tv Bloomberg Markets Bloomberg September 15, 2016 3:00pm-4:01pm EDT
♪ we are live from bloomberg world headquarters in new york for the next hour. covering stories in los angeles, chicago, ukraine, and syria. stocks are surging today, apple among the biggest gainers as it has been, extending the four-day winning streak and hitting the highest level since december. in august posting their first decline in five months. our consumers once again reluctant to open their wallet? and we are joined at the bottom of the hour with a take on donald trump's economic plan. and all the attention paid to the fed is simply a distraction. one hour from the close of trading. stocks are at their high. a 200 point game. oliver is here to talk through it. amazing.s
without a 1% gain, it has been the past five or six sessions, four days with big gains or losses? oliver: a little bit of volatility back from a quiet work it and a bit of positivity here. really the data that is going to be real to market, people are looking at the same situation where it has been without a lot going on. the same time, look around and there's not a lot of great options. let's look at what is happening here. we are up to about 1.5% gain on the nasdaq with tech stocks doing very well. apple, as julie mentioned. apple and the s&p doing very well. look at what we're talking about with the five day move if you look at the s&p over the last few days. things have gone pretty volatile. the swings are big.
athave that big move down 2.5%. it will look at the move back up on monday. and today, looking pretty positive again. happening. what pretty interesting trends in terms of the oversold and overbought nature of the s&p 500. there is still about 8% of the s&p 500. oversold would be somewhat of a bullish indicator. the biggest contributors to the move today. than 3%, 60more billion in market cap added to the shares. a lot of interesting stories. we have some of the biggest target cap movers providing a big boost. we will look at the energy space. this is lifting energy stocks. it has been a part of the market the last couple days as energy does well. crude up about 50 basis points. it is giving a boost to
companies. diamond offshore has been doing terribly, down over 40%. a pretty soliden bull market at this point and we are seeing some pretty good stuff in the energy space. and we have financials kind of weighing on the market a little bit. wells fargo lingering down 50 basis points and some other losers in the index. for vf corp. broad-based gains as well. if you look at the movers in the s&p 500, 37 stocks are down at the moment. thanks so much. let's check the headlines on bloomberg's first world news. mark crumpton in the newsroom. mark: donald trump today outlined an economic plan that promises to lower taxes and create jobs. he told the economic club of new
york his strategy will also target it us of regulation. -- target excessive regulation. mr. trump: i propose a moratorium that are not -- on regulations, i will eliminate job killing regulations now on the books. mark: part of it is a revised tax code and clued pledge that no business should pay more than 50% of income in taxes. the current corporate tax rate is 35%. mr. trump has widened his lead over hillary clinton in iowa according to the latest poll. it has trump leading 45% to 37%. in july, he led 44% to 42% in the battle for iowa. israeli prime minister benjamin netanyahu saiys
one of the country's most admired figures. china has launched its second space station into orbit. it was carried into space on a launch center at the edge of the gobi desert in northern china. a space ship with two astronauts will dock with the station and remain on board for one month. launch alooking to mission to mars by the end of the decade. news powered by more than 2600 journalists and analysts and over 120 countries. this is bloomberg. it back to you. the worlds of news in of investment banking on this anniversary of the collapse of lehman brothers. said to berans are raising up to $500 million for the first fund. isning us for that story
natalie who covers boutique investment thanks for bloomberg and simone foxx. let's start with you, natalie. it is interesting that is the anniversary of the lehman bankruptcy and here comes a lehman veterans to raise this cash. what is the firm focused on? natalie: miggy was known for energy details. he was an advisement on the energy transfer williams deal that fell apart this year. he does all sorts of oil and gas. he hired someone this year to focus on investment management. it is kind of like the comeback of the emergent banking model. they invest alongside their clients as well. julie: it is a comeback. are there a lot of competitors now that have been reentering this type of business? natalie: absolutely. models, wet banking
have the kind of billionaire known for inspiring warren buffett who raised more than $6 million for funds this year. a lot of people are doing it. ,nother reason it is pertinent all of the banking veterans are coming to the table and thinking of this model this year. julie: and if you look at another area of the investment world that is perhaps not doing as hot, it has been hedge funds. it sounds like it is shrinking. >> they have added quite a few people. they went from 1100 to 1700. the message the firm had for its clients today was that we want to cut out inefficiency. that is going to include laying off some people.
