tv Whatd You Miss Bloomberg October 17, 2017 3:30pm-5:00pm EDT
it does suggest well they are saying bad things about each other they feel enough hope they are scheduling negotiating sessions farther down the road. >> micah mentioned mexico elections. talk to us about who this agreement does to the mexican election prospects of the incumbent? >> the elections are in july, 2018. the candidate that is in the lead is a leftist. advantage that is substantial but it is early. the thought is that if there is not a solution or the u.s. steps up from the table and walks away this would benefit leftist policies.
>> obviously, if nafta were to collapse, canada has a bilateral trade deal with the u.s.. what is the canadian priority here? would it prefer to fall back to that? >> when the minister started talking about arlington cemetery, that was a metaphor for the death of nafta. canada would probably be the least disrupted. it would be a short-term pickup. canada can fall back on the free trade agreement with united states. there may not be that much of a disruption. back-and-forth, the unconditional proposals, make a good agreement better. some of these proposals run counter to rules.
and we had the mexican representatives saying we will need to a knowledge we have limits. are we going to be will to resurrect nafta or is the united states justifying a way to get out of this? dollar is the billion question with mexico. we don't know where they are going with this. they have extended the talks. they do want to make progress. donald trump keeps saying it is a bad deal. robert today highlighted all the problems the administration sees with the deal but the non-starting proposals seem to come from the united states. the other two countries are saying we can't walk backwards. ,hey did try to talk about other areas were countries were not giving ground but it is the u.s. that has given nonnegotiable things on the table.
>> to look at the markets, we haven't done that, we have dollar mexico trading at the lowest level of the session. investors thinking this is a positive, the fact that these talks are continuing, at least mexico is still in the game. >> i want to go back to the mexican perspective. it is always dangerous to get too many analogies. thinking about brexit. concern suppose that vote about -- is there any indication, are people getting concerned about that? the investment plans, we heard it a lot after the election, investment plans in mexico being delayed? >> that is always a possibility. the theme, the most difficult
pill to swallow would be rules of origin in the automotive sector. that is where mexico is gaining all of its investment. it is the biggest engine of growth for many years. with some could deal of the other concessions on , even the cure meant sunset clause, when it comes to rules of origin that would be the line in the sand. it is by percent is too high. the u.s. requirement of content would be difficult for the automakers to comply with. you to ourank mexican government and economy forrter, and david scanlan our canadian coverage. we want to stay with this topic and bring in an economic
perspective. this and theat threat president trump is making about withdrawing, talk us through what we know in terms of how that would play out? can he'll do unilaterally make a decision about that? it is already having an impact there. dance your question, we don't think so. youe is something called -- know what happens when you have to have an autonomous talk with a lawyer, something is awry. what we think we have decided is he probably could not do this without congress. there is something called the congress clause which states congress decides the rules of the road dealing with international trade. while trump could make threats, he probably couldn't actually do
it without that approval. tariffshat happens to in that case? can the president add tariffs? or does it have to be congress? tariffs, theized standard ones, he cannot change those without congress. he can't just say we are pulling out of nafta and increasing these tariffs. andan on specific goods countries for short times raise tariffs which could be problematic but not in the long term. joe: let's assume he gets the approval. what areas of the u.s. economy would you look at to be the most likely hardest hit? >> agriculture. anywhere where the government is running a trade surplus. ofthink that is a tariffs
u.s. exports. it would be about 7%. that is going to be bad for u.s. farmers currently. talking about and balanced trade. our tradeo know relationship with every prime minister or prime minister who stands next to him. is that a structural force or is there something with mexico or canada we could tweak under different data? >> there is probably an opportunity to increase trade. , there's ways to fix it without targeting. if you look at the transportation sector and you factor that out with the u.s. mexico trade relations. the u.s. is running a surplus. that accounts for the entire
deficit. scarlet: that keeps coming up, auto parts and auto issues of origin. is that mainly because of politics, that becomes a more divisive issue? great sloganmerica applies to the manufacturing sector. that is at the heart of what got trump elected. even if we were to take nafta, theut of capacity does not currently exist to make up for what is lost in mexico. his assumption is you would have billions of dollars in the capacity is back. in actuality what would happen is tariffs are not going to be that big. they will pass the costs to consumers and just keep producing in mexico. what the nextnow effect of stepping way for nafta
would be? president trump can't unilaterally raise tariffs. that doesn't stop other countries raising tariffs and impacting the united states. what do we expect here? good or bad? >> the net impact would be negative but it wouldn't be that substantial. >> assuming you hold the tariffs? what about the fact they could raise tariffs? >> if they raise tariffs, that is not something they are going to do. that is going to be more disruptive. when you are doing trade negotiations if the trade -- the company by moore has the upper hand. especially when it comes to mexico. you are already seeing the impact the uncertainty is having on investment. it has an impact in exports.
