tv Bloomberg Markets Bloomberg August 22, 2016 3:00pm-4:01pm EDT
we are live from bloomberg world headquarters in new york for the next hour. we will be covering stories from san francisco, switzerland, and japan. stocks turning lower this afternoon, moving cautiously on comments from fed officials. we will tell you how one hedge fund robot outsmarted its human master. david bank m&a is heating up. mn is heating up. oliver:. after stimulus and central bankers around the globe, economists have made the case that government should spur growth by spending more money. and bank of america is the latest firm to ask that argument.
we are one hour from the close of trading in new york. trading,start of rather. let's head to the markets desk. matt: an hour from the close. oliver: is it that already? matt: it's 3:00. oliver: that's right. bank while there hasn't been any movement, so don't worry about it. what we are looking at is red arrows. tight today.been swings of only half a percent. range on theter snp today. losses,seen gains, seen but we are talking 6/10 of 100 .ercent really tight range, not much action here.
where he seen action is in pharma -- where we have seen action is in pharma. anre is a big reach for oncology drug in the m&a sector. also rising in sympathy. not the 20% you get with medivation. these are much bigger companies. medivation is a $14 billion company. regeneron is a $40 billion company. much bigger companies but smaller moves. take a look at the oil. oil has come down today. oil down 3%. this is after hitting a bull market. big rise up and a bit of a
drop today. halliburton is down. burstq worsts out -- iraq s out. julie had a chart today, and it shows what i think is incredible --volatility in the oil patch. another bear market and another bull market in less than a month. massive volatility in that sector. do often use other people's charts. and we are standing on the shoulders of giants. david: matt miller there at the markets desk. let's check the headlines at the bloomberg first word news. mark: senator mark kirk says he will hold a hearing in september on the obama administration's delivery of $400 million in cash
to iran. republicans have criticized the administration since it admitted we tame and of the money from a 1970's iranian account was connected to the prisoner exchange. secretary of state colin powell is pushing back against hillary clinton's assertion that he suggested she use a private nmail account for on-classified information. germany, france and italy met at see today to discuss economic growth and the threat of terrorism. aland --kel, francois kel francois picard merka, francois hollande --
friends from 2007 2 2012. 2007-2012.nce from a wildfire in central california is chasing more people from their homes. the blaze forced the famed hearst castle to close. august 13. the blaze is partially contained. day.l news 24 hours per i am mark crumpton, this is bloomberg, back to you. even bank let's get back -- david: let's get back to the markets. self learning computers, so-called ai funds, are outperforming the start of --
let's look at why big names are looking at ai. i want to bring in mark connors come ahead of risk advisory at his,t suites -- mark on head of risk advisory at credit suites. of a trend is this and why are they faring so well? : we were talking off camera about it. one reason why we think the model-based strategy, whether it cpa, what is happening now is unprecedented. let's look at the start of the year. first day of the year we look at china coming out with evaluation. dropped -30 unexpected on the market. and that started a deleveraging that we have not seen since since the first part of 2014. hedge funds have not recovered from that.
