babies. denied an emergency motion that the ceo remain free while he appeals his conviction. the court of appeals issued the ruling the same day he is due to report to start -- start serving just one-year sentence. he was also fined 200 $50,000 in connection with an exposure in six years ago at the mine in west virginia that killed 29 people. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. back to you. scarlet: thank you. the vote was 55-22. the vice president was named acting president inheriting the
worst economy brazil has seen in decades. he named the new finance minister. anna is live. >> let happened in the next 24 hours? >> just left the presidential palace and she had a strong message for supporters. she made it clear she will not step down. she is not going to give up the fight and she against the process is an illegal cute -- and illegal coup and she feels it is any just -- injustice. she is going to prepare to continue this fight to exhaust every legal option she has to return as president. >> we mentioned he named his former central bank tell us about what surprises make up his
cabinet. >> within us today is smaller than the cabinet. it is clear he is going to emphasize transparency and infrastructure and look at putting together a group to solidify his base in congress. there are a lot of senators from parties he hopes support him in what he wants to implement. alix: what are her actual legal options over the next 180 days? >> the process goes to trial in the senate. the margin yesterday was solid in favor of impeachment. it is not likely she will able to -- be able to convince them in the final vote. scarlet: thank you for joining us.
as the brazil economic outlook following the impeachment vote, the former u.s. ambassador chairman robert says there is tremendous opportunity in the country. >> he painted the picture of a new brazil. >> a different brazil with a lot of opportunity. brazil has been considered the land of great opportunity but it never quite fulfill its potential. they have a lot of raw materials people and a diversified economy but they had never quite gotten there. they are now in the circumstance you see with weaker growth and they will not get out of it soon because they been a lot particularly on their biggest company and they are facing the headlands. tom: i will not ask you the biggest mistake you have ever made. i know the biggest mistake i
ever made, which is underestimating the success. what an exceptional success for the nation. can they rekindle the opportunity in the time of misery? >> he has got his own legal problems. he did a great job when he was president. a candidate of the left but he governed as a pragmatist and was able to pull a lot of factions together. he has now gotten into difficulties while president and he is the person who was really responsible for the current president becoming president. she was his chief of staff. not a good legacy. he pulled together the country really well. >> the economy of brazil is on its knees. the majority of resilience are backing the impeachment it was
not only because she was lenient on corruption but really because she mismanaged the economy. what kind of person do you need to -- need at the moment? >> they need a lot of reforms because they need to get their dependence on energy far lower than it is today. they need more diversification, more openness to foreign investment and a lot of structural reforms. anticorruption is critical. that factor undermines confidence quite severely. petrobras traditionally has been a well-run country -- company. it has gotten heavily engaged in the politics going on there. enabling it to operate as a country that works on the basic -- the bases of market part falls -- market principles.
person for the job? he is a career politician and a constitutional lawyer. it is also about unifying and rallying the troops. >> he is a teacher and a lawyer, he has been from an important city and played an important role. a lot of factions, as you well know, who wonder whether he can do that. we will see whether there is a lot of pressure to really clean house and put a lot of new people in. that will be a big challenge. tom: a wide-eyed freshman on diplomacy, you know as a pragmatist that it is out there. prime minister kamman working
with a corruption panel in the united kingdom. we saw the queen the other day and prime minister cameron talking about corruption i believe in nigeria. how do you shift brazilian people toward less corruption? what is the tactical thing to do to get that done? >> in many emerging economies, people want to get their share of the action. it is not this notion of an orderly, sustainable rule of law or rule of morality. part of the morality is get what you can when you can get it. alix: that was robert on bloomberg surveillance. scarlet: coming up, apple falling to $90 per share for the first time in two years. it is at risk of losing his title as the world posse most
abigail: the biggest drag by far on the nasdaq today are the shares of apple down sharply. hitting the lowest levels in two ears as shipments of iphones are likely to slide sharply. this follows other bearish reports on iphone sales. when we take a look at one year shares of apple, the stock has been trading in a range of
uncertainty bearish lower highs telling us they're increasing conviction. between 90 to $95, telling us some investors see big value until today suggesting there could be a more bearish action ahead for shares of apple. now, more bloomberg markets. scarlet: you are watching bloomberg. i am scarlet fu. here is what we're watching. industrial production falling in march 4 the second straight month. alix: a big win. denmark agreed to buy $3 million worth pending approval from parliament. scarlet clue -- scarlet: quick take on taiwan. there has been an unexpected drop in industrial production.
