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tv   Market Makers  Bloomberg  December 4, 2014 10:00am-12:01pm EST

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we are not down that much. maybe the jobless claims will help things later on. back on thee markets in 30 minutes. "market makers" is next. ♪ >> worst-case scenario. the economist known as dr. doom outlines the biggest macro risk for the coming year. >> the obama appointees that liberals love to hate. critics say will be too close. >> any regrets? exclusive interview with michael dell.
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quick top global business stories of the morning. mario draghi said he wants to raise inflation as fast as he can. it looks like he has some serious work to do. here he is at a news conference in frankfurt. >> latest projections indicate lower inflation. accompanied by weaker geo do -- to do the growth and subdued economics. >> the ecb cut his forecast for both inflation and gdp growth through 2016. draghi says the central bank will gauge the need for further stimulus at the start of next year. russia's president vladimir putin took aim at the u.s. and european union today in his annual state of the nation address he says both impose economic sanctions on russia anyway no matter what happened in ukraine. he said their goal is simply to
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hurt the russian economy. they may have to change the old , posting its 10th straight quarterly loss thanks to falling sales. sears lost $548 million in the third quarter. the ceo eddie lambert, hedge funds are you near, has been selling and spinning off assets to raise cash and it is still not working for this company. and in pro basketball, sorry to say, it turns out the philadelphia 76ers can't even win at losing. so they probably could not be happier. the team missed out on tying an nba record for consecutive losses. they lost 17 straight games 85-77 beating minnesota last night. that leaves the 2009 new jersey nick's with a record for the 0-18.start to a season
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you know i'm a fan of the team's president scott o'neill. scott, if you're watching, sorry, brother. >> i said, nice to see something in the w column for a change. he responds, woohoo. >> hold on, is that on the record? >> why not gekko he is happy they won a game. you cannot deny the fact they lost 17. >> scott, congratulations on the win. congratulations, brother. we have another winner, this one the champion of the wildest running race ever held. ready for this? the beer mile. beer, run one quarter mile, then do it again. four laps, four beers. the winner in austin, texas, canada's corey gallagher. just a hair over five minutes.
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put him present. that is about three seconds slower than the unofficial world record. >> i want to be on his mail route. he is a post route. hopefully, he is sober when delivering it. >> what could turn our comfortable world of rising stock prices, accelerating gdp growth? cheap financing, low inflation coming to a bouldering -- boiling cauldron of chaos? the markets remain replete with risk. who better to pinpoint them that no man they call dr. doom? nouriel roubini has made a list and calls it five series economic dangers for 2015 and beyond. as you can see, he is here today along with our guest host for was aur, lee sachs who top adviser to timothy geithner the treasury department and now runs alliance partners which originates loans for community banks and it turns out, stephanie, this is something of a reunion party. they worked together in the clinton the administration, which i did not know. >> did you ever get lunch together? >> we did.
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>> i like that. >> eric and i don't even get lunch together. >> but we are to spend two hours together before noon. let's start with the list. i want to itemize -- >> why not get miserable before christmas? >> going to itemize the five risks you put on us. eurozone becomes a destabilizing force. the risk of an implosion of abenomics. china's tricky balancing act. two political risks are building. shock tog dollar, a the global system. given that we heard from mario draghi early this morning, it makes sense i think to start with europe. explain. >> europe is only one shock away from deflation, recession. the ecb should've done connotative easing a year ago. and even now after the inflation and growth forecast, there doing nothing. [indiscernible]
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>> is it too late? today,heir own forecast they have set for next year, they're not [indiscernible] those forecasts were made a month ago. >> you have worked in the treasury department. united states -- welcome and not in recent memory, had to confront deflationary front like that which are is bracing. facing. expect to people what it means to be in a deflationary spiral. >> well, in the united states, we're not really concerned about a deflationary spiral. i think the fed has done in a summit job keeping us out of that -- done an excellent job in keeping us out of that. europeans do have to be concerned about this. people are concerned about
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deflation, it has implications for spending both for investing -- >> people put things off because -- >> cheaper. the price level falls. borrowing costs are higher. it is another force -- >> why what mario draghi pull the trigger? council,bers of the the head of the bundesbank and others are resisting it but the ideas to get a green light from berlin. berlin decides they can go ahead with qe. i think it will, junior, february the latest. the signal today where that had discussion within the council, today, to do qe, how will they do it? what are the criteria? it is a done deal, just a question of time. >> are they going to turn on the firehose and try to keep the
