tv Bloomberg Markets Bloomberg September 9, 2016 12:00pm-2:01pm EDT
scarlet: welcome to bloomberg world headquarters in new york. the s&p headed for the biggest or treat sense of june as the 10 year treasury note jumps to the highest since that month. scarlet: jack bogle joins us as he celebrates 40 years of investing. steady and low-cost returns over the last four decades. why does this method still generate so much addresses and? matt: aetna under fire. withdrawing from obamacare exchanges to get back at the government trying to stop its merger with humana. scarlet: we're nearing the halfway point of the trading day. let's go to abigail doolittle in the market desk in the new york
newsroom. abigail: it is great to be here on this selloff day. we have the three major averages sharply lower. that dow and s&p 500 near special lows, the third day of declines. on pace for weekly declines, breaking the complacency for the u.s. equity averages. over the last few months, the s&p was on day 43 of not making a 1% move. that has been broken. there are technical reasons the downside could continue. , thisk in the bloomberg is a two-year chart of the s&p 500. it is traded in a range. the orange oval is the range of complacency. that thisreasons could break toward the downside or to the bottom of the range. there could be more to come where today's risk off.
one reason for the risk off oil confirming the risk off tone with oil down 2% on the session, paring gains. investors seem to be reconsidering the plunge in stockpiles reported earlier, saying it is a one-off due to a storm. the majors down, including chevron and show. the s&p 500 energy index on pace for the worst decline since the beginning of august. it is a risk off day. matt: is not only crude oil rising, other national resources are affecting the market. trading we have steel lower. iron ore is down five days in a row at an 11 week low, dragging on some of the u.s. steelmakers, including allegheny we canogies, u.s. steel, see big plunges. u.s. steel and ak steel are on
pace for the worst declines since june. a weakness for markets in the u.s. matt: let's check in for the bloomberg first word news. mark: the house of representatives voted to let families of 9/11 victims sue saudi arabia. lawmakers cleared the bill a short time ago. president obama signaled he will veto the legislation over concerns of exposing americans overseas to legal risks. 15 of the 9/11 hijackers were saudi arabia nationals. there is probably enough congressional support to override the presidential veto. hillary clinton will mark the 50th anniversary of 9/11 with a visit to ground zero. hillary clinton was the new york senator in 2001 and was not scheduled to visit the landmark. her campaign notified officials she would attend.
warned that russian interference with the u.s. election is unlikely. he spoke to the international news network and said democrats might be putting out stories of russian interference. he has been criticized for his praise of russian president vladimir putin. american officials downplaying chances of reaching a cease-fire in syria civil war. secretary john kerry met in geneva with his russian counterpart. u.s. officials suggested secretary kerry would not go to switzerland unless a deal was imminent. half a million people have been killed in five-years of fighting in syria. the flooding that damaged 110 thousand homes and 110,000 vehicles in louisiana cost $15 billion according to a risk model income forecast. 80% of the homes lacked
insurance. john bel edwards is calling on the u.s. congress to approve $2 billion in aid for his state. day, news, 24 hours a powered by 2600 journalists and analysts in more than 120 .ountries, i am mark crumpton this is bloomberg. scarlet: the vanguard 500 index was formed with $11 million in assets. in 1976 it seemed like a crazy idea. today, jacobo will is having the last laugh. it is worked three -- it is billion5 dollars. joining us is the one and only job global. -- jacobo will. -- jack bogle. the numbers, when it comes to investments are staggering. active funds have seen $600 billion in outflows.
bill ackman recently broke -- recently referred to an index bubble. what caught you by surprise? i guess its strength. i'm disappointed how long it took. 40 years is a long time. it took until the middle 90's. we started in 1975. middle 90's until indexing caught on, then it caught on with a flourish and dominates the industry. the industry is in need of creative distraction for destroying old ideas and making life difficult for asset money managers with high cost. active money managers at low cost can do a little better than that. matt: there has been criticism in part because of that success. a note, an analyst wrote
saying index investing is worse than marxism. [laughter] matt: i am sure you have heard these criticisms before. index investing does not participate in the price setting mechanism. how do you feel about that accusation? jack: well -- [laughter] a silly attempt to get across an argument that is terribly flawed. willarxist article, if you , says any field of endeavor that attracts value from society is doomed to fail. indexing in general should create a mutual fund industry adding huge amounts of value to our society, to investors. if they do not understand that, i'm not sure what they do understand.
it is a funny article. it is long, detailed, i'm not sure how many readers could understand all of those formulas printed page after page. the comparison with the financial business to the mining industry struck me as absurd, until i realize that they are both extracted industries. the mining industries taking gold and coal and the financial industry extracting value from the clients it serves. scarlet: we know the rise of passive investing is a threat to company specific bottom of research. does it provide value, what is it? how should they adapt to the new world? jack: you are right. research, it does not have the bias of south side efficientcreates markets. the issue is at what point is
indexing making the market less efficient? the reality is that you could get right now, indexing is 30% of the total market. you could get 50% or 60% before anything would be noticed. the index moves a certain portion of the market for trading activity. might make it easier for active managers to win. or, so it is alleged. when the market is less efficient, it is easier for the bad guys to win and for the guys to lose. have to balance each other out. on the simple mathematics. it is not seem to have dire effects so far. the reality is that year after year, in terms of performance,
investment returns, indexing outpaces active managers. 8% for the s&p 500, 6% for the average large-cap growth fund. that is huge. 6% compared to 8%. it has to do with taking cost out of the equation. those costs are fund expense ratios and cluster fund takeovers. when you don't know how much that is, you know it is large, but if you take those two numbers together you will take 2%. should be the margin by which and s&p 500 fund reads the average large-cap fund. $.99et: for active funds, dropping to $.70 today. matt: a story was written about
the vanguard affect a couple of weeks ago. he estimates that you and vanguard have saved investors about $1 trillion over the last four decades. do you reckon that that is a fair calculation? jack: i think that it may be understated. they compare our expense ratios to the average of our competitors. the fact that we are not trading , a huge cost saving, but they do not take the savings each year and enter return on the accumulated savings, the cost of capital. return on the money that we save investors every , you will20 years find a huge staggering number. whether one trillion is the right number or 1 trillion and a half, i would not know, but it is very big and good for the investor.
