tv Bloomberg Markets Bloomberg May 16, 2016 3:00pm-4:01pm EDT
-- welcome to bloomberg markets. from bloomberg world headquarters in new york, good afternoon. here is what we are watching at this hour. markets beginning the week rallying with oil prices rising to a six month high, leading to a rebound in commodities and stocks. the dow is up triple digits and the nasdaq higher high nearly 1.5%, so why are investors becoming bullish on oil? barclays and more saying the market is going to turn faster than we thought, but what happened last four weeks to change everything? shares in apple gaining ground today with berkshire hathaway and warren buffett dying stocks in the company, giving them a rebound from slow iphone sales. we are about an hour away from the closing of trade. let's head to the markets desk
where ramy inocencio has the latest. we keep hitting highs of the session. amy: we have basically canceled all the losses as if friday never happened. an hour before the close, the dow is up similar with the s&p 500. by 1.5%.q up the most let's take a look at the imap and i want to show you the actor health of the s&p 10 sectors. it continues to be a rally based on the energy sectors. look at the rest of this green here. it's also a broad-based rally with materials not far behind energy. information technology similar and health care up by 1.4%. but energy has been the name of the game. up by 3.3%.
we are looking at highs not in the past six months or so. this goldman sachs says that it in hat -- it has increased its price or cast by several dollars. they are citing a couple of things -- militant attacks happening in nigeria. that comesing demand earlier than expected. stocks hitting a bum. let's look at some of the biggest percent risers here. forget about a big m and a story we have an covering all day and that is with pfizer. pfizer saying it has agreed to buy this company right here -- up 56%.
pfizer says it's going to buy it for $5.2 billion. that a sickly gives it control of an experimental eczema drug expected to be excited -- decided on by january 7. pfizer says that could bring in sales of $2 billion. betty: what about safe havens? what are they doing? you would expect, safe havens are losing a little favor. herean see a leg down versus where we had been. let's take a look at where the 10 year has been going. 1.75%.ld is up betty: thank you so much. let's get a check quick on the headlines with the bloomberg first word news. shery ahn has more from our first word news.
sherry: the u.s. up in court issued decisions today that justice is reached a compromise in the case over contraceptive coverage under obamacare. decision, the justices ruled investors can pursue securities fraud suit in state court, a decision seen as a setback to the financial services industry. the court rejected an appeal leaving intact the award to the state of new hampshire. handed themcourt and award so that more money goes to the estate of a smoker who dropped the -- you died from cancer. so-called wrath through him law is facing another legal challenge. the american civil liberties union wants a federal judge to stop the law from being enforced. andstate of north carolina the u.s. justice department are suing each other over the law which orders transgendered
people to use the bathroom that corresponds to their sex at birth. has honored 13 ,aw enforcement officers presenting the awards in east room this morning. to a them, respondents rampage at a committee college campus. dayal news 24 hours a howard by our 2400 journalists in more than 150 news bureaus around the world. betty: today's stock games come after the biggest one day rally still recovering nicely from winter lows and goldman sachs says now may be the time to take a break, sell, and go away. in alex young,
investment strategist from oppenheimer funds with $216 billion under management. the sell inribe to may and go away theory? don't.we if you try to time the market along those lines, we find that you do better over the long run. years, it is more compelling than others and given the big rebound we have had understandary, i can people wanting to lighten up, but the very caution we are seeing among investors, the net sellers of stocks across funds in january and february went back into equities and in april, they took almost as much out as they did in april. the american association of investors do a survey and normally neutral runs about 30% and right now, 15% are neutral. people are not panicking come a
but they do not have conviction that it can continue. of investor caution is usually associated with better performance than worse. a lot of big headwinds that have been hurting earnings, emerging markets, we are seeing a cyclical bounce. there are struggling -- structural issues in places like china but we see them a data in the u.s. economy approving -- improving. is moving inpmi the right direction. as you look at the second half, we see a lot of headwinds may be receding a little bit. think we all up and i are looking for modest gains in the second half. betty: describe modest. guest: zero 25%. we would stay the course with risk assets here.
generally speaking, one there is this kind of skepticism in the market, that is generally when the route -- market rallies were outperforms. would you call this skepticism or just plain uncertainty? a goodi think caution is word. they've got more cash and a lot of dry powder because they are worried about committing money at these levels. dynamic, thehat pain trade is higher. the move that would surprise most investors is a move up and not down. anerally when you see preponderance, the market wants to surprise as many people as possible. betty: where would you want to be right now? it's hard to make the case to stay in equities. i think we are seeing in the commodities complex the best gain. we think that is the area that has been beaten up the most.
