tv Bloomberg Best Bloomberg August 20, 2017 5:00pm-6:00pm EDT
anna: coming up on "bloomberg best", the stories that shaped the week in business around the world. ceos turn on president trump, who lashes back. pres. trump: they're leaving out of embarrassment. anna: anger and frustration in an alliance that there is an agenda. >> ceos will be reluctant to get too close to trump because who knows when the next outburst will be? >> if this was not enough to get you to withdraw, what would be? >> their romance with big business is done. anna: trade issues moved to the fore as talks commenced. investors spent hours figuring out central-bank minutes. >> basically there is a
consensus within the fed which is if we see any sign that things are going back to normal we hike. anna: germany, and china's growth, and a risk of nuclear war, the week's best conversations cover plenty of territory. >> the majority of germans do not want to have a grand coalition again. it is not good for democracy. >> we had been marketing airbnb is a way for china to explore the world. >> that is not the biggest risk out there. anna: plus, the earnings drumbeat keeps pounding on. >> look at the big picture, this was a good report for walmart. >> what they are now doing better is monetizing the user base. >> one-word takeaway is affirmation. anna: it's all straight ahead on "bloomberg best." ♪ anna: hello and welcome. i'm anna edwards.
this is "bloomberg best," your weekly review of the most important business news, analysis and interviews from bloomberg television around the world. the week began in an atmosphere of turmoil following days of heated rhetoric over north korea's nuclear ambitions and violent protest in the united states over the weekend. but monday dawned with positive economic data from japan. >> japan's gdp expanded at its fastest pace in two years and the second quarter extending this prolonged period of expansion. is it an especially all-around bait but a weakness coming through from exports. very positive trend. >> absolutely. this is probably a very decisive confirmation of final for long-lasting transition away from relying solely on external demand, and really a transition that i think is hopefully more sustainable to domestic demand. think a lot of people forget
that domestic demand make over two thirds of japanese gdp. so, it is supercritical that this largest part of the economy starts to gain traction, which i think we are seeing evidence that it is. ♪ david: it was a shakeup from washington and wall street this morning. merck ceo, ken frazier, resigning from president trump's council of manufacturing leaders, saying "american leaders must honor our fundamental values by rejecting expressions of hatred, bigotry and white supremacy, which run counter to the american ideal that all people are created equal." president trump fired back on twitter, saying now that he has resigned, he will have more time to lower ripoff drug prices. >> president trump has come under increasing criticism over the way he has handled the protest in charlottesville. we are now hearing that the ceo of under armour, kevin plank, is now leaving that counsel. >> within the last 30 minutes or so, the intel ceo has become the
latest ceo to abandon the latest -- abandon president trump's council of business leaders. we're talking about brian krzanixh who says he is quitting -- the divided political climate is the reason he is resigning. >> another business leader resigning from trump's manufacturing counsel. scott paul is the president for the alliance for american manufacturing, what makes -- which makes it all the more interesting. he tweeted -- i am resigning from the manufacturing jobs initiative because it is the right thing to do. president trump responded, for every ceo who dropped out, i have many to take their place. gran standers should not have gone on. jobs! >> these ceos are looking at the headline risk associated with doing business with president trump and they have arrived at the conclusion that it is better for business not to be on these councils. pres. trump: some of the folks that will leave, they are leaving out of embarrassment because of they make their products outside, and i have
been lecturing them about being. -- i have been lecturing them, you have to bring it back to this country. i want manufacturing to be back in the united states of that american workers can benefit. ♪ >> president donald trump saying, he is disbanding two advisory groups of american business leaders. earlier, he tweeted, -- "rather than putting pressure on the business people, i am ending them both. thank you all." his announcement comes after several ceos quit from the manufacturing counsel following blowback over his remarks over violence in virginia. >> donald trump is not unfamiliar with divorce, just divorced big business today. at least he did not have to do it in a courtroom. for an administration that heralded its relationship with business, at its beginning, it is quite striking how he is basically saying, it is over, that the romance with big business is done. >> i think the biggest damage to
donald trump here would be, i would put it under the category of credibility. he set up these councils saying that he wanted to hear from them, and then mated essentially impossible for them to stay on an associate themselves with some of the comments takeda has made, particularly -- with some of the comments he has made, particularly at the press conference yesterday. i think people will be reluctant to get too close to trump because who knows when the next outburst could be? >> president trump does not want a fresh coat of paint on the north american free trade agreement. >> i want to be clear that he is not interested in a mere tweaking of provisions and a couple of updated chapters. >> the united states came out swinging, whereas canada and mexico took a different approach. they seemed to be more conciliatory. set the scene for us there, in terms of the approach? >> i don't think anyone is surprised in terms of the
