tv Bloomberg Go Bloomberg May 16, 2016 7:00am-10:01am EDT
jonathan: we are looking forward to that conversation. futures are largely stable. they are down about three points. it looks like we are going to have a stable start to the day. euro, 11322. you can see the story at the bottom of the screen. wt is -- wti is up two percentage points. the yield on the 10 year is upon basis points. 2007. the narrowest since david: let's go around the world for in-depth coverage. both kennedy will tell us what's going on behind the surge in oil prices. we're going to start with merger monday.
pfizer is back at it again. julie hyman is here with the details. julie: this is a much smaller deals and allegan. this is a $5.2 billion deal. they are the target. what's attractive about anna core, it does have revenue to treat fungal infections in the toenails. it is developing a drug that looks like it's expected to be a high sell it to treat eczema. it has had some positive steps in terms of approval and in terms of studies over the past year or so. 9925.ice per share is that is a 55% premium. we're not talking about a transformative deal by any means. it's more just an add-on would look atd
what has been going on for the past year, they saw a big surge last summer after the were positive trial results for that eczema medication. the stock has performed well. there are some other merger monday things coming up. in at is increasing its offer to buy tribune. statement, it's not enough percent of the closing price. that is the last trading day before get at publicly said it would get an offer for the company. to see if we are now going to hear back from tribune once again. they have been resistant to a deal. we are seeing a rise in yahoo! shares. warren buffett a says to be
looking at it. how would yahoo! fit into berkshires strategy? jonathan: there are a couple of things to keep in mind. he is not leading the charge. he is working with dan gilbert who knows a fair amount more about technology that i think warren buffett says he can bring to the table. he can be an important source of funds. dealwill put a terrific together if that were necessary for him to do so. in terms of -- in terms of hitting specifically with the kinds of investments he's done in the past, this is a little bit different in terms of financing the deal. he has done that for. he is done that in the way that would let someone else take the lead. is we important to recall really focus on something that
makes a difference to the portfolio. there could be significant upside. i think that's certainly possible. lisa: thank you so much. jonathan: let's talk crude. oil crimes to the highest price since november. we're looking at this, so we different ingredients. what's the dominant one? will: nigeria has been the big story. we've seen a resurgence of violence in the niger delta. more oilpposed to get revenue out of the central government. they've attacked several oil platforms. the production to a 20 year low. can still trying to recover from the wildfire. venezuela has an impact. it started to have a big impact
in the market. goldman sachs put out a report that says the market is rebalanced its deficit. it has already begun. he has called this so well over the last couple of years. you other market inside out. they been caught off guard by how fast it's rebounded. will: that's a good question. in nigeria, what's gone could come back to canada will almost certainly come back. what's interesting about what goldman reported, this is pretty close. long-term the market may remain oversupplied. the really important question for the oil market is as we see prices rally into the 50's, will feel producers come back with fresh girls? -- girls?
-- barrels. this will come back down to 8.8 million a day. where is this the spot for shale? will: people have seen 50 as a crucial level. the one that would see a lot of perils come back is $60 a barrel. this is still a very new industry. there is a lot of perils coming out quickly. thousands of workers lost their jobs. knows. sure anyone jonathan: thank you very much. david: let's go to robin. there was more disappointing information coming out of china. please walk us to the data. the date if it came out
over the weekend, there were slumps and industrial production. this reflects the dilemma that chinese policymakers are facing. try to control growth or affect it? --ry time david: we lost robin. thank you for joining us. now we need to go to vonnie quinn. vonnie: they will work together to detect missiles from north korea. they conducted a fourth nuclear test. the bombings and russell martin turning point that had not been a terror attack in a western nation for a decade.
terrorists had been trying. onres of attempts of attacks airlines, roads, and bus lines in the united states and western europe. police work and occasional ineptitude prevented it more deaths. donald trump says if he is elected president he is unlikely to have good relationship with david cameron. s proposalsled trump' divisive, stupid, and wrong. i am vonnie quinn. jonathan: coming up, desperate for income and a yield starved world, investors are's peaking that also. is the u.s. still the best bet?
tank of america met with management. to have greater confidence on mandate and desire to deliver. the stock was down 75% last year. it has just about doubled so far this year. rated as the equivalent of a cell. bank of america changed its tune. ,e have the french company those shares fell to the lowest since 2009. morgan stanley says the company is in transition. it's more of a growth plan. the dividend cuts will be earlier and more substantial than the banks prior forecast for the company. nextcut its own forecast -- last week. here is another done deals this morning. range resources will be buying
memorial resource development. it's a $3.3 billion all stock deal. there have not been that any during thes turbulence we have seen in the market over the last few years. many analysts have been calling for more energy deals. this is just one example of the few that we have seen. lisa: foreign investors are starving for income. take a look at japanese outflows. is the u.s. still the best place to go for hunting for yield? bob michael joins us. how much are these japanese investors coming to the yet -- u.s.? bob: that's a really good question. they've been here for a while. they've been exporting capital. the bank of japan has done
around of qe. they have sold their fees to the bank of japan and bought largely in corporate's. what we see is a dramatic acceleration. the ministry of finance released data that showed it was the greatest surge of purchases in foreign sovereign debt ever from japan. that's a big number. that's on the sovereign side. we see a ratcheting up of buying in the u.s. we have some large institutions looking at u.s. high-yield. david: when did you first notice the acceleration? intowhen they cut rates negative territory. much invented qe. to go to negative interest rate policies after some of the other central banks did created a mind of change in japan.
i think everyone believes they can go to -10 basis points. assetre going to see more purchases, more increase in the size. people want yield. it looks great. over 3% lookst great. david: i would guess the last thing they wanted was to take their investors and and then to the united states. they see the same data. what does this mean they will do next? bob: i think seeing all this capital exported overseas is somewhat problematic. i'm not sure what else they can do. i don't know if they are supposed to increase asset purchases. i don't know if they are supposed to look at more equity. i think they have to pull some more arrows out of the three
arrow policy. lisa: we are in a later stage of the credit cycle. you've got to fall rates cleanup any significant pace. rating agencies are surprised at how quickly the rate is going up. when japanese investors start accelerating their cash, is this the beginning of the last hurrah? bob: defaults are going up. first quarter earnings were a mixed bag. bottom line and the top line was coming down. down, top line is coming i want to see them take out expense. this is what central banks are responding to. they are desperately trying to reflate and create growth. this is the side effect of that policy.
jonathan: how do you define upon the bubble? bob: i think that's a really good question. the things we have tended to look at in terms of bubbles are two plot things on a graph. if you get up curvature, that is a pretty good sign. usually bubbles are that inflated. there has been a lot of our wing that has gone in. are we in a bond bubble? negative yields cannot be sustainable for very long. be a scholarly approach to the markets that the banks are taking. jonathan: we've got this to 10 spread. it used to tell something about world. said,verything we've just does that mean anything anymore?
that the fed is on the move. likely they are going to raise rates in june and depending what exit polls look like they may wait until july. a lot of money is pouring into the long end of the u.s.. it's been exported from very low yield environments. there are other opportunities out there. you can go into us joy and pick up 50 or so asus points. i agree there has been some flattening. the thing i am hearing most is an inversion. those who are saying this is ridiculous, we will not have recession. you are coming at it from the other side. we are headed in the resurrection. maybe that's not a very healthy sign. jonathan: it's great to have you
4/10 of 1%. we will whip through the fx market for you. dollar yen is pushing back toward 109. a big story in the commodity market, crude is $47. that is a six month high. it's already just monday morning in new york. we already have a lot of m&a news. and we have jeff here join us. let's talk about pfizer. and core is surging. pfizer has made a deal. they were worth about $3 billion on friday. that was the main product.
