tv Bloomberg Markets Americas Bloomberg January 5, 2017 12:00pm-3:31pm EST
david: from bloomberg's world headquarters, covering stories from new york, washington and london, morgan stanley's chief economist joins us with her outlook. we will talk about lies ahead for janet yellen and the federal reserve. u.s. intelligence chiefs reacted with president-elect donald trump has said and tweeted about russia's role in the election. a live update from capitol hill and the armed services committee hearing taking place today. an inside look at the mclaren 570 gt. there is a car in our headquarters. we will speak to the north american ceo. let's have a check with the markets with julie hyman. julie: makes me think of matt miller. let's look at stocks. we have seen a pullback that is accelerating throughout the session. all three major averages are down. the nasdaq has been the outperform or, it is down negative.
it is down more. 1.4%, the biggest one-day pullback since october. the small caps have been outperforming.postelection we are seeing that reverse and decided fashion today. the s&p 500 really taking a a.m.ownward around 11:00 after oil prices after we got the inventories report. now down 4/10 of 1%. the biggest drag on the s&p is an energy stocks, it is financials. they are down sharply today and dragging down the banks. as well jpmorgan, bank of america, wells fargo. we have seen the 10 year yield up nine basis points, a big move as we get some buying today. adp employment report. they came in weaker than estimated. on the flipside we had services in the u.s. expanding at the fastest pace since 2015 in the
report. it looks like folks are paying more attention to the adp report. we see buying of treasuries and the ripple effect throughout the financials and yields. s for oil prices, we have seen them rally when iraq cuts the opec cut plan. minute tumbled at 11:00 a.m. only got the inventory number. now down three tens of 1%. if you look at the inventories you see what is going on. here is the weekly change in inventory. crude oil and white. also down 7 million barrels last week. that was bigger than estimated. gasoline supplies up 8 million. distillates are up 10 million. that is really offsetting the decline we saw in crude oil. that is responsible for the drop in crude oil prices. vonnie: thanks for that update. that is julie hyman. let's get you first word news
with emma chandra. emma: top u.s. intelligence officials say russia is a major and growing threat to u.s. government, military, diplomatic and commercial operations. todayals are testifying at the senate armed services committee hearing. they are focusing on russia's meddling in the u.s. presidential election. >> every american should be attacked by russia's attacks on our nation. there is no security interest more vital to the united states than the ability to hold free and fair elections without foreign interference. emma: intelligence agencies say russia is one of 30 nations developing the capability to launch cyber attacks. donald trump said he is quoting julian assange and he is not an ally. he said "i simply statement he thinks. it is a for people to make up their own minds as to the truth."
president obama is expected issue at least one more batch of pardons and commutations before leaving office. the white house says they will likely be nonviolent drug offenders, some high profile people seeking compassion. was held for five years by the taliban, and chelsea manning delete classified military and government documents. a car bomb detonated in front of a courthouse in western turkey reportedly killing a police officer and a staffer. 10 others were wounded. two suspected attackers were killed in a shootout with police. a third suspect is being sought. it was at an entrance used by judges and prosecutors. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra, this is bloomberg. david: thank you very much. minutes from the december bankersshows central
are grappling with the problem they have not had to face in years. the economy could start to run faster than anticipated. that could force them to raise rates more quickly. is morganbreakdown stanley chief u.s. economist and joins us here in new york. what did they tell you about the saw?mous -- unanimity we >> one thing this that to me was the upside risk to their forecast. when do you think the last time that was, not in many years. they are always discussing the downside risks. that was prompted by a healthy discussion around what to build in about fiscal policy. i think another surprise was that janet yellen really played down how many participants might have provided revised forecast on fiscal policy at that meeting. she described it is only a few, yet the minutes said half. there was one way to look at that.
we thought there were many more that were going to bring down fiscal policy assumptions and that meant more of such revisions to their forecast and their rate path later on. instead, it didn't raise the path that much. there is not much more upward revision to be had. one could view it that way. we saw there was discussion equally on both sides. there was downward risk to inflation. if the unemployment rate dropped materially low full employment, they can see risk to inflation have to move more quickly. a lot of boilerplate, being fair on both sides of the coin, but there were some nuggets of surprise. vonnie: what do you say to those that shows the economy is showing strains of weakness? resultng the morning adp -- report? ellen: we have seen a growing trend in job creation. apd, anything from the range of 150 all day long.
that is a good health pace of job growth. i want to see that kind of slowing. job growth has popped above 200,000 and starts pushing the unemployment rate down meaningfully, which is what policymakers have told us they are looking for that might them nervous if they are behind the curve. i don't think that would be a good outcome. we would get back to that gray area. a faster pace of rate hikes that are bad for the economy when the stock market starts reacting as good data is bad so to speak. we want the labor market to continue to strengthen. i'm nervous fiscal stimulus is late in the cycle we have a 4.6 is an unappointed rate. you want to be careful not to push it down too much further and starting of the kind of inflation pressures that can get the fed feeling more frisky. they will have to raise rates quickly and shorten the business expansion. david: we saw that drop in
november to 4.6. i am struck talking to other economists at the big banks about how many of them saying we are past old when it. -- full employment. do you agree with that? ellen: many years ago, if you're watching the fed as long as i have you have read transcripts going back 20 odd years, she said i buy into the idea there is full employment measure out there. i also acknowledge we don't know where it is in real time. it is very difficult to get at. -- wel -- info employment should have already seen much more broad spread wage pressures. that would tell me just licking my finger and sticking it in the air that neru must be much lower than we think it is. shia knowledge that in a speech last year, it's probably much lower than where policymakers think. maybe it is in the high three's.
we've had big shifts in the labor market. we are not there right now. vonnie: what about fiscal stimulus? janet yellen did not make mention of it according to the minutes. some of the numbers did. at what point can we start factoring it in into economic projections? ellen: we factored it into hours. we raise our growth forecast by half a percentage point. i am in a different business than the fed. i can't sit in front of a client and say sorry, i can't tell you what trump might mean for the economy. i did expect policymakers to begin to pull onboard physical policy assumptions this early because they are more academic -- a more academic group. still the more noble ones like regional bank presidents are probably those that make up the majority that pulled on board physical policy assumptions already. we are all stepping in the dark.
-- stabbing in the dark. i called it a shot in the arm because forgetting an aging economy stimulus. we could have called it a shot in the dark because we are having to make a lot of assumptions on assumptions on assumptions. now we can be certain that tax reform is coming, but the timing is uncertain. policymakers would want to wait at least for things to be moving in congress. that is why yellen seemed surprised at the fomc meeting in november that so many had or if you had provided revised forecasts. we are certain on the delta, and the delta is -- we are thinking about that speech where she talked about the potential for height -- high-pressure economy. what do you think the utility of the speech was? you talk about the academic nature of central policymakers. was it a mistake on her part to introduce that is something we
grabbed onto and talk about afterward? ellen: the fed often does not see eye to eye with markets. in that speech it was in theory post financial crisis we have persistent under inflation for so long. one might want to run the economy hot and that the pressures build. something similar to that was mentioned in the minutes, that idea. no doubt that was probably the chair's voice. i think that she would have prepared for is markets would take her so literally and become complacent, saying you will raise rates quickly. at some point later down the line you will sit under heels for a long time. that was not the message she ultimately wanted to send. the market took it as her backing out of the perceived promise. she made no such promises. only in theory you might want to run your economy hot. we are all trying to guess what the fed's reaction function will be.
♪ vonnie: this is bloomberg markets. david: it is time for the business. clash some of the biggest stories in the news. sears announced it is closing 150 more stores. sales at sears and kmart were down more than 12% in the first two much of the fourth quarter. sears will sell it crass mint tool brand to for $900 million.
the third move to raise money. long-term mortgage rates in the u.s. fell this week after nine straight weeks of increases. the 30 year fixed-rate loan rose 4.2%. the 15 year mortgage slipped 3.44%. of federal just confront penalties against four other worlds biggest banks for manipulation of currency markets. they have been fined $2.5 billion and the agreement hammered out in may of 2016. that is your business update. vonnie: alan, we have top -- ellen, we've talked about your outlook for 2017. and the president-elect. what has the bigger multiplier effect on the economy, regulatory reform or just regular corporate tax reform and individual tax reform? ellen: corporate individual tax reform, the sheer size of it.
is also easier to estimate. and the effects it will have on the economy. we're still trying to grapple with just how dampening of an effective regulatory changes since the financial crisis have had on the economy. trying to estimate what the removal of those will have is also equally difficult. i think changes to regulatory reform is down on the list of priorities. you have aca taking precedent, personal tax reform taking precedent before you talk about dodd-frank and more of the changes around dodd-frank will come from the regulatory heads of agencies than a gutting of the legislation. we went through will it affect our growth outlook post-trump. the upper provision to growth, the ball came from consumer spending. tax cuts can be pretty powerful. tried to do is get away
from focusing on willits for the low income consumer more than the high income consumer. and concentrate on simply the categories of spending that tend to garner the benefits of those tax cuts. that consumer durable goods cycle has been petering out. we are getting later and later in the business expansion. we have seen auto sales, we will set aside yesterday's numbers, having growing on a year-over-year basis. that lengthens the durable goods cycle because a lot of those tax dollars go into new cars and trucks, motorcycles, recreational vehicles. and other categories that garner a lot of tax dollars are furniture and home furnishings. and then travel, because the dollar is part of this story. a stronger dollar has spurred domestic activity. foreign travel by u.s. residents, caroline transportation overall, booking services for travel.
these are some of the nuggets we have picked out in terms of the 300 categories of spending we track, in terms of the ones most sensitive to tax change. that is really interesting. an element for investors this year is to try to decide where those dollars and up in the economy. david: it seems like this week in particular there has been news about the affordable care act in some better information about how republicans plan to proceed. hattie forecasted what it would mean if the law were totally repealed -- have you forecasted what it would mean? ellen: the first baseline is what did health care expenses look like before aca? and also there was an element of tax burden as well. it sounds disingenuous to call it a burden because of fell on the upper-income households, but that can make a difference. repealing it and having extra taxes caps on into investor
income. income.d onto investor if i step outside and become the objective economist and set personal bias aside, i would have to say it is less of a burden on the economy if you repeal aca. but that is the objective economist in the. that is what congress is grappling with. the burden on the economy and the other side of it that how can you suddenly stripped health care away from millions of americans that finally had health care? i don't think it will be an easy issue december something were p a without replacing it. vonnie: surely millions of people without insurance are also a burden on the economy. how do you calculate that versus the other? ellen: a longer-term issue versus short-term. vonnie: deficits and a stronger dollar and higher interest rates
did not matter as the deficit gets bigger. ellen: if you are a trump advisor, you say 50 year u.s. treasury's which is something that is an bandied about before. we will issue longer-term debt to pay for it. the debt sustainability is a longer-term issue. it is something republicans have always grappled with because they want to do a lot of large-scale tax cuts, but you have to pay for that. that is where dynamic scoring comes in to play. estimating the macroeconomic impact of all of this tax reform and saying that has an impact on the economy and increases activity and brings a feedback loop of revenue back to the government, and we are just arguing over who measures it right. done in a creative way you can show tax cuts pay for themselves, proving that you are not goes well beyond the time horizon of any congressman. they don't have to worry about if it actually did pay for itself in the long run. vonnie: we have to leave it there. thank you to ellen, chief u.s.