bluster and the rhetoric, i think it was anticipated going into the meeting. the question really is, what is the value of bluster in washington today? and i think the risk some calculation, certainly on the canadian side, possibly on the mexican side, that cooler heads will prevail in the talks themselves. so yes, there was plenty of rhetoric, but there is still a lot of optimism that things can get done. ♪ >> moments ago, we got the minutes from the feds july meeting, and among the takeaways, september is in place for a balance sheet announcement, but no specific timetable was mentioned. the inflation debate is deepening with most officials expecting inflation to pick up in a couple of years, and stabilize around 2%, but many saw the chances that inflation may stay below that level for a longer time than anticipated. and some officials see the scope for a rate hike -- some officials see the scope for rate
hike patients. others saying delays leading to inflation overshoot. >> one thing that caught my eye and the minutes, when they said they would get back to 2% in the course of years. i checked the previous minutes and they have not used to that length of time in the past. i think basically there is a consensus within the fed, or much of the fed, which says if things start to go back to normal, they will hike. it doesn't mean we have to get back to 2%, but if we start posting 2% encore, it will be enough to tell us that this is idiosyncratic. ♪ >> the story of the day, the terror attack in barcelona where police are confirming 13 people dead and over 100 injured after a van rammed into a sidewalk in barcelona's iconic las ramblas area, slamming into pedestrians. >> it was similar to what happened in nice last year in france. a vehicle came through at 80 kilometers an hour and plowed into the crowd. the driver jumped out and ran away, and he is still at large.
>> the s&p 500's second-worst up of the year. not only barcelona, but rumors that gary cohn will be resigning as president trump's top advisor. >> hours after the attack that killed at least 13 people in barcelona, spanish police say they have killed the perpetrators during a counterterror raid in cambrils a coastal town some 120 kilometers away. four presumed terrorists are dead and one injured. >> we saw a quick reaction by spanish authorities. but there is a larger question here, and that is, are we creating a hostile environment for the ideology of groups like isis? and of reaction, while on the law enforcement side, and by police has been quick. there has been a slower reaction in our ability to stop recruitment from happening. and that is where we must turn our attention.
♪ david: white house chief strategist steve bannon is out. quote -- "white house chief of staff john kelly and steve bannon have agreed today to be steve's last day. we are grateful for his service, and wish him the best." what is the aftermath? >> it is a huge win of john kelly, the new chief of staff. everyone was watching to see if this four-star marine general could actually impose some order on the white house. so for pope kelly to be able to -- so for kelly to be able to ease steve bannon aside, i think the markets and others will view that as a sign, perhaps, of a chance of more stability inside the white house. >> in terms of actually changing policy, i think we tend to overstate what this means for donald trump and his policymaking. donald trump thinks like steve bannon, the echo each other. as long as steve bannon has access to a telephone, they are going to talk all the time.
and i think that ultimately, this probably won't have a lot of effect on policymaking itself. i do think it signals a greater discipline on the part of the chief of staff, that he has been able to impose an is white house. but he has not shown an ability to do that with the president, and that is the key thing. anna: still ahead, much more on the strain relationship between donald trump and the business community. with frank opinions from larry summers. plus, exclusive insights into airbnb's plans for china, on walmart, cisco and others. up next, more of the weeks top business headlines. shoppers can get just about anything they want from amazon and now, investors can get bonds. >> if you are able to get it at the 4% range, you can deduct taxes on top of that, it is compelling on the capital standpoint. anna: this is bloomberg. ♪
♪ anna: this is "bloomberg best." i am anna edwards. let's continue our global tour of the world's top stories with a presidential order in washington that could have serious repercussions in beijing. ♪ >> at this hour, president trump is set to take on china. he will sign a memo directing the u.s. trade representative to consider launching a formal investigation into china's alleged theft of intellectual property. pres. trump: we will safeguard the copyrights, patents trademarks, trade secrets, and other intellectual property that is so vital to our security and to our prosperity. >> look, we're still a long way from the trade war that we thought we would have at the start of the year. this seems like another play in
a wider geopolitical issue that is going on around north korea. and president trump is using trade as a stick with china, a tool of leverage, and in fact, he has said as much. there is a significant source of grievance here among companies when you listen to the chambers of commerce, not just american, but around the world. but nonetheless, we're still a long way from the trade war that donald trump promised at the start of the year. ♪ >> the u.k. government published the first in a series of brexit papers aimed at smoothing its divorce from the eu. the u.k.'s request for an interim union being met by some resistance as the eu said frictionless trade is impossible outside a single market. no cherry picking. >> there are two different possibilities for the future relationship between the u.k. anti-e.u. -- and the e.u. one is a streamlined system where requirements on exporters and importers are kept at smooth and frictionless as possible.
