tv Whatd You Miss Bloomberg December 29, 2016 3:30pm-5:01pm EST
russian intelligence officials and agencies. 35 russian operatives will be expelled from the u.s.. as part of the response, the fbi and homeland security department have released a report with technical evidence intended to prove russia's military and civilian services were behind the hacking. president-elect donald trump has repeatedly dismissed claims russia was behind the attack. two videos released by syrian group show thed aftermath of a attack on a school in syria. effect atre goes into midnight. russia and turkey have both backed the deal. argentina has reopened its investigation into an activation against former president christina hernandez. she is accused of covering up the alleged iranian involvement of a 1994 bombing of a jewish community center. the accuser was also found dead.
the -- or early this week, a judge approved fraud charges against hernandez and two aides and ordered her assets frozen. issident-elect donald trump turning to former presidents john f. kennedy and ronald reagan for inspiration for his address. that is according to "the washington post." he wants to keep the speech short. a presidential historian tell cnn he wants to write the speech himself. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. julie: live from bloomberg world
headquarters in new york, i am julie hyman. joe: i am joe weisenthal. oliver: i am oliver renick. the question is, what did you miss? scarlet: risk assets -- julie: risk assets appear to be taking a breather. oil retreating from its highest close in 17 months. treasury is extending gains after a strong auction. sears ceo eddie lampert is opening his wallet yet again to help keep the struggle retailer in business. he is offering a $200 million lifeline, but that amount could grow to as much as half $1 billion. the u.s. retaliates against russian interference with the 2016 election. the obama administration announcing changes against russian officials and expelling 35 operatives from the u.s.. we will have the latest developments from washington, as well as from moscow. we're now getting some headlines from a russian conference call saying the russian reaction will
create discomfort for the u.s., and that russia regrets over obama's decision on the sanctions. he also says -- the spokesperson there -- the kremlin spokesperson, the u.s. sanctions are an attempt to undermine the trust administration. looking at the marketeer, as we get all of this geopolitical news, -- markets, as we get all of this geopolitical news, we have not seen major reaction. abigail doolittle is standing by. reactionnot a lot of at all. the three major averages all largely unchanged as we go into the close. a slight decline going into the close. -- it isortant to note the second down day for u.s. stocks following a pullback yesterday. it appears investors are taking a breather within the trunk rally. when we look at other asset class -- trump rally. when we look at other asset classes -- the dollar index in the 10-year yield and gold -- we
should coming up any moment. the bloomberg dollar index is down the first time in four days. you also have a 10-year yield trading higher, along with gold trading higher. gold is having its best day september. so, a little bit of a risk-off feeling there. here we have the bloomberg dollar index down half of 1%. the 10-year yield is higher, down three basis points, represented in green, to tell us bonds are rallying. gold is up 1%. a little bit of a safe-haven where. , silver, and yen x is higher for the fourth day in a row. g #tv 4350. over the last vix year. in white, the s&p 500. out a s&p 500 has carving
record highs, the vix has been going toward record lows. cap seen that when the divergences have been day in the past, they tend to converge. perhaps in the beginning of the new year, oliver, we will see stocks drop and the vix trade higher as complacency leaves the market. i know you are looking at sears. oliver: fine by me if complacency leaves -- it makes for a great story and good reporting. got some short-term financial relief in the form of a $200 million letter of credit -- eddieedit lampert leopard. it is a credit line that could be expanded buys much is $300 million. let's see what the numbers show about sears in the numbers don't lie. the billing are behind sears and he needs funding for his company, which you can see suffered a big quarterly loss. , you have cutere
little damage of $9 billion in the past eight years. according to one analyst, that is the company needs to raise about one and 45 million dollars to make it through 2017. take on the fifth decline in the store count. the financial loss is a result of the slumping comparable assets. it has been coming down, except one little blip right there, the only corner of positive sales growth since 2000, right there in 2010. last corner, same-store sales dropped more than -- last quarter, same-store sales thaned one and -- more 10%. investors will have to betting on the underlying real estate value. sales and the stock have never really picked up. in the meantime, the restructuring continues. the company may sell its craftsman, kenmore, and diehard
brands, along with some of the sears home services businesses in order to stem all of the losses. the cfo said today in a statement the company has numerous options for financing. the story with sears is certainly more about the funding, at least today, then it is the stock. for more on -- joe: for more on what is next, let's bring in no herbert from -- nolo herbert. what is next for sears -- they have this extra cash, but where does the company go strategically? l: ask -- you have to ask a handful of questions. one of the things you have to be mindful of is the agreement they struck last year in terms of the new language that kicks in around a $1 billion market cap. that could become an issue related to the real estate
diehard, kenmore, and craftsman properties in the new year. you have to take a deep valuation of what are the prospects. liquidity is very tight. referencing the movies report that oliver referenced, if you are looking at $1.5 billion cash this year, that is going to have eddie. julie: this is supposed to be a good time of year for retailers, even for sears. what does it tell us that this news is coming now at the end of december? noel: that is probably the most concerning item. there is been a positive reaction with the incremental liquidity, but you have to be mindful of why you need a liquidity. as a letter of credit, you have to guarantee vendors are going to get paid at the end of the day. they have funded that off of their revolving liquidity. it raises concerns they will not have as much liquidity under the
