tv Bloomberg Markets Bloomberg May 17, 2016 3:00pm-4:01pm EDT
betty: good afternoon. i'm betty liu. here's what we are watching at this hour. .tocks are close to the session economic numbers show the economy may be strong enough now for the fed to raise rates. rest itonger have to just risk your investment in the startup. give the rest of chance to get up in the ground floor. a crowdfunding website. and andrew has gone long. he is now long on valeant. he sent the stock into a tailspin. he says he is a buyer now. he will join us to tell us what exactly has changed on valeant.
we are but an hour away from the close of the trade. .emy has the latest remy: we saw the dow below 200 points. we are close to that pair the dow is down by about 193 points or so. let's look at what is happening if we could pull that up. stocks are lower, giving up all of the gains we saw monday and then some. the s&p yesterday hit its 50 day moving average and then some. the dow is up half of 1%. it is pretty much flat.
the nasdaq cannot be pulling out of the red anytime soon. part of this is because of what happening in consumer staples. is a little bit more than 1.8%. we are talking about the biggest fall since january. all of the stocks are all in negative territory. climb this is the biggest since january 20. craft as welllude as campbell on the order of 3% or more. down by nearly 4%. betty: an interesting move in the bond market as well. in thee is a strength markets. people are fearing the strength right now. we are seeing the potential for the interest rate rise and
definitely impact what is happening on the bond market as expected. the two year yield is a little more sensitive to what is happening, up by .03 basis points. the 10 year yield is paring those losses. you basically how the yield curve is flexing to its flattest ever since 2007. morecurves, a paradox, likely a recession but i want to point out some analysts are saying maybe they are not so fearful this time.
betty: crimson has more from the newsroom. mark: the u.s. senate today passed legislation that would allow 9/11 victims and their families to sue other companies for their role in the attacks. u.s. treasury department disclosed saudi arabia that things for the first time in 31 years. officials have reportedly threatened to sell the stake if the bill became law. we have a good relationship and we want to keep good relationships. participatesment in terrorism, they should pay a price. mark: senator schumer making andrence to his colleague that bill cosponsor mark sherman. josh earnest said it is difficult to see the president
signing that bill into law. the senate blocked president obama pauses request. the vote was 50-47 with 60 votes needed to succeed. by cutsill be offset from a health care fund. if that passes, the senate would vote to advance the plan with no offsets. the white house has threatened to veto the bill. democratic voters want hillary prefer senator sanders. elizabeth warren was second with julian 10% preferred castro. donald trump has his efforts to woo the a gop elite continues toay as he meets according
multiple media reports. this reportedly comes after several phone conversations between the two. he has been critical critically of his plan to prevent muslims from entering the united states. 100al news powered by our news journalists. back to you. betty: the cost of living in the u.s. climbed in april, showing inflation is finally inching closer to the fed goals. 0.2% after a 0.1% gain the prior month. our next guest says it is evidence the fed will make their new -- they're moving 2016. portfolio manager, good to see you. there is no way this is a fluke?
