tv Bloomberg Markets Bloomberg August 17, 2016 2:00pm-3:01pm EDT
those come out, if there are any changes, looking for stuff on the inflation and the economy. >> markets are pretty calm. the s&p 500 markets are down 1/10 of 1%. erik schatzker is now live in washington. erik: there is a battle over rates raging inside the federal reserve. that is a clear take away from the minutes of the federal open market committee meeting that was just released here at the fed moments ago. the minutes revealed what appears to be a growing and increasingly frustrated contingent of fed officials who believe the central bank needs to raise rates, either now or very soon. of course we know from the statement back on july 27 that the president of the kansas city -- voted in a favor favor of a 25 point basis
increase. she was alone. the minutes showed that another fed official, presumably someone without a vote, also argued for a rate hike. several officials said that they couldn't afford to make -- to wait much longer because of the following reasons. the labor market is already at or near full employment. number two, the economic data already justified a rate hike. inflation could suddenly accelerate, forcing the fed to move too quickly. four, leaving rates where they are right now. threatening financial stability. it is fascinating stuff to see these tensions building inside of the central banks. you may ask why the fed didn't move on july 27. it's simple, the overwhelming majority of those officials who have votes felt it was
appropriate to wait and they had their own reasons for not moving. number one, the job market. that theed to be sure market was solid. number two, there's still no sign of inflation and expectations remain muted. three, brexit. the policymakers still worry about the u.k. economy, european stability, and the potential for market volatility. number four, italian banks believe it or not, they got to dimensions inside of the minute. fed officials appear to be concerned about the potential for a banking crisis in italy. now we have to ask ourselves what this tells us about september. i told you why the fed officials may have wanted to move.
they got that information they were looking for in that jobs report that showed 255,000 reports created in july. inflation is still nowhere to be seen. great stuff, eric, mining through the minutes. liveber, you can go to top on the bloomberg to get the run down on any of the events. you can get the actual text from the minutes and get quotes from reporters giving feedback on the minutes, talking to market participants with the crunching of the numbers on the markets themselves. let's cross over to julie hyman to see how markets are reacting to those fed minutes. are still bouncing around. just as the numbers were split, investors are trying to figure out what to make of these minutes.
does it mean that things are -- change isn't more or less likely with members pushing for a hike? we had an increase in the yield before. if you look at the two-year, the shorter end of the and what we are seeing there, we also saw a basis point moving down. rounding the outlook, the dollar that we have been watching as well rebound today at the moment , still rebounding and up one quarter of 1%. if you take a look at stocks and where we stand now compared to where we were before these came out, we've seen the stocks bounce around a bit. briefly positive before going negative once again. at this point, not seeing much of a change from where we were 15 minutes ago, right before the minutes came out.
very little changed. 500, taking ap leg up at around 1 p.m., perhaps in advance of the positive before 2:00. that's sort of been bouncing around a bit, right now down by less than a point. looking at the other assets we have been watching, gold prices still lower, taking a bit of a leg up from the lows of the session. finally, oil prices. thee did we see them in wake of the fed minutes? less of reaction with little change. areoes seem that investors still trying to parse out what to make of these minutes overall. vonnie: thank you.
we will be back with you in a minute for another reaction. by someone whow has written the book on the fed. he joins us from his office here in new york. this wouldsaid that be hawkish and that is what we got. ethan: i think we gobble we expected. clearly there are impatient members of the committee. they don't have much power on the committee. but they did indicate a better economy. clearly the fed is slowly moving towards another rate hike. the reasons the market didn't react that much, a lot of people respected hawkishness there. a lot of people have been watching the expectation for the fed and finding out if that report that we had about employment and jobs would be a blip on the radar.
