tv Bloomberg Markets Americas Bloomberg April 18, 2017 12:00pm-1:01pm EDT
from bloomberg world headquarters in new york city, we will take you from san jose to washington dc and to shanghai in the next hour. these of the top stories. bank is stunning wall street with a shortfall in bond trading revenue. competitors gained momentum. a possible tie up between them. the largest retailer is in talks to buy the men's clothing started. it could boost their online cachet. we will talk more about e-commerce. we are halfway into the trading day. there are a lot of political headlines. with: this has to do
earnings and movers that are going on. stocks are trading around the lows of the session. politics is on some investors minds as a risk, particularly in europe. it's interesting that we see this accelerate, even as the european markets are closed. weyou take a look, even as are awaiting the french election, as we are awaiting the actual brexit, we are seeing people invest in europe. this is an etf that track your area shares. there are inflows for seven straight weeks. that hasn't happened in two years. we have seen outflows for much of 2016. it's been not much change. now, it looks like people are buying this particular etf, even as we see some these risks looming. session,ack to the
some of the movers we are watching today, we've got a mixed bag of what's going on in the consumer industry. cabela's will sell its credit card portfolio to sonoma's financial. buyout or in though shares are up. products, thist is a pet food company. they are a top group over at citigroup. it's the best u.s. food growth story. harley davidson is on the flip side. davidson reported slowing motorcycle sales in almost every region. it has a lot to do with the strong u.s. dollar around the globe. though shares are down by 4%. we want to take a look at the
airlines. a dichotomy. spirit airlines on the one hand, though shares are higher after they reported revenue fell. that is because of the easter shift. looking transfer the second quarter do look strong. ual reported earnings as well. initially, the shares rose but then they have fallen back on they addconcerns as capacity. there are market share come petitions with other rivals. all that is putting pressure on those shares today. vonnie: julie hyman, thank you. shares of bank of america are lower but goldman sachs is down 4%. they showed a shortfall in stark contrast with reports about its three bigger competitors. bank of america climbed.
jpmorgan and citigroup reported they exceeded estimates as well. laura, what is the street saying about goldman's miss? ase were calling for as much the trading revenue they did have. we will hear from one of those analysts from guggenheim later. for the most part, they expected them to do better. think $2r analysts billion. that's that with the and that doing. we were looking for all of this on the call. we did not get the color we wanted. there are so many analysts asking the same question. was whatl that we got didn't happen. currencies weren't strong. mortgages did pretty well.
we did not understand exactly other than these pieces what went badly. that contrasted with hank of america. they said these things did well in mortgages, special situations. we are trying to figure out what bank of america did well, why didn't goldman? mortgages were popular. that has worked for the banks like bank of america and wells fargo. laura: everyone of these banks has a different mix. if you have a trader that does well in mortgages, you might do well there. some banks don't have that view was well. banks toese underwriting. they have a big bond shop that will underwrite deals for their clients. they can trade these deals once they hit the market. bank of america is pointing to
that as a strength. goldman said our financing is not as big. we don't have as good of benefit. the sweet spots aren't just sweet spots for bank of america. vonnie: things like compensation levels, that's what the banks are given themselves plaudits for. they reined in costs again. bank of america started hiring people. just the trading environment, they produced good results with 6% fewer people. bank, theyifferent will put more aside for increased competition costs. when they do better in bond trading, they do that is in the last terrible quarter. they have to put more aside in compensating these traders because they were not able to bring in more revenue. vonnie: does this give them more leeway when it comes to lobbying on capitol hill for changes that might be coming in terms of fewer regulations?
maybe rolling back the folder rule? -- folder rule? i mean the time it is particularly -- laura: they were asked several times how they thought the change would be. they did not change the answer. they gave some fodder to politicians who might be on the republican side that would like to cut those regulations. vonnie: the trading just wasn't done. it's like they fabricated it. laura: it's hard to fabricate revenue lines coming in. goldman does have a big business in investments in equities and debt securities. aere can be -- it's like lockbox for animals. they can't predict that. there can be a things in there we don't understand. vonnie: though morgan stanley be the final arbiter of this debate? laura: that is a good point. if they have different results
than goldman would, it would be difficult for goldman to argue they were different then the money center acts. vonnie: capital and liquidity, how did they look at all the banks? --ra: i think that something there is a good question and how bank of america thinks about it. they have not given back the. they seem optimistic about it in the coming quarter. that should give some investors who are concerned about those things rest. not tumbling. stock is not tumbling. generally, ranks are doing pretty well. how long does this continue? do is see more strength in bank stocks?