output climbed from february to march. it suggests the euro area economy lost momentum at the end of the first quarter. alles: mark carney is warning a vote in favor of the grexit could lead the economy to -- >> a vote to lead could have economic effects on the exchange rate and demand and the economy potential, the effects that could affect monetary policy. alles: the bank of england also lowered its growth forecast for the u.k., unchanged at a record low, 0.5%. denmark plans to buy fighter planes. the government still needs approval of the parliament. it would replace denmark's aging fleet.
they also competed for the deal. first-quarter profit earnings of the french bank retail unit plunged 32%. -- 232%. i plunged to 32%. -- bmw plans to injured as electric self driving car five years from now. the bmw will supplant the seven series as the flagship car. bmw is responding to challenges from tesla motors and mercedes-benz. it is expected to lose the top spot this year for the first time since 2005. scarlet: time now for the bloomberg quick take. his taiwan a country, sort of. it has an elected -- elected government and yet the united nations does not recognize a because taiwan was the home base of the chinese who fled, and is him.
mainland chinese considers taiwan as one of its provinces the government would illegitimate, and any talk of independence deeply hostile. its first female president in a landslide in february. eight years of closer ties on the mainland. public opinion currently shows strong support for maintaining the status quo of coexistence and a little immediate interest in independence. cross state tension erupted twice, first in the 1950's, and then again in the mid-1990's. china passed a law authorizing an attack if they declare independence to it only a handful of nations recognize taiwan as a nation. even the u.s. does not have official relations with it. technology and manufacturing powerhouse.
much of apple iphones are made by taiwanese companies. three times more than china's. no peace treaty has been signed in the decades since they split and china still aims 1200 missiles at the island and yet many say there is still too much at stake for any kind of military action. others consider it evidence -- evidence and does not point to relaxing attitudes. we know that taiwanese voters have turned to keep the peace while building a future less dependent on mainland china. that is your report. for more stories, visit bloomberg.com. alix: coming up, donald trump changing his tune on his tax returns. he now wants to release them. that story is next. ♪
stephanie: -- scarlet: this is bloomberg markets. i am scarlet fu. the conference in las vegas. >> you have to give the odds to hillary clinton. probably because of the minority factor i mentioned, she is probably more likely to win. anybody who says it is impossible for donald trump to win is making a mistake to a people in the hillary clinton campaign would agree. they will not just say we have
this has a layup. i do not think the campaign will be decided until the end. >> if the world and the market starts believing donald trump might win, the issue of political uncertainty might start flying off the handle. trump has been calling for things that are non-judicious to be generous. i've a that political uncertainty could become a big issue. >> i also know if i do not get some donald trump with change not knowing change and what it is, i will get hillary clinton. now tell me who are you going to vote for? there is no way you can vote for her. >> we have been growing at relatively modest rates and we can do for a more particular
slowdown. our last recession ended in june of 2009. seven years of recessions. eight years, not usually 10 or 11 years. probably we will have something close to a recession or something that might be close to very low growth. scarlet: john boehner also chimed in saying he think's paul ryan will try to help shape trump's policies. trump is holding off on releasing his tax returns, saying there is nothing new to be learned from them. tim o'brien argues otherwise in one of the most widely read stories on bloomberg today. as someone who saw trump's test it turns a decade ago as part of legal action when he sued me for libel, i think there are probably some things to learn he wrote. -- possible conflict of interest and financial pressures if he
does win the white house. a research fellow at the hoover institution and a former adviser to marco rubio's presidential campaign. great see you again. to clarify, releasing tax returns is not a prerequisite for running for office. for an antiestablishment candidate like trump, why doesn't he just say i will not follow the usual rules? >> the big problem for donald trump is that people are curious why he won't put out these returns. the longer he waits to put that out, the longer the pressure builds. there are a number of different things you can learn from taciturn spirit when does it become a bigger problem for him to not release those returns over just getting them out there. scarlet: do you think there is a bombshell in it been?