>> we believe wage inflation is starting to increase and by no measure is it going out five to 6%. reserve ate federal least a little ammunition to and we believe that will happen after the election. betty: you are looking at december hike? >> i think so. we have to do with the grexit vote as well and we want to make sure the system is stable before we raise rates. the dollar and can have a meeting will impact on emerging market currency. our currency as well as our interest rates are paired off with our trading partners. when you have a tremendous trade out there, they could have a
destabilizing effect. they want to be cautious in how they raise rates. we think it will be one and done again. forward-looking multiple based on our expectations over the next four quarters. say that would be ok if profit margins are increasing. we are not bullish at this juncture. ourould be fading recommended trade of high yield going into the next several months. betty: you are underweight on emerging markets? >> yes, a neutral position but i would be more inclined to take high data stops off of the portfolio. betty: what did you make of
george soros as we saw the filings today, reducing his u.s. stocks by one third, and then buy into gold? believe the global economy is decelerating. he is careful to point out that the chinese system reminds him of 2007 and 2008. on 15 trillion dollars of debt in the last five years. decelerates, that will have a meaningful impact on global growth in global trade as well as the financial system. with the staff that you want to move of the spectrum. betty: the latest holdings you
are betting on, dr pepper, why? >> we're operating margins that we believe will go up in the next 18 to 24 months. this is not a trade. we believe the revenue growth of 3-5% would be assistant. compared to their competitors, the margins are substantially lower. as they talk and acquisitions, they get the leverage approach. it reminds me a lot of another consumer staple economy where 12 have a market cap of really dollars and as they the atthe acquisition, the operating leverage. think gdp growth will
be one in three quarters and consumption debt growth will be at least somewhat more than the previous eight month -- eight months. we believe in the next 18 months, you can get a 10% overturned. environment, that is one we would favor. >> you narrow the range, why? tradeause we think global will be listless and we think even though it is rolling over, consumptions patterns are not looking terrific. gdp, we look at global believe it will be far lower than expectation over this four quarters. thank you for having me betty: thank you. senior portfolio manager.
betty: time for a look at some of the biggest business stories in the news right now. is going allcer out to try to win back customers. the company is offering record high interest rates. the most heavily indebted company in emerging markets plans me proceeds and buyback as much as $3 billion in notes due
in 2018. carl icahn cut to junk status. the agency caught icon enterprises from triple d minus. the value ratio is expected to say to 60% over the next of the year. that is your business flash update. and the day fundamentals are still there to drive the market, the assessment from the globals -- goldman sachs global investment m&a. he to alec still in an exclusive interview at the finance conference in california and talked about the m&a pipeline and regulatory issues surrounding market. the m&a vice -- environment
is quite good though down from the 2015 record levels. 20% from last year, which probably understates the drop off. it is down like 35%. the real difference is the lack of transactions. we are at about half the same level as we were last year. the pipeline still does not have as many dig -- big deals. it is across all sectors. the health care sector continues to be active. we have seen a lot of pickup inactivity and consumer. i think we are bullish about the pipeline. it is a lack of the transactions that inviting the pickup last june that we have not seen as much. the fundamental drivers of the
orivity last year, limited grant -- organic growth opportunities, they can drive growth quite easily. that gives us reasons for hope. there are greater headwinds and we saw last year. not the same pattern as we saw last year. been a lotent has more active blocking transactions for antitrust and at the test reasons. the regulatory issues, it seems like tax inversions were a way to sell m&a for so many years. the tax inversions got a lot of headlines. only about 5% of volumes. in terms of overall activity for 2014 and 2015, 5% was driven by
tax inversions. was not the biggest driver of activity. the biggest challenge is the antitrust regulations. >> part of the tax inversions his u.s. companies were buying targets. do you see that dying? >> i do not think so. the texan version was fuel for the fire that made strategic sense. many were done for solely tax reasons. allownefits and synergy there to be more flexibility in terms of how you could pay a premium. it just makes it harder to work on a lot of the deals but the strategic rationale will still make a lot of sense. you'reother region looking at us china. what is the trend? >> we see a massive pickup in outline -- outbound m&a.
buying into europe and any were outside of china. centrallyike it is driven to us. with aake advantage relatively attractive currency. over a quarter of volumes have been chinese companies by something out of china. if you look at the nature of the activity, more than half are buying assets that were about to be sold and they have come in and of the think about the companies that are relatively i know with the price is so all i have to do is pay a slightly higher price. someone has come along so it must be clean. >> they come in and they pull out a week later.