demand for commodities will be stronger than had been expected. supply in the u.s. likely to come down. we are high conviction that we see a cyclical low for commodities. lookr limited partnerships interesting. it's not that you see huge gains in here, it's more have you seen the low and does that allow you to collect the coupon from dividend and interest paying areas. whether it is high yields or senior loans, there's relative value there. maybe cyclical stocks that pay dividends that have not run up as much as the utilities. cyclical but still a nice yield profile. betty: where do you think the fed is going to land? guest: that's one of the biggest reasons we are looking at things half full.
we think the fed will continue to underwhelm. has come around and now the focus is more on the fall. going to beably lucky to get one rate hike this year and that would be at the december meeting. continues to be dovish, that continues to be more of a reason to be in risk assets and out. betty: good to see you. much more ahead. now anyone can become a venture capitalist for just $2000. new crowd funding rules let the little guys did an on the ground floor of a startup. that story is next. ♪
betty: this is bloomberg markets. i'm betty liu. a quick check on how the markets are trading as we are about 45 minutes away from the close of trading. hitting highs of the session and energy shares, as we have seen oil prices rise. turning to technology, you can now invest in the next big thing. the fcc is out with new crowd funding rules. a list the financial threshold on who can put out money in exchange for stake in the business. to anies can raise up million dollars by crowd funding lots of small investors. it is ourplain bloomberg deals reporter. now you can put him $2000 and be
a venture capitalist? alex: this was signed into law by president obama four years ago and it is doing away with this idea that only accredited investor -- investors could invest in these companies. before you had to have a net worth of a million dollars and now they are bringing it down, saying anyone can get in if these companies raise money through what is called these funding portals. they are trying to make it easier for smaller businesses to make money from anyone. betty: so these businesses can raise up to $1 million? alex: is the limit for the year. it depends on how much the investors make and how much they are worth themselves, but it is opening the door to what was seen as a funding gap. when you think of traditional tax funding, you have angel lands investors and special
venture capitalists and then you get into private a rihanna growth equity. for the littlest of companies, especially those not considered pure play tech companies, this is what is considered to be opening the door for us. of companies might be interested in, it's not who you might expect. we are talking theater production companies or a whiskey seller in cleveland or a maker of clothing. these are companies that need capital raising funding and may be would not attract that kind of attention from venture capitalists. betty: who are the middlemen taking the money from these investors and injecting it into these businesses? them the fcc is calling funding portals. indiegogo is one that we have heard of, a crowd funding platform trying to get approval,
standing in as the middlemen to connect these companies with the investor. there are other things the company's do have to do. they have to provide some kind of financial statement. they provide unaudited financial statements. there is more back and forth isng on and a lot of this mom and pop might lose their savings if they throw it into a business that is not proven. betty: what is the difference between these funding portals alex:kickstarter? kickstarter is different and they are one of the ones not looking to get into this. when you think of kickstarter, you think of the return being the product itself -- a t-shirt or an experience. you are not getting a stake in the company. are the crowdfunding, you potentially getting a stake in
some of these businesses who are looking to regular folks to raise capital. interesting story. thank you so much. oil prices today hitting a six-month high, fueling the rally in commodities. is it a sign the global oil market is ready to make a turn? dan juergen says absolutely yes. come fall, he says we will see a market back in allen's with declining production and rising demand and that will push oil prices to around $50 a barrel. he explained why on bloomberg. have been saying since february we thought the second half of the year would be quite different because we could see production going down and it is now accelerating. that is one of the things that has caught everyone's attention. tightens,ket disruptions would be more significant. based upon no
major disruptions. weyou have venezuela blowup, could be looking at a different situation. >> how different? this point, we can't say what it is but you've seen a oflion barrels a day canadian oil sands and nigeria is down to a level it hasn't been in several years, so there are these disruptions at the market but we have had enough supply to offset them. downturns don't last forever and this one started 18 or 20 months ago. alix: many banks have raised their price for the shirt -- for the short term, like rank of america. goldman sachs sees weaker prices because they think more supply will come online. what do you think?
