tv Bloomberg Markets Americas Bloomberg October 19, 2017 12:00pm-1:00pm EDT
♪ from bloomberg world headquarters in new york, here are the top stories we are following. u.s. equities opened lower today. this following a record-setting setting. tech giant apple seeing a dip. we will get the latest outlook from jim mcdonald northern trust. we will speak exclusively to partners chiefw investment officer. the investors conference is in toronto. a part of our series this week on automation, we will teach with -- speak with gary norcross, fis president and ceo, about the role of ai in
technology. julie hyman is with us to explain the markets. lie: we are seeing the biggest drop in maybe a little over a month, but that is because we are not seeing big drops. we are seeing small, incremental moves. today, it is a matter of risk-off sentiment. just to put the drop in perspective, we have got an interesting chart on the bloomberg. i do not know if we can call it up -- here we go. 500, the s&phe s&p fell at least 2% going back a decade. as you can see, it has become much less frequent. you see the magnitude of drops. we have not even had a drop in 2% , and it has been since last year since we have had a drop of 3%.
sell us have become much less common than any kind of magnitude. let's go back to the semiconductors. apple is cutting orders of the .phone 8 and the iphone 8+ the stock is down .7%. all of the apple suppliers are trading lower. as for the earnings side of the equation, we have got the pressure as well. the staples of producing well, phillip morris is the worst within that group. the company has invested a lot in smokeless tobacco, but it is not helping to offset the decline in cigarette volumes, down 4.1% in the quarter. cigarettes in the so-called he's stick -- smokeless tobacco -- volume, it is not making up that decline.
we are also watching united airlines. these shares have been declining, and they have been accelerating following that topany's earnings, that seem indicate it does not yet have pricing power and will not going into the last quarter of the year. analysts are also telling us they are somewhat skeptical for the company's forecast, and it appears that is why we are seeing a further decline in the shares now, which is now the steepest it about 18 months with the 11% drop your today. one more story to mention on the smaller mover basis but an -- amazon isne down today along with the rest of technology, but there is speculation on twitter -- it is unconfirmed for the moment -- but it is moving, an idea that amazon would come in and buy ul ta here. one analyst says it would be helpful that amazon would want to purchase another
brick-and-mortar retailer after whole foods. is those not familiar, ulta a cosmetics retailer. vonnie: julie hyman, thank you. at large erikor schatzker is at the conference with an exclusive interview. erik? vonnie, thanks so much. i here with david warren, the founder and chief investment officer at dw partners. david, good to see you. david: thanks for having me. in 2015, you described to michael milton we are entering the golden age of credit, and he has not forgotten it. where are? it is 2017. are we in the golden age of credit? now everything has changed. david: yes, what i was referring
to was the secon secular change or perhaps cyclical change that was allowing investors to have access to capital that they did not have before. huge -- raisesa are still not huge. not huge,say they are but if you add up the number of firms and funds in revit credit, it sizable. aliens of dollars raised for private credit. is it getting too competitive, or is there planning to go around? david: i do not think it is tooing to it competitive -- competitive. each company has their nation. -- niche there is plenty for us to do. this is a multitrillion dollar market for credit assets.
i am not sure if it will get $100 billion or not, but 100 billion dollars versus $1 trillion, i am not worried much. erik: your target goes into the teams. if you are looking for higher return rates, like the financing you provided to radioshack a few weeks ago, where do you find it these days? what is interesting is in some sense, you have to go to an area which scares somebody else, right, because there is so much capital, and we know that high yields are very locum interest rates are low, pe and equities are very high. every asset, real estate, are quite low. you have to be willing to do something that somebody does not want to do. sense, it is not providing a loan against a stabilized property in toronto or new york city, where valuations are very high, it may mean going to a property in st.
louis where properties are scarce. 10%, 11%,w you get 12%, 13% returns. erik: the reason people are fearful of those returns is the fundamentals appear to be poor or because there is a lot of hair on? them! there is hair on it is scary where it has gone through a downturn, and people have been hurt. st. louis, ifs in you will, to tier properties into tier cities. where else? david: homebuilders. homes,u.s., we need more so the homebuilders need capital. some of the homebuilders' balance sheets are in great shape. some cannot get access to debt capital the way they could 10 years ago before 2008 hit, so private capital is stepping in.