the other is for a sort of system where there is a customs border, but in fact, exports and imports coming into the e.u. and destined for the u.k., would be treated by the e.u. according to u.k. rules, and vice versa. it is slightly complicated. it is not quite clear how that would work in practice and it would mean that customs official would have to deal with two different systems for two different customs regimes. ♪ >> seven companies alone have issued more than $108 billion worth of bonds with at&t so far at $23.6 billion. the focus now is on amazon. the tech giant has issued $16 billion in debt to pay for its acquisition of whole foods, which was said to include a 40-year security and the yield of 4.5 percentage points at treasury. as tesla and amazon comes to market, these are companies with really, really strong valuations
in the equity market. and i just wonder why they are choosing to come to the debt market instead everything equity? why is that? >> i think a lot of these guys historically are very nervous about diluting their shareholders, not least of the reason because shares are part of their compensation package which helped save cash flow for both of these companies. tesla saving cash flow is important, as well as amazon which has a lot of cash strapped overseas. again, the shares are a really big part of the compensation package. if you are able to fund long pleated paper in the mid-4% range and deduct that, it is compelling from the capital standpoint. ♪ >> more signs of life for the european economy. gdp increasing overall by 0.6% matching estimates of economists surveyed by bloomberg. what is your take away? >> the interesting thing about the euro, it has shown a broad-based recovery. the breadth of the recovery has
been quite impressive. but as you break it down, italy was strong, netherlands was very strong, germany strong yesterday. from a growth perspective, that breadth will be something that will encourage the ecb. what they will want to see is that breadth also being reflect it in the growth in inflation, and especially wages. we have not seen that as yet, but given the growth dynamic we are seeing, it will give the ecb some encouragement that hopefully they will start to see some higher wages. >> mcdonald's is super sizing its presence in china, planning to open 2000 new mainland stores over the next five years in a strategic partnership with state run conglomerates such as carlyle group. -- eight run conglomerates such as carlyle group. >> i know there is a vision 2022 plan about opening 2000 more stores within five years. why such an ambitious plan? >> to start with, china is a
large country, and if you look at our competitor, our main competitor, which is yum, they already have 5000 kfc stores in china. betty: right. >> as we know, mcdonald's is the number one brand around the world, but in china, in terms of store numbers, they are a distant second. and we feel there is a lot of room to grow. ♪ >> ubs is said to be considering charging clients $40,000 a year for access to basic equity research. that is according to people with knowledge of the matter. this all in the wake of new rules from the european union that require money managers to separate the trading commissions they pay from investor research fees, what is also known as mifid how much do these numbers actually mean is to mark -- how much do these numbers actually mean? >> we are not only talking about price. it feels like these banks are testing the waters here, we're
five months out of this and some of this information is leaking out, and people are testing a little bit to see what the market will bear. and we won't really know what it will bear until this is really in effect, and until clients really start to see what they are getting for this money. and that is why i think you are seeing a bit of a range here. it also feels like some of these banks may be putting out some prices to see of they can gain some market share. this is going to be a very different competitive landscape for them. ♪ >> the ecb brings out there accounts of their last meeting. the big headline is that they expressed concern over the risk of the euro overshooting. so, if you want a message for the fx market, here it is. this is the most explicit reference to the euro yet over the last five months from the ecb, isn't it? >> yes it is. very much so.
