tv Whatd You Miss Bloomberg September 9, 2019 4:00pm-5:00pm EDT
above the political fray and will likely do so as they integrate the businesses within the sector. at&t and google and facebook all now in the same sector. what does that say about the future of the u.s. economy? it is where we want to be thoughtfully there is the closing bell. we have energy leading the day. yes, financials gaining 1.5 percent. that accounts for the big bump up in the russell. yes, it seems that rotation came into play. notably, health care lower. but volumes, they were higher. least 11%nd up at versus the 20 day average for the s&p, up 20% versus the 20 day average, so people are making changes to their portfolios. all right, let's dig deeper into the action with our reporters.
abigail? abigail: you were talking about energy outperformance. this leaves the russell 2000 and a positive spot in the near term, but the longer term, maybe still a bit cautious. a big fourth-quarter selloff relative to the 200-day moving average, the momentum indicator on bottom. when it goes above 70, overbought, below, oversold. the russell 2000 has been slipping downwards, and that slowly but surely says the buyers have been exiting in a very orderly manner. right now, the russell 2000 back above the moving average, so in the near term, that is bullish, but it is sloping to the downtrend, and we have a series of parish lower highs, something to think about going into the end of the year and certainly into 2020. renita? renita: taking a look at some of the big laggards, health care.
merck is dragging down most health care stocks, down during the session, and this all happened in wall street, including goldman, sounding the alarm to a potential drug pricing headlines in the coming weeks, following congress's august recess. they see there will be a focus on the amendments to the drug pricing deal. "bloomberg intelligence" says they will race for a bite when congress returns, noting that lawmakers would face inflation-pegged rebates to medicare. abigail or caroline? caroline: we have got some breaking news. a rating cut to junk by moody's, now seeing a ba1 for these companies, over at moody's, ba1 overall,t, a so this is clearly one for us to watch coming from moody's, and
we know autos have been under fire, whether it is tariff concerns, trade concerns, and, indeed, overall the element of a need to make money in an era where perhaps people are not purchasing as many car so quickly. guest, sherryour paul. this is interesting. this is a time when corporate's corporates- when have been doing this, and are we expecting a rush? they will not think be as intense. that is a pretty easy call to make. i would say hindsight is 20/20. that was kind of the great tell, the ability to absorb that amount of slide with fairly low concessions, and how you see that reflected in the stock market, for the first time in a very long time, buybacks -- you look at kind of gross buybacks or the kind of sector-neutral
flavors, buybacks are really outperforming. that is partially a financial story, but that is partially this financial engineering that is able to take place and carry on. you see the appetite for it. that is something new working in the market that has not been before. if you look at the last leg when we were down in august and then the surge to close at all-time highs, the buyback story has a lot to do with it. no stockresting, gaining over 2%. again, it's weeks to the same theme -- it speaks to the same theme we are seeing. in your view, could this have legs, this rotation, and some of these sectors, do you think we could see them rally for a while? sherry: yes, absolutely. absent an outcome around china tariffs, which is putting a lid on the market when you think about how enduring this market has been, we can absolutely see that rotation. i also appreciate what luke just
said about buybacks. we are in the beginning phase of a monstrous corporate quantitative easing in times of how corporations are preparing for, again, the recession that has not come. unlike, you know, the lack of advance notice that they had come corporate america had, in 2001 and in 2008 and two and i think we went to -- and 2009, and i think we want to encourage investors. i fall on the side that corporations are doing this because they believe they will be able to deploy the capital for the benefit of shareholders, typically in the form of share with small companies in the united states, but taking them away from tariffs and currency issues, and to that capital in a way that will benefit shareholders, so i do think that this has legs, and i also think, just quickly, one more thing we should really take that big sure view on is that we
