tv Bloomberg Go Bloomberg August 10, 2016 7:00am-10:01am EDT
strike, the bank of england struggles to fulfill its qad. david: crude falls for a second day after saudi arabia says it pumped a record amount of oil in july. alix: a trump controversy, this one involves guns, the second amendment, and stopping hillary clinton. jonathan: the focus on the united kingdom. and uncovered bank of england operation, not enough sellers for the bank of england to get to that one billion target. david: they tried to sell that nobody wanted to buy. we have german bunds reaching record low levels. alix: .9%. had aday in the u.s. we great demand for three-year treasuries. q2was after those weak
productivity numbers. jonathan: yields pushing higher and what happens, investors come back to get that yield again. the demand is strong on the three-year and i wonder what it will be like on the 10 year. david: it feels like a rush after the positive job numbers have gone away. alix: we are going to hear from two very big ceos today, including bob iger, discussing the future of television. plus the prudential ceo mike wells on how they weathered the brexit storm. with actual equity markets relatively calm, we will talk about the bond market. jonathan: it is a little bit soft in europe with the dax down about one half of 1%. the bloomberg dollar index down one half of 1%. euro, euro-dollar up one half of 1%.
on the bond market there is one story. and uncovered bank of up -- bank of england operation yesterday. the sellers were not there. 52 million pounds short. it is symbolic and you see the rally at the long end of the gilt curve. and we tradeints at 1.29%. these are all-time lows. if you were in the market yesterday and decided to not sell to the bank of england, you make somebody today. maybe --llar, crude down $42 .40 two cents. isis said that saudi arabia pumping at an all-time high alix:. alix:how much are they exporting is the real question. let's go around the world and check with our bloomberg team for in-depth coverage on these stories.
guy johnson is in london. yousef gamal el-din is in saudi has theand megan murphy latest controversial comments from donald trump and the bloomberg politics poll. jonathan: i want to bring in guy johnson. what is the easiest way to get a rally in the gilt market? you got what you want. guy: that certainly seems to be the case at the moment. they are putting a brave face on it. the bank of england saying we are not going to worry about it. we will give the details of when we are going to do that in november, keep, and carry-on seems to be the story. we get this very big move in the tens and 30's, that kind of area is where we are seeing the real
action, the area that the market needs its bonds we have been talking to a number of people. , i am not these gilts going to sell them to the bank of england, i need these bonds. it will be interesting to see how much of a pickup on the price the bank is going to have to deliver to get some of these bonds away from the market. they just want to get the money into the market so it is a reasonably priced incentive. the government is selling linkers tomorrow, inflation linked bonds so some really interesting information going on in the gilt market. jonathan: in the grand scheme of things, 52 million pounds is not a terrific amount of money. it is symbolic. symbolism, i wonder
if two people are watching this, the head of the debt management office in the u.k. and the chancellor philip hammond, who is basically looking at this and saying if you have a shortage, maybe i can help you with that problem. guy: i think that is what they are going to look for in the autumn statement. we already have one of the longest duration stories of any major economy. the u.k. has the longest bonds out there already so in some ways there should be a shortage at the front and, but that is not what the market wants because of the duration mismatch . the bank has said it is going to buy reasonably evenly across the curve and it this stage it says it is not going to change that. jonathan: guy johnson from the city of london. a fascinating story. ared: another thing we
focusing on is the new controversy surrounding donald trump. speech last night
he suggested gun owners might be able to do something to stop hillary clinton. : hillary wants to abolish, essentially abolish the second amendment. ,f she gets to pick her judges nothing you can do, folks. although the second amendment people, maybe there is. david: we are joined by megan murphy, our washington bureau chief. this is fairly serious and perhaps those in the united states do not understand the history of presidential assassinations, suggesting anything about guns and presidents is dangerous. what was he thinking and what is the campaign saying? megan: it is a very serious moment. you can see the reaction from a man in the crowd where his jaw drops open. we have a violent past in this
country and have had threats. globally there have been similar threats when people collide the two issues of guns. i think it was yet another unplanned statement that came out of his mouth. the campaign has tried to say he was simply referring to the strength of pro-gun rights advocates. there is no question those remarks in the context of what he was saying did not seem to be referring to that. i think they will note the seriousness. we have had people like martin luther king's daughter coming out, and hillary clinton. there is no place for this rhetoric. david: i am sure he did not attend to do this. .ou said it was off script it raises questions, if you are going to be the president, words matter and careless words really matter. it raises questions about competency. megan: throughout the past
several weeks he has continued to make statements that people say, does this man have the temperament, is he being advised properly, does he have enough serious people around him advising him of how serious this office is? he very much believes this is media created campaigns against him and the remark was taken out of context. this is how he has gotten this far, like telling people the strength,this is his the ability to talk unscripted. when he goes off message as much as he has, his temperament will continue to be questioned. david: let's talk about his strength with the voters. before this incident last night, bloomberg politics conducted a poll that put hillary six points ahead nationally for people most likely to vote. what do you make of that? megan: it is important what you
said of most likely to vote. these are people who show they .re active when a third-party candidate is involved, that gap narrows to a smaller extent but does not take into affect these latest .ontroversial comments it shows he has retained the large portion of that postconvention bounce she got but it also shows a closer race than many people might expect. in mind, have to bear there is a long way to go until november. megan: that is what this race shows, things have been pretty much every day. david: now we are going to check on what is going on. emma: delta airlines are likely to cancel more flights after a crash of their computer system. in a video message to customers,
the ceo apologized, saying the airline spent hundreds of millions of dollars on technology upgrades. put dilmaed to rousseff on a impeachment trial. illegallyaccused of financing government spending. the most decorated olympian was back on the victory stands. michael phelps 12 more golds, the 100 meter butterfly and the two by 100 relay. teamomen's u.s. gymnastic lived up to expectations, winning the gold medal. the u.s. leads the way with 26 medals overall, china, 17, and japan, 14. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries.
i am emma chandra. this is bloomberg. alix: thank you so much. i want to look at some pre-market movers and definitely have got to focus in on disney. 1%, profit was up by about 5% but overall it was the cable unit profit up by only 1% that seemed to catch investors' eyes. there is a great chart that highlights the risk in disney and that has to do with affiliate growth. it is about 5% in its last fiscal quarter but still, the worry is that this will not be enough to drive long-term revenue growth. this highlights espn and subscriber growth. it was lower over espn. moving over to some of the solar stocks, sun power cutting 15% of its workforce, shifting
production to mexico, lost $70 million. solar city unchanged however growth is slowing amid a bid from tesla of about $2.6 billion. yelp, reporting a surprise profit, up 12% in premarket. earnings and guidance also getting some upgrades today so one positive mover. jonathan: coming up, the bank of england's expanded qe program investorsed bump as proved unwilling to part with longer dated bonds. timmer discussing what it means for governor carney. this is bloomberg. ♪
go." this is "bloomberg i'm alix steel. oil falling for a second day, about one half a percent after saudi arabia pumped a record amount in dubai. joining us is yousef gamal el-din. this is all ahead of opec's official monthly report. usef: just when you thought the kingdom of saudi arabia was pumping at record highs, they pumped even further. the numbers coming in at 10.6 7 million barrels a day in july. talking time, we are june 2015, we are looking at 10.5 6 million barrels a day. it has to do with the summer
surge, the relentless heat in the arabian desert, so domestic demand spiked. saudi arabia has ambitions in terms of defending that market share. is unlikely to inspire any confidence ahead of those in formal opec talks next month. alix: opec freeze, maybe not so much. yousef gamal el-din joining us from dubai, the headline to watch. jonathan: bonds and focus on one side. gilt yields falling to record lows as sellers go on strike. the bank of england failed to buy enough longer dated gilts to reach its goal. they had this message for the bank of england governor mark carney. >> there are a lot of people bidding us the bonds. mark carney is billing me for bonds and he still cannot have
them. jonathan: you're in timmer -- jurrien timmer joins us now. he is not selling. has the bank of england got a big problem? jurrien: i suspect operationally they will work things out. when yields go negative, change the basket of what they can buy so i'm sure they will figure something out but it speaks to an underlying fact, there is an insatiable reach. if you are an institutional investor in the u k and europe and have to match liabilities, why are you going to sell your bonds? even at inflated prices. people that did not sell yesterday made money and the market today. the offers were there, they .ould just suck it all up it is the 15 year plus that are a problem. i spoke with guy johnson about how this is symbolic and the
screaming noise coming out of the bond market saying, give us more. should they be issuing more debt? jurrien: to me the real macro message is the leap to fiscal or the combination of monetary and fiscal and currency depreciation is so much clearer by this action. historically you would argue against fiscal stimulus because of the crowding out of government borrowing but clearly there is a demand for long duration paper so the bar toward stimulus is made that much easier at this point. about that, because we have seen this in england and japan as well. this gets to helicopter money pretty quickly. you can get a lot more 15 year gilts if the treasury issues them and the bank of england bought them. what are the problems with that? jurrien: helicopter money is a controversial term and i think
