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tv   Bloomberg Markets  Bloomberg  September 29, 2016 2:00pm-4:01pm EDT

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-- oliver renick. vonnie: i am vonnie quinn. welcome to bloomberg. we are live at bloomberg world headquarters in new york. covering stories from san francisco, mexico, and saudi arabia. breaking news. some bank plan set to cut collateral on trade. ceo returns to capitol hill for questioning by a house committee. still looking for answers and berated the banking chief over how he responded. oil prices surging after oil said they have agreed to curb output. is becoming evident. we will examine what it all means for prices. more reaction for doing check
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bank -- from deutsche bank. >> deutsche bank shares are around the lows of the session. an 8% decline. we are also seeing heavy trading volume. more than three times trading shares that have typically over the past month or so. i was begin with scarlet fu and erik schatzker with dan davies, ,n analyst with frontline speaking about the idea that there is not yet a liquidity crunch. it does just appear to be a few clients that are pulling some of their money from the bank's. nonetheless, there is still concerned. he talked about the steps the company could take over the next 24 hours to stem the selling, including talk of raising new capital. .one of that as of yet
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whether deutsche bank is indeed having liquidity issues, whether or not that was a case, it was certainly a trigger for the overall market. the three major averages are trading lower. this accelerated sharply after the selloff. all three major averages at the lows of the session. the s&p financials and the selling within the financial group, it is down by nearly 2%. individually some of the best selling, jpeeing morgan, citigroup, wells fargo much.und -- down by this this occurred after the deutsche bank headlines. morgan stanley and goldman sachs are a couple of the financials we are seeing lower. have been watching the
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saplings in stocks and big accelerations and selling, we see a turnaround in the bond market. the 10 year yield, a decline, not a big decline. consider in six of the past eight sessions we have seen the field move lower. that is something else that puts pressure on financial companies. that is something we have seen affect the banks. effect happening today. finally, a look at the fixed -- vix. boost in that index today, up above 15 once again. oliver: sticking with the big news on deutsche bank once again. thank you for coming on again for the big story. seems like it keeps ramping up.
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what are you looking into to figure out what the next play is we ares company gekko >> monitoring credit markets pretty closely. this has been largely in equities story. we are not seeing anything close to what we saw back in 2007 and 2008. it is important to keep that in perspective. was looking at a piece of the deutsche bank business, clear derivatives and hedge funds that are basically clearing out excess cash from the margin account. keep it in perspective, 10 or moreut roughly funds out of around 200 or so. vonnie: i want to show people the short interest on deutsche bank shares at the moment.
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>> nothing crisis-like for sure. we are seeing spread widening in the credits. natural. in terms of the actual funding cost, to suggest we are seeing a liquidity issue, nothing really showing up. oliver: i want to bring up a chart real quick looking at the deutsche bank price, which as we know the story being negative is not necessarily new. we're looking at a steady downtrend. the stock has gotten hit even worse lately. not quite to the levels it was in 2011. i know there is another element, which is the credit curve. walk us through what we are looking at. when you really start to get the fear in the market, you will
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see the curve not just flatten out but what they call an inverted curves, where you are .aying more the is just showing you counterparties that trade with deutsche bank are getting worried. they are just protecting themselves, and they are looking to hedge at whatever cost. we're not seeing that yet. vonnie: this was a topic of .onversation erik schatzker speaking with mark missouri about how serious this is and whether he would be an interested seller or buyer of deutsche bank shares. >> they do not have any issues right now. the problem is the more people keep talking about it, the .arder it becomes i actually do not think they do, but it is hard. you cannot withstand shocks.
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vonnie: he did go on to say he would be a very cautious seller. we are not seeing that yet. he is absolutely right, we are talking about a business that is on confidence. whether fundamentally speaking there is a real concern is what are the counterparties doing, and is going to have an ultimate on the situation gekko >> -- is that going to have an effect on the situation? oliver: in terms of litigation that is still hanging over from , is thereial crisis going to be relief? that has spurred renewed interest in the company, but once they figure that out, will there be released there or will they have to find another way to
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raise capital? i think it is premature to think about what they will have to pay, but there has certainly been a lot of regulation over that. i do not think i am in a position to know what ultimately they will have to raise if they do. vonnie: earlier julia and scarlet were speaking with an analyst. there is ad sovereign name on the door. if he were john cryan what he would probably do is get a quick capital injection from somebody, a major investor or sovereign wealth fund and have the markets opened with an extra 2 billion in capital. would that be enough to calm everyone down? >> is certainly would not -- it certainly would not hurt. that point, itat
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is hard to say. politically speaking, this is a different -- an interesting issue. do you think on july ?erkel is concerned about this >> you have to think they're having some conversation. something that will pretty quickly turned on financial to political. thank you very much. checking now on bloomberg first word news. mark: new jersey governor chris christie, andrew cuomo and other state and local officials are holding a news conference at this hour. you are looking at a live picture from hoboken, new jersey, where and new jersey transit train slammed into the terminal this morning. chris christie says the engineer is in critical condition and coiffed rating. governor crist says at least one person is dead and 108 others injured. officials with the national safe hoboken.e in route to
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all travel into an out to new jersey has been suspended. bombknew it was not a because i saw it happen. a horrendous exploding noise. the train flying into the depot. could not believe what i was seeing. you never believe that can happen. mark: stunned survivors and witnesses say it appeared the --in sped up before trash crash through a barrier before coming to a stop on the platform in the waiting area. hillary clinton has selected a democratic operative to rick root potential white house staff. the reverend lee at daughtry comes aboard as the transition
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team is expanding. part of the transition team in 2008 in 2006. an endorsement for gary johnson from the detroit news and what the newspaper calls an endorsement of conscious. it marks the first time in the paper 143 year history that it has not backed a republican. the gop is unprincipled, unstable, and quite possibly dangerous according to the paper. critical of hillary clinton of career long struggles with honesty and ethics. the body of israel's ninth lining in state in israel's parliament. he died yesterday at the age of 93, two weeks after suffering a stroke. bill clinton paid his respects earlier today. president obama leaves for
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israel. mock motor boss will join scores of world leaders that will join for the burial tomorrow. news 24 hours a day powered by more than 2600 journalists and analysts. this is bloomberg. coming up, wells fargo ceo makes his second appearance or congress for scrutiny over bank practices. dishonest,it was broke our code of ethics. >> did you steal? >> our people did not do what was right. >> i want to know if you and i are on the same page. did wells fargo employees deal from 2 million customers? yes or no? >> in some cases, they did. >> we go live to congressman brad sherman.