areral bank actions dominating and overwriting the idiosyncratic opportunity. member matt just showed a chart of energy? the dominance of those factors is overwhelming the research stats of these funds. oliver: i want you to get more specific on why the traditional -short stockpicking strategies are blunted. for context i want to bring up a function on my terminal. this is the equity screening function on bloomberg eqs. this is the standard deviation we have taken. go right to left it gets more recent pay it if you go back to 2014 dispersion was very low. it is hard to pick stocks in the same direction. but now it has picked up where the s&p 500 stocks are moving in the same direction. why has that not enabled active
managers to pick the right company? what we have done at advisory, we look at singles the broader500, group across the regions. when we break it down and say we rip out energy, just 40 odd stocks in the whole s&p 500, that the star version -- that dispersion goes below average. to the't dropped down single stocks. yet sigel stock dispersion is higher. but it is sector driven. people making interest sector bets-- making inter-sector are not making as much. we have not seen as much differentiation within sector. with an energy we had a bit of intra-t sector -- bit of
sector. you don't have to dip down to lower liquidity to get to the upside. and that is where the models -- one reason why they have dominated. they pick the trends like that, they are not fundamentally based. david: what is a hedge fund manager to do? salad days to c ome? mark: let's look at the data. the data shows it is tightly held by -- if you look at the earnings growth in the past three to four years, it is single digit. that are 16 corners of single digit earnings growth. we haven't seen a cut of constrained opportunity since 1934. really --only three only really three lovers driving the stock market. , it is costm&a
cutting, doesn't really help you essause there's l volatility, and it is -- where are they? we need the alternative because when this central-bank activity stops, the passive investment, which has got the tailwind of the beta market, they may not be where you want to be. january andously february put a lot of pain on hedge funds. there were a fair amount of closures. a lot of people were saying this is going to be a washout. for the industry -- washout period for the industry. be --there are going to there is going to be pain to the individuals, but not the firms. a report our cap
services did, pulling investors pollingas managers -- investors as well as managers. they were not reductions, they were allocations. , it'sdustry is going well growth is slowing, and its maturing at a time that's creating consolidation. you see guys cutting staff, reducing fees. i remember that was the conversation about how much the fee structure had to change. the we see fee changes still? -- will we see fee changes still? yes. people were more interested in getting short than they were on fees. rather,, or investors whether it be foundations are endowments, they want the returns and they appreciate the fact that the central-bank activity isn't going to last forever, it isn't going to be driving us to these pe levels that we have seen since 99, 07.
for some perspective hour to jeff in cynthia koons, and mccracken. why is pfizer so interested in this company and what might it mean for pfizer? there was talk of the company splitting. : i think they are not likely to split. to start build at up but the feeling in the investor community is they don't need he yet.y this gives them more pipeline in oncology, which is an incredible area when it comes to drug pricing and growth for pharmaceutical companies. that is what they are focused on and why they are willing to pay up. they could edge out the competition in a big way because this is where they know they need to be growing if they want to continue to grow the way they have.
bigger talking about the picture, it seems like merger monday is back in full force. what gives with all the recent deals? i can't help but notice they are happening with stocks generally at a higher level. -- jeff: you see investors like sanofi get beat up by the deal. 52 pert in a bid for share. if there are some conversations with morgan stanley and goldman -- i think there are some conversations with morgan stanley and goldman. got beatuestion, they up by their investors because they weren't able to get out. david: when you look at medivation and what they offer,
it strikes me they have a drug approved. there are developing drugs that -- do you think they will take a chance on developing drugs that haven't been approved yet? wherea: on the rare cases you have a company that has a drug about to be on the market, that is the sweet spot, you're going to get a intense company -- get intense competition and pricing. obviously companies with drugs and development are going to be competitive. oncologyundamentally is going to be right for a lot of m&a activity. shares ofth the companies that came out and looked at this acid and got into is fray, this appetite extraordinary and it is not dying down. to mention -- senate fee is one of the more adjusting parts of this story --
sanofi is one of the more interesting parts of this story. were they just kind of wanting to get out of sanofi's target here? jeff: sanofi didn't play this aggressive early on and i think they upset people at medivation. that being said, it comes down to price. they would talk about how great pfizer is. but had medivation paid a dollar share -- more per italy's comes down to price -- it always comes down to price. i think companies felt very confident last week. i don't think the anticipated pfizer would go to this level. we will see if they topped the other bids. it seemed like a nice premium.