matt: let me get back to a point you made earlier where you say hassan investing, -- were you investing investing is part of the market. what about individual investors? is there a place for active investing in some portion of regular investors' retirement savings or funds? jack: for the individual investor trading stocks is condemned finally to lose. he shoulders the emotions of the market. he has a marketplace that is probably more informed than the typical investor. i do not see that the individual can do very much that will make him any better or worse. there is, however, a gambling effect. investors love to gamble and play the lottery. -- my own belief is, i do not
do this myself i would add, but money in theour low risk safe account, long-term , real money, and up to 5% on the funny money account. do it you want with the 5% and you will be fine. everyone sit a while, every five years, look how you are doing with that 5%. if it is not doing as well as the remainder of your report olio, the serious -- the portfolio, theur real money account, you would question if that is a strategy to keep following. scarlet: talk a little bit about the kinds of risks passive investing has created. it has cut the cost of investing and democratized the financial markets, but some argue it created increased correlation within the stock market, between stocks and other asset classes.
what do you think? do can'm doubtful to her prove a lot of things with statistics that are not true. missouri on the fact that these effects exist. i've never seen documentation that establishes that to my satisfaction. i'm a tough critic, but i do not think it is a good idea. i would add, i do not know less correlation or more correlation among the stocks in the market is good or bad. i'm not sure it makes much difference. matt: what you think about what we are seeing? bonds and stocks are down. this is the correlation we have in assett, even more classes. everything seems to be moving in the same direction. you would normally think there is a flight to quality, people
are piling into the safety of u.s. treasuries. why doesn't that work anymore? jack: that is a good question. i'm not sure i am qualified to answer it, to be honest. negative interest rates, which we see around the world, not in the u.s., seem to make no sense at all. that cannot be a permanent condition. i do not think the correlation between stocks and bonds is meaningful. the market does peculiar things for sure times. deep down, i believe this is just one more of them. haveet: longer-term, we seen modest returns for a couple of years. what are you telling people that need to put kids through college and need to fund their retirement? how do they plan ahead with financial banks so aggressively easing? jack: i have reasonable
-- a reasonable expectations formula i have used for 25 years and it has worked almost perfectly. expectations has been almost exactly the same as returns delivered by the s&p 500. it is a very simple system. you have the dividend yield that is 2% going back a long time it was 4% or 5%. that is a law suggesting no returns in the future. earnings growth is 5%, i think that will be tough in the future. maybe we can do 4%. the first two are what i call investment debt aspects of the investment return. the second is specular return. what will people say for -- what will people pay for $1 worth of earnings? historically, 16 times earnings.
today it is 24. i do not thank you will get anymore mileage out of a rising price earnings multiple. you are looking at lower returns in the stock market up to 4% to .% before costs are taken out the typical mutual fund investor could get as little as 2% per year. he wants to be very careful for lower return markets. matt: you do not see any more multiple expansion boosting , and, i'm assuming from what i have read, you do not see a pickup in earnings either? the u.s. corporate earnings situation is not to be viewed optimistically from your point of view? forecast thet future. i can make judgments, reasonable expectations. it seems the handwriting is on the wall for lower returns. fors certainly on the wall
lower price earnings multiples. market can that, the go into a lunacy phase and 40% earnings at the high. i cannot say that will not happen. i guess that one would say you do not want to be near the stock market when it does. there is no more room. matt: why will not corporate earnings pickup? vastlyor market is improved. around the world it is improving. the consumer seems strong and ready to spend. outlook,l, most of the people predict the outlook. 2% the economy, looking at 2.5% for gdp most growth. 96% --wth has been at
corporate earnings have a 96% correlation with gdp growth. a high correlation. corporations make money when the economy is good him a less money when the economy is growing more slowly. for not see the case substantial gdp. it would be ok, but hardly sensational. it will be a tough slope to get to 3% gdp. scarlet: you mentioned negative interest rates make no sense. i know you like to invest based on risks you understand. which of today's risks, in the u.s. or outside the u.s., do you struggle to get your head around? isk: the most obvious one the political situation in the united states of america. i find it deeply worrisome, unpredictable, unfathomable
about what might happen come election day and what the consequences might the. -- might be. the world economy is not doing as well as the u.s. economy, and i do not see that europe and japan, may be the emerging but i doill do better, not think europe and japan will be able to grow as fast as we do. those are risks. there is always the risk of nuclear war get a view not think it is a likely risk, but we live in a very fragile world. someone's finger on the nuclear button, in moscow or washington, d.c., is something i'm no ability to verdict. i hope that same heads will prevail, but you cannot be sure. there are a lot more. global warming seems to be accelerating, it certainly is in philadelphia today. that will be a big problem, a costly problem.
if it continues in this direction. there are those that feel it will come on us in a serious way more quick way than anyone anticipated. matt: what about market risk? over your career we have seen so many incredible changes, some good, some not so much. there has been a rise in the use ? andfs, what do you think the use of computer algorithms and robo advisors, which i would guess would lead to more index investing or passive investing. how do you view that stuff? jack: robo advisors almost universally use index funds and vanguard index funds are they're not making big bets on market sectors or individual foreign countries. withare basically going the total market as a part of the stock allocation.