we will raise capital to offset balance sheets for homebuilders. erik: you describe yourself, investors a bottom-up who informs himself with macro. what is your macro view right now? how is that informing your perspective on credit? david: for people who do distressed credit, some of us feel we are due a distress cycle. it has been eight years since the last distress cycle. but it may well be that we are in mid cycle. spread and yield and prices look like a yield cycle, but if you look at -- where is the leverage in a system? what are the actual issues? are they in balance? it is not clear that we are not midcycle. i do not think we are there yet to call for a recession or a bankruptcy in the next couple of years. erik: so if you are right, and i have heard others say this recently, we could see this
cycle playoff or 4, 5, maybe even six years longer. david: absolutely. erik: what does that mean? what will the credit market look like five years from now? david: i think it is hard to imagine yields and spreads getting lower from here. for example, we are starting to creditp high rating deals again, not because we are expecting bankruptcies in a year or two, but because we are finding those selling at 100 seven cents on a dollar. there are new opportunities in the market that we have not seen in this bull market over the last eight years. erik: do you find yourself drawn certainess that is for attractive to others in retail and in energy? ll, you have to look at the areas of stress, and there is no doubt from the last couple of years there is huge stress and both of those sectors, and we certainly have components of capital across our different funds, whether it is energy, for
sure, retail not so much, but we are looking at different complexes, and i think there will be things to do there. in some sense, there is some investment in mortgage-backed securities. we analyzing the underlying retailers in that space. erik: liam there is a big thesii know you are well aware of, that so much of this retail property can be repurposed for nursing indoornd gigantic gyms, entertainment complexes. do you buy it? david: to some degree. that repurposing will happen. at what prices will people be willing to lease and pay for those spaces for different use. but yes, the property will likely get reused. erik: on balance, are those properties still overvalued? david: there are many that or.
there are some that are doing just fine. erik: david, thank you. founder and, chief investment officer of dw partners. vonnie, back to you. sebastian: -- erik, thank you. let's get to first word news with mark crumpton. mark: u.n. ambassador nikki haley describing russian interference in the 2016 presidential election as "an act war." speaking at the george w. bush institute, ambassador haley criticize russia's efforts to "sow chaos in the recent election." president has backed a non-biting -- nonbinding senate republican plan, treating it as
the first threat towards massive tax cuts. the gop deficit concerns in drive.f the tax cut according to those familiar with the matter, the move sets the stage for tax legislation that could pass later this year. in californiay cooler temperatures and light rain today will help firefighters battling wildfires. a spokesperson says that by tomorrow, crews should fully contain a wildfire that devastated sonoma county and santa rosa. flames in seven counties have killed at least 42 people and destroyed thousands of homes and businesses. rifles andce fired here yesterday to break up the missed raiders of government opposition supporters. this was despite a court ruling that renewed the government's
on demonstrations. -- ban on rights demonstrations. elections are scheduled next week. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. crumpton. this is bloomberg. shery? sebastian: mark -- shery: mark, thank you. inflation why low around the world may be helping. this is bloomberg. ♪
president trump in a meeting with the governor of puerto rico. he said he believes they have the votes to pass a budget and changes to the tax plan. once again, president trump saying "we have votes to pass budgets and pass changes. are ongoing.ks we will bring you any more headlines as they cross. shery: stocks sliding, reversing the sentiment of the record high just a day ago. the outlook for risk-taking is still favorable. jim mcdonald is chief investment strategist at northern trust. $1.1 trillion under asset management. is this a result of the minsky moment, to from the coc government? jim: we are seeing a small reduction in u.s. indexes today,
and there are a number of fixed uses people can went to. supported by fundamentals, it is very logical to have a little bit of a pause in that rally. i think that is no more likely than we see today. at 12 isven the vix back down below 11 again. do we continue to grind higher? jim: the two biggest risks of a continued rally are a mistake out of the biggest banks or a political problem. we think the new fed chair will likely to be appointed before february, and there are developers around the world, such as north korea, catalonia, etc., that are gathering a lot of attention. to your point, we have not really talked much -- and we were discussing this about said governor jerome powell being the
next fed chair -- what are the chances of that happening, and what will that mean for continuity? jim: i think the market would view that as kind of yellen to point out. 2.0.llen to poin the market will be a little unsure how to price the. pthink they would view j owell as someone to be more continuous. a neutral, right, because there is definitely , as we wereings reporting in congress, campaigning against yellen, jerome powell could be the solution. jim: i think so. if you are the president, you want to put your own person in. particularly what the decision