are in the biggest bond market. like, we are not talking about the bond market bubble anymore. i think we spent a lot of time talking about the stock market bubble, but if you take a look you couldyear term, really start to argue that we have actually been in a secular sideways market with two massive cyclical corrections within that trendline versus what is inarguably one of the biggest if not the biggest bond market bubble in u.s. history, so when you start thinking about risk trade, is my point, i would much rather have an appetite for under favor, out-of-favor companies that are getting politicize for whatever reason and still have good earnings and pipeline and cash flow -- getting politicized for whatever reason and still have good earnings and pipeline and cash flow. i would rather own a stock for 30 years, i guess is what i am trying to say, and so that is my
thought. selloff in saw the treasuries last week, and everyone said the trend is still for lower yields. we are seeing treasuries get sold off again, and it is not just the u.s. it is globally. are you hearing different things in terms of how much further this rally has to go, or is it just yet another pause? luke: that is just the way it has been. i think a lot of people are watching the ecb, particularly, and we have seen this global premium continue. bunds do can transit into treasury, and vice versa. that is certainly something. if you look at the technical analysis on the bund, like the gap between -40 and -20, fairly quick yields to the downside,
perhaps it could happen just as quick to the upside, and about 10, 15 beats away. joe: if we are going to see all of these rotations, could global outperformance be part of that? ubs's position is that we are underweighting. particularly, in aspen disproportionally -- it has been disproportionally impacted, with the politicization of the global economy, so we are staying close to home in the united states, kind of go big and go along, meaning big companies, a long-term view, although i would say one interesting thing to consider about that is whether or not we see what is essentially, in my personal view, a global reordering, and you all had a front seat to this with the handover of hong kong in the late 1990's and covering european equities and the failure of nieminen all of those front row seats in history making that these two have had
,- the failure of neiman marcus all of those front row seats in history making that these two have had. the fed takes a look at how they are going to cut rates to normalize the curve. is the equivalent of five rate cuts by the end of 2020, but some of that might be impacted by what the europeans do, so we are in a global -ing, isthat is now 2.0 what i call it. we are in a 2.0 moment where this tariff negotiation is changing the last 15 or 20 years of agreements, so we are sort of embarking on the conversation rather than concluding that in october. caroline: we have the ecb later this month. can it do enough? i amy: i do not know if the best person to answer that question, although i will say the policy of negative rates
going more negative, just from the psychological standpoint -- we talked about can we will our way into good economies -- i think it really mentally ways on people. this is my 20 years of experience, managing money and the mentality around money, as an influencer to outcome, right? human variables having a direct impact on performance versus fear index, so i think that the ecb would be cautious to think about that, but i do not know that they have a whole lot of room to go, and my hope is that here in the u.s., we do not end up in the same situation. >> the ecb is going to cut on rates more than expected, i do not think you would be able to tell whether the euro or risk assets go up and down, and i think that is still a very open question. scarlet: thank you. sherry paul and luke kawa. the showins -- that is
parliament set to be suspended, and asus brought -- surprising economic picture. calling out at&t, disclosing billions in a position in a telecom conglomerate and some critical advice. and good news for fannie and freddie. steven mnuchin says a deal to allow them to keep some earnings is in the works. great britishh a pound, because it is pretty since strongest level july. boris johnson struck a rather -- on tone on xi jinping brexit, addressing one of the key sticking point standing in the way of a deal. went minister johnson: we to the border several times before the good friday judgment,
and i can say now, as i said many times before, the u.k. will never ever institute checks at the border. caroline: joining us for now with more analysis is the president of an institute. >> caroline, i think part of it is that the consumer in the u.k. is buying stuff now of there being a weaker pound and restrictions on what they can buy, and similarly, people who are buying experts -- exports in the u.k. are doing this ahead of upcoming problems. i think that is a can tripping factor. the government has, her