i think that is very wise. theetf thing, every day standard 500 etf is the most widely traded, turning over 4000% a year. i am the person that thinks a 5% turnover is pushing the envelope. etf's are heavily traded. they have lots of perfectly good uses. etf is dominated by traders. in the long run, traders are a gift to wall street, and by definition, not a gift to investors doing the trading. softet: with the rise of beta and faster form etf's, we talked about the vanguard effect at work. what would you tell hedge funds that charge high fees? what is coming to them in the future? jack: what has happened to hedge
funds, deteriorating returns is a product of the fact there are smart people running these things. i mentioned one of the leaders , but there areqr more of them. there is only so much undervalued security in the market, price discovery to take place. economically, the more participants in the hedge fund area, the more difficult to differentiate yourself in a positive way. i think that hedge funds, i will say this clearly, no place in the portfolios of individual investors. they are too unpredictable. the spreads between the best and worst, in the last three years, maybe, 100 or 200 percentage points, it is amazing how much of a different. they are expensive here they are a manager's dream, but for many,
and investors nightmare. scarlet: thank you. jack bogle for sharing your thoughts on everything from hedge funds, the political situation, the rise of correlation between classes. joining us from valley forge, pennsylvania. matt: coming up, where are the growth opportunities right now in etf's? we will discuss that pure and we talked a little about etf's. i find it fascinating that he thinks robo advisors are a fantastic idea week as they use index funds. mostly passive investing and vanguard funds. you would think that is why come he is talking his own book. jack bogle is not a huge, mega-billionaire like people that started other big mutual fund companies like the johnson family at fidelity. it is a mutual fund.
they did not ever have the big ipo to cash out the executive. it is interesting. he seems to be truly concerned about saving the investor money and making markets more efficient. scarlet: the focus on cost is good thatessive speaks of his stature in the mutual fund industry, particularly or index fund investing. gundlach made a reference to one of our favorite functions on the bloomberg. the world interest rate probability. he referred to this when he was discussing the federal reserve in the timetable for raising rates. let's listen to what he told his investors. will be whent time it is below 50, maybe 45 or 48. they will say, we cannot be replaced by this work function. scarlet: he said 40 or 45.
where are we? matt: 32%. yesterday, when he said this, we were on with joe weisenthal and it was 28%. has gone up a little. very interesting looking at the 10 year yield, which has continued to climb. i think eric rosengren's comments chains perspective. scarlet: and people are wondering if she will move the needle. we have more coming up with markets and etf's in the next 10 minutes. this is bloomberg. ♪
let's start out with headlines from first word news. mark crumpton has more. the united nations security council has scheduled an emergency meeting on north korea's latest nuclear attacks. expectingmbers are discussions on further measures, including sanctions. the 15 members are expected to meet behind closed doors late today. the council strongly condemned the latest missile launches and hinted at quote significant measures if they refused to stop the test. what could be a pivotal phase of the present election begins today in north carolina. allowrst state to balloting by mail. crashed off a bridge in eastern india today. at least 21 people were killed
and another 30 injured. authorities say the driver lost control of the vehicle while talking on his cell phone. it plunged nearly 50 feet into a ditch. india has the highest road death toll with over 110,000 people die each year in accidents. nasa is celebrating the successful launch of a rocket that will have a rendezvous with an asteroid. .t is heading to bennu once there, it will vacuum up gravel from the asteroid's surface and deliver that back to earth. >> we will be answering some of the most fundamental questions that nasa focuses on. how does this planet work? how did the planet form? we will be even looking at questions such as where and how thisife originate on
planet? mark c.: the mission will take seven years. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton. back to you. scarlet: thank you so much. we're taking a look at u.s. stocks falling this friday afternoon with the dow off by 402 points. is that -- matt: it has been a long time since we have seen numbers that big. smp -- it has been a long time since we have seen a 1.5% move. june 7. scarlet: summer is over. let's go to courtney collins, lies at the nasdaq. the nasdaq is moving lower this afternoon, down for a second straight day, down over 1.5%. it is currently on pace forconsr
this week on tuesday and wednesday. some big tech names are moving it lower including apple, amazon, and facebook. facebook is down for a second straight day, matching its longest losing streak in three weeks. the stock is lower today after facebook is being questioned by the eu's competition privacyoner on the data policies after they announced policies allowing advertising on facebook and instagram to take data from whatsapp. facebook'stock -- stock is still doing ok. it is still up over 20% year to date. is sky works.g
the biggest laggards down over 5%. customer ismber two samsung. it could be feeling follow after samsung recalled a product last week after they admitted that they could catch fire or explode after being charged. the faa iss it a -- warning to not bring them on to airplanes or put them in checked baggage. could be falling in for global with news.
political uncertainty here at home plus overseas and the potential for increased volatility, we have seen investors flocked to gld. scarlet: explain how it has ticked up, strong at the beginning of the year, it dropped a little bit as we got to the summer, but how do you see things playing out for the rest of the year? >> we have seen inflows post brexit. it has actually picked up in september. the reason being, now, investors are back from vacation, looking ahead towards the federal reserve meetings, plus, of course, we know what is coming, the election. matt: i was surprised.
first of all, we had jack vogel .n a moment ago we were talking a lot about etf's. surprisingly, you mentioned gld. in the wall street journal that came outk recently, he would not be opposed to 5% holding of gold. etf's are moret helpful to traders and investors. what you think about that? >> he is right. the thing about him is he usually equates goal to trading. he is anti-trading. they only have $2.3 trillion in assets. stocks triple what turnover. on income funds. they do trade a lot. there are a handful that make up
most of that. there is an argument as to whether they inspired normal people to become day traders. i've not seen evidence for that. i am more of the environment that those who are already trading love etf's. if you look at vanguard etf and trial, they are barely, barely turned over. and people are buying holding but their definitely a lot of people trading. scarlet: when you look at technology, because you have seen some recent technology -- gains in technology stocks. a lot of that is chasing growth. we have seen and it has been pointed out to us that the stocks paying out dividends are doing better. people want growth and payoff. you see the rise of more of in thepecific etf's coming months? at one point do we run out of constituents because you have only a handful.
