tv Bloomberg Markets Americas Bloomberg November 7, 2017 12:00pm-1:00pm EST
vonnie: from bloomberg world headquarters in new york, here the top stories on the bloomberg and around the world that we are following. activist investor bill ackman failed in his bid right now at ats at adp.t se what it will mean for adp and for bill ackman. he joins us in a few moments. president trump continues his tour in asia and sends a message to kim jong un -- come to the table and do a deal. tax reform front and center on capitol hill as house republicans approved last-minute changes to limit the carried interest tax break. a look at what is an and what is out as the debate heats up. let's check in on the first word news. mark compton is with us. mark: president trump calls north korea a threat that is a danger to the entire world.
the president is in seoul where he met with the south korean president. he called on other nations to stop doing business with north korea. the president also said it's time for kim jong-un's regime to come to the negotiating table. in saudi arabia, the anticorruption crackdown is expanding. according to people familiar with the matter, banks are being asked to freeze the accounts of dozens of people who have not been arrested. so far, a billionaire prince, 10 other princes, and dozens of other foreign ministers and well-known businessman are in custody. british leader theresa may's ministers are taking the first step to making the country a global trading nation after brexit. they are rewriting custom laws that will come to force with the cave leave the european union. of priority is keeping hold 40 existing trade deals that the u.k. has with other countries. global news 24 hours a day
powered by more than 2700 journalists and analysts in over 120 countries, i mark crumpton. this is bluebird. bloomberg. shery: bill ackman is losing another boardroom battle. this time it's with automatic data processing. shareholders rejected the three board candidates put forward by ackman's firm, including ackman himself. vonnie is standing by right now with the billionaire activists . vonnie: this is the first proxy battle in the first five years. did you get any sleep last night? bill: yes, i slept well. vonnie: this is your first proxy battle since canadian pacific, which was a different campaign. tell us about this campaign. did you have a great strategy for what adp should do or was the campaign carried out badly? bill: i think we executed the campaign extremely well. the difference with canadian
pacific is that canadian pacific was a company that vastly underperformed the market over an extended time. it was viewed by a dog by all the shareholders. we got 90% shareholder support replaced seven shareholders. and itsk is beaten vastly underperformed its direct competitors. there's a lot of opportunity for improvement at the business. we ran a campaign on improving the company's profit ability and addressing their weakness in their enterprise. vonnie: would it have been better to decide for you just running for a board seat yourself? why the three directors? had: in retrospect, if i one direct, we would have one. the company did mischaracterize the outcome. i received 31% support versus eric fast, who ira ran against. the directors who received the most numbers of votes got on the board. what i wanted to do was get seat number 10 and get on the board. i got 31% versus eric fast.
however, eric fast got another 14% of shareholders withheld their votes on the management proxy card. it sounds technical, but the shareholders were basically voted for me. for those unfamiliar with the way the proxy contest work, this an enormous influence over the shareholder base. glass lewis give us their full support. iss said support builds elections, but do so by withholding votes against eric fast. the way we think about is that we have 31% of shareholders vote for me. 14% of shareholders support my election by withholding for eric fast. that is 45% of the votes cast between me and the candidate that would of got me on the board. whether you look at it as a 31% vote of support or 45% vote of support, that the huge indication that shareholders believe in the strength of our campaign. one last thing i want to point out is that we were one shareholder shy of winning. we did not give vanguard
support. i respect their decision, but vanguard was a swing vote. the notion that this was some kind of a landslide victory or a grand victory is completely false. vonnie: black rock supported you. bill: and a very permanent and long respected shareholder. there is no board of america that even takes a 31% opposition vote not seriously. seriousa very indication from shareholders that this company could be a lot more profitable and have a lot higher margins and needs to address the problems that it has in their enterprise. vonnie: lisa ellis was saying that this whole campaign was a win-win for shareholders because not only did the stock price move higher when he moved in, but it did only go down a tiny bit. bill: it's actually up today. the markets reaction was at the stock went down. i went on another network and
