tv Whatd You Miss Bloomberg August 10, 2016 4:00pm-5:01pm EDT
♪ stocks closing lower, off record highs, the worst day for the s&p 500 in one week. joe: the question is "what'd you miss?" our guest explains the call for higher oil prices. joe: the latest qe efforts hit speed bumps. what it means for stimulus? matt: macy's gearing up for a leadership transition. we have the charts you can't miss ahead of earnings tomorrow. declining.s. stocks from record highs, at least the s&p and nasdaq. the biggest drop in one week for the s&p. we have not seen big moves. six out of 10 groups finishing lower, financials and energy
laggards, wti declines 3%. joe: consumer staples and telecom leading the way, classic defensive sectors. matt: some individual stocks moving down. bank stocks taking a hit. pretty decent losses for heavily weighted stocks. right aid rose the most this year, up 6%. point 25% after earnings yesterday, initially down, then coming back today. up, at 13%, massive move least four analysts have upgraded yelp. some interesting things in the government bond market, particularly u.k., new lows on the 10 year yield, but action as the boe has trouble with its
reverse auctions, not enough bids. better, but all time lows in 10 year yields. i want to go into the bloomberg to talk about mongolia. bondis a mongolian euro that matures in 2022. that is higher rates on a government bond. they said we are running out of money, major crisis. i think investors have forgotten that interest rates can go up and there is sovereign risk. matt: other governments would just print more money, right? joe: the problem is they can't euros print -- print euros. scarlet: i am keeping and i on the korean won, strengthening.
now approaching 1000. a government official says if the rate falls below 1000, korean exports will be bashed. 8% against gained the dollar, 7% against the yen. the new zealand dollar rose as much as one point 4% against the dollar, coming before the central bank interest rate decision. --ecting to cut rate tonight rates tonight, and once more before the end of the year. joe: the aussie dollar has also been strengthening sense that rate cut. looke commodity markets, at saudi arabian oil production, new highs. there was talk about wanting to squeeze producers out. they are continuing to pump oil. oil prices tumbled.
matt: internal use, right? speaking of consumption and palladium futures, surging over 4% on the back of a sales,chinese auto palladium used in catalytic converters. scarlet: those are today's market minutes. get more insight into today's trading and some moves ,n the energy sector, tobias head of u.s. equity strategy for citigroup. into into a bear market, hovering in the low 40's. where is that going next? >> our commodity research team thinks that end of year, early wti,year, a low 50's on
low 60's by the end of next year. relative tois soft expectations, but not seeing surge in inventories we saw a year ago, so people suggest similar to last year, probably overstating. nigeria, reduction problems not likely to be resolved. want tohappens, you take advantage of weakness in energy stocks. oillet: if you look at prices and how energy stocks outperformed, they have decoupled. if you look at it as a ratio to the broader market, they have moved in line with oil prices, so what does that mean for where these energy stocks are headed? >> oil prices go up, historically stocks also go up. people look at the absolute phenomenon. can get disconnects because all stocks are correlated to some degree if markets are going up even if energy prices
pullback. on a relative basis, joined hand in glove. if energy prices move higher, then we will see this. we are not anticipating strong moves in the dollar either. commodities are priced in dollars, stronger dollar, weaker commodities. scarlet: shake shack has just reported earnings. sales up $66.5 uplion, comparable sales 4.5% when analysts were looking for 5.4%, so a miss. adjusted earnings per share, $.14, versus $.13 consensus estimate. ,bsolute number quarter revenue $66.5 million. stock tumbling, down 8%,
despite full-year revenue outlook appears to be higher than previously thought, but it saleslike comcast store are what investors are not liking. store sales are what investors are not liking. scarlet: it trades at 117 times revenue. the average should be 37 times. great storywas a this morning saying will be short play work on shack after earnings again this time as for the last three quarters of 2015 since it has become a publicly traded company, traded down even though earnings beat. it looks like it was getting set up for that. back andnt to go rejoin the bias of citigroup. -- rejoined tobias of citigroup.
since june 27, post-greg's it post-brexit low, this market is on momentum and value stocks. does this represent a shift? does that strategy of piling into low volatility is over for now? >> our sense is that there is a shift going on. worst point,at the bond yields at lowe's and people searching for yield. they are willing to overpay in our opinion for these defensive, save stocks with dividend yields. they stop being defensive when you overpay and don't have the safety requirement. as yields move up, income from the treasury market as opposed to dividend driven stocks, then they think about what is a better set up. if the curve steep and's, maybe financials make sense.