>> we have seen about 390 million inflows. as you point out, investors are coming back. one of the reasons they are clean back is you look outside some of the big names and earnings outside of tech have been difficult. it is not justt, the big growers. there are also some names that are undervalued because investors the opportunity to get exposed to cyclical names as well which could be potentially important if we see a turn in the economy. matt: we saw financial sector spiders also doing well. 30 so those gains will be taken down when they break up the retail sector. what is that -- september 16? are you excited about that? >> yes and no. the sector has already earned -- look, i bloomberg, when we track
sectors, real estate is already a sector. we are already there. here's why. when you add up the assets, they are greater than every other sector. by all means, i think there are some issues to speak about in outside the 20% reach of the etf's. people are already there. why? low rates. there is a ton of money. by all means they have already earned their place at the table. inflows ison into actually about the equivalent of outflows into financial etf's. it is all about rates. investors are looking for bond lowies and income in the income environment. we have begun to see money moving to financial in september alone. scarlet: out of reach? >> not necessarily out of reach
watching. in the post-brexit world, is london in danger of losing its spot as global financial capital? one person says don't be so sure. mark b.: antitrust regulars say that a company has not provided data and is suspending their review. julie: in the quick take, the perils of poland. the ceo of britain's second-largest insurer does not think the world is ready to take away london's position as the world's financial hub. mark anderson spoke exclusively with bloomberg about how london will remain an important financial capital even after they leave the eu. >> the reality is that london is the home of things like insurance. whatink london has got -- has that got? it has great labor laws, it is a
wonderful place to live, it is still a financial hub, and has all the systems. trying to unwind that is a pretty tall order. mark b.: the european union's big tax case against apple started. paye has been ordered to ireland me or that -- more than $14 billion in back taxes and interest. largesttretch its boeing maynter t -- stretch its largest jet to compete with the airbus. airbus has received more than .300 orders meanwhile, eu antitrust regulators have stopped their clock on the immersion between
dow chemicals. they suspended the january 11 deadline. dupont says the move does not change their timing. the deal is the largest ever in the chemical industry. thee: time now for bloomberg quick take where we provide context and background on issues of interest. polls have long been the gold standard on voting concern. they have not been shining lately. they were far off the mark in the british referendum and the congressional elections of 2014. here is the situation. from supporters of republican presidential nominee donald trump say that polls show him trailing hillary clinton cannot be trusted. reliablesay the most measures are the conglomeration
of data. in the u.s., over half of adults use mobile phone services. calls toe increased mobile phones, but they seem to -- they tend to screen out unknown callers. here is the background. gallup created the first scientific political pull back and 1932. correctly predicted that franklin delano roosevelt would be reelected in 1936. they led to this famous image, .leeful harry truman here is argument. pundits and politicians believe polls decrease, accuracy will suffer.
matt: take a look at canada's .conomy the country added twice 6200 jobs last month after lost jobs in july. it is not all good news. unemployment rate actually picked up a bit to 7% and the number of hours worked dropped. thank you for joining us. let's start with the good news. the good news was obviously the headline number, which was the increase of 26,000 jobs added.
that was initially seen as very positive, especially given that the july number was so grim. more the jobs were full-time, which is also good. in fact, if you want to be optimistic, you could say the rise in the unemployment rate could signal some positive sentiment. indicate that more people are feeling optimistic who lost their jobs so they are entering the job market. sometimes you have a situation where the unemployment rate is whong but because people gave up looking for work are now looking for work. if you delve down into the report a bit more deeper, it is a little more negative. scarlet: with the unemployment rate rising to 7%, is that because of the good reason, or is there something more sinister going on? >> it is not clear up your you mentioned the number of hours worked was lower. that is one of the things that economists have focused on.
it is something that is worrying. working fewerre hours each year, it hits them in the pocketbook. another week point was waitrose. in march, which is where increasing by about 3%. that has almost been cut in half now. wage inflation has been running at about 1.5%. it is below the 2% target. again, it is something that hits people in the pocketbook. you have a picture where canadians are working fewer hours and their wages are increasing at a slower pace than they were earlier in the year. that is obviously not good news. the other thing i would mention part was the biggest in the public sector. while those tend to be high quality jobs, they have good benefits, so that is good in terms of boosting consumer spending, but they are also
dollars. taxpayer it becomes a little bit of a zero sum game. like to see private sector growth, and we did not see as many jobs added there. matt: thank you for joining us. scarlet: at not is coming under fire for its decision to withdraw from the obamacare health care exchanges. mostly democratic senators want details on the decision because of a potential link for a federal lawsuit challenging their merger with humana. is it fair to draw a line between the merger that aetna has proposed with humana and the fact that they are pulling out of obamacare exchanges? >> certainly not from aetna's perspective. firmly thatid quite ofy are dropping out
exchanges because of financial losses. they expect losses of 200 thousand dollars in the second quarter. matt: to be clear, this is a publicly traded company. they are supposed to make decisions in the best interest of the shareholders and making a decision for revenge would not idea for them. that is a real serious accusation. >> it has come up particularly in this case because of a letter from aetna to the justice department and july. what the letter said is aetna if expressed concerns that the justice department moves forward with a lawsuit challenging the merger with
humana, it would cause the company serious financial issues. some are using the letter to make the argument that something affairs is going on here and and that is using the aca program as leverage to try and get their merger deal through. scarlet: what specifically are lawmakers calling on edna to do? >> they want them to get back to them by september 15 on some specific questions including what are the exact costs that aetna may incur because of the doj lawsuit and why did the company agreed to a $1 billion breakup fee as part of the deal. the acaat about exchanges. if they are out, they are out, right? >> they are totally out. in this case, aetna has reduced substantially its presence in the exchanges from 15 to four. it is still operating but at a much lower level. matt: other companies have
pulled out of the exchanges as well, right? and that is not the first to say, we cannot afford to keep doing this. >> you are right. aetna is not the only one. there have been other large insurers like humana. this is part of a trend where the larger insurers are pulling out of the program and fueling concerns that maybe the obamacare program is not liable. matt: thank you so much for joining us. a ceo joins us for a look at everything from currency moves to football affecting his business. scarlet: soccer football? matt: football football becaus more people ar drinking more mixed drinks. scarlet: a programming note for you. on tuesday we are live from the
6:00 in london, 1:00 in hong kong. good afternoon, i am matt miller. scarlet: i'm scarlet fu. welcome to "bloomberg markets." acquire shuttle service chariot. this seems to be positioning the company as a mobile solutions provider. i spoke with ceo mark fields earlier today and asked about the acquisition. we are announcing the intent to purchase chariot, a crowd sourced shuttle service based here in san francisco, which will be the cornerstone of us scaling globally. we are announcing our partnership with motivate, which fordput up to 7000 bikes on the road. finally, we are announcing a group solely focused on working with cities, we are calling it
city solutions, to help them with their mobility solutions in their cities to solve some congestion issues. service ishariot active in other cities as well. are you going to buy the company outright, what doesn't you look like in terms of price? are not disclosing terms, but it primarily focuses here in san francisco. we are going to require the entire company including the management team. we are going to use that scale and a number of different cities. in addition to san francisco, we will be expanding to five more cities globally over the next 18 months. chariot, we will see them around san francisco. i'm assuming they will be ford vehicles. are they still going to have drivers? will have drivers.
