Skip to main content

tv   Bloomberg Best  Bloomberg  August 28, 2016 5:00pm-6:01pm EDT

5:00 pm
♪ >> coming up on "bloomberg best" the stories that shaped the business world. a big deal in pharma makes headlines while another megamerger makes progress. we will 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. matt: another busy week from earnings reports from deep in the minds to-the skies.
5:01 pm
>> there is so much opportunity. >> every region for us was up this quarter. >> we will make sure our sheet is absolutely bulletproof. matt: cutting edge insights on the market. >> negative interest rates set of all kind of incentives. >> we are in a low return world. those of 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: it is all straight ahead on "bloomberg best." ♪ matt: hello, welcome. i am matt miller. this is "bloomberg best." the weekly review of the most important business news, analysis and interviews from bloomberg television from around the world. throughout the week, investor attention focused firmly on
5:02 pm
friday, awaiting janet yellen 's 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 aspen, colorado on sunday, 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 in the drag of dollar diminishes." what would you call this? >> i described this as less of an aggressive hawk and a slightly more ill tempered dove. >> gradations of cautiousness. [laughter] >> do you think the rate hike is on the table? >> without question, they should be considering a rate hike. the economic conditions in the u.s. without question warns one. the real question, how can the
5:03 pm
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 see today, as we look across markets whether it is rates, credit or even equities that central banks are becoming key to the asset markets. we think a surprise rate hike would have a negative impact. and monsanto, is the third time a charm? the number that buyer has to hit is $135 a share. they are talking to each other, a potential price. the deal getting approved by u.s. regulators yesterday putting the heat on the potential monsanto deal. >> to step closer. how much closer? >> the guy who got this moving is hugh grant. he is the ceo at monsanto.
5:04 pm
master, you made a run and that did not work out. he showed that he knew there needed to be more consolidation in this space, so he cannot push back on the concept, the strategic concept of bringing two big companies. jonathan: because he made it. >> exactly. a year-and-a-half ago he was arguing that this was what needed to be done. i believe right now they offered $1.5 billion in termination fees that they will want more at monsanto because there are a lot of other regulatory issues that will, and price always matters. come up and price always matters. half profits. net income falls to $300 million. debt reduction is a banner head with this set of numbers. >> absolutely. that is exactly 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
5:05 pm
progress they have been able to make in cutting that. even today use of the unexpected deal coming out of australia to sell gold assets and that really speaks to the weekly and how much they have been able to sell in an effort to stabilize the balance sheet and turn around the company. >> there is a mixture of stories. very good performance from the marketing business, sort of as they predicted but still a good performance. a good recovery on the metals and mining side of things. industrial, the actual physical mining. but not so good on oil and gas. that has dragged them down. the cost of servicing the debt has gone up and the, there is a hit on the hedging activities. so, this has dragged the headlight numbers back into a loss, but actually the underlying business is doing well. so on balance, quite a nice report. >> carson block entering new territory. his research firm is betting
5:06 pm
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. that could be two years or longer. this would be do to device recalls. flaw, found a security an achilles heel? >> we were made aware of it. 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 the security. so what they found with the safety's devices and the ecosystem stunned them. this appears to be a company profits years has put before patients when it comes to cyber security. and we think it is important to
5:07 pm
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. saint jude says they will remain vigilant to the ever-increasing sophistication's of those seeking unlawful access to such data. the saint jude cto denied the vulnerability saying allegations are absolutely untrue. that is a direct quote. what do you make of this? how seriously should we take 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 flowing to carson block. it was the cyber security firm that was doing research on these devices for some 15 months. and then brought this information to carson. and then from there formulated
5:08 pm
this short hypothesis. this is totally unprecedented. >> tell us specifically how you would make money by passing on a solution to muddy waters? do you make money regardless or 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 compensation, with regards to our arrangement with muddy waters is connected to the investments. >> markets and economists are on standby as we get set for janet yellen's speech. the formal topic of the speech is around monetary policy toolkits and many will be looking for any clues as to whether the bank could raise rates as soon as >> janet has a september. message for you. she does not put a timetable on it but she says the economic data has improved.
