tv Bloomberg Markets Americas Bloomberg August 23, 2017 12:00pm-1:00pm EDT
vonnie: from bloomberg world figures in new york, here are the top stories. trump threatens to bring the u.s. government to the brink of a shutdown is needed to pressure congress into funding the border wall. we will look at the growing divide within the gop. plus, losing patience for the president's antics, why our next guest is not ready to throw in the towel yet. deregulation is going to washington could add $27 billion of gross profit at the sixth largest u.s. bank. a lot to cover in the next 60 minutes but first we have abigail doolittle. a little bit of a selloff. crazy, smallo
declines for major averages for the dow, s&p 500, nasdaq down about 2/10 of 1%. but declineses after the big rally yesterday. consolidation on the part of investors. the chief technical analyst said that yesterday's rally let the s&p 500 slightly overbought in the near term. a little bit of a pullback. the dow transports, the seller is significant, down one and one quarter of 1%. what is dragging on the dow, american airlines and united both down in a big way, 3%, roughly 3% for both shares. george ferguson says this has to do with concerns about fares, somewhat a cautious note after raymond james after a management meeting with delta around potential pressures on airfares the oil up about 1%, that seems to be pressuring the shares of kansas city southern. some weakness for the transport.
some weakness for consumer discretionary within the nasdaq, some of the bigger drags on the nasdaq, amazon down about 7/10 of 1%. after whole foods shareholders have approved the $13.7 billion deal. starbucks lower by a little more than 1% after cleveland research downgraded shares to a neutral. netflix down 9/10 of 1%. not quite netflix is down but it cheated, saying the solar clips on monday took away from their place by about -- why 10% of you watched a giant rock when i have always been there for you. a 10% of drop in place during pse.-- plays during the ecli nasdaq, in relation to its
200 day moving average, those rising. that tells us buyers are in control. this talks to the number of members above the 200 day moving average. dropping down, down 47%, around a line of support, similar to 2015 ahead of a pretty big crash. one that was very close to a bear market with the nasdaq in early 2016 down almost 20%. an important technical indicator to watch. vonnie: abigail doolittle, thank you for that. president trump turning up the pressure on lawmakers to deliver on his agenda. he promised to build a border wall, even if it means to dire consequences. if we have top: close down our government, we are building the wall. let me be very clear to democrats in congress who opposed a border wall and stand in the way of border security --
you are putting all of american's safety at risk. vonnie: washington chief correspondent kevin cirilli joins me. it was a long speech. a lot to say. what is the buzz in washington, are people taking the threat of a government shutdown seriously? >> they are, uncertainty gripping washington, d.c. and reverberating around the beltway and into the business community. starting to plan for what is certain to the uncertain political september. lawmakers want to tackle tax reform and tackle the corporate tax reform in particular by the end of the year, republicans and the administration say they want to. they first have to raise the debt limit, they have to do that and passive partial government funding bill by the end of september, in order to avert a government shutdown. the president drawing political
,attle lines in a fiery speech reminiscent of his campaign trail speeches in phoenix, arizona. he looked to blame democrats, saying that border security ,unding, quite inexpensive cost along the u.s.-mexico border, would be part of the budget in september. if it wasn't, he said he is willing to shut down the government. vonnie: kevin cirilli, thank you for that. not just lawmakers getting impatient with the president's rhetoric. markets removing their optimism. our next guest says this raises there is risk assets in general. we will get back to what that means. a cute macro strategist -- he was the number one u.s. bonds strategist by institutional investor magazine for 10 years and wrote about this in the last day or two for bloomberg profits
which you can access under bloomberg view. explain your position, david. david: i have been watching and waiting for the antics and the semantics, and all the tensions in washington to have an impact on risk assets. i am a bond strategist and that tends to be bullish for the bond market. i have not been right on it. i have been patient. the events of last week, in particular, indicated the market, particularly the risk market, has lost patience. the rhetoric. we had good news last week for risk assets and the stock market still traded down. we have rates that inflection point. death reached that inflection point. -- reit's that inflation point -- inflection point. treasuries inseen that range, what makes you think the inflection point has been reached and surpassed? avid: treasuries are stuck in
range but yields incredibly low and the fed said they would start the balance sheet reduction. they are still on for a rate hike later this year. the market is not the let's take last week, retail sales were good, cops were good, rumors that gary cohn would leave but he stayed, good news. when steve bannon resigned, that was a blip up in stocks, then they gave it up. if they are giving up on the good news, now we hear this week that there may be a government shutdown. maybe it is rhetoric and the markets have been tolerant of donald trump getting into his pace and learning what to do in the white house. we are getting tired of it, i think. i do think it will start trouble for the risk assets. that will ultimately prove bullish for the treasury market. vonnie: what do jackson hole or the next jobs report, a few days