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house from burning down? >> they will do qe by two nora february next year but it will be too little, too late. by nextwill do qe january, february next year but it will be too little, too late. qe worked in the u.s. and u.k. because you had monetary stimulus and backloaded fiscal consolidation. in europe, it is frontloaded. because japan the first round of abenomics that was fiscal stimulus. this load at only came when they started doing the physical tax increase this year. you need to have fiscal stimulus . monetary is not enough. on both counts, eurozone will come too little, too late. >> stay on japan. your number to another list, you think there's a risk of implosion of abenomics? >> not in the short run. as long as they're buying 70% of the bonds. they can sell the debt for two
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or three years. the third aero structural reform for potential growth is too little compared to what they should be doing. the second became a fiscal drag this year. tax for next year. at some point, even quantitative easing only affects the currency. weaker yen and pfizer currency war were everyone in asia from issues a currency war were everyone is affected. nobody wants to have their a currency appreciate to the ye the impact of then. yen will be diminished. the pressure goes on the dollar. eventually, even the fed might decide to start hiking rates more slowly because too much of a strong dollar [indiscernible]
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one of the things -- >> called on. lee, weigh in. >> i was struck by your comments on the dollar in relationship to other currencies. when nouriel roubini and i were together, feels like 100 years ago back in the 1990's, the day russia defaulted back in 1998, we worked together on some of andasian financial crisis things like that. one of the challenges that the world faced back then was as a result of the fact so many countries and companies outside the united states had borrowed and dollars to take advantage of lower interest rates. with the dollar started to appreciate, it became much harder to those countries and those companies to pay back and to service those debts. we got into a downward spiral. think wextent do you are exposed to the dynamic today and if we are, are there
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specific countries that you would be more concerned about? >> and people have started to get by the situation today act of the 1990's when the financial crisis spread to russia and other countries. i think there are some similarities because many companies, many banks, even governments in some emerging markets have borrowed a lot in foreign currency and now their currency is weakening. therefore, the ballots she reflects the real -- balance sheet reflects that. first, most countries have flexible exchange rates. secondly, there are less currency mismatches. there is less -- third of all, a war chest of reserves they can use as a buffer. more liquid, so in some cases like in russia and some emerging markets, yes, yes some individual financial institutions and corporate set will go belly up and have to
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either default or the structure will be built out, like in russia, but i don't think would be a generalized crisis in the emerging market. one segment is dangerous, mining company in well at sporting and commodity exporting countries. -- exporting and commodity exporting countries. >> let's talk about some of the geopolitical risks. we're familiar with what has taken place in the past year, but vladimir putin speaking russia today, talked about the need -- i'm interpreting slightly -- the need for russia to behave the way it is behaving because it has to act like a sovereign nation and has to remain a people. if it did not act, if russia did not annex the crimea and undertake the policy it is conducting in an area of eastern ukraine, the country would dissolve. if that is the kind of attitude that putin is taking in the face
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of sanctions and the declining oil price, what does that tell you about 2015? sanctionsople believe and lower oil prices will moderate putin and make it more conciliatory towards europe and the west. >> it didn't sound like it this morning. >> i think will become more excessive. >> do you disagree? >> no, i don't. based on his comments this morning, he is not showing any signs of that. >> how much of that is posturing? or how difficult is it to tell? >> we don't know for sure. [indiscernible] if the recession becomes more
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severe, at some point they cannot blame it on the west. more becomes more he eroded, we don't know. it looks aggressive. >> we need to take a quick break. we will be back with nouriel roubini and lee sachs. we will be speaking about the outlook to the u.s. economy. talks plus, what are liberals progressive sang such terrible things that we will look at president obama's latest appointee from wall street. ♪
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>> welcome back. we are back with nouriel roubini and lee sachs. take a look at the state of the u.s. economy. we went from global to local. >> the with the economy is doing better than other advanced economies.