>> there is clearly stuff in there he is not comfortable with, whether it is how much he has actually given to charity how much he has actually made in income and whether he has taken advantage of tax shelter, all of those are questions that i think people have a right to know and to a certain degree, he will save himself a lot of agony down the road by getting this stuff out earlier rather than later. >> it is ironic because mitt romney himself was under pressure in 2012 to release tax returns. when he ultimately did that tell us how that unfolded and what the results were. klesko in a romney put out his first batch in january of 2012 during the primary process before florida primary. then he put out the 2011 returns once they were available later in the year. governor romney did try to get those out timely. he did make an effort.
it becomes an issue for voters particularly if the campaigns make it an issue. if the clinton campaign makes it an issue for donald trump, he will be under significant pressure to do it. conventional rules do not apply to donald trump. at some point, will the pressure get to him and forced him to do this? scarlet: donald trump is of course bringing out new voters because he has been unconventional and ripped up the traditional playbook. does that mean he is restricted or does he go for someone from other like newt gingrich? >> i think it is import and for him to pick someone with governing experience. an outsider is his brand. he needs to pick someone who can work with congress and figure out how to get things done. i think he needs to allay conservative concerns regarding
policy decisions. donald trump has been all over the map on tax policy and other crazy muslim than idea. he needs to figure out, how do i shore up my support with conservatives who care about conservative policy, people more closely aligned with paul ryan. he has a couple of tasks picking a vp. >> paul ryan has made it clear he is not ready yet to back donald trump. what do you make of his stance and how might that shift in the week ahead? >> paul ryan is trying to lead the party in the house to make sure republicans hang on to the majority in the house. conservative policy reform, and i think it is important for him to continue that. it is important for paul to continue to stand for those principles.
he put it best, unification between the different wings of the republican party will not be easier or we will see how it continues in the next several weeks and months. scarlet: thank you. alix: coming up, erik schatzker will stick -- speak with erik schatzker. do not miss the interviews right here on bloomberg television. ♪
from bloomberg world headquarters in new york, good afternoon, i'm scarlet fu. alix: i'm alix steel. should near energy has tapped a new man to lead the company. shares are rising on the news. here my exclusive interview with the founder. scarlet: demand for gold hitting a record in the first quarter. buying showing no signs of slowing down. alix: germany's bayer is considering a bid for montana. it would create the largest seed company, but wouldn't raise antitrust concerns? scarlet: let's go to the market desk where julie hyman has been tracking the latest. still read on the screen. julie: not releasing any recovery here. a lot of weight on individual averages.
the nasdaq remains the worst performer, bouncing off of the lows of the session. now down only .75%. also struggling today and for the week to recover. two down weeks now for the major averages. if you look at how stocks have done this week there is not much of anything. overall, just up about .2%. take a look at the latest groups on the move. health care is down the most in percentage terms. technology way more because it is more heavily weighted. industrials also. telecom, industrials, utilities helping to stem some of the declines today. on an individual basis the stocks gaining the most today, monsanto rising on reports that bayer made by the company. basf also rumored to be making a bid for the company. ralph lauren showing some
progress with its turnaround efforts. counter to that, looking at percentage declines, we have kohl's down after they missed estimates, unexpected drop in same-store sales. micron falling on memory chip prices. copper and gold under pressure as we also see some of the commodities under pressure today. alix: the other story has to do with brazil. julie: that's right, dilma rousseff has been suspended and there is a new acting president, finance minister in brazil, so investors are trying to figure out what to make of all of this. right now, the brazilian stock market is up 1.25%, but there has been a lot of bouncing around as people try to assess the interim president michel temer in what has been a difficult situation. the currency has also seen some
volatility. we saw the dollar climbed versus the real and then came back to some extent. also want to look at bond yields. we are looking at a one-your chart. we had seen a round-trip. bond yields have come back down so there is still some buying of bonds going on the midst of this very much evolving political situation. scarlet: thank you so much. alix: let's check in on first word news with mark crumpton from the newsroom. mark: julie hyman just spoke about the political situation. there is one going on in this country as well. in washington donald trump and the speaker of the house of representatives paul ryan met today against the backdrop of healing a party that split after one ryan called a bruising primary season. the speaker told reporters that he and mr. trump share the goal of defeating hillary clinton in
november. >> i have heard a lot of good things from our presumptive nominee and we exchanged differences of opinion on a number of things that everyone knows we have. there are policy disputes we have no two ways about it. plenty of republicans disagree with one another on policy disputes but core principles are what we discussed, and again, i'm encouraged. mark: trump held back-to-back meetings on capitol hill roast with speaker rhine and the head of the rnc, and then setting down with -- sitting down with leaders of the republican party in congress. mr. trump is meeting with senate leaders this afternoon. he reportedly wants her to be hillary clinton's number two.