♪ vonnie: this is bloomberg markets. david: on capitol hill the u.s. intelligence committee is defending its conclusion of a hearing that russia was behind hacking attacks during the presidential election. rushers said today only -- russia's most senior officials could of authorized it. there is a bloomberg reporter on capitol hill following the hearing. what do these three intelligence officials have to say today that was new? i get it the potential for a closed-door briefing as well afterward. >> i think what we heard today and have been hearing is a growing concern for the
intelligence community that russia did hack individuals and entities for the purpose of meddling in the 2016 presidential election. podesta andas john are has been going consensus among some of the intelligence community for the purpose of helping elect donald trump president. it is important to know that trump is the duly elected president whether or not this is true. what senators want to figure out is the extent to which this is a threat and what can be done about this going forward. one thing ever doing today is subtly but surely rebutting president-elect trump's skepticism and rejection of the consensus in the intelligence community this is happening. vonnie: what does it mean if there is a rift between donald trump and the intelligence community? sahil: it could create some tension. trump is scheduled to take
office in a matter of days. he will be there boss. is the fifth -- these officials and agencies will be answerable to him. it is unusual to see a president-elect or a president disagree with intelligence officials in the way he has. the disagreement is one thing and the skepticism is one thing, but one of the reasons officials are peeved is a give him as disparaging their conclusions and their work. he said a few weeks ago -- he that these of the same people that thought saddam hussein had weapons of mass distraction. some view that as a cheap shot. there will be contentions and it will be a challenge but trump will rely on these people when he is president. david: a question about tomorrow. one of these gentlemen is breeding the president-elect
along with the head of the cia and fbi. what we expect out of everything and do we expect a response from donald trump afterwards? sahil: he will get some more clarity on this. is a question is how he handles this publicly. one of the reasons he has been so skeptical, according to my understanding, is he views this talk of russian meddling to help elect him as a shot at the integrity of his election. vonnie: thank you for that. david: looking for a new car to impress your friends? we will tell you about the gt in the0 courtyard at bloomberg in new york. ♪
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emma: senate democrats want an investigation into the finances of president-elect donald trump's choice to head health and human services. price traded $300,000 in shares of health-related companies while backing legislation that could have affected the stocks. price has complied with the laws . the florida attorney general is joining the trump white house. questions emerged about a donation the trump foundation that syrian state media says 10 people are dead after a car bombing -- it is the first such explosion since the new cease-fire last week. dozens more were wounded. islamic state and other agreeing toe not
the truce the opposition agreed to last week. authorities are close to catching the gunman who killed 39 people at anniston bowl -- an istanbul nightclub. they've detained several people. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. vonnie: let's get a quick check on u.s. stocks. you can see that we are lower today, dragged down primarily by retailers. the dow is back below 19,900, down 86 points. the s&p 500 is down .25%. the nasdaq is relatively unchanged, just down two points. averagesthe u.s. major
may be lower today, but you would not know it looking at this board. these are the big internet stocks in the u.s. amazon is of the most come having its best day in about a month. it's not entirely clear what is behind this print it could be some reaction to that weakness in retail at of coals and macy's. -- kohl's and macy's. charles allen did tell our team that it is clear the end of leicester, e-commerce was dominating from a growth standpoint. retail overall grew 5%. the overall strength was not just in the u.s. these are the chinese internet alibaba up the most. behind this could be the fact that the china pmi services did hit an 18 month high.
this is a chart since december 22 when the u.s. put alibaba on a watchlist for fake goods. today, one reason alibaba could be rallying as well as the fact that they are taking strong measures against sellers of fake watches on the internet site. this is the first legal action they've taken so far. been looking at g #btp 1901. this suggests more strength is ahead for alibaba. this is its ipo in 2014 come up overall, but a bumpy ride. this speaks to buying momentum come a rising average. momentum anding this range in orange could be breaking to the upside.
could trade back toward the high of $120. a good stock to keep an eye on. global equities have been rising since donald trump was elected president. david is boosting his casualties. he oversees $33 billion in the --and comanager of he explained his reasoning. david: it's important to mention that we are value investors. companies atrchase big discounts. naturallyspeaking come as equity the increase, we typically become more sellers of securities that buyers of securities given our price sensitivity. we've had a nice increase in the equity markets, pretty consistently over the last eight years. some of that driven by earnings growth and economic growth in the u.s.
a lot of that driven by lower interest rates come ultralow interest rates and a real averaging of the global economy. reread leveraging -- leveraging of the global economy. as value investors, we would because ity much creates opportunities for us to invest more capital. vonnie: many say certain sectors are still undervalued come even after this runoff. where are you seeing any value left? inid: we think certainly individual situations, there are securities that offer us good value and our portfolio reflects those. the banking industry, especially in europe, still suffers from a lot of negative sentiment surrounding several issues. the political bashing up banks continues. there continues to be uncertainty regarding the
regulatory process. there are a number of banks that we do own in europe that we think are significantly undervalued. ubs -- mark: ubs is among them. is there temptation to love this bank in with the more fragile thisrs in europe -- lump bank in with the more fragile lenders in europe? david: all banks get lumped into the same trading pattern on uts. a good, healthy organization like ubs, the largest wealth manager in the world, $1.1 trillion worth of client assets that they manage in a very low capital-intensive operation, that is worth a high multiple of earnings. much more capital-intensive, much more regulatory driven in terms of the amount of capital they must retain.
as a result, a trait that he altiple -- it trades at multiple of price-to-book that does not reflect the underlying quality of its business. mark: i have a chart that shows samsung's share of the south korean stock market. it had quite a year in 2016. the stock rose by 43%, snapping the three-year losing streak. has it managed to salvage its reputation after the note 7 debacle? issues you number of would like to see the company address. these the evidence it's doing that tested to use the evidence it's doing that? david: even though the share price has had a tremendous performance last year, the stock remains very cheap. this is a $225 billion market cap company. the largest tech company in the
world by revenue. it carries 25% of its market cap in cash and securities. the stock still trades at about six times earnings two years out. the stock is incredibly undervalued. it does have issues in terms of managing its capital effectively and affecting a smooth transition from one generation to another. that is very korean specific. we think we can help the not with that transition in a way we vote for structural changes the company needs. once they affect those, the company will be in a position to better allocate capital and return more cash to shareholders which would just be cream on top of a very cheap valuation that these shares trade at. vonnie: where do you see the yuan going? is tradingyuan
within a range of fair value. we are not hedging our exposure to the korean wong. vonnie: we saw huge moves in china overnight. what do you see for china? it's not a big part of your geographic allocation at the moment. david: it is not a big part of our geographic allocation. that comes down to when inability to find securities that are significantly undervalued. an inability. china has its own problems. china has been growing on the back of a very large and rapid credit expansion that is getting less and less efficient at driving underlying economic growth. are of the companies state-owned enterprises.
where the state would have somewhat different objectives then we would. there are some companies such as very that we are bullish on. can you tell us what happened post-brexit? did you buy u.k. plc? are you still buying u.k. plc? david: yes, we are buying some u.k. plc. it's mainly centered on the banks. we own two banks there, lloyds, the strongest retail bank operator in the u.k. and rbs which is in a different part of its restructuring cycle. ath banks trading at or significant discount. both have incredible core franchises that once you remove fines and restructuring charges
and look at the earnings power operations, should be able to generate 15% r.o.e.'s, which would warrant a price of 1.5 times. considerable opportunity to make money in these banks over the next couple of years. samra. that was david coming up -- david: we will be talking with the president of mclaren north america about the mclaren 570 gt . this is bloomberg. ♪
business report. raising $100 billion for its global technology fund. it may have found a major investor. itnie: vanguard group says attracted $305 billion last year -- the ceo told bloomberg how they did it. privatelook at how equity firms turned the u.s. housing crash into an investment opportunity. deutsche bank exploring ways to avoid using its balance with and its settlement u.s. government over subprime mortgages. loaningan lender is money to private equity firms. those firms would bypass mortgages from government options and lower consumers's obligations. itk: vanguard group says attracted a record $305 billion last year, an annual total that
some firms needs decades to reach. the ceo spoke with bloomberg about whether stock valuations have run too far too fast. >> i think the market has maybe gotten a little and of itself. if you look at where valuations are in the developed world in particular, they are at a pretty high level. over the nexties decade of returns being somewhat lower than their long-term historical averages is pretty high. mark: macy's cut its forecast and said it would eliminate 6200 jobs, 4% of its workforce. the chain's comparable store sales fell 2% in november and december from a year ago. an abu dhabi development may -- softbankftbank
wants to raise $100 billion. saudi arabia may come up with half of that. apple will invest $1 billion. vonnie: time for our bloomberg quick take. bubble popped,ng millions of americans lost their homes as property values plunged. some big investors all this as an opportunity. i would agree firms led by blackstone quickly bought tens of thousands of homes at steep discounts. in the first quarter of 2016, the nation's homeownership rate was 63.5%. in 2015 commit 63.4%. the number of renter occupied units has increased by 5 million since 2011. many landlords only own a few units.
blackstone, black rock offer financing to smaller landlords looking to expand their holdings. have rock and blackstone an advantage -- billions of dollars in credit from large banks. subsidy became the largest family home landlord in the u.s. hedge funds, private equity firms and real estate investment -- the firms laid a role in lifting property values. blight byemoving fixing damaged, vacant houses and filling them with tenants. but individuals and smaller investors complained that these outsiders pay in cash and suck
up the best bargains. they face a bigger logistical challenge than the owner of an apartment complex. housing advocates have called for federal intervention. they complain lower income homebuyers are being shut out of the market. they are skeptical about the that -- you can read more on the bloomberg. had to -- head to bloomberg.com for more stories. ♪
where it sold 1100 cars for the first time. david is outside bloomberg's headquarters where he's joined and a priceyh supercar. david: tell us about the car behind you hear. -- behind you here. tony: this is the second car in the sport series lineup. this is the 570 gt. the most luxurious mclaren to date. more luxurious on the inside -- david: who is buying this car? last year was a great year for sales. tony: the sport series lineup allowed us to double our sales in north america. we have an attractive lease program on this car. it attracts a new range of customers.
