tv Bloomberg Markets Bloomberg September 6, 2016 3:00pm-4:01pm EDT
we are live from bloomberg world headquarters in new york for the next hour, plus covering stories in san francisco, washington, ec, and saudi arabia. the fomc meeting is just a few weeks away. most in better -- most investors are not betting on any action, but are most investors writing off the fed? thinking -- seeing thousands of jobs on the chopping block to cut down on spending. vonnie: donald trump has not gained much traction with women or minorities, but he has held the support of older white men. we will break down the difference between those demographics. we are one hour from the close of trading. let's head to the markets desk where julie hyman is looking at what might happen in the last hour. julie: if we held steady, it
will look like not much changed. that's characterized the session with a short detour south earlier in the day after we got the i sm services report. not much activity in terms of price action. -- thes become the norm 41st straight session we've seen a movement of less than 1% on the s&p 500. take a look at the bloomberg for an illustration of that. july 8 is the last time we exceeded the 1% threshold for the major benchmark. volume today has picked up a little bit, about 6% above the 30 day average for the s&p 500. we have a lot of dealmaking to talk about. monsanto, we have been watching that even though it has been falling after a buyer raised its head. and we have them bridge acquiring spectra energy.
that itinteresting is was lower in premarket trading. has turned higher. this will become a large energy infrastructure player. the largest owner and operator of type lines. a couple ofwatching carl icahn-associated stocks. after vwrising today announced it would take a 16.6% truck maker. there's speculation this will lead to more ownership by vw. and then there's an auto parts company carl icahn already controlled most of and is now buying the rest of it for $9.25 a share after making several other bids. with histo combine it other auto parts holdings. a way from that, we have been watching other asset classes as we talk about the 10 year yield
down six basis points and the dollar saw tumble at the same time. the bloomberg dollar index down about one dollar, the bulk of that drop coming in the wake of those numbers at 10:00. check on theget a headlines with the bloomberg first word news with taylor riggs in the newsroom. taylor: hillary clinton says the fbi report on her private e-mail server has answered all the questions. she spoke to reporters on her campaign plane on route to tampa, florida. ms. clinton: the report answered all of this. the findings included debunking inflated conspiracy theories. taylor: while there were no startling revelations in the materials released by the agency on friday, the documents give context to james comey's assessment that the former secretary of state had been extremely careless in handling sensitive government communications. donald trump's campaign has
released an open letter from retired generals and military officials endorsing his presidential campaign. overdueer urges a long course correction in our national security posture. dozens of republican national security leaders released a letter last month warning that trump would risk the nation's national security and well-being. president ise expressing regret over his expletive-laden tirade against president obama after the president canceled a one-on-one meeting between the two in laos. on monday, he rejected u.s. criticism of the method he is using in his anti-drug campaign, saying it is an internal matter. the white house has not ruled out a less formal meeting. a german court has dismissed 84ealed -- appeals by russian athletes looking to compete in the paralympics. the entire russian team is act doping.o state
the games are set to be in tomorrow in rio. local news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. david: the ecb is poised to expand its bond buying program and the bank of japan is set to do even more for the japanese economy. their signs that central banks may be losing credibility, especially when it comes to controlling inflation. looks at theda relationship between markets and the central banks. richard: the key driver is inflation expectations. if people believe central banks create inflation, you can interpret the fact that they are doing a lot and fighting against that. >> how will the central bank change the market expectation for consumer matters as well? richard: the big decline in oil prices, the big surge in the
dollar and that lowered inflation in the u.s. now that oil prices have bottomed out, underlying headline inflation will pick up and i think central banks are hoping inflation expectations will rebound on that. david: our markets as sensitive to central bank statements as they were a year ago? think they are less sensitive. they are less sensitive to the fed because the fed has been all over the map. markets are essentially in the mode to ignore the fed, not completely, but essentially, you are looking at low rates, supportive monetary policies and markets spend less time trying to reverse fed statements. functions -- they .ave in rather passive if you lose the market and you are the federal reserve and you desperately want to do something, how dangerous is that? richard: i think it is
dangerous. i think the fact that markets are doing well by ignoring the fed made you well in the short run, but it's a terrible long-term strategy. there is a price to pay if the fed continues to wallow in uncertainty. david: there seems to be consider it -- there seems to be criticism of janet yellen -- part of it is data dependency. the data do not point in one clear direction. i think the challenge for chair yellen is that she is trying to say several things that are inconsistent. on one hand, she says she's data dependent. on the other hand, she says we expect a hike in coming months. herself the optionally to do nothing, so is a complex message and i think that's part of what is going on here. chair janet yellen was in charge of the subcommittee on communication at the federal reserve.
