tv Bloomberg Markets Bloomberg August 29, 2016 3:00pm-4:01pm EDT
we are live from bloomberg headquarters. in the next hour, covering stories out of silicon valley. thanks for watching. investors are pushing thoughts of a rate hike out of their minds, at least for now. tanks to a strong reading on consumer spending. we will hear from an investor with $3 billion assets under management. david: plans for a generic version of the epipen. we will discuss the impact on mylan's profits. herbalife stock has pushed lower the past few sessions as carl icahn squares off. the close of trading and were looking at markets in the green. david: here we see all the major
indexes in the green right now. .6% -- the tao off dow jones off .6%. 500d: this is the s&p broken down into 10 sectors. financials and materials vying for the top spot in terms of percentage change upward. looking at financials we have bank of america of five consecutive days, and wells fargo up for two. thatipation being raised raise will rise at least once on the heels of that speech from janet yellen. apple, we are always interested in apple. right now only down .10%. higher whend move
news of the september announcement came out. tomorrow we may get the results .f the probe in damages owes jpmorgan says the worst-case scenario is a $19 billion liability. apple holds $231 billion in cash and equivalent so it would not even be a drop in the ocean to apple, but even if that were the case, ireland has said it will fight on behalf of apple, basically. we will see how that all plays out. boeing is another stock we will have a look at. it's now .5% higher. it's going to stay at the benchmark. how much do you get for a jetliner? david: i have no idea. at's check on the headlines bloomberg first word news.
mark crumpton has more. adedin said she is separating from her husband, former congressman anthony weiner. there's a new report out today that links him to more of the same behavior. clinton leaves donald trump in a new national survey. the latest monmouth university poll has donald trump and 39%. 7% back libertarian gary johnson in 2% support the green parties jill stein. earlier this month the same poll showed clinton with a 13 point advantage over donald trump. allies called on to stop fighting in northern syria. a pentagon spokesman called the clashes unacceptable. last week turkey expanded its
role in the syrian conflict to stateefeat islamic militants and also stop the advance of kurdish forces in the region. russ is increasing the frequency of its unannounced military exercises, straining its relationship with nato, to an official who said there's been a dozen such deals over the last few years. members poland and romania are said to be uneasy about russia's military presence near their borders. news 24 hours a day, powered by more than 26 hundred journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. the s&p 500 looks to be on its way to snapping a three-day losing streak as investors await friday's jobs report for more clues about the fed's next move. joining us is a president and portfolio manager who has $3
billion under management. processed and listen to what janet yellen had to say on friday? we've heard economist talking about what it might portend for rate hikes. what was most important to you? didn't really hear anything new. i think the edge to little bit closer toward potentially raising rates. i never suspected september was on the table and still don't. there's a reasonable likelihood of a december raised by 25 basis points. they did nothing to make a convincing argument that would happen or dissuade the markets from believing that would happen. think they have resumed their equity trading bradley up again as they got that obstacle out of the way. that is where we are right now. realistically, i don't think that is unexpected. rose is based on the first two quarters of annualized gdp.
you have weak economic growth globally. from the standpoint of watching thing,d that sort of they really can't do too much even if they do raise, so i think it's 25 basis points if anything and i think the markets will shrug it off in the longer term. vonnie: how do you feel the strength of the u.s. economy is holding up? low single basis points. >> it depends on which measure you use. if you looking at gdp, it is anemic. and it is not dynamic. ,ther things like employment we're getting near full employment if we are not already there. if some guy seen some indication of weight prices going up although i don't think it is a sustainable item. it needs more data at this point
he consumer spending was strong in the second quarter. one of the bright spots in q2 earnings i think was the health of the retail sector, generally. better than i expected, but net cord earnings were still negative for the fourth or fifth order. it really depends on what date it you're looking at to form your opinion. it's a lot of mixed data and not a robust direction one way or which boats for the fed not doing too much, which bodes for more of the same of where we are right now. when you take in consideration the uncertainty of the u.s. election, the longer-range brexit story, weakness in asia and south america, it adds up to probably more of the same where the u.s. is doing better than everyone else. david: the post-jackson hole return to equity trade, 30 plus sections for the s&p 500 has
gone up and down by much less than 1%. what do you make of that absence of volatility in the equity market and what is attractive to you? >> it has been an interesting year for equities. we started the year down to enter 12% and we've earned all that back plus the 8% or 9% we are up right now. to there is speaks nowhere else for investors to go so there's not a lot of conviction and other asset classes. dividend yields are still favorable compared to bonds. risk reward is in equities. you're not seeing enough growth pressures on commodities. there is still not a high conviction situation. what you've seen as a grinding move on the upside for equities and they are not cheap but they are not significantly overvalued. it depends on which industry you look at. investors believe they can still earn at least meager dividends