that is a long way off, because you would need to have a non-independent central bank to go straight to the treasury and by the debt from the treasury. i think the message here is that there is so much demand for long duration that you do not need to go there. ratesral banks keep the at negative, you are doing a form of helicopter money. david: the central bank is saying, we want to buy it. wrong with the treasury saying, we will write some new 15 year paper? jurrien: and they can go in at auction and by as many as they need. it is happening in japan and europe so i think it is a slippery slope, helicopter money, but this would be a mild version of it. i do think that is where we are going. 2.4%,ominal gdp growth is
productivity is declining with an aging population. that tempers what your perpetual growth could be so i think some sort of fiscal is coming. with plenty of demand for paper, they are doing it. the bank of england was only 52 million pounds short yesterday but it is the first time they have -- it has happened since 2009. the screaming noise out of the bond markets are saying, give us more. is,d: the other question why will it not happen again? up, turning to equities, stocks near record highs and hedge funds are betting more on gains, short very much on the vix. find out if the bulls are going against the grain. this is bloomberg. ♪
alix: this is "bloomberg go." the s&p 500 is hovering near a new record high but what about the s&p at 2400, a 10% upside from current levels? jurrien timmer says it is possible and he is still with us. when you are looking at earnings that are still in a contraction, what kind of earnings growth do you need to see to get to that 2400? jurrien: we are wrapping up a pivotal earning system. what we're seeing is the earnings are still falling so the annual rate of change is still negative, but the second derivative, the quarter by quarter moves are becoming less bad, if you will. the first quarter was -7%, the second quarter looks to be about -4%. if you wait for the level to
turn, you are usually too late so you have to look for the second derivative or rate of change, and that seems to be turning. growthplug in earnings into your model, that buys you a couple hundred s&p points. alix: are you making a distinction between actual growth and buybacks? jurrien: that is whole other issue, that the quality of earnings is very poor. 70% are financially engineered with buybacks. if you look at the earnings-per-share for the s&p, it is about a hundred $18 per share and has been there for a year and a half, but if you look at dollar earnings, they are down from their peak. we have had in earnings recession but you cannot see it because the share count has gone down. alix: are stocks given more expensive than we think they are if you look at the absolute dollar number? essentially, a lot of
companies are being supported because it is so cheap to borrow money and buy back their chair -- shares. what sort of factors would go into earnings growth as opposed to falling less fast? jurrien: i think the turn into the second derivative lies you a certain amount of s&p points, but from then on, the cycle needs to turn. if all we're going to get his 2% or 4% earnings growth and it is low quality, that is not the recipe for a sustained rate out and 10% and 20% gains for the s&p like in 2009 through 2015. we found stability, the cycle has stabilized, maybe bottomed, but that does not mean we will go back to the upper track. back of the envelope math tells you if you look at dollar earnings versus
earnings-per-share, the market is probably priced more like 22 times earnings, not 18 times. there's a premium lost in translation. alix: we are more expensive but on the other hand less bad. jurrien timmer, fidelity's global director of macros. load --: concerns still linger over the future of espn. bob iger discussing the future of media and the evolution of the viewing consumer. from new york and global markets, this is bloomberg. ♪
assets by $4.2 billion because 31% of electricity generation comes from renewable energy. this has been a trend for the last three years and e.on feeling the pain. pricing 19 million shares of a secondary offering at $23. the offer was increased from $17 million because of such high demand. on steelhigh tariffs coming out of china, making some room for u.s. yield products. wrapping up in tech, let us say, third-quarter outlook missing estimates by as much as 9%. they get one quarter of their revenue from arrow electronics who supply defense contractors so a really interesting supplier from semis to defense.
some individual movers to watch on the downside. jonathan: a lot to watch on the broader markets as well. if you came in this week expecting peace and quiet, that is not what you are going to get. futures a little bit firmer in u.k..s. and softer in the it is a weaker dollar captured by the bloomberg dollar index, down by 6/10 or 7/10 of 1%. the bond market is clear -- great things come to those who wait. yields at the long end of the gilt curve coming in nine basis points. the bank of england could not find enough sellers for 15 year plus. if you did not sell, you made money with 38 yields plunging to .n all-time low at 1.293% you are seeing this rally at the long end of not just gilt but the long end of treasuries and
jgb's as well. you would think the softer dollar story would mean a decent commodity session and the bloomberg commodities index captures that story, but crude not a part of it, trading at $42.66. , they areia in focus pumping at a record high. we will look for confirmation when we get the opec report later. it's get to the headlines outside the world of business. emma: a new poll shows hillary clinton has retained host of the bounce she received from the democratic convention. it shows clinton leading donald trump 50% to 44%. are third-party candidates included, it is close to margin of error. carolina whenorth he suggested that gun supporters
could stop clinton's agenda. : hillary wants to
abolish, essentially abolish the second amendment. by the
way, if she gets to pick her judges, nothing you can do, folks. although the second amendment people, maybe there is. emma: the clinton campaign responded quickly saying what he said was dangerous. elizabeth warren treated that trump "makes death threats because he is a pathetic coward." the trump campaign said he was referring to the political power. the richest nativeborn person in the u.k. has died. he was 64. his family had owned land since the 17th century. according to the bloomberg billionaires index, they had a fortune of more than $12 billion. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. chandra. this is bloomberg.
david: today, our morning must-read is a much watch -- must watch. yesterday i talked with bob iger after his earnings call and we talked about espn, and
how the company will be able to stay in the growth considering the change in television. you just came out with your earning statement and when i took away, you had some modest growth in the cable area on advertising and subscription, not so much on broadcast. i wonder about the overall track for let's say, espn. at one point you said it will continue to grow. espn is large and successful, but the growth may not be as robust going forward. what does the track look like, roughly what you thought or is it changing? bob: it has not changed at all.
espn has been an incredible growth engine for this country touch company for the last 20 plus years. it will not be as robust, the growth will simply not be as high as it was. we are seeing a business that has matured. we are not seeing a great growth in subs. rates in terms of personnel but fees are not likely to go up -- per sub fees are not likely to go up. espn, you have to conclude it is a great business for the company, a large business for the company. it does have growth ahead of it but it is not going to grow at the rate that we have been used to. at the same time, we have been investing elsewhere as a company. you look what we have done with the studio, particularly with the investments in pixar and lucasfilms, and the gross that has created for the company.
you look at the investments we have made at parks and resorts, most notably shanghai disneyland. as a company we have growth areas that have become more compelling than they had been and we have some growth areas that will continue to grow but will not be as compelling as they had been. david: you've obviously had a remarkable quarter, particularly out of the movie studios. one, when a day, and the over-the-top services will make up for the difference in the growth rate in espn? .ob: we are hopeful i cannot absolutely predict that but we think the over-the-top services offer consumers a great user experience. it is possible a lot of these services will be lighter in nature in terms of fewer channels and lower-cost. it may help either retain customers who have been customers of the multi channel bundle, or attract new customers
that may not have signed up to the current multi channel product because it has to many channels at a cost they deem too high. we think ultimately it is positive. whether it stems the tide completely, we do not know, but it is certainly a step in the right direction. goes, youthe quarter have to consider a studio that has grown over 60% for the quarter and year, delivered over $2.3 billion in operating income over three quarters, which is a record for the company and may be the highest any studio has ever earned, and we have a quarter to go. that is quite a performance. parks and resorts had a wonderful performance as well. david: that was disney ceo and chairman bob iger. joins us now and you follow this company and you just heard it from bob, they had
a great quarter. the real story of profitability as well as revenue lies in the media networks led by espn. what did you take away from the earnings? paul: it came in a little bit light relative to expectations so that gives some of the bears on the story a little more ammunition to say, and as bob a year ago, espn is not the growth driver that it has been. about, if espnnk is not going to be the growth driver, where am i going to get that growth? they have maded, some big investment in their other businesses, notably parks and resorts and film and entertainment. those businesses are driving revenue and earnings growth. typeinvestors put the same of earnings multiple on those profits as they have done
historically with espn? the stock is in uncertain territory and the bulls and bears are playing off each other. david: the stock went down in pre-trading and as we heard earlier, it is down today in the pre-trading. is that because of the uncertainty surrounding espn? paul: i think so. we continue to seek court cutting and -- cord cutting. we saw from scripps networks yesterday with the same issue with losing subscribers, does that mean for the affiliate fee growth rate and advertising has driven thet profitability of the cable network businesses for the walt disney company? i think the stock is still trying to rewrite itself and investors are trying to figure out, if espn is not going to be the growth driver, what can i pencil in for growth of some of these other businesses?
