tv Bloomberg Best Bloomberg July 23, 2017 5:00pm-6:00pm EDT
♪ up on "bloomberg best," the stories that shaped the week in business around the world. major banks beat earnings estimates, but there is more to the story. central banks meet to set policy and investors read between the lines. firms make outside hires, while others boom from within -- others group from within. from oil to real estate, bloomberg guests offer out sets
on the markets. >> this is a phenomenal asset. the return on those insurance -- those instruments could be quite spectacular. >> there is much more growth than a lot of the skeptics think there is. >> i don't think there is enough confidence today that we have broken out of the 2% growth world. anchor: it is all straight ahead on "bloomberg best." ♪ anchor: hello, and welcome. i'm vonnie quinn. this is "bloomberg best," your weekly review of the most important business news, analysis, and interviews from around the world. let's start with a day by day look at the top headlines. the week began with a fresh batch of economic data from china. ♪ china's second-quarter
gdp data show the second economy continuing to grow at that brisk rate of 6.9%. >> gdp was better than expected. , there expecting 6.8% estimate of economists at bloomberg. factories are pumping out goods at a faster clip. goods production at 7.6%, more than a full percentage point more than the estimate. retail sales much better than expected, 11%. we were expecting 10.6%. this economy, even though the authorities are trying to curb excessive debt and over leveraging, they are seeing still strong production and growth. overall i think all numbers suggest the economy has stabilized, led by strong fiscal policy. the heightened monetary policy
conditions has not affected the real economy much. ♪ anchor: disappointing quarterly results from bank of america and goldman sachs, second quarter fixed income training had the half of lloyd blankfein's term. >> overall trading coming in line was a little worse, but equity is better. there is a little of a trade-off there. there were some bright spots in the quarter. is the lowest cost ratio accrual for the first half in the public history of goldman. that shows they are doing what they can in terms of managing costs. is very tiederica to long-term rates. anytime you see the tenure not doing what we think it should be doing and picking up, that is
bad for bank of america. the thing that really sticks out is net interest income for that bank, which is core revenue for something like bank of america. that is something that fell despite predictions two months into the quarter saying we would at least have 35 to $50 million increasing. ♪ after two more republican senators announced their opposition to the health bill proposed by gop leadership, not only is mitch mcconnell's effort to pass that dad, but repeal only and replace later looks like it is a no go, as that, but repeal only and replace later looks like it is a no go, as well. >> this bill that failed miserably, last night you have senators coming out and saying
they are against it. the bill fails. that you have the senate majority leader saying let three vote to repeal this, and less than 24 hours later you have senators like susan collins saying we don't even want to have a vote to proceed. discussionsou that are already underway for a new passport, but they are going to be relying on a very narrow path forward. ♪ hasor: morgan stanley reason to celebrate for the second straight quarter. on traders posted more fixed income revenue than its larger rival, goldman sachs. how did morgan stanley manage to do better than goldman yet again? reporter: one of the things we were highlighting in our stories is the commodities sector. this is something morgan stanley has largely gotten out of. interestingly enough, goldman sachs didn't say we had a terrible loss in commodities.
anchor: wasn't of the worst quarter ever for commodities? reporter: right, maybe not a loss -- anchor: but not good. reporter: one other item was that they've got the rates that did offset that. ♪ the bank of japan, as expected, took no steps to dial back their aggressive monetary stimulus program as other central banks around the world are looking for the exit. anchor: but the bank did surprise biotechnology it was too optimistic on achieving its 2% inflation -- did surprise by admitting it was too optimistic on achieving its 2% inflation target. risks.e are a number of there are the tax hike schedules for 2019.
