Skip to main content

tv   Street Signs  CNBC  May 31, 2016 4:00am-5:01am EDT

4:00 am
welcome to "street signs." i'm julia chatterling and these are your headlines. sell in may and go away. with auto stocks stall after the first quarter results from volkswagen bound to alleviate concerns over the emission scandal. dramatic footage from a bernie sanders rally in california after animal rights activists jump the barricade and try to charge the stage.
4:01 am
a warm welcome once again to "street signs." it's tuesday morning, welcome back, too, if you were in the uk and on holiday. lucky you. we are tilting to the downside stoxx 600 by were the 25 gains. the ftse 100, a bit of catch-up there. let me show what you the individual market movers are doing this morning. it's the auto stocks pulling with more popularity. i mentioned volkswagen cue on numbers there as well. it is the final trading day of the month, let me give you a look at the performance on the month, despite the concern about sale in may moot.
4:02 am
stoxx europe managing gains of 200%. the dax and ftse both -- sorry, the cac up by 1.85%. i think you can justify the underperformance in the ftse 100 this month by the losses we sold, too. we'll be talking far more about the european markets and more broadly later on in the show. for now, let's look at stocks, volkswagen shares tumbling to the bottom of the stoxx 600. with low expectations, stoxx did make the rise to profit for the embattled carmaker this following a torrid 2015 with record losses on the back of its diesel emission scandal.
4:03 am
france's pugheot family, considering a sale of all or part of its holding. air france inching higher after the pilots going on strike over pay conditions equaling pressure on the french government struggling with strikes over proposed major reforms. separately, air france-klm is selling to chooiinese conglomer. francesco, we didn't see a sale in may, with losses at four-week high. trading is tough? >> it's very tough. we remain defensive. and we're very wary of stock
4:04 am
markets. we think there are risks out of there. with many events, beyond that, markets still look expensive to us, especially the s&p. and for no fundamental reason for liquidity and everything that applies. and now we see risks like the strong dollar coming back to the market after yellen confirmed interest rate hikes for the next months or so. and china with the weakest fixing in many years. we think it's a bit defensive now. >> you've given me a whole host of things to dig around in. but first how different of a sense is your portfolio? >> it's difficult as a family to make it and being a positive man, you need to carry based on carry. but this basically might be the right time to be to have the
4:05 am
fund carry, at the time, $1 million of trading negativity. right now, the industry goes down the credit curve into liquid. so it say good carry. and it's very dangerous. we prefer to be patient, defensive, wait for the better end of points and at the cost of, obviously, having less carry and less yield for the time being. >> but you've got 50%, 50% of your portfolio in cash and cash equipment, that feels very high? >> there's still some sense to be made there because some of our position is corporate bonds on the sharp horizon, another two years. and that is just a defensive position in the waiting mode for things to happen overt next few months. we think it will take longer for the market to reply. in the meantime, we do everything with trades.
4:06 am
so, there's still stuff to do. and we can focus on that, instead of on the direction of trades. >> what should you be doing here? >> for example, we like the interest rate spread. differential positions between u.s. and europe. we have longer receiving rates in the u.s. and also like if there is a little bit of interest rate assumption, you know, in the next few weeks, we're also going to look at the practical position against the euro stock in europe. we think with higher rates, in a tactical way, in the long term, we remain bearish or negative. tactically, we may want to put a little bit on the interest rates. >> i'll come back to the banks. obviously now you've got a full hike price for july. you mentioned a stronger dollar derailing activity here. do you actually think we get a hike from the fed here?
