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tv   Whatd You Miss  Bloomberg  November 18, 2016 3:30pm-5:01pm EST

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membership and we have worked with all u.s. administrations. actually, one of the leading presidents support in the imf was president reagan appeared so we look -- reagan. so we look forward and we are prepared for that. mike: thank you very much. scarlet? scarlet: thank you. "what'd you miss?" starts now. ♪ scarlet: we are 30 minutes from the close of trading. live from our headquarters in new york. alix: it is like old times. scarlet: the band is back together. u.s. stocks on track for gains.
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joe: but the question is, "what'd you miss?" scarlet: some are wondering if president trump will take on a more moderate taliban candidate trump. and wondering how to invest during the election, keeping growth high and the continued growth of populism in europe, goldman sachs outlining trade ideas going into the next year. and started to get a reality check with returns from hedge funds, why take risk if you can put retirement money into passive products. we will hear from the ceo of a billion-dollar portfolio. to get a look at major averages. abigail doolittle is a standing by. abigail: not a lot of action. the dow is at 6500. all are trading a little bit lower. are back.ekly gains
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as to what is helping with technology, microsoft a top percentage perform it. it is up on an upgrade. nid the lady likes -- beli likes the business. and really on fire as google says they have added -- to their cloud platform. and our team spoke to them yesterday, saying it adds to legitimacy for amd. they are up on the year. it is a huge winner. and a top performer, we are looking at the financials, bank of america, citigroup, jpmorgan, and wells fargo are higher for the week. that is after the big rally last week. jpmorgan earlier put in an all-time record high. and helping the banks with the
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rally in rates, helping the banks to lend and make more money that way. we are seeing strengths. and we are looking at the bloomberg. 4872, looking at this chart, this is provided from jonathan. it is a great chart. laste the xlf over the three years. we see that it recently put in a new high, raking in about a 20% high. and the tremendous outperformance of the financial sector, relative to the s&p 500, downtrend.out -- a and we believe the rally will go into the end of the year. so that is for the financials. name with thebig markets is not so much the
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financials club but the dollar strength. scarlet: unabated over the last couple of weeks. looking at it compared to the mexican peso. joe: incredible. and we are looking at the long and -- end later on in the show, showing genetic -- showing how jim it has been. and a great story right now on the terminal on how the goldman sachs options, it looked like they made millions for the goldman shares surge at the last second. scarlet: looking at it right now. donald trump making millions of dollars for those insiders. joe: congressional leaders from the left and right speaking out about the need to make washington work again. there is let chuck schumer told reporters after being elected the senate minority leader. >> we are ready to stand with republicans, working with soon-to-be president trump on issues where we agree. but we will go toe to toe
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against the president elect whatever our values or the progress we have made is under assault. of: it is in the hands donald trump and the gop, can be conservatives and democrats by the common ground? we have a fellow from the roosevelt institute, mike, thank you for joining us. you heard him, it seems in theory that there could be room for democrats to find common ground with donald trump on infrastructure, do you buy it? or is a trap? mike: it is a trap, there are big problems to see any kind of progress. three big things to remember. one, the big priorities are some sort of weakening of health care legislation, either obamacare or medicare. and also a big reduction in tax
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cuts, the big-league tax cuts. paul ryan has engineered the caucus to move past this with 50 votes in the senate, budget reconciliation. and they knew they would do it when they had a friendly president. it will not require democratic votes. there has been a big fight over medicare and it is not going to involve getting them to sign up for something, so no give and take with democrats. the big proposal that could work between the progressives and the trumpet of ministers in, family leave or childcare, and then if a structure policy. and proposals that have been floating are not very good ones. not really one's good for progressives. tax cuts that would not do a good job stimulating the economy or providing security for families. and i think it is wishful thinking, it has only been about 1.5 weeks since the election and people are taking this from
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trump and hoping there will be a policy. the jump campaign was built on, i will get stuff done. what will it take to get the democrats on board to get more initiatives? done? repeal forca instance, from what we have seen, they have not gone to the democrats and a set of kumal we have pullback this part of dodd-frank and we will make the stronger. no give and take with that policy. and it was not in 2009, obama facing a similar situation with 60 votes in the senate, wanted republicans to come together. and it looks like mitt romney's plan, the heritage plan, the idea that it could be delivered to the private market. so i think in that sense it is problematic. and the structure -- inf
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rastructure, been in said he wants - -bannon once trump -- joe: we have the quote. it says, with everything's related to jobs, the conservatives will go crazy. i'm the guy pushing a trillion dollar plane with negative interest rates. it is the greatest opportunity to rebuild everything. get them all jacked up. we will throw it against the wall and see if it sticks. it will be as exciting as the 1930's and greater than the reagan revolution. it will be an economic movement. it sounds like something you could have written. mike: if i thought there was going to be -- you know, i am --d people like steve bannon if they had an inclusive vision it might work. i do not think they will deliver. they will do a big tax cut,
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putting trillions of dollars in for the next couple of years. it may or not break us out of stagnation and we may not get inflation up, which would be good for the economy, but a bad way of doing it. it is disproportionate. and things we are hearing our tax credits for private investment, things that will crowd out people. basically pay companies to do what they are going to do anyway. and it is not rebuild infrastructure. if there was a trillion dollar kind of new deal, wpa hoover dam style thing, then that would be amazing. i think we will have a small, private tax cut and equity fund that will not think very much work. scarlet: you mentioned that donald trump does not really need anything from the democrats, but one thing conservatives were not ready, because they did not expect the election to result this way, was a replacement for obamacare.