it is pretty bad timing. i think it would be best if the government delayed the consumption tax again. another is much bigger, much more important, the ability of prime minister oabe. we have seen the decline of prime minister abe's approval. is that goes, there goes the support for the bank of japan. cannot maintain the current aggressive stance. that is the biggest risk. ♪ thatr: draghi said
financing conditions are the last thing the firm wants. backpedaling from all the discussions that came out is very visible. this is a very delicately worded statement. i think he is going to attempt to -- going to tip toe. there is quite a lot of uncertainty lurking around the r -- around there. anchor: robert mueller, the u.s. special counsel investigating donald trump's campaign's possible ties to russia, is now investigating a broad range of transactions involving the president's businesses and associates. give us the details we know for certain. reporter: we know now that special counsel bob mueller is
looking at a lot of transactions that involve not president trump, but developer brand name trump going back at least a decade or further. anything involving russian money going into trump apartments, certain individual developments , the 2013 miss universe pageant in moscow, as well as the sale of a luxury property in palm beach almost 10 years ago. >> the legal authority robert mueller has, given to him by the deputy acting attorney general, is very broad. the language is to the effect of, matters around the russia campaign collusion questions and any other matter. i think robert mueller has decided that these other matters are very much part of his purview. he was the fbi director for a long time. i would call him a prosecutors prosecutor -- a prosecutor's prosecutor. i don't think he is going to hesitate to bring down the hammer on donald trump, donald
trump jr., anyone who might be caught up in the crosshairs of this. i think he views his business as to get to the bottom of this, wherever it leads. anchor: there is a staffing shakeup at the white house. white house press secretary sean spicer announced his resignation after president donald trump hired financier anthony scaramucci as his communications director. let's get more with bloomberg's chief washington correspondent. reporter: this is a very clear shakeup in the communications department of the west wing, something that has emerged as one of the most combative with the media, and one of the most visible. there are several sources in and out of the white house that says the president had grown frustrated with sean spicer. >> sean will continue to serve the administration through august, and president has also appointed anthony scaramucci as communications director. >> i don't have any friction with sean. this is the white house in the united states of america.
we are serving the president. i want to make sure our cultural template is that we put the president's agenda first, which is perfect for the american people, and that we serve his interests. if we have a little friction inside the white house inside of that, it is ok. i'm a business person. i am used to dealing with friction. ♪ anchor: still ahead as we review the week on "bloomberg best," neil atkinson of the iea produce oil prices will keep rising. plus, barry giller has no love for president trump, but still likes what he sees of the u.s. economy. we also have a thorough roundup of the week's earnings report. up next, more of the top business headlines. it is not a ceo change. it is very much acceleration of the plan. anchor: this is bloomberg. ♪
♪ vonnie: this is "bloomberg best ." let's continue our global tour of the week's top business stories on wall street, where a looks to auyout firm future without its founders. anchor: they have just taken a moving to executives in their 40's to prepare for the cofounders no longer being at the helm. they have basically run the firm since then. this has been their shop. people wondered, as they get be inheir 70's, who would
line to take over. this answers the big question not just for the public investors and shareholders, but also the institutional shareholders in investments and endowment funds that give to kkr every year. anchor: icv confirming this morning that karen mccall is , and willhe next ceo start her new position on january 8. there were rumors she wanted to go into politics. why she going to itv? >> it does seem like an odd move, going from aviation to broadcast television. she is probably at a point in her career where she would like to try something new again, to some degree. itv is trying to reinvents itself.
the question is, does she still have that touch? does she still understand that industry, having spent seven years away? ♪ anchor: the ceo of the chemical giant resigned, citing health reasons. he will be replaced of the former head of the specialty chemicals division. everything is playing second fiddle to the elliott story. will these resignations reopened the door to what is happening? guest: that is the question. months that it can come back with a new offer. that ends on december 1. the successor is currently the head of the chemicals division. promised the markets to
do this within a year. how can the attention be retained at the head of the chemical divisions is now leading the company? ♪ anchor: it looks to be the biggest proxy flight in history. try on has dominated its founder to the board of procter & gamble. of $200e a capital million. they have been talking with procter & gamble for some time. why did they decide to move? >> in july there is a meeting where they came in and presented ideas for how this company could turn around and be a little more responsive to the market changes. they suggested at that meeting that nelson get a seat at the board. the company directors decided that wasn't the avenue they wanted to go because they already had a plan in place. anchor: is this a restructure situation? breakup, andnot a
not a ceo change. it is very much acceleration of the plan. ♪ china moving to reduce financial risks and stimulate growth. some banks are said to have been sold to lower rates on wealth management products. >> the wealth management products part of this push is particularly important. there were $4 trillion in total. there quite popular for retailers looking for a higher , much higher than you can get on other products. the banks like them because they are on alternative source for funding the money markets. the reason regulators are worried is because they are saying if you are paying yields that high, there is a risk you
might passed on those higher funding costs to your customers and hurt the real economy. regulators are trying to come in and put a squeeze on the wealth management products, cutting these banks, bring down the yields you are offering customers to make it a bit more affordable. it generally is part of this wider crackdown on containing risks. ♪ ishor: the german carmaker bands -- overseas recalling mercedes-benz vehicles to avoid an emissions scandal. >> they are saying they have not cheated in the way volkswagen did, but they have that they may have pushed the boundaries in testsof what emissions allow for.