if you are an investor looking at the stock, how do you evaluate giving up some on the espn growth rate as opposed to the stellar performance in movies and the strong in theme parks. how do you evaluate those? paul: they have put a higher growth rate -- because it is much more predictable than the film and entertainment business. i would argue the prophets we are seeing out of the film and entertainment business are actually likely to be fairly predictable. when you look at the past six to eight quarters, but the output they have had from pixar, marvel, and lucasfilms, they have very successful franchises coming out every single year for the next five years. historically, live action features have been up and down. have they figured out a better way to do it? paul: they have opened their
pocketbook over the past 10 years by making multibillion-dollar acquisitions on proven franchises, exar, marvel, now lucasfilms. they are now reaping the benefits of those investments by having a very predictable slate of films with proven commodities, proven franchises and characters, and we are starting to see the benefits in some of the results. david: that is paul sweeney, thank you. jonathan: for gentle hosts a 6% increase -- prudential posts a 6% increase. we will bring you a piece of bloomberg's exclusive interview with mike wells. this is bloomberg. ♪
go." this is "bloomberg i'm alix steel. coming up, leslie biddle discusses the recent rally in oil and more. emma: here is your bloomberg business flash. exporter's largest oil pumped a record amount of crude in july. saudi arabia produced almost 11 billion barrels a day last month when other opec members want to limit output to shore up prices. seven days of strikes planned against euro star. it would start on saturday and another set for later in the month. scheduling is over a dispute. drop inownplaying a
prime tv viewing for the summer olympics. they released data showing the audience is being fostered by those viewing online. digital viewers accounted for 9% on monday. the opening ceremony attracted 35% fewer viewers than four years ago. alix: thank you so much. climbingl financial this morning after reporting earnings that highlight a 6% increase in profit led by their business in asia. francine lacqua spoke with mike wells. with the results, earnings up, cash up, asia's performance outstanding. and these generation, are on u.k. currency basis so if you look at the local currencies, even more dramatic. we have been de-risking the portfolio for about a decade so
you have about 16% of the earnings that are spread based, having do with bonds, so the bulk of the earnings are not affected by the rates directly. there is some accounting noise but as far as. economic value, we are well positioned. francine: you grew double digits. is this a trend? mike: it is a key part of our strategy. you have two material elements to the asian market, you have the nascent markets, clients buying for the first time. the key is to make it affordable. it is a key social made. you are getting them protection from health concerns, from savings for children's education, from retirement, .imilar to the west those markets, their competition is delivery, it is getting to
first time consumers. that demand is the catch from financial markets to a great degree. the more sophisticated markets are competing with more sophisticated clients with more assets so you see more asset management products then you would see in the west. francine: how did the company fair through brexit? mike: fairly well. started with the company that is internationally based in earnings and currencies. the key impacts would be about 10% of the m and g assets are based from european clients and we want to make sure we can service those. havether key issue is i 265 european employees and i want to make sure their status is not in question. i am an immigrant so i would like to make sure my status is not in question. : on m and g, are you
expecting the outflows to stop or is that still in question? : they are improving, second quarter was better than first quarter. when you saw the european inflows into m and g, and it is pierce scale and quality and reputation as an asset manager in the u.s. -- in the u.k. and europe. we will see if the european investors see a london-based .sset as a key place to be i think they will be part of european savers models going forward. francine: given what you are saying about your model, you are still committed to the u.k. business? mike: we are. there is tremendous growth. the consumers in the u.k. are responsible for their own retirement savings so our product is tremendous. the sales are up very dramatically.
the products we have built off that chassis are working very well. the sales for the u.k. business have exceeded historically high levels so it is growing extremely well. that was prudential ceo mike wells talking with francine lacqua. i'm interested to see how the global bond market rally influences these other companies. david: we are six weeks or so after brexit, and people like the prudential ceo, a mixed story. jonathan: there is $9 billion in outflows. thiam builte tijane up his name. if you are credit suisse, it is a different business of course but one of the reasons he was hired, to build up the asia business. the legacy is bearing fruit at
prudential giving the gains they are seeing in asia. credit suisse could only hope to see some of these gains in the coming quarters for the banks. alix: isn't this what we see with a lot of banks, moving toward asia and away from european businesses? david: it is a hedge essentially. alix: i want to update you on some news, we have been talking a lot about opec and saudi arabia pumping 10.6 7 million barrels in oil a day. it turns out due to the report, saudi was only pumping about 10.4 7 million barrels a day. the lower number is according to external sources and the higher according to country data. this points out, it is really difficult to know how much opec is producing in individual countries so it is difficult to model the overall supply on the market. jonathan: external forces say
10.47 and the other sources say 10.67. they do not have a target for a reason, he has no one can agree. david: and inventories are still high. alix: there will be weakness in the global demand. oil picture. david: you know what is coming up? we will have three charts and explain what is leading the s&p to an all-time high. this is bloomberg. ♪
dow. a softer session in europe with the ftse down 1/10 of 1% and the dax down by a quarter. a fascinating session in the fx market, a weaker dollar against every single g 10 currency. the cable rates are firmer. dollar-yen down. yields are lower, down a basis point on the 10 year to 1.54%. treasuries, jgb's, and of course gilts after the uncovered bank of england operation yesterday, failing to find enough sellers. it is day three of the qb. -- qe. alix: we keep talking about the s&p their record high and we have eight within the four weeks. it? is actually leaving this chart shows 1% moves on the s&p, the redline delineating the
1% moves. it has been 23 days since we have seen a move to the upside or downside, the longest streak since 2014. there is not a lot of volatility in stocks. bets, bighedge fund traders and how they are positioned with the vix. they are net short the vix, the most we have seen at least in a year. volume was down 20% at the close as of yesterday. not only is volume light, but so was the expectation for volatility despite the fact that the vix is in a two-year low. ,hat is leading the rally fences or cyclicals? this 0% line, anything above this show cyclicals are outperforming the fences. defenses started
to leave the market and cyclicals started to crop up, and they are almost outperforming the market. the laggards have started to show leadership and leave the market despite the lack of volatility and despite the lack of volume, yet we continue to hit record highs. jonathan: that will be the catalyst of conversation in the next two hours of programming. coming up, leslie biddle, partner at serengeti gives her forecast for crude as the opec report hits the wires. from new york city, futures model -- moderately positive, this is bloomberg. ♪
disney bets on -- as bobas bible iger makes a bid on your habits. alix: a donald trump controversy. david: welcome to the second hour of "bloomberg ." we are from bloomberg headquarters new york city. there is a lot to talk about but it's all about bonds. sayingn: we are used to that yields hit record lows but we are but used to seeing the bank of england to try to buy a certain amount of bonds and not be able to do it is sellers don't want to sell. alix: you can see that in who is doing the buying. pimco is a good example. return fund has increased their stake in treasuries to a 25 month high and accounts for almost 46% of assets. they will buy it will not want to sell right away. they are in it for longer-term
and where does that leave central banks? david: it feels like a macro risk off. we saw that when germany was able to sell bunds for negative point 09%. will tackleter, we these questions and we will have more from the interview with disney chairman bob iger discussing their $1 billion investment in the future of streaming. we want to drill down on the bond market. thethan: the headline in equity market is stocks are doing nothing. the ftse 100 is down and the dax is down as well. action is in fx and fixed income. there is a weaker dollar. weaker ine dollar is the g 10 space against every other major currency.
but is going nowhere with wti of 1%./3 the headline is very much in the bond market. the long end of the curve in core government debt, 30 year t coming in 10 basis points to a record low after the bank of england tries to buy at the long end and cannot meet its target because the sellers are on strike. alix: we talked about bond buyer strikes amount it's the sellers. let's go around the world and check in with our bloomberg team fore-check on those top stories. jonathan: let's bring in guy johnson from london.
the bank of england is conducting operations in three segments. 15+ is where they seem to be having problems. > you think about the mismatch of the many pension funds. they need the long dated bonds. look at the 30 years. sub .55. since we last spoke, the front and has started to sell up at the back end is absolutely firmly bit. jonathan: it's a flatter curve. responded tongland this with no drama. 52 million pounds short and they say they will make it up on the back end but the tongues are wagging. worried about having
another uncovered operation? what is the fiscal response to see what it looks like in 3-6 months? >> the bank responses clear by keeping calm. the liquidity is not there and the ecb has done this before. they make sure they have the liquidity to make sure these auctions are dealt with. it's not uncommon for this to happen. nevertheless, maybe there is concerned that the bank will not be able to deliver and the fiscal response story. what will we see in terms of the spending plan. maybe that will provide long dated instruments. jonathan: thank you. i'm looking at the oil market. brent is paring its losses. let's go to dubai. day, bloomberg
broke that saudi arabia was million barrels per day and now it's 10.4 so what can the market believe? it's sometimes difficult to ascertain the exact number. what is important is the actual message being sent from the opec group which is an increase of 46,000 barrels per day in the month of july. there is also an increase from the side of saudi arabia as it meets domestic demand. it is hot and is hot in this part of world this time of year. more importantly, it's out there to defend its market share and making that statement. it is defending the market share against rising powers in the oil world like iran which has recovered 80% over the three sanctioned level of production. that is the critical number to watch. the opec report says there remains pressure on the supply side of the equation especially with the driving season coming
to an end in the third quarter. alix: they say the weakness could continue because we will have seasonal demand weakness so it's not necessarily a supply story. the demand side of the equation is one to watch out for. the matter is the conversation has mostly been focused on the supply side. in light of global growth which has been struggling and the numbers simply don't add up and that's why the bears keep coming out and price pressure remains on both brent and wti. we will see how this evolves and whether the opec team next month in algiers are going to bring anything tangible to the table. the analysts we talked to don't think so. alix: thanks very much.
