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tv   Whatd You Miss  Bloomberg  November 29, 2016 3:30pm-5:01pm EST

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is reportedly in the running for secretary of state. other candidates include former cia director and retired general david betray us as well as former new york city mayor rudy giuliani. vice president dan, a longtime ally of mike pence from indiana was also at trump tower today. and trump adviser kellyanne conway, it was unclear what he was there to discuss. trump's choice to be attorney general, jeff sessions sat down today with senator chuck grassley, who chairs the senate .udiciary committee grassley says sessions would be an evenhanded attorney general. iraqi forces have lost an assault on villages as the val to retake the country'second-largest city rages on. an attempt to appeal to rural areas and stay behind to stop the iraqi's advance.
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parliamentary federal police are also helping iraqi forces. and the pentagon has found no misconduct in an airstrike that killed forces in september. the u.s. central command determined the soldiers were mistakenly identified as islamic state fighters. the investigation found intelligence and to medications mishap contributed to the error. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. julie: live from bloomberg -- world headquarters in new york, i am julie hyman. julie: --
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joe: i am joe weisenthal. julie: gains in treasury yields and the dollar went out of seen. joe: the question is, what did you miss? julie: opec members enter the final negotiations before the critical meeting. participants are unconvinced the cartel will be reopened for production. donald trump has chosen, spend on price. what is the fate of the affordable care act to the head -- under the hand of a fierce critic? later this hour, a value investor live from the conference, someone who has voiced unfavorable opinions about trump, is cashing in on the trump rally. the italian referendum in havee upcoming referendum a lot of people wondering if these events are offering up another opportunity for the global populist revolt against
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the establishment following the election of donald trump. our next guest says not so faster trump's victory does not really mean the same is -- same tide is sweeping over europe. an economist for europe joins us now on the phone from geneva switzerland. thank you very much for calling in. this is obviously where we are all focused now. let's start in france. scenarioany plausible where maureen could be the next president? >> i do not think so. it is very important to remember the differences with the u.s., ,he u.k., the initial election if there is a protest vote, like in 2002, then you have another to make things change in the
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election.ary different in the structure. a huge decline in participation for the far right candidate to win. it is very unlike the. we just got a very large victory for the center-right conservative candidate. if anything, it will help them on the large consensus right. it is unlikely indeed. >> is there anything culturally in france? are we not seeing a populist tide on that front nearing what forave seen in the u.k.
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that matter? >> it exactly. globalization, distribution of wealth, that is also -- the big difference is there is no such thing in france. otherason for that is candidates are mainstream and well-established. in there for all of 25 years and that is true for the far right. that is the big difference. it is very well-established and take the opinion polls for instance which have been criticized quite a lot. able to capture very well at the expense to the far right. that is an important difference going into these elections. joe: when the father ran for president and made the runoff in the early 2000's, the left came out and voted for jock to
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prevent from winning. one people in this election, they say, -- what does the left say at home? worth just is not even coming out? >> you are right, it looks very similar. he made it to the second round. the left parties in france, very fragmented and divided. we do not know yet the official candidate of the socialist party. we will know this by the end of january. again, the far right candidate needs to win a huge number of votes from other -- from others, on top of a high vote.
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again, it is already likely she would win a huge number of votes and on top of that, another 8 million estimated and that is other -- ven against >> what about elsewhere in europe? we have austria and germany and the netherlands. do you think populism has taken hold there as well? >> i think that contest is indeed a reason for this search. in most countries, it would save on the coalition like in the netherlands. i do not think it matters that but not least,
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referendums on the eu membership are very unlikely to be held in both countries and if they can be implemented, it would not be legally binding in my opinion. thank you for joining us. julie: erik schatzker is coming up with a big interview from the investor conference. joining us on the lives investment outlook, and donald trump, the interview is coming up. this is bloomberg. ♪
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joe: if you want to learn more about what is going on with this meeting, go to opec go on the bloomberg. it is your research for all news -- resource for all news opec.
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oil production, broken down by country. looking over here, you can say click on saudi arabia and get a chart on that. it is a fantastic resource for all the different countries. to cut production for earlier this year. now the details are coming and it looks like there are serious differences between saudi and iran and they are not there yet. i am amazed when there is optimism about these deals. there -- it is so difficult for them to get done. they come to an agreement relatively rarely. we will see if they come up with something in the next day. low priceshs says are at a 30% chance of a deal at this -- at this point.
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goldman sachs says this place will be tracked to inventory in the developed world and this is one of the things, basing that 30% figure on. they say again it is a 30% chance of agreement coming. super high chance. joe: also people are saying maybe it does not matter right now. maybe oil will decline a few dollars. at the end of the world. julie: the discussion amelio afterwards would be, will this take to the deal. joe: that is right. it will never be over. julie: it does not seem like it. pictures will face to work and flood oil. ine of it will also come oklahoma, one of the hottest shale areas in the country.
