tv Bloomberg Markets Bloomberg May 19, 2016 2:00pm-3:01pm EDT
from bloomberg headquarters in new york, here is what we are watching this hour. markets tumble, stocks decline in a broad retreat. the fed moves closer to a rate hike. here is new york red president william dudley. convinced that my own forecast is on track, in thethink a tightening summer, the june-july timeframe, is reasonable. david: will crude c $40 a barrel? and golf champion phil mickelson hits plenty of green with some stock trades on dean foods. he will have to pay that $1 million in an sec settlement that has led to criminal charges ,or the former dean foods ceo
big-time gambler. markets close in about two hours, and stocks are down but off their lows. another day of weakness across the board. we're talking about all sectors. on concerns the fed will height -- hike rates next month. concerns they will be more pressure on an already sluggish global economy. we are now seeing the dow jones come down .7%. the s&p 500 down .6%. the s&p has been in the negative all day today. .t has not been doing great at one point, it was down more than 1%. it has pulled back some of its earlier losses. i want to take you through some of the individual sectors, and you can see that financials and the tech sector are now down today, but after the rally we
saw yesterday, remember, the only point since 2000 nine did we see bankshares gain as much as they did yesterday, just outperforming the broader gauge, but today, coming down from those highs, down more than 1% there, but if you look at consumer staples, it is staying in positive territory, and all of this because of walmart. that was a big story. they just beat first-quarter results. they beat estimates, and now they surge as much as 9.5 percent. david: just one of the stocks doing well today. >> were talking about cisco, urban outfitters, results that came in much better than expected. they surged as much as five 9% at one point today. urban outfitters -- look at that
. plus 12% today. of course, their results topped estimates. grew when sales analysts expected they would decline .5%. a bit of a different story when it comes to monsanto because it is up on news that a german buyer sent an unsolicited inquiry, getting a boost on that. mark: breaking news at this hour -- egypt's government says it has located some of the wreckage from that egypt air flight in the mediterranean senior the carpe those island. egypt is working with greek officials. the fight -- the flight with 66 people on board disappeared near the greek island of crete.
carolyn: good evening. the latest information just mentioned shows that the wreckage of the plane has been found, and french authorities to theen sending help egyptian authorities to identify more parts of the plane and possibly locate the black book that could give us more information about the causes of the accident. mark: how much cooperation can be expected between the french and egyptian authorities? carolyn: paris authorities have opened an investigation. at the moment, they are examining in collaboration with egyptian authorities the background of every single passenger who was on that plane,
including 15 french nationals and 30 egyptian nationals. they are also trying to check the background of the crew that , and examining together the airport, not only the charles de gaulle paris airport where the plane took off last night at around 11:00 p.m., but also the other airport in tunis where the plane has made some stopovers in the past few days. they will check for any suspicious behavior they can find. speaking of airports, since that plane was en route to about the paris, talk security at french airports, particularly in light of the last november.
carolyn: of course, security has been reinforced since the paris attacks and also the brussels attacks. remember, they actually targeted directly the airport in brussels. in brussels, they have actually outside thecontrols airport, so before you come inside the terminal, this is something that they have not done yet at the paris airports, but they have increased the military presence inside the airport. crew.ontrols also of the apparently, they then re-examining 86,000 people who have special access, special some security zone of the airport. they have also hired profilers who are just patrolling inside the airport. mark: caroline, thank you so
much. in other news on this thursday, a jury in colorado has ruled movie theater chains cinemark holdings is not liable for shootings in 2012 that left 12 people dead. said the theater should have had more security measures in place. the theater said they could not have prevented a gunman's heavily armed as james holmes. oklahoma has enacted measures that would make performing an abortion a felony and punishable by up to three years in prison. the bill is the first of its kind in the united states. legislation has been withheld until staff has time to review it.