explained the vote outcome so people could understand the facts and the stock is now up today. why is it up? people believe the worthless we have with this company, the higher probability that changes will get made. the company has the next three quarters to demonstrate what they committed to shareholders. they won the contest fair and square, but they committed to meaningfully higher margins and watching a product to address their launches in the enterprise space. they had a very tepid quarter as lisa mentioned on your show this past quarter. they are expecting the growth to turn beginning the middle of next year. shareholders don't see those commitments met by the company, we will be right back there three quarters from now. months is a nominating deadline for the next nominee. vonnie: give over to speak some shareholders were angry -- just want to say that some shareholders were angry that you put that at the expense of some
shareholders, but you did a lot of work behind the scenes on adp. bill: i've not met or heard from a so-called angry shareholder. we met with as many shareholders who would meet with us. that is most of the top or spoke to most of the top shareholders. everyone said that we did incredible research on the company and it opened their eyes and lifted the veil on adp and helped them understand the business. a proxy contest is apparently healthy thing for shareholders and management teams because it gets everyone to focus on issues. the ceo went out and met with shareholders. we researched areas that were not as well-known and the company has a chance to address those issues. we want the company to succeed. my goal is not to win proxy contest. my goal is for the company to succeed. if this team and board of directors can get it done without more work, that's a huge win for us. vonnie: i guess you decided to go the proxy battle route
because the last time you did not go as activist and may be regretted that? as i mentioned, we have not run a proxy contest in five years. the last was canadian pacific and each case of them was that every case we saw directors like chipotle recently, boards have been very accommodating and open to listening to ideas. running as that i was proxy contest was that the board shut down. we had to wait a year before putting up directors. shareholders have been very supportive of this contest. vote oryou call the 31% 45% vote, which i think is the right way to think about it, eldause those votes withh us. eric fast, that was for vonnie: here's a quote from adp side. it has given us a better
perspective and we plan to continue a dialogue with our shareholders. have you spoken to carlos since it was announced? bill: i went to the shareholders meeting and i went over to shake his hand. we put our statement. we are not had a chance to speak. i very much like the statement that he put out. it's exactly the point i've been making is that the contest has the country to engage with its owners and the theme has been consistent. the company needs to make progress on margins. it is half of its direct competitors paychecks. if you compare them segment by segment, the company underperforms versus the competition. that message has been heard loud and clear by management and they have to come up with a new product to have a competitor product in their enterprise. vonnie: you have a 2% voting stake. do you plan on making any changes? bill: we have no plans to make
changes in our state to the company. we always make changes to stakes based on capital flows. if we have redemptions, we will reduce the position. the stock price moves up and down and we may make adjustments, but as for a dramatic increase in the stock aice, i imagine it will be very large stockholder for a long time to call. vonnie: have you had any calls from shareholders, any angry ones? bill: no. i think this proxy contest is a very important step to trading value at adp and i think investors will view it that way . this was a $98 stock before our involvement. today it's a $112 stock. if the company delivers on the promises they made during the proxy contest than the stock will go a lot higher over the next nine months. if the company fails to deliver, we mitigate the downside of the start because people expect us to run another campaign next
year and get on board of the coming. perhaps we should only run one nominee this year or we would not have gotten this issue of fiv iss recommending withhold. we asked the company for it to be clear for next year's meeting that there should be universal priorities so shareholders can pick which directors they want they want. you plan onpe w running more shareholders? bill: i hope we don't have to run a proxy contest. what we do overtime will get the company to where it needs to be. in yourif you believe whole argument or you do not believe in management unlocking the value, why stay in? bill: again it's all based on what management can achieve . the results will speak for themselves. if the company can make -- the results have been disappointing
the last 12 months. the business has promised investors that growth will return the second half of this fiscal year, which is the first two quarters in next year's calendar year. they are expecting a fairly dramatic acceleration and growth. they gave guidance for 6% to 7% revenue growth for the next three fiscal years with the first year being 2%-3%. the only way to get the 6% or 7% this for growth to dramatically accelerate for the first quarter prior to the annual meeting. if that's, we will get a lot of support from shareholders. my goal is not to get on the board. my goal is to make money for investors. the proxy contest as a vehicle to send a powerful management message. support, no matter how you think about it, that's a major vote of confidence from shareholders on our ideas. if you include votes against mr. fast that were intended for us, it was a near majority.