senator warren has not ruled out joining mrs. clinton on the democratic ticket. an annual census of the homeless population in washington d.c. estimates there are 30% more homeless families than a year ago. city officials and advocates for the poor say rising cost and a policy of guaranteeing the homeless a right to shelter has reduced record numbers at city shelters. the world health organization is morning pregnant women not to travel to areas with the zika virus and is cautioning others to take percussions ahead of the olympics. earlier this week, a canadian professor called for the olympics to be postponed or moved because of the epidemic, saying holding the games would result in the avoidable birth of malformed babies. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus
around the world. scarlet: thank you. cheniere energy has found a new permanent ceo naming jack whose go to the post immediately. alix: the post had been held by neil sheers since it was vacated by the previous person. >> i am delighted the search is over. i do not know mr. fusco but i hear he is a great guy, nuts and bolts operator. all of those things are what cheniere energy needs for the next 18 months. it is a wonderful development. i wish him the best. the previous person. >>i wish he puts the company back on track. alix: that is what i'm hearing, nuts and bolts, operational. what kind of vision would a nuts
and bolts guide be different from the one you had six months ago? >> the first thing we need to correct is this emphasis on vision, at this point of the situation. the most important thing facing chin year in december was the transition from a development stage company to a company that would become an operating company. over the next three years, the revenues of the company would increase from almost nonexistent to $10 billion a year. gross profits of the three companies together would go from almost nonexistent to $6 million a year. we would become, by a very significant factor not just a purchaser of natural gas in the country, but we would be selling to cargoes of alan g every day. this is an enormous effort that is required in order to transition from development stage to operating stage. we were in the process of doing this in december. the vision was for further down
the road in 2018-2019, when the company would generate free cash flow and the question was what to do with that. mr. fusco has a couple of years. from what everything i'm hearing on the street, people that know him, he is very qualified to do this. i wish him the best of luck. alix: talk about what happened in december when you were let go. carl icahn recently claimed responsibility, calling your ideas hair brain talking about your longer-term vision of the country expanding to oil. what is your response to those comments? >> i am sure a company that is almost bankrupt in 2010 that wants to actually start a program where you invest $25
billion and become one of the largest exporters of natural gas in the world may seem harebrained. at the end of the day mr. icahn was repaired to value the company at $15 million. maybe it was harebrained, but not enough to stop him from making the investment in august. alix: so he bought into it. what changed? those are pretty strong words coming from him. >> it is unfortunate, i don't think it was called for. i think we both know that he caused my departure. we agree on that score. [laughter] there is no point in being called harebrained or not. we disagree on strategy for the future. he prevailed. good luck to him and the company. i am still a large shareholder and then rooting for him.
not quite as large as he is. alix: fair point, he owns 13%. as of february, you still own 3 million shares. you told me that you would hold them for a few years. is that still the case? >> not to the same extent. i have sold some but i still own over 2 million shares. those i will keep for couple years. i wish the company the best. alix: that was my exclusive interview with the founder of cheniere energy. scarlet: gold demand breaks a record. why that rally should be sustained. ♪
alix: you are watching "bloomberg markets." i'm alix steel. scarlet: i'm scarlet fu. in julie hyman is checking in on apple shares, down 2.6% on the heels of yesterday's drop. julie: apple has been on a losing streak for the past few weeks. today, the catalyst appears to be a report from the nikkei wire service that taiwan semiconductor's indicated shipments of apple phone chips will fall by 70% to 80% from june through december. not necessarily siding where it got the information from, but it's causing some concern in the market. shares are down 2.6%. we have been also watching alphabet. we have been watching the market cap cap between the two shares. if you look at the bloomberg
you will see the market caps of the two companies. here is apple, here is google. we saw them converge in february. that appears to be happening once again. so we may end up with new leadership for the s&p 500 for the u.s. markets as a whole. if you look at apple you today, it is down pretty sharply as we have seen this downtrend ever since mid-april, down 14.5% for the year thus far. what we're seeing today is the ripple effect with an apple suppliers, which is a pretty broad universe. taiwan semiconductor, not down that much, but you see other chipmakers are also trading very chart -- sharply lower today because of that ripple effect.
alix: thank you. scarlet: turning to the world of precious metals, global gold demand jumping to the highest level in the second quarter since investors jumping into the bullion. alix: jewelry buying sliding 19% . you have demand slowing in india and china, the biggest consumers. juan carlos artigas is from the world gold council. great to see you. what i have a hard time right time -- right now with gold is that investment buying is killer but the physical demand is not. how does that wind up playing out? >> when you think about the gold market, you have to think about there are two aspects, the consumer demand and the investment demand. they are the two major things of gold. investment is countercyclical.
