tv Bloomberg Markets Americas Bloomberg October 12, 2017 12:00pm-1:00pm EDT
vonnie: from bloomberg world headquarters, here with a top stories around the world. starting things off with a bank, the biggest bank in the u.s. kicks off the industry's earnings season. a look at what lies ahead for the rest of wall street's biggest firm. getting health care done his way, president donald trump signing executive order month -- moments ago, aimed at expanding health insurance options for some americans. who does it really benefit, and who will that hurt? one voice, why amazon is considering teaming up with its competition to improve the alexa voice activated personal assistant and why google and out for that -- why apple and alphabet would even go along with it.
not much movement on the face of things. julie: we are seeing another very tight trading range just as we saw, yesterday. five-and-a-half and a half points is the swing in the s&p 500. after a record close yesterday for all three major avenues, any gains today would mean records once again. we are watching the fallout from that executive order on health care that the president just signed and we are seeing a mixed impact. you are some of the hospitals. -- here are some of the hospitals. -- this executive order will create tremendous uncertainty and risk for managed care organizations in individual and small group markets, but at the same time, it is going to take a wild to write the rules to comply with this order, and it really is a small portion of the overall health care market.
that said, we are watching hospitals and the insurance companies that are exposed to medicaid. down, we areing also watching outside of the health care story, what is going on with oil because we had a interesting weekly oil inventories report, which showed a longer than estimated drawdown build inories while a gasoline inventories. lows of thef the session, still down below $51 a barrel and we are seeing shale producers as the worst hit. drags onne of the big the s&p 500. income taking center stage as jpmorgan and citigroup kicked off third .uarter earnings
citigroup saw 16% year-over-year decline in revenue. both banks compensated by generating growth elsewhere. this as wall street looks to washington for the next steps in tax reform, which is expected to deliver a big windfall. chris kotowski, oppenheimer's managing director and senior analyst joins us now. at the trading level, trading revenue very unpredictable but at least after five years of that, can we say this momentum could have legs? chris: when you look at the trading revenues, recognize that jpmorgan had a very tough comparison, last year. they are down a bigger percentage. the second thing about fixed income trading is that while the quarterly numbers bounce around, i whole lot on a annual basis,
trading revenues are actually markedly stable for the five american big banks, we tracked them and he said that -- each of the last three years has been or $75 $74 billion billion. in terms of the fundamentals, i do think you have flat net interest income from 2011 to 2015 and now we've got seven straight quarters of steady growth. you are finally starting to see the increase. the other thing is that you are finally beginning to see the share buybacks have some impact. jpmorgan was down 3% year on year. citi was down 7%. that illustrates one of the reasons i like citi. they are trading so cheap. in you can buy -- you can buy back a lot of the shares. vonnie: it can work both ways if
interest rates are going up, it also means that loan repayments might be more difficult. one of the interesting things is provisions for credit losses were massively more than analysts were expecting, more than double, and a couple cases. chris: i think you are barking up the wrong tree. it is like you were saying in february, it is two degrees outside and on february 3, it is three degrees outside. it is a 50% increase. these credit provisions are minute. all the analysts were falling over themselves to ask about this $20 million here or there. the credit numbers are amazingly good. be, but just to fine-tune this a little bit, charles peabody was making the point that it signifies a place
in the cycle and that if delinquencies are getting worse and more intense, it signifies something about the industry in general. chris: i think you are barking up the wrong tree. i think credit is amazing. i have been following this industry for 30 years. it is different. it is not just a link. early delinquencies are not just .ower, they are a fraction froms will probably come fallout from qe or something down the line. it is not that this is a industry without risk, but you should never look -- the banks are pretty good at nailing shut the door through which the cows got out, last night -- last time. the place they got out last time was consumer credit. you can bet that is going to be