revolver itself. that could point to cash lost quarter for, or a reduced inventory in positions for other -- or other items that are not great in the long-term. let's talk about the business -- sears was my first job ever. i sold tractors and tools. craftsman -- if they are thinking about selling that off, what does that say about the future of their storefront and brick-and-mortar stores? there is a little bit of a codependency there. part of the value of the brand is contingent on the health stores. some degree, if you are trying to preserve the value of those enterprises, you have to try to monetize them sooner rather than later. seem big bidsally emerge for that because we have the --anley bid for assets instead of the sears
assets. it is not clear who the hitters are. there was a filing that indicates they might be engaging affiliate parties. the big thing at this point is tried to keep those out of the -- so that eddie, fair home, the affiliates, can make sure they realize whatever value is derived therefrom. joe: oliver mentioned craftsman. does the sears brand itself have much value at this point? noel: it depends on who you ask. of thegiven the nature incentives program, the way they are trying to transform sears and kmart, eddie would argue yes. julie and i probably have this conversation almost a year ago -- whether there was brand relevant to left for sears -- brand relevancy left for sears. it is certainly reduced. julie: the other discussion we have been having, ongoing, for probably longer than just the last year, is why eddie lampert
keeps going with this thing -- why he keeps putting money into it, why he did not turn it into a bigger investment vehicle, which was the original hope for his investment. there is sort of this mystery at the center of the story. do we have any kind of insight into what he is thinking? noel: when you look back to when he originally merged kmart and sears, the goal was to focus on things that delivered what he thought would be strong roi opportunities. he was focused on under investing in the stores, that sort of thing to generate cash flow and return money to shareholders, boosting his own stake. as time went on and sale started compounding negative, it changed the long-term trajectory there for them, and now it is about preserving what value there is in the enterprise. as you noticed over the last year and change, a lot of the lending eddie has done with cascade, a lot of it is secured. it is going to be backed by real estate -- some other collateral
pool thomas so he is not exactly going in naked into these positions. oliver: i was just looking at the bloomberg relative valuation -- sears debt to capital. it lends itself to a high percentage. how, when we look forward and take the story forward -- what are the sense to figure out the longevity of the company? noel: there are two things -- longevity of the company as a whole, or as a part. as a part, you need to preserve some function of sears because as well, theyme have value tied up in other all of these things, and even the value of intellectual property is really dependent upon maintaining some sort of sears going forward. what that looks like -- who knows. four, andet through q you see what they did with inventory, how they ran it down, it is headed into a seasonably demanding q1 four cash flow.
you get indications of whether they would do something more material near-term. oliver: thank you very much. julie:, the u.s. retaliates against russia for cyber attacks and that interfered with the 2016 election, and russia responding in a conference call. a spokesperson for the kremlin saying that russia regrets obama's decision on new sanctions, and that russia has no alternative but proportional response -- in other was, some sort of retaliation of its own. the pressure reaction, says the spokesman, will create "discomfort" for the united states. we will have much more perspective on this evolving situation, and have the latest of elements from washington next. this is bloomberg. ♪
the obama administration has retaliated against russia's cyber active involvement in the u.s. elections. president obama said the data theft and disclosure activities could have only been directed by the highest levels of the russian government. moreover, i'll double mats have expensive unacceptable level of harassment in moscow by russian security services and police over the last year. onma has imposed sanctions top officials and agencies, and expelled 35 russian operatives from the u.s.. the associated press is reporting a clinton aide says russia -- a vladimir putin aid will consider retaliatory measures. we are joined by alan katz. that escalated quickly. what do know about what obama has said he was going to do? that's what we make of the measures? what was the reaction? an: the measures themselves
will have a limited impact. they are mostly against the russian intelligence, and the successor to the kgb -- institutions that do not use the international finance system that march, certainly do not have big accounts in the nine states, or likely europe. there is a limited attacks in the near term, on them. they might use the international financial system for some of their operations, so it might make it a little more difficult for them, but, again, in the near term, the impact is limited. the more dramatic, immediate impact would be the expulsion of the 35 russian operatives in the united states, and as you has, with asia statement saying they have no choice but to have a proportional response, and what that likely means is that we are going to go back to the, sort of, situation we had when it was the u.s. versus the soviet union, or the u.s. expels a certain number of people, and the soviet union would expel the same number of people. according to people i have spoken with, you can expect
russia to expel around 35 people in the coming weeks. were: when they said they expelling these folks from spy cases in maryland and new york, does that mean there is a situation where the spy agencies in the u.s. know there are russian operatives there, and they have just, sort of, tolerated them up until now? i mean, how does this work, exactly? alan: that is a good question. it is -- you know, highly unusual to talk about russian compounds with these operatives working there near d.c., near new york city, and then say actually, these people were all spies and we're going to kick them out. they have not said they were spies. have said they were operatives. they might have been hackers working for the russian government, maybe freelance or full-time. it is hard to tell at the moment. answer to your question