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one of the many congressmen putting tough questions to him today. this is bloomberg. ♪
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vonnie: this is bloomberg time now foriver: a look at the biggest business stories in the news right now. boeing close to a multibillion-dollar commercial jet order. this is u.s. approval of the long stalled sale of f 15 fighter jets to the persian nation.
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they will provide a boost to boeing as the largest commercial plane maker and second-largest defense contractor. air berlin has announced the largest job cuts in almost 40 years of flying. planning to cut 1200 and 8700 employees and cut the fleet in half. the past three years in berlin has lost more than $1 billion. one of the most high profile insider trading cases ever. portfoliock rock manager faces three charges involving equity trade and the call option. he was arrested did three years ago. he appeared in court in london. he is not yet entered a plea. that is your bloomberg business update. 16 years ago the term hanging chad first entered after a a contested race between al gore and george w. bush. where are we today echo mike riley said it is buggy,
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obsolete, and plagued with mishap. .e cowrote the cover story he joins us now from washington. give us the evidence you uncovered while researching the story. a long, strange history as the u.s. has moved to computerized voting. $4 billion to transform the electoral system. not what you was would want for the $4 billion. one thing that we found is most of the systems now in place use technology that has firmware written in the 1990's. bugs in lot of software it. it was not particularly well engineered. six teen years later what we not moving anym
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place. no one is buying new equipment, so you go into the voting booths and you will both on a very old system that was not good to begin with and has only gotten worse with age. o we all know what happened in 2000. andld we be concerned anxious about what is going to happen in the nest -- next couple of months? >> in some places we are in worse shape. at least people knew what the problem was. machines wereard not being cleaned and it created all sorts of problems when they went to cast the ballot. states use systems that do not use paper ballots at all.
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this creates all sorts of ways in which it can mess up ballots. we have given interesting examples in the piece. it is really hard to reconstruct who voted and what they voted .or when there is not any paper slowly they are cutting out states like california who mandated there has to be paper received for everything. we did a story and memphis, there are noere paper ballots at all, and they ended up having really complex elections were they just lost votes and it was hard to figure out what went wrong and why it went wrong. and memphis they have had one major lawsuit after the next because they just cannot figure out who is voting for whom. vonnie: great story. you can read more online and on newsstands. don't forget, here for reporters
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every saturday and sunday on bloomberg television. next, we go to congressman brad sherman, putting tough questions to the wells fargo ceo today. ♪
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fcc says they will pay nearly $200 million because of the charges. paying 2.2 million himself. settling allegations that senior employees paid bribes to high raking officials fcc and -- and ceo heard it bigells fargo today from members of the wells fargo -- from the committee. firing questions was
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representative sure men he joins us now from capitol hill. countries. where you convinced by john stumpf's performance today? should he still be chairman and ceo of wells fargo? >> i think it goes bigger than that. i think it is time to break up the too big to fail institutions. we learned they were too big not to bail out. we've learned they are too big to jail. invited be reluctant to the institution. we learned they are too big to compete against because they have a lower cost of capital. now we have learned they are too big to manage and too big to regulate. >> we know you want to break up the big banks, but in this specific instance, you have the ceo and the chairman, should he still have a job?
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what he said today but how he ran the and to touche and over the past 10 years. i do not think he will be the flesh thean risk that wells fargo names. they used to be one of the great names in the west. now it comes with liability. >> over the past five years, wells fargo has been a bank seen as a good guy on the block because the business is very different from a lot of the banks during the financial crisis. this scandal is not directly tied to the same kind of market concerns. how -- what does breaking up mean in this case? >> what was that again? >> when you look at wells fargo, it it is very retail driven. what does a breakup look like?
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>> you could create three or four regional banks out of wells fargo. worked well and one of those entities would be so large they could come to washington and say we are in trouble and you have to bail us out. instead we could have real to mock receipt, not crony capitalism. them andd like to see the five or six other institutions broken up so we get away from the idea that there are some institutions that have to have a federal safety net behind them. >> what would you like to see next? >> one thing, and
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this is a little arcane, but i would like to see statistics important to an -- statistics audited. stump was pitching his stock not based on the income statement but other statistics, chiefly penetration rates, numbers of accounts. >> one thing, and this is a little arcane, but i would like toif those as reasons stock had been audited, then we would not have seen this problem. we would have learned many of the new accounts are phony. instead, the only thing they are audited is the income balance sheet. what people talk about are completely different statistics. our thanks to brad sherman. opecr: we will talk about and more on their cuts. bloomberg.
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oliver: from bloomberg world headquarters in new york city, this is bloomberg "markets." vonnie: i am vonnie quinn.
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opec may have surprised markets by announcing a plan to freeze production yesterday. alex steele is here to break it all down. youhree charts that show then you may see lower prices. this is the call. basically, what the world needs to hear to meet demand. 33 milliont over barrels per day. the blue line is the range. bars, youook at these will see supply and demand come into balance. nigeria and libya, commerce banks thinks it could be a extra one million barrels per day. you are looking at opec production of 34 million barrels per day. there is less incentive for saudi arabia to cut production to keep prices higher.