you go from the markets to the unbelievable moves in oil. we will turn to you as politics and controversy surrounding donald trump. in a speech last night, he suggested that gun owners could stop hillary clinton. this
is what he had to say. >> hillary wants to abolish essentially abolish the second amendment. by the way, if she gets to pick -- ,f she gets to pick her judges nothing you can do, folks. although the second amendment people, maybe there is, i don't know. david: megan murphy joins us now. i know the chump campaign says he was talking about political power but not violence. whatever his intention was, this was clearly not the donald trump agenda to be talking about this. how does he get back on message? been planning this
as a comment taken out of context. he was referring to the political power of the gun lobby and gun owners to show their support for donald trump and emphasizing how much is a theical part of his path to presidency. there is no question this is seen as a statement, dog whistle politics of mixing violence and violence of of candidates in this country. when you listen to the comments and see the reaction of the crowd, many took it as a call for them to raise arms in terms of hillary clinton becoming president. he will have to try to walk that back today or face the consequences in terms of his rival but in terms of voters. david: this is a series of events since the convention. khan family and not an voice -- and not endorsing paul ryan right away. there was up all this morning that shows hillary clinton is up six points.
at what point is the donald trump campaign going to be concerned? nowhey are concerned right and one thing about our poll this morning is that the six-point gap is smaller than the gap you have seen in recent polls. this is a sample of likely voters and we should emphasize was taken before these latest comments on the second amendment. that being said, one of the most interesting parts of the poll is that 61% of respondents in this poll said they were less impressed with donald trump's business track record than they has desdemona have been. that has been a huge factor in playing towards the success in the primary and voters he has captured. he'sng them behind him, got to continue to have this image of a successful businessman who can take what he's done the business world and take that into the white house. if he loses that, it will be a him difficult road for which is already difficult and
he himself keeps making harder to climb. david: thank you so much. and take a look at stocks that are moving. we are focusing on disney. it was good and bad when i came to earnings. cable profit was only up by about 1%. you still saw the espn subscriber loss. thethe affiliate fees drive growth at disney that investors had been used to. disney is getting an upgrade this morning at mccrory, buying a half a stake in bam texch streaming. korsng to retail, michael is echoing the theme in retail. flat revenue between now and march of 2017 is the projection with low mall traffic and reduced tourism. it is cutting sales at department stores and is not want to deal with discounting.
its sales are not holding up. theme this week as retailers check out earnings. retail in china is different. selling goods online revenue is up 42%. it sold more higher-priced goods that carry higher margins. there were 65% of active customer accounts but only half of what alibaba has. coming up, more perspective on the stock market as leaders have turned to losers. our utilities and other defensive areas poised for a rebound? we will talk about that case next. from new york, this is bloomberg. ♪
jonathan: from new york, this is "bloomberg ." the leaders have turned to the losers in equities. the defensive areas are showing weakness lately. it could be a buying opportunity joins us now. we have had a series of guests saying the bond proxy, the utility stocks, the time is over and the rally is done. what is your view? >> bonds, utilities, gold, staples -- the bugs have been a great trade and i think it will be that way for a while. the demand for bonds is unbelievable. that will push rates down. treasuries are still a positive yield. sovereign debt is negative and you have a flight from demand. that will go for a while but we
are starting to see some interesting opportunities. things have been beaten up a lot. david: what about rotation? particularly in things like consumer discretionary which is we arel >> question >> quite short on consumer discretionary. you just had the michael kors report which was not good. part of that is the amazon roadkill story. story,-line to online j.d..com is very strong. be dead foril will a while. people are overextended and have borrowed a lot of money on student loans and credit cards. they are now financing cars were 84 months a like a house. alix: goldman sachs had a note out. it shows cyclicals versus defensive and cyclicals were starting to outperform before brexit. we are starting to inch up there.
>> cyclicals are great. at the beginning of the year, everyone thought commodities were dead. was going to be fantastic but the dollar has been terrible this year. it had a terrible couple of days and has been good for commodities. they have bounced hard since january. a lot of cyclical stocks should have been bankrupt but if they don't go bankrupt, the upside could be huge. you look at glencore and freeport-mcmoran, there have been some amazing stories. the idea that growth will pick up and that will be good for cyclicals, that one is more dodgy. the mining story was ugly in 2015 and this year it's the banks. we are looking at deutsche bank and credit suisse and we are almost there. >> my hero in the business or one of my heroes is george soros. is the worse the
situation becomes, the less it takes to turn it around and the greater the upside. it cannot get much worse on the european banks right now. it can get a little worse. there is a great line that says bad things happen, really bad things don't. everyone is saying that deutsche bank will go out of business but it's not. equity go down further? sure, but we are starting to get interested. jonathan: what are you interested in and where is the turn? >> what do you need to happen? >>you need to see a stock going down. it's like a falling knife. to catch falling knives and they live their fingers. let the knife hit the ground and let it move a little bit and then stopped moving and pick up by the handle. it has stopped going down. the rate of change of decline has gotten better. what we need to see is the cathartic blowout and i think that happened two days ago when
the euro stocks 50 kick them out. everybody will be forced to sell. we will have this blowout and prices stop going down. the value buyers then come in. alix: do you buy equity or debt? >> the play has been to own the debt but now the play will be to buy the equity. not tomorrow but sometime close. terms of gold, i feel like a lot of gold bugs are coming into the market. point does gold not offer you the kind of liquidity and return you could get from a deutsche bank equity? -- that's a great point but i don't think they are substitutes. i think you want to have a barbell. you want to have gold is currency. is reason gold is doing well not because it's a commodity but because it's a currency and it's the best one out there. all the other currencies you them in the bank, they take away your money.
it does not have a negative yield so you have to have some of that currency in the bank, so to speak. what you want to do with equity is start to move a little bit out in terms of value. low andething is despise like it is right now, no one wants to talk about value. gtmo in boston, everyone hates it but it's amazing. when something is despise, that's when you want to get into it. when i hear things are cheap, i get interested but greek banks? >> they have been terrible and truth be told, we were early which is a euphemism for being wrong. they had their second restructuring. gregxit talkll the is gone. going forward, it looks like a greek banks could be back
to profitability by the end of the year. that would be a positive and they are trading at silly valuations now. it's a silly story right now still. there are a lot of challenges like unemployment. great lineton had a -- he said people ask me where's the best place to invest. that is the wrong question. the mostere is miserable. it's pretty darn miserable in greece right now so that's a place to maybe start looking about picking up value. right now it's all about value. talked to a value manager and she said she is hated. >> i want her phone number. alix: you think it will turn and you see value take hope it does not happen because of feels like liquidity overwhelms fundamentals. david: let's go a little bit east and talk about turkey. if that's the theory, how about turkey? turkey qualifies and all the
things we just talked about. it has been beaten down. i always hesitate when the leadership is a little off. little bit but we are starting to at least look. it's on the radar screen and there are some good companies. istanbul is an amazing global city. we think there is good businesses. we looked at a private equity group there but could not pull the trigger. maybe but we are not quite there yet. jonathan: mark will stick with us. the state ofup, hedge funds and barclays saying liquidation in hedge funds will outpace creation this year for the first time since 2009 and we will discuss that next. this is bloomberg. ♪
coming under fire for leica returns and now barclays is putting the nail in the coffin. they say the number of hedge funds will shrink for the first time since the financial crisis and more hedge funds will be created. us now andjoins overseas over $4 million in assets. you live and breathe this stuff. etf's and smart beta cause this shift? >> no question>>, we talked earlier about something being low and reviled, that's the time to be interested. you could not find something people love to hate more than hedge funds right now. it reminds me so much of the first quarter of 2000. tiger management was shut down and put out of business as people said hedge funds could never work and they were wrong about the internet. the same thing happens every time we get one of these big moves in passive. this is different a little bit
in that it's 10% of assets and now it's 40%. that moves us into a longer cycle so i think this cycle run longer and people will jump on the bandwagon of hating hedge funds. everybody but hedge funds after the fall in 2009. now they have underperformed. now they will sell what they will need. just when i needed. jonathan: we talked about the death of hedge funds. headline on one document said the death of the hedge fund was a typical headline and the date was 1970 something. if passive funds go to 40%, does it top out or stay there a while? >> any time we see one of these portfoliots like insurance, index funds, smart beta wish to me is an oxymoron,