high-profilea profile situation were that took place. i think a lot of the companies are still learning how to do m&a. we sit with a lot of clients in beijing to talk about how you do outbound m&a, how you get the needatory approvals you and how you transact with western companies that will be a of debt -- a bit more skeptical based on the record. ?> what about market volatility how does that impact decisions? >> the one great factor that it, the markets were really choppy early and for the first six weeks of the year, it was choppy out there and companies were anxious. being zaidi of the ceo level is still there and there is more caution taking on the m&a then
there would be a year ago. betty: that was the exclusive sachsiew from the goldman leveraged finance conference. on -- up, what you missed i 4:30 eastern time. coming up, home depot is the biggest laggard in the dow despite same still -- same-store sales. plus, homeowners may be pulling back on renovation. how should you trade home depot, next. ♪
why isally raising rates strength and health a fear factor? why can it be up for once? >> that is a great question. the fed is unpredictable when they raise rates. going back in december, they gave an indication they will raise four times this year. that is when we started having extreme volatility. indicating fed funds at over 1%. that is what we are seeing with volatility. the earnings season saved us last time. earnings started fading out. people are focused on fed as well as strong numbers. >> right, the volatility is coming back. least he mark.
in the opening of the day, it hit 14. actually saw a lot of people go out and purchase a lot of call versus put on the vexed here you had 2.6 times the amount of people going long versus. that is telling when you think about it and going back with the affectness, that will dollar and earnings. that is why people are scared and are espousing that earnings view. >> let's get to home depot. walk me through the reasons. the entire sector over year to date, it is pretty much flat. deal -- started out the the year and i say a retailer will grow on the top line and beat on the bottom line, they
are insulated from amazon and raise guidance throughout year, he would be ecstatic. well if you look over the last five years. they managed excessively well. do is sell theo january $120 put any you actually will get a 4% yield. downside.0% yield on a conservative basis. >> thank you. more bloomberg markets is coming up next. ♪
mark crumpton has more from the newsroom. mark: thank you. paul ryan says he is trying to unite the republican party around commonly held principles. the process is still in early stages. speaker ryan showed more voters trust donald trump and paul ryan. the person who is getting the nomination of our party is the person to lead our party. invitedrump has been for a visit here they have many gazed in a world of words. trump has called the new mayor nasty and challenged him to an iq test. he made it clear who he wants as the next u.s. president. he says i hope hillary clinton trounces him. he details on how a pilot managed to walk away after his plane crashed in alabama and
exploded upon impact. the ntsb national transportation safety board says the plane the drop from the sky. the pilot was able to unbuckle his seatbelt, open the rear hatch and drop to the ground. he says the engine just died on him in midair. up forameron has signed the dating after, tender, but it has nothing to do with his personal life. put ads on tender urging young people to vote in next month's referendum on the european union, the so-called grexit. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. back to you, betty. thank you.
abigail doolittle with more on the declines we are seeing today. abigail: we are looking at a selloff. the nasdaq was ever so slightly higher briefly this morning. now down 1.4%. the biggest drag on the nasdaq, microsoft shares are down sharply after it was revealed that john jacobson capital management exit is 12.7 9 million shares stake in the of march 31, as worth nearly $710 million. all of this as myself tries to transition away from the model on revenues. timest of the last three this has happened, it has been pretty bearish. the biggest boon for the nasdaq, baidu shares are higher today's in a row, more than 7%. goldman sachs put out a bullish
note on a chinese internet meme. they have confidence growth and profits will be strong for the first time since 2010. as oneas named beneficiary. j.d..com trading higher as well during baidu and j.d..com are for 2016.wn perhaps there will be a turned out there. betty: what else is dragging it down? abigail: the second-biggest is interesting. amazon have been higher briefly but higher this morning, now trading down nearly 2% below the $700 level, i was unable to dig up a fundamental cause. it could just be a consolidation of the big move after the end of april. the stock was up more than 10%.