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so what should progressives due to press an advantage of their? -- there? mike: it is interesting, they will have their own challenges. dodd-frank, the moment you pull out pieces of obamacare, it can collapse because it is kind of this agenda block -- jenga block of reform. and the parts reinforce each other, and you can weaken it and the whole thing would not implode with like the aca. what you will see is, what you may see is it is repealed, but the actual ending of it for the day-to-day people will be kicked out maybe in two years. i think you will end up with a clunky situation where it is isr, but in practice it going along. joe: one thing from the profile that caught your eye was bannon slammed democrats for their
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association with those companies that have billion-dollar caps, the unicorns, that the democrats talk about disruption and startups and you think he is right, that that is a misguided obsession with mainstream democrats. mike: the idea that we will be postindustrial workers and itself entrepreneurs, that is often in a lot of democratic knowledge, i think that is a lie. for a lot of people, you are in on jupiter because you are fired from your job and you are fired back as a contract worker. most people work for a company with 500 employees or more, this is a big economy with a big scale. and i think donald trump's idea of bringing back a manufacturing economy from the 1950's is a lie. if it was not trade, it would be automation. the challenge is to make the service sector work for the middle class with secure jobs. and i am sad that he will not
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try to take that on. scarlet: when it comes down to it, we are talking about a revolution, but how far apart are the populists on the left and from the right? -- wesease comes in for did see convergence on the way that wells fargo handled the false accounts. mike: and the electorate has been swinging, we went from bush, 20,, now trump. the electorate is looking for an answer and it is swinging in different directions. --make him a donald trump people wanted a change. and clinton ran on a campaign of confidence, not what really excites people. i do not want to overlap the similarities. steve bannon said that people from wall street should have gone to jail for things relating to the housing bubble and
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financial crisis, but they are likely to put in an attorney general that built a reputation on attacking voting rights, not bringing criminals to justice. we will see where it lands. that is another thing that will surprise democrats, they were hoping there would be overlap with appointments and transitions, but so far they are pro-corporate. joe: great topic, great insight. thank you for joining us. lix: coming up, we heard from ms. lagarde and we will have more highlights from that, next. 20 minutes away from the close, the s&p 500 is down about 2.2 points. it was a record week for the s&p 500. health care the biggest loser come off by 1%. this is bloomberg. ♪
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♪ scarlet: "what'd you miss?" looking at the apec summit in lima. moments ago, our correspondent talked to christine lagarde. ms. lagarde: we have seen walls come down to the benefit of economies. i look at germany and when you look at china and when it was behind the great well, that is not what it was most successful. with theare stated by big question, what does she think about the u.s. and president-elect donald trump? trying to be diplomatic. trying not to rock the boat, and pointing out that there is a
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case for adjusting the lives of those that have been affected by globalization. she said, she noted that growth has been slow and perhaps something needed to be done. take a listen. ms. lagarde: but we certainly know is trade be done on a different page, if you will, where it will also be inclusive and we will pay attention to those whose jobs are eliminated, whose jobs are displaced. like nevertheless, she most leaders are nervous about what might happen if the united states withdraws from the world economic stage, but she says it is too early to make a decision. the imf has not begun to think about what they might do. scarlet: and looking at china, on the one hand, you have traded disruption that could be upsetting for their currency,
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but internally, they could look toward other countries for growth. any other comments on china? mike: we talked about china, because the two big economies in the group are the u.s. and china. with that transpacific partnership, they were trying to drive the rules of trade across the pacific for the toy first century, but if we are withdrawing from that, then the president of china is stepping in and trying to present a plan to increase trade that they have put together. it does not include the united states. what will that mean for the global power going across the pacific ocean? the trump administration, or the campaign, argued that china is trading unfairly. she did not say that is true, but she is keeping a close eye on what china does and they do