there can be no such thing. beta is rule-based, it's dumb. it's a marketing term. the key is they all end and how to the end? they don't and slowly, the end abruptly. how did you go bankrupt? two ways, slowly at first and then all at once. that's the way it will happen. starts, it gets exacerbated on the downside. alix: great to have you here. coming up, we will talk about crude oil. from new york, this is bloomberg. ♪
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consensus, downgraded at multiple firms. hereditarysiness was cancer testing and that fell 7% this quarter. they live and die by their drug ability and their pricing. in terms of perak go, it was a similar story. which was dealing with an erosion in the drug prices. the prescription drug distribution is 20% of business so any sort of issue with hurtng or competition will those stocks. it's a common theme we tend to hear from drugmakers. the broaderr markets, the story goes like this -- futures across the screen are a little bit positive in the united states. the insurers lead but there are some losses out there 4 of 1%e dax down by 1/ and prudential is the big mover,
a double-digit growth in asia. market, softer dollar story and a weaker dollar with the index capturing that performance. of 1%.by 7/10 the commodity complex is more firm. 3/4 of 1%. on the downside is crude with -- incord output can saudi arabia. the bond market is generating all the headlines. we come in almost 12 basis points over 11 and a new record low, one point 26%. it was an uncovered bank of england operation that came out yesterday. the gilt market is rallying. a new post shows hillary clinton has retained most of the bounce she received from the
democratic convention. it shows clinton leading donald trump 50%-40 4%. when third-party candidates are included, her lead shrinks. donald trump is defending remarks the some say were a threat to hillary clinton. in northnts came carolina when donald
trump >>, essentially abolish the second amendment. , if youets to pick guess to pick her judges, nothing you can do, folks. although the second amendment people, maybe there is, i don't know. and: the clinton camp saying what he said -- campaign said what he said was dangerous. they called it death threats. the trump campaign said he was referring to the political power of gun supporters and donald bemp told foxnews there can
no other interpretation. in germany, chancellor angela merkel press government wants to tighten security after a rash of attacks last month. quickert to have deportation procedures for asylum seekers accused of criminal activity in three of the attackers were refugees who sought asylum. day,l news, 24 hours per this is bloomberg. alix: thank you so much. energy stocks is the big call from goldman sachs this week. they are cheap. the ratio ofows energy stocks to the s&p 500 versus the two-year oil futures. energy shares have lagged the recent rally and the lower than when the market is pricing in for oil over the next two years. us now is leslie biddle from serengeti asset management with 1.5 billion dollars under asset management and focuses on favored asset classes. you typically look at the energy
stocks. why have we seen that month -- underperformed when the future prices are different? >> i think folks are looking at what the multiple should be. we have had increased production and efficiencies are you still have a belly -- a very volatile underlying commodity and big springs. is the proper multiple? you are seeing people react. alix: it's based in the fact that no one knows which at 40.es make money why has that been hard to figure out? way to --cause of the production declines work and who has the best acreage. and who was able to extract oil at these lower prices in a cost curve that's much lower than it was before. that is not easy mass -- that is not easy math. there are winners and losers. we need to check that out enemies to happen pretty soon. alix: the other part has been
the high-yield market. 8% on theking at high-yield energy index so this keeps companies alive when otherwise this should have been a washout earlier. >> exactly, you saw equities respond to the move of the curve, we have not seen that in high-yield. high-yield energy index has been holding up with a 23% move in and less iny high-yield. that will suspend these companies and allow them to tap into markets and keep these companies alive longer than they probably should be. alix: is there a trigger where we will see that watch out? be athink there will washout. we clearly don't need the production. a lot of those companies don't need a whole lot in overall global production. keeping those companies alive is not good for the overall market. it's not good for those
companies. we have seen some u.s. independent oil exploration companies lowered their capex and raise production. it's unbelievable because we thought the capex would have led to lower production. what is driving that? >> it's about efficiency. a hugey have they taken amount of cost out from services technologicaleen changes. the reason why the market is oversupplied is that we have had a technological boom in the united states. i don't think the market has fully digested that. it's probably not the same as the iphone but it's a big change. thinkingt is still about things in a different manner. these companies are incredibly efficient. they were coming out of $26 oil in february and everyone be production and at $42 oil, we have people increasing and
guiding up for production going into the second half of the year. that does not help your oversupply situation. alix: you say part of that was a efficiency. the other part you mentioned is cost-cutting from oil services. services cannot charge a lot for the company they are renting to oil companies. say halliburton literally called the bottom in the last quarter saying they would raise their prices. how does that change the cost curve? schlumbergern and are not the only ones. there are so many components to the service cost curve. where youmany folks can still put pressure on them. be bankruptcies in services? i think that's the next shoe to drop. there is $20 billion of debt coming due in 2018 for service providers so there needs to be some movement.
they have nothing to lose so they might want to keep their pricing as low as they can. that is keeping the cost down. so the oil services potential bankruptcy, when do we see that for e&? felt pressure at 26 and we thought it's over. again, putting backup up rigs and longing the problem. -- and prolonging the problem. this could put the brakes on the capital markets. you see what's happening with global production and the saudi's and the libyans coming back on. gasoline. building we are not through this yet. the way to get through it is another price signal. alix: how much more do you see
on the downside? academick we will goad to the mid 30's and we will be the same for a little bit. you need the capital market to take a pause. everyone cannot do equity block trades at a small discount. alix: so investment is the problem. thank you very much. great to get your perspective. to today's morning meeting will wait look at what banks are looking at. we will look at some of the euro e.m. crosses. i will bring up the euro against the south african rand over the last year. 12% return if you are long on the south african rang -- rand versus the euro.
what is that continue? it's still boiling down to the dollar cycle. we are in a very soft dollar despite the bits and pieces out of the u.s. data that came in better than expected. there is the perception of a study and low-inflation environment in the medium-term. that is affecting emerging markets. are some divergence of u.s. growth and the rest of the world. the macro effect is positive. i think this is exactly what we are seeing. when it comes to south africa, there is a nice mix going on now orslightly lower significantly lower energy prices over the last two or three months. there is some price action and iron ore and platinum and even
gold. that produces a nice dynamic in terms of trades for the south african assets. this is being supported for the south african rang in -- rand in the medium-term. south africa will be looking at this. about the political situation in the last few weeks? how does the political backdrop feet into the financial market story? >> that's the tricky part. the party has been damaged in terms of public support almost 10 percentage points. positivebeen read as a for the rand assets. they will be more pro-or more economic reform pressure.
there will be an attempt to avoid further downgrades. in general, it applies to a better balance down the road. i think that has been read as a positive. that will probably keep mr. zuma in a very secondary stance when it comes to making economic policy decisions. at least over the next quarter. that in general is net positive for the rand. africa,: from south wholelook down on the complex. what strikes me is a lot of people are looking at e.m. as on correlated diverse a vacation what's happening. to me it's becoming more of a yield story in the united states. we have had story after story
that yields are starting to test the lows. you see the appetite in the auctions a couple of weeks back and the moves in japan and europe for the base investors that want to get there hedge in that return is down negative. what is that yield story stay favorable for e.m.? markets are not giving major signs of exhaustion. selloff onbittle un ds and the two sup -- on bunds, there is an environment of low inflation. what the fomc members are discussing will be one of the lower gdp ors potential gdp growth in the world. and how should monetary policy react to that. it's a very interesting piece of information to the markets now.
i believe we are reach and in the low regime unless dm and em act on the fiscal side which we have not seen yet. before that happens, it will be very difficult to get rates out of the hole. jonathan: great to have you with us. is ax market generally substantially weaker dollar. david: that's an important story. coming up next, below $1 billion investment in streaming video bring back the disney magic? i asked bob iger about why the bamtech investment was so important for his company. that is next and this is bloomberg. ♪
coming up, the cio of merck investment talks about the volatility in the currency market. yesterday, the walt disney company announced its third-quarter earnings that news was largely overshadowed by its announcement that it was paying $1 billion for a 1/3 stake in bamtech. i talked with bob iger about this investment and why he sees it as an important strategic move for his company. as most people know, i used to work for you. when i worked for you, you have this discussion about content versus distribution and which one is came. it strikes me this is the first time you have made a major investment bamtech in into distribution.