5:09 pm
"the case for an increase in the federal funds rate has strengthened in previous months." no matter what you think, it is the most optimistic and directs that janet yellen has been about interest rates in quite some time. the labor market has improved and is still subject to the transitory effect of energy. yellen goes on to caution that the outlook is uncertain. that policy is not on a preset course. the fed's ability to predict where rates will go is "quite limited." she says because what she calls disturbances and headwinds continue to buffer the economy. still, over the longer run, she has forecast showed that the federal fund rate will settle at about 3% in the longer run. that is higher than most people on wall street would put it. much of the rest of the speech as a defense of the fed policy actions during the recession and recovery, how they have worked and contributed to the economy,
5:10 pm
including zero rates, the big balance sheet, interest on excess reserves and former guidance. -- forward guidance. janet yellen goes on to say that at this point, we need the tools going forward although she says the fed is not studying the idea of targeting higher inflation or nominal gdp. matt: we have much more from jackson hole later in the program. interviews with several significant figures asked the fed. plus we hear from howard marks surprisingo some 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. ♪
5:11 pm
5:12 pm
♪ matt: this is "bloomberg best."
5:13 pm
i am matt miller. 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 purchase of the company at about this deal gives pfizer a block $14 billion. west or treatment that is already approved for sale. >> the company that kicks it off was santa fe. their initial bid was $250 a share. here is santa fe, you are in a bit of distress. you completely, you are way off on your expectation of evaluation and what others would bid. pfizer came in and blew them out the door with a $14 billion all-cash bid. >> when it comes to pfizer, the company has mentioned it is looking to split up into two at some point. this is purchased make it more or less likely? >> one of the tough things were
5:14 pm
pfizer is that they are so big that even when they go out into a $14 billion deal, there are analysts out there saying, this is not really move the needle for them and will not affect the decision to split. >> another crisis on the horizon for volkswagen? it is not even on the horizon, it is here and now. the german carmaker is having to halt production with its most popular model. the volkswagen golf. talk about what is going down at the moment in germany. >> right now, they have shut down production of the gulf -- golf in germany. a number of plans are affected including the main plant in wilfork. it is unusual. volkswagen is known for pleasing suppliers. it looks like they have gone too far with this one supplier and the damage could be as much as 100 billion a week. >> shares of europe's largest automaker rising today after it
5:15 pm
negotiated through the night to reach a deal with a supplier. work have been halted for almost a week across germany. what did the deal look like that they eventually came to? >> details are sketchy. all we know for sure is delivery of the parts for seat parts and transmission parts are restarted and will be resumed in the coming days, so we buy -- reproduction -- production can start. this kind of an action won't sit well with volkswagen and they will likely seek second suppliers for these types of parts so they are not left home and dry in the future. and dryand dry --hung in the future. >> investors in tokyo dealing with a new circumstance.
5:16 pm
$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 a top 10 shareholder and 99% of japan's biggest companies. take a look at this chart. out of the 500 companies on the topix. 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 billions of dollars worth of shares in some of those companies have resolved the strategic shift back in 2014. they have more than doubled their holdings 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 rate for six months trimming it by 8.5%. this matched the estimates of
5:17 pm
economists surveyed by bloomberg. we did see the turkish lira rise initially because this was expected. >> the initial reaction was a bit higher. there was relief that the bank did not move higher with the expected rate cut. >> any sign of what will come next? you investors think the central bank will cut again next month? >> many analysts expect the central bank to keep cutting rates as long as the global environment permits. has rebounded quite strongly after the coup attempt. and that has been an influence in the turkish assets. the central bank looks to be taking advantage of that environment to keep better rates. >> elon musk is vamping up 's model s and x, telling investors to expect more powerful batteries that can cover up to 315 miles on a single charge.