fundamentally is that it seems the u.s. is aware of russian officials working in the u.s.. they are largely declared through the embassy, just like russians are aware of u.s. officials working in russia. which of them are working -- actually working for the state department, or actually working for u.s. intelligence agencies in russia -- we do not know, but russia might. it might be the same thing here. been people might have with the russian embassy in the united states, but the u.s. is aware they are working for the gre, the fsb, or others. it is shocking, almost tv-like, other than real life. joe: right after this news was announced, the russian embassy in the u.k., which is into trolling and means, tweeted the following -- open quote -- 35esident obama expels --sian flag emoji
it is pretty funny, but it also says something real, which is the administration is about to change. is it possible these will just be reversed in 25 days? julie: -- alan: it is possible, and one of the officials i spoke to mentioned you could see little reaction from the russian government. whereuld have a situation russia says we are going to respond, but doesn't actually do anything, waits until january 20, waits until donald trump is inaugurated, and says actually have decided to turn over a newly for the united states, we're not going to do anything in response to sanctions. we count on the new president to roll back those sanctions, and he may or may not do that. who knows, really, what donald trump is going to do when he becomes president, but that could be part of the calculus -- donald trump has been very clear
that he wants to improve relations with russia. russia could decide not to do anything about the actions. the new president is going to change things, so let's not do much, we will see, and hopefully by the end of february, all of the sections have been rolled back. it is quite possible, though i defy anyone to predict exactly what the new president will do. julie: allen, at the same time, we are hearing from a number of members of congress, most recently senator john mccain, lindsey graham, paul ryan, chuck schumer, all of them in support of these sanctions. i know you cover crimes and not necessarily politics, but is this really the first showdown donald trump wants with the new administration -- the showdown over these russian sanctions with congress? alan: it may or may not actually be a showdown. certainly, lindsey graham, john mccain, traditional foes of vladimir and russia -- this is not a change in their position. paul ryan said in his statement these are overdue, but are
appropriate. he is in line with his previous policies toward russia. if donald trump comes in and says this is all fine, and we do not want russia hacking us, and if you were, mr. putin, please stop, but the way to address russia is through friendship not through sanctions -- sections have been place, whether it is for cyber or ukraine since 2014 -- they have not changed russian actions. they have not changed russian mines. it is the wrong way of going about -- about things, you might find a receptive ear among a lot of republicans. i doubt among john mccain or lindsey graham, but it might not be the showdown people think. joe: the new cold war -- oliver: two cold war with the emojis. joe: text, we look at the best-performing stocks in the chart. this is bloomberg. ♪ ♪
julie: i am julie hyman -- what did you miss -- probably not the commodity comeback of 2016, the you might be surprised at what the returns have managed to be. here are gold, brent, and natural gas. gold, you and yellow. i tried to make it appropriate. even though we have talked about the pullback since the election, gold futures up 9% on the year despite the pull back. brent rising about 30% on the year. that is the white line. natural gas is a big winner, up 62%, 63% year to date it looking like a big year for natural gas in 2016. of course, all of these commodities did fall in 2015. what are you looking at? joe: that chart goes nicely into mine because with the commodity rally, excluding gold, even though it was up, the big winners -- if you bought into cliffs natural resources or chesapeake energy -- some of the bonds expiring in
the years ahead. earlier on in january and february, when it looked like the world was falling apart, you could have made 300%, 500% on your money. you had to have had guts. it was the commodity companies based on energy and iron ore that were the huge winner. oliver: that is a massive return. you left me so much time for stocks. i'm looking at what is happening the u.s. equity market that has not helped -- happened elsewhere in the recovery market. let's start with what has happened since november 8 -- the yellow line is the s&p 500 and we're up 5%. nothing to write home about, but what is interesting is you have these emerging markets that are not doing as well. if you look at the other rebounds post brexit in february, august, october last year, even back to 2011, that does not happen. this is the only time where you have had a rebound in u.s. stocks nobody else's partaking in. julie: divergent. joe: it shows you how you have been furnished for divers --
the closing bell. "what'd you miss?" stocks nearly unchanged. volumes continue to be light. extending gains after a seven-year auction. the dollar in financial fall. i'm julie hyman. joe: i'm joe. oliver: i'm oliver. you can watch our closing bell coverage on twitter every weekday from 4:00 to 5:00 p.m. eastern. julie: we begin with our market minutes with our penultimate trading day. i like to use penultimate. were too busy using your other word of the day yesterday. us start with stocks. let us check out what is happening with some of the winners over the past five days because they gained again today. utilities up, real estate up. this has been the case in the
last week. we are in the post trump rally. the contour of it has changed quite a bit. financial down over the past five days. that value versus growth play is also sort of flattened out a little bit. let us get a few companies, switch over the boards. a few big movers. mining was upgraded today by an analyst, jumped 8%, traded quite a bit above its average volume. , downle still hurting 10%. no big news out of their my social media, etc., but it is still hurting, downing in volume. nvidia ended up in the green but lots of volume. citroen had a short call. we got stocks here. this is not a huge deal. a lot of people freak out when the vix and the s&p move together, which they have, a
bit. the s&p 500 started. the s&p is flat. basically, the s&p is either flat or down, it happens 20% of the time, which people exaggerate. it is interesting that volatile is climbing, i think. anchor: yield lower today. it was a pretty significant move , yesterday., low we are seeing that continues today. fairly significant action over the last two days in u.s. 10 year yield. we were in the mid-2.6 last week, so we have come down significantly on that. stocks have not moved much. we are seeing action here. julie: it is interesting to see the flip of the postelection terms of thes in individual groups, in bonds, and in the dollar as well. weakness in the dollar. could be repositioning at year end for tax purposes. we tend to see that for currencies.
