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tv   Bloomberg Markets Americas  Bloomberg  January 2, 2018 2:00pm-3:30pm EST

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scarlet: we are live at bloomberg new york headquarters. here are the top stories we are covering. old a new year but the same sticking point for president trump and congress. what will get done when it comes to issues from immigration government spending? we look at the prime opportunities with morgan stanley's chief u.s. equity strategist. plus is amazon's next target target itself? gene munster says it will happen this year that doesn't make sense for either company? we've got u.s. markets closing in two hours time. we got a rally today. once again we are seeing the divergence that characterized late november or early december. outperformance dwarfed
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by that of the nasdaq as it is rising more than 1%. tech shares accounting for a decent amount of the game. the gains are relatively broad-based as people get back to work today. among the fang stocks helping account for the rise today we've got netflix on the rise. we also have some of the content and broadband providers on the rise as well. disney, dish, discovery communications and charter communications. mccrory looking at the media landscape for this year emphasizing the idea that content is king and that some of these content creators are going to do better. fox buying more content. various eitherer of the pipes,
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providers of the access to over-the-top networks or to the providers of content like discovery themselves. media seeing a pretty broad lift in today's session. one group that is not on the rise of the pipes, providers of the today, insurer. todaye kbw out with a new cutting all state to an underperform saying that companies margin expansion story is just about played out. looking atso decelerating rate increases. that is something that could be an issue for others in the industry as well. finally, bitcoin kicking off 2018. continuing to talk about this big story. this is after the wall street journal reported that peter taken amain fund has hundreds of million dollars stake position in bitcoin. you can see bitcoin trading higher by 7% on the session. i should mention as well we had bitcoin futures getting underway last month and the gap between the futures and the underlying has actually narrowed quite a
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bit over the past couple of weeks. julia: let's get a check on the first word news with mark crumpton. >> president trump will continue to withhold $255 million in military aid to pakistan. the white house will review what it calls pakistan's level of cooperation in fighting terrorism. the president tweeted at the has given pakistan more than $30 billion in aid and gotten "lies and deceit in return." there were protests across pakistan as a result and pakistan's foreign minister tweeted that the country would make clear the difference between fact and fiction. a potential effort is underway to change the course of america's longest war. the top u.s. commander for the middle east is pushing for more aggressive stance in afghanistan. military to afghan increase pressure on the taliban in the slow winter months
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leading to a spring offensive. the u.s. has been at war in afghanistan for more than 16 years. israel's parliament passed a law today making it more difficult to divide jerusalem. impede peaceould talks with the palestinians. the new rules requires a super to approve any land giveaway. by aaw can be overturned simple majority vote. the palestinians want east jerusalem as their capital as part of any deal. 2017 was the safest year ever in the skies with major airlines worldwide reporting no fatal accidents. saysutch consulting firm there were two fatal accidents involving small regional planes overseas. that works out to one fatal accident for every 16 million flights. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries.
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i'm mark crumpton. this is bloomberg. julia: january shaping up to be another hectic month in washington. there's a looming deadline for funding the government and president trump is focusing on new parts of his agenda as well as old. joining us from the white house is kevin cirilli. happy new year. that were putes on the back burner to get tax reform done at the back end of last year. one of the things that came up in the press weekend was immigration and the suggestion from the president tweeting that if you want to get a solution going toreamers it's cost you a mexican wall. tell us more. new year, same tweeting from the president. earlier today the president tweeting out about daca ahead of the generally 19th deadline for lawmakers on capitol hill to pass the partial government funding bill in order to prevent
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another government shutdown. mitch mcconnell says he believes republicans have a bit more time after that genuine 19th deadline but you are absolutely correct. democrats are united in their opposition against any additional funding for bolstering security along the u.s. mexico border a.k.a. the wall. that said president trump has made this a key campaign point as well as hammered this point home throughout much of his first year in office and his tweets earlier today indicating that he's not backing down. then you got the battle between republicans and democrats. i'm interested in the battle within the republican party itself. susan collins had extracted promises on bills to restore subsidies for co-pays and deductibles and reinsurance programs to help insurers cover people with chronic illnesses. there is concern that the house might not go for this. >> they are not going to go for this. have spoken with several sources
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who suggested just that. all of this to be continued as we get into next week when house members will return home from their prolonged holiday vacation. the senate is in session this week. infrastructure something that president trump has really hit home on i can tell you that the washington examiner just within the last 15 minutes reporting that the house infrastructure committee chairman bill shuster is set to retire at the end of this year and he is banking that infrastructure will be his high note to go out on. many republicans including the freedom caucus are eagerly awaiting details about what exactly an infrastructure blueprint from this white house would mean. in addition to the $250 billion of allocated funds that they have allocated in their budget. on the issue of additional resources needed for infrastructure at a time when many republicans are calling for additional resources and the national defense community -- it
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looks like infrastructure might he a bit controversial. even more controversial than the looming fight on immigration. julia: is it possible? finally overshadowing. always lingering in the background is the rush investigation. endwhite house said at the of last year it is wrapping up. it is coming to an end. we have an end in sight in 2018? republicans have really ramped up their criticism of the investigation and the institutions responsible for this investigation as a whole within the last month. i anticipate based upon my reporting that that will continue. the second point i would make is that no, this is not going away for this white house. the court dates are going to keep continuing. we saw over the past seven days the back-and-forth of the president's legal team turning on several of the folks that have made deals with mr. mueller and i would anticipate that continues as well. the developers with george