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not think that the yuan is undervalued at the moment and they will follow along to see what happens as china perhaps assumes a bigger role. alix: always a diplomat. thank you for joining us. scarlet: time for the room glowed -- bloomberg business flash. rivals, looking at dealing with products from emerging-market currencies, rate and debt. the bank generated $2.2 billion from macro trading in the first nine months of this year. and alaska air is close to reaching a settlement with the antitrust regulators in america so they can complete their acquisition of the virgin america. that is according to people familiar with the matter. and the settlement with the department of justice could be announced at the end of the month. officials were concerned it could pose a risk to competition. and draft kings completing a merger, controlling more than 90% of the daily sports fantasy
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industry brady the consolidation could have antitrust concerns and regulators will need to look at the tire. they could close the deal next year. terms were not provided. and if that is the bloomberg business flash update. joe: coming up, bonds going for their steepest two-week loss in 26 years as donald trump cents inflation expectations is surging. we will take a look my next. this is bloomberg. ♪
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♪ scarlet: i'm scarlet fu. "what'd you miss?" a massive repricing following
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the election victory of donald trump. and it is not saying more so than in bonds. taking a look at the bloomberg barclays index, the measure of the global bond market, the high limitednd the route not to one profile. it is universal credit and you can see at the far right. these are two standard deviation movement, something we have not seen since 2015. not something we see that is very common. and the inflation story was already taking place, but the victory of trump accelerated that and everybody is looking at different scenarios, tighter monetary policy included. worseemarkable that it is than 2013 and the bond selloff. i am looking at something similar, the newer version.
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we are looking at treasury yields and the one-month change on the u.s. tenure. -- 10 year. it jumped over the last month. the biggest jump since the beginning of 2010. 5.1 in the 31 -- up last month. even more dramatic if you think about how much of that was done in the last couple of weeks. think about inflation and higher rates and growth, but to what extent are the entire rates going to start impeding on the u.s. economic recovery? we spoke earlier about the connection between higher rates and mortgage refinance is. -- re finances. we have not really talked about what are the downsides of this? that could be a bigger story in the future, the negative side. scarlet: these go hand in hand because this is a drop of
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prices, being driven by the treasuries. joe: two ways of showing the same story, clearly the biggest market story of the moment. scarlet: and what it means for other areas of the world, think about donald trump, there will be borrowing -- joe: we were talking about negative rates. scarlet: now you are paying 4% or 2% on what you want to borrow. joe. this is for you i am bringing you a commodity chart, one-month oil volatility. this will highlight what has happened, this spike in volatility, the range of 43-50, all on the edge of opec. this is about opec and with a will or will not do on november 30. every day, a new headline and this is a moving the oil prices. saudi arabia mentioned to
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specifically a cut to 32.5 million barrels a day. and that would imply a cut. the theme we are hearing is they might agree to a cut, but being able to have an actual cap will be elusive on november 30, so what will that mean for the market? there could be a downside for that. scarlet: that was a concern, following the last meeting, is a they have not figured out what country will do what. alix: when i spoke to the secretary general, he said we are all on board and i asked about assurances, and he said, we have them. but the market is not necessarily believe in it. scarlet: not just oil, we want to show you how the market is getting ready to close. take a look at the index, we have the dow industrials closing down and it has been an up week over all. down 37 points for the nasdaq. barely changing.
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this is bloomberg. ♪
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♪ away frome moments the closing bell.