it's a toenail fungus product. something for eczema which should be approved in the next few months. that's what pfizer is paying for, something that's come in in a few months down the road. david: it's a relatively small company. is this about intellectual property? pfizer, this is the next best option to break in two or three companies. they've got an established products business. the have future drugs. this will probably fall into the future business. you will probably see a lot of deals like this for pfizer. they create another company that will move forward. lisa: how much money is there in toenail fungus? isn't there an empire over there?
why is now a good time for pfizer to be buying? jeff: in some ways, it's a bad time. they have a lot of money and resources to buy other things. this seems small relative to pfizer. it will add up to what the future is going to be. i don't know about tongue -- toenail fungus. they've got a lot of cash. they can borrow cheaply if they wanted to borrow more. it's not a bad time to do that. david: kennett is not going away quietly. tribune said no and they come back and raise the price. jeff: they are going to have to start talking. they have jumped to 15 share. they are trying to get them to table.le andga -- i would not be surprised if they get a deal done. david: coming up next, china's
red flag. disappointing data from china highlights the reformers trying to reform the economy. we will go to the numbers and find out whether china needs another round of stimulus. let's get you up to speed very quickly. futures are little bit staple -- stable. the crossd get to asset board. the dollar is on the back foot. high.is at a ♪
tom keene is falling asleep after bloomberg radio after these numbers. the 10 year is up two basis points. the spread is the narrowest since 2007. david: we are just under two hours away from the opening bell. pfizer has agreed to it deal for 2.5 billion dollars to gain control of a treatment for eczema. offert has boosted its for tribune publishing. yahoo! shares are up more than 1.5%. warren buffett is backing a group waiting for the yahoo! internet access. let's get first word news. of attacksiraq, sirs by the islamic state have killed at least 29.
14 victims died in attack in a natural gas plant north of baghdad in a series of bombings killed 15 more and others were wounded. it's a fifth straight day of attacks around baghdad. president obama took another shot at donald trump and a commencement address. graduating students at rutgers that ignorance is not a virtue in politics. he criticized the presidential campaign for what he calls anti-intellectualism. the world largest cruise ship has set sail on its maiden voyage. the $1 billion harmony of the seas left france for the u.k.. it has 16 decks, 23 swimming pools and can hold six the 300 passengers. -- 6300 passengers. jon: it is the chart of the day, the optimists say this is not
2007. it's the spread between u.s. treasuries. that spread as the narrowest since 2007. tom keene joins us now. that spread is kind of different. tom: it's getting a lot of play. within emphasize that any given spread, there are four it's this thing which is most interesting. move relative to the two-year? the two-year yield is rising and the tenets coming down at the same time and that's intriguing. typically, that would tell you that things were not all good in the u.s. economy. 100 it would, going through days always gets peoples attention. we had a clear indicator back to 2007 and 2001 of recession. i don't see much of a linkage at
this moment into a true recession. jon: with two-year yields rising and 10 year yields coming down, has ally the 10 year global hunger for yield. tom: that's exactly where i wanted to go. and not about the two year 10 year, this is about the banks. there is the idea of how they make money with the spread for the libor proxy. those spreads are probably a lot more important for the central bankers. it there is a commodity market rally. how do you reconcile the rally in commodities with the flat yield curve? tom: we have not seen it yet. we are in the process of seeing
commodities recover and there is a huge doubt whether that trend is there. noted by an oil expert that he he does not see sustained higher oil prices. think news for oil is in the market. we are focused on brexit and june 15. jon: is it too early to say these correlations are broken down? tom: yes, we and up talking about this which is correlations. i would look at the blunt instrument, the massive news from j.p. morgan was they have seen a seachange and not that they are looking for a boom american economy but they are looking for a better american economy which would keep the yield curve steeper. jon: thank you so much on the flatter yield curve. david: we have breaking news on apple -- we've just learned that
berkshire hathaway has acquired an interest in apple. i'm not aware how big it is but from previous experience, any interest berkshire hathaway has in a company means a lot on the stock is already up 2.5% after prominent news has come out of apple. considering that berkshire is potentially interested in backing yahoo!. are they getting into technology? we want to follow china where there is a run at disappointing data and it suggests the company's debt addiction may be tough to shake. missedetail sales estimates as growth in car sales grew and industrial production went up 6% from year ago but the forecast were for 6.5%. the senior fellow joins us now from washington. thank you. this missed estimates but what does it tell the president of
china? does he have to increase stimulus? >> a pleasure to be here. these are disappointing numbers out of china but what is clear is the president of china is embarking on an aggressive reform agenda for the economy. there is dissent playing out within their own public papers with different parts of the bureaucracy. he has a challenging time i had an he is trying to introduce a new kind of economics to focus on supply side so they don't resort back to the whole strategy they have employed in the past of fiscal stimulus. they will have to do something to re-energize the economy and they are exploring different kinds of methods to do that. david: one of the transformations is from rural areas into urban areas. numbers tell sales us anything about how that transition is going. question mark >>?
>> is a fundamental part of the agenda, it developing purchasing middle class. they need to move away from government investment and low-cost exports into this consumption-based economy. it's disappointing to see these ambers and part of it reflect concern about the direction of where the chinese economy is going to massively as well is something the leaders themselves are focused on and that is why our chinese people buying chinese products. it's a question of having confidence in what's being made in china and that's one of the areas the chinese leadership is focused on. how can they make sure that chinese supply whether it's through automobiles or rice , people either have the confidence or the desire to buy. >> i was struck by the fact that
the industries that were a bright spot were the only ones that have actually benefited directly from the stimulus that the chinese government has embarked upon. been, has this been trickling out into the broader economy but has not had an effect >>? we need to focus on the long-term trend. we focus month by month so it will not be a pretty picture. canquestion will be what you what compass overtime and there are indicators we have to look at. one of them is with the data on enterprise reform. some of going to let these state owned enterprises go bankrupt? the second is the focus on what they do about overcapacity. they have pledged to reduce steel and coal production by 150,000 tons over 3-5 years and that requires letting people go. massive unemployment potentially and how will they handle these
issues? are we going to start to see the stimulus again? i think it will be a combination of both. a few weeks ago, they announced the creation of the million mile road. this is going back to the old government investment in building the economy. david: let's talk about the new world and that's green energy. investmentnt is this injury to the president and the regime? >> the environmental issues have almost become what the trade issues were in the 1990's. an area ofme potential cooperation between the united states and china and can show president chi leadership in the world but it's an area where they see there is tremendous potential. goldman sachs said there is a potential of a trillion dollar private sector market in this base. he needs to find ways to drive drive at sector capital into
cleaning up the environment because the government itself cannot afford it. there is great potential. the chinese have decided that this is the pillar of what they will have as their regime and they are trying to encourage the other g 20 members to adopt the same principles and practices they have. they see this as a way of stimulating chinese road but global growth. david: thanks very much. good to have you with us. next, the hedge fund exit of apple and warren buffett steps in as berkshire hathaway gets a 10,000 -- a 10 million share stake in apple. the stock is up. ♪
>> is there a boy who cries wolf problem here? with all the statements that come out, we might do it twice. it is 50-50. >> to even get one rating, there is a big munication step between what the fed is thinking and what the markets are thinking. the fed has a challenge here. own the markets around their view.