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alix steel went down to oklahoma and continental resources quickly. >> we would like to think we are in the champagne of all the oil here. >> $15,000 a pop. mosts become one of the prolific shale areas in the u.s. it is not the permian in texas that it is in oklahoma. >> we are 60 miles northwest of oklahoma city. over the next year. >> continental began investing a year-and-a-half ago. >> its returns are twice what you are seeing in any other place going on today. by comparison, permian, the production there is 68% water? 9% naturalre than
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gas. >> these will start flowing in the first half of 2017. 2000 barrels of oil per day. 3 million cubic feet of gas. >> we drill down 10,000 fever he, drill a curve, turned sideways, and another 10,000 feet horizontally. just shy ofup 20,000 feet and about 19 days. a very nice well and these are doing easily two or three times that. the area is so pressurized it does not feel that arctic of the oil out of the ground. continental has 186,000 acres and 95% of it is over pressurized environment. >> he traveled your production. >> yes, no problem.
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>> where land values are $50,000 an acre, some of that money is finding a way in oklahoma. >> it would have probably been that 250 range. acre.0 an >> they make up 10 years. --to go to an area >> it needs to be and will be a big part of who we are in the future. 65% from a drilling standpoint and i can see it getting more 50-50. is it has been aggressive in its investment. things forannot so i
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if you on the dollar, give an old man a dollar, he will drill with that dollar in that is how you went up with some of the companies that have a little more debt on the balance sheets. time it is different. >> we will be disciplined and watching all of the signs and signals of what is going on the market. we have tremendous quality for this company for years. >> that was alix steel reporting. joe: we will have much more on the outlook for oil. will be on bloomberg daybreak america at 8:30 a.m. eastern tomorrow. again, a 30% chance of an opec deal. this is bloomberg. ♪
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julie: we have been talking about various folks at trump tower. gary is one of them, the president at goldman sachs earlier today. he would be a trump tower meeting with the president-elect and it looks like he has completed his meeting, making a phone call. just one of the folks we have been talking about. and another one of the attendees at trump tower today. visit.eryone is making a even harry stern does not know what to make of a trump presidency coupled with a republican-led congress. erik schatzker caught up with , chairman and ceo, earlier today at the robin hood investor, -- investor conference. buying and selling after the election. we want to see congress's response to trump's plan and whether penson reinke together and put their own plans in
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place, i think we need to see what happens here. pace will dictate wraiths -- rate. we continue to look at things that will work well. the markets have slowed to certain parts. i think we will see them do well. i think logistics have done well. distribution centers, the internet, hotels will probably pick up, expect -- except cities like new york as expect -- exces like new york as the dollar moves higher. they will go to london. hotels in the u.k., a big beneficiary of 124.
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county banks in particular, i have an issue. they will have a vote in a week. do you want to belong italian real estate in the face that you could be right but you could be wrong? i am not smart enough to figure out what is the best side of the trade now. caution. i think it is a good job to be cautious. you know that rates are rising globally. you know the dollar will be stronger. i think you just have to be super careful. a place of interest that is so controversial is retail. consumer has wealth again in the middle-class. income is rising 5%. retail work has real estate investment. >> exactly. >> we have reasonably good sales over friday.
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we are very diversified. lincoln, nebraska, members were not that. somewhere down but they were very -- pretty good. great parking and everyone knows . he will see a lot more entertainment and a lot more restaurants. thing called pandora. a jewelry company, victoria's secret, storefronts, hispanic victoria's secret. think it will be ok. i think there will be in equilibrium between online and retail. where that is exactly we do not know but retail will not disappear.
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>> right now, my macro cloud is cloudy. these of will work really well. spanish doing pretty well. including spanish hotels, wemany, just tickly, continue like norway and sweden. everything about them, sweden is going quick the presidential and berlin is fantastic. there is a lot of opportunity. we have been trying to figure out banks leaving london. london, because you have not seen the impact on brexit. they are wondering, do they have to leave, saying do you have to
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go, france and germany wants us and we are trying to anticipate will -- where they will move. we have an idea. we do not know when they do not if they will move. >> the city of london has become the equivalent of a real estate short. >> i think yes. i think there are better risk rewards on the downside. calgary in canada was one of the strongest markets and one of the lowest vacancy rates, 3% or 4%. rate.% vacancy it is possible you can see they can see rates.