5:18 pm
--musk also appealing to sports car enthusiast saying it will accelerate 60 miles per hour from zero in 2.5 seconds. how significant is this announcement? >> in terms of real technological advancement, what he talked about his kind of marginal, incremental. there is some significant marketing news. first of all, he can say he has on a single charge and he can the first car they 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 questioning. gordon was summoned with connection to allegations of authorization of a special investigative unit. when he headed the national tax agency. he has denied any wrongdoing. the rand lost ground after the announcement. what should we take of the squaring off of the finance ministry versus the government?
5:19 pm
>> 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. what we do know is yesterday he was expected to make a decision in the evening and that is exactly what he did. he made a announcement saying that growth may not reach the levels that government had anticipated earlier this year. it is probably got to be around 0% for this year. we do know that the two other officials indicated and have presented themselves to the police as requested this morning. as to what the finance minister will be called and again, we are just watching that very closely to see how that develops today. investment veteran mark a southells us there is african experience this experiment. the spoke to bloomberg television earlier on when he says the and eventually could happen.
5:20 pm
>> they will going to be much 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 in light. 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. so i would expect them to talk up some e-zine or possibly deliver something, especially if the dollar-yen is below 100. but for helicopter money, i think the boj needs to be in panic mode and for that we probably need 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.
5:21 pm
this includes presidential candidate hillary clinton. the volume got turned up and the company act down. how embarrassing is this? >> it doesn't look good. you know, they had a rough time. they are one of many drugmakers recently who have come under fire for raising drug prices so high that people can't afford them. so they have reacted fairly quickly compared to others and have offered assistance with trying to afford the high prices for the epipen. 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 from at the event, but ultimately now that i spoke to thought that they would be irreparably harmed from this. >> bloomberg news has learned the uber is set to of lost 1.2
5:22 pm
profit after turning a in the u.s. after the first quarter. what is leading the losses? >> we are in uncharted territory. even if you look back to the biggest excess of bubble , amazon lost a little over $1 million. uber looks like it will surpass that this year. china -- humor has been spending -- the main big story is china. --uber 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 does the market justify it continued high evaluations? >> i mean, market share. they have 85% of the u.s. market
5:23 pm
and people think it is a big industry. they may be losing a huge amounts of money but it is growing very fast. huge growth and huge expenses. ♪
5:24 pm
5:25 pm
♪ matt: you are watching "bloomberg best." i am matt miller. let's turn now into the latest of the small to big theories. not every company follows a straight line to success. there can beat setbacks like a global financial crisis. the marketing firm factory 360 has had quite a ride since it opened its doors in the ceo 2007. tells the tale. >> factory 360 is an experimental marketing agency. you have to taste, touch, feel or be educated on a product,
5:26 pm
that is where we come in. i had worked in public america, primarily brand marketing. i had the entrepreneurial itch to go out on my own. in the summer or fall of 2007, i got a lump sum bonus and thought, it is sort of now or never. the first year was great. we're taking meetings with us. we had some small projects, and in september of 2008 happened, it will collapse. i would like to say it is like building a boat in the eye of a hurricane. we were forced to really be creative with less and make it into more. by 2010, we could see that something was shifting and things were starting to loosen up a little bit. we could see the light at the end of the tunnel. we actually found a niche within silicon valley and the tech center. we worked with paypal and ebay and lyft. silicon valley lived online and operated online.
5:27 pm
but there are no longer growing online. they are actually 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 verticals all of the time. we never stop the interview process. we went to meet who is out there. we want them to meet us. it has worked really well and that is really part of our secret. employees to 45 employees. we opened an office in san francisco inn san 2014 and have gone from $200,000 in daily to over $10 million. we would like to double our revenue in the next five years at least and would also like to open more offices in the united states and abroad are
5:28 pm
international appeal. really, 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. matt: still to come, howard marks on the challenges of investing in a low return world. plus, conversations from jackson hole with the latest on what fed leaders are thinking. and straight ahead highlights , from the weeks earnings report, including a pleasant surprise from best buy. this is bloomberg. ♪
5:29 pm
5:30 pm
♪ back to bloomberg best. i am matt miller. as earnings season winds down, we are getting some surprises.