from that standpoint. we still like equities long-term along with several other asset classes. we're looking at areas that have not participated in the equity market run. you mentioned a natural and materials as areas that are outperforming today. we like both of those because they have underperformed the broader markets going forward and we think the risk reward would be better in a situation like that longer-term. vonnie: you say your liking gold in this environment. shorter duration. do you anticipate it will go higher in terms of yield? have not been buying gold because it's had a nice run, but we certainly haven't sold much. we still have a very healthy allocation. i don'tpect to bonds,
worry about central banks as much as market reaction to central banks. is risk in there market interest rate because of volatility and investor behavior. be thee is poised to first one out the door if the fed does rise. as a result we've been relatively conservative with investing with countries with stronger balance sheet and reducing our durations to the shorter to lower end of intermediate. we think there is some return there but also not taking on a lot of credit risk in the event market interest rates are volatile. michael, thanks for joining us from san francisco. david: herbalife shares trading higher after carl icahn bought over 2 billion shares. we will look at how the latest play is going. this is bloomberg. ♪
vonnie: this is bloomberg markets. david: time for the bloomberg business flash. in ovi of pharmaceuticals launching a clinical trial of the zika virus -- 0 -- zika vaccine. the company will meet with innovators next year to develop the vaccine if results are promising. boeing is not raising airplane prices for the first time in seven years. cooled based on economic uncertainty. a campaign to fight
misconceptions about the transaction software that they say is unfairly seen as vulnerable to criminals. they will conduct research to develop a strategy for government leaders to use the technology. that's your business flash update. vonnie: carl icahn is raising the stakes in the battle over herbalife. shares rising after he increased buying an additional 2.3 million shares. joining us is matt townsend. bring us up-to-date. >> this all came out late last week. he came out and said i was approached about buying a stake. carl icahn has lost faith in the business. what he was doing was buying
more stock and increasing his shares by 2.3 million. he now wants 20% of the company. it was like, i will show you and by 2 million shares. ackman said he basically was willing to buy a couple million getes so carl icahn could out his stake. he owns like 17 million shares. ackman was basically saying i'm going to get carl icahn out of the stock because he lost confidence in the stock. we were just joking about how long this fight has gone, back to 2013. we had an ftc settlement recently and what has changed as a result of that? >> it still remains to be seen.
will bege that implemented will be late this year or next year. the company says it will just make us stronger. carl icahn is basically saying the same thing, it's a great company and it will not be affected. that's the next big shoe to drop in the story. but carl icahn has not bought stock in a while and now he is back in, doubling down on the stock. you were just saying there are 17 mlm's publicly traded which have roughly the same kind of business model. >> everything from tupperware to avon. one in five americans are involved in some kind of mlm.
let's turn to the latest on my land, the drugmaker under fire for pricing its vpn at 600 or -- $600 for a two pack. now saying it will start selling a cheaper version of the shot. it's been facing criticism from insurers. help me understand what mylan is doing here. they have the $600 model with the epipen name on it and now they're going to release a generic of their on. what is that, and how does that business model work? >> it's an interesting concept. there's something called authorized generics where a company can launch a generic of their own product and it has been going on for years. this,would not need to do
they didn't want to take the step of maybe lowering the price of their actual branding product. this gives them the ability to build out and stop the generic market with this product. they can move in easily and quickly, and for a lot of , there will still be people who are covered at the brand name level so they will still be selling the brand name drug. that is essentially what they are doing here. analyst come out on this? >> the potential is there going to make as much money off the generic, a little bit less off the generic, but not that much less. that is because of the 600 $80 they may charge, they give a significant amount of money to those who set the drug tear
system and money to insurers as allows their status on formularies for prescription drug lance. they're saying they collect about $274 of the $600. backmay not give as much of the $300. there is a potential from what they're taking in the door, they will not get that much less from their own generic. that's what makes it a smart business move if that is how it plays out. there is still a political storm surrounding this. is not going to quite all the political noise. >> we've already seen a few congressmen come out and say we want to know more about the pricing and hate got to this.
