Skip to main content

tv   Bloomberg Markets Americas  Bloomberg  October 20, 2017 10:00am-11:00am EDT

10:00 am
vonnie: here of top stories we are covering, the ge ceo in the hot seat in the aftermath of the very disappointing earnings and profit outlook. it shares are lower, retracing steeper losses. ge well on track to being the biggest loser in the dow this year. lawmakers paving the way for president terms tax reform. the senate passed a budget resolution which would allow passage to tax output. divisions could threaten any next step. kkr head of pe
10:01 am
america gives us a look into what is next for him after his 24 year run at the company. we are 30 minutes into the trading day. .ulie hyman is here julie: we are seeing all major averages on track to close higher. a higher ratet than estimated. picture with the new home sales. month over month, rising at 0.7%. that is the annual pay. another positive economic data point so we are seeing in the stock market. i want to look at what is going on in the bond market. market participants are awaiting the announcement of who will be the next head of the federal reserve. the news broke that jerome
10:02 am
powell was the front runner. taylor is the other front runner here. we have been seeing an increase in bond yields today alone. here is the upswing when that news came out. we don't know until it is a done deal. the increase in bond yields is helping the financials as well. we had financials in the top spot with a 1% gain. definitely supporting gains in the market. technology also bouncing back. consumer staples remains in the negative because of earnings. if you take a look at our big earnings movers, let me start, if you look at proctor and gamble that is pulling down that consumer staples group. the company has fended off a proxy battle who tried to get a
10:03 am
seat on the board. the company is making some progress but not in other areas. sales met estimates, the company so weakness in some segments. has accepted ac representative on its board. the company made comments about the size of its board after it slashed profit forecast. sending shares down. the shares are not down as much as they were earlier. we will talk more about ge in a moment. and a steep drop, the company is going to halt a crohn's disease drug. analysts expected to be a blockbuster. they paint a pretty penny for it.
10:04 am
annual sales perspective to top $1 billion in 2023. big disappointment there. mark: down for the first week after the best run of weekly gains since march 2015. helping stocks rise today by a quarter of 1%. third-quarter operating profits better than expected. sales.unk second-biggest's truck maker. average, 10% of revenue, challenging rivals. the figure was 9.5%. look at the shares up by 7% today. most investors pointing to relative pe levels as an
10:05 am
attraction for european stocks this year. valuationslow though. that excludes financials in real estate. ..7% nearly 240 basis points over s&p 500. well about the 25 year average spread. that is the chart worth watching as it has been for the last weeks since the catalonia referendum. 1.19 percent. this will change over the week after narrowing. the spread widened in the week after the referendum. officials finalizing plans for taking control of the region. the catalans urging supporters to money from banks.
10:06 am
discussions advance and how they might stage a unilateral declaration of independence. today.ead is narrowing >> big corporate news in the u.s. for the day, ge shares are lower after the company posted lower earnings. the results underscore the challenges facing the new ceo who replaced jeff in august. he spoke earlier on the earnings call. >> the company has many areas of strength, it is clear from current results we need to make major changes. with urgency and a depth of purpose. our results are unacceptable to say the least. now, the senior machinery analyst from bloomberg intelligence. deals.ers
10:07 am
thank you for joining us. terribly disappointing forecasts. what does he need to do immediately to convince shareholders he has a plan? >> he is going to sales some assets. i don't know if he will sail the big ones -- sell the big ones. that is one thing he will do. he also has more costs. i think people want more than that. i think the asset sales. the dividends is a big question. he has to hold hands through that as well. mark: hasn't already been priced into the stock? either of you can answer that. >> what you are seeing the stock down today, people didn't realize it was as bad as it is. the resultsorries were not going to be great and that can put the dividend at
10:08 am
risk but i think what this showed is this is not good. a lot of of the business units are struggling. in oil and problems gas. nothing today is going to put those fears about the dividend directs. there is a risk you see the stucco lower depending on november when we see john flannery present his assessment of ge's business. people are going to be looking for more detail there. >> could it be reducing the share buyback, could that paper the dividend? >> it does help. that is what they are doing. there is still a shortfall here. you have pension contributions, standard expenditures. there's other calls on ge's cash. you can't just plug the gap here in there.