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city of london, the financial sector, if a big bank has to move, and they must, the question is will the continental -- my they do not sound team in london is telling me that a lot of text -- tech firms -- amazon's expansions, she is very pull if you have not been there. -- amazon'sit is a trading opp. i do not know the answer. if i did, we would not be sitting here. joe: that was erik schatzker, and he will be back in just a few minutes. julie: time now for a look at some of the biggest is the stories in the news right now. wells fargo's's most senior executive decided to remove the retail banking chief months
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before she announced plans to retire and her division became the focus of a national scandal. behind the scenes, the total duration was described. it offers new details on her departure and reveals that the new ceo played a role. bonus could be a lot fatter this year. companies are planning on doling out figure year-end bonuses in addition to salaries. giveay their firms will workers cash for the holidays. the real estate business could become a conflict of interest father-in-law donald trump offers and he accepts key roles in the new up and astringent. the wall street journal says the company has hundreds of millions dollars in loans and obtained financing through a controversial for -- program that sells green cards. that is your business flash
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update. here are your major averages as they had toward the close. earlier, it does not look like it will close there. this is bloomberg. ♪
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♪ >> we are moments away from the
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closing bell. "what'd you miss?" market suggesting encouraging data on growth in home prices ahead of friday's payroll report. i'm julie hyman. joe: and i'm joe weisenthal. we want to welcome in the viewers tuning in live on twitter. every day -- every weekday here in the newsroom. julie: we want to take you to the robin hood investors conference, where erik schatzker is talking to some of the biggest names in the hedge fund industry and is joined now by a special guest. yes, whitneyr: tilson, great to have you here. donating your time to a good cause here, robin hood. time withfor spending
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us here. we are going to start the conversation with a macro theme. you are cautious. almost as cautious as you have been at any point in your career. why? whitney: i'm not super bearish, so i'm not predicting calamity, but i'm sitting on almost 60% cash right now. there are a few reasons. number one, going about my day to day business of trying to find good stocks to buy, i'm fearing -- finding very few longs and a lot of short. bottoms up, that tells me something about the market. from the top down i see all the major indices at or near all-time highs with complacency at low levels, yet a very uncertain world with a wide range of outcomes. but i'mt not calamity, certain there will be more volatility in the world and is a stock picker, i welcome that. that's how i make money. what about valuations?
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whitney: using something like , it hasller pe multiple its critics but it has been consistent over many decades. when compared with past markets, 27ht now it's showing multiple on earnings for major u.s. stock markets. that may be a little overstated, but that is using the same peak level that we were at in october of 2007. i don't think we are in a bubble territory in general, big cap s&p 500 kinds of stocks, but we are certainly very full on valuation, i think. erik: what are the factors in your mind that lend to this feeling, if not forecast, of uncertainty? whitney: there are a number of things. we have been in a declining interest rate environment for almost two decades. july, interest rates have moved up quite sharply over
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the last three weeks since the presidential election. sort of one area i would .2. the second would be brexit and what's going on in europe. is that orderly or disorderly? could the eu breakup? a general rise in populism around the world sort of threatening the world order that has governed since world war ii. exhibit a, the surprise election of donald trump. i'm not going to get political on you. but if you look at his characteristics and his policies , his characteristics, from sort of being -- he goes with his got, tends to be unpredictable, really wants to shake things up, that could be very positive for a sclerotic washington where the swamp needs draining. on the other hand, it could cause real chaos. turning to his policies as best you can define them, they are to
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renegotiate international trade agreements. i could benefit the u.s., or it could lead to trade wars. spend more on infrastructure. that could be very stimulative and benefit the economy and stock market. on the other hand it could lead to a big budget deficit and ultimately be harmful. that you any area look, when he takes office in seven and a half weeks, i think that anyone who claims to know with certainty what's going to happen is kidding themselves. so, being prepared for a wide range of possible outcomes and prepared for volatility strikes me as prudent. you told your investors that you expected the stock market to do poorly of trump or to become president. so far you haven't been right. do you think you are wrong? any investor will tell
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you that being early and being wrong can look the same for a while. i will say that if you look at trump's business career, as characterized by a number of booms and busts, i did a very unscientific survey shortly after the election and you mailed a couple of my investor friends. the single most common response that i get is that in the short term the tax cuts, the infrastructure spending, the infrastructure spending is stimulative and good for stocks, but look out for the long-term. a lot of people were cynically playing the short-term and looking to head to the exits quickly once they sensed the turn. are you surprised at how the market has performed since the election? whitney: yes, but now having seen it, i sort of get it. i understand why some investors view this bullishly. to be clear, all of those
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characteristics and policies that i laid out, there is a compelling bull case to be made for all of them. as an american i hope things turn out great and that our economy booms, but as an investor my first job is to protect my own investor capital and i see a wide range of possible outcomes, quite a bit of volatility. i'm happy to be sitting on a lot of cash right now. aboutlet's talk protecting capital, beyond sitting in cash. looking at the world that you've just described in which you are cautious and see a wide range of uncertainty, volatility, high valuations, stock indexes at record highs, if you are going to invest, where do you put your money? one stock idea -- whitney: one stock idea that a just pitched, berkshire hathaway, this was my idea of uncertainty going into 2007, 2008, when i
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correctly anticipated real turmoil there. warren buffett sitting on a pile of cash is a pretty good place to invest in the markets. by the way, with the acquisition of duracell, the operating earnings got a 12% boost and as a result i have increased my estimate of the intrinsic value. the stock today is a little under 240. so, you can buy something safe and conservative that has nice growth characteristics and it is a 20% discount to intrinsic value. in today's world, that's decent. give me warren buffett and berkshire hathaway at the 80% dollars in this world, i will take that. some of the skeptics might look at that recommendation and say there are two things wrong with it. one hand, it's caution squared. want cash on cash? cash multiplied by cash? the set -- the second thing is
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that you are both stop pickers. why would i invest in a stock picker to find a stock picker? tear latter point, berkshire hathaway is a global conglomerate at this point. think of it as something like ge. the stocks of warren buffett, todd combs, todd wechsler, they might not even count for 20% of the value. the right way to think about it is there is an investment portfolio of stocks and bonds that is approximately half of its value. of then it is a collection superior operating businesses. you put a multiple on that like you would any other business and you add those pieces together to come up with my estimate. why buffett, as opposed to the other long-term investors with a good track record of building value?