the reason it all came up speaks to some of the parts of the pharmaceutical industry and supply chain that we don't understand a lot about. then there are questions about the fda and how quickly they may a may not have moved to get generic on the market. there are a lot of angles that members of congress are going to pursue. they had a bad headline risk with this pricing issue and every headline was another pylon of bad news for them. ultimately they probably are still want to be asked to explain this, because getting to the point of $600 in such a short window of time is something congress is going to want an answer for. vonnie: thank you. ahead, shares of lululemon have been on a roll this year, up nearly 50%. this is bloomberg. ♪
vonnie: time now for options insight. we were speaking a few moments ago about treasury volatility. how are you being impacted? >> we were on your last week saying something similar. implied volatility was as low as , last your the meetings at jackson hole, over the last couple of years. our point was going into jackson hole, markets were more or less on their heels. now what is important is you look forward to the report this
week, expectations of 175,000 or so. etf, impliedar volatility as low as it has been going into the report in the last couple of years. there is significance to that, onen the mood we have seen futures and expectations for a rate hike. that good are not good, because there isn't much you can do? >> it could be good. 10ted option flow is up million contracts, probably about the lowest we will see all year. our broader view is going into the fall, we are entering seasonally the most volatile period of the year. maybe we will see a little more at the end of this week but we do expect volatility to lift over the next couple of months. vonnie: what would need to
happen? even the odds of a september rate rise have increased, it doesn't look like the market is getting jittery about rates. would we need an international event? >> it could be. -- at the end of the day theorically, the fall is seasonably vulnerable time of the year when we talk about the clients. inc. about risk management, it's time to wake up a little bit and use a relatively benign strategies to take down the risk. lululemon, what is your trade today? >> this is a good example. shares are up year to date. we think it will be a solid report thursday.
the focus will be on gross margins. ultimately even if they meet costs, we think this stock may be ahead of itself a little bit. here's a case were going to take out a little bit of risk, selloff the long stock and replace it synthetically with a call spread. spread and getll similar exposure. you have reduced your risk. david, i will send it back to you now. of assete head allocation and what the markets need for the rally to continue. this is bloomberg. ♪
bloomberg markets. let's start with a check of headlines on bloomberg first word news. mark: italy will investigate whether fraud had anything to do with a number of people killed in last week's earthquake. at least 292 people died. authorities want to know if -- they want to make sure organized crime does not get involved in the rebuilding effort. brazil was suspended president has made an emotional appeal to keep her job. she urged senators to vote against her impeachment. she said it would amount to her death sentence and put brazil's democracy at risk. death,e i came close to once when four days of was tortured, suffering aggressions that made me doubt humanity and life itself. painful a serious and
illness almost made my existence short of. today i'm just afraid about the death of democracy. mark: a final vote could come as early as tomorrow. she is accused of financing government spending without congressional approval. president obama will meet with the president of turkey next week when he travels to asia to talk to world leaders. they will meet sunday on the sidelines of the g-20 summit. they will discuss the assault against islamic state in syria and rising tension with kurds in the region. they will meet for talks on climate change and security. died, according to the associated press. he was twice nominated for an oscar. his nephew told variety that the actor died from complications from alzheimer's disease. gene wilder was in blazing saddles, young frankenstein, and stir crazy with richard pryor.
he is dead at the age of 83. i'm mark crumpton, this is bloomberg. >> the first weekly decline last week in nine weeks. emerging,interesting this is a weekly chart, last week's candle is doing something we don't see in the dow and s&p 500 and that is an outside candle, basically higher highs and lower lows. typically these are bearish reversal patterns. at the other outside candle's highlighted by
the yellow arrows pointing down, you see that each did in fact lead to a decline so perhaps there is some downside ahead for the nasdaq. as for what is dragging on the nasdaq 100, not any real standout winners or losers. the worst percent or -- percentage performer is having its worst and about a month. there appears to be a few different reasons why. hepatitis drug sales declined somewhat. some see this says competition. and rbc saying there is increased concerns over the idea that companies can see quarter over quarter declines, setting up the possibility that the next quarterly report could be disappointing as well. what are the balloons pulling it up, abigail?