julie: it implies performance is not a strong. you can employ people to do those extra things, i guess, if you have a lot of cash floating around. >> they do. it is still 150 billion. they pulled in $22.5 billion in new client capital. i think early 2015. but the deal is, they might want to rethink things as well. one of their funds is doing well. their main hedge fund is not going to be performance fees this year. they are down 9%. you are looking at a different amount of money coming in. they made money last year. julie: that brings me back to my question. are we seeing a flow among wealthier investors away from something like a hedge fund to something like more dealmaking?
is that something we are seeing? >> they started the fund-raising. but there is demand. thingse looking at new like the middle market lending and opportunities in energy. prices have rebounded a little bit. there are opportunities for structuring and they will need the investment that might be a little bit more long-term. the pensions and insurance companies that they are looking at for this long term. julie: ross earlier said he was looking at distressed debt. thank you guys so much for talking to us about these stories and what's going on in the investing world today. retail sales dip in august. do these numbers in sure that the fed will not hike rates next week? bankinge on the fed and sector with treasury secretary
larry summers. an interview with him coming up in 25 minutes. outlook for the economy and presidential race with blackstone chairman stephen schwarzman. and we keep an eye on stocks in rally mode here as they rise and hover around the high of the session with volume higher than we have seen over the past 30 days. this is bloomberg. ♪
julie: this is bloomberg markets. time for the bloomberg business flash. a look at the biggest stories in the news right now. the european commission has started an ethics investigation into its former president. they take issue with the decision to accept a position at goldman sachs were he will advise on global issues
including the u.k. exit from the block. the president says he does not have a problem with him working at a private bank, just not goldman contributed to the financial crisis. the $66 billion acquisition may jeopardize its business. provides thedeal german company with little scope for other acquisitions and potential deals to boost the biggest moneymaker. they say the concerns are compounded because of a patent duration. and u.s. factory production fell in august. there were cutbacks in electronics and machinery. tworopped .4% following months of gains. a broader measure of industrial .4%.t, it also dropped that is your business flash update. also outretailers today dropping more than forecast in august, indicating a
positive recent consumer spending. retail sales were down .3%. joining us now is stephen stanley, chief economist to talk about these numbers. here,ecline in sales enjoying what would have been a streak of data that has been disappointing. augustink the month of nearly wasn't our best month in terms of the economy. we have to be careful about taking a new signal about everyone of these numbers. we know august wasn't a great. we've known that for the third or fourth time. as officials always say, you can't look at one months numbers and draw too many conclusions from that. it is probably a better bet to wait and see how things play out. julie: given we have one month
of data, is there anything to indicate it was a one-off? >> i will give you two answers as economists always do. this is the second month in a row that sales have been week and they kind of zigzag back and forth. you typically have a strong month and a week month. august was due to be strong. wasn't. having said that, the broader outlook is still fine. even in july, overall, consumer spending was fine. part of the reason there is people are spending less and less on goods and more and more on services which are outside the scope of the retail sales numbers. you have to focus on the overall consumer spending numbers. trend have we seen a where incomes are taking up more than spending? people are not necessarily spending the money they are earning? >> income growth has been very good.
that has been a very encouraging sign. are maintaining the growth we have seen, which is been very strong. long as the labor markets are healthy, and there's no reason to believe they are over, they will have plenty of cash to spend. we have had this increasing drumbeat of people saying just do it already. jamie dimon saying the other day, just raise rates. should the fed just raise rates? >> i have been part of that chorus for a very long time. the fed has been very picky. the luxury of picking and choosing their timing because inflation has remained pretty benign this year.