majesty's government, has committed to loosening, and while the cash is not there yet, i think people are expecting it, so i think that is part of it, but i will admit that this data is a little better than i was expecting. romaine: so do you discount it, adam, that we could see the negative ramifications with what ,as been happening with brexit while in the short term, the signals may not be there, that in the long term would be? , i do not discount that at all, remain -- romaine. will not bethey able to make later or will be much more expensive to make later, and there'll be fiscal policy. cannot just keep borrowing indefinitely, so i think there will be a cost paid later. moment, int the terms of what can the bank of
england do to prevent this pain being felt at a certain point, you were a member of the bank of england, have they felt too behind the curve, with the federal reserve easing and the ecb set to? does the bank need to do something if we are going to deal with the payments down the road? adam: i think not, because, frankly, i think it is far more important that they do not seem to be making an opinion on brexit or ahead of the uncertainties of the exit date, so i think the bank is right to sit there and not do anything yet. that they have more room to cut interest rates and of theirt qe than some counterparts in europe, so the bank will be in a position to act. the constraint is more about what happens to sterling and not about being behind the curve now. it is possible that sterling
could be in a very weak position, which could constrain them. romaine: when you look forward, adam, at what the government is going to look like later this year or early next year, do you think it will still be led by boris johnson, and if not, how do you think that changes the economic landscape? aam: i am really not qualified person to say whether or not it will be led by boris johnson. i have been saying for a long time that it is kind of all or nothing. you are going to end up with a coalition that is led by labour and presumably by jerry corbin , orno brexit or brexit something led by the tory coalition. i do not see an intermediate place. obviously, as your viewers are aware, there are some pieces of the jeremy corbyn economic
agenda that might do damage the way that brexit does, so either way, it is not looking great for the u.k. going forward, unless the coalition constrains corbyn and avoids brexit. caroline: what do you think about the country as its future as an economic powerhouse, going forward? this as the end of situation as being a powerhouse? adam: there is a distinction between the prominence versus the economic performance of the u.k. i think just as argentina and other countries have shown, you can have something bad happen to you, and if the currency adjusts enough, you can make up for it to some degree, so in terms of the u.k., people will be poorer, but it will not be terrible.
in terms of the u.k. position, how many people want to hold sterling assets, whether it is seen as a safe to invest or a useful place to invest, no longer being a bridge into the eu, under those circumstances, i think that is much more doubtful, and i think, frankly, either a corbyn or a johnson government will give people concerns. caroline: as we look for any type of certainty from a political perspective, what data are you going to be looking at, going forward, or what kind of hard facts will be you look -- will you be looking at, particularly 2019 into 2020? greatthat is a really question, but i think, frankly, for the next few months, it is going to come down to what is the election, what is the election fought on, and when is the election? i am sorry to be that simpleminded, especially since i
am not good at predicting the election outcome, but, frankly, i think this is the rare occasion where this is a choice point about the economy and where they are in the world, so i am not going to be looking at anything else but that, frankly, for the next several weeks at least. romaine: all right, adam, adam the petersonent of institute. from new york, this is bloomberg. ♪
auto show and asked for his outlook. >> it is a complex market environment, 2019, more complicated than we anticipated, but we are gaining segment share in three major areas of the world, europe, the u.s., and asia, in this leads to our strong momentum. tensions are not comparable to 2018. why? because there were things in place between the u.s. and china in 2019. what will happen in 2020 will, of course, very much depend on what is happening between the u.s. and china in the coming then will be have a
hard brexit. concerned that the trade war and slowing demand will have a downside effect on the sales of bmw cars going forward in 2020? bmw is probably best prepared for volatile markets. why? theuse it is clearly one of areas, particularly in production, we most focus on, because we know from the past that markets are volatile. have had volatility, more in the last couple of years than in the previous years. volatilee to see markets? of course, not. things are not predictable, but we welcome it. why do we welcome it?