they are actually rising. they don't want that shooter fall because it is a major driver of growth. talkingre basically about a trade war. scarlet: it all comes down to the headlines of getting a win here. thank you so much. now, coming up, china's communist party congress kicks off tonight. what effect would have on economic reforms? this is bloomberg.
opens the communist party congress with remarks tonight. can we expect chinese policy toward north korea to shift? the author of the book china's future. >> one would hope so. the economic reforms in the last four years have been stalled. best isementation at the common consensus. that is the most important question. will there be greater momentum and support for the economic reform package they announced? it depends on the appointment of the premier. that is the one appointment coming out of this that we do not know yet. the rest of the results are ready anticipated. if there is a strong premier
appointed we can expect the economic reforms to pick up steam. i would expect five more years of stalled implementation. there was a belief they would not let the government slow too much. what happens after? >> it is not a question of economy to slow. rates maintain the growth , it is an indication of a lack of implementation. infrastructure driven kind of growth, that is not what china needs. china needs structural changes. >> when it comes to china's relationship to the world, they
have been averse to interfering with other states. will they do more to rein in north korea? >> that assumption that china is not interfering in other sovereign states is false. china routinely and regularly interferes. right now they are interfering in south korea. china interferes a lot in other internal affairs. in terms of north korea we have seen them grudgingly go with the un's sanctions. to be trying to increase the implementation of those sanctions.
>> they wants tommy president trump was doing a good job handling north korea and china as well because he was unpredictable. is this the right way to approach these states? >> no. predictability is an asset in dealing with them, and consistency. the chinese don't know what to make of trump. much of the world doesn't know. on monday he says one thing and on tuesday another thing. that is not good for sensitive issues such as north korea. the chinese and other asian countries he will visit when he goes to the region are looking for reassurance, predictability and constancy. that was the professor at the george washington university. covererg television will
xi jinping speech before the commonest party congress in beijing at 9:00 eastern time tonight. a look at the biggest business stories in the news now. according to the wall street journal, fighting foundation officials. soros will not trade funds from open society. push society to the top ranks of philanthropist organizations. will boostdson shipments to dealers by 10%. it finds bike sales slumping across all regions. . they were down in each region through the first nine months. the company is overhauling its ridershipincrease overseas. and the eight member ivy league fund through june the rewarded
portfolios invested in public equities rather than private markets. 12.6%erage return is according to data. the performance trailed the average among 450 endowments and foundations. that is your bloomberg business flash. the stock of the hour, another casualty of amazon , w.w. grainger rallying after earnings fell less than estimated. let's explain. consumer thing. you talk about competition for groceries and apparel.
it sells itself not to regular people but more to businesses. amazon is in this business. is also in the industrial space. the company earnings were down but that was not as large a drop as anticipated. it has been cutting prices in order to try to hold onto market shares. that strategy has been working to some extent. when you look at the reaction you see what the stock has done this day. joe: can you explain how amazon played in this? they sell the same kinds of things on the list? >> the reason amazon is this hadical, brooke sutherland
a piece out today. these earnings are all well and good but amazon still presents more existential threats. and how far can price cutting go? it sounds like they mostly distribute rather than manufacture their own. we have the operating margin. amazon, they have a certain amount of flexibility. as brooke pointed out, granger would need a 5% boost in sales volume to counteract one and a half percentage points from price cut. how far can you cut the prices here. are they global or just united states? >> they are global.
amazon operates. joe: it is a bunch of different brands. it is all distributed. >> what portion are digital? >> they do have a digital component. reasons that if you look at that chart there was another leg up on the conference call was going on. talking about the digital marketing. some level of traction. scarlet: that will be the challenge going on. julia: you were there with me. 23,000: the dow hitting for the first time ever. we have the chart you can't miss. this is bloomberg.
