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tv   Bloomberg Markets  Bloomberg  June 7, 2016 12:00pm-2:01pm EDT

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from bloomberg world headquarters in new york, i am scarlet fu. here is what we are watching. with the s&ping 500 within striking distance of its all-time high. investors are drawing reinsurance from janet yellen's speech yesterday. we will speak live with mary barra. the sale of twitter, is it inevitable? one analyst says it is. first, we are halfway through the u.s. trading day so let's check in with julie hyman. the nasdaq, little change in the s&p up. julie: it appears to be mostly a commodity led recovery even though oil is down off its high.
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the s&p getting closer to its record of around 2130 on a closing base. the dow up about 67 points but the nasdaq has not managed to gain much traction on the day. take a look at the s&p since the record closed may 21. we are less than a percentage point away from that record close. it is 2134 if you are looking for the intraday record. we will be watching to see if the s&p can rate attainment. ain it.t but get back to the nasdaq as we have seen it bounce around. it is a tight range even though it looks like a big drop and recovery. -- its seem to attract does seem to have tracked pretty closely with oil prices.
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the pattern that you see is quite similar. oil still hanging onto a gain and holding above $50 a barrel. it has been a level that has been difficult for oil prices to hold. also we are watching transportation stocks. they are rising at the same time that oil is rising. thanks in part to the airlines. pointing out jetblue has raised its domestic fares and other airlines have matched that move. if the economy is good enough that people will accept a raise in fares, it may be a good indicator. scarlet: good thing i just booked my jetblue tickets. you mentioned oil prices. what about the other commodities? julie: we are seeing gold prices fall off in the drop in copper has been more dramatic.
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because of that build up in stockpiles, copper is taking a hit. worth noting is the movement and sovereign debt, in particular in germany where we are seeing a record low for that 10 year bond. u.s. one-month debt, the yield on that is four times that of the 10 year in germany. it is incredible, the movement we have seen as the 10 year in germany gets closer to potentially going negative. the two-year yields are negative. --ant to check in on w rp wirp. we are at a 0% chance of a rate hike in june. janet yellen seemed to semantic yesterday with her comments so we are not looking at 50% or more until december. dennis lockhart still
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talking about the possibility of two or three. there is still half the year to go in theory. withet: let's check in now bloomberg first word news. mark crumpton has more. >> hillary clinton has enough delegates to claim the presidential nomination according to the associated press. clinton got the news in california, the largest of six states up for grabs today. polls show she is in a tight race with bernie sanders, who says mrs. clinton is depending on superdelegates who do not vote until july 25, and is hoping to change their mind. the sanders campaign manager says the presidential race well continue "until the delegates cast ballots."
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the national weather service has dropped a tropical storm warning for northern georgia, south carolina, and the southeastern coast of north carolina but the warning continues in parts of north carolina from north of wilmington to south of nag's head. up to another three inches of rain coats -- could fall along the outer banks. president says his country and the united states should develop bilateral relations because of mutual respect. >> what i heard directly from , was that china intends to remain open, to stay
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open, to open up even more than it is today, and that it does not see that these laws are going to be applied in any way whatsoever that affects the ability to open up and do business, and for people to feel confident about what they are doing. meeting, thethe president said he was looking forward to meeting with president obama in september at the g-20 global summit. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. scarlet: thank you so much. federal reserve chair janet yellen stressed the u.s. economy appears fundamentally solid but there was a contracting message in her speech. hir sharma joined bloomberg the earlier today and said global economic events are influencing the fed's decision
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now more than ever before. financial markets have been hooked to this liquidity issue and the change in the fed inking is how linked it is to global events. this is something the fed did not do much historically but over the last fear month it has become acutely aware that it is the central banker of the world. what we are seeing is that the weakness in the global economy is infecting the u.s. economy and preventing the fed from really getting on with its normalization process. the weakness principally being out of china. i think that is a big factor. david: what is the exit strategy? you are no longer the center of the world. .uchir: the fed is not the dollar has never been this widely used in the world. if you look at the prevalence of
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the dollar in both transactions or look at it in terms of the total dollar debt or the share of the dollar in global foreign-exchange reserves, you put all that together and the dollar has never been this widely used. this is the big disconnect the world is facing. the u.s. economy is much smaller as a share than it used to be. the dollar has never been this nipresent.sent -- om globalsupplier of liquidity, everything the fed does has such a pronounced effect on the world economy, even china. does has such an important impact because of the dollar. >> the fed wants to give itself maneuvering room to take all the stimulus out of the system, get
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back to more normalized rates. we are going to be low for long, are we not? where there ever will be enough growth for the fed to be comfortable raising rates? .uchir: that is a risk it is widely acknowledged that the normal interest rates have come down a lot. the issue is, doesn't need to come cheap -- keep coming down further? the 10 year bond in the u.s. seems to think so because that is one market that has been persistently negative about global growth prospects. i think that is something that is hard to see changing. david: crude is holding near a 10 month high. or disruptions in canada and nigeria have raised the price 90% since lows in february. what is the story on oil?
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is this a supply issue? it is a supply issue but it goes back to the original point, we pay a lot of attention to the supply and demand but there is a third factor. to the dollar and the financial is a nation of commodities. 2000.k to about the amount of trading volume in global -- in oil was three times global demand. now it is nearly 30 times global demand. that is the amount of financial trading that is happening in oil and has gone up 10 times from where was 10 to 15 years ago. the correlation between the dollar and oil is extremely strong that whenever the dollar weakens, the price of oil goes up. this is supply and demand, and undoubtedly supply has been
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theonalized following collapse in price and distraction that has taken place, that the fact that the dollar has been week has helped the price of oil recover. david: it has gone from three to 30 times. should i and for that people are buying oil and oil reserves without regard to consumption? this is theyou read finance a lazy of commodities that has taken place in the last few years. trading hasn and been even more, and the correlation, if you are to show the chart between the dollar and oil you will see how tight that correlation has become. scarlet: headlines just crossing, president obama meeting with the indian prime minister in d.c. and discussed
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cyber security and regional security. they have strong bonds after the meeting. ruchir sharmadi, to discuss. ruchir: the hype about india has been deflated a lot. now there is a lot of realism. one of the roles i have is the hype watch. for countries that are too hyped up to be a bit cautious. countries people are ignoring is where you will be rewarded in the next five years or so. scarlet: had of emerging markets at morgan stanley investment speaking earlier. it is our mystery stock of the day, time to get back on the horse. turning the reins over to a new ceo may cost $400 million in costs to resettle up. ♪
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>> you are watching bloomberg markets, i am alix steel. scarlet: i am scarlet fu. julie hyman has the big reveal on the mystery stock. it is time to get back on the horse after a week outlook fell. turning the reins over to a new ceo. x: it is a horse stock. representativea on a horse.