away, or something like the next ecb meeting due to mitigate the risk you are talking about? hole, it couldn be a big yawn as there will be a lot of academic speak. i want to hear what the fed and other central bankers have to say about inflation remaining much lower than their target for an extended time, whether it has an impact on anything. we heard from the ecb, somewhat relatively speaking, somewhat dovish comments suggesting that their tv program, already starting to taper, maybe they do not address it. perhaps the markets will get a little bit of a goose, the bond markets with the fed addressing inflation, it sounds dovish at the ecb, if they do that. an academic conference. nhe risk is that we will yaw
ourselves out of it. they talk a lot about the phillips curve and why it may not be working. david, you are speaking to milton berg this morning and he thinks there is a 30 year bear market in treasuries. to get underway shortly. then you have the treasury bulls like lacy hunt who is coming on in a few minutes. if you ignore the immediacy and the immediate market moves, what is the broader cyclical picture for you? a i do not think it has to be bull market or a bear market in treasuries. it could be this sustained type of trading range we have had since march for the foreseeable future. maybe we do, particularly around the debt ceiling, and if my fears and concerns about the equity market come to be correct , perhaps in your treasuries
will take a get below 2% anyone 90's. we are broadly speaking about a range that could well hold into next year. the fed will be on hold to do next year and we will talk about the midterm elections, which raises a whole new degree of uncertainty going forward. vonnie: will the channel that is most telegraph political uncertainty in the u.s. and maybe unease with the president, will that the equities, bonds, or fx? david: i think we will move a little bit together. if equities are hit, the bond market would be better, probably going to rally. we could see a steeper curve and that maybe be enough to put the fed on hold longer and for the fx considerations that would tend to be dollar bearish. i will go with that story. vonnie: dg macro strategist at informal financial intelligence and one of our bloomberg profit. check out those columns under bloomberg view. let's get the first word news
here >> the french interior minister say some of the men suspected in the deadly attacks in last week's barcelona visited the paris area two days before hand. speaking alongside the spain theying interior minister, said that officials are working to determine why the suspects were in paris and what they did fall they were there. a top united nations body on racial discrimination is taking the unusual step of calling on the united states to reject racist hate speech and crimes following the violence in charlottesville, virginia. without referring specifically to president trump, the committee on the elimination of racial discrimination pointed to "the failure at the highest political level to unequivocally reject racist violence events in the united states." theresa may once promised to take back control of the country's laws from europe. her government is now willing to
accept a close cooperative relationship with the european court of justice. a new position paper today says the u.k. is open to abiding by past ecj rulings and even referring decisions to it. in hong kong, the stock exchange canceled trading in the city and it issued a highest level storm warning for the first time in five years. a severe typhoon lashed tycoon -- hong kong with wind and rains and airlines canceled 450 flight. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. vonnie: coming up, wins of the regulation this week but a pop gold mine for large u.s. banks. we will have the details. this is bloomberg. ♪
♪ vonnie: this is bloomberg markets, i am vonnie quinn. president trump metlife promises about deregulation on the campaign trail and that is been welcome this for banks. it has nots says gone started for wall street. it says that financial market deregulation under consideration as sixaise profits 20% of the largest u.s. banks and additional $27 billion of gross profit. among the banks that could benefit the most are jpmorgan and morgan stanley. joining us is a senior writer on the finance team. how did you come up with that number? >> a lot of numbers coming together. a lot of number crunching with
several elements and suggestions in the treasury report in june that came out. some of those will not happen because they are related to congress and congress has to pass them. nobody is expecting congress to do anything. a big chunk of them can be done theegulator, by retuning regulations and some of them related to what came from how we implement to them in the u.s. we increased the rigor of the rules that internationally were agreed to. sanctionshose are the -- sections i looked at, the tweaks that can happen, if we bring down the rules by international standards. vonnie: let's look at this pie chart. majorws what each of the pieces of regulation that will be done away with what do you
compliance costs would give the banks back $2.8 billion, the biggest one is 9.8 billion dollars. what any of the cash make a difference to backs performance? >> when they make a bigger profit, this is without increasing capital, they are able to keep the same amount of equity, then return on equity goes up. another one that part of this chart relates to even more capital that they could -- shares they could buy back in more money they can return to shareholders. if you add those, returns on equity would go up a lot. back to levels, not maybe the same, but closer to the levels they were before the crisis. that helps shareholders. they have been disappointed with returns on equity in the banks, which had gone down.