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this tells the story. the idea is shale production is so cheap to produce it has brought the cost curve down. in 2009, you could only produce 10,000 barrels per day for $80 or less. now the number is 35 barrels per day. there is less incentive for saudi arabia to keep cutting. assist deigned cut would be self-defeating the cousin of the large drilling response that you would see around the world. commerce bank says it best when they say opec does not control production. that is really about shale and other low-cost producers. isn't a saudi cuts really a cut or a whole? this explains it. the light blue line is saudi arabia and oil production right now.
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in 2011 twoaverage 2015. seasonally they end up winding back because it is not as hot. in theory, they do the same thing this year. if they go back to 2015 levels, it would be a normal cuts of 300,000 barrels per day. if they went through the average, that would be considered normal at about one million barrels per day. they are probably doing this anyway. it may not affect the export market because they could export any amount they want and cut production that would have been normal anyway. when you look at whether this actually matters, this shows you not so fast. oliver: thank you. alix steel. for theight on cutting
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first time in eight years. joining us, special envoy in court nader for energy affairs at the state department. thank you for joining us. saul you nodding. is this going to be the case that perhaps this cut will not be enough to stem lower oil prices we have seen for the past few years ago >> great -- thank you for having me, it is great to be here. i was nodding because i think the presentation is right on. at what's opec is doing in the context of where we are in the world of energy. there has been a transformational change that oil -- that opec countries and other producers are trying to understand how to react to it. that is primarily new producers .oming on the increase in production from the united states of 4 million barrels over the past several years was an enormous shift. what really made the shift is
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that it is not one or two producers but thousands. the cost and resiliency was so great. what opec tried to do was to say relevant.ll we still have a role to play, and we want to engage in the market. it is a very complicated process they have to go through. if you take the decision outside of the normal seasonal cuts and assume they actually mean the actuallyhat they implement it, all that will do, if they get the consequence they were looking for of a greater price increase beyond $50, the production of shale oil in the united states will ramp up, and that will mean a loss of market share. they are in a loop that they are changed to figure out how to come out of. i really think they are
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misguided and where they are looking to make change. the change should be in the economy and making themselves the reliant because of fundamental change that will affect us in the future. anyie: was there conversation with the united states about how good it might be or the saudi arabian economy if they were to agree to a freeze or a cut? of theink several members would like to see the others whats and they refer to as the non-opec dialogue, and it is important to have a conversation but the position is that we do not believe in this kind of intervention in the market, and we believe what is best for the market is that if we let it manage itself and focus our efforts elsewhere. united dates is not supportive of these kinds of measures.
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>> you have to be happy with the outcome. >> i am not sure there is an outcome. all i know of the outcome so far is that traders have increased the price of oil overnight within the announced -- within hours of the announcement yesterday. i am not sure that is based on a change in the market. i will believe when i see it is this change will>> you have to e outcome. >> i am not sure there is an outcome. all i affect prices and the long-term and not just weeks.w days or we have seen a number of times the effort of talking up the price of oil. i want to make sure that is where it is before i celebrate. oliver: you mentioned the relative cheapness in which shale producers can continue to produce oil even at lower levels. due to the overall speed and severity with which oil markets fell, there were a lot of domestic reducers that had to put production on hold. is the news overnight and any potential opec cut going to be enough to bring them back on
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line allow them to keep pumping where they are? i think what we've seen over time is if the price does increase above $50, i would expect to see production going back, and fairly quickly. but if that starts happening, i think you will have the reverse effect where traders will be concerned that the market will still be oversupplied, and therefore, i do not know how long that will be. when i am concerned is the efficiency rates, those advances in the united states will keep putting pressure on the cost of where it is economically feasible to increase production. the longer we are in limbo, the better it is for the producers in the united states and the ability to bring the cost down. this is grasping at straws for opec. vonnie: what are you predicting for prices at the pump? >> i am
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glad i do not have two brutus -- predict oil prices. i think it will continue to grow but grow slowly as the market development continue. u.s..e seen this in the the increase in gas and inefficiency. this has meant the united states has become the world's energy superpower. not only in the u.s., but great consequences for foreign policy but security. the seat of the table we have an energy markets around the world. o thank you for being here to give your input. -- oliver: thank you for you to give your input. checking the headlines on first word news. mark crumpton in his room.
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chris christie says one person was killed and 108 others injured in this morning's crash on a transit train as it entered the hoboken terminal. the train crashed through a concrete and steel bumper at the end of the line at the historic 100-year-old terminal just before 9:00. >> what we know is the train came in at a high rate of speed into the station and crashed through all the barriers, bringing it chris christie sayse person was killed and 108 others injured in this morning's crash on a transit train as it entered the hoboken right through the interior wall of the hoboken terminal. mark: chris christie says the engineer is in critical breeding but quite with investigators. officials are in route. hillary clinton is picking up early voting in iowa with a
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major effort to boost support in the battleground state. she will deliver a speech in des moines focusing on childcare challenges. she also plans to host events in 10 iowa cities. at company controlled the donald trump reportedly violated trade bans by doing business in cuba in the late 1990's. hotel and casino reports reportedly paid consultants at least $68,000 to examine opportunities. documentsuments and with trump executive. at the time and american corporations were banned them spending money in cuba except through charities. his campaign manager dispute the report. russia accuses the united states of not supporting a nuclear attack. secretary carter of jewish -- accused russia that nuclear weapons are still needed to documents with trump executive. at the time and american corporations were banned them spending money in cubadeter ruse aggressors. moscow groupon -- responded saying they are threatening to use nuclear weapons in support of an attack against russia by allies.
