tv Bloomberg Best Bloomberg August 27, 2016 12:00pm-1:01pm EDT
♪ >> coming up on "bloomberg best" the stories that shaped the business world. a megamerger makes progress. we bring you up to speed on tesla's latest plan and fed watchers everywhere have their eyes trained on jackson hole. >> i think it is time to move. >> i think there is a cost to having rates this low for this long. >> i don't think the committee is risking a lot right being cautious. >> another busy week from earnings reports. >> there is so much opportunity.
every region for us was up this quarter. >> we will make sure our sheet is absolutely will improve. matt: cutting edge insights on the market. >> reversed incentives. >> a low return world. the three most important words to remember. matt: plus, carson block reveals his selling target. >> we think there is a chance it is about to lose half its revenue. ♪ matt: hello, welcome. this is "bloomberg best." from theand interviews burke television around the world. throughout the week, investor
attention focused firmly on friday, awaiting janet yellen speech at the jackson hole symposium. but on monday, comments from the vice chair caused a stir. stanley fischer signaled that a rate hike is still on the table for 2016. speaking in colorado, he said "we are close to the targets. looking ahead i expect gdp growth to pick up as we recover from the surprisingly weak patch." what do you hear? >> i described this as less of an aggressive hawk and a slightly more ill tempered dove. >> do you think the rate hike is on the table? question, they should be considering a rate hike. the economic conditions in the u.s. -- how can the global
economy cope with this? this is something that the fed has not looked at it they are much more intuitive. >> would a rate hike make a difference to the binge we have seen in credit markets? >> we look across markets whether it is credit or even equities that central banks are keeping key to the asset markets. a rate hike would have a negative impact. >> monsanto, is the third time a charm? the number that buyer has to hit is $135 a share. talking to each other and a syngenta price -- getting approved by regulators yesterday, putting the heat on a potential monsanto deal. jonathan: how much closer? this movingho got
is hugh grant. the ceo at monsanto. last year he took a run at -- at surgeon to. he can't push back on the strategic concept of bringing too big -- jonathan: because he made it. >> exactly. a year-and-a-half ago he was arguing that this was what needed to be done. they will want more at monsanto because there are regulatory issues that will come up and price always matters. >> glencore reported a 66% drop in the first half profits. net income falls to $300 million. debt reduction is a banner head with this set of numbers. >> exactly and that is what people will be paying attention to today. the surprise is that people are talking about reinstating the dividend by next year at the big
story for today is how much progress they have been able to make in cutting that. you saw the unexpected deal coming out and that speaks to how quickly and how much. there is a mixture of stories. very good performance from marketing. on the metalsy and mining side of things. but not so good on oil and gas. that has dragged them down. hit on thes a hedging activities. so this has dragged the headline numbers back out but the underlying business is doing really well. on balance, quite a nice report. >> carson block entering new territory.
the research firm is betting against the strength of saint jude medical. the device company is in the middle of a takeover. >> why do you believe the stock is poised to fall? >> we think there is a very good chance that it is about to lose close to half its revenue. this would be jude to device recall. erik: you found and achilles heel? aware of it.de we did not find it ourselves but we were approached by cyber security researchers who had been doing a study on the four largest manufacturers of cardiac devices and their security. so what they found with the saint jude devices and the ecosystem stunned them. this appears to be a company that, for years, has put profits before patients when it comes to cyber security.
and we think it is important to make sure that users are notified of the risks and to hold them publicly accountable. >> saint jude has made a statement saying it takes the security of its devices and data very seriously. they say they will remain vigilant to the sophistication of those seeking unlawful access to such data. cto denied the vulnerability saying allegations are absolutely untrue. what do you make of this? we talked to the cyber security company that did the research and their findings track with discovering's that we have written about over the last eight years. the sub story here is the sequence of events that led to this information going to carson block. it was the cyber security firm that was doing research on these for some 15 months. and then brought this information to carson.