let's go beyond that. eepens, maybe financials make sense. let's go beyond that. get 20%,ot going to 30%, 40% earnings growth in these companies. you may get this in deep cyclicals like energy. they are higher than they were at the worst point last year at $26, $27. when you get to the fourth quarter, you will get positive energy earnings factor you will not get in defensives. high in energybe relative to these names -- valuation can be high in energy relative to these names. four months trading left in the year, your s&p target is
2150, below where we are now. you are looking for $124 in earnings. >> let me interrupt. that is a mistake on the bloomberg data. $122.50.een at scarlet: we need a correction. matt: maybe it is a mistake in the numbers. >> it isn't. we have tried to reach out to you guys on this. matt: i will deal with that as soon as we are done. my question is about valuations. earnings nexted year, all wall street consensus, is that too rich for next year? does that multiple need to come down? the fun aspect of this. it is a question i kind of hate. what is the right multiple for the market is not up to me.
it's up to millions of investors to decide. you the multiples are already reflecting 4% inflation looking at history, but we look at which metrics have been best indicators for performance. we look at the cyclically adjusted pe against normalized bond yields, still suggesting it could be up another 6% over the next 12 months. me theot about you and finding if the market is expensive or cheap. we look back objectively and see which metrics have been successful in determining stock outcomes. joe: what is your read on sentiment? a lot of people talk about market rallying despite no one likes it. our people starting to like the market more or are they negative on it? >> we measure sentiment in various ways. models proprietary
that's a just april to a week and a half ago, we have lost that sentiment driver. we also track correlation by top 50 names in the s&p, and that under 20%,om 86% to warning signal, and people have given up on macro fears. , 30 billionin july dollars went into u.s. equity oriented etf's, the biggest number and a long time, so you are saying people coming back, chasing the market to a degree, and that is taken -- has taken the -- out of the sentiment market. scarlet: coming up, the boe thousand to carry on with its bond buying program. we have the breakdown. a quick check on shares of shake after falling, down 8.5%
mark: let's get to first word news. donald trump held a roundtable today with coal mining executives in virginia. difficultiesut the facing the industry a with other energy issues. donald trump attacked hillary clinton, who is advocating a move towards renewable fuel forces. he says clinton wants the mines close. the secret service has spoken to donald trump's campaign staff about common some say were a
threat to mrs. clinton. the remarks came yesterday and north carolina, where donald trump suggested gun owners could stop a clinton agenda. he denies of violence and was referring to political power. says a justice department report accusing the department of this committing against blacks is not an indictment of every officer. revealed a pattern of excessive force and unlawful arrests. there are officers right now just as offended as we are to see the details that are laid out in this report. why? because they wear this uniform proudly and serve the citizens of baltimore honorably each and every day. mark: congressman elijah says the report validates the concerns that residents have been expressing for years. russian president vladimir putin is promising a response to an
alleged terror plot and crimea. by ukraine move special forces to carry out what he calls subversive actions was criminal, stupid, and an attempt by ukraine to distract its people from economic problems. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am mark crumpton. scarlet: thank you, mark. "what'd you miss?" u.k. yields on the rise after falling to record lows. the boe says it has enough on's in -- bonds in a reverse auction. here now to sort out what is , executive dan maes editor of global economics. what changed between yesterday and today? the boe was, hunting in the 15 year maturity. today, they went down to the 7-15.