back to you. david: thanks. the dollars on pace to rise for the third week, the longest .treak of gains in months our next guest says the fed will not tighten too much but will continue to play this cat and mouse game with markets. eric stein joins us. let's start with the minutes out yesterday around this time. surprisingly hawkish, surprising to many that they were so hawkish. did they catch you off guard? little bit. first off, thanks for having me. i think the dead signaled markets that they are trying to increase rates a little bit. not too much, but the fed did not like it to be one way. they are trying to put some probability of a rate hike this year back on the table. david: you said the fed president is trying to open the door for a june hike. janet yellen sounding markedly hearingand we have this
yesterday seemingly showing the opposite. had a dovish tone at the march meeting, but at the same time, i think the fed wants to raise rates but do not want to tighten financial conditions too much. in a perfect world, the fed would raise rates a couple time this year and a couple times a year and you would get a rate closer to normal. who knows if they can do it? i think that is what they are trying to do. this: how are you playing dollar we have seen strengthening? we think the chinese yuan needs to weaken as a currency. certainly in the dollar weakness we saw a couple of weeks ago, strengthened a little bit, but it weaken on a trade basis the past couple of weeks. we think that is a good trade to
have, being short the chinese yuan. david: what do we see in emerging markets? i can only imagine the strengthening dollar is having an adverse effect on emerging market currencies. eric: we have had a pretty good run or i should say a very good run in a emerging market currencies. not many people liked the negative returns in 2014, 2015, but a strong yield so far. there are certainly pockets of opportunity in countries like india that we like in emerging markets. david: pulledt -- of those minutes yesterday. the brexit did come up as something on the minds of fed policy makers. how large is that looming, do you think? eric: i certainly think they are thinking about it and talking about it. is thinking ad
lot about global issues. i think it is what caused the fed to delay the rate hike from last september to december. i think that is what caused them to be dovish in february, march, and april, and the biggest issue in the immediate to longer term , but also the so-called brexit vote is right on the front and center of the minds of fomc policy makers. david: you mentioned your favorite short. let me ask about your favorite long. eric: i would say belong swedish krona. -- in sweden, the fundamentally strong economy is doing well. particular, 2015, they seemed very concerned about the strength of their currency, and low inflation -- inflation picked up a little bit, and they seemed slightly less concerned. they are at negative rates, so you would certainly not call monetary policy hawkish by any stretch of the imagination, but they are getting incrementally less dovish, incrementally less
concerned about the strength of the krone against the euro. david: great to talk to you. appreciate that. coming up in the next 20 minutes, from the chairmanship of morgan stanley to the middle of a controversy surrounding lending club, why the rush to embrace new technology could endanger financial tech. harnessing volatility in the joinss, the ceo of intech us to explain why his method is beating the s&p 500. and jason shanker of produre economics joins us. prestige ranked number one in forecasting. that is coming up on "bloomberg markets." ♪
shares of peer-to-peer lender lending club are down 80%, and it appears the company has become a cautionary tale. john mack, a board member and about user of lending club cost services, joins us. john: obviously, the news , broke thatt week the chairman was being ousted from his own company. we wanted to take a step back connectionsall the morgan stanley had with lending club. back in 2012, they got together. it was a mutually beneficial arrangement. old finance, does not get any more impressive than that. it appeared john mack wanted to
and wanted to have that sort of hand in the game. david: you look at this company starting out in silicon valley, wanting to disrupt the industry. why was that relationship with old finance so critical? ugh: a lot of reasons, primarily because it is an engine that requires growth. at some point, it morphed into needing institutional money. in one case, we found that mack was really helpful in gaining access to brokers at morgan stanley in terms of having them invest in these peer-to-peer loans. david: the relationship is more than just john mack.
investmentbout the morgan stanley made here. : one of the things we were surprised by is that morgan stanley is one of the biggest holders of lending club stock. --n more so in the forced the first quarter, and it turned out to be a that investment. perhaps this is a coincidence, but as you know, the timing was bad. it appeared that in their mutual funds they are invested in, performance for a morgan stanley client. david: for lending club shareholders, where do things stand now? where does this company go from here? hugh: right, lots of questions and a lot of uncertainty, which is bad.