>> at least for the nasdaq 100 and the nasdaq itself, that's the biggest point booze. from a percentage point booze, micron shares are nicely higher. bank siding the recent recovery as a reason for why they take their price target higher. in fact this was last year's worst nasdaq 100 stock. year on thatis pricing recovery. we could continue to see the pricing firming up. abigail doolittle, thank you very much. the s&p 500 index is on pace for its best day since august 5, rebounding from a three-day slide. our next guest says sustainable gains need to be predicated on
faster earnings growth. thanks for joining us. i just want to get your take on the last few days in the market. spoke, we sawllen a big rally in everything at the same time, then reversed. today were seeing a reversal of that. what do you make of the market action recently and what we learned from the fed speakers in jackson hole last week? >> not much, or not enough to dispel the confusion. confusing because on one hand, we know september is if you listen to the comments by janet yellen and
other members of the fed, what is apparent is that even if the fed growth this year, it will be a shallower, shorter cycle than we've seen in the past. thatconfirms the notion it's still a low environment. the combination of better economic data, people are not overly worried about the fed. that's producing some good market movements. >> we've heard comments about the lower neutral rate. are we going to see the next recession before the fed rates get back to the level we normally see in a recovery and what does that mean to asset allocation? >> it is entirely likely. unlikely inighly the fed is almost telling you it's unlikely they will get back there. the challenge is when you start the next recession, whenever that might be, there will be less latitude for the fed to cut , at least using traditional method.
joe: you mentioned we got different economic data. i'm looking at a five year chart of the spread, really flagging. we are seeing a lot of flattening. that maybe we us will get one this year, maybe another one later on, but no one out there thinks there will be anything sustained? let's the shorter answer is yes, but there's something else going on. reason why the long end of the curve is not responding despite the better economic data is on a relative basis, u.s. yields are flat. relative to negative yields, that's keeping foreign buying up and keeping downward pressure on
the long end of the curve. matt: also, we are not that flat. this is an old chart i pulled up the goes back to the 80's with the red line being zero. but were getting there are still at crisis levels here. to the question about the fed, is it possible that the market doesn't give the fed enough credibility anymore to act on what the fed? says? even though we get a little bit of reaction, we don't get a lot the market saying doesn't believe what it fears from the fed. beene forecasts have consistently to bullish. people are skeptical. it is not clear what the fed's reaction function is. there was a lot of discussion about events over seas and about china. investors are asking the question, if you're worried
about china and risk out of europe, is this going to be all that aggressive? in the second longest bull market rally in history. you have a great piece talking about the elusive spark needed for the rally to continue. he talked about nominal gdp and you say a combination of buybacks and elevated margins make it not a gamble that is likely to end well. well, we'res starting to see improvement in the economy and the consumer is in better shape. inflation picks up and you get higher nominal gdp in that supports corporate earnings. if that doesn't happen, if the data weakens too much, you see earnings expectations come down.
a, people will have a dovish opinion about the head. the way out of this is faster gdp. you will be staying with us. matt: are going to take a quick rate. and with more from russ will ask about the corporate earnings picture. we've seen earnings come down five or six quarters in a row. what do we need for a recovery? this is bloomberg. ♪
you mentioned earnings, the corporate earnings picture needs to improve for this rally to continue, for gdp to pick up certainly. if i look at a quarterly breakdown of corporate profits, it doesn't look rate. five quarters in a row that we have dropped here. at least it looks like maybe there is a little bit of a recovery coming, or we are getting back to break even. what do you think about the corporate earnings picture? >> it is looking better. the problem is when you look at expectations for 2016, they are fairly aggressive. are going to get enough growth and will margins be able to maintain themselves? one of the things we heard from several ceos in the last earnings season had to do with wages going up. i have a chart here on the bloomberg showing the atlanta in a steadyen
uptrend, 3.4% year over year. the trend is clear. is this a threat to earnings in hitsense that it will margins are good news in that customers have more buying power? or does it say you have to be discriminating about which companies benefit? >> in an environment where the economy is firing on one cylinder, there is little corporate investment. we know there is not a lot of fiscal stimulus. it comes down to the consumer and it ultimately comes down to what is happening with wages. what is happening is consumers are spending differently. we see that every day in retail sales numbers, the distribution of shares is changing. -- thet enough to say question is which consumer stocks. >> if you look at valuations in , do you mean relative
to other parts of the world? do you mean historically? it is expensive relative to its history and cross-sectionally. what were doing is looking for equities that are reasonably priced and finding more those outside the united states, particularly in asia and japan. i think the rally can continue but it's hard to argue that u.s. valuations are cheap. joe: you mention that there's no fiscal stimulus coming but the drumbeat is beating loudly for more fiscal stimulus. today about article that. people warming -- warning that if the change comes it would be a regime change in terms of economic policy post crisis.