: i think there are two sources of supply that would come online. one is some sort of recovery or stabilization. the other is a new stance of the big mideast reducers led by saudi arabia. they are sending a different message about putting more supply into the market and it ran wants to put more supply into the market. 1.3 millionssuming barrels a day of demand growth and that is where we start to see the balance. we really start to see the balance in the third quarter. >> why do you think it has come up on the short and long? dan: i think you will see them come back and $50 a barrel, we will probably stabilize production. when you have line of sight of 60, that is when you see
production increase again and you have a different policy .oming from saudi arabia in the last month, the uppity crown prince, the new energy minister have all talked about increasing production and you hear that rum some of the other producers. those are some of the factors weighing on that side, but as the chart shows, expectations are one thing and what happens in the market are quite different. betty: that was dan juergen earlier on bloomberg markets. alix steel will be live tomorrow at the goldman sachs first annual leverage finance conference. don't miss her interview with the global head of commodities research. department store chains got hammered after earnings showed shoppers are looking elsewhere for clothes and home goods. retailyou go long on were short on the stocks? all of that is coming up.
betty: this is bloomberg markets. time for our options insight with ramy inocencio. ramy: joining me today is jim studer of mk m holdings. i want to get to what is happening in the markets right now. markets at session highs and volatility at russian lows. what are you making of this? jim: it's sort of like follow the bouncing ball. we can show at the entire curve looks like with the selloff on friday. there was almost in version at the very front end, so spot vix almost moved up above the front future and the recent few days
of that, that would have in a sign of a slow inversion ahead of the curve which would have correlated with u.s. equities moving lower. instead, the front end of the curve gets smacked down and stocks are up. ultimately, what we are thinking is finallys resolved, it will be with volatility resolved and stocks lower over the very short term. hopefully, institutional investors are pretty much sidelined until this u.s. equity market shows a distinct direction. you went into the retail sector for your trades today. down 11% or so since late march. do you think we had a bottom? jim: we might have. it's equivalent to the retail etf. a couple of weeks ago, we talked
about cap stores and a view of our analyst was there would very likely be an earnings did location in that stock and she's cautious. we wanted to own june puts and what is interesting is many of these companies haven't even begun to report. these stocks have absolutely collapsed. what we are looking at this week is the fact the all price .etailers report tomorrow ross reports after the close thursday and these guys are the beneficiaries of the lack of demand among the more premium retailers. at near session highs for today. what are your trades? up and ins moved 62.5t, you buy 57.5 or
call spread and similarly, when we look at this morning, 75 or 80 call spread and in this case, you probably have to move up to an 80 two half call spread. we want to get long these names. about consumer sentiment, when it came out at a one-year high, quick take on : we are notmark jim digging too much into the data. the stocks sell the story. there's obviously sector change in the industry. very much. you you are watching bloomberg markets. don't go away. ♪
>> voters go to the polls in oregon and kentucky tomorrow. hillary clinton visited a unit -- union training center in louisville. today bernie sanders will talk about the u.s. territories crime instead of primary coming up on june 5. john boehner plans to hit the road to stop for house republicans this summer. the triple start after the republican convention wraps in july and end over the labor day weekend. return to the spotlight after his surprise resignation as house speaker last year. ongress is ready to move president obama's request for additional money to fight seek a. .- to fight zika house republicans released legislation to provide $622
million and 1.1 billion dollars measure is expected to be endorsed by the senate tomorrow. a second mexican judge has ruled that the extradition to the united states can move forward. awaits the still approval of mexico's foreign ministry. the foreign admin -- foreign affairs ministry and decide to hisw the extradition but longest could appeal, meaning the extradition could still be months away. local news 24 hours a day powered by our 2400 journalists in more than 100 80 news bureaus around the world. disclosure hathaway disclosing a $1 billion they can apple. the news is driving the shares higher in early trade.
by berkshire standards this is a relatively small investment, or not as large as others. chain -- a change in philosophy, perhaps eerie >> it's pretty clear, buffett has said today that this was a position and initiated by one of .is backup stock pickers they tend to make smaller investments, but yes, this is an area we have not seen berkshire investing in, they have not been big technology stock investors. sittingis famous for out the run as an internet stocks in the 1990's. i think what you are seeing here is that one of warren buffett's deputies thinks they can get their head around apple. they think it is probably a good value and this is something that should be in the portfolio.
betty: do they run their investment ideas by warren buffett? actually quite the contrary. that both managed portfolios around $9 billion and they are not micromanage. buffett has said in the past that he doesn't see what they thought until maybe the end of the month or the end of their regular reporting period. basically he's not standing over their shoulder saying you need to do this or that. they have a lot of autonomy. the jury is still out, but it seems to be working in the sense of managing those two. buffettyou make of going more deep into financing deals? he has done this a few times before. >> it makes sense, berkshire is a huge company with a huge balance sheet.