this is a sports car enthusiast's car. also someone into grand touring. it offers luxury and performance. you must think about exclusivity all the time. -- have youertical navigate that? getting more people to buy them, maintaining the exclusivity you have? tony: we are a small volume manufacturer. this year, we did just over 1100 cars. the u.s. did around 17.5 million cars. we will always be exclusive. we were at full capacity. we build 5000 cars globally a year. our goal is to continue to come out with different models and butants of those models,
remain limited in terms of our product lineup. david: what are you looking to do is how different will those models be? tony: the plan states that we are going to invest over a billion pounds in research and develop an over the next six years. we will be presenting 15 new models during that time. half of those new models will be some sort of hybrid technology. the cars will be very cutting edge and innovative and limited in scope. tony: suvs are driving high-end luxury. are you thinking about expanding into that realm at all? we've done well. our desire is to continue to build the iconic sports car. what we know very well and that's what we are concentrating on. at this time, i don't see us -- david: there had been complaints
about the interior electronics. this is something you will have to learn or do differently. how do you answer those complaints? we have a new car, the second generation of the super series we will be showing in geneva. when you see the car launched in geneva, you will be very impressed with the changes. david: talk about the engine technology you guys utilize. --'ve been at the vanguard is that being incorporated into the sports cars as well? tony: the automotive side of the business is relatively new. we've been selling cars in north america just over five years. mclaren itself has been around for a long time, since the 1960's as a racing company. we have taken a lot of the technology and incorporated it into our car business. the carbon fiber chassis -- we are the first company to roll out the carbon fiber chassis
with formula one. the other teams thought it was crazy. it allows you to have lighter weight, stronger material, has better performance. this particular car is 570 horsepower. a v8, 3.8 liter. it's incredible powerful, but still comfortable to drive. david: record sales last year. you are proceeding -- tony: we are looking for an increase over the next couple of years. carsyou get to 5000 at year globally, we cannot go beyond that. we will stabilize around 5000 cars globally. tony joseph.s vonnie: for more, check out pursuits.
ofare covering stories out las vegas, washington, d.c., istanbul and london this hour. investors during a poor job state tomorrow. will be see a change in which growth? we hear from aol ceo tim armstrong. he tells bloomberg that the yahoo! integration planning is still going well. sears has agreed to sell its to stanleyools brand black & decker. trying to prop up the retailer. we are halfway into the trading day. julie hyman is here with the latest. julie: i want to start with the smaller cap averages. i thought we had a board of majors as well. we are seeing a selloff accelerating as the day has gone on. we've seen crude oil take a leg lower. an in the moveen
and treasuries that's acceleration-- an in the move in treasuries. nasdaq still barely hanging on to again. we are seeing that divergence now and the underperformance of the small and mid caps. a reversal of what we've seen since the election. fall into the small and mid-cap category. beingof the mid-caps affected by macy's and kohl's forecast cuts. off 5%. co's.with chi
it is affecting a number of subsectors of the retail industry. es is down some 9%. it's comparable sales rose for the holiday season in december. up 3.4%. but that is a percentage point worse than estimated. 8% as well. one of the trends affecting these retailers, the rise of online retail and amazon. this is the proportion, the salesof non-store retail to overall retail. store -- evens though it has been such a huge game, still only accounts for 10% of overall u.s. retail. we saw an 11% gain in online
sales during the holiday season. our those stocks doing today? amazon up to gwen 6%. netflix is gaining and paypal is also higher. up 2.6%. betweenhe disconnect brick-and-mortar and the online --used retail david: thank you very much. let's get the first word news. top u.s. intelligence officials say russia is a major and growing threat to u.s. government, military and at the medic and commercial operations. todayclapper testifying before the senate armed services committee -- focus on russia's meddling in u.s. presidential election.
commands a and cyber have worked extensively with our broader government partners to detect and monitor russian cyber activity. the hacking of organizations and systems belonging to the elections process is of great concern. intelligence agencies say russia is among 30 nations developing capabilities to launch cyber attacks. the front runner for a role in the treasury department served in the reagan and george h.w. bush administrations. he's the leading candidate for the undersecretary of international affairs. will attend donald trump's inauguration. he was one of trump's strongest he let theters -- anti-european u.k. independence party until november. he was a key player in britain's vote to leave the eu.
the obama admits race and has announced terror related sanctions against the son of osama bin laden. administration has announced terrorism related sanctions against the son of osama bin laden. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. a bit of mixed data on the jobs front today. a slowdown inting private sector hiring last month. tumblingobless claims as the year ended. all of this before the december jobs report tomorrow, the first major data wrapping up 2016 and the economy's performance under barack obama. dan moss joins us for a preview.
we are roughly in the ballpark of creating plenty of jobs, more than we need come almost. would that be a correct statement? will moveumbers around. let's keep our i on the general trajectory here. we are on the eighth year of economic expansion. we are still creating enough jobs to push the end of limit rate below 5% and keep it there. fed's projection is 4.8%. we were at 4.6% in november. if the forecasts are correct, we will still be below when the numbers come out at a: 30 tomorrow morning. that's 8:30 tomorrow morning. david: we did see a bigger drop than many expected. it will have to pick up here. dan: we also saw a significant decline in jobless claims today. we thought that would plateau at around 300,000.
then, it was around 270, then around 250. at this rate, we are headed to 200,000. that is a labor market that is tight and getting tighter. to weightit lead gains -- wage gains? you have to take into account the improvement in workers' lives. gdpquarter over quarter figure, the yellow line and job creation -- job creation going hybrid gdp growth has not been so strong. best job creation going higher. the forecasts are for an economy that keeps growing in the 2-3% range. that is largely where the world is stuck. time, thef that
consumer spending component of gdp has been far stronger than the other components. the retailers did not do well over the holidays. perhaps that might be changing. dan: but online sales are doing great. consumer spending has been holding up this expansion while cap x and other things have been indifferent or worse. that does not translate into the retailers in the mall down the street doing great. consumers expecting hiring -- the prospects for wages taking up. spokenhn williams has and written about this extensively. by his estimate, we could go as low as 80,000 payrolls per month and still be creating enough to
absorb new entrants into the labor market. this is one of the longest expansions we've had. was three or four years. we are in our eighth year. vonnie: what about donald trump's activity -- will he be able to improve an economy that is already improving? will he make a vast difference in the first 100 days? dan: trying to predict that is very difficult. who would have thought that the transition period would have been as volatile? the u.s. can shape the global economy but is also shaped by the global economy. what is going on in the u.s. labor market is highly dependent on the rest of the world. it is not just one leader in one country can do one thing david:
i want to ask you about trade policy. weekwhat we've seen this on a company by company basis, donald trump tweeting about gm -- does that tell anyone anything about how his trade policy is going to be or is this something where you can say these are companies acting in their own interest? what does it tell you about trade policy? dan: we are just going to have to wait and see. it's an indonesian official told 's in the summer, campaign campaign, government's government. there is a global supply chain which has been built up over decades that is very difficult to dismantle. bloomberg customers can still hit enter and billions can go around the world in a nanosecond. vonnie: dan moss, thank you. david: coming up with a
soundcloud warning it risks running out of money as he said in service doesn't gain -- if the subscription service doesn't gain traction. soundcloud may have to raise additional funding to meet financial obligations. dhabi's development may invest $50 billion in softbank's global technology fund. they want to raise $100 billion. saudi arabia may come up with half of that. apple will invest $1 billion. that is your bloomberg business flash update. david: donald trump's pick for secretary of state has disclosed assets worth as much as $400 million. rex tillerson's personal investment portfolio includes stakes in exxon and competitors. this and a 38ll
page filing. what else did we learn? what's interesting is how much of his wealth is tied to exxon. he has some stakes in his competitors, which is very interesting, including shell, opec -- one company he does not own any shares in, bp. how will he extricate himself from this huge portfolio he has? tina: a lot of it has to be sold for cash. dekes on chairs have to be put into a trust. aboutare open questions how he will go forward and handle the job which involves --
which expands the globe. david: put this into the context of the confirmation process. was he required to detail all this? what's next in terms of timing? tina: these disclosures were required. he spent this past week going round the hell meeting with the folks who will ask him questions. --s going around the hill he's been to this past week going around the hill meeting with the folks who will ask them questions. he does have to win over some republicans as well as democrats. conflicts about what dealings you've made in the past. int we know about tillerson terms of other interests he might have had in the past?
tina: one interesting thing in the disclosure statement was holding largest equity of all was with apple. not a huge position. if you look across the portfolio, you see a fairly monday and retailer -- monday undane retail investor. it is not illegal. he has shares in some companies that do business with exxon. not only his competitors, but also companies like schlumberger and general electric. as long as the board is notified of these holdings, they can source sale. if they are ok with it, it's ok for them. vonnie: what is next for the confirmation process?
tina: the hearing next week. --y allowed for disco days they allowed for two days. unless something terrible happens over the course of these hearings, he has enough republican support to move forward. vonnie: what do his colleagues in the community say? about this potential appointment? is there a lot of positive and negative reaction or a preponderance of one? ofa: there's a lot excitement about someone at their level who does their job taking on this role. the other thing we heard a lot, when you are doing this for a multinational oil company, a lot of your work is shaking hands, being diplomatic with foreign leaders. bit of thattle background already from having to broker-deals in countries
that are not always easy to do business in. david: how does he compared to his competitors in terms of size and reach? expect -- what do we expect to hear at the hearings about his outlook toward the world? his outlook on climate change differs from what the president-elect has said. expect him to not give a lot of details. the main focus is going to be on exxon's relationship with russia. it's the place where they've held the largest amount of acreage for a long time. something he helped push exxon into doing. david: thank you very much, tina david. vonnie: julie hyman is with us now. breaking news on toyota. julie: donald trump has now toyota to toyota saying
motors will build a new plant in baja, mexico to build corolla parts for u.s. no way. the plants in u.s. or pay big border tax. these are the japanese shares of toyota. you see the drop off in the adr's of toyota, don .4%. it's unclear what this will bring. .4%.wn i'm also taking a look at the mexican peso. one of the places we have watched for reaction to commentary like this. the dollar taking a lake up leg up the peso -- against the peso. the mixconcerns about can economy if more automakers decided to move manufacturing away.