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ralph laurent is the stock we are talking about. came totively new ceo the company from gap and was head of old navy. he was at h&m and has been there since november. not great news for him today and the stock as he came out with the forecast for this fiscal year that says sales might decline in the low double-digit range. down as ralph lorenz has been struggling sales wise and he is talking about a new restructuring effort. he is doing more layers of restructuring, trying to save costs. he is going to eliminate three layers of management. if you look at how the stock is performing, it is down once again although climbing back pretty considerably from the lows of the day. it looks like there is a little bit of optimism that his
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turnaround will bear fruit. retailers in general have been struggling recently, trying to figure out what customers want. let's take a look at the bloomberg, s plc. who are the major retailers? ralph lauren looks at the supply chain. tjx,s, kohl's, hudson bay, nordstrom, ross. ralph lauren is a big product for them and they sell their own merchandise. looking at how these department stores are performing because sometimes you get a spillover effect, do we have a look at those? they are turned higher. , they were enough having a depressive effect and that seems to has -- have dissipated. did you like my acting out? scarlet: it was in practice --
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impressive. our mystery stock, ralph lauren. alix: time for the bloomberg business flash. itsett is pushing for hostile takeover bid for tribune publishing. the publisher of usa today will keep a $15 a share offer in place while developing new term development. the tribune is changing its name. scarlet: canadian national railway's' ceo is stepping down after 22 years at the company. the replacement has served as cfo since 2009. barra says is the largest u.s. automaker is undervalued. in an interview she said gm can handle a downturn and sustain
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profit if the economy slumps. >> we are going to focus on doing the fundamentals, putting cars, trucks, and crossovers on the road that people want and investing in conductivity and autonomous and it electric vehicles to lead the transformation. alix: more of david westin's interview coming up later in the hour. that is the bloomberg business flash. ahead, why the u.s. could go the way of the defunct ottoman empire. we speak with todd buchholz about why nations often so their own seeds of failure. ♪
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election,presidential promises are making
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but these moments of prosperity are also a time of great -- grave danger for our country. thelet: todd buchholz is author of the new book "the price of prosperity." he is here to talk about five factors that could tear our country apart. applauded from people on the left and the right. clearly this is not a book that is geared toward democrats or republicans. ising said that, your thesis that nations are just as likely to unravel after periods of prosperity as well as a recession. todd: when countries get wealthier, people have fewer babies. we sell this back in the ancient romans and spartans.
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if they have fewer babies, and especially of people are living longer because of advanced health care, who is going to provide the services as neurologist, respiratory therapists, waitresses? immigrants. you end up having a situation where countries get richer so you need to have more immigrants . it becomes a more multicultural company -- country. if you failed to maintain a andure and a character stories and a sense of patriotism, then it can all just fritter away. scarlet: is that where we are? todd: i am concerned about that. in schools the pledge of allegiance is discarded in place of a pledge to the world. we saw the protests against donald trump. it is on price tested -- unprecedented do have protesters
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waving the flag of another country. sayt half of millennials the american dream is dead. alix: how would you fix something like that? we have been a nation of immigrants for hundreds of years and have assimilated them. andave had protests uprisings before and have been able to move on. why is this different and what is the solution? todd: the solution is going to sound corny, telling the stories. find the broadway show "hamilton" so uplifting. the fact that you have a multicultural cast that sings in hip-hop, they take the founding father story as their own. instead of saying, those are a bunch of dead white guys, those are our people.
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we have to contain -- communicate to young people that america's history is their history. scarlet: it is building connections but another one of your factors is globalized trade. there are plenty of conversations about that. donald trump is an example of looking at the downsides of trade and says he questions the value of trade deals. he said he makes a good point. todd: i think those of us who were adam smith ties and disciples of milton friedman, perhaps in talking about free trade have overlooked the numbers of people that are hurt through globalization. overall, it raises the overall standard of living in the u.s. but lots of communities are hurt. we have moved from a situation where people used to have pride in made in usa and now we have gone to made in wherever is cheaper.
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it is tough to maintain this sense of pride in one's country when you are willing to export jobs to whoever undercuts someone else. alix: ottoman empire, are we going to get out of it? todd: it is not too late. i suggest certain things the country can do so we sustain our more left of is this country than donald trump's hair 100 years from now. scarlet: todd buchholz, thank you very much. we will be right back. ♪ get ready for the rio olympic games
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by switching to xfinity x1. show me gymnastics. x1 lets you search by sport, watch nbc's highlights and catch every live event on your tv with nbc sports live extra. i'm getting ready. are you? x1 will change the way you experience
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nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. scarlet: live from bloomberg world headquarters in new york, midtown manhattan -- a beautiful day out there. know, we are not
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in here. i heard it was really nice. scarlet: i am scarlet fu. alix: i am alix steel. this is bloomberg markets. scarlet: let's start with the headlines from bloomberg first word news from mark crumpton. nancy pelosi has endorsed tillery clinton for president. the california democrat had held off on a formal endorsement, but on the day that her state holds the primary, pelosi announced candidatet for the nominee. house speaker ryan is blasting the person that he is supporting for president, donald trump here is the orion earlier in washington. cannot dog a person their job because of their race is the textbook definition of a recent -- racist comment. i think it is unacceptable.