moderately strong words, draghi did allude to it in his press conference following the previous decision. but this is a little more explicit, and now we can see the accounts of the meeting. there is some risk there. there is concern generally that financial conditions have tightened a little bit over recent weeks, or over the run-up to that meeting and that is something that will likely be weighing on policymakers might as they head towards the september 7 decision when they may or may not, decide what to do with tapering, or they may put it off until october. >> emphasis plunging as much as 6%, after the ceo quit as ceo. what do we know? >> well, this does come as a surprise. sika had been installed to help infosys make progress to some of the changes in the industry, it has been more challenging for its years in the industry. he had a dispute with the founders of the company, about a number of issues, including his pay and compensation. the fact that he spends most of
♪ anna: welcome back to "bloomberg best." i'm anna edwards. the collapse and ultimate disbanding of several white house advisory groups was one of the week's most dramatic stories. in a "washington post" op-ed, the former treasury secretary larry summers applauded ceos who chose to resign from the president's councils. and he went a step further in an interview with bloomberg television's david westin. ♪ david: given the moral imperative you see so clearly, let's talk about gary cohn for a
minute. or for that matter, steve mnuchin. it was reported in "the new york times" that he was very upset when he stood next to the president yesterday. given what you know right now, should gary cohn resign? surety -- should he? because frankly if ceos leaving his counsel leaving the president, gary cohn leaving would have a much more powerful effect? larry: if i was working for the president of the united states, who equated those marching for civil rights with white supremacists, some of whom had passed connections to the american nazi party, i would resign that day. now, that is my moral calculus. i cannot walk in another man's shoes. i cannot make the judgments of effectiveness. the judgments of ambition. the judgment of prudence that others have to make, so i am not
going to prescribe for gary cohn or any other particular official. what i would say is that i find it shocking and disturbing that there have been no resignations of principle from the political appointees in this administration. i am someone who is worried about the excesses of identity politics. i am someone who argued, and have some scars to show for it, for the importance of being supportive of the business community in democratic administrations. but there are some places where you have to draw a line. and i guess i would ask the ceos, who have chosen to remain, and i would ask the officials in
the administration, not the ones in the national security area who really have a big obligation to maintain sanity in our policies, but the political ones, the communications ones, the legislative ones. i asked them to think about the question, if this was not enough to get you to withdraw, what would be? or is your position that you will stay close to the flame of power? no matter what happens? david: right. larry: what would it take? what line with have to be crossed for you to step away? ♪ anna: coming up, more of these week's most compelling conversations. if you are uncertain about the german elections, we offer inside. if you are concerned about chinese debt, imf representative puts in perspective. and if you're worried about the threat of nuclear war, you may be reassured.
♪ >> meal kit service companies, are they competition to fine casual dining? especially if amazon gets in on the game, as well? >> the great thing about the food sector, is that it is something that you are going to do, at least two or three times a day, no matter what and you are going to do it for the rest of your life, two or three times a day. in my case, sometimes five or six times a day. so it is a great time to be in, a great category to be in, and because people are so interested in food right now, rather than having the choice i had growing up which was the one to eat at home, which always went shopping
for food in your supermarket and cooking from scratch, today, there are 10,000 ways you could eat at home. it is not just pizza and chinese food delivery, you could get a meal kit where someone did the chopping for you, ships it by mail, kind of like color-by-numbers. i know there is a fair number of people who would like to dine that way. i don't do it that way because i like shopping for food and i like cookbooks, but i think it is probably here to stay. anna: that was danny meyer, founder and ceo of union square hospitality group discussing the disruption in the dining business, this week with bloomberg television's scarlet fu. now, elections in germany kicked off this week with angela merkel seeking a fourth term as chancellor. guy johnson spoke with a board member of the opposition party about the core issues that germans will be voting on. ♪ guy: what is this election
about, what is it that germany is deciding upon? >> i think we have to see that the german situation is very good. we have the highest numbers of employed people in the history of our country. we have the developing of wealth, we have developing of a great situation in our country and our refugee question is under control. therefore, i think people think in this time of disarray in the world, a quiet leader like angela merkel with all of her experience would be the right person to lead our country for the next four years. guy: is that stability the product of the grand coalition? and therefore, would germans be happy to see another grand coalition taking place or does that stability let them bring that liberals back or generate another sort of outcome when it comes to the coalition that could be formed subsequently to this election?