in a corner like this, the first quarter, that is when you see things like that playing, where you have strong investment but some weakness in consumer demand. alix: i keep hearing it will be difficult or goal to make another like higher without china and india going gang boxers. basically, you need etf, india, and china coming in to push fold higher. >> you can see that in china. good consumption especially at the bar and coin level, consumer demand, more jewelry that was down. consumer demand in china for bars and coins was up, as it was for etf and investment around the world. in terms of india, we think there were specific conditions happening in the first quarter. last year, indian demand in the first half was weak, but then it came back in the second half. we are expecting that for india
we may see some thing similar, where demand, because of the higher prices on the consumer side, may slow down a bit, but is not lost. waiting to come back into the market. scarlet: let me ask the obvious question, is there industrial demand for gold? >> there is. you were talking about apple. gold makes a way into almost every component. 10% or so coming from electronics, even though there are small amounts of gold. we know that there are a lot of electronics being sold. scarlet: is that meaningful enough to push the price of gold up? >> in the long run, there are long run and short run components. when you think about all the aspects of gold, including the demand for gold in technology and jewelry demand, they are helping the overall long-term trend. in the short-term, investment
scarlet: if you think that is high one investment firm says that amazon could be the first trillion dollar company, even before google. let's get more from carol massar. carol: we welcome everyone from bloomberg tv, this is bloomberg radio. great to be here with chris from arc investment management. i want to talk about amazon. you think it could be the first trillion dollar market cap company. they do seem to be growing rapidly in terms of market cap. what is your thinking behind it? >> i think amazon is out to be the world's most incredible injustice company. when you think about amazon they are a logistic company for adams and bits. the goods they sell on their platform. they use planes, boats, drones all kinds of things, to deliver those adams. their bits is their computer
architecture. that is where they are 10 times larger than their 14 competitors combined. we are talking about mastiff logistics scale where they can capitalize on all kinds of efficiencies of scale. that is why we see this trillion dollar opportunity for them. cory: what do you mean larger than their competitors combined? microsoft is admittedly one/tent of amazon services, but that is still a fast-growing business gronk after than amazon services. >> good point. when i say that, i mean in terms of compute capacity. amazon has been laying the groundwork for this opportunity since the 2000. i would argue microsoft is making a pivot. when i use microsoft cloud services versus samsung or google cloud services, amazon and google are superior because they are cloud-aided.
when i think about the infrastructure that has been built out, that is where amazon is at a much larger scale than microsoft. carol: if i look at earnings projections, we know they sell a lot of stuff, we look at the revenue line. earnings this year, four times what we saw in 2015. do you really think they are going to make those numbers? >> this is where the velocity of their cloud product is coming into play. what's interesting about amazon they have been a retail company for a long time. with cloud growing in the 60% range, that is ramping quickly reaching a $10 billion revenue runway. we saw a real acceleration in their retail segment this last quarter because they are taking 50% of incremental online e-commerce share. cory: does it matter that they have an operating profit margin of barely 3%? >> this has always been the
argument against amazon. carol: and it is a good one. >> it is understandable. we want them to invest in front of this massive opportunity. warren buffett is the king of value. cory: he does not own the company. >> no, but he has spoken positively about it. when we look at amazon's long-term vision business as he really said, the return on capital will be in the triple digits. with those kinds of figures we absolutely want them to be investing in this opportunity. carol: what is the tricky part at this point, that they do not mess it up, because there is competition/ . >> there will always be competition and this is where barrier to entry is key. there logistics for adams and bits will keep their competitors out. carol: we talk about they might
be potentially be creating a competitor to ups, fedex. trucks, planes, that is a lot of capital expenditure. how do they have to be careful in that they do not trip up in their pursuit? >> i think there will always be this tenuous relationship between amazon and investors, as cory said, as they keep margins thin. but if you look at the efficiency with which they do things, it's really amazing. one of the analysts have done research to show that amazon could deliver packages for less than one dollar. there is no one else out there that can do that. they will be pleasing the consumer with massive efficiencies of scale, which should drive unit volume growth over the long-term. carol: we have to leave it on that note, thank you for coming in. an interesting argument. analyst at ark investment. back to you. scarlet: thank you.