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global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. vonnie: coming up, we look at the new space race aiming for mars and beyond. this is bloomberg. ♪
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oliver: this is bloomberg markets. vonnie: i am vonnie quinn. jack lew is in mexico today
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saying we cannot separate interest from our neighbors interest. in an exclusive interview with david gura. >> in the region, the u.s. relationship with the western hemisphere has been central to our sense of security and our economic interest. i think we have deep relationships here that we have put a lot of interest on deepening and developing, and i .m here to speak about that is no question that the u.s. and mexican economy are very much interconnect it. you look at the goods that have gone back-and-forth. we sell a lot to mexico. i think it is important for both of our countries to do well and to do well together.
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>> i would imagine you are more .nterested in monetary policy but there will be conversation about the prospects of the speech and your conversation is much more about openness. >> very much. there is a lot of anxiety about the effects that technology and globalization are having on the effects of the daily lives of people. it around the world. i think the answer cannot defeat to shut ourselves off and say that we can do better with lower rails. that weer can not be will separate our interest from the interests of our neighbors and not quite great. what we have to also do is look at why the anxiety is there. it is not hard for me to understand. some have been enacted, others are pending. there are a lot of
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people in america who do not benefit from economic growth. people will say, what does it mean for me? the answer is we invest and the things people see affecting their lives. this creates good jobs and tell people that we care that you sit in traffic for two hours on the way to work. we know people are worried about have theheir kids will kinds of opportunities that they had. primary education, we can help people get the skills they need. childcare is a burden that most working families struggle with. we have had proposals and some success. we need to do more. i think that if we sent the message that we are determined touche overall growth your life, we could get back to a place where there is a broader
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under dancing where there is a benefit from interconnectedness. -- broader understanding. >> what more could be done to marketse emerging investment? >> i think the police -- the key's agreement and columbia is a big step. war in acade long country creates a lot of uncertainty. that does not get resolved the day the agreement is signed. confidence,to be but i think if it is implemented and the sense of durable stability becomes more widely accepted, there is a lot of pluses in the economy. they have been running a very sound economic policy. they are respected around the world for having done so in
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difficult circumstances. we have given them access. they have plans to continue to do that. i think there is a combination of things and columbia where the germanic event that things will change tomorrow. things do not change overnight, but they do start to change. i think this could be the beginning of a new and prosperous time in terms of columbia being unattractive place to attract foreign and .est >> that was david gura's exclusive interview with jack lew. oliver: julie hyman with today's sector report. julie: i will look at the financial spider. that is because we see it under pressure in part because of the ripple affect crated by deutsche bank. you can see it is down by 1% but off of the lows of the session.
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goldman sachs, jp morgan, morgan back.y all pulling as we talked about, deutsche bank was the catalyst for this. some of the hedge fund clients are pulling some collateral from the bank. they were down as much as 8% or so. now down by less than 7%. else we have also seen happen is the shares have fallen to a record low. the options activity has surged. this is specifically the u.s. options. this is both puts and calls. we have seen it surge. .e have also seen volume search today trading well above the we have seen.
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finally, wanted to check on another financial, ox it capital coming to an agreement with u.s. authorities, agreeing to plead guilty to charges stemming from a bribery plot involving african officials. paying 200 million in the settlement. looks like there is relief vonnie: reflected that it is putting that behind it vonnie:. thank you for that. much more ahead. ♪ finally, wanted to check on another financial, ox it capital coming to an agreement oliver: you are watching
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bloomberg. vonnie: i am vonnie quinn. sure many second-largest lender, commerce bank, is cutting jobs and defending dividends. the biggest bank problems continue to mount. 7's -- a note 7
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smartphone x loaded after he bought it. how the company reacted. we examined the increasing chances of space travel to mars. sampson electronics is apologizing to chinese customers after a new complaint about corrupting -- exploding smartphones. earlier this month samsung units afterillion reports surfaced about batteries bursting into flames. samsung claimed -- excluded the country from the recall. oliver: telefonica calling up a restructure of the unit. it says it will continue to look at alternatives. volvo recalling 120 7000 cars and suvs in the u.s. because the air-conditioning can leak water into the vehicles causing
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airbags to malfunction. it covers 2016 and 20 of 18 as she be. and sedans. sedans.and startcall is expected to november 17. commerzbank will it eliminate 9600 positions and sis and dividends. the bank will take a charge of $1.2 billion for restructuring costs. time now for a quick take. there is a new space race going on. this time nations and private companies working together to reach asteroids and the great dion's. the concerns are not the same as 50 years ago. elon musk has an ambitious exploration.pace
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his company hopes to supply the fleet of rockets needed to sustain human exploration. his company hopes to supply the fleet of rockets needed to sustain human life on mars. >> what we want to achieve here is to make mars the possible, something we can do. and that you can go, and is there a way that anyone can go if they wanted to vonnie:. vonnie:nasa is developing its own spacecraft at the same time to bring people to mars. in less than five years it is planning to have its own rover joined nasa to explore the red planet for signs of life. the space race began in the late 1950's. the soviet union and the u.s.
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vonnie: it's 8:00 p.m. in london. oliver: welcome to bloomberg markets.
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oliver: we are live from bloomberg world headquarters in new york and the next hour. here is what we are watching. stocks falling and treasuries rallying after concerns among deutsche bank clients. avestor steve cases on mission to fund startups not found in silicon valley. we'll hear about his venture and who he is voting for in the upcoming election. the u.s. economy grew at a faster pace than originally expected. we are breaking down this and other pieces of economic data next.at the fed will do we are one hour away from the close of trading. julie: we are still talking
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about deutsche bank. major averages dipped more than 1% during the day but since in the have recovered to some mix. deutsche bank was the downward catalyst. here is the map of the groups on the move. we've had a little bit of a , but telecom stocks are little changed, as our energy. financials definitely still on the list, as bloomberg news is reporting that deutsche bank, some of its hedge fund clients have pulled some collateral from the banks. it's not a run on the banks. analysts we talked to say there is not a liquidity crunch at the moment at deutsche bank. it's enough to cause concern for and the ripple effect we are seeing across the other financial stocks. something else contributing to the selling in financials is what is going on in the rates markets.