toyota shares have been moving. the mexican peso has been moving. it has been moving all day, but really stabilized around the 21.50 mark. the mexican central bank had been successful until this tweet print nevertheless, still at 21.42. piece a great looking at what toyota's president said in regards to this issue -- he would take what donald trump says into account when planning what the automaker 's relationship would be with mexico. donald trump calling out a company on twitter and seeing havetic effects -- we
seen it in the defense sector, automotive sector. david: for those looking for the mexican peso to appreciate -- vonnie: it is now even on the day. it had fallen beyond 22. it could fall beyond 23. it will be interesting to see what toyota's response is. david: i'm reminded of the peace shannon wrote yesterday about the threat donald trump has made here. he would seek retaliatory action -- under the terms of nafta, that is something that would not be legal at this point. mexico would have the opportunity to challenge that in court and that could be the start of a trade war. donald trump saying nafta was something he wanted to revise,
took issue with that trade agreement. we shall see what happens next. toyota being called out by donald trump on twitter, saying he will not allow the company to build a plant in baja. vonnie: it will be interesting to see when he moves beyond the auto sector. areie: how yahoo! breaches affecting its deal with verizon. david: this is bloomberg. ♪
motor corp that it was thinking about building a plant and baja, mexico to build toyota corolla's and they should think again because there would be a border tax placed on them. there is the tweet on your screen. we will see what the japanese have to say in response. if you look at the trading in the u.s., you can see shares did take a little bit. covering cars.y jamie, tell us how to toyota is likely to respond to this. it is a different culture, more of a japanese culture. >> toyota tends not to be confrontational in the u.s., they came here in the 1980's when automakers agreed to build
more -- japanese automakers agreed to build more in the u.s. instead of importing so much. the thinking was they had to deal with american workers, they would face unions, they would have all the same problems that detroit had, but they showed they could bring their manufacturing system to the u.s., and they have done well. they have invested billions and billions in the u.s. one thing i need to point out, mr. trump has his facts a little completed. the unit is building a corolla mexico.in central in baja, they have a factory there that they have had for a long time making small pickup trucks, the tacoma. the corolla factory is actually in central mexico, some of those vehicles would presumptively moved to the u.s., but they already have a plant in mississippi. what they told me earlier in the week as they have not decided where they are going to send those vehicles. mexico has so many free-trade agreements, they could send them
all across south america, asia, or europe. david: it makes one wonder where donald trump is getting these from. these do not seem like controversies rocking public attention at the time. have they are, correct me if i'm wrong. a sense of the greater import of these factories. >> clearly, there is a target on mexico. with ford, you could see they were announcing a large investment in mexico. gm, a small number of vehicles that they don't make in the u.s. that are not popular in the u.s. and it would basically be a car that gm would not be able to sell here. toyota imports a lot of hybrids, lexus models from japan. so far he has not gone after japan or imports from korea or germany or anywhere else, or canada. it has all been mexico. howeverhatever reason, that plays a politically, mexico is clearly the target.
vonnie: you may not have had a chance to report this out yet, but where does this come from? is it possible that toyota called it thent incoming administration, having seen what has happened with gm and ford, and maybe he was to be included? >> or it's possible friends of the detroit automakers -- ford is getting picked on. we are not the only ones that make an smell -- and sell small cars in the u.s. so then he calls a gm. then the was automakers say we are not the only ones, toyota is doing it. reason, there is always a lot of back channels of communication. these are being brought to his attention and he sees benefit in highlighting them. david: my mind keeps wandering back to the interview that we did with mark fields, where he
was so adamant that ford came to its decision because it was a sound business decision. it makes me wonder about the timing. why were companies going had with these factories in mexico, it made sense to do these in the u.s.? make theill still focus in mexico, which is the car they were going to build in that factory. answer was that they did not need to spend a billion and a half dollars on a new plan to make the focus, when they could fit it into the small car plant already in mexico. .hat was definitely part of it small cars are losing favor, but the corolla is hugely important to toyota, their top seller worldwide, the top-selling card in the world. these are hugely important vehicles. not just for the u.s. market. david: jamie butters is in detroit. thank you very much. ces is in full swing in
las vegas, nevada. earlier today, we caught up with aol ceo tim armstrong. we asked about the status of the yahoo! hack investigations. the yahoo! deal for us is strategic for our 2020 goals, we are hopeful it will close. split into for us is two areas. one is the integration and strategy planning with marissa and the executive team at yahoo!, which has gone well. we have close relationships with them. the second piece is information coming out about the breaches and what the effect of that is. verizon is handling the breach research with yahoo!, yahoo! is going to their investigation. we will not have any comments on that because yahoo! is not finished with that investigation. on the execution side of things we are on track and hope the deal will close overall p we will know more in the first half of the year.
i think the yahoo! team is doing a thorough investigation. i am sure they will have more to say about it. >> is it theoretically possible that these series of hacks, the public's knowledge of them has any effect on the brand, damages the brand of yahoo! in any way? of the things that yahoo! is looking at and will continue to look at, the total effect of what the breach was, what the outputs of them are. of course, we have a viewpoint on that as well. from the standpoint of where we sit right now heading into 2017, our strategy is clear heading toward 2020. yahoo! is one piece of the strategy overall. as we get more information about the breach, we will update people on that. i would say, from what our goals are, what we have been tasked to get done with yahoo!, it remains on track. pisa researcha
and investigation that is still ongoing. the size of the business of yahoo! is not properly understood generally. it is such a very big business, so many users. when you look at that asset, what do you see that holds such a value? the noise, the concern over the breach tends to dominate the discussion. what do you see as the underlying asset and its value? world todayn a where there are hundreds of billions of dollars, billions of consumers coming online that are all digital and mobile first. yahoo! is one of the largest footprints in the world on the consumer side, has a very sizable advertising business, e-commerce business in asia. from our standpoint, when we look at the combined assets, over a billion consumers doing billions of dollars in ad revenue, and have a very big footprint in mobile, added with verizon which is very strategic.
that opportunity with data and targeting and getting to mobile consumers is huge. i think the breach information and the investigation is there, but from a business strategy standpoint, over the next 10 years, the assets coming together represent a very unique opportunity, unique scale. we have gone from company consolidation to industry consolidation. verizon has been very forward thinking, very clear on the execution of where they think the world is going in media and wireless and mobile. we are excited about yahoo!, the team overall. there is this one issue that needs to be resolved. i would look through that on my side from the integration side to look at the strategy. i think the strategy remains intact. that was aol ceo tim armstrong from ces in las vegas. joining us for more in san francisco is cory johnson. were you convinced by tim
armstrong, did he tell a good story? cory: he tells a great story, but do we believe the story? i know it is hard to pin him ofn on the value, the cost the hack, but the important part of the interview, the notion of the strategy. the $3.5 billion that yahoo! brings in on topline revenue, the billion customers that yahoo! is in touch with on a daily basis, that is what is so important to him as they look at that business. when tim armstrong looks at yahoo!, they see a huge collection of customers and the ability to get in front of those customers with digital media. they don't have to go on and build an audience that is facebook-like in size. it is already there. while yahoo! had problems profiting from that, under the verizon umbrella, they see that as one of the only possibilities across all of digital media to
gather a big audience all at once with a checkbook. vonnie: cory johnson, we will have to leave it there. thank you. more interviews from ces throughout the day, including a conversation with iac founder barry diller. still ahead, the president-elect has been tweeting. investors in the defense sector may not have liked what he said so far. i look at the future of defense and aerospace stocks. this is bloomberg. ♪
donald trump apparently remains opposed to the merger between at&t and time warner. apparently he believes it would concentrate too much power in the media industry. this is according to people close to the president-elect. he has not spoken publicly about this transaction but according to our reporting, a story out by jerry smith and josh green, he told a friend that he still considers the merger to be a bad deal. his chief strategist steve bannon is also opposed to the deal, according to people familiar with the situation. deal duringast the the campaign but has since been quiet about it. shares falling sharply on these headlines, down 1.7%. for trump did not him respond to request for comment. we are watching at&t shares as well. they have also taken a hit, but
a smaller one as the acquirer, a less dramatic reaction. lower, but only off by .4%. it is unclear at this point whether or how the president-elect, when he takes office, we try to influence the regulatory review of that merger. he did say before the election that his administration would acquisitionat&t's of time warner, saying at the time it was too much concentration in the hands of too few. hats investors who had not heard from him on this front since then were more hopeful. this seems to indicate that that hope is not necessarily warranted. we will bring you any developments and commentary from the companies as we get it. clearly, it is having a market effect. of course, just the latest tweet to have a market effect, just today. david: thank you.
one of our callings behind that scoop is jerry smith, who is with us on set. how is the regulatory environment expected to change under a jeff sessions department of justice, is the greater heard , under a trump administration? >> a lot of investors have looked at the trump administration loosening regulations, the possibility of more m&a, for example, would be a more realistic possibility under a trump administration. certainly with republicans in control, it would be more of a pro-business standpoint. what our sources are telling us are that donald trump has not changed his position, that he stated back in october during the presidential campaign, when he spoke about the at&t time warner deal and said he was opposed to it and would try to block it. vonnie: how much of his dislike of the media is tied into this? >> hard to tell. he has certainly criticized cnn
for what he sees as unfair coverage of him. cnn is owned by time warner. you could read into that possibly as being part of his rationale for why he might be opposed to it. david: these are two companies with huge lobbying spends in washington. what do we know about how they have made the case [indiscernible] have we seen an increase in lobbying spending? >> there was a congressional hearing where the ceos of at&t and time warner laid out their case for why they think the deal should get approved. they stated a lot of different reasons for it. the fact that they said they would better compete in online advertising with companies like google and facebook. they talked about how it would make it easier to have channels available on smartphones. helps them to adapt to the changing landscape. they have try to position this
as a proconsumer deal. david: i imagine we will now wait for the tweet. jerry smith, thank you. defense stocks like boeing and lockheed martin have come under fire in recent weeks after provocative tweets again from donald trump about two/costs on their respective programs. in december, trump wrote -- he goes on to say about boeing -- if you take a look inside the bloomberg, major defense names have been volatile recently. we want to bring in the carter copeland, barclays aerospace and defense analyst for how exactly the incoming president-elect is
impacting this area. from a high level defense investors are dealing with a cross current year. the thought process being we will have higher defense budgets under a trump administration at the same time trying to quantify the magnitude of this tweet risk on various programs. everyone expects the budget will be higher, we were already on a budgetary upswing. the question is how that cuts against what was growing optimism in the sector. we don't know at this point about how successful that will landscape,ing the return profile of these companies. clearly, the cross current is the theme that defies the group. vonnie: i remember hearing a few years back the pentagon budget needed to be audited. it hasn't been, something that lawmakers have been calling for. david: could that be something that donald trump would call for, when he talks about reforming the way contracting works? >> there is the hard part.