4:07 am
or get away from it to back off because they create turbulence that we've seen in the past. they sort of inch off and we've got this cat and mouse game going on? >> interestingly, priced in above weights is above a certain is level, like 50%, 60% which is where it is now, i think it's more likely for the fed in position to do it, as a self-profiling prophesy. an 80% chance of a brexit -- of the remain camp is leaning and it may be that the fed may not be compelled to wait until july. but in june. then we've got to ask if it's a similar situation like in december. the fed hiked interest rates. before and after, the markets seemed to be fine with it. a few months later, you had to
4:08 am
panic, china's needs including the s&p. so we might be seeing it moving, that is the first thing. >> we're going to leave for a few minutes if you have a question for francesco, you can e-mail us @streetsignsc nbc. send in your questions. coming up on the show. a gathering at the ecb meeting to boost the economy. louisa is in paris. louisa, tell us more. >> hi, julia, i just heard the great and the good are gathering here in paris. indeed i found both a great and good. let me introduce you to my little guest here. hello, pepper. this is pepper made in france. and potentially could be a companion to people in businesses. >> i hope you enjoy your time
4:09 am
here. >> you may, you may. he wants to show me where the amphitheater is. very responsive i have to say, a little bit scary. how are you, pepper? >> oh, i'm good. and you? >> i'm very well. i can't believe i just answered a robot. anyway, we'll be back after a break at the oecd in paris. we spoke to the portuguese finance minister. good morning, good morning. i'm going to continue my conversation with pepper. we'll see you after the break.
4:10 am
4:11 am
so, welcome back. before the break, we were talking about the strength we saw in the dollar in the month of may. we also saw positive risk
4:12 am
sentiment. that is risk for gold. gold performed down under 6.4% to be exact. we'll give you bearing and perspective on that, of course. still higher by 14.5% year to date. although we saw some weakness in the market, so significantly higher over the next six months or so. let's take a look at brent because we did continue to see a rally in oil prices higher by 4.2%. a touch lower today. but we are bouncing around to that at $50 a barrel level. the french rally are going on strike. protesting labor in france that would allow them to fire more easily and extend the working week. now, hopefully, the strikes didn't prevent policymakers meeting at the oecd in paris this week with aims of
4:13 am
kick-starting a faulting global economy. louisa, as you saw, before the break is at that oecd meeting. we were totally distracted by pepper. i saw you high-fiving after the break. >> you know what, we were high-fiving. i was a bit afraid that his high-five, the power, was going to send me through the building. i got a hug. i can't believe what robots can do these days. that's something to enhance the quality of life as well as companies. you mentioned the strike action that we're seeing here in paris today. i spoke to the randstad ceo, the replacement group, a bit earlier, i was asking him if the french needed the labor reforms, and he said, yes, they do. if you take a look at what's taking place in germany, they went through a similar change for working conditions for employees. it's easier to hire and fire.
4:14 am
he said in the longer term it pays off. he's surprised that younger people are opposed to it. with regards to other guests we had this morning, i also spoke to the portuguese finance minister, mario centeno. when you look at their get burden, 100. we're looking at a massive debt burden. and they are implementing reforms. a pretty scathing article was put out recently by the business insider. and the headline there is portugal is europe's next looming economic disaster. now, i asked the finance minister about this and what his reaction to reports like this was. take a listen. >> the good thing about the debt is that it's been falling since 2014. we've been able to put the debt over gdp ratio on a decreasing path, that's the important thing to do. and to keep. and we are working very hard on
4:15 am
the public finances. to curb the deficit, to post a very low deficit this year. this is the main role of the government in that respect. and then we are -- we need that -- certain reforms that the government made in the last years. gained momentum. and the possibility to realize it. and boosting gdp growth. so the two effects, fiscal consolidation and the economy gaining some momentum, will be key to the debt issue. >> how long will it take, though? because the imf, they have a growth forecast of around 1.6% per year for the next six years. and again, some people are looking at this and saying that will take way too long. nowhere near getting out of the debt situation they're in. >> yeah, patience is of the
4:16 am
essence at this moment. the country, as i mentioned, went through ann adjustment process very strong in its public finances. it's had an impact, for example, huge flow of migration, outmigrations that was just delivered for us. we need to stop that process and put all of the forces, general forces, of the country to work. and it takes time. we do understand that. the reforms to much realize they need time, they need to grab what i sometimes call economic space. and economic space is both strong market and we had bad news recently, the crisis involving brazil, for very dynamic markets for us. our firms have been able to divert exports to other markets, for example, the u.s., and
4:17 am
response to the european union increasing very much so. >> sure. >> but responding to those, it's not an easy task. >> yeah, i also asked the portuguese finance minister about this very large recapitalization of portugal's largest bank. and he was saying, yes, they are going ahead with it and that the banking sector, though, that they're working on, again incorporating it into the overall economy so it continues to be healthy. this particular bank is not healthy meaning that it does need up to up to 4 billion euros injected into it. they haven't quite agreed on a number but they are working on it. now this afternoon, i'll be talking to the chilean finance minister which will be interesting, they're the world's largest producer of copper. we all know what's happening with the copper prices. they've been heading south. we'll be rolling out that interview early tomorrow morning, julia.