laura: that is something analysts are asking. is this bond rally something that can continue? on the consumer side, what kind of trans lending is there? i do think we saw a lot of conviction coming from any of the executives. we are positioned. we did really well this quarter. that positions us for more growth as we get in the economy. if things don't go as well, we may not do as well, but we will be fine. there was a wide variety between what happened with net interest margins at the banks. how did that happen? laura: you would think the fed is raising rates to our primary business is lending. up, interesting income should rise also. jpmorgan was 11 basis points
higher. bank of america was 17 and wells fargo was flat. it's back to this annoying mix question. that's a portfolio question. bank of america has a lot more in mortgages which did better for technical reason. wells fargo does not keep as many mortgages. they did not do as well. there are differing pro tiles -- profiles. now,we get loans right what we are replacing it with is something that has a higher interest. what we are replacing it with is something that has a higher interest. >> she has called for a general the election june 8. that is an indication they will the houseexit through
of commons. next the other political parties oppose it. at this moment of national significance, there should be unity here in westminster. instead, there is division. together,y is coming but westminster is not. until election is in two 2020. the conservative party is up 20 points. she could consolidate her power. turkey's main opposition party asterisk the referendum that would give sweeping power to the president. the vote gave the turkish president a narrow win for constitutional changes that would abolish the office of prime minister. they are asking for a reversal saying there were voting irregularities. --es mattis is north korea's said it was a reckless act of publication. withid that while speaking
reporters traveling with him to saudi arabia. his language was stronger than initial russian statement he had after the launch. he simply said he was aware of the failure. the mayor of flint is recommending the city get drinking water from a detroit area system in the long-term. that follows the crisis that left them contaminated with lead. the announcement is a reversal last year she said they would sick with a plan to draw from a pipeline from like here on. they reevaluated that. got $100 million in federal funding to does russ -- address the disaster. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. i am taylor riggs. vonnie: thank you. coming up, kansas city fed president esther george tells us why she thinks the economy is
vonnie: this is bloomberg markets. kansas city fed president esther george says they haven't made a decision on when to shrink the balance sheet area speaking exclusively to michael mckee, she gave her outlook on the forward strategy and where she thinks the economy stands. esther: the economy has that's and starts. we've seen this over the last five years. the first quarter looks to be relatively soft. keeping our eye on
whatsapp anemic, i think as much as possible, not over interpreting what it means relative to the longer term. for the year as a whole, i still see consumer spending in a way that should carry the economy forward. intoel: the fed is divided a camp that says we can do one more and a camp that says we could do two more and a small cap that we could do three more. where are you pitching your tent? requires you can't and down the number today. it,eans toward the long run you know where you are headed and you continue to move toward, watching how the economy reacts. the strategy of going gradual has been what i have supported. whether that means we will get for moves or three moves or no more dollar will be a function of how we see the outlook unfold. that's what we do.
michael: you suggested that if things proceed as you expect, you would be in favor of normalizing the balance sheet this year. a number of decisions need to be made about how to do that. when would we get that announcement of how the fed is going to handle the balance sheet? esther: i don't know the date and you saw in the minutes that we began the discussion with the staff helping us understand those discussions lead to more questions. we want to be thoughtful and continue to talk about what we think the implications are with the timing. all that happens in the context of how we see the economy unfold. we have not made a decision about when. discussion,ue this you will see the minutes reflect really committee is coming. michael: rate -- later rather than sooner? esther: my preference would be we nail down what we think about the relationship between
short-term interest rates in that balance sheet, we have to make decisions about whether that will be a natural runoff or if there will be some smoothing there. i don't know how long it will take to figure that out. i hope that we can sort that out themake a decision until public what we plan to do and get on with that by the end of the year. michael: you are in the camp of being careful with the reduction in the ballot sheet to see what happens with the economy. there was a positive effect. you agree with that? we might see a negative effect as we start to wander down? asked are: that has been my concern. i don't discount there has been some short-term benefit, the aim of that policy was trying to focus on boosting economic activity. also, there were cost. how you wade those were different. i weighed the cost more heavily in 2013 as we continued that
balance sheet acquisition. i think there will be costs. that's why we have to be studied about how we approach it and be cautious. this is something we can't look to history to tell us how it's worked in the past. michael: you came up through the bank regulation side of the system. when dodd-frank rules were just being put into place, you said you had your doubts as to whether they would make the system more stable. several years on, what do you think the effect has been? the system has become more stable by virtue of many actions that have gone on. i want to take note of some of the positive steps. there is more capital in the system today. there is more focus on regulation of that system today. i don't think if you look at the preamble to that legislation it which was aimed at too big to fail.
