tv Bloomberg Go Bloomberg September 23, 2016 7:00am-10:01am EDT
that after this week plus said induced rally in stocks, bonds, and commodities. elongated that first for the biggest weekly is vance -- weekly advance. david: keep on cutting. president erdogan tells bloomberg that turkey pot central-bank should continue to drive rates lower. welcome to "bloomberg ." i am david westin with alix steel. jonathan ferro is off today. alix: now there is a pause all across the market unless you are long -- buying long data treasuries. david: the markets were all going up, and today it seems the markets are saying let's take a minute here. alix: we get 12 speakers between next monday and thursday. if you want more federal confusion, you will definitely getting it. that he will deftly begetting it. david: turmoil within the seas
week and opportunities within emerging markets. we have the eponymous jack welch himself, who is the former chairman and ceo of general electric. inching ever toward a record. alix: let's take a deeper dive into the weakness we are seeing across the board. the nasdaq closing at a record. futures are soft. if you look at what is going on in europe, it is flat or down. we have negative pmi out of the eurozone, manufacturing inching higher. with the services in germany are getting hit hard. that is weighing relatively across the board in europe. in the fx market, the dollar goes nowhere. it is higher versus the yen, higher versus the qe, higher versus sterling and dollar yen during it. goes nowhere after a two mulch was week. brent is having an interesting move today. it was off by 1%, bounced into
positive territory, now relatively flat. the bloomberg commodity index is now down .2%. you will have to go out on the curve duration. take a look at the 10-year. that is coming down by maybe one bit, but really the rally into the long-duration anywhere you can get it -- whether it is you k, sweden -- here in -- whether it is the u k, sweden -- here in the u.s. is where it is at. they have the opportunity if they want it. david: i'm sure it will be very clear, though. we will talk with jack welch, the former ge chairman, now executive chairman of the jack welch management institute. welcome to "bloomberg ." it was a very weak -- a very big week for the fed.
the markets reacted to my question is, are the central banks creating a climate that fosters business growth and development of new business? they are trying, but they are pushing against a bunch of regulators who are not doing anything. they are pushing against their own big fat governments. they are not doing anything to slim down and become more competitive. i think they are doing their jobs, but they are pushing against a new here because they do not have the authority to change the regulatory environment, change the fiscal environment, so they are stuck. they are playing in the weeds. david: when you are running general electric, i am sure the cost of capital was important to you. does that free up the ceo to be able to invest? we do not see a lot of capital spending. jack: the demand is not there
because the jobs really are not there. it is all demand. an entrepreneur with a new idea, feeling a new niche -- you are not just going to sit there and let's build cheap, another factory, but nobody is coming to buy it. alix: is this the right use for capital right now? is still growing, but not at the capex is still growing, but not at the rate where there are buybacks. jack: you will not get a robust economy when you have regulators whacking you every day. there are more regulators than there are bankers. we are being inundated as a result of the 2008 crisis, in banks and every other -- you go around the u.s. and there is a regulator on every corner. david: i can understand why the
constraining the businesses. is it also constraining demand? play that through. jack: it does not create good jobs. we have 10% unemployment. alix: but that has been coming down. underemployment. jack: it is 10%, and the jobs we are creating our lousy jobs. we are not creating jobs like we were with fracking, etc. alix: the link here is that unit labor costs will rise. at some point investors will not be hiring, they will increase productivity. that will spur demand and the economy. that has not been playing out. from running a company for decades, why isn't that working out right now? jack: demand. alix: it is aggregate demand, not an oversupply issue? jack: i do not think so. it is a demand issue. people are frightened.
they are not spending. retail sales are very modest. are operatingnts at very low capacities, below 80. david: coming back to jobs, you thet out that 9% is underemployment number, not the 4.9%. how much of that is because of technology? technology has changed the nature of the jobs and are creating structural unemployment problems. jack: that is something we do not have the answer to her new can get an economist in the closet who can come out with a mix of that number, but i cannot do it. david: a lot of economists -- alix: a lot of economists now are saying you need stimulus. that that will solve all the problems. is it going to, if it is cyclical? if it is structural, that will not make it and -- that will not make a dent.
david: we need less -- jack: we need less government. along with infrastructure, we cannot agree on infrastructure. and productivity is very low. , etc.lk about automation -- if automation were doing that much for us, we would have higher productivity. alix: that is an issue, too. are we miss measuring productivity? ,here we are getting the gains bringing into the efficacy of can you trust the economic data, the data that we get with gdp? i did not like it in 2012. jack: i still do not like it very much. we have real problems. we change it every week. we change the way we measure, we change jobs, gdp. who knows right now? david: let me ask you the unanswerable question. if you had faced, during your
time at ge, the sort of regulatory burden you have now, could you have created ge into what it was? coulda, i don't know. let's say we had a pretty nice environment in the 1980's and 1990's. the wind was at our backs. we were slugging it out -- those who are slugging it out now do not have the wind at their backs. david: we will come back and talk with jack welch, executive chairman now of the jack welch management institute. we want to get an update on what is making headlines outside the business world. we turn to emma chandra with first word news. demonstrations in charlotte, north carolina, stayed peaceful on the third night. a curfew was imposed. show a black man shot by police.
the man's family watch the video, and the family's lawyer says he could not tell if the man was holding a gun, as police say. in tulsa, oklahoma, a white police officer has been charged with manslaughter for killing an unarmed black man. it is said that officer betty shelby reacted unreasonably. u.s. secretary of state john kerry has abandoned efforts to salvage a cease-fire in syria. he told reporters in new york it was pointless to move ahead without a major gesture from russia to end the violence. the u.s. accuses russia of failing to use its influence with syrian president assad to end the fighting. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am emma chandra. this is bloomberg. alex? alix? blamedhe mylan ceo gets
alix: this is "bloomberg ." first is facebook, down by almost 2%. it gave advertisers inflated metrics on ad revenues and only counted viewers who watched more than three seconds of an ad. the miscalculation of over 8% covers about two years. the other company to watch is twitter. rbc cutting to underperform the company down to 4% in premarket.
more marketers are planning to cut twitter ads than to raise it because advertisers are not getting enough bang for their buck. unraveling atory yahoo! -- we reacted negatively to the breach. yesterday,ut 45% after yahoo! confirmed the breach. now the story becomes what does verizon do about its bid for yahoo!? verizon is conducting its own investigation. it is unclear what that deal impact will be. we will be speaking with one of the bankers on that deal and pose that question to him as well. david? david: jack welch ran ge for two decades. under his leadership, he turned it into the most valuable company in the world. jack welch is still with us. one of the things you are known for europe urged to leadership, much of the news this week has been about wells fargo, and the
difficulty john stumpf is having. would you give the ceo faced with that magnitude of the crisis? jack: when you are facing a crisis, when you first hear , one, it is always worse than the first message. they waited a while to give you the first message, and what you get is still under the radar. still -- secondly, there are still no secrets. as you face the problem, the whole world is going to know. third, you have to know that you will be portrayed in the worst possible light. the media will choke you, beat you to a pulp. be prepared for that. realize that you have to take positive action and project a view of the future, and you have got to understand that it is going to have to be blood on the floor. blood will spill.
it is absolutely the case. somewhere, blood spills in a big way. volkswagen, etc.. you go down the list of companies that have been hit. finally, you have to know you will come out the other end as a better company. there is an end. alix: what is your advice to john stumpf? he took a very different approach than jamie dimon. jamie dimon said the buck stops with major john stumpf said the buck stops with the board. jack: this is a cultural issue. how can this go on for 4, 5 years? this is an issue of the wrong measurement. numbers,ward account you will get account numbers. if you rewards customer satisfaction, you will get customer satisfaction. david: how do you change that culture?