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u.s. stocks slip into, but it was the dollar that extended its rally. scarlet: it could pose risks following the u.s. election. scarlet: i'm scarlet fu. joe: i'm joe weisenthal. alix: and i'm alix steel. joe: welcome to viewers who are coming in live from twitter, you can watch every day on weekdays. scarlet: we begin with the market minutes, u.s. stocks closing lower on this friday, but the second straight week of gains for the s&p 500. groups,d within the there were seven that were lower. scarlet: it was to the downside. it is hard to call it a down week for the equities. alix: $31 billion injected into the u.s. equities and in newer can ucs clearly when you look at s&p financials. you can see the rally, the month since donald trump was elected
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president. joe: amazing. alix: a different story when you take a look at the mix -- vix. twoe was a drop in just weeks, down 42.5% and it shows how quickly the market re-rated. we have $31 billion injected. joe: a look at bonds today, the yields are higher across the board. that is the theme of the postelection market. the 10 year yield right there. take a look at the longer term chart. it is at the highest level in a little over a year, the last time we were here was early november 2015. so that is an incredible surge. scarlet: we saw asian central banks taken a back by how quickly the currency is where faltering. that is in malaysia and india as well, to support their
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currencies. and if you take a look at the yen, they had their biggest weekly decline since january, that was when you valuations triggered it. alix: i remember. scarlet: people were worried about recession and it is happening again. the situation has changed since january and donald trump calling china a currency manipulator, so factor that in there. and the peso extending a decline, even after they raised rates by half a percentage points. a sign that investors expected more from the central banks were they expect more rate hikes in the weeks to come. alix: looking at nickel and copper and lead, reversing the monster rally we saw. they are dropping. we have a strong dollar and the china property market cooling off, so that was hurting the industrial metals. i want to highlight gold and silver. the monster downside for gold
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and silver. silver is in a bear market and gold is nearing a bear market. it is off over the last two weeks. a quick re-rating that we have seen. if you are going into election day, you were burned. commoditye miss the perspective. those are the market minutes. taking a deep dive into the bloomberg. joe? joe: talking about the weird postelection action, this is what i have been following. this is a one-year chart, the closeine is the s&p 500, to a record high and the white line is the goldman sachs financial index. up until the election, they were both have thebut
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effect of tightening financial conditions, but there is a clear break away where the stock market is rising and you can zoom in and really see this sharp divergence since the election. scarlet: does it last? i am looking at the 10 year bond premium, you can see that the red line is the 20 year average, 1.2% and the white line is -- and a huge jump where we have positive territory after being negative for so long. alix: how much more do they run? you can make the argument that there is a lot of room, but the higher term premium is growing more than they expected path of the short-term rate, so is that going to be a concern? pointing this out, is there uncertainty as to what the fed will do with inflation and the current balance sheets?
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there could be a fear in the market. scarlet: so looking at stocks and bonds, now into currencies, the dollar on a terror. we are looking at 3/10 of 1% of a record high. there is our favorite rate of the day. a two-week jump for the dollar, going all the way back to 1988. that is when the greenback started to stabilize. joe: i do not remember. alix: i was nine years old. somewhere. scarlet: and since november 4, the dollar has surged to almost 111, that is almost 7%. joe: talking more about incredible moves, we will bring r, andt basel are -- bosle thence -- vince. the dollar is an incredible
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story. 1988 veryemember well. joe: big moves like this, will they be reversed? vince: there will be consolidation and you get moves like a this, especially going into a long weekend. but this is the beginning of a base for a major dollar surge. central banks getting out of the business. $10 billion of negative rates out there. it will get ugly. ratesatt, talking about nonstop and the big surge for the long and yields -- end yields. you are looking at them differently. what is the butterfly and why is it important? matt: we are looking at 10 year treasury yields, looking at the curvature of the yield curve and
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how different parts of the curve are changing. what you see -- scarlet: we are getting into four dimensions. matt: not quite, but you can see the 10 year yield was rising since the election. this is a similar idea to the term premium that alix showed. you can see that throughout the course of them especially at the end of last year, we had a plunge in the 10 year yields relative to the 30 year and five year. and a flight to safety. the first thing you can reach four is the 10 year treasury. so we had a depression of the yields and now it is unwinding, so it started to unwind a little bit before the election and now it has surged, people are dumping the treasuries. scarlet: so what does this mean for the fed? you have a potential growth coming down the pipe and inflation picking up and a rereading of the neutral rick, so what will it mean for the
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fed? joe: if you want to bring up the double butterfly chart, what are we looking at? line is what we looked at, but the blue line is the new one. you can see this is more of a trade about fed policy, because the fed policy impacts the five-year the most, so you can really see what is going on and you can see that it was actually declining, they were going down even when the 10 year yields were going up, just until the election. all of a sudden now it is a game changer for the fed policy and the overall longer-term. scarlet: available on the bloomberg. alix: when you look at this move and of the steepness of the curve, how does that put pressure on the central banks and asia to deal with fall out?