amongstear bracket is the higher-yielding groups of u.k. bonds. they have been at this since 2008-2009. other central banks as well. there is not a lot of yield to be chasing. offers quitewindow a nice thing, so why give it to the central bank? matt: if they offer you enough money. isn't it an issue of price, i will sell my bond if you pay me enough, right? boe will know that come back looking to fill a quota with a different maturity, why not keep the yield and sell to the bank next day? investor.e spoke to to sell it to the boe put take a listen. trying to buy 15 your bonds
is difficult. ear bonds isonds difficult. is not the only place where we are seeing the central bank running into these issues. japanese 10 year yields jumped up on concerns over concerns about running out of bonds to buy, germany, ecb. is this all the same story or it is august and not a lot of people showing up to these reverse auctions? , how muchs technical idiosyncratic? a bit of both. the central banks are not going away. you will run occasionally into these mechanical issues. august has not been august since 2007. would the boe have
preferred to do this another time? sure. they did not vote for brexit. if theyic was warned chose to leave. guess what? they chose to leave. the boe pledged to respond. here we are in august. they cannot do anything about the timing of it. how therelked about is a subtle shift in fiscal policy, the central bank may not have to go entirely alone, but that does not mean they will step back either. boj officials could say there are other things we could buy. people have heard speculate that other central banks may even buy into treasuries. does that seem a little too crazy? >> again, if you go back to 2007, probably nothing seems that crazy now. matt: good point. inconceivablet be
for central banks to run into difficulties if they are buying assets outside their own country. matt: they have been reducing anyway. foreign holders of treasuries have been reducing. boe,et: going back to the how does this experiment with the failed reverse auction change or prompted the boe to a just what it does next time? >> we will know more thursday when they publish a schedule of what they will buy next week. there is probably some recalibration going on here. again, they did not ask for brexit. no one would argue with the contention that the brexit pushed the boe into this fresh round of stimulus. this is where we are. joe: one of the arguments for tenderple don't want to their bonds at these reverse is they have nowhere
else to put them men, especially in countries where the official rate is negative. they would have to find some other negative yielding bond or hold cash at negative rates. how much does that create a problem? we live in an environment that has been characterized by next or bleat lower bond yields. there is a lot of cash sitting around. we have global growth between 2% and 3%. how do we get out of it? you tell me. joe: i'll work on it. thank you very much. look at we are taking a the probability of a rate cut from the rbnz. this is bloomberg. ♪
scarlet: i am scarlet fu. "what'd you miss?" rateealand central bank decision coming out tonight. i am looking at a chart that highlights what is going on. and the easing mode catalyst is a rise in the kiwi. line, theur white trade weighted new zealand dollar, up, up, and. theation is likely to hit target of 1.3%, currently at 0.4%. that is why people are expecting interest rates to be cut again to the lowest since going back to 2011. , probability of rate cut is 100%.
today hasurrency strengthened because people have price to that in and looking ahead. --y are also praising pricing and another rate cut before the end of the year. yields all the way at the other side, remarkable. the latest jobs report, jobs opening labor turnover survey. takes the number of job openings and divides by the number of hires happening, and then you get a proxy for the length of time it takes to fill a job. 1.1 jobs per opening. months for jobs opening. at thenot quite post-crisis high, but we are at high levels, speaking to the increased tightness in the
market. there are lots of different factors. there are some structural changes going on. matt: i have a look at oil and gas. the top five companies in america, we consolidated their debt. that is the blue column. of oil and gas companies continues to climb into a drop in oil prices. oil prices in white. the yellow i threw in their last last minute,re refining margins for the gulf coast. it continues to come down. it's not good when you have that rising as the underlying commodities are shrinking as well. hopefully tobias is right. macy's setming up, to report earnings tomorrow. we will explain why this
♪ to first wordt news. and new poll in the presidential race in wisconsin, and law survey has hillary clinton with 52% of likely voters, and donald trump 37%. in a four-way contest, clinton at 34%, johnson at 10%, jill stein has 4%. shows mrs. clinton has retained most of the bounce she received from the democratic convention. the bloomberg politics national survey shows hillary clinton leading donald trump among likely voters.
when the third party candidates are included, clinton's lead shrinks closer to the margin of error. 17 people dead and 40 injured after two buses collided head on near the pacific coast of peru. it took place in a province south of the capital. traveledball fans who to canton, ohio for the hall of fame game plan to sue the nfl. the game was canceled sunday night because of poor field conditions. the ap says at least 20 people have approached an attorney about a class-action lawsuit. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am mark crumpton. matt: thank you very much. a recap of today's action, the indices falling from record-is highs, the s&p 500 posting its worst loss in a week, 2175, not
far off a record high. at 5204 the nasdaq down and the dow jones at 18 495. oil fell today, one of the big drags on stocks. joe: shake shack, the burger chain plunging. were ok, butevenue investors punishing the company p store sales, not as good as the 5.4% expected. not what you want to see in a growth restaurant like shake shack, down over 8%. scarlet: we are looking at macy's, the incoming ceo has his work cut out for him when he assumes the job next year. he will replace terry lundgren.