>> it would be safe to assume this is our largest investment in what you might call distribution. as an investment into technology. what we have set up for more than a decade is that our strategic priorities include making high-quality branded content and using technology to make the product better and make the content better and use it for production and quality reasons but also use technology to distribute in more modern and ubiquitous ways, ways that the consumer enjoys more or is gravitating toward. it's safe to assume it is a distribution play. we view it more as a technology play. that is vital to the future of this company. david: for those of us who like to watch baseball, we are familiar with this technology.
i assumed you would not be making this investment if you are not inclined in the direction of putting disney content on this new platform. when can we expect that to happen? >> we have been incredibly impressed with what major league baseball and bamtech have created. our due diligence proves we were right, that people who have been clients of their product have raved about it. the content owners have used it to distribute as well as consumers and we did our own due diligence and used competing platforms. nothing comes close to what this platform offers. they got a great product from a technology platform with a user interface perspective. i'm a big fan of major league baseball and it's a great platform. we clearly are investing in this to use it as a sports platform and we have said we will launch an espn branded service direct to consumers utilizing rights
has already required and adding rights we have already acquired. we believe this also provides opportunities to jumpstart us in other branded businesses into the direct to consumer space, notably disney branded, possibly marble or star wars down the road. we don't have specific plans. offering does not have a date but we believe this puts us -- this will inevitably put us into that business. esid: is it safe to say that pn is probably first up? >> that's the business bamtech is largely end. one of the big clients is hbo. the hbo now product is powered by bamtech so it can be used for many different types of products but sports will be first for us.
it's very exciting because we think we can want something that's a complement to the thatnt channel offering espn participates in in a very big way. david: that was bob iger of walt disney. the director of north american research joins us now. everyone is asking when they will have their over-the-top direct to consumer scriptures and service. is this part of the answer? big bet onis a technology they believe can bring their content over the top where the have not had an offering yet. hbo went over the top as well as cbs arian . i think this is the first step to move them down that road. david: how big and successful could this be? will it replace espn? paul: i don't think so.
they said they will not put the high-quality sports content on this direct to consumer product as of now. the high-value sports content, the nfl, the nba, that will stay on their linear business but over time, that may change. david: thank you so much. coming up, how far has u.s. productivity come since the 1980's? the answer might surprise you next, this is bloomberg. ♪
corporate insiders. we are showing the buys. this is legal insider trading? laura: it's all good. you have this explosion here of the financial executives who backed their own stocks around february when we had the bottoming out of the s&p 500. you have that going on and jamie bought 20 7 million of his own shares on that day, february 11. financial executives know how to buy. alix: i like her chart. this blue line are wages right now. the white line is wages in the 1980's. the purple line is productivity now in the pink line is productivity in the 1980's.
we are having productivity lower than the 80's and wages higher than it was in the 1980's. this does notys make any sense. it's a dramatic drop-off in productivity which is overstated and perhaps there are structural issues like demographics and the decaying of the manufacturing sector. they said that will shift and pick back up with wages. i cannot understand that so i'm voting for laura. jonathan: i remember that day when they brought 500,000 shares of j.p. morgan stock. merck investments when paris last year and stock vest the stock went to a record high this week. this is bloomberg. ♪
opening bell in new york. it feels like the story of the month or the year -- the rally continues the global bond market. jonathan: an auction today of $20 billion but would there be a buyers strike? there be a seller's strike so an interesting move in the bond market right now. david: they keep cutting the rates and people want them more and more. alix: we had week treasury auctions in the past and we productivity in the three-year auction yesterday was huge. just like the next hour we have. we have great guests. we have the j.p. morgan head of you is equity strategy we will talk to him about his year and call on a much lower snp. rck called for a
bear market a year ago but stocks of continue to climb and we will see if he still stand by that call. about 29 we are minutes away from the cash open in new york with stocks firmer in the u.s. and the europe slightly down. weaker dollar,t, are two3/4 of 1% as we days away from the retail sales number. the next big data point in the bond market is the treasury severalthat comes up in hours. over $20 billion worth. solidyear notes have demand. in the bond market today, look at the move at the long end of the gilt curve, 11 basis points which is a record low. the sellers were on strike yesterday. the bank of england had an operation yesterday with significance.
alix: the curve tells you all you need to know. on individual stocks, disney is the highlight. there is good and bad and the rough part was the cable unit was up only 1%. leavingscribers were and seaworld will not be a driver for disney any longer. you had the company buying a streaminge in bamtech business for $1 billion, its biggest investment since 2012 when it bought lucasfilms. it's trying to deliver on its streaming service. retail was a mixed picture with flat revenue between now and march, 2017 and comp sales falling about 7%. it's trying to protect its margins by not discounting inventory. ralph lauren is a different story. the first quarter earnings topped estimates on that stock is soaring in the premarket.
a are looking at inventory reductions and closing some stores but same-store sales were worse than estimates and -6% in the turnaround effort, it's in a better place. let's look at what's happening in other parts of the market. let's go to the nasdaq. the solar companies are really moving in the premarket. have a bad story turning worse with shares of sun power which were down 50% yesterday on the year are now plunging in the premarket, down about 30%. it cut its full-year forecast, ebitah by 30%. credit suisse has cut the firm's rating to inertial -- to a neutral. there is an apparent instability in the core business. it appears it will be a rough session for sun power. retail, fossil group beat
earnings for the second quarter despite missing comes. they also revise the full-year guidance so it straddles estimates. it has been a rough road for the watch and accessory company. callan is not convinced of this is a turn and they remain neutral on those shares. retailers are struggling, thank you so much. to london and let's start with the dax which is all about that big german utility, e.on. >> what a week it has been for the dax because it's the first major eurozone benchmark to enter a bull market, up more than 24% from february. 1%s down about 3/10 of today in the heavyweight companies are really driving the benchmark into this territory. is this?inable some say this is not about
fundamentals in the german economy but all about dividend yield. how far does the bull run have to go? speaking on the hunt for yield of a different kind, let's take a look at the u.k. gilt market or it 10 and 30 year yields hit record lows yesterday. we see the first stumbling block for the bank of england once it -- with this expanded qe program. what they failed to acquire yesterday will be acquired during the second half of the six-month qe program. the bonds extend their rallies in this environment. we will have to see how this continues. we are at record lows at the moment. we talk about the hunt for
yield, a lot of it has driven money into emerging markets. we have seen currencies gaining against the dollar today but looking at the msci emerging market index up for a fifth day. alix: thank you so much. what is the next 10% move for the s&p 500? one analyst things you will see what another analyst sees 9% downside risk, perhaps reaching 2000 for the s&p 500. we keep talking to people and people have totally different opinions of the market. what's behind the call? the s&p has exhibited a relatively odd behavior. look at the aftermath of brexit, it has decoupled itself from a lot of risky assets be at
european or japanese equities or oil. these were important risk factors driving us last year. it has re-coupled itself with safe assets like gold. if you look beneath the surface, we have seen a decent amount of flow into u.s. equities coming from bond investors. you look at dividend type stocks in the u.s., they are at record valuations. inflows are coming from foreign investors because of political risks abroad. we have seen a decent amount of structural input from systematic strategies because leverage in equities has picked up on account of ultra low volatility. volatility has significantly underperformed. all of this has happened and there are expectations that have been priced into the market. there is too much complacency.
negativesignificant sentiment of the market we had earlier in the year is out of the equation now so things look better. is inflictingle to the better so profits are picking up from low levels. i think it's too premature to move ahead -- for the market to talk about your complacency on the vix. david: perhaps the market is underestimating risk. year-over-year earnings continue to go down but they are not going down as fast. is that indicating a turnaround that could affect the second half? >> there is hope there and we a relatively stabilizing dollar trend.
we need to see oil prices that stabilize. we would hope for interest rates to stay low. when you look at the broader profit cycle since 2007, the biggest contributor to earnings growth has been interest expense savings. in record high margins, 10.7% in the last year. rates stay low, the dollar continues to stabilize or weaken and oil prices move higher, that will provide support to earnings. that's still a big question and the fed will continue to look at opportunities to move forward. 25 basis the idea that points does not matter? >> it's not going to have a huge impact but it will have some. the recent risk will be removed. corporate yield has come down. over the course of the last eight months. that is a huge help to your
capital intensive stocks. at the stock look market and try to project where it's headed, how much of a factor is productivity? we have seen it go down again this week. how important is that to project future earnings? >> productivity is at the center of it all in a way. measuring productivity is difficult. there is dispute around the current numbers we are seeing which are sitting at 0% growth for the last several years. is that capturing the troop productivity in the u.s.? inre has been a huge boom the tech sector and certain parts of health care. i'm not sure productivity is getting captured the proper way. speaking,ly productivity is lower in this cycle than previous cycles. perhaps the numbers underestimate things a little bit. jonathan: why don't you think productivity has been
captured accurately? >> many people will say there of technological advancement over the last 10 years that is benefiting businesses. if you compare the productivity versus the boost we saw in the mid 90's, the delta does not really stack up. it's not a very straightforward analysis. david: thank you so much. he is the jpmorgan head of u.s. equity strategy. for an update on news outside the business world, we go to emma chandra. >> a new poll shows hillary clinton has retained much of the bounce she received from the democratic national convention. it shows clinton beating donald trump 50-40 42 likely voters.