oliver: the deal is going received -- but received approval. there is so much political dissatisfaction with that deal. the chinese company had to come to the hill to testify. has washington written more large now with companies? i think they get more comfortable, as long as chinese aren't buying a defense company or a tech firm that will allow them to sneak peeks into your e-mail or play with your credit cards. the reality is they have a lot of business in 25% of its revenue in the united states. they're a swiss company, not a youcompany -- not a us-based company. a lot of time that is seen as back other to pay
sectors today, obviously utilities because investors looking for yield have done well in the past months and weeks. but today specifically it is interesting because the oil prices down. and yet youre down see utilities up. is this just a defensive play? dan: it feels like it. if it is like we are seeing the treasuries reacting positively. it feels like there is some defensive repositioning today. but overall you have seen over the course of the last several weeks, utilities coming under some selling pressure. today it feels like a bit of defense of positioning ahead of the speech this friday from fed chairman yellen out and jackson hole. we will have to see if it continues. it feels like it more often today. matt: will we hear from the fed from dudley, from fisher, twice from dudley and others, that we may get an interest rate hike,
that they really are data dependent, and the data looks good. do you think they will increase or are they floating balloons? what isis a question of the sentiment in the market. inyou look at 15% chance now december, overall it is really about the sentiment of the market and the perception. i think if they do come out, if she does come out with a more hawkish tone based on the rhetoric coming -- this on the rhetoric leading up to the speech, it could shift interest rate environment expectations forward, which could ultimately rock the market. a fedif we do expect height rake, the people will be holding paper when the news comes out, how will they be
affecting utilities, which is a classic stock people often by for the yield? dan: i think it is similar, maybe not as substantial. the repricing will affect the utility sector because it will have to compete with potential rising rates, maybe not now but attentively in the future. we are showing the spider now, up 16 year to date. you have a play with utilities on options. how do you play it? at shorting ang risk reversal. a defensive position against the possibility of further fall back. lookwe talked about, you at technically it is below the moving day average. i see resistance at 5133. and it could move even further see a big- if we shift in the sentiment. this is a defensive play with
further fall back in the sl you. matt: gentlemen, back to you. david: -- oliver: closing of the markets, still some reds. sector wide, we are talking about utility. still doing well at 25 basis points. six of 10 sectors in the s&p are down. mostly 90 basis points as there is a bit of weakness in more than half of the s&p. this is bloomberg. ♪
of the headlines with mark crumpton. mark: the state department is reviewed nearly 15,000 previously undisclosed e-mails recovered from hillary clinton's private home server. the first back should be released in mid-october. it raises the prospect it could become public just before november's presidential election. donald trump's campaign maybe wavering on whether he will still call for deporting 11 million immigrants who are in the u.s. illegally. the washington post says donald trump made it clear to a panel of hispanic advisors that his position is final. the trump campaign manager said his stance on mass deportations was to be determined. would-be suicide bomber was apprehended for the boy was able to detonate his explosives belt. the boy was caught just an hour after suicide bomb attack on a shiite mosque in the city. in that bombing, only the bomber died. stop using basis in
strikes, at least for now. rns defense manager -- minister criticized russia calling it kind of a show often ungentlemanly. global news, 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. matt: it's close in just under 30 minutes. abigail, any action there? grexit appears it's down to the wire once again -- >> it appears it is down to the wire once again. if the nasdaq turns back down to the red, it will be the first today decline since the end of june but action is all about biotech. , on the deuce.5%
of the acquisition for $14.5 billion, better than the bid from earlier this year. there is a lot of speculation over the last several months about whether we would see an m&a run in the biotech space. not surprisingly lots of biotech getting a bit here including midcap i/o text. it seems that many investors are placing short bets on the stocks thinking there could be some takeout action. matt: a lot of stocks moving up in sympathy or on a bet that they will go next. with the nasdaq lux rating between gains and losses, what is polling to the downside?
