tv Whatd You Miss Bloomberg August 22, 2016 4:00pm-5:01pm EDT
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. entering a bull market before
gave way to some profit making today. some modest moves. modest is the word of the day and probably the word of the month. matt: i looked to measure on stocks and i saw that half a ,ercent was the widest range the nasdaq and the dow's 1.5%. take a look at my imap, the most basic function to use to see how the industry moves are going throughout the day. you can see a totally defensive investor. utility the biggest gainer, then health care, then consumer staples. down ands were consumer discretionary stocks were down again as well. so people were getting defensive in today's market. joe: on the government bond dealt, the indian tenure
jumping, some nervousness in indian markets. any transition of power is going to cause a little agitation. that stick with emerging markets here. seeing the biggest drop in about a month. the russian ruble leading the slide. the up arrow is the dollar versus the ruble as the oil prices drop for the first time in eight days. fitch cut its outlook on turkey's credit rating saying it increases the legal risk of investing in turkey. joe: gold and silver getting hit silver really getting slammed. perhaps some of that was the selloff that was perceived to be the hawkishness of those comments from stanley fischer.
one commodity getting a bounce today was natural gas. one last heatwave, you can see right there a bit of a rally today. diveet: let's take a deep into the bloomberg and you can find all the charts using the function at the bottom of your screen. we will stick with the idea that oil prices have given back from their recent gains. you notice this column, this is september. oil tends to drop in the month of september. for the last five years that's been the consistent pattern. in 2015 crude oil drop more than 8%. 2013, about 5%. these are pretty sizable losses. so an ominous warning after this extraordinary about.
i want to talk about the stock market today because it's kind of an interesting day. it's really jerky. matt: how did you do this? you see these really sharp ups and downs. on the left side you see this is volume distribution, this is the volume analysis function. you can see it's concentrated at basically here, here, and a little bit here. you get the point there were just a few prices and then you have these big gaps where there is almost no volume it all. of a jerky, slow, summer day. ultimately not much change but the changes that did happen happened that no volume and very fast. matt: i have a great chart that
i stole from someone else. what it shows you is company r&d, capital expenditures and profit margins. r&d is the red column and you can see it has gotten bigger each quarter going back to the beginning of 2014. at that capital expenditures have dropped to almost nil. we know that capital expenditures are probably because companies have little confidence in the economic future, but the r&d expenditure is growing. i thought that was interesting. it may have something to do with the tax treatment on r&d. it looks like they would be putting more into that. profit margins got bigger over the first couple of years in this chart. they are starting to shrink a little bit. a lot of pressure on profit stills, but they're growing r&d, which is interesting.
you can make your own chart that is that. there has been some concern or at least people noticing the recent surge in the with usetween libor -- is bob finch. when someone talks about libor, what comes up is that this is anticipation before the money market reform kicks in. but when you look at the spread, why are people taking a second look at it and wondering if this could be concerning? >> when you see spreads between bank oriented paper and treasury bills, you hearken back to the 2007 financial crisis. is there some sort of risk brewing up that we are not aware of? and concerns that that is what the market is beginning to tell us. in this case is more innocuous.
october 14 there is a major reform going on for money market lines. the industry is creating more volatility in the net asset gains thatlso some slowdown redemptions in charge redemption fees in case there's a run on the money market funds. this is designed to improve liquidity. what has led to is a lot of companies, major brokerage firms, retail oriented, rick wearing their customers to shift out of what would be called a prime money market fund that would include cds, commercial paper, and move instead into government only funds. there may be a benign expiration for the shift, but will it have economic ramifications for loans and other things tied to libor? even if there's a benign explanation, will it filter through to the economy in a negative way?
>> you have a $400 billion shipped from prime money market funds to government funds. as a result the demand for t-bills has gone up in the demand for libor-based products has gone down and the spread has widened about 30 basis points. is that because libor went up 30 basis points or t-bills went down 30 basis points, or is it some combination of the two? my guess it is a commendation of the two. .aybe libor is overstated i cannot believe 10-15 basis points is going to have a macro effect anywhere in the economy. i think it is small, but sometimes you just read simplistic measures like the widening spread and say there's something bad happening out there, there are liquidity strains on the economy. i think this is easily explained by reform process.
