tv Bloomberg Best Bloomberg May 21, 2016 8:00am-9:01am EDT
best,ing up on bloomberg the stories that shaped the week in business around the world. warren buffett dips a toe into tank. george soros goes for gold. the fed minutes say get ready for a rate hike. >> the keyword is jim. shery: we sorted through the highlights and highlights -- low lights and highlights. oil prices rally but is a slump really behind us? >> i'm shocked this market is not substantially higher.
shery: how did the big-time investment people feel about the economy? >> simply put, we are in the proceed with caution spectrum. we all have to be worried about it. shery: straight ahead on "bloomberg best." hello, and welcome. ," your "bloomberg best weekly review of the most this news, and interviews from bloomberg television. the topgin with headlines. warren buffett has never shown much of a taste for tech investment but on monday we learned his company has taken a billion-dollar bite of apple. shunnedn buffett has
technology companies, staying on the sidelines through two internet booms but berkshire hathaway has discovered a stake for his holding of 9.8 million shares at the end of march. he is also among a group bidding for yahoo!'s assets. are we reading too much into this? is he changing his tune? i am sure we would all love to know the answer, but i think we need to put these things in perspective so when it comes to are talking about a billion dollars, which in the grand scheme would be a lot of money for you or i, but for berkshire hathaway, not as much. a billion dollars is relatively small for berkshire. when it comes to yahoo!, what we are talking about is financing for the takeover, and this is something that buffett, has been doing for many years.
he uses berkshire's resources to back companies bid for other companies. i am looking at that moore as a financing relationship and not a long-term bet on yahoo!. >> hedge fund managers and -- andgiving investors decipher some market trends. what are the big names that stand out and everyone jumps off the back? some stuffift from that had been working for a while. the biggest draw down was in the health care space and the financials. last quarter at the end of 2015, you had about seven out of 10 sectors had pulled money out. this time it was pretty positive in that there was a fair amount of money more going into the stocks. we had utilities, as we expected to see, a lot of people adding to those stocks. betty: a headline that came
across this morning with george soros cutting his equity holding by about one third i believe, and taking an enormous stake, over $260 million in gold. what do you make of that? disagree, sotally for my perspective we are seeing growth around the world but it is not being discounted properly by equity markets. fear trade is causing an acceleration and things like bonds in gold, and even consumer staples and regulated utilities. >> japan has beaten forecasts back intod sliding technical recession. gdp numbers saw the economy growing 1.7% and that is a relief for the prime minister as he prepares to host the g7. >> it sends a message that japan has avoided its second recession in two years, but there is still
a lot to be cautious about. i think you see business spending contracting again. if you look at consumption, week in the quarter. hike,te over a sales tax that consumption certainly doesn't give any ammunition if you want to hike that tax. when you take it all together, sure, it is fine, japan looks to have escaped recession but there are plenty of soggy numbers and plenty of reason to think japan has a lot more work to do on the stimulus front. >> the keyword here is june. >> fed officials definitely tilting toward a rate move in june and they are worried the markets are not ready for that. the key line, and listen to this judgey, most participants that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions strengthening, and making
progress toward the 2% objective, it likely would be object -- appropriate for the committee to increase the rate in june. >> is june now in play? >> i think there was an overreaction from the headlines. , ife was a really big if all the data cooperates, but the next sentence said there is a range of views on the committee whether the data will fall in line, and the next sentence went further to say there are significant doubts whether there will be enough information to even declare or sound the all clear. the headline was dramatic and as there was more interpretation of the minutes, people saw this was a job owning effort but not really pounding the table for june. >> egyptian and french officials are scouring the mediterranean seas for in egypt airplane that banished earlier this morning with 66 people on board. >> what are we hearing from
