tv Bloomberg Go Bloomberg June 10, 2016 7:00am-10:01am EDT
, and the three word to tweet that sent the internet into a frenzy. longest streak since 2014. ♪ >> welcome to bloomberg . jonathan ferro is off this week, but we have a great program to close out the week. >> we have voices that can shed light on global markets. the chairman of bullets advisers will speak about central-bank policy, choices and politics.
from thelso hear former ecb president. europe's economic performance under the microscope. looking at how costly of brexit could be for investors. and the latest on from versus clinton. let's started off with the rush into government bonds winding no reversing today. where we are with prominent investors and where we might be going. was here, which brings the question if we are with heading into negative territory in the u.s.? >> we are seeing record lows, as .ou say to fea everybody is buying bonds.
if everybody is in the same trade, the potential for disaster decides to get bigger and bigger. bad job report, you buy treasuries. find a safe place to park your cash until you know what is going to happen. moving intorybody the bond market, short term paper is becoming more expensive and harder to get. investors are being pushed out the yield curve. we have the impact on longer-term bonds. the citibank macro risk indicator, how concerned people are about where things are going short but thely longer-term, investors are concerned. it is like a supernova, a star that is about to explode. >> we look ahead to next week
where we do get the fed meeting here at no expectation of any movement next week, but what is the market waiting for to take the risk off trade out of the picture? >> the market is waiting for good news. ritzr the news that the are not leaving the eu, or that the u.s. economy is doing better. it would only take a small move in bond yields for people to feel a lot of pain. expect the fed to wait until we get better news. >> thank you. bear's are growling in europe and stock investors are going to run for the exit if u.k. voters decide to leave the european union. let's get more from anna edwards and london >>. . riske report by the bottling company working out a simulation of what could happen.
they say we could see stocks lose a quarter of their value. that is partly because we have not seen the stock market reacting in the way we have seen the pound for pound volatility in perl regular reacting in the run-up. the story.tly stocks have been protected by the weakness we have seen in the pound and rebounding commodities, because we have so many commodity related mining companies in london. it is just one report, but it has a fairly stunning h eadline. >> i want you to tell us about the debate that occurred last night, less -- yesterday about this. we have had a series of tv debates about this in the run up to june 23 on u.k. tv. we saw the most recognizable face the former mayor of london,
we saw his motivation been called into question. is he more interested in getting of thee as the leader conservative party and the next prime minister in u.k.? that is the allegation, and for his part he was defending what he sees as the prospects today side to leave the eu. the authority i'm inclined to trust is our prime minister, david cameron, who only a few months ago before the whole project kicked in, was very .lear we have a great future. under anyare india doubt, the german finance minister was giving a interview
.oday >> thank you very much. now the latest on the race for the white house. let's bring in our washington bureau chief with the very latest. it looks like they may be getting hillary together with bernie sanders. >> hillary picked up two big endorsements yesterday. but the one that may mean more significant is elizabeth warren. the senator from massachusetts who cannot out and said to get in this race. outside of bernie sanders, elizabeth warren is the face of economic populism in america. targeting the banks, reducing income inequality. to can help hillary clinton
-- raising coming? this is one that shows how fundamentally disruptive 2016 is. in an interview earlier this need to raiseot $500 million for making edition do it on the cheap to get elected president. that is a real big shift most people the money that will be $1.1d to win this campaign billion. we will find out in 2016, can he win the white house on the cheap? t now regarded julie hyman for a look at the markets. of course we have the dynamics of central banks in place today. we have a risk off scenario. even more magnitude than yesterday. germany plunging by 2%.
cautious are feeling ahead of central banks next week. the vote. you get this trepidation going into the weekend. that goes today. 10677 for the buying of japanese yen. the pound, once again has been volatile. bond yields fall across the people are buying sovereign debt as they are going out of equities. we are seeing the continuing selloff there this morning. here,sides all of this the russian yield is falling in the currency as volatile as well. that is because the russian central bank account interest rates today going to 11%. this is a hotly debated move.
it was something they thought would happen. the country had been on a rate reduction path last summer. then the collapse in commodity prices confident. seeing the drop off in the ruble after that happened. >> let's get an update of what is making headlines outside the world of business. here's bloomberg first word news. ramy: first we had to the south pacific and teams hunting for that malaysian airlines are. the discoveries suggests that the wreckage may be spread out over 6200 miles. oft would be the first part the plane found east of the main search zone in the southern indian ocean. it disappeared more than two years ago. the u.s. house has passed a
bipartisan bill aimed at changing their debt crisis. it still has to be passed by the senate. the islands government has said it does not have that money. 2016 football to reach its get underway today in france. trash that isover piling up because of a strike by garbage workers. they will try to make sure that fans can get to the transport. david: tijuana. mario draghi's new corporate bond buying program. more messages that answers. how this is warping values.
>> welcome back to bloomberg . here is a look at the futures are mirroring what is happening overseas. you can see the dow has all of these. europe is weaker, and in some cases it is universal. it is not just one sector, it is materials, financials, energy. a risk off trading session. it has been three days since the ecb started buying corporate bonds. we are waiting to see what sort .n the credit markets this is abnormal behavior by a government.
when we learned so far about what is happening in the market? >> there has been this distortion that happened way ahead of when they started buying bonds. people knew they would start to buy these bonds and there was so much speculation of research that went into what could it potentially by? >the ecb have the sense that thy would keep this specific purchase quiet. reveal sayingld we are buying and these are the general sectors, but within hours we knew a specific bond, we knew this sense, the rating. we knew everything about it. the first thing they do is an tallying -- an italian telephone company. >> and they are buying junk bonds. this is supposed to be an grade program. but they are being really aggressive they want to frontload their purchases before
the summer slower month. they want to get out there in shock and all. when it is doing is creating more concern among investors. >> david mario draghi look at goldman sachs? are they looking for altruism and the market? the goal is to make money. saying this is what they're going to buy, let's sell it to them. how does he expect us to end ?ell >> it seems like the idea is let's crowd out investors from the safer investments pretty broadly. they going to take risks, but they who love the smaller companies and say let's get this economy going, give money to the companies actually doing the increases in hiring. does that really work? >> is there any evidence that
that has ever worked before? >> look at what happened with the u.s. with u.s. treasuries. they can borrow money to invest. that is the theory. they are trying to help corporations get access to capital more inexpensively. why is that run? yes, they are getting financing more cheaply, but what are they doing with that financing? they are buying back stock or increasing their dividends. you have companies that are issuing debt. do they need more money? these investment-grade companies really need a boost by half of a percentage point. >> when we have bill gross
saying there is a supernova effect coming, you see sovereigns going down to zero. knowing corporate going down to zero. ?hy would we transfer >> this was really interesting --by the policy of the with history replete itself. to defend them, it has not blown up yet. it is unclear what the catalyst could be. [laughter] >> you say this is a something that we are waiting on since 2007, it hasn't shown up yet. [laughter] >> are we seeing increased inflation expectations? no. they showed their expectations
for consumer wages, they are not . >> if you give patient too much blood that are, eventually it will die. >> that is the argument. >> when will we get a report card? he would say we just started, don't judge yes. we >> they something will start posting in july with an actual list of what they own. the question is will they buy enough? if purchases are too small, it will not have the effect that they wanted. >> with respect to their sovereign debt purchases, it does seem like they might be struggling to buy enough
portuguese and irish debt. they have very human markets, you have markets that are not that liquid and not that big. >> but it makes your job so much more interesting. thank you. explosion.ead, the a massive explosion of a giant star is a supernova. coming up, or low interest rates destroying the modern financial system? ♪
it is time now from bloomberg trends, the top stories leaders are you viewing on bloomberg. >> we are starting to see risk modeling in the event of a brexit. at what wouldding happen if european equities and , one denominated equities of the manufacturers plummets. they are not pricing it in in either direction. leave. of a it will be a very bad day on june 24. >> a lot of the percentages are that it will not happen. want to look at
where the money is. but there is a fair amount of sophisticated polling that has indicated it relatively unlikely. >> let's hope so. so my trend, it is actually deutsche bank. it has more bad news. there is a whistleblower involved. they are in trouble because of not taking the losses they .hould have the back security >> one issue that stocks the --k's control control issues internal control issues. you have to wonder if they have really changed the culture, and it is the way they incentivized or not. it is a concern. >> legal department's are working overtime. john has a tough job because if you did not have all of these writers, he has issues with his house.