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these are all companies that have in some respects styled themselves after warren buffett, but which have at times had competitive if not better long-term returns. or speaking downstairs as we speak, jeff him out at ge. whitney: the answer is that a ge.h or two ago, i own to i hope that there is a pull back there. the other stocks that you mentioned, i am familiar with most of them. i wouldn't quarrel with anyone, if that's a they wanted to play it. i have been going to the last 19 annual meetings out in omaha. i had the privilege of meeting warren buffett in person a few times. there's probably no one i've ever studied more in-depth than him. i co-authored a book on charlie monger a decade ago or so. these are guys who personally i have a comfort level with.
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look, to be a successful investor, if you get to know a handful of managers and companies very deeply and you are patient -- years ago i read a book about mcdonald's called the golden arches. pour your heart into it, by howard schultz. of home by the founders depot. you study and read about businesses, the market is volatile enough that you will get opportunities, right? berkshire hathaway has ranged from 3% to 30% in my fund, depending on the price the market was offering me relative to its value. today that's about a 5% position. my second largest, but i'm not pounding the table like it was march of 2009, when it was a $.50 dollar and i made it well north of a 10% position.
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everyone knows that warren buffett isspring chicken. how do you know when he has lost too many miles off of his fastball? things. two one, he has instructed the board is that their first and foremost job is to detect when he is losing it and take away the keys. he loves what he does so much, he recognizes that he might refuse to recognize it. i view it as my job as well -- that's part of the reason i go out to omaha every year, to see him on stage and answering questions on the fly. look, he's on television plenty. morefairly easy to track -- track warren buffett. i can determine for myself if i think he's making a big mistake, if i think he's losing it. i am absolutely convinced today, having studied this man incredibly closely that he has never been better. now, hege of 85 or 86
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is still on a learning curve and he is getting better with age. very few people and professions where at that age you can be getting better. canney: can you -- erik: you see another investor out there particularly as accessible as warren buffett the demands or requires as much study as warren buffett has required of you? whitney: that's a good question. munger put buffett and at the top of my list. i hesitate to shame of my friends personally. but there is an unparalleled track record there. the two guys that have been hired to replace him are top-notch guys. followersprove worthy , no one will ever be able to fill those shoes. bill ackman, who i have known since college days, he is a
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controversial figure and he certainly had a couple of tough back-to-back years, but one fred said there are only two kinds of companies out there. the ones having problems or the ones that are going to have problems. i would tell you that there are two kinds of investors as well. to be a savvy investor you want to find those companies or those stock pickers who really are really good but are having temporary difficulties. that is where you can find bargains. when they turn things around, you make a lot of extra money. a lot of people out there are wondering how you could conflate bill ackman with warren buffett. raising a lot of eyebrows. for the you asked me list of people that i study closely and follow what they do in the market. sometimes you can make some beey, a guy like me doesn't -- doesn't need to be an
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activist and i don't have the capability to be one. money when hef got involved with canadian pacific and brought in hunter harrison. in the top bill handful of guys who have a tremendous long-term track record who invest in a way that i can understand, where they are trying to understand and evaluate businesses, figure out what they are worth and buy them at a discount. some of these guys try to unlock value through friendly or hostile activism. you like berkshire hathaway as a hedge. we been discussing that. what about these shorts that you find so attractive? >> everywhere i look i find great short ideas. if you asked me to put on a new short ideas every day, piece of cake. i don't want to get so bearish that i get my portfolio -- i'm
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primarily a long investor. the two stocks that i pitched downstairs weren't old one that i first pitched at this conference two years ago, the stock exact sciences. it's a single product diagnostic company for colon cancer. i pitched it couple of years ago. it declined by 80% and i look like a genius and then i hung around thinking it would go further below five dollars and then they got some good news from the regulators about their tests and it skyrocketed from under five over 20. today it has pulled back to 15. my price target is still suffering. changed thatn't much. things are played out like i thought. i knew that they would get the test approved and they spent a lot of money. that company is just hemorrhaging cash. the question is -- will this test in the early stage of the growth, where is it on the s-curve? they are certainly betting that this becomes the mainstream
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colon cancer test. they have spent one hint -- $180 onlion in the last few years this test. those numbers don't add up and i'm skeptical if they ever will. erik: there's another question mark whitney: my second short idea was anyone i have never talked about before called wing soft. they are a chicken wing franchise business. there are almost 1000 of them all over the country and it seems to be a decent business with decent growth prospects that has been around for 22 years. it has been owned by the public shareholders who are now the fourth shareholders of the business and it has a nice story, but the problem is i think the chicken wing business is getting quite saturated. more than half of all chicken wing restaurants in the united states have been opened in the last five years. one quarter of them in the last two years.