10:09 am
are there businesses going to be able to generate the profits to sustain this over the long-term? >> the other point, flannery said it up front, he did not say he was deftly keeping it. he said dividend was a priority. were no sacred cows. we are looking at everything. and growth and balancing the dividend. he danced around it. i think that is going to raise fears. mark: cash flow from industrial .perations is a key metric are we pleased we are no longer negative? >> sure. a positive is better than a negative. they were aiming for 12-14,000,000,000 dollars. now they are saying it is more like $7 billion.
10:10 am
that really caught people by surprise. they were not expecting them to meet goals but no one was expecting it to be as bad as this. >> he didn't get any positive vision. >> he said they have strong core positions. they are doing ok. they are well positioned. but that was a long-term story. people want what are you going to do now. i don't know how much patience investors will have after waiting so long. >> there is also not a lot you can do. you are stuck as an investor. their suggestions were do more share buybacks. none of that makes sense now. it's not clear what they are going to do or if this is going to be a perpetual weight in see, lots of restructuring. vonnie: does ge end of a
10:11 am
stronger company? >> i think so. i think that will be phases of it. probablyat are up for going to be sold. he's probably going to have to do several stages of this. vonnie: thanks both of you. bloomberg gas line publicist -- publisher. let's check in on hearst word news. topresident trump's priority tax reform has taken a step forward. the road is likely to get tougher. the senate approved a budget resolution already being signed off on by house republicans to allow a tax bill passed without democratic votes. there are concerns about higher deficits and middle-class issues. president trump's top advisers have nero the fair does feel for the next chair of the federal reserve. saying john taylor or
10:12 am
jerome powell great president trump has promised to announce a decision next month. theresa may says there are some ways to go and brings it talks. she wants the negotiation to move to trade by the end of december. she says the two sides are closing in on an agreement that there is larger differences on the irish border and an exit bill. spain's prime minister is ready to crack down on catalonia. an agreement has been reached with opposition parties on the measures he will use to take control of the region. meanwhile, the government is working out how it might stage a declaration of independence from spain. global news powered by 2700 120nalists and analysts in countries. this is bloomberg. gold dropping today.
10:13 am
the dollar gaining after the senate cleared a huge hurdle for president donald trump's tax plan. this is bloomberg.
10:14 am
10:15 am
vonnie: life from new york and london i'm vonnie quinn. mark: this is bloomberg markets. gold heading for a weekly drop. dollar gaining. renewed momentum to donald trumps tax plan. r.o.e. a step closer to tax reform? i know it is a long journey but are we one step closer to it? >> yes.
10:16 am
i suppose you could say that. it is not a sprint. it is a marathon. everybody has got to realize that. it does not mean something is going to happen next week or even by the end of the year. but it is a step in the right direction. that did he lay fears that the market may have had it can't get through the senate. >> the dollar is up for the fourth week in five. is it going to continue? >> i think it is. we saw the dollar get hit. it has rallied somewhat. now we're in the at risk on mode specially with news coming out last night. the dollar was under pressure over the last few days because of made me -- maybe the rhetoric about who is going to replace yellen. i do think momentum still is to the upside.
10:17 am
, we were at 1283 now. what are the key levels from here for gold futures? >> 1270 is a key support level. i think 1270. if we break 1270 there is a good chance we get down to 1220. >> what about oil? that surge we saw last week, fieldsg out, restoring in the disputed region, what next for crude? >> that is a town of one. i hate to say that but we have traded in such a narrow range. i do think the momentum is to the upside.