they have to do it in such a way that is not tone deaf on the weak economy. evidence thaty over the last 3-4 months, that jawboning has had any effect? >> they've only been lightly pushing. they can be much more forceful. do not forget, we have the press conference after the june meeting. the june meeting statement will be very important. we will have a semiannual testimony sometime in july. some of high profile events for the fed to say, we have been warning you about two hikes, and now we are getting serious. >> i do have to say, they have been the same for much of the same time. the market said that we do not buy it. who has been right? the market. >> the fed is sticking to their methods here. it will really depend not so much on the inflation numbers, but by the labor data. we need to seek strong job growth and income creation.
they said, despite all the weakness in the economy, including consumer spending, real household income growth is solid. that will be what saves their view. >> widely keep hearing so much why do i keep hearing so much about july? >> june is too soon. it is simply too soon. you will not have enough data. you only have one job support and one report on consumer spending. there is just not enough data for them to convincingly sound the all clear. july is the next opportunity. once you get past july, september and december. bloomberg's chief u.s. economist, thank you so much. coming up, is increasing household net worth building another bubble on the horizon. we will discuss next trade -- next. ♪
>> if you want a confirmation that apple is now a value stock, this is it. warren buffett steps in. they hold a 9.1 million shares state of the i've phone maker -- the iphone maker. the stock is up to full percentage points. the fascinating thing is, here we are warren buffett getting into tech. >> he always said he would not do it. he would only invest in things he understands. >> over the weekend, we got the news that he may be in a group of investors taking a look into yahoo!. ,> this is a big shift for him and it is a big endorsement for apple. good news for tim cook. ofyes, there were a lot people beginning to ask about the future of tim cook over the next year.
it is a last needing story, and we will continue to keep you updated. it could lift the overall market. charts,now for off the a sharp rise in household networks has picked up the last two major bubbles. the.com bubble and the housing bubble. we are seeing it again, the signs that something bad is on the horizon. seen an increase in net worth. we have seen in a couple of places. the.com bubble, as we were seeing, the asset prices were rising faster than income, because there was an inflation of tech stock. housing crisis, we saw a big increase in the housing rises -- prices. when the bubble burst, it wrote -- it fell sharply. >> let us talk about what is
behind this. we are seeing an amazing rally in the stock and bond market. you have not seen the increase in the baseline wages. ist you are seeing right now that the actual fundamental picture for the economy is not supportive of these values on a fundamental level. the reason i was watching this chart, was because dr. daniel researcher,ongtime pointed to this in post. said that this shows we are on the verge of a downturn. the economy is not supportive of where we are in markets. >> what is the cushion like now, compared to what it was like then? i wanted to look at another chart that was the savings rate. it has been kicking up. here is the personal savings rate, and the spending rate. the spending rate is not so high , and the personal savings rate is higher.
if we get a burst of a bubble, if it is indeed a bubble, our people better positioned than they were during the.com bubble or the housing bubble? >> maybe we are not going to see some kind of massive explosion in the way that we did during the.com or housing bubble. com or housing bubble. this is a really important chart to show. it seems the question becomes how much leverage is backing these stock and bond personages -- purchases. i guess we will find out. way, it is not a particularly rosy scenario. >> it is still something worth watching. we shall see. i thought it was very compelling. let's head over to john. >> thank you so much. coming up in the next hour of bloomberg go, we would hear
and also the new whack a mole target. >> eyes are on tim cook and global credit, we would hear about this week spot in global fixed income. ♪ >> welcome to the second hour of bloomberg go. lisa is joining us for the entire week. lots to cover already. >> lots of tech news and warren buffett news. 76ers willr and the talk about their new partnership.
let's get a check on the markets with jonathan ferro. >> you can see the nasdaq futures getting a nice little left that apple has risen. it represents 76% on the index. the s&p 500 has been down for three weeks, coming back this monday by 32 points. there is a lot to talk about in the commodity market, with crude at a november high. -- with crude at a high. yields given up in some of last week's rally. there is so much to talk about. let's get back to that story of berkshire hathaway, disclosing its bid into apple. we've got a couple of hurting as filings this morning. this one really stands out. it is the story of warren buffett and the shift into tech, or is it a story about tim cook and eight saving grace for apple
? >> i think this is a different than what heesis is using to think about yahoo!. specifically to apple, if you look at the acquisition criteria that berkshire uses, they have several of him. it should not be a huge surprise , given that the company's stock , and it iseen lower potentially an opportunity that berkshire has identified. >> what does it do for apple? how much does it give them a vote of confidence? apple, but iover can only presume that because rapture has -- berkshire has a long-range turn in its investments, then this would suggest that it is a bright future for apple.
or pickupserm causes when it comes to rolling out products or development of products, it is perhaps something the company can readily overcome. buffetto cover warren and his approach to investing. does this indicate they have had a study of apple, and that they have made a decision that in the long term this is a good investment? >> i believe that is safe to assume. the cash generated by this company has been really fabulous over time, this company meaning apple. i believe work shirt is impressed with that, and they are impressed with the market increased that the company has shown. i suspect that warren buffett would make a careful assessment of management, which is important in any acquisition. it probably reflects very highly
of apple's management that berkshire is willing to take such a significant stake. >> what does it say about the overall market if berkshire is now looking outside its comfort zone, getting into tech? >> i believe it was charlie mungo that said when things change, they change their strategy great and this case, it is technology. it is such a large part of the economy and consumer buying habits. they need to begin to get more involved in that area. i believe it is correctly and are printed as -- correctly interpreted as warren buffett's desire to traverse and an area that he was recently uncomfortable with. >> let's cross over to julie
hyman now with a look at some of the market movers. >> let us not forget that berkshire -- a little company -- theybm is raising are raising their stake in ibm as well. the steak was already at about a percent of ibm's share, they were the top shareholder in the company. the share has not yet changed too much in that. moves that other berkshire is making this moving -- this morning, we are seeing some decreases for berkshire hathaway in walmart. at&t, in which berkshire was a fairly significant holder, that state is being eliminated entirely. that is notable, as well. there is the situation with yahoo! that we have been talking about this morning trade there
is news that redshirt is backing a group led by 10 gilbert of quicken loads -- dan gilbert of quicken loans. there are about 10 bidders in the running for yahoo!. 4-8ial bids range from million dollars. it is interesting that berkshire would be identifying -- appling in technology in that way as well. it has been a long-running situation with yahoo!. we will find out eventually who will be the winner in that process. >> joining us to talk about the wider markets is jonathan. it as a, you spoke of weapon will market.
>> we know it started with energy and materials in the late 2014. we saw it moved to some biotech. earlier, it was financials. we have seen some many markets that have just not happen at the same time. it is cap the overall market in this neutral trading range. --i was struck by one can one statistic in your report. you wrote that the s&p 500 department store index has lost quite a bit from its height last year. what is the next industry to see one of these rolling markets? >> we are starting to see some weakness back in the bio techs and financials. the yield curve continues to flatten.
it is keeping a win for financials. the european banks are back at the lowe's. it is tough to say which one will see the big decline. pointe now getting to the -- we have already seen almost every industry see a correction of the highs. you are starting to get some areas that already signed our rebounding and rolling over again. >> on the one hand, you can say that this is good, because you have another industry coming along to pick up the slack. does this say that the market is relatively strong or not? there is no advantage for the bulls are the bears here. within the industry, you start to see relative strength active and utilitiesples
which is a function of the lower interest rates and letter yield curve. that is not necessarily the most oldish makeup. we probably have a near-term weakness but we are agnostic on the overall trend of the market. what's the best way to play the market now ? >> you're looking for the industry groups that are exhibiting relative weakness. we mentioned biotech starting to show that. if you can break it down and be more tactical, that's probably a better bet than trying to call the big win in the market. jon: thank you for the breakdown on the market. david: let's go over to first word news. vonnie: if she's elected saysdent, hillary clinton bill clinton will be in charge of revitalizing the economy.