sinces macy's stock price named ceo.ren was you can see the steady decline since last july, losing half of its value. the main challenge for macy's is encapsulated in this chart. people are spending their money on internet sales and eating out. what they are not spending it on is department stores and paying for things there. it is not clear what would change that trend. helpedrise that this has to drive down comparable sales. on top of slower traffic, the stronger u.s. dollar is weighing on sales to foreign tourists. been a bright spot, online sales providing momentum with brick locations on the decline. ,o combat these challenges
macy's is closing underperforming stores and expanding its discount offerings. announcements, macy's estill has more locations now been 2006. slowing sales & profits have attracted activist investors, pushing the company to monetize its store portfolio. the firm values macy's real estate at $21 billion, double cap right now. macy's is looking to capitalize through joint ventures. we will be looking for these numbers and any announcements on property thursday morning. joe: cap right now. let's talk more about macy's and look what the next ceo has to do to turn the company around. shelly banjo covers retail. thank you for joining us. what is they key thing we need to look for our needs to happen when the new ceo takes over to
turn the company around? >> the first thing we will watch for is real estate, what they will do with all that rent. it will unlock value and push macy's to close stores. as soon as you have to account barthe rent, it raises the on which stores are profitable to keep open. bestet: what is the practice for macy's when it comes to unlocking the value of its property. have seen some interesting examples with hudson's bay. sears, a reals estate company and spin it off into a reit. matt: that is kind of a band-aid, right? a real solution would be getting people back in the stores to buy stuff. is that a possibility or do they have to go online? >> when you have too many
stores, that is not helping anyone either. if all your growth is online, why are you keeping so many stores open? we ared coach saying closing 250 department stores. that is a roadmap for a company like macy's. one of the things that has weighed on macy's has been the strong dollar, not good for tourists coming to the u.s.. piece thatn your macy's should be more aggressive about going international. what do you see as the opportunity there? priority number one, but could be a priority down the road. they are finding success with stores in the middle east. macy's has a good brand name that foreign tourists love. scarlet: they are definitely
leveraging on that bloomingdale's name. which makes me curious that they are expanding to discount stores. -- there too much supply in these discount chains? >> i agree with you that the strategy is not smart, but now it is too late. matt: can they forge better relationships with their brands? they have other important brands at macy's, but don't have the strength, at least as far as i inr, like lily pulitzer target. >> you want to strengthen your ties with coach, but you should be reaching out to different brands. it used to be that upstart rands would kill to be in macy's. now they are just going online
and bypassing the department store. macy's is seeing growth in e-commerce, slowing of little bit, but it makes sense that digital is the future and e-commerce needs to transition. what is their edge and digital? macy's ultimate compete online with the amazons of the world? >> the best thing they ever did was jump into e-commerce quicker than a lot of its competitors. there is that. people are used to it already. there is a first mover advantage there. scarlet: i'm looking at the management of macy's. the chairman and ceo will be stepping down. 4.8 5% total return analysis tenure.n that 10 yea what is his legacy? >> it will be mixed. the first years of his career
was amazing, merging together these two gigantic department stores in the midst of a recession, managed it throughout the recession, and continued to get people to shop while managing e-commerce. on that side, it is great, but then he stopped. he said i have done this great thing and then it popped. scarlet: he ran out of ideas? >> who knows. change would have been better if it happened about a year ago. matt: would it have been better with somebody new? >> he spent his entire career there. we will see. i think he has to come out of the gate with big ideas, splashy ideas, and bold ones. joe: we just saw walmart by jet.com, and people are
characterizing that as a $3 billion -- for m&aee any argument to be an macy's acquirer of fast-growing companies that could play a role? >> there are not many jet dot-coms out there. did buy a skincare company not too long ago. a smart move in a world where beauty is one of the bright spots in m&a. if they could find a company that help them to move the needle that walmart is hoping it can do, that they can get on the cheap, it is not a bad idea. joe: shelly banjo, thank you very much. we have some breaking news from chesapeake energy, it commitment, shale
a $400 million payout to williams partners. their gasrenegotiate gathering agreement. they are giving preliminary 2017 guide notes -- 2017 guidance. we don't have alix steel here. scarlet: the stock is up in after hours. joe: the stock has tripled since it's low. this deleveraging process is probably why the stock is up over 200%. scarlet: for now, shares rising in after-hours trade. coming up, no holding back. saudi arabian oil production at a record high. we wait in on what this means for opec's production politics. this is bloomberg. ♪
scarlet: i am scarlet fu. "what'd you miss?" saudi arabia giving no ground on mark and -- on market share. fresh data shows that saudi arabia, the world's biggest crude exporter, boosted output to a record high in july. earlier today, john hofmeister assessed what this news meant for the global equation. >> it is in line where i think things were likely to be. arabia, russia, and iran get their acts together and figure out they are all shipping oil while spending more money than they are bringing in with oil revenue. , we will see over production
from those three countries. we don't need the oil. it is too much. the u.s. is shrinking as production in an oversupplied market, but it would take more than the u.s. to shrink production. with all this over production and the lack of spending capital, we are sitting ourselves -- setting ourselves up for a price rise in 2019 when the won't be oil that the world needs. scarlet: people are worrying about a supply shortage. investes would have to now when prices have not yet recovered to keep future oil flowing. $50 a barrel,low incentive toenough invest in capacity supply additions? >> that is what i meant by the higher prices in 2018 and 2019. there is not enough to keep investing now.