and then formulated this short hypothesis. this is totally unprecedented. >> tell us specifically how you would make money by passing on a solution to muddy waters? oryou make money regardless is it only if they make money? matt: do you get paid a fee? >> we are paid on a fee basis and as consultants. our relationship is connected to his investments. markets and economists are on standby as we get set for janet yellen speech, the formal topic is around monetary policy toolkits, and many will be looking for clues as to whether they will raise rates as soon as september. >> janet has a message. she says the economic data has been it improving.
the case for an increase in the federal funds has strengthened. ands the most optimistic directs that janet yellen has been about interest rates in quite some time. the labor market has improved is still subject to the transitory effect of energy. janet yellen goes on to caution that the outlook is uncertain. the fed's ability to predict where rates will go is "quite limited." because disturbances and headwinds continue to buffer the economy. so over the longer run, forecasts show that the rate will settle at 3% in the longer run. that is higher than most people on wall street would put it. the rest of the speech is a defense of the fed policy actions during the recession and recovery.
to they have contributed economy including the big balance sheet. that yellen goes on to say at this point, we need the tools going forward although she says the fed is not studying the idea of targeting higher inflation or not will -- or nominal gdp. >> we have much more from jackson hole later in the program. interviews with several significant figures of the fed. plus we hear from howard marks and sunny earnings reports from builders on both sides of the pond. up next, get ready for tesla that can hit ludicrous speed ridiculously quickly. this is bloomberg. ♪
matt: this is "bloomberg best." let's continue the global tour of the top business stories starting with a major acquisition by one of the world's largest pharmaceutical companies. >> you have pfizer clenching the medivation, $14 billion. this deal gives pfizer a block west or treatment that is already approved for sale. >> the company that kicks it off was santa fe. are in aanta fe, you bit of distress. you were way off on your expectation of valuation. pfizer came in and blew them out the door with a $14 billion all-cash bid. into two ato split some point. does this purchase make it more likely? forne of the test things
pfizer is that they are so big that even when they go out and do a $14 billion deal, there are analysts saying it doesn't move the needle for them and it won't affect the split. on the horizonis for folks like in? it is here and now. the german carmaker is having to halt production with its most popular model. top 20 as about what is going down in germany. ,> i have shut down production a number of plants are affected. it is unusual. volkswagen is known for pleasing pleasing suppliers. it looks like they have gone too far with this one supplier and the damage could be as much as 100 billion euros a week. >> shares of europe's largest
automaker rising today after it negotiated through the night to reach a deal with a supplier. work had been called that for almost a week at dr. rees across germany. what did the deal look like that they came to? >> details are sketchy. these are seat parts and transmission parts. andvery will be restarted will be resumed in the coming days. so production can restart. won't sitof an action well with volkswagen and they will likely seek second suppliers for these types of parts so they are not left henan dry in the future. tokyo dealingn with a new whale. $1.3 trillion government pension investment fund has become the main shareholder of honda, mitsubishi and more than 100 other companies. what do we think here? >> the fund is huge, to say the
least. they own 5.8% of japan's stock market. they are shareholder in 99% of japan's biggest companies. take a look at this chart. theof the 500 companies on top, they are the top owner of 121 firms there. the number two owner of 141 firms. what does this mean for individual companies? the fund has aliens of dollars of worth of shares. than double their holdings and investments in japanese stocks. >> let's move to turkey's central bank, just moving to add more stimulus to the economy. this is following the failed coup. it cut the overnight lending to 8.5 percent, matching the estimates of economists