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a growth storyg and i think they are trying to go into now a very competitive and saturated market that they will never get to. are nosebleed valuations for that kind of company. whitney: 47 times next year's earnings, 35 times 12 times revenue. i even saw some analysts going into incredible contortions trying to justify a share price saying -- look, it's only trading at 18 times even and you sort of no one analysts are putting high multiples on years out earnings, something is wrong there. this wasn't a true evaluation short, but it is extreme in same-store sales growth has been to celebrating dramatically from double digits he year ago to low single digits today. think that is sort of a permanent fact of life in the chicken wing business. a stock that quite
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frequently gets cited by short-sellers is tesla. you have dabbled in a before. what do you think of it now? gave an mark steagall outstanding presentation, i thought, earlier today at the conference. i'm so tempted to short it. i got destroyed shorting it last time on the big run-up. it's made me cautious of shorting it. partially because i got burned before. but partly because you can construct the most perfect bear case on it about rising competition and companies hemorrhaging money and the solar city acquisition just adding to their losses. it has certainly added to their debt load. but elon musk is the real deal. he's an incredible entrepreneur. yes, sometimes he lives in a reality distortion field, but do i really want to bet against that guy? every analytical part of me says that this is a great short.
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there's a tidal wave of competition. tesla, to its credit, has done a service to the world, even if the stock goes to zero, it has lit a fire under every major manufacturer to really invest heavily in electric car technology, autonomous driving, battery storage, etc., etc.. tesla has had a big advantage as a first mover. the first question is -- having lit a fire under this much thousands larger time competitor , are they going to flood the market with things that are great for consumers? tesla lines of being -- if you have an old omega -- remember that? so, that's hard to know. that's a question that only time and elon musk can answer. whitney, thank you for joining us. i would like to add a disclaimer -- as much as i like talking
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about short ideas, we haven't had an opportunity to ask for a response, but nonetheless, thank you for sharing ideas with you. julie, whitney tilson here with us at the investors conference in brooklyn. imagine that. thank you so much, erik schatzker. shorting chicken wings. let's talk about what the markets did today. here,start the stocks here which closed about 20 minutes ago now. we saw a bit of an increase and it was a bit of a confounding day. we did get a last quarter gdp revision it was better than estimated with consumer confidence that was better than estimated. the bond market didn't necessarily follow. energy shares were the weakest, not surprising given opec. those groups have been
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beaten up recently as we saw the years -- yields turn lower. also held on to gains. not necessarily a lot of rhyme and reason on that. no. let's take a look at the two-year and 10 year yields. both lower today. you change the color scheme, it's blowing my mind. that's interesting, because we actually got strong economic data where it ended lower. italian yields are sort of a proxy for political risk. want to keep an eye on those, those ended solidly lower at the end of the day. there you go, president-elect trump talks tough on china, accusing the government of manipulating its currency. does china have a trade advantage and is the trump approach good one? we will discuss, next. ♪
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♪ joe: "what'd you miss?" president-elect donald trump once called china the "single greatest currency manipulator ever on the planet." what are the repercussions if he keeps his promise to get tough with china? joining us now is the senior fellow at the greenberg center for geoeconomics council on forward -- on foreign relations. great to have you back on the show. one of trump's consistent promises is to label china a currency manipulator. what does that mean, labeling a company a currency manipulator? >> the irony is that labeling someone a currency manipulator is pretty much the gist of the law. the 1988 omnibus trade law, the law that you would use to label
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china a manipulator doesn't sell out any sanctions that follow from a currency manipulator label. it's a name and it requires negotiation. that doesn't mean that labeling china a currency manipulator right now makes a great deal of sense. china has undoubtedly managed its exchange rates for a long time. 2002 two 2014, they were buying foreign-exchange reserves to hold currency down. over the past year and a half they have currently been selling foreign currency reserves to try to keep its currency stronger. in that sense, labeling china a currency manipulator reflects what china used to be doing. we can talk about whether it makes sense or if china is manipulating its currency in that way, but to be clear, the law is a pure rhetorical flourish, essentially.