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.apadopoulos and general flynn fascinating and a preview of what's to come this year. scarlet: we just saw a headline. senator orrin hatch set to retire at the end of his term. is this a surprise? julia: another one. >> not a surprise. where this is headed is whether mitt romney throws his hat into the race. he is very much considering getting into that race in utah. would really suggest that mitt romney the former presidential republican nominee from 2012 would align himself with the likes of other republicans in the upper chamber who have been critical of this white house including people like senator jeff flake, bob corker. that is not a good thing for this president who i can tell you from my days on the campaign trail has a very very interesting past with the former
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governor, mitt romney. julia: kevin cirilli, moving on. combine all of this. what does all of this political machinations in d.c. and the agenda of the tax overhaul mean for the markets? , you had mentioned the market would be at its top the day the tax bill was signed and so what we're going to see this year is a tradable top u.s. equities. a couple things happened to our thesis. the tax bill came sooner and it was a little bigger. that could carry us through our original target towards maybe 3000 if things get out of control. we got to keep in mind that if we get a move to 3000 that's not going to be the same quality that we had this year. people are misconstruing that. people seem to be more optimistic and think it is a lower risk market. it's actually a higher risk market is the quality of the
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earnings is going down, not up. earnings are going up because taxes are being cut. my guess is that costs are going to be going up as well. your overheating and economy that's already running at full employment. energy costs are going up. that means operating margins are probably going to peak. margins are going down. that's a lower quality beat. last year was all about earnings going up because revenues were higher. multiples expanded this year because everybody figured out the taxes were coming. the question is do multiples need to contract this year as the earnings actually come through. our guess is that is exactly what's going to happen probably in the second half of the year. scarlet: do you think investors analysts and company's have a good read on how the tax overhaul will affect their bottom line? >> no. this is complicated stuff. scarlet: it's not a postcard. it's goingorations
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to affect their behavior. they may decide to share some of this with employees. some of that might be politically motivated. of this may actually fall to the bottom line. this is not going to be crystal clear until the middle part of the year. sentence your first you said out of control. never haveyour note we witnessed such a high gross leverage by longshot at the funds.- equity even at the contours of the rally you are concerned by leverage. >> optimism is high. institutional investors are there. they are playing with both hands. are not.vestors retail investors still could come into this market. that's plenty of fuel.
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we don't know for sure but my guess is they will come in in some size. i think the individual investor is permanently scarred from 2008 and 2001. scarlet: which might explain why they are flocking to things like the coin. up next, from a flattening yield curve. does it signaled looming recession or something else? from new york, this is bloomberg. ♪
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julia: this is bloomberg markets. i'm julia chatterley. scarlet: and i'm scarlet fu. mike wilson is chief u.s. equity
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strategist at morgan stanley. you pointed out in your notes that the yield curve has been flattening for years yet it deals like people suddenly started getting alarmed about it in the second half and specifically the fourth quarter of 2017. >> they were nervous about growth slowing. a flattening yield curve is usually a sign that the economy is getting better. now it is getting even flatter but the market is going up so people are starting to ignore it. typically the market does well until the yield curve inverts and then there's time after that. a flattening yield curve is usually about economic strength so i don't think there's a problem here yet but we are moving in that direction. the beginning of the flattening. this has been three years in the making. julia: you are talking about a negative yield in the fourth quarter of 2018. do we need to worry about that? equities can continue to rally beyond that. >> the second half of this year
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could be a problem for equities and the inverted yield curve could be part of that cocktail. i don't think most folks think it's going to fully invert in the fourth quarter. we will start to see rotations in the market that are more defensive in nature. hiking --l they be stop hiking to prevent that? >> that is never happen in the past because the fed has to do the job of raising rates. let's assume the yield curve inverts. what is probably happening in that occasion? we are probably overheating. on employment below 4%. labor costs are probably coming back. ignore is not going to their job. drive us into recession on purpose. they never do it on purpose. they are just doing their job. that leads me to a
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aestion about bitcoin question about consumer behavior as a result of the rally and people who have done well. >> this is an overlooked risk. bitcoin is big enough. it's a $400 billion market cap. not to mention the other cryptocurrencies. you have essentially created $400 billion of wealth out of thin air. it does affect behavior. it's a wealth affected. no different than house -- housing going up. some just felt richer and that changes behavior. there's also macroeconomic impacts of bitcoin because of the mining. when we do mining of bitcoin it uses a lot of electricity. uses as muchay it as 3 million households today of electricity. that's affecting things like ,ndustrial production
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semiconductor consumption and all of the processing power required to do that. if bitcoin were to really correct i've got to believe it's going to be a negative knock on the effects of the consumer economy. ,carlet: not just in the u.s. globally as well. there's an assumption that bitcoin is a rich person's game. i don't think that's correct. the statistics that we have seen suggest that the average account size in bitcoin is $21,000 and run-up toer the that's pretty small numbers and that suggest there are a lot of very small players who potentially would be affected by the wealth effect.