surveyed by bloomberg's. . turkish lira rise because this was expected? higher,s up a blip there was relief that the bank could move with a higher than expected rate cut. >> any sign of what will come next? centralstors think the bank will cut again next month? >> many analysts expect the central bank to cut. the turkish lira has rebounded quite strongly after the coup attempt. and that has been an influence in the turkish assets. the turkish bank will be taking advantage of that in cutting rates. >> elon musk is vamping up teslas model s and x, telling investors to expect more powerful batteries that can cover up to 315 miles on a
single charge. also appealing to sports car in zusi is saying it will accelerate 60 miles per hour from zero in 2.5 seconds. how significant is this announcement? >> in terms of technological advancement, what elon musk talked about is marginal that there is marketing news. he can say you has the first car that can go over 300 miles on a single charge and he can brag that the model s will be the fastest car in the world that you can buy at retail. south africa's finance minister says he won't obey a police order to present himself for rationing. connectiononed with to allegations of authorization of a special investigative unit. he has denied any wrongdoing. the rand lost ground after the announcement. what should we take of the squaring off of the finance
minister versus the government? >> the minister has made it clear he wants to carry on with his job, to focus on the mandate of steering the economy through difficult times. yesterday he was expected to make a decision and that is what he did. saying a announcement that growth would not reach levels that they had anticipated for this year. what we know is that the two other officials implicated have presented themselves to the police as requested this morning. watching this very closely to see how it develops today. us -- spokeus, tell to bloomberg television earlier on when he says the and eventually could happen. be muchwill going to more circumspect and they
probably will wait until the yen reaches 90 before taking action. jonathan: the last time the yen reached 90 was back in 2012. >> i don't think this is a decision the boj can take lightly. and i don't think it will happen in september. i think what will happen in september is the bank of japan will want to fight the idea that it is out of ammunition. to talkld expect them about easing or possibly deliver something, especially if the dollar-yen is below 100. as for helicopter money, the boj -- we need the dollar-yen to be well below 100. jonathan: mylan stock up this morning trading after the company said it would take immediate action to cut the cost
of the epipen after facing pressure from politicians. the volume got turned up and the company act down. how embarrassing is this? >> it doesn't look good. time.ad a rough they are one of many drugmakers recently who have come under for raising drug prices so high that people can't afford them. so they have reacted fairly quickly compared to others and withoffered assistance trying to afford the high prices for the abbey pen. investors are saying that they were a little bit afraid that mylan might take a hit as far as the profitability and that prices would have to come down so mylan won't be getting as much revenue but ultimately, no one that i talked to thought they would be irreparably harmed i this. uber is set to of lost 1.2
billion dollars in the first half of the year after turning a profit in the u.s. during the first quarter. what is leading the losses? >> we are in uncharted territory. even if you look back to the biggest excess of the bubble, amazon lost $1 billion. the main big story is china. humor has been spending largely on subsidies. mainly overseas. the good news for uber is that they made a big deal with their largest competitor that will allow them to exit the market. and people familiar with their finances are telling us that in the second half of the year we will not losses. nonetheless, uber commands an extraordinarily high valuation. how is the market justified? >> market share. 85% of the u.s. market and people think this is
matt: you are watching "bloomberg best." into the latest installment of the small to big series. not every company follows a straight line to success. there can beat setbacks like a global financial crisis. ridery 360 has had quite a since it opened doors in 2007. the ceo tells the tale. factory 360 is an experimental marketing agency. taste, touch, feel and be
educated on the process, that is where we come in. marketing.d in i had the entrepreneurial itch to go out on my own. 2007 i got af bonus and thought, now or never. the first year was great. people taking meetings with us. small projects. and then in september of 2008, it happened. the whole collapse. being in a boat in the eye of a hurricane. we were forced to really be creative with less and make it into more. see thate could something was shifting and things were starting to loosen up a little bit. the light at the end of the tunnel. we found a niche. we worked with paypal and ebay and lyft.