look, dollar weakness across the board today, at least versus the major trading partners. the dollar lower against the yen, lower against the euro, and the pound as well, strengthening versus the u.s. dollar. one of the big winners on the day, the south african rand, one of the best-performing currencies this year. the dollar falling versus the day.on the the gap narrowing month after month in that nation. at: let us take a look commodities. not a whole lot of action once again. one of the gainers, up 1.4% pure gold futures up 1.5%. -- 1.4%. old futures up 1.5%. so, keep an eye on this. fits with the rebound in treasuries, safe haven assets that have done well. all catching -- nymex crude down.
get to the> let us first word news is afternoon. president obama against russia for cyber attacks aimed at the 2016ng with presidential campaign, imposing sanctions a top russian intelligence officials and agencies. as part of the response, the fbi and homeland security department have also released a report with technical evidence intended to prove russia's military and civilian intelligence versusas were behind hacking. russian president vladimir putin's spokesman says russia regrets the sanctions and a look and said her retaliatory measures. the gop is reacting to the obama administration announcement. house speaker paul ryan and john mccain and lindsey graham call these sanctions long overdue.
it left the u.s. weaker in the eyes of the world. mccain and graham say they will push for stronger sanctions. russiath was arranged by which backs the syrian government and turkey, which supports most of the rebel forces. syrian tv says the agreement paves the way for talks and that -- aimed at ending the conflicts. president gauck and when the can join thep peace conference once he takes office. he was not in contact with the main suspect in last week berlin truck attack. federal prosecutors say up a time his telephone number was cell phone and suspect he may have been involved in the attack. is believed to have driven the truck in the berlin christmas market. his fingerprints were found in the truck. global news, 24 hours a day,
powered by more than 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. anchor: "what'd you miss?" donald trump's tough line on immigration could do major harm to some of the states that helped elect him. pennsylvania, michigan, and was gone skin, this past year -- and wisconsin, 1% of the population's growth. fallinglations would be significantly if not for immigration. joining us now is connor from atlanta. part of the narrative of donald trump's campaign is that these are states in parts of the country whose jobs have left, whose manufacturing industry has departed, but you are saying a lot of it might be an issue of population? >> in those four states you mentioned, they had 88,000 new immigrants come in and only 23,000 in population growth over
the last year. it you take out the immigrants, the states would have all lost population and that is the trend . if you have baby boomers retiring and moving to warmer states and the millennial keds following them, they need an influx of people from somewhere to keep going and that place will probably have to be immigrants, if from anywhere. anchor: people say, "why did people vote for trump?" was it culture and race or economic anxiety and the client? anticline? -- -- and delcine. of changebout fear and basically not wanting their lifestyles to change, then ultimately, an influx of immigration does not really get out what concerns them and might further drive them to support trump. now? conor: if those are the two options, neither choices that appealing. if you don't bring in
immigrants, appealed to the cultural sensibilities as he points out, you are looking at perpetual population loss. bypetual population losses for economic growth, bad for employers looking for workers, bad for the tax base, on and on. on the other hand, if it is economic, you have to pick one or the other, and it is kind of a no-win situation. julie: at the same time, if you have this slow population growth or population stagnation in some of these states, is that a problem economically? i mean, at least in theory, you would have people competing for the same jobs, right? conor: one of the things is that in a lot of these places, the unemployment rate is actually very low. if you look up the measure of economic health, these places are doing quite well. if you look at the vote history in terms of who voted from these sort of obama/from voters, people who switched over, one of the things a person at the new york times pointed out is that
if you look at the percentage of houses built before 1970, older housing stock, that is very highly correlated with people who voted for obama and from trump. it does not feel like it is growing and changing in a good way. anchor: you wrote for bloomberg view about the labor market lab out of the -- market ramifications. any sort of stimulus will draw workers from one area of the economy, to another, not creating any net gain? what industries are most vulnerable in your view for an ongoing tightening of the labor market? conor: construction has been the canary in the call mine for tightness for a few years now and potentially in 2017, you could look at three different factors pulling construction workers. you could say housing, which has been the case for years, you could say infrastructure.