joe: i find that ship the most interesting. is that because they're getting into government funds, or is it because they're getting out of prime money market lines? the latter could be because of changes in the way they are regulated, maybe investors have less trust in run money market funds in the have in the past. >> i think it is both, and i think it's really not a choice back her. i brokerage account at a major discount firm required me to take my sweep account for my brokerage account from prime fund to a government fund. all the big retail brokerage funds are the christ to do that. ,his is not a choice variable it's been happening over the last couple of months. it's a lot of money to shift from prime funds to government once. luckily t-bill issuances creeping higher.
i do think this is a regulatory issue, and again it's not that individuals are making a conscious decision. i received a notice saying you have no choice. matt: you can see that the inulation went into effect december 2015. there is a drop in prime money market funds there and a coinciding job in government funds. it's not really a good metric or indicator of liquidity. what would you look at to get a sense of the liquidity crunch if you cannot use this metric? markets otherther than treasury bills to you can look at commercial paper, international dollar markets. the spread between libor and commercial paper rates is unchanged this year. it's three basis points through commercial paper.
basically the other markets it might show some change relationship to libor in fact have not done that at all. in that context, it tells me that this is more than anything else a big demand for t-bills, which is artificially depressed t-bill rate and may push up the other great is all the primary -- prime money market funds have been forced to liquidate some positions. what is interesting also is that the market tends to equalize it self. seeingual companies money market finds having to dump their libor and commercial paper assets see those rates go up little bit. the companies have probably been putting money directly into that paper because they can get a better yield on it. i think the market is working and given the $400 billion shipped, spread widening is actually pretty small. matt: let me ask you about currencies. when i hear your name, i think about currencies for some reason.
there are 94,000 short contracts open with pounds. think about this positioning right now and what can it mean for moves going forward? >> it's potentially a painful position. we've seen the pound per couple of it in the last couple of days. the trade weighted count was down about 7% before the brexit vote and down about another 8% afterwards. the trade weighted count is down 15% this year. the currency is getting into an undervalued territory. i would tend to disagree, i think 130 is the low level and we could see some squeeze higher in the near term. joe: bob, thank you very much for coming in. with one offizer
congressional republicans have issued subpoenas to three technology companies that either made or provided maintenance for the private e-mail server that hillary can use while secretary of state. the gop has been stepping up attacks on her handling of sensitive government information that flowed through the server located in the basement of her new york home. mrs. clinton lead stop trump in latest poll out of ohio. she has a four-point lead in the latest monmouth university survey. it is consistent with recent surveys showing her ahead by single digits. sarkozy wants his former job back. he has announced he is running for president. his republican party holds primaries in november. he led france from 2007-2012. he urged the tougher stance against president. current president francois inlande has been sinking
polls. global news 24 hours a day, powered by 2600 journalists and analyst and more than 120 countries. this is bloomberg. scarlet: pfizer is buying medivation for a price tag of $14 billion. -- where can the paris-based company go to move all that m&a cash? let's put this into perspective first. pfizer is buying medivation. cancer.all about this has been a hot year, going back to last year it's been a hot time to buy oncology drugs. they're trying to develop a breast cancer drug and a blood cancer drug. so you have current assets that now andw of cash right something coming in the next couple of years that has value.
iny started the process back march. they played it badly. i'm sure there are a lot of difficult conversations going on right now between their bankers because they never saw this company being worth $14 billion. i think they assumed it was like a $12 billion deal at most. they were advised way back to bump their bid because they started out at $52 and pushed to $58 and ended up selling for $81. is it possible that pfizer could end up with the winner's curse? what are people saying? bigger, ifs so much they do an ok job in merging this, that will be fine. are $212 billion market cap company and this is a deal they can do easily.
they did not do the hour again deal which would have spent a lot of their time and energy and money, but that deal fell apart so they have a lot of money to do this deal. and 36 months they can look at other companies as possible takeover candidates. it would not surprise anyone if pfizer came in and also bought that. joe: i know that you and alex , which have a pool companies going to go next. are they all cancer drug companies right there lined up at the top of that poll? bute do not have that pool, i mention this earlier, the name is well known by the arbitrage community. i think the market cap is around $15 billion so they would fetch
maybe $30 billion. probably of $6 billion market cap. that's another one to keep an eye on. we should also keep the night on and others. they are all looking to do deals in this size and space. when it comes to health care it seems like there is a ramp-up in deal making right now. is this typical to be so much dealmaking in the late summer months? >> made the mistake of trying to schedule vacations in august because i thought it was going to be really slow this month. but between this deal and the gas deals, just in general it feels like it's picking up.