is going to be, not the easiest. shery: does that really matter for the markets? the bars and yellow, right now, the third quarter, because of the hurricane, they are still stabilizing around .2%. we willkely is it that see earnings growth that will contribute to the stock market rally without tax reform? jim: i don't think the market right now is counting on tax reform. if you look at baskets of low tax rate stocks and high tax rate stocks, the high tax restocks are underperforming. that means the market is not expecting them to be the global beneficiary. if you look at the global outlook, we pay 7% to 8% out of the next 12 months. 2% to 3% dividend yield. that is a reasonably good backdrop with continued gains in the stock market. shery: you have been speaking to a lot of strategists, and that is one of the words that comes
up. jim: i get nervous using a term like "invincible." whon tell you investors have been cautious all right little bit less cautious and are starting to see an uptick into equity funds, more international than in the u.s., but i would say we are nowhere close to the stage that you would typically look for at the blowout stage of a bull market. vonnie: thank you. jim mcdonald, chief investment strategist at northern trust. ber's biggest of editor, lyft, changing the right share -- rideshare's game. this is bloomberg. ♪
is going through another round of funding. the cash infusion, billion dollars, a total game changer for lyft, whose main competitor is uber. mark barton joins us with more. $11 billion compared to $60 billion, $70 billion for uber? clearly as and aolt in investment major shift. google ventures, now a billion-dollar race. we have heard it here through global corporate, and now they are going through the private equity arm. will: does that mean lyft ensure its independence, or is there a potential tie up with alpha that?
-- alphabet? mark: there is the question about whether it will be a monopoly or be two viable players. lyft is working on its own self driving, partnering with gm on self driving. the deal today is separate from the weimo partnership. vonnie: alphabet is playing both sides of the coin, right, it has an investment also in uber. mark: possibly. it could mean they are really picked up with uber. they could have gotten in the round with uber. i do know the executives are really excited about the space. they have been invested in sidecar, the ridesharing company with uber, and now they are with lyft. it is a space they feel they need to be in. ber has been suffering
from some self-inflicted scandals. what is the market share right lyft?r uber compared to mark: it is pretty good, despite the scandals, they have pretty good shared growth. they have pulled back in the larger markets in china and in in the and lyft is just u.s., even though there are reports that they are thinking about expanding globally. vonnie: mark, what will it actually do? moreit just require customers and so on, or will it actually makes some kind of capital investment? lyft, we know the game is competitive, getting both drivers and riders, and uber and lyft has been going after each other for a long
time. it clearly involved -- requires a lot of investment as well, and rivaling health care. they are in different industries. thank you, mark bergen their reporting lyft vs. uber. coming up, we continue our series on the automation of wall street. we are speaking with gary norcross, president and ceo as of fis. what he sees ahead for the banking industry coming up next. this is bloomberg. ♪
it feels like winter. i am shery ahn. this is "bloomberg markets." let's take a look at markets during the dow down .1%. we continue to see the selloff from the pboc governor from china, talking about the minsky moments and the kata line crisis. and techstock companies down, apple also showing some weakness on order cuts for the iphone 8. the hit of the anniversary of black monday, 1987. vonnie: let's get to the first word news now with mark crumpton. mark: british prime minister talking about brexit talks. may made the comment that she entered the european union summit in brussels today. i set forth my vision in
the speech, and i look forward to discussing that and other key issues, the challenges of migration, terrorism, these are issues shared across europe, and u.k. wants to continue to play a full role mark: . may says the united kingdom -- full role. mark: may says the u.k. will be putting forward an ambitious plan in the weeks ahead. bytexas, communities hit harvey, the number of borrowers by 67% last month, according to mortgage data firm black night. increase of borrowers falling behind. rex tillerson heading to middle east, south asia, and europe next week. conflicts in on
iraq and syria and increasing iranian influence in the region. also, one of four ways of improving relations between saudi arabia and iraq by participating in the first meeting of the two countries' new coordination council. the federal deregulatory commission's proposal to provide electronic access loopholes to cyber assistance. in january, the energy thosement will focus on who are in "imminent danger" from cyberattacks, who could result in widespread power outages and undermine national defense is some. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. vonnie? vonnie: mark, thank you. this week, bloomberg has been focusing on the automation of wall street and the revolution.