reforms in procurement policy have been underway for decades. this is not something new. the government has tried to get more for the taxpayer dollar for a long time. the problem is, for a complex as large as the department of defense, instituting black and reforms is very difficult because of the relative size and makeup of these companies is different across a lot. when you have is it is tough to england blanket reforms and that is clearly a risk to the industry because the industry has never been more profitable. the risk of the president-elect tweeting individual programs is something new. it is not blanket reform, it is a one-off investment risk that people are struggling to deal with. vonnie: one of the other considerations to take into account, you say the industry is doing as well as it has in 60 years. what does it mainly depend on, war? were to look at the
level of defense spending in this country as a percentage of gdp, it has been much higher than in the past, even in war times. vonnie: how is the defense community than reading the stance of the president-elect as regards to foreign policy? >> i think they are struggling to read it as much as we are in the investment community. this is a risk they had never had to deal with. of programs one pecans on at the change of administration. we saw that with a helicopter with the obama administration coming in. that program was canceled. could we see things like that under this administration? it's possible. it is too early to see black and reforms affecting the whole industry. vonnie: carter copeland, thank you. david: coming up, shares of sears are higher after agreeing
shares of seers are higher after the retail chain agrees to sell its cross midline to black and decker for around $900 million. this marks their third fundraising move in the past few weeks. joining us now is brooke sutherland. talk to us about how many sears outlets are being closed, whether it will really help. >> they are closing 150 stores along with this announcement that they are selling craftsman. it is one in a long series of efforts sears is taking to try to revitalize itself and raise money, stay afloat. whether this will be the deciding factor in the long run, i don't know. i thought it was interesting that on the stanley black & decker conference call, the ceo
had to address whether sears would be in bankruptcy before the deal closed. you don't see that often where the acquiring company is worried about a deal would get done because they don't know if the company would be around. david: what is keeping this company above the waterline? >> i think it is part of that and also eddie lambert. hanging on.f i don't know how much longer that can continue. right now they seem to be making ends meet, but the more they sell, the less they have to sell you wonder what more is there, how do you keep raising cash? vonnie: there is a domino effect as well. even if you have written off sears as a proposition for retail, it is still a tenant in many malls around the country. these one heard 50 stores closing, all those employees go, animal no longer gets the revenue. is there still hope for sears? >> that is something we will
have to wait and see, they have managed to hold on this long, but there is an economic effect when you have all of these employees leaving. it is interesting in stanley's press release, they talked about the jobs they would create. i don't think that will be enough to offset the cuts happening at sears, but it's interesting, in the age where trump has such a focus on american manufacturing, stanley went out of its way to talk about the jobs they are creating in the u.s. manufacturing footprint. what does this say about big-box retail in america right now, can you look at sears as represented on the sector as a whole? >> when you look at macy's results, kohl's, i don't think big-box retail is doing very well. these companies expanded very fast and they have a lot of real stores that people are just not going to. they are shopping online, going to amazon, and you can get pretty much anything online.
david: were they late to the online game? >> i think they were a little slower and that hurt them, but they have made some missteps. the kmart merger does not look smart in hindsight. they did a lot of things to set themselves up for more challenges. vonnie: can we just pay tribute to the history here? craftsman has been a part of sears since 1927. this is a piece of history moving around. our analyst saying it was too cheap of a price. brooke sutherland, thank you. david: the founder and ceo of the mark analytics says markets are about to exhaust their uptrends. this is bloomberg. ♪
we are live in bloomberg while her quarters in new york. we are covering stories out of chicago and washington. u.s. stocks snapping a two-day winning streak. financials, industrials, and energy companies are facing the losses. banks singing the most in months as yields plunged. weighing on the indexes after disappointing holiday results. shares of macy's and kohl's all sinking. on pace for its biggest drop ever. rudy giuliani and blackberry ceo john chen will be live from ces. they will discuss their newly announced joint venture. u.s. markets close in two hours time. let's check in with julie hyman, not just on the major indexes, but the trouble fact that his words have had on individual names. julie: we have had several
breaking stories having an effect on individual stocks and one currency. i bet you can guess the one. according to people familiar with trump, thinking with his plans, he is still opposed to the at&t purchase of time warner. he had commented about that on the campaign trail pre-election, has not commented on it since then. we have seen stocks trade relatively benignly with regard to the deal going through. a sharp legtaking lower, then recovering some of .hat, still down 1.4% still waiting to see if there is any commentary from the companies or officially from the campaign. a spokesperson was not available for comment. a leg lower, taken not as dramatically as the acquirer. now down about .3%. other situation, donald trump tweeted about toyota's plants to build a plant in mexico.
he threatened a border tax if they go along with that. earlier today, there was a story that the toyota president had expressed willingness to be cognizant of trump's commentary on mexican plants. toyota shares also lower, only off by .4%, but the market effect that we saw from that comment was on the mexican peso. this threatens more potential manufacturing activity within mexico. you saw some activity here, this is the dollar versus the peso. initially, earlier today, we saw the central bank of mexico selling dollars for the first time since february, and then the more recent reaction. scarlet: thank you here and we will stay on the theme here isause a magazine publisher said to have expressed interest . therging with time inc magazine part of the business of
time warner, now a separate company. meredith said to be interested in merging with time inc. this is rekindling a possible tie up that had died in 2013. other strategic companies of privately held businesses have also build in touch with time about a possible deal. no talks have been held yet with interested parties. broke thean, who news, will be joining us shortly on this development. you can see shares of time inc. up by better than 5.5% on the headlines. meredith taking a big leg up initially but then coming back down, now currently down about 2% in afternoon trading. breaking news here that meredith is potentially interested to merge with time inc. once again, throwback to 2013. let's go straight to our white house correspondent kevin cirilli. back to the at&t and time warner
deal now at risk. tell us more about the genesis of this conversation here that donald trump has been having with the public about time warner and at&t. two things, first and foremost, this started during the campaign trail in gettysburg, pennsylvania ahead of what was being dubbed as a major policy address for the then candidate trump. it came at a time when there were several women who accused of havingate trump misconduct against them. he started up the press conference in gettysburg lambasting the media, and as a result, he lambasted the corporations owning that media, most notably time warner and at&t. that was back then. the second point i would make is that this fit with the base of the republican party, many of which are skeptical of large financial institutions and large corporations. now that he is president-elect, we had not heard much publicly
on this particular issue. we have the story on the bloomberg now saying that trump has said to at least one individual that he is still planning to oppose the merger. i can tell you i have also spoken with a source with knowledge of information who has also said that trump has brought this up to another individual. clearly, president-elect trump still very much opposed to the deal. oliver: our reporting today attributes this more to the kind of idea that he doesn't want a big conglomerate, a single power in the media industry which seems to go in line with populist views. this may be a result of him having a beef with the owner of some of the stations he does not like? >> i am. when this originally broke, this was something that really fit well with the narrative of trump going against the media, the
speech where he was outlining this was supposed to outline his original economic policies for his first 100 days in office. i also think it is a fight that fits well, again, without more populist approach, with the more populist rhetoric, that many, not only in the conservative grassroots, but progressive grassroots, would be able to get in line with. i also think that the sources i'm talking with continually note that trump likes to have key points of leverage when he is in the room with some of these executives. we are seeing this not only with at&t and time warner but also with companies like boeing or carrier, and most notably in the headlines, toyota. good point,t is a he has been very actively vocal when it comes to how companies should operate their businesses, directing what he thinks should be done.
in terms of mergers of big entities, has he commented on any other kind of acquisitions, made his opinion known on those? >> he has not, so far as we are concerned. what will be interesting here is to see what particular impact carl icahn has with this type of policy subject area. of course, he is surrounding himself with several business leaders. these are folks like steven mnuchin, gary cohn. when you look at previous business deals of some of the folks that he is surrounding himself with, this could raise some questions. as far as time warner and at&t has been somewhat consistent on this from the time of the campaign and now entering into the transition. but again, how much he is able to do on this front aside from stoke the flames of a discourse within the media and business
communities, that remains to be seen. i would underline this point, that could be a key point of leverage for him, as he assumes office in the first 100 days. down to publices pressure. have we reached out to the trump administration for comment on this? this is based on bloomberg reporting talking to confidants. >> so far, no statement coming from the trump spokeswoman hope hicks. no word back. said, as what they have before this report, they said there is no change on his position in opposing the at&t time warner deal as of now. kevin cirilli in washington giving us some important context. coming up, first on bloomberg, rudy giuliani and blackberry ceo john thain will join us from the consumer electronics show in las
scarlet: this is "bloomberg markets." i'm scarlet fu. oliver: i'm oliver renick. merited it is said to have expressed interest in merging with time inc. the board is expected to meet later this month to discuss options. alex sherman just broke the story and he joins us. moving markets with that story.
why the reaction? the stock has moved up quite a bit on the speculation but people are getting excited about this. bethe time board will meeting this month to discuss what it wants to do. bit was background, a already in place at the time and rejected. that was a couple months ago. and $20.between $18 now the time the board has to decide, do we want to sell the company or plow forward as an independent company as we are now? tot is what the board needs decide. the stock price is likely up on this news because now we know there is more than one game in town. meredith almost actually merged with time in 2013. they had talks, they eventually fell apart -- oliver: for what reason? >> there and it was not fully on board with some of time's properties at the time. meredith owns magazines like
"better homes and gardens," .regnancy magazines it was not an ideal fit in terms of topic. i think they would have preferred if time had kept some of those magazines. meredith almost did a merger last year -- 2015, i should say -- with media general. that was busted apart because somebody else came over the top. that was for broadcast stations. so there are a lot of questions about exactly what meredith wants to do, even if they still want to go in this direction. have at least contacted time advisors to say we are interested in talking, but no talks have taken place quite yet. scarlet: it sounds like meredith needs to decide what it wants to be before they decide who to merge with. >> it's possible if they did a
deal with time, they would spin off their broadcast division, which they have talked about. a lot of other companies -- inc. -- they have already done this. they own newspapers and magazines and broadcast asians and -- stations and they want to unlock the value. meredith has not done this yet. they did double down in publishing. it is possible they decided to go in that direction. oliver: last time it did not make sense because of the content, but it seems like now more interested in doing business. >> i'm not sure that merited even knows what they fully want to do i'm sure some of it has to do with price. we know that there is another bid that is still interested, and it's an open question about whether they will increase their bed. from our understanding, there is a plan on what to do with time.