10:18 am
the range we are seeing here of 50 and a half to 54 is what we are looking at. the divergence now between west texas in brent is as wide as we have seen in a long time and that is leading to some u.s. stockpiles being drawn down. for u.s.such a demand because the west texas price is so much better. >> does it continue to widen? >> i think it does that may be in that seven and a half to eight dollar range as the top. it wouldn't surprise me if we see it narrowed to the three dollar, four dollar area. oil in a tight range but the spread is as white as we have seen all year. >> great to see you. have a great weekend. vonnie: great stuff. time for the latest bloomberg
10:19 am
business flash. a look at the top business stories now. weakness in the grooming and baby family care divisions. sales missed. and better margins posting the biggest sales gain in three years. the prices and revenue boost driven by aerospace and energy units. the company is preparing to spin its home products businesses. in japan, more revelations in the scandal involving fake data. anagers at one factory had text to determine the extent of the conduct. launched and's own internal investigation. mark: still ahead, artificial , watson computer
10:20 am
powering a new funds. we have the details next. this is bloomberg. ♪
10:21 am
10:22 am
mark: this is bloomberg markets. i'm mark barton in london. vonnie: i'm vonnie quinn. time for our uts friday segment. artificial intelligence continues its penetration into the asset management business. it will be managed by ibm's watson computer. here to discuss, the senior etf analyst at bloomberg intelligence. lots ofas been used for different things. this is the first time it has been used for money management. >> this is borne out of two
10:23 am
young guys who have a relationship with ibm. one is going to be watson. the goal here is to use watson's -- to mimic an army , going toh analysts regulatory filings, news reports and spitting out stocks to invest in. the firm will implement those stocks and rebound if they need to. it is an active strategy. >> i'm wondering how many stocks are going to be in it. you basically make a list based on your criteria. it is small, mid and large. , active share. that just means how much etf is
10:24 am
there. this is 98% active share. that is good. there is a lot of active share but it can be win big or lose big. that is what is going to drive into this. if it doesn't it will probably struggle. >> there is another new introduction that you have been looking at. that made headlines because it has been critical of passive investing. what is the deal here? >> it is ironic. they wrote the most in type rp in thed turning last five years. if the world was all passive that would be worse -- worse than marxism. ultimately they get passive. pages thought if the whole world
10:25 am
got passive. they can't overlook this. this basically will track the stocks that have outperformed. julie: it is not really passive, passive. they have picked vstoxx. >> true. it is rules-based. this is democratizing an area that has not been penetrated by etf's. they're looking to monetize this. looking on how to get more money based on research. timee may calls all of the . nobody ever follows out how those calls did. this is a big risk by them. if it underperforms it won't look that good. julie: eric, thank you so much. vonnie: still ahead, we take you to the robin hood investors
10:26 am
conference. an exclusive interview with alex , former head of private equity at kkr. following yesterday's open, and a rebound, we are seeing the opposite. we are seeing some gains. s&p 500 up 3/10 of a percent. last hour of the european trade. this is bloomberg. ♪
10:27 am
10:28 am
10:29 am
vonnie: live from bloomberg world headquarters, i'm vonnie quinn. mark: this is bloomberg markets. let's check in on bloomberg
10:30 am
first word. rand paul tweeted he is ready to cut taxes but made it clear no middle class taxes go up in a tax reform package. he was only republican to vote against a budget bill. the tax plan would break the deficit by $1.5 trillion. some republicans object to that. rex tillerson is promising to stay on the job for as long as president trump wants him. a new study puts a global price tag on pollution. $4.6 trillion. 9 million dead per year. -- itudy was published accounts for one of every six deaths.
10:31 am
shinzo abeelection, ruling coalition is expected to lose its two thirds majority according to a nikkei poll. the biggest impact would be to make it difficult for abe to revise the pacifist constitution. 2700l news powered by journalists and analysts in 120 countries. now toward developing an aspect of regulation that will force traders of european asset classes to handover personal identification such as passport numbers. for look at why we are joined by will hatfield. is this a seldom discussed
10:32 am
?spect of these changes >> most do not seem to realize this is in the rules at all. they are now because the exchanges are coming to them and saying we need all of your in the passport numbers same data from the people who they are trading on behalf of. there are three problems to this. philosophical and legal ones -- it's a lot of problems. >> the legal one is not potential. it is real. cannot set your passport number to a commercial entity such as a stock exchange. it is illegal. what will they do? -- >> what will they do?
10:33 am
>> they were not phase immunity as such. that is when it gets interesting. find theyxchanges just all have the data and decide to kick these people off of their platforms or will they be told by the regulators that it is ok. find out an acceptable solution. mark: what is going to be done with the rule breakers? >> there considering whether they should be phone -- find or thrown off. mark: that is drastic. what is going to be the effect of that? arms. are already up in >> they are. where it is serious a venue with a lot of customers
10:34 am
from switzerland or outside the european union. trading,ome asian there are quite a few of them out there. they didn't even know the method applied to them. vonnie: we will see soon if it will going to be -- they are quite comfortable getting their data. they are starting to collect at the end of october already. >> yes. over the next two months, and we're going to find out up to christmas the perfect time of year to deal with massive problems like this one. systemict about internalizes? not everyone is going to lose out. trade in as get to different way from everyone else. guess what, the passport
10:35 am
requirement rules will apply to the bank traders. they are going to hand that data over. but the fund manager and be,stor, whatever it might they will not have to supply personal data if they trade through the bank. vonnie: our thanks to will hatfield. a range of solutions for navigating, listen to the navigations. rules and returns airs weekends on bloomberg tv. ahead, speaking with alex, the former head of private equity at kkr. he just left the firm after 24 years. this is bloomberg.
10:36 am
10:37 am
10:38 am
mark: live from london. i'm mark barton. vonnie: this is bloomberg markets. trading lower today. ofs may reflect questions separate is calling for a withdrawal today. let's bring in abigail doolittle. >> political uncertainty in spain. we have conflicting reports about whether or not the withdrawal activity is greater than usual. it is hard to know what is happening. we will know more next week when the company reports that it follows the political uncertainty in this effort. of the move the
10:39 am
company's headquarters out of catalonia. this is a break from the separatists. sayings on the ground they are calling for the withdrawal. the bank is saying it is business as usual. we won't know for certain until they report the deposit updates. >> how does this political uncertainty that into the bigger picture? >> it is a little bit of a ripple. if we hop into the bloomberg we can take a look at this. shares are down in a huge way. from the peak to trough, lots of bad loans. but that is improving.
10:40 am
thatbought the u.k. bank is being helpful for the company. is at the bestio at 12.5%. all of this mark seems like an unwelcome distraction. over the last year the shares are up 35%. political uncertainty is something most investors don't want to have. >> thank you for that. in july kkr announced a big .anagement shake up they were promoted to newly formed roles of copresident and co-chief operating officer. another veteran of kkr left after 24 years of service. he joins bloomberg for an exclusive interview at the robin hood conference in new york city.
10:41 am
alex.m here with alex: thank you for having me. erik: almost $14 billion, now you have left kkr in our spending a lot of time here at robin hood. what is the story? have i was privileged to 24 great years at a wonderful firm that i consider my family. i'm at a stage where i want to build my own business. acquire companies or build a firm. looking forward to doing that while i am thinking about all of those options. timet to spend most of my on the main philanthropic
10:42 am
interests i have. that beforee about we get into the next phase of your career. what are you doing here? alex: i have been a member of the board for a number of years. evolution,ced the the growth, the capabilities this organization has which goes back for two decades. a number of people built the group. classk they are a best in organization fighting poverty in new york city. it is not a simple one issue cause. it is on multiple fronts and it needs multiple people, organizations, resources. robin has developed the best 200 of the best
10:43 am
in class nonprofits fighting poverty. hopefully we are enabling them to do a good job in those areas. time withspend my robin hood helping these nonprofit organizations. particular, i have been focused on the homeless initiative. i think i can see that with a degree of certainty. donated to republicans, i would like to know in addition to what you are doing in robin hood what do you want to see happen on the policy front? what is most important? obviously we can spend a lot of time on a whole bunch of policies. erik: what would have the biggest impact?
10:44 am
alex: as i learn more in new been spending my time, let's take the homeless problem as an example. roughly 65, 70,000 new yorkers who go to homeless shelters every night. 25,000 of those our kids. population our families. you think about everything that needs to take place. integrative solutions to bring inn the homeless challenges the city. you need the city government, you need the state. no one group can do this all on their own. , it is aer of policy
10:45 am
policy issue, a fund-raising issue. it is a group of people coming together to come up with solutions. to me it is a matter of how you bring these groups together. everybody well intentioned, doing their peas. that can reduce that number two amenable numbers. the answer to homelessness must be a big part of it. that, you need to provide counseling. you need to provide services. before that committee eviction prevention. print those services together on an integrated bases, to bring the aggregate
10:46 am
down and keep it down, and let people get back on their feet rather than we just brought the number down, and the number goes back up again. erik: tax cut's clearly are not going to alleviate homelessness. but do you believe tax cut for the wealthy will generate prosperity? alex: i don't want to get into policies on tax cut's erik:. but it is something you have to think about. >> of course. what we are blessed in this city, we have a very philanthropic group of individuals, organizations, in terms of capital, resources, fundraising and time devoted. at all of the people involved in robin hood and they time they spend, the energy they in newo it, that is what
10:47 am
york is a special opportunity to tackle poverty. all the things that go with that are going to have an impact. i don't think there is one policy, one issue that expands it. so much of the philanthropy comes from a number of people who devote a lot of time and energy, and money. what we want to do is expand that to include the private sector, city and state working together. they bring different pieces to the equation. that is where the real opportunity is. a great cause can convene all of these different areas together. erik: let me ask you what happens next. are you going to start a private equity firm? is it going to be something else in finance? >> i will keep you posted.
10:48 am
i'm thinking through all of that. the opportunities in terms of raising capital, it happens to a good time and environment for raising private equity. i feel fortunate there are a number of different options i'm considering. erik: is it more to be the founder? and would like to find .uild and grow the business it could be in another firm. and really expanding their capabilities. more likely it will be something that i built from scratch. on my own, with partners and investors. ofe of a long-term view investors. erik: henry kravis has had nothing but good things to say
10:49 am
about you. do you think they will back you in that after? >> i sure hope so. pioneers really been and great mentors to me. i would hope that we remain partners, in a different way. i have the utmost respect for henry and george, and my partners at kkr. you are out of the industry you can be clearer eyed about the challenges private equity faces. in some respects it has none. there are things the industry needs to confront. what is top of the list? alex: let's dissect that if i can. investors, big institutional investors, even individual investors are
10:50 am
recognizing the private equity deliveredt large has good risk-adjusted returns. decade. last which is been the most followed volatile. i think we start with the foundation the private equity has delivered significant returns. there are a lot of people who are either increasing allocations to private equity or coming into private equity. on the fundraising side it is a terrific environment for good reasons. the industry is more competitive. there are a number of firms competing at all levels. like in the industry that has delivered great returns, there has been a huge amount of talent.
10:51 am
it is a more competitive industry. the industry has evolved. ago you looked at what we bought this business. there was ask amount of leverage. doing the deal is the easy part. financing the deal is the easy part. the harder part is what you do with the business to create meaningful value? the industry has evolved in a positive way to deliver that. as a result what you will see is more repeatable returns. this is not just about we bought it low, sold it high, that is 20, 30 years ago. hopefully we bought at a fair value. we were able to create significant revenue growth.
10:52 am
expansion of the franchise. i really think the industry at large can deliver that. be betterthere will managers, top managers. i think that evolution needs to continue. what we are seeing is the industry getting more global. it is delivering returns in different industry segments, delivering the returns i am talking of from valuation and the businesses, as well as hopefully finding the diamond in the rough, low price you can pay for something. vonnie: optimistic about the prospects but clear eyed about returns. it is great to see you. alex: thank you. erik: now spending most of his time at robin hood, we are in downtown manhattan. more coming your way shortly. mark: thank you for that fantastic interview.
10:53 am
this is bloomberg. ♪
10:54 am
10:55 am
vonnie: live from london and new york, i'm vonnie quinn. mark: what a wonderful view. this is bloomberg markets. we are roughly 35 minutes until the end of friday session. we are up for the day, down for the week. we've had five weeks of gains before this week. today, the 30 years ago i have a view i'm not going to share until the top of the next hour. it is an incredible statistic i will share in five minutes time. the dax is lower. ,rogress on brexit talks
10:56 am
boosting sterling. some would say yes. percent for the ecb. will we get more details on the bank's intentions? let's finish with the bond board today. you'll gaining in london. in germany, spain, and italy. we will delve deeper into that in the next hour here on bloomberg markets. this is bloomberg. ♪
10:57 am
10:58 am
10:59 am
>> it is 11 a.m. in new york, 4:00 p.m. and new york -- in a london. from london, i mark barton. vonnie: i'm vonnie quinn, this
11:00 am
is the european close on bloomberg markets. ♪ mark: hero the top stories we are covering from the bloomberg and around the world. u.k. prime minister theresa may a helping hand from angela merkel in her cast -- in her quest to advance toward brexit talks. economy, jobs and fair work, telling us what this would mean for scotland. the search for the next fed chair could be nearing its end. president donald trump met with the current fed chair janet yellen yesterday, what would this mean for monetary policy at the worlds of central bank? the evil illusion in the pharmaceutical industry is extending to real estate.


info Stream Only

Uploaded by TV Archive on