she set up a whole communication policy in the post crisis here a. that was great for guidance when they wanted to ease. have a newd to subcommittee on communications and rethink their whole communications strategy right now? tohard: i do think they need reconfigure communication. i think jackson hole was a lost opportunity. there was hype about a new framework. jackson hole is about the plumbing of the financial system. david: it's not just a matter of the fed governors indicating different things about where they might go with the rates, but we have had bullard come out and others come out and suggest we should be rethinking the framework. where does that process stand? richard: i think it's a very early stage. nothing appears to be eminent. they have said in the next downturn, whenever that is, and we don't think it's imminent come about essentially there
will be a -- eventually there will be a recession. i think it's rare to say that they realize they need to begin rethinking the inflation targeting framework. >> are you surprised that the almostis around exclusively monetary policy and not on financial stability? there was a huge debate in the -- whyveral years ago are we not seeing that in the united states? richard: that's an excellent point. we are at a stage now where the fed is tending to ignore it. when jeremy stein was on the fed, it was more front and center. but with big chunks of the global bond market trading at negative rates, we could have high yield bonds and negative secondary yields. there are clearly distortions there istive rates, so potentially more to be concerned about now. david: that was pimco's richard clarida earlier on bloomberg
. looking at the property -- the possibility of a rate hike, let's start with the said number meeting. after that conversation in jackson hole, it seems like september could be on the table. a 20% -- a 24% probability that that could happen. a small uptick in the likelihood we could get a rate rise by the november meeting, but most people say it's not going to happen with the election so close. after this morning's jobs data, there doesn't seem to be a reason to move immediately anyway. if you are looking to evidence to that regard, you saw weaker employment data when it came to services, 90% of the economy, and weaker employment in the labor market conditions. chart is 2332 in the
bloomberg library. this is the breaking inflation rate and there was almost a chance people thought the fed would raise but right now we are looking at -10 basis points. janet yellen will be looking at that too. vonnie: saudi arabia looks to trim its huge budget deficit. plans it haswhat to do and what it means for a post-oil future. this is bloomberg. ♪
$127.50 peroffer share. we had heard monsanto would not consider anything below 100 $30 -- $135 per share. david: you probably know saudi arabia is the world's biggest oil exporter. what may surprise you is that it has the largest budget deficit among the world's biggest economies. the government is said to be considering several plans, including canceling $20 billion in projects. i want to bring in bloomberg editor john micklethwait. but this into some context. and howtess of this hard is it to get out from underneath this? aboutpeople are talking maybe they can reduce it to 10% and that's even by the most wild standards, this is quite big.