they do and local governments have been passing measures, so there's that factor as well. back, the price of oil declines, and now that oil is coming back and potentially energy employers want to we hire people, they may have gone to other places. where are you going to fill all three of these industries? anchor: basically coming back to the discretion of the full employment and where that exists ulcrum ofhe f employment first to rise. given how sluggish inflation has been, is it possible to where you could have a fiscal policy that pushes employment lower to a level we did nothing prior to this was a floor? conor: absolutely. if you look at the change in the workforce, the two biggest changes are how the workforce has gotten older, one compositional factor that should be to a lower unemployment rate, and the educational level of the increased, so
based on those two factors alone, you could get down to the end of the upper three and potentially not have this runaway inflationary spiral, and we will have to see if that happens. julie: what you also discuss in your piece today is two missing pieces in the labor market right now. participation, which still remained at a relatively low rate historically, and productivity. participation will rise if we start to rise further, but what do you do about the productivity? conor: that is related to this as well. one of the reason productivity has remained so low is wages have been so low. if you are an employer with money looking to grow, you can get cheap workers instead of equipment and factories. if wages go up, it creates the incentive to invest in equipment and machinery as well which will drive growth in the years to come. you can check out his
anchor: joining us now to talk more on markets is management from los angeles. thank you very much for joining us. we have been talking a lot on the show lately about sentiment, whether we are getting for do for you or not. let us talk hard numbers. when you look at u.s. markets from a strictly valuation
perspective, what are they telling you about future returns? >> that is actually an int interesting comment about cinnamon, going back to the 1980's, we actually had one of the lowest bullish readings ever in january, february this year. historically, the following 12 months mean you have something like mid teens returns and nobody wanted to buy stocks in february, but ironically, that is what ended up happening off the bottom, but as the market has increased, valuations have got rich, look at the 10 year around 27 right now. not worth it, not as bad as they were in the 90's, but kind of like 1996, so getting expensive, but we are in a strong uptrend, the second longest bull market ever in the dow. if we make it to the spring, it will be the longest ever. the bull market is getting -- it
is not the biggest by magnitude -- but it is getting pretty long as far as time. meb: as we get to the end of the year, double-digit returns and the s&p, probably more cautious. we think there is a lot of opportunity elsewhere in the world. anchor: so we basically look at the ratio and it is a positioning measure. when you look at what has happened throughout the bull market, you would have missed out on it. beyond that, just to play devil's advocate here, isn't it sort of built for a different world? that is it to the chart. what we're showing is where the cape is. deviation stigma right now. one deviation above the average. the question about the cape fundamentally is can we still apply it in a very different economy, especially a services related economy? meb: i love that example because it is a great illustration of how valuation works.
let us go back to 1993 when valuations first popped about 20 in this regime, going back to earlier in the 1920's, they got really high, but when they first crossed above 20, you would have missed out on something like 800% gains in the s&p if you sold and moved on, but no one puts their money under a mattress. if you park that money in long-term bonds, you would have ended up in the same place with stocks and you would not have the same drawdowns. there are other alternatives and things you can do like you could invest in bonds, except one stocks are cheap by kate ratios. stocks got really cheap in 2008 and 2009. as people don't remember that. it got into the teens. the best way to use it is to say, you are not just confined to u.s. stocks and bonds. the world is your oyster. you should invest were valuations are cheap anywhere. instead of just saying u.s. stocks are cheap, what are the cheap assets in the world?
let us say you bought the 25% of tsipras global stock market each year, rebalance once a year, that would beat both of those by leaps and bounds. it would have beaten the s&p by over four percentage points per year. if that is the world we find ourselves in right now, if you look at global market, much cheaper cape ratios. for foreign emerging, it is below teens, and then if you buy the cheapest basket, the eastern europe of the world, you end up with cape ratio of about nine, almost a third the valuation of the u.s., and historically, that means double-digit returns going forward. u.s. maybe 5%. trying ton you're project this forward and look at forward valuations and not necessarily looking at cape, given all the political events we have had in the u.s. with the prospects for fiscal stimulus, what is going on in europe, is there a way of quantifying the kind of events when you are
doing your valuation metrics? meb: absolutely. it quantify them by ignoring them. and that is the thing with valuation. they all say the same thing. it does not matter if it is one your forward earnings, tenure prior earnings, dividends, cash flow, bulk sale, we look at five af them, take the average on basis. you are not trying to predict what is going to happen next quarter or next year, but over the next three to five years, so if you look back, the u.s. stock market since 2009, number one stock market in the world out of 45 countries. that is an incredibly rare phenomenon. u.s. versus foreign is usually a coin flip. when you compare u.s. versus the globalockets, value approach, that outperforms and 60% of all years, so it is almost a coin flip. it underperformed in 2014, 2015, but it had a monster year this
year due to the brazil than russia's of the world up 50%, 70%. if europe if they're at together, you can see continued explosive returns out of global values strategy. anchor: i want to go that's what you said about sentiment. i made a chart about what you are talking about. aaii bullish sentiment hitting its lowest level in five years. after the election, and i had not realized this until right now, we saw a gigantic spite and ke in people who said they were bullish. historically, when you see gigantic spikes like this, do they say the flipside? returns are good when sentiment is negative. what is such a flip in sentiment towards bullish tell us about the future? meb: get a little bit about what david tells us about. you can have a bullish perspective from that. when you look at sentiment, it only matters at the extremes.