i'm not sure how long they will continue to have that luxury. but they have been excessively picky. episode, the briggs it vote where they seem to be setting up for a june move and it was off the table. i don't think they will move in september but i think they want to move. it is kind of similar to last year with a pass september and go to december. we have across her fingers and hope that nothing terrible happens in the market between now and then. draghi becoming the latest central banker to acknowledge the limits of monetary policy. in the u.s., the fact that we are as low as we are and inflation has not come up more, you might as well just raise rates because inflation seems to be untethered to some degree. >> it operates with a very long lag and we're just getting to the points in the last six
months or year were the labor markets are starting to get tight. you see a pickup on the weight side. markets are getting tighter. 2017llows as we move to that we will probably see a gradual uptick in inflation. the point you mentioned is an important one and it's a global one. it feels like central banks are reaching the limits of what they can do. everyone was really excited about the negative interest rate idea. and that kind of opened up a new frontier for potentially very important monetary policy easing and i think people are recognizing it wasn't all it was cracked up to be. asset purchases in europe and japan, they practically bought over half of the float in the respective government bond markets. it doesn't seem to be catching hold. what do you do? ,t seems like from the g-20 maybe we will hear the same message next week.
maybe you have to shift gears and moved to something else. other things that are perhaps competing growth. there was plenty of monetary policy but there are other policy initiatives holding us back. we need tax reform and regulatory reform. we heard one version of that from donald trump. we don't have much time left but as briefly as you can, give any reaction to his presentation? >> he's on the right track. the devils in the details but regulatory policy can certainly be progrowth and helped reform the tax code. and those are things that would help raise potential gdp which is what the fed has talked about. it is so low and needs to be raised. it would be great for the economy. if he can do it in a way that is responsible for the budget and if he can get it through congress, that's anybody's guess.
at least he's looking down the right road. thank you so much for talking to us about retail sales numbers. i want to get back to the markets for just a second and check on what we're seeing as stocks are the high of the day. still up quite a bit as we see this return of bigger swings in the stock market. at, is the map i am looking sort of the landscape of sectors in the s&p 500. you don't see read on that screen because the advanced today is broad as well as being relatively sharp upwards. tech shares leading once again led by shares of apple. oracle after the bell is also rising today. a parade of newsmakers continues. larry summers joins us on the anniversary of the lehman brothers bank. he will discuss his paper out. this is bloomberg. ♪
julie: this is bloomberg markets. is time for options insight. oliver? is the joining me manager at kkm financial and joins me in chicago. aboutbeen what -- talking -- as we have been talking about volatility, what do you make of the swings cropping up? dan: i think that is really causing some anxiety in the marketplace even though september pretty much is off the board. they manifest themselves in a significant rally given that they are weak and unexpected. but how this will present itself in the next week and in december, is december still on the table?
that's what the market is trying to get a handle on. as we move toward that announcement, it feels like the attention span of this market has become like a gnat. we focus on near-term numbers and how it will influence the fed moving forward. it seemed like markets earlier this summer were ready for the rate hike and were performing pretty well on the back of strong economic data. and then a day like today where you miss retail numbers and the market jumps up. what can we infer about how the market feels? not september, but december. dan: we try to digest that. right now, as we are moving out of the slumber, we don't know if one day means much. last four orthe five days were the market has reversed course dramatically overnight. the announcement next week, we can still see further weakness in this market. when you look at the technicals, most of the major averages have
broken down below the 50 day moving average. coming out into this, we see the market shift towards the downside. >> you're looking at a put spread. tell us what the trade is. over the course of the next three to six months, the market will experience further weakness. tolooks like we break below 10. we're headed to 205. we're looking at a protected spread. it protects me should the market break. s&p bouncingw the a little bit around its moving average. we will see if it makes it down to the 200. real quick, finally, we look at the sector moves. what do you make of the shift? can we see if economic numbers are weak? dan: they will be challenged.