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do i think that hillary clinton is the answer? no, i do not. thatc.: trump is claiming the judge presiding over the trump university cannot judge fairly because he is of mexican heritage and trump wants to build a wall between the united states and mexico. recent polls suggest that the leave campaign is gaining momentum bolstered by the comment that leaving the block is the only way to control immigration. in peru, no one is going out on a limb to call this election with 97% of the votes counted, a former wall street veteran leads by 3/10 of the percentage point. he has promised to use his finance background to increase
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investment and employment in peru. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. back over to you. scarlet: thank you so much. investors and general motors are gathering in detroit today for the annual shareholders meeting. alix: we spoke exclusively about the state of gm today and the cadillac brand. >> cadillac is something you made a big push on. where are you on the success of cadillac? >> i think cadillac is a very important brand for us, an iconic brand. we are putting in the work, being very disciplined in having the right products that are engineered and will build in their segment. having the right experience of the dealer. they have made improvements in
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their facilities and are working to make sure they provide an exceptional ownership experience. that work takes time to build and provide that to the customer and takes time for perception to change. we are approaching cadillac and a very disciplined fashion. what is a good proof point for us is how well cadillac is doing in china. it does not have the past reputation that we may have in ae u.s. to prove that it is true luxury vehicle. we see that success in china. we are seeing success in the united states, and we do not even have a full pro-folio -- portfolio yet. i think they will move forward industry on what luxury is. cadillacre room for and chevrolet? >> absolutely. buick is a brand that keeps
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surprising people. it is really growing quickly. we are bringing in a whole new customer sent through buick. i'm pleased that the product lineup we have and i think we will continue to grow on that strong trend. how much of this is caught up with china? it is a very strong brand in china in particular. >> it is. it allows us to have a strong portfolio not only in china, but we bring that to the united states as well. to your point, buick is incredibly strong in china. it has an important heritage and that is something we are proud of. scarlet: david westin joins us now. congrats on a great interview. why is she so committed to gm's luxury brands? aes logo -- oldsmobile was
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luxury brand, and they got rid of it. >> profit. their profit margin is much higher, and that is true globally. we talked to the ceo and he said, i don't want to project, but i think we could double cadillac sales. scarlet: the other thing you talked about was the sharing economy. why own a car? scarlet: are you a millennial? alix: no. did she talk anything about those lines and how it might sales?r help >> they think that in urban centers, dense centers, ridesharing will become the norm. they think you cannot cannibalize their core business. a lot of profits are going to with trucksreas
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and suvs. alix: let's take a listen. >> looking forward, let's assume that lyft is wildly successful and we have car sharing across the country. who will own those cars? will gm on those cars? >> that has not been decided yet. it is very exciting. i believe there will be fleets. i believe that individuals may also on their autonomous vehicles. there is a lot to be defined and to be a part of that definition, that is what we are working on. >> it is exciting, but in a world where there is a lot of sharing going on, a car could he come more of the service that you rent rather than something you own. what does that mean for the future? >> there has been so much going on.
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will the car market get bigger or smaller? for the reports that say it will get smaller, i can show you once were they say it will get bigger. the answer is that we do not know. where sharing will happen first is in urban areas. those are areas where we are not as strong as middle america. when you look at the strength of our business it is with trucks and suvs. for many people, that is an important part of their work. can participate in the sharing and strengthen our position in the urban areas while maintaining the core strength of our business which is trucks and suvs across middle america and the globe. ,carlet: when it comes to lyft it sounds like they are making up as they go along what role they can play in the sharing economy. >> she insisted that i talked to her senior manager. she said it is a team effort. the president quickly says that it is not just sharing, but plus
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autonomous. when you play together, it is really interesting. he envisions calling up one of these autonomous vehicles that would come and pick you up. no more taxicabs. scarlet: brave new world. you also got the chance to drive a chevy volt, right? >> they are bringing out the bolt, which is a reasonably small car with an interior that is specialist. -- spacious. it is entirely electric, sort of a family vehicle, it seats five. , it getslot of torque up to 50-60 miles per hour very fast. scarlet: i can't wait to see the video of you doing that. you can catch more of his great interview from general motors in
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the next hour. he will be speaking with mark royce. we have some breaking news on soda stream. rig is discontinuing their cold average system. the idea is more business for soda stream. that is according to the burlington press. a big spike there. scarlet: this is bloomberg markets. ♪
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scarlet: you're watching bloomberg. i'm scarlet fu.
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alix: i am alix steel. this is your global business report. scarlet: here is what we are watching. the u.k. homes market, not as rosy. alix: general motors expanding its growth and china, but can pedal to thee metal? poland, where polling is inaccurate. halifax says that prices have risen more than 9% in the past year to an average over 310 thousand dollars. saudi arabia is planning to cut wages and subsidies by 2020. it is all part of the economic shakeup. to crown prince is trying reduce reliance on oil revenue. have been a long
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road, but general motors is gaining ground in china. we caught up exclusively with the ceo in detroit and asked about how the automaker plans to keep its foot on the pedal in china. >> i am proud of the margins and one of the key things is keeping those margins. we intend to do that. of the 16 new models we will have between now and 2020, 40 percent of them will be suv's. that is a more profitable vehicle and something that consumers are really moving to. scarlet: she also said that she considers the largest automaker to be undervalued. that is the group has been acquitted of -- the disney group has been acquitted of discrimination charges. d was intended to decline applicants from africa and syria.
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scarlet: time now for our bloomberg quicktake, where we provide context and background on issues of interest. the golde long been standard for assessing politicians, elections, and voter concerns. they have not been shining lately. they were fault off -- far off the mark recently. last week, they missed outcomes on israel and greece. in part, this is because different firms have posted on that very of 10 points or more. in the u.s., more than half of adults use mobile phone service. firms have increased calls to mobile phones. they tend to screen out unknown callers.