it seems like they are largely brushing that off. is that the right move? enough to sustain expectations? the economy is in great. the gdp numbers have been week. some of it is a temporary adjustment to the oil shock, but the labor market is fantastic. that may number was clearly never ration. if it was the u.s. economy alone here and the fed was in a risk-averse mood, i think it would have had a second hike by now, but every time you get a market disruption it's a that the fed isn't that worried about that inflation target being a big deal. that's why the committee is being so impatient. if you to that point, wanted an increase in july, it's
all the height warranted soon. risk fromow inflation the job gains. how do you coordinate them? how do you then worry about hiking? i think that the outlook is simple. the fed has moved to incredibly slow pace of hiking. i think we will wait until december for the next move. don't think it's quite as frozen in place as the bond market thinks. remember, the u.s. bond market is heavily -- heavily distorted by bond rates overseas and is not consistent with the u.s. economic picture. the u.s. economic picture is ok. less than 5% unemployment, we've had a little bit of pickup in wage prices. i think there is a bit of an exaggerated sense of the fed and i think they will hike up by
year end. the market is essentially predicting a 50:50 chance about where they will go by the end of the year. if you look at this time last year, all the metrics they are looking at, they are better by pretty much all standards. inflation, moved up. joblessness reports have gotten better. all of these banks, including the market itself, which people think the fed takes into account after, are better as well. yet the expectations at this time last year were significantly higher. why right now is the market so sure it's not going to happen? think about what global investors are doing right now. there's a negative return on a lot of fixed income assets.
i think that has pushed down the u.s. yield curve to levels that are just not warranted by fundamentals. it's even affected the front end of the market where the pricing is people buying short-term u.s. that to get that tiny epsilon of interest, rather than hold onto foreign debt. you don't want to hold onto it as a pure measure. i think it will be heavily impacted by the technical bid into the u.s. markets. i take that with a grain of salt. it doesn't look like they are looking for too much in terms of wage increases anytime in. they called it a moderate set off in wage increases. there's no inflation in that, is there? what there is is if you look at the general inflation data for the economy, it's taken
a slight turn higher. not at concerning levels at all. most indicators are that it has had a few more weeks of data, picking up slightly from where they were a year ago. the core measurement working up slightly, creeping in the duration -- direction that the fed wants. but if i'm the fed official i don't want to just creep in that direction, i want to be confident. we are going to give back that normal inflation and i don't want to see positions seen as they were in japan with zero rates. i don't want to see what happened in europe happen in the u.s.. we want to make sure that we get -- get out of the strange world we've been living in. that means being slow about exiting from zero rates and making absolutely sure that we get back to zero inflation. think one of the biggest stories about the
economy in the fed governors this week was john williams, talking about rethinking inflation targets and how to rethink the economy. that he'ssing is it looking at these things? the tip of the iceberg. fed officials are looking at this closely. they're not looking at changing to target, it was so painful create it in the first place. but the world has changed so much, you have had a terrible economic picture with many central banks frozen at zero interest rates for years. we have seen signs of the fed losing its credibility around the target. the world has changed a lot since 2007. when john williams looks to target the fed back then, it was
informal back then but they set it in 2007. if that's still appropriate, he's got a logical question -- maybe we should change it. and maybe we shouldn't be so .igid .his story is going to resonate you will hear more about this. brendan: and we will be watching that. thank you for joining us. coming up in the next 20 minutes, the cover story of this week's "bloomberg businessweek," focusing on a problem at walmart that you have probably never heard about. a spike in violent crimes. silver, along with other precious metals, lower today, but have had quite a run so far this year. we will hear from one of the largest silver producers today in the commodity close. brendan: taking a look at u.s.