look at what is going on with utilities and the areas where the interest rates are sensitive. even though the markets up today, we still see a lot of the treasury flat to up just slightly. drumbeat where we see them come under pressure. oliver: thank you for joining us. julie: oliver and dan, we appreciate it. still ahead, we'll talk about why he thinks focusing on the timing of a fed rate hike is wrongheaded. we will talk to him in just a few moments as stocks rise near the highs of the session. ♪
headlines. the: thousands marched in streets of paris today to protest the government's controversial labor law. some demonstrators fought with police and officers responded with tear gas. it allows employers more freedom and to layorkweeks off staff. united nations faces massive problems in shipping humanitarian aid to syria according to a u.n. envoy that blames the lack of authorization on the sheer olive sod. they say the cease-fire has reduced violence, but the humanitarian aid hasn't followed. the senate has approved a water projects bill that includes millions in emergency funding. it comes a year after officials there declared a public health emergency due to lead contaminated water. the michigan senator praise the bill's passage but said with
city residents still using bottled water, it comes months too late. jimmy carter says the u.s. is experiencing a resurgence of racism. to promoteaders change in their churches and communities. he made his remarks in atlanta during the start of a summit on creating partnerships between black and white churches. news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. this is bloomberg. back to you. focus on rates causing unnecessary distraction. u.s. economyat the depends a lot more on sectors that are outside the central banks control. he joins us now from irvine, california to give us more thoughts into his thinking. there is so much talk about
september, december. what should we really be focusing on? path looking like , and it will be very shallow. with where we will end up. and that will be well below historical averages. and finally, other policy instruments, will they be helping monetary policy? that is what will determine where equity markets, the bond markets, and currency markets end up. not if the timing is this december or september. >> that makes a lot of sense that ultimately it's not nearly as important as the markets and the fed long-term estimations of their trajectory. people are so entrenched in this idea that whatever the cycle is will be very slow and inconsistent. and there's not much inflation risk.
that?ill kick us out of what will get us out of this consensus? what gets us out is the rest of the world. and the policy mix. if the rest of the world stays sluggish, if it stays over dependent and over reliant on the fed, we will stay in this world for a while until it breaks in a major way. thekey thing is to ask question what happens outside the u.s. and what happens to physical and structural reforms. scarlet: a lot of people say that meeting is more important than the fed meeting next week. assessment of the bank of japan supposedly trying to steep in the yield curve. important point. the bank of japan is at the forefront of banks going from
being effective to ineffective to potentially counterproductive. watch the bank of japan. it's a very intriguing meeting. they indicate that they will do less in terms of qe and more in terms of negative rates. i think it's a mistake. itch the currency because manned up with the currency market. >> let me bring it back to the u.s.. fiscal policy. , have youomist thought about this a lot? what kind of stimulus should congress the getting ready for, and what are the sizes that we should be expecting to see. that we should see? we won'te should see see, just to be clear. we should see a major infrastructure investment program. improvingrd not to be
win interest rates are so low. and that speaks directly to in gauging the private sector and unleashing what, until now, has been an economy operating below potential. case fora strong corporate tax reform and also a strong case looking at student debt and trying to figure out how we address a major problem in four or five years time. >> people come around to this view that you have been advocating that we should change the policy on infrastructure spending. a contributor writes that there is something weird about it. maybe it made a lot of sense in 2010 when we had unemployment but now we are basically full employment. we have seen him prove it around the world. we are basically there on full employment.
why the sudden spike in interest and finding new ways to juice the economy? >> i don't think of it as juicing the economy as unleashing the private sector. you have capital and you have to improve productivity. keyastructure investment is to making the private sector more engaged, more productive. this is not about them juicing the economy as much as it is putting it on a road to hire sustainable growth. reducing the pressure on potential growth. potential growth is coming down. >> and whether they are investing in bonds or equity, where are we in this economic cycle? are we aligned? doing need to be? >> we have decoupled.