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scarlet: they are looking at a rapidly losing value. nce: there was a lot of movement out of the treasuries and a triggering movement out of programsnd algorithm are pricing the dxy, this correlation, markets going off all week on it. and when you look at gold, as you mentioned, when you see the u.s. rates going higher and approaching what developed market currencies yields, why take the risk when you can get a great yield in the u.s.? joe: markets pricing and a rate hike in december, and according to cut collations -- at what point do the stronger dollar and higher yield become a concern
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for the economy? matt: that is the biggest question right now. the chart you showed earlier with goldman sachs, the sox are a big component. joe: it shows how the divergence is more extraordinary. matt: we have had in say moves over interest rates and the dollar in the last week. when we already see it getting housing and mortgage applications are down a lot, from last week, so there is a real question -- what is this going to do to the housing market? even with construction and issues in the u.s. economy, how will it play out? we will find out soon. scarlet: and once you have the dollar index hitting 100, it does tend to back off and there was a reverberation through the fed. we are through that level today. vince: it is a blessing for the fed. this the most policies being tossed around, if they go through, the fed could move away
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from negative rates and we get back to normalization and we could push people off of the fence, with housing for instance, who were taking it easy. so why rush into things? there could be a sense of urgency all of a sudden. .oe: great conversation thank you very much for joining us. scarlet: breaking news, a new york attorney general reaching a settlement in the trump university case, $25 million settlement and the donald trump will be paying for some of the $25 million for violating education laws. the new york attorney general reaches a $25 million settlement in the trump university case. i thought he was supposed to be testifying. i guess this will move that. joe: he has other priorities. scarlet: in any case, that has been resolved. coming up, taking a look at how donald trump's election when --
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win is affecting asian currencies. this is bloomberg. ♪
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♪ mark: time for first word news. president-elect all-time has agreed to settle a lawsuit over trump university for $25 million. that is according to a report by reuters. claims that were brought by the new york attorney general while -- will represent $4 million of that amount. armyelecting a retired lieutenant to be the assistance of the president for national security affairs. the 57-year-old flynn is head of the defense intelligence agency and has been a surrogate throughout the campaign. he has also been a vocal critic of president obama's strategy to
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combat the islamic state. and donald trump has selected jeff sessions to serve as attorney general, but he could face a tough confirmation process. when he was nominated to be a federal judge, he was haunted by racist comments he was accused of making well and alabama. he has denied the allegations and he had withdrawn from those -- and putting in outdoor spigot and other water fixtures after high lead levels were found in the water. conducted the summer found that 9% of water sources exceeded the standards set by the environment the protection agency. and massive wildfires have forced hundreds to leave their homes in chile. the fires started -- scorched pastureland you to trees, making
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it harder to contain. global news, 24 hours a day, powered by more than 2600 journalists in over 120 countries. this is bloomberg. scarlet: thank you. a clarification on the breaking news, the new york state attorney general has settled the trump university case. it will be for $25 million and according to eric schneiderman, the victims will be rewarded by this settlement and donald trump will pay penalties to the state for violating education laws. back and facebook buying $6 million of class a shares while the stock moves up by about 1%. facebook buying up to $6 billion of us -- class a shares. if we get more details, we will let you know.
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and interestingly, you pointed out that this was a stall wart, the buying back. it has supported the market and the idea that it could wear off and you could see it go to cap x. rising: facebook shares in the after-hours trade. and for the second time in two weeks, the donald trump presidential win will be affecting asian countries. joining us on the region's michael blithe, the chief economist at the -- a bank in all-star you. so generally we follow the old tripe that we want to weaker currencies, but this is a case of choosing the borrowers over exporters? corporatesworry was taking this on and how it would --in this environment, which
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it will crystallize those problems. scarlet: are they going to be able to sustain that? be short-term volatility. we have taken a leap into the unknown and we are looking for clarity on it. i think it will continue. joe: speaking of asian currencies declining, the chinese yen continuing to get weaker. not a lot of attention on it. people are watching, but it has not been a market mover like it was earlier. perhaps because it has been smooth and people think that the government is under control. where do you see this going? >> that is right. we are transitioning to a new system and the way that the chinese manage their currencies, it has been good so far and we think it will remain a background issue. other things to focus on right
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now. scarlet: if we do get a trade war in the u.s. with the new administration, it could hurt emerging growth. and this really limits the ability for the central banks to step in and help, do you feel like this is a risk for next year? >> we could have slower growth rates if we see the trade work, that is what people are worried about. and we could see those countries take action to prop up their economies. alix: how will they do that with inflation rising? >> it will go to fiscal policy where you expect the action to come through. scarlet: how about china, because if a trade war erupts, they will be in the cross hairs first. the people's bank of china has been cutting the rate for the past 11 days and of course the situation here is different compared to the start of the year, the last time we saw that