that, the sno there's no start. hope he does every job. >> keeping your job, how about keeping your reputation? phil mickelson in the world of golf. we know that he has been linked ofa variety grumbling situations. mann monday in california a was sentenced to prison for a year and a day, suspected of blundering. -- laundering. >> this is the second one in
global growth. the fed on hold. i want to show you a little bit of our losing picture but overseas equities and if you take a look drilling into the if it's way, it's a material climb so you're seeing energy stocks. it's everywhere. sam? >> thank you ahandsa. we are about two hours away from opening bell. investors are buying up bonds around the world sending interest rates tumbling to record levels. and described volatility in the british pound sterling as the battle of britain's future batters investors. and people with knowledge of the situation say the securities and exchanges commission is being helped by a whistleblower in a post crisis mortgage-trading business. eanwhile let's get news from
-- >> the obama administration is the verge of giving military more authority. afghan troops had been struggling in their fight against the table. and the closest election in peru's history, pablo the former finance minister had a little bit more than 50% of the vote. the election office is expected to make that official in the next few days. and powered by our journalists in our news bureaus around the world. >> thanks, ramy. >> now we take a look at how george sore rose's predictions played out. tom keene joins us. as you know, he certainly went short on the world and this is
piece predicting what he did in the past. his so far rose fund fund cut ts stock holdings by 37% and index hen the s&p 500 has returned 3.1%. >> well, i'm not going to take shots at sore rose. you e the -- i like that re wearing global macroblue. what's interesting about those bets is you bet the piece but don't know the end. the thing that they miss is all the investors understand they don't know the when.
he doesn't know when he gets the when of his gloom and his caution. >> so take caution for example. he said i'm worried about china. i'm going to go short on china. it hasn't gone nearly as bad as he thought. your point is, wait. tom: just wait. waiting is a big part of it. but we have in the bloomberg story bets, by definition if some of those don't work out, a global macrofund, what it's doing is it's a lot more sophisticated than the fwobal moving parts. now he can be -- >> but the gold has gone up more. tom: it's gone up some 37%. my point is he can say i'm cautious about u.s. equities and take that belief and that
position knowing he has got time for the win for the "when" to work out. >> that raises the attention as we pay attention to george soros who is a very smart man, should we be paying attention the fact that he thinks the world -- is going down. are we jow reacting to what he is saying? tom: i think we are overreporting the global macrocontinuum. if all of us invested by mr. sore rose, we would be in trouble because that's different so if he has gloom, does that mean i go to cash? there's lots of proof that would be a dangerous game plan. >> and there was the bet early that he would bet often the
yen. >> i would say oil is the toughest mathematical detail. so if you have a stronger-weaker yen bet, mr. sore rose is extremely cautious on japan. maybe he has a weak yen bet, and as you know, it's gone completely the other way. m: well, it's called an ty ony momics. whether it's a sophistication blunt soros or some more instrument of mr. bass, it's -- > he went long on argentinea which is in default. tom: well you get a series of macrobets and you go in knowing you will be wrong on some and it's ok to be wrong on a global macrobet.
i hope -- i think your global macroblue is better than my global macroblue. dave: oh, no. ours is double-breasted. >> janus capital tweeting from the fund manager bill gross. it's the lowest it's been in -- this is a super nova that will explode one day. he managing director of -- and credit strategist. what is he talking about here? as i understand it you would buy a negative yield bond. does that mean the world is a wash for people who think we are headed into a deflation narrow period here? >> the impact on the economy is
insitous because it takes away from the -- what does the fed do to savers? because savers get punished. if the problem is low growth because of low demand, they are not going to invest more just because capital is cheap. and in the event that they doing vest because there's pressure to produce. s&p 500 last year came to mind, the difference in al lowe indicating -- not only that, in certain cases, you get paid toboro. in the long run i think that's really bad for all of us. >> so in this environment, what's the best investment? >> that's hard to say. there are very few low-hanging fruit. because of this environment
because people are driven by fear, you see gap down and gap up, what's important is a, to have a long-term perspective and b to be able to differentiate companies that are quality companies. i've talked about a lack of discipline and the ability to differentiate -- it's going to give us the real task outside his multial of fear. >> where does that leave high yield in terms of our relative appeal? the risk of it? >> i expect it to come down as well, because it's going to move along with investment grade. e already see that low impact. when people rush into things, there will be period when there
are fears in the market and you're going to see -- >> because there has been, as -- does a rush into spread become less relevant and he absolute number become more relevant? >> there is concern about the absolute number. and i think the spread is less relevant, the lower we come to zero. >> what is the -- so any kind of debt? >> however, there are opportunities in smaller issuers and smaller issue nts. if you break down credit indices and they provide a not so great mirror into the credit world, because once you break it down -- smaller issue nts
and issuers are still unloved because not many people have the ability to -- to o it must be difficult find opportunities, where are you making money? where have you made money in the past year? >> so our ability to look through smaller issuers, if anything we are graphed to see the funnelled ever fundamentals are starting to get rewarded. it's going to take time, and i think for us patience is a currency not many of us have, but if you have the ability to stick to your convictions -- >> if you have a smaller fund, u need so does that start to squeeze your ability to -- >> we believe small can be
beautiful. edge vest in smaller head h fund managers. >> on the opposite side of opportunity, are you concerned that u.s. -- are taking on -- >> yes and no. in croorn places, yes, and certainly in investment grade we're seeing certain ideas being piled up. but the debt is so cheap that their cost of servicing that debt is lower. on the other hand, in the long run nothing really solves your problem like growth. so your doomsday is delayed because you don't have this interest payment, so to speak. however, that problem is resolved. > when we see massive stimulus
it's either inflation that you want to happen or it's what you want and hard to predict. in this case have we gone fast point where it's gone fast point of hyper inflation -- >> i think what he is talking about is more like long fizzle rather than one big bang explosion. the se here -- sort of republic style. i don't see this happening, however, it's going to be a low bleed where the lack of opportunity continues to -- borrowers and -- >> as they come down. there's the german government. what struck me is the u.k. and speaking latively
became -- but if you follow me there's still that spread. when do you see anything happening and narrowing the spread between the u.k. and theu. s. and the rest of the world? >> the combination between sterling weakening and the flight to quality, that could be the event that brings that gap closer. with you investing brecks it? >> we tend to be fundamental investors so we don't make bets on what we think macroeconomically is going to happen. that's not our skill set. -- ere you surprised that >> it was a very aggressive move on chairman draghi's part. >> and do you think it's the right move? >> yes and no.
to a certain extent, i think he is under a lot of pressure politically, because there have been expectations in the past and the market felt he didn't deliver. so from that angle, it was the right move, however, my personal sense is it might be a little bit too little, too late. >> thank you. >> coming up, the manic e.t.f.'s could be the next big thing but for 2340u most are scratching their heads. aiming to profit from fighting obesity. find out what other e.t.f.'s have investors rolling their eyes when "go" returns. ♪
>> this is bloomberg go, i'm amandatory avement coming up in the next hour of bloomberg go, tay with us. funds once ge exotic now pretty common place, but what e.t.f.'s track common at stments and it's aimed one of america's most widespread issues, obesity. joining us now is bloomberg's senior etf analyst. erik why don't you begin and 's l us what these new e.t.f. are trying to do other than
take your money? >> vanguard and schwab have done a great job of having low-cost market indices, and that's great. most investors buy those, but investors are saying how can we -- because there's many who want to outperform or invest, we've got fitness e.t.f.'s and those widely mocked on twitter. so there's a lot of outlandish ideas. there are 20 that have been launched. and the number one with the ost assets are -- which invest in companies led by women. so out of about every 20 launched, there's about 20 hit. so it's like throwing spaghetti
at the wall. you don't know what's going to it and stick and what's not. >> is this a marketing device? etf -- a whisky >> if you look at the obesity etf and will remember long-term etf they will talk about fundamentals so they are based on legit concepts. it's just the name can sound a little gimmicky. >> the question is where do these fit? hen it gets to gimmicky -- what's your take about how good they are as far as investments? >> going back to erik, there's all sorts of skepticism
regarding managers. you look at a company like janus. another active fund manager. they are saying how can we, late in the game, get on this passive e.t.f. business. and theme atic. again, it's a great conversation piece. you out to lunch at cracker barrel, of course you're going beau t to invest in the obesity e.t.f. after that. and all of wall street -- >> gow they tend to be good investments? that's the question. >> we'll see. to go back to what's in these etfs. if you go back to the obesity etfs, nobodyo minor 'tis which
makes insulin and treatment for diabetes, different things. there's a bunch of other countries that have experimental drug makers. that may be risky. but in any etf there's a concentration risk because you're betting on one idea but o me it struck me as extremely -- >> do we have a sense that they are putting money in -- >> she, the gender diversity, and that was for one pension fund client. but back to mike's point, i have a rule which is look at your overlap. if it's companies you already -- in spy or -- just know there's -- nobody, none of the etf's -- there you were getting
so this is volatility. >> this is volatility? >> yes. it's the highest it's been since 2009. here's the six-month decline. what's interesting is now we are one month or less out from the vote. so the volatility will be high. > what about stocks? julie: stocks, not seeing it to the same degree. so what we are looking at here s essentially the two relative things we are looking at, the vicks. >> and it bounces around now but nothing come padres to february or last august. >> yes. so it's interesting that it's really concentrated in the pounds. not seing in i in stocks and as anna told us earlier.