some of it might be the election, people are trying to get things nine when the have a sense of what the administration looks like now and what the struggles are going to be. investors are generally rewarding companies that are doing deals. i think the investors expected they would get this deal done. so the environment is still supportive of the acquisitions. matt: you let us perfectly into asian buyers with u.s. and european targets. japanese buyers are looking for u.s. companies because of yen strength. we know that nomura is hiring a dozen or 20 bankers because they think ipos are going to pick up. >> that's going on in places like deutsche bank and credit .queeze, -- credit suisse in general, if you are in china or japan, the u.s. is the best place to try and add business.
even at 1.2% gdp growth in a everyone hereakes ring their hands and get upset, that still tremendous when you look at what the base of our gdp is. every other company would like to have more business in the united states. looking at the deals here in blue, we hit a record last year as far as the value and number of deals. .his is a quarterly breakdown are we going to get to another record this year? >> i don't think so. are going to see asian outbound deals into the u.s. or europe. i don't think will have a record year. deal.t anticipate a i could be wrong but i don't expect the next four months to be anything like last year. ever wondered how
scarlet: let's take a deep time into the bloomberg. are at the limits of what monetary policy can achieve. the chart goes back to 1990. i've graphed how often the word fiscal stimulus shows up in news stories, versus the frequency that the worst monetary stimulus appears, that is the orange line. stimulusy of monetary was right after the financial
crisis from 2010 and peaking in 2012. and coming back down again. it's gotten some play lately because most of the articles are about the limitations of it. it's a fascinating chart for multiple reasons. scarlet: and also at the end of the -- or the start of the financial crisis. into the -- went when into dormancy and then it -- it's one of the best functions for understanding how the frequency appears. matt: i just want to show, the 10 year right now is yielding 1.54 percent. i just have a simple yield graph of it.
you can grab the curve here and then look at it over a week and it will show you down in the second panel the changes in yield over the different tenures . what we can see from this is that at the beginning of the short end of the curve, the yield have gone up on three month, six months, one year, whereas on the long end of the curve over the last week, yields have come down and the 30 year has come down 4.5 basis points. basically this shows you there is curve flattening going on. you don't think about that. it's just a cool way to look at 10 year yields. japan will be fine in the long run, but what happens
mark: let's get to bloomberg's first word news. the u.s. state department is reviewing nearly 15,000 previously undisclosed e-mails recovered from hillary clinton's private home server. the first bat should be released in mid-october. that raises the prospect they could become public just before november's presidential election. illinois 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 repayment of the money was connected to a u.s. iranian prisoner exchange. the administration denies the money was ransom.
the turkish president is complaining about the u.s. delay in next are dining an islamic cleric accused of masterminding last month held military coup. president erdogan said the u.s. position is overshadowing the country strategic partnership. he plans to discuss the situation with vice president biden who is scheduled to arrive in turkey on thursday. the u.s. said it of something criminal. russia will quit using basis to rebels,ttacks on syrian the russians began the attacks last week earlier today iraq's defense minister criticize russia for announcing is using iranian base, calling it kind of show off and ungentlemanly. global news, 24 hours a day in more than 120 countries. this is bloomberg. let's get a recap of
today's market action. not a lot going on when it comes to equity. we did see equities drifting around, the nasdaq closing marginally higher. traders pushed up the dollar and pushed commodities down. stan fischer, the fed vice chair basically suggested that another rate increased this year would be appropriate. falling,10 year yield so as matt pointed out with or, we saw little bit of increased rates on the short end, lower on the 10 year. oil giving up -- falling for the first time in eight days. it had been on a seven-day winning streak, the longest since 2012. matt: the longest streak in four years, pretty remarkable. a big drop, but oil, i showed a chart earlier and i will just