she cited the economic success of bill clinton's presidency. go before the to vote to campaign over whether the u.k. should leave the european union is getting more caustic. ify europe is very contentions. opponents say there is anti-eu supporters. that are losing their moral compass. up, confused consumer, dismal week for department stores was capped off by strong april sales results. can target and walmart avoid the retail malaise? plus, crude reality after falling to a 13 year low in crude prices have rally nearly 80% in just three months. is $50 per barrel around the corner?
david: we just learned berkshire hathaway took an apple stake worth $1 billion in the first quarter. reports are out that warren buffett may be backing a group reading for yahoo! we have jeff mccracken with us now. warren buffett was on the sidelines but have his views changed? has he decided to get into technology? >> warren buffett has spent a lot of time and money in ancient media like newspapers of this is
just new media. yahoo! is the night quite bygone era but getting there. mostly this is about him putting money behind someone he believes in which is dan gilbert. he will not have an equity stake in it or it he's just putting believesfor dan who there is something there for yahoo! even broader than this, the reason why this leaked out is because the yahoo! folks are worried they are not getting the money they were hoping. in there as well as yellow pages but there is not interest as they were hoping. the bids are not as high as they were hoping. : what aspect of yahoo! would warren buffett be interested in? he has a big holding an old media. >> i think he understands yahoo! as a media company. it's got a website that people go to and it's got yahoo! news and sports and finance so he understands that and then there
is the e-mail. 3g and when in burger king wanted to buy tim horton. he will put money into things as long as he gets the terms he wants and the interest rates he wants. that's what he is looking to do. david: if he is backing dan gilbert chat does dan in yahoo!? quicken loans that dan has about 30 different companies he owns. quicken is the one we know most but he also owns the cavaliers. he owns different companies. he owns a lot of real estate as well. warren buffett is willing to put money with someone he believes in and dan and he have a good relationship. lisa: how much is warren buffett done that recently?
he has been doing a bit of this kind of thing. 3g has put the most money in. the people behind burger king and behind the broad portfolio strategy of consumer products, he puts money in with them because he believes in them. he likes not getting his hands dirty. heads and cutut back on advertising and get rid of headquarters by streaming operations. david: do we have any sense of timing on yahoo!? >> we should find out in the next several weeks. i think sometime in early june we will have a sense of it or. i think verizon is the likeliest winner. they have tim armstrong behind them so he can run it and maybe make it work. we will know for sure in 3-4 weeks. david: thanks very much.
despite a rocky retail work for earnings last week, retail sales for april came in better than estimates. this week, investors are keeping up close eye on target and walmart for posting quarterly results. isning us now with a preview the wolf research analyst. what are you looking for this week? >> after last week's debacle, it's hard to think it will be great. we did not expect a massive blowup in either walmart or target. walmart is a huge grocery store at this stage with 65% of their sales in grocery or health and wellness. we were not expecting a disaster out of walmart. as far as target, it's less of a grocery store but we thought the quarter would be ok. week, it was hold on for your life. the retail sales number
actually surprised to the upside. maybe bricks and mortar are being sucked up by the internet? >> we just published a big report and millennials are going to amazon and we added up the numbers in almost 50% of incremental retail sales are going to amazon. it is taking a big piece of the pie. or looking for with respect to the walmart and target earnings to highlight how much they are adapting to the internet? >> one thing that came out in our report which was interesting is when we asked people if you want to pick it up at the store or deliver to the home, 95% of women said deliver to my home or work. the companies are doing big efforts particularly walmart to invest in picking up at the
store and we are not sure customers want that. thatt the announcement walmart is experimenting with a today service. amazon has got 27 msa's doing same day. it's really a tough environment for these guys. take a look at the relationship between the internet and bricks and mortar. julie: this is a modification of a chart the joe weisenthal used last week. most of this is amazon but it includes catalog sales but this is e-commerce. we saw the beat for retail sales. we have the so-called general andhandise, target, walmart some of the mass merchants. we are still not seeing a recovery in these numbers. things that target and walmart still do is sell food. that is something amazon is pushing into but it's not quite
there yet arian from your research, does that still give them an edge that other retailers don't have question mark >> it should help them to a degree. is youllenge in this look at everyday essentials like toilet paper or laundry detergent. women say bring that to my house. they don't want to go to the mass merchants anymore. it's very convenient. what amazon is doing is giving people their time back especially for these monday and chores like running errands over the weekend. time is incredibly valuable. amazon is giving people their time back especially when it comes to walmart, it's hurting walmart and that's why the company is reacting so aggressively with investment in e-commerce to catch up.
focusime for futures in which art rising to a six-month high as goldman sachs says the market has flipped to a deficit quicker than expected. great to have you with us. on the supply side, the supply has been cut and it looks temporary. come back online sooner than people think? >> i think so, the suppliers
eventually, they have been overcome. oil is one of the most fantastic turnaround stories and we are close to $50. we surprised if we see $50 in the next couple of days. it has been the plunge in the rigs that's one of the big stories which is down 80% in the last two years and the drop in u.s. production. where only at 8.8 million barrels and you have supply disruptions like nigeria and people are talking about how long that comes back online. i think it will later this week. i want to look out for wednesday when we have that eia data. there may be another draw down of supplies. we will keep an eye on that. $50 is targeted and i would not be surprised that once we get slightly above that, some of the
hedging comes back on and we reject that first time over $50 and will back up at the turnaround is real. jon: the inventories are huge. how much of a draw down do you need to see to get that price above $50? >> if we see another 3 million daryle's drawdown -- 3 million barrels drawdown, i always keep an eye and look out for what the bloomberg analyst expectations are. we will see that tomorrow and i wouldn't be surprised of its negative aura draw down in the expectation. you will probably see i'll -- oil prices go back up. the dollar and oil have in correlated closely. how do you reconcile what potentially could happen in the efx market with crude? >> it is definite factor and we therelittle disconnect it
is typically the shorter dollar pushing down the oil market but there is too many outside variables. and the euroit zone's oh is in a tough situation so anything can happen with greece. these things start to come back after being off the radar. if the fed gets back on track and we start seeing stronger data points, you will see that thing strengthen. jon: thank you very much. next, want the return of equities without volatility? we will explain what corporate bond market is doing. ♪
premarket. the ftse down by about 4/10 of 1%, the dax closed for a public holiday. the at 11324, dollar at 1.0 877. crude oil at $47.26, in november high -- a november high. with crossover to vonnie quinn. the u.s.outh korea, and japan will hold joint military exercises next month, focusing on cooperating to detect missile launches from north korea. the north has been testfiring missiles and in january, conducted a fourth nuclear test. opec repair finances
that have been battered by cheap oil and the war with islamic state. its first -- a first for germany, clean power supplies almost all of the countries demand, -- was the boost renewable energy while phasing out nuclear and fossil fuels. jonathan: it is all about risk versus reward. our next guest says we should favor -- our next guest is pimm: cio for global credit, mark kiesel. timely interest. you,to get to a quote from ,he increase in the limit enhance returns without significantly all thrilling --
altering the rest profile of the fun, how does that work? in creditee value right now, we see value in the investment-grade market, high yield and also nonagency mortgages. nonagency mortgages have a very attractive risk reward right now, given the fact that we are not making more of these bonds and housing prices continue to rise, these bonds are offering returns, risk-adjusted so now is the time to increase credit. jonathan: you up to the count for 10% -- from 10% to 20%. are you near it? we are not and that by no means suggests that we are going to 20%. what we are seeing around the world is low yield. if you look at what is happening in germany and japan, 75% of the government bond market is negative yield. on the 8% of the devil -- developed government bond --