donald trump denies he was threatening violence on he suggested gun owners can stop a clinton agenda. he said he was referring to their political power. delta airlines says operations should be back to normal by late afternoon and they expected cancel more than 150 flights today. it is struggling to recover from the monday computer crash. hundreds of flights were scrubbed and the ceo says they spent hundreds of millions of dollars to avoid such failures. voted tolian senators impeach dilma rousseff. she is accused of illegally financing government spending. 24 hours a day, powered by more than 2600 journalists in more than 120 countries. alix: thank you so much. saudi arabia reportedly broke a record production last month putting into question any future opec
alix:alix: we are putting oil as the future in focus. it had a wild ride this morning, down 1% but now relatively flat. this is a chart that tells the story. this is saudi arabia and oil production. according to its monthly out port opec report, saudi production stands at 10 point form million barrels of oil per day. according to reports early this atning, the output gap is 10.6 million barrels of oil per
day which is a difference of 200,000 barrels of oil today which is significant when you do with a market in oversupply. the oil volatility today. let's turn to the trade. atning us is scott bauer trading advantage. what do you make of the saudi numbers in the move we saw in oil? >> it's a bit of confusion. day does not sound like a big number when you talk about 10 million barrels per day but it is when you are in this time of oversupply. the really overriding theme is that oversupply seems to be waning a little bit. even though we still have it, the glut seems to be over for now. onanything, the shift may be toward more of a balance production. earlier this morning, we were off a little bit. a little bited them as reason for the big
volatility here. alix: is it a fair price of $42? dipped downt is, we below 40 a couple of weeks ago, 37.5 to whereat you would see these short star s to cover. was a place just below the 200 day moving average which technically was a place for people to come in and we never quite hit that low. the buyers really came in. barring anything out of the norm, we have an opec meeting next month and we will see oil inventories later today but we are range bound 40-45. alix: the other big move in commodities was precious metals rocketing higher and i could not find a fundamental factor for it. than maybe people who are on the sidelines with gold, still wanting to be in that precious metal space, going to
these other metals. i really have not seen anything fundamental or technical for the massive inflows into those metals. alix: palladium is up over 5%, thank you so much. big mover inother the market is disney making a big investment in the hopes it can save the future of espn. more details next. this is bloomberg. ♪
david: this is "bloomberg ." reported third-quarter earnings that reported some headwinds for their tv business. i spoke with bob iger yesterday after his earnings call me talked about espn and how the company was going to sustain its growth. espn, you haveat to include is a great business. it's a large business for the company and it has growth ahead of it but it's not going to grow
at the rate we have been used to. david: joining me now is michael morris. as you look at these numbers yesterday, what did you take away? we always start with the media networks which is half of the company's business and it's clearly in a time of change, very dynamic industry. we start with the domestic subscriber number. whetherto understand the behaviors we are seeing in the consumer marketplace is waiting on the results. it appear their overall revenue was up slightly like 1%. offooked like it was setting with fewer subscribers but they are making more money. is that will continue? be a difficult trend to maintain. the subscriber numbers are declining at an increasing rate. there are so my options for the consumer now. wetalked about netflix and
talked about facebook and pokemon go, different ways for people to spend their time. the extra person is not signing up for a bundle anymore. >> can the increase the price per subscriber to compensate? >> they have been and they have significant increases from the distribution partners. you are seeing the distribution partners consolidate as well. cable, and time warner at&t and directv and part of that consolidation is about managing costs. pushing for these outside rates going forward will be challenging. david: if they are losing incremental growth, it's not growing as fast as it was, what will make up for that? will help,hope it this acquisition but where is the difference going to come from? >> it's a difficult question and their main up in answer.
i think disney is an outstanding company and i think espn is a great franchise but this is a business that has been earning dollars-seven dollars per month from 100,000 households. there are not 100 million households that consume the product. the deflationary force in the business is difficult to overcome. bamtech the investment they made starting point for giving them a more direct consumer relationship in the future. this will be a multiyear process and i'm not convinced it will not be without having some economic pain along the way. the studios had quite a quarter. it was extraordinary. come that make up some of the difference? >> it certainly helps. we called disney a tale of two companies. we have a media networks business that is half of the company and a consumer driven business which is roughly half the company which includes the parks. and then also the studio which
is the underlying engine of that is most the drives through both the film products and the consumer products and drives interest in the parks. company has entered into an entirely new phase in terms of the size of that business. that was the story for this past year which was headlined by a couple of on "frozen."was it's a strong part of the business going forward but the rate of growth will be difficult to maintain. david: where are the parks right now? >> they are still a great business but they are maturing and they are seeing some challenges in terms of the global travel trend. you saw 4% decline in domestic attendance which was hurt by some international visitation which has softened. the trend going forward is growing but at a modest rate. they will rely more on pricing.
aftermath to the terror attacks in paris and orlando? think we are still in the early phase of what the impact of that is. a disney vacation tends to be booked very far in advance. a significant expenditure for the average family so it's six months-one year in advance. be sot think it will powerfully negative that i would get more negative on the business. they took control measures in the quarter and did well on profit. we are talking about a stock that means multiple expansion to work and i think that will be a challenge. they have a new theme park in shanghai but do we have a read on how it was going? >> they were positive on it last night and they gave statistics which are hard to gauge as far as visitors.
fromthing we have heard the company has been very positive about the reception. there are always pick up with smaller things but the international expansions we have seen so far, this one seems to be going the most smoothly. early in the process of opening a new park, it's hard to tell. david: thank you very much for being here. three minutes and 40 seconds until the cash open in new york. no big price action and futures are marginally positive. marginally softer in europe. the softer dollar is the story and yields are lower. this is bloomberg. ♪
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♪ "show me the latest medal count?" ♪ ♪ xfinity's where it's at. ♪ welcome to it all. comcast nbcuniversal is proud to bring you coverage of the rio olympic games. hohey s w'oiit ghong, estcak ?hoestcak .th lais p hceotas hkeca hyso wn' aret't ey llsekelica hotkes? cwithstomcain business rntean d e.ju ddst aus a czetomimed e y towiour rofi pas splgeh pa an u'd yo 'll yeachstr somer eie esr a adylr -ju ddst aus a czetomimed e y on diresevic pas splgeh pa .or upder . 'it' tstn jui, wif c itelan howp grr younebusiss. odintrg ucin pwifiwiro, fi hthatpselyow usur bs.ines u 'doe t eth dvery.ay ascomcbut .ss t builbufor sssine jonathan: from new york, this is bloomberg. moments away from the opening bell, let's get you up to speed. futures firm up, marginally.
on the ftse, moving to the the downside on the dax for the first half net loss, down by a third of 1%. here is the action and the other cable, -- dolly and down towards $1.01. towards -- wn crude just pushing higher ahead of the cash open, about 25 seconds into that open. let's get to alix steel. close right now, you would have another record for the nasdaq and the s&p. the level to watch for a record close, so we are just floating around that level and for the nasdaq,522548.
stocks continue to grind higher, day by day. -- we knows anme individual names that are moving. the big one is disney. relatively flat, was down for most of the market trading. just 1%,t profit up raising concerns that espn describe her -- subscriber growth is diminishing. flipside, the company did buy a third state in bam tech and will be launching in espn's -- launching on espn -- launching an espn web-based streaming service. jetblue air traffic was up over 6% in july, although how much money they made her seat per mile was down by about 2.5%. airlineswas also high,
with a lot of capacity. story,st, a different the revenue they are making percy per mile is down by 4.5%. they had cancellations and outages july 20 and that weighed on that company. in terms of eli lilly turning to biotech, parma, health care, a panel is recommending the company's late stage trial of a cancer drug will continue despite the act the drug did not eat an interim goal. those results expected in the first half of 2017. a look at pfizer on the back of this, they are rivals to this breast cancer drug. now we look at other stocks around the world. cory johnson imprints and -- in san francisco has the latest on solar city. -- showing the company's turnaround plans may just be working.
very different from some other retailers we have been hearing from. what is ralph lauren doing right? >> basically taking his own medicine. taking step out of the department stores where they are not selling, they will close unproductive stores. they said they will not return to growth until 2019, so anything that is better than nothing is pretty good for ralph lauren right now. alix: this is a stark contrast with other retailers like idle cores, that are trying to protect their margins and do not want to discount their sales, but say that but traffic is struggling. this wholert is thing of wanting to reclaim this one sure a brand, we want to try to be a luxury brand again, so in the short term, a lot of pain comes with than that that comes with that. -- comes with that. alix: how much more bad news
will we see from retailers? we had jcpenney coming later this week. >> it is all bad news, unfortunately. ralph lauren and michael kors are pulling their stuff out of stores, so that will not bode well. other retailers will continue to do well as consumers spend on things like their homes and decor. alix: online sales were up as opposed to foot traffic. which companies are doing that transition to e-commerce best? >> you are seeing the biggest players finally get into it. people were saying their stuff is too nice, but they are definitely going to benefit. alix: we are definitely watching ralph lauren. thank you so much. city shares are down after the company reported earnings that showed less of a loss than estimated, but also showed that growth was slowing. chairman elon musk said people
should focus on the long-term. for more, bloomberg's cory johnson joins us from san francisco. as i said, they beat estimates in terms of not losing as much money, but the slowing down, isn't that alarming? >> the number of solar panels terms of the amount of wattage generated is down 15% year-over-year. that is problematic. they want to install more, not less. there were concerns about how the business has run, they talk about exciting projects in the future, but the scene right now for solar city is not a good one. david: the on that, there is an issue of cash. they are running out, it appears. >> the company burned through over $200 million again this quarter. they have said they are cash flow positive for the year, yet
the company is burning through fast fortunes -- that asked -- vast fortunes. imagine a company trying to grow, yet burning through $212 million in a quarter. it is a conservative company, because they have less than $40 million of cash left on the balance sheet. the stock is not changed a lot in terms of the trade. board, likely to happen because of the overlapping interests of the shareholders. elon musk has said he is recusing himself from this, from acquiring his cousin company, the very first question
on the conference call was not answered by the ceo. elon musk jumped into answer that and many of the questions. david: as i understand it, elon musk was in favor of putting these companies together, he claims there will be substantial synergies with relation to batteries, was that discussed? . >> he asked why the price was lower for solar city and that was the first question he jumped in on, but he said he was not involved in that and has chosen -- it is the morally correct thing to do, to recuse himself from the situation. that was his first answer, then he jumped in to talk about a new project that solar city has not put a date on, but the announced this new product called the solar roof, an entirely new product that they do not sell yet.