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the only practical ramification of it is more talk? correct. there are actually two different definitions of manipulation under u.s. law. there's the 2015 trade enforcement act, the bennett amendment, which does have some modest banks negotiating with it, but china doesn't really meet the criteria for the definition of manipulation. so, i would think the you would use the 1988 definition. that definition is not, in and of itself, defining. julie: is this something the treasury department would do on its own? or would it need to be ratified by congress? brad: the label is solely within the discretion of the treasury secretary. the treasury in due course of time would issue a report and
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the process would start. there anything further that the administration could do unilaterally towards china without congress? something different from the currency label? brad: there are a number of things they could do. that's the just. doing it alone, doesn't really college much. and it might work against u.s. interests. but there are a range of other tools available. tougher safeguards, cover reviews of chinese foreign investment. there are things you can do that are clearly within the rules and things even do that would be much more on the edge of the rules. joe: we will be talking about those over the break with brad setser, who will be staying with us. julie: we will also be talking about how donald trump may govern. you might look at silvio burlesque owning. we have a telling tale of --
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-- we burlesque owning have a telling tale of billionaires leading governments. ♪ seeing is believing, and that's why
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you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. joe: we are brett -- we are back with brad setser. we were talking about the bizarreness of calling currency -- china a currency manipulator, because of anything they are doing it to keep it artificially strong. how much are they spending right now to keep it from tumbling further? what does it say about the state of the chinese economy? that's not an easy question to ask. as usual different indicators provide different evidences. joe: i remember earlier this
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year and late last year there were all kinds of concerns about house flows that seem to have died down a bit, but it's obviously still a thing in the u.n. has weakened considerably. how bad is it right now, in your opinion? bad: really serious reserve drain comparable to the biggest reserve drain would be something closer to 100 billion. a relatively modest reserve drain is something between say zero and 15 billion. china can weather that for a long time. china's actions suggest increasing concerns. the decision to restrict fbi outposts for example suggest that the maybe pick up in the month of november and it seems to me that china is finding it more difficult, not less difficult to continue to prevent that differentiation. julie: in other words, if china is not going to be doing any longer -- or is going to be doing less manipulation it will be because of its own internal
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pressures and an inability to keep spending at that rate? remember, the element of truth in the argument is that china did engage in it -- in aggressive intervention to keep currency down for 15 years. china built up one of the largest reserve stockpiles the world has ever seen. it has built up $4 trillion in reserves. over 3 trillion. china can burn through a lot of reserves, in my view, without immediately being at risk of having too few reserves. but there is the question of whether china wants to do that and if the u.s. should want china to do that. i would argue that right now the u.s. would rather have china go through some of its reserves rather than stabilize its exchange rate or tell china to stop managing its currency on the risk that it would weaken significantly. let's say the donald trump
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calls you and says -- come back to be my point man on dealing with china. what is your first suggestion you make? i would say that right now is the wrong time to name them a manipulator. there are other ways. other ways of using the existing safeguards much more aggressively. address some of the concerns in the steel and aluminum industry. or the legitimate concerns that a more -- that are more aggressive -- that a more aggressive within the rules interpretation of the law could allow you to pursue. had -- it stuff, i hope he's watching. brad setser, appreciate you coming out. now,: going to the world
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silvio berlusconi's routing the spotlight in the wake of the trump victory, but that's no surprise for our next guest. les joins us now. luigi, you actually wrote an op-ed from the new york times -- for "the new york times," drawing a comparison between the gentleman. other people have made the comparison as well. what is the lesson of the berlusconi leadership that we in the united states can draw from in terms of how to treat a trump presidency or view a trump presidency? luigi: it's very important to ruledtand that berlusconi for many years, not because of his merits, but because of the people opposing them. ofhas a particular talent triggering a position, of loewe
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pavlovianon rage -- reaction of rage that generates support among moderate voters. i feel that trump is a natural. having studied the phenomenon, he's big at doing this thing. he uses that ability to not tweet from a different tweet ton, he uses the provoke opponents into getting some aggressive with him that at the end of the day, he gets more support than people expect. it seems that if you want to sort of fight his presidency or fight the ideas, understanding this mechanism is very important. instead of criticizing him or opposing him, you wind up promoting him. joe: this was the entire premise, arguably, of the clinton campaign. make it so that he is viewed as