silicon valley lived online and operated online. but there are no longer growing online and they are having to go off-line to grow online. we have had to really compete with so many other industries for great talent. for us to keep running our business we are constantly recruiting. we have ads on so many different places all the time and we never stop the interview process. we want to meet two is out there and we want them to meet us. that is part of our secret. 45went from two employees to employees. we opened an office in san francisco in 2014, we have gone from $200,000 to over $10 million. we would like to double our revenue in the next five years and we would like to open more offices in the united states and
broaden the international footprint. the sky is the limit because this industry continues to grow and we see a lot of upside so we are excited about the future. very bullish. matt: still to come, howard marks on the challenges of investing in a low return world. from jacksonations hole with the latest on what fed leaders are thinking. straight ahead, highlights from the weeks earnings reports with a pleasant surprise from best buy. this is bloomberg. ♪
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expectations. results ran counter to conventional wisdom after the break as it vote. the u.k. housebuilder pretax profits coming in at 352 million pounds. an increase of 29%. and contrast what you saw in the first half and what you're are seeing now in the housing market? >> it is very interesting. we started the year off strongly and then there was a slight slowing down towards the brexit vote. since then, trading has been robust. numbers are up 20% on site in the last seven weeks and actually, trading is very good at the moment. >> when we see the gloomy of julycs for the month that say, we saw the biggest job in transactions into allies since the 2008 financial crisis, is that a path of the country
that is far removed from your business? >> certainly not reflective of what we're seeing. we are specifically first-time buyers but nonetheless, we have not seen real change in buyer behavior. to buy andstill keen lenders are keen to lend. >> shares of the biggest u.s. luxury homebuilder, toll brothers, are up after the company reported a 50% increase in third-quarter earnings, demand remains robust for high end properties. >> every region for us was up this quarter. ourad 23% growth in deposits for the first three weeks in august and it is nationwide. our luxury business is strong and we are excited. >> and the environment as well is supportive. compare and contrast this
housing market strength we have seen with the booms of the past. >> we are not in a boom. we are in an improving real estate market. mortgage money is not easy. -- ares are not be as not building too much spec inventory. now, this is a steady, solid market but it doesn't compare to the market of the 2000's that were overheated. >> lifted by recovery in the markets -- the nation's largest residential developers saw a climb amid an ongoing ownership battle. >> first-half net income up 10%. revenue up 49%. that is offsetting the negative
impact of the shareholder struggle. nearly a year, the end of last year is when we got the struggle where -- group of secured kumquat was revealed as being the largest shareholder of the management. vanke was not pleased. even the chairman said the steak was unwelcome. ,nd then you have their rival competing interests, and we don't know who will win out. how this will play out and what the intentions are. of blue scope still are higher after they reported forecast for the first half of 2000 17, 15% higher than the end of this year. blue scope reported an underlying profit at 220 2 million dollars, below analyst estimates. >> is the seal market out of the
woods or rp all on tender hooks? >> i think there is still too much steel supply in the world. further restructuring is required. we will make sure our bullet sheet -- our balance sheet is bulletproof. we have taken costs out of our business in a year when we made a profit. that has moved us into the best quartile of competitive steelmakers. ishave a future that somewhat insulated from the global steel industry but i think the industry will be facing challenges, going forward. 96%, is there light at the end of the tunnel? >> no light at the tunnel yet. a gloomy outlook into 2017 giving the oversupply and slower
demand for oil. hasven though brent crude reached $47 a barrel in the second quarter, petronas is sticking. up 19% today, the largest u.s. electronics retailer reported a boost after years of sluggish growth. well over what was expected. what happened here? >> they did the expectations game. their projections for this a small gainey had and they raised their profit outlook for the year. , thebuy basically said overall electronics market in the u.s. is weak and a lot of categories are down but we keep gaining market share and thus we are able to grow sales. >> are we seeing a beginning of a turnaround? time, the story at
best buy would be a good quarter than a bad quarter. the relationship with samsung and apple are really paying off. see you are starting to what the ceos said as the emerging growth story come to fruition. qantas shares are higher after the airline announced a therd full-year profit and first dividend in seven years, the turnaround continues. very much so. after three years, he has been pushing the transformation strategy and it seems to have worked wonders. we have a record profit today. $1.53 billion. that transformation strategy, getting rid of old airplanes, a wage freeze, added up to savings. it was just a few years ago that qantas was announcing a billion