they were not making as much money and had a lot more capital. vonnie: this chart, more buybacks would be one of the results. freeing up cash for shareholders. in that case, citigroup and j.p. morgan, and morgan stanley, would end up the winner's. >> they have been giving so much cash back. it, it's held onto earnings for more than everyone else. they have a lot of axis capital already. reducing the axis capital. -- excess capital. all of the banks this year, after results were announced in june, made increases. they saw a jumps and how much money they are returning with buybacks and dividends to the shareholders. it would keep on going, deregulation will help increases get bigger.
shareholders will be happy. vonnie: we will talk more on this. thank you for your great reporting. a fantastic story on the bloomberg. it is time for our latest bloomberg's news flash, the biggest business stories in the news. all through shareholders approve the amazon acquisition this morning. the next step is approval from government regulators. the takeover will give amazon some 460 gulf is locations that --le foods locations and $13.7 billion deal expected to close before year end. is considering a major overhaul that would focus the company on mass-market cars. the italian company reportedly might spin off the upscale maserati and alfa romeo brands, and its parts operations. they say that would make fiat chrysler more attractive for a
more combination with a competitor. investment bank executives at bank of america are debating where their european union trading have should be after brexit. brexit.hould be after the equity says one friend for 20 fixed-income chiefs favor paris. that is related bloomberg business flash. still ahead, the isbn ceo reveals that ibm -- we hear from her next. ♪ this is bloomberg.
and in only three of those cases, what she replaced by a woman. the ibm ceo sat down with david rubenstein and the latest episode of the david rubenstein show. position,sed her management style, and mentoring women in business. >> for the woman to be the head of ibm is better than the men or economic a difference? >> it did not make a difference. >> if you do not like some of his idea, do you yell at them, which meant often do, or are you quiet and tell them quietly that their ideas are no good. >> i am not a screamer, never was. >> you do not throw things? >> i do not think i've ever thrown anything but i have believed in the way to challenge things is to challenge them. it is the intellectual. i feel you need to know what you're talking about.
i have no trouble being the want to ask questions. >> do you feel a certain responsibility as a woman ceo to mentor other women, and to speak out on issues relating to women? >> an interesting question because i have grown to the comfortable with that role about being a role model. i think that many of my colleagues would all say, and maybe it is a bit as we came through our businesses, you always wanted to be noticed and rewarded for what you did, your contributions. this has nothing to do with gender. almost blind to that. over time, i came to learn and see how important it is that there be role models. you have to accept the fact that you are a role model on the appropriate things. at one point, another image that sticks out in my mind, this is maybe 10, 15 years ago. i was in australia and giving a
financial services presentation. i thought i did an ok job. , couple people came up to me afterwards and a man i thought would tell me this was great or he disagrees, he said to me, i wish my daughters have been here. it is funny, the moments you remember. dohought, that is what you have to realize that any of us in these positions of any kind of influence, we are all models for someone and women do need role models. we are still a small minority that runs companies and they need role models to say, that is .ossible, i can be that it is hard to dream to be that if you do not see people like it. >> take the fortune 100 or 4200 companies, relatively few women ceos. >> i would have hoped by now there would be more. i think this is very conscious effort. we make a conscious effort, to keep women in the workforce.