the current business today, they ,ave about 100 transit vans they run 28 routes throughout the city. obviously, we will expand that. we think -- we have talked about how we talk about our core business, designing and developing great cars, trucks, and man's, and these are emerging opportunities. this is a great example of how we are using both, bringing them together. going from an old business to a new business, just a bigger business. it really shows how we are uto to an auto atu and mobility business. matt: you had record sales, record profits, and yet, the stock price continues to weaken this year. is this an attempt to show investors that you deserve may be a bigger multiple? you know, we don't manage
the business on day-to-day stock changes. we are just staying focused on the four drivers that drive value creation in the company. that is a run growth, reducing , and improving returns providing rewards for our shareholders. those are the things we are focused on. things like what we're doing with chariot help in that regard. as long as we stay focused on that and deliver results, the market will reward us. that is what drives us every day. matt: as far as profits are or auto saleses, for the industry, if you want, have we reached a peak, and are we coming down from now? >> as we talked about in our second-quarter earnings call, we see the market in the u.s. as plateauing, albeit at a high level. we are seeing the retail industry come down.
the second quarter was down about 1% last month here in the states. incentives were up. we are prepared for that. at a fairly healthy level, but clearly, that growth has plateaued. we are prepared for that. matt: with more people getting their transportation via chariot, uber, lyft, public transportation, you think this is the future of mobility? >> our view is the world is moving just from an ownership mindset about transportation to owning and sharing. we want to be there for our customers. that is why we will stay focused on our core business for the folks that want to own a vehicle. we will continue to give them great products. but for those that want to share, we think that is a big opportunity for us.
we have always been around making people's lives better is by helping change how the world moves. it is consistent with our brand. me ask you a question about marcus and the economy in a broader way, since you are here and you have a great position to comment. the consumer seems to be doing well, still buying a ton of cars , but the fed is that a precipice now trying to decide whether to raise rates or keep rates low longer. what do you think they should do, and how will that affect consumer behavior? clearly, i am not one to recommend what the fed should do, but our view is, when you look at the consumer, they are in fairly good shape. the car industry has benefited over the last five or six years although we are seeing that taper off. it's important to put something in perspective. the fed is looking at raising rates.
it is because the things they are looking at in the economy are healthy. when rates are raised, that is a sign the economy is doing well, which helps not only our business, but many other businesses. matt: you don't think a rate increase would crimp auto sales? howlearly, if it depends on the rates are raised, our view is rates will come up over time at a fairly measured pace. if that is the case, it won't have a major impact on the industry. could have some on the fringes but not to a large degree. that will depend on the size of the rate increase. scarlet: mark fields. ford shares down for the first time this week. matt: about 9%, 10% this year. they had really underperformed the s&p, part of the reason that mark fields and the team are aiming to more these mobility
solutions. ofically, other ways transportation other than buying and owning a car. meantime, let's get a check on the first word headlines. mark crumpton has more. nationse united security council has scheduled an emergency meeting this afternoon on north korea's latest nuclear test. secretary-general ban ki-moon call the test "unacceptable." >> i condemn and the strongest possible terms the underground nuclear test by the democratic people's republic of korea. this is yet another brazen breach of the resolutions of the security council. the council threatened when it called further significant measures if pyongyang and its leader kim jong on refused to stop the nuclear and missile tests. thedays ahead of
anniversary of 9/11, the house of representatives voted to let families of the victims to saudi arabia. the senate have passed the legislation. resident obama has signaled he will veto the bill over concerns about exposing americans overseas to legal risks. 15 of the 9/11 hijackers were saudi nationals. a democratic aide says there is probably enough support to override the president's veto. of the cdc says the money needed to fight the zika virus is essentially gone. the funding bill needs to be passed by the end of the month to prevent a government shutdown. democrats blocked the republican $1.1re that would provide billion to fight zika. the bill would also cut funds from obamacare and would bar planned parenthood from getting public money to treat pregnant women. a windfall today for organizations seeking the defeat of donald trump. a billionaire cofounder of facebook says he and his wife
are giving $20 million to aid anti-trump efforts. he called the republican presidential nominee divisive and dangerous and says his appeals to americans who feel left behind are "quite possibly a deliberate con." global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. mark: thank you. we are halfway into the trading day. let's go to the markets desk abigail doolittle has the latest. : the worst selloff for stocks since june 27, the second day of the big brexit selloff. this is something that some analysts have been looking for. and nasdaq dow, s&p, down sharply, the nasdaq reading the losses.
on this weakness, we now have the three major indices on pace for their worst weekly decline since june 24 and the week of the first day of the brexit selloff. leading the losses in terms of the indexes, we are looking at the semiconductor index. on pace for its worst day since february of this year. index on pace for its worst day since last year. this could really reflect the fact that investors are now expecting rates to rise, competition for the dividend yields. one reason rates are expected to rise, jeffrey gundlach, he did say that he thinks there is a good chance the fed is going to raise rates. 10 year yield spiking on this, having its
2-day spike since july 12. basically, he believes rates will be taken higher this year. scarlet: investors should be defensive on the fixed income side. across the board. anything bucking the trend? abigail: indeed. sands.sorts, increased their gross gaming revenue this past quarter. this follows the first increase months.or macau in 27 perhaps we are seeing that big turnaround that investors were looking for.