investigators are smelling blood in the water. a longrocesses will take time, so right now, you have uncertainty, institutional they want toing if continue to invest, and all of this is bad for lending club and the industry. thanks very much. appreciate it. take a look at the piece online. unicredit is content -- considering selling a stake in reviewing its holdings in poland and turkey. that's from people with knowledge of the matter. investors are trying to replace .nicredit's ceo barclays will learn by early next year if prosecutors will file charges in connection with a $10 billion fundraising effort. the lender is being investigated over a capital injection from private investigators in abu
dhabi. the money health are clays avoid a government bailout. and 2/3 of americans would have difficulty coming up with the money to cover a $1000 emergency according to polls from the ap, which found americans' financial positions are as precarious as ever. 38% of households say they would have some difficulty coming up with $1000. still ahead, using the to profit off of wild swings in the market. intech, which has been beating the indexes with its unique methods. ♪
market. our next guest has a math-based trading model to profit off of volatility. joining us is the ceo of intech, coming in with a phd in mathematics from princeton. walk us through the way the model works. applytried to mathematics, probability, and discipline to investing. we are interested in using volatility as a source of reward, buying low and selling high, trading off that volatility while simultaneously managing the volatility through different volatility regimes. david: do you pay attention to conventional research, other things investors would be looking at. adrian: we like to be aware. doesn't mean we always use it. how you'm curious balance your portfolio. how often do you do it, and what is involved? adrian: our mathematical model s. for setting target rate
apple might have a target weight , meaning if the rate rises above, you sell, and if it goes below, you cry. pretty simple concept. people do it at the asset .llocation all the time hours are based on the market. etf.: this is a pro shares you look at this here. if you set your options for a standard & poor's selloff, you would have made a killing there twice. how have you been performing? if you want tose make it that against the market, you are going to do something like what you just described. we're interested in not taking directional forecast, but recognizing that sometimes the market is in a pretty foolish .ort of environment the beginning of last year,
things got a little heated up, and of course, we saw it happen, as you mentioned, in august. october recovery. who would have thought in january of this year, we would have finished the first quarter ahead? there is a lot of uncertainty in the market that does not always translate to volatility. the question is how you can manage your way through it without taking a view on the direction. david: how did you find your way from the princeton campus to intech across the street? adrian: it is literally across the street, so it was not very hard to find my way. i had intended to become an academic. lucky enough to see an internship offered during my graduate days at intech. what i found was a unique thought andcademic practical application. we love that mixture because we can turn the theory into real
outcomes that impact regular play. david: how did this get started? adrian: a former academic made a after working982 with markowitz for a few years. it took him five years on the relatively primitive computers at the time to turn a profit. you looking at equities on in equity by equity basis or a portfolio basis? portfolio outcomes are the important outcomes, but they are made up of what happens with the individual volatilities of stocks. isid: do you think this where investing is headed? you mentioned the company technologyn computer was more primitive. as technology gets more advanced, do you think this is something that will be more widely appealing to folks outside of your company?