investors are looking for income, we think it is a income 3% real growthto environment. credit is a good opportunity for investors to earn their equity returns with significantly less volatility, so the case is compelling. lisa: how long do you expect the sweet spot in risky corporate credit in the u.s., given the fact that we are seeing some stress in a variety of different markets? mark: within the high-yield market, you want to be selective. 9 went on your show february and we said when oil was below 30, it would recover to $50 and as you know, it was quite controversial. advocate buying particularly high-yield energy
or commodities, we are reducing that risk. there is value in high-yield, and building materials, gaming, many areas in health care that look attractive. management is key, you want to be more selective in high-yield given the rally. lisa: how concerned are you about liquidity risk when you go into some of these sectors, given the act that the total return fund gives investors daily liquidity and the potential to redeem? on a we are sitting significant amount of cash in all of our portfolios as well as the credit portfolios. that gives us a position of strength. pimco was one of the only buyers in the energy sector, so we were able to step into a market which buy very cheap very cheapnd buy
assets. investors can step in and capitalize, so when these markets dislocated, that is a huge advantage. david: i want to talk about pricing and geopolitical risk, brexit in june, and the u.s. elections, to what extent are you pricing in geopolitical risk? look at the fed and the market, it is expecting less than one hike and less than two hikes, next year so the market in,rly is pricing this risk we think there is a higher chance the that will go, one or two hikes. in terms of credit markets, you want to be cautious on sectors tied to europe and china because china is rebalancing. we are more cautious on metals and the retail sector which has a big inventory overhang. we are sticking our investments
-- investments on the u.s. domestic economy. the u.s. economy is almost 70% consumer and they are as strong as they have been in 10 years. we see significant value in telecom and gaming. active management is key, and that is how we differentiate ourselves. lisa: there have been a lot of the stress situations, bankruptcies, how willing is p imco to get involved? mark: we are willing to step in. back in january and february, no one was buying energy, but we were because we ought through our top-down bottom-up analysis that many of these companies would in fact make it. $9turns out there are been billion of equity raise in the sector, so in our research suggests there is significant undervalued assets, we will step
in and having that large cash that we have gives us a big advantage. jonathan: you called energy right. you look for that rebounding crude and energy assets. i wonder how you reconcile with a rebound in energy and then treasury yield going lower. what is the story? mark: the story is simple. the u.s. treasury market is being set, not by domestic considerations but global considerations. qe is expanding and that is because the bank of japan and the ecb and that qe is pulling down yield across the globe and that is why the longer maturity treasury bonds are not going up. you also have seen inflation yet to pick up. constructive on inflation, we think that with china stabilizing, the rebound and oil and basically the domestic tightness in labor markets, we think inflation is going to rise.
if you look at the facts, wages are up 2.5%, jobs are growing 1.6%. the income proxy u.s. economy is up 4%. economy thatestic is doing very well that is why we are constructive on inflation rising to 2% by the end of the year. investors can capitalize on this by owning tips. they provide a very attractive hedge for inflation rising over time. lisa: you are favoring several areas in the u.s. including housing, banks and consumers. mark: we like to favor industries where you have above trend sales growth and also significant earnings growth. sales and building materials is growing two times faster in the overall economy. 8%,are growing sales at
more importantly because of the industry consolidating, a lot of these companies have 30% market share, so they have pricing power and because of operating leverage, your earnings are growing 15%. what that means for investors is a lot of free cash flow is being produced and companies are using that to the lever. you are seeing leverage come down dramatically in the building materials sector. fundamentals are very positive, what is happening is home equities are rising and the inventory is aging, some people who are buying existing homes are starting to remodel and the pricing power is there. the sector is deleveraging around the world. mark marquee slur, -- keesler -- mark kiesel, think you so much. -- thank you so much. scott cutler and the
wars study, looking at new carmakers and products. what did your analysis come up us --, to mark -- with with? -- come up with? john: a big step up that is more normal, the automakers are spending like crazy on new product because they have been in a good cycle and this is consistent in the mid to late stages of a u.s. auto demand cycle. is, this ishing really broad-based among the automakers. there is a fair level of isomaker activity and gm leading the charge with about a 80% replacement rate over the next four years. bring on moreu models, you will do better in the marketplace, which of the
auto companies are going to be adding the most models? john: gm is high on the list. ford is not that far behind, honda and toyota are not that far behind. him the divergence -- the emergence is smaller than it has ever been since we have been doing the study for 26 years. that will leave the automakers to lean on the supply partners for good technology to help differentiate the product as well as dealer partners at the point-of-sale. does this mean that we should be looking for market share gains from the u.s. suppliers? there is a chance over the next four years that we see gains coming from gm, ward and at gmer, particularly because they are very focused on hot segments of the market, particularly the crossover segment and trucks. we are in the middle of a great resurgence and we think there is
a chance they gain market share over the next four years. david: crossovers and suvs, as that were the most models are coming? than an better -- better third of the introductions coming across the line. consumers wanting a truck like look and a car like ride with the utility of an suv. it is where the consumer is heading, a lot of great products with great fuel efficiency and truck like attributes. david: that is john murphy, lead u.s. auto analysis. lisa: in a deal that is among the first for u.s. ports lee's, stub hub has teamed up with the philadelphia 76ers to sponsor their jersey for the 20172018 season. this is the first of its kind in nba history. onset with me is scott o'neill.
along with scott cutler, --sident of stub hub, scott, why is this a good time to do this and why the 76ers? scott: we can learn a lot from the brits and they have had logos on jerseys forever, so it is about time. this is an incredible time, the league is very hot, it is at its golden age and i think it is right. for us, with stub hub, it is a partner that fits. it is part of the overall fabric of business. nike takes over the jerseys and is part of that coming in, we will have the nike swoosh. of got dr. j -- i've got
dr. j. david: when you are watching nba, you see these guys up close and personal. you will be able to see stub hub pretty prominently. scott: that is key to why this makes sense for us as a brand. this generation is about experience and experience is the new currency and for us to be tightly associated with the experience and the performance, as is where we want our brand to be and that is the best way to get there. david: if you are advertising and a traditional advertiser, you think you are competing with stub hub, on jerseys. this is about brand consideration, we want people to get off their couches and go to these events live and go to the venue that is why this is so exciting. teams are shown to 212 countries around the world. this goes beyond a couple of
people in the arena seeing the patch. [laughter] is,than: my first question why has it taken so long? scott: we have a lot to learn. there are some traditionalists that say keep the jersey. and i say nike logo, stub hub logo, both part of the experience and a makes perfect sense. -- and it makes perfect sense. jonathan: the soccer experience is that the rich clubs get even richer, they are the guys that can get out there and get stuff up to pay the millions. the league is that of the bottom of the poorer clubs, they don't get the exposure in the same way, they don't get the same deals. that have that sports in this country, they try to keep rings equal.
scott: 50% of the deal gets pulled and distributed to each of the teams. doing this deal with the 76ers, would you do it with other clubs? scott: know, this is exclusive. david: so if the golden state warriors came to you, tomorrow. 76ers.the 76ers -- the i have known scupper a long time, but will we like about the brand is their thoughts about innervation -- innovation. they just launched the new innovation lab with the 76ers and we wanted to find partners that have a like philosophy. david: this is an experiment for the nba to try this out. will we see patches from somebody other than stub have on other jerseys -- other than stub hub on other jerseys?