people spend most of the time in kind of the middle, but my favorite part about theaaii -- aaii series, the single month when people were most bullish in the entire history of the sample, you could probably guess this, january of 2000. the literal worst month to be bullish in the entire a last 30 years is when investors were most bullish. guest when they were most bearish? you could not make this up or come up with a more ridiculous survey answer. march of 2009. sentiment is really useful at the extremes. most of the time we spend in the middle, i don't know how useful it is. interestingly enough, they have a second survey which is not do what i say, but do what i do. ironically, most of the people spend most of the time saying "we are not that bullish, but your stock allocation is high," and that is largely because stocks have increased in value. so what you really want to use
those types of surveys is often a coincident indicator was what else is going on in the world so when stocks are expensive, the sentiment is usually bullish and high, which it should not be, and on the opposite, where the sentiment is really bad is when valuations are low and when you want to be investing. anchor: great stuff. love having you on, thank you very much. julie: let us take a deep dive into the bloomberg. you can find all the following chart using the function at the bottom of the screen. solared to start with the industry, so we talk about a lot of risk assets rallying in the wake of the election. one of those as decidedly not participated is the solar industry, measured by the guggenheim. it is down about 40 plus percent year-to-date. the other one is the average silicon solar module spot price, because after all, you are talking about panel makers as a commodity, and that has also
slumped. inhave seen the cost go down part because time is expansionary industry has been so rapid. helped the stocks, but we have seen an expansion in production and expansion of adoption to solar power to some extent as well, but it has not been good for -- anchor: good news for the world if you believe it's always good for the world, cleaner energy, fossil fuel, but not good for the people who tell us -- anchor: for pricing power, right? julie: menu put in the incoming adventist -- and then, you put in the incoming administration. anchor: my favorite ratio is pricing the stock market in gold, s&p versus gold. people think it is silly to price things and other things but i like it because s&p companies represent human achievement, people creating new things. gold represents rocks. people get upset i call it
rocks. opposite of human achievement. we are up a long time from the lows, which is in 2011, but we have a very long way to go to the peak, which meb was just meb was justhich , talking about. wasor: i thought the cape outdated but you are comparing it to rocks. always good to have another valuation measure. let's look at what happened over the course of the past year here. i want to give an update on what is happening. positive, boom positive, positive. bonds down if you look at the lqd. a big push to value and now it is flattening off a little bit. so, you know, the trend is shifting, i guess, a little bit here. julie: all right, we have to go to break then. and we will be right back.
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>> i'm taylor riggs. let's get to the first word news this afternoon. russia is calling the u.s. sanctions and aggressive move by the obama administration and is planning a proportional response to the u.s. explosion. that is according to kremlin spokesman who spoke on a conference call. according to interfax, russia will announce those countermeasures. interfax -- the russian foreign ministry. argentina has reopened its investigation into an accusation against cristina fernandez, accused of covering up an alleged uranian involvement in the 1994 bombing of a jewish community center. 85 people died and hundreds wounded.
earlier this week, a judge approved fraud charges against ides andz and two a ordered her assets frozen. 2016 was a deadly year for law enforcement officers across the u.s. with 130 five killed across the line of duty, the highest level in five years according to the national law enforcement memorial fund. 64 officers were shot and killed, up 41% from last year. nearly one in three officers fatally shot were killed in an ambush style attack. u.s. state colleges and universities are facing funding challenges. they are turning to tuition paying students from abroad. the institute of international education find the number of international students is up 85% from the past decade. it has helped keep u.s. public colleges of flow. -- afloat.
120red by more than countries. i am taylor riggs, this is bloomberg. julie: let us get a recap of today's market action. we saw three major averages pullback, but the dow and the s&p barely budging. the nasdaq budging a bit more, but we have seen a reversal of a lot of the trends we have seen since the election in the past week or so, including a little bit more weakness in stocks, in financials as well as weakness in the u.s. dollar and buying happening and bond markets. anchor: thanks, julie. "what'd you miss?" the u.s. could find itself at a trade war with china. who would outlast whom and who would take the biggest blow? joining us now is derek scissors. resident scholar at the american enterprise institute. give us good news. trade war, the u.s. coming out on top, right? >> i guess, if that is good
news, it is kind of like being shot in the foot and shooting somebody else in the stomach, but if we have a trade war, which is a bad idea and people will get hurt, the u.s. will win, so that is good news. anchor: what is behind the analysis you did, because part of this i know is the longevity with which china can hold on. is that just because of a sort of stimulus buildup, do we have that here as well? hand is ana on one country leading foreign exchange. a lot of money moving out of china and people worried about it and they are taking on in the united states, the reserve currency company, which means we do not need foreign exchange because the dollar is our currency. they are getting $300 billion a year roughly that of the trade surplus they have in the united states. ultimately, if the trade war goes that far, which no one could hope for, the u.s. cut that off and china loses. there is no way around it. anchor: you mentioned that somehow the trade relations with
trumpduring the administration will settle into something that allows him to claim a victory without actually altering the fundamental dynamics very much, and what could that look like? derek: that is very possible, even likely. i think what you are going to get from the trump administration from the start is things like calling china a currency manipulator, which does not require terrace, to -- ta riffs. things that are not going to really change the relationship that much. if china goes along with those, knowing they are not big changes, not really going to hurt china that badly, resident electron can declare victory and declare something else. he has a lot of other things on his agenda. obviously, tax, health care, and so on. the question is, what happens if ?hina retaliates, or depreciates its currency further than we go into a spiral -- or
depreciated currency further? then we go into a spiral. julie: the top administration actually takes over and actually perhaps comes through with some of its campaign promises, but given what you know about the chinese government, what do you think the stands will be? do you think there will be a retaliation you're talking about? derek: i think there will be more talk than action. notwithstanding people talking here about how china would when a trade war. the chinese know they would not when a trade war and you don't want to go down that road. they know they benefit tremendously from their economic relationship with the u.s., so there will be a lot of talk, articles in chinese newspapers and people making statements, but i don't think they want to act. we will have the headlines, but we won't necessarily take action. that does not mean the u.s. can do whatever it wants without chinese retaliation. the year coming up is a big year for china. they will have their source bought. i think they would like to be
cautious. spots.an -- sore i think they would like to be cautious. anchor: derek, let us talk less about the theoretical stuff that might happen in the new administration and talk about what you see right now, the china beige book. how are things looking? well, we have a story that's was into two parts. if you just want to look at the fourth quarter, our stories are very similar to a lot of other people's, which is that it was a good quarter. china's fourth quarter was better margaret economically. the chinese report these very stable him artificially stable statistics that no one believes, but if you do 3100 surveys, you get better evidence. the fourth quarter was a good quarter. the downside is 2017 does not look as good and i say that because cash flow at these firms is weaker. new orders are mediocre. inventories are building up. here.have two tales right now, things are better, a lot of evidence of that.