progress has been made. i think it's important that you continue that. this financial system performs the way we wanted to, meets the public's expectations for a system they can trust. presidentat was esther george speaking with mike mckee. buyinghead, walmart is emerging brands. we will discuss what all that means to the world's largest retail next. this is bloomberg. ♪
rebuild it cash a online. is shelley who covers retail. at first glance, i can see why this would be a good deal for walmart. i'm scratching my head about why it's a good deal for bonobos. do you really want to be a walmart customer? shelley: i don't think it makes sense from the outset. it takes a while to understand what happening. i don't think they are going to start stocking inside stores anytime soon. this is something that will help bolster them online. they don't want to ruin the brand value they have created. a lot of people to shop at walmart. i was watching these chinos for $88.
obviously, you're not going to get those in walmart. the people who shop at walmart may not be able to afford those. is this proof it online is not where it's at either? they can be profitable on its own or it would stay. : they rate so much money. evaluation is sky high. they can't raise any more money. have revenue and profits not kept up. companies like this that walmart keepought, they can't going anymore on their own. they are running to suitors like walmart who say i can get this on the cheap because these companies are having some problems. let me step up these deals while i can. vonnie: does it mean all of --se other online retailers
sapa's might disappear at some point having been bought by amazon. what is the greater story here? does online presence also need -- we're going to take a moment. we're going to go to the president. he is heading to wisconsin. he is going to visit a factory for toolmaking. we will bring you any comments he makes. there he is waving from air force one. snap on tools is the destination. an executiveing order later. coming up, he founded his own firm and his own success.
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biggest a drags of stocks. , and itown, s&p 500 looks like the losses are gaining steam. julie hyman it here. -- is here. >> health care is in the bottom spot down 1.3%. in index point terms, health care is dragging down the s&p 500 more. what's going on here? with of it has to do cardinal health. this is drug and medical supplies distribution company. and it announced that it was buying a business in an effort to mitigate some of the declines they are seeing in drug pricing. they saide time, generic deflation will be in the low double digits. it also said that in fiscal 2017 earnings will be at the low end of its prior forecast very this
is putting quite a bit of pressure, not only on cardinal it self, but on the other companies. analysts are saying this is a concern because this won't be limited to cardinal but industrywide instead. sayingd from washington it's part market based. i guess having technical problems. was toss it back to you bonnie. vonnie: we'll be back to you in a little bit for another update. this equity fund that specializes in telecommunications, serves more than 20% and bloomberg recording. for more on this market, the president of the company and founder, glen, welcome. >> thank you for having me. vonnie: since our previous
conversation on retail, it is a very for tile area for those who want to go credit and equity at the moment. you have a position on retail? stocksocus on technology and see phenomenal opportunities amazon andes like alibaba. at the same time, they have to gain share from other places. it is coming from traditional bricks and mortar. the biggest problem with retail is they might have a 10% are typicallythey losing money. they are training their retailer dollars to going through e-commerce on profitably. that is getting more difficult as e-commerce grows. vonnie: is there a balance being found? it seems like some of the ones that were in dire straits online like walmart, are finding ways to acquire online companies. it also seems like online companies are getting more and
more into brick and mortar. glen: i think that is in the us to observation. the problem is, for traditional off-line they are 80% and 20% online. they are in the wrong direction. i think the optimal makes for retailer may be on the -- 80% online and 20% off-line. the offline becomes a billboard, a promotional tool for their visits. it is going to be a very difficult time for traditional bricks and mortar retailers to migrate. vonnie: an aid can't tell individual names, but are you short some credits in the retails? glen: we're sure the equities. our focus is retailers that don't own their own real estate, and often times sell commodity products and brands of other companies. rather than their own product. vonnie: let's get into the tm t product.