what do you do as ceo to fundamentally change a culture? jack: you can never let anybody they want toay spend more time with the family. if they have done something that you hang it out there, lawyers will say do not do that, hr people may yell don't do that. do it. it sends a better message. with personnel around bad behavior does more to establish a culture than good behavior. great rewards for those that have the right culture, public hangings for those that do not. alix: that is the jack welch roadmap. david: jack welch will be with us for the rest of the hour. alix: coming up, president --ogan says credit ratings he does not care if it cuts to junk. this is bloomberg. ♪
david: this is "bloomberg ." "morning must-read" is actually a morning must watch. president erdogan said the central bank was right to cut interest rates and that it should keep going. central banklast cuts as a steady, careful, and balanced cut. because it is not right to make sudden moves up or down that could contain some violence, that could create a tremor in the economy. but i believe it will be beneficial to continue this thisily, and right now administration of the central bank, since they took office, they have been carrying out a
cut, taking into consideration a special interest rate policy of the government. and i think this is an important signal, especially for investors. my hope is that the other banks will take the signal, that the central bank has given, that they also heated and accordingly -- that they also heeded and accordingly brought to investors. john: you are an economist. surely you are a bit worried about inflation at 8%. it is not really a time to cut interest rates. when you came in, inflation was much higher, at 70%. but still, 8% is higher. surely, cutting interest rates is a bit dangerous. >> in turkey, before we took
over the office, we had seen inflation exceeds three digits. when we took over the office, the inflation was very high. around 30%, and then the interest rates were to be around 63%. , the officialover inflation rate started going down. throughout the protests, the interest rates reached 4.6%. rates at thatst , and the real interest rate being at that level, pulled inflation down. let me say something. i do not see inflation as being inversely correlated with interest rates. it is exactly the opposite.
i see inflation and interest rates as directly correlated. if you raise interest rates, inflation will rise that much. however much you cut interest rates, inflation will start to fall with that. for my 14 years as prime minister and president, i follow this. i have seen this. rates, see banks raise inflation has gone up. when we cut them, inflation has gone down. even now, when i look at the measures being taken. if inflation is falling, it is because interest rates are falling. otherwise, these things are about the basket and so on, these are the things that impact these issues so much. this is my belief. david: that is president erdogan of turkey per joining me now is john micklethwait,, who did that interview. also, jack welch is with us. he likes lower interest rates. inflation going on there.
does he need higher interest rates? john: that is what i put in my poor man's david westin way to him. he genuinely believes that if you bring interest rates down, you bring inflation down. that is almost the opposite for monetary orthodoxy. he tends to see himself as the german ceo of turkey. alix: that comes with a cost, right? is he worried about that kind of effect from something like that? john: his view is the rating agency is politically motivated, and who cares almost. it is not quite that. i asked him, do you mind? he said i do not care about it. rewarding others what
he calls bad economies, not looking after him. from the point of view of investors, they will look at this and say you have a bit of an inflation problem. secondly, you have problems to do with the purge. a lot of people have been removed from their jobs all the way across the sector, including the central bank. finally, you have the problem with credit. they have done this very strange thing of having historically been somebody who has encouraged saving in a somewhat. tentacle way through his government is now -- in a somewhat puritanical way. his government is now saying -- david: jack, when you ran ge, you invested in more than one in emerging market. h this sort ofig geopolitical risk? now, looksy, right
like a place if you made an investment, you are taking a huge risk with the political instability, the geopolitical risk all around you. that is when you get the big hit. is, everyone is guts and upon your own the balance of the risk-reward that you see. if you see a better one than the other guy, you win. if you bet wrong, you get hammered. john: you think the currency alone has meant that it has gone down 40%? that means you can get into turkey cheaper than you did before. look, i runs -- this thing, we have this very near miss, i have rounded up 100,000 people effectively in terms of people being pushed out of jobs, some into jail, often in ways we might find deplorable. but, look, i am back in charge
and we will make this work. he is still very much like vladimir putin. he is still very popular. alix: the pitch to investors, the risk-reward -- we are getting growth somewhere. thank you very much, john micklethwait. it was great to have you bring that to us. jack welch come you are sticking with us throughout the hour. more "bloomberg " is up next. this is bloomberg. futures are pointing to a lower open. ♪
20-month low at the end of the third quarter. are building momentum. the slowdown in september was largely due to germany, where the services sector barely eat out any growth -- barely eked out any growth. german newspaper is reporting commerzbank is preparing to cut as many as 5000 jobs as part of a new strategy by the chief executive officer to boost profitability. in an interview with the bloomberg's check and president -- the bloomberg -- with bloomberg, the turkish president says it is the right thing to do. that is what you need to know this hour. alix: what else you need to know is that nothing is really happening in the markets. s&p futures down, lows around europe, but not around -- but not a lot of movement around the big central banks. energy, banks leading
the way after the weaker pmi both in services, manufacturing a teeny bit better. services are getting hit pretty hard. the dollar goes nowhere fast. the yen is looking for its best weak since july -- it's best week since july. you have dollar 18 c bit stronger. -- you also have the dollar a tiny bit stronger. commodities are relatively flat. back into positive territory. if you want to go to the action, go to the bond market. it is buying across the long end of the curve, the 10-year yield backing down a bit. you are seeing selling on the short end of the curve. yields in chuck over one basis point here in the u.s., so the curve is flattening. you are buying at the long end, selling at the short end. it is kind of like the last six weeks never happened, despite
the boj and the fed coming out this week. david: just like brigadoon. since its inception in 22010, the -- since its inception in 2010, jack welch's fully accredited business school online has over 1200 students. it's executive chairman is here to talk about the school and how it takes a fundamentally different approach to teaching business. when you started out in this, what were you trying to do? jack: i was trying to bring some leading custom winning leadership principle to working adults who could transfer it immediately to their jobs. with those nice things that you set about our school, this week after our sixth year in business, we were chosen among the top 25 online business schools in the world by the princeton review, which is an incredible accomplishment for
our faculty and students. david: congratulations. what do you bring that other business schools do not follow? jack: it is an online school. we have a principle of changing lives for the better. we teach you on monday, you take it back to work on tuesday, you practice it during the week, and you come back a you share it on friday with your classmates. classes are small, 18 to 20 maximum. the students grade the faculty. the student controls their destiny. the me another school where student is the customer and not the faculty. everybody comes to work in our place knowing that the student is the customer. we measure customer satisfaction every quarter. we remove faculty that have bad customer satisfaction weightings
-- bad customer satisfaction ratings. you can measure all the contacts between the student and the faculty because it is online. nicefaculty member says job but does not do anything to raise the caliber of the learning experience. david: it sounds like you are not directly competing with the harvard business schools because you have people who are older and are already in the working world. jack: and we are not there to come back to school to have a graceful way of changing jobs. company thee wrong first two years i was out, i have to come back and get another company. let me sign up for an mba and then let me get out and get a big raise because i have my degree and start again. no, we have a whole different program. we promote you vertically in your job. our first graduation, we were 600 graduates in washington on
the mall. the students started coming across the stage, and i was handing out diplomas. roll.rted in a slow 25% raise while i was in school. two promotions while i was in school. by anderson who came took a diploma screamed out to the crowd, "free promotions, two raises," etc. it is such a rewarding experience to see these people practicing real life, real leadership lessons come and winning in their jobs. david: that is the jack welch management institute, going gangbusters. now we are going to turn to media. a bump in the road for the yahoo!-verizon deal. from usersformation was stolen in 2013, exposing a verizon users ahead of
-- you have been involved in just about every deal in the last years. what are the possible pitfalls here for the verizon deal because of this disclosure? >> thanks for having me. as you said, it is a deal we have advised on. knowing verizon, they are assessing the situation and trying to determine the right financial remedies, if any. everyone was looking forward to closing the deal and integrating other verizond assets. this has been a hurdle. avenues wouldd of you have for verizon if they ?ere worried about it yeah go >> >> they are doing that work right now. it is way too early to get out in front of verizon. david: let's go on to other
deals that have been made. alix: jack is laughing, by the way. jack: it is never too early. jack, i doe advising not think he would expect me to come in and advise these remedies too early. jack: i would not want you advising on television, but i would what you talking in my ear all day. alix: if something came out with numbers that you did not know and did not like, how do you handle something like that? jack: you raise hell and you go back at it. thatld be looking at alibaba piece with a great glimmer in my eye. there have been a lot of media deals going down. what can you tell us about viacom, which clearly seems to
be, if not an play, certainly open to strategic alternatives? the viacom situation is another we are involved with that would not be appropriate to talk about here. that situation is more about getting the ownership and the governance set appropriately so the company can move forward back to the fundamental profile. the media industry is not just about the deal flow, it is about investing in the consumer, changing the model of education. trying to figure out the best way to get the the consumer, around the traditional models of the cable satellite infrastructure. the consumer is the customer that demands accountability at any time. sometimes it needs scale. that is where they media mergers and acquisitions come in, so that we can get more scale. alix: liberty media was talking yesterday about certain deals, pandora moving in the wrong direction. can you give us any insight as
to what liberty media's interest is in pandora? they are trying to move much more into a strategic direction where they are operating businesses. sports genre,e and pandora is one that they do not own today. musicave an interest in as well. there is a sports and media focus coming out of liberty there. bourkoff and jack welch are both staying with us, we're happy to say. alix: we have some breaking news about socgen. if french court ruled in the damages case. this is the deal of a rogue trader at socgen and what he has to repay for socgen.