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here is the background. george gallup created the first scientific clinical poll in 1932. in 1936, he correctly predicted president franklin d roosevelt reelection. now, gallup and other pollsters bot called in the 1940's. here is the argument. pundits and politicians fear int home surveys decrease frequency, accuracy will suffer. some posters have turned to cheaper web questionnaires, but this was a factor in the flaws flawed u.k.s -- surveys in 2014. some think that more people
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would flow if they did not think the results were preordained. for more stories, visit scarlet: just ahead, can twitter state as one company? one company says no. that is next. ♪
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alix: this is bloomberg markets. i am alix steel. scarlet: i am scarlet fu. let's get a quick check on how u.s. stocks are rallying. alix: snp is at the highest level in the nasdaq at the highest level for this year. building on that rally that we saw unsold from yesterday pushing the 2016 highs. scarlet: breaking past 2100 was a big move. it makes people think if we will get higher than the highs from last year. in terms of the sectors that we
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have seen move around, come inside the bloomberg. this is the relative rotation grass. alix: i love this. like a weather map, that is why i like it. customer staples, telecom -- moving into the leading phase -- industrial were in the leading phase until recently. the data has not helped. in addition, you have financials and health care improving. that was on the backside of the improving rate outlook. alix: let's get more detail on the nasdaq on its highest level since december. we goe to add the guilty little. is littlehe nasdaq changed. let's see how the index closes. helping the nasdaq is airlines
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including american airlines and jetblue, trading higher. all of this after j.p. morgan's jamie baker says they have bysed fares domestically three dollars and other major airlines have matched that rate fai. been a major has factor this year. also trading higher are the after bullisha comments on cnbc. that is one bullish view. there is height cash, and also the most recent promise of delivering 500,000 vehicles per year -- at least 500,000 per year -- by it will be interesting to see
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how it plays out as time goes on. alix: i know it has been a very volatile year for tesla. where does the chart play in? abigail: we see the volatility is not just this year but the last couple of years. lots of disagreement between the the bears.hat ther it seems likely that tesla would trade near the top of the range. where the range will break, only time will tell. thank you so much. abigail doolittle reporting live from the nasdaq. alix: let's stay on tech. company?er remain one that is not likely, says some analysts. scarlet: twitter shares have been under pressure, losing 60% over the last year.
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they have seen high profile departures. i want to go now to a senior bloomberg analysts, joining us from san francisco. you have put out a series of us why thereing is still value in twitter. a lot of people do not see it because they compare twitter to facebook. talent, andaking -- soon, advertisers as well. -- focusy fix that needs to move from user growth to engagement. iche inn become a n the field. alix: instead of being obsessed
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with the monthly user growth, we need to look at how much they are making off each user. >> twitter needs to do that more than us, show that they are focused on capitalizing the platform whichir is sharing news in the fastest possible way. that brings uncertainty about execution capability. scarlet: we have a chart here that illustrate some things that people may not realize. they monetize the average user much more than, say, facebook. is this something that twitter does not spend every moment of the day hammering home to analysts? it is basically suggesting is if they can get engagement up, they will have growth. alix: what will they see if they are able to shift investment of investors? >> they need to lay out, this is
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our plan, the trajectory, and help investors set a better expectation. scarlet: what you were talking about earlier is analysts talking about twitter m&a as inevitable. does not talk about switching over engagement than user growth. they say that partners could be google or apple. alix: it's third of banks -- it's sort of begs the question, why do they not believe the plan that twitter sets out for them? >> if you look at the three things i mentioned about leaking shares, they are not able to fix that or show their value to others as well, as much as they can. i think the first step is focusing on engagement and then going after the other avenues if need be. scarlet: very quickly, what happened to periscope?
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it was a very big deal about one year ago. it is not something even in the discussion anymore. what happened? >> it is still a nascent platform. there is a lot of uncertainty about how to monetize it. facebook has the live stream which is beating up the drum. periscope is not really showing that he can move something for twitter in the near term. alix: thank you very much. scarlet: next hour, we will be looking at valeant. the company coming out with the results this morning. a little bit brutal. alix: mrs. bloomberg markets. ♪
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alix: it is 1 p.m. in new york, 6 p.m. in hong kong. scarlet: welcome to bloomberg markets.
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scarlet: from bloomberg world headquarters in new york, good afternoon. alix: here is what we are watching -- atis looking down the road its future and it sees ridesharing and autonomous vehicles. the company's global product chief tells us how gm plans to speed past the competition. scarlet: an historic victory for hillary clinton because it looks like she will be the first woman to be a presidential nominee of a major political party and bernie sanders still refuses to back down. can president obama get him to back off? alix: the company ceo/as its earnings forecast saying a turnaround is a multiyear process but is it already too late to save the former pharma giant? scarlet: let's go over to the markets desk and julie hyman. talking about how the
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nasdaq has been building on its gains. julie: it's at the highest level so far this year and all three major averages are shrinking. in the case of the nasdaq, it's a bigger gap of the s&p 500 and the hour getting closer. the dow briefly touched 18000 and the s&p 500 was 2130. it is building on the gains we saw earlier in the session. the s&p 500 over the course of the day has been moving pretty steadily higher. the trend has been steadily higher and we have seen this trend frequently recently. this morning in our battle of this idea, there was that used to be when we pushed out the idea that the fed was going to raise rates sooner, the stock would go up. lately, they have gone up when that -- when it happens and when we bring the rate hike forward.
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i am not sure we can maintain that scenario. looking at the best percentage performers -- it's a mixed picture. we have some of the oil and gas gas pricesg or with going up we also have the airlines performing well after j.p. morgan noted that jet lou has raised fares and the other airlines have followed suit. on the downside, a lot of health care movers today. lexion came out with surveys of the drugs they are developing and both of them showing relatively negative results. is fallingc moran along with copper and gold prices. alix: you brought up the eog where we see a nice rally in oil prices. it has been choppy today but maintaining that gain. below $50,e falls wti has had a hard time maintaining any gains above 50.