it's indeed the u.k. votes to leave. >> and people think when it comes to the ftse, when you talk to english or british stocks, if it goes down on brexit, there might be an up side to the british companies going down. julie: there's different views on how realistic it is that there will be a lead vote. >> or trading to make money. >> trading zwrouths make money. imagine that. that does it for the first hour of "go." coming up, jean clauds trichet and europe's economic performance. that's next on bloomberg "go." ♪
next five months to come? >> and a two-week notice. followed by britain's brexit vote. are the next 14 days filled with too much risk and not enough reward? across the world, they sure hink so. amanda: welcome to the second hour of bloomberg "go." we are now 90 minutes away from the open, and it sure does look like we are back to risk trading. eric: yes. and the government bonds show no signs of mercy. >> coming up in this hour we are going to help guide you through this all. we have steve ratner, the chairman of wil it advisors.
he will be speaking of markets and politics. we are also going to be hearing from the former european bank president jean-claude trichet. wait until you hear about what he says about a possible brexit vote. anda: first let's go to cara rick adone mix. megan murphy is in washington. michele cask can i in new york and caroline conan in paris as strikes threaten to disrupt a major soccer tournament. eric: we begin with the rush in government bonds showing no signs of abating. all across the globe carl rick adonna tells us where we are and where some prominent investors may be afraid of where we are headed. all right. tell us what's going on in
global credit markets and those big-time investors. >> well there's two stories here. one is slower global growth and inflation should lower warrant yields on government bonds, but secondly, we have government banks gobbling up stall government supply, so there's a real high level of demand that's driving yeelts lower as across the board in europe we are seeing such low government bond yields. you're seeing a strong international demand for u.s. government securities which was reflected in this year's auction results. eric: well looking ahead to this week,? carl: well, they are not going to do much of anything. the real question will be how much they -- how strongly they
adhere to their previous plan of two rate hikes this year. if they stick to the rate hike plan that means very much that july could be a higher probability than the 18-20% odds that the markets are currently ascribing to that meeting. i don't think the feds are saying with those hikes that it's really a viable option. we see how fragile markets are. and that could very much have implications for market sentiment and voter sentiment come the 8th. >> thank you. >> now, for the latest on the race to the white house. a big endorsement for hillary and trump fires back. so megan, it looks like hillary is getting things to fall into place. she has the obama endorse
appellant and the endorsement from elizabeth warren. what's next? >> well, we just had news crossing this morning that elizabeth warren and senator hillary clinton will be meeting today. yes, she picked up the endorsement of the president but elizabeth warren is important because of her support for bernie sanders that hillary clinton really wants to mobilize behind her. we have to remember that bernie sanders is still in this race hillary he fact that has enough of the votes. >> how far behind is me? >> if donald trump can't mount
but it may have been this week that phish first his controversial comments about a judge and he struggled in fundraising. in going to try to reset new hampshire in which he promised to take down her ties to banks and fund raising. but it is a reminder that as mump as hillary clinton has had a great week and when you have donald trump who is willing to cross every line in the book, there's no telling what can happen. >> designed to stem puerto rico's worsening debt crisis. michele, i want to start with whether this is enough, whether this is the next step that needed to happen for puerto rico. michele: no one really love
this is bill, but the alternative to have nothing in place would have been worse because that would have meant that puerto rico would have had no framework to restructure its debt and no control board in place to oversee puerto rico's budget. this still needs to go through the senate but we are hearing the senate does plan to take it up within the next few weeks. amanda: and we know from jack lew and others that this is what was recommended for puerto rico. can you catch us up on what needs to happen next inside michelle kaske? michelle: sure. what the government is saying is that he can't make the july 1st payment on general obligations. that would be the first time that the island is defaulting
on its general obligation debt which has the constitutional pledge of repayment, and it would be the first time that a tate like -- that a state-like borrower is defalmting on those since arkansas did it during the great depression. >> now let's turn to a major soccer tournament but the euro 2016 cup faces a lot of challenges not just a team. in paris with more care lean is there. tell us more and what does a welcome to france mean today? >> on this opening day, the challenges are many. first, the security challenge, as many as 100,000 security fficers will be patrolling the
2.9 million expected. the second challenge of course are the strikes. they are still going on in the air. the french airline striking from tomorrow until tuesday. and the train also the train director has said supporters for the opening match tonight should arrive three hours before the game and in the streets as you can see even behind me, the piles of garbage in the street, the treatment centers have been on strike for about 10 days. not very nice of course for the mage of france especially when the floods leave behind mud and debris. >> i wonder if you could turn our attention to french politics and the potential contenders for the presidency. >> the president aland needs
this to be a success. he is still at the lowest in the polls. the good news for him is that the euro 2016 could have a positive economy impact for france. as much as $137b94 billion according to the organizers. of course, he needs that, and france if they make it to the finals, just like they won the world cup in 1998, if they won this, it could be a boost for his popularity. hess a soccer fan. he wanted to be a striker, but he said he wasn't good enough, so he jumped to politics. >> thank you caroline reporting from paris. w making headlines outside politics we turn to ramy inocencio. ramy: the discovery off the coast of the bowing 757 may be
spread out over 262 miles, if so, that would be the first debris found in the search zone, the plane disappeared more than two years ago. and one of the most expensive natural disasters in canada's history is expected to be a real estate boom. more than 200,000 homes were damaged by the wildfire and rebuilding may provide a $785 million boost to alberta's economy. powered by our journalists and more than 150 news bureaus around the world. i'm ramy inocencio. amanda: thanks ramy. could being prudent have unintended consequences? steven ratner is here, chairman of wil it advisors. he will come on set after this. ♪
david: this is bloomberg "go." 'm david westen. steve rattner, wil lit advisor's chairman is with us. steve, if this does go bad, how does this go bad? steve: well, i look at interest rates as more a flashing yellow as opposed to a red light. i think interest rates are something the central bank has done to avoid something like this happening. companies don't die of old age but they do. you get imbalances in the
system and one thing leads to another and next thing you know you're in a recession and they never see recessions coming. so how does this go bad? you have imbalances, excess savings and structural problems. china has its debt problems and it all takes a toll. >> how does this play out? the value of these bonds going up and up and up as the yields go down and down and down. hen you've lost 10%-20% of the -- steve: well, that would be a movement in interest rates that i think is unprecedented in history. david: a supernova? steve: well, yes, a supernova. but i think that's highly
unlikely. the only time think that would of them got ne spooked and took all their money out. >> but you will lose money if and when we see rates turned around, right? with every percentage point higher you lose -- steve: this obviously makes no sense which is why you're asking me, why would any investor buy a 50-year u.k. built and regardless of what they say they want inflation to be? in other words, you are guaranteed to lose money if the bank succeeds. >> why are they doing it then? >> because they have no place else to put their money and athletes an excess safings in the world. >> that sounds to me like something dangerous. when we divorce the realities of the transaction from what the market is trading at,
that's a dangerous situation and also this is a world we have never been in, right? so we don't know how it plays. steve: well as one said, things that can't go on forever, don't. so this is part of a situation in which governments in the developed world certainly have failed to exercise their responsibilities. they failed to have prudent fiscal policies and failed to have structural forms and they are doing the best they can, playing the best hand they can and i think doing the right thing. i think creating these negative interest rates was unfortunately necessary but it's not the right way to run a ailroad. david: that railroad is getting less valuable every day. then you are devaluing the actual value of thes a set. steve: they are not de valuing. >> well, you are telling me
money is basically worthless. steve: i'm not making you buy this stuff. these people are -- >> is that really true? because a lot of people have to buy government paper and triple-a paper and they would rather have -- steve: those so-called people are investors who give their money to a money manager and say i want you to buy triple-a paper and this or this so every one of those investors is making the decision to -- >> i just want to ask you, when the mortgage crisis was happening in the lead up to it we didn't know what was going to happen. everybody just said, this doesn't feel right. so we don't know exactly what the cause is, give us some predictions. >> i agreed with everything you said until you said the central banks are the cause.