authorities? >> from the french and egyptian authorities, nothing can be rolled out, meaning it could be technical, it could be terrorism, it could even be a bomb placed in paris at cbg airport before the plane took and the plane had three different routes between europe and north africa over the past 24 hours. : this plane follows a string of aviation related incidents following egypt. can they withstand economically incidents like this, especially when it comes to tourism? >> exactly, tourism is a very important sector, which has not been doing so well since the revolution in 2011. whether it is a
bomb attack or mechanical failure or whatever else it turns out to be. -- david: u.s. dollar the u.s. dollar rising against the yen. it is boosting against expectations the fed will be raising rates in june. have your views changed this week as we have seen these fed minutes? >> generally we have been looking for dollar strength. it took a pause on the back of the fed backing on the tightening sense, and now that they are putting tightening back on the table you see the dollar start to price that back in. david: so you expected to strengthen? >> i do. i do not think we will see the magnitude of the moves we have seen. it will be a more gradual move up. what do you think is the red flashing light to the fed it has gone too far? >> i think the fed has added a
certain mandate. it has unemployment, inflation, but i also think it is looking at global stability and the currency. or potential for devaluation in the chinese currency, and if the dollar gets too strong because of the peg, that creates increased problems for them so i think they are balancing all of that. >> how can the fed manage that over the coming months? >> i think it is a very difficult balancing act they have in store. that is why you get this rhetoric going one way and they try to walk it back. it keeps the market guessing, keeps them on their toes. shery: still to come on bloomberg best, highlights from the week plus earning reports and long-range forecasts on the price of oil. debtso found how much u.s. is held by saudi arabia. coming up next. ♪
best."this is "bloomberg i am shery ahn. let's continue our global tour of the weeks top business stories including some in trading activity in m&a. betty: pfizer agreed to buy and a core 45 $.2 billion in their first deal since walking away from the 100 xt billion-dollar takeover of allergan. is this what is to come from pfizer? >> they said they are going to decide by the end of the year whether to split the company up, and this fits the bill. a want assets that are fully developed, they do not want to , and assets, on
there is not nearly as much competition as there is in say oncology, so this is a perfect fit for them. making an unsolicited takeover of men santonio. a potential takeover was first reported by bloomberg news a week ago. is this out of desperation, defensiveness? what is the rationale? shifting spaces in the aggro can. we have seen on santino go for santo -- they mon wanted to buy but now it looks like they have gone from the hunter two the hunted. shery: why do they need this so badly -- betty: why do they need
this so badly? this as a unique opportunity to describe -- to combine the strengths of buyers with the seed business. overlap,ot a lot of they fit quite nicely, and this would make them one of two or three major players for the next hundred years in that space which could generate a lot of profit. a 50 $5 billion purchase of time warner cable a year after it first announced the deal, we are looking to announce -- to talk about the long roll with tom rutledge. you are going to i believe quadruple your subscriber base, based on this acquisition of time warner cable, however you are also acquiring one of the most hated rands in the cable industry world. how are you going to improve that? tom: we are going to change the brand to charter spectrum as our service. betty: that may help.
.om: it is not a solution you have got to run a good service operation, and we do at charter and we are getting better every day. we have invested and enormous amount of money and will continue to invest in improving the whole service experience through better call centers, create service functions online for customers, train our technicians, give them tools and test equipment that work, and do the job right the first time. all of that takes a little time for us to implement but we know how to do it, and we will do that and simultaneously change our brand approach. as a matter of policy, the u.s. treasury department is never disclose the holdings of saudi arabia but the question has come to the forefront after plunging oil prices and costly wars in the middle east. what did we get from treasury?