he has to repay about one million euros to socgen. this concerns about $5.5 billion of trading losses that were amassed in 2008. that exposed socgen to a repayment of about 2 billion euros of a tax break. we now have learned that jerome: kerviel- that jerome will have to repay. alix. thanks, coming up, it is notches media that aryeh bourkoff has his eyes on, but also disruptions. what opportunities does he see in detroit? that is up next. this is bloomberg. ♪
david: this is "bloomberg ." coming up later on the program, goldman sachs asset-management cio cohead of global fixed income, john heiner. here is your "bloomberg business flash." facebook has been telling advertisers users were spending more time watching video than they actually were. that measurement may have boosted advertiser spending on one of facebook's most popular ad products. the error has been fixed and advertisers have been informed. the embattled ceo of wells fargo has quit the federal reserve advisory council. john stumpf was the san francisco fed's appointee to the panel. pressure has been stepped up on wells fargo after employees
opened up 2 million accounts without customers. the ceo of the london stock exchange spoke to bloomberg. >> we estimate conservatively minimum,he very 100,000 jobs in risk management, compliance, middle office, back functions -- not just in london, up and down the country -- are implicated in supporting this business and clearly could be at risk. emma: executive at -- executives at global investment bank says "bloombergt is your business flash." ofx: where is the next wave media and the day going to hit? m&a, the whitea line. western europe is the yellow
line. then you have emerging markets and latin america. they are low on the totem pole. has many media deals going forward. not a lot of oil you miss coming from latin america and emerging markets. where is the next boost going to be? u.s. trumps latin america and europe today. but it also has a lot to do with the political uncertainty. as you see more clarity around elections,itical there are 16 elections in the eu that will have between now and the end of 2017. everyone needs a bit more clarity to look at where they can deploy the capital. you will also see more capital deals across border. we have been investing a lot in european m&a as well as latin america. also more on the cross-border side because market consolidation has more
regulatory constraint, consolidations of power. i think that will be an increasing trend. alix: and what areas does media have that room for consolidation trend in western europe? aryeh: defragmentation sits in the entire areas -- content industry has a $500 million market value. the content industry has to consolidate, whether it is in or within one region the industry, or with the technology companies and the distribution companies. the other part of it are the european distribution players, british telecom, telefonica, itv , etc. those companies are very fragmented. those companies are ripe more consolidation. david: consolidation is one thing, but what about growth? you will not have a lot of growth overall in europe.
what about china, or india? aryeh: there is not a lot of growth around the industry because a lot of these companies are in transition models. think you will start to see more investments into the r&d budget, into disruption and new business models, which will take a while for the shareholders to see, but it is the right thing to do for these companies. forget the consolidation. go back to the business model and say how can you unlock the potential of these models? the marketplace is ripe for that. rates are low. they should be coming back into their own marketplace. alix: we are having a steeper yield curve over the last few weeks. the ipm markets are much more open than they were at the beginning of the year. does that change the m&a landscape? aryeh: the m&a landscape has had record highs over the last two years.
it is moderating a bit. we have had some successful ipo's more recently. the backlog is building. snapchat,e spotify, all going public with in next 18 months potentially. i think what i am talking about are the traditional businesses, traditional industries that have capital, that will either use it to invest organically or to build into consolidation themes. david: so good to have you with us today. that is aryeh bourkoff, the founder and ceo -- with jackill be back welch. he is a big supporter of donald trump for president a cousin of his policies. what about him as a of the business? we will discuss that next. this is bloomberg. ♪
days away from the first presidential debate between hillary clinton and donald trump. in the latest poll of high income voters, hillary clinton has the lead over donald trump, 46% to 42%. but when who is asked about their own investments, trump is ahead. jack welch is with us, executive chairman of the jack welch institute. he has made it no secret that he is for donald trump. if you were the ceo of a major company today and donald trump came in and was applying for a job as the president of one of your major divisions, would you hire him? based on his character and his truthfulness and his accuracy and reliability? jack: i did hire him once. we owned the building -- we -- the windowsg losinglling in, we were
$100 million on the deal. we brought donald in, give him $28 million to fix it, and he led the project, fixed it. we made $150 million. so i have hired him. we hired him at nbc. it in sixmp fixed months when other people took 10 years. else could take a post office building in downtown washington and turn it into a luxury apartment? he gets stuff done. i am voting the republican platform, and donald trump has to be the leader of the republican platform right now. david: jack, what i am asking about is his truthfulness or accuracy, either one. all politicians have inaccuracies, but according to every media examiner, donald trump way off the charts in saying things that are not true.
you don't think hillary clinton is inaccurate? david: do you think they are equally inaccurate? jack: absolutely. we have two platforms. mrs. clinton chose to go left, not center. she raised the state tax to 65%. we will see how those high wealth voters think about that. alix: the issue that donald trump has, he is not republican. his policies are very much more on the left-hand side of the page. how do you reconcile that? jack:'s social policies are that way, and i like that. his fiscal policies are down the road republican. obama-plus is going to do that? obama took the federal deficit and doubled it. he created more deficit in his eight years then all presidents
combined since the beginning of the republic. isn you have -- and she going to do over-plus. -- she is going to do obama-plus. i think we have a better chance with a businessman cutting costs than we do another politician. david: what about his lack of experience in foreign affairs? he will say some controversial things, off-the-cuff. does it worry you when he is the leader of the western world, that that could get us in real trouble? jack: no. i think he will be a solid, thoughtful guy. look what he did with mexico put was that a positive or a negative? it was positive. do you want elizabeth warren and bernie sanders running your country? that is what you get with mrs. clinton. talking aboutare
trump, initially supporters will come out and say this is what i like about him, but then turned quickly about what they do not like about hillary. is your vote against hillary, or is it -- jack: is it against the bernie sanders/hillary clinton platform. .he policies we have two flawed candidates. i love the idea of donald trump being in black churches. other republicans never went there. that we need to address issues with the republican party. i think he is moving socially left with the republican party, which they need. they are sitting there with the p wrists, the bill chris -- with .he purists, the bill kristols
get out of here. do it, take care of women's health. david: he is emphatic. you have to give him credit. jack welch, the former chairman and ceo of ge. it is great to have you with us for the hour, jack. tune in on monday for special coverage of that debate right here on bloomberg tv. up, we will discuss opposing opinions on the bond rally. jim caron will be weighing in on that debate when "bloomberg " returns. futures are slightly negative. ♪
rally in stocks, bonds and commodities rebounded a big week for world central banks paired -- world central banks. keep on cutting. president are to want -- an says the banks will continue to drive rates lower. ."lcome to "bloomberg jonathan ferro is off today. we had a very big week, the bank of japan -- today, nothing going on. david: they had a pretty active week. friday, taking it easy, not so bad. alix: we will see a lot more fed speakers piling up over the next few weeks. we will be watching that as well. we willn the meantime, dig deeper into the big debate
on wall street, whether the bond rally has more room to run. .e will do that with jim caron first, you will take a quick look at those markets for us. alix: i love this gmm board today. when you see it is gray, it -- equities in europe around the lows of the session. energy come industrials, banks leading shares lower. not a lot of dramatic swings overall. dollar -- a little stronger against the qe in sterling. initially falling on the boj, then rallying by the end of the day. inking for its best weeks july. the neutral fx market is neutral also for commodities. the bloomberg monday index down .3%. crude flat into that potential meeting between russia and opec on monday.
it is a by the long end of the curve story. you have the 10 year yield down by about one basis point. -- a backup in yields in the short term. the flatter curve keeps going on. that raises the question, how much more juice is there left in the bond rally? david: which is exactly what we will be talking about later in the program. let's check in with our bloomberg team. dani burger is here in new york. michael mckee wraps up the busy fed weekend looks ahead to what's next for janet yellen and the policymakers and guy johnson in london as germany loses a bit of momentum. first, that new york stock story. ani, we have had quite a big
week. nasdaq set a record yesterday. is there room left for the stock rally to continue? : it's interesting because when you look at what the fed funds futures were saying before the fed decision, they did not expect a hike. wasn't this already priced in? what catalysts there were in the markets for a major selloff, this decision, the boj, both of them were catalysts for that and it's over with. this face i have relief for investors. relief fora sigh of investors. this bid for yields can move higher. industrials, stable the dollar weakening, boosting energy companies.