nailed down pretty finally. -- pretty finely. shery: we are hearing from the ceo that they are looking at regulation coming from this administration. point, aect that some normalization of credit, we have not seen that yet. appropriately cautious, but we are not seeing any deterioration or fertility in our portfolio that we are concerned about. shery: that was not the soundbite i was thinking about. i was thinking about the ceo talking about the direction of tax from warm and how this could affect citigroup. onen how dependent they are regulation or less regulation, in helping more risk-taking in the industry, how much is citigroup expected to benefit if we do see some sort of action
from the white house? chris: the biggest difference is going to be, not the regulations, but the regular tour -- regulator. i don't think you will see a whole scale rollback of dodd-frank. there is no benefit of opening that can of worms. muchtortured the banks so was't the regulation, it the way the regulations were applied. if you think about all the things that really hurt the thes, it was things like quantitative fail on the car. we put in the supplementary leverage ratio and all these other things. all these things were a function applieday dan to reload the regulation. i think it is the regulator who
is way more important than the regulation. i think we are probably going to end up having more business friendly hands for the next couple of years. vonnie: thank you christopher kotowski, oppenheimer managing director and senior analyst. let's check in with "first word news. mark crumpton is here. mark: president trump today signed an executive order designed to expand health insurance options for some americans. it is a move he says will result in quote, staggering competition between insurance companies but the order may also undermine coverage for those who remain in obamacare. the order directs federal agencies to take federal actions through federal rulemaking. small employers would be able to band together from across the country to create so-called association health plans and buy insurance together, outside of
obamacare. >> my administration will explore how we can expand something called short-term limited duration insurance. these health insurance policies are not subject to any expansive and expensive obamacare coverage mandates and rules. as hethe president believes the votes are there for block grants at a later time. fire crews are making progress on the deadliest of more than two dozen fires burning in northern california. today, theson said blaze burning in sonoma county is now 10% contained, but he warns gusty wind could hamper firefighting efforts. that fire has killed 13 people. blazes burning in three other counties have left 10 people dead. the house of representatives is expected to pass a hurricane aid package, totaling $36.5 billion.
the bill provides money to pay for insurance claims. florida and texas had pressed for some $40 billion. the european union says brexit talks have hit a wall over how much the u.k. will pay, when it leaves. that increases the risk that the british departure will be a messy one. says it is up to prime minister theresa may's team to unlock the talks. eu leaders will decide next week not to start discussions on a post-brexit trade deal with the u.k.. global news, 24 hours a day, hour by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. flag: still ahead, a red in at&t's data. its customers are not swapping out their old smartphones for new remodels. could tepid demand for the
shery: welcome back. this is bloomberg markets. vonnie: investors shery: could be in store for a little iphone pain. data from at&t shows the number of its mobile subscribers that swapped out their old smartphones for newer models fell by 900,000, from the same time last year. tepid demand for the iphone 8 could be one reason for the
disappointing number of upgrades. could it be that we are all just waiting for the 10? that i is a big issue think analysts assume that most people who were interested in buying a new iphone are waiting for the iphone x to come out, next month. that is probably hurting demand of the iphone 8, in the meantime. alie: the numbers included days of iphone 8 sales, so how much does this reflect an actual trend out there? shira: it is a fair question. there is one data point and it is still early. the first week of sales, there is usually some pent-up demand for new phones and i'm sure apple would have preferred that number to go up. vonnie: and if you are going to buy an eight, you will buy it in the first week. the reviews were not great and anecdotally, some people are not even going to bother with the 10. could this be an issue for apple? shira: i think this is going to be a big issue.