it has been backed by the idea that they've got oil behind it and the interesting thing is this crown prince, the deputy crown prince is going through the whole thing. bit like aa is a family that has been on a wild bender. it's the way you read about a paid a hugeis been amount of money and never taken account of where it has gone forward. they reckon they can get rid of $20 billion. my memory is this is abnormal waste. normally, whatever you hear a politician say i'm going to close the budget deficit by getting rid of waste, you know that is rubbish. every single western prime minister, everyone has said it. in this case, i think it is real. ideas that nold andknows is going to work
it is billions of dollars because they have been living in this unreal world with a huge amount of oil. essentialat is the conundrum for these economies. the thing about saudi arabia is if it cancels those projects, what does it do with the people that were supposed to work them? it has cut back on subsidies for it own citizens. is some of these projects are such barrages in terms of they have so little effect on the overall economy that i think there are two sorts of dangers. ,here will be some genuine normal people working on this and in other cases, it's almost screaming straight through that so few rich people have money anyway and they are unlikely to spend it. you cancel andif infrastructure project, it causes problems everywhere. you don't get reelected,
but that's not a problem here. john: that's one of the great things about being a monarchy. david: how long have they been having these talks? john: i think they've always been talking about cuts. difficult -- he spotted that saudi arabia was the third or fourth highest spender on defense and only had the 56th best army in the world. i'm making up that number, but it somewhere around there. basically, it has been a patronage system. there are efficient it's to the saudi economy. our emco does seem to be a well-run company. at these palaces in the sand, those are the things they are trying to get rid of. talkstime the government about waste, they are often wasting their words because there's less waste than they
imagine. the guest is -- the guess is there's quite a lot of waste. vonnie: they want to bring down the budget deficit and that's a good thing. -- if they were trying to get into the capital markets, that's the next chapter. what is the vision for a new saudi arabia? john: they want to modernize saudi arabia and move away from one which is dependent on this oil cash and build a broader economy. that means two things -- try to build up other things and, to be fair, i think they are being cloudy about what's in this list of canceled projects. i suspect some of those will broadly come under the title of non-oil reducing packets. on the whole, they want to find new, good industries and back those. least the theory.
but to what extent can a monarchy do that? recently sat down with vladimir putin and asked him about the deputy crown prince and the prospect for an oil freeze. what did he say? tribute,sort of paid which in some ways is interesting. he seems to have done this more dramatically than most. you could almost at the print season -- the parent the parentheses. yes summary projects going to cronies and he has failed to cut those out. on the issue of oil production, there was an attempt to do a deal where saudi arabia would combine and enforce a production freeze and it did not work out. putin'snd, at least in
version, they pulled out and he's probably broadly correct on that. the new idea is the russians will go along with it and somebody will maybe give the iranians a bit of slack. message, that's they were trying to recover the position where they were miles behind. generosity toward iran which is not generally found. still ahead, shares of google approaching $800 a share. as the stock too expensive or a argan? we will traded in our options insight, next. this is bloomberg. ♪
kelly, chief investment officer at recon capital. we don't have much movement in the markets overall, yet as you pointed out, three times the amount of puts versus calls have been trading, which is surprising given that on the surface there's not much movement. kevin: there hasn't been much movement over the summer and there's been a lot of this type of unity where you some more puts being bought because everybody was expecting something to happen, just like it did the two previous summers when there was grease and china. but a lot of people are re-putting on folio insurance for the month of september. so you see a lot of contracts are and of said number in early october and they are trying to protect in case there is volatility heading into said number. -- into september. julie: is your reading out and
out pessimism or insurance? kevin: i think it's a little bit of both. i think you are seeing people put on overall market that's where they are trying to protect themselves and bet against it. because volatility is so inexpensive is they are doing stock replacement and getting extra exposure because calls are so cheap and people are bidding up the imbalances that can go with the puts. they are doing that in individual names. they are staying away from utilities and getting into tech and health care. and it's not just they, it's it you. you are looking at google specifically. how does this work? kevin: this is a great strategy to deploy because you can get great exposure to the earnings that are going to come out on the 13th of october. there are weekly options that
expire on october 14. it was trading for 16 or $17. what is nice about this is that it's a leader in that space. they are not trading at a certain valuation unlike some of the other sectors. google has a lower volatility than some of the utilities, which is interesting. it is a great way where you can come and not risk loss. if they do, the stock would go down further than the options premium that you can pay and you get the upside exposure. julie: when you started looking at this, it was at 16, 17, and now it's up to 18. when you talk about getting into the stock replacement strategies, where's the tipping point because some a people are buying calls and doing stock replacement?