elmar: i think the stability is combined with mrs. merkel, i think germans do not want to have a grand coalition again, it is not good for democracy. two big parties leading together. therefore, i think they would prefer that the coalition of democrats with the green or the liberals are both together. that would be better for all democracy and i think the figures will show that, but we do not know the figures about that. it might be a very small margin at the moment. therefore, no one can estimate what will be the result. anna: there was also plenty of conversation about china this week. let's visit three exclusive interviews. on tuesday, the imf raised its growth outlook for china but in the same report warned about rising debt. jonathan ferro asked the imf deputy director about the nation's daunting debt load. ♪ >> what is your advice to china at the moment?
what do they need to get done by 2022 to ensure the number is not going to be a huge problem for the stability of their economy? >> yeah, we have seen the senior leadership in china come together already and decide and define financial stability and the building risks in the financial sector as a matter of concern of national importance. i think that is the first thing. they have also taken the first steps in reining in credit growth, we have seen a major tightening of financial supervision. the economy is quite strong right now and i think we need to see two things. when is, we need tightening of financial conditions, supervision to be sustained, not just for a few months but for a few years. in the face of a slowdown of course as a result, in the face of some credit event, as a result of the tightening, to keep going despite it becoming more and more difficult is one thing, but the second and more
important thing is that china has to find new sources of growth that can bring the economy back, but in a new way, not from public investment and debt creation but from private sector growth. that is a huge agenda we have also outlined in the report, of giving more access to private investment, domestic and abroad in many domestic areas of the economy which are still very restrict if and state-controlled. >> what is your strategy in asia? how important is asia to airbnb? >> intra-asia travel is a big thing. we have been in a number of countries, singapore, australia, we are ubiquitous and most well-known known in those countries by the populations. we have been investing a lot to china lately. chinese travelers are going all around the world and they are the fastest-growing segment and number one spenders in international travel. we are running a big campaign right now. a lot of our growth in singapore and elsewhere is a result of chinese travelers using airbnb
to explore the world. >> expedia merging with another company, today has over 450,000 listings and growing. you have been competing with more players. >> there is local competition in china, focused on domestic travel. our focus has been on international travel. we have been marketing airbnb for a way for the chinese to explore the world and we have over a million homes in 21 -- 4 million homes in 191 countries. none of the local companies and china have that. we have made sure to play to our strengths and not to engage in any direct competition. >> a lot of chinese companies have obviously in the last few years, rushed to buy overseas brands and overseas assets, maybe getting around some of the capital controls that were in place.
do you have such ambitions? do you want to use this time when your stock price is at or near a record high? do you use that to buy overseas brands? >> anta mainly focuses on the chinese market. we have been actively looking for good opportunities overseas, but we will only consider mergers and acquisitions in the same sportswear business rather than crossing over into irrelevant industries. we have been looking. i believe there will definitely be opportunities for us to make m&a deals in the global market. >> how about growing your own brand overseas? you still trail fila, nike, adidas, puma, commerce. even fila is more known then anta in china. >> anta's goal in the next 10 years is to become an international company, through either m&a or introducing our products to the wider market. i think our share in the international market will definitely be higher than it is at present. >> can you jump over underarmour?
>> i believe we do have an opportunity to move up, i am confident. ♪ anna: concerns about u.s. diplomatic tensions with north korea continue to simmer. an expert on rare events documents a nuclear crisis. nassim taleb sat down with our reporter and told him that there are more dangerous things to worry about. ♪ >> nuclear is very bad but that is not the biggest risk out there, because nuclear is confined to a region. first of all, i do not think will have nuclear war with anyone. nuclear in an area like lucas shema is bad, the worst you can think of is fukushima. if we were comparing risks, you would kill vastly more people with a biological agent or by poisoning the water supply than