>> we got a breakdown of all the opec holdings of u.s. treasuries and they know that under that $300ory, it is around billion. of that, on hundred 20 billion belongs to saudi arabia and that number went up slightly during the oil crisis. >> doesn't answer more questions or raise more questions? i was surprised. news for theod gloom and doom are's who are basically saying the saudi's are selling everything. it is not inconsistent with the notion that when the oil was falling, a were divesting some of the global equity and putting the proceeds into bonds, that is one thing. ,he question that it raises is the treasuries that are owned by bydi that are not identified
saudi, those held under the names of the hedge funds off-shore located. i think this is a good start of the story but i would like to know how much saudi arabia has started to sell in u.s. and non-us stocks. bloomberg are telling that china over rival -- china's uber rival. >> it comes right on the heels of them raising more than a billion dollars from apple, bringing the total amount of this fundraising from $3 trillion and valuation about $23 million. >> what does this mean? >> they said they want to hold off the ipo as long as possible. targeting theing same pool of investors at the same time, so this does put a lot of pressure on uber as a
company in china and globally. klein back some of the losses we saw in the share price wednesday. awing back some of the losses we saw in the share price wednesday. how serious is this forces yuki? >> they really put a scare in everybody. it looked a little bit like tsuzuki was going to be the next mitsubishi motors and there are some parallels, but certainly tsuzuki's disclosure as much less troubling. you have the admission they have been doing testing wrong. they have used some testing in a wind tunnel in the lab but when they did go back and test these models properly, they say that the results within a reasonable amount of deviation, so you are
not going to see the company .estate their ratings at this point it looks like japan's transport ministry is signing off on that. they are not necessarily going so far to say that tsuzuki is off the hook. they will have to report some information by the end of the month, but it looks a heck of a lot serious man what we see at mitsubishi motors. hisy: tim cook is setting sights on this massive market called india. during his multi-day trip, he will be developing a development center and introducing a program for ios developers in bangalore. why is he making this trip to india now? >> it is one of the world most fastest-growing sport phone market -- smart phone market. so far, they have not really been in the top 10 of the market and they need to sort of compete
better with competition like samsung, which is far higher rank. it has been challenging for apple because their products are pretty much out of the range of most buyers, but they seem to be gaining some market share. the have grown about 56% in the first quarter of this year in india. holding itsbank investor meeting in frankfurt, the chief executive says he is unreservedly committed to the securities trading business. did he win over the doubters? : it seems like he made a very positive impression on not only the large shareholders but definitely from the smaller shareholders as well. the most positive thing by far that they said to shareholders today was that they will not be needing a capital raise. that has been a concern for especially the big investors.
this whole time, deutsche bank has raised capital three times for a total of $22 billion in the market cap is less than that as the shares have fallen 50% in the last 12 months. the fact that he thinks they can make it through this rough patch without increasing capital is very positive for shareholders in the bank. ♪
bright spot. they posted earnings that beat analyst estimates benefiting from rising home prices. i want to show you a chart that sales gainsepot's often move in tandem with the remodeling market. d get the sense that home depot represents a bigger trend, or to you think they are just effective at marketing? >> i think it is little bit of both. fromf their sales comes the pro who is doing the installation and work on those remodeling project. kennyyou break -- lisa: break down the earnings and talk about what you think is interesting? 4.4%,sensus is at transactions and take it were both up indicating people are spending more and going more frequently, which i think is a positive for home improvement
and home depot in particular. not sure ifand i'm that might be related to some cost in q2 but they raised guidance for the year based on the results. >> another busy day in the u.s. for retail earnings. mixed earnings so far. >> we are getting a better picture of how u.s. retail is doing. there is a lot of negativity. those came out today and they beat them on top and bottom line , raised their forecast for the year. they, very similar to what we saw on home depot. people want to spend on their homes, apparel, not so much. staples thought they were going to merge with office depot, their report was mixed a little bit on the top and bottom line, but this company is trying to figure out what they can do
because the idea of the merger fell apart. >> let's take a closer look at target's earnings. they are down more than 9% in trading, the most in seven years after they beat estimates. sort of a strange thing. why are the shares down? beat estimates on earnings-per-share so they are doing a good job on controlling cost but when it comes to same-store sales, that was only up 1.2%. that is not great, and analysts were already moderating their expectations on what those sales would be coming into this. some had lower their expectations, and they still missed analyst expectations. the ceo said second quarter will not be great either, sales flat or down. an ugly picture in the second quarter. >> walmart shares are up around 8% after reporting earnings that