i think the central banks are the people trying to fix it. you want the scenario of what could happen? >> yes. steve: well for instance george soros is worried about china. bill gross is worried about the negative interest rates and what that implies. there are many things, but i think the most probable scenario is we muddle along and the second most probable thing s we slide into a recession. david: coming up, we will talk about the battle for the white house as clinton and trump exchange cheap shots on twitter. is this just the beginning on what could be an ugly and combative five months? ♪
up endorsements. president obama's and elizabeth warren's yesterday. and heavyweight c.e. o.'s revealing how the rest of the world views a trump presidency. steve rattner, advisor is still with us. you travel around the world. you know these people. how nervous are they about trump? steve: i got a text the other day with a former partner of mine whom i communicate with every five years or so and he said, what the hell is going on? he just couldn't believe how we could nominate someone like trump. of course they had bill sconey and plenty of narco wacko birds of their own but they are now kind of curious as to how we ended up with one. david: do they know nothing about american history?
we had barry goldwater running against lyndon johnson. steve: barry goldwater was five times more kmp tent than donald trump. >> but we don't vote for resumes. steve: fine. avid: in politics you can't -- lose to someone unless they are better than you. we had jack welch on and listen to what he had to say. jack: i'll vote for donald trump. >> you will? jack: absolutely. not a question. i would vote for just about any human being against hillary clinton. david: now, steve that, might strike you as extreme but i've run across many business leaders who say they will change anything we have.
that's a challenge for hillary clinton. how does she overcome that? steve: well for every jack welch, i've talked to five of what i call sensible republicans who would have supported jeb bush or basically say i don't love hillary clinton, but there's no way i'm going to vote for donald trump and i owe it. t's my responsibility to vote. amanda: on that front from an investing point of view does this election matter than most? in terms of how you position ahead of it? steve: i think it's a little premature. if you look back in history, it's not done well. maybe that's gist because people are nervous and pull back as the election
approaches. i am a hillary clinton supporter and i don't have a lot of time for trump as a president. i i thought he could win would be pretty scared as an investor. mean 30% tax on imports from china and a wall between us and mexico? i mean, i would be pretty scared. >> so what do you recommend to clients? >> well, i don't recommend anything to clients. we are lerment investors. i'm with warn buffett and heard him on bloomberg radio as i was getting drosed re-assuring everybody in the face of everything we have been talking about that in fact america is still the best place and a great place to invest in.
we look a long way down the road and still see a reasonable amount of growth. the big thing we have right now is a lack of productivity growth. if you want something scary to worry about, worry about that. david: and that's not because of a lack of access to capitals. how concerned where you that we have run out of ideas? steve: well driverless cars, there's 6 million people who drive trucks in this country. you say how do they get other jobs? but the fact is we couldn't get much more productive if something like that were to occur. certainly more investment is key. amanda: and to bastardize churchill, is it still the best place to invest? david: the least worst?
the german dax down 2.3%. individual stocks across the board led by big ones like deutsche bank. go andgo into debt, it see a lot of green. set new two-year records. everyone rushing into those jgb's. also, we have given back to the gains earlier in the week, but particularly look at wti crude, dropping down below that $50 mark. that is the asset review. let's go over to amanda. amanda: thank you. one hour away from the opening bell. here is what you need to know. ann kuster's are buying bonds around the world. interest-rate to record lows. volatilitydescribe in the british pound and sterling at several years high. and people with knowledge of the situation say that the sec is
being helped by whistleblower in an investigation of deutsche bank's post crisis mortgage trading business. let's find out what is making headlines with ramy. passedhe u.s. house has a bipartisan bill aimed at solving puerto rico's debt crisis. it would create an oversight board to restructure u.s. territories. bystill has to get passed the senate. puerto rico bases in july won the deadline for $2 billion debt payment. the government says they do not have the money. singapore is prepared to prosecute indonesian companies responsible for polluting its air. they have ordered six suppliers to one of the world's largest paper producers to describe what they are doing to prevent fires on their land. hazardous ash clouds last year. bill clinton will be among the memorial service for mohammed ali. he will be buried in louisville, kentucky.
yesterday, thousands more and the boxing champion at the prayer service. global news and more than 150 news bureaus around the world. thank you. not to today's morning meeting, where we hear what key banks are looking up. in december 2013, jeffries created a franchised six list, a group of buy rated stocks, where analysts had a high conviction about performance. the list has returned nearly 30%. joining us now is t.j. born. welcome, mr. thorton. tell us about this list. how do you pick the stocks. mr. thorton: it is a bottoms up list. we look for where we have some kind of different view, not necessarily out of consensus ideas, but numbers off the street, which is generally the case. and really have some survey work
or anything else that gives this convention -- conviction. have 22 company. your latest is murphy usa, tell us about the company and why did you add it? mr. thornton: it is an interesting stock to talk about given some minor carnage in the market, but this is all domestic. they have gas stations and over 8% of the gas stations are located next to walmarts. kind of eight no fruit convenience store -- kind of a store.ls convenience they offer particularly good prices. as aexecuted very well spinoff or murphy oil, and receive their ability to cut front and welabor think that is just starting. they have a contract with walmart that we think can help the top lending and help when it comes to merchandise. >> i wondered if you could tell
us about the dish networks that was added to the franchise list. what do you think is valuable? our people to bearish on the stock? mr. thornton: that is only added we did the update at the end of may. we had some unfortunate timing on that one. the idea is that we think the spectrum is valued at about 2x the implied value the market's giving it, and we also think that people are not that excited about the paid tv business and probably rightfully so. there are probably more values in that paid tv business than people give credit for and there is strategic value in that as well with potentially some partners coming down the line. amanda: just 22 names, high conviction. how often do you rotate things in and out? you recently took wisdom tree out. why did you do that and what is the turn on this? mr. thornton: the turnover on the list has been about 75%, so it is not major.