bring it up again. julie hyman put this together. it just shows you the wild ride that oil has had back to 2015. we fill 47% that year through february and then we were up 95%. then back into a bear market and then back into a bull market on friday. there is a sufficient chance the bank of japan will add to its unprecedented easing at september's policy meeting. the yen weakened after the boj governor made that comment. this is all set against the backdrop of the japanese prime minister's recent plans for more aggressive stimulus. our next guest said the second round will be dead before arrival. joining us now is the codirector of macro research at global
investment management. thanks for joining us. last night this was one of the stars of the closing olympic ceremonies in rio. i have not seen this yet. he was dressed as super mario, holding up a big gold coin. what does this mean, is it somehow symbolizing inks to calm? ome?ymbolizing things to cal difficult for be him to face the japanese after another round of monetary inflation. joe: what is next for the bank of japan? there was talk about reevaluating the ring were. what do you think they are going to try and what do you think they should do instead? >> they are aiming at the wrong target. if you think about the japanese economic problem, it's not a
productivity problem. basicallyrowth is productivity growth plus labor force growth. japan's productivity growth has been on par with united states for about 20 or 30 years. the only thing that explains the japanese relative shrinkage to the rest of the world has been the labor force. , this is i understand done nothing to address that problem. that's why think it's not going to resolve any problems at all. scarlet: at one time japan was dominant globally in economics. how is it that japan came to dominate global economics in the 1980's? confluence ofal demographics and technological shock that created that moment, or was it an anomaly? the 1980's, it was a
combination of things. been exporty had driven. the world economy had just come out of a very deep recession. japan was able to capitalize on that opportunity. if you look at japan's productivity growth, it was very high. at the same time, they do have positive labor force wrote. earlyd say since the 1990's, it has changed. it's been a par with the u.s., don't get me wrong. the problem here is the japanese labor force has started to shrink. japan's gdp, the u.s. has outgrown japan by 25% in terms of the size of gdp since 1990. that outgrown has been explained by the rising labor force, not
productivity. the japanese standard living has been increasing along with productivity grew. for the last 20 or 30 years, the standard living for the average japanese has been increasing along with that of the united states. it's just less and less people are producing goods and services. that's why you have a stagnant economy. it's not a solvable problem unless the japanese government is willing to allow a lot of immigrants to come into the country. otherwise you cannot solve that problem, into the story. joe: does the problem need to be solved? >> i don't think so. problem,hink there's a because japan is not like other countries. japan is as productive as the
united states, don't get me wrong. the japanese living standard is increasing at the same speed as the united states. there's nothing fundamentally wrong with that economy, but the only problem here is, japan has run a very restrictive immigration policy. that has really undercut its labor force wrote and allowed its natural demographic trends to play itself out, where the u.s. will always have immigrants , and new labor force growth. that is what makes the difference. scarlet: you mentioned that japan would become the equivalent of a nordic country, , somewhatative well insular with a more limited impact on the world economy. is that ok with the japanese government? >> if you think about the u.k. history, the u.k. used to
dominate the whole world. affluentll a very economy but it is an island economy. japan used to dominate the world economy in the 1980's. the size of the japanese economy was way too big at the time. as the bubble collapsed, the natural process put japan on a path of returning to its natural equilibrium. i think eventually japan will become another u.k. or slightly bigger than the u.k. because japan has a bigger population. but it's an island economy nonetheless. i don't think there's anything wrong with that. can take a look at the japanese unemployment rate, and this is a problem that every country in the world would love to have. it's at its lowest level since 1995 at 3.1%. if you say there's nothing underlying wrong with the japanese economy then what is he
playing at? theypersonally don't think really think about their economic problems very deeply. you just say japan has been stagnating for decades, but wait a minute, you have to really the eager and look into causes of why the stagnation is taking place in the first place. think abe is addressing this popular -- popular observation that japan has been stagnating for years without really looking at what he is doing. japan is lower than the u.s. in the misery index. you do talk about act that it grow their gdp, by accepting immigration.