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we will see if they can keep them above those. scarlet: thank you so much. alix: let's check in on first word news. mark: there is new pressure on bernie sanders to exit the race for the democratic presidential nomination. hillary clinton has enough delegates to win the nomination which includes the delegates she has one and commitments from superdelegates. she got the news in california, the largest of six states up for grabs today. the polls show she is in a tight race there with senator sanders who says mrs. clinton's is depending on superdelegates who don't vote until july 25.he hopes to change their minds. house speaker paul ryan is proposing an overhaul of the nation's poverty programs. the first of several policy plans aimed at uniting republicans divided by donald trump's candidacy. he will not translate these ideas immediately but his major
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point would not be enacted under president obama but the idea is to set the stage for the future if a republican should become president. istanbul, police are questioning 4 suspects in a car bombing. the explosion near a police vehicle killed 11 people and left dozens wounded. no one has claimed responsibility. since last year, kurdish rebels and islamic state have been blamed for a number of almonds in turkey. -- nation's obesity echo at epidemic continued to grow the by an alarming increase among women. for the first time, more than four in 10 u.s. women are obese according to the centers for disease control and prevention. obesity rates for men and women in the united states had been roughly the same for about a decade. gonecent years, women have ahead and now just over 40% of women are obese compared to 35% of men. global news, 24 hours a day, powered by our 2400 journalists
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in more than 150 news bureaus around the world. scarlet: thank you so much. crisis,e financial active asset financial management have had a dismal -- has had a dismal run. active management is fighting to stay relevant. alix: the ceo of alliant earns teen says part of the fault lies with active managers themselves. -- inchatzker spoke with this exquisite interview. >> for years, the asset management business grew handily without much restraint and without much conflict. today, we have reached a level of size and number of managers that has outgrown what we can deliver. if you look at the actual results, he would not be an appropriate for an investor to say i am not satisfied with what the industry is providing. it's pretty clear that active managers have not performed above their benchmark set any great degree.
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we had to take a look at that and say what are we doing that is not fitting the bill? erik: what are you doing that's not fitting the bill? >> the one problem is that we have grown too large. there are capacity constraints that managers have and we have not paid attention. as you grow larger, what a manager generally does is diversify their holdings. when you diversify your holdings, you undercut your ability to continue to produce the returns that got you there in the first place. erik: how much this industry need to be? we are both talking about the same thing, active fund managers. >> that's a good question but a difficult one to answer. erik: your best guess? >> i think it comes down to each manager putting capacity constraints on themselves. that will likely create a reduction in the industry of some magnitude but i would be guessing as to what the number is. maybe 30%. erik: not 50%? >> i don't think that's
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necessary. erik: but we are talking about trillions of dollars. >> we are. it's a huge amount of money. for activepennies managers as we cannot actually manage all the money in the world. there is a limit. passive plays a role. there will continue to be and should be a passive world. active managers should also play a role in a place in which there cap at -- there are compassionate he -- there are capacity constraints. a size have to find where we can produce the returns and produce the objectives, investment objectives, that people gave us money for. erik: imposing capacity restraints on the industry by definition means that some firms will have to impose capacity constraints on themselves which constrains growth opportunities. > if you are a publicly traded company, your investors demand growth and that's why they buy
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equity in the first place. >> i believe investors demand the growing income at a rate that is better than the market. howdy you get that? you don't necessarily get that just by adding assets. sometimes you can get that by effectively adding new investors and new investors have additional capacity constraints. we want to diversify business that allows us to have more than one place for which we can get returns and those capacity constraints will also lead to better returns. not every manager will outperform all the time. not every manager will be at their capacity restraints. we will always have and opportunity to grow. erik: what is the capacity constraint for you? >> each manager has their own capacity constraints. erik: in each firm? are you as big as you should be? >> i think we can be bigger but i don't think we need to be much more than 30% acre. our investors would be very happy. erik: what will it take for
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active managers on balance to start outperforming asset strategies weather is dow jones or morningstar? the studies show that active underperformance passive by a wide margin. >> i think the market is speaking. money is moving today from active managers to passive managers. it is darwinian. the size and structure and balance of these markets is going to be driven by whether or not active management steps up to the challenge and starts producing the terms. to do that, the active managers need to enforce capacity constraints on their businesses and turn to higher conviction management and when they do that, you will see the constraints on the portfolios and you'll see the performance and the darwinian movement will change. alix: that was peter krause. he was being exclusively on bloomberg go. coming up, an exclusive
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interview with the general motors global product chief and says why gm invested half $1 billion in the ridesharing company lyft. ♪
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alix: you are watching bloomberg markets. scarlet: let's go to the markets desk with julie hyman. this one got a pop. soda stream is the company we are talking about. you should be writing mystery stories. as you can see, the stock is not that up percentagewise but it had a spike on the news that keurig was going to suspend manufacturing of its cold system
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which competes directly. they say customers will get refunds and soda stream is confirming that in the past few moments. it's interesting it took that player out of that market. elsewhere, we're looking at a company called seresta therapeutic. the company has been asked for more information on its experimental treatment of muscular dystrophy because wanttigators -- investors to know that they are closer to being approved. we're also taking a look at an acquisition in the medical industry. ldler biomed will buy holding for 30 million dollars in cash. these are medical device companies. shares a rallying after the company agreed to pay $130 million in a settlement to news
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corp.. this is a smaller settlements and had an anticipated has to do with the news corp. unit because , there was anlow issue of information sharing between the two companies because some executives move from one to the other so those shares are up. scarlet: thank you so much. alix: general motors recently paid $500 million for shares in the ridesharing company lyft. they want to find their next wave. scarlet: the companies position was explained by the chief development officer. you invested $500 million in a portion of lyft. why did you do that? >> we have been making trucks and crossovers for many years and if you look at the competitive and it -- advantages we have, we have a connected