you would with a dirty bomb in new york. the dirty bomb will kill a lot of people of course, and it is a horrible thing, and would definitely -- they would make sure it does not happen, but the biggest risk is not the nuclear it is too much on the radar screen. the thing that is going to harm you is something that is not on the radar screen. >> so how should people be thinking of kim jong-un and north korea? >> this, i don't know. i am not following. i don't know if he wants to commit suicide or something, i cannot spend time on this, so it makes my life easy. i mean, of course you will have saber-rattling with them but -- i just don't think -- i don't know the details. >> so you do not think we will have nuclear war? >> with china? >> no, with north korea. >> how can you call it war? think about it. let's say you have 1000 wolves
attacking one wolf? is it war, or would you give it another name? >> because the outcome on one side is very catastrophic? >> exactly, they are very small. so small, nothing to reach it. one thing, we are very good at that kind of stuff. nuclear war, we know the risks you are very good with nuclear. nuclear is something we are good at, the military. the military is good at that, all as well as russia. how horrible there turns out to be is fighting malicious, terrorists. that, we are not good at. ♪
spotlight for a busy week of corporate earnings reports. our roundup begins with results from walmart. ♪ >> walmart gave a lukewarm forecast for the third quarter. the world's third largest retailer is trying to outspend amazon and it is taking its toll. the outlook tempered enthusiasm as posted its best resales growth in 10 years, and their accounts for more than half of its revenue. >> eps guidance for the third quarter is not quite as strong as investors were hoping for but i think if we zoom out and look at the picture it is a good report for walmart. they have been on this steady streak of great sales growth for 12 quarters. great growth in e-commerce. it is mainly charged by two things. when they have been these strategic acquisitions such as bonobos, jet and that is added to the total pie. but they have also really
expanded their own assortment online. they have 67 million skews where they are offering shoppers more product and that is being off -- paying off, too. >> target boosting its forecast for the rest of the year after second quarter sales topped estimates. a sign of big-box retailers improving retail and customer traffic. >> they have really enhanced their margins, focusing very much on apparel and home categories. some baby and kid areas as well and they have upgraded the brands, their house brands in particular. they have done a lot there. that has all been helping to drive more sales and in the same time they have done a good job with their mobile site, with their e-commerce desktop site and has been helping to drive sales as well. prices have come down a little bit and they are trying to stabilize on that level. generally, they had a good quarter and the consumer is looking for some value and they are now finding it at target. ♪ >> shares of dick's sporting goods fell more than 18% this
morning, ouch, after the company cuts its fourth quarter forecasts. there are expecting low single-digit sales for the year -- i am seeing some leisure to blame here. >> you saw this stock down almost 20%, near the lows of the session. as you said, there for your forecast earning has been cut versus earlier estimates of $375 a share. that full-year same-store guidance of single digits that one to 3% growth is also having some impact on its suppliers if you will. under armour gets almost 10% of its revenue from dix, and nike gets about 3%. and croc's gets some. so as dicks sees the sales falter, it's playing into their shares. ♪ >> one of the largest tech firms in china reporting monster growth in the second quarter.
it is supported by wii chat, which has 960 million users. a they also have sales from online games that jumped 39%. what do you pull from the report? >> if you look at those wechat numbers, 963 million, they also have another social media platform with more than one billion users and what they are doing better is monetizing that user base in wechat and qiuqiu to drive mobile gaming and creating an ecosystem for that. we saw mobile gaming revenue for the first time surpassed that from the desktop gaming and that has always been there juggernaut, mobile gaming. i think internet added services and mobile gaming makes up about 71% of tencent's revenue. but now, it is really moving into mobile gaming because of this massive hit "honor of kings." 10 million users and growing.
>> alibaba shares are on the rise today after e-commerce giant topped earnings and sales estimate. china's largest online marketplace said revenue grew 66% in the last quarter helped by improvement in advertising algorithms. >> one word takeaway is affirmation. we have been noting accelerating trends in there and alibaba's position is very strong as you noted. they have been seeing some very notable modernization improvement combined with good volume growth and strong operating environments. in a high-margin business model, the product is the result of what we saw today. it is an affirmation, my initial take away. >> online shopping mall jd.com posting a wider quarterly loss after raising running to drive sales at its mid-year promotion. a shortfall of $74 million is almost twice that of a year ago despite a 44% jump in sales.