ceo says that challenging the merger would create a negative financial impact. and that they would keep providing plans under the aca. spree: 10 sent shopping on premium content has helped the company to fight investor the slowing in chinese economy. second-quarter sales beat estimates as users surged and online ad revenues swelled. the top estimates for revenue and profit came in five of the past six quarters. top deutsche bank executives may have to go without bonuses for the second straight year. the supervisory board should consider grounding them after germany's largest bank put dividend payments on hold. and that's the bloomberg
business flash. getting back to the july fomc minutes, what do the ministers feel about the fed's next move regarding progress over expectations? oliver: this is the chart version of the question i just ask can, looking at what's happening now is supposed to last year. you can see that right now the is 50% chance of a high in september, much lower than where it was last year. however, if you look at my terminal, there are a lot of metrics the fed is going to look at. in purple we are basically looking at inflation moving up, 31% climb, showing a in the average hourly earnings from last year. measure goingtion up, the s&p touching new highs in the light. quiwhite.-
lower,ectations are which i think kind of shows just how much they had to go exterior and how much they knew that. vonnie: when you say that that's the version of the question you just asked, i would say that this is the version of the question you just ask. the neutral interest rate is in a typical light. the target is now at 2%. the white line is where inflation is. the blue line is real inflation. you consume see we have a long way to go to get to the target. we are closing the gap between real and actual inflation. oliver: i think you made a more
interesting article. fascinating and interesting at first, then very hard-hitting. the first question off the bat is -- what is going on? tonnon: that's what i tried figure out, months and months ago. constantlye i was seeing stories of horrifying things happening at walmart. that was my question two police officers. part of the answer is that it's big, it's everywhere, has millions of customers and is not always in the nicest neighborhoods. then i talked to police and security people in their was a sense as well that this level of crime is not inevitable. part of it is because of corporate decisions that have been made around cost cutting. for a decade or so walmart has been trimming costs, cutting back on the number of employees. there's a lot of complaints about how the stores have become dirty, with poor service, hard to find an employee, taking the
greeters and moving them away from the exits. all corporate decisions around cost cutting. creating a perfect environment for shoplifting or other crimes. a sense that no one is watching, no one cares, and no one will catch me. it's not just shoplifting. it's murders. it's homicides. the story is a good read, 20 pages long. the officer said it was .idiculous shannon: in the city of tulsa thingsgeant in charge of said that he went there are three to four times a day. one, shoplifting can turn violent.
there was a walmart employee who was killed by a shoplifter just a few months ago. shoved customers, hit people with cars making an escape. then there's the general sense of bad guys thinking that they can get away with whatever in walmart because no one is watching. someone they meet find on craigslist and do a bad deal, ripped them off there. snatch an old lady's purse. last was a walmart just week where they found a meth lab underneath a parking lot in a six foot drainage pipe. it's got to be, to talk about the corporate side here, it has to be in walmart's best interest, what are they doing about this? shannon: that's the argument that consultants make. , you wouldsted more get it back. people wouldn't be walking out
the door with your stuff. walmart acknowledges the problem, doesn't think it's acceptable, and are trying to fix it. they say it's been a year and a half since they started to tackle this with new management. they put the greeters back on the doors and are using more technology with programs for first-time offenders so the police don't have to be called, walmart can deal with it in-house. but the police and the people in the field say that it's not going fast enough. vonnie: thank you, shannon pettypiece. you can read her story in the latest issue of "bloomberg businessweek." ♪ [ clock ticking ]
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vonnie: let's head over to the markets desk with julie hyman. julie: we are half of an hour from the fed minute release. traders have had a chance to digest the information that came out of that, starting with gold. most reactive to what we see in terms of interest rates. we have seen yields running lower, although it's still down. coming up off the lows of the session. copper prices, we have been watching those as well. we should mention that what's also affecting these commodities is what's going on with the u.s. dollar, which remains higher today, even though we took a leg lower and went unchanged for a bit. 6/10 ofs still down, 1%. reacting to the oil inventory
numbers today. prices bouncing around quite a bit, taking away higher after that report. one quarter of 1%. this is the weekly inventory changing. this is the year to date change. street,e long declining we've seen three straight before thiseeks with this unexpected decline of 2.5 billion barrels next week. bullish.d have been if you look at the five-day chart of oil, you have seen this consistently bouncing off of those lows, entering a bear market. gain during that time. until today we have been seeing a downtrend for the u.s. dollar rising on top of the opec
meeting in algiers and what it will bring. getting close to $47 per barrel for oil. that's phenomenal. steve george saying they have turned their spoon. thanks, julie. televisionbloomberg -- >> this is the start of the next for him. we went to a long bear cycle here. we are back $20 right now, i think there is much more fuel in the tank for silver. i don't think there is a reason to not believe that. >> what will the catalyst be?