commenting. everyone is sure they are not going to do anything, there is no use in meeting. if they wanted to hike, the last thing they would need is a huge market shock. fed futures are being used to manipulate things higher. of officials said the markets focused on the wrong thing. not the next move but they should be looking at the path which is shallow and gradual. if we get a trade, does the market overreact? once they managed to hike over the next two years, they would get to 8%, if they managed once a year. you are right, the terminal values is what everyone should be looking at. -- there werey of many papers around what we call the real natural rate of interest. it seems to me the point of talking -- hiking is to cut
later on, but that does not seem like a good reason. matt: a very big deal on the rates world. now it is time for the bloomberg business flash, a look at some of the biggest stories in the news right now. general motors is a recall million vehicles worldwide to fish and airbag software defect that has been linked to at least one death. the automaker says in rare cases, the computer can go to test mode and a front airbags will not inflate in a crash. the seatbelts also may not function. the recall involves 18 different models. will notify customers and update the software for free. scarlet: negotiation between buyer and monsanto are in the final steps, according to people familiar with the matter. if it happens, it would great the biggest maker of seeds and pesticides. the german company could reach a deal by next week. ayer's supervisory board is scheduled to discuss the deal on wednesday.
hig: kkr held talks with capital about a takeover of the midmarket specialist, according to people familiar with the matter. hig cancel the talks and instead chose to sell a minority stake to dial capital partners last month. still ahead, amazon was to broadcast live sports. a multibillion-dollar ambition. it could include tennis. note, on a programming the coming tuesday, next week, we are live at the inaugural argentina investment for him. exclusive interviews with the president of argentina as well as the ceos of bp and technit. this is bloomberg. ♪
scarlet: this is "bloomberg markets." i'm scarlet fu. matt: i'm matt miller. let's talk about the market selloff. matt: we have a drop of more than 1%. you see, bond yields are up after eric rosengren from the fed said maybe we need to move more quickly toward normalization. scarlet: lyle brainard will be speaking on monday as well. a lot of people thinking that she may move the needle on fed rate expectations. meantime, amazon. matt: amazon is said to be pursuing video rights to a wide range of sports. that includes the french open tennis championship and
professional rugby a will and drawn new customers to its online tv service? lucas shaw broke the story and joins carol massar and cory johnson on bloomberg radio. carol: welcome, everyone on bloomberg tv. lucas shaw, entertainment reporter from our los angeles bureau. , when it ison up to looking into sports streaming rights? for sure -- pursuing a wide range of sporting events. nfl, mlb you can watch on tv. that may not change for some time because rights are locked up by tv networks, but amazon is trying to find different ways, especially force posts with global appeals come up because its prime video service is a global service. that could be tennis, soccer, rugby, a couple of the ones that
we mentioned in the story were the french open and professional rugby. i know that they have been talking to folks about those rights. amazon may also try to find ways to take those popular american sports and had them onto prime. the way the prime works now, you get the video service for free , but youf paying $99 can add on other video services like showtime or starz. it's not unreasonable to think that amazon will do the same service or the nba league pass. cory: we have seen the way cord cutting has led to people not having satellite, a cable relationship, particularly with younger consumers. the suggestion is cable companies and dish companies, they spend so much of the dish content, they are going to be losing the audiences.
the deals will not be as valuable. amazon may be an outlet for that. does amazon become an outlet for things that maybe they could not find before? amazon has made a significant investment in video over the past two years with its prime service. as you point out, they can go one of two ways. they can go for the broad sport or they can shine a light on some of these niche sports that may not be getting attention at the moment. i think they may try to do both. the first experiment could be with the sports that are international in flavor and that the u.s. may not get much attention. one thing that has come up in the last couple of years, as the cost of media rights for what you think of as main sports has gone up, so have the costs and
interests in these more and it sports. anything you can get people to watch live is inherently more valuable. i have been looking at some studies that show how --lennials are watching cutting cords more than anybody else, suggesting the future of the marketplace may be that people do not have a relationship with a cable or satellite provider. even as providers are paying to get access -- you see in los angeles the ridiculous laws over the dodgers, where a lot of fans cannot see the sports. is there a suggestion that this could be a way for those rights holders to be bailed out of the problem of cord cutting? amazon come in many ways, is known as a multiple service operator online. you can imagine, by combining their prime service with some of the add-ons like showtime, all
these other services, with sports, amazon would be a one-stop shop for everything that you want in traditional television. by the way, amazon is also working on a live tv service that would offer you these traditional channels. it just doesn't have the deal done. carol: sports programming is not cheap. we know that. we see the deal done with major networks. amazon has cash to play with. can they spend enough to get what they want? can spend enough, the question is whether they want to. pays close to $2 billion for the nfl, nba to several billion a year. those deals without, for while, so they may not be able to get them now, but if amazon want them, they have the money. they are a larger company by market cap than any of the other major media companies. it's just a question of where they want to direct resources.
cory: data probably plays a big role. amazon knows where customers may be before the eu customers. -- before the customers. >> the point is they can get people to watch a tennis match on prime, they can probably already seldo get them to buy as racket. thank you. thanks also to lucas shaw. you can catch more radio interviews on serious xm -- sirius xm and bloomberg.com. we speak to the man behind the chase card. this is bloomberg. ♪
headquarters in midtown manhattan, you are looking at a hot and hazy day on the northeast coast here in the u.s. i'm matt miller. scarlet: i'm scarlet fu. this is "bloomberg markets." let's get a look at the first word news with mark crumpton. united nations secretary-general ban ki-moon has condemned north korea's latest nuclear test as a brazen breach of you and resolutions. he called on the security council to "unite and take urgent actions when it meets in emergency session this afternoon." regime said they conducted a higher level closing test today. it was their fifth atomic test and are second and eight months. int could be a pivotal day the presidential election is starting today in north carolina. the first of 37 states that will allow balloting by mail or in person. that it compiled by the associated press shows early voters are expected to make up
between 50% to 75% or more of all ballots in some of the races most pivotal states. the flooding the damaged as many as 110,000 homes and more than 100,000 vehicles in louisiana caused 10 billion dollars to $15 billion in damage. at least 80% of the damaged homes lacked insurance coverage through a government program. meantime, governor john bel edwards is calling on congress to approve $2 billion in aid for the state. in cyprus, officials are baffled by reports that a media reporting across the night sky .ay have exploded overhead inputted from a surveillance camera, you can see the reflection on the windshield of the car in front of the building. authorities are looking for possible remnants of the object. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm mark crumpton.