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an acceptable buffoon to the voters. it didn't really seem to work how similar is that to the used by the opponents of berlusconi? 9 -- luigi: there are some similarities and some differences. berlusconi started his career as being an entertainer and he's a comedian at heart. he is good at pleasing people by being funny. many times his jokes were very , butgeous to the educated resonated well with the people at large. gaining him a lot of attention. i think that in part he learned that if you make a joke that outrageous part of the voters, you get in your position to only discuss that and not talk about
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substance, where he was weaker. i think that trump is doing the same. we discussed a lot about his outrageous statements. we discussed a lot about his outrageous tweets. we discussed much less about his plans. do itthe campaign and we now. julie: what do you think the proper reaction is for a more appropriate plan in terms of folks who do wish to oppose some of the policies? what would the strategy be? luigi: first of all, ignore the tweets. when he comes out with outrageous statements about the number of illegal immigrants that vote, this is a relevant. why do we need to spend time on this? on the other hand, i think the info -- issue of conflict -- conflict of influence on his
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presidency's huge. when berlusconi was elected, theyone took as an example institution of blind craft in the state as a way to behave. it is only now that we discover that this is a huge blind spot in the blind trust rule. if you are the president, there is no blind trust for you. in my view, this is crazy. this is something that we should discuss openly and not only --ticizing trump could also but also moving in support of this idea, the people in the republican camp that criticized heavily the clinton foundation. i was one of the most aggressive critics of the clinton foundation. i thought it was a big source of conflict of interest. in 2011 you wrote about dodging the trump will it and how america was lucky that trump
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didn't run for office. you have been on this story for longer than most people in thinking about it. berlusconi ruined italy, ruined the economy in the country. how, specifically did you do that? what about him was a terrible? luigi: in part it is because he ran to be president, not to do anything. with a large majority he was most interested in taking care of his own business than that of the country. i think that that is what made the country weaker. the second thing is that there was already a perception of conflict of interest in the italian government. but he really became the symbol of that. which of course, legitimized a lot of other people to do the same. so, the image that in order tickets -- succeed in business you need to have political
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connections has become prevalent in italy. i think this is the definition of crony capitalism. i fear that we are headed down the same path in the united states as well. notady the situation was very good to begin with. in 2012, aat i wrote capitalist for the people, described the united states becoming more and more like italy. and of course not in the good way, like with the food and the wine, but in the corruption and the cronyism. i said that in 2012. imagine how it would have gone today. joe: you were definitely ahead of the curve. julie: the irony is that many folks who voted for donald trump did so to get rid of that. but we are going to talk much more about this. us.i will stay with
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can special banks remain the volatility? we will discuss that, next. ♪
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♪ joe: still with us is luigi zingales, finance professor at the university of chicago school of business. speaking of politics, of course, italy is right back in the spotlight. they had a big referendum this sunday. polls show that the people in opposition to these constitutional reforms were favored in the lead. how significant is this referendum? if it goes down, what is next for italian politics? i think it is mostly what
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economists would call a focal point. whether you like or not the constitutional reforms being proposed, i don't think that by themselves anything changes. i don't think it's going to change the game dramatically. it's not going to change the game dramatically if they are projected. ,owever, in the last few months everybody has believed that if the referendum that is not approved for reform, this would be the end of the government and a lot of terrible things will happen. it's almost like a self-fulfilling prophecy, there's a lot of nervousness about what is going to happen if they don't prevail. julie: and they haven't done much to stem that. he's been back and forth about whether he is going to stay on. see been unclear if we will the more populist party in italy
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gaining control. what do you think is going to happen? luigi: i don't think it will be genetic, on the political front. what i'm worried about is the banks. he has postponed addressing the problem of the banks, this will have cost him in terms of popularity and before the referendum. so, now all of our problems come into view. aggressiveness will determine what he's going to do in the future and to some extent but europe is going to do. italyr banking crisis in can really put the entire euro zone it risk. luigi: how should he deal with the banks? he's arguably handcuffed by the rules against bailouts. bondholders and how politically damaging that would be, further undermining the credibility of that centrist government that hasn't collapsed yet. what is the best path for him?
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luigi: this has exaggerated the limit that has been imposed. but for everyone there is an exception. italy is becoming pretty systemic. if you have four major banks in a crisis, one that is about to sort of ask for $13 billion in capital and of they don't don't call if you this systemic, i don't know what systemic is. this is a systemic problem and we need to address it like a systemic problem. government intervention in a systemic problem is needed. whether it comes from europe or italy, this is a second order problem, but they need a political price to be paid.