2017, we start worrying about chinese weakness again. theor: one of the things of equity market and currency market is the weakness in chinese currency under surprised evaluation was bleeding through and to other assets. that largely, even though the currency has gotten significantly weaker, it has not really been a major talking point, so when you look to the economic data here, does the devaluation of their currency, the weakening of the currency, correspond to what you see on the economic side, or is one out is in the other? is a big economy, the second largest in the world. of course, there are companies affected by the weaker wone. here are financial firms affected by capital outflows, but what matters is internal chinese policy. i'm not seeing the depreciation affecting most firms. there's too much construction. manufacturing sector serving
the chinese market is huge. jenny consumers are relied upon by a lot of the world, maybe unwisely. so depreciation matters. the balance of payments matters. when you're talking about internal china, it is really their own policy, their own debt situation, not the currency. anchor: we start to speculate on what the going to do in his administration, talk about tariffs, putting up blocks for trade, and emerging-market around the world and other countries are going to fall way behind. i guess, if the u.s. is growing at a gdp that is above what we have seen come almost double, some people are saying, gdp up to 4% next year, then walked the rest of the world still benefit even if it is by a lesser relative the amount on the margin? derek: the question traders are facing is the timing of this. another words, you are not going to snap your fingers and get the u.s. economy accelerating.
you can have a u.s. trade disruption that affects emerging markets, so if the trump administration comes out of the gate as i hope they will with tax reform, with actions to strengthen the u.s. economy, i think the emerging-market problem is overdone because you will get good timing, maybe u.s. trade action, but also u.s. worth. if they come out which may protectionism, that is where the threat comes from. u.s. policies on a going to work in february or march of next year. one key point about china, capital outflows. it appears they are continuing strong. any signs of stabilizing on that front, and any signs that what the government has done, very is measures to tighten the money, any sign that is working? derek: well, it will work a little bit. i have a data set on chinese investment, and you can see the change in november and december compared to earlier in the year with chinese companies rushing out word for new projects and
acquisitions and slowing down dramatically in november and december, but all of that -- but all that is going to do is slow the bleeding. if you need to do something dramatic for it to stop so that is why people talk about devaluation. i think that would fail miserably and cause cap outflow. need to make time a better place to invest. chinese money is leaving china because they would rather go somewhere else. if you make china a better place to invest, get more opportunities to private capital, that is how you keep capital from leaving. the capital controls will work as a band-aid. but what china needs to address problem is internal reform. we are not seeing that and that is pretty worrisome. anchor: we are looking at the outflows, chinese foreign exchange reserves just down, as joe was saying. i guess it has plateaued a bit. oliver: definitely something to keep watching. derek scissors, resident scholar at -- think he's a much for joining. julie: coming up, there may be some bright spots under a trump
a flip of 2016. in the second half, it was negative organic growth. i think he will start to see modest growth next year, particularly in the second half, better than the first half, but there is not in my view going to be a snapback of any kind. anchor: what are the factors that you look into in terms of where the demand is going to come from? is it u.s., is it international, is it stimulus based? companies>> all the are pretty global so it is in most cases at the top level of what will the gdp looks like. a lot of the more cyclical industrials are focused on commodity market, so, you know, what is copper doing? what is still doing -- steal doing? equipment,em make ag energy equipment, so they are tied to commodity markets.