had we had one shareholder, it would make a difference. obviously i don't speak for any shareholder opposed to us, but we did hear from some that said we agree with all your ideas and your entire the right with what needs to happen, but we made a lot of money on the stock and we only to management to give them another year. let's give them more quarters to prove what they said in the proxy contest. thank you for making the commitments, but if they disappoint us, you will be right with us next year. vonnie: how actively you do with management over the next couple of months?, which of your time is it going to take? tol: we don't make calls management. it would be a very healthy thing for us to sit down with carlos and sit down with the senior team. cools frommperature of a proxy version contest, we also intend to have
the opportunity to sit with the board of directors. many of our investments historically, we have been quite active without being in the boardroom. in recent years, we have chosen and been invited to join many boards. we can be a very influential shareholder. by the way, it's not just us. lisa bernstein on your show talked about how this contest has raised a number of issues that every shareholder can now hold the company accountable. when carlos goes into a meeting with shareholders, the first question is how much progress you are making on margins? show us that in the numbers. the enterprise product that is what to win market share that you talked to iss about, when is that coming out? what is its functionality? show was a beta test of the product. time, but ie out of do want to ask one more question. we're mild -- will you might start focusing elsewhere now because you cannot be as
passionate about this as you were? are you want to the next thing? bill: that's a very important point. we have done a lot of work in its consumed 100% of my waking hours. now the ball is in the other court. it's really up to management and the board. they kept me off the board so congratulations to them on their victory. we will follow the progress of the company. we are building a stake in something new. not likely to be an activist investment. it's one that's interesting but more on the passive side. vonnie: in the u.s. or europe? bill: the u.s. economy. vonnie: which one? bill: that we cannot tell you, but this is a very important industry for us and we will see through. were not going anywhere. .onnie: fascinating there's no way you can give us more? bill: no. vonnie: but for now. congratulations on a hard-fought battle. that is bill ackman. shery: great interview and great
for pershing. u.s. treasuries nudging higher right now. the 10 year yield falling to 2.3%. investors turned their attention to fiscal policy. that is as the gop tax writers hammer out their plan this week. next guest says credit has gotten too expensive and ones that people are loading up way too much. the chief investment officer with $290 billion in assets under management. he joins me now. great to have you here. this is all to do with that search for yield going on. how much of an impact has that had credit quality? >> on the prices of bonds, it certainly had an impact. we talk about credit quality, the big event that has occurred in the markets impacting credit quality is the huge amount of stock buybacks that the companies have done it may have issued debt on the backside of
that in order to finance that equity by back. the search for yield has certainly been a driving force behind the allowance of all that extra credit that has been issued. shery: in order to allow those buybacks to raise dividends, leverage has been raised. ofn you are thinking investing in fixed assets come you think safety. how much of that dynamic has been affected by this? douglas: i think historically that bonds have meant safety. we like to talk about two different types of bonds. there are the safety bonds, which are u.s. treasuries and the like, and then there are the return seeking bonds, which are high yields and certain emerging-market companies. it's very dangerous if investors don't separate the return profiles of both of those two asset classes. they really are two asset classes even though they are both bonds. vonnie: in an environment where we are seeing flattening yield curves, would those be the right
way to mix them together in order to get steady income and at the same time reduce risk? douglas: generically speaking, we do not like letter curves. we are sitting here today and the markets are arguing about whether or not the fiscal thrust will actually occur or not. the same time we are having yields actually fall. the big element in the market today is the curve is flattening quite a bit here. shery: 68 basis points right now. take a look at the chart showing you exactly what happening there. ofare also seeing spreads net positions between two and 10 affectinguries are leaders and they are betting that the yield curve will get even flatter. douglas: again i don't like that as a barometer of risk-taking. for us, particularly when you mentioned earlier the credit-rating marketplace, it's to be long credit. crowded is to be
short duration. we are asking clients to think about that. liquidity is still somewhat challenged in the bond market and you don't want to be around crowded trades. to balance the duration risk along with the credit risk because those two are negatively betweened, so i balance those two in today's markets when the credit spreads are so expensive to us, it's a much better way to play the market place today. what about outside the u.s. like china or emerging markets? douglas: the big thing in europe is that the ecb was a bit more dovish than expected. they did in fact announced that they are going to increase the pace of tapering. they are going to go from 60 billion a month to 30 billion and their asset purchase program. they also indicated that will go out until september. obsessed withen preventing their equivalent of a