cann: one of the ways you do it is by doing call spreads. or a calendar spread. there are several ways to make it inexpensive. you are seeing more calls being traded in sector leadership where people want that exposure and upside. so they are doing it in the options as opposed to just going out and lying the stocks. week: still ahead, this marks the beginning of the nfl season and that can only mean one thing -- tennessee football. we will talk to the ceo and cofounder of draft kings. this is bloomberg. ♪
trump attacked hillary clinton and referenced clinton policies.ent obama's is your trump: you have illegal aliens treated better than veterans. better than people in this room. you know it. they are treated better than veterans and let me tell you -- they have their priorities mixed up. it's going to change so fast. >> trump promised he would fix your credit problems in the veterans administration. he said veterans waiting for care could go to private doctors or hospitals and the government would pick up the bill. for her obama is paring first campaign appearance for hillary clinton. the first lady will be at an event in virginia on november 16th. is scheduled to
hold his first solo campaign event for philip -- in philadelphia. fox news says it has settled gretchen carlson's sexual-harassment lawsuit. they have agreed to pay carlson $20 million according to a person with knowledge of the terms. roger ailes stepped down as chairman and chief executive in july after carlson brought her lawsuit. she says in a statement that she is ready to move on to the next chapter of her life. a pennsylvania judge says bill cosby is blind and might need special accommodations in his upcoming trial. they disclosed the condition in a letter before the pretrial conference. they are asking that prosecutors not be allowed to use a telephone conversation of recorded by his accusers mother at the trial. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries.
markets close in under 30 minutes. let's go to the nasdaq where abigail doolittle is standing by. abigail: we have seen a shift through the day. we had the nasdaq fluctuating between small gains and losses. but just minutes before the close, the nasdaq is on pace for a record closing high. behind this strength, it's all about the big names. these are the biggest boost to the nasdaq -- lots of alledge commentary out there. saysiper jaffray analyst chairs are well below fair value. climbuggests the stock to by 14% while one another analyst says some of the analysis on netflix could climb higher by 25%.
facebook, the marketing team in chicago says incremental positives are coming out of those meetings. another analyst says they will take a lot of shares of advertising budgets out there. but white -- what might stand out the most is if we go into appears theg, it trade could be decoupling. amazon and outk, but trading higher on the your but netflix is still down about 12%. piper jaffray turns out to be right, it could stay together. but concern about domestic subscriber slowing, maybe netflix will decouple out of that trade. oliver: there has been some diversion in those trades but a pretty good day for the stocks. looking at chinese internet stocks, some of those names are
up as well. abigail: the chinese internet stocks are the best performers, including i do. baidu is on phase -- is on pace for its best they in seven months. was chatter earlier that baidu could be in merger unit talks, but baidu says that is not true. that could he giving the shares a boost. we have alibaba nicely higher on the day after the company entered into a pact that should boost chinese e-commerce. have yahoo!,s, we a u.s. internet name trading higher, considering it has a big stake in alibaba. abigail doolittle at the nasdaq. thank you so much. and as technology advances
jobs are increasingly sent overseas, americans are becoming more anxious that their occupations may become obsolete. most is the anxiety justified? white men and those with less education are those likely to find themselves in a market where the jobs are shrinking. is the chief economist at an online career website. lots of interest during this campaign season about to is feeling economic pain and who is feeling economic anxiety. you looked at it in a novel way. describe your findings. the percentage of people in jobs that are likely to shrink, every couple of years, places wheret has jobs are likely to decline because of automation and so on. what we find is the group in jobs most likely to shrink our
the highest unemployment rates to lowest income today -- it turns out that is white men and older adults are more likely to be in occupations rejected to shrink. what is interesting about this research is a lot of these occupations have fairly high employment rates at the moment and their income is not at the lower end at the moment. jed: that's right. a lot of occupations projected to shrink are outside of manufacturing, 43 and fishing. most of them are service jobs and some of them are high paying service jobs like air traffic controllers. when we think about who is in jobs that are likely to shrink it my become obsolete, it's not necessarily able being paid the least or unemployed today. bring this into the political conversation. this has been a tense focal point. we have a chart looking at .conomic anxiety
white, african-american, hispanic -- this does feed into the conversation. what does this tell us about the expectations for standard of living going forward? is: one of the challenges people who have expressed the by a lotomic anxiety of measures like unemployment and income are not necessarily the worst off. therefore people have questioned whether those folks deserve to be anxious. when we look at the wider set of reasons why, especially when you think about measures like drinking occupations which tell us more about the future, it makes more sense why we see greater anxiety among white men and older adults. joe: when you look into the future and extrapolate this job
is going to decline in the future, are these things people can see right now? are the effects of these trends happening in front of their very eyes or are these things that haven't happened yet but 10 years from now, technologists and economists will predict there will be fewer of them? jed: it depends on the occupation. some jobs are predicted to shrink that have faced challenges for a long time. manufacturing and agriculture, for instance. jobse are also seeing most projected to decline going forward are service sector jobs. that is a change from the past. it makes sense that service sector dominates so much, but some of those jobs in the service sector like bookkeepers and accountants may be jobs that have not seen declines in the past the way manufacturing and agriculture did. scarlet: when it comes to these
jobs and shrinking industries, how do the red states compared with blue states? jed: the share of jobs and shrinking occupations is higher in red states than in blue states. this is the opposite of what we see if we look at unemployment rates. lou states have higher unemployment rates than red states, but the states that tends to have the jobs likely to shrink are those in red states. a lot of them are rural states like the dakotas, montana, nebraska, iowa, rather than states today that happened to have the highest unemployment, places like alaska and nevada. oliver: what is the timeframe here looking at when these changes will take effect? when are these groups going to be feeling the pain? projections for these occupational changes are a 10 year projection.