joining us now is gary norcross, whichent and ceo of fis, is a leader in financial technology. ranking -- more than 10% year to date, which means 25%. congratulations. gary: thank you. vonnie: more than 50,000 employees, and headquartered in jacksonville, florida. what is your main business, and what are you working on next/ ? gary: first, it is a pleasure to be back today on bloomberg. we are exclusively focused on financial services, and we focus on a very broad array. we handle retail banking, retail payments, also wholesale products, so really anything that our clients need to offer in order to compete in the industry. fis offers the capability to
help them do that. shery: there was a lot of optimism about the regulation coming from these banks. have you seen that optimism translate into your sales, or are you still waiting?you are right gary: -- we have seen a lot of optimism around regulatory reform. some we are anticipating will occur. what we have been telling the market is we look at that optimism. it translates into spending rates. it is really about an 18-month tailwind for us. to seecertainly starting our pipelines increase, we are seeing sales of volume across the area's product lines, so we are excited about this increase across the industry. when it comes to big banks, we know bank of america, for example, are planning a consortium to do away with some services from fis, trade profits. any concern there that the big banks, maybe even smaller banks,
can do their own? gary: when you look at the industry, it has really shifted over the years, so definitely regional banks and even larger banks -- not the largest global banks -- there is definitely much higher dependence on companies like fis, but what we are starting to see is opportunities for global, there are opportunities to partner, bringing in components, leverage them come around technology around it. many are partnering with the largest banks. we recently did a post derivatives utility that has been very successful, so banks are taking advantage where our scale can make a difference, so we think there is plenty of room with everything going on in the industry for fis to continue his success. shery: plenty of room to grow where? this week, we have been focusing on automation, the job market, wall street. do you see that growth, and where do you see a decline? francine: for us, -- gary: for us, what is going on
the market, and you guys see it as well, you have regulatory reform, massive digitization of all of the technologies -- that is returning investment across all of these great products. let's not forget cyber to rock on top of that. when you think about artificial intelligence, it is one more way to quality. in the see it impacted back office, i think we well, but it will take time. we are doing as, lot with artificial intelligence today and with other technology. this technology will take multiple years to roll across. vonnie: what is the next frontier? we are only hearing now about things that were being worked on several years ago. fat will be implementable in ive years', 10 years' time? gary: that is what is so exciting, it is moving at a really unprecedented pace.