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be affected by the wealth effect.
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scarlet: this is bloomberg markets. i'm scarlet fu. julia: and i'm julia chatterley. let's focus on the fang stocks. we are with mike wilson, morgan stanley chief u.s. equity strategist. these guys are responsible for just under a quarter of the market cap gains of the s&p 500 in 2017. what drove those gains and will it be consistent to what drives those stocks in 2018? >>these guys are responsible for just under a quarter of the market cap first of all, fundam. earnings growth has been spectacular. this is like the 90's bubble where the multiples are really out of control. is an underlying fundamental driver and it's an earnings story and is powerful. the other factor is we have been in this world of qe which means growth is scarce and anything that has organic secular growth .ike this people wanted to buy it's a combination of the two.
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there are some things that could happen in 2018 that may change the suspicion that they can continue to grow at this rate. some of them are regulatory. some of them are the migration back towards value stocks and things geared towards global growth which these things don't need. and just capital concentration. a lot of the performances come from these stocks because people own them. they have driven their dollars into these investments. there won't be any balancing out. scarlet: apple you could say is a value stock and you have made the point that we lump these companies together even though they are pretty disparate on their own. >> apple is unique in that group. that would be the fang with a aa. is note single-a apple in there. then you are talking about the high multiple part. negativeay anything
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about the fundamentals of these companies. there are extremes in terms of investor positioning and the growth we have had. i don't think there's a bubble or anything. the likelihood of them outperforming in 2018 like they did in 17 is very low. scarlet: they have gotten a lot larger. that momentum has driven a lot of gains into them. wouldn't they be more vulnerable to a downturn or recession? when we get a bit of a pullback wouldn't they be more vulnerable than in 2017? >> that is one of our views which is a lot of investors in these stocks do not view them as being economically sensitive because they are secular growers with their own product cycles. we did some work on this which suggests all of these stocks are predawn sensitive to economic growth and the consumer. when you have the next recession in the united states -- there will be a recession. becausebe consumer led
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that's how recessions happen. i have to believe these stocks would go down more, not less. julia: watch the price of bitcoin at that point. how else are investors going to make money? overweight technology stocks as a broad group. technology stocks is a very diverse group of stocks. we are neutral to slightly overweight technology stocks as a broad group. technology stocks is a very diverse group of stocks. the secular growers. it's not just those. it's the high multiple cloud computing stocks. it's a whole plethora of those type of stocks. there's another bucket called the beneficiaries. the tech stocks people don't really want to know. to do well continue because people are spending more on tech. then there's the semiconductors. those are probably the most vulnerable of all three of those simply because they are the tip of the spear. as the economy peaks sometime in 2018 which is likely those
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will be potentially more at risk. wilson. thank you, mike julia: still ahead, frigid cold hits much of the united wilson. states but how is it impacting the natural gas market? the commodities close is coming right up and this is bloomberg. ♪
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♪ >> from bloomberg world headquarters in midtown manhattan this is "bloomberg markets." markets are closing in new york.
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we are focusing on natural gas today with arctic temperatures hitting much of the united dates. as you can see from the map, frigid temperatures have been impacting much of the eastern and two thirds of the country. well into the soft with temperatures in north florida barely topping 14 degrees fahrenheit, in texas, barely hitting 30 degrees. cracking 10ly degrees today. >> pretty incredible. with this weather, markets are using this chart which shows theral gas consumption highest level since the winter of 2014. yes, it is freezing or finally, a look at oil today. breaking due to $60 per barrel more. its highest in more than two years. are notests in iran
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impacting production as yet. >> it is freezing but the show must go on. let's get a check of the with markat this hour crumpton. mark: senator orrin says he will retire after four decades in the senate. in a video posted to twitter, the longest-serving republican senator said every good fighter knows when to hang up the gloves and for me, the time is soon approaching. the 83-year-old hatch is a steadfast conservative who is chairman of the senate finance committee, which oversees tax policy. it opens the door for republican mitt romney to run for a seat. to the middle east is on. after arab leaders in egypt denounced for recognizing jerusalem as the capital.
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people in iran are finally acting against what he calls their cruel and corrupt government. the president tweeted about the largest protest in iran since the disputed 2009 election. therote the iranian people leader blames the protests -- which he accuses of meddling with the country passes internal affairs. the upcoming winter olympics. kim jong-un's regime agrees, it would be their first meeting since 2015. south korea is hosting the olympics next month. the north korean leader has sent a delegation there. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i mark crumpton. this is bloomberg. julia and scarlet?
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scarlet: let's get back to the breaking news. let's start first with how this finally settled the question of will he won't heat. herrick -- steve bannon and encouraging him to run for election once again to prevent mitt romney from coming and perhaps running for election as senator. >> that is right. it has been a question on many's minds. he served for more than 30 years, first elected when jimmy carter was elected. currently chairs the senate finance committee. there will be jockeying, i expect, for that physician. senator ron wyden would be the next chairman of that committee.
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this is huge news and it opens the door for mitt romney to run for that seat. there had been a lot of rumors and a lot of chatter about it. see like many people for a decision. there will be a lot of notulation about whether or mitt romney will jumped into the race and he may be the favorite at this point. julia: explain why the white house would have preferred orrin hatch rather than perhaps mitt romney running for a potential .enator position here noteworthy headlines were the tensions between these two gets people. like a dog, wasn't that the phrase the president used? just talk us through this, why the relationship going forward could become more contentious? >> you answered your own question, the relationship between president trump and mitt romney has been a frosty one to say the least. romney was enormously critical of candidate donald trump, tried
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to encourage republicans to go to extend lengths from winning a nomination when he was all but a shoe and in the primary season. he described him as unqualified for the presidency. their critical ways. we know this about president trump, that he does not take kindly to criticism especially not from his own side. the white house including president trump had encouraged hatch to run for reelection. he was not only supportive of president trump but effusive in praise, calling him the greatest president he has served under, at least one of the greatest. it is one reason, certainly, the trump wanted him to stay in the seat. the two of them got a major accomplishment done together. hatch was one of the key authors and he andbill president trump got to the end
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of 2017 with a significant legislative accomplishment there. it is partly a matter of -- of comfort, too. you look at some of the voters poll numbers for orrin hatch and he is increasingly unpopular here, or is it a democratto suggest could win the seat anyway? utahlikely, i do not think is on the list of seats republicans will worry about in nevadaction, topped with , and open sea for jeff flake in arizona, open c for bob corker in tennessee, perhaps another seat and another in mississippi depending on what john mccain and subduing. -- and's up doing. i do not think republicans have a lot to worry about.
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scarlet: thanks for jumping on camera on us following breaking news that hatch will retire. coming up, a bullish bang. why jean thinks the retailer takeover target by, who else, amazon. this is bloomberg. ♪ this is bloomberg. ♪ by, who else, amazon.
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scarlet: this is "bloomberg markets." i am scarlet fu. julia: jpmorgan has raised fiscal numbers above consensus. abigail doolittle he is here to talk about the fact that it investors are truly lapping this up.
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abigail: there is a glimmer of hope. nowhere close to where they were back in 2012, stocks are down from their peak. abigail: there is a glimmer of hope. analysts coming out in raising numbers above consensus. that is being seen as a bullish stirring. but still neutral. what could really be happening here is a bit of a short squeeze. g #btv 7177. ofhave this, a small part the death spiral. we have this increasing 46%. that is incredible, we one of the most highly shorted stocks that has a well-known name. that is a big piece of what is happening here. scarlet: we cannot get let you get away with the technical aspects. abigail: the chart is in line with catching falling ice. #btv 2483 and it may suggest there is something bullish happening here in the
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near to medium term for the stock. let's separate the short from the stock. it does not mean things will turn around for jcpenney even though they put out a positive quarter more recently. what we are looking at over the last nine months, but here we have areas of congestion. today on the breakout, we are starting to see the buyers on the near term, it suggests the entire area of congestion, the battle between the bulls and the bears, will go to the bulls. above about four point $75, a less than five dollars stock, it suggests we can see the stock easily gulf -- go to five dollars -- from five dollars to seven dollars. big risk, big reward profile, perhaps this is an interesting chart to take a look at. julia: does it come back to store closures question mark abigail: that could be. assures of other stores such sears could help jcpenney but this company does need to close some stores.
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the map tells the story. jcpenney is everywhere and there is very little likelihood there -- now between closer to $13 billion. they have already closed 127, 138 share stores, but it could need to go deeper than that. you look at the map and you could make the case they are can lysing themselves. remarkable that is the map. abigail: agreed. scarlet: thank you for the chart and the map and the map. we will stick with retail because an analyst protects amazon will acquire target this year. he estimates amazon would have to pay about $41 billion for a target. he spoke to bloomberg radio earlier today. quite the timing is difficult. seeing the combination in the value of it is easy.