scott: other teams will have patches on their jerseys, they have the opportunity to do it. it is the right time, but each team has the opportunity to do this. david: and you do more than one patch? scott: no, and no disrespect to nascar, but it is about the jersey. lisa: you don't see people buying outfits of nascar jerseys. could this have her sales of this merchandise? scott: i will tell you that as a data three daughters who are all active in sports, they just want to wear what the players on the field or court are wearing. we think this is very consistent. boss, squaring up in the fa cup, --
the stadium is full of jerseys with a big logo on the front. mark: scott -- jonathan: scott and scott, i just feel like i have to sort out my lining. [laughter] i bought mine was cool -- i thought mine was cool. david: coming up, the search for yields, we let you know on the battle of the charts. lisa: take another look at shares of apple spiking. ♪
yield. lots of questions about whether or not stocks are getting overvalued. we are at a pricing point in the stock market. at thely, we are looking blue line which is the s&p 500 earnings yield, the inverse of the pe and this is a 10 year yield of the u.s. government bond. the relationship we have today was not always that way. 2000, sinceto about 2009, we have seen this spread wide and out, higher earnings yield on the s&p, you see that spread and if you take a look where we are, it has been about stagnant for the past four years but is still very high. yield has been pushed down so far for so long that if you are looking at stocks and suddenly they may not look to expense as opposed to the pe which is still pretty high.
this is to some degree, stock investors giving them some drag. >> i'm looking at another way that investors are making their decisions and it -- and it is what they are prioritizing. all the cash coming back to shareholders in the form of buybacks or dividends, but sort of what investors are prioritizing to some degree. at the looking outperformance of an s&p buyback index, then going into the early 2015, it was how these companies are using their capital. for companies that were the most efficient started to do better, but now it is dividends that are doing better, perhaps something to do with what all of her was talking about, the yield question as we see the dividends payers out before -- outperform buyback payers and capital efficiency. david: that is a tough one. lisa: these are two fabulous
charts. i learned something really interesting and julie's chart and this chart raises a lot of questions, which is great. let me put the pressure on mr. weston and go with all over because it is so out of whack with what's happening domestically and i wonder whether he can really gauge much in the way that he used to. david: i'm sorry oliver, i go with julie because this does tell a very important corporate story which i like, a lot. up, dawn:, aing world to were in the search for opportunity.
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billion deal and gannett ups its deal for tribune publishing by 22%. rise,oil on the production continues to push crude prices higher. goldman forecasting $50 a barrel in the coming months. ♪ david: we are just under 30 minutes from the opening bell in new york, this is bloomberg . morning. what a up, nasdaqming futures of about five points. nowhere.ind of going the ftse rolling over, a touchdown by half a percent.
headline the board, a in the commodity market, wti at a november 2015 high. what you are seeing is creeping higher by about three basis points. lisa: it is a yield curve morning. it is time for the three stories that matter to markets. joining us is investment director of private assets. berkshireare talking hathaway buying shares of apple, i'm in a monday and rising oil. warren buffett, berkshire hathaway disclosed a $1 billion stake in apple, buying over 9.8 million shares. company's shares have been on the slide over growth concerns after a softening in iphones. they'll.
what is your take? >> you are presuming i can think like warren buffy -- warren buffett. i have read about him and the things he says and i think the first thing he sees is a very strong competitive position what he calls the moat around the castle. he also focuses on the management team, the quality of .he team if you take those two things together and what you are saying about the slide of the shares, he sees what he likes to see which is a margin of safety. is paying below what he thinks a fair market value of the stock should be. lisa: as this mean that he is going in tech? federico: i think warren buffett is known not to particularly love tech and what he sees in apple is less of a tech me at this point.
they obviously have a tech component, but they have a -- a stream of very recurrent revenues. you can know where apple's revenues are going to come from over the next five or 10 years and i think that is what makes it attractive to him. he is not taking a huge tech risk, it is more about the cash flows of this company can already generate given his level of maturity. julie: we have seen a big slowdown, this is the quarter over order revenue growth. it was a huge grower going back to 2011 and has slowed considerably and had that drop in revenue last quarter. when i think about other berkshire hathaway holdings, coca-cola, kraft heinz, ibm, they are not the sexiest companies. if you think about one of these things is not like the other and you are looking at apple, i wonder what it also says about apple is not being an exciting
company that once was. david: you are saying that you do not think apple is sexy. what federico also likes a strong balance sheet, which apple certainly has. he loves a cash business. consumer facing any does understand consumer facing can -- it is a consumer facing business and he does understand consumer facing businesses. federico: he'll was talked about the management team with a high standard but i agree, i think there is also the ability to continue to make transformative acquisitions if there are upsides, but at this point, many businesses within apple are cash generating.
significant cash generation is what buffet usually likes. jonathan: that takes us to story monday,wo, it is m&a pfizer buying -- pharmaceuticals and only media side, cannot -- gannett upping its bid for tribune by 22%. looking at the potential for a couple of these deals, it seems the premium gets bigger and bigger. last year, -- how are people going to reconcile? comes from a pretty run couple of months between the government and the eminent -- and the loss of the m&a it was trying to do, but it shows that big, is pushing a huge price -- huge rhenium pipeline -- premium pipeline. i think one of the drugs they are interested in and will be
approved -- but there buying is the future and i think that is why you see these premiums that will continue to increase as long as they can get the cost of capital as low as it is. lisa: you think now is a good time for pharmaceutical companies to be buying one another given the fact that we have already seen some trouble with our game and valeant -- allerganrgen and -- and valeant? therico: they have lost ability some want to create the next big blockbuster drug and the wave to ask is through acquisition and i think the trend toward acquisition will continue, whether it is a good or bad time, we will see if this was a good price point for pfizer to be coming in. oil,: the third story, rising to a six-month high. goldman sachs is the oil market
has flip to a deficit sooner than expected. production disruptions in canada and nigeria have cut supplies by up to 2 million barrels a day. demand, with sustained that has caused banks to raise expected prices to $50 a barrel by the end of the year. what do you need the oil price to be? federico: we invested in a company and needed the oil price to be $23, so we are hopefully in the money. it is interesting that goldman was saying oil was $25 a couple of months ago. predicting the -- predicting the price of oil is a almost impossibly difficult affair. with a world of oil companies in general, they will not believe all by the wayside. is -- the second thing is, at
50, you will not see the massive issues that we thought we would have with cheryl -- with shale. there are many oil products in basicallyhat are reproducing at breakeven or slightly above break even. lisa: given the fact that we have seen such a rapid surge in oil prices, can the disruptions simply evaporate and we are back to $23 a barrel? federico: we could, and i think it is going to be interesting to see because if you see the worst phase, it was trying to get the show producers out of the market and most of these shall producers ended up stopping the completion of their fracking wales and stopped -- fracking wells and stopped producing in the u.s. and if they turn them on, you may have a head fake or you may see reduction and inventories and stockpiles start to go up again, and then we see a return to the price. jonathan: what was the company
position? federico: it is in the u.k., so .t is in your area federico: some of the stories that matter to markets, 20 minutes away from the open. julie: i'm going to bring together two of the stories, talking about oil and deals because we have memorial resource development, and 3.3 but in dollar all stock deal if you put in the debt, gets at the 4.4 billion. 75 a share is where it values memorial. shares have bounced back by 70% this year, hence the all stock deal, and essentially it is getting access to some new properties in northern louisiana to take advantage of the rebounding price of oil and natural gas and also potential exports of natural gas in particular. is when it's a look at the oil and gas movers we are watching because we are seeing a general
across the board lift in these stocks. energy, marathon, is are traded stocks in the premarket as we see this bump in oil prices and also related to that deal. finally, speaking of another deal, this when bringing together europe and the u.s., terex is selling its lifting your business to combs crane of finland for $1.3 billion. the abandoned a full merger, but this paves the way presume lion of china to buy the rest, excluding that lifting your business and you can see shares are searching in early trading. lisa: let's get the bloomberg first word news with vonnie quinn. hillary clinton and bernie sanders are campaigning hard and heavy ahead of tomorrow's presidential primary in kentucky. secretary clinton visited a union training center while sanders also campaigned in the
bluegrass state. voters also go to the polls tomorrow in oregon. u.s. attorneyia, of state john kerry that with the king about conflict in syria, yemen and libya. there have been violations of the truce on both sides. cruiseship largest has set sail on its maiden for age -- maiden voyage. harmony of the seas has 16 decks, 23 swimming pools and 5300 passengers -- 6300 passengers. everybody is looking at the supreme court as it is going to bring some decisions. it is a eight member, split cointreau and four. are they holding off on important decisions? stop -- nextnext
jonathan: 60 minutes away from the market open -- 16 minutes away from the market open. s&p 500 futures seem to be going nowhere throughout much of the day. david: tom keene falling asleep with you when he was here. [laughter] it is decision day at supreme at -- at the u.s. supreme court. they will feature a variety of rulings that could be important. --ning us now is greg store joining us now is greg store.