when we get a good idea, i would say that averages once every six weeks or so. wisdom tree -- we want to make sure all the names on the list are names that we can recommend right now. wisdomtree is really interesting. we really like that etf business taking share. we think there is potentially something strategic that can happen with them down the line, but in short-term, it really gets knocked around by what happens in europe, japan because those are two of the big etf's for them and it is hard for them to have much convention -- conviction in the short-term and that is why we took it off but we like the story. that not fully valued already why do think there is upside there? mr. thornton: one thing that happened with alphabet recently is their first quarter was not great. the stock is alive this year and had a great year in 2015, so we were glad to have it then. between the lag that we have seen this year and the quarter not been great, we think there
is a lot of value. quarter and% in the this thing is not wildly valued even that kind of growth that they are putting up. david: thanks. that is t.j. thornton. jeffries managing director. pimm: coming close to in 11th month high, s&p 500, well, taking a pause. for more, let's go to the next weeks fed reserve meeting and get some thoughts from the president of bianco research from chicago. a pleasure. what do you think all, not necessarily in each meeting, but you're talking about interest rates. when do you think they will raise interest rates? ask,i think you have to what is the driver of interest rates. over the last year to 18 months, it has shifted and now the market believes it is in control of the fed. it will tell the fed went to
raise rates or not to raise rates. it sold the fed not to raise rates in september or in august for september and they did not and they told him it was ok in december and they told him it was not ok in june, so when will the market be ready to tell the fed to raise rates? function to your wrip and bloomberg, it is december and that is the critical driver. when will the market did the fed permission to do it? amanda: in terms of what the fed is looking at, we have seen data points that feel weak. thatard from yellen and the job day that they are looking past it and not overreacting to it, but you think that the fed needs to get in front of further weakness? if they want to get anyone close to talk zero, near normal, that they should move in case the economy gets weaker? i know that is counterintuitive, but there is a recession and noah to go, that is a real problem. jim: there is always the
question of what the fed will do and what the fed should do. i think they should raise rates. i think abnormally low grades is acting as the retardant on the economy and not helping things. the problem is getting back to the markets. if the fed forced the hand and said, we will raise rates, we have to get back to normal, they risk a selloff in the stock market, risk assets, and the fed does not want that. they call it tightening financial investments and they worry about it and that is why they need the market to be in board with them. the market is not ready to have them move, so it looks like it is off the table. june looks increasingly unlikely at 18%. wpria: you mentioned work go. it is an interesting function to give insight. we start to get above 50% of probability in december, but 36% in september -- when you see the market will signal, that seems a
probability that can change a othersed on things like economic data. jim: absolutely. just because it is 36 percent now doesn't mean it will stay there. the data will come out and sell offense speak. just like we saw starting in late may, the fed will no doubt come out and start a serious speech saying, we will raise rates to see if the market buys into it. if they did not this time around, but maybe he will . if you look at the data, check back because it always changes, especially after data releases. brexit is critically important in that anything pops up along the way, we look to that to see the market changes its opinion. david: you have done a study of how accurate the fed's fund future rates becomes an as you get closer to the day, it approaches 100% accuracy according to your work. at what point do you really start to rely on these numbers? jim: you are right. the have been 32 rate hikes since 1994 when the fed started
targeting and it has pretty good all 32 of those rate hikes two weeks in advance. i say somewhere around three weeks to four weeks before the meeting. for the july meeting, that is at the beginning of july, that is when you want to pay attention to it. early on, the reason it was so accurate is the fed was telegraphing, telling the market what it was going to do, but along the way, the market figured out the reason they are telegraphing it is they need is on board. if we decide we don't want to price it in, the fed will cave and do what we want. that is why i think it has shifted over the last years but the result is the same. whatever the market discounts is what the fed will do, and they will try to influence it, but at the market does not buy it, they will not go. amanda: here's another wrinkle shows, once you get higher than the 50% probability, you see a split, is it 25 basis points or as high as 75 basis points? that is an important number to
try to understand. what is your guests on the accuracy and how quickly the fed tries to go? jim: when you look at the december odds, it is like looking at the political polls right now. they are nice to know who has a two-point lead over do not vote for six more months. the fed does not sit down for six more months and a lot can change. ,he accuracy of those numbers the only way the december odds could be accurate today is if the fix was in and the fed decided what they would do in december. they did not do that and are not doing that, so it is interesting but i would not pay too much attention to those numbers other than curiosity. pimm: thanks for joining us. jim bianco joins us from chicago. amanda: still ahead, how mario draghi's unorthodox message plays out. making sure they make an impact. will it be her brother or worse? do speak to the former fed president and wait to you hear
david: this is "bloomberg ." i am david rustin in the hewlett-packard and diverse greenroom. we would talk about this lady, new york state pension chief investment officer nikki fuller. ramy: here is your business flash. bp sold out there in the region oil fields in a $1.3 billion stock deal. bp will still hold a 30% stake and some of the oil fields are more than 40 years old. the most popular mobile messaging service in japan hopes to raise up to $1 billion in an ipo
terry that would put the corporation on track to become the years biggest market debut for a tech company. they will sell shares at a valuation of about $5.5 billion. tesla motors is the nine reports that the u.s. government is reporting -- investigating a potential safety issue. tesla says there are no problems with the cart suspension and they deny asking customers to sign a document or renting them from talking with regulators. that is your bloomberg business flash. amanda: this morning on "surveillance," jean-claude trichet spoke about central banks, the limits of monetary policy and the need to social performance europe. take a listen. jean-claude: i think that monetary policy is doing what it very, probably do in the very difficult circumstances in japan, new york and the u.s. of course, it should not be the
only game in town. the problem is that the government, the parliaments and all other partners have to do their jobs. again, a central banks cannot be the only game in town. they should go into deeper negative territory? understanding is that they are doing a lot. everybody can see that. they had taken decisions, which are difficult to take, very bold, obviously, but necessary in the circumstances. i hope very much that they will not be obliged to do more. they can take into consideration that they are counting on government and parliaments, particularly in europe. the language of the ecb is very stronger, as it should be, on the other partners governments and parliaments. this is absolutely of the essence. my working assumption is that it
will be progressively implemented, that the appropriate correction would be done by the concerned because they are all at stake, and that the central bank could be relieved a little bit. fromine: we hear that mario draghi, central bankers around the world, but that relief is not coming. do central banks need to step away and go to the meeting of their limit or will they do helicopter money? again, my working assumption is that in japan, as well as in europe, and also in all other advanced economies, appropriate i would say work would be a per -- progressively done. i cannot imagine that the other partners, particularly the executive branches, would only say the only game in town are the central banks.
a have to do all good jobs, including the job that we are not doing. this would not be correct, and this would be probably preparing the next big crisis. again, it is not my working assumption. yourwhat i love about economics is used that he does an engineer, you believe in dynamics and you took your economics degree from the university of paris, and then you invented this lovely phrase moves."and unwelcome can european banking survive these "ruvell and unwelcome moves?" moves?"ll and unwelcome do you think european markets can cleared their markets given the negative interest rates? jean-claude: first of all, i take it that this circumstance is exceptional. when i look at the level of , i feel inflation is
extremely low and in some countries, negative. we have been absolutely abnormal situation. i would say that the negative very are part of this abnormal situation in which we in plunged, and not only the eu area but also in switzerland or in sweden and also in japan, so these are extraordinary circumstances. we have to get out of that. of course, it has a lot of negative influence on many segments of markets and many a fault but it is not of the central banks. in my opinion, it is that central banks are doing what they have to do in the circumstances, taking into account that others are not doing their job. amanda: that was the former ecb five rep -- ecb president jean-claude trichet. next, mark gets
into risk off mode, and that means lots of selling. one reason for u.s. stocks stalling, more shares are adding up on that and battle of the charts. a quick look at where equity futures are trading right now. dow futures down more than 113. s and p down more than 14.5 points. and the dow index has not close with losses this big since may 17. the markets open on a lower close. ♪
board 2%. have a look at exactly what is going on. we are in a scenario where people are looking for safety. you can see what is happening to global bonds. yields are falling to new lows across the world, and that has investors jittery. we have seen record stimulus and up until now, that has been good for stocks. suddenly it is interpreted as the central banks know something we do not know and that the growth has reached worldwide and that will hurt stocks. this may be short-term, but watch these record lows around the world. indeed. thanks. now it is time for battle of the charts with joe weisenthal and julie hyman. joe, you are visiting, so what is your chart? joe: record low bond yields is what i am looking at and we focused a lot on the u.s., u.k. and japan, but it is everywhere. this is a chart going back to 2001. theave switzerland here in
louvre, japan, korea, australia, new zealand, france -- everywhere you look -- record lows. all the lines are going the same direction down into the right. a few are negative, some close to negative, but almost everywhere you look, this is a global story. it is not just in the safe havens like germany, switzerland, japan. it is in places like new zealand, australia, rants, record low bond yields around the world in an incredible bull market happening right now. david: joe wins color, but what are you looking at? julie: i am looking at the stock world and we are talking about what central banks are doing and what that means for fixed income. if you look at what has been happening, we have been having a rally in stocks. more or less since the lows last year. that means stocks are "overbought." within the s&p 500, you have about 55 stocks that qualify as
overbought according to the strength index, a momentum indicator, so 55 overbought. more overbought and oversold. the average back in 2010 was 17, so a much more overbought level than usual. what might take away is from this chart -- and i have covered this for a long time -- you can talk about fundamentals, central banks around the globe, but sometimes something comes down because the line went up too much. in other words, you can impose the fundamental logic you want on stocks or bonds or anything else, but sometimes it is just sort of momentum. as you talked about earlier, it is speculation. david: trees do not grow to the sky, simple role. julie: exactly. it is great to get the perspective that this is basically every sovereign in the world doing the same thing. amanda: that stock chart says a lot about where we are. very high levels. david: a vote for julie. pimm: i am voting for julie's