what they are trying to do is come good with the german government and say, ok, we are going to get out ahead of this came best the state. where get -- ahead of this thing. this -- is this fixes the problem for them, they get away pretty cheaply. ♪ anchor: trade talks in washington between the u.s. and china off to a rocky start, with news conference is canceled on both sides after the commerce secretary wilbur ross criticized beijing over that trade imbalance. >> it is time to rebalance our trade and investment relationship in a more fair, equitable, and reciprocal manner. anchor: will be kind of managing expectations going into this dialogue feel more a little acrimonious than expected? >> the opening statements were. the rhetoric was reasonably sharp.
china also warned the united states not to bring in geopolitics to this because any sanctions would torpedo talks, maybe a direct reference to the steel sanctions the president has threatened. the hope was that could agree to continue meeting, create an action plan for a one year of negotiations to follow their 108 negotiations that came out of the mar-a-lago meetings. we don't know if they got that far. neither side talking yet. ♪ anchor: deutsche bank ceo telling employees to prepare for in a videotaped message, saying there is an offer a lot of detail to be ironed out and agreed depending on what the rules and regulations turn out to be. basically what we are seeing is the big banks are now making decisions, assuming they will britain going into the eu.
they are deciding they will have to have parts of their training businesses in the eu to be successful after brexit. they are preparing for a hard , and moving ao large portion of the trading business into frankfurt. ♪ anchor: talks between scripps network and potential suitors are heating up. a deal could be announced by the end of the month. both discovery and communications and viacom have been holding separate talks with the tennessee-based owner of hdtv and the food network -- hgtv and the food network. is,ne of the main factors who will control this combined company? the control of a combined company is somewhat tricky
because all three companies here are owned by families, or at least control to some degree. scripps network by the scripps family, discovery by john malone , and viacom controlled by the redstone family. is a deal is done with a cash and stock component as my sources are telling me, both sides will have to figure out exactly who controls the votes here. those can prevent major competitions to a deal getting done. i'm sure that's what the advisors of these companies are working on right now. ♪
to producers and investors that global stockpiles could shrink and prices rise in the second half of the year. it is still a complicated. -- complicated picture. 's had spoke -- head spoke with lumber -- with bloomberg. opec spoke with russia . will they achieve the cuts? guest: it has been reasonably successful. for the month of june, the latest date of which we have reliable numbers, it looks as if the compliance rates have slipped a little. we will have to wait and see what they decide. opec is responsible for its own decisions, and we are observing it just like everybody else. reporter: i know it is extremely
difficult to predict the price of oil. we don't formally publicly forecast oil prices. thatwe are able to say is based on our current outlook for supply and demand in the rest of 2017, we do expect stocks to start falling during this second half of the year. on that basis of falling stocks, you can expect the price to be supported, and expect the price to rise, but not by very much because every few dollars that the price does begin to rise, it incentivizes more oil from the united states and one or two other places. to some extent, any rise in prices is capped by the availability of short cycle oil. vonnie: coming up, more of the conversations on brexit, gridlock in washington, and the
♪ vonnie: this is "bloomberg best ." brexit talks between the u.k. and the european union continued this week, but was prime minister theresa may's political support at a low ebb, some question whether she can rally the nation behind an exit plan. the former u.k. ambassador to the u.s. discussed the plans ahead with our jonathan ferro. reporter: can you draw a parallel between what is happening here in the u.s. with health care and what is happening in europe with the brexit negotiations? guest: there are moments when it looks a little similar.