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if you look at the 10 year treasury, we had been seeing a recovery in the rates, but then they turned lower when the deutsche bank headlines crossed. trend for rates has been lower, which is not good news for those banks. the wall street journal record i beported that qualcomm interested in buying the largest maker of chips for automotive uses. a potentialed about merger in the past. both of the shares are trading higher. obviously there is a share reaction. and a check on oil, date to after the surprise announcement that opec was planning to cut production. we don't know the details of those cuts. though should be worked out in november in terms of country by country at the next opec meeting. oil was languishing as investors were taking a step back and saying, will this change the
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fundamentals for oil supply and demand? traders shrugging that office an oil pricesn now working higher for the second straight day. vonnie: let's get a check now on the headlines. mark crumpton is in the newsroom. mark: officials with the national transportation safety board -- safety board are looking at what caused a commuter train to smash through a concrete and steel barrier as it entered the hoboken terminal. one female was killed and 108 .thers injured, some critically the terminals located just across the hudson river from new york city. the most important thing is the structural safety of that building and the safety of the people that were there. we did have was not someone on the train, but someone who is killed by debris that was created while they were standing on the platform, from
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the crash. says theernor christie trains engineers in critical condition but is cooperating with the investigation. president obama has signed a stopgap spending bill that keeps the u.s. government business, at least until the second week of december. congress approved a temporary spending measure, avoiding a possible government shutdown. democrats agreed to go along after a separate bill was passed that included money for flint, michigan's contaminated water supply. tropical storm matthew has grown into a hurricane as it moves toward islands in the caribbean. a storm watch is now in effect. it passed over the eastern caribbean yesterday, leaving one person dead. the hurricane is forecast to turn north and head toward cuba, jamaica, and haiti. there were 30 votes in favor of withdrawing the bid for the olympics, leaving los angeles,
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paris, and budapest in the running for the 20 24 games. global news 24 hours a day, powered by more than 2600 journalists and analysts in over 120 countries. oliver, back to you. to the let's get back markets. stocks dropping off midday as banks tumbled more than 1%. that brought by news that deutsche bank clients were set to cut collateral on trade. it adds to mounting concerns about doing business with europe's largest investment bank. to an investor with $3 billion under management. he joins us now from san francisco. welcome, michael. investor trying to assess the potential systemic risk in markets here, where do you fall
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on the spectrum in terms of how dangerous this is? you are right, we don't own it, but it brings up a host of questions. specific,now anything these are rumors, so like everybody else, we are waiting for more information. it brings up the age-old question of the health of european banks. with respect to the german are there more banks like this? and more broadly for u.s. to mind ofit comes what impact it will have on the federal reserve going forward. we are in the camp that would like to see rates start to trend up. if that will happen in december or not, but we have been concerned for a long time that global concerns may bring in the fed, the fed being the central banker for the rest of the world. this does nothing to alleviate it mayoncerns and it --
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put them off even longer than december. that is the broader picture. oliver: even though deutsche bank has their problems systemic it morecountry, is dubious than the financial stocks right now? it doesn't look like will get a steady fed rate increase in terms of interest rates. the have to worry about capital requirements that banks of had to deal with for several years. canmany more of these risks there be before you have to start considering their weight on the broader overall market? >> it depends on perspective. if there's a lot of negatives, that sometimes an indication of where you want to look to longer-term gains. we actually like some of the financials. bigger, tooe the big to fail banks. we don't own any of them. we do own a couple of the
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smaller, second tier banks that are tied to local or regional economies. first republic bank, state mind. bank come to we think in the longer term, rates should go up. they need to be normalized. we are tired of the subsidy and we think financials will benefit from that eventually. and the balance sheets are stronger, which gives us some credit concern alleviation. now, taste on today's trade, which is only one -- based on today's trade, they don't look that good. vonnie: right now the s&p 500 banking index is only down about 1.4%, to put it in context. i want to talk more about europe. we heard some analysis on all of this, talking about the difficulties that sovereigns will have in europe going
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forward. this is a case in point. let's listen to what he had to say. it starts raising all sorts europeanons about the state overall. it's an atmosphere on leap -- of legal uncertainty. bullish would you be on europe, given that we are seeing more and more difficulty with sovereigns deciding their own fate? >> not vary, and that gets back to my earlier comment. there is substantial political and economic risk, balance sheet risk. rates are low and that has propelled the european equity markets at some level. there are more measures that could potentially be undertaken by the european central bank. that is another big question, maybe, maybe not. in our portfolios, we look to
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preserve assets and protect what we have learned along the way. i think there are substantial credit balance sheet issues and anemic economic growth. some have speculated that europe may be coming out of the worst iod.ts non-growth per you hope that occurs, because that will benefit the u.s. as well, but, again, i haven't seen it. i still don't think we are seeing robust economic growth here in the states either. there's a lot of questions, and europe is one of them. viacom,looking at following the potential merger buyout. is this a company that should be a buyer of viacom? >> we own both, so as a result i look at them differently. and hasbeen well run
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been growing. a, has underperformed operationally. the soap opera in the boardroom has not helped. it makes sense that they might consider merging, since they were married once before. but that doesn't mean they should get married again. it is a prudent step for the stockholder to direct the boards of both companies to investigate it. that way we can determine if it makes sense or not. or doesn'te it does at this point. i am awaiting more information, myself. we are looking to evaluate it for the benefit of both companies as a combined entity. it will be interesting to take a look at. i'm anxious to see more. oliver: thanks for your candor on those two stocks that you all. -- that you own. aol cold for --