companies are not bringing in enough cash to pay for current production and invest in new production, so we are putting off the day at which time we will have sufficient oil to cover the demand of the world and setting up a crisis on the other side of the price spectrum. it will be a high-price crisis instead of a low-price crisis. instead, it will affect the global economy and be much more painful because people don't see the pain in the oil companies right now with some 400,000 people laid off with the deferral of hundreds of billions of dollars of spending, which affects everyone right back to the steel manufacturers and the supply chain, so it is a terrible time for the oil industry, but consumers are enjoying the consequences of overproduction. a point you made when you said oil nations need to get their heads together. where do you see the conflict
right now in terms of countries producing and knocking their heads together? how does they get resolved? is on the verge of collapse, nigeria is in trouble, other countries are in trouble who are members of opec. the saudi's rule the day because they have the most production capacity. the saudi's are on a geopolitical agenda to say to the russians and iranians, back off. the only weapon they have our oil prices. somehow the russians and iranians are not listening to the message, and the consequences saudi will keep producing and producing until they feel such a economic pain that they start to back off. you are hearing some rough edged talk about a production freeze. informal meeting will explore the prospect of a production freeze? signal, bute a
whether or not that happens, we will not know until it happens or doesn't. i understand the saudi's point of view. they feel a mortal threat in the region and cannot count on the u.s. for support. that is gone. not administration will support them, so they have to fight it on their own terms and their own manner. scarlet: you describe these crossed currents nicely. it is debatable how important or critical opec is. influence the cartels diminishing on oil prices? will the filings do more to move oil prices on a day to day basis than what opec says when opec meets? >> remembered that opec is some 30 million barrels a day. the u.s. is a .2 million barrels a day. in terms of the big swinger, opec remains the big swinger, led by saudi arabia, saudi aramco.
they will continue to be the big player out there. the u.s. can help with shale. we were at 9.2 million barrels a year or so ago, so we can help influence global oil prices, but still the big game in town is opec. opec is pretty well-controlled right now by the saudi agenda. probably as it should be. they are up around 11 million barrels a day. it is a lot of oil. producer,re a smaller you cannot tell saudi arabia what to do or not to do. joe: that was john hofmeister. speaking of energy, chesapeake energy has agreed to give up its barnett shale holdings, exiting the birthplace of the shale revolution. it will cut shipping and processing costs by 750 million
charts on this tomorrow, but you are giving us a preview. >> what a difference a year makes, right? , as scarlet was saying, the markets were shocked that china devalued its currency. it was a 1.8% move. it does not sound like a lot, but it is. railing --he markets rolling. take a look at my chart. lineyou can see the white ,s the depreciation of the yuan and the first red arrow is august 11. >> the blue line shows the s&p tracking the fall closely,
but then you can see it has the verged in the last few months while they markets have gone up and the currency continues to slide, but it is a more measured slide because the pboc has come out with i don't want to say restrictions, but encouragement of restrictive capital outflows, but also more communicative. an unusual move during this time, the central bank admitted they were not relaying information well enough to the market, so now they are being much more transparent, talking to the markets more, so there is more confidence. matt: part of this is the chinese broadened the basket of currencies. a that is point. all in anticipation of the added touan to be
the basket at the imf. let's pull up this chart. of currencies, onshore and offshore -- scarlet: it is the spread between the offshore and onshore yuan. that the rate is becoming much more fundamentally solid. joe: betty liu. on "bloombergher daybreak asia." scarlet: what you need to know to gear up for tomorrow's trading day. this is bloomberg. ♪
>> i am donnie deutsch. mark: with all due respect to donald trump, next time you might want to put the safety on. ♪ mark: on the show tonight, break thatads, polls, and hope donny deutsch does not have a breakdown over the election. a brand-new bloomberg politics survey shows hillary clinton beating donald trump, 50% to 44% in a two-way race. the margin drops when the