prices are decoupled from fundamentals b it corporate or economic fundamentals. and for good reason, that is what central banks have wanted to do. we open up the 401(k). the market is up. but the theory hasn't worked. we have a situation where asset prices are up her and fundamentals are down here. unless we can validate asset prices, unless we do that, the market is going to have a rude awakening. joe: if i look at the 10 year, just a few weeks ago we were at 155. points time in just a week and a half? >> the 10 year and the 30 year are higher while the two-year is lower in yield. retail sales numbers were
disappointing and people think the fed is not going to go forward. in the long-term yield has gone up. think about that. investors are less confident control theility to yield curve like they have been controlling it in the past. talk about infrastructure spending. it doing need to reconceptualize what that is? improveoal is to really productivity, not just put people and resources to work, do we need to have a different idea of what that looks like? >> absolutely. ,e need to take very seriously technological advances that are enabling individuals. take seriously the power that comes from artificial intelligence and we need to be enhancing the ability of companies and individuals to tap-in to this.
it is huge potential. we feel it every day whether we use uber or airbnb. we are connecting many more segments and we're using existing assets much more efficiently. we need to continue to do that and enable people to achieve more. requires public investment and private public partnerships. >> we should fix the bridges and roads. let me ask you about the demand side of the bond provision that would happen if we did this kind of fiscal stimulus. is there a huge unmet demand? reasons to dor it other than boosting growth? >> i think of it as the collateral benefits. you want to do it because you want to enhance the productivity and the growth potential of this country. by doing it, you also get other things.
you get demand which we need right now. matchso get a better between supply and demand for assets. there are lots of pension funds looking for long-term investments. afrastructure investment is very good way of managing assets and liabilities. joe: for more bloomberg stories, type view go on the terminal. this is bloomberg. ♪
analysis showing that did banks are no safer now than they were before the financial crisis. david? secretary summers, you served as president obama's national economic council director passing financial regulations. you find it has little support for the view that major institutions are significantly safer than before the crisis and support for the notion that risks have increased. you?urprised were >> i was surprised. increase wouldg lead to stocks of banks being less volatile. i expected options markets would
lead them to expect less volatility. i expected that the beta of banks would go down. i expected with a substantially larger cushion, perhaps the preferred stock yields and risk premiums would go down. those weren't the patterns we observed in the data. is not mean raising capital was a bad idea. would be in a much more dangerous situations. >> there will be people that read your paper and say that this money poured into regulation, it might've been for not. you disagree with that? thehe paper says in introduction, abstract, conclusion, and several times in
thatody that we believe the increases in capital ratio are desirable. in some cases, it may be desirable to increase levels of capital further. note there are lots of things that happen in the economic environment, some of them also caused by regulation that have, in a sense, reduced capital in a dynamic sense by reducing the ability to make returns, and that, of course, reduces their value. effectiveses their leverage. it makes them more volatile and less certain. >> let me pull up a chart showing beta here. this is the #3569 here. the large six u.s. financial
institutions. the precrisis average was lower than it was post crisis. give us the significance of what you saw in beta principally. very basic financial argument that you learn in your first finance class that when levered, becomes more it's beta goes up and when something becomes less, it goes down. we thought we were testing a very simple financial proposition. if that is the main thing going on, we thought the banks have become far less levered. we expected to see them go way down. we saw a certain amount of reflection was going on with financial regulation and it was appropriate.