adrian: i think the investment landscape is wide enough to accommodate a variety of approaches. great to talk to you. thank you for coming in. the ceo of intech joining us here in new york. still ahead, commodity close coming up in a few minutes. the president of first each economics will join us. meanwhile, oil -- take a look at it. we are seeing around $48 a barrel. more "bloomberg markets" coming up. ♪
is "bloomberg markets." mark crumpton has more from our news desk. mark: the egyptian department of foreign affairs confirmed the discovery of wreckage from that jetliner that disappeared today. members of the passengers and crew have been informed. egypt air flight 804 and airbus a320 went down halfway between the greek island of crete and egypt's northern coastline after takeoff from paris. the greek defense minister said the plane made abrupt turns and suddenly lost altitude just before vanishing. the white house says it is too early to determine what caused the crash and investigators will consider all factors and possibilities. 66 people were aboard the plane. authorities have released a suspect in the november paris attacks. he was accused of having links to suspect in the case. he is a belgian national and one of two people picked up during
in a brussels neighborhood. the house of representatives ofed to allow the department medical affairs doctors to allow medical marijuana to patients in state where it is legal. the strongest and yet edited in congress toward pot are shifting. 60 minutes correspondent morley has died. cbs said goodbye to him with a special tribute program for his retirement. morley safer was 84 years old. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. back to you. david: commodity markets are closing in new york. let's look at some of our biggest movers. fed minutes after
showed policy makers may raise interest rates as early as next month. copper futures touched the lowest in three months. oil in the red for a second day as the dollar advanced against its peers. let's get more on the price of crude from the number one ranked forecaster by bloomberg news, from austin, texas. let me hear you react to what we heard yesterday. i know you were down at amelia island with the atlanta fed hearing from feta facial's. the feds saying they were trying goingmunicate what was on. jason: i did hear when i was down there. very much wants to raise rates badly, but the truth is that some of the growth data is not very good. this is a problem. bill dudley, who kind of gave the indication that he would
like to raise rates maybe in june, also spoke about the need for the fed to push banks to .aise some of their reserves if you are pushing banks to raise their reserves, that is trapping liquidity at the same time you are raising rates, and all of this is just going to slow growth more our baseline scenarios that we will have a u.s. recession starting in the order corner of this year and into next year. you mentioned the concern about debt in the energy sector. in your latest note, you were flagging something called the share of national credits review. for those of us not familiar with it, what is it and what are you seeing in that document? jason: it is really interesting. and it was wildly ignored. fall when thelast was $40 ande of wga
$.20. it is an annual review of different levels of debt out there, and that highlighted the risk from oil and gas debt, and oil and gas bad debt in a year had gone up almost 400%. the day this warning was issued, again, the closing price was $45 and $.25, a price we had not seen until about two weeks ago. in the first quarter, the price lower than when the warning was issued. natural gas prices were 20% lower than when this warning was issued. and they are still well below the level of the day that was issued. this is a really important warning, and it was something i discussed with different from the fed. the three regulating bodies that issued this warning about bad debt when i was in amelia island, i asked if i'm the only one who noticed this, was no one
paying attention, and they would laugh, shake their head and say that no one noticed and we don't know why. it's a really important warning, and we do not know why anyone missed it. i have spoken to a number of institutional investor clients. in trying to raise awareness about this because a lot of people just missed this red flag, and it was a really big deal. for wti, it's one of the reasons q1.ave such a bearish we started out really at the bottom and saw wti prices rising through the year. they have excel a rated now for a number of reasons, but we have seen higher prices. we expect higher prices through the year because of all the defaults that would come -- the reductions in production, massive cuts in as a result of this morning that came out in november. so we see the price supported because of some of the things as a result of this morning, but we still see more defaults, more
cuts in capex, more layoffs, and more bankruptcy. david: a lot of the conversation about opec has been around the prospect reacting to the oil minister. >> do you believe russians will fix to the ruble if you get a freeze? >> yes. i got the sense from my colleague, the minister of andgy, that he was genuine firm in his word to us, but when we started talking about it, we that if not everybody would come on the table to freeze, there is no reasonable logic behind it. jason: i have been going to opec meetings for 12 years. i think it will be very tough to