this is bloomberg. credit card travel points. who doesn't love them? last month, chase release the sapphire reserve card and people were so eager to get their hands on it, banks run out of the metal card and had to ship a plastic versions of it. we went to the authority on credit card points. let's go to brussels to speak with the points guy founder brian kelly. $450 ofers have to pay the annual fee to get their hands on a sapphire reserve card. walk us through the benefits and how they stack up versus the next best card out there. you00 $50 annual fee but get $300 a year automatically rebated for travel. if you take one trip, you get that. it is really only $150. when you look at the sign-up bonus, you are getting 100,000 valuable chase points which is at least worth $1500.
what it comes to value proposition, it's a no-brainer, which is why chase is seeing them fly off the shelves. matt: i am a complete noob to these things. what are these chase points, why are they so valuable? you can book any flight or hotel or transferred to 12 different partners, like united airlines. i flew last night to brussels here for a conference. one-way7,000 miles business class. the sign-up bonus can get you a round-trip business-class ticket to europe, which goes for about $5,000. if you don't want to play the frequent flyer again, you can book any flight for 100,000 points. very valuable points. scarlet: all this is very appealing, but after you pay that annual fee, maybe get some of it that, will the benefits last? people are right to worry that it is not sustainable past one year. talked to a lot of people
in the industry and people were shocked by this offer, myself included. offer.n incredible people think chase will not be able to afford to keep it down the line. chase is coming out strongly. we will see. until then, i would not worry about it. the value proposition is there every year. you get that every year. matt: what about the competition? everyone tells me american express has a card where you can get into all of the delta lounges for free, supposedly something big for travelers. card is aerve no-brainer but the annex platinum is great because you get into delta allows is -- lounges and some others, which are amazing. the citi prestige currently has american airlines axes, and they
also have this free hotel might benefit that saved me thousands a year. there is no one right choice for consumers. i have all three -- actually, i my sapphireto get on reserve. i was one of those that was put on hold. i am trying to get the sapphire reserve. matt: can you get somebody to put in a good word for you? >> you would think so. chase has a rule, if you have five applications over the last two years, sometimes they will decline, often, but if you are a private client -- i had to send in my tax returns to get this credit card. scarlet: you have to send in your tax returns to get this credit card? >> not everyone. i am a weird situation. i have so many credit cards with chase, they want to make sure i can pay my bills. i assure you, i do. the whole point of credit cards
is you pay them in full every month, reach the points, and avoid interest. scarlet: i am sure you have the sapphire preferred. talk about the ecosystem with chase. you have the sapphire reserve, a lot of people have heard of the preferred, which is also a metal card. then there is the chase freedom. they want to keep cardholders in the family. if they don't want to pay the annual premium, they could downgrade. i have the sapphire preferred, it has been my workhorse card. i will downgrade it to the freedom unlimited, which is their new card where you get 1.5 points on everything. you want to maximize the three points on dollar for reserve dining. that includes travel, parking tolls, airlines. that is what the credit card game is all about, maximizing every dollar you spend for maximum returns. if you are shopping at a store for clothes, there is no bonus
on a credit card, so i would use my freedom unlimited to earn 1.5 and then on the way home, the sapphire reserve. like there isels an arms race going on between the spring and credit card providers. my head is spinning. i don't understand how you keep track of all these things. scarlet: obviously, people do. at what point, does this end, at what point can chase not afford it? >> they have come up punching with the offer. i heard rumblings from competitor products coming up with even more sweeter deals. this is the golden age for consumers. can they sustain it? consumers who spend a lot and a credit worthy, they are earning two or three cents per dollar spent, and they are kicking a portion back in the amount of reward. let's not worry if it is sustainable. maximize not get the most value back and travel for cheaper than
coach. matt: i guess i have to learn. i am going to go on his website. >> it is easy and fun. matt: i like to travel first class and cannot afford it. maybe this is a way to make it happen. brian kelly, thanks for joining us. will definitely be checking on your website. scarlet: older workers booted from silicon valley jobs are seeking rest tuition -- restitution, sometimes going to great lengths to appear younger. this is bloomberg. ♪
stocks on pace for their biggest one-day drop since late june. let's go to abigail doolittle at the markets desk. >> we are looking at quite the selloff for u.s. stocks. another way to think about it is the multi week, week streak has been broken. if you look at the bloomberg, we see the ultimate expression of this complacency being broken which is the 43-day streak of the s&p 500 not making a 1% move , finally making a much greater than 1% move down. 1.73%. some pretty bearish action for the s&p 500. to put the decline into perspective, the decline has accelerated all day, and we see this with the s&p right now at session lows, on pace for the worst day since june 27. dragging the most on the s&p 500 today, we are looking at apple,
at&t, amazon. apple having its worst two-day decline since april 28 after the disappointing march quarter report. investors are pretty bearish, iphonehaps, report that seven preorders are less than expected, so that could be weighing on shares. amazon is also having a bad day, down the most since june 24. confirming the risk off of x, spikingthe vi sharply higher today, having its worst -- its biggest spike since june 24, on pace for its biggest weekly decline -- excuse me, increase since january 8 of this year when there was a risk off feeling to the markets. we go into the bloomberg and we another way of
expressing the s&p complacency. the vix now back above 15 as investors are in a risk off state of mind. matt: you and i have talked about the vix. i am more interested, i think it is tickling something that we all expect. meantime, time to look at the pressure points of social change and where it is outpacing corporate america's ability to adapt. we are focusing on how older workers are trying makeovers and even surgery to keep working, especially when it comes to those in silicon valley. this is a fascinating story. you hear anecdotes about this, but you got some numbers. the median age of the u.s. worker is 42. what is it in silicon valley? it varies company from
company, but facebook is 29. lower in some of the startups. 22 is the average age. matt: those are not the interns? that is crazy. you are still a senior in college -- in my case, a sophomore. startups founded by teenagers these days. story, sove read your i know a lot of the things happening, but walk us through them. dressing to look younger, what else? carol: they are getting plastic surgery, doing everything they can to pass as younger. these are people that have worked in the industry a long time and are edged out of a job or they are on a contract gate and they have to regroup. very few older people would go to silicon valley looking for a job who are that age, 40 and over. they also have to erase experience.