>> 50% to 60% of the , with silver, gold, and steroid. silver is up this year, out running gold there. it is with investor demand. we will see the people looking to keep haven security that going. i would like to bring up the chart to show silver over the past five years. you were talking about that bear market coming in after 2010. we have seen a bit of a recovery with the argument about that being moving higher. as you mentioned, it is an industrial metal as well as a precious metal.
with concerns over global growth , are youking hold hedging against that in any way by for example considering buying put? >> it is unmatched in our metal production. if you look at the share price, it really moves with the silver price. that's why people buy pan american's overstock. no -- pan american's overstock. there's no reason to slow growth. the world is one reason, picking up as investors are worried about it. that's the reason. in the end, the big peaks that you see in the silver price, the last one must really be pushed up and save haven.
>> do you see silver outperforming gold and that continuing in 2017? >> it is on front -- unfortunately underperforming on the way down. that's what they like in a company like that. with a bigger chance to be exposed to our great results. successful with the exploration. >> you are based in vancouver, british columbia. with operating mines in places like mexico, peru. them affecting our operations in the near future? working in america for a long time now.
our operations have always been in latin america. for a long time in argentina. overall we are very happy with the jurisdictions we have been working in. >> of course, congratulations to beating wall street, but tell us a bit about your expansion plans. any m&a on the horizon? 2015. compared to huge strides there. there's more to come. oliver? oliver: let's check on the headlines now with bloomberg's first word news erie it -- word
news. "the times of london," citing accounting entries saying line forafford was in secret payments from the pro-russian party, not confirming that man afford received the money. with polling data out today, it's good news for hillary clinton. the latest swing state poll shows clinton with double-digit leads. clinton leads 49% to 39% in colorado and virginia. giving a clear advantage in iowa. a monstrous wildfire in california has forced 80,000
people to evacuate their homes. several buildings have been destroyed. the exact number of the losses isn't known yet. an official today described the blaze is devastating and set many families will come home to nothing. the latest prime level detection is being hailed as a major victory for the south. sang the second-highest rank official at the north korean embassy in london arrived safely with his family, telling officials that he defected because of disillusionment with the regime. when things time continue to deteriorate across the korean peninsula. global news, power 24 hours per than 120 countries. i'm mark crumpton. this is bloomberg. up next, a shakeup in the trunk campaign.
♪ vonnie: target got hit last in the by brian cornell retail environment. we will be talking about it a little later on. but first we want to talk a bit about the campaign, oliver. oliver: in politics there's a bit of an overhaul happening right now in the trunk campaign. seems like that happens a lot. chiefs a new campaign executive, as well as kellyanne
conway, with paul manafort keeping his campaign chairman title. hillary clinton appears to be leading in three swing states, so is it too little, too late? you are right on top of this like white on rice. glad to have you back. what is behind the latest shift? >> more than anything else tom trump has decided to carry forward in mobilizing his core supporters. folks without a college degree. he's going overweight on that strategy. he thinks there is no other way he could potentially have a shot at the white house. whether this will work, that's highly questionable. he's doing so poorly with , even withters
college educated white people, it's a very risky strategy. this is based on number one his view of what the road ahead is and also the fact that paul manafort has been his campaign chairman for a while. there has been a drip of news. oliver: hillary clinton had some comments on the trump shakeup just a little while ago. secretary clinton: there is no new donald trump. this is it. know, i hope you will talk to any of your friends who are flirting with the idea of voting for donald trump. friends don't let friends vote for trump. [cheering] that seems like a very millennial appeal. what is she trying to accomplish by this?
she is targeting the majority of american voters who have a negative opinion of donald trump . saying that this is who he is, he is not going to change. they are actually in a weird little prism of agreement on this, clinton and trump, this is who he is and he is not going to change. much of the coverage of this election has been around him. with one speech or one controversy after another, it was ultimately going to take a few months around whether he is fit temperamentally. right now she's winning that argument. vonnie: she also talked about her taxes. it's interesting, the
donald trump tax plan is similar to that of republicans in previous cycles, though he does go further. his plan would give upper income americans in particular a very big tax cut. a colleague of ours wrote a piece today about how under the theld trump tax plan clinton bill would have gone down by 1.7 million. a big tax cut for upper income individuals. said it would give people like me a tax cut, which we don't need. that's what she's making it about. vonnie: thank you. you can follow all of the politics action on the bloomberg. we have the latest news, polls, everything you need to stay up-to-date. coming up, cisco has a plan to cut as many as 14,000 jobs worldwide.