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vehicle like no one else and if you look at the mobility and the models that lyft brings to the occasion -- to the equation, we can experiment with them in-house and can learn from lyft and cruise automation which we purchased out in silicon valley. i think this is very special and different than anybody else. andre here to go fast provide different kinds of transportation and different kinds of models 20 widely changing industry worldwide. david: are you concerned that it ridesharing takes off that it will limit how many cars people buy? could cars become a service rather than a product? >> they could buy transportation becomes a service. i am not sure it will rapidly overtake anything in the next two years but in the next 10 years, i think this will change radically. we want to be part of that but
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we also want to offer something no one else can offer with the type of vehicle you are transported in and the customer really wants. there is a lot of people that still love to drive. between detroit and l.a., there are great places to drive that have open road. we are talking about the more densely populated urban environments that are very challenging. i think that's where you will see this first. david: what did cruise automation give you that you did not already have? >> we've got deep expertise in the car itself. you saw the early bolts on the road in san francisco with software and equipment that cruise is integrated into the car. it gave us lots of different things but primarily, the speed at which they are delivering this is really healthy for our organization. us and we also can teach them around how a car is
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integrated from a safety standpoint. some of the electromechanical things that they have interface with from a software standpoint. it's a great give-and-take. i think they are excited to see. we used to be a lumbering giant. like thosethose guys operate,yft and how we the reason they partner with us is because we are different and can learn a ton from them in lakin -- and they can learn a ton from us. david: you said you would be in the past of developing some relationship with google. is that still the case? >> absolutely, we have had great conversations around what our vision of the future is and what do you think it will be. not the only are people we will partner with. can general motors get where it needs to go without a
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partnership with a major tech company question mark >> i'm not sure that either one of those the only way. what we have created is a trifecta of things with ourselves of cruise and lyft, our own research and development and autonomous vehicle development. no one really knows about it. likenk when you see things our super cruise come out in the catalogs, you will be very impressed -- in our cadillacs, you'll be very impressed. those are the kind of things that when you create that synergy, the sky is the limit and we will see. that was mark reuss. scarlet: hillary clinton stands on the cusp of history to be the first woman to be the nominee for a major political party but her battle is far from over. ♪
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scarlet: this is bloomberg markets. republicans have their presumptive present shall nominee in donald trump and now hillary clinton has secured a not delegates to claim the democratic nomination. a very clear statement -- we are repudiating donald trump. we are getting ready for the fall election. we are going to defeat him. if you will vote for me, i will work for you. her nemesis bernie sanders is not giving up the battle yet with six primaries today including a close battle in california. herewith with us now is megan murphy. does it matter what happens in the primaries? whatat we are watching is bernie will do. it's possible he wins california
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tonight and that will rain on her parade. she did not want to secure the nomination the way she did with his late-night announcement from ap. tonight.d to win it she wanted to be a natural procession. president obama crossed same threshold and she lost her moment and we waiting to see what bernie will do. alix: why did ap decide to release this information before the next tuesday for democrats. continuallyile this and they continually called delegates and asking. when they had that tally and crossed over, she was only 23 away and would have wanted in new jersey and they made the call and then everybody makes that call because this is what they do. scarlet: that may be but people will complain. that it manipulates the politics. absolutely, people are asking
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how much it will suppress turnouts. it could be her supporters say they don't need to go out but ernie benefits from a huge turnout. he benefits from the surge of people who committed to him so we will see tonight if she wins california. there will be questions raised whether this is ethical or not. alix: what is left for bernie sanders to do? he has vowed to fight through a contested convention. hardliners are telling them not to do that so what's next? >> president obama is the ultimate hardliners. he called bernie sanders sunday and talked about uniting the party. they think they can take the senate and there can be as many as three supreme court chiefs in the next administration. had aesident himself somber conversation with bernie sanders and said to think what you are doing and think what
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agenda we will set for the party . do you want to be the person who leads the fracturing? they don't want a contested convention. there is a lack of people coming together behind a common agenda which they so desperately want. scarlet: it's just more distraction ahead of the general election. >> and this election will be one of the most vicious and brutal. scarlet: we have heard reports that president obama is trying to get in there and campaign for hillary clinton and taking shots at donald trump. >> will also watch tonight that if president obama comes out immediately after new jersey and california has she is my choice. we expect them to endorse as early as tonight or tomorrow morning. we will watch the rhetoric he uses and how much he raises -- he uses the lofty phrases and how much he cares about hillary as a pardon -- as a person,
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given their legacy. will this be a true and for hillary clinton is the first woman presumptive nominee but for president obama as he makes this transition away from the presidency and into his future. alix: is there a risk that he delays support and does not talk in those kind of words? >> it's clear that he wants to get involved in this race in a major way. this royal controversy which considers -- which continues with the heritage of the judge and the trump university case. president obama believes this goes against everything he has tried to create in a progressive america that believes in equality and everyone is on the same playing field. he sees everything he wants to leave behind is being fractured either republican presumptive nominee so he wants to jump in. he is neutral but he will want to get in. side,t: on the republican
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who cares if paul ryan endorses donald trump or not? does a president obama endorsement of hillary clinton make a difference? >> the president's approval rating have gone up significantly since five months ago. if you match his approval rating to the nominee from their party, that tracks more closely in terms of who will win the presidential election. it's a powerful indicator. has been riding his coattails on the economy and will want to keep that going. scarlet: megan murphy, thank you so much. we will be back with more. this is bloomberg markets. ♪
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alix: from bloomberg world headquarters, you are watching bloomberg markets. scarlet: let's begin with the headlines on first word news.