taper tantrum. and rightfully so. mario draghi and his team have done a masterful job. at the same time, are we getting to a spot that if a taper tantrum does come it is going to come in spades? this growth if increase that they are going through right now leads to a little bit of inflation and we have to some way i backtrack on that dovish commentary? that to us is something to keep a very close eye on in europe. shery: a conundrum. douglas peeples, thank you so much. vonnie: still ahead, president donald trump's promise of fire and fury in north korea has taken a call for a milder turn. he's asking for kim jong-un to come to the table to make a deal. how far will the present go to negotiate. we are asking those questions and more. this is bloomberg. ♪
shery: welcome back. president trump continues his asian to her in korea today. at a press conference in seoul with the south korean counterpart, president trump struck a different tone from his previous fiery rhetoric. he says he hopes to god that he does not have to use the u.s. military. let's bring in the ferry, bloomberg's team leader for national security, who joins us from washington. i don't get it. the president -- does president trump want to talk to north korea or not? bill: it depends on which month or week you are talking. it was just amount of month ago that secretary of state rex tillerson on his way back from south korea was criticized by the president directly for his efforts to talk about a channel of condition with north korea . the president said stop wasting your time.
we will do what needs to be done. today in the region itself, he thinks that north korea should come to the table. at the same time, the u.s. does have three aircraft carriers operating in the western pacific so there is a tough stick behind this softer approach, but i think the u.s. is looking for any sign that there may be some way of reaching an agreement with north korea to have talks to deescalate what would've been the highest tensions in decades on the peninsula. vonnie: have you heard from any north korea experts? we know obviously there was a war of words over twitter between the two leaders recently with one calling the other little rocket man and a north korean leader saying that president trump was a dotard. this could all change in the course of a few minutes if kim jong-un does decide to meet with president trump. bill: right. i think everything is fraught
relationship to change with a tweet or an official comment from the north korean. one thing we try to do is look at the actual actions on the ground. even when tensions got very high, there were no plans for instance to try to evacuate u.s. citizens from the peninsula. we do not see people who look at the north korean military, they did not see movements of troops or missiles. that was despite some of the noise, you did not see a lot of underlying movement. in recent weeks we have seen positive signs. the north koreans released a fishing vessel that they had captured. that was seen as a little bit of a goodwill gesture. i think the president perhaps deciding not to go to the zone on thed t border of north and south korea was another bit of an all of ranch -- al olive branch. it depends on how long this
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
headquarters. >> this is "bloomberg markets pure co-we are seeing u.s. stocks accelerating losses. the dow is falling after five days. 500 down 2/10 of 1%. this is after the 14 day rsi. , falling 4/10 of 1%, curving. two days of gains. investors are focused on politics and tax reform. president trump is in asia. a ceo has quoted being skeptical of bitcoin. he said, the only reason people would buy that point is to make money, fueling speculation of a bubble. but can we afford to avoid it?
thank you for this great story. >> the interesting thing, we saw these comments last week. they had a huge conference in new york dedicated to cryptocurrency. agenda there was a number of employees that have cryptocurrency. this is one step further than watching -- blockchain. banks have committed to blockchain, but people have been hesitant to embrace the digital currency. >> but they can't avoid it? that.ave to get into they have to have employees focusing on that and answering clients' questions. >> clients are asking about it.
300 people were at that conference. this is not the only situation. when diamond said bitcoin was a fraud, they had a conference in san francisco that same day with a bunch of private clients, hedge fund managers, that were wildly important. if clients are asking about it, how do you ignore it? >> the technology underpins bitcoin. one can be speculative and the other may not be. >> that is a really important differentiation. we do see people with cryptocurrency backgrounds here. the head of block chain in cryptocurrency strategy is focused in the space. it is cryptocurrency which is one step beyond blockchain.
this is for clients. they haven't gone so far as to say, we're going to be out there trading bitcoin. it is fair. many banks have concerned about anti-money laundering issues. bridgepoint futures are being introduced by your end. seeing a new infrastructure emerging? said thenalysts investment in infrastructure was emerging. this aare calling watershed moment in the industry. you see the price growing higher and see more interest in the market. vonnie: were you able to do a tally of what banks are getting involved? sonali: a great question.