5:31 pm
we started with a pair of home builders beating expectations. results ran counter to conventional wisdom after the brexit vote. >> the u.k. housebuilder pretax profits coming in at 352 million pounds, an increase of 29%. tried in contrast if you could what you saw in the first half and what you see right now in the housing market. >> yes, 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 statistics for the month of july, jeff, which say we saw the biggest drop in transactions in july since the thousand eight financial crisis, isn't that a
5:32 pm
path of the country that is far removed from your business? >> well, it is certainly not reflective of what we are seeing. as i say, we are specifically first-time buyers but nonetheless, we have not seen real change in buyer behavior. people are still keen to buy and lenders are keen to lend. >> shares of the biggest u.s. luxury homebuilder, toll brothers, are up after the company reported a 58% increase in third-quarter earnings, demand remains robust for high end properties. >> every region for us was up this quarter. we had 18% order growth, 23% growth in our deposits for the first three weeks in august and it is nationwide. our luxury business is strong and we are excited about it. >> and the environment as well is supportive. compare and contrast this
5:33 pm
housing market strength with the blooms we have seen in the past. >> we are not in a boom. we are in a strong, solid, improving real estate market. mortgage money is not easy. you builders are not building too much spec inventory. we do not have buyers coming in who are investors. right now, this is a steady, solid market but it doesn't compare to the market of the mid-2000's that were overheated. and had bad fundamentals. >> lifted by recovery in the markets, the nation's largest residential developer saw a climb amid an ongoing ownership battle. >> let's talk about the good. first-half net income up 10%. rising rebound in china of 4 million u.s. revenue up 49%. dollars. that is kind of offsetting the
5:34 pm
negative impact of a shareholder struggle it really overshadowed the company for nearly a year. at the end of last year as what we got the struggle where the group of southern china secured conglomerate was revealed as the largest shareholder of the management of vanke was not pleased. even the chairman said it will point the stake was unwelcome. and then you have their rival, competing interests, and we don't know who will win out. how this will play out and what their intentions are. >> shares of blue scope still are higher after they reported forecast for the first half of 2017, 15% higher than the end of this year. bluescope reported an underlying net profit at $222 million.
5:35 pm
is this steel market out of the woods or are people on tenterhooks? >> i think there is still too much steel supply in the world. further restructuring is required. that is why we are going to make sure our balance sheet is totally proliferative. we have taken $220 million of costs out of our business where we have made profits. that has moved us into the best quartile of competitive steelmakers. we have a future that is somewhat insulated from the global steel industry but i think the industry will be facing challenges going forward. >> shares fell and falling 96%, is there light at the end of the tunnel? >> no light at the tunnel yet. they are looking at a gloomy outlook for 2017 given that they
5:36 pm
are going to be oversupplied and a slower demand for oil. so even though brent crude has reached $47 a barrel in the second quarter, petronas is sticking to its assumption of $30 of therefore -- $30 a barrel for all of >> best buy is up 19% 2016. today, the largest u.s. electronics retailer reported a boost after years of sluggish growth. well over what was expected. what happened here? >> once again they beat the expectations game. their projections for this quarter or for sales to all as much as 2%. they had a small gain and they raised their profit outlook for the year. best buy basically said, the 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 under a new ceo?