.avid: another sector, tech nasdaq hit a new record yesterday. this is the 12th record for the nasdaq 100. these are the naked cap big technology stocks. they have not done that since before the tech bubble. big cap are the mega technology stocks. many thanks. that is dani burger. it all comes back to earnings and sooner or later. best when you have a $133 last feels to me like the couple weeks never happened in the markets. we started off with a rally in stocks and bonds and ended up
after the boj with a rally in stocks and bonds. mike: lower for longer proved impossible to root out. haveed conceded they might japante hike, bank of recommitted -- the bank of england will cut again. you have a great environment for asset markets. the world's index , it's hovering right below its all-time highs. money is going into these assets. the end of the bond rally has been postponed that's analysts are starting to write that maybe the ratio has tilted to the negative. much money into the economy around the world and thatt generate inflation
look at the imf measure of global inflation, it is going down. we came in this week expecting some answers. we got some answers about what they are intending to do but still leave the week with no answers about where we will end up. alix: we will get a ton of fed speakers -- 12 next week. are we going to hear anything juicy in the next five days of that talk -- fed talk? mike: we will not be hearing monetary policy this week. 12 speakers next week talking about why you should study economics and bank regulation. nobody focused on the idea of monetary policy and its impact. alix: federal confusion. it.y get paid -- i dig you need growth for inflation expectations.
the reason, data out of europe did not point to that. david: we bring and guy johnson from london. we had pmi data overnight. it a mixed bag. guy: this is disappointing. programtarted your qe march of 2015, you would be hoping that it would have had a big effect. it has not had a big effect. lower byr was skewed germany, the services sector they are not performing. the outlook for germany's manufacturing sector a bit better. of are looking at a number 52.6 which is the lowest number since qe was announced. you've been having a conversation about whether or not monetary policy is able to deliver from here on in. we have data that suggest the eurozone is not reacting in the way it once did. the ecb is getting less bang for its buck.
help us with another story here. o'neill has resigned from the uk government apparently because it had something to do with a disagreement with theresa may over china. it's indicative of what is happening and the confusion that surrounds the policies coming out of number 10 downing street. whent an idea back in july they had a front page on the idea that he was not happy the way that's with the way theresa may was handling china. i don't think this was a particularly all caps secret. that's well-kept secret. particularly well-kept secret.
thank you for putting that in perspective. that is guy johnson, our colleague in london. now, looking at some stocks moving this morning. alix: we are not seeing a lot of movement in stocks. facebook is off by over 2%. it gave advertisers inflated matrix of abbeys. inflated metrics of ad views. ad revenue is huge for facebook, up 53% year on year. twitter getting a downgrade at rbc. look,g reason, he says more marketers were plan to cut twitter ads and raise them because they will not get enough bang for their buck. he sees a 20% drop in the shares. , second-quarter
estimates did match, revenues were 3% better. can't sales of over 5%. the estimate was for a gain of 2.8%. -- copt sales desk mp sales of over 5%. >> a third night of protests after the shooting of a black man were mostly peaceful. scott's relatives have watched the video. the family's lawyer says he cannot tell if he was holding a gun. it white police officer charged with manslaughter for killing an unarmed black man has surrendered to authorities. betty shelby was released on a $50,000 bond. video shows crutcher walking away from the officer just
before he was shot. in france, a legal victory of sorts that he's being ordered to pay $1.1 million to his former employer, since it's a general. generale. socgen will make a statement later today. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. alix: coming up, crude on pasteboard biggest weekly gain in five weeks. will producers find a collaborative solution to stabilize the markets? and later, vadim zlotnikov will be here. what he says gross related assets are undervalued. this is bloomberg. ♪
alix: this is "bloomberg ." oil is declining 1% today. theyaudi's have said that -- isd to freeze output it about the opec meeting on monday? is this a risk on rally? for more, let's bring in harry tchilinguirian from bnc perry pearibas.bnc is it risk on, is it opec? harry: good morning. i think the oil prices benefited
from the fed. we got the department of energy showing crude oil stock draws once again for a second consecutive week. oil caught a break. the next big thing coming up is a producer meeting in algiers. there will be a second one coming in vienna in november. alix: the saudi's came out and said we would cut production to 3.6 million barrels a day it iran freezes there's. theirs.an freezes harry: there's been a lot of talk by producers. in reference to those particular soundings coming out of the saudi around talk, in the end, it's no sweat of their back to say they will cut production because their production seasonally decline.
the question is whether iran wants to freeze production. they have said repeatedly that their pre-sanction level of output is closer to 4 million barrels a day. i don't think their agendas are aligned and it will be difficult for them to come to an agreement. take a look at the terminal here. you can look at long positions versus short -- long positions come down a little bit, short positions come down a little bit. aat is the potential for shakeout if we walk away from monday and tuesday and nothing happens. ? positioning has not changed that much. the market has adapted its positioning by adding worth tracking short positions. when the market felt the producers were not going to do anything and prices were going to fall, they added to their short position.
when producers talked up the price, there was a short squeeze in those positions were reduced. the market will still operate along the same line. if we don't get anything out of algiers, growth positions will increase and we will wait for the next opec meeting in november. alix: iran does not want to freeze until they reach these pre-sanction levels. there's been question about what this pretension levels are. is it export or production or actual market share? they're relatively close to that level. it's just market share were they have had a hard time not being able to boost their sharing your. if iran wants crude oil market share that was available to them pre-sanctions, since production has moved on higher,
the amount they would have to produce to maintain the same percentage of market share would be much higher. they are aiming to produce higher to recapture what they had before. there's no way they want to come to a deal to freeze production in any way. is that a fair assessment? harry: i think that is completely fair. when you look at the agendas of the different countries come iran is not prepared to freeze until it recaptures its market share. saudi will not do anything unless iran does something. iraq has reengaged with international oil companies to expand production and capacity in their southern oilfields in terms of other opec producers, their production has been affected by domestic unrest.
it will be difficult to find a collaborative solution here. what is the downside potential we could see next week versus the upside when we need higher prices to meet that demand? harry: in terms of the market reaction, we have been here before. producers have disappointed. how many times do they have to disappoint until the market gets up and essentially goes much lower? the market will still be on hold waiting for what happens in november in vienna. look forward in terms of the price outlook, we think returning to 40 and possibly below is more distinct possibility that going above 50. below 40 before going above 50. able call. i like it. that's a bold call. i like it. david: should investors prepare
david: this is "bloomberg ." markets around the world are taking a's day after pushing to near record highs this week. that steepening yield curve is flattening. joining us now is vadim zlotnikov. stocksbeen looking at that benefit from lower for longer. and those that look for growth and inflation. what did the central bank due to that analysis? vadim: steeper yield curves improved profitability.