chart as well. it gives us more information. david: why should i make an enemy? i think joe's is the best looking. [laughter] i think this is a very important chart. it expands with his going on today in the equity markets. ok, that is all for the second hour of "." the new york state pension chief investment officer vicki fuller will be here. she runs the third-largest pension fund with more than $184 billion under management. ♪
suspension problems, sending the stock down. pimm: as markets close, attention turns to next week central-bank meetings with the bank of japan and the federal open market committee gathering to discuss their next moves. david: we are under 30 minutes away from the opening bell. this is "bloomberg ." i am david westin with pimm fox and amanda lang. jonathan ferro is off this week. pimm: coming up, we will speak with vicki fuller. talk about how they invested billions of dollars. amanda: let's take a look at the futures, 30 minutes away from the opening. dow has weakened slightly in the last 45 minutes and that is no
doubt as investors look to europe, where receipt 2% and two plus percent across-the-board declines. it was better here yesterday in terms of sectors holding their materials andeas, consumer are seeing a real kind of fear about what is ahead and we're waiting for the fed next week. wewe head into the weekend, will have investors on the sidelines. time for the three big stories that matter to markets now, investors sending bonds to record low yields, warning to stock investors. how it will take the first steps to restructure puerto rican debt. to discuss it all, great to have you here. why don't we start with global bonds. we have been talking about this in terms of we have seen negative brakes and a real sense of fear out in the world. are we see momentum in the way? >> part of this comes partly
vote,rexit and the brexit the uncertainty and could this be another crisis, people getting ready for this binary move? the markets were not prepared for it and now they are getting prepared. it raises a question of how low can they go and at what point is the lack of income that investors are receiving from the fixed income investments stymieing their ability and willingness to go out and invest in riskier assets? to your point about suffer growing prophecy, you have banks that are withdrawing from certain lending activities, banks that are concerned and you have consumers who are literally looking into buying a safe deposit box area literally. if you look at bank of japan, there was a great story about how actual sales of said deposit boxes increase is dramatically. amanda: and they're probably putting gold into it, something we are hearing more about when you hear consumers really
battled. driver to your portfolio manager, there is a sense that this is a grand experiment and central banks are engaging in territory that they have never seen before and we do not know the outcome. what will happen when the music stops? everyone have a chair? lisa: the inflation is really interesting that we are getting theof germany, manufacturing data has been stagnant or worse, so we are not seeing any positive impact from this. perhaps we could argue that what we would be seen would be that much worse, but frankly, everybody who i speak to, the efficacy of these programs is getting less and less and less the longer that we go on with this. up oni went to pick amanda's musical fame. go the world be singing "god save the queen" after june 23 or will they be seeing -- sinking
after the brexit vote? lisa: both songs are lovely. they can say whatever. been fickle and it is hard to read into that. people are lobbying pretty hard right now. it is a tricky situation. amanda: we do have this new poll today. saying that there is a 24% risk of equity decline in the event of a brexit. in terms of how people should be playing this, it is interesting to see everyone is on the sidelines and waiting because bedding in advance seems dangerous. lisa: let's say that it does float to exit the european union, the amount of uncertainty that it injects his already crop to it an incredible amount of lack of growth and uncertainty in that will be a problem. pimm: there has got to be a good trade somewhere. lisa: absolutely. pimm: how do you do that?
lisa: the other problem is what recourse to the central bankers have to counteract about of fear -- a bout of fear? what is the ammunition and what did they do? it would have to be some policy measure or something more concrete. that is the main concern. if you have europe, they have all guns blazing to try to stimulate the economy. if there is some kind of shock with respect to britain decided to leave the european union, how do you bring investors back to the table then? david: when you talk about the done,urvey that was either the market is not paying attention to brexit, which seems far-fetched, or it has decided it will not happen because the market otherwise would have internalized the 24% reduction already. my real question is, suppose it is not happen because the market indicates that it will not happen, what happens? to be go on with business as usual or is there a cause
because there is some addiction -- some reduction because of the risk? lisa: are we going to see kenexa this from the bond? could -- are we going to see an exit is from the bond? this is a safe haven trade and all of a sudden it that binary risk is off the table, to your point, yes, you can see a pretty massive selloff in bonds. honestly, they will be some positive or some growth and inflation at one point in europe. pimm: they'll be something to sell to mario draghi and the european central bank right why not sell it to the millions of buyers out there at the other end of the scale? [laughter] lisa: that is frightening because it seems to me that the ,mount of buying going on negative rate buying of sovereigns, it suggest people betting on deflation and if they move against the bigger investors in the world, the momentum in the other direction could be nasty. amanda: this is something i get
made fun of a lot, i will say, is there going to be a violent reversal? once you see the sense that things are in the opposite direction, why not sell everything you have? lisa: you have endless conversations like that in 2007 when you interviewed people about mortgage securities. that is where my musical chairs analogy started. amanda: i used to say, everyone thinks they are going to get a chair but it is like that. does not thinkss you are exaggerating, right? [laughter] amanda: true. david: the other story is in puerto rico. there seems to be progress being made to stem their worsening debt crisis. the house passed legislation to establish a seven-member panel to oversee the restructuring of the u.s. territory that is $70 billion in debt. the bill has not passed in the senate. this is the continuing saga of
puerto rico. are we drawing near a conclusion? senate passes the legislation, it is a new beginning. it will begin the process of restructuring their dad and getting some kind of agreement on the table and figuring out which court will be handling it and all the details. it does not actually give them a. it is not actually give them a plan. it gives them a path under which puerto rico can restructure their amount of debt, which is the greatest amount of municipal debt behind new york and california of any state in the united states. pimm: $70 billion? lisa: yes. pimm: i have a question about the board of managers that will be constituted because of the legislation. there was an item that said they gifts from the parties involved. is there ever a situation where the board will take over the finances and can accept gifts from the people involved in the future of maybe litigation?
this $70 investors in billion of bonds are a lot of institutions. they are aware of and involved ish the negotiations of who on what, so you have to imagine that there is going to be a lot of scrutiny. it would not be eight when get approach. -- it will not be a wing-it approach. david: thank you. it is time to go to julie for the markets. 1%ie: tesla down about .6 of but an interesting story developing. posts andto some blog reports, the company is being investigated by the u.s. over potential safety defects involving suspensions in the model s sedan. that thisnded itself is not happening and there is no safety defects. there were also allegations by a different blog that the company had essentially fixed the defect
in exchange for customers signing a nondisclosure agreement. tesla also says that is not happening. interesting back-and-forth that we are hearing. elsewhere, taking a look at retailers once again because urban outfitters in a filing saying that it's comparable sales are in the mid-single for theirtive range fiscal second quarter, down 8% for shares. i was in that analyst commentary and there is debate on whether it is weather related. urban outfitters had talked about negative weather effects but the weather has been improving, so there is some skepticism that it is not just part of the retail environment and specific issues that urban. finally, this is interesting here, wells fargo says that my link "took some exceptionally this yeare increases and therefore could be the next drugmaker to face scrutiny from lawmakers and patient groups as well," and that in this
wells,ment according to "you are sort of tempting fate in this sort of environment." there has argued been a lot of scrutiny for drugmakers over this issue. amanda: thanks. we look over to first word news with ramy. ramy: the obama administration will provide closed air support to afghan forces and u.s. troops will accompany afghan soldiers on the battlefield. there are almost 10,000 american troops in the country. about thed remarks likely republican nominee for president from the republican leader of the senate. mitch mcconnell tells bloomberg politics like donald trump needs to pick an experienced running mate. >> he does not know a lot about the issues. you can see that in the debates in which he has participated. it is i have argued to him privately and publicly than he ought to use a script more often. there's nothing wrong with having repaired text.
it indicates a level of seriousness that he could convey to the american people. ramy: he also says that trump's attacks on other groups must come to an end. has given the space industry the wake-up call. the spacex golf can nine rocket has landed on a barge after lunch. the head of france's space agency said that they thought it was just hot air and now europe is scrambling to come up with their own reusable rocket. global news powered by our journalists and news bureaus around the world. thanks. coming up, in this market environment of low interest rates and high volatility, how can funds achieve high returns? is the chief investment officer of the third largest pension fund. she joins us next with their investment strategy. ♪
currently 178 billion dollars in assets, the new york state common retirement fund is the third largest pension fund in the country. the average return is 10.52 percent. we are joined by the chief investment officer vicki fuller. in this low yield environment, how can you make sure returns are enough to pay your retirees their pensions and they become due? the way we have made our target historically is by making hard decisions. in the 1970's, we decided to go up to equities. 1980's and 1990's we went into alternatives, so that we need to going forward is to make sure that we had investors and the
asset classes, whether it is a private equity or real estate that would generate outside return, but at the same time, we have a large share of our portfolio and u.s. equities making sure we're not paying too much to do it. david: there are two examples you gave, equities into alternatives. at the time, it would have been seen as riskier. is there an equivalent today , is therelow yields an equivalent for taking on more risk for more return? vicki: we do not do it that way. when we are investing in large [indiscernible] we try to get the beta of the market, where we invest in private market and we try to invest with firms that are may be smaller, where the general target can generate more returns, so it is not more but it is the first vacation. in public equities, 10% in private equity, 8% in real income, no in fixed
one say is going to be the panacea. it is getting all of those right. the things i am focused on the most right now is making sure that in this very volatile environment with low growth and low interest rate, that we have the right skills, the right power. that is one of the big initiatives. we need to have people who can navigate the markets and will give us in procession and we need to pay them more to be able to do the same thing we need them to do. amanda: your job is different than other portfolio managers because you have a responsibility to pensioners. like an insurance company, you have to kind of match or long-term obligations. do you do that with an investment strategy? if you do, it must be incredibly hard. you used to be able to go to a long-term bond and get a pretty decent lockton risk for a return. now ibm is at 51%, so where do you find the way to get that long-term riskier return?