get a deal. i think the political impasse between the saudi's and arabians is the real conflict. i think it will be very difficult to get an agreement of any kind through the group, especially now that oil prices are higher. why would you batten down the hatches now that the price is up ? there is a challenge there, and there is likely to be continued conflict. it's very tough to get unanimous consent among 13 different countries. ivid: while i have you here, know you track a lot of commodities. .et me ask you about copper jason: i am also ranked number one for the first quarter for copper by bloomberg as well. i am very concerned about copper, very concerned about aluminum. commodities were off balance the last couple of months and have since come
crashing down. especiallyoncerned -- you know, we talk about copper as dr. copper. what does it mean for the chinese economy? the chinese economy has been in a manufacturing recession for 16 of the last 17 months. almost a year and a half of manufacturing recession going on right now. it's one of the things christine lagarde pointed out in april as one of the big concerns about the global economy. you are seeing some weird stuff, weird flows going on with commodities, and i'm very concerned about industrial data in china, very concerned about ndustrial data in the u.s. industrial production has been negative year over year for eight consecutive months. the number of times it has been negative year-over-year for just
five consecutive months, and we were not in or after a recession since 1919 is zero. there have been no times since the fed has been collecting data where we have an manufacturing industrial data, industrial production this bad and we were not in or recovering from a recession, so i am concerned what that means for copper, scrap, metal, and aluminum in general. david: thank you very much. the president of prestige economics, the number one forecaster for crude and copper. the golfer, the gambler, and the connected.rman we will have that coming up next. ♪
david: this is "bloomberg markets." it is time for a look at the biggest business stories in the news right now. vivendi raising of it for game locked after buying a small stake in a french maker of mobile games. it controls 26.5% of the game votes. they will resume trading tomorrow. samsung electronics in preliminary talks with gaming tvpanies to sell an online service. samsung has asked media companies how much they would charge to carry their tv networks in a bundle of channels over the web and apple ceo tim cook has inaugurated an office in southern india. venture would create about 4000 jobs. the tech giant already announced
plans to set up an app design and development center in bangalore by early 2017. a 2% phones currently have market share in india. dean foods' former chairman and billy walters were charged along with golfer phil mickelson a conspiracy that played out over which they passed tips on the company. >> the story centers on phil mickelson's predilection for gambling. walk us through what happened. >> so these guys were golf buddies. walters and davis apparently knew each other from way back when. they became friends. mickelson was somehow also related to these folks. he certainly played golf with
walters. they also liked to gamble, apparently. he owed money to walters at one point and also benefited from some of the tips. u.s. attorney people are calling this a brazen scheme. winnie: this is not a one time somebody getting a heads up about something. this was systematic over years, earnings call after earnings .all in each of those cases, they created a home network. prepaid phones, code words for how they communicate, and execute. mickelson here a relief defendant. he has not been charged. winnie: that's right, not named by prosecutors. but he hasbeen sued, agreed to pay back the money he got. sometimes, we will see them chase a bunch of family member
trades on information that was passed. it was not part of the scheme of an inadvertent action. the money was questionable how it was on, but not part of the scheme. i think mickelson is very happy to pay this money and have it all go away with no legal entanglement. causedwhat was it that dean foods' stock to spike the next day? winnie: not just once, but multiple times. got information about a possible spinoff of the company. all of this was nonpublic and being passed by davis. had a fiduciary duty, and he was passing that on to walters. davis had money troubles at various points, and he was benefiting, which is a clear-cut example of insider trading. phil mickelson -- has he commented? he has a good lawyer. what is he saying about all of
this? he says he is innocent and did nothing wrong. yes, he may have been tipped off, but he had no reason to believe that was insider or nonpublic information. therefore, he got swept up and benefited from something, but he certainly was not part of any scheme. david: what did we learn about the criminal case? winnie: davis has pled guilty. in addition to these tips, he did more than that -- he perjured himself, tried to destroy evidence. he picked up a burner phone and tried to throw it in the water so it could be destroyed. he has cooperated and now pled guilty. i do not know what kind of agreement might be reached in terms of his sentence. walters is fighting this and said he did nothing wrong, but that will be the next wave, prosecution against billy walters. incredible story. thank you.