we don't know the details but i have been told it is more than just running the business better. expect something else to come down the road, if, in fact, time cells. is merediths contacting time for a potential merger, so couldn't it be just looking for a higher bid? >> from our understanding, it was meredith who said we are interested in speaking with you. now the time board needs to decide if they want to sell the business. advisers to at least contemplate the idea of selling. they are open to being open to it, at least, and we will know more later this month about just how open they are. obviously, if there are more bidders, you would have to think a chance of them going down this road are higher, because it is more likely you will get into a bidding war and the prices will start to escalate. oliver: i know you haven't
gotten to this point of the deal talks yet, but given the nature of the company, about the same size, roughly 2 billion in market cap. one is a combination for companies like this looking like? >> great question. one of the reasons the deal died the first time around, the meredith company did not want to lose control of some of their business. at this stage, meredith would be an buyer, as opposed to equal merger. oliver: one is a little bit bigger. >> part of that value for meredith is the broadcast station. the publishing, you don't really know how that works, but certainly you would have to conceive it would be smaller. it is an open question of who would run the company and if the broadcast business was spun out, would there be a combination of leadership? i don't know, i'm sure all of that will be discussed in the coming weeks. scarlet: we were just breaking the news earlier that donald trump is opposed to the
.t&t-time warner given all of that, is the time right for media to be looking at mergers and acquisitions? is the industry in an upswing or downswing with donald trump becoming president? >> they don't know. that is also the question. oliver: so get it done before -- there would bek huge antitrust concerns about this a deal. the print industry at this point has declined so much. it is fragmented and small, it is still big. at&t-time warner, a much bigger deal. different animal. but it's a great question, the same question that cbs will be thinking of, viacom, now that they are not doing the deal. do they want to sell two different parties, are they going to read big parties, foreign parties, will trump be open to that?
it is possible we will see a lot of these big deals, but if this deal, at&t-time warner, gets next, no question that will have a chilling effect on the rest of the year. exclusive market moving beat, thank you. rudy giuliani and blackberry ceo john chen join us from ces to announce their newly formed venture. this is bloomberg. ♪
earlier today we spoke with melissa kramer, the chief ratings officer for snp, who warned the u.k. could be headed for a hard brexit. >> the likelihood of a hard brexit has been increasing over the past couple of months. hard brexit meaning the u.k. with being the eu without sort of any substituted agreement in place. the reason for that is twofold. the first is simple, lack of time. this is an awfully short. of time to negotiate a -- period of time to negotiate a conference web. secondly, i'm struggling to see any overlap where compromises could be struck. that.k. seems to be saying we want to control the immigration,. . we want to be not under the jurisdiction of the court of justice. the european side seems to be basically, the eu is not ibaka where you can pick and
choose. it is a set menu. it is all or nothing. if you want to control your borders on immigration, that means the customs union and the single market is not going to be available to you either. how you can square that circle is uncertain to me. it seems to be gone rather slowly in terms of the u.k. actually defining its strategy. thing is, this is political positioning, really, isn't it? showe are not going to their hand before negotiations begin. we have to wait until the article 50 is actually presented. >> well, maybe. i think they are showing their hand, we want full immigration control. i think it is not a secret that this is going to be very, very difficult to reconcile with access and free trade to the eu. but i think what many people overlook, it is not so much the trade in goods, cars.
the thing that really matters to the u.k. much more than industry is services. the u.k. is a major service exporter. on goodst free trade and services, this would benefit countries like germany or italy or france, which are exporting mostly goods to the u.k., but the u.k. much more dependent on selling services, financial services, business services. that is the comparative advantage of the u.k., and it is much more difficult. there is no wto, preset arrangement that you could adopt. -- time is really very sort short and we have not seen any clear formulation of the road the u.k. wants to travel. have said the you pre-campaign rhetoric from donald trump makes it too early to understand the impact on emerging markets. then you said the impact may not be as much of people think.
as you see the administration coming together under donald trump, as you look at where growth is under emerging markets, what is 2017 going to look like? >> the biggest risk we need to try to gauge is in protectionism . some of the nominations, the appointments that donald trump has been suggesting seem to suggest this is a real risk. we need to remember, the u.s. has a lot of checks and balances. while the republicans hold majorities in both houses and in the senate as well, it is not that the president can do create any sort of policy. there needs to be, even in a republican dominated congress, there needs to be some negotiations with the white house on where things are going. nearly, we will see emerging, much of the agenda that has been regarding trade, seems to be a centerpiece of the trump
presidency. of course, southeast asia in particular, they are open, trade oriented economies. if we are to be moving gradually into a less open, protectionist environment, these economies would suffer. kramer: that was moritz earlier on bloomberg middle east. oliver: it is time for the bloomberg business flash. headwind for boeing and airbus. the jetliners shopping spree is waning. both companies are facing dwindling sales and the highest levels of delivery deferrals in 15 years. unveiled in ae few days and will likely show orders are trailing shipments, a sign of a weakening market. on top of that, the low cost of jet fuel means airlines have less incentive to retire older planes or order new models. bitcoin prices plunged as much as 23% from an all-time high yesterday, according to
bloomberg data. the digital currency hit a record things to continued adoption in china and other parts of the world where traditional currencies are tightly controlled. a federal judge has confirmed penalties against four of the biggest banks for their role in the manipulation of currency markets. scotland, jp morgan, citigroup, and barclays have been fined $2.5 billion in the agreement hammered out in may 2015. that is your bloomberg business flash update. still ahead, the commodities close. a roller coaster day for wti after the crude inventories report, rebounding again, now ending up about 1%. this is bloomberg. ♪
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things stand. wti falling at midday. there is the big leg down after data showed gasoline at this let stock piled rose by more than eight million barrels. crude inventories posting their biggest drop since september, so we have seen crude making a comeback on her report that saudi arabia is making promises on those cuts. in a report out earlier today, barclays is warning of so-called lacks one threats to commodities in 2017. one of the biggest risks to oil is the relation between u.s. and iran. other relations click -- include a default in venezuela and a potential trade war with china. moving on to other commodities -- gold climbing its way to a four-week high thanks to a weaker dollar. gold futures up by 1.4% at the moment. palladium or i should say
platinum gaining for a fifth straight day. this is the longest winning streak since july, up 2.9% on the day. oliver: some breaking news reaction to donald trump's tweet about toyota. the company has responded, saying the company looks forward to collaborating with the trump administration. they said the volume of u.s. employment will not decrease due -- that mexico plant or is of course in response to donald trump last week when he said they would be holding a plant in half, mexico. says they would have to pay big border tax to the united states. we will have more on that later in the show. weeks away until donald trump gets inaugurated. cabinetcted 13 of 15 posts but has yet to announce
who will leave the department of agriculture. in ruralupset many america. the president of the farmers union says folks in rural america feel like they delivered for this president and they just want there to be more attention. joining us from washington is our reporter. he's getting close to filling out the cabinet. is that a big deal? how come these people are upset? part of the situation where rural america feels like they delivered for donald trump and they look at all these other folks getting put into these musical chairs and the music is about to end than they do not see an agriculture secretary yet. you have seen some more traditional picks, like the former governor of georgia who has been in trump tower. you have also seen a lot of diversity among the picks.
we had seen anr, be ana farmer coming in to candidate but no one seems to be sticking. with the time running out, they are wondering who is going to be the secretary of agriculture is what kind of secretary are we going to get. scarlet: what has donald trump said about his agriculture secretary? could be based on his comments regarding trade? guest: there has not been a lot said to agriculture since the iowa caucuses when every candidate seems to have support for ethanol. even that has been walked back a bit. a lot of farm groups like the deregulatory emphasis and that the epa may be more relaxed toward farmers. concern about trade because the u.s. has a trade surplus and tighter immigration makes for a lot of problems with folks with labor-intensive crops, especially on the west coast.
i think a lot of people are interested and excited about what a trumpet penetration could do but we don't know the details until we have a direction for the department and we don't have that until we have a secretary. oliver: it goes beyond just farming. a lot of stuff gets overseen. longert's going to take to brief whoever he brings in. guest: they do food safety inspections and administer the food stamp program. people who deal with timber companies are all handled by the usda. it is a complex task, the fifth-largest agency in terms of its budget. i have anl you, office three doors down from the trump transition office and it has been empty most of the time. on the spot reporting. thank you so much. scarlet: blackberry has
announced it is teaming up with giuliana partners -- giuliani partners. for more now, we want to bring in the blackberry ceo as well as rudy giuliani, chairman and ceo of giuliani partners. they join us from the consumer electronics show in las vegas. thank you for joining us. mr. mayor, let me start with you. give us a sense of what customers will giuliani partners be pushing this software to. would it be corporate store government clients or individuals? mr. giuliani: all of the above. in the case of individuals, we would be helpful but this is for large-scale cyber security problems. blackberry, from the very beginning, has had just enough best and most secure software.
they have now become a software company and they are the best at being able to analyze problems and supply solutions to the problems. have been doing security for 16 years with corporations and countries on every continent . over the last four or five years, many of our clients are seeking better software solutions and i have a passion for this. to create the best software solution that is available but that will only come out of the executive. don't know the dollar amount of this deal. will this be material for blackberry's bottom line? john: from a longer-term, it will be. this always takes time. it's a goods is
melding of what we both offer and they offer good consultancy, a rich client base. we offer the best secure solutions, so i think this will be a long-term relationship and it will take a while. it will take a while and i wonder if working closely with rudy giuliani and his firm and mr. giuliani was a key trump ally during the campaign, does that give you access to the new administration and potential contacts blackberry could john: we have always been strong in the federal government enterprise around the world. i don't think we should look at it from a political standpoint at all. i have strong respect for our government. it's not about who you know, it is the standard, open process. we tend to bid and bid aggressively, so it would not
have any bearings to that. : we don't do any lobbying and we have been in the cyber world for 13 of our 15 years. this is an ongoing business. we have worked with government agencies and a lot of private corporations. i believe on every continent. this is not a question of any one particular agency. we don't do any lobbying of any kind. to switch gear's and ask about hearings taking place in washington. the hearings indicate senior intelligence officials believe russia played a role in the election. this does not appear to be a partisan issue because you have republican saying they believe that is the case as well. if it is proven russia played a role, what should be the response from the new administration?
giuliani: hypotheticals are not good things to respond to. theft,ntrusion, cyber cyber crime. the director of the fbi says there are two types of companies in america -- those that have been hacked and know it and those that have been hacked and don't know it. the reality is, this is becoming ubiquitous and the reason companies and countries need us is because we can come in and we can tell you whether you have the best possible solutions. you may have solutions, but you may not have the best possible solutions. second, you have to keep changing your solutions because if you keep doing the same thing for two or three years, the hackers will figure it out and get in. dispute about the russians and chinese, all it does is underscore the fact that
we have followed the way behind in cyber defense. we are way ahead in cyber initiatives and information gathering. where we have fallen behind is like our defense has not been on the field. have to bring our defense up and that is what blackberry, giuliani partners and others we hope to work with will help us do. i like the way you put that, yet the intelligence agencies have assess what they believe is hacking by the russians. why do you disagree with their conclusions? giuliani: i don't. i have not seen the reports, so i cannot comment on it. these conclusions are always percentages. i've done a few of these. these are percentages. they will give you the percent chance it was let's take another country -- that it was north korea.