there is no doubt that when people -- when women have children, or ailing parents, there are many reasons women will come in and out of the workforce. you can do everything you can to keep them in, your odds are higher than their ability to keep going. one of our newest benefits is shipping baby breast milk from others who are nursing. so they can keep working, if they want to. the idea of keeping women in the workforce in the is one of the most important ways to create the pipeline for these roles. vonnie: that was the ibm ceo. catch the full interview tonight at 9:00 p.m. eastern on the david rubenstein show. coming up, lacy hunt. ♪
live from bloomberg world headquarters in new york, i am vonnie quinn. let's get a quick check of the major averages. we saw a bit of a decline early on. the dow was down about 2/10 of 1%. the s&p 500 is down a quarter of a percent. chipmakers are trying to save a bit of a rally. the nasdaq is also down. we are talking treasuries in a few moments. let's get to mark crumpton and the bloomberg "first word news." mark: egypt's president and foreign minister met today with white house advisor jared kushner. after the trouble administration cut nearly $100 million in economic and military aid to egypt and delayed almost , citinglion more egypt's poor human rights record and its crackdown on nongovernmental groups. kushner was in cairo as part of a middle east tour looking at
ways to revive israeli/palestinian peace talks. navy has responded to a rash of accidents by firing the admiral in charge of the japan-based seventh fleet. admiral relieved vice -- the vice are more, saying it lost confidence in his ability to command. that happened two days after the uss john mccain was involved in a fatal collision. there have been for accidents under his command this year, two of which have been fatal. authorities in brazil say seven people are dead and dozens others missing after a boat carrying 70 people sank on a major river in the northern part of the country. 25 people were able to make it to shore. there is no word yet on the cause. president trump is lashing out at an arizona senator. the president tweeted that he quote, lowe's the great state of arizona but added that he was
not a fan of jeff flake. blake has been very critical of trump. day,l news, 24 hours a powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. vonnie: thank you. , two of theeek world's top central bankers, mario draghi and janet yellen will share their views on monetary policy at the jackson hole symposium. this fight the fact that both --nomies have undershooting have undershot on inflation. lacy hunt is chief economist at hoisington investment management. a notorious bond bowl. bull.d
do you believe that the president will shut down the government if the mexico border wall does not get funding? lacy: this is way outside of my -- vonnie: will you do live in texas. lacy: i do. government shutdowns are very short affairs. would be very difficult for it to go on, for very long. you would have to prorate expenditures, which means we could only pay about $.55 on the dollar. i would not expect it to last long. vonnie: the treasury market does react to political instability. you must be looking at it from that point of view. how will the treasury market respond? lacy: it is hard to say. the treasury market is very volatile over the near-term. many factors influence it.
because of this short-term inherent instability in the treasury market, we are going to keep management on the long-term. we think our value is in capturing the multiyear view. vonnie: we will get to that. everybody keeps talking about the instability inherent in the market, but we have not moved out of this range in forever. spreads are coming in as you take a look. it is just above 100 basis points, a very flat curve. lacy: it is, but keep in mind at the end of last year, everyone said the long-term yields would be rising. in fact, the long-term yields have declined, this year. the capital gains opportunities where we are operating have been quite excellent and from my perspective, the significant point of view for investors is
to understand that the long end has rallied in the face of a 50 basis point increase. the fed was directing the markets higher, saying that there was a incipient inflationary problem and yet the bond market rally is the bond market's only way -- own way of saying they repudiate the forecast. we are onlypt that pricing in one more rate hike. backe have really scaled their inflation expectations and their interest rate increases -- increase expectations. a 30% chance that the fed will move by december? lacy: if the fed were to raise the rate, i don't believe that it will affect the long-term bond yield. long-term bond yields are directionally heading lower over the next several years.