dollar plus right down and there was a question about whether the ceo would keep his job. >> i'm very excited about the future for the qantas group the cut there is so much opportunity in the pipeline. , theelivery of the 787's work internationally, the continued expansion of jets in asia. planned, australia, and the loyalty program. , if i'mlways said enjoying it and shareholders want me to continue, i will keep the job and nothing has changed on that. >> shares of hb inc. are lower, down 5.5%. this company formally known as hewlett-packard -- printers. that salesstimates
of personal systems missed analyst expectations. how bad was it? >> i thought the quantity of the numbers were mixed. there were a lot of one-time items and a lot of cost-cutting. there was a lot of inventory reshuffling. i thought execution is getting better and they are focusing on the right things. and q4 guidance was weak. i think it is the right focus but there is a lot of messiness near-term as that shuffles. ♪
interest rates and the future of >>ance in europe after the it. we had fascinating conversations are of these topics. let's begin with howard marks to discuss low rates and high risk with our erik schatzker. it is very challenging today. we are in a low return world. the three most important words to remember. doing yourgo about business in a low return world? you can settle for a low return with characteristic safety. or you can pursue a high return. how do you get a high return in a low return world? significanttake a risk. i am a professional. don't try this at home. i have been doing this for 38 years. weknow how to do it and what have done in the last five years is operate under a mantra -- move forward but with caution. a cautious investor
and that means more caution than usual. we have amped up our caution and selectivity and skepticism. all of the things that we said were in short supply, we have increased. erik: oaktree is willing to sacrifice this short-term return? >> yes. normally, we goes will make a lower return than the average. but that is the price you pay for having a safer than average portfolio, which we think is important at this time because when we say we can't predict but we can prepare -- one way to prepare for the future today is by increasing the representation of caution in your portfolio. erik: if you look at the credit market now, is there anything that is either attract his on an absolute basis or a relative basis? attractive on a
relative basis. i am highly confident that over a multiyear time you will outperform. that is attractive. in relative terms. there is nothing which is absolutely cheap. there are no bargains in absolute terms. there is nothing that is being given away for less than its value. >> you have unique insights because you are a banker and an economist. are you uneasy with negative rates? we wouldn'tpromised go into negative territory but he might have to. >> you will search a long way to find a banker who is enthusiastic about negative rates. i don't like the idea and i'm afraid, going back to our conversation five minutes ago, i am personally in favor of trying to lift over time the level of inflation that we target. is my concern is that negative interest rates set up perverse incentives in society.
able to hold excess cash which is not a good thing and it also means that the central bank is not really in control. band,ou reach the lower you don't know how the economy will respond. you are pushing on a piece of string. so i think that what we need to learn from this is that we probably got used to trying to target an inflation rate that is so low that for a large amount of the cycle you may find yourself at the lower band and therefore out of control. and that is what i don't like. that there any possibility the u.k. retains access to the single market whilst curving immigration? >> i don't think so. because we have made it clear, the four most important points. free movement of goods, workers, right of establishment and freedom to provide services and free movement of capital but you can have that only if you are a
member of the club. unfortunately, the u.k. has voted for brexit. i will give you an example which will be a big change, and i really think this is going to be something which is nonnegotiable -- the banking passport. a bank which is willing to inrate in europe has to stay the eu and cannot stay in england. that means some of the banks like american banks, have to move headquarters from london to frankfurt or dublin. a country of the eu. you think these banks will move to frankfurt or berlin in said of dublin? dublin has a massive advantage of the language. >> we are happy to receive them in frankfurt or berlin. is veryther hand, this bad for the u.k., that is obvious. we don't need to discuss it.
it is unfortunate if the banks are leaving the london market, the market in london will suffer. let's head to this week's gathering of economic and monetary policy leaders in jackson hole, wyoming. earlier we heard what janet yellen had to say in her speech. bloomberg sat down with other officials to discuss economic conditions and policy prospects. >> when i look at where we are with the job market and inflation and our forecast for that, i think it is time to move. where it will look by the september meeting, we will have to wait and see. >> you are looking at inflation in the job market, are you a firm believer in the phillips curve? that it will bring us faster inflation? >> i think we are beginning to see signs of that. we are seeing inflation strengthen.