don'tt: the mexican peso move in sync but that is starting to change a little bit. it shows the spot price. the blue line is canadian dollar per u.s. dollar. can see bothr, you currencies have been losing ground to the u.s. dollar. we saw the peso get a lift after the headline. we will have to push off the deadline while the loonie weekends. this shows the correlation. it is nowhere near a lockstep. increaseeing a steady in correlation rising in the first four rounds to renegotiate nafta.
they have been steadily rising ever so slightly. joe: and then it is nafta headlines driving folks. this is very important for fund managers to watch. byy may be taken off side this rampant turndown over getting a deal. the white line is the exchange rate. that means the peso is getting stronger. the recent downturn over the last month, it reflects that skepticism. they are going to extend it but the rhetoric was far from good. the blue bar, you can see during went pretty people along thinking it still had room to run.
there is still -- they are still pretty long even as the peso has come down. it will be interesting to see , if there is more of a squeeze, if they will see a rapid unwind. watch this space on those talks. it would be what if you didn't see the dow jones ending -- hitting 23,000. we can give you all sorts of reasons about why this is or isn't an important level. as exciting as it is, the question is, do we continue to
under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store
stocks continued to entire, the dow topping the 23,000 level for the first time. on dollar also rallying speculation the next fed chair will be more hawkish. i am julia chatterley. scarlet: i am scarlet fu. joe: i am joe weisenthal. if you are tuning in live on twitter, we want to welcome you to our closing bell coverage. scarlet: we begin with our market minutes. the dow jones industrial average did top 23,000 earlier in trading today but could not get past the hurdle by the close. at least not in the initial first minutes. the s&p approaching around a number, if you think 2560 is a number. we're talking another melt up. nasdaq, little changed. plenty of news to go on, including earnings. let's start with political developments. they have reached an agreement on a bipartisan
deal on subsidies for those insurance companies. as a result you are seeing gains in the health care extension, both of which have exposure to the obamacare exchanges. united health rising for separate reasons. they raised the guidance to $10 a share after beating estimates. had top& johnson estimates. two banks, morgan stanley gained as much as a percent. --rd-quarter earnings beat the part of the business where he has been putting emphasis. 2.6%,n sachs down by after citing a decline in its investment banking transaction backlog. mostly toppedlts analyst estimates. joe: let's take a quick look at government bonds, the u.s. two-year and 10 year.
two-year yields up to 1.55%. 10 year yield unchanged at 2.3%. julia: just giving you a look at canada and mexico, in a similar vein to what scarlet was talking about the canadian dollar spots and the mexican peso spot, the blue line. there was weakness, the dollar higher in these currencies. this is a session chart. you can see we got the press conference around 2:00 p.m.. in thelly to selloff, mexican peso and canadian dollar. my argument is, despite concerns the talks are going badly, they have been pushed back. but they are still going. there is going to be a fifth round of talks. they were having a weaker session earlier on, as you can see. that is the dollar, stronger, the story of the session.
broader weakness going on in em. the turkish lira, lower, the african rand, and the ruble, too. joe: on commodities, oil hitting $52 a barrel. west texas intermediate, ongoing concerns about supply in iraq, but it is not much going on. it has been in this range for a while. gold ticking lower. copper had a big day yesterday, but industrial metals selling. copper down over 1%. zinc futures down over 3%. china'sreaking news on u.s. treasury holdings, they have risen to the highest level since july 2016. $11.5 billion of u.s. treasuries $5.45 billionling
in equities in august. here is a great chart. we did see that depth off from the beginning of 2016, beginning of 2017. a pullback adding to that. those are today's market minutes. did we say that already? waiting for ibm's earnings. we are joined by a senior analyst of software services for bloomberg intelligence. when we look at ibm everyone is focused on the cloud, watson, and artificial intelligence. this is where ibm is really putting its eggs in the basket. >> they are legacy products people are going toward a lot of these emerging i.t. products,
such as cloud analytics security. that is where the bulk of the spending is going. ibm is also doing that. scarlet: how does the growth rate look? i know in the second quarter it was 7%. but then it was faster than that. that suggests moderation. anurag: the 7% was almost all organic. all in all, it is in the same range. julia: what proportion of its revenues is it? anurag: about 43% or so. is entire company revenue down 2% or 3%, imagine how much the rest is declining by. that is a big store you have to figure out. has. -- not done particularly well -- the stock has not done particularly well. it is now at 146. as if ibm isook
doing anything impressive on these fronts. what do they have to show? what is the bar for success right now? anurag: organic revenue growth and gross market improvement. those about two metrics you want to measure i.t. services companies by. julia: it was across the board, wasn't it? and it is going in the wrong direction, not the right way? anurag: a lot of legacy products you see pricing pressure, shifting budgets. a lot of that has an impact on pricing, which gets reflected. in --lso had m&a investment for cloud. julia: analysts are expecting further erosion. what are you expecting -- erosion are stabilizing? anurag: it should stabilize going into the fourth quarter, they have a mainframe refresh cycle. scarlet: you were talking about
legacy businesses. if you look at the ibm topline, i believe it has fell for -- fallen for 21 straight quarters. anurag: if you look at analyst estimates, and 2019 you would see positive growth rates. that is imagining there is no further pressure on legacy products. that, cloud businesses, now you are competing with amazon and microsoft. joe: what is ibm's differentiator when it comes to cloud? anurag: they have a lot of legacy relationships. in the tech sector you have microsoft and oracle, which are entrenched in old i.t. all the others on the periphery do stuff others can also do. going to be it is difficult for some of them to show that level of growth they did in the past. havelike ibm, they relationships to do hybrid cloud and analytics. julia: we will bring you those
♪ mark: i am mark crumpton, this is time for were stored in -- first word news. leading senators have the basic outline of a bipartisan deal to resume payments to health insurers that president trump has blocked. murraylexander and patty say the deal would continue federal subsidies to insurers for two years.