there are many factors that can cause rates to move higher over the short run. rates cannot stay up. the economy is to fundamentally weak. vonnie: the third year is at 275. long in 1990, when the yield was around 9%. there have been nine yearly backups. we felt that each one of those were transitory. there were many interim spurts in which rates rose, our view is that while rates can go up, they simply cannot stay up. the economy is just to fundamentally weak. -- too fundamentally weak. vonnie: where does it go to? lacy: we had a backup last year, between 220 in the long bond and 320. it did not stay there very long and there were expectations there would be much -- a much
stronger year, this year. said to haveas momentum. we are seeing an economy that is losing momentum and demand for a wide variety of goods is exhausted and there is no reason for an increase in economic activity in the high multiplier sectors. this is the type of environment where grades are going to grind lower. not constantly, but the trend is lower. vonnie: milton burg says we are staring at a 30 year bear market in the treasuries. yieldsds are going up, -- central banks are reversing the quantitative easing. if they have not begun yet, they will be.
you don't need much of a move or a crisis for bear markets to begin. vonnie: the straw that breaks the camel back -- camel's back. lacy: i think this is the problem. the u.s. economy is deteriorating cyclically and secularly. the main problem is we have too much debt, the wrong type of debt. we are becoming increasingly more indebted. the deterioration in growth has gone on for a long time. ,t is resulting in a baby bust a household formation bust. the fact of the matter is that the potentiality for growth is getting weaker and weaker. moreover, layered on all of this , the federal reserve policy is really biting. when the federal reserve engaged in its first tightening action in december 2015, the main
credit aggregate was growing 9%, year over year. it is currently growing less than 3%. the fed has reduced the rate of growth. vonnie: the fed is seeing this, too. lacy: i don't know what the fed is seeing. they don't look at those. they focus almost myopically on the phillips curve, a more version of the dual mandate -- a morphed version of the dual mandate. there is no phillips curve trade-off. reserve is operating on a concept that is basically flawed. it causes a couple problems. vonnie: let me interrupt because that is the environment we are in. if you are a traitor, do you don'tave to -- trader, you just have to accept the flaw?
you still have to live with this. our: we are investors and clients expect us to take the multi-term view. the influx of these extraneous factors can be very powerful over the short run. the fact of the matter is, over time, the fundamentals will dominate and the monetary restraint pushed on this economy, the other structural problems we are facing suggest to me that the trend in rates is lower. i would add one thing. to 1990 when the bond yield was around 30%, there are tens of thousands of forecasts of a bear market in bonds and we have yet to have it. vonnie: we were lucky to have you both on the same day. hunt, chief report -- chief economist at pleasing to an investment management.
extending -- expanding its cloud dominance, joining us more is taylor riggs. taylor: so many downsides, there were concerns about the third quarter billings. analyst say the third quarter billings forecast have a lot of seasonality components to them. don't worry so much about that. topline revenue growth was strong and that is what matters. some other things on the mixed shows concerns analysts have about the company's growth versus profitability. i want to bring in the operating margins because that will show some of the concerns. the company had hoped to achieve operating margins in the third of 30%. by more than grown 200 basis points, annually since 2010. the stock is up today because of the cloud dominance like you mentioned. it is the biggest sector.
92% of the sales force comes from the service and subscription service. the cloud makes up 36%, their largest product. acceleration was the key growing 17%. asy have been a disruptor they continue to grow into ai. vonnie: what about the competitors? across mygot a note desk saying it is one of their favorite buy periods. relative tothat salesforce, adobe and service. we charted in on the enterprise value to sales forward estimate. it is cheaper relative to service and it pulls in debt and equity and you subtract out cash and short-term securities. you get a better picture of the overall company value. vonnie: taylor riggs, that was a lesson in valuing companies.
thank you. turning now the samsung, hitting its turn in the smartphone wars. electronics company is set to unveil the galaxy note eight in just a few minutes. for more on what to expect from samsung, let's bring in celina wine -- celina why. tell us what we have heard. is samsung keeping details under wraps? >> the stakes are superhigh at this event. it is the latest phone after the last one was scrapped after reports of catching on fire. they revealed low details about the phone, which i am holding in my hand. a very large screen, a very large phone. another added plus is the
andus, which is skinnier more pressure resistant than before. they also have a dual camera lens in the back so talking to people here, it seems like there's a lot of excitement about these improvements. we will have to see if they really bounced back from the problems of last year. vonnie: how soon will we know that? selina: it is a mix of media as well as a whole bus full of note 7 loyalist they brought over to the event. thething they did during presentation was called out their fans and say we are not going to forget what happened last year. it was a huge mistake, but we are so thankful to all of our fans for sticking by and inspiring us to do better. they have been given a second chance and they need to prove that this phone is worth it.