we are talking about affirmative action, abortion, immigration, although that is really less likely. over puertoase rico's debt and its ability to force its creditors into a bankruptcy type proceeding. david: let's talk about that puerto rico decision because it has been undercovered. puerto rico has its own bankruptcy statute that they want to enforce their own bankruptcy statute with with -- which would sort of preempt what congress is trying to do. this is a case that you came into it and most people thought puerto rico was going to lose, the court was going to say no, puerto rico cannot set up its own local law and is out of luck until congress acts. people came out of it saying there is a chance the court could say this is fine. if the court agrees and puerto rico holds up its statute,
congress can still act, but it gives puerto rico a lot more leverage in those discussions. lisa: sticking with puerto rico, given the fact there is such a kind words -- time constraint, when the supreme court take that into consideration in expediting their decision? that they need to expedite it because the court ends its term at the end of june. probably the court will be anyway, that said, they understand that this is a pressing issue and they will try to speed things up when they know is a special that when they know there is a special urgency. david: there is a consumer case involving internet that could have some broad ranging effects. what do you think about what the court might do in that case? >> that is a case for the court has a spectrum of options. data broker over internet profile that had all
sorts of errors in it and the question is whether that person can soon without saying they suffered economic harm because of those errors. a dozenld affect statutes and congress's ability to authorize consumers to sue, but they're also narrowing ways that the court could decide this case. coming up, the investment director for private assets is currently invested 50 of the u.s. -- invested 50-50 in the uris -- in the u.s. and europe. ♪
has made the country a good entry point. there has been a run-up in assets in brazil, already. why isn't it fully valued at this point? taking a step back with brazil, there has been a significant amount of turmoil, but if you think about what they have been able to accomplish, that sets the stage for a potential for recovery and most of what is happening in brazil is really self-inflicted. the country should not be contracting 3% to 4% this year because nobody is, but i would say that what i find interesting as we can take a long-term view, the second thing we see right now is that there is a currency overlay, the currency is available in not seen the last 40 or 50 years, so if you take those together and look at what the fundamentals of the country are and put those someher, there is still
further appreciation that one could see. when you go into a place like brazil, how do you get your arms around what the company really is and what are the numbers are right and what the regulatory system is? federico: that is the biggest problem in brazil is understanding with the financials look like. dos poorly pervades will we across the world, we look for companies that have very strong heritages in terms of regulatory oversight, we look for companies that going back to buffet and theonly a minion, but reality is, we look for companies that have the ability and generateevenue significant cash flow and hopefully they come from a heritage were you can actually get your arms around those problems. we are looking at one asset that would have those characteristics. lisa: we just came back from where you were hopping from place to place. one place is china, that you
were not as enamored of when you possibly visited. why are you not so enthusiastic about china? it is similar to brazil were the political and economic environment sort of converge. political have a environment that is dysfunctional and eight economic environment that is functioning -- and a economic environment that is functioning. jonathan: what did you see in china? i imagine if it was to negative because you would not go back. federico: i was actually in singapore talking among other people who invest in china. when i used to go, it was all about china, everything in china, renewables and consumables.
now it is less about china and more about india, southeast asia. the absence of evidence or the evidence of absence is what makes it interesting, there is less interest in buying chinese assets. jonathan: a lot of people are going to shift into your world very soon because they cannot get the returns, the yield that they want from the traditional bond market and the conversation we had was that they become private lenders to some extent. are they tourists in your world? federico: you see these things when things hit a wall9. -- hit a wall. there are a lot of people going into the lending market in europe, but you also see players who did not used to be in this market who are very heavily getting in just in the search for some premium above the risk
free rate -- the rest rate. lisa: there has been a lot of withdrawals from hedge funds, particularly by insurance companies. are they putting that money into private equity? if youo: i think so, look at the statistics, the private equity is a growing asset class and it is because it is the one place for you see yield both through equity and debt. you see funds getting directly into this market. i have not seen the u.s. pension fund, but i think you see the rest of these behemoths, the sovereign wealth funds that the pension funds actually get directly into the market and there is a significant amount of insurance firms around the world that i met him visited with that are making middle met -- middle-market direct lending. david: you are doing some demographic investing and you
are in the aging possible that population, tell us about that. federico: advocate is a general term that that is one of the things that is respected of the short-term volatility of the market, the world is aging and with the world aging, there are a lot of markets and submarkets that are interesting, which i think feet into the long-term trend. talking about drug development, there is a significant number of drugs that are being developed for the later days of our lives and we invested in a company that actually helps pharma develop these drugs. we also look at a company in a theer of natural products better for you type products which is a hugely growing market and is also related to -- lisa: what is your most contrary and that? -- contrary and that -- contrary anian bet?
mostico: one of the difficult committees we had was getting through a process where we were investing into a falling knife which was the price of oil at the time, but now it has become more of a crowded trade. david: thank you, so much. jonathan: investing into a falling knife, i like that. futures of stable throughout much of the session, nasdaq futures of about six points. approaching the close in europe, the ftse down a third of 1%. we discuss, very shortly. ♪
simply by using your voice. the billboard music awards, live sunday may 22nd, 8/5 pacific, only on abc. jonathan: this is "bloomberg ." just moments away from opening bell. allow. me to get you to speed on global financial markets. future stable throughout much of the session. of about a single point.
plenty of markets close, including the german dax. as you hear the opening bell here in new york city, let me go through the asset classes for you. 1% on thef 2/10 of dollar. the dollar yen taking a temperature gauge of the fx market with the weaker japanese yen. yields are up about four basis points to session highs. the big story in the crude market, $47. 25 seconds into the open, let's strip it back t to get to julie hyman. by oilparsley helped prices going higher, that will do some of the energy stocks in premarket trading could nasdaq leading the gains of about nine points to that is likely due at least in some parts apple, which is been talking about. .
aftershare are higher berkshire hathaway diebold a billion dollars state -- diebold a billion dollars state stake. we have talked about this a lot of appleshare so berkshire is seeing value their. to acquireeing anacor. those and a course getting a nearly 35% boost. experimental an treatment and development. pfizer shares trading lower by little bit . i just quickly want to bring you into the bloomberg and take a look at ma go. this looks at mergers and acquisitions. the blue lines are the deal volumes, the dollar values of
the deals that we have seen. last year was a big year for drug deals. then you have the green line, which is the number of deals. the ones line is the deal premium. the deal premiums kick up in the early part of this year because stock prices have fallen. you get some larger premiums in some cases. there is the deal signed to get done here. raising tolishing $15 a share here. that's an increase over the prior offer. ind net has been resisting order to avoid being taken over. we are waiting to see if there's any response from tribune to this latest offer. jonathan: let's stay with the markets. companies have snapped up trillions of their own stock, but the biggest decline in buybacks since 2009. david joins us now.