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house speaker paul ryan says donald trump's comments on american board judge of mexican heritage are the textbook definition of racist comments. he says that mature and responsible thing would be for trump to disavow the comments. he says he will still support trump because his agenda is more likely to get and acted under donald trump that hillary clinton. said the mexican american judge cannot judge him fairly. president obama welcome the indian prime minister at the white house today. they will discuss climate change, security and commerce. this is his urth visit to the u.s. since he took office two years ago and his seventh meeting with president obama. >> as the world's two largest a withr sees and countries
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strong bonds between our , oures, our businesses scientific and educational communities, it's natural that united states and india have deepened and brought in partnership across all range of issues. mark: the prime minister addresses a joint meeting of congress on wednesday. a former astronaut who flew five missions and help lead nasa back into space after the shuttle columbia disaster has been charged with murder. responsible for an early morning car accident that killed two girls in alabama. he was released after he posted $150,000 bond. two adults were in the car and suffered injuries and were hospitalized. greek merchants are crying foul over new taxes. their problem is that taxes will be imposed on great businesses like pay-tv and hotel companies. internet-based companies like netflix and air b&b will not have to pay. the taxes are part of the price greases paying -- greece is
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paying to get its next bailout payment. alix: we had breaking news on pulte group. a larger stake is being taken in the group. stock is spiking and trading at its highest level since november, 2015 and the move is up 5.8% which is the biggest advance since january. are watching we today is valley and to its shares plunging today after the embattled drugmaker cut its 2016 earnings and sales forecast. in a conference call, the new ceo aimed to reinsurer investors that you could stabilize the company. >> we have tried to be realistic with what we know.
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where there is uncertainty, we try to be conservative so there would not the any overstatements and what we are trying to accomplish. resolution, aick quick approval and get ready for a launch on time, there could be some upside. conservative in those assumptions as long as there is uncertainty in the marketplace. the calllistened into and cynthia joins us now. investors were wanting to see a new valley and and they did not quite see that. more red flags were raised that there was not enough of a forewarning that this was coming and they were losing money on the drugs they were selling for walgreens and cut their earnings and they are now running closer to getting in trouble with their debt covenants. the ceo said he wants to make things more transparent but it was not enough for investors to feel this is a new vsaleant. scarlet: what has changed under
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his leadership? >> it has only been a couple of weeks and he has created a pricing committee and changed the pricing program that apparently had not been giving discounts to hospitals for hospital drugs. he has done a few things but he said he was talking to congress. he is doing something valeant has not done before which is government relations. this is not a public relations story. it's a sales story. they had a forecast that was 2.5 billion larger than what they had now. they had to pull the guidance and now they're cutting back and it's typical for a new ceo to cut guidance and outperform but in this situation were the company has had problem after problem, it's just another problem for investors. problemsthink of the on drug pricing.
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there are many other fundamental issues that are not related to those problems. >> some of this is the filador.n away from filador. what investors understood about how much sales were going there, they see it going to walgreen. some drugs are not necessarily getting reimbursed him he might be losing money in some places. there are other more fundamental problems. wasof their biggest drugs flagged with significant problems. they did not get to the root of what's going on there. previously had inventory problems but they did not bring up inventory this time to something new is going on and we don't know what it is and that's what investors get scared about. cynthia kunz, thank you so much. alix: we continue the conversation with valeant.
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you are maintaining or underweight rating and you have a reinstating of a price target at $19 per share. after the call, what is your number one biggest concern about the company? >> my biggest concern is regarding net realized price or average selling price. cynthia mentioned the walgreens partnership. that's the dermatology business but there is also zytax and the average selling price has been pressured and that's not something we saw last year. last year it was inventory related. that is a big concern. there are other things we have to think about. the generic competition is there. some of these assets are very high margin so there will be a big hit to sales margins when the competition materializes. that's another point of concern. said the average
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selling price has been negative? he said we are taping dollar bills to the drugs? scarlet: that's incredible color. joseph poppa is fairly new to the company. he pursued a pretty aggressive acquisition strategy at his previous firm. what is your confidence he can on growing sales? >> it's too early for me to say that i have confidence in his ability to turn things around. when he left parago, there were major issues with that company. there was some credibility problem associated with mr. papa bear. it's way too early to say that he is somebody who is capable of righting the sjhip. the shorte spoke with seller who got things rolling with his report on val;eant. >> i owned the stock for a
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trade. it was easier at $200 per share and $150 per share to say it is moving lower than to make an assumption where the stock will go at $30 per share. everyone is looking at the same prescription and reimbursement data. we have to predict the future. how will reimbursements look? how much can they charge for the drugs? how is the sales force? these are questions that everyone is looking for the answers in a not obvious. scarlet: if you look at the share price, many people want to see it as a reset. it has fallen 25% since march. what is priced in here? >> keep in mind that the company is sitting on $31 billion of that. -- debt. thinking about the business going forward, you have a declining business or a number of segments that are decline and
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a company trying to convince people they can meet their obligations. downwardat these revisions to guidance and you look at the average selling overseas isre -- excess inventory and that has to be corrected. you are looking at a number of weaknesses and the question i have to ask -- are these guys going to be able to avoid a bankruptcy? is the probability of a bankruptcy minimal? the answer is no. in terms of looking at what is priced in, we have a situation here where we don't know if the equity down the road will have value. alix: what would cause a bankruptcy for them? >> if there continues to be pressure on the business, thinking about the average selling price and thinking about this as being a new normal or potentially even more deterioration -- talked about efforts to stabilize the business.
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in the early stages, it may not bear fruit. if things continue to get worse and they get generic competition, you have a problem. talked about selling non-core assets. any sacred cows here? >> i don't think there can be. i would say there are assets that are saleable. there might be some overseas segments that are saleable. i think there is the ability there to sell assets. i don't know how it will play up at that something that companies should look at with a certain sense of urgency. was the darling of many hedge fund managers and that still the case. a lot of hedge fund favorites and this was at the top of their list. itx: when valeant said
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cannot predict its earnings on these hedge funds are in it, have you value a company when they don't know how to do it? >> it's difficult because they are not generating cash and you can look at it from the sum of its parts or a breakup value. that is also tricky. you are looking at certain businesses that are declining like their mentality in a freefall. multiple toscribe a these segments? that's not an easy exercise either. a terms of coming to conclusion that certain things are priced into the stock, i would push back on that idea that all the bad scenario surrounding the business is in the stock. alix: thanks very much. up, more of our interview with andrew left on mura.atest target, che
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the four seasons hotel in toronto is said to be up for sale and white could sector record per -- it could set a record price in canada. ♪
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scarlet: this is bloomberg markets. alix: let's go to the markets desk with julie hyman. rally it's a decent especially considering it's two up days for the major averages. the dow and the s&p are holding onto gains of 2/10 of 1%. there are a couple that are under the radar.