of the iphone 8, from professional reviewers, were not over the moon and people said this is an expensive phone that is not much of an upgrade from the iphone 7 and even the models from two years ago. the other thing is, even though there is this fancy new iphone coming out in the next few weeks, apple needs to sell a lot of the eights. that is the volume phone they need in order to satisfy the need. shery: how important are these upgrade sales for apple? thes: the best -- shira: best majority of iphone sales in the world are to people who already have a iphone. apple absolutely needs people who have older phones in their pockets to decide to buy new phones. that is the issue. not people switching from android or the small number of people buying smartphones for the first time. vonnie: is it just a case of finding a different rhythm? in the earlier days of the
iphone, it was more necessary to change quicker, faster. now your phone last longer, the battery does not die as quickly. you could wait out a cycle or two. shira: there is less of this big step up, and improvement and everybody -- people are happy to hold on to phones that are two or three years old. ,he issue for apple and samsung in order for their sales to keep growing, people need to replace their phones more quickly than they have been, instead you are seeing the opposite trend. shery: and we are seeing a difference in popularity between the iphone eight and 10 around the world. shira: morgan stanley surveyed and showed the people who intended to buy new iphones, 34% of them in the u.s. intended to chinae x model and 75% in , which is an extremely important growth market for apple and one that in the list
think people are more susceptible to wanting to buy the newest hottest thing. vonnie: what happens to the stock price, you investors get nonplussed -- new investors get nonplussed -- do investors get nonplussed? shira: it is basically predicated on a cycle of sales in the next year, from the iphone x and the iphone 8. if that does not turn out to be the case, there is going to be pressure on the share price. it is inevitable. shery: thank you so much for joining us on the latest on apple. it is our bloomberg gaslight columnist. it is time now for the business flash, a look at some of the biggest -- biggest business stories. richard branson has joined the board of the soon to be renamed virgin hyperloop one according to a statement. virgin aims to raise $200 million for the futuristic
transportation that elon musk first their rise in 2013. france and convinced that quote, groundbreaking technology will dramatically change travel. a $417 & johnson says million -- should be thrown out. three jurors were left out of the decision-making because they did not agree with the majority. the case alleges j and j failed to warn women about health risks after a lifelong user died. call it a sign of the times, nike selling sneakers on groupon. they world's biggest sports shumaker is having a 48 hour sale with discounts of up to 40%. nike sales in north america fell 3%, last quarter. retail analysts say the sneaker industry is like the rest of teen retail, now it sees -- now
shery: welcome back, let's head to washington, d.c. were global finance leaders are gathering for the annual meeting of the international monetary fund and world bank. tom keene talked to imf managing director christine lagarde. about president trump's plan for tax reform in the u.s. christine: for two years now, we have repeatedly said that a tax
reform was absolutely needed and necessary in the united states, in particular a corporate tax reform. mind, nono doubt in my ambiguity about that point. it is needed, necessary, we call for it and we look on the decision to think about a tax reform that would make taxation simpler, that would reduce the ,oopholes and many deductions that would be focused on labor activity, help the middle class, that would be progrowth, and i am not going to pass judgment on the current draft that will be under consideration. i have done tax reform in my days, and i know what those drafts go through. ,hey go through iterations addendum's, lobbying efforts. madame lagarde is the
finance minister in france, and has received every headache you can. -- nuance to me i know you can defend yourself, but they defended you self. phd economists on the theory. the distinction to me is between the blue book and the green book and the redbook of the imf. the linkage of tax reform to fiscal responsibility. how does the imf link constructive tax reform with the worldwide idea of getting our debt house in order? christine: what needs to be done is to look at the evidence and data and the numbers and then to determine policies on that basis. things, theco revenue, the spending, the
political agenda of being pro-growth, wanting to improve the situation of the middle class and of reducing inequalities. that is what needs to happen. but clearly in those countries, that have a heavy debt burden, and those that have entitlements coming to fruition, that will probably increase the spending. it is necessary to take into account that medium-term and ensure that it -- any tax reform is revenue-generating. tom: what is important is the tone of the imf, of a more optimistic world. the united kingdom is off their game with the battle over brexit and other serious issues with emerging markets. you also marked down the u.s. because the imf is doubtful on successful tax reform legislation in the short term? christine: we have actually
marked of the u.s. economy compared to our july numbers. we marked up a few other countries including advanced economies. what we hope to see is implementation of the reforms that we have called for, for years. a solid tax reform that will be simpler, where corporate rates will be lower with a base that is much more solid and clear. that is what we hope to see. the sooner it goes through, the better. vonnie: imf managing director christine lagarde, earlier on bloomberg tv. we will have more from the world bank meetings in washington. this is bloomberg. ♪ retail.
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let's get a check of the major averages as we are seeing downside pressure, especially financials. jpmorgan and citigroup beating estimates. the dow is down slightly marginally. 500, financials also dragging the index. real estate industrials are leading the gains. the nasdaq slightly up, 1/10 of 1%. coming off of record highs. we are seeing some downside pressure. keeping a close eye on those central bank officials that are gathering in washington. we have the world bank and imf meetings, there. vonnie: let's get to the "first word news," with mark crumpton. isk: president trump criticizing hurricane ravaged puerto rico and says the government cannot keep federal aid there, forever. the president says there is
quote, a total lack of accountability and said the island city electric system and infrastructure were quote, it is asked her before the hurricane. of puerto rico is still without power, three weeks after the storm. house speaker paul ryan is lashing out at states like california, new york and new jersey, saying the federal deduction for state and local taxes forces states that have their act together to pay for states that don't. speaking on capitol hill, ryan defended the new tax pros old to eliminate the popular state local taxed adduction. that's adduction is claimed by around 44 million people and cost the government an estimated $1.3 trillion in lost revenue over 10 years. president trump is praising the pakistani government for its help in freeing an american couple held by a group linked to the taliban. the couple were abducted five years ago while traveling in afghanistan.