the analyst estimates. what surprised you the most? >> the traffic at walmart in the u.s. was quite strong, up one and a half percent. at more than drove the cop because the cop was one. ticket was a little bit lower, but to get the foot traffic into the stores, that is everything for walmart because it means people will buy stuff. --we saw target disappoint report disappointing earnings. is this just a signal that u.s. consumers are shifting from a target, a higher-priced store to a walmart, touches more of a budget focused operation -- which is more of a bug it -- budget focused operation? >> i think the dollar stores were probably do very well and good numbers, but
clearly in those types of markets, walmart wins and walmart often does win when there is pressure. leapt after it says it was cash positive. how much further do you think you can go on the cost front? >> it is amazing what you can do in tough times and we have done what we promised. our cost program is 67 complete -- percent complete which means we are headed schedule. we are working very hard and we have removed high-cost production. we are still removing some of the high-cost production as well. the cost-cutting is bearing fruit >>. >>the price is up. how much is that helping out? not at all. we are focusing on the things that we can control so we are continuing to cut our costs.
we want to make sure we position this business in the best possible position such that if onlyrice increases we are increasing our liquidity, our cash, our returns to shareholders. it is important that we increase the cost-cutting program as scheduled. >> $.10 earnings hitting a record in the first quarter driven by its mobile games and entertainment content. you are seeing a share price drop, 2.7% down right now. what is going on? concern onit is a the cautions yesterday about the potential slowing down in china's economy, and also in terms of ad growth quarter on quarter, or was a weakening down 18% even though year was up 70%. some investors are saying this is a potential sign that the segment of the business is
maturing and once you have seasonality comes into play and inevitably it will be affected by the wider a reported drop in our earnings for a second year in a row. they basically announce a huge saverings plan. is it worse than we were expecting? >> the savings plan is going in the right drokse because costs have ballooned over the past few years, but it's really not enough to attack the problems bureau brie has which is that it is a bit of a tired brand the and needs refreshed. >> how do you refresh that such a large 3wr57bd? .t has a duo role >> talk about fostering beyond the operation on the c.e.o.
side but what it needs is some real new creative force to get shipping again and not just relying on the chinese travelers. >> we turn to cisco. you're leading cisco through a transition from largely a hardware business into a software business. how far along in that transition is crifpko at this point? and how much of that are we seeing in the earnings reported? >> so what you saw in this week's announcement was three great examples of our portfolio, which is cloud-based networking where we drove growth in those businesses but also saw significant deferred growth in software. so to answer your question directly i'd say we are in the early days of this transition but we have proven we can actually make this transition
shery: this is "bloomberg best" i'm shery ahn. this week on bloomberg television we spoke with some of the world's most important niggeds asset management and investment banking. they are all dealing with challenges and politics, volatility in the markets and -- greth. we begin with blackrock's larry
fink who is bullish on china but has some concerns. >> i would give the chinese leadership some of the best marks in trying to transform their society. we're on the fourth year of the plan. to re-orient china away from manufacturing and away from an export-dependant economy to a much more resilient and service economy. that's a very hard thing to do. it takes many countries 50 years to do that and countries generally have transitions. so to say china most recently in form of policy behaviors overstepped -- the market is saying that. the market is saying china's dependency on exports and sort
of the unproductive state-owned companies is not a good long-term solution, i would say indeed it is not a good long-term sligse. hopefully this is only a short-term remedy and then they get back to the basic of trying to build a better domestic economy. >> are you worried about the debt nile china? >> we have to be. but to grow 6-plus percent, you can grow out of your problems but you can't grow 596% and have your balance -- so in the future i would much prefer the economy grow at 6% but with some form of deleveraging. >> what we don't do is take a top-down approach to investment and say political risk is too great in this country. but it may. >> not even for brax it? >> i think for brax it, the asset management between banks
and insurance companies and asset management, and that's mainly because most of us have always ran our european operations out of luxembourg. so an investor from italy and germany, luxembourg is their hub to where as we in the u.k. would definitely buy u.k.-registered funds or perhaps dublin-registered funds. so we are not going to be hugely m affected. but if we do, there will be some unintended conscience consequences we hadn't thought about and there will be some market value tillty. >> volatility or could it be a freeds or lehman-like moment? >> no. it will be very uncomfortable for a few days. currency will be vol tile. the share market will be vol tile. what people 2r50eu to work out