were we to see that in the u.s. and europe and the u.k., what with the investing implications be for that switch? >> it would probably be cyclical. there is broad agreement if it was well-designed but it's not clear we're going to get there. level, if we have fiscal stimulus well targeted, to parts of the market benefit. .alue has been trailing if we began to see an acceleration, i think value and style would benefit from that trend. matt: i want to talk about where we find value. what do you we do as an investor if we see rates turnaround? with this fiscal stimulus story which i find so exciting, it
could be that congress says let's borrow a trillion dollars and fix all the crumbling infrastructure in the country, then they sell a bunch of that and we see 10 year yields come back up. would you be worried about that? call it the bond market proxy. that i call aes bond market refugees, they've been fleeing there for years. --works in an environment percent on a 10 year, the valuation on sectors is not sustainable and you will see a lot of multiple compression relative to the bond market. >> were seeing a move away from those defensive stocks as well. do you see that continuing in that case? >> absolutely. ins lower than we were back june. up, thatht the 10 year
can put a lot of pressure on these stocks. from black rock's global allocation fund, thank you very much. matt: time for the bloomberg business flash. electronic payment service square is unveiling its new deal with software startups. the partnership will give square access to larger businesses and more transactions. ceo jack dorsey says he's trying to convince investors that square can grow among competition in the crowded electronic transaction industry. fed chair janet yellen speech last week was hawkish enough for goldman sachs. the bank is boosting the odds of a rate increase. bond traders are agreeing with goldman to some extent. futures showing the 42% chance of a hike.
it's not overwhelming but it's up 22% from just 10 days ago. janet yellen's remark that the spotlight on this month labor report. >> payments of been suspended for 15 years because of liabilities and the 2009 hiring crash. they use proceeds to pay down debt and eventually return cash to shareholders. j.crew says it will start selling an assortment of women's close as part of a push to revive the brand. move builds on existing partnership with nordstrom. your bloomberg business flash update. a programming reminder that is important. tomorrow, a conversation with
matt: this is bloomberg markets. time for our chart chat for we look at trends making market news. consumer stocks just cannot seem to get out of there right. >> consumer discretionary, i thought it would be timely to bring it in. if you look at my bloomberg, i've got it up here. companiesiscretionary
have been the engine of the rally in u.s. equities with a gain of more than 400%, but they remain on course for the worst year since the financial crisis, even as the american consumer continues to show signs of strength. this chart is normalized relative to the s&p 500. the group lagging behind the s&p 500 by 2.9 percentage points. the chart takes it all the way back to 2013. the report today shows consumer spending rose. discretionary shares are the worst performer of 10 groups. i just thought it was interesting to highlight that. matt: i guess bmw is a consumer stock, right? , the sevenok at bmw series versus the s class.
hear what you see in yellow, the series, their flagship sedan, sales were basically in line with that of es class in 2012 and 2013. then in 2014, s class took off because mercedes introduced a two door version, very slick, and a number of other areas. bmw stuck with the same old four-door seven series. now in an attempt to fight off the tesla model s which is almost caught up with the s , whichnd the audi a8 will become self driving, bmw is going to make a two door version of the 7 series. 733 of thee if the early 1980's was a two door but i cannot recall seeing a two door7 series.
so this is a big deal. joe: another big deal is the fed. just take a look at two-year yields. this chart in my bloomberg has a comparison of two-year yields, which is the blue line, and the fed rate increase, and you can see how well they mesh there. this is always going to be basically how it works. that ona good reminder the long end of the curve, it fluctuates for all kinds of things, whether the economy, international spillover from policy, the short end of the curve is sensitive to the fed and expectations for the short-term policy path. two-years how well
yields are essentially a proxy for what people think the fed is going to do in the near term. matt: i thought it was very nice. what number is that? joe: i don't remember. that's it for bloomberg markets, but fear not. the three of us will stay here. "what'd you miss?" and the market close coming up next. less than four minutes to go until the close. green arrows across the board. before i forget, don't you forget to tune in tomorrow. stanley fischer sits down with om keene at 6:30 a.m. if you don't have time to turn on the tv, listen to it on the radio. ♪ . .
the s&p had its best day in more than three weeks halting the longest slide since june. joe: the question is, "what'd you miss?" matt: u.s. stocks make up their mind. janet yellen's recent comments are good for investors. can the fundamentals improve enough to keep the rally going? joe: wall street is waiting to get more endowment clients helping schools manage investments has grown into a $100 billion business. chandra: in brazil, the impeachment trial of the president is entering its final phase. can she convince lawmakers to keep her in office or is her removal already a foregone conclusion? matt: we begin with our market minute with the biggest gain on the s&p we have seen since august 5. we pointed