5:37 pm
>> for a long time, the story at best buy is, they have a good quarter, then a backorder. the relationship with samsung and apple are really paying off. they can offer better assortment in customer service. yes, you are starting to see what the ceos said as the emerging growth story come to fruition. >> qantas shares are higher after the airline announced a record full-year profit and the first dividend in seven years, the turnaround continues. no doubt, nothing indicated here. >> 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. up 57% underlying profits $1.53 , billion. that transformation strategy, getting rid of old airplanes, a wage freeze, 5000 jobs cut, added up to savings. this of $1.66 billion. it was just a few years ago that
5:38 pm
qantas was announcing a billion dollar plus right down and there was a question about whether the ceo would keep his job. well, we are also need a different tune -- we are all singing a different tune today. >> i'm very excited about the future for the qantas group the cut there is so much opportunity in the pipeline. the delivery of the 787's, the change route network internationally. the continued expansion of jets in asia. the growth in japan and vietnam, australia, and the loyalty program. i have always said, if i'm 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, you can see them down 5.5%. this is the side of the company formerly known as hewlett-packard that sells pcs, inc. and for its bottom line, printers. they beat estimates sales of
5:39 pm
personal systems which include computers and guidance for the full year. this was a miss. how bad was it? >> i thought the quantity of the numbers were very, very 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. but q3 was ok and q4 guidance was weak. i think it is the right focus but there is a lot of messiness near-term as that shuffles. ♪
5:40 pm
5:41 pm
♪ matt: you are watching "bloomberg best." i am matt miller. three current concerns that keep investors up at night. shrinking bond yields, negative interest rates and the future of
5:42 pm
finance in europe after the brexit. we had fascinating conversations all of these topics this week on bloomberg television. 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. those are the three most important words to remember. how do you go about doing your 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? the answer is, you have to take significant risk mark: are you . comfortable taking that risk? >> well, i am a professional. don't try this at home. i have been doing this for 38 years. we know how to do it, and what we have done in the last five years, we have operated under a mantra, move forward but with caution. when i say with caution for entry, that means more caution
5:43 pm
than usual. we have amped up our caution and selectivity and skepticism. all of the things that i said earlier were in short supply, we have increased. erik: oaktree is willing to sacrifice this short-term return? >> yes. we have a safer than the average portfolio. which means that if everything goes normally, we 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 attractive on an absolute basis or a relative basis? >> high yield is attractive on a relative basis. if you buy high-yield bonds
5:44 pm
today, i am highly confident that over a multiyear time you outperformwill treasuries. 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 intrinsic value. >> you have unique insights because you are a banker and an economist. are you uneasy with negative rates? mark carney promised we wouldn't go into negative territory but may have to at some point. >> you will search a long way to find a banker who is enthusiastic about negative rates. >> but as an economist? >> well, i don't like the idea either, and i'm afraid going back to our conversation five minutes ago, i am personally in favor of trying to list of our time the level of inflation that we target because my concern is negative interest rates set up all kinds of perverse incentives
5:45 pm
in society. people hold excess cash which is not a good thing and it also means that the central bank is not really in control. once you reach the lower band, you don't know how the economy will respond. you are pushing on a piece of string often on the banking system. 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. >> is there any possibility that 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
5:46 pm
, can have that only if you are a member of the club. unfortunately, the u.k. has voted for brexit. there will be definitely changes. 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 which is a banking passport. a bank which is willing to operate its plants in europe has to stay in the eu and cannot stay in england. that means some of the banks , like american banks, they have to move headquarters from london or frankfurt or dublin. once more, the country of the eu. >> do you think these banks will move to frankfurt or berlin in -- instead of dublin? dublin has a massive advantage of the language. >> we are happy to receive them in frankfurt or berlin. of course. on the other hand, this is very bad for the u.k., that is obvious. we don't need to discuss it. i mean, it is unfortunate if the
5:47 pm
banks are leaving the london market, the bank market in london is going to suffer. >> now 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 federal reserve 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 if anything changes fundamentally. >> you are looking at inflation in the job market, are you a firm believer in the phillips curve? that it is going to bring us faster inflation as employment goes down? >> i think we are beginning to see signs of that. we are seeing inflation strengthen. if you look at cpi, it is
5:48 pm
beginning to show some movement, so yes, i think we should expect that. again, i don't think we will need to have high interest rates. i do not think we need to cool of the economy by any means, but i do think that it would be appropriate to begin the process of continuing that normalization. >> let me follow up on the word. you say "normalization." crisis this and a closed environment? >> there are a lot of questions about that today. what is normal today? you see this with the participants in a plot forecast. i think regardless of where you would peg that today, there is scope to begin to review. we are at negative real rates today, and whether we go back to something that looks normal pre-crisis or something less, i , think we will judge as we move along.