when you think about the digital market outof every there, that requires a massive change of everything underlying to support that. when you start talking about the changes of artificial intelligence, i do think that is coming over the next i've years. so there -- next five years. so there is plenty to do with the current transformation that is going on. shery: what about a transformation for fis? debt levels are declining, given the sungard acquisition. we look at automation, we want to make sure we are investing heavily. we are investing over 60% back to help our customers be competitive. seeing someinly early accelerator programs as well, but if you cannot make them, then certainly we can look at organic growth, in organic activity. if there is an opportunity we
see in the market, a brand-new ,product for service sure, we would consider it if it made sense for us and our shareholders. vonnie: i was wondering that. thank you so much for joining us, gary norcross, president and ceo of fis. still ahead on the program, headquarteredd deadline is here. which cities have the best shot? that is next. this is bloomberg. ♪
let's turn now to our stock of the hour. apple losing the most in more than two months. abigail doolittle, what do we know about these cuts? "bloomberg markets -- abigail: the report coming from the economic daily news overnight, saying that apple has cut orders relative to the iphone 8, saying sales are weak. if we hopped into the bloomberg, this is the supply chain in bloomberg on the outcome and we thea number of them, conductor, intel, cisco, some of the u.s. suppliers, such a sky work, brought camp among others from also down sharply. massive standpoint, the question is whether it is model specific or production. it is probably model-specific. you can get the iphone 6, much
stronger than the iphone 8, the prizes much better for basically the same phone. the question is whether or not this will affect the december numbers. 8% year-over-year revenue growth. it could get shifted forward. what that does to the stock, we will see, if that happens. shery: is there some concern that revenues have not hit him and not be the same of early 2015? abigail: to some degree, yes, numbers for the iphone x come out so much later than normal, that could be another negative. or could it turn out to be a bit of a dud? hether question is whether can hold the pricing. $1000 per phone is really expensive. , greatn trying to demand on the apple and the iphone, i spoke to him earlier today come
in china, 16% of the revenue, so you can see when we go into the bloomberg that the revenue from china simply declining on it order over order basis. if this continues, it could really be a problem, and apparently orders out of china for the iphone 6, 7, and 8, are ity weak, because in china, is all but a status, so they want the brand-new model, the iphone x. perhaps it is an early hiccup of the december quarter. shery: abigail doolittle, thank you so much for that. the deadline for proposals of amazon's second headquarters is here, and the competition is about to heat up. about 100 cities are expected to compete for a company that will create 50,000 jobs over the next two decades. what city could be the tech headquarters?
joining us is karen weiss. ren, which city has the biggest chance of winning the lottery? karen: i wish i knew more about it, but there is basically a big range of cities that have more than one million residents in their area and have the talent that amazon is looking for. the one thing driving this is amazon once the high talent, so you need a place that has a lot locally and a place you can move people to, and attractive place you can move people into. places like austin, for example, --nashville, though arm those are morally equivalent of where seattle is at, a place they can really grow. or you can look at larger cities for example, or the d.c. metro area, big places where amazon will still be large and powerful, but will not be the only big company in town. do we know what amazon's
criteria are coming yet, karen? living costs might be lower, and there might be other criteria. says, ifs, everyone you look at the criteria this way, we are perfect for it. we know they want to metro area with more than one million people. they want a good, strong airport with direct flights to seattle, d.c., and the bay area. they want a strong intellectual capital for the place, some that has a strong university system. they talked about wanting good transit in a vibrant, urban area. depending on how you cut it, a lot of places could fit. some have said to me -- we know what the criteria are, but we do not know how they are prioritizing it. what is more important, a place that has tip top talent? for example, boston has an incredible wealth of talent, but it is very expensive, both to hire people and for people to live in. how they will balance this is what we will start looking for. it is widely expected that they
will narrow the list down. typically, companies might look somewhere between 3, 5, 6 places at once and then do a really deep dive and visit those places. shery: i was not really paying attention to the new york skyline yesterday as you did, but i heard that some of the iconic landmarks were lit orange in celebration of amazon. some of these cities trying to do to appeal to amazon right now? karen: so many gimmicks, it is amazing. tucson sent a cactus, which amazon sent back saying "we cannot take your cap this." cavalry took out a full-page in attle times." a lot of cities are applying that would, frankly, be a real long shot. never say never, but it would be shocking if they got it.
cities are finding it away to promote their brand, regardless of whether or not they get the amazon headquarters. so they could be looking for something else from amazon, maybe a fulfillment center, or they might be looking to other employers to say hey, this is interesting, i never thought about what this town might be doing. vonnie: i want to ask about state taxes and whether that will ultimately be a major decider for amazon. i am also curious about geographically where amazon might want to be. will distance to seattle be a major factor or no? interesting -- amazon has said many times they are considering any application andorth america in the u.s. canada. at the same time, a senior executive about a week ago said peopleonly track so many to the pacific northwest, and we will probably have to look elsewhere. amazon said no, no, we will look at all applications from the northwest as well.