warren buffett has a reputation with an ability to move quickly and put a lot of capital behind the deal. he has become a favorite deal partner for certain people looking to shore up confidence in a time of stress. so it is one of those other franchises that he has built at berkshire. thing to know about these kinds of deals is that they don't tend to be that long of duration. a lot of the more financing type deals he does are a couple of years in duration. they tend to have attractive returns. buffett has said it is a good place to put some of the plan to work. betty: what about his relationship with some of these take ceos? hereof shoulders with people like tim cook and others. comes to yahoo!, there are a couple of things to point out. dan gilbert, who is said to be
backing that she is said to be known eachey have other for several years. susan decker was a longtime executive at yahoo!. this is not a company that is unfamiliar to him. that hethis morning might not by the yahoo! stock, but certainly he has ways of getting information about the company. betty: is it surprising that he is going in this direction? >> it depends on how big this is. i don't think anyone is talking about this in the sense of a $30 billion deal. if it's a couple of billion that's not super material to berkshire. he still has a lot of cash, he will be back above $60 billion probably in june. if he is putting a couple
billion to work in this area, he still has plenty to play with if that good acquisition comes down the road. betty: i want to get a sense from the shareholders you have talked to, or they pretty happy with where buffett is putting his cash these days? >> sure. several shareholders i spoke with this morning were happy that berkshire has this are highlythese attractive deals for berkshire to be doing. they get paid generally a pretty high interest rate. so it is wonderful to see, they've told me to see that up and running and still in effect. when it comes to apple, a lot of were notid they confused. in a value investors mine, it looks like a cheap stock. they have a lot of cash and it's an opportune time to buy. betty: thank you so much. we will talk in
bouncing back from losses last week. it's time for the bloomberg business flash, a look at some of the biggest is the stories in the news right now. convert $3.7 billion in long-term debt into equities while allowing the company to keep its operations going. sandridge filed chapter 11 in u.s. bankruptcy court. saidil and gas producer has put on hold most of its debt. a $3.3 billion all stock deal. it's valued at 4.4 billion dollars with $1.1 billion of debt included. it will give access to oil and gas properties in north louisiana.
a crane maker has abandoned the plan to buy all of a u.s. for $1.3 billion. that clears the way for chinese company to buy the rest. shares rose by as much as 20%. that is your business flash update. now to another big deal of the day. a 55% premium from the closing price on saturday. the managing editor at bloomberg news, we were talking about this earlier this morning. --s may be the hallmark hallmark of pfizer deals to come. >> six weeks ago there deal with allergan got blocked by the treasury and the change in the tax code. going forward i think we will see a lot of deals like this,
buying a deal -- they have an eczema drug that will get approved. establishedhuge drug business that will probably be spun out this year or next her. they want to have a business that is the future of drugs and this will fall into that category. they ball one company for 17 billion dollars, mostly established or drugs they were buying into. they will be looking for deals in the $1 billion to $10 billion range. does that change the landscape for other drugmakers? >> part of the reason they did it now was before allergan got their money from the sale of their generics business. they are very acquisitive. this is someone they might've competed with. going forward they will see deals in the low billion dollar
range. you will see a lot of pfizer deals in that range. the biotech space has been kind of slow this year so it's a good time if you're pfizer and you have a lot of cash to be doing those kinds of deals. betty: talk about media. tribune and get in at. why is kennett sort of bidding -- why is gannett betting against itself? >> they want to put pressure on the tribune executives to say let's sit down and have a dialogue, run a process and let us be part of that process to buy you. about $1.6 billion versus the $400 million than tribune. they are about four times larger. there's a lot of synergy and cost savings in their willing to pony up more than $15 a share. it's all about trying to convince the shareholders this is a great deal.