the couple had three children while in captivity. u.s. officials say all have been freed. >> the pakistani government's cooperation is a sign that it is honoring america educate wish -- america's wish that it do more to provide security in the region. i want to thank the pakistani government. mark: the family was being held by the hakani network. the u.s. government called the organization a terrorist organization and have targeted them with drone strikes. secretary of state rex tillerson is trying to resolve a dispute with turkey. arrests led to the u.s. to freeze visa services in turkey. global news, 20 four hours a day, powered by more than 2700 journalists and analysts in more than 120 countries.
congress failed to pass health care reform. president donald trump has taken his own action, signing an executive order he says will promote choice and competition. the order may create lower-cost insurance options for healthy people, but critics argue it could destabilize insurance marketplaces created under the formal care act. -- the affordable care act. >> mya administration will explore how we can expand something called short term limited duration insurance. these health insurance policies are not subject to any expansive and expensive obamacare coverage mandates and rules. vonnie: joining us from the white house is bloomberg's senior white house reporter. we will get to the meat of the order in moment, but first, the people want to know, does this does -- does this turn into
something actionable right now or is this something we will have to wait and see whether it becomes the law of the land? margaret: this is an executive order, an order for any of these changes to be implemented, there has to be a rulemaking process through the federal government and that is a process that could take weeks and months. nothing immediate, but the outlined the president has announced is important in terms of signaling his intention and a tertiary effect, the potential that it could have a chilling effect on sign-ups for the affordable care act and the prospect of fully healthy people out of the existing system and into this new system. ,ou could have a market affect the actual effect in terms of options is going to take some time to unfold. shery: let's get into the
details and talk about relaxing standards for association health plans, also short-term health plans. what is the order saying? margaret: it would allow for these association plans, smaller businesses to band together, to give them new insurance options that exist without some of the restrictions of the affordable care act, but also some of the protections for patients. if you are young and healthy or if your insurance under the affordable care act is so expensive you feel you cannot afford it, this may give you better options. don't look for those new options to give you the same protections. mental health, maternity coverage, pre-existing conditions, they may not be covered under the new rule that would be envisioned. there is that issue, the issue of tax shelters for health care expenses. that will be very popular.
these are just some of the issues. one of the big questions is whether or not it creates new alternatives for people who want some short-term plans and affordability, but whether it takes away that option of getting insurance under obamacare, if despite the expenses, you still feel that is the coverage you want. vonnie: thank you so much for joining us. let's get more insight on what president trump's executive order will mean for the health care industry. joining us now is les funtleyder , health care portfolio manager at e squared asset. he is also the author of the book health care investing, profiting from the new world of pharma biotech and health care services. the key concern right now was that this would suck out young healthy people from existing systems and send them to the new plan and destabilize the market. how likely is that? les: i am a little disappointed.
the executive order did not live up to the hype. question,your unlikely. it is unlikely to be successful. it is also unlikely to suck the young out of the current system because quite frankly, the young are not in the current system. i don't think they are going to go anywhere. association health plans in the past and they did not work well then. insurance plans are generally the kind of thing that the older and sicker people joined in the first place which is why we had to have obamacare in the first place. i think there are concerns on both sides and for me, it is a giant nothing burger. vonnie: if you are a insurer, why wouldn't you be delighted with this idea that you could negotiate individually with different groups who have got
plenty of healthy young people? you don't have to worry about the other portion of society where there might be some sick people. les: that is a perfect world, but what happens is association health plans tend to be freelancers and they tend to be older. i would not expect that would happen. the best case for insurers, and you see the insurance industry, the stocks have not done much on this news, they would take maybe groups from the individual market and they would all join these association health plans and administer those, realistically, i don't think a lot of young people have insurance on the individual market. shery: what would this mean for health care, managed health care stocks, but also for those hospitals, the rural ones in the outskirts of the country? rural stocks issue bonds
and they are in trouble as it is, because they just are making enough money and especially the rural hospitals are teetering on bankruptcy and to the extent that people go in, uninsured, they don't pay their bills, it puts even more pressure on the rural hospitals and i would expect to see more bankruptcy in the rural hospital side. it is also a health care access issue. vonnie: what is the bottom line? are you saying that nothing will really change or that this stabilizes the marketplace? les: i don't see this particular issue changing. if he were to take out the insurance support, maybe in 2019, you would see more withdrawals from the exchange. at the moment, it looks like he is punting a lot of the regulations to the department of labor. shery: so we don't know what it is.