why is jd.com spending so much on marketing? what is behind this? >> jd usually wraps up spending in the second and fourth quarters when it has sales promotion days. in the june quarter, it was what they call a 618 promotion, and the underlying reason for this spending is to attract traffic and users, because it is in a pitched battle with alibaba for chinese online shoppers. as long as jd can maintain its topline growth, if i remember it came in at 40-45%, as long as it can sustain that growth momentum, i think investors are not too much worried about the pace of ending. >> cisco announced its earnings after the bell yesterday after it narrowly beat earnings estimates. nevertheless, the stock turned down. this may be because of the major turnaround in the networking that cisco has undertaken,
moving from hardware to software. the company whose machines are the backbone of the internet and revenue in the third quarter may fall as much as 3%. is it being successful in the turnaround and why isn't the market recognizing it? >> we said we would begin to shift more of our business model into the software model and we have made unbelievable progress. this past quarter, 31% of our revenues were from recurring, up four points from the last year. we have, actually, our software-deferred revenue, growing 50% and increasing $5 billion for the first time. that is moving rapidly, and of our software business, 51% of our software business now, is actually from subscription. so, we have made a great deal of progress and i think that the strategy we laid out is actually working and i am very
comfortable with where we are and i am pleased with what our teams have accomplished. matt: wesfarmers has reported a full year earnings but it missed estimates. that company acquired kohl's as well as homebase and has interest in coal mining, chemicals and fertilizer production. let me ask you first of all about the possibility of a sale of your resources business. it is the headline sticking out at me from bloomberg this morning. you say you are pursuing strategic options. these kind of reviews typically lead to sales, is that a possibility? >> yes, it is a possibility, we have been looking at that for a while. pleasingly, the coal business made an increased profit in business this year which has been great for growth. we have been talking to various parties for a positive outcome and there is a possibility that it will sell both the coal mine and now interest in another one. if not, they are good assets
generating cash for the group. >> in the pre-markets, 1.5%, the airline reporting its first worst half yearly loss in a decade due to the declining passenger numbers it is facing its first back-to-back annual loss in its history. however, the coo rules out a budget feature saying that he would like to concentrate on airport lounges, more wi-fi in planes, and yeah, also better food. >> earnings came out worse than i think everybody was expecting. caught a lot of us off guard. for a lot of us, it is the biggest loss, as you mentioned in the first half term in almost two decades. we do not have data going beyond that so it is at least two decades. a lot of losses from hedging losses continuing for cathay and we saw pressure on passenger yields going on.
when we saw one-time things like fines that they had to pay for cargo, fixed pricing that eu has rolled against them. so there were a lot of operating factors but they're also some nonoperating factors that have affected earnings. obviously, the reports out there, the earnings reports seem worrying going forward. ♪
♪ >> i just want to bring up the bloomberg function where you can find out pretty much everything there is to know about this. it is nisi on bloomberg. you can click on the various menus on the left, overview videos, lots of different explanations here. this is really cool. i have done this. you can subscribe to news alerts, which means you get all of the stories coming through to do with mifid ii. anna: there are about 30,000 functions on bloomberg and we always enjoyed showing you are favorites on bloomberg television's. maybe they will become your favorites, too. here is my favorite, quic , which gives you context and fast insight into timely topics. here is a quick-take from this week. ♪ >> it is impossible to ignore
america's opioid epidemic anymore. the numbers are staggering. nearly 500,000 americans a they used heroin in the last 30 days. heroine overdoses have tripled between 2010 and 2014, and deaths from overdoses including heroin are now approaching deaths from car crashes. how did we get here? pain. so here is the situation. there is a grim connection between opioid painkiller addiction and heroin addiction in this country. in the 1990's, doctors turned to opioid drugs like percocet and oxycontin to use them for widespread treatment for chronic pain. the number of opioid prescriptions in 2002, 79 -- in 1992, 79 million. it went up to 217 million by 2012 -- 2002. at the same time, heroin from afghanistan and mexico became a cheaper and more available alternative.
the result is an increase in drug users in the u.s.. now here is the argument, president donald trump appointed a commission that in august advised him to declare opioid addiction a national emergency. >> we are going to spend a lot of effort and money on the opioid prices. >> trump says he is focused on cutting off the supply of drugs rather than focusing on treatment like the commission had recommended. the health care bill passed by house republicans that he supported drop the requirement that drug treatment be covered by medicaid. nearly every state has enacted laws related to drug abuse including targeting doctors and pharmacists who overprescribed hills. -- pills. states and the federal government had also made naloxone more accessible. it is credited with reversing more than 26,000 overdoses between 1996 and 2013.
meanwhile, advocates for patients with chronic pain worry that the rush to solve the addiction crisis may leave those who truly need opioids with needless suffering. ♪ anna: that was one of the many quick takes you can find on the bloomberg. you can also find them at bloomberg.com along with the latest business news and analysis 24 hours a day. that will be all for "bloomberg best" this week. thanks for watching, i am anna edwards. this is bloomberg. ♪ ♪
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