4:18 am
i may catch up a little bit more with that robot. >> you might not lose him if you do that louisa. he did really seem to like you. we'll look forward to that interview and catch you tomorrow. now, just in the last few moments we heard from gg news service in pairs saying that they the japan prime minister is to hold a news conference. perhaps this is the confirmation that we are expecting some kind of announcement on wednesday. and likely to come according to gg news line at 9:00 a.m. wednesday. we're waiting to get full confirmation from the prime minister himself. japan have real trouble here. they have to have some focus on the announcement. do you expect that and when do you expect that? >> i think japan is the most desperate of the markets.
4:19 am
it's launched $800 billion a year. and the low cost of zero. probably going into recession with the dollar and everybody else since the beginning of the year. and inflation is still that low. i expected japan to be in stage for the next step of policy making. to invent new things going beyond qe. >> have they got money? >> they got the money as well. japan, for example, owns a lot out there, 50% of them. but only $150 billion. it's a very small industry. >> they test the credibility, aren't they, and the efficacy of the policy? because ba we've seen in the last few weeks when they've introduced new policy, it's actually heavy reverse effect on prices. the negative rates. so it's a problem for them? >> there's been a few missteps. announcing the negative rates
4:20 am
which has been tried across the globe, not just in japan. it obviously back fired. it wanted to prevent it and the opposite happened. a lack of credibility. and isn't itself, negative rates in the short term which eventually will be pushi deposis keeping it out of banks like in the bank vaults. i think that it such a deflationary themselves. it's a self-fulfilling prophesy. need to go a little further. although it would be of little use. and at the same time, they may go down the road to recoup their money. at some point, you have negative taxes. and recoup the money just for the base and spending coupons. domestically, really, to base
4:21 am
the currency and bring up inflation, otherwise, it's very bad. >> if you've got any fx questions, get those into me, too. for now moving on, banca carige has approved his plan to 1519. joining us live is andrea cabrini. good morning. the question is, is this enough to satisfy the ecb? >> well, this is a question that is good for carige, but also for banca which held a board meeting during the night to decide the price for its right issue that will have to gather 1 billion euro to save the bank. in general, we are here in front of this italian central bank. with the report in a few minute, it's not business as usual.
4:22 am
italian banks had such a tough and difficult year. if you look at numbers of the market, we are down 41% with the banks leaning 12 months, 30%, year to date which is an underperformer, nearly 50% on the stoxx 600 of the banks. why is that? is that because fundamentals are so bad? not exactly. but there's a lack of trust on the quality of these banks. and we had to respond how much and how long will it take to start here in a real market of nonperforming loans? atlanta, a newly launched fund in april will start to invest in nonperforming loans but the market is asking will it be enough? do they have enough money to not only save the two banks, intesa,
4:23 am
but back to you. deutsche bank is reportedly being closely investigated as a probe as to whether traders rigged debt auctions. no bank yet has been accused of breaking rules, an inquiry is looking at a target list. stuart gulliver is the chief executive most shareholders would like replaced. this was a report by the financial times which was not to be released publicly. when they asked which three banks needed a change of ceo. gulliver received a large majority of votes followed by tidjane thiam and richard c carrion. let me give you a look at the performance of the banks,
4:24 am
though. if you look at the one-year change, we're down an eye-watering, what, 29.75%. we did see a bit of a pickup or fwhou bounce in the bank debt. is that the lows? >> i think they can keep going for a while. it's a achewing correlation between the rates and the steepness of the curve and the performance on the broader market. i think right now, rates and boons followed the types of rates in the u.s. it might be good capital trade. beyond that i don't think the have seen real inflation. i don't think that rates are going much higher. eventually, they're going back down. for then, i think of the central issues is challenging. >> you're talking about negative interest rates and impact that's having in particular, weighing on the performance? >> for example, like at some
4:25 am
point, the banks cannot cover the cost of negative rates forever. if they do, they will be the big deposits for banks. are we going to see a bank run, we're not going see that because it's not going to happen but at the same time that means subsidizing that cost. in general, if the rates are so low and the curve is flat, it can work for the spread which is not just -- so the business itself, the core business is really challenged. banks can look towards management and private banking and the core business which is buying and selling interest rates. >> but even in the private banking and those banks that have shifted their business models more. actually clients are less eager to do trading activity, given the environment that we face right now. that as we discussed at the beginning of the show, having those cash balances when you
4:26 am
deposit them at the central bank for negative rates. and you're penalized for having those cash balances a double whammy, the shift in the businesses that we've seen for the banks has also been painful. >> it's painful for original banks like european, for example, with the spread on it still very high. there are many culprits in europe trading outside of those. you're unable to lend into those good companies. they're forced to lend regionally, locally, much lower. so one thing it will surely -- it surely will be on the list of the ecb on the central bank. we don't think it's sustainable. it's not the balance issue.