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cofounder steve case hits the road to seek investments in unknown pockets of the u.s. this is bloomberg. ♪
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oliver: this is bloomberg markets. , cofounder ofcase off across the u.s. on a bus tour, five cities in five days. it's aimed at investing in startups outside of silicon valley. greaticon valley has momentum going, as do boston and new york. if you look at the cities over
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the past 100 years, there has been a rise and fall. 75 years ago, detroit was the silicon valley of its time. uber iseresting that betting its future on pittsburgh . 500 engineers there focused on driverless cars. carnegie mellon is a great university there. a lot of augmented reality technology companies have raised millions. they are in baltimore doing interesting things. are four billion dollar unicorn companies on wall street. over time, though cities will be able to build more of these breakout, iconic companies. we've at the same time
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been hearing about all these unicorns, we do also -- we have also been hearing about the winter coming. i feel like i've been hearing that for years. steve: the late stage growth equity market was overheated a year ago and it has come down a little bit, but there is still a lot of capital out there. i think the capital is focused too much in places like silicon valley. that is where most investors are focusing. in valuations of companies these other cities is lower. that's one of the arguments i make to investors. you get on a plane to visit some of these companies, you will find great entrepreneurs building great companies. betty: are you seeing any trends at all when you do these tours and your hearing pages and seeing these companies, are
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there any trends you are seeing? steve: i focused on it in the wave is taking the internet to the next level, integrating it into our daily lives. health care, energy, food, transportation. a lot of the cities are focusing on most third wave sectors. a lot of the companies are in .hose cities i think that would just accelerate over the next decade. betty: are we talking about artificial intelligence, the internet? all of the above. when you talk about building the internet, that took 15 or 20 years. the last 15 or 20 years has been about software and apps building on top of the internet. food,y we think about
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stay healthy, the way the kids learning classrooms, has changed a little bit in the first and second wave. it will change a lot in the third wave. when i did the first one, we weren't quite sure what we were getting into but we focus more on what is happening in these places and feel more of a sense of possibility within these cities. my expectation is we will continue to do it for years to come. betty: i remember you cycling around detroit, around a company headquarters. >> they are now expanding around the world. there are a lot of jobs it created there. maybe entrepreneurship can bring detroit back. topic inat is a big
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this election season. i know you are doing a first, you are coming out and endorsing a political candidate for the first time, hillary clinton. why? steve: as you say, i've avoided politics, i've tried to work in a bipartisan way to get the jobs act passed. this is an important election. hillary clinton is the best person to lead the country forward. the policies she has put in place around technology and startups have been very important. has not put really policies on the table around startups, innovation, and technology. i've been quite concerned about what he said around immigration. immigration is not just a problem to solve. we should not be focusing on a wall, we should be a magnet trying to focus on people coming
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here. tois too important a time sit on the sidelines and that's why i decided to come out and support hillary clinton. betty: was there a turning point that made you finally say i'm going to be public about this? steve: i was reluctant to jump into the political fray. i want to be a consensus builder and a bridge builder, but a few weeks ago, i decided it was time. betty: are you going to be out fundraising for her? would you consider working in government? steve: i'm not planning on fundraising or being in government. i'm for working together in a bipartisan way. am jobs act is one thing i proud of. i did testify on immigration. i'm happy to weigh in on these
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issues around innovation and startups and jobs and growth, but i'm doing it through the prism of being -- leading an organization. oliver: can technology still outperform? we will find out. this is bloomberg. ♪
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oliver: this is bloomberg markets. vonnie: it's time for options insight. joining me is the manager of kkm financial. he is in chicago. dan, it seems like it was going to be a quiet day, and then we saw a spike in volatility midday. we saw deutsche bank u.s. shares plunge. what kind of options activity have you been seeing?
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of: we went from a narrative observer to action mode pretty quickly when the new started to break about deutsche bank in what is going on over there and the potential of what it could mean for the market going forward. big pickup of activity in the last couple of hours. activity in big october and four december, we're seeing 22,000 december 8-put trading. julie: we are trading at about $11 right now. i do want to get to your trade for the day. that has to do with technology, which has been leading the recent leg up, the post-brexit leg up in the market. do you think that move still has some legs here? dan: i do.
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when you look at the fundamentals, the technicals, moving into earnings season, it feels like the narrative is that this could lead the market higher. i'm looking at a call spread here for october, a short-term play, basically. it's less than 1% above where it is currently trading. i could see it going to 50 very quickly. i'm thinking of call spread here really makes sense. about are you concerned valuations? stocks like amazon are trading at a record. microsoftyou look at and what's going on in the semiconductor sector, there is still some upside here. i think technology will lead us higher very quickly. julie: what is the downside risk
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for this call spread? dan: you're just risking about $.33. it's a short-term play. below 11,latility was if you break above 48, it will deleverage dramatically. you are not risking too much, and the resort -- rewards could be significant. julie: thank you so much, we appreciate your time. oliver: still ahead, part of our exclusive interview with jack lew. this is bloomberg. ♪ . .