had what he describes as a very constructive meeting today with donald trump. senator mcconnell told reporters , we talked about a variety of things, both campaign related, and issues. that meeting followed an earlier sit down with paul ryan who do knowledge to afterwards at political differences remain but that he and mr. trump pledged to work together to beat hillary clinton in november. he also met with the republican national chair committee leader, kevin mccarthy, and the majority whip. john boehner is getting behind mr. trump despite disagreeing with his stance on banning muslims from entering the u.s. and tearing of trade deals. he says he is confident trump can win in november over the likely nominee hillary clinton and says, anyone who thinks donald trump cannot win, just watch. malaysia says two more pieces of debris are almost certainly from the missing air flight.
the debris was found in south africa. five pieces have been found so far. it has been more than two years since flight 370 is believed to have crashed in a remote stretch of the sunburn indian ocean. a solar powered airplane hits to oklahoma on its latest leg of the around the world journey. the solar impulse 2 took off from phoenix this morning. after oklahoma the plane is expected to make one more stop in the united states before crossing the atlantic ocean to europe or north africa. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. back to you. alix: thank you. it's a new chapter in brazil after the senate voted to suspend dilma rousseff opening her impeachment trial putting the economy in the hands of vice
president michel temer, who is now acting president. scarlet: our next guest says impeachment alone will not change the fundamentals and investors need to look at a change in policy. gabriella, when we look at how the markets are reacting the real is weaker. what does this mean for the next 180 days, our investors in a holding pattern while we await what is pretty much a guaranteed impeachment? >> it tells me, this year, we have seen such strong performance in brazilian assets. this proceeding of the impeachment trial was priced in as well as a more market friendly cabinet that now president temer announced. going forward, expectations alone are not enough. now we need to see implementation of economic and
fiscal measures. alix: you like fixed income in brazil last time we spoke. >> the reason we think it is more appealing than equities right now is what we can actually expect to be implemented in terms of turning a growth, the outlook in the country. it is a tough outlook. for equities, that is a difficult backdrop while you are arguably still in depression. for fixed income, we cannot expect rate cuts the second half of the year. that is what is being priced in but is also realistic assumption for brazil. scarlet: as for the cabinet, naming the new finance minister former central bank governor does that get us closer? >> his choice is very much a credible and business friendly cabinet. these are the kinds of measures that we expect. expectations are pretty high for some very progrowth and pro-fiscal credibility measures.
alix: if you look at your call on fixed income, you can see the tangible effect of a rate hike. one industries may you see that the most in? >> rate cut, i would say. brazil and corporate bonds are still in a tough pattern. you have the ongoing corruption investigation, you never know what sector that will touch next. as well as the weakness in the economy. we are a little more interested even on the brazilian sovereign side, where you will see the direct benefits of the interest cuts improvement in the risk premium for the country. scarlet: will that hold of even if the external environment does not say the same, if the dollar should strengthen, the rest of the emerging markets come under pressure? >> i don't think you can separate the performance in brazil being 100% brazil specific. you also had a favorable backdrop during this year. if you have a reversal in the
strength of the dollar, commodities, you may see it fall under pressure again. alix: how long do you think the acting president has to have make changes to support the rally we've seen? >> i think the market will give him a little bit of time. it does not need to be next week, but it needs to be sooner rather than later. we will not be waiting for 2017 to roll around two in a measures. i think his priority, especially the naming of his cabinet signals that he will be focused on improving the fiscal results of the country. that is priority number one. scarlet: you favor fixed income overstocks. how does your view on brazil shipped relative to other emerging markets? we are differentiating between the different emerging markets. russia, mexico china. >> interesting that you mention russia. the reason we say we do not like brazilian stocks as much is because they are not as cheap.
on the ground, they are trading one standard deviation above average. decently expensive. in russia you have a difficult situation on the ground as well, but you have a cheaper equity market. what we try to do with emerging markets is it differentiates strong growth stories and also where we see value in the market. alix: we see the value in other russian stock markets. what do you see being the trigger to lead prices higher? >> so far, the multiple expansion, the fact that the russian currency and the equity market are both still very cheap . you have oil prices continuing to rebound, which is a plus for russia. scarlet: as for china, that is the lion sleeping in the backdrop --elephant in the room -- it could awaken and disrupt everything. stable right now.