they were asked when it would happen, but they'd said they do not want to show their cards, yet. say what you will, but he always has an idea. thanks so much, cory johnson. markets, in the equity a series of record highs over the last few years -- weeks. our next guest thinks they are heading said -- or substantially lower. just how far he thinks the market will fall. stocks across the board in the u.s. largely unchanged. this is bloomberg. ♪
this is bloomberg . the formerster, president of shell oil, later today. in the markets, 10 minutes into the session, equities of the u.s. largely unchanged. the ftse in london also largely unchanged. let's head over to the nasdaq and catch up with abigail doolittle. >> we had some huge movers on the open, starting off with myriad genetics shares are plunging on pace for their worst day since march of 2000. this after they missed fourth-quarter earnings and they offered a 2017 guidance forecast that is below estimates. there are at least cointreau downgrades out there. the companies -- the company's four core cancer businesses.
trading nicely higher on the open, soaring clean energy fuels, a company that has natural gas doing stations and is making its best move in three days on every small-cap growth investor stream. the company went profitable, turning a profit in its second-quarter. another stock plunging on the after they slashed their full-year forecast by as much as 45%. lots of negative sentiment on the street on a stock that is now down 65% year to date. jonathan: big movers on the nasdaq, thank you. a year ago, our next guest comment -- came out as an equity bear. the market has rallied as of late with the s&p 500 hitting axeler record high, so
merk, president and cio of work investments -- of merk investments. he went bearish after the last record high and putting that out there, another record high, talk to me about where you stand now and whether you have changed your mind over the last 12 months. was good, thatg said we thought we would get 20% down before we reached new highs and that has not happened. if i am not mistaken, we are topping out in this market and one of these years we will enter a bear market. the question is, what is the catalyst and this catalyst may be that september and october are coming, which are great months the market to come down. not even a cold turkey could bring the market down, but things are so great when volatility is so extremely depressed, so that might be the time to take chips off the table
and central banks have -- as we have seen with things like the bank of england, ecb, and cannot working great in the world of central banking, so i would not be surprised if the market is going to take on a life of its own and at that time, volatility is going to come back. jonathan: arguably, the market has already taken on a life of -- own, earnings you could have sent -- would have been dead wrong on the equity market as to be polite, you have been, so i wonder, is talk about the catalyst, not just september and october, let's talk about a real catalyst. earnings will not bring the market down, what will? axel: we talked to a bunch of people and you pointed out you could talk to folks or the glass is half-full or half-empty and the concern we have had is asset
prices have been -- asset prices have been rising, so everything is highly correlated and that could be a reason to take the chips off the table. the drivers have been central banks and that is why volatility is low and as the fed is trying to engineer -- it has made it clear that they are spooked by the chinese, brexit, maybe it is the market fund change or labor markets are messed up, they will always have an excuse to not think marketsd i do die of old age, it might be a more boring way to die, but it could also be based in silicon valley when you have cronyism, when companies by other companies they are affiliated with -- buy other companies they are affiliated with. every rally stops with volatility goes back up, but the fact is volatility will go up
for any reason and it might not , it might bep very boring. alix: when you have guilt at very lows cup -- at lowe's, how do you -- if you take that, because it has to reverse, negative rates are not working, so the investors have to back up. we live in this world and we are saying we will have this great u.s. recovery, the fed is going to hike rates and the dollar is rallying. in europe, they will not lower rates further, but it is difficult to have a market impact, so they have this lower and of the rate cycle and things will go in reverse and the share buybacks are a little it back, but as rates move higher, they are not as attractive. ,ecause everything is so quote unquote, perfect -- that is when
it is time to prepare for when times are bad, and the simple fact is, you invest in a diversified action -- fashion and have a robust portfolio. most people have not taken chips off the table sufficiently, so when we have volatility, people are going to scramble. the argument is that every time the market has corrected, it has rally back. one of these is not going to be the case, and it will be like in 2000 where all these things that work in our favor will work against us. last month, we had -- the last time we had a goldilocks economy was ahead of the financial crisis. when times are great, that is when you have to think about the next step, and it is usually not as great as the previous step. jonathan: the consumer made money last year, whether you are long-term stocks, long bonds, it delivered and that makes a lot of people nervous. it is easy to come out and say you are bearish, last year you
express that view by liquidating assets. how do you express that there -- the bearish view in this point without getting burned? and as youught gold may know, i favored gold coin for extended. -- for extended -- four on an extended period. bystructing a portfolio that design has a local relation to risk assets and what i'm talking about is a long-term sort of strategy. you have to go away from judicial investments because traditional investments are just so highly collided with risk assets and you don't want to go into the complexity. call, also the uncorrelated investment strategy, raising --
coming up, it is bloomberg markets. what is the focus of the show? --the big focus is the title is going to be what is happening in the markets. we saw this risk appetite cutting up a little bit, but we will kick off the top of the show with a great interview, former wells fargo ceo dicker must've it will join us. why theyet a take on are at odds with both parties about this and looking at the markets, we will be looking at the bank of england and this stumbling block of its expanded qe program. we will be picking what happened -- guilt yields following to record lows on the 10 year and 30 year and what this means going forward. the boe turning its attention to those shorter seven and 15 year.
we will be talking about emerging markets because we have a weaker dollar and with this hunt for yield, globally, where are some investors turning, it is e.m.. we have stocks heading for their highest close since july of 2015. index currencies gaining as well. alix: a great point with that. coming up, donald trump latest remarks on hillary's sector -- an amendment use have many questioning the true meaning behind his words. this is bloomberg. ♪ >
if she gets to pay -- [brewing -- booing] if she gets to pick her judges, nothing you can do, although the second amendment people, maybe there is, i don't know. david: we are bringing in megan murphy. -- there has
been a lot of reaction to this, we got close to the area of saying may build -- maybe people ought to take runs and trump and his people say that is not what they meant at all. is there a way this could benefit donald trump in the sense that it communicates to his core base of the second amendment and the more people object, the more they want to take away our guns. >> this type of commentary, if you read it the way he wanted to be read, speaking to the political power of second amendment voters, people who firmly believe in their rights, then it will play to his passionate defense of that.
the problem for him is that the reaction to this not only among people who have been affected by violence, people who have objected to his rhetoric and senior members in the party, outside the party who just continually make the point that does he have the temperament to be president? it is not so much what he says, it is just that it is so unpredictable and people have no way to gauge what is going to come out of his mouth. even some of his advisers when he makes comments like this struggle to get back on message because they are speaking to different parts of what he is trying to say and there is no unifying, cohesive message. david: bloomberg politics had a poll that shows hillary clinton ahead by 16 points with likely voters. whom does donald trump need to appeal to in order to cover those six points? key demographic will be republican women who are falling off quite rapidly. erodes,support
republican women have been at the mainstay of every republican candidate that has been elected in a recent decade. you cannot lose republican women and still defeat hillary clinton. he needs to shore that up and shore up white voters. he needs to get over 75% of the white vote. david: thank you for the breaking news. jonathan: the bank of england fully covered, uncovered, now fully covered, different segment on the curve. pounds, the bit to offer ratio is pretty high and you can see the moves in the market off the back of this. look at the turn in 10 year yield, yield lower off the back of this news, pushing higher and paris gaining. you can see the spike, down just two basis points along the curve on the 30 year and the interesting thing is this is not just happening here. gains in treasuries as well. a slight retracing in markets as
a purchase operation is fully covered, that means enough bonds offered up to the paper -- bank of england can soak that up. talking about auctions looking towards 1:00 p.m., the u.s. treasury market as well. for look at what's coming up on 10:00, we get the jolts number for jim, i love this number,. it looks a job openings if you feel good about your job and your financial situation, willing to quit your job and get a new one. 1:00, the u.s. treasury will be auctioning $23 million in 10 year old -- 10 year notes. jonathan: they offer to cover ratio on this buyback is fascinating, bloomberg up next.
this is bloomberg markets. ♪ vonnie: we will take you from san francisco to washington and cover stories out of the u.k. and china in the next hour. a new bloomberg politics national paul has hillary clinton enjoying a x point lead over donald trump. the finding suggests damage has been done to one of his main calling cards, his business expertise. say theykely voters are not as impressed as when the campaign began. the bank of england says it will stick with its expanded on buying plan even after failing to find enough sellers of long-term government securities this week. news just crossing -- just crossing that it is fully covered. in a rare pointed agreement for both u.s. political parties, a