les: we don't know. one thing is clear, health savings accounts a big -- are a big popular thing with republicans. win,nk they are going to but it is not clear exactly who is going to lose and to what magnitude. shery: les funtleyder, thank you so much for joining us. health care portfolio manager at e squared asset managing -- management. up, amazon says that its dive into virtual assistant technology has just begun. the e comer -- who the e-commerce giant is willing to go to, next. ♪
julie: -- shery: welcome back. vonnie: time for our stock of the hour. shares are absolutely plunging, today, hitting the lowest since the company went public back in march. abigail doolittle is here to explain what is going on. abigail: you don't see that too often. what is happening here is the fact that the company offered a third-quarter forecast that is absolutely slashed, well below estimates. the first two quarters that they reported were not that good. the one of coming in december, another one that is going to be horrible. lots of problems, here. out,e sales not helping product misses, markdown calendars, plus additional discounting.
management expect -- expressed a hopeful tone on the third quarter. bloomberg,d into the we have the retail malaise that we are all aware of. this is the bloomberg function showing the apparel traffic for a specialty retailer and back in 2014, 2015, that is the last time we had positive tracking forward but we have just seen declines and clearly that is not as helping -- that is not helping j jill. jeffries has maintained a buy rating, saying it is largely explainable, the company is largely nimble. there is a lack of near-term visibility and that will lead to multiple compression. shery: you said it just went public. how does the company recover? abigail: it is extraordinary. let's take a look at this chart of the company since it has gone public and back in march, j jill went public. in august is when they put up
that messy quarter. down, that isap how blind-sided investors were, in terms of how much the forecast was slashed. sometimes companies go public because they want to have acquisition currency. perhaps that was the strategy, to see if someone would take them out. recovery, this could be what analysts call an orphan stock. the original investor is not interested and they need a new set of investors to take over. they will certainly be buying these shares on a bit of a discount. shery: thank you so much, abigail doolittle. let's turn to another story. willing tong it is team up with competitors if that means improving its voice activated technology. that news coming from a bloomberg exclusive with vice president of alexa and echo devices. joining us now is emily chang in
san francisco who brought us that scoop. we know that amazon is working with microsoft on alexa and now they're going to team up with more rivals. emily: she said they are willing to team up with more rivals. i said what about apple and google and she said why not in the main reason is they are looking for anything that will improve the customer experience. i spoke with tony read in seattle. 5000 people are working on these devices. they are hugely optimistic about the future of voice and alexa as the center of a home connected hub. take a listen to what she had to say about why they would consider partnering with other rivals. >> it is very customer focused. operated for years and it has served us well. super passionate about the cup -- customer first approach. if we believe it will benefit customers and improve their experience, we will work towards
it. as you said, they are partnered with microsoft when it comes to cortana. the main focus of that partnership, she said it has improved productivity. microsoft comes with outlook, microsoft office, so they assume that is what users will use that partnership to exploit. vonnie: fascinating. talking about amazon, all this talk about where amazon is going to have a new huge building, if not hq. emily: that is a big talk -- that is the big talk in seattle. it is exciting that amazon is expanding and bringing tens of thousands of jobs, but it is a huge loss for seattle and the fact that amazon could not do this in seattle is a big deal. seattle, theage in ceo of amazon consumer worldwide professed the vicinity of a town like pittsburgh any hopes hq to
go somewhere with -- hq two go somewhere with strong stem education. i try to get something from the ceo of amazon web services. here is what he had to say. >> that is above my pay grade. none of us really know at this point, where it is going to be. we are in the middle of a process. above hisy one person pay grade and that is of course jeff bezos. it sounds like it is all up to jeff bezos. toni forto ask andy or any hints, and they say they don't know, this is pretty much anyone's guess. vonnie: emily chang, thank you for joining. fantastic interviews. don't forget to tune into italy from 6:00 -- tune into emily