i believe you're staying bullish, but i want to know how you factor in the lack of buybacks into that call? these are share buyback announcements and not what has been executed. i think you also have to make a distinction to what actually happens and what companies intend to do. earnings were down about 8% on a i'm sorry, 6%s -- in the first quarter. it is not tetley surprising that we are seeing a little bit of slowdown in buyback activity, but that's probably going to be the low point for earnings seeth and we should earnings growth resume in the second half of this year. it will probably support some further buyback activity going forward. be queen, but a company ought to be buying back their shares when they are good bargain. if of this because some company's are concluding that
they are fully valued at this point? david l.: i think that's a fair point. share buybacks tend to be somewhat cyclical. companies are buying back stock usually when the have the cash. they have the cash when times are good. i think it's more a reflection cashlittle bit lower flow incorporate amerco today because of what is happening in the energy sector as well has been happening to financials. i do think as those cash flows come back that you should see buyback activity improved. is this the best time to be buying back stock? you want to buy back stock when shares are cheaply valued. i would say they are a little bit higher than average in terms of valuation right now, but i do not think it is terribly excessive at this point. lisa: what are you seeing companies do with their money that is giving you confidence to at least hold steady? david l.: the way we look at it
is that it's really all about what is happening with earnings. risings, share prices should be rising as well. obviously valuation matters in that equation as well, but earnings are the primary driver . if you look at what has been depressing earnings over the last 18 months or so, it has been energy, it has been the dollar. in the first quarter, financials were a little bit week because of headwinds specific to that sector. all those issues are getting better on the margin, so that should provide a little bit better tone for markets as we go to the second half of this year and into 2017. your marginalin call, you have a preference for small caps over large caps. is that a valuation pledge currently? david l.: valuations between small and large are relatively fair. it's more of a call on the fact that small caps are a bit more cyclical than large caps. we are going to see a
little bit of improvement in economic activity and earnings growth. that should support smaller companies on top of that. interest rates will creep up a little bit. that tends to be more of a headwind for the higher dividend paying large caps. a little bit of a cyclical improvement, a little bit of higher interest rates, and that in our mind leads us to favor small cap slightly. are down andnings they are not buying as many of their own shares back, which affects price, you the price-earnings ratio has to go up or the value goes down. isn't that right? , thisl.: i mean, i think is going to be the worst part for earnings. we are going to see earnings growth resume, but in order for and move up higher faster than earnings, you would mathematically see some multiple expansion. that's not our call. we say that market gains will be
driven primarily by earnings, especially as we go into 2017. lisa: earlier in the show, we have bob michael talk about how japanese investors are flooding to the u.s. to invest in great bonds and fixed income. pimco is saying the same thing. goingch of this money is to u.s. stocks and why is it more of it going into the u.s. stocks? david l.: i do not have the data on where foreign flows are coming into different asset classes, but i would say at the end of the day that if company fundamentals justify paying higher prices for stocks, i think you will see that. the other thing that people lose sight of is that pe multiples are slightly higher than long-term averages. the long-term average since 1960 is only slightly lower than we are right now. we also have a low interest rates and very low inflation. that's a pretty supportive environment for pe multiples. as we get better corporate
fundamentals, valuations that are not problematic, i think that is what drives markets higher. jonathan: david, thanks for joining us. lisa: coming up, between participating in a potential bid for yahoo! and the billion dollars stake in apple, is warren buffett suddenly chasin changing course on technology investments? we discussed, next. ♪
his tune? >> great question. he is yahoo case, willing to back that bid. billion a holding at a dollars, which is not much for a stock investment. is this something they are going to add to? a question of a successor? >> he brought these two guys in theirve been building own portfolios. other in his 40's and the
rs. there have been a couple in the oil patch. a couple years back, one guy made an investment in intel. isn't were saying this buy and hold. they are selling out of it. david: very unusual. excetpions like exxon, but that's unusual for him. ton ofe's not a portfolio turnover, but they will hold it a couple years and will sell. turning to yahoo, where
weeks of losses. the ftse 100e, creeping into positive territory as we roll toward the close. here's the situation across that. treasury yields giving up. i have to say that the big headline is that crude is punching much higher now. $47 and $.72. david: it is been a pretty wild day. the possible buffett investment ofyahoo! and there's a lot investment not fully reflected in the markets he. lisa: there's a lot of mystery. what are the driving factors? what is real and what's not? jonathan: we looked at a breakdown of the pe ratio. it's coming from growth down to value.
it kind of looks like a warren buffett and company and very many ways. david: whatever you think about the iphone, boy, what a bargain. it doesn't seem quite right. lisa: no was point was really compelling. it should be much more of a fixed income investment and much more the financing of a bid that has warren's viewpoint. david: he has done that quite a few times. remember the goldman investment and the bank of america where he made it in fusion's of capital, which is basically fixed income? he had a right to get back with certain options, so he has done this before. we want to turn to bloomberg trends, a look at some of the top stories in the terminal today. you can find these for yourself on read . one that caught my attention was by our own michael bloomberg. this is a very important t subject.
what this is saying is that sending all these kids to college is not necessarily the best answer, but there are other skills they can develop your they need post secondary education, but they do not have to go to college to be health care workers. million investing $7.5 and a program in portland that specifically identifies kids from new orleans as they come at a secondary school to have them have the training to get the certificate to really be conservative members of society. lisa: did you do work on this? david: i cofounded a charity in yonkers and what we found is that it's not always the right answer for these kids to go to for your liberals are education . and they come out with not necessarily the skills to get a real job. you're going to get targeted on being a computer ji engineer. jonathan: is a cyclical on the labor markets? david: figure out where the jobs are likely to be in the next
5-10 years and then target the kids for them, rather than train them for the things they cannot use. lisa: the danger here is tracking kids and getting them to attract were they do not have the option to broaden their skills and get to attract that is different. that is deathly something. jonathan: speaking of debt, the fixed income market. 10 year yields. if you have ever wanted to see what uncertainty looks like, here's the spread on the most bullish forecaster, down to 1.5%. to 3.5%, these are the urine forecast. year and forecast. you know the debt market very well. it could be a very different world at the end of this year if you have a yield on the tenure of 3.5% versus a yield at 1.5%. this speaks to how uncertain the rest of the year is for a lot of people. lisa: listen to what i guess say and they are talking about potentially buying into high-yield bonds and their people preparing for a
recession. it's a split nature at this point. david: we are all waiting on one person -- janet yellen. we are all guessing for what she's going to the. do. jonathan: we are waiting for the fed to come out and say what they are going to do. we are all waiting for that one person. magic may not be the operating word. be sure to join us tomorrow. that does it for "bloomberg ." "bloomberg markets" is next. ♪ . .
bloomberg television. betty: we are going to take you from new york to london to hong kong. here is what we are watching. oil prices surging to their highest level in six months, leading a rebound in commodities as goldman sachs increases its price forecast saying the crude oil market has moved into a supply deficit earlier than expected. warns a vote in favor of a brexit could travel beyond the u.k. border increasing negative rating actions on other e.u. nations. hasy: berkshire hathaway taken a stake worth $1 billion, betting the company will