>> you see this decline in franchise value. how much can you chubby that to regulation versus low interest rates? an important question we were able to provide direct evidence on in the paper. from analysis of bank security pricing, talking to people involved in the markets, i think it's difficult to escape the conclusion that both are important. certainly lower interest rate and a flat yield curve. i think it's pretty clear that whether it's the magnitude of the fines levied or a variety of business practices that have been curtailed, the diversification that has been beend, steps have also taken that have reduced the value of banks.
and by reducing the franchise more, you have made them effectively levered relative to all they have that is valuable. and it has been a source of an increase in volatility. >> thank you for previewing it here. involved inor those the supervising of financial institution, these are early days. look to market measures of capital as well as accounting regulatory concepts of capital. at this moment, you need to avoid the complacency that everything is ok. you need to have a clear awareness that it is the market
value of equity that has historically been substantially predictive of trouble. and by those measures, cushions are not as large as they have been historically. and that you've got to be conscious of the fact that if confidentlyks to be healthy and robust, the regulatory framework has to be consistent with the ability to earn a reasonable rate of return. to ask you about next week's fomc meeting. larry: i will stay out of that but i will say that i think there is no compelling case of increase in a rate september.
looking at an economy where the number of hours people have worked, total hours has basically shrunk. where measures of medium-term expectations are stable or declining. and where actual inflation is below the 2% target. forn't see any case at all tightening. and i worry that the framework that the fed is using really isn't a consistent one. they speak of a 2% inflation target. not a 2% inflation ceiling, a 2% inflation target. if you have that target, sometimes you will be above and sometimes you will be below. if you are in the eighth or ninth year of recovery and the unemployment rate is in the four
, if that's not the time you are above 2%, i can't imagine when that time whatever be. i don't understand why the discussion that comes out is about the need to halt or slow the economy so that inflation doesn't ever get above 2%. they should want inflation to be a little above 2%. and this is the point the governor made. largeakes are very because in this world of secular stagnation and low neutral interest rates, if another recession comes, the fed is going to have very little room to address it. likedon't have anything the 500 basis points they've had historically. that means they got to lean over backwards to make sure another recession doesn't come. do not understand the hyper concern getting above 2% when
that won't happen. it would probably be ok if it did happen. which i canidence see no basis for in the evidence that somehow if we did have another recession, it is something that the fed would be able to manage. i think there needs to be a thategic realignment, and means not raising rates in september. david: former secretary larry summers. a scarlet, i will toss it back to you. scarlet: coming up, what to look for an oracle earnings and we would hear from the sales force ceo. this is bloomberg. ♪
see how chrysler was to drive further into china. people say the italian carmaker is exploiting a joint venture. talks are still evolving but if the deal closes, it would be the second partnership in china. at least 200 jobs are getting scratched in green -- dreamworks. focused on corporate overhead distribution and consumer products. staffs according to a memo obtained by bloomberg news. they had 2300 employees last year. alsoewater associates is cutting jobs according to a letter to clients. the letter written by the and other top executives doesn't mention the number of jobs but notes that part of the firm are bloated, and efficient, and bureaucratic. the nations biggest regional lender is lowering forecast for profitability and return on equity. the banks ceo is citing a "tortured recovery for
turbulence and persistently low interest rates. they have less than 1% this year. up that is your business eight. incredibler day of breath. all stocks being up. and very few being down. again, we see these amazing volatile swings. we will wrap that up for you on the other side. that's it for bloomberg markets. what you miss is up next. here are the major averages. less than four minutes to the closing bell up 1% across the board. this is bloomberg. ♪
scarlet: stocks closing higher this afternoon. major indexes gaining more than 1%. joe: the question is, "what'd you miss?" scarlet: we take a look at china and the fed. joe: and we bring down donald trump's economic speech today. matt: and we dig into a new bloomberg acquisition. it looking at index solutions, what of the most important in the fixed income world. scarlet: we begin with the market minute. the dow moving another triple digit, up by better than 150 points. u.s. stocks gaining more than 1% overall. and all 10 groups in the s&p 500 gaining, this is even as retail sales disappoint. joe: and we will have a 1% move in the s&p 500 for the fourth time in five days. matt: