tv Bloomberg Markets Americas Bloomberg August 28, 2017 2:00pm-3:30pm EDT
scarlet: we are live and bloomberg world headquarters in new york over the next hour. here are the stories we are covering. tropical storm harvey looking to be an economic catastrophe. we will be speaking with the former fema administrator on the to be inecovery said the tens of billions of dollars. uber has settled on a new ceo. we will look at how he addresses persistent losses. amazon is having its newly acquired cut prices on everything from autocad to bananas. we will ask a coetitor how this iweighi on th indust. let's get you started with bloomberg first word news at this hour with mark crumpton. mark: thank you. is going toet worse befor it gets better. that warning fr the director of the national weather service who says, the catastrophic flooding that is overwhelming
houston and other parts of texas will worsen in the coming days and then be slow to reseed. additional 20an inches of rain could fall in the coming days on two of more than 30 on top of rather -- more than 30 inches, some areas have received. the acting homeland security secretary tells bloomberg it is too early to predict cost estimates on the toll of devastation caused by harvey. she outlined in media priorities for the department. no preliminary estimates at this time. at this point, we are doing what the president asked us to do and said people first, and paperwork later. we are looking at search-and-rescue. secretary duke says officials expect floodwaters to peak thursday, at least 30,000 people are in official shelters, thousands more have and
displays. officials released more water from houston was a bars -- houston reservoirs. say ancy officials controlled release could cause additional street flooding, but if steps for not taken, rising water levels and rain could cause the dams to break. gas prices rose to a two year high, up more than a six point 5% as tropical storm harvey flooded texas refineries. more than 10%ed of the u.s. fuel production capacity. gas prices are expected to fall as refineries recover and to an end. global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. scarlet? scarlet: thank you. we will be covering more of harvey with the former fema director in a few moments to u.s. markets closed in two
hours. let's get a check on where stocks are trading with taylor riggs. taylor: i want to look, i feel this has been a push, pull feeling. that is how i am describing it this morning. the s&p, you are getting companies like iliad going higher and other things like expedia and energy companies that mark crumpton was talking about pulling it lower. on the flipside, you see nasdaq and the biotech industry being pulled higher in the small pharmaceutical companies like tice. i want to talk about that because gilead takeover from its $12 billion is pushing its competitors higher. perhaps calling this a sympathy trade, if you will. on the gilead aside, you have declining sales in their hepatitis c drugs. they were hoping to boost those cancer drugs may have, pushing these pharmaceutical companies a little bit higher on that
sympathy trade. the other big story we heard ,rom mark is hurricane harvey now tropical storm harvey. i want to take a look at gas prices. g #btv 9335. you can see the highest since april. off a bit, even for that fourth of july holiday season. up over 10% over that. finally, the insurance company -- those shares trading down in sympathy as they are expecting to pay back those losses related to the hurricane. julia: thank you. it is official, expedia's the ceo has confirmed has been capped. bloomberg technology anger emily chang joins us with the details emily chang joins
us with details in san francisco. tell us the issues the company faces here. what do we expect him to tackle? the dark horse candidate. his name never surfaced and anyone's reporting. some say he is the true candidate because the other two people in this race where meg whitman, they ceo of hp enterprise, and jack ml, chairman of ge. some members of the board favored jack, some favorite mag. they could not agree. it all happened quickly and very dramatically on friday. meg whitman talked to the board, she talked to the board on saturday. on sunday morning, jack withdrew and megalith -- meg whitman seems to be the favorite in that moment. what they could not agree on was the terms, how involved with travis kalanick still be? how much power with the board wield?
at the end of the day they went with the ceo of expedia who by all accounts has a strong record at expedia. iac, hed as the cfo of has banking experience before that. he has this deep finance background that some of the board member like benchmark capital the looking for. has experience with google if he is leading uber with google. tell us about his priorities and his to do list. there is a huge string of things he has to address. emily: right. number one, i think cultural issues is huge. this is what took travis kalanick down in the first place. it was this contention from a female engineer that she was sexually harassed and that there were deep-seated cultural issues. she called it a political thrown game of war, the way that managers with interact with each other.
a number of executives have left in part because they could not work with travis kalanick himself. there is not a deep bench of uber. they don't have many executives. they now have a ceo. dara khosrowshahi is going to need to hire a cfo to help him lead this company. my guess is he is going to recruit right away for those high-level positions, and then try to tackle the culture which impacts the entire company. then, you have the balance sheet. this is a company that last more than $600 million in the last quarter. they are bringing in billions and billions of dollars in revenue. at some point they have to turn this into a sustainable business. scarlet: it is going to be an interesting couple of months for uber's new ceo. thank you, emily chang. up, lessons from hurricane katrina, former fema administrator david paulson joins us with damage from harvey and the trump administration's
areas and rescue them. we have to get them into shelters. this mission is going to be a heavy lift. we are anticipating over 30,000 people being placed in shelters temporarily to stabilize the situation and provide for their care. scarlet: for more perspective, we are joined by david paulison he served as a fema -- administrator. david, good to speak with you. thank you for joining us. houston city officials chose not to evacuate the city ahead of the storm. the national weather center -- serpas has told us the conditions are going to get worse. is, are we to you passed the point where if people who have not left yet still can and if so, what does that mean for the rescue operation? david: that depends on what is happening around them. if there are people surrounded by water and cannot it out, and the system know
where they are and they will get picked up and moved up. to try to drive through those deep waters is not a good thing to do. they need to listen to their local managers who are giving them directions about what they want them to do. to try to move out while there is still deepwater, is a bad move for them. obviously this situation is ongoing at this moment. what do you see is the biggest and most pressing challenge? is it search and rescue at this stage? david: i think most of the search-and-rescue is almost done. left toe some people get up and most everybody has been taken care of. the biggest challenge is going thesehousing all of people, making sure they are in a safe place, making sure there is someone to take care of them, make sure there is food and water and supplies and all the things they need to be there for a while. if it is quick to be a long-term effort, which it may be,
shelters is not a good place to do that. they can stay in a shelter for five days, but then you need to start looking for a more permanent-temporary housing, maybe hotel space or apartments or things like that. like we did in katrina. we started putting people in places. it may not be in texas, it may be somewhere else. these are the types of things they will have to think about. this could be a long-term housing situation. many to find housing for people. scarlet: speaking of katrina, compare and contrast what we have seen with harvey to katrina, especially when it comes to the federal government's level of preparedness. david: i think there is a huge difference. -- i met a conference in new york. one of the most important things anyou saw the president put
evacuation, that has not happened before. -- the statey he got overwhelmed before you move supplies and is the up -- it did not work that way. he got way behind and could not catch up. bush alloweddent us to do a pre-landfall evacuation and up feet up -- freed up money. we could move supplies, inulin's is, food, water, and all the things we needed to help with people. was icond thing we did found out clearly that there is not any type of command system set up inside the federal government. the secretaries -- they were not talking to each other. so we got president bush to
agree that we would adopt a system. it's everyone in the same room at the same time -- it to everyone in the same room at the same time. night, what got accomplished, what did not get a college. that is -- that fell in place. julia: better coordination. crit -- clearly critical. i just want to finish here where scarlet kicked off the interview. that is the mayor of houston over the weekend defended his decision not to evacuate. hindsight is perfect site. but do you believe that was the right decision, not to evacuate? said, hindsight is 2020. 20-20.
maybe they thought it was not going to come here, i'm not going to second-guess people. , now iss is all over not the time to focus on that. thes time to focus on search-and-rescue. deal with the housing and then we will get the city back in shape which may be a long time. then, we do the report and look at the decisions we made and what the impact of those decisions were to could we do better next time and should we have done something differently. i think it is too early to get into that. now is the time to continue to work together. wait for things to con down and pragmatically, look at our decisions and what the impact of those decisions where. trump -- sident
♪ scarlet: this is "bloomberg markets." julia: amazon is spending its first day as whole food is cutting prices by -- as much as will offerood selections. there is more to come. outside ofs standing whole foods. what kind of price cuts are we talking about and on what? like you said, amazon has wasted no time in cutting prices at whole foods.
ofot of the produce and some the core items that people come to whole foods to buy our cut a itnificant -- are cut significant amount. rotisserie chicken and avocados are both down 29%. throughout the store, it is not that there are cats everywhere, but they are significant cuts across a number of items that people come to whole foods to buy. i spoke with one shopper who said she came in the other day and looked at buying a rotisserie chicken, thought the price, thought it was too expensive, but it back. today she bought that ticket because of the lower price. it will be interesting to see how these lower prices throw a new bomb on an industry that is already fighting over lower prices. the grocery industry is seeing a lot of moves to cut costs as much as possible, give shoppers the lowest possible prices. this is bringing that war to the organic aisle. it is going to have an impact on this important industry.
scarlet: thank you so much. speaking of the war in the organic industry, these price cuts are a sign that amazon is serious about taking on its competitors in the $800 billion supermarket industry. that includes our new guest. he is the chair of grocers. thank you for speaking with us. you are joining us by skype. i would like to get your response to the whole foods price cuts we have seen so far. are you surprised by the magnitude of the cuts we have seen at the whole foods on eights -- on east 57th street where avocados are a dollar 99 a pound? >> no, not really. they needed to -- they needed competitive.o be they needed to cut their prices and avocados at our stores i believe, are already a dollar 99
-- are already one dollar 99. $1.77.n for they are still more expensive than we are. not surprise me that they needed to -- that amazon needed to cut prices. in milan does not have -- amazon does not have to worry about making money like other retailers. they are saying this is just the beginning. even if this is a remaining -- risk, in addition to the ongoing price war, those prices could come down further. then they are going to compress margins for companies like yourself where you find yourself in this decision. do you agree or do you don't? kemper: i think if they of a -- if they decide to cut prices more, then they are denigrating the experience of shopping in
their markets. i think they will find it is , toicult to make money compete just on price. in our industry, you have to have more than just price to compete. you have to have a good experience. julia: you could argue they already have that. they are ready have the brand. now they are matching that with cheaper prices. kemper: they definitely already have the brand. whenr experience competitor has taken over, the brand deteriorates because they don't have the fire of what made the brand, and what created the brand. a company like many times you destroy the brand. when you have a company like ours that are based on
values, then the experience for the customer becomes more important. and it becomes better for the chainliken a speller -- and a smaller chain like ours becomes a better destination for customers. they are going to lose some of that but they had. scarlet: i see what you are saying. part of the amazon brand is the delivery. as you mentioned, grocery delivery represents a small component of revenue. my question to you is why do you think that is? what is preventing this from becoming more widespread? is it something amazon can exploit? kemper: i think a lot of people -- most consumers like to come in and look at their groceries. they don't like to order their groceries and have them come into their house. they like to come in and they like to see. maybe there is a new candy bar or on the candy bar i'll, or
maybe there is a new gluten-free pizza crust out there, or maybe there is some sort of new quinoa. -- they want to look at it. and what you feel it, experience it. particularly in the produce department. julia: it is interesting, you are talking about it from a theuct selection and principle of products. what about for the likes of walmart? it sheer scales to offset to the threat that amazon represents? kemper: walmart has been selling organics for a long time. they sell it for very inexpensively. we can't compete with them on price because of their volume and also because of their scale. and the fact that they have of overhead out
of their cost structure. trying to compete with cosco and walmart is not something you are going to succeed at doing. walmart is into the delivery just as amazon is. aey have been doing it for long time. i think it is only like 2% of the grocery business so far. julia: it is going to be fascinating to see how this plays out. still ahead, the effects of harvey across markets. we see longer-term impacts, particularly with oil and gas? we will discuss, from new york, this is bloomberg. ♪
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-- we have gasoline futures looking and upper -- opposite directions as harvey close refineries in the gulf coast. oil dipping as it causes a drop off. wti having its worst day since early july, off by 2.7%. that is the opposite for gas futures which are declining by 2.7%. they are gaining. say the u.s. could see as much as 30% of refining capacity shut because of harvey. if the storm moves up the texas coast to louisiana, even more refineries could be disrupted. switching to soft commodities, we see cotton climbing by 2.5% as the massive flooding threatens the crops. texas produces more cotton than any other state. it comes at a time when farms have been storing excess supplies on the field. there is concern that that crop will be unusable. the $1300ing through
barrier, hitting a 13 month higher. up by 1.5%. catalyst out there but it is likely due to positioning as well as a slumping u.s. dollar. julia: make sense. for more than 30 inches of rain falling in some areas and floodwaters continuing to rise, let's bring in joe, he joins us on the fun. great to have you on the show. what you arese of seeing, what the latest is. how many people are impacted and what is going on with the ongoing relief efforts? of thousandse tens of people driven from their homes. more of them would be driven if they could get on the roads and drive away. you simply cannot do that in houston. downtown is surrounded on three sides by rising floodwaters. most residential neighborhoods are also underwater. tens of thousands of people impacted, that number is going to keep rising.
it is still raining, it is going to rain for another three days. i think the damage will keep compounding. julia: i've heard reports suggesting we could see a further 15 to 25 inches of rain in certain areas. is that right? what is that going to mean for the emergency services for the ongoing search-and-rescue process? it, makes the issue. it is astounding. the rainfall figures. we already have an houston the amount we would normally get in six months. when you add what is forecast, that is a years worth of rain in about one week. it is amazing what is going on. longtime houstonians tell me they have never seen anything like this. unleashed the state national guard, he announced that a few hours ago, to help with the rescue efforts are you see helicopters and boats plucking people from their
neighborhoods. in never ends the amount of people who need rescuing. scarlet: certainly very sobering. how is the city of houston coping with all of this? and thatty shut down government officials are not at the office, or they are, or how does it work? joe: the entire city is shut down. it is paralyzed. no one is able to go anywhere. the authorities, they are at command centers. the police are out and about. the fire department is working nonstop. flooding extent of the rain,e nonstop daily of -- deluge of rain, i am surprised it is not more scary than what it is. what we saw it with hurricane katrina, there are better systems in place. is that your sense from being there, but at least everything is getting done and people are
doing the best they can in terms of facilities and services there? joe: absolutely. is thatsant surprise individual civilians are out in huge numbers with their fishing boats, just helping strangers escape the floodwaters. that is really amazing. that is not something the government can or did order them to do. they took their own initiative. we are seeing people from cities hundreds of miles away to can get into the flooding -- flooded areas and help out. it is heartwarming. scarlet: what can you tell us about the president's visit to houston? i believe he will be there tomorrow afternoon. joe: i think he is karmic -- coming tomorrow afternoon. i wonder how it will be taken, if there will be folks who find it a distraction and they would rather get down to the business
of rescue and recovery? but i am positive there will be people who will be pleased he is making the gesture. the bureau chief for bloomberg news, thank you. let's dive ebert to how harvey -- dive deeper to how harvey is impacting markets. it shows the path of the tropical storm and the refineries that arrive -- that are either closed or partially shut down. shock, us is stephen stephen has over 25 years of experience in commodity and derivative trading. he joins us now from philadelphia. great to have you on the show. give us a sense of what we are looking at in terms of closure. i read half of the area is closed, gas production has been halted. are those the numbers you are looking at here? >> absolutely. the big numbers right now are
the refinery outages, relative to the demand figures. right now with what we know, with the numbers of refineries closed, that represents one out of every four barrels of gasoline and diesel fuel making capacity that impacts the mark until exchange contract. some of the good news is a third arehat, one refineries coming back in. as we go ahead and days ahead, we know the rain is still there and it is going to continue. if this rain and storm continues on an eastward bend, that means we go over the texas-louisiana arthur,nto the port texas center which represents another million and a half barrels. we go into the new orleans center and that represents another 3.7 million barrels a day. when it is all set and -- said and done, the storm's path, we are talking about 70% of the refinery capacity that has direct access.
hence why we are seeing -- i have been talking to clients about this over the past week, a gain in the gasoline market over the past few days, and a real pullback in oil prices. hurricanes tend to be bearish for crude oil as you shut down refineries. hurricanes tend to be bullish for the gasoline market. julia: that is what we are seeing, too. before we get into price impact and how that moves as we go forward, i think one of the big concerns is they simply can't pump the water out quick enough. then there is the risk of damage to electrical pumps. when you are trying to get capacity back online afterwards, this is going to have an impact on the timing. what are we hearing about their ability to pump the water out and protect some of that infrastructure? i think one refinery is
coming back online. it is a positive sign. not that there is positive -- this is a catastrophic event. i do not want to go rich on the hyperbole here. essentially you have this storm which developed into a monster storm, but it happened quickly, right before it made -- came to short. unlike katrina which was a major storm well up into the gulf and was able to build up the surge that created record storm surges that flooded new orleans, we are not seeing that to the extent relative to katrina. that is a potentially positive sign. as we said, rain expected for the next three days. the jury is still out as to the extent and duration with regard to the storm surge. secondly that is a concern. we have to keep in mind this is the most technically advanced refinery at the center in the world. in the world.
the evacuated personnel shouted their units in the -- in an expeditious manner. reseed,get the water to barring any sort of significant lasting damage, they will be able to start up in a prompt manner. texas is 30% of the u.s. refinery taxes. you mentioned there has been damage release a shutdown of refineries near the houston area. can it make up for the shut down there? stephen: absolutely. ande go short of gasoline, now in houston and a southern texas, we are starting to run shortages. if we look at wholesale levels along the east coast which is where these refineries feed into, we are looking at inventories that are above average. if this is katrina and we did get refineries that are down for weeks and months on end, then
certainly there are going to be other refineries to step in. we have the refinery be center er here, but there is a transatlantic trade near new york harbor and northwest european refineries. we are starting to see the arms are well open. we go back to economics 101. with this search and gasoline prices, there -- we are in the process of moving oil from producing areas, namely europe, that will make their way and find their way into new york harbor to alleviate shortage. you mentioned gasoline futures climbing. they are at two-year highs. is that a knee-jerk reaction or is it going to be restrained? stephen: it is a knee-jerk reaction. this is purely speculation. clearly what is going to happen and what i can promise you at
this point is prices are too high. they could go higher. they are not justified because we have not gone to any shortage. the concern is on thursday of this week, the september contract does go off the board. that is a contract you can make delivery on two different grades of gasoline. if we had anyone who -- short going into this weekend that has to make or take delivery, i can promise you that we will see a tremendous amount of volatility. ,ertainly, the rise in price and a lot of it is speculation. a lot of it is also going to be, refineries do have supply agreements in place. they do run to hedge their forward production. caveat out ofthis there. we have a historic short squeeze in the crude oil market following storms -- hurricanes mike and gustav.
number of speculative who went short to the crude oil market but they did not realize the people buying it for them were the refiners, people who could not get access to the oil. if you are selling crude oil and you expect demand is going to fall, you are right. you have to be careful who is buying that oil from you. you might wake up and find out like i expect to deliver -- to deliver that oil. scarlet: positioning is critical. stephen schork, thank you. julia: the lack of reaction says a lot about the dominance we have seen. precisely. let's get your check of the headline with first word news with mark crumpton. we stay with a hurricane. mark: thank you. authorities in houston say they rescued 2000 people from flooding caused by harvey, which has been downgraded to a tropical storm. harvey came on shore late on
category four hurricane. the slow-moving storm has caused catastrophic flooding in texas. >> a lot of people are frustrated. they don't understand you can't get to the trucks. the trucks can only go so far and moving waters. will get to the rest of you. please do not give up on us. none of us are going to give up. mark: houston mayor added that nearly 6000 people have moved into city shelters. the trump administration is lifting restrictions on surplus military equipment being passed on to police. civil liberties groups fear that will lead to violent confrontation. the administration believes the program is necessary for public safety. put thea administration restrictions in place after the police shooting of an on the armed man in ferguson, missouri three years ago. the bodies of 10 sailors missing in the uss john mccain accident have been recovered there
remains -- have been recovered. their remains were found inside the ship. says 265 warning letters to companies notifying them of what it alleged to be serious violations of federal rules. tally for thewest first seven months of any year since 2008. that is according to a review of letters posted on the fda's website. global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. julia? thank you. coming up, analysts begin to quantify the economic cost of tropical storm harvey. we will take a look at the impacts from auto dealers. from new york, this is bloomberg. ♪
♪ julia: i'm julie chatterley. scarlet: it is time for our stock of the hour. we are looking at group 1 automotive, a retailer based in houston. it's stock is falling as much as 2.41%. emma chandra is here with more. >> we have been looking at the impact of storm harvey. note tome out with a say it -- today saying auto dealers are likely facing serious financial headwinds from the storm. own andake a look, they operate auto dealerships across the country. we have a chart showing its revenue. vehicles,ew and used
does maintenance, 55% of its revenue comes from new cars. if you take a look at the next chart, you can see 55% of that revenue comes from texas. there is a big concern about loss sales. -- goingweekend, forward as we see the recovery. julia: i would expect given the potential damage we have seen would mean people would need -- lead to more demand. emma: that is right. vehicle demand spikes once the local premarket -- market recovers. it could take time. you are seeing, this loss of sales i mentioned. take a look at this other chart we have. this shows sales and profit. you can see the business is up 14%. but it is 42% profit. you would think lots of cars being repaired. because damages so bad after a
♪ julia: this is "bloomberg markets." scarlet: inflation has become a problem for the world's major central banks. here is what cleveland president said. >> inflation is not a 2%. what we have learned is we have to move policy before we get to the goals or else we are going to be behind. scarlet: inflation has been a long-running headache for bank of japan governor haruhiko
kuroda. with bloomberg. kathleen hays asked him why central banks are missing their inflation targets even with stronger economic growth. in the u.s. and in rates areflation close to their target. close to 2%. in japan, inflation rates is still 0.5% are far away from our 2% goal. there is some difference between u.s. and europe and japan. it is not rising so far. prices are not rising. kind ofere is some mindset. leaders.ong inner-city
to be cautious in raising prices so that the investing.re heavily they are saving equipment and so forth. so as toy are changing reduce labor. by so doing, despite some rate increase, costs have not been rising. it has not been required. well.t they are doing gdp growth of six quarters in a row. that has not happened in japan in years. you are succeeding on growth. and maybe something has changed to the degree. does inflation matter so much? two things.
one, 4% growth is good, but i do not think 4% growth can be sustained. men --2% growth, we -- a may be possible to attain to 4% growth is somewhat unusual. that this 1.5% to 2% growth can be sustained in coming years. now, that is one thing. second point, as you can we are satisfied with growth and 2% inflation, the economy may be faced with reflation.
of course, it is almost impossible to address the situation with traditional reducing. rates are continuing low. to have a necessity room for thepolicy monetary authority. >> what do you mean by policy room? [indiscernible] it could reduce by 4%. was veryinterest rates little. there is no way to address the situation by traditional markets
to reduce it. hugeve to resort to programs. scarlet: that was haruhiko kuroda speaking with kathleen hays. we will have more on global central bank policy, including the prospect of regime change at the fed when we speak with christian ramani. you want to catch that interview at 4:00 p.m. eastern on "what'd you miss? " york, this isw bloomberg. ♪ . .
julia: we are live from bloomberg world headquarters in new york. here are the top stories we are covering on the bloomberg and around the world. be on the social cost, the potential economic and security catastrophe -- damages growing larger by the hour as an unusually large number of people do not own insurance. president trump set for news conference this hour, one of the many events taking the focus away from what was supposed to be a big week on taxes. speaking of challenges -- it is a long list for the expedia star 's he takes the job of uber ceo. he said to be the favorite as the decision goes near. get to bloomberg first word news with mark crumpton. securitying homeland
secretary elaine duke tells bloomberg it's too early to tell whether there is a need for emergency funding in the wake of now tropical storm harvey after a republican aid said last week said fema pasta disaster relief fund was sufficient to handle the hurricane response. >> we cannot predict that at this point, but if we need additional funds, we will be working with congress to obtain the necessary funding. mark: secretary duke says floodwaters are expected to peak on thursday. officials say the storm will force 30,000 people from their homes. thousands have flocked to shelters throughout the region. more than 500 people are into shelters in dallas, about 240 miles north of houston. plan tot and mrs. trump visit texas tomorrow to get a firsthand look at the devastation caused by harvey. in a series of tweets, the president said his
administration with handling its responsibility and praised the spirit of texans as they cope with the storm and its aftermath. harvey is the first major national disaster of mr. trump hoss presidency. away from texas, louisiana is bracing for potential flooding as outer bands from harvey head east from houston. new orleans residents arrived at fire stations to pick up sandbags. the city's pump and drainage system is still not working at full capacity since the 2005 devastation of hurricane katrina. president trump has declared a state of emergency for louisiana and approved federal assistance. global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. i mark crumpton. this is bloomberg. julia: we are under one hour from the close of trading. let's get check on the markets with abigail. abigail: very small moves for the major averages.
the dow and s&p 500 fractionally lower. the s&p fractionally higher. it appears investors are treading water to some degree. it is the last full week in august, so perhaps traders and investors are less active. that would appear to be what is happening. the nasdaq i attack index up 1.8%. here's what is driving the outperformance -- gilead sciences up 1.4% after the biotech giant said it is buying kite pharmaceutical for $11.9 million. tight is up 28%, so a megadeal there in the cancer space expected to help gilead sciences revive growth. other biotech stocks trading higher. this is helping the nasdaq outperform in a way. turning to one sector doing less well, the energy sector, one of
the worst for the s&p 500, very much related to harvey. oil trading off the lows as have beenn texas shuttered. it is estimated that 10% of refining capacity is off-line, but the demand for crude is lower. gasoline is higher as less gasoline is being produced out of the refiners. there is still real world demand. that's helping refiners and we e&p names, not so much -- chesapeake energy down about 4% as oil is declining in the wake of all of this. another sector being hit by harvey is insurers. many are trading sharply lower. this is estimated that the storm could cost as much as $30 billion. many analysts say if you look at past storm activity, these stocks tend to bounce back and
the insurers may pay for less than one third of those total cost. , the acquisition of whole foods did close today and amazon starting out with a bang, reducing prices by as much as 43% depending on the item. we see walmart and costco and kroger, all of those shares trading lower. and very interesting -- amazon, since that deal was announced, amazon is down as is cosco about 15%. to see what the new amazon deal with whole foods is doing to the grocery space. president trump will hold a news conference with his finnish counterpart. you will be will to watch that here on bloomberg. this comes as the president prepares to travel to texas tomorrow and the stump for tax
reform later this week. our chief washington correspondent joins us from the white house. this was supposed to be a huge week for tax reform but the focus is on harvey and the search and rescue efforts as it should be. what can we expect from the white house? i think when president trump lays out his tax vision tol try to pressure congress try to lay the groundwork before getting tax reform accomplished. members of the treasury department commerce department have been working behind the tones with mick mulvaney work with republicans on capitol hill to bring that toward some type of consensus. they are very much similar to that which we saw on health care but i have spoken to several sources who tell me they leave
the secretary of the treasury is working as hard as he can to correct the course from the political missteps that happen on health care reforms. president tweets against republican leadership paul ryan and mitch mcconnell are an illustration that he is to stump with leadership on policy issue. you suggesting they are trying to avoid the secrecy issues and spillover from health care? i read that the freedom caucus are having scheduling issues and are not going to people to talk about tax reform until the first week of september. once again, you have a very important group feeling cut out. that spells trouble to me. kevin: there's death only going to be trouble ahead. they have to clear to hurdles.
the first is they have to raise the debt limit and second, have to pass some type of partial government funding bill to avert a government shutdown. , presidenther day trump in phoenix arizona suggested he would advocate to include funding for the ball along the -- for the wall along the u.s.-mexico border. fallouthe clinical coming as they try to get what has been elusive for this administration and that is a major legislative victory. scarlet: going back to the storm, you mentioned funding issues with harvey that may come up in today's news conference? kevin: absolutely. there pushing a myopic version of what has gone toward tropical storm harvey and the surrounding areas. the president will travel to corpus christi, texas, tomorrow
and democrats and republicans are having some disagreements about whether the city should have been evacuated. but this is going to be interesting because we saw this with the response to hurricane sandy and republicans voting against that type of flood theef and how that impacted future of governor chris christie. it could be a similar political battle line drawn with some republicans who frequently advocate against such funding are going to have to change course because of the devastating images and the fallout from tropical storm harvey. it feels like months since we mentioned the russian investigation. so monday morning, bringing this it is all fake news? i want to talk about the article you point out, a company lawyer for donald trump apparently
discussing condominiums to be built in moscow. talk about the timing here and why we think this might be relevant. kevin: the new york times and washington post really reporting just within the last hour that the president plus personal attorney has communications with a trump organization business emailste who sent allegedly handed over to the intelligence committee on monday they would bely able to win the presidency if a business deal with russia went through. the second point i would make is he has released a statement of which bloomberg news has obtained saying there was never any communication between the trump organization family candidateor with then donald trump and russian affiliates. deal with moscow fizzled.
but that said, we should know the bottom line which is consistently over the past seven months injuring the campaign, candidate donald trump and president donald trump has had consistently they never had any type of business interest or were looking for business interest in russia. the date of these emails suggest that a proportion of the early campaign, there was in fact the trump organization looking into whether or not they were going to build in russia. i can almost hear into you he will be asked about this at the press conference should he take questions from reporters. julia: i think we can pretty much guarantee that. our chief washington correspondent joining us from the white house. count on bloomberg for coverage of the news conference at the white house at 4:20 p.m. you can watch it here on bloomberg television or on the bloomberg. just use the function tv . scarlet: coming up, a
scarlet: this is bloomberg markets. on scarlet fu. investors is for finding value when things are trading at all-time highs. eric shocks are spoke with john rogers from ariel investments in chicago and asked if passive investments like index funds are distorting markets. john: i think they are temporarily distorting markets because they are distorting securities. people by the big weights on the index and push them higher and
higher irrespective of the fundamentals of those businesses. it really doesn't make sense. is that why value is out of favor as a style? john: for sure. the value stocks are what i call orphans these days. just to become smaller parts of the index, less and less research is being done on these companies. erik: what about the fact that a lot of value managers are underperforming? john: it becomes a self-fulfilling prophecy. we learned over all of these years that once everything becomes a common trend, everyone thinks passes is going to boom and these orphan stocks will underperform, once that becomes the conventional wisdom, it never plays out that way. erik: so you are as confident as you have ever been at value investing is the approach or have you had to change some of your assumptions or some of the philosophy that underpins what you do?
john: we do exactly what we have always done. we want to buy cheap stocks selling at substantial discounts and low pe stocks. we still believe they are a strong as ever but you want to make sure they have strong balance sheet to whether whatever storms happen. we learned during the financial crisis that if your balance sheet was not focused, you could be surprised at how much downsize or was. -- even ate been out this at ariel for 35 years and longer if we include before that. how would you clear -- how would you characterize the stock market right now? time it's an interesting as i think there are pockets of opportunity that are really special and if you do your homework now, it really can pay off and you look for these names that have been the collected and misunderstood and left out. i think it is a fun time to be
doing research and think about industries and sectors and where they could be some hidden gems there. active managers like you face a number of challenges and hurdles. there is fee pressure, equity market structure, that can at times make your job more difficult. thatecond order of effect you are beginning to experience, what do you find most challenging? john: we find it challenging that a lot of institutional clients are indexing their equities. you get calls from clients who say we are indexing everything. we've just got the ghost and we are going to index everything. that's extremely challenging. if you talk about the fee compression, it is real. we have to negotiate fees and make sure you are living in the current fee structure or that's another reason you can lose an
important account. erik: have you had to cut fees? don: we have seen our average fees go down. that something our president works hard on and we are working with our board to make sure we are staying in the dorms of our industry. we had board meetings last week and we were talking about that with our board members. erik: what do they say? john: they say have to be at the average or lower. fees matterronment, so much and you have to make sure you are on the lower end of the fee structure. to make sure we are competitive and more than competitive. that'ss that a trend going to continue or do you see a point where it? express -- and express -- and expense ratio, few were
to cut that in half, what would happen? john: it would make it harder for us to do our job. erik: would it help those clients who as you have through 100% going passive on equities from leaving? john: i don't think so. feel there's a place for the old-fashioned stock ticker, the peter lynch you wouldgo belly -- not find people and make a decision based on a few basis points. erik: what is it going to take to trigger a shift in fund flows back to active from passive? john: you will have to have a major correction. these highflying large-cap growth stocks make a big part of the index. happens before
at the end of the century when this happened before. the dot-com bubble and the s&p collapse, those of us in value have extraordinaire a time, we had our day in the sun and that will happen again. julia: that was john rogers, ceo of ariel investments. we're showing you live pictures of texas governor greg abbott taking questions on the rescue and recovery efforts from tropical storm harvey. he is speaking in corpus christi, texas. he is saying the federal government's response so far has been an a plus. more to come on this developing story. ♪
options and markets. the s&p 500 and nasdaq as we go toward the end of our guest -- end of august on pace for the worth -- for the worst monthly performance of the year. the options market is very quiet. probably from 12 million -- 12 million contracts. i think what people are looking for is post labor day, we do have some events coming up. the fomc meeting ending on the 20th and the debt ceiling as well coming up late september, early october. quiet now, not a great month, but the catalyst that might move equities around are going to play out over the next several weeks. aboutl: we were talking financial stress indicators and there's been a turn in the global financial stress indicator. bloombergchart on the and you and i looked at this in
april. can you take us through it? guest: it is the best measure of cross asset come across geography volatility. to me isnteresting late 2014, this moved up sharply and remains in an elevated environment until april of this year. about broad measures of volatility, and all declined sharply. pricesay, and this only once a day, on friday, it was at zero and that is a critical level. above that, we are in higher volatility environments. below that, and lower volatility environments. what happens over the next several weeks? does gsi break to the upside it we are in a more elevated time of financial market volatility or to the downside? series tos one time
keep an eye on an eye on, it is the gf si index even more than the vix index. abigail: that's a great index to watch. turning to your trade -- the lululemon call spread? guest: if you want to start with trade, they report on thursday. our analyst is in line in terms of what she is looking for. second quarter of $.35, higher than the street for the second half of this year. we think there could be a nice guy up. -- guide up. a laggard. it has consolidated around this 60 level over the last couple of months, so we don't want to be too tricky, expecting earnings to be a significant catalyst, but we want to go out to october with stock in the low 60's and call spread and pay
rising water and rescues. the nation's fourth are just city is still largely paralyzed and there is no relief in sight from the storm that slammed into texas as a category four hurricane and then parked itself over the gulf coast. an additional two feet of rain is expected. >> we are working with the red cross and other partners to make sure we have the supplies, people need clothing, people are coming in and coming in wet. they need clothing, we have asked some of our business partners for things like diapers, baby formula, things of that nature. we have kids, babies, all the way up to senior citizens and they are needing everything. house sayshite president trump and first lady melania trump will visit texas on tuesday. -- american city civil liberties union is suing