they're good for the insurance companies, etc. what does it do for the broader economy? that is a bit trickier. if it's due to technical reasons, it doesn't do much good. slightly negative for the economy as a whole. the we were to see reflation take old, that is a much bigger positive, positive for the corporate margins and the recovery. david: are you seeing any glimmers of reflation yet? alan greenspan said he thinks it's coming. vadim: we've been waiting for a a while and we do think it is coming. there are some signs of improvement to core inflation in germany. reasonable core inflation in the u.s. but we are not seeing acceleration that would be coveredve of a really -- of a real recovery. alix: bonds are selling off,
stocks are selling up. what kind of selloff can we expect if we can see a sustainable higher yield curve? jim: if the yields go back up to -- vadim: i think 1.8, we can handle. once the real rates move above zero meaningfully, it could have significant unintended implications. there are a number of financial instruments that rely on bonds to be diversified. they rely on them to be defensive. to rise,elds start that will not be the case,. significant leverage -- there is significant leverage. david: if there were meaningful fiscal stimulus, what would that do to your analysis? vadim: it's easy to say, intuitively obvious come
extremely difficult to implement well. coordinate with monetary policy and make sure it has a significant impact. the single most likely outcome of fiscal stimulus is inflation. you start to see even stronger tightening labor slack. alix: isn't that the worst thing that could happen to the markets? that could shake out the rest of the assets. jim: if this ran a normal business cycle, you are 100% right. over investment in capital. what has been really hurting this market is a four year earnings recession. earnings growth has been zero since 2012. if we start to see reflation, it could alleviate the downward pressure on margins and
services in germany weaker. dragging stocks a touch lower. the ftse off by .2%. the dax al by .4%. -- off by .4%. dollar-yen going nowhere. overall, looking at not a lot of movement after they had a pretty interesting week with the boj and the fed. that stability leading over to commodities. oil confused today, down 1%, now up to my flat. -- now up, flat. the opec meeting is on monday. in a bond market, that's where all the action is. sell the short term of the you curve and by the long end of the yield curve. you are seeing yields move up in feels like the- playbook we had in the summer.
get into equities come get into the long end of the bond market. treasuries are set for the best week since july. greenspan remains a bond bear, calling low yields unsustainable. here he is yesterday. >> that's what the market is telling it. the question is, where is it going to go? , theover the longer run 10-year note, 3-5. type ofo think of this bond market in terms of its price-earnings ratio. if this were a stock market indicator, we would all be running cover. element a speculative involved in this market. which cannot persist.
alix: joining us now is jim caron. you have alan greenspan the bond bear. bond bears have not done well. is that old playbook the correct playbook? jim: it so far has been for this year. the market will be reacting on muscle memory. people don't really know what the bank of japan is up to. there's a lot of disagreement on what they said. the default position has been to say interest rates will stay low, the fed was more dovish in terms of moving down there.'s -- their dots. as alan greenspan said, where is it going to go and what might start to change? alix: fair point. take a look at the terminal yieldi have the two-year
curve in japan and the u.s. does this flattener end? what the curve is going to take its cue from today is inflation expectations. with the central banks have been trying to do effectively is push .own real rates they can push rates lower. rates are here and if you push and flex asian -- --lation expectations higher if there is growth and inflation starts to come back, they will react slower. they will allow real rates to move lower as inflation expectations start to rise. it's like greasing the wheels.
david: that makes me wonder whether there's been a different type of flattening this week. thinking the bank of japan will jump in with a lot more stimulus and the fed will have a lot more ises. does that take some of the volatility out of the bond market at this point? jim: absolutely. pinning a bank of japan at zero and a fed saying they will move a lot slower. how long does that last is the question. it is the right trade for now. get some data to points that look better and of japan is unhappy with where the dollar-yen is right now and they continue to act on policy, does that actually create another
affect on the markets? bank of feels like japan being able to carry through on their strategy of keeping ten-year yields at 0% is pivotal. they will have to buy a lot and sell a lot. will there be enough bonds for them to manipulate that yield? , if we take this in steps, for right now, i would say yes. longer-term, that's where they could run into some trouble. that's where people get very nervous about these things. david: calm her bond market, carry trade, but the possibility it will have to change. how do you hedge? jim: by being underweight duration. fundamentally come upon markets are overvalued. i like kerry, i like high-yield , i like high-yield.
definition, my hedge has to be to be underweight duration, underweight, positioning for -- so i can still earn income. alix: are you buying yields or spreads? i'm looking at it more in terms of spread. spreads have tightened a lot, but they've gotten back to average levels. ,f you look at emerging markets emerging markets have been the darling this year. for the past couple of years, they got really hurt. we are getting back to more normalized valuation levels. i still think there is a lot of opportunity in the bond market. it's a question of how you will hedge your risks.
being overweight carry spray spread product -- right now, we are running the higher levels of cash that we've had in a while. --s is an opportunity for us september would be uneventful month. -- and have been full month. -- we said september would be an eventful month. i like banks. what i think is happening right now, central-bank policy is starting to move towards supporting the banks. at some point. having a steeper yield curve or having policies that will invigorate a steeper yield curve is very positive for financials and especially for banks within that. the bank sector is a sector that
has gotten unduly beaten up. worst-performing sectors of the investment grade markets in some ways. there's a lot of value their and with policy supporting that, we think that sector works well. alix: i love the perspective. thank you so much. we turn back to turkey now. n addressed thea turkish lira and the resilience that currency had after the attempt to pick -- attempted coup >>. >>there hasn't been the explosion in the currency some people were expecting. our hope is that it should be lower. it is not at the level desired.
but, those who were expecting it to crash, they did not get the result they wanted. stability and the turkish currency gets a little more valuable, i believe in turkey's growth and economy within the first six months, growth rate in turkey is quite satisfactory at 3.8%. this is much better than the primary economies of the european union. turkey has grown 20 nine quarters. -- 20 nine quarters. we have never experienced negative growth. we have fiscal discipline all the time. there is stability and confidence in the markets to which we have attached great significance. we have protected stability and we have protected the confidence. ofare bounded by the rule
fiscal discipline. that's why investors did not get scared. we are still strong, 3.8% on average basis. that was our exclusive interview with turkish president hearerdogan. alix: the first euro denominated offering in six years -- will fall yields continue to drive that demand? that's coming next. this is bloomberg. ♪
with us. emma: the yahoo! data breach is worse than originally reported. an attacker stole the personal information of at least 500 million yahoo! users two years ago. yahoo! was tiptop in july when it received a report that someone was selling information on the black market. the jobs would be lost all over the country and not just in london. he also said there were very few financial centers outside of london that could accommodate clearinghouses. thatount pictures is paramount pictures is taking it right on for a movie that will
not even hit theaters until january. the movie is monster trucks. all paramount says in a statement is that the write-down is related to the expected performance of an unreleased film. lower for longer reinforced this week by the boj and the fed is spurring investors to hunt around the world for yields where they can find it. one place they can look is latin america. the president of argentina spoke to bloomberg television earlier this month on the opportunities he sees in his country. >> you cannot find another country with such an outside -- argentina now is producing. in spite of all the conflicts i described. , 10 times theople in argentina and we can
double that in five years. is juanoining us now sartori. welcome back to the program. give us your thoughts in response to mr. magritte. can it sustain this? uan: this is a country that less than a year ago was in default. time, the amount of implemented very aggressive policies. it is now an investable country with an interesting growth story and investors are starting to flow. 1600 ceos were introduced to the new argentina. they got feedback from some of them.