4:27 am
it's about tprofitability. >> global central banking problem. we've talked about portuguese banks and italian banks. is there one specifically that you're very concerned about, in terms of the sector, whether the italian banks, portuguese banks, one that needs a great deal of work? >> no, not really. i think it's a macro problem. i never realized why it was so obsessed, for example. it can be said europe in germany, the largest country in europe is the most traveled one, deutsche bank. so i think that, you know, obviously, there is a lot of attention and focus and panic on the country and it had not been for the fall, we would have seen a bust. likely enough the fund will go up and we didn't see that. the problem is macro. it's nothing to do too much with a single bank or single team.
4:28 am
they can do so much in monetizati monetization. there's little they can do. francesco, great to have you on. further comments from japan, japan's lower house defeating in a confidence motion against prime minister abe's cabinet. that's the latest out of japan. i want to reintterate what we heard from the news line, prime minister abe is to hold a news conference wednesday. we will work to get further confirmation of that but that could be some kind of announcement on that sales tax hike delay that we've been talking about this week. we're head for a short break. check out markets live which runs throughout the day. lots of information there you that can pick up.
4:29 am
we'll be back in two.
4:30 am
4:31 am
welcome to "street signs." i'll julia charterly. these are the headlines. shares on track for third straight month for gains. auto stocks stall after first quarter results from volkswagen failed to alleviate concerns over the emission scandal. dramatic footage from a bernie sanders rally in california after animal rights activists jump the barricade and try to charge the stage.
4:32 am
a warm welcome once again to "street signs" this morning. let me give you a look at u.s. futures. markets closed yesterday a bit of a catch-up with gains in europe. the nasdaq 16 points higher at this stage for the dow jones, just a few points higher for the nasdaq. unchanged for the s&p 500. hey, we've got a few hours to go yet. let me give you a look at the european markets this morning. minor gains. remember, the ftse 100 was closed early. earlier on, we saw a bit of catch-up. not the case now. that clearly weighs on the ftse 100. a bit of consolidation art last month or so of gains. let me give you a look at the asia markets overnight. we've had a followthrough from there. the nikkei 225, with gains helped by the weaker yen. helped by the strong dollar. the shanghai composite finishing
4:33 am
up 3%. overall down for the month of may. let's give you a look at the nikkei as well. closing higher boosted in part by production data which came how of our expectations despite a series of earthquakes. i mentioned the dollar yen as well. as we can see, did nice to say what they were saying was a bullish close of 11 figure overnight. the question is where do we go now particularly in light of rumors we've heard about the sales rate hike we were talking about earlier in the show. joining us live from zurich, the head of the market -- the jen and dollar story here, what are you expecting from the japanese here, more stimulus and when?
4:34 am
>> well, over the last couple of weeks, we've seen from the japanese that they are quite jumpy with their policy decisions, disappointing us at one stage with not coming with an adaptation of stimulus. and for this reason, we don't trust, at this moment, too strongly, this new rise of dollar yen. we remain cautious until we get a clearer signal that the authorities really want to do something in order to help -- to reflate the economy. at this stage, the dollar yen goes higher and we don't need to do anything. we don't have to print additional money the dollar yen is down again. so in the short term of the next few months, we remain stuffer in the forecast pointing south rather than north. >> dollar is obviously part of this story as well.