u.s. stocks sliding abroad. etf's: only a handful of up right now, and we are talking about retail -- not surprising because we have some good earnings. .e are talking about xrt all of this because of a few retail stocks that are doing pretty well, to say the least. we are talking, of course, about walmart gaining the most in more than seven years after results meet estimates. gains seeing steady throughout the day and also talking about american eagle. american eagle could be one of the best consumer stocks today if not the best. the biggest surge in 16 years, we are talking about august 2000. they announced that their first quarter adjusted eps earnings
amounted to $.22 a share after .ame-store sales group one sales percent when analysts were expecting it to decline .5%. and we of course have the sympathy movers. pitch gaining more than 4%, but we will have to get the decliners as well because we are seeing some of those in the retail sector. we're talking about monro muffler brake, a chain of car that you can see out there. they are falling today in double digits, more than 7% right now because of the announcement. the first quarter, sales were down 8%. brands also see elle down about 4%, and they own victoria's secret.
we saw them declined a bit, and hitting the stock. david: thank you very much. coming up, "national geographic" takes a page of netflix's playbook. what to expect from the cable channel. plus, you can watch the president's speech on live and we will be paying attention to see if he makes any remarks on that downed egypt airplane destined from paris to cairo. ♪
talk about it. your piece begins with a fascinating culture clash between national geographic proper, national geographic television, one of which is making a considerable amount of money. felix: right. there was sort of this long simmering culture clash about the quality of the programming on the tv network. it was apeople felt little too downmarket, offbrand. they were doing these reality shows. at the same time, the tv network was making all the money keeping the society alive. rocks has had a relationship with national geographic for some time. fox has had a relationship with national geographic for some time. past fall, they announced way first century fox would be taking over not just the tv network and also the magazine, book publishing, all the properties within -- consumer facing properties
within national geographic society, and at the time, people were kind of shocked. i think a lot of people did not becausethe tv network, it was national geographic-based, was controlled by rupert murdoch for a long time. people were saying this would be terrible, how could the owner of fox news on national geographic, and people were making all these dire predictions. reallynetwork is going upscale, trying to become the venture. it has been hiring like crazy a lot of people to do that. felix: the model is based on cosmo did, take a highbrow topic, apply hollywood
production values and budget, and that is what they are doing across the board. david: there was this fear of ation of national geographic and that did not happen because of the particular murdoch who is in charge. felix: james murdoch cares a lot about conservation and environmental issues, and his values very much aligned with national geographic society. a lot of people were concerned that rupert murdoch's values and skepticism about global warming would sort of infused the magazine. they did not really realize that james murdoch and his brother were the ones that were really driving this skill. david: how similar is national geographic programming today to discover? felix: for years, they have been trying to catch up with discovery and were never quite able to do it. this model i think puts them on
a crash course not just with discovery but also with what netflix is doing, what hbo is doing, what amazon is doing. there is this huge pile on into the premium tv world and national geographic is not just doing documentaries and nonfiction programming. they are also doing scripted series for the first time, and again, they want to do that at a very high level. into going to get them that territory where they are running up against a whole new competitive set. david: so many companies now trying to get into the content game. how fiercely competitive is this space now? felix: it is incredible. everyone is preparing for the sort of post cable bundle world where everyone imagines a direct relationship with the consumer. to do that, you have to have some big offering that you can hang your hat on.
and hbo is thinking style show like "the sopranos" that will really make our name for us. the problem is how you promote that against everyone else's premium content? does the culture of national geographic markedly better? felix: the culture now is everyone is working under the same roof. they are very much on the same page. the brand does not have the schizophrenic personality where it is one thing in the onsonality and -- one thing the magazine and something different on tv. they are all now at least in theory working on the same page. thank you very much. you can read the story in the latest "bloomberg businessweek." mily interviewing director of business operations. ♪
betty: from bloomberg world headquarters in new york, good afternoon. i'm betty liu. authorities are on the hunt for debris from an egyptair jetliner that vanished on an overnight flight from paris to cairo, 66 people on board. the aviation minister says terrorism is a possibility. the vice president of global operations, hugo barra, will be joining us to tell us how he expects the box to beat apple tv. and insider trading takes down the former chairman of dean foods. champion golfer phil mickelson agrees to repay the money he made on trading tips from las vegas gambler. we are about an hour away from the close of trade and i want to head to the markets desk, where ramy inocencio has the latest making sense of the markets.