the next step would be to win enough support from congress. >> right now, patients and families are looking at the harm. president trump has taken to sabotage health care in our country. their bank accounts and are realizing the president is allowed to continue the path he is headed on, they are the ones that will pay the price. mark: at the white house, the president spoke favorably about the bipartisan compromise, which is likely to face opposition in congress. president trump's third try at a travel ban has failed. a federal judge in hawaii blocked the ban saying it reflects anti-muslim hostility. the two earlier tries were rejected for the same reason. the administration will most likely appeal and it could head to the u.s. supreme court again. the u.k.'s domestic intelligence chief said the threat the
country faces has accelerated at an alarming pace and is worse than at any time in his already four-year career. andrew parker said his agency is constantly expanding and upgrading its capability, but cannot realistically prevent all attacks targeting civilians. thisted a dramatic upshift year with attacks in london and manchester. the remnants of hurricane battered scotland and northern ireland, has left at least three people dead and hundreds of thousands without power in ireland. the former atlantic hurricane disrupted public transportation because of trees that were not to down onto train tracks. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪ scarlet: ibm reporting its third-quarter results.
the numbers are such that operating eps beat analyst estimates by two pennies. billion versus the estimate of $18.6 million. it does appear revenue has broken the streak of 21 straight quarters of declines. you have to consider the fx part of the equation. growth margins slightly weaker than what analysts were looking for, they were looking for 47.9%. ibm's this is 45% of overall revenue, coming in at $34.9 billion, coming up 10%. it be cash flow expectations, to. are they expecting a whopping fourth quarter to maintain that eps? anurag: these are good numbers, given what we saw last quarter
in every area. you see slight improvement, cloud revenue is up. thisnumbers from ibm at point. scarlet: ibm routinely beats profit goals. tend lot of these things to come from things other than organic growth. deals, moreensing effective tax rates, kind of a one-off. anurag: it has been the story for a while. it is a very big ship trying to turn around, a lot of moving parts in it. it will not be an easy transition. it is a very complicated move, shifting the business model. a sense where they stand relative to competitors, especially in the cloud business. is this a margin growing or are they ipm, being actively encroached upon? anurag: they do not want to compete with amazon and
microsoft with basic infrastructure service. they want value-added hybrid cloud services to help the client move infrastructure. kind of what they did in the old world with the data center migration. is why these products can have higher margin than what amazon is selling. joe: you have to help me out, i see the $4.4 billion -- what are cognitive solutions? way where youa are looking at products that include more of artificial intelligence, analytics. you provide a cloud platform. there is a lot of different type of products that go into that section. anyrag -- anurag rana, he will make it the bloomberg radio to give you his estimates. the apprentice, central-bank edition.
getting a dose of reality tv. president trump teasing ahead to his decision. pres. trump: within those five you will probably get the answer and now make the decision over the next fairly short period of time. >>? your favorite pres. trump: honestly, i like them all. scarlet: could he make a decision before his 11 day trip to asia? moss.bring in dan maes -- a lot of talk about dan taylor because president trump was reportedly impressed by him, even though by his own taylor will, the interest rate should be lower. >> intriguingly, at a conference late last week, john taylor appeared to water down a firm commitment to his own goal. we will see. the market is moving around based on the news that comes out about the various contenders.