4:35 am
we're at the higher level in the dollar index now since march. we've also got one full hike price by july of this year as well. how much more upside do you think there is in the dollar? >> well, i'm not looking at dollar yen here at this stage. it's rather u.s. dollar. for this, i will say it's certainly possible that we have towards 1.08 or even a bit lower, depending how quick the fed is acting if they surprise us evenly there and move in tune. rather than to rely on other things. so, we see certainly, the stronger dollar over the next couple of weeks and months. the downside could be as low as 1.08 even, 1.05, depending on the country and how more the fed
4:36 am
promotes now it's time for hiking. >> talk about the pose alicy, y were short the aussie. and remaining short. you've been short the aussie since the first of this year. a cut price. what more can you see and a further aussie position go? >> we were short against the canadian dollar and the u.s. dollar. at some point, we decided the move was strong enough and take our position what. and took that the canadian dollar given that oil prices are already quite high. and promote, being long u.s. versus the dollar. in our view, it can go towards certainty, even a bit below certainty, at high times. depending on how quickly the fed
4:37 am
reacts, what is the low. but in principle here, around 71, 72, i think there's more downside for the aussie. >> we're not expecting further syste stimulus. it's more about bank lending. how does that play into your focus on the euro here? >> well, if they do something for bank lending, i still think there's a bit more room for carry trades and other things, and to still see some euro downside, as long as this is coming. on the other side, the euro strongly undervalued list as the u.s. dollar. if the median, in the longer term, we have to prepare for a situation that inflation is coming higher. and as inflation is coming higher, probably the ecb is not
4:38 am
as convinced any more to ease monetary policy. and then europe can rise higher. but for the time being, clearly, the ecb is on hold, in particular, this week. they will promote more bank lending. they will talk details about this. and therefore, i would say it's rather a bit of a weaker euro as they moment bank lending. >> thomas, great to chat with you. head of global strategy at ubs investment offers. hillary clinton has rewritten her schedule to focus on the must win state not before she and her husband bill march in a parade in new york. meanwhile, an attempt to rush the stage at a bernie sanders
4:39 am
stage. at least one protester faced a police baton. meanwhile, donald trump has already mathematically clinched the republican nomination but still faces the possibility of an independent challenge. nbc's tracie potts is in washington and has all the details. what's the latest story here, tracie? good morning. >> good morning. well, let's start with trump and that independent challenge where one prominent republican is saying he's going to put somebody out there with a strong team and strong background to try to siphon support away from donald trump. trump doesn't seem too worried about it. he's name-calling the people behind this on twitter. but we're waiting to see who that person might be. a lot of names being thrown around, including mitt romney. the other things that you mentioned the democrats, hillary clinton is going into california
4:40 am
earlier than her schedule originally showed. she's going to spend five straight days campaigning there before the california primary. of course, bernie sanders has been focusing on california for well over a week now. he's got two more events on health care. yesterday, he had a couple of events. and he's talking about those pledged delegates, sort of the base of determining who becomes the democratic nominee. now he's saying neither he nor hillary clinton will get enough pledged delegates to clinch the nomination before september. and he believes it's possible to remain competitive and win that nomination. >> tracie, back to donald trump and the likelihood of an independent challenge here. i was just looking at his tweets. we know he's a prolific tweeter. he put if bill kristol actually gets a power to run i'll put him
4:41 am
on my drone list. we do like his attitude at time but appropriateness to be a president? >> does it go over the line is the question that a lot of people have been asking. clearly, his supporters don't think so because the more out there he gets, the more support he seems to get or retain. and so those people who may actually go out and vote for him don't seem to be bothered by this. clearly, others are. the tweet about the supreme court is interesting because it's been so controversial here. there have been questions about who donald trump might put on the supreme court. he released a list no one that really was a huge surprise. but it does raise the question of whether or not he's going to try to pull that in as another key issue in the fall campaign. >> tracie, thanks for that. we've got comments from suzuki this morning as well details regarding the focus on emissions
4:42 am
on scandals with that company as well. they're saying that the independent tests do not apply to tests outside of japan. they using 14 blended vehicles and 12 models also. and they've revised previously announced figures for the affected models. they've conducted their own tests on 26 models, they say, including oem vehicles, and confirmed that all models exceeded the field consumption targets. any other comments from suzuki, we'll bring you up to speed on that. ♪ the world's biggest tech companies and the newest startups are gathering at the rise conference in hong kong this week. >> reporter: well, is this a conference that began as the wedge summit in europe. known for its second year in
4:43 am
hong kong as the rise conference. we're seeing about 8,000 people here, startups, investors, everybody coming together to look at the latest techs. one of the latest is drones. this is one from a china based company. it's known as the ghost drone. what you can do is actually control the drone through these v.r. googles. if you look down, the drone moves down if you look up, it moves up. this is a target that is expected of 3 billion for example year. we're seeing the consumer market in china really grow. and the same company that created this ghost drone is now teaming with a bio-tech firm using organs for this. it gives you a sense of where