vicki: diversification helps. there are certain asset classes that we can talk about like private equity and real estate that matters. and equities to the extent that volatile growth is 2% to 3% globally. it is no one thing and we are an allocator. we had the ability to index, right, soap making the decision to hire inactive manager is a choice, whether it is in public markets, equity or fixed income or private equity. making that decision has to be based upon our belief that those mightonal fees that you pay, whether it is in active management, on the equity side of private equity or real estate, are going to be worth it. there are a lot of things we need to do smiley. pimm: i want to delve into your background because in addition to an mba, also philosophy in
chicago, tell us your philosophy about using pension funds -- hedge funds, and hedge funds that are trying to make a mark but cannot seem to get the attention because the big ones attract all the assets. vicki: good question. hedge funds have the target allocation in our portfolio of about 20%, so it was topically the way we thought about hedge funds is not to be equities. it was to provide diverse of dictation against equities -- diversification against equities, so i have said it before that the fees are too high but they are higher in other things as well. the industry has gotten very big. our job is to rationalize that ,ortfolio, but in hedge funds they provide something different for the overall the precipitation of the portfolio. overall diverse vacation of the portfolio.
there might be a $500 million hedge fund, somewhere in cincinnati it is doing well, but we cannot access that. we have embarked on a very important project to rationalize our hedge fund portfolio. we have some hedge funds that do wey well, but number one, will negotiate fees, and number two, we will make sure that your hedge funds actually can help us go to our return target. david: i went to pick up on active versus passive and there is a raging debate about active versus passive. where are you on that? hog-tie you decide when active makes sense and when passive does? shares of ourx large industries. it is hard for inactive manager to generate that performance. when we start to look at
capitalization like mid-cap and just can, active men add value, so if you look at our overall equity portfolio, you might note that on the equity passive and85% is 15% is active. when you go outside, where we still believe there are opportunities to make active return, you see the reverse. more active management unless passive. , activeortfolio today managers have generated important outfits for the last 10 years to 15 years. we want to make sure that we hold on to them and also look at others because there are others that we have not maybe been able to find. pimm: you will stay with us. fuller explained with us.
amanda: welcome back. some state pension funds have exited their position of hedge funds and are cutting back on the hype these because they look to maintain strong returns. vicki fuller is back with us. you are just talking about that push and pull between you want the returns but you don't want to pay outside fees and you said you were rationalizing your exposure. does that mean you would exit some or you pressing the monfils instead? vicki: we are doing all of the above. there are those that we believe we do want to retain and we are pushing them on the fees. for those that we do not believe would be able to provide
diversification benefits -- david: are you paying anybody [indiscernible] isalked to some who say that the list price but they negotiate. and 20,e are paying two and there are some that if they had been generating double-digit returns for a long period of time, we are happy to pay that but that is the issue. you are in in environment where the 10 year is less than 2%, you have global economic growth expected to be three. how do you pay 2%? the: i just returned from persian inside 2015 conference and one of the topics was how do hedge funds get paid to your point, and one was about the hurdle rate. if you cannot make more than x, let's say 10 year, then the hedge fund manager does not get paid. is this the performance that will be built in the future? vicki: yes. if you look at our private equity and real estate general partners, they all have hurdle.
there is a natural alignment. we have to make a before you make money and that is not the case in the hedge fund industry generally. that is one of our pushes as well, that there has to be a hurdle that the lines are engines. pimm: thank you for spending time with us. good to have you here. i fuller is the chief investment officer. david rustin? -- david westin? david: i have to get out to that. have more.ll futures selling off the head of the opening bell, next on "bloomberg ." ♪ okay, ready?
little further. the doubt is down about three quarters of a percent. the s&p and nasdaq are 8/10 of 1%. there is the bell. u.s. dollar strength is showing up in that 10-year. 1.65. not long ago citigroup said they were going to 1.5 and they were mocked in some orders. -- quaters. investors are preoccupied globally with whether the growth is strong enough. central-bank actions are not reassuring. lets the were stocks of open for treating. julie: we have declines here. well he saw overnight with the u.s. futures following the path of recovery over the globe. then they declined and accelerated as we get closer to the open. we had a drop of a tense of 1% for the nasdaq. at least half a percent for the dow and s&p 500.
as we have his concerns about global growth weighing on stocks. we have oil going below $50 in the u.s. as well. on the flipside we have another deal this morning. the chemical industry. westlake buying axial for $3.8 billion. about a 28% premium. apparently this company will be the third-largest out the light producer, the second-biggest maker of pvc in north america and the second-largest maker of ammonium. -- amonia. dow and dupont the most notable deal in the past year. we are watching airlines. jetblue was cutting plans growth forecast for this year. it's looking at increasing flight and see capacity for the full year, a 8% and 9.5%. it was as much as 10.5%. seat willfor each
drop 7.5% to 8%, a bigger drop in previously forecasted. we will be watching jetblue. shares not down that much and we are watching other airlines as well. jetblue blending in a part of the increasing cost of jet fuel. h&r block, the biggest u.s. tax preparer, not much changed. they didn't really jump in extended trading last night after the company raised its orderly dividend by 10%. the company saying it will buy -- it did buy back within 20% of its outstanding shares in the fiscal year 2016. this is after the net income and revenue fell last quarter. the stock is down 35% this year. pimm: that is painful. stocks are falling today as well. strategist believe stocks are poised to move higher. according to them, two major components of the s&p 500 could
lead this leg up in stocks. the industrial and the so-called fang stocks. facebook, alphabet. draws the picture of what you believe is going to happen with equities in the next 30 to 60 days. >> the trend is up. our cyclical trend indicates on the s&p 500 just turning up yesterday. the trend for other industries has been out already. fang index, we pointed out last week that an equally weighted fang index broke on its previous high. that previous high than held as support. that's a good indicator for the sentiments stocks, the stocks that are following a lot for sentiment. the s&p 500 industrials index also has a number sloping cyclical trend indicating --
it's just given them a momentum boost. we think the conditions are good for the u.s. stock market to break above the previous high of 2134. one of the main reasons for that is the fact if you look at sentiment readings, they are fairly balanced. there's a balance between bull and bears, and it's probably erring on the bearish side. amanda: let's talk about how that compares to previous times we have been close to these levels. the last five times the s&p has brushed up against that 2134 high it has retreated. is the sentiment much different now than when it was then? >> it is more balanced than a was at the previous high. from a pattern perspective we think the entire move from the
, then15 top has gone away you would not have missed much at all. we think the correction down was a correction. the market had a confirmed double bottom earlier on this year. that is another difference. we think this market is about to break higher. pimm: where's the money going to come from before that to happen? retail investors are not buying stocks. we've been talking about people buying bonds. where is the money going to come from to move stocks higher? >> i think that is the power of the trend. once the market starts moving up you will see a bit of a scramble for people to get into the market. the one issue we haven't a moment, one potential problem is that unbalanced volume is past its previous peak. we would like to see unbalanced volume above that. 4 on the s&pbout 213
500, there is the potential terms of a2363 in wavy quality target. amanda: when we talk about sentiment, that feels as though that is a pretty important piece of analysis. with the change investor sentiment? i imagine it changes in a hurry. >> oh, yes. there are one million things that could change investor sentiment. as analyst we view the markets as being irrational so we don't have to rationalize market moves. it -- the trend is a measure of how the sentiment is moving. it is inching in that direction slowly and eventually issue the to a rush into the market. amanda: murray gun, great to have u.s.. tesla motors vivian hot water.