above ae the stock one-year range of uncertainty. positioned precariously just above. back downe the stock across the range. a prolonged data. betty: thank you. we talked about this story yesterday. they let anybody and not just the wealthy invest in startups. private doing away with companies, making at least $200,000 a year and a net worth of one million or more. 20 us now is the cofounder and ceo of an investment crowd funding platform which represents a fundamental shift in the u.s. private capital market. good to see you this afternoon.
is this the game changer it sounds like? classic can be. it is day one. we will see how the market turns out. betty: how does this change the game for you? focused not on tech startups. we have funding for small businesses. we have been running a portal. a million dollars in small businesses. we just the -- of the u.s. economy. betty: will this help boost your own business? >> yes. we focused on noncredit investors.
we are focused on empowering the individuals. betty: if you get more more into the market, they may not be that sophisticated. liquidityve far more going into companies that may not be doing due diligence. >> he raise a good point. pretty good at the rules. that products in terms of term and revenue-sharing loans. businesses, you cannot get think loans. what we try to do is connect the small businesses with people around the community to build
the community together. betty: why don't you want equity? >> i do want equity. there is a lead in financing. the takes time for people to understand it. we are focusing on debt and small businesses. betty are you concerned there requirements and the company will have to release annual reports and talk individually with the investors, that might turn off more prospective candidates. >> is not for everyone. the rules have been in place for so long. realize is ant to
change and it will take time and there will be a lot of public education necessary for businesses and investors. it is not new. people are pulling money together for a specific purpose. time, i think it will change how we do business with each other. betty: a lot of people are familiar with kickstarter. they are not participating in this. do you see that as a negative? there isot think anything 100% bad. it will take some effort. after they -- yesterday there was a celebration on capitol hill. it will take an effort.
he now says the stock is priced right and he is long on it. what is really behind the turnaround? andrew luck himself is joining from l.a.. good to have you back. is this really a change of heart ? andrew: it has been overblown. it is a trade i made, not exactly a change of heart. valeantng i said about is still true about setting up certain entities to alter statements. i seemed that i said it seemed like a good trading strategy -- andtegy to buy some stock may g -- maybe has myself because odds are i figured the stock would see higher than lower. i do not know if it will see lower whatsoever.
i wrote about the stock, $200 $29.hare initially at that is the first thing. it seemsd thing is like he was not preparing for bankruptcy. quite possibly perform a viable hidden planet whenever taken back to anywhere before. more importantly, i was long valeant versus a short position because it is a bit unfair. happened in the senate may be month ago, when claire mccaskill treated bill ackman, it was terrible. complete like criminals and in reality, the biggest offender of the health care system is nine miles away.
they actually donate to her campaign. that has notunfair been in the dialogue when it comes to the overpriced pharmaceutical. valeant, this is a trading opportunity. where would you exit valeant then? >> i would need to see a lot more financials come out and see how the new pricing model fix in -- fits in and how their credit -- creditors are treating them. there are a lot of moving parts. understand a change of heart would also mean i would leave different than i believed initially. it is not true. i believe initially $200 per share, nothing at all is being priced in.
many of the hedge funds have exited the position. sentiment, negative overly negative, i figured it was an opportunity and i own what was put against it for the black swan. right now, for me you have to look at the entire pharmaceutical industry. it is amazing -- how about this? valeant is not going lower without dragging it with it. but valeant can go higher and it can go significantly lower. belief that your this is a valeant like company? andrew: much worse. valeant played with the system, raised pricing, pretty much helped establish the platform company.
on the other hand, most of the income comes from one drug. which they got lome bought >> core. 30 dashers $36,000 per vial. nephrology and lucas remembers the movie, my big fat greek wedding, where can treat everything, they never tested against anything else but a placebo but it can cure -- it can cure everything. .oday i issued a challenge i put it out on twitter. thell give $1 million to foundation if they just test their drugs. i just want them to tested against a synthetic version and steroid and not just versus a placebo. they did respond.