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scarlet: from bloomberg's headquarters in mid-town manhattan, you are watching bloomberg markets. markets close in just under 30
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minutes. let's look at where the major indexes stand. we've paired some of our losses a little bit. the dow off by 155 points. financials remained a big drag and the nasdaq off by a similar amount. this check-in with abigail doolittle live at the nasdaq. lows on we are off the the nasdaq and stocks overall, but we are seeing a return to risk. this has been a lumpy week, up and down. the nasdaq has been on key for its first weekly decline in three weeks. the weakness is an old theme -- biotech and technology. care is the worst performing on the nasdaq by far, the index down 3%. the big names are dragging. this matters for the reason that the biotech index is on pace for its worst week since the middle nearly 15%h a
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weighting to the nasdaq. it could be seen as a precursor to some sort of risk off or pullback considering biotech is considered to be one of the risk there.ock groups out the technology drag is all about apple. apple down sharply after as a topremoved apple pick stock, saying apple has run too far, too fast over the last couple of weeks. salesally since iphone 7 may not be as robust as scarlet: some are thinking. scarlet:a give back there for apple. we have some possible deal news involving two semi conductor companies. one of them being qualcomm. both shoot saw higher on news that qualcomm could buy them. if this does go through, it would be another example of all
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em and day we are seeing in a semi's faith of the companies fight falling customers and rising cost. it could be one more example of m&a in the chip space. abigail doolittle, thank you so much. joe: the big story today is deutsche bank, the way that is roiling markets on the news that some investors are moving their collateral with the company. you sent out a note that said this is not really that much of a broader concern. market is down but not that much. deutsche bank in the broader realm of what is happening. peter: everyone wants to talk about lehman and page and counterparty. a lot of things have gone on in the market as a result of that issue. there's a lot more clearing
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mechanisms and even deutsche itself has been in the news with single name credit default swaps. risknk there is systematic to the system but it is much reduced. that may be the case, but our reporting shows according to an internal bank document that the number of funds that clear derivative trades have drawn excess cash decisions. are they no longer trading with deutsche bank? say you were doing all sorts of business with joe and he had to post $50 and had 100 and the account. you leave the money in because it's easier than passing money back and forth. now maybe you say i don't want that extra $50 sitting with joe and take it back. there are issues from the longer-term longevity. i think it means their prime brokerage business is going to slowgle, but it is a long,
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play and a grind on earnings. but it is not an urgent thing like what we saw with bear stearns. joe: in the example you gave, we're still doing business. it didn't really need to be there. look at a company like deutsche bank. it is gigantic. even though it does not match the risk profile of bear stearns, people look at this enormous company and get nervous. from a liquidity standpoint, does deutsche bank have plenty? peter: the ecb is there for them, providing financing. have to haveks their last will and testament done. no one is willing to risk a lehman brothers type moment. they have a lot of funding available from the ecb. level, it is in no
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one's interest to let that collapsed. go to zero like bear stearns or aig? yes. yesterday very careful but i very much going to be directed at a senior level. as politicians get involved, it's more at risk. but the safety of preventing a lehman moment will meet everyone's expectations. scarlet: comments can get blown out of proportion. one analyst said stay away from deutsche bank shares and deutsche bank credit. peter: i think that tipping point phenomenon where people are not worried about that excess cash are saying the prudent thing is to not have that excess cash. can tip quickly which could accelerate any need for capital races. theset comfortable with
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things that have been off and on a story, but at the senior level, more comfortable because it's no one's interest to risk a lehman type moment. joe: is there anything proactive deutsche bank could do? peter: they're going to have to make a decision that we need some capital let's raise capital . that's one thing we saw with lehman. lehman had opportunity after opportunity to raise capital but never liked the terms they were getting it on. i think they have to embrace their biggest holders and find a plan, but they have to do it quickly. you can't have the arrogance that it is this as usual anymore. scarlet: how do other banks benefit from this situation? peter: i think right now it's in the interest of all banks to assume this does not turn into a lehman brothers type moment.
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everyone is taking a close look to make sure they are paired. making sure they are ok and urging deutsche bank to fix itself as much as possible. anything they can do on the regulatory front? the was a request for $14 billion. is just hanging over. if they were to pay the full amount, is there anything on that front? peter: that's where this leads to a logical improvement, maybe stepping in and seeing what is going on with the department of justice. of fine was way out of
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order compared to what other people are paying. 100% level and something should be looked at. the dow was off 140, now at 120 -- everything fell at the same time bloomberg news reported it. do you think this is the market assessing it correctly? peter: yes. i think the market is a little overvalued, so i would like to see more of a selloff but i don't like these stomach risk as a reason to be selling off. the reaction was overdone, but it is a reaction about this whole liquidity. you saw how quickly that can drop way. i think you are supposed to remain very cautious, not just because of deutsche bank, but because it's one of multiple
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aories that risk disrupting relatively complacent and possibly overvalued market? scarlet: what are the stories that can be a bigger threat? peter: i think we have the a biggerand that's threat. normally janet yellen does not know the answer and seems it doesn't care, but the questioner into theigging conquest of interest and it looks like she felt uncomfortable and that's an issue as we head into the election. does the fed become concerned they are viewed as political even if they are not? what is up with the brexit? bank of doj take it -- japan take advantage of the rates? ,oe: the head of microstrategy thank you for coming on and breaking it down for us. scarlet: i spoke with dan davies research analyst
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along with julie hyman and erik schatzker. dan: it does not so much look like a liquidity stress. it effectively funding itself. losing customer business across prime services and hedge fund business. that damages the long-term profitability of the business. loss of confidence begins to snowball, how would we see that play out? dan: the business unit of deutsche bank need to be looking at his global transaction banking. that's the corporate deposits and payment system at deutsche bank and it's a significant and
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material part of the funding for deutsche bank group. if they start losing balances from global transaction banking, i would say this is a thing that has to be taken seriously. you had to advise deutsche bank war were expecting them to come out with a response, what does it do before trading tonight to stem the confidence believe? lead --onfident confidence bleed. dan: i would give the advice that the earlier you raise capital and the more capital you raise, the left -- the less pain there's going to be. that all of him deutsche bank come about 2.5
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billion euros will be paid in get some large anchor investor, maybe sovereign wealth funds and raise other 2.5 billion. if that happens, we could see some interesting things in the share price. you could see some surprising behavior. scarlet: that was dan davies speaking with us earlier today. coming up, and exclusive conversation was treasury secretary jack lew. this is bloomberg. ♪
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scarlet: this is bloomberg markets. i'm scarlet fu. u.s. treasury secretary jack lew is in new mexico -- is in mexico today. he said we cannot separate u.s. interests from international interest and sought to deepen the relationship between the united states and mexico. he spoke about commodity prices and the effect their having on latin american prices. sec. lew: commodity prices go up and down and economies have to be able to weather the in commodity prices.