two weeks ago we were talking about how the markets were reacting to kevin warsh. not hearing so much about that at the moment. joe: you pointed out and are two important roles to fill because trump also has to fill the vice chair with the departure of stanley fischer. does it seem plausible that of thative names, maybe two he likes, one could get the one spot and one could get the two spot. dan: it is entirely plausible. scher is out of there this week. what if january comes and there is no replacement for janet yellen? what happens than? concerned,he fomc is statutorily, bill dudley runs it. it is complicated and we have not been in this decision before. if we are going to put in taylor, wrap the exit -- academic up in a
management-style person, that is powell comes in. up yellen, give her consensus builder as vice chair, again.s jay powell scarlet: do you think he thought about this? dan: i have no idea. joe: you can read his mind? dan: i am not going to try. scarlet: so many wonder why there are empty appointments around the government in general. as a possible president trump may leave the fed vice chair vacant? is a necessary he fill that role? dan: it is possible. it is pretty important for the economy to be operating at full pace. if yellen is not reappointed, it is an open question whether she sticks around beyond the first week of february. starting to get a little shorthanded over there. scarlet: we have been
shorthanded for a long time. dan: but we have never been to three. some wonder how long lael brainard will be around. she had some contention for donations to hillary clinton on the campaign. what i can say in the column you referred to, i thought he should powellnt yellen and name as the vice chair. joe: hopefully trump is listening and taking your advice. moss, thank you for that. that grand duchy of luxembourg will be -- will be here to discuss e.u., brexit, and the future of the eurozone. this is bloomberg. ♪
julia: "what'd you miss?" countriesan union preparing trade deals with the united kingdom as brexit negotiations remain in deadlock. how will this shape the future of europe and outlook for the eurozone nations? we're joined by pierre gramegna, the finance minister of luxembourg. thank you for joining us. you just came from the imf meeting. thes wondering what perception was, the conversations you are having about europe and the eurozone nations, even compared to a year ago? pierre: what a difference it makes. last are there were worries about brexit, that it would trigger a domino effect. in fact, the contrary happened. politically, the parties and governments that have been areirmed or won elections
in favor of a better integrated europe. the second thing is, economically, europe has gotten its act together and growth is back, close to 2% in most european countries. in luxembourg it is twice as much. there is a lot of confidence that europe is going to grow and this is ater, reliable partner and good economy for the future. julia: the problem is, the ongoing discussions with the u.k., negative headlines in the region. we have chancellor philip hammond calling brussels, the e.u., other e.u. nations the enemy, in the past week. do you feel that kind of standoff is going to achieve brexit talks? and is he being penalized? pierre: there are a few i am not going to mention that want to punish the u.k. because their
people have decided to leave the european union. we believe that is not the right approach. we have to find a solution. we have to make sure that even after the brexit, the business relationship is good. i have many ideas how that can be done. luxembourg is reaching out and saying, we must be on the cooperative approach because it is in the best interest of the u.k. and the e.u. 2020 summit. you you leave the group, cannot pretend to have exactly the same advantages and use the e.u. single market as if you were in it. the british, on the one hand, would like to have their cake and eat it. some europeans want to punish them. let's find a way in between. greater senseee a of unity among the european nations as it tries to deal with u.k.'s demands, and whether that
would bleed over into efforts to reform the european union when it comes to matters of finance and banking? pierre: i completely agree with your analysis. the degree of unity has strengthened. only one element. when there is a divorce and the family, the rest of the family sticks together. but there are many other things. the economy is starting to look better. also the new french president, brings a lot of energy in saying, we need to integrate to be more efficient. whatever it takes. i think we have a window for opportunity now, which luxembourg definitely wants to support. i think we are the best example, as one of the smallest countries in the e.u. and the most open country in the e.u. if you want to be successful, you need to reach out and be open for trade, investment, citizens.