of course, there is a lot of the reason these stocks ran is hope on what trump might do on a lower tax rate and infrastructure and other things helped industrials as well. theor: let us talk about trump boost. this has been pretty interesting to watch some of the companies and centers that did really well after the election. let us jump into my terminal because i have a breakdown of itself.strial sector a different industries within industrials. there is a big difference. it is not gains across the board. trading companies and the tribute is up 9%. engineering industries up 7%. and then, when you go back down to the aerospace companies you go down to some of the more core industrial, 7.5%. there is a lot of disparity here. what is within the applications for next year that has created that are difference -- that has greeted the difference? look at more stable companies versus cyclical
ones, there has been a huge bifurcation and that usually happens when people are anticipating accelerating economic growth. the cyclical takeoff. higher to the election, the machinery companies were up 40%, trump.t would be before post trump, they ran further. the multis were up 10% because people weren't begging next year, gdp will be better and the cyclical companies get the leverage. these are the ones to be in. so anything commodity related, economically incentive related, they really ran. more stable once did not. industrials art in health care. are in health -- care. aerospace also. they wanted to be in the big cyclicals in hopes that next year is going to be a 3% you're not a 1.6% year. julie: when you look at the potential for tax cuts, we look at the recent run and
commodities and gdp growth. the you think that would be positive? are there big risks looming for the sector potentially? then: there is always geopolitical risks. i mean, europe is a very big market for these companies, 25%, not a great story there. china has been an interesting incrementally growth market for them, but if that slowed down, it is more like sort of regional risk i would say. the u.s. construction market is a very important market to these companies, so that has been flowing all year. if it continues to slow, that would be a risk. ense is that s it will get better. anchor: the equity market has been the use of money for capex. ats comes from kevin kelly bloomberg fundamental data. this has basically been a trend a good bit has come
from industrial companies. people can expect that to go up. i wonder when you guys do your assessment of some of these companies, how are they going to weigh the economic expansion and the ability to do capex on the back of that? karen: i think you will see a slowdown in the latter. there was huge, again, the capex cuts are down 70% in terms of spending. next year, most of the companies, you are looking at flat. they are not expecting to all of a sudden raise capital spending 20%. companies would always rather be investing in their business and getting earnings out of their ,usiness rather than, you know a buyback is that i have free cash. ,hey have got so much money they are not reinvesting it in the business. they have been shrinking capex.
all things being equal, they would rather spend it in the business. ubelhart, thank you so much. i appreciate it. she is a senior analyst at bloomberg intelligence. anchor: up next, what analysts and business leaders say are the most significant risks to the global economy and international politics coming in 2017. this is bloomberg. ♪
2017 are two. first, it is the expectations being so high and the inability of government to move as quickly as expectations might be. ambitionsith great and applications and sometimes, they cannot achieve everything oneself. expectations being lowered is a big risk. >> the weakening of democracies in europe and the united states, we are seeing a wave of white wing.- right they get attention by an attack on south korea, that is the risk. india and pakistan, the war, the struggle between them is heating up, death on both sides of the line of control, they are both nuclear weapons powers. a lot for donald trump to think about. >> donald trump makes good of his campaign promise, which is really starting to reimpose some sort of tariff on trade.
other than that, 2017 world economy, economic policy, are on the progrowth side so i'm optimistic about 2017. i think the world growth will be better than 2016 and i think the asset prices will be higher. >> as we look at 2017, clearly the overall this is an political environment are things you want to closely, and those could have big impacts on the economy one way or the other. the other is obviously anytime usre is any kind of exalting -- any kind of event, like errorist event, we have to look at the business environment and understand those type of thing that would impact consumers, impact government approaches, regulations, things of that nature. >> i think there is the possibility always of a black swan, some foreign-policy crisis
we do not anticipate today or some economic crisis we do not anticipate the day. remember, george w. bush came into office expecting to do many things, but 9/11 happened. we don't know what will happen that is unexpected and the unexpected is really the biggest risk. anchor: those were carlyle group cofounder, david rubenstein, brandywine -- and mark fields on the most significant risks in 2017. anchor: time now for the bloomberg business flash, biggest stories in the news right now. the bill and melinda gates foundation will invest as much as $140 million in closely held therapeutics. used to develop an anti-hiv therapy. if the program goes well, the foundation may give up to $90 million more. palladium is the only precious metal to rise since donald trump surprise election win. gold has slumped at the progress
policies strength in the dollar but palladium, which is used in conversions, stabilizing vehicle sales in the u.s.. finally, the software maker for mostrless cars jumped the since august after announcing a partnership with the german mapping company. they include bmw, audi. technologies will be integrated into technological mapping systems and that is your bloomberg business flash. julie: coming up, what you need to know to gear up for tomorrow's trading day. this is bloomberg. ♪
across the asset classes. in the meantime, don't miss this. the last economic data point of the year in the united states. chicago pmi tomorrow, 9:45 eastern. be looking at the u.s. rig count, oil activity picking back up with the rise in prices, potentially a threat to the rally. we'll see how much further it has to go. anchor: we are trying to assess the move from stock to bond as people rebalance at the end of the quarter. we will see what we can find out. julie: yes, we will. that is all for "what'd you miss?" anchor: have a great evening. anchor: this is bloomberg. anchor: this is bloomberg.
with the presidential campaign. 35 russian operatives will be expelled from the u.s. their response, the u.s. released a report with evidence to prove that russia was behind the hacking. russia says the sanctions are an aggressive move by the obama administration and is planning a proportional response, according to a kremlin spokesman. the kremlin says the attempt will create discomfort for the u.s. the gop is reacting. paul ryan, john mccain, and lindsey graham call the sanctions long overdue. ryan says it is an example of the administration's ineffective foreign policy. mccain and graham say they will push for stronger sections. the first vote in 2017 will be to schedule obamacare. republicans are talking about how long they will delay the repeal.