they were very impressed and they started the whole process of bringing back large funds into investing in their country. we have news today of a new access tohey have financing. they are grinning credibility with investors. this will start the process that will take a bit longer than expected. but over two or three years, it will generate the conditions for the stock market to do well, for companies to start investing. you have those yield hungry investors, $16.5 billion sale in april, huge demand for this bonds. the second quarter recession ened.lly steep how do you reconcile those two things short-term? juan: investors anticipate -- the people getting into are looking at
what happened last quarter. we see an improvement happening there. over the next year from inflation will be taken back into control. investors are giving the benefit of the doubt that these policies will start working. david: let's turn to another turnaround. brazil. emer has a bigger project on his hands. juan: this week in new york was the general a summary of the one and all south american presidents come and present their vision. temer was there and he was very toar, the main project is put the economy back in order. he said we have to rein in federal spending. we have to restructure the debt and start showing productivity gains in the brazilian economy again. amount ofpass a whole
measures in congress in order for them to be sustainable. that will give a bit of stability to brazil. you still have news of the former finance minister going to jail two days ago. is in transition but the way forward is quite clear. brazil is one of the best performing markets this year. a well-known emerging markets investor at franklin templeton told me last week that he would rather invest in emerging markets. emerging markets look relatively stable. how do you best expressed that view? is at the debt, isn't companies, fx -- is its the fx? juan: the debt to gdp levels are
much better -- one of the first times in south america where we shake from left to right in a democratic way continuing most of the policy some banks in the way you play this, you believe this simple framework is going to be growth,ble, you analyze it is there, you analyze companies, there's good evaluations. high interest rates allow for people to go back into those countries. it will be over the next two to three years a safe and profitable place. david: thank you so much, juan sartori. up, we will take a
david: we have a bit of breaking news. the president of the fed for boston has come out and explain his dissent on the fed decision this week. he said if we don't raise rates now, we may hurt a recovery. he's arguing for a gradual increase. he is saying we are making a mistake because we may overshoot hurt us and that will in the long term. today, alex deal is up against steel ismowicz -- alix .p against lisa abramowicz
lisa: this is a chart for demand for treasury protected -- the highest bid to cover ratio since may of 2014. what does this tell you? suddenly, investors are betting that right now come inflation expectations in the market are just too low. told bloomberg he is seeing value in treasury protected securities because fiscal policy makers are going to try to ignite inflation. point, it is don't fight the fiscal policy makers. they we've heard pimco say will go into those inflation like bonds. i have been meet behind lisa's chart. behind -- this white
line here is the dollar index inverted. the trade weighted dollar index inverted as it goes down, the dollar is rising. there is an inverse correlation between the dollar and inflation. you have the dollar moving higher, you have inflation moving lower. inverse correlation. if the dollar rally we've seen since about 2009 and again in 2013 can pause, that will give room for inflation to move higher. the trade weighted dollar has actually decreased and inflation has started to pick up just a little bit. 31% of pce inflation comes from the dollar. not from wages. and 40 basis point pause in the
that's a positive the dollar could lead to a 40 basis point move and inflation. pause in the dollar could lead to a 40 basis point move in inflation. david: the dollar is weakening, it will have what effect on inflation? alix: inflation will start to rise. lisa: it is all connected. these are the mutual funds that took up most of this option. we are not seeing inflation expectations show up yet. alix: as expectations are embedded lower as inflation moved higher -- their mandate is not for inflation expectations.
they have to change that to really move inflation higher. lisa: who wins? i like both of these charts here. i have to go with lisa because alan greenspan has been saying this is coming and maybe this is the first indication we will get inflation picking up. hour, johnn the next byner joins us. whether the bond market rally will continue. ♪
30 minutes away from the opening bell here in new york. is off today. very old was your in the market week in themultuous markets. alix: we got that weaker euro manufacturing pmi. the dax off by .4%. the ftse relatively flat, all the lows of the session. fallingerg dollar index ar a bit, tracking up -- stronger dollar against sterling against the kiwi. in fx.ively flat market that lead over into the commodities -- crude is the story today. down 1% early, now relatively flat.
saudi saying they were willing to cut production if iran froze. that did not work, they wound up going the opposite direction. the action in the bond market by uye long end of the curve -- b the long end of the curve. the 10 year yield is down for a fourth day. the longest streak since june. you can see it anywhere you look. switzerland come in uk, sell the short end and by the long and -- end.he long u.s. futures up by about one point. the nasdaq has closed two days at record highs. week for stocks, all three major averages coming off three-day winning streaks. but cannot really be does european stocks at daily lows. individual names we are watching
now, facebook the big one down gave inflated be were day not to advertisers. they do not count the video as that people watched for less than three seconds. revenues key for facebook. twitter actually up, which is interesting and surprising because and rbc analyst cut that stock to underperform. dealing with advertisers getting little return for their data. this stock was down earlier in premarket. definitely watch that downgrade from rbc. bats.ter rally for creating the world's largest options trader. exchanges consolidate for business.
for more, abigail doolittle is joining us at the nasdaq. and in europe, mark barton is in london. a monster disco days for the nasdaq, closing at record highs. abigail: it has been quite the two-day stretch here for the nasdaq. the shares of you trading lower after the company did admit that half a billion user accounts were breached. shares trading lower. bank of america merrill lynch -- there is not a material adverse change here. ,opping higher in the premarket finish line after the company beat second-quarter comps quite nicely. a relieved to investors considering we have a choppy retail environment out there. on the year, finish line is up
more than 30%. alix: good stuff. thank you so much, abigail doolittle. mark barton is joining us in europe. a mushy after that euro data pmi. mark: the first weekly gain in three. biggest weekly game since july. we have come far, but stocks falling today, bonds falling today. 13% lower, the biggest fall since 2003. drug failed tos meet the target for their final stage patient trials. interviewer shares were down 17% earlier. the pharmaceutical company the best-selling treatments for opioid addiction statesd by 36 dates --
in the u.s. eurozone pmi, when you look at the composite index, manufacturing at 81-month low. that's a 20 month low. the service sector barely geeking out any growth at all in germany. this is a spread between the two investors have been buying the 30 year. the yield is coming in from the widest spread last friday in three months. investors buying the long end of the curve. yesterday, we talked with alan greenspan. who warned that pontarelli is simply not sustainable. is simply not
sustainable. a stock market indicator, we would all be running for cover. i think this tells you there is speculative -- a speculative element in this market that cannot persist. isid: joining us now jonathan beinner. he is responsible for managing over $600 billion in traditional alternative and money market assets. we have jeff good luck against -- just unlock against bill gross. what is a buyer to do? jonathan: we would agree with alan greenspan that the bond rally has gone too far. that the global
currency wars, there's been a truce. the fed is saying they will be low for long, they will go really, really slow. anything about what is priced into the yield curve in the u.s., it is even slower than that. closer andotten closer to the market, but there is still a big disconnect there. you don't want to be pushing out the yield curve. we are not uber bearish on rates, but we think there will be a normalization that is not priced into the market. do you want to add inflation protection? those indirect bidders were huge, almost 70% of demand. that a play to deal with this? jonathan: tips look relatively attractive. -- theyin a low risk
have pushed down risk premium everywhere. in the context of that environment, tips look pretty good. inflation is not yet at the target, but if you look at the tips market, what is embedded in that price, they are certainly less expensive than nominal bonds. investors are seeing that. you are not giving up cary, not giving up yields. inflation is running below where the cpi is running right now. em fordo you look for sovereign bonds? jonathan: if you look at the sovereign bond market, it will not be the developed world right now. you have negative rates everywhere, u.s. curve not so attractive. em is getting a lot more focus.
you have to be careful in terms of where you are investing. there are still markets where there is a positive real yield. brazil is a great example where the real yield is very high. the economics are not great. is notworld economy growing very fast, it will not be the heyday we had in em a while ago, but you have very positive real yield, you have growth and you have policies that seem pretty conservative. alix: i love what you brought up about inflation versus inflation expectations. take a look at the terminal here, this is the 230 yield spread. i brought up the shorter-term look at inflation. you see that white line is a steeper yield curve. the blue line is inflation expectations. lower, despite the fact that the curve is deepening and actual
inflation is a lot higher. how do you manage that as a bond guy? jonathan: it is tough. if you look at the survey data, it has been very stable for a long time. it had some of late. oil is a combination of the and some of the participants who thought inflation was going to be really high and they gave up. they are looking past the breakeven inflation we talked about in the tips market. you have to look at the fundamentals. the u.s. economy is doing ok. we have gotten used to this 2% growth. 2% seems to be ok. it is getting more and more people to work. you have a situation where slack
is going away. you are seeing wages start to pick up. we do think that will come through in more price inflation and you are seeing it to some extent, it is just very slow. targeteve when the fed goes back to the 2% b.c.e., that is going to happen. david: we will keep jonathan beinner with us. u.s. secretary of state john kerry is walking away from efforts to salvage the cease-fire in syria. pointless to move ahead without a major jester from russia to end the violence. >> we cannot go out in the world and say we have an agreement when we don't. nor can we tell our partners there is a sensation when there is an. ifcannot resolve a crisis one side is unwilling to do what
is necessary to avoid escalation. emma: the u.s. is accusing russia of failing to use its influence to stop the fighting. assad blames the u.s. for the truce's collapse. protests in charlotte remain peaceful for third night -- demonstrators called for the release of a video showing a black man being shot by police. the man's family has viewed the video. tropical storm karl is forecast to pass just use the bermuda tomorrow. -- east of bermuda tomorrow. could become a hurricane as it moves away from bermuda. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. alix: we want to update you on
some news i brought you earlier. that spike in twitter shares, up 16% in premarket on reports that it could be bought out. a deal could be happening for twitter. we hear these rumors all the time. you have that rbc downgrade from twitter. it could be moving closer to a deal. keeping ratesanks a locum investors have turned to corporate credit in their search for yields. how long will the appetite for that risk last? we continue our conversation with jonathan beinner, next. more of our interview with jack welch. he was pretty fired up today. this is bloomberg. ♪
alix: investors piling into corporate credit for the search for yields. yesterday, we spoke with wilbur ross on where we are in the credit cycle. wilbur: we are getting toward the end of the cycle. i think monetary policy has long -- itlived its usefulness is harder and harder to find value, even if you look at adjusting. alix: still with us is jonathan beinner. is it harder to find value as investors reach for that yield? jonathan: in an absolute sense, it is harder to find value because it's credit spreads that have been tightening, we have that whitening in the beginning of the year and then a relentless rally -- widening in the beginning of the year.