joe: one of the big countries economically countries are dealing with is the complexity of international tax for corporations, the ability to domicile tax in various places around the world. ,arlier this month, luxembourg ordered by the commission, to collect over $260 million in back taxes from amazon. what is your government's response to that, in terms of going forward with tax structure in luxembourg, what are the implications? pierre: in the past dealing with this company in e-commerce, we have cooperated with the case.sion on this we do not agree with the conclusions of the european commission, we do not think it was a safe haven. i am not going to comment in details. taxreal issue is, how to digital companies and the digital economy. luxembourg, together with europe, has been implementing the new tax landscape the oecd
has devised. we are among the first in the world, along with europe. is, e-commerce, digital e-commerce. the oecd has not yet found a global solution. there is a tendency in europe to do that as a kind of quick fix, which we do not think is the right idea. we need to make sure all companies, those in the digital economy, pay their fair share. boeing we need to find a global way of doing it. scarlet: elegant solution. pierre gramegna, finance minister of luxembourg, thank you. insight on the future for technology companies in china. our guest will be recognized as one of the top vc's in the tech sector. this is bloomberg. ♪ are you on medicare?
do you have the coverage you need? open enrollment ends december 7th. so now's the time to get on a path that could be right for you... with plans including aarp medicarecomplete insured through unitedhealthcare. call today or go online to enroll. these medicare advantage plans can combine your hospital and doctor coverage... with prescription drug coverage, and extra benefits... all in one complete plan... for a low monthly premium, or in some areas no plan premium at all. other benefits can include: $0 co-pays for an annual physical and most immunizations, routine vision and hearing coverage, and you'll pay the plan's lowest prescription price, whether it's your co-pay or the pharmacy price. or pay as low as zero dollars for a 90-day supply of your tier 1 and tier 2 drugs,
with home delivery. don't wait, call unitedhealthcare or go online to enroll in aarp medicarecomplete. sfx: mnemonic mark: i am mark crumpton. it is time for first word news. president trump will announce his federal reserve nominee before leaving for an early november trip to asia, that is according to a white house official. the president is working with a list of five names to lead the central bank, including current chair, janet yellen, whose term ends in february. the post requires confirmation by the u.s. senate, a process that can take months to complete. senate republicans have a crafted a hard draft of a homeland security spending bill that includes one point six dollars billion that the president wants for a wall at the mexican border. tolduthor of the bill
reporters today the border wall funds would be resolved in a $1 trillion spending bill in december. the bill will also tackle the issue of whether to continue work permits for immigrants ought to the u.s. illegally as children, the so-called dreamers. brexit talks remain deadlocked following the meeting of foreign ministers in luxembourg. chiefropean union's negotiator, michel barnier, talked to reporters. >> just look at the timetable, the european union is not holding anybody back. we are ready and willing to speed up the negotiations. in the meantime we will respect to the various stages. we do not have any intention of holding it up. mark: barnier says the e.u. needs to see significant progress from the u.k. on the divorce bill to move forward. fleeing muslims are
myanmar and going into bangladesh, according to the united nations office for refugees. more than half a million others are living in squalid and overcrowded camps. myanmar officials have denied the systematic violence against the rohingya muslims. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪ scarlet: let's get a recap, the dow touching 23,000 for the first time, but falling just shy of that landmark, that milestone. the s&p 500 marginally higher. the dollar strengthening to a one-week high on speculation of fed chair, whenever the president announces it, will be more hawkish. joe: let's get a recap of ibm, which reported earnings after the bell. up 3.66%.
three dollars and $.30 beating estimates. billion versus 5 estimates of 18.6 billion. another, eight .8 billion. investors liking what they see. growth margins a little shy of estimates of 47.6% versus 47.9%. overall, investors are happy. julia: still a high margin, as well. "what'd you miss?" communist party congress begins tonight. a lot of interest in how the landmark meeting could impact the technology sector going forward. business leaders and tech leaders are debating the topic at the wall street journal's live conference in laguna beach, california. selina wang is there with a very special guest. with jennyting here
lee, managing partner at ggv capital here in laguna. all eyes are on the chinese communist party congress, the expectation is that xi jinping will consolidate power and the next leaders will be chosen. what are expectations for what the outcome will be on china's tech sector? jenny: it is a congress we are paying close attention to. from a technology perspective we look at broad trends. is there definite support for state-owned companies versus private enterprise? that is one. we are also looking at policies regarding censorship on social networks, which is also a bear -- is also a big area. along with, more supporting measures for policies or subsidies around the electric car area, transportation, another growth area in china.