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devaluation. so donald trump called china eight currency manipulate her, so how much room to have to play with? >> they can cut interest rates a long way if they think the economy needs to kick things along. they need to replace the exports and certainly the central government has plenty of options in china, they could ramp up and look at fiscal expansion. joe: we have been talking about the bond selloff, one of the most dramatic places we have seen that is all still you, where you had a 10 year yield -- now above 8.7. so we are looking at what it means for practice in the economy so what is happening as a result in all-star you as it trickles into the economy? >> it is less important in australia's case. our central bank is on hold and
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there is a chance they could cut further. we are not looking at direct effects at the moment. you are looking at a central bank -- that is part of the reason our market -- scarlet: a similar question for fx, where the reach for yields has been capped. is it affecting the aussie dollar? from aave shifted tech mutual stance and it is actually positive. so the news we have seen has been a little bit surprising club but it does not reflect the big moves in some of our key commodities like iron ore. scarlet: what is the biggest driver for your country right now, is a china, or the dollar strength? >> commodity prices without a doubt but it can generate a lot of extra income for the economy. and when the prices fall, that
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will float into government revenue and the wages and the economy from there. scarlet: and commodity prices also driven from the u.s. dollar. >> that is a part of the story print and from our point of view china is one of those key drivers. scarlet: thank you. >> thank you. joe: coming up, goldman releasing the top trade recommendations and we will show you to three charts -- you three charts you cannot miss. this is bloomberg. ♪
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♪ scarlet: i'm scarlet fu, "what'd you miss?" trading recommendations from
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goldman sachs. blaster, they had six trade ideas and by mid february they had to abandon five of them. populisme first is on and it means everybody is looking at king dollar. what that means is the dollar is set to rise and the strength is underpinned by what donald trump will implement. in the u k, we are looking at inflation and brexit and a that will put pressure on the pound. and with the euro, there is anticipation that the italian -- could be to follow. so the relative compared to the euro and the pound, they would exit this position if it falls by 5%. of the post at donald trump trading environment, goldman sachs believes the inflation we are
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looking at will be a headline. there is a chart from goldman showing the gap between the 10 year treasury yield and the tenure --, the competition where the investors think inflation might go. goldman says this could go longer and i think it is interesting combined with the last thing, how much goldman sees 2017 trading environment really being informed by the triple x and to the immediate market reaction we have seen. so more inflation ahead. alix: that trade has a lot of people in it. everybody is recommending it. joe: everyone. alix: but if it is overcrowded, how do you find another option? going for looking at selective on emerging markets, they are looking at brazil,
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india and poland. there is a chart of all three of them. the white line is brazilian stocks, poland, and then the purple line india. these are what they say you should buy. it in in hunt hedged -- unhedged baskets. and they will buy out of them if it is above 10%. that is trade exposure. and that is how it will be. scarlet: it goes back to inflation. in a stronger dollar. commodity stability. we will be keeping an eye on these and how they play out over the year. with hedgetensions funds. and looking at kentucky and their portfolio, why they are taking a stand against high fees and low returns. this is bloomberg.
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mark: time now for first word news. president-elect donald trump all meet saturday with people who will be interviewing for jobs or offering him counsel. this morning, a spokesman gave reporters an update. >> one of the thing that's important to point out is these meetings the president-elect is holding initial thing that -- he is meeting with the best and brightest, the most qualified people. also to give advice and counsel how to besties on put together a team and enact a successful agenda. invitees are the cke restaurantd
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ceo for labor secretary. blocking the sale of drilling rights in the atlantic the and 2022 under a five-year plan. oil and gas companies had been seeking offshore options. joined the rest of her states in criticizing the move calling it "shortsighted." 76 academics have been detained at a university in istanbul. it is part of the ongoing investigation into the movement allegedly responsible for that attempted tcoup in july. officials from 21 nations have been reporting.
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the feasibility study into the so-called free trade area of the asia-pacific had been ordered at the summit in beijing two years ago. its findings had not yet been made public opal be presented for leaders of member nations on saturday. 24 hours a day powered by 2600 journalists in over 120 countries. scarlet? u.s. stocks slipping after this postelection rally. it finally petered out a little bit but it looks like it is taking a pause instead of petering out. selloff.modest the dollar continues to strengthen. >> indeed, taking a look at banks. they are light today. the biggest of the gains it september -- in september. it came continuing over the last few weeks. joe: and yields continued more
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today through the relentless march of higher rates. miss?t: what'd you investors fed up with hedge funds. funds billions from hedge . the next guest is one of those investors taking a stand. david is the chief investment officer for kentucky retirement systems that oversee $16 billion in assets. he joins us from kentucky. david, good to see you. you have pulled a million dollars out of hedge funds so far. how much more do you want to pull out? we made a board decision. yet.d not occur i we are in the process of doing that. we are responding to taxpayers that have concerns. we are taking a fresh look at asset allocation and the use of hedge funds. it was determined that there are
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certain strategies within the hedge fund portfolio. they may be aren't providing the necessary return for the cost. committee which is newly appointed by the governor a year ago. they had the investment committee that had investments .xperience we take a fresh look at our portfolio and we are trying to create a less complex, lower cost, more transparent portfolio. is it because of the governor finishing his first year in office that you are taking a closer look at co hedge funds have long been high fees and challenging returns. it is a news story.