scarlet: what do you mean by that? anything not mention you dirty and earlier in your career. i met somebody who was in the armed services for seven years working on sophisticated computer equipment. never mention that. matt: do they actually have to falsify their resume, are they don't you have to tell your possible employ your birthday? carol: you don't have to tell them your college graduation date. few people are putting it on their resumes anymore. they are not falsifying, they are just eliminating until pushed. often they are not pushed. for the situations where tech companies are inadvertently or purposely phasing out older workers, what kind of repercussions have you seen? legally there have been some complaints and lawsuits. carol: there are more age bias
suit being filed in california than gender and race suits. very few people file them because they are afraid it could hurt their record to get another job. on the other hand, there are two big suits pending. four workers at hp filed a complaint saying they were replaced by younger people. that is a class action suit. another one at google on hiring. realize we are complete dinosaurs. we have been here since the late 1990's. not only do we have many years of the same company, but we have experience. matt: very unusual. i hear kids that work in tech today saying, i feeling i've been at this company too long. it's been almost two years. you get hurt when you have been at a tech company for 10 years or more because you are stuck in a particular technology
and you have to retrain yourself. it is moving so fast it hurts you to be at any one place for too long. scarlet: you have talked to consultants helping workers adapt to the landscape. beyond addressing younger and making sure you are hit to the lingo -- matt: do they tell people to make sure you know what yolo stands for? carol: it helps. anything you can do to connect to millennials. the main thing they are saying is have perseverance, recognize that you are going to have to fit into a different sector, you will have to work for somebody who is younger than your kids. matt: or work somewhere else in silicon valley. is this a trend that is coming across the country? often times things start out there and end up here. carol: yes, just happening earlier there. scarlet: any repercussions on working parents? you have companies offering
policies,edible leave we hear them on offer, but nobody ever take them up on it. so there is this culture of offering perks that are not actually meant to be used. what is interesting in silicon valley, they are really trying to address the gender and race issues. there has been so much backlash against them that they are not yet talking about age. scarlet: so that is being swept under the rug. carol: that's right. matt: carol on the bits, thank you. up, we speakng with turnover card chairman alexander ricard on the popularity of premium spirits in the u.s. matt: i do like brown spirits. scarlet: this is bloomberg. ♪
scarlet: let's show you what is going on with u.s. equities. we have a cell of on our hands. met a pretty quiet summer, but if you look at the bloomberg, you can see the trajectory u.s. stocks, a steady decline. the dow holding up a little bit better than the s&p and nasdaq. the nasdaq taking another leg lower. all 10 industry groups down by at least one .2%. all 30 members of the dow are falling as well. 96% of the s&p 500 in decline. across the board, including in fixed income. bonds coming up after comments from the fed's eric rosengren. we are waiting for lyle brainard to speak on monday. scarlet: that is a late addition, took people by surprise. matt: now you see the 10 year
yield up seven basis points, the five-year up five, the two-year up to. not only do you have a selloff that may beconcerns an increase will come sooner, but also a steepening of the curve, which may not be a bad thing. scarlet: and not limited to the u.s.. german yields. upt: i have the 10 year bund on my terminal. above the zero level. the german 10-year has come back for the first time since july. with the nfl season kicking off the season fors spirits and the popularity of premium spirits is growing here in the u.s. joining us to talk about the trend is the chairman of pernod ricard, alexander ricard. thanks for joining us. one of my favorite subjects. i love the spirits as well.
don't love the clear spirits too much, and i don't see as many people drinking vodka as much as when i was a kid. it is more about scotch and bourbon. is that the case in your business as well? >> actually, vodka is growing as well but to a lesser extent in the u.s. than the brown spirits. talking about clear spirits, tequila is doing very well. i'm: tequila is big now, guessing around football games. >> we have two innovations that we launched sometime ago. tequila avion and altos. both are growing. matt: what is innovative about tequila? brands. were new we brought them to live some years ago. scarlet: going back to vodka, everybody wanted to put the absolute vodka ads on their
wall. you plan to reinvigorate the absolute brand. you recently appointed a former head of absolut to head the north american region. sales were down in the last goodell. what demographic are you trying to reach? >> millennial consumers. it is fair to say we have had a lifestyle messaging on absolut and we are trying to be relevant from a quality point of view. vodkau know the absolut is a single distillery vodka? it all comes from south of sweden, a small community. it is built out of winter wheat, which is quite original. it grows in the winter and is harvested in the spring. matt: when is the story with a dark spirits? i like bourbon and rum. a lot of people are getting away from the traditional single malt scotch is and going toward
drinks.ch distilled is that just what i'm seeing or is that happening? >> they are all growing, which is a positive. the american market is doing very well. our single malt photo is growing with the glenlivet, the leading brand here in the u.s. you also have irish whiskey growing, fastest-growing category in the u.s., including jamison. some pretty nice innovation going on there. scarlet: you mentioned irish whiskey, so bring it over to the u.k. theread of your business opposed brexit. is it more of an opportunity now for scotch than a challenge? oppose, we just said we are a pro-european company.
the british are stubborn, they .ecided to exit the market that being said, the pound has weakened. for exporters, which we are, we export our scotch throughout the u.s. and the whole world, so it's a positive. matt: and a positive for scotch drinkers in the u.s. as well. scarlet: alexander ricard, thank you. coming up in the next hour, oil falling 3%, trimming its weekly gains. u.s. inventory dropping the most since 1999 last week. is this the start of another selloff? matt: this is bloomberg. ♪
david: we are live in new york. we are covering stories out of san francisco, detroit, south korea, and saudi arabia. and bonds are selling off with the dow falling 300 points. major averages are having their worst day since june. david: ford is expanding their business to include shuttle and bike services. loyal trims its weekly gains after a stockpile. turns back to opec production as the group prepares for its informal meeting. let's go to the market desk where abigail doolittle is watching what is not a slow september. >> we have a selloff on our hands.