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is not just a revenue grab it would be one piece of the demographic, that the mom demographic is critical to how amazon thinks about their business. sarah joins us now from washington. it is a demographic grab. why would a combination of amazon and target make sense? some of theirell biggest problems to her target really lacks in online penetration right now. only 4.5% of total sales are digital. they will need to turbocharge survive the will digital era. ofzon is really in need having a bigger presence. in target, you have access to stores nationwide. use two whole foods stores and the shelves are empty at times. they seem to have some issues
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with supply and we know there is challenge with dealing with beginning and renegotiating. do they have the capacity to be able to absorb something like target when they are already wrestling with something with whole foods? >> i think you've is a good question and it is a reason to be skeptical that this might actually happen. when the amazon and whole foods aal closed in august, we saw few items, but what really have we seen since then? we have not seen the price cuts go wider or deeper and have not seen and integrate -- integration with prime and whole foods yet. a lot of work to do there and think about all of the other do in amazon is trying to media businesses. there is talk of them tying up with dish network this year and maybe these networks are not once they want to add. herewas looking at a map
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that shows target stores across the united states, those are red dots and the o-dog's are the amazon center. a lot more target stores in the footprints are a lot bigger. what does target too well that amazon would want to pick up? what would amazon learn from target? >> one thing target is good at his private brands. amazon has tried to make a big push with fashion and home goods, trying to get people to buy their own stuff and edge out these. target is great with this. they have a lot of muscle with home brands, they do a good job in this space and amazon could really learn something from them. you point out with store locations, online pickup has proved to be a popular way of getting online goods and picking them up in person the same day and amazon could benefit from these easy stores.
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>> there is so much speculation about what amazon will be doing, whether they going to pharmaceuticals as well and drug pricing in particular, bed bath & beyond was another one that was mentioned. scarlet: lululemon as well. julia: exactly. we are continually speculating about where amazon will go next to do you lump this into that pile? >> i do. whole foods got wall street's imagination running wilde p are we did not think before this that amazon would make these deals big. this shows they are willing to buy retail growth to a certain extent and more importantly, it proves they are interested in brick-and-mortar to an extent we did not know before. prior to the home -- whole foods deal, they had a dozen of them or something. i think now wall street is getting really imaginative. scarlet: thank you so much,
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sarah halzack. julia, do we have breaking news? we were going to tell you about sarah huckabee sanders and her news conference. julia: first of the year, we were looking at the headlines, the u.s. will continue maximum pressure on north korea. a situation they're very much being focused on and as far as iranian sanctions are concerned, the u.s. is keeping all options open. we will continue to follow comments on the briefing, plenty to deal with in january of 2018. from new york, this is bloomberg. ♪
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scarlet: this is "bloomberg markets."
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i'm scarlet fu. not obviously a driving force behind ashley stewart, a plus size retail chain for african american woman to -- women. he has done so not once but twice. bloomberg's ongoing conversation about diversity in the workforce, julie hyman and i sat down and discussed how his own experience helped inform the turnaround. >> ashley stewart has always been a way of life. it is one of the largest and oldest is mrs. of scale that originated within the african-american community and for many years, for 26 years now, it has been a place for a lot of these women who do a lot of good for their families, communities, and this country. a place where they could be pampered a bit and seek some friendship and get some strength. >> it is clear you feel a connection with the customer. ashley stewart is not a real person.
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it is a mashup of laura ashley and martha stewart. your most loyal customers at the company are plus size women. you as a korean american former theerson, how do you make connection and make this brand relatable to your customer when you do not fit the profile? anyone who is a plus size black woman was not -- would not necessarily fit the profile at first glance, but it is an interesting gap you are filling here. one of the things janet wrote so well in the article, it reminded me of my mother. it woman who did a lot for me and our family, she immigrated here at it was not easy for her. she overcame a lot of barriers. one of the best parts of our story as we focus on transcendent values. as a pe guy, it is capital, as a former high school teacher, it is kindness and friendship and loyalty.
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in my experience as a retail consumer and a human being, when you combine all of this together and have them all functioning at coming you get great results. -- time, you get great results. pageantave a national you watch. you are building awareness or talk about that and what kind of reception you're getting from the audience you are reaching out to? >> my goal, our whole goal and the egos of the entire brand for 26 years, has been to treat a so much women that do respectfully and give them a voice. and events,al media we are building a business. not a retail business. speak tohave women, we close to 3.5 million women a day, when you can amalgamate all these women's voices into --
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into a united front and a united voice, you have tremendous influence and we are trying to use the influence to invest in colleges,aughters in to provide entertainment at events, and three, over time, and it started in the last six months, so many other things, goods and cosmetics, she looks to us to have influence on her life. scarlet: it is a fascinating conversation about community outreach and you the way you talk about this is about outreach in many ways and you are aiming for profit in the business. ?hat is next for ashley stewart is it opening more stories -- stores, events, what does 2018 look like? >> we will open more stores. one of the best parts, one capital is used wisely, impact
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investment can be as fundamental as creating jobs. that is one. number two is to continue to unify and amalgamate voice and show our customer base and our friendship is that she has influence. we will have another pageant in september of 2018. a lot of influential type people realize increasingly we are to do much more than soak -- sell clothes. we are trying to invest in this community in this woman's self-esteem and give her voice. conversationur with the ashley stewart ceo. julia: you got my surprised face there. now it is time for a look at some of the biggest business stories in the news now. there we go. in 2016,ion in taxes according to filings in the netherlands.