4:44 am
the drone industry is going. another thing at rise, is the tech scene in india. 100 billion. but 350 million internet users. one mobile messaging app, number two behind whatsapp in india. as more and more people come online and start to use their mobile devices. take a listen. >> there's about 200 million mobile internet customers in india. that's a small deliver of the 1.2 billion people in the country. 30% of the people. the remaining 70% approximately people are in what we call pay as you go. really 2.5 million people use the internet. because what is key for a very strong internet market. however, the number which is 23%
4:45 am
has jumped up in the last months which means that the mix of users is getting better as prices drop. >> reporter: another big theme here is fintech, we heard so much about these traditional banks being threatened by technology. we've talked to companies out of singapore, dbf who have embraced the fintech boon. and starting to really get a step ahead of these up and coming mobile lending apps. going back to the drones, the same company who built this ghost drone has as unveiled a one-passenger drone. especially, it's a big drone that allows one person to sit in it. and controlled just like a drone. we haven't seen it tested just yet here. i'm not sure we want to take a ride in it before we get fuller testing from that company. not on the market just yet.
4:46 am
cnbc, hong kong. >> so, we have to take a quick break, but coming up on the show, a proposed deal could long value the long pharmaceutical company, we'll tell you which maker is trying to strike it big after this break. see you in two.
4:47 am
4:48 am
welcome back to "street signs." the iraqi army seized a police station inside the fallujah city limits on monday. the assault comes as bombs killed more than 20 people across the iraqi capital of baghdad. a north korean attempt to launch a ballistic missile early tuesday appears to have failed, that, according to south korean officials. the south korean news agency quoted a government source saying the missile was likely after it launched. brazil's anti-corruption minister has been resigned. he stepped down from the oil company petrobras.
4:49 am
and demand for air travel could be on the verge of shifting down a gear. that's according to the industry's main trade body iata. they call for a drop in annual growth, down to 4.6% in april, the lowest pace since 2015. jazz pharmaceuticals could announce a deal to buy celator pharmaceuticals. some analysts question whether the company had enough money to bring the drug to market. the proposed deal would be for about double of celator's market value up around $740 million. verizon has reached a attentive deal with leaders of striking unions in an effort to win a walkout that lasts nearly seven weeks. according to one of the unions, verizon has agreed to almost an 11% raise in pay over four years.
4:50 am
nearly 40,000 workers are expected to return to work wednesday. this is expected to have an impact on the nonfund payrolls as well. the expectation this week is 140,000 jobs significantly week weaker than expected for verizon. and now to viacom, it took another turn over the weekend. wilfred frost is at cnbc hq and has the details. good morning. >> good morning, julia, yes indeed another chapter this morning. viacom boardholders are speaking out. in the notes, the independent director said the board will fight in court. this sums as sumner redstone and his family battle with the leaders. the family controls 80% of the class a voting shares. earlier this month, they added to his legal team to a legal
4:51 am
campaign to oust ceo chairman philip domer. many believe redstone's daughter sheri is behind the push to get rid of domer. and as you can see, viacom, over the last three months performing pretty well. as for border markets, strong gains 2% to 3% for the main indices. all three indices remain in the green for the month of may today, the last trading day. looks like they'll be able to hold on to the markets. early fractionally, the dow up by nine points. julia, back to you. >> thanks so much, wilfred. quite right. as you mentioned the dow down, 0.5 of a jump. i'll quickly show you what happened to the nasdaq over the month of may as well. gains for the nasdaq as well. that's significantly stronger, actually given the losses that we've seen. three straight months of gains despite the concerns that everyone was saying there would
4:52 am
be a sale in may and go away. doesn't mean it hasn't been choppy. let's get more perspective, we're joining by the president. great to have you on the show, you're also saying stay the heck away from u.s. properties. >> no, not exactly. what i'm saying we're late in the stage with the bull market. seven years here in the u.s. what we've launched is say global dividend market. when you get this long in the tooth with a bull market what you want to do is position yourself so you're buying at high quality that pay dividends. and a culmination of some u.s. equitieses and non-u.s. equitieses will give you a yield. being cautious, perhaps, buying quality, perhaps, get a dividend while you can, that's sort of where we're at. >> we're at late stage in the
4:53 am
cycle as you quite rightly mentioned. are consumer-driven names the answer here? you mentioned a number like nestle and procter & gamble that offer an opportunity here too? >> yeah, in the three names that i think i gave in the preparation for this, budweiser which is inbev, nestle and p & g, two nonu.s., one u.s. name. they share two things in common number one, consumer driven stocks, less susceptible in the economy. but free cash flow yields and dividends. all three of those names have a very high free cash flow that happens to be higher than their dividend yield. as people seek out yield in the no-yield environment, they sometimes chase dividends and that can be a dangerous game.