because we have strong production on the one side, and we invest in the u.s., as we speak. we are strong in europe. we invest in europe, and, of course, we have our chinese production, as well. >> in europe, your main concern is brexit uncertainties. have you set aside any provisions in case of a hard brexit, and do you have increased concerns of what is going to happen after the october 31 deadline, given what is happening in the now? nicolas: we have communicated over the last year at every opportunity. bmw understands free trade. what do we do in case of a hard brexit, october onward, number
make it does brexit extremely likely that wto tariffs would be introduced? wto tariffs would mean that we have a crisis in many markets in order to offset the negative impacts, and this, of course, would have a volume impact, and the volume impact is finally leading to negative production impact, and this is why we really urge to find a solution and to avoid a hard brexit. nicolas peter was speaking to our bloomberg reporter. ford having its senior rating cut to junk by moody's. this is interesting, romaine, because s&p and fitch have ford on a negative outlook. amaine: yes, ford made
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i am mark crumpton with bloomberg's first word news. demand the government hand over communications about the decision to suspend parliament -- it plan for a no deal it's plan for a no deal brexit. prime minister boris johnson is trying to make it harder for lawmakers to block his plans for a do or die brexit. he is suspected to suspend parliament until october 14. and the italian premier has won the first of two confidence votes. the vote came after a day of
aelding insults during boisterous parliament session from the opposition that italy got a new government instead of a new election. in the senate is expected to be much closer. the international held a meeting in geneva today amid concerns tot iran was continuing jeopardize the landmark 2015 nuclear deal. its use offended advanced centrifuges prohibited under the deal. the acting director of the iaea will be going there. cornel: the activities in iran continue. in regards to the protocol, with my discussions in tehran, i
emphasized the importance of full and dynamic cooperation. marc: the nuclear deal was intended to keep tehran from building nuclear weapons, something iran denies it wants to do, with the u.s. unilaterally withdrawing from the deal last year. president trump says u.s. talks with the taliban and afghanistan are dead after they collapsed last week amid what seem to be in imminent deal to end the war. the president tweeted he canceled his planned meeting with the taliban and afghan leaders at camp david this past and now more bloodshed. group of attorneys general have opened an investigation into whether alphabet and google's search applications are violating privacy law.
on the steps of the u.s. supreme court today, investigating business practices harming competition. this investigation is not a lawsuit. it is an investigation to determine the facts, and right now, we are looking at advertising. the facts will lead where the facts lead. marc: today's announcement followed one from a separate group of states that disclosed an investigation into facebook. hady's news conference democratic and republican attorneys general. day, onews, 24 hours a air, and @tictoc on twitter, powered by more than 2,700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. you.ine: mark, thank good news for investors. won an important
legal victory. let's welcome our bloomberg reporter, and this happened after the markets close, but seemingly, billions of dollars of company profits could end up winding their way to some pretty hefty hedge funds. the policyes, so that these hedge funds are litigating over is that billions of dollars in profits every quarter go to the u.s. treasury, the federal government. was theirally, this first legal victory for the hedge funds. up to this point, most courts had shot them down. so it is a win, but a lot of hurdles still to get across, because there is several court decisions out there that said it was perfectly legal for the federal government to take all of fannie's and freddie's profits, so now you have an
outlier who has to go through the courts, maybe making it all of the way to the supreme court. romaine: correct me if i am aong, jesse, this was sort of critical component of the 12 plan to get this back into the private market in some -- a critical component of the trump plan to get this back into the private market in some way. pre-the big issue is that fannie and freddie are giant mortgage companies -- yes. the big issue is that fannie and freddie are giant mortgage companies. anyone who remembers the 2008 financial crisis will catch on to the fact that this is not nearly enough money to weather another event like we had in 2008. i mean, it would wipe through these companies. they would be right back to where they were and eating massive taxpayer support again, so in order to get way above $3 billion, they need to return their earnings -- retain their
earnings rather than send it to treasury. that process would take years, so there are other things that have to be on the table, such as a share sale, if they are going to get out of the government's grip, but steven mnuchin saying we are going to start the process of letting them retain earnings, so i step in the right direction for shareholders, getting them out of government control -- so a step in the right direction for shareholders, adding them out of government control, and into the hands of shareholders again. caroline: without much of a timeline, do you have any idea how long this is going to take? jesse: i will say something about that 43% gain. these are some of the most volatile companies. sometimes, a strong wind can make their shares rise double digits, so they can be down. a week from now, there could be more news, and they will be down whatever,i do know, but the timeframe, it is going