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david: we are relatively new to hedge funds. we are not unhappy with the results. a 300 to 500jected return. our number is a 5% return. 6% andatility is 4% to we are at 5%. the results are not the issue. the issue is looking at low libor rates or risk-free rates. the absolute return may not be there and the expenses are still there. overlap thegies most with the traditional portfolio that is much cheaper. it would be equity market mutuals. it would be german strategies that have a lot of credit risk.
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the trend followers such as fixed income. needll not immediately those strategies. we will reevaluate those. create to see if we can different structures that have more transparency and lower fees. at the end of the day, the taxpayer and the legislature, they are not entirely happy with the results. we need them to be happy with what we are doing. in kentucky, we are one of the worst funded pension plans in the country. i need them to have total confidence in what we are doing with an investment staff. he will continue to do their hard work to keep the pension plan healthy. joe: i want to clarify something you are talking about. don't deliverthey performance, it is finding hedge fund strategies that add something to the port folio.
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to diversify the portfolio. and which ones aren't worth paying for? david: hedge funds, if you use means variance optimization, hedge funds will be a favorite of that because of the high risk return ratio. we had a sharp ratio. it is a very attractive ratio. in order to to do balance our risk return components with the goals of having increased transparency and lower cost, it led us to say long-short equity has a higher beta than the equity markets.
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of equity have a lot in the portfolio. we have a lot in the fixed income portfolio. there is no reason to pay for that. those that aren't represented in the traditional portfolio, the cheaper part of the portfolio. to staff and the investment committee to reevaluate that. scarlet: in general, what do you think is a fair fee in the low yield environment? david: first of all, very few people are still paying two and 28. of managersandful out there that still remain to and 20. there are other choices that they will feel pressure. i don't know if there is an exact fee that is right. smaller managers may still
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justify having that fee rate. if you are still requiring ,ustomers to pay 1.5% or 2% that seems a little high. you don't need cover the infrastructure. aboutt: you also talk high fees, disappointing returns might be an issue with pensions losing their favor or be less enamored of the hedge funds being less and hammered of the hedge funds. let the public perception of hedge funds is rich guys spending time in their penthouses. talk about how it may influence their position. david: the retirees, the government, those are my client.
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have those issues around how much those hedge funds cost. we try to educate the broader public on a lot of the contributions to the volatility. battle.een a difficult we are trying to strike this balance between the public's concern with the hedge fund managers in general. it's unfortunate. it has a negative connotation with investors. i don't feel that way. that and respond to find a balance between doing what best for the investment portfolio and accommodating the concerns for the retirees. scarlet: well said. david, thank you for joining us. joe: coming up, donald trump stacking his cabinet.
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who he has picked so far and the unexpected people he is scheduled to meet with this weekend. this is bloomberg. ♪
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you -- what'd miss? trumps white house center circle consists mainly of conservative white men, some of whose political views are well outside the mainstream. joining us from d.c.'s alex wayne, white house editor for bloomberg news. we got the first real badge of names -- batch of names today. jeff sessions -- tell us what we
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know about the people so far? alex: jeff sessions, very conservative. the republican senator from alabama will be attorney general if he can be confirmed by the senate. michael flynn, lieutenant general that was by trump's side will be his national security advisor. mike pompeo, republican congressman that wrote a scathing dissenting report on the benghazi investigation. he will be the cia director. scarlet: are you happy? sad? nervous? you are pretty happy with these guys. they are not strangers to the trump orbit so they shouldn't be any surprise to his supporters. one of the first elected politicians and the highest trump forat endorsed president. he was given his pick of cabinet
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positions. he's been rumored for defense and attorney general before this announcement. the 80's,uble back in nominated for a federal judge ship under ronald reagan and the republican senate to client to confirm him because of some statements he had made that were considered racist. will see if he encounters any trouble this time around. sinceeen in the senate 1996. he is well-known there. senators tend to have a bias toward confirming their own when the sorts of situations arrive. he may be ushered right into the justice department. scarlet: donald trump will be meeting with eight people on saturday including mitt romney, the former presidential candidate that recommended people not vote for him during the campaign. as well as the armor d.c. public school chancellor, a noted democrat. focus on mitt romney
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because he's been floated as possible secretary of state. earlier on, we had names like rudy giuliani along with john bolton, former ambassador to the u.n.. these are different candidates. what is he looking for in secretary of state? alex: good question. it is hard to tell. rudy giuliani may run into trouble because of business connections. he has represented clients including some kind of sultry governments around the world including the government of yemen. it was anticipated he may have some trouble with confirmation. john bolton was a strong whichte of the iraq war puts him opposite donald trump in that regard. him opposite puts the current senate. would be a shoo-in