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revenue from one irish subsidiary to a dutch company with no employees, and then, another island where the company is under pressure from regulators around the world for not paying enough tax. retail sales of marijuana for recreational use are now legal on a limited asus. andribed as brisk in stores one of the roughly 700 licenses issued so far. in san francisco, did not authorize enough shops in time. americans hit a record on new year's day. the u.s. burned the most natural gas ever on monday, breaking a in 2014.y march 100 43 billion cubic feet of gas as it fit to an all-time low. 1.4 years ago.
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is your business/-- business flash update. it is not normal. we just want to give you a quick programming note because coming up tomorrow, we will talk with byron. we discuss his list of surprises for 2018 coming up at 10:00 new york time in 3:00 in london. you can catch all of my interviews -- all of our interviews and here is kevin. the latest functionality all discussed on the program. from new york, this is bloomberg. ♪
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julia: it is 3:00 p.m. in new york. i am julia chatterley. scarlet: i'm scarlet fu. welcome to "bloomberg markets." ♪
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we are live in bloomberg world headquarters in new york over the next hour. here other top stories we're covering from around the world. one hour now from the close. the tradingr on day, tech shares leading the advance of the dollar extends its decline. hedge fund billionaire steve: is leaving nothing to chance. he prepares to manage outside money once again and we look at his new strategy after his previous hedge fund ran into a bit of trouble in the law. former treasury secretary jack lew, why he says tax cuts will lead the nation in growth. we are one hour away from the close of trading. let's get a check on the markets. we seem to be starting 2018 on the plus side. continuing that trend from 2000 team -- 2017, the
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outperformance, the nasdaq is evidence of that, outpacing the gains in averages. the s&p 500 could potentially close on a record but the others are not quite there. even though tech is performing well, if you look under the hood , some of the other groups on a percentage basis are doing better. you have technology here 1.2% but energy 1.6, consumer discretionary at amazon up 1.5 here and utilities are on the downside pulling back about 1%. less too the upside has do with crude oil and more to do with natural gas. are having in we the northeast. up 14% here, it did not too well in 2017 and was quite choppy. this coming as a welcome news, though the longer term outlook is not necessarily as rosy. clear division
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between energy, particularly natural gas producers on the upside, and some of the power producers on the downside. are having in the northeast. up 14%on the downside, some of e utilities are being protected by in particular for american electric power and for pg&e. it was downgraded to sell there. analysts saying there is an overly consensus long with a high bar historically challenging jurisdictions for downgraded toalso a cell, a relative call versus its california peers. atewhere today, if you look the best performing individual stocks in the s&p 500, a mixed bag. analysts are saying it also has to do with the colder weather and what we are doing could provide a boost to demand the does if it is cold, that means perhaps things can break in your car and you need to replace them. it to an outperform ahead of long anticipated cancer drug data, phase three data,
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lift and d getting a listed it as a top 10 idea for the year. also semiconductor industries, data for november was released t that could also be helping giving some of those semiconductor makers a left -- a lift. mark: nikki haley is calling on the security council and the security rights counsel to hold a meeting on iran. protesters have taken to the streets for six straight days. it started as a demonstration against poor economic conditions but it morphed into an overall antigovernment protest. >> it takes great bravery for the iranian people to use the power of their voice against their government, especially when the government has a long ownory of murdering its people who dare to speak the truth.