there are some very select companies that you are very bullish on. one of them is momo. momo is a social media company that most of the people in the united states had not heard of. it is based in china, it was app.nally a dating they created a way for people to hang out and talk with live video. andst will have between one 5000 -- 1000 and 5000 people watching them. it is a phenomenal service and we have been involved in that spot for two and three quarters. vonnie: and people tip, that is how they monetize, right? they take a portion of the tips for themselves. glen: right. vonnie: and you are the number four shareholder? glen: yeah.
we continue to buy and alibaba keeps selling. vonnie: there's another one in the united states you are very high but the shareholder list of. have anduation does it will you see an exit for yourself. ? i -- shopify is creating online stores as well as entrepreneurs that have an online only operation. average store only does about 50 to $60,000 in sales. the most fascinating thing is that the product scales up to millions of's -- millions of scales per store. they have retailers that are selling over $100 million of goods. vonnie: i have to ask you since we are on the topic, i know you
were a shareholder of evelyn. how do you react to this bonobos news? mortar think bricks and retailers are in a tough spot. they need to increase the amount of sales that they have going e-commerceir division. they also need private label product. has built a good brand ne has as well. are of the products high-end product. vonnie: are they all going to be gobbled up by amazon? glen: i don't think so.
if you look at any business that end up at the top of the mountain, there are a lot of that don't quite make it. they have to find a home for their investor and their business. , our goal iserlane to be the j.crew of the internet. theou look at how fantastic products are, i think they have the chance to go it alone and be a terrific company. the trick is being a great operation or -- operator. our ceo is an incredible operator. vonnie: it is interesting you're in silicon valley but you started the hedge fund as opposed to being a venture capitalists. -- capitalist. could you ? we did 70%3 years investment in public companies and 30% was in venture. i decided to, we didn't have a long or short structure at in a .rill -- integral
i decided to start a serve about seven years ago and moved to a long short structure which i was familiar with at tiger management before i went to business school. we had a lot of success with that. we are starting to do private companies, now. i may end up in the bit same place that i was before with a different financial structure. but you aresay tmt ignoring a little bit of the telecom portion. you said you're not so interested at the moment. is that a secular argument? glen: there are parts that we do play in. the cable part of the telecommunications industry we think, is the most attractive place to deploy capital. it is the best connection into be home and, while we may cutting or reducing our reliance on traditional telephone
services by using our mobile wouldn'tst people consider giving up their cable modem at home which provides incredibly fast access. more and more we are getting our video content a la carte over that connection. vonnie: all right. we will have more conversations over your portfolio. ok thanks again glen kacher. let's get to first word news, mark crumpton would be here but he is not. the u.s. attorney general says the justice department will crack down on gang violence. jeff sessions said he blamed open borders and years of integration enforcement forking such as ms 14 suspected in the killing of several people in new york. like msgames -- gangs gang violence difficult.
>> the status of the trump administration is still unclear. the sale should be completed soon. >> i'm unemployed. i'm not homeless, but i still have an office at sky bridge. the deal will close in five or six weeks. he agreed to sell his stake in january, would media reports said he would be an advisor to the president and head of the white house public engagement. police say they thwarted a terror attack before the presidential election. two men had been elected in marseille. they said both are french and turned radical islam in prison. news, 24 hours a day, powered by more than 2600 journalists and analysts in with
zuckerberg might do. about thel developers. facebook kicks off mark --kerberg's taste division taste of of vision. we will probably also hear from david marcus which is the head of a messenger who has 1.2 billion users. vonnie: does the 10 to be announcements that are for a -- doesdience then just there tend to be announcements that are for the wider audience? think one of the things we need to pay attention to with this announcement is that mark zuckerberg usually lays out of vision. he states what his priorities are and, recently, he released a letter. word manifesto of what he
wants to expand two. he is trying to make the world better. he is trying to make us a more involved in our communities, more civic engagement. he is trying to address issues like fake news. i would be interested to hear what he has to say about that. vonnie: he has definitely become more of a political figure in this administration. immigration and many other issues as it relates to silicon valley. will we hear some of that today? zuckerberg has become a lot more political lately, and last year, at this conference, he made a comment on how we need to build bridges not walls. to donaldled jab trump. this year he has been the lots more open about the need for positive connection. we will see if he sells more.