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for secretary of state. i will pay each of you a dollar if it happens. i just don't see it. it seems incredible to me that this president-elect would appoint one of his fiercest opponents as his chief ambassador to the world. let's go back to jeff sessions and the current doj under the obama administration. they've made the pursuit of civil rights issues a priority. now we are looking at the prospect of an attorney general that couldn't get confirmed as a judge in the 80's over comments that the republicans and the senate found racist. think a department of justice under jeff sessions would pursue? what would be the priorities under him? it would be an anti-terror
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agency as it was under george bush primarily. lot to do under george w. bush and i think they will find themselves with a lot of time on their hands under president donald trump. the focus will return to terrorism. in the last hour, we broke the news that donald trump has agreed to pay $25 million to that hisaims university cheated students with false promises. was he scheduled to testify? was it a huge distraction to hang over his head? we will miss out on the scene of the president-elect testifying at a civil trial. it is kind of unfortunate but this is probably the smart thing to do by the president-elect and his people. i don't think they wanted to risk having him go on his stand. thanks for the update. scarlet: time for the bloomberg
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business flash. reaching a settlement with u.s. antitrust regulators allowing a $2.6 billion acquisition of virgin america. it's according to people familiar with the matter. the settlement could be announced by the end of the much. -- of the month. you're worried it would pose risks to competition. this move will affect the retirement of 13,000 u.s. workers. the freeze will take place in 2018. they plan a megamerger with dow chemicals. hosea cuervo has decided to move forward with an ipo. this is despite volatility to send assets plummeting following the presidential win. they are targeting an offering of his much is $1 billion. that is your bloomberg business flash. we will hearng up, from the st. louis fed president. what he says about the economic
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policies of president-elect donald trump. this is bloomberg. ♪
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scarlet: james fuller says some of the policies president elect trump could help restore order to a lagging u.s. economy. he spoke to matt miller in frankfurt, germany. the rollback of some regulations to the extent you think some of the regulation might've been overdone. republicans are betting they can roll that back. program, doneture properly, could provide some public infrastructure which could improve u.s. productivity and drive.
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some kind of tax reform that would repatriate profits from overseas. it could increase u.s. investment. there is some potential here. we have a long way to go to see if any of that gets implemented. and on these issues that were maybe more concerning during the campaign which are immigration and trade, to me, those are longer run issues. affects the macro economy. it takes a long time to unfold. if you are going to redo trade arrangements, you're going to negotiate over time with other countries. i would see that as a five to 10 year kind of horizon which is outside the box for day-to-day monetary policy. change how we did it.
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it would change you is coming into the country and that would affect the workforce over a longer time. those are slow-moving issues. i see the first three is faster moving issues. the near term, tax cut and tax reform, a boost in spending, maybe $1 trillion on infrastructure. that would add to growth and add to inflation. we have seen it inflation expectations take off. does this constitute a regime change for the st. louis fed? like a reagan expansionary regime? a new normal regime? can we go back to the reagan years? james: it is way too early to say that. but it has potential. the things that are driving the low real interest rate are low productivity growth which has been very slow.
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there are other terms -- returns that have been declining for decades. what we are saying is except the fact -- accept the fact that it is calling for not too many rating increases. we would have to watch for that. we would have to change monetary policy at that point. scarlet: james fuller speaking with matt miller in frankfurt, germany. joe: coming up, what you need to know to gear up for next week. this is bloomberg. ♪
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scarlet: stocks kind of sagged into the close, but it wasn't weak overall. treasuries continue to selloff. the day that continues the rally, you see a lot of volatility and commodity. scarlet: this weekend, the french are going to the polls for the first round of the republican party primary. there may notps be a great chance of doing well. >> on november 28, you get opec's meeting happening. said the consensus is building. that was in the news today. minutes from the november meeting on wednesday for the fed, they see december as a lock. 98% chance but we will see if we get more clues on that. scarlet: that is all.
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thanks for watching. you.we will miss great to have you back. have a great evening. scarlet:
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>> i am donny deutsch. with all due respect, it seems fox news has moved on. see, we are worth something. we brought you mystery phone. ♪ we will ask all our guests tonight about the mystery phone. friday is newsday, my friends. on a day when donald trump has changed course


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