how quickly does that change, how does that affect the rest of your emerging markets x? >> we talked about the weakness in the dollar, commodities being a support factor, but also the stabilization in the chinese economy. that is where we will continue to watch. i think china will be in the headlines for years and years to come. that transition is a long-term process. alix: good to see you gabriella. scarlet: coming up, german company bayer is it planting the seed for a monsanto acquisition? ♪
scarlet: this is "bloomberg markets." i'm scarlet fu. alix: i'm alix steel. time for a look at some of the biggest business stories in the news right now. long-term u.s. mortgage rates fell for the third week and posted new lows for the year. the 30-year rate is now at a three-year low. freddie mac says into to 3.75%. the 15-year he's 22.81%. scarlet: google want professional women to be better represented in a motive for. the company says examples include different clothes and
objects. it would be cute. alix: walmart is testing a two days of scripture and shipping service. members would pay $49 year for walmart program. amazon prime service offers two-day shipping for $99 a year but that also includes access to streaming video. scarlet: the deed is is parting ways with chelsea soccer club. the organization says their deal will end in june 2017, six years earlier than planned. neither side gave it a foundation for the split. one analyst call the break of a surprise and worrying and raises concerns over the intensifying battle in sponsorship rights. alix: lyft is doubling a settlement to california drivers
after a judge ruled that the settlement previously agreed to was too small. the company is also revising its termination policy. that is the bloomberg business flash. scarlet: julie hyman has been tracking some m&a for us. julie: monsanto has been a big subject of discussion today after bloomberg news reported that bayer of germany may be interested in acquiring the company, creating the world's largest supplier of seeds and chemicals. monsanto has been rising today. bayer fell by about 5%. in terms of relative size, we are talking about a $40 billion company in the case of monsanto $96 million in the case of bayer . also a report yesterday that basf may be interested in making a bid form on center as well.
interesting to see how this evolves. speaking of takeovers, infoblox received an offer to go public. the offer a prayer of the coming from thoma bravo, a tech focused equity firm. they are hiring advisers to study their options. shares are up 20%. finally, we are also watching annenextera energy. shares up by 1.3%. scarlet: thank you. we will be speaking later about how dealmaking has gone from
boom to what feels like a bust this year. alix: is can best financial system more risky than reputation would have it? they are bulking up their market intelligence team. scarlet: the move is so the central bank and get a better handle on risks in the system, specifically the shadow banking center. jamie sturgeon is with us from toronto with more. why is essential bank looking to bulk up in this area now? >> over the past few years so-called shadow banking has expanded greatly in canada. certain estimates put it at 40% of gdp in 2012, and that figure has surely grown since then. partly a symptom and a reaction to home prices. prices are exploding in places like toronto and vancouver, and now surrounding suburbs. that corner of the financial system that shadow banking system, is feeding into that
trend. it is something that the bank wants to get a handle on as it sees home prices climb in excess of 20% year on year in many markets. alix: aside from housing, how levered our households now? >> if you look at canadian balance sheets it's an area that the bank is watching closely, an area that economists are watching closely. you have auto loans, lines of credit all trending higher over the last several years. of course a reaction with what's happening to interest rates, and the economy. consumers have been relied upon to drive the ship for quite a while now and it's been something that is becoming apparent in terms of household leverage. alix: thank you, jamie, good to see you. scarlet: coming up, a new american home is tricking in size and buyers want more density and less lawn, according to a new barclays report. we will speak to the analyst who
alix: this is "bloomberg markets." i'm alix steel. scarlet: i'm scarlet fu. let's get to some corporate news. the german company bayer is said to be exploring a potential bid for monsanto. alix: for more on this we are joined by ed hammond. europe does not like gm owes. why would bayer want the biggest maker of gmo's? >> monsanto is consistently ranked one of the most hated companies. discussions have been going on most of the year for some kind of partnership between bayer and monsanto. from what we understand, bayer
wants to take over the company. they have asked to study the merits of this, whether they could finance this. scarlet: there have been discussions in the past about them teaming up. basf has been named as well. >> there are reports of their that are incorrect, we think, about basf getting in with monsanto. quite a small circle of companies who do this. they have all been talking to each other in the past couple of years. monsanto -- the idea of consolidation is not new. alix: you say that monsanto is hated in the u.s. you and i talked about this before. our bayer -- are bayer shareholders going to like this? >> from what we understand,