is there more support for autonomous? we're also looking for other trends around the ai trend. in china we call it ai plus. the government is intricately involved in growing these new areas. selina: bloomberg news recently reported the government is considering a 1% stake in some of these big internet companies. what would that mean for the growth trajectory of alibaba or tencent? jenny: this is not new. a lot of the large companies in -- i would sayge there are over one billion users .f we chat -- wechat almost everyone in china hasn't alipay account. this intricate interaction
between the consumer and the internet, it does make sense that the policies they craft around this, there is in mind where the regulation is going. i would say 1% is not a lot. we have seen in other countries where the government has taken more than 1%, 10% or even 51%. does seem the policies being crafted are tighter and more highly regulated. is this the new normal in china? what does this tighter policy mean for the development of the internet industry going forward? the governmentns accepts new growth in china's gdp is likely going to come from equal shares from the internet companies, as well. if anything,ship, would get tighter overtime. selina: technology developed by alipay and tencent has revolutionized china's payment
industry and put them at the forefront. what you think the landscape will look like in the next two years? jenny: this is a very interesting relationship. that is a part of it leveraging new internet technology and private enterprises where innovation is at the forefront to try to disrupt and wake up the sleeping giants under the state owned entities. that relationship has to be a synergistic one where you are leveraging innovation and trying to grow some of the incumbents in china. it is something to watch for, going forward. incumbents receiving this into their daily operations, innovation and products. it is something we are hopeful for. theresee that in china, is a tighter working relationship between the state and private enterprise.
selina: do you think we will see more of that going forward, state-owned enterprises upgrading everything because of innovation in the private sector? is always goodit for new innovation tools. this tighter, new internet regulation regime, what do you think that means for u.s. , thatiants like facebook still have the very broad ambitions for business in china? jenny: i think it is very important for u.s. companies, particularly companies in the areas of internet, communication, to really understand china regulations, to have more conversations. to have teams working the ground to understand what are the needs of the average consumer. end of the day for innovative companies, it is finding and developing the right product for the consumer. it is the consumer that will
ultimately decide which company, product, services will take root and grow in china. is the u.s. company or china company, at the end of the day, consumers choose the right product for themselves. is an investor in airbnb, they faced challenges in china, including regulation and loss of local competition. are they cracking the chinese market? are they avoiding the mistakes uber made? they're entering china at a time, this is a market that is still very nascent. from arefore, available, market entry perspective, open to new entrants and participants. the company is doing a great job in terms of localizing themselves, talking to the right people, the right companies. making sure the product works and is suitable for the
thank you for joining the show. we have had this incredible bull market. everybody knows that, it has gone on a long time. every time you bought the dip, it was a good move. either signed it is coming to an end? mebane: i am a trend follower at heart. one of the tenets of being a trend follower, you do not say when it will end. there are signs that give us pause. we are in an incredibly low volatility environment. --saw last week or the last week prior, the lowest in history. 12 months in a row of positive year stock returns. there has only been one time in history there was more, and that was 15, in the 1950's. you see signs of complacency. joe: we are looking at this amazing chart, you did a piece, the percentage of trading days
where there vix trades at various days. the 10, 11s never in range, by historical standards. mebane: one of the challenges, volatility can stay low for extended time. we call the jay cutler -- a very melancholy quarterback. no one seems to care. everyone knows it is expensive, but they do not know what else to do. we say a lot of things. if you do not want to take risk, risks.e say -- take the show an on number of times before calling for cheaper foreign equity better place to be. another way to think about it, you can hedge that risk. a lot of people have a 401(k) or retirement account or equities position with huge tax bases they cannot sell.
hedging through sale risk makes sense. joe: let's talk about that. we just ran a story today on the funds,rg about hedge bedding long volatility, betting any day volatility will surge and we will get a drawdown. these have proven to be costly events. you have to pay money to keep these trades on an volatility keep surprising to the downside. talk us through the cost-benefit of continuing to bet on or hedge for the downside when it never seems to come. mebane: let's be clear, sale risk hedging is not a great investment strategy. but it can be a phenomenal hedge and it is one of the best hedges in a big down market, particularly one characterized by a really bad month. days fromo -- two
now, bloomberg get a great piece on black monday. it could be a fantastic hedge, then. we put out a research paper looking at hedging ideas. if you pair buying long data put with that data treasury, which is historically a great hedge, you can end up with a product historically has had positive carry. which is not something i would expect. it has good returns over time. -- inf it has to do with general, you end up with a positive return. and you are not predicting when that volatility will return. if you study markets long enough, it does. joe: you say the idea is to marry the tale risk hedge with data puts, with a long-term , a lot ofosition 60-40 portfolios. why is it important to have the two of them together?