>> apple shares are lower. smallis making a acquisition of of health data startup. shares -- saying the shares of apple or undervalued. makes the point that the iphone seven production is about flat from a year ago. he makes an interesting point that the se is tracking well, that is the cheaper iphone that produced a better than expected quarter. to team did have a chance speak to harrison this afternoon and most interesting is the idea that he thinks apple could return to top line growth in december. happen,s it could there's a next week in the december quarter that is traditionally strong. but he said there's a huge base out there that has not up rated
their iphone. matt: you will certainly be a boost to the stock. around the world, calls are growing for more fiscal stimulus and less monetary stimulus. this would be exactly the opposite of the approach taken by major company since the financial crisis. bank of america merrill lynch laid out the stock ideas that would benefit from such a shift. joining us is bloomberg's market reporter. a bigs were to happen, push on fiscal stimulus and less on monetary stimulus, how to analyst that affecting the market? >> they call it the keynesian put. they essentially say that we think of the central bank put as more of a support for markets. this would topically be more of , support for the real economy but this would be a case of
picking winners. joe: what would have to happen, would we have to see real will stimulus coming out of this congress? >> a lot is predicated on congress. like ronald reagan said, the nine scary words from the government, i'm here to help. the real push would come from voters saying government, we need more help. .hat seems to be the direction who wins, fromf both sides there's a push for some kind of infrastructure spending. there is an awareness that the infrastructure in this country is crumbling and needs to be fixed. heck vote donald trump said
would double hillary clinton's plan and if you're looking for electoral results, trudeau in onada got elected explicitly a promise to spend on infrastructure. this is something people like and will vote for. the backdrop is that yields in sovereign debt of developed countries have been sinking. you can look at the u.s., japan, germany, switzerland, it's all been going downhill. is it as simple as saying this is a more popular prescription that's tended to benefit the banking sector and the ely -- elite? >> as you say it might be more on the populace angle, really forcing their hands.
>> who are some of the companies they mention in the u.s. and generally one of the categories of companies they sepoys to benefit from this shift? public works projects, rebuilding roads, making more bridges, that kind of things. on the more 21st-century style of infrastructure, they say telecoms and semiconductors could benefit. and with companies that make turbines, if we had that kind of tax credit an incentive to do more in that area. matt: you see borrowing and -- boeing and others, you mentioned telecom, at&t. , there motors and ford bank ofompanies that
america is saying stand to benefit the most. end ofntially from the the paper spectrum is has not been a one-way ride up. to industrial lead markets could involve a lot of volatility. >> when the line goes down, utilities are underperforming whereas when it goes up, they are outperforming. that's exactly it. i spoke to one of the co-authors and he said the real action you might see is a leadership change in the bond market. market. this would be a government taking advantage of that, and that could undo that yield rising the next of higher growth
and inflation. >> obviously there's a lot of debate about whether it's possible to get fiscal stimulus out of washington given the -- given the gridlock. are there other places in the world where it's more likely the political stars are aligning or more spending? whereseems like a place they will be up to get more there. canada we're just seeing the school stimulus start and that the thirdcking off in quarter and beyond. china when you have that kind of power you can get the money moving whenever you want. >> thank you very much for joining us. scarlet: coming up, by a con second-largest boating , whether the company should merge with cbs.
scarlet: it's time for the bloomberg business last. we'll has dropped its endorsement deal with ryan lochte after he admitted lying about being robbed at gunpoint in rio. below is donating $50,000 to a global charity for children in brazil. it was the first major company to drop its sponsorship. retired nba star kobe bryant is now a venture capitalist. he is unveiling a $100 million fund that will invest in
technology, media, and data companies. fantasy sports operators are back in business in new york. the new york state gaming commission issued temporary permits. does companies can resume operations immediately. that is your business flash update. matt: deciding how to reboot permalink pictures will be the first task for the interim ceo. then there's all the other channels like ntb, comedy central, nickelodeon, and the et. we got an exclusive on the second-largest boating shareholder behind sumner redstone. in an interview with bloomberg's betty liu, he shared what he would do. do is getng want to rid of both of them. i like tom -- the last thing i
would want to do is get rid of both of them. i have a general contract and the architect is pulling the strings. ceo, this is a a perfect logical thing. he's got a contract, you know what going to cost you. you keep them on ap can do a good job, that's one wing, but if he cannot, the answer is, what do you do? the company has a certain attraction and it needs to be fixed. betty: so you're willing to give him a chance. or eight him six months back in february and march. so that is over. you have 50 new directors on. it's not costing my clients any incremental money because of the contract in place that has a parachute. he has until the end of the fiscal year.