so the reality is there is a benefit to having geographic diversity, looking at talent and not everyone wants to live here. i love living in seattle -- it is beautiful, it also i have family here -- but what if you coast? the east do you want to expand to the midwest or the east coast, and if so, what does that mean for traveling back and forth between the two headquarters? for example, atlanta has a very strong chance, i would say, based on georgia tech the end there, it is a big, vibrant city, it has a lot going for it -- a big airport -- but it is also very far, almost as far as you can get in the continental u.s. from seattle. almost a six-hour flight, more than new york or boston. that is a lot to juggle. cities thathere any desperately need this who could get the biggest loser getting amazon? karen: yeah, i think detroit and
pittsburgh are often talked industrialnd of towns turning themselves around, and they do have strong advantages. detroit has a lot of engineering from the automotive industry that is very close to the university of michigan. lord knows the cost of living is cheaper there than in seattle. and pittsburgh has a really strong base of tech talent, including in robotics and artificial intelligence. keople can tell me the weea .4 pittsburgh might be the airport -- it is not a major airport. one question will be tax incentives. how much money are cities and states going to put out? some of the numbers out there or enormous. governor chris christie set up $7 billion to come to know work -- to newark, which is a huge number. at the same time, i spoke to an
expert who says tax numbers alone will not cut it. shery: karen, thank you for joining us, karen weise. time now for the bloomberg business flash. emerge asankfurt may the winner of the battle of u.k. dubs post-brexit. the chancellor tweeted "just left frankfurt, great weather, really enjoyed it, thinking about spending more time there #brexit." goldman is thinking about setting up an office there is a new trading held -- hub. a 5% profit margin for united pull behindld delta. oscar munoz, the ceo, is in the middle of a turnaround plan. shery: coming up on ashoka mody story of the former wall street
vonnie: all right this is , "bloomberg markets." i am vonnie quinn. shery: and i am shery ahn. vonnie: the top story in the latest issue of "bloomberg businessweek" looks at how the opioid epidemic is affecting the affluent on wall street. a wall street trader got addicted to oxycontin, got clean, and is helping others with the same problem. abelson --is matt max abelson. jeanna, michael reiter, one reason i wanted to write the
ofry is i loved her coverage the national workforce, and of course especially poor and middle class, working-class neighborhoods, especially throughout larue america, but rurali talked to -- america, but what i talked to jeanna about is since we cover what we do, bankers, executives to take into oxycontin the edge of what they hang over -- edge off of a hangover and ascend into real misery. we talked about what it looks like when opioid addiction comes to wall street. shery: you mentioned that instead of data, it also shows wealthier states are showing an increase in this open your crisis. max: absolutely. we should be really clear that even in a place like new york city, the real harbors are in
place, neighbors in staten island, in queens, but they are on the rise in manhattan. it is exactly as you say, and wealthier states like new york, connecticut, faster than they are rising throughout the united states. classic walla street career. he was at lazard. he ended up taking 160 milligrams of oxycontin a day, which is a lot -- people usually start with 10. these lives can't ascend from what looks like a sort of perfect, happy wall street life into misery pretty quickly. vonnie: one of the difference is, i guess, is that on wall street, they can afford to buy real drugs, not the synthetic drugs on the street. max: i wouldn't say it a little bit differently than that, it a littleuld say
bit differently than that, vonnie. because they have money, they take pills, they avoid heroin. but i have to tell you, i did also speak to people who used heroin, including intravenously, injecting heroin. on the one hand, these people, even wealthy addicts, are the lucky ones because there are people throughout the country who don't have hospital beds to go to and don't have insurance, so on the one hand they are lucky, and on the other hand they really suffer. vonnie: you have to check out historic your max abelson covers wall street culture. still ahead, madeleine albright. you are watching bloomberg. ♪
the most divisive fight in congress are said to convert on it that is that bitter partisan clash could result in a government shutdown. madeleine albright joins me to talk about a range of issues, including iran, north korea in president trump's upcoming trip to asia. senator bob casey talks about the current battle over tax reform one day after he met with the president at the white house. what he thinks the president needs to do to five milligrams on relief for the rich and the middle class. ♪ david: confusion on capitol hill after a few days of flip-flops on a health care fix. president trump has signals his opposition to the alexander murray deal to shore up obamacare exchanges.