there are different thresholds. most of the major ceos have said something. another big moment was early last month, when it was reported that goldman was considering a way to trade bitcoin. for the most part, individual hedge funds, but not get institutional investors. vonnie: what happens if bitcoin goes to zero what about the other cryptocurrencies? sonali: we haven't seen that in this market so much. with an untested market, that is what keeps the biggest players from getting in. vonnie: would there be a systemic shock? a lot: it is definitely of people that are trading, but systemic is a big word. banks and insurers and all of that, there's definitely a
community dedicated to this. andnow more are coming in it is seeing who is going to be regulating it. but the ceo of credit suisse and analysts have said this is the key component. shery: think so much for that. -- thank you so much for that. let us go to mark crumpton for the first word news. election day for two states could test the political influence of trump. thes in virginia show lieutenant governor has a slight edge over the former advisor to the -- to george w. bush. results could get an early indication of how that's november's midterm elections could play out. production in north
america will grow faster than expected in the next four years. producee industry will 7.5 million barrels a year by 2021, 56% higher than opec forecast. cuts triggered an oil price rally that helped american producers. the first country to give women to vote now wants to close the gender pay gap. new prime minister says her government plans to achieve pay equity for women in public service within four years. swept to government power last month. global news 24 hours a day, powered by more than 2,700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. shery: coming up, investors are bracing for a third quarter results.
we shall have the stock has performed since october 2015 -- we show how the stock has performed since october 2015. it has gone up 69 690% since then.- 690% since this has gone up almost 400% this year. involved in the company since she joined. she has become the face of the program and appeared in all the advertisements. it is all about her. has been shown exercising, stretching, running, she has been very important to this brand. so andl continue to do .e a part of the advertisements shery: i may register for that.
it can't just be her. there must be something else. >> she has been a really big part. but the company has been investing heavily in tech. in its marketing campaigns -- the meetings have changed. they are trying to bring their programs more up to date. they have a digital platform. to of that contributes growth. we have seen that paying off in the subscriber numbers. they have also brought in a new ceo this year. she joined them in july. of thisbeen a big part turnaround. they are expecting a profit as $1.83, from the previous
forecast of $1.67. the profit confident will continue into next year. shery: are they in asia? >> this seems an american thing. our stock of the hour. thank you. has had a rocky road since its march ipo. shares are trading below its ipo price of $17. the company may be in store for more pain. it is expected to report an adjusted loss of $.13 per share in revenue of $235.5 million. investors are watching for signs from its user engagement and at prices. bloomberg's in
editor at large, cory johnson. snap, fascinating technology. beloved by its young users. you would think advertisers would be attracted to this product, but they have had troubles with user growth. epice: there has been this battle between instagram and snap. there have been words that instagram is copying everything snap is doing. why would you bank on snap? cory: you can see it in the results. you can see the instant slow down in user growth. we have a chart that shows the percentage of user growth on a sequential basis. if you look at user growth in this way, it was growing at
double digits until be surpassed -- september quarter of 2016. the instagram story comes into existence and snap's growth falls. they need that number to get higher and they need more users and more revenue. shery: what is happening with the ad is this? they are getting headwinds from automated selling channels. there used to be all these fantastic magazines were advertisers were going -- where advertisers were going. we are seeing the death of the magazine business and the advertising business sending all of its money to facebook and google. everyone else is struggling. twitter is struggling. "sports illustrated" is a shadow
of what it was. snap's ability to draw advertisers has been difficult. ers are really important to advertisers because they have yet to pick the brands they will use for the rest of their life -- young people. but we haven't seen the numbers. vonnie: they don't have all that much discretionary spending. cory: but they will. this is why advertising in sports is so important. a lot of young men are picking brands for the first time. what an 18-year-old picks people use when they are 39 -- they will use when they are 39. snap had over a dollar per user last quarter, revenue fell.