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how imminent is that problem going to come to a head? there's the problem of the referendum in italy and the distraction of elections there. feel like you are in a race against time here, not on the side of doing something to fix the italian bank. luigi: i think that time is running out. there is a voluntary conversion and is duee needed not surprisingly by this friday. just before the referendum. the mandate, they will start trying to raise capital as a function of that conversion. i think that regardless of the result of the referendum, i suspect the motion will be fully limited and the challenge to raise capital will be very large.
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the problems then become very serious. going back to politics, sort ofckly, the anti-elite, antiestablishment five-star party has been rising in the polls. how would you describe the ideology of that party, to the people who aren't familiar with italian politics? what would be the significance of they continue to rise? luigi: the best way to describe it is to try to find a combination between bernie sanders and donald trump, when for the leftgning out people. the five-star movement is very strange. it's not a strong ideology. the problem is that it is a post ideology party. there will be discontent on the left and the right, which makes it much more appealing in terms of success and much more
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difficult to determine what it is going to do if they win an election. luigi, thank you so much for your time. luigi zingales, of the chicago school of business. from joe we will hear sitt. this is bloomberg. ♪
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joe: "what'd you miss?" the trunkare cheering proposal to spend $1 billion on infrastructure. joe sit explains --joe sitt explains to betty liu while -- why will help his business.
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joe: we are too late and we have to make up for lost time. the great recession was really one of the greatest opportunities in american history to fix all of our infrastructure and bring us up to speed where, effectively emerging countries today are well ahead of us. could be the airport system, bridges, tunnels. betty: why is it too late? joe: what i mean is that already are infrastructure is coming apart. we have got issues with water delivery, bridges, highways. the great recession that happened, we need to drive businesses to create jobs. lifting that window of opportunity, it's not lost for ever, but we probably should have been doing it started's -- starting seven years ago. the donald trump focus on creating jobs and getting our infrastructure and our cities up to par, that's not a bad thing. don't tell them to slow down.
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tell them to go for it, bring the united states into the modern era. betty: but one of the reasons why we so to speak missed the boat was that it was so hard to get infrastructure going, hard to get congress to do anything on infrastructure in the last eight years. what makes the difference now? we don't have a president -- joe: we don't have a president, we have a king. with the republican-controlled senate and congress, he doesn't have the challenges that you just referred to. he won't have the bottlenecks along the way being able to effectuate getting infrastructure projects, because he is going to have in the early part of the administration he is going to have the support of both congress and the senate. a window of opportunity here to really make things happen. betty: would you put that is one of his top priorities, then? joe: i would say that if you see donald trump's politics, from pre-election to postelection, you have really seen a lot of what we joked about and what i
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said beforehand, you would effectively see is change from the aggressive approach, things that i didn't necessarily agree with on the campaign trail, to really now acting logical. betty: you knew that he was going to do this? joe: i think i told you that. joe: we called it right. betty: you called it right. [laughter] joe: sometimes you get lucky. any times, long story short, i think he's backing off on those confrontational issues. even with mexico he seems to be backing down, not looking as much for conflict. remember, mexico is a great country and a great friend to the united states. great economic trading partner. probably the largest commercial developer in the country, i'm obviously bullish on mexico. but you have seen in tone down that rhetoric and focus on the things that people all agree with.
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namely infrastructure. take the airports here in new york city. 15 years i have had that as my number one civic venture. nothing has been done, no matter how much banging i have put out there. so, we need it. a lot of it is right here in new york. betty: can i say this, you were oversees the day after the election. you and i were chatting and you said that there were people who work very nervous about trump afterwards. but what was interesting is that in the weeks since you have seen the markets just take off. it seems like investors are actually bullish about trump. you know, throughout all , i spokes of visited for the swift economic forum. concerns.e i said -- i want to see how everybody votes with their
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pocketbooks. i wanted to wait a year. we didn't have to wait that long, we related -- we waited less than a month. marketmes that type of movement turns into reality. that mindset of positive moving up in terms of valuation and etc.? i think it's going to turn into real positive business rolling out. julie: breaking news out of canada, the prime minister has approved the transmountain part -- pipeline with conditions saying that it will create middle-class jobs. shares letter chain -- little changed after hours. this is bloomberg. ♪
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>> don't miss this. the bank of england will publish the results of its stress test
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tomorrow. ministerialed its meeting in vienna to discuss trying to hammer away at that oil production. we'll see if it happens. >> that
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mark: i mark halperin. john: with all due respect to donald trump, who suddenly an expert on flag -- pres.-elect trump: i don't know what all of the stripes represent. john: mr. trump, can we ask for your birth certificate? on our political color palette congress, and's the green party's jill sign will be on the --

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