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if you look at commodities in this region and around the world, the economies that are well-managed where fiscal and monetary policies are well-designed, where structuring -- structure reforms keep the economy growing can benefit when things are going well and be when they are not. i'm quite confident about the u.s. economy and quite confident about the future of energy development. it's a question of when they are developed, not whether they are developed. i think we are seeing sustained growth and our expectation is that will continue. david: taking what you're saying about how you can judge a country's health and how they whether the ups and downs, how successfully have resell and argentina dealt with the downturn? sec. lew: here in mexico, the government has sound fiscal policy, sound monetary policy, they managed their oil revenues
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so that they were cushioned for a couple of years of low prices. in colombia, there are two things going on -- it's not just the price but volumes of production have gone down. they knew that was happening with or without a change in price and had a budget built on an expectation that revenues from oil would be declining. it has an question impact on an economy where oil development the next word is a major part of the economy but if youlook in this region, have seen government economic policy help to stabilize the ability of the economy to be resilient. it doesn't mean there isn't a negative drag, i think it has been a good example of good fiscal policy. david: we have been looking at the pay so throughout the campaign. what is your answer to those
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worried about financial contagion because of the election? for our history, it's been the central to our economic interests. i think we have deep relationships here that we have put a lot of emphasis on developing and i'm here to speak about that. there's no question but that the u.s. and mexican economy are very much interconnected. you look at the number of people who go back-and-forth, the goods that go back and forth. we sell a lot to mexico. it's important for both of our countries to do well and for both of our countries to do well together. david: i imagine you are more .nterested in monetary policy but there will be a conversation about the prospect that your speech is much more about oh and this. sec. lew: very much. there's a lot of anxiety in the world today about the effect
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technology and globalization are theng on the daily lives of people not just in the united states or mexico, but we see it in europe and we see it around the world. be to shutcannot ourselves off and say we can do better with lower growth. say wewer cannot be to are going to separate our interests from the interest of neighbors. we have to look at why that anxiety is there and i can speak from a u.s. respect. it's hard to understand. we have had policy proposals over the years, some have been enacted. there are a lot of people who don't feel they have benefited from economic growth. people will say what does it mean for me. in the thing people
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see, we have infrastructure that needs to be modernized. it also means that we tell people we care that you sit for two hours in traffic morning. we know people are worried about where -- will their kids have the kinds of opportunities they have. secondary education, technical education, we can help people get the skills they need. childcare is a burden most working people struggle with. we've had proposals and some of success but we need to do more. -- some success, but we need to do more. if we are determined to have overall growth touch her life, we can get back to a place where there's a broader understanding that there is a benefit to interconnectedness. joe: that was our exclusive interview with u.s. treasury secretary, jack lew. scarlet: the hong kong stock market may be headed for its best annual performance in four years, but not all shareholders are happy.
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this is bloomberg. ♪
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scarlet:scarlet: this is bloomberg markets. i'm scarlet fu here with joe weisenthal. we are moments away from the close. upe to look at what's coming after the bell. i'm focused on costco. joe doesn't go because he lives in the city but the company will be reporting earnings after the bell. story is an impressive one because as retailers struggle to lure people into their stores, cosco is in a good job. same-store resale -- same-store sales have risen because cosco
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is able to get customers through the door. analysts call it a treasure hunt experience. customers can get one-of-a-kind that encourages repeat trips and impulse purchases. i know you are a cosco virgin but if you were to decide you like something there and you put it in a shopping cart, it's going to be nine dollars or $10. joe: cheap but costs a lot because it is in such a large size. scarlet: it's value for money. you are buying something that will cost nine dollars or $10 each time. or $60.l goes up by $50 some point, i probably won't be living in downtown manhattan.
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i'm looking at a construction company in hong kong. the stock absolutely cratered less like, ending down about 30. tumble isd it to anonymous analytics. nobody knows who is behind it. the twitter avatar is the anonymous avatar with the mask. down biases they take companies for the lulz. one anonymous hacker group says they are having all of these troubles with the business. the stock cracked and the company has no idea who to address the complaints too. there's nothing to say, they say business is fine, but there was something in the report that anxiety aboutf the state of hong kong construction companies, but this
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is the perfect capsule story of investing in the modern era. scarlet: that is a great way to put it. because they are not a highly priced stock. 36% but at $.41, it's a penny stock. speaking of down pretty hard, we had stocks really tumble in the wake of bloomberg reporting that clients deutsche bank were pulling excess cash in positions from deutsche bank. off, the s&p 500 losing 18 points. the closing bell is next. this is bloomberg. ♪
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scarlet: we are moments away
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from the closing bell. mountingclining and concerns over deutsche bank as banks.s global i'm scarlet fu. joe: i'm joe weisenthal. scarlet: all major groups decline. joe: the question is "what'd you miss?" overet: a growing concern deutsche bank and 10 joe: hedge funds reduce exposure to the german lender. cosco earnings out in 10 minutes. we're looking at whether the visa except issue has led to more members. scarlet: columbia posco government signed a peace accord . we will get how the deal impacts the global economy. begin with our market minutes. the dow losing more than 180 points in all 11 industry groups finishing lower.

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