ofane: bonds have been one the best hedges. others have not been correlated, like commodities in gold. we look at the 10 worst stocks, a -10% month, all the way back to 1900, it is -20. some asset classes like gold hedge some of the time, but also were down 16%. bonds have one of the best batting averages. markets, it goes to show one reason why they are expensive. in general, you put that together, it puts together one of the best hedges. i have more of my net risk invested in tale risk. a lot of asset management companies and financial advisors have far more leveraged u.s. stock exposure risk not just in their portfolio, but their client portfolios, the business, the revenues, and a chance of
getting fired, to. a lot of advisors should consider hedging their revenue anm a standpoint that airline company may have fuel costs. joe: this bull market over the had one have these hedges in place, how much would it cost? mebane: it is hard to say, would have been a slow bleed. be 0.5% aoking it may month, depending how much you put into the long data puts. overtime it has been a positive. since we launched our fund it has had negative, slow returns. like carat, it is insurance, you are happy when you pay it and don't have problems. joe: mebane fiber from cambridge of management, thank you. julia: a look at canada's new mortgage stress test with the ceo of toronto dominion bank.
julia: "what'd you miss?" top banking regulator released its new mortgage rules, which include a requirement to stress test borrowers at higher interest rates. bharat masrani we discussed this with, the ceo of toronto dominion bank, one of canada's biggest lenders. >> i think overall this is a good thing. canada has had a robust housing market, specifically in some other regions like toronto and vancouver. moves, had a few policy it is a useful tool for policymakers to make sure we not
getting into a situation that will mean disruption to the financial markets. >> is that the say you think this new step will cool the housing markets? bharat: we have had many steps and this is one more step. a useful tool to have. we have had some sort of steadiness in the housing market in toronto over the past few months because of other changes introduced a few months ago. i think we are headed for a more of the housing market and policymakers are on the right track. >> it raises some questions. canada, thebank of department of finance, the provinces, many steps have been take it in an effort to cool the housing market, to keep prices from rising as quickly as they have been rising, with not that much affect. perhaps it has plateaued a bit, but prices have started to rise again, as you are aware.
does it make sense to you, that regulator should keep trying to do more? or is there a point at which, enough is enough? about: when we talk housing, it is more of a regional story. overall, the national market is fairly well-balanced. there are certain regions where you would say it has overheated a bit. the flipside is, there is not only a demand issue in many of these markets, there is a supply issue, as well. municipal approvals, the amount of land available for single-family homes. will have to, we make sure there is enough supply available for the population. >> that is why i asked. the more regulations and restrictions you put in place, the more you run the risk of unintended consequences in the markets outside. these policy moves will help to stabilize the market, more so than we had before.
over the long term we need to increase the supply of housing stock for these growing populations. toronto attracts a lot of new immigrants, it is a vibrant economy. we need enough supply to have a balance than we -- balance, more so than we have today. ,ulia: that was bharat masrani ceo of toronto dominion bank. scarlet: let's look at the biggest business stories. johnson & johnson reported third-quarter earnings that beat analyst estimates. the world's biggest health care company changed its outlook. held off competitors, despite losing its patent protection. hadlair broadcast group bids for 12 television stations, which could bring in as much as $1 billion, as it tries to win regulatory approval for a merger. that is according to people familiar with the matter, who say sinclair may sell some or all of the outlets.
hong kong's market for ipo offerings on track for its worst year since 2012. that is after a combined $20 billion worth of megadeals pushed until next year. the postponement could mean companies missing out on optimism, driving a rally in the honda -- in the hong kong index. chemical,oleum and $10 billion ipo's. swiss watchr the market, reporting a 45% increase in first-half profit. they were buying unsold watches to reduce a collect on the market. that is your business flash update. joe: what you need to know for tomorrow's trading day. this is bloomberg. ♪
the agreement. trump signed an executive order order blocking those payments just last week. the third time was not the charm for president trump's travel ban. a federal judge in hawaii has blocked the ban on grounds is still reflects anti-muslim hostility. earlier tries were rejected for the same reason. it could head back to the supreme court. negotiations over the future of nafta were extended into the first quarter of 2018 after canada and mexico rejected what they see as hard-line u.s. proposals. a fourth round of talks wrapped up in washington. nations are trying to find common ground on procurement. president trump will announce his fed chair nominee soon, maybe even before leaving for an early november trip to asia. the president is said to be working with a list of five