, i would want to look at that in then i could give you an informed judgment. it's not a political issue, it is a technical issue. what is your level of concern about cyber attacks from foreign governments, even as we may not have possible relationships with? john: i think very high. i will say as the mayor said earlier, every company being attacked and i think the attacker comes in all forms. some of them are a little friendlier than the others. i would say we are looking at each other's information. i expect other governments have been involved also. scarlet: mr. giuliani, do you believe the administration did the right thing in announcing the sanctions last month?
: i have to leave that to the discretion of the president. not going to disagree. he had the information and acted on the information. i have no way of second-guessing what he did, nor will i do that, but i want to underscore what john said. hacking is ubiquitous. it's happening all the time, and you have to have defenses against it. it is also important to catch it early. opm where 20f million identities were taken. they were in for 10 or 12 months. that's why they were able to get millions of identities. had they been caught in the second or third week, you could have stopped it. we can do things like that and that is why -- that's what we're going to try to do. not always stop it, but catch it early like cancer. if you catch it early, you have a better chance of catching it
and don't lose 20 million identities. scarlet: the wall street journal has reported donald trump plans to overhaul the intelligence community. what kind of changes need to be made so our intelligence community can catch things earlier? think theni: i intelligence community is in need of overhaul. we've seen a lot of faulty intelligence. that's a little unfair because intelligence is never 100 percent, but there's no reason why he should not overhaul it. he's the new president, he should bring a new energy and spirit, a new way of doing it and cyber defense has to be at the very core of it, but it is not the only thing. intelligence goes beyond just cyber. scarlet: such asp? could you elaborate? mr. giuliani: you need operatives and information coming from villages and towns.
a lot of the information you collect electronically doesn't mean anything unless you know what is going on in that village or town. the human element has to be restored to the intelligence community. scarlet: i'm glad you bring up the human element. i want to bring up >> tillerson, the nominee for secretary of state. do you think his ties to russia through his is his dealings should prevent them from becoming our next secretary of state? mr. giuliani: of course not. he has said and i'm sure he will say it under oath, that the decision he makes as head of exxon, just like the decisions john makes as head of blackberry or i make as head of giuliani partners have to be for the good of our stockholders, or shareholders, our partners. so those decisions are made for the good of the exxon shareholders. now he will be secretary of state and he's going to make
those decisions for the good of all of us and i think you take all the expertise he has from dealing all around the world and his ability at negotiating and put it to work for us, i think that would satisfy most of the senators who are not voting on just a partisan basis. i think it's an excellent choice. scarlet: thank you for sharing your thoughts on that. limited your final thoughts as we wrap up our conversation. as the head of a large multinational, what do you think such aspolitical leader president-elect donald trump intervening and directing companies on how to operate their businesses, whether it's not building factory somewhere or hiring more workers elsewhere or not merging. is that good for business? john: i think every time the government puts more regulations and directs it into the private sector, it's never good. have a moreer
collaborative conversation and it remains to be seen whether we can get to that point. i'm hoping the president-elect will allow us to voice our opinions and we can get to a common point rather than directing one direction or another. scarlet: is what he is doing collaborative? john: i think it is early on. it's a little bit of a shocking factor here in the beginning. i'm hoping once he takes over after january 20, we will be a little more collaborative. : i've seen it happen. i was with donald trump when he went to mexico. you know the issues with mexico about the wall and paying for the wall. the two of them had an hour and a half, enormously productive conversation on the things they can do together, helping on the southern border in dealing with issues on trade with china. they were able to find common ground even though they disagree . what you have to know about donald trump is when you sit
down to talk to him, he's a pure businessman. andants to get things done get them done in the right way. i'm sure it's going to be a much better atmosphere for business in terms of less regulation, less intrusion than we have had over the last eight years. scarlet: thank you for your time, john. john chen and rudy giuliani. let's stay on the topic of national security, a public hearing today on russia's meddling in the run -- in the u.s. presidential election. senator mccain: everyone should be alarmed at the russian attack on the united states. there's no greater threat than holding elections without fearing interference. joining us from capitol hill with the latest is our bloomberg reporter. onmp is still standing firm
his dubiousness, i will put it, in terms of russia possible involvement. resistant?o is it just a matter of he does not want to go back on what he has said before? is there any information that could turn him the other way? it is unclear what if anything could turn the president-elect the other way. according to my understanding, one reason he is so resistant to accepting the conclusion is that he views the debate as an attack on the legitimacy of his election. it is important to note that despite the intelligence community's views, assuming they are right, with the express press -- express point of meddling, truck -- trump remains the jimmy lee elected and he worries this debate is distorting that fact, even if russia did engage in malicious activity. called the hearing now
by senator mccain is to explore the extent to which it is a problem and some of the intelligence chiefs, including james clapper, are subtly pushing back on president-elect trump's conclusion that we still don't know because there is pretty wide consensus right now that russia did do this. hiser: the point about resistance that the idea that maybe he thinks it's an attack on the legitimacy of his election, while it does seem petty, there are a lot of explanations offered by his opponents from everything from comey's emailed disclosure to the electoral college system. is it perhaps -- is there any legitimacy to the idea that his opponents want to keep perpetuating this? guest: sure. am apolitical matter democrats are shocked by the results as they are looking for reasons that was the case and scapegoats. democrats to save
the intelligence community has concluded with a high level of confidence that russia did do this and it did impact the election. but trump's team has come back and said he won fair and square. russia did not force voters to do anything and there's no evidence of vote tampering or evidence the integrity of the ballots cast was somehow distorted. trump's team has a fair argument that he did win this election validly, but the big question is many republican senators and members of congress broadly agree with democrats that this is a big problem and agree with the intelligence community that this a big problem. this is going to lead to some tension between president-elect trump and the intelligence community because he has taken some shots at them over this issue and now, he's going to be their boss. scarlet: coming up, skepticism creeping into the trump rally in equities according to one
oliver: this is bloomberg markets. i'm scarlet: oliver renick. and i'm scarlet fu. we're seeing some skepticism with equities being on a tear after the election of donald trump. joining us is joe weisenthal. if not necessarily in the vix but this -- but specifically in options. joe: it shows a premium on downside protection creeping up or the relative premium of the downside creeping up. that even if you don't see it in options, you see it in the trade. the 10 year yields are now well .elow where they were remember what happened to translation and all that stuff? i have not seen that much talk
about it, but there's quite a big move and at the end of 2016, everyone is like this is the year rates breakout and go higher. maybe they will, we are only three days into the year but it is striking that a lot of these post trump moves are going. this is looking at a three month skew. move we sawkind of after the election where it means people are betting on the move back up in terms of a positive move. now put much looking at a situation that is not quite as bullish. the vix, but to your point about the yields, it is astonishing to me how the financial group has been. i think that has to be tied together.
joe: it is all tied together. we saw some interesting flattening in the curve. the banks like the steepening of the curve. if you look at this 2:30 spread, you see some reversals. it's not that these are huge reversals. we are well off where we were in that low right before the election, but this idea you can try straight line, that's never going to happen. the consensus discussion i have had as her's a big call for this next year. some of it is purely speculative. joe: people were going to come up with excuses because of a trump tweet or whatever, but it's important to her member the price comes first and then people tell the story. when no one thought trump was going to be good for the market, it rallied and now things are
fading, so people are going to come up with points. scarlet: but the narrative was so compelling. there hasnot like been no shift. we got the fed minutes and it is clear the fed is talking about a new narrative. comes first and then people supply the story. everyone was looking for a new story. joe: it may still happen. scarlet: joe weisenthal will be coming back at 3:30. barry diller will be joining us as well. this is bloomberg. ♪
oliver: we are live from bloomberg world headquarters in new york. we will be covering stories in washington and las vegas. u.s. stocks snapping a two day winning streak with financials, industrials and materials shares facing a decline. move down. and a bloomberg exclusive -- donald trump said to be opposing the megamerger between at&t and time warner. shares of both companies are dropping on the news. and a conversation with barry diller. his media and -- his media empire comprises more than 150 brands. he talks about the country under president-elect donald trump. we are one hour from the close of trading. what's going on? scarlet: things are looking up to some degree. we started out mixed with very little changed for all three
averages but the nasdaq has fared best. then we hit the lows around the middle of the day and now coming back to some degree. the nasdaq up at the dow and is -- and s&p 500 are still down. some of the news having to do with president-elect donald trump. here is time warner on that story that trump is opposed to the at&t acquisition of the company. during thed on it election season but not since the election itself. there was speculation about what new administration would do and there is speculation whether he is opposed to it and what exactly will happen as a result. now 1.8%.r shares at&t shares less affected as the acquiring company. about a quarter of 1%. then there is the case of toyota
after donald trump tweeted the company should not build a new plant in mexico and would face a tax. toyota saying u.s. production and employment will not be reduced as a result of this new plant. toyota adrs down about .1%. elsewhere in the market, we have been watching retail stocks and the slashhis their forecast and said the november/december holiday season was disappointing. macy's announcing additional job cuts. this has been affecting all of retailers nordstrom down, but this has spread beyond that into specialty retailers and clothing manufacturers. it has been broad-based weakness. in thes also weakness banks. the financials are the biggest drag on the s&p 500. wells fargo, j.p. morgan and
bank of america -- it does come back to the bond market. the 10 year yield up -- down seven basis points, i should see -- i should say. it was poised for its biggest one-day move since the brexit vote and now, it has moderated to some extent with the dollar showing some weakness has traders looked to be backing away from what they see as increasingly crowded that's in the rates and currencies market. oliver: a brutal screen there with the retailers. to bloombergs get first word news with courtney collins in the newsroom. courtney: top intelligence officials say russia is a major and growing threat to u.s. government, military and diplomatic operations. the national intelligence officials testified today at a senate armed services committee focused on rush upon smuggling
in the u.s. election. nsa andthis last year, cyber command have worked extensively with our broader partners to detect and monitor russian cyber activity. -- the hacking of organizations belonging to our election process is a great concern and we will continue to focus on this activity. courtney: they say russian agencies are developing capabilities to launch cyber attacks. transition team says the man who served in the reagan and george h.w. bush and ministrations is a leading candidate to be undersecretary for international affairs. looters angry about skyrocketing gas prices sacked at least 250 stores across the country. walmart was among those targeted. the wave of unrest was triggered by 20% hike in fuel costs. the obama administration has announced terrorism related sanctions against the son of the
9/11 mastermind, osama bin laden. the state department says he poses a serious risk to u.s. national security. year,audio message last he threatened to avenge his father's death and warned americans they would be targeted at home and abroad. global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. i'm courtney collins. this is bloomberg. we want to get back to the markets and the growth of passive investing. vanguard saying most of its income coming from etf's. he expects the trend to continue. you could see it double over the next decade, especially as you go broader and more global. when you go outside the u.s., it's a foreign concept in most markets. scarlet: joining us for more
insight is the man who has been called the godfather of etf's. he has been influential in bringing many of the etf's listed in the u.s. market. oliver: this has in an interesting year. we have talked about underperformance, but let's start off because we just heard do you see that it is sustainable? down comeprices come easy a lot of competition and you find more and usual investors using etf's. i expect i shares to announce today they have garnered trillion dollars of assets. seeing tremendous growth that it is just the beginning. scarlet: what type of clients need to sign on? insurance companies have begun to take advantage of etf's. we see asset managers and
central banks use etf's. out, starting to broaden letting mom and pop by into portfolios. now, it's about institutional investors. oliver: limit table i want to bring up here that is a sickly speaking to your point about why people are going to etf's. cheapestultimately the ones. that speaks volumes. the etf's are the ones that attract investors. they are extremely low. bringing it as opposed to saying it is cheaper? guest: i think etf's arm grabbing market shares from hedge funds. you see etf becoming more refined.