vonnie: in your estimation, i know you don't want to give an forion, but is there room markete to take some share away from apple at a time when apple is going to come out with its 10th anniversary iphone? the big one? selina: i think it is worth remembering that samsung is well positioned in the market. apple --ung and samsung is still the number one player, globally. in terms of going head-to-head a lot of the features we are seeing are on par, the stylus and bigger screen setting apart the samsung phone, but apple has built a strategic ecosystem. it will be hard to get apple loyalist to become samsung loyalists, but this is a good bet. vonnie: what are you hearing
from your sources and shareholders today? have they had a chance to react? selina: i think analysts are pretty bullish on this phone. a lot of people do not get a chance to experience it after it was released, so they are excited about this phone ringing in those customers that were loyal to the previous phone and bringing them to the upgraded version. it seems that samsung is pretty resilient and that consumers and investors don't really care about the corruption scandal happening back at home. if anything, we have shown that samsung has been able to bounce back very quickly. they had the best earnings ever in stocks. vonnie: selina wang at the park avenue armory in new york city.
vonnie: this is bloomberg markets. wall street has been urging washington to help soften the blow from european rules that banks able up and the research in businesses. the sec may be working on a cure. i want to bring in bloomberg's sec reporter. a cure sounds curious. tell us more. >> it is kind of like the sec is the last best hope that wall street banks have.
these are rules that have been years in the making. the updates are's -- are sweeping rules and really, at the crux of the problem is under the new rules, broker-dealers would not be able to bundle their free research with other services they offer. if they did, they would come across other rules that they would have to at -- register as asset managers. they do not want to do that. what they have in doing for months is pushing the sec to come up with some way with the rules could get tweaked or they could get some type of get out of jail free card and continue to operate as they do while complying with the european rules. we have learned the sec seems to be picking up the pace to come up with something, but the clock is ticking. these rules in europe basically come into effect at the beginning of january and these are big firms.
in order to get everything going, they said we need months to make sure we are all set. it is coming down to the wire like things often do in washington. vonnie: how did he get there, in the first place? lots of lobbyists? ben: sure. the biggest trade groups, banks and asset managers, both sides of the calling care a lot about this issue -- of the coin, care a lot about this issue. buy want to continue to research like they do in the u.s. pushing, been lobbyists, trade groups have been pushing for most of 2017 to get some fix. the sec did not have a permanent leader since january, until may. since jay clayton, a former lawyer himself came in, the staff has really picked up the pace with the impression we get
is pretty helpful they are going to get some relief. vonnie: what about the shops -- might changesse are such big that the steps that firms have taken, they are still going to be able to benefit and even if the sec does come through with what would essentially be a type of ruling that they would not be prosecuted or go to their enforcement decision. they are still going -- there are still going to be workarounds. it is still going to take time for everyone to get their head around these big changes. a lot of firms in the u.s. and globally are going to have to deal with it. vonnie: when are you anticipating a decision or next announcement? ben: if you talk to industry, they are hoping that happened
yesterday. the short answer is we don't know. the truth is for it to happen, it has to happen with leadtime of two january -- up to january. september, october timeframe at the latest, but things come down to the wire when you have regulators and deal with a pretty complex issue with multiple jurisdictions and different units within the sec. vonnie: benjamin: bain:, -- ben bain, sec reporter for bloomberg. up next, larry sabato jr. ♪ ♪
there was top stories we are following at this hour. president donald trump threatens to bring the u.s. government to the brink of a shutdown if needed to convince congress into funding the border wall. we look at the growing divide in the gop. paul ryan speaks this hour from oregon on the need for tax reform. we will bring you his remarks live. follow the money. that'secial counsel -- special counsel robert mueller's strategy. we will take you to the tactics being used. ♪ julie: president donald trump is dialing up the pressure on lawmakers to deliver his agenda. resumely last night in a a, he would build the border