what their fact is. and i think part of that is because markets are really pricing in. we are staying in currency markets. so there could be, as i say, extreme volatility if we vote to come out. >> i would say, simply put, we are in the proceed with caution step. so what we have done in response to this more tepid economy is, our fund sizes are sized to intercept. we have 1,000 people globally. we're staffed up to invest responsibly and really proceed with caution. o we have about a $7 billion -dollar u.s. fund and we have sized it to fit where we think there are opportunities. >> give me a little more detail, if you don't mind. what from a private equity
investor, what does proceed with caution mean? how does that translate into action? what are you not doing that you might do in se a more confident -- >> i'll tell you what it translates to. there are many companies that are selling at a very large premium now that are staple, high-market share companies and probably not much to do with them. they are pretty well run and people are sometimes paying 13 or 14 times -- for those companies, and those are the ones who say this is the kind of environment we want to stay away from, because we don't see how we could do that much better. >> have any u.s. technology companies really cracked the code in china? >> i think you know the answer to that. it's no. we are all trying our living hearts out to do as much as we can to both hold to our standards and principles as a
company, but find a set of things that can make us concessions to the chinese government that gives us access to the billions of users that are there. and it's capitaling the standards that we have and the consistency we want as we run our business with the interest we have and have an access to those users. >> could india be a replacement market for china? >> no. it certainly can be a is up emanual market, because it's one of the few growing economies in the world but you annot replace a 6.8% billion people growing and their g.d.p. growth is still more than 3 times ours in the u.s. so you cannot replace china. you can augustment china by having a stronger remoat but you can't replace it. >> we have retail sales holding up.
at what point does it become harder for the fed not to hike rates if the data keeps coming in positive? >> most of with a we see, empire yesterday was on the softer side but generally it's reported that we will both see rate hikes this year, and we are getting that story from the fed. stories like williams. also if you look at what fed brothers and dudley said on monday last week, it is certainly supportive of the idea that we will get some hikes. >> the pipeline is good. i think it still doesn't have as many big deals as we had that the time last year but i think we will see good activity and the health care sector continues to be big and the health care and biosector, weave seen a lot of pick-up in activity in consumer and across the technology sector. -- think it's just the
>> what do you make of it? why? >> i think as couple of factories. the limited organic growth opportunities for biggest companies and lots of capital at cheap rates so they can drive and that still persists. i think the challenge is there's greater head winds in 2016 than we saw last year. think there's not the chance we would see something else. and the government has been a lot more active blocking transportations for trust and tax reasons and in relation to the largest transactions, that's what's shown activity to a large degree. ♪
"bloomberg best" i'm shery ahn. early this week the price of crude oil hit a seven-month high, but is it real or just a flash in the pan? we discuss the prospects of oil on bloomberg television. is the oil market ready to make a turn? vice chairman says yes. we will see a market back in balance with rising production and demand. >> you've got goldman, morgan stanley and barclay all coming out saying oh, my gosh, we're going to see the market turn faster than we thought. what happened in the last couple of weeks? >> we've been saying we taught the second half of the year would be quite different because we could see the production going down in the united states and that production is now accelerated. that's one thing that's caught attention and we have seen a series of disruptions that tells you as the market
tightens, disruptions would be more significant so it's based upon no major disruptions. if you have venezuela blow up over a fear then we could be looking at a different situation. >> many have dom out saying we are going to see prices lower in the third quarter because we're firing maintenance. goldman sees lower prices in 2017 in the first half because they think more supply will come online. what do you think? >> i think there are two sources of supplies that would come online and one would be a recovery or stabilization in u.s. oil production. the next thing is a new stance of mideast producers led by saudi arabia, and they are sending a different message now. they are sending a message about putting more supply in the market and iran wants to put more supply into the market. but we see next year, assuming
about 1.3 million barrels a day of demand growth. but we really think we start to see the balance in the third quarter. >> you had the callout yesterday. your call was short-term bullish, and long-term bearish. break it down. >> well, our average forecast over the next seven months didn't change so we brought forth some of the bullish to bear term and then took some of the bearishness and put it in the fraurt. think about the half lives of these. canada, we think of a short life and when we think nigeria, we expect it to be longer. but it strikes some of that bearishness as well as iraq. so when you put it altogether it shows bearishness followed by some bearishness in the first quarter pushing us back into the 45 range.