there are a lot of people who decided they would vote to get rid of obamacare without working out what they want to replace it with. i think in the u.k., there were a lot of people who decided to vote to leave the european union on what many would say was a pretty dishonest perspective without working out what the alternative was. think that is one reason why there is once again talk of maybe thinking again and perhaps even holding a second referendum. orweren't getting that two three months back, but now it seems to be back on a number of agendas. reporter: for that referendum be on? what kind of specifics with that referendum be on? guest: is not -- it is not for the near future at all. if there is ever another referendum, a can only have an -- they could only happen if parliament decided there should be one. i think it would have to be, do your do you not accept the deal
-- do you or do you not accept the deal the government has come up with? the problem is that any conservative government, which is what we had at the moment, which says it wishes to hold a referendum, is it lost that it would survive. they will be very reluctant to hold a referendum because it would look like a vote of no-confidence in the deal, which the government has managed to negotiate. nevertheless, it is still on people's minds. ♪ anchor: the dow, s&p, and nasdaq all reached record this week despite signals that donald --mp's business from the business friendly agenda is stalling on capitol hill. efron ofin with blair center view partners, who told businesstin that optimism may be starting to fade. guest: there is a rising level of frustration. we had optimism early in the year.
now we are here in july and there is recognition that a lot of the promises of what we wanted to get done, tax reform, infrastructure, just isn't gathering momentum. yet you have the market at all-time highs. you have growth from the cdo -- the cbo at 2%. optimally that optimism needs to turn into something real. the frustration that jamie dimon expressed on friday is quite broad. david: how is it affecting es'investment decisions -- businesses' investment decisions? guest: we went into the year with certain protections -- certain projections saying it would be a record year. the fact is, it isn't.
onot of that is based certainty of decision-making, confidence and where we are going to go next year, three years. we do think when you make investments, you want to have a good tailwind following that investment. i don't think there is enough confidence today that we have broken out of a 2% growth world. ♪ >> the economy is good. there is much more growth than a lot of the skeptics think there some of the numbers -- all of the numbers are not terrible. --re is definite, complete and i mean complete in a waymatic, but stimulating -- there is optimism. do you share that optimism, or are you at odds with the consensus that you
found? guest: well, yes. i certainly think that for business, there is no reason not to be optimistic. country, our resources and basic way of conducting business has basically -- all those pockets in south korea and technology, certainly china in certain areas, nobody compares within 12,000 miles. so yeah, i do. ♪ reporter: how would you describe the state of commercial real estate in europe? guest: pretty good from a to supply -- from a supply and demand perspective. european cities have been typically difficult to build in.
small urban cores, sometimes height restrictions, lots of capitals still looking opportunities to park in defense of asset classes. hand, lots of opportunities for traditional assets coming out of the uncertainty around brexit and some of the other political issues affecting caught no europe. us, those like moments of instability create opportunity with respect to transitional assets. reporter: has brexit been fully priced into the u.k. real estate market? guest: we have seen a deep bid reaction to the brexit vote, when the pound devalued, a lot of global capital felt that buying london would be cheap because the pound was cheap. obviously there is a reason the pound was cheap, because of the anticipation of brexit and what that meant to the u.k. economy. like the u.k.eel
assets and bid for risk should adjust to a more normalized level. reporter: and that is a repricing of what percent? , but: it is tough to tell in the real estate space, i wouldn't be surprised if you saw london repriced 5% to 10% for core assets, and traditional arets, which obviously you buying to create a core asset, the expected rate of return for transitional asset should reflect that risk. i would expect transitional assets to reprice as well. ♪ reporter: want to ask you a question about venezuela. there is a great deal of nervousness about the degree to which venezuela will be able to honor those obligations. what is your point of view? guest: we look at this and say it is a phenomenal asset. if it is allowed to operate as a normal young peak company, --t's normal e&p company