are there immigrants waiting to go into japan? >> at think it's very difficult. japan's culture is not very tolerant, not very likely to accept a lot of different people . you don't see a lot of different people in japan. the japanese don't like to see a .ot of other people that is the culture and i'll respect that. from an economic point of view, that is a problem to grow the size of that economy, even though we all understand that japan has a very competitive export sector whereas the thattic sector is not competitive at all. economics can address that. why not open up the economy a little more? japan is not a very open economy. japan can do something about
that in terms of boosting productivity and there is still room for japan to increase productivity somewhat, but in terms of overall dynamics, i don't think they can change , unless they're willing to really change the immigration policy. joe: a fascinating perspective, thank you very much. donald trump is calling for the clinton foundation to be shut down immediately. this is bloomberg. ♪
clinton has spent decades lining their own pockets instead of taking care of donors. just sent a letter to foundation members outlining the changes that if hillary clinton is elected, and he said he would step down from the board. donald trump not the only one, you also have the former governor of and surveying is saying that the clinton foundation should be limiting now immediately. >> i don't think donald trump wrong necessarily on this point. the clinton foundation is a bit of an albatross for hillary clinton. i think shutting it down would benefit her, actually. insinuationss of that are not ungrounded that -- haveave allowed the
allowed them to buy access to the clintons themselves. started tweeting the msnbc host. is just giving the media something else to vocus on? -- to focus on? i thought his new staffers were supposed to keep him on message. just one day after the shakeup and he cannot lose his grip on his twitter account. matt: we were talking last week about the clinton tax returns. they gave 10% to charity, which looks great, but then report started popping up that the charities they were giving most of the money to was their own foundation. have you heard those reports? that doesn't really sound right.
>> think it's kind of an unfair characterization. donors may use the foundation to get to the clintons, but it's not like the foundation only benefits the clintons. it doesn't really benefit the clintons at all. it gives all this money to actual programs and does a lot of good work in africa, for example. it's not some sort of slush fund for bill and hillary clinton. if they give money to the foundation, that money is presumably going to good causes. you can look at the foundation's tax returns and see where it goes. matt: that's an interesting point, because we're seeing wealthy people give more money to down dacians. the zuckerberg's are going to give 99% of their well to the foundation. people seem to accuse the clintons of somehow having control of this money and benefiting from control of money in that foundation. you're not concerned that they would benefit from the money in the foundation.
>> they make plenty of money on speaking fees. a salary byet paid the foundation. the problem with foundation is that donors can use it as access to the clintons. the problem is not that the foundation is doing bad things are somehow secretly funneling money back to the clinton family. what extent is hillary clinton even involved in the foundation? >> there are e-mails from the state department that show people at the foundation trying to get access on behalf of donors to state department officials. from thoselear e-mails that hillary clinton ever really got involved with that. at least in one of those recall, oneat i can of hillary clinton stabbers actually said no to a request
mario bailey says he's willing to give tom dooley a chance. directors,ot 50 new it's not costing my clients any incremental money because he's got a contract in place. he's got a parachute and he has until the end of the fiscal year. why would anybody in their right mind want to change the ceo, cfo, and coo all at once when you don't have to? scarlet: if you read between the lines, he has until september 30 and the end of the fiscal year. but what timeframe does he really have to get something done? that hed said earlier wanted to leave six or eight months ago and that was a good time to roll something out of the hat. the funny thing he said -- that
was an awful movie from paramount,. it,organ freeman stars in ben hur. that's a good metaphor for what is wrong at viacom right now and what needs to be done. to what extent was the unhappy with how my was being managed, even before this change with sumner redstone? betty: remember that for so long it was redstone and gabelli together. this was a man we thought would be making some final decisions for sumner redstone," -- how quickly he has fallen from grace. mario has seen the shares of this company underperforms significantly.
he said that sherry redstone was welly and in her moves and look more to the future now, so what is going to happen with viacom? will it stay as a standalone company or might it come back together with cbs? saidt you to hear what he about who might get the job done if dooley cannot. >> let's assume you combine cbs with viacom. number, you talk about a company in three years with $20 billion.of you basically have one owner that controls both so there is no takeover premium necessary. betty: les moonves is one of the highest a ceo's.
>> but there's no reason to put a ceiling on it. maybe give him in a $50 million a year because it is extra work, you have to then run both companies. moreuld have to be in cities and more private planes, more speeches. but i don't want to put a ceiling on it. betty: clearly if there was any kind of visual you could have on who has done the best job, i mean look at the stock price of cbs and viacom. perhapswhy people say les moonves can now make his move and combined the two companies. matt: i'm just looking at pay go, he's the 25th highest paid ceo. maybe 96 me in dollars at this happens, but no ceiling. betty, thank you so much. you can catch her show at 7:00 p.m. new york time.
joe: don't miss this, eurozone pmi and consumer confidence all out at 3:00 a.m. tomorrow. and best buy earnings coming out at 7:00 a.m.. don't miss that. scarlet: and it tick -- 10:00 a.m., us home sales, were looking at a drop of 2% for the month of july after 3.5% gain in the month of june. that does it for "what'd you miss?" thanks for watching. this is bloomberg. ♪