plan ononse was, we meeting the numbers. numbers byl meet the volume increases and not price increases. gouess there is nowhere to from 36,000, but we are definitely not going lower and we plan on selling more. studies,retrospective no real and hard clinical data whatsoever. betty: have you added onto your shorts? andrew: yes. betty: recently? andrew: yes, i am short. until clairehort mccaskill's office does the right thing and looks across town and starts asking questions to the real offender of the health care system. betty: i want talk about other shorts.
people are listening to you and stocks are moving based on your comments. there is speculation on other companies you may need doing research on. one is herbal life. are you looking at herbalife? no position on herbalife. betty: are you looking at it at all? andrew: no. betty: there is talk. there is chatter in the market. andrew: i am flattered. wrote everything i wrote turned out to be true about operating in china. i think there are much better opportunities than things i will be looking at in herbalife right now. betty: another company is pandora. you are that, i believe. today pushingout
them to sell. andrew: i am long pandora. not only that, i e-mailed your before theesterday news comes out. i do not want to make it seem like i was short or like i bandwagonto the today. i do not jump on pandora. you connect the world with music pandora has shown they have their listeners. i understand revenue and being profitable, but from where it is trading now, i think it is extremely undervalued. you agree pandora should explore selling itself? >> 100%. suitors, google or
facebook, should be lined up to buy pandora, yes. betty: what do you think pandora should do to increase subscriber numbers? should they move to video? andrew: i do not know why. they are doing a great job at music. i would never second guess her management. i'm an investor. i do not run companies. music is universal and i know that facebook wants to connect the world. google likes connecting the world. cannot do without music. apple, pandora, stratify. argument foran radio as well. it is extremely cheap for what they are offering. betty: before we go come on retail, you called it. since we discussed the turnaround and expressed some doubts, the stock has gone down. are there other retailers that you believe are struggling --
struggling and that you are targeting at all? andrew: what about retailers that i'm looking at? $27, gap is getting pretty irrelevant. showing now on 17. i tweeted, if you look at men's warehouse, these are just in the crosshairs of such bad trends. suits, everything about it. some retailers have become irrelevant. problem is when you are sitting on close to $2 billion theebt, you do not have time to hopefully find a new trend in three years. betty: andrew, thank you so much , good to see you again. much more is ahead on bloomberg markets. the close of trade is moments away. we had another speed bump here.
betty: markets are closing in about 10 minutes time. : we are off session lows but scraping the bottom of the barrel. the dow is down by 1.1%. the nasdaq, down 1.3%. this is all happening at a broad-based selloff, on concern the fed might raise interest rates a little sooner especially because of new home built coming in better than expected. s&p go intosaw the negative, a fraction higher.
the dow is up about a half percent but the nasdaq is down by nearly 6% year to date. let's go into my terminal and take a look at where -- where the s&p sectors have been moving so far. see it is a broad-based selloff with consumer staples leading everything down by about percent. health care down the third most by one to -- one point 2%. energy has been lower as well. let's look at what consumer staples are doing specifically. we are taking a look at a couple. 4.5% down right here. than 3.5 percent,
the biggest drop since november. and its biggest drop since february here. on the flipside, energy has been rising. let's look at the top oil performers. williams and raines researchers up. rising oil, take a look at where that stands now. it has been looking higher. up by about one and three .uarters percent betty: thank you. that is it for bloomberg market day what did you miss and the market closes next. the major averages again, less than four minutes away from the closes how we will review. -- leave you. ♪
alix steel is off today. [applause] closing u.s. stocks lower today, the s&p 500 has its worst day in weeks. joe: the question is, "what'd you miss?" scarlet: writing demand and falling output, the worry about the calls. plus, the biggest headline jump in a month over month inflation within years. scarlet: changing environments for hedge funds, what is driving it and breaking down the crowded trades out there. we begin with our market minutes. a big decline for the dow and nasdaq and set -- s&p 500. many industry groups are lower. within the dow, 27 of the 30 names in the red. deceleration of