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thor industries is not a household name. the company's earnings per share is up 27% which is a bigger gain than estimated with sales up 9%. they say fourth-quarter revenue will rise in the high single digits. the ceo said there has been a continued influx of younger people coming into rv dealerships and are interested in purchasing. that's a source of demand. united natural is another company we are watching and they are a distributor of natural products. their biggest customer is whole foods. the company's earnings per share fell 8% but still beating estimates with revenue up 8%. the company raised its forecast. most of the analyst commentary was quite cautious. the shares are doing very well.
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casey general foods is continuing to expand. michaels, the crafting store chain, the company numbers missed estimates and a name to the cfo of the company to a newly created role of vice chairman so it is looking for a new cfo and the shares are down by 9%. scarlet: every parent of a child in elementary school knows michael's. julie: it was private and went public a couple of years ago. scarlet: the saudi prince said he is looking to sell the toronto landmark four seasons hotel for $1 million canadian per room. that is the highest price for a hotel in canada ever. pamela richie joins us now. when did this landmark hotel at
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the market? it looks like the hotel has been on sale privately since earlier this year for that price . the hope is that they get 100 $97 million u.s. and that would be the highest. the four seasons operates this hotel and the prince's holding company owns the parcel itself. there is a condo that goes with it. that operatesns it has almost 99 properties around the world. private by the prince and his holding company. a toronto businessman founded the four seasons as well as cascade which is the holding company that is run by bill gates. the three of those took the four
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seasons private back in 2007 43.8 billion dollars including debt and it has been growing since then. the property we are talking about was opened as a hotel back in 2012. erik: scarlet: we have to bring the loony into all of this. it's now $.78. it was as low as $.58 oh it has had a huge comeback. what kind of a role is that playing? ,> putting up a five-year chart you can see it has traveled from parity with the u.s. dollar to about $.78. everything is on sale from a global perspective when hunting for real estate. canada is on sale and that plays into it. how much of role is competition within the hotel industry playing? there is competition but also
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consolidation. consolidation is a big piece of it as blackstone told us they are the biggest shareholder of hilton but business travelers 11 relationship with one hotel. it seems to be the case that there are buyers on the lookout to fold into these global chains. alix: thanks very much. up, we will hear more from our exclusive interview with andrew left and why chemura is his latest target. ♪
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alix: i want to confirm that elliott management has taken a state in -- taken a stake in pulte group.
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that company was spiking as much as 3% -- actually 5% on the report earlier today. scarlet: it is currently up about 4.4%. we want to also bring in our interview with andrew left who is a short seller that was digging around valeant. whichw target is chemura he is calling a bankruptcy waiting to happen. internal -- do i have internal e-mails saying let's design a company that goes bankrupt? absolutely not. there are companies that have been on the same track to go bankrupt. i can look at companies that is too late -- two highly levered for the ebit.
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i don't have enough it -- a nefarious plot. when you look at the structure of it, you can tell they designed this to go bankrupt. you have motive and structure in my opinion. joe: you point out that they have an extraordinary amount of debt load relative to earnings versus their peers. you say they have this huge potential legal liability that's more than understood area explain why the legal liability is perhaps more than investors are anticipating. what does that legal liability stem from? a's are mainstream news. it's what is used by dupont to make teflon for 30 years. dupont has known this has been a danger to people for the past 25 years. yet they continue to use it and dump it in -- around the plants
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where was manufactured. has absorbed that liability from dupont. they have told dupont we will deal with this liability and that includes the cleanup and and thecal monitoring compensatory damages, punitive damages, and legal fees. everything involved with dealing with this pfoa crisis. they have only accounted for the washington works project. in west virginia, you are talking about that is the tip of the iceberg. we also have plants reaching the netherland and japan. estimates are four or $5 billion. we don't know where to put the estimates on the potential damages but we know they are above the $25 million that is being put on the balance sheet by chemours. some analysts are looking
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at $500 million but you got to five ilion dollars and potentially more. what happens if that number is not reached? >> most people are just looking at the washington works project. they only see what's in front of them. no one is factoring in more punitive damages. if you read the citroen report and you do any of the work you will see and the great research and articles that have been written like from the huffington post or new york times magazine, there is actual intent by dupont. it new for years they were poisoning the environment around them. not eliminate punitive damages. the $500 million is a moderate number. alix: let's look at a three-day stock iswhat chemours look like since a report came out. there was a big drop but only down about 4%.
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joe: we asked him what the bullcase was. i think it was single digits. if you think the liability he is stating is not as they from a conventional metric standpoint, it's a cheap stock. scarlet: it was a straightforward argument against the stock which against valeant was not as clear. alix: coming up today, we will speak to the associate professor of economics at bard college. she says basic income is a bad idea and instead, the government should guarantee everyone a job. scarlet: some would think that's a bad idea. this is bloomberg markets. ♪
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it is 2 p.m. in new york, 7:00 a.m. in london. alix: welcome to "bloomberg markets." ♪
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alix: swinging higher with the s&p touching its highest level since july of last year. the dow briefly passing 1800. commodities are gaining and we will be looking at the commodities-based etf. >> outrages growing over donald trump's latest comments about the mexican heritage of a judge. the gop is getting ready to take on hillary clinton. betty: can general motors make inroads against tesla? toy barra discusses plans bring things to the masses before the model three. markets


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