why would anybody in their right ceo,want to change the cfo, and coo all at once when you don't have to? work in progress. that: let's say he doesn't make the right moves in the next 6-8 months. then what happens, are we talking about her breakup of viacom? >> viacom is $30 billion. his gut global distribution, it has paramount. you take the notion of putting ebs back, let's assume you combine cbs with viacom. i don't want to put a ceiling on it, but just as the number, you have a lot of synergies. you basically have one owner that controls both and there's no takeover premium necessary. in addition to that, you have about $20 billion of debt but -- with beingion
$300 million. this is a company that would be ideal for less to run. betty: then why not just go ahead and do it then? , i would sayles wait a minute, i would want to have shery vote for me and give me to vote for five years on national news stock. otherwise be's oath that is going to unlock the store and is goingtherwise bezos to unlock the store. so who else would be there? all want content, they all want distribution.
then you had the digital world and the global marketplace. movie like ice a age, very little u.s. but terrific globally. if something needs to be done, you're leaning toward bigger, not smaller? >> this is a wonderful engine. it's like the engine that's going to keep going. today there was a deal with robert johnson and there's a lot going on in the entertainment and media echo system. betty: you like seeing all these deals. this is also in the area you like to play in, last week we spoke to john ledger of t-mobile. a lot of people want to buy t-mobile, take a ticket. who do you think should buy t-mobile?
>> if i was going to go out on the party and bid on the yankees, i would start trying to bid on some team in milwaukee first and say get me a license. t-mobile is an interesting asset , but right now i cannot comment. i'm in the auction on spectrum so i would have to talk about spectrum and that's a violation. i'm passing on t-mobile. betty: you mean someone can tell you what to say? >> absolutely. there's a suggestion that t-mobile is worth a significant price over the current level, and so is dish, by the way. matt: that was the gamb co-ceo in an exclusive interview with betty liu. i have a chart of t-mobile. $38 billion today is the full
market cap. i was there the day that deutsche telekom bought t-mobile. it used to be called clear stream back in 2000 line. that was for $32 billion. also andre agassi and steffi graf. it's trading at a forward de of over 31. people remain quite optimistic clearly about this company. scarlet: and to other companies they were talking about, by, and cbs, which sumner redstone also controls.
this is their price-earnings ratio and you can see that cbs and viacom, the gap is starting to close between the two. that means investors are starting to lay the groundwork for these two companies to reunite. they've been independent companies for more than 10 years because the valuation gap is closing, it might be an indication that that is the case. now they are just sort of merging into one. what everyone looks at as the network to emulate. they're not dependent on hits the way that bike on his with movies and everything. joe: you can access their content online and you can access it on the apple television box. scarlet: they adapted to that a lot earlier than everyone else.
recession. given the historical experience following a financial crisis. when you look at the different charts that support the points that he makes, you can see inflation, the target right now up percent, we are inching closer to that. we are at 1.6%. it wasn't fancy, he didn't talk about expectations in all this. he just talked about the data as it is. if you look at the fed's preferred measure of inflation, it shows it inching up at the 1.6%, obviously it still below the 2% target, but it's getting higher. matt: this is a very long-term look. is it is trending up. you can look at surveys and break evens but the point is, it's getting closer. matt: you want to get as basic oneou can, inflation is
mandate, employment is another mandate. it's one that we look at all the time. quits are on the rise. people are more confident in our ability to get a job. are on the rise but up at 3.5%, so serious growth there. the employment picture looks great and the inflation picture is improving. scarlet: and you have to look at productivity as well. if you look at it by worker output per hour, he pointed out from 1949-2005 it averaged
2.5% per year. 2006-2015 is only increased 1.25%. >>'s low productivity is a function of a weak economy, then the fed could do something about it, but if it's not, then maybe are getting toward the limitations of what the fed can do. matt: how much work to you do at home? since 2000 six you can do a lot more with your mobile phone or computer, and that doesn't get measure. scarlet: that's it for bloomberg markets. major look at the averages with less than four minutes to go before the close. the dow is all by 21 points. this is bloomberg. ♪
stocks are mixed as crude oil drops more than 3%. the question is, "what'd you miss?" scarlet: a closely watched speech this week by janet yellen. joe: japan's prime minister makes an epic olympic appearance as super mario. matt: and we discuss what you missed in today's $14 billion deal made by pfizer. scarlet: we begin with our market minute. a modest move in the major indexes when all is said and done. the big story has to be oil prices. oil declining for the first time in eight days, the longest winning streak in months, if not years.