to be very tough for the trump administration to do a lot of heavy lifting on fannie and freddie before the president's first term ends. if he gets a second term, then they have a much longer timeframe to get a lot done, but if he does not, all of the proposals that the trump administration has come up with two reform these companies will be scrapped immediately -- to reform these companies will be scrapped immediately. you cannot see elizabeth warren or joe biden would do what the trump administration came up with. so there is not too much time. it is hard to see this is something they're going to be hugely focused on the year before the election. it is not something that a lot of voters understand. it is something hedge funds understand, and it is very important to them. fromne: ok, jesse, washington, d.c., thank you. hisld trump pledged during
2016 presidential campaign that helped to win over voters in industrial swing states like wisconsin, but a recent decline in manufacturing jobs could pose a problem for his 2020 reelection prospects. here is our bloomberg reporter. you wrote a pretty extensive in "theday about voters heartland" of america. you seem to be a bit vexed by the collateral damage and the trade war. can you give us some sense about what the actual economic and job losses that we see that are directly connected to the trade war? look.er: yes, direct connection to the trade war gets difficult because it is a big, messy economy out there, and it is a big, messy trade war. there are all sorts of impacts out there, but what we decided to look at in this piece is what is happening in the manufacturing sector in the united states. remember back in 2016, president
trump's big promise was to revive manufacturing, to bring jobs back to america. he did pretty well and had reasons to claim some success the first two years of his presidency, but this year, things have really changed, and we have seen what looks a lot like a manufacturing recession in america. in wisconsin, i was meeting with an agricultural equipment company. they had 250 workers who were furloughed over the labor day holiday and are going to have another furlough again in early october. things look very different there than they do on wall street, where, as you know, people are worried about a recession that is somewhere in the future. there are corners of this economy if you look in the u.s. that are actually already experiencing a recession. caroline: when though? how much can they stomach this recession? and your piece is so beautifully written, showing the frustration of trump saying this is
long-term, beneficial, and that it is good, certainly money going to farmers, which might in some way placate some of the issues, but clearly, he is claiming that china is bearing the cost of his tariffs. they feel it is an out and out lie, but do any of these business people realize it is a fight worth fighting in the longer-terms? hawn: -- longer-term? shawn: trump has a lot of support, and issues he has identified with china, the intellectual property theft, these subsidies you get there, the big state-owned sector in china, and its increasing venture out into the world, where it is competing with the u.s. and other companies. those are all legitimate issues. the thing you hear from business people is that they are frustrated with the way the president is waging this fight,
and in particular, frustrated with tariffs. this is not a big company i met with in wisconsin, a town of 3000 people, and they make agricultural equipment. they are in a part of the economy that has been hit both on the demand side, where farmers are no longer able to export their soybeans and other goods to china. that is a big market that has been written out, but they are hit on the cost side, as well, where this company is paying a lot more for its steel and a lot more for other components that go into these equipment, these and it is alsos, being hit by a shafter economy, and it is largely the result of these trade war's -- a softer economy, and it is largely a result of these trade war's -- war. romaine: tracking the pain we are seeing in some of the
sectors of the economy, the kicker is, despite all of that, they will vote for trump or vote for the republican ticket, just because of their own personal politics, and i am wondering if this economic pain is enough to override some of the support these people may have for other types of policies, some of the social policies and non-economic policies that may be brought them to trump or the republican party in the first place. shawn: that is a very good question. i would just tell you that gr eg, the president of the company i met with, voted for trump in 2016 and said he will not be voting for him in 2020. this is a manufacturing recession very close to what was going on in 2015 and 2016 when he was running, and now, he is the incumbent, and he has to weather that. nnan, a: ok, shawn do
study,le, according to a congestion on the highway has increased by 60% between 2010 and 2016. in those six years alone, it could be pegged to companies ft, and theyd ly calculated what it would look like if ridesharing did not exist, and the increase would be just 22%. and bloomberg.com has a story on expert who has built an empire of his own. he is writing about valuing agricultural land and increasing production. economies of scale. you can follow all of those stories on your terminal, on @tictoc oncom, and twitter. romaine: caroline, wendy's, the fast food chain, it was down as
much as 9%. the company cut its 2019 adjusted eps forecast to arrange -- 3.5%, cutting about half a percentage point, the company saying it is going to invest a lot more money in launching a new breakfast menu next year, in 2020, and, apparently, that is the reason they are revising the forecast for the current year. again, shares down about 1.5%. to plant basedrs burgers. some are questioning the growth potential for beyond meat. an equivalent of a sell rating and a one dollar cell rate, -- rate, a guestl
joins us now from portland, oregon. alright, i guess we all kind of understand a little euphoria in the share price of beyond meat, but i guess there is a zeitgeist going on for this desire for some sort of alternative niche product, alternative dairy products out there, and beyond -- alternative meat products, alternative dairy products out there, and beyond meat seems to be tapping into that. >> we think the downside comes from, again, we are believers in the market opportunity. we don't think this is a fad, better said. however, we think it is going to be a slower build, and to the extent that the market is using plant-based milk as a proxy, plant-based milk has about a 13% share of total milk.