from 6:00 p.m. eastern. bloomberg reuters reporting that the company has taken one of its customers help weight -- health webpages off the -- offline as a look into reports of another cyber breach. equifax recently disclosed a hack that compromise the information of 14 million people. -- 145 million people. we can see that the stock has fallen from that 110 to 107. you can see that from the latest news. the webpage has been taken off-line on reports of a new cyber attack on equifax. we know that the security breach has compromised millions of people. coming up, assessing the fallout from hurricane harvey -- hurricane harvey and irma. after storms ravaged the states. how big of a told that the hurricane take on production? -- did cold did -- of a toll
vonnie: this is bloomberg markets. hurricanes harvey and irma taking a toll on orange production in florida. orange production is expected to plunge to a 71 year low after as much as 17 inches of rain on citrus growing areas. this according to the usda crop report. caused 200 -- $2.5 billion in damage. let's bring in our expert in the field, bloomberg's agricultural reporter. it is a serious issue. are we going to have enough oranges coming out of florida, this season? >> we had a little bit of
controversy in crop country because you saw that report that put on production at a 71 year low. low,ast time it was this armors were not even irrigating their oranges. it could be even lower. a forecast yesterday said it is even going to be smaller than this. when the usda number came in, the markets went down. a lot of traders were expecting something lower. mutual hasrus reacted, saying the usda numbers are unreliable. it is going to be worse. either way, you are going to have problems with orange juice supplies and prices. florida is the largest u.s. producer. california does not grow the right oranges to make up for it. brazil cannot make up all of the supply shortfall. the markets did not know who to believe because the usda said it is the worst in more than seven decades but the florida growers say the situation is even worse. shery: it is not only about orange. it is also cotton and other
crops being affected. >> you saw citrus production go down across the board. grapefruit is down, cantaloupe is down. those are publicly traded markets so you do not see markets reacting the same way. cotton is interesting because cotton get a lot of publicity during hurricane harvey since harvey affected mainly texas, the largest producer. texas is a big states he did not see it production number affected overall. irma went through georgia and georgia is the number two state. yielda saw a big drop in and it pushed the estimated cotton crop down. not to crisis level. it is still over last year. vonnie: allen, what other notable things came out of the report? markets areing reacting to the -- soybean markets are reacting to this. the estimate for how much -- how many soybeans there are on hand,
coming into this growing season. they did not change any production estimates but because you had a smaller number going in, you had a smaller number for inventories coming out. that is pushing markets of, today. vonnie: can i just thank you and mentioned that not only do you cover all of this, but also the author of endless appetite, how the casino creates hunger and unrest. ahead, a senator who could sink health care and tax reform. rand paul, the republican of kentucky will join us in the next hour. a crucial conversation happening right now in washington, with tax reform as well. we have heard from president trump as well on issues that he could have been upset about when he came to -- when it came to middle-class earners having to pay more taxes. we discuss all of that with the senator as he joins us in the next hour.
let's get a check of the markets in play. we are seeing a little bit of pressure for u.s. stocks. investors focus on what is happening with the fed chair and the tax reform plans coming out of washington. vonnie: the 10 year yield at 2.33. a bit of movement in oil. we got those inventories and now at is trading down 2.1% $50.22 a barrel. i want to remind you you can catch all of our interviews on the bloomberg. just type in the function tv . this is bloomberg. ♪
weid: here the top stories are watching. president donald trump signs of a new executive order he says will expand insurance options for some americans. facebook coo sheryl sandberg speaking out publicly for the first time since reports that russian actors purchased ads during the 2016 election. we will talk to rand paul and get his thoughts on president trump's tax overhaul plan. ♪ david: after lawmakers failed to pass health care reform president trump signed an executive order to promote health care choice and competition. the order may create lower-cost insurance but it could destabilize the insurance marketplace is created under the affordable car