>> and basically like a dollar away from that now. do you feel like the market has run up too far, for that level. >> you've got a million barrels per day out of canada and out of nigeria. so i'm shocked it's not higher. i argue because inventory still so high that they can turn to inventory to bid up canadian or nigerian oil. >> now, we see better prices in the market. i think demand has been increasing and the production. in canada and libya and nigeria. and the shell oil. it seems that over 3 million barrels per day has been cut early. >> to have $92 million you have to have strong investments and seems that over the last two
years, 30% of this amount has been diverted or canceled. this tells you that demand will be picking up. and this is the forecast everybody has been talking about. so probably we would see most stabilized markets. meeting of the to have a dialogue in that meeting is very important and then we can determine our steps forward. regarding agree capital investments, would you use the phrase rebalancing and if so do you think it rebalances by the end of this year or first quarter of next year? >> clearly, some of the outages of production are an attempt -- of course. but it helps the price none. now, i think the forecast everybody has been talking about heading towards the end
this is ecsu. so you newspaper ecsu, go, you get economic data bloomberg compiles. shery: if you have a question bloomberg probably has function that can help you answer it. keep watching to learn our favorites. and quic, go, will take you to a word quick takes where you can get fast insights into fast, timely topics. here's a quick take from this week. >> simple question, what's actually healthy for you to eat? we know this is good for you, but is this? what about this? this? or this? if you're confused over what is and isn't healthy to eat, you're not alone. knowing what to eat is comp indicated, and the reason is as green as your leafy vegetables. a draft of the most recent government dietary regulations says a healthy diet is lower in
red meat which has shown an crease in cancer and other problems. the youth and unreliability of nutrition science adds to the confusion. t 1980's, scientists associated saturated fats and butter and cream with heart disease causing many to switch to margarine. when the science later concluded the transfats in those were more harmful many resulted in the non-fat diet sugers but ed the the connection between dietary fats is still confuseling bautsdz it can't definitively reality cause and effect. the problem is it's impossible to know if these connections
are real, because so many factories can affect the identical. here's the argument. the 2016 new traditional guidelines won praise for being specific about what you should e eating like whole grains and a vague list of new triyents, instead of saying avoid soda, they said avoid excess sugar. at 204 pages many say the guidelines on what to eat are simply too long, too complicated and too influenced by outside forces. eat in moderation, lots of fruits and vegetables and go easy on the salt and sugar. shery: you can find our quick takes at bloomberg.com along with all the business news and analysis 24 hours a day. that wraps up "bloomberg best" this week, i'm shery ahn. thank you for watching bloomberg television. ♪
♪ to leaderselcome with me, francine lacqua. our guest is martin gilbert rum aberdeen asset management. his story begins in asia. born and raised in malaysia, he went to school in scotland at the age of nine, and he cofounded aberdeen in 1983. for 33 years, he has grown aberdeen into what of the biggest publicly trad