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more than 20 people have been killed during the protests more --dreds vice president mike pence had postponed his visit to israel and egypt after arab leaders denounced the u.s. for recognizing jerusalem as israel's capital. the search is on in brazil for 99 inmates who escaped during a prison riot. the two-hour uprising left nine inmates dead and another 14 injured p are fighting broke out when inmates from one cell brought -- cellblock invaded three other blocks where rival gangs are housed. off to a bonen chilling start in much of the u.s. with plunging temperatures breaking centuries old records and leading to several deaths, authorities of chu beaded to exposure to it in chicago, the extreme cold froze parts of the chicago river and made this morning a tough one for people heading back to work for the first time since the holidays. boston has tied a record for the
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longest cold snap ever in the city. temperatures in boston have been below 26 degrees for the past week. serviceonal weather covered an area of -- from south texas to canada and montana through new england. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. scarlet? scarlet: thanks. steve: is back in the game after the end of a ban on investing outside money. of new hedge fund is one wall street pauses most anticipated comebacks and it is counting on the help of big brother. matt robinson wrote the story and joins us with more. he is counting on huge compliance team to make sure everything is kosher. now, he is able to start raising cash and he is
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going to make sure he doesn't get on the radar of regulators. scarlet: is this something regulators have imposed on him? that person, he is employed by, steve cohen, and the reports go directly to the fcc. outside of that, the general counsel, at one point the third-highest ranking member of the justice department, has another team that has compliance, we described it as a command center where they are listening to folks in real-time and looking at you males. they can even veto managers they want to hire. it is very big brother. the banks ine seen particular massively pumping money into compliance, to oversight. can you give us a sense of how unusual it is to have a hedge fund like this with 50 members
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of a compliance team relative the -- relative to the amount of traders versus an ordinary hedge fund and what that would look like? the scrutiny is much bigger. you have to remember that steve cohen was investigated for seven years. regulators did a lot. at one point, they were trying to get a lifetime ban from him and they settled on two years. there is a lot of interest in his activities. julia: if you want any kinds of concerns, this is a great headline. what about a portfolio manager or a traitor working there, with that kind of oversight, do you think that would put people off? matt: some things we have heard is the increased scrutiny is quite a bit on money managers. they tracked trades, even profitable trades, they track when money managers get out, if that is the best time. for instance, did they get out
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of the trade too quickly, could they have made more money? julia: scrutinized on the fx trade. scarlet: the physical location of the team is important. you cannot ignore them or turn away from them. mat: right. i think that is part of the culture they have. julia: it is quite fascinating. scarlet: what our government regulators doing to prepare for the return? you mentioned the outside monitor on steve cohen's payroll . are they doing anything on their end in anticipation of the comeback? matt: the monitor goes on and we -- at least until 2019. they will also look at the normal regulatory filings that hedge funds have to provide. julia: they seem to do their best to find something here. he himself was never charged with anything and we should make that clear again.
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believe hever managed outside money? matt: at least, that was not their goal. they were seeking a ban for a lifetime. you think this will be a new normal for hedge comes overall, that other firms will be under this kind of scrutiny? matt: for a lot of regulators, they look at big names and big do bring ase they successful case, they could use it as a big deterrent factor. on theit protects you hedge fund side as well. you know exactly what is going on with the firm and that protects you at the same time. that is another angle to look at this. matt robinson. now coming up, right for a big an unexpected crisis in 2018. former treasury secretary jack lew says the tax overhaul will lead -- leave the nation " broke." this is bloomberg. ♪
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julia: this is "bloomberg markets." be the year8 could of meltdowns. among them, the biggest uncertainty as china and its ability to lead as u.s. influence declines. in shared some of his biggest worries with francine lacqua today. >> when the global economy feels the way geopolitics do today, people respond. they see it is a crisis. they know they need to do something. they have to infrastructure projects and get the banks ready. we had that in two thousand eight.
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donna and i talked about this and you and i talked about this. we all knew it was a crisis that we needed to respond to. easily as bade today globally as the economics in 2008. they might be worse but there is no crisis and no sense of, we have to respond. if you look at the americans, the one superpower in the world today, the one country that could conceivably help to respond and get us out of this crisis, is actively doubling down and saying we have no intention of providing the kind of certainty to our allies and supporting institutions so as a consequence, anyone who looks at the policy today has to understand this is not sustainable in the crises are coming. >> without question, the top research on the street. there, i do not care about that. i want to know what the businesses will do this year. you cannot do three or five year
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amid accidents. what do you see in the behavior here?icers this >> it is the yen and -- the ying and the yang. growth and weis should recall in the last couple of years, we have seen that improve. is you have to go after the growth but be prepared for the risks. the number one risk ceo's see out there is critical. the problem with those risks is they are not probability curves. they are one or zero. the issues about resilience, so what are you doing for resilience? what is your supply chain look like, how will it withstand some of the shocks that ian is talking about in the risks that are there, how do you think about agility in the organization to move resources very quickly?
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and then recall that we're in the mists of a massive technology transformation, the digitization -- this.e will talk about francine jump in from luncheon -- jump in from london. >> 2018 is a year where we see a much greater fragmentation of the global marketplace because governments are becoming more interventionist. part of it is because the chinese have an alternative will see -- be seen as increasingly the most important driver of other economies around the world who will align themselves more with beijing them with washington. part of it is president trump. the united states who in 2017 talked a lot about protectionism and talked a lot about beating up on trade deals, but aside from leaving the transpacific partnership, did not do much, in
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2018 the china economic relationship gets worse, in 2018, nafta -- nafta has to get renegotiated and the real action is not likely to go well. this is clearly a year where we will talk a lot not only about traditional tariff barriers but also nontariff barriers and government support and protectionism for their own industries at home. ,carlet: that was ian bremmer joined later by former treasury secretary jack lew, who explains why he thinks the tax overhaul will do more harm than good for the economy. lew: it is almost the opposite of what voters were calling for in an election a year ago. where were worried about, do they fit in an economy where technology and trade and globalization seem to be changing all of the rules they .rew up with what we need is training,
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education, infrastructure, we need to invest in the kind of workforce in the future that gives people the confidence. what we have seen is a tax cut that spends money we don't have to have very concentrated benefits for global corporations in the top 1%, and it is leaving us broke so we cannot deal with fundamental problem so we are farther behind in actually making progress. i fear the next shoe to drop will be the most vulnerable in our society. how do we pay for the deficit caused by the tax cut? he will see proposals to cut basic food support from poor people, to attack medicare and social security. one could not have made up a more cynical strategy. tothe people are going reject things that are otherwise good when they don't work for them. thing forade, good the world for global growth but people rejected if they think it does not work for them. technology is obviously a good thing but they rejected and what
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they are saying now is on the back of this extraordinary tax bill, if you will see cuts for the average people, the response will be vastly greater .rojection -- rejection of this >> the election of president donald trump, the united states has been spending money it has not had for a long time. my question is why is this any different than before? >> i have been in office in several different periods. in the clinton administration, we were at a surplus. we fixed a problem when i came in the obama administration, we went from a deficit of almost 10% gdp to 3% gdp. we now consciously, intentionally as a government, made a decision to add substantial amounts of debt at a time when the economy does not need fiscal stimulus but targeted investment and things people need for a better future.