5:49 pm
>> in june, you flatlined the forecast. >> yes. >> but we have had some interesting numbers since then. two pretty good jobs numbers. after the week may number. 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 , thee -- is it possible change you have been waiting for is going to start to unfold. >> no. i do not think so. 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. and also, another part of the regime is no real rate of return for government paper. we don't see that changing anytime soon. so those are the fundamentals. and then we say, ok. let's make optimal monetary
5:50 pm
policy given those facts and that is what brings us to the 62 basis point projection. >> however, we are seeing more strength in the economy. is it possible that as the trend continues, even if the regime does not change, but the growth numbers pick up and you will be in the camp saying, well, we better debate that seriously in september? >> we will keep our eye on it. i haven't seen anything in the data that suggests that this regime and those two factors are really changing in a fundamental way. >> do 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 rates going forward will be much flatter. we have a number of persistent headwinds. so even though i do think in the
5:51 pm
near-term the case for removing someone's of accommodations has been strengthened, that is in the context of a much slower, flattered rate of increases. in for business people, i think the path 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? >> i think there is a cost to having rates this low for this long. is there, but the cost is it hurts savers. ,there is no question. if you have money in savings, you can't earn on it. secondly, it causes people to take more risk. people that have one type of asset allocation are pushed to take more risk. institutions are pushed to take more risks. it can create imbalances. >> in a time of uncertainty, and
5:52 pm
that is one of the things so when people are talking about not knowing what the world looks like. why move now? is there a rush to move? you have said recently that you could see one or two rate hikes. >> i could see it possibly when i look at the calendar. we have three more meetings this year, so that is possible. what i have said recently is that i cannot imagine certain circumstances where if we continue to see the economy perform as it has been, in my opinion, at least one this year. now, none of that is locked in in my thinking. we just have to see how the economy seems to be performing. committee isk the risking a lot by being cautious in gradual areas i do not think we are behind the curve in terms of inflation or risking and
5:53 pm
big financial instability event. i think the byword that the public should understand is cautious and gradual and there is no gun to our heads. ♪
5:54 pm
5:55 pm
♪ go into then also bloomberg terminal and look at the rich function. this is the bloomberg billionaires index. gates, >> whatt $90 billion. we have done here to create a portfolio, looking at companies that derive revenue from china. in the first half of the year at , least 40% of their revenue. that is the white line and they have outperformed the bloomberg world index. matt: 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 will find useful.
5:56 pm
quic, it will take you to quick takes where you can find fast insight into timely topics. here is a quick take from this week. >> corporate china has been on an unprecedented shopping spree. it took chinese companies barely four months from 2016 to break the record for overseas deals set last year. here is the situation. chinese companies now on things the u.s.ires for soccer team and the waldorf-astoria hotel. it now includes the pesticide. committee is a regulated acquisition company. globally, u.k. lawmakers have expressed concern over chinese acquisitions. in australia they blocked the , sale to a group and rejected bids from china for an electricity network.
5:57 pm
here's the background. chinese emperors for centuries consider the company self-sufficient in foreign trade only opened up after they began unlocking china's borders. more recently, the government has encouraged the push to the -- a due to slowing economic growth and businesses have incentive to spend cash sooner rather than later. the weakening yen. china should loosen restrictions and give foreign companies the same freedoms the chinese firms in joy. and that has one huge advantage. easy financing from government backs banks. but some argue that chinese investments should be embraced. it has saved many american firms from bankruptcy. china says it's overseas purchases are nothing more than usual. they closed twice as many deals in 2015. matt: that was just one of the many quick takes you can find on the bloomberg. you can also find them on along with business news and analysis 24 hours a day.
5:58 pm
that will be all for "bloomberg best" this week. thank you for watching. i am matt miller. this is bloomberg. ♪ . .
5:59 pm
6:00 pm
emily: i am emily chang and this is "the best of bloomberg west," where we bring you all of our top interviews. uber faces the challenge of profitability. uber is said to have lost at least $1.2 billion so far this year. what does that say about the business model? tim cook marks five years at the helm of apple, taking a look at his tenure. the front page of the internet is answering your questions,


info Stream Only

Uploaded by TV Archive on