revenue purchaser is so important. they have to get that dollar for dollar high. simple -- ifis as you look at the kardashian apps, isn't that what they depend on? cory: the ongoing cost of our into the is interesting -- research and development is interesting. development in technology has happened over a multiyear cycles, traditionally. those things took a long time to develop. the research and development costs were bacon. -- were baked in. snap is more like a videogame company or a hollywood studio than a technology company. if some of those hits fail, there is a greater risk to investors. shery: we don't use snap at all
in asia. instagram or twitter. cory: get with the program, asia. shery: thank you. vonnie: it is time for our latest bloomberg business flash. the basketball europa league is coming. -- euro league is coming. it is 20 facebook and looking to tap the sports trading market. joining facebook and looking to tap the sports trading market. >> will see more partnerships and content creators and those who own content. there is a link between fantasy sports and content consumption. --ry step you see shows every statistic you see shows fantasy sports players want to consume content. general motors is
offering a $5,000 nationwide discount looking to purchase the cattle like escalated in 2018. it will apply to buyers trading in any 1999 or newer ford lincoln model, as it rolls out the first significantly redesigned navigator in 15 years. this also gets a general motors and estimated ilion dollar pre-tax -- billion dollar estimated pre-tax edge. shery: we also break down shale oil's growth. this is bloomberg. ♪
breaking news on goldman sachs. more changes in senior positions. goldman sounds has announced gmelich and esposito to co-coo roles. we are getting a memo that the fixed income trading changes for runer -- schleiser will slow credit and mortgages. we will have more names for you as the ever progresses. shery: shale oil production will power ahead after production cuts boosted prices. the reports released this morning outlined outputs soaring to 7.5 million barrels a day by 2021. the forecast isn't 6% higher from a year ago. not everyone is convinced.
opec's announcement doesn't necessarily reflect the capital nature of shale drilling. this is probably a little more optimistic than reality. shery: we are focusing on u.s. shale all this week. we have our colleague to break it down. great to have you here. >> it was interesting. their outlook for north american shale, pretty much the united states, rising by more than 5.1 million barrels of oil a day. iny did say it would peak 2025, which is interesting. until then, it caps how much the market needs from opec. is that true, are we going to
see this kind of a slow in shale production? there technological or geographic constraints that will impact reduction growth -- production growth? a key part of this is technology. you wind up saying you have so much technology, it is going to get cheaper and easier to get shale. but if the technology is going to cost us so much more money, you will not get the kind of returns you need. to the guy you go to if you need to technology and here is what he had to say. average, the tight curve on an unconventional reservoir is about one million barrels. the permian basin produces 10% of those reserves naturally. if we can boost that production barrels, you0,000
can see the return on that additional 500,000 barrels is the highest return of any barrel they will produce. >> we were talking about pioneer natural resources, one of their clients. if you increase the recovery rate of oil by a few percentage points, that is 500,000 barrels of oil a day. alittle technology can go long way and we are in the space of execution in the oil markets. shery: this is what you are focusing on? >> yes, thank you. i pay everyone to be on this show. we have "the next shale revolution" at 9 p.m. the first part is about the billionaires who had no money and were like, this will work and didn't. -- and did it. big oil is getting back into the
game. thewe take a look at environmental and regulatory issues that could come out of this. the last portion is, can you take the technology and the experience you have learnt in the united states and take it to argentina or russia and australia? that is the key to see how explosive this can get. oil, above $57 a barrel. you must be getting notes from people. >> take a look at the bloomberg terminal that shows you the curve. orange is where we are now. the green line is a few months ago. shale producers are hedging. the curve is still really low. vonnie: thank you. reminder, on thursday join her for an hour-long special of the meteoric rise of shale.
at 9 p.m. eastern. shery: don't miss a new weekly show at bloomberg. "bloomberg etfiq." hosted by scarlet fu and is the first show that solely focuses on the etf. vonnie: you can catch all of our interviews on the bloomberg at tv . you can go back in time and watch live. more markets, next. this is bloomberg. ♪
hong kong. >> at the top stories we're watching. president donald trump sends a strong message to kim jong-un into neighboring south korea. and tax reform under the microscope on capitol hill. house republicans are approving last minute changes. a look at what is in and out. elect ania, voters will new governor today. how will the selection shape next year's midterms -- this election shape next year's midterms? we will speak with former governor george allen. ♪ president trump continues to tour north korea -- south korea