shareholders have been keen for them to expand into pharmaceuticals, animal health an area they are quite substantial in. there would be some reputation issues, but that said, they already play in the same industries, so they suffer from the same problem of having this stronghold over farmers, gmo's, which people don't like. i don't know if they get as many protesters as monsanto, but it is something that could well up. scarlet: thank you so much, ed hammond. from growing seeds to building houses. when it comes to real estate, bigger is no longer better. postrecession, the new american home is shrugging in size. the average size has been 2200 fair feet over the past decade. alix: this is all part of a long-term secular change in the american housing market. barclays analyst stephen kim outlines a new report. we spoke to him yesterday and asked him about the demographic
shift fueling the change. >> you have the two biggest demographic groups in the country, the baby boomers, and their children, the millennials. what you have seen over the last several years is the baby boomers have entered a wave of downsizing. lots of reasons why it's happening now. probably the most important one is at their home equity is finally now restored and we have seat house formations picking up, so you have junior moving out of the basement, so they are free to downsize. at the other end of the spectrum, you have millennials who are saying i'm going to wait a little longer before i buy, but when i do, i will not go so far out like people before me and buy a cheap house in the sticks. i will buy something nicer, closer in. i'm a little older than most first-time buyers, so i can afford it. now they both want something pretty similar. scarlet: and you can see that pushing prices up. the average price for a starter home is no longer what you would
expect. it is gaining anywhere from $250,000 to $300,000. >> that is the price point seeing the most action for first-time buyers. the average price in the u.s. is about 225, so these are priced higher than the average price. >> another trend we are seeing is multi generational living. what are the economic forces behind that? >> a number of reasons why you are seeing a rise in multi generational living. some would point to the fact that you have a demographic shift in terms of foreign nationals, more 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 coming to live with you is a form of downsizing for them. another way to think about it if you have had the cruelty of young folks getting a job when they come back to live, that is in the generation coming into the household that you maybe
thought you were free of. it is really a function of the parents of the baby boomers moving back, which is a form of downsizing. alix: baby boomers and millennials are looking at the same kind of property, looking for a price point that is a little higher. what does that mean for the homebuilders? >> what we are really describing is, across the nation, you are starting to see a more rapid shift in how people want to live, the kinds of homes they are looking for. unfortunately, the housing stock in a change that fast. it can only change 1% or so a year by builders coming in. what we think will happen is you will see builders capturing a lot of this change in preference. you have already seen it show up in a new home price premium. a lot of factors behind it, but one of them is the fact that if you cannot find what you want in the existing stock, you are going to pay more to get what you really want in a new market. scarlet: even though that home
price premium is inspected to come down, it will stay up over the long term. >> absolutely. scarlet: that was stephen kim at barclays. we have breaking news. charter and time warner has cleared a hurdle. it looks like it will become a done deal, the second-biggest u.s. cable provider. alix: it doesn't look like the shares necessarily had a huge move. here is an intraday chart on charter. we did see the stock slipped into positive territory on the news. this is when the headline broke. then it was not able to hold onto the gains and is now lower. we heard the news leaked yesterday. perhaps the deal would be approved by california regulators, and the stock moves on that yesterday. this deal appears -- scarlet: ed hammond was just
talking about the inches to buy with monsanto. overall, nothing has been that regulators are pretty strict on which deals they would approve and which ones they would kibosh. alix: a lot of guys falling by the wayside. scarlet: meantime, we have joe weisenthal. we have a number of things we'll talk about, including high-yield credit market. a lot of issuance of debt recently. we will be looking at how the risk factors for high-yield debt has been inching up lately. >> it has been a tale of two years. off to -- last october november, the junk selloff concerns about the etf. you can see here, this is the spread on high-yield cx -- cdx. it surged at the end of the year but has been ticking up lately. the question is, does that auger for weakness in the stock market?
given we have seen this huge surge in issuance helped in part by the ecb, is this sustainable, how much appetite is there really? one of the big questions in markets. alix: looking forward to that segment. later on today on "would you miss?" my interview with the founder of cheniere energy after the company names a new ceo. we will also hear from the analyst that covers the stock. mother move the needle portion near? scarlet: short seller jim chanos will be with us live from the salt conference in las vegas. ♪
headquarters, good afternoon. here is what we're watching at this hour. market's giving up their early gains and are struggling to rebound after yesterday's selloff. you are red flags once again. oil also with a bit of a decline. apple shares are at their lowest point in nearly two years as slowing sales continues to her that company. can apple shares recover? a change in leadership in brazil. there is a senate trial she calls the impeachment process a coup. we do have some breaking news just crossing the bloomberg in the last few minutes. charter and time warner cable have gone over their final hurdle to