we think it is going to be slower in plant-based meet, -- meat, so we talked about people who may be desirous because of the environment, or people talking about health, although that is questionable, and with plant-based milk, there is two times the number of folks who and thatse intolerant, is driving a disproportionate amount of purchase in plant-based milk. we think that is going to be more difficult to offset on plant-based meat. we think it is a real market. we think it is going to grow. but the valuation, trading somewhere near 30 times revenue, we think it is pricing in a very significant opportunity that we think bills over a much lower timeframe than what the market is pricing in right now. ofoline: you see a price about $130.
how big could this market become from your perspective, and how out of whack could this be with ?he exuberance >> it has got a 13% share with plant-based milk. that was over two decades. about a 10%e think share of total meat, and that is really just driven by the consumption mix. about 62% of the plant-based category. we think there is a smaller need, say, implant based meat. is a more fragmented market overall. chicken is not the same as steak or sausage and on and on, and
that introduces other layers of complexity, more hurdles, each category. i would argue beyond meat has done very well in terms of achieving taste parity in the market, but, one, they have to achieve that taste parity in each subsequent march, and there has to be a desirous market within those subcategories -- in each subsequent launch, and there has to be a desirous market within those subcategories. romaine: looks delicious, based on what we are showing. talk about the various entries here, because when you go through the supermarket aisle, the frozen food section, there is to on of options. beyond meat is not the only option, despite the amount of coverage we give to it. brian: i would say they are placed in the refrigerated meat, next to their counterparts, which i think is an important distinction and is the right move for the company.
i think it has helped drive a lot of this initial trial, because even the company has pointed out that 93% of the folks who are at a kroger and bought beyond meat bought animal-based products in the last months, so there is that distinction. having said that, you look at the top 10 meat processors in the u.s., they have all committed to either having plans in place or are already introducing products to the market, so when i think about the competitive backdrop for beyond meat, i think in the context of valuation, 20 times or that tech valuation, i think highdemands some ip, real barriers to entry. the number of entrants, the number of really high quality entrance into the market, credible competitors, thatgg, kroger, i think suggests the barriers to entry are not terribly high. weaine: all right, brian,
caroline: now, back to that breaking news on ford, it's crediting rating -- its credit rating cut by moody's. detroit, anow from guest. the worry here is, of course, that it will not just stop at moody's but that s&p and fitch will follow suit, right? >> right, those agencies have them two steps above junk, but this could start a domino effect, and then you worry about access to capital and dividend and all sorts of things. romaine: a little less than a year ago, on one of the earnings calls, management was adamant about defending their investment grade rating. do you think that this is something they allowed to
happen, or it was just out of their hands? >> it was out of their hands. they certainly did not want it to happen. they said they thought they had adequate liquidity to get through this phase they are going through, and they were also looking at new products, like an explorer suv. caroline: they talk about weak earnings, cash generation, but how novel is this piece of information? they are completely revamping their lineup while at the same time developing electric vehicles and self driving vehicles for the future. this restructuring is a big call on cash during a time with the market is going down. they sort of missed the best years as they were struggling, and now as the market is heading down, they will have this big cost in front of them, and moody's is worried they cannot handle it all. romaine: we really appreciate you joining us, keith, joining us from detroit.