♪ "bloombergs is markets." investmentucrative for cbc partners, the private equity firm acquired a majority stake in the motor racing sports in 2006. now they are looking to exit the investment and goldman sachs is on board. the price tag could reach 10 billion. is an interesting story. i don't know much about formula one, but they seem to have made a lot of money. what is their next move year? are they having trouble getting rid of this investment? >> we have actually reported on
the potential for several years now. haven't gotten the price that they wanted. the valuation keeps getting higher and higher. that said, they are a private equity firm and they have to turn this investment over at some point. the age of the fund is getting to the point where it makes sense that they don't want to sell. it seems to be making so much money. it's a pretty niche sport. usc is the same. these are the values, now, like tech companies. right, here we have cbc with its initial equity it hasent at a billion to do with broadcast rights. that's really where a lot of the
money is at. revenue, advertising the tv landscape is shifting to the point where live sports demands a premium in advertising timeshiftingone is and watching things later, skipping the ads. therefore the ads are much higher priced. just the rising popularity? they have pointed it out for -- before, but is it something they are doing specifically? alex: the colorful ceo of formula one has been running it for 40 years now and continues to run it. i would argue certainly if you listen to this week's deal of the week podcast, my colleague is on the show along with's boards reporter evan williams.
they posit that formula one still has a long way to go because it has hampered the progress of the sport. quick question on the had a lot ofave power when it comes to formula one. do they get a say in this? how much say they have in it is limited, but the future of the sport is very much tied to the teams. in fact, cbc was paying themselves and the limited partners back, instead of pushing the money to the teams. just like ufc has some interesting contractual things , formula one, especially when some point you need a transition away to a new ceo, it will depend on how the teams get as they work it out.
all right, alex. thank you. be sure to listen to his podcast, deal of the week. it comes out tuesday morning some -- from bloomberg on itunes. cisco, planning to cut as many -- 14,000 worldwide jobs worldwide as they are looking to report fourth-quarter earnings. for now, let's bring in cory johnson from san francisco. similar been hearing stories and conversations around this? cory: i would tap the brakes real hard on the crn story. that 14,000 number seems incredibly high for a company worth -- things are not going that poorly at cisco.
getting rid of one out of five workers just seems wrong to me. we will know after the bell. the possibility of some layoffs is certainly out there. but they are particularly aggressive. when you look at cisco and the world of technology, it is a business that has done better in the recent years where the others have had a hard time. when you look at the big names in technology, if you look at the last few fiscal years or the big tech companies, the likes of ell, sunlett-packard, d microsystems, they have seen year-over-year declines. cisco has not, except lately when it has. a little bit, then a little bit more.
and then a little bit more. you are on the record as dubious about the number or size of the job cuts. overall if they make this transition away from the hardware business, is that going to be part of the trimming of the fat? cory: if you look back, there's a great function on the bloomberg where you can see the circles around the layoffs. usually in dreads and drags. it is crucial part of this company. using stock options to make those acquisitions. even his the issue options on the other side as well a stock to acquire things and full those things in, it is very much a part of that feature there --
look at you guys, you guys are so good. the circle on the graph shows whether it are the layoffs. cuts over the course of the last eight years, yet the employment numbers are bigger. cuts, andart from job reporting isthat invalid in the sense that it could be fewer, but what are we looking for in the earnings? the commentary will be interesting. it will show some of the places where there are switchers and routers around the bulk of it. software and security, i'm certainly looking for how those things are doing, how those things are growing. to give a notion as to where they are going. matters to cisco. it matters to the world of enterprise computing. thinking about the company they might want to
acquire next. oliver: we will be breaking down earnings even more today on "what'd you miss?" chuck robbins at 2:30 p.m. london time, on "bloomberg ," tomorrow. we've got a bit of fluctuation post the fomc minutes. largely negative with the yield spread he and the s&p picking up. vonnie: they say they don't think it tells us much about the september meeting. markets unchanged, feeling pretty much the same way. this is bloomberg. ♪