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the risk of the tax bill is a further disenchantment with institutions, and the report gets to this kind of rejection how will people -- how will people respect these institutions more? that was jack lew speaking this morning. julia: time now for the bloomberg business flash. analyst gene munster predicts -- amazon would be the ideal -- it estimates amazon would have to pay about $41 billion for target. a startup company suspends operations weeks before it was set to shift its pricey locks. the company fell through, leaving it with no hand. allowing people to unlock their
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doors with an app on their smart phone. deskews he had been filling in alongside savannah since december when matt lauer was fired for sexual misconduct. and in recentday years, the morning program generated more than $500 million in revenue in 2016 according to the research firm cancer media. is scarlet: your business flash update. , can they get back on track after tumbling in 2017? julia: from new york, this is bloomberg. ♪ ♪ ♪
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julia: this is "bloomberg markets." scarlet: time now for options insight with julie hyman. julie: joining me is kevin kelly.
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happy new year. great to see you in person. so it is the first trading day of the new year and everything is different, right? kevin: everything has totally changed. it is so surprising. changed fromeally last year. you see the skew is relatively elevated, people are still taking out a lot of portfolio ,nsurance on a tail risk side so a skew of 137, above last year's average. the extent 11% today not translating into people taking off the portfolio insurance. >> a lot of traders crossing their fingers that volatility will pick up this year and buying insurance, that eventuality. what are the things you are hoping will change potentially this year, one of the dogs of the dow last year maybe turns in -- turns it around. ibm. to finish lower in 2017. kevin: it got decimated against
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the broader market last year. decimated against the broader market last year. if you look at one of the dogs of the dow last year that did exceptionally well, caterpillar. looking at it, he turned around and had exceptional performance. i'm trying to find another name that will do the same thing and come up with a catalyst why. one of the reasons ibm is a good dog and the dow, it yields 3.9% but it is blockchain's dark horse. they are one of the biggest technology names that got in early and now they are fixed with a hyper ledger collaboration. that is telling because it is part of the foundation in one of best technological breakthroughs we had was actually the android operating system. andsaw google build android so, it is trying to have the same success with that. you are seeing the adaptation because out of their 60 data centers, the largest capacity will be used by the blockchain, so that is pretty telling.
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julie: over the past couple of months, everything that has to do with blockchain and bitcoin has gone up to why? is it a small part of such an enormous company? yes.: you have 20 straight quarters of revenue declining and this is a new initiative starting to take hold. if we start to see a take hold, we could get the multiple ,xpansion we want, going to 15 that is a sizable amount of concerns -- returns. people are going in for blockchain but leaving with more services. julie: your trade on ibm is pretty long dated option. 20? kevin: what is great is the volatility is actually lower than on average. you can go out to 2020 and by $150, costs you just $18. it is the most it can lose on this in two years, the blockchain story to pay out.
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starting to come out revenues, we have tailwinds of corporate taxes. lower rates. you see companies will start to spend more on services from big lou, large multi-natural -- multinational corporations. it is a great way to play out long-term for a company that has not played out well. julie: all right, kevin kelly, thank you so much. julia: cold for 2019. can use the function tv . we will pull it up now, we were having a discussion earlier. breaking news, functionality discussed on the program. from new york, this is bloomberg. ♪ retail.
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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 near or far covered. leaving every competitor, threat and challenge outmaneuvered.
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comcast business outmaneuver. mark: senator hatch of utah, the longest serving republican of the, and a leader
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effort to rewrite the u.s. tax code at the end of last gear, will not seek an eighth term in 2018. he made the official announcement in a video posted on twitter. the time to hang up the gloves is approaching. that is why after much prayer and discussion, i have decided to retire at the end of this term. i look forward to spending more time with my family. decision could open the way to a bid for mitt romney. he thanked hatch for his service. and formally submitted his senate resignation letter to the governor of minnesota -- al fr formally submitted his senate

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