it has become harder to find value there. we are getting towards the latter stages of both the economic cycle and even more so the credit cycle. you see these things we never thought we would see again. the issuance, the so-called toggle where a company can choose to pay the coupon or not. seeing those things, you are seeing more leverage and also margin start to come down. you put all that together, it is not a great story. looking fore just any kind of feel. -- any kind of yield. you have a technical situation where there's great flows. alix: investment grade at a record 2.4 times earnings. we keep issuances off the charts.
when trillion so far this year. david: it does raise the credit risk question. undervaluing the risk involved right now from credits? ♪ broadly speaking -- jonathan: broadly speaking, we say yes. we are being very selective. we are going higher in quality. think about the credit spectrum, , theo-called triple c's most susceptible to any kind of shock, that area, we are under way. you are giving up a bit of yield there. you are not necessarily getting compensated there. go higher in quality, bank loans is another example where you are in a first lien situation, you are higher up the med there is a problem, you will get paid before more subordinated securities. alix: how much of your investment is tied to libor?
jonathan: not so much -- it is just an added bonus. you have seen that spread wide and. -- widen. if you're a bank loan investor, that is a benefit. as an owner, it is a higher expense from the corporate aspect of. from the fundamental perspective, it is not an issue. if the concern is growing over possible credit risk, does that drive you towards collateralized debt? jonathan: we would not say this overpriced. this is a relative value world. a couple of things in emerging markets maybe -- on a relative basis, we find some interesting opportunities in assets that are more securitized rather than just securitized by corporate assets.
think about securities backed by student loans, the issue about student loans, the securities were the government guarantees what you are getting a pretty attractive spread right now. there is a good risk premium there. the actual fundamental credit risk is quite low. could get a downturn in the economy in the credit cycle and be just fine. you will not get rich, but you will not get poor. alix: that sums it all up. david: coming up, more with jonathan beinner, whose call on the dollar was dead on coming into this week's fed decision. this is bloomberg. ♪
some of the biggest news in our world over the week was what the bank of japan did or did not do. the bank of japan has been taking action for some time. --y have not been successful what do you see as the u.s. dollar japanese yen story? jonathan: there is a short term and a long-term. i'm fascinated. japan has an unsustainable debt that continues to grow each and every day. -- policymakers initially the yen sold off in a big way. they have struggled to get the yen to weaken. japan runs a current account surplus. you have that currency, that demand -- it is a had went to their policy. that's headwind to their policy. they cannot buy any more bonds, they don't have any more bonds to buy. what they did, now it's about
the rate. in essence, they have turned on the full monetization. they have the ability to do the full on helicopter money. big the deficit is, we will keep buying them to keep the rate of zero. eventually, inflation will come. investors who keep getting more and more yen are just sitting on it. at some point, they will spend it and you will get inflation and that's when the fireworks start flying. sachs echoing it's called to be a yen bear. start positioning for that weaker yen. will that be sustainable when it comes? jonathan: in some sense, it might take a crisis committee stronger yen, before you get before you get the
full on increase in the stock -- or a stronger dollar. the dollar is the other side of the coin. , at this point, the dollar may have a bit of short-term strength because, as we talked about, the fed will tighten policy this year. they will tighten again next year, probably more than what is priced in. it's the other side of the coin. the u.s. has a current account deficit that constantly needs to be funded. that puts downward pressure on the dollar over time. in the intermediate term, downward pressure on the dollar. the euro will be struggling to weaken. the euro may have upper pressure because downward pressure on dollar, the yen may be also downward pressure and concerns about the yen as a long-term holding and the euro may bear
the brunt. alix: jonathan, great to have you. the opening bell is up next. four minutes away from the close of an interesting week. the dax around the lows of the session. take a look at the currency market. it is flat, flat, flat, flat. unless you are in the kiwi. that is where the dollar is moving up 1% against the kiwi. dollar-yen goes nowhere. the buying continues. this is bloomberg. ♪
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17 points on the dow, 3.75 on the s&p. after a week of a lot of uptake in equity markets around the world. coming down just a little bit. let's go to the other assets come if we can. the kiwi is alix steel's labored currency -- paper currency. favoritecurrency -- currency. the 30 year yield in the u.s. and treasuries up. let's find out what's actually going on in the markets. alix: we had seeing a lot of buying on the long end of the curve. in the opening market, you were just highlighting that we do see weakness across the board. its twoaq closed
records, now seeing a bit of weakness. the weaker euro pmi data, services are particular week. the weakness bleeding over in u.s. premarkets down in come rbc downgrading the stock, looking for 25% downside you to advertisers not getting enough bang for their buck. now, up 14%. there are reports that perhaps google and salesforce would be interested in buying twitter. this is a continuation of the twitter drama. will it put itself up for sale? affectings rumor apple and google -- the data breach for yahoo! verizon saying it was only made aware of this data breach in the last few days. it's unclear what the deal impact would be.
we heard from one of the lead bankers on that deal who advised horizon who is saying they are looking into it. david: we want to follow up on that twitter story. we are joined by pro-sutherland who know something about twitter -- brooke sutherland. talk inn a lot of the marketplace about restructuring -- brooke: what is being reported right now is that there has been early expressions of interest from several technology companies, including google and salesforce. a sale is not imminent. we might see something by the year end. totter is no stranger takeover speculation. twitter has jumped four point
and percent one out of every six trading days so far this year. 4.8% one out of every six trading days. david: growth started to flatten out and it became less favored. at this point, what does a tech company see in twitter? >> there is still a significant user base, even if it is not growing as much as it once was. there are still people who use this for daily things. those are valuable eyeballs. of somebody hands who has more experience dealing with advertisers, you might be able to make this more profitable, get more out of those eyeballs. becausee stock was down advertisers are not getting the bang for their buck. they are seeing less return on those and dollars. when googlee issue
and facebook are lapping up the ad revenue. facebooksomebody like which gets lots of money from advertising or somebody like google with more experience in this area do a better job? david: it echoes the yahoo! deal with aol. aol has a lot of ad tech and yahoo! still has a lot of eyeballs. is this something salesforce could afford to buy? google has the money, they have the cash. >> salesforce was looking at linkedin. twitter is not cheap. it is still very expensive, even after the stock has fallen so far this year. month, when we ran the data looking at the premium
microsoft paper linkedin, twitter would be crazy expensive. best paid for -- the premium microsoft paid for linkedin. we will see. david: salesforce has been very acquisitive. wendy you expect to hear something on this? that's when do you expect to hear something on this? >> we will have to wait and see what comes out of this. it is still very early stage at this point. the other question is, does twitter want to sell? is this an admission of defeat if you sell when you're stock is trading at these levels -- when your stock is trading at those levels? david: that is brooke sutherland. a little earlier, we hosted jack
welch, former ge chairman and ceo. we asked him whether central banks are creating an environment that is fostering business growth. jack: i think they are doing their job. they are pushing against the noodle here. they don't just have the authority to change the regulatory environment, change the physical environment. they are stock. they are playing in the weeds here. david: i'm sure cost of capital was an important issue for you. the cost of capital has gone down quite a bit with these rates. does that free up a ceo to invest? why aren't they investing more? jack: demand is not there because the jobs aren't there. it's all demand. you will not sit there money is cheap, let's build another factory. nobody is going to buy it.