normal e&p company, it will have extraordinary assets. the key is, can you get from where we are today where things are dysfunctional to the point where you can operate as a company quest mark r -- company? our view is that it will be a rocky road, but there will be a point in time where that has to happen. interestingly, they had $10 billion in reserves before the last that payment was made, and they have $10 billion today. there is more capital there than is maybe evident to the public markets as result of the explosives -- as a result of the disclosures made to the public. reporter: at this point using the instruments are money good? guest: we think the return on those instruments could be quite spectacular if the company is allowed to operate as a normal business. ♪
♪ they banksond that we mentioned earlier in the program, it was a busy week for quarterly earnings reports. let's dive back into our roundup of results, starting with netflix. ♪ netflix is already dominant in streaming video, and its latest numbers just reinforce that dominance. global discovers estimated to reach 108 million by the end of the third quarter. it is all about the original content on netflix. momentum is expected to continue, with most estimates raising subscribers and price targets. reporter: investors continue to focus on subscriber growth. they're trying to get investors to focus more on revenue and
profits, more traditional financial metrics. but again, this is a momentum stock tied to subscribers, and that is still the focus. they blew out the second quarters on both domestic and international subscribers, and i think more importantly for the stock, it is not like they pulled some of the growth from the third quarter into the second quarter. they are forecasting subscriber growth in the third quarter also very strong. ♪ anchor: the drugs giant has reported a smaller clearly report that some thought. now tomitted are you spinning off this business versus six months ago? guest: i was pleased to see the turn on how, -- turn on our alcon. i think what this beginning of the turn does is improve the
options we have available to us. if we were to do a capital markets exit, we would want to see a number of quarters of consecutive growth. hopefully we can continue this momentum and drive additional growth in the back half of 2017 and into 2018. ♪ anchor: ibm coming out with these numbers, second-quarter operating earnings of $2.97. however, falling short of forecasts, $19.29 billion. it was a bigger drop than expected. time i thed the last and booked a revenue gain. reporter: the company is undergoing a massive transformation into going into emergency technologies. some of those numbers are fairly cloudy.
the gross margin expectations were slightly above what they were looking for. i think this is where the big story is, is a lot of the pricing pressure. anchor: how much more cost-saving can they ring out of ibm? reporter: i think that is a good question. if the gross margin doesn't decline, that is something that they focus on. that is an area of focus for investors. ♪ anchor: let's get on to volvo shares. second-quarter earnings jumped 39%. they delivered more vehicles and demand for construction machinery increased. give me a sense of trump's infrastructure plan. are you starting to see the fruit of it? forecasts are still below demand from last year. guest: what we have seen and when it comes to the truck side
is that our forecast with the is considerably better, and economic activity is generally strong. we are going up from 215 to 225,000 units. also, the construction side has grown as well due to small improvements. ♪ anchor: second-quarter sales growth in line with estimates this morning. revenues rose 3%. this is a business clearly very much in the nla crosshairs at the moment. the question is, does the current business model and plans going forward justify that? -- the mlathe i
story be back online? guest: i think this shows what enormous value can be created with unilever. a long-term compounded model for unilever is a good model for many of our shareholders. ♪ anchor: microsoft shares are rising in extended trading after reporting sales and profits that top estimates in the fourth quarter. adjusted sales rose 9% as demand almost doubled for microsoft's cloud service. investors are closely following the ceos plan to reshape microsoft is a cloud computing powerhouse, with new services related to office 365 and azure. we have got to talk about the
cloud first. big progress. reporter: is amazing growth. this is one of the busiest -- it is amazing growth. this is one of the biggest cloud businesses. a lot of their dedicated office customers who were already storing things using office 365 are using as her -- using azure and having comfort with that are willing to go to microsoft with their cloud needs. ♪ is the third biggest point drag on the dow, the lowest level since october 2015. really an ugly day for ge. reporter: they set expectations at the lower end of the 160, 170. rice oflk about the p
oil and gas been a lot worse than they expected. they said three or four times that the dividend is ok, but that almost creates concern. they did say they are going to back off on the buybacks probably to help fund the dividend. there is a little worry about that. they also pushed out to november when they are going to talk about flannery's plan. i think people were thinking early fall, and now it is late fall. he is saying basically it is a big company, it is taking longer. ♪ anchor: boston-based fashion public companya yet, but the two-year-old firm is growing fast, aiming to disrupt the market for luxury italian shoes and expect $50 million. in revenue this year. $50jerald fishman -- million in revenue this period.