i'm curious what the actual implications of that are. facebook live has been controversial for its lifetime. what's with the address regarding facebook live as it comes to things like violence live on facebook? >> you're absolutely right. over another -- over the weekend there was another high-profile content on facebook. the murderer was just apprehended and this company needs to deal with those issues. facebook has the pattern of , and thinkingcts of the social implications but not necessarily the societal influence and implications. this is a told that can cause very vicious things to happen in a way that facebook can't control. you might have to address, have they proliferate into these
tools, how can they ensure that the people that use this and rely on facebook don't have to deal with these problems. vonnie: sarah frier, thank you for that, much appreciated. that fromve more from david marcus at 4:15 p.m. eastern a big transaction this morning, we will be getting to that in a moment, it is part of our business flash that you need to know this hour. is going to buy cardinal patient's care. insufficiencyl business. johnson and johnson, the 6%ghtest -- the latest drug, --
a $30 billion of this drug maker, gives the company a time where its own medicine sales are falling. this private equity fund gathered $15 billion in just four months. theyompany said contributed $500 million to the pool. the initial targets was 12 and a half million dollars. that is your latest in bloomberg business flash. coming up, we will hear from the german automaker ceo. how he plans to meet the new green regulations. his profession -- his perspective from shanghai next. this is bloomberg. ♪
yahoo! is reporting earnings after the closing bell today. investors will want details on the purchase of verizon for 4.5 -- $4.5 billion. the deal was pushed back to the current quarter and given a $350 billion discount. let's look at yahoo! in today's numbers don't lie. data has deteriorated steadily over the past four years. it still represents over half a billion eyeballs. that is meaningful to advertisers and verizon which wants to become the third-largest player after google and facebook. they think they can generate $20 billion of rep -- of ad revenue by 2020. yahoos revenue decline is
slowing, and sales in the quarter were down. not as much as previous quarters. it marks the best revenue performance in a year and half. it implies a turnaround. what really matters to investors on tuesday, today, how yahoo! plans to monetize the remaining assets left after the verizon deal. mainly, it's a $40 billion stake in alibaba. i verizon, tim armstrong has gotten some heat from the sale name that will represent its internet properties. called oh --to be ohf. tesla is switching to a midsize suv. they will be partly developed in
china. the ceo talked to bloomberg in shanghai. >> we have a number of joint ventures here. we have prepared them over the last few weeks and months and some of them have been concluded. i could talk the entire evening about those things. is ja see, our corporation with jac, that is in place. is a win, win situation for both parties. us, starting in small and very small battery-powered vehicles on the chinese market. goneeliveries have somewhat down in the first quarter partly because of the pre-buying affect. expect for the people in china?
>> our goal, admittedly for 2017, is rather vicious but we are confident we will achieve them. last year we sold 4 million vehicles. this year, the figure will be slightly higher. volume is not the only thing that counts. we also want to be profitable. given -- >> given the strong foundation of your two ventures, there has been concern that volkswagen as a group might become too relied on china as a market. what do you say to this? i'm happy to rely on china. i said it before, we have been very successful in this market for the past 34 years and this is an important element of our success. in fact, the success of the entire group. now it is time to look ahead,
that's our processes, way we can ensure that we maintain this very successful position. what will the quotas play that the chinese government have been considering for rolling out across the country that is potentially like a bigger disruption, but there is some degree of in clarity -- on unclarity. what is your take on that? >> we don't have a binding decision over the next three years, but we are getting ready for the situation, so next year, we will have a quarter of 8% and then 10% to 12% to going forward. we're going to implement solutions. >> as a group, you're very strong. think that the tightening
of omission regulation in china will dampen the growth of these upscale brands or are you optimistic that the road will continue? >> as far as we know, the premium market, you mentioned of the relevant brands, this market is going to grow despite all the prophecies of doom. we will have to make sure it is part of our fleet of regulations that the cars meet the regulations necessary. it is a game that must be thoroughly planned and we have done it in the past, and we will do it in the future. ♪
watching this hour. theresa may calls for snap elections in june. a link to give her more leeway in negotiations in the european union over brexit. leaders are targeting a trillion dollar tax break in democratic states. we'll hear from anti-tax crusaders later. steve ballmer is launching something called usa fax to track a government spending. he will join a slide, later this hour. live laterjoin us this hour. president trump is expected to sign the buy american, higher american order. this program