a couple of weeks ago they were trading at half is so they're trying to put pressure on the management. betty: is anyone else coming to the table at all? >> no. they would probably go another dollar or two if they could sit down and do more diligence on the company. betty: why do they wanted so badly? >> the only way for newspapers to make it is to join forces and cut out i.t. and what you can get to -- get rid of when you consolidate. betty: why are they reluctant? >> they feel like they were trading at two low of price. i think there were trading around $7.50 a share. offer came in at 12.25. now it's up to 15. it's hard to say they're making a cheap bit given that a couple
of weeks ago they were trading at half the price. weekend we saw data coming out of china showing industrial production came in at 6% year on year, down from 6.8% in march. analysts had estimated a 6.5% growth. let's bring in joe weisenthal. that was one of several pieces of data that came out from china that all kind of disappointed. joe: there was all kinds of data , fixed asset investment below expectation, retail sales. compared to the u.s., these numbers are still pretty there was aoad, but hope that china was re-accelerating a little bit and the latest data shows that maybe that is already fading. a number of analysts came out to say is this it, did we already
ump that wena were going to get and now we are fading again? i think the money supply data is one thing to consider, the idea that the negative when china was posting strong numbers a little while ago, it was very credit driven, debt driven. so the monday supply data is a little we and we've heard from officials that are cognizant of the fact that the credit driven boom is not necessarily the ideal way to grow the economy. and the fact of the matter is it canidely accepted -- you see the aggregate financing down from earlier in the year. there is also a widespread understanding that there still a lot of excess capacity in the industrial space in that needs
to come off a bit. betty: shares were quite volatile overnight. >> the h shares in hong kong had a strange night. there was an interesting flash crash. at one point the market was up 1% and a minute later it was down 1.5%, and then it recovered. there was no corresponding equivalent on the mainland trade insured but that was not remarkable. sayingsome people are just get used to chinese shares being volatile. >> think of all the wild things we've seen over the last year. massive limit up or down a after day. this is a market that is not for the faint of heart. betty: retail sales for the chinese consumer. >> over 10% growth year over year but down from earlier in the year.
you could see that huge deceleration, that's a five-year chart right there. it's hard to interpret that chart. betty: thank you, joe weisenthal. talk with the cfo of the world bank group and the former onance minister of brazil "what'd you miss?" the close of trade now that does less than 15 minutes away. here are the major averages of the stocks. ♪
highs but still solidly in the green. let's look at where we stand in the last few minutes of trade. 1% or higher across the board for major markets, the dow is up by little more than 1%, the nasdaq up 1.3%. it had been as much as 1.5% higher earlier today. i want to show you where we have been throughout the course of rally it's been abroad across the board for the s&p. forrials is up 1.6% but most of the day it had been energy. energy not too far for high -- not too far behind at 1.58%. a very broad-based rally. looking at energy we have to look at what's been happening with the price of oil. by 3.75%. this is a six-month high not seen since november 4. goldman sachs has increased its full gear 2016 price target by
several dollars a barrel. they think a supply glut is potentially over and there is more demand than expected and it is coming earlier. let's see what's happening with oil movers off the energy price. aboutand chevron up 2.25%. in terms of the s&p leaders and laggards, a bunch of leaders to talk about. the top two or three right now regene ron expects its price i'd to rise by about 35% in the next year. barons pointing to a cholesterol drug potentially bringing in millions of dollars there.
with the williams companies, williams has a 30% of side, according to bernstein, despite its deal with energy transfer falling apart. laggards, thethe biggest one down about 10%. range resources is on track to buy memorial resource for $4.4 billion, including $1.1 billion in debt. also looking at chesapeake, down 3.2%. chesapeake management appears to butolling a boulder uphill it's much less than competitors. time warner is getting the boot from the s&p, seeing its last days being traded on here. betty: staying with the markets, the old adage is sell in may and go away.
true.ear it could be alec young said sometimes it's , if you hold on you do better. why is goldman sachs saying this? risksyou have one or two in the market you might as well just hold, but they see a lot of different risk so the risk to reward ratio doesn't add up right now so it's just better to not be in the stock market. onound like a broken record high valuations, still high valuations in the market right now. hikesn expects two rate but the market is pricing in an even chance of one or zero. to thee was a surprise up or down side, that could
impact the market as well. it's an election year and they say every call they have, they are asking about the election and what it means for the stock market, so there is a big concert also. betty: what is the historical data on this? quick sometimes it works, sometimes it doesn't. just arguingy're that. there's a lot of risk out there, you might want to be a little more cautious. bank of america said the same thing last week. betty: are there any strong calls for the opposite? >> the average is around 21.50 which would be a five or 6% rise from where it is right now, a decent return for half year. rewards fare outweigh the risk right now. thank you so much, julie.
♪ scarlet: u.s. stocks closing higher this monday. joe: the question is, "what'd you miss?" ask what theill nation needs to stabilize its economy. joe: monetary policy will continue to support growth, after data on new lending, retail sales and industrial production all missed estimates. scarlet: goldman sachs out with a new study on oil. we have the charts that you cannot miss. we begin with our market minute. pretty much a steady rally throughout the day although we did close off our best levels of the session. the dow gained almost 180 points and the s&p 500 up about 1% and the nasdaq