growth.e the areas of it is really about price, but it is about performance as well. oliver: if they lose any of their competitive advantages, cutting cost is an option. but there's not much for the etf space. the expense ratio etf sometime in the next few years, the etf structure is pre-robust. forces are driving down prices. etf is cheaper than their two other compared -- competitors. how do you pay the portfolio manager? guest: there's opportunity inside the etf structure to compensate for good ideas as well. scarlet: i want to broaden out
here and talk about the environment for wall street. donald trump has selected j clean to had the sec. he is a throwback kind of nominee. others are not so please. senator elizabeth warren says he has dedicated his career to defending wall street firms and other big companies. good news if you happen to run a big bank, but you are out of luck if you want to see tough for than bankers held accountable when they break the law. as his ability to be tough on wall street when needed? guest: i think the narrative against wall street has taken its course. i spent my entire career on wall street. we are looking for is regulation and someone who understands the mechanics of wall street and the need for sensible regulation of oversight
and i think we're getting that with this nominee. scarlet: what kind of sensible regulation has been put in place? is there anything worth preserving? guest: i do give her a policy from the last administration is up for review. there was a lot of cry about dodd-frank. farink it went a little too . but senator warren, i do not share her view. outcome as at the narrative against wall street banks, it has hampered the ability to provide capital to main street. i think you have to find balance. there was an interesting article citing steve eiseman from "the big short" fame. he basically said recently the trump europe will usher in a great time for banks. it will be a wonderful time for financial companies. for me, i think if he thinks
it's going to be great for banks, that could lead to deregulation that becomes problematic. how can you be sure that you have an administration that can listen his capital restrictions without going too far? had -- i heard former senator lott say one of the worst things you can do is go too far. i think going slow is the best approach. i think industry has a lot of say about regulations and how best to think about it. i think you have to try to find a middle ground here. a inc. finding the middle ground is the best course. is there a specific example of regulation when it comes to etf's? guest: exchange harmonization, exchanges,perate on i think looking at the etf format, you have the volume of
exchanges on the etf send you have to figure out how to harmonize existing rules from 1930 and etf's now trade on the u.s. exchanges. we saw currencies over the last couple of years of systemwide, massive disruption and how the rules were not governed well and you saw a lot of action from the etf community on how to find middle ground around that. carl icahn is going to be an advisor to trump in some capacity. one thing to be concerned about is the bleed from one strategy to another. people think they're getting into one strategy and it bleeds over into another. guest: high profile investors like carl icahn, there's a narrative they are fearful, but you can't protect the principal and the expectation has been delivered well.
you can't protect against principal risk. etf's are a mutual fund, there's no additional risk outside the regulation for etf's. the narrative is a danger that it's going to explode, it's not going to happen. oliver: what about buying a momentum factor etf? if a: you are saying retail investor doesn't understand what they are buying, they don't understand what they are buying. scarlet: the senior managing director at cantor fitzgerald. oliver: we will hear from a former sec commissioner about a trump administration, continuing the conversation we just had, coming up next. this is bloomberg. ♪
scarlet: this is a bloomberg markets. i'm scarlet fu. oliver: i marvel run it. time for the bloomberg business flash and the biggest business stories in these right now. according to people's earlier with the matter, the move would rekindle a possible tie up that died in 2013. other strategic companies and privately held businesses have been in touch with time about a deal. the board is expected to discuss its options which include pushing forward as an independent company. brazilians are saving the most in years and paying down debt the worst recession on record. a central bank report found savings accounts rose by $3.3 billion last month, the second gain in the row and the second biggest since 2016.
that dropped to the lowest and smart 2012 and the default rate on personal loans fell to the lowest since november 2015. deutsche bank has a new top financial crime fighter. this is after peter hazelwood step down. he resigned after a request for hundreds of new hires was rejected by management. deutsche bank plans to boost the headcount at its anticrime unit by 15%. that is you are boom -- your bloomberg business flash at scarlet: date. we're just weeks out from president-elect donald trump's nitration. many are wondering how the threat of deregulation will shake out in his administration. bloomberg daybreak: americas spoke with joseph confessed who was asked what it means to deregulate the sec. guest: it's a darn good question and we don't know yet.
it could occur through a variety of different mechanisms. one is to have congress change the laws through which the sec now that -- regulates and the other is to change the statutory authority congress is giving it. david: how much authority does the chair have? how much influence does the chair have over the other members? can answer that question two ways. the first is to say am a tremendous a lot of influence in a chair sets the agenda and has a tremendous amount of control over selection of the various divisions at the sec. on the other hand, the chair is just one vote out of five and to get any action, you need a majority of three when the commission is fully staffed up to its five over complement. david: mr. clayton is a new chair and has the authority to
do what he wants. how many regulations are there that you would look out at the top of the list and say those are the ones they probably go my guess is guest: the regulations related to the dodd frank act would be close to the top of that list. you are talking about things , extractive ratios industries some of those regulatory matters. then you have an interesting question as to how the trump administration seeks to undo those various regulatory reforms. if the trump administration wants to do it quickly, smart thing to do is to move through capitol hill and get legislation passed that would withdraw the sec's authority to withdraw these regulatory matters. >> this argument that they had banks and would deregulate and
regulate less. senator warren is making that argument as well. is that too simplistic? i just far too simplistic. the situation is more complicated than that. it will be similar to the situation we see with obamacare were saying you're going to repeal it turns out to be much more difficult thing to do and the new administration is going to discover that unraveling dodd-frank raises many of the same questions that oh -- that eliminating obamacare brings to the table. david: what about the enforcing side? how much discretion does the chair and commission have over backing off enforcement? guest: there, i think the chair has a lot of authority in terms of determining who's the head of the enforcement division and setting enforcement policy. but the battle there is going to
be fairly predictable and it is a battle that falls along party lines and intellectual lines. there, the question is how much of a penalty should be imposed on a corporation where the penalty winds up being paid by stockholders who are often victims of fraud the sec is attempting to prosecute as opposed to the responsibility play some the individual who calls the corporation out that has engaged in alleged wrongdoing. from new york, this is bloomberg. ♪
glad to have you on. we're going to launch straight into it. mr. trump is seemingly not a fan of the at&t and time warner deal. what are your thoughts on that story? barry: who cares what he thinks. unless he's going to go to the whole legal process, he's just doing what he does, making noise. and on a subject he really doesn't know anything about. alex: he has taken a 10 out of the shares today. barry: when he says something, the stock is down -- fine. if your stock is subject more than a day or two to his comments being a negative drag on you, then you have a lousy it is all today's
ridiculous silliness. alex: there were some mergers last year in a similar space. do you see any likelihood of that deal being resurrected? barry: it should have never happened anyway. on the cbs special committee representing the shareholders, you are not going anything but at bargain price. never going to happen anyway. i don't know why everybody made noise. alex: how would you try to turn around paramount? barry: make good movies. it's not hard. it's a simple business compared to what is going on here and the changes in the world. narrative storytelling on a big screen or small screen is very simple. you have a story, you tell it,
and people either like it or not. there is no tech involved. it is binary. alex: a lot of tech companies are increasingly looking at content -- netflix and amazon has made huge strides. a lot of prospects about apple getting into the space. do companies need to own content to get into them? barry: no. if you own content, you want to distribute it everywhere. these companies engaged in distribution, it's what apple is doing, they are essentially distribute. they can buy anything. they don't need to own directly the content. if they are going to begin to produce content themselves, then that's another thing. you have toomething not have tech aptitude for. you have to have an ability to
make editorial choices. alex: the since you don't need to own content, does that cold true? barry: if you could actually take away from broadcast and cable a large sports franchise, it would be good for an over-the-top service to do so. live is a completely different category. there is one thing you cannot technologically mess with -- live is live. love to hear how the deal with lions gate came about. are developing video into a platform for everybody to use one of the most recent places we went and said why don't you put your programming on video, on our platform, and
they said yes. wex: are there deals pending need to keep an eye out for? barry: yes. are very much now in business. we aremonths, years, going to be at this and because we are an independent platform not owned by a totalitarian because of that independence, we can barrel through. alex: does that mean when you talk about online video services, -- it's going to be a direct on those. barry: netflix is going to be,
unless they monumentally screwed -- thatn't think doesn't mean they take the market share of the world. there's plenty of room for niche programmers and programmers that have many millions of subscribers, just not to their levels. alex: let's look at the way the cable tv bundle is developing. are they killing it? i don't think anything kills anything dead, dead. so,have had for 40 years or being thead cable only place you can get a bundle of rogue ramming. that has ended. now, you can get being the only -- all you need is an internet connection and
you can get all a card or little bundles, etc.. the cable just has to evolve and it alex: what do you think that does work? what do you think is the model that goes through. i think that the cable operators are essentially now in ,he data transmission business and no longer in the program business. they used to be in the program business, with a healthy margin. there was a decrease. now, when you have so many alternatives, they are in the data business. does that explain some of the rationale behind the at&t-time warner deal? i don'