for many of these occupations, this changes already underway. for some of the service sector jobs, including some of the better paid service sector jobs, we might not yet have seen that become underway yet. we will see more of that from automation and globalization, but it will be different rates for different occupations. joe: one thing i like about this research is that it exposes the contradictions about this. more of the jobs are in red states where unemployment is lower and the jobs at higher pay -- is there a common thread that even people who are fairly well off have a sense that they are not part of future of this country is going economically? even at this moment, they can see the direction of the country and the economy is not toward them and people with skills like them?
there are many people in well-paying occupations that are likely to shrink. but when you look at education, higher education attainment and those have graduate degrees, they have higher incomes, lower unemployment rates, and they are in jobs that are less at risk. there are lots of people, particularly those with utter education that are doing better today and that her position for the future. the key is when we think about why different people feel economic anxiety, we need to look at those current stresses terms of income, wealth and unemployment, but also what is likely to happen to the occupations they are in and the skills they have. joe: fascinating and complex stuff jed kolko,, thank you very much. scarlet: coming up, regulatory questions have dogged online fantasy sports sites. we will hear from the ceo of
scarlet: this is bloomberg markets. i'm scarlet fu. time for the bloomberg is this flash. billionaire investor carl icahn's investment company is buying federal-mogul holdings. the maker of champion spark plugs will be closely held by icon enterprises. the price is 86% more than the the closing price on february 26, the day before the original proposal of seven dollars per share. elon musk's tried to make a good impression on wall street
continues as analysts remain divided. to earn moreers and spend less. showing positive cash will make it easier for the carmaker to make funds to complete the new model three vehicle and it giga factory that makes batteries. 21st century fox is betting millions on a new online venture by the former host of "top gear." to this statement, it will feature videos, articles, social media and interact to programming for auto enthusiasts. because live in november. apple unveils its new iphone tomorrow am a based on reports they are unlikely to have the breakthrough features that defined its earlier models. iphones made up almost two thirds of apple revenue, but for the first time, iphone sales have in falling. a quick reminder to join us for
special coverage of the apple time,at 1 p.m. eastern 10:00 a.m. san francisco time right here on bloomberg. that is your business flash update. oliver: this week marks of the getting of the nfl season and that can mean a lot of things, but one big thing is tennessee football is back. online fantasy sports are a big otherss, but new york and states have raised objections. earlier today on bloomberg , the ceo and founder of draft kings, jason robins, talked about how they are handling regulatory hurdles. the regulatory requirements are all things that we are doing more in the process of doing anyway. those are things that are important and have a positive impact on our business. maybe a lot of people before hesitant to play. now that people know there is oversight, you'll see more people adopt the game. david: you are still in the startup phase. i don't believe you have turned
a profit yet, but is it going to extend the time you get to profitability? while it does have some impact, it's not going to change the economics of the business. just engineering resources that we devote to product features. in the short-term, i think there's a little cost to implement some of this stuff, i think it is ready middle. david: there has been some difficulty with the reputation of fantasy sports and there are reports about equivalent insider trading with employees trading. has that hurt your business? are people more leery about fantasy sports than they used to be? in the beginning stages, maybe, but since then, a lot of information has come out that there was not any impropriety. whether or is not
not something actually happened. the issue is making sure people feel safe and what we do, not today, not tomorrow, but forever, to create an environment that allows people to feel safe and embracing regulation and making sure people know that there is oversight. know that it, they will be protected. david: look in -- looking in the overall business and growth, how may players can be in this market? is merging with your biggest rival in the cards? jason: i think competition is always in the cards. you are seeing it go from unregulated to regulated. that's going to create a lot of interest. yahoo! entered the market and you will see other large companies that play in fantasy sports that have been watching
this carefully take a hard look at it. competition is going to intensify. david: so we're not going to see an announcement next week? jason: not next week. to a: compare the business year ago. what is the level of participation? week tohis is a tough predict because so many of our players don't enter the lineups until the days right before the games. we will learn a lot in the next few days. the preseason only tells you so much. preseason is up 70% year over year. david: how do you address the basic challenge that it is a very few people making all the money and they are benefiting off retail participants?