show somenning to movement so yes, i think we should expect that. again, i don't think we will need to have high interest rates. i think we need to cool off the economy but i do think it would be appropriate to begin the process of continuing the normalization. >> you say normalization -- what is a normal interest rate in this post crisis environment? >> there are a lot of questions about that today. what is normal? there is scope to say -- and you see this in the. plot forecast -- the terminal has been coming down. wouldless of where you pick that today, there is scope to begin to review. we are at negative real rates today and whether we go back to something that looked normal pre-crisis or something less, i think we will judge as we move along. june, you flatlined the
forecast. but we have had some interesting numbers since then. two pretty good jobs numbers. the gdp tracking that the atlanta fed does, looking for a growth of 3.5% on gdp. if you were going to make your projections right now, would you possible theit regime change you have a waiting for is going to start to unfold? >> no, the regime we talked about is the low productivity growth and labor productivity has only been about .5% over the last several years. we don't see that changing near term. another part of the regime is low, real rates return. we don't see that changing anytime soon. so those are the fundamentals. and then we say, ok. let's make policy on those facts
us toat is what brings the 63 basis point projection. >> however, we are seeing more strength in the economy. is it possible that as the trend continues, the growth numbers be in thed you will camp saying, well, we better debate that seriously in september? >> i haven't seen anything in the data that suggests that this regime and those two factors are changing in a fundamental way. think wall street is putting too much pressure on the open market? >> well, as someone who spent 30 years in the market, sometimes it pays to take a step back. what i have been saying and what others are saying is that probably the anticipated path of much going forward will be flatter. we have a number of persistent headwinds. so even though in the near term
there is a case for removing an amount of accommodations. context, there is a rate increases. and i think the pass of rates is just as important or more important than the exact timing of when the next move is. do you think there are distortions in the market from monetary policy? a cost to there is having rates this low for this long. the cost is -- it hurts savers. question, if you have money in savings, you can't earn on it. and he causes people to take more risk. and people who have one type of asset allocation are pushed to take more risk. it can create imbalances. in a time of uncertainty, and
that is something that so many , whye are talking about move now? is there a rush to move? you have said recently you could see one-to rate hikes? could see it possibly when i look at the calendar. we have three more meetings so that is possible. and what i have said recently is -- i cann't imagine imagine certain circumstances where if we continue to see things as they have been, at least one this year. none of that is locked in in my thinking. we just have to see how the economy seems to be performing. committee is ahe risking a lot by being cautious and gradual. i don't think we are behind the curve in terms of inflation or risking and instability event. i think the byword that the
matt: we will going to the bloomberg terminal here and look at the rich function. this is the bloomberg alien heirs -- bloomberg billionaires. >> what we have done here to create a portfolio, looking at companies that derive revenue from china. at least 40% of their revenue. that is the white line and they have outperformed the bloomberg world index. there are 30,000 functions on the bloomberg and we always enjoy showing you our favorite. maybe they will become your favorites as well.
here is another function you find useful.ng -- it will take you to quick takes where you can find fast insight into timely topics. here is a quick take from this week. been onrate china has an unprecedented shopping spree. it took them barely four months of 2016 to break the record for overseas deals set last year. now on thingsies such as a soccer team and the alderfer soria -- the waldorf-astoria hotel. -- clear the biggest hurdle in the committee on foreign investment in the united states, for not positions of companies for threats. globally, u.k. lawmakers have expressed concern over chinese acquisitions. to aation bloc the sale group and rejected bids from china for an electricity
network. here is the background. consider --rors only after they began opening up the borders. more recently, the government theencouraged the push to economic growth and businesses have incentive to spend cash sooner rather than later. china should loosen restrictions and give foreign companies the same freedoms that firms in joy. and that has one huge advantage. but some argue that chinese investments should be embraced. it has saved many american firms from bankruptcy. chinese purchases are nothing unusual. closing twice as many deals in 2015. was just one of the many quick takes you can find on the bloomberg. you can also find them on
♪ haslinda: today we meet with a woman who was forced to take over her family-owned company after her father died. just as business was picking up, she was faced with another death in the family. this time, her husband. the tragedies, though, have made her stronger and she now runs a multi-million dollar operation. let's meet sin hwa dee's jocelyn chng. ♪