u.s. regulators are looking at a potential defect in the model s city and suspension. tesla says there is no safety defect. with either model x or x. jamie, let's talk about how serious this is. tesla is denying it. what is your take? jamie: the numbers appear to be not so big that there will be a big issue on the safety front that would maybe require a recall. like tesla has millions and millions of vehicles on the road that we need to be replaced and a worst-case scenario. not too long ago they recalled every model x they sold and it was only a few hundred or couple of thousand. the bigger issue is this issue of somewhat of a nondisclosure agreement. plus, it's called the goodwill agreement for the fix the car but asq cannot talk about it.
the point is they don't want that to be used against them in court later. in way some of it is written the secular not supposed to tell anybody, including safety regulators, which would not seem to be legal. pimm: what exactly is the model s? the low-priced internet for tesla -- entrant for tesla? jamie: this is the car they sold the most of. they have a roadster they got into the seed money days to prove they could make an electric car. then the model s was their main car, a $100,000 car. they just cannot with a $66,000 version yesterday -- they just came out with a $66,000 version yesterday. either expensive luxury cars. they drive like sports cars. this is their main sedan. last year the humility -- they came out with the x, the suv.
chances withr any that until the make them. amanda: they ask customers to sign anything to talking to that is preposterous, but we reportedly did find one? jamie: whether tesla meant the language it to keep him from telling regulators, you can look in the government's website and there is a customer who has posted about it and filed a complaint. it is not like they went after them and sued and said he can't do that. can certainly believe that impression and tesla needs to be more careful with their language going forward or they will find themselves certainly in trouble. pimm: stocks down about 1.5% today, down 5% this year. the orders for the new car, the model 3, tell us about that. said 373,000 was the last count they gave. these are people giving $1000
deposits and knowing they will have to wait a year, maybe two to get their car. tesla has tried to accelerate and announced they will that summer at how quickly they will bring that part of market. but it is always been a challenge. say it with me again, carmaking is hard. they arey pieces and very important that they be safe and people be well taken care of, as well as they always work. they get you to work on time, get your kids to school. they are trying to meet that demand that people are really excited about this car. we have never seen a car that had that kind of demand and people willing to put down that money a year before they might get one. pimm: i see you in one. i do. thank you very much. leaderrg new's auto team talking about tesla. we will take key economic events coming up next week. mark your calendars. these will all be market moving reports. that is next. ♪
av debbie spokeswoman said the company will respond to that investigation. it was a lower is hoping u.s. regulators investigate deutsche bank's mortgage trading business. received ae sec complaint that they invest -- inflated the markets values in their books. the bank says it was cooperative with the investigation. a hack attack at wendy's was larger than the fast food chain first thought. last month they said malware into getting customer payment information was founded fewer than 300 restaurants in north america. now that number of affected locations is expected be considerably higher. some payment cards may have been used fraudulently elsewhere. that is the latest business flash. pimm: thank you very much. let's get to julianna check on what the stock markets are doing right now. julie: heavy bottom after slightly? pimm: no, but in looking for one. i hope i can help them. julie: mattress firm is down
sharply today. it's bigger on the west coast of the also agreed to acquire celebes last year --sleepy's last year. 260.rior forecast was investors and analysts were not happy about that in march. at the same time, the coveney replaced unexpectedly it ceo. is had a troubled the year thus far. not only is it down 16% but it is pulling down some of the other mattress retailers as well. we are taking a look at the farmer retail industry this morning. the new york post reported walgreens and write a, the deal between the two is seen as receiving approval from the federal trade commission. that might come within the coming days. acquired for nine dollars a share. walgreens also trading a bit
higher. twitter, the company says some of the accounts it has were locked to prevent potential disclosures from other websites that have leaked logins. vulnerablers may be and were notified and told they had to reset their password. these shares are down by 3%. amanda: katie so much. time to go to abigail doolittle. she is the latest on to nasdaq stocks moving in early trading. abigail: in keeping with the bears town, urban outfitters trading down. they make comments in a filing saying so far the second quarter sales are "mid-single-digit negative." this is after the surprise first-quarter was up 1%. they may have to get this pizza ovens firing from a recent acquisition. tv,ing to movies and
--flix shares are down after he is now saying the second quarter trends were amiss in the second quarter. he has established a below consensus estimate. he says the june price hike could make it worse. tesla has shares down after yesterday's nearly 3% drop. today they are denying a safety default for the model s in the use that the u.s. investigating this possibility and whether the company prevents customers for reporting this. the blog site, tesla says this is "preposterous." those over a few movies at the nasdaq this morning. amanda: thank you so much. there are two economic events that we will be watching next week. the federal reserve june rate decision on wednesday. before that, retail sales data.
investors are watching the retail numbers to see what that could mean for july and when the fed meets again. here is bloomberg economist ulena. they for being here. let's start with retail sales in the expectation because last month it was not so bad. what are we looking for? >> last month was great actually. , the fed is counting on the consumers this year to drive growth to the point where they can deliver a couple of rate hikes. that is what they are hoping for. i think the previous month's retail sales report was great. if at the trajectory on the right path. continues, they should be able to deliver a couple of rate hikes this year. amanda: what are we looking for? >> a modest increase of around .3%. the previous month was so strong
that growth in the second quarter is already being strong already. meeting, we will get the results on wednesday. what will they say? >> nothing. of things for the market to digest coming out of that meeting. there will be a press conference after the statement. it will be a release of a new forecast. this is interesting to watch as dot because we will see the plot again. pimm: everybody gets a dot, like a pony. >> we will see with the fed is expecting to deliver this year. he will adhere to the previous plan for rate hikes. this year, is it still possible? i think nothing will change in a major way in the forecast, but we will see. pimm: the dots represent the
members of the fomc? just to make sure. they don't identify the person, the voter, but that is something you can figure out because you know who they are. >> we were going to try to make an educated guess. the center of the committee is still within two rate hikes. historically by mandate the fed looks at only two things, the rate of inflation and employment. there is a sense they are now dealing a responsibility in the role it is playing in the world. the role of the dollar, the role monetary policy will play. >> that is obviously their concern in the sense that how it will affect the domestic economy. remember that the fed wants to see growth domestically and they are counting on the consumer. this is in their statement, this is what they are counting on. i think economic data are
basically where we should see domestic growth strong enough for them to deliver a rate hike. obviously they take into account global risks and probably some uncertainty around elections, but the main concern is how strong domestic growth is. pimm: u.s. domestic growth. we have to pay attention to what retail sales and the fomc meeting and the press conference on wednesday and the cpi results on thursday. >> inflation is probably less of a concern right now for them. it is moving in the right direction. they keep saying it will reach their target in the medium-term. probably the major thing to watch is retail sales in the meeting. pimm: thank you so much. coming up, it's "bloomberg markets." mark, what he looking at in london? mark: the best quote i read today is "stick a fork in the
fed, they are done for the year." that is jason shanker from prestige. hourll tell us in the next what he thinks the fed is done for the year. what a day to have carl lower garnett from lufthansa. today the cfo surprised the market and said she is resigning. it comes at a time at a state of flux at lufthansa. shares of fallen as much as 6%. and the euro 2016 football tournament kicks off in paris today. it's about the economics as well. what a day. can't wait. pimm: thank you so much. don't stick a fork in us. we have more "bloomberg " coming up next. ♪
♪ amanda: this is "bloomberg ." let's check on it. a bit of a sloppy one so far. this is the weakest in three weeks at this point, pulling off some previous high levels. markets remain relatively close to high levels. as a risk-off sentiment travels around the world, asia traded down today but not as steeply down as yesterday. they may be a day ahead of us. maybe we can see some perspective. there was a lot we don't know about pregnant -- brexit.
pimm: stocks falling today. big rally in global bond markets. some estimates are that maybe this will go to 1.25%. amanda: sovereign has been your best rate so far. japanese 10-years. didn't, they have to have a little asterisk. amanda: i would not hold that against anyone. pimm: that does it for "bloomberg ." amanda: thanks for being with us. ♪
♪ vonnie: we will take you from new york to london to washington in the next hour. with 30 minutes into the trading day in new york, u.s. and european stocks are following -- falling. bond yields fall to records and investors seek safe havens. drop morees lufthansa than 5% after the surprise departure of the cfo opens unwelcome hole in their top management at a time when it's strategy is on certain -- uncertain. vonnie: what is next for donald trump and hillary clinton? clinton's meeting with elizabeth more. mitch mcconnell says trump "does