make casual participant, how do you assure me i'm not a patsy for the guys who are real pros? jason: i think the key is to make people feel like it's a transparent environment. i know a lot of stats have been shared, but that's similar to the stock market. the best of the best are going to win most. you don't have to play against tiger woods. you can play an amateur tournament or with a few buddies. we just launched a new feature that allows you to form groups of friends and just play with them. that makes sure you know exactly who you are playing against. i think we all think we can be our friends. that was the ceo and cofounder of draft kings,, on bloomberg . scarlet: coming up, speculation the federally borrowing costs
scarlet: this is bloomberg markets. chart chatr our where we look at graphs to illustrate the days trends. i want to start with turkey because you would think a were acrossp and the border would turn off investors, but you would be wrong when it comes to investors. the white line is the turkish 10 year yield and prices plunged at that vertical line. but prices are clawing back from the ground because of the fat, juicy yield. the turkish yield pays six times other treasuries. that's a reflection of how they been cutting their overnight lending rate mid july which has not discouraged investors.
the cost of those rate cuts is a weaker currency, but the yield on the bond still makes turkish bond attractive. you have more than $4 billion flowing into turkey's currency bonds. and if you believe what some of the people are saying, that it strengthens the government as opposed to a weakening, it doesn't necessarily threaten credit worthiness. oliver: it is interesting how flat the yield has been, especially when you look at other clinical turmoil around the world, particularly in her zillow. is chart that i'm looking at looking at emerging markets and price valuations and stocks have climbed up quite a bit. you are looking at emerging markets over the world index. the trend is there.
in termsen accretive of emerging markets stocks and it continues to be one of the few places where people are going to find cheaper equities. more expensive, you have to wonder how the value add is going to relax. still trading at a level below -- scarlet: or alternatively, how rich u.s. valuations are. of the u.s., hedge funds are trimming bullish that's on the u.s. dollar. this is a chart that looks at total loss. hedge funds are still bearish but instead beginning of august or over the last month, we have seen them come down a little bit. part of the reason is for and central banks are not as aggressive as people expected a month ago.
some of the case for the dollar has come off a little bit. got the is stale and we mediocre i sm today, so it will be interesting if we continue to see that speculative love for the u.s. dollar come off as expectations for the rate hike in u.s. or to get pushed back. scarlet: especially today, the dollar having its worst day in five weeks. oliver: that showed up when you look at the financial companies where it's a little more unclear what is going to happen. does it fort bloomberg markets. "what you miss" is up next. this is bloomberg. ♪
scarlet: bwest stocks closing higher this afternoon. you the question is what'd miss? scarlet: more interest-rate clues may emerge in discussions from five regional fed presidents. joe: investors await apple's big unveiling tomorrow of its latest iphone. will be released change the company sales trajectory. way to bet against stocks is born. why people are looking for industries exposed to exotic hacking attacks. scarlet: we begin with our market minutes. he was stocks drifting higher into the close and the nasdaq .losing at a record high the nasdaq securing a new closing high yet when you look at the dollar, that was down on