a.m. jenny -- m jen is m. gemi is -- providing luxury shoes. we want to be a business that occupies a spot and place in the customer's mind all the time. shoes create that unique obsession. with think that you have got to be newsworthy. you've got to be different. you've got to have a story to tell. our consumer knows there is must-see tv every monday. it is not about markdowns, private sales. it is about great new product. that much moree product than other retailers do, we just don't do it all at once.
we are old world meets new world. in thetify very early on business creation 18 in italy that i've had some history with. there is a group in florence that have been in the shoe manufacturing business for generations. there is a whole bunch of challenges from taking the old, historical italian shoemaking industry and putting this new engine on top of it. , weke most fashion brands fashionse big spikes -- brands that have these big spikes four times a year, we are producing products at the pace we want them produced. the only way to solve that was to learn. they've done a pretty good job of learning through our data, through our forecasting. can opportunities they receive by moving faster than they have ever moved before. they have been pretty open to listening about ways to improve
their demand forecasting and speed of production. they are not listening to better ways to make shoes, probably rightly so. we opened our first store in soho. 80% of customers who buy and restore the first time buy online the second time. 50% of buyers come back a second time. time,hey buy a second they average four times a year -- fourth purchase of the year -- fo four purchases a year. ♪
♪ vonnie: bank of america and goldman sachs reporting earnings this morning. goldman sachs down almost 1%. take a look at the bloomberg. this is their fixed trading revenue, down 40% and is the weakest since 2008. anchor: it is a new function we have on the bloomberg. if you look up equity and type tv and dated for about a month back, you will see all sorts of tv clips attached to certain dates during that month, and a list of stories related to that certain company. we are always adding new functions on the bloomberg. we always enjoy showing you the newest ones on bloomberg television. here is an old favorite that you will also find useful, quic go.
quick takes the more you can get important insights into timely topics. . a quick take from this week. -- here is a quick take from this week. ♪ u.s. departments of agriculture said that foods labeled organic must be grown without synthetic fertilizers and be free from genetically modified organisms. meet must be from animals raised without antibiotics or growth hormones, and with access to the outdoors. organic foodst have greater nutritional benefits and can even fight cancer. that is why they sometimes spend nearly twice as much for an organic product compared to a nonorganic one. but our organics really healthier? are they really worth the money? . the situation -- here is the situation.
concerns about the use of pesticides and antibiotics profited some consumers to look for so-called organic food. in 1990, congress passed the organic foods production act to develop national standards. organic products became more common. mainstream grocery chains started their own lines of organic food, and larger food companies began acquiring smaller health food companies to get in on the action. now from the big boxes to the small, specialty stores, three quarters of u.s. grocers sell organic food. here is the argument. producets say organic is more nutrients, including antioxidants and vitamins then can actually been -- then conditionally grown foods. they also limit exposure to certain chemicals that can possibly cause cancer. but there is no evidence that
the trace amounts in food are a danger. scientific surveys haven't found that organic foods are much more nutritious, and just because food is organic doesn't mean that it is good for you. it may be nearly as high in sugar, sodium, and other unhealthy radians as -- unhealthy ingredients as nonorganic products. yet more farms are going organic, seeing the appetites for pure foods, with chains like organicelling more products. organic foods should continue to grow in popularity, healthier not. -- healthy or not. ♪ vonnie: that is one of the many quick takes you can find on the bloomberg and uber.com -- and bloomberg.com. that will be all for "bloomberg best" this week.
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♪ haidi: earnings and trump's ties to russia dominated the market this week. also the fed policy meeting. oil producers discussed the at-bat -- the output will not be able to drain the global glut. the nasdaq is more expensive than the -- i am haidi lun in sydney. we are hours away from the open here in australia becoming the first