alix: is this the right used for capital right now? cap x is growing, but not at the rate of dividend buybacks. jack: capex is not growing at all to speak of. you will not get robust economy when you have regulators whacking them everyday. result ofndated as a the 2008 crisis with banks and there is a epa -- regulator on every corner. can understand why the regulation is constraining the businesses. is it also constraining the demand? jack: it doesn't create good jobs. we have 10% unemployment. alix: that has been coming down. the jobs we are creating
our lousy jobs. we are not creating jobs in the oil patch like we were. alix: unit labor costs will rise. at some point, investors will not be hiring, they will increase productivity. that will spur the entire economy. why isn't that working out right now? jack: demand. alix: it is an aggregate demand story? jack: absolutely. it is a demand issue. people are frightened. they are not spending. retail sales are modest. are operatingnts at low capacity. alix: central banks have done all they can. now, we need some kind of stimulus. -- that will to
not make a dent. david: is that up to the government? jack: we certainly could use less government. along with some infrastructure. we cannot agree on what infrastructure. you talk about automation, etc. if automation were doing that much for us, we would have higher productivity. that was jack welch earlier today on "bloomberg ." alix: what commodity just saw a big rally this week? more, next. you this is bloomberg. ♪
david: this is "bloomberg ." .oming up monday, dan fuss alix: it is the end of a very big week for the markets and you are seeing indices lower across the board. ,he s&p off by about six points a three-day winning streak coming to an end. take a look at the long end of the curve, we had a lot of buying, yields pushing lower. -- aar yields backing up bit of selling coming in the last half-hour. the president in boston outlining why he dissented earlier this week. he sees imbalances but still sees a gradual pace for tightening. the dollar index went nowhere
fast. now moving substantially higher. a bit of a move in fx and treasuries. still a quiet digesting market. for morecambe and the guilty little is joining us at the just -- which days of record highs. shares arecebook lower after the company said it gave advertisers inflated video metrix. this issue has since been fixed. paul sweeney says it is embarrassing but he does not think this will have a long-term material financial impact on facebook. international announces a new ceo.
paul will be stepping intimately. the reason investors are so excited, relieved, da silva came from valeant. wynn resorts trading higher as well. analysts saying to take some chips off the table, then earnings estimates are likely to come down. alix: abigail doolittle joining us from the nasdaq. that hadthe commodity a monster rally so far this year? natural gas. this is a chart of natural gas versus the oil price. the oil price is the purple line. natural gas leading where oil is going. it declined substantially in early 2014. a fierceas is seeing
rally, 50% since the beginning of june. kurt billick, is the founder and cio of a commodities hedge fund. what is that next move for net gas? -- natural gas? we are pretty optimistic about the prospects for natural gas heading into winter. i think there is a fairly good least 350will see at over the next few months with some real potential for it to spike up towards the four dollar level. alix: will we see a rally in oil? with what kind of lag? to link oil mistake and natural gas prices to directly. o directly.
there's a lot of differences in the sources and uses. fuelal gas is a heating and power generation fuel. stationary consumption. oil is used in mobility command transportation. the demand functions are very different. i'm not sure you can look to the natural gas market to tell you the near-term direction on oil. the positive dynamics and natural gas are pretty much a function of natural gas. isre there was a linkage come as you said, natural gas led oil lower. companies that produce oil and natural gas can make a capital allocation decision. we saw them pulled back from the natural gas market in that 2012-2014 time period. natural gas was helped by -- the reasonns
we are optimistic is because nobody has been committing capital to drill for natural gas. alix: right. take a look at the terminal here. this is the curve of natural gas now versus where it was six months ago. at blue line was six months ago and the orange line is where we are right now. and unbelievable re-rating of the curve higher. at what point do we see companies coming in, investing more capital, pressuring natural gas prices and increasing stockpiles in the u.s.? kurt: there's a couple of really positive dynamics that will keep the price elevated for the near-term. the first has to do with the fact that the oil companies are capital constrained. they have a limited amount of capital they can redeploy. because oil and gas prices have been so depressed and a lot of them have balance sheet issues to work through. to work ono choose
their best opportunities. there is still great opportunities to earn a return producing oil. natural gas has to compete for that capital dollar. the low price of natural gas has created new demand. the share of natural gas and power generation has gone up and the u.s. is becoming the significant exporter. thethird constrained on supply response is takeaway capacity, the lowest cost region for producing natural gas in the in. is the marsalis shale the northeast, primarily in pennsylvania. there have been a lot of regulatory issues and getting sufficient pipeline capacity built to take gas to the places where it's needed. now that you have laid out why you are bullish net gas, what is it, futures, stocks,
what? kurt: we see good opportunities in equities linked to the natural gas price. we like owning independent power producers, companies like dynegy which produces power by burning coal and gas. they have a lot of low-cost plants. as the price of gas goes up, it pushes the cost of the marginal producer up. the reason we like owning dynegy, they are making tons of cash even at today's gas price. they will be able to produce their entire cap in free cash flow over the next four years. any increase in natural gas prices is just another benefit, another tailwind that will help them improve their balance sheet and pursue good reinvestment opportunities. alix: great perspective, kurt billick. thank you for joining us for.
david: this is "bloomberg ." 'snday night presen presidential debate -- we have megan murphy. this.s into how important is this presidential debate? megan: it could not be more high-stakes. he has been tightening in the polls. in crucial states like ohio and pennsylvania and florida. he has to show he is presidential and she has to have a gap over him in terms of expectations. whatll all be about
viewers want to see out of this and who will really when the debate. donald trump is gathering momentum. seems to do when he doesn't say something foolish. megan: this is always the issue. how low is the bar. he needs to have a credible debate performance. to do something that is in a moment that we replay over and over. she is coming in with a lot of expectations to wipe the floor with him. people expect her to outdo him and policy issues. they expect her to walk away from his punches. we will see if he is able to do that. he will try to hit her where it hurts. the financials on sector and her e-mails and whether she is able to not take that date, to stay calm and presidential -- take that debate. ait.ake that b
trust are thend biggest issues that have dogged her campaign. hillary clinton is still time to -- tryinger campaign to relaunch her campaign and get people and voters a glance of who she is. people don't really know who she is. when they see him, he comes across as more authentic. david: you will be at hofstra covering it for us. megan murphy, thank you so much for being here. tune in monday for special coverage of the debate right here on bloomberg. policy decisions around the world from the fed and boj, a good week for us on "bloomberg ." >> what i would like central bankers throughout the world to say, it is time for aggressive
fiscal policy. we cannot do it alone. >> i think monetary policy has long since and its usefulness. debtors. benefiting to my view, this is one of the big reasons why we have such anger in the world, anger over brexit, anger over our political process. >> wherever unprecedented i like to argue because i think it is the case that we are working against -- it cannot go on indefinitely. it's a matter of time before long-term rates go up. >> i'm a little surprised that where we are relative to four years ago. we have a lot of downward pressure on interest rate out there. the fed has to be responsive to that. >> the fed has no toolbox
anymore. that's why i think they shouldn't have been raising -- they should have been raising rates. >> they don't have the authority to change the regulatory environment, change the physical environment, so they are stuck. -- change the fiscal environment, so they are stuck. alix: a fascinating week, lots of dramatic market moves. here's a check on the markets. uighur all across the board. -- weaker all across the board. have a great weekend. this is bloomberg. ♪
vonnie: they went to take you from the to london and cover stories out of washington, turkey and ireland. here is what we are watching. every got an global market sputtering as they slide around the world. we get perspective from and market's and what's keeping them up at night. mark: and excessive interview with editor-in-chief. the turkish president this bride -- describes their move to cut rates as careful and balanced. more on his unorthodox views on lower interest rates. vonnie: saudi arabia has an opportunity's reduction if iran agrees to freeze its oil output. we will bring you the latest in oil markets as opec meets next week.