4:54 am
what we do is first screen for free cash flow yield. that's the pot of money, if you will, that these companies will use to pay dividends we want a higher cash flow yield than dividend yields. we feel good about that. there's a side benefit those are the kind of companies that buy back stock and buy their competition or invest in their businesses. >> the other thing we've kicked off the week talking about is the fed and whether or not they're going to raise rates this summer. what is more important, sean, here? focusing on inflation or the instability by chatting about the possibility of rate hikes? >> well, you know, we've been talking about it for i don't know how many years. it seems to me it's kind of a conundrum. if in fact they would come out and say they weren't going to raise rates which say lot of folks that i read that say that's likely to happen. i think the market would celebrate that, there would be an indication that there's bad news and the fed doesn't feel
4:55 am
justified in raising rates. what we've seen recently that would kick off a little bit of a rally. it shouldn't necessarily work like that. it probably would be a good thing over the long term if they would raise rates a little bit, especially here, at least they would have some ammunition in case they have to lower rates to stimulate going forward. but i suspect if we actually got a raise in interest rates, that in the short run, people would see that as potentially negative for equity prices but is probable a healthy thing in the long run. >> what's the probability that the u.s. dollar derails here? it's kind of doing that and we do seem to be seeing that stronger dollar trend re-establishing itself, positioning also is now just flipped to longer dollar as well. so, the mood seems to be that there the potential for that to take place as well? >> well, you know, it's interesting, we have a dynamic currency-hedging strategy on one of our etf's paeu.
4:56 am
there's been this recent phenomenon of hedging -- u.s. investors hedging their non-u.s. currency away because the dollar has been so strong. but the dollar, like all things is the market that runs in cycles so for the last several years the dollar has been strong. if you go back the last 20 years, it's been up and down in particular the euro which is we're most focused on. what we do in terms of helping investors manage currency risk, we have this dynamic strategy where we look at the relationship of the euro versus the dollar at the end of ever month to determine whether we're hedged or not hedged. i suspect going forward this will be a bigger and bigger topic. now that eyes are open to equity returns. most people don't think about it this way. when you buy equities if you're buying them outside of your home country, you're basically making two bets. you're buying the equities and
4:57 am
taking the risks there. the second risk that you're taking is you're automatically taking that currency risk. the implications can be quite substantially. it's reversed itself this year. so our dynamic currency, etf is actually outperforming some of the hedge products because for the vast majority of this year we've been in the unhemped position. >> shaun o'hara. thank you. that's it for today's show, i'm going to give you a quick look at the european markets sinking further in the last 30 minutes or so. i'm julia chatterley. "worldwide exchange" is up next. see you tomorrow. p?p?h
4:58 am
4:59 am
5:00 am
good morning. sell in may and go away? maybe, not so fast. we'll get you ready for the month's final trading session straight ahead. a developing story -- sumner redstone drama unfolds. viacom board members vow to fight back. the latest coming up. steph curry and golden state beat the thunder to set up a finals rematch with the cleveland cavaliers. "worldwide exchange" begins right now. ♪ honey i'm good very good mor

20 Views

info Stream Only

Uploaded by TV Archive on