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the labor market is improving. ares a the downside of u.s. external and external. lower its base station, lower growth. as some point the fed will decide the commendation of lower global growth and stronger dollar might imply [indiscernible] >> i agree. most of what is going on in the u.s. is positive. we do have exposure. obviously, we can't be the only engine of growth in the world. we talked about what is going on in japan, china, all the other list of five plus things in
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nouriel's list of things we should be afraid of. itancer only impact us -- can certainly impact us and we can sustain the global economy just on our own, but having said that, there are some nice tailwinds. employment has been heading in the right direction and seems to be continuing in that direction. the tax cut effect of lower oil prices in terms of helping consumption is all quite positive for us. >> how does the tax could affect, lower oil prices versus the drop in production, the loss of jobs that comes with it? [indiscernible] growth, the fed
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might want to start more slowly. this money is going into asset inflation and at risk of a bubble being created. markets are underestimating how much the fed is starting to get concerned about financial market . the fed might start sooner by the middle of the year in spite of low-inflation because they're worried now about financial stability. >> if the fed were staying lower for longer because oil is cheap, in theory, that doesn't sound like such a bad thing. if you believe staying lower for longer just increases the level of risk in financial markets, then it is something to be worried about. >> the fed has such a terrible track record calling bubbles, though. >> is it their job to? >> then why do they do it? >> good point. >> financial stability is the
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responsibility of every bank. >> i think everyone has a terrible track record protecting bubbles, except for nouriel roubini. although they would not say it is their job to predict bubbles, i think they've done an excellent job in helping manage the bubbles when they do. >> do you think they have? >> when the bubbles burst, the fed aggressively uses with conventional policies. the collateral damage has been dampened. in the past, the fed was never reacting when the bubbles were forming. the debate is not whether you do something but whether you're using monetary policy -- the fed is still saying [indiscernible] why, because so much of that is happening outside the banking system? >> part of it. there are ways of essentially avoiding this kind of regulations.
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if it is not effective, then you have a dilemma. if you exit slowly, you will create [indiscernible] that is a real dilemma of the fed weather than -- >> i agree with that. his point on macro prudential approach that the fed and others have been talking about, that requires a certain precedents in terms of what the bubbles are. macroer for you to use financial regulation to try and avoid bubbles, you have to have some sense of what those bubbles are. and no one has perfect judgment on that. we have a financial system today that even if we do have bubbles, that will happen.
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it has throughout history. the system is in a much stronger position today to handle that. 5, six yearsay, 4, ago. the banking system is much better capitalized. there's much more liquidity in the system. the interconnections between financial institutions are much more under control than they were say 5, 6, 7 years ago. yes, there will be bubbles. yes, they will burst. >> always great to see you. the one and only nouriel roubini and lee sachs, of course, will be with us for the hour. nouriel roubini, thank you for joining us. >> back in two minutes. ♪
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>> elizabeth ward leads the charge. her target, when a president obama's appointees. we will tell you why.
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>> it is "market makers." imf schatzker. >> i am stephanie ruhle. >> enough is enough, that is what elizabeth warren and others are saying about president obama's string of government nominees from wall street. so they're taking on his latest pick, antonio weiss is been nominated for a top treasury department overseeing domestic finance. with this is lee sachs who worked with timothy geithner and previously served in the treasury department in the clinton. is there a point to be made about the revolving door between
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washington and wall street? >> we always have to pay attention to the so-called revolving door, but i think -- >> but why? because of the risk of regulatory -- >> there is always that risk, but one of the most important things when you are making policy, whether it is regulatory policy were others, you need to have a diverse set of views around the table. you need to have people who have finance backgrounds. you need to have academics. you need to have people who have served in government. >> the issue now, is it wall street-heavy? >> it is hard to see. if you see who is sitting around the table, you have talked about the committee of regulators that was formed through the , if younk's legislation look at who is around that table now -- and they're all
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excellent, but they all have either academic backgrounds or government backgrounds. for the most part. actually, the thing that is missing today is someone with finance or markets background. >> for example, it took months and months for the regulatory body to agree on the definition of market making. had there been a person who actually had been in those markets, who had been a market maker, maybe that could have been resolved far sooner and dot-frank could've and implement it. how about thinking about that? >> i think that is probably right. although, look, anytime you get 8, 10, 14 people around the table, each of whom have their agencies, their own priorities, it is going to take time for them to come to an agreement on something like that. but it is in poor and at least one person around that table -- but it is important to at least have one person around the table
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that has a background. "the overrepresentation of wall street banks in senior government positions since a bad message and tells people that one and only one point of view will dominate economic policymaking." >> i have tremendous respect for senator warren and what she stands for. i come at this from a mainstream perspective. working with about 200 community banks around the country. our business has been set up to help them compete with the larger financial institutions. quote saysuote -- would be right if everyone around the table were from wall street. he would not want that. just like you would know when everyone around the table to be
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an academic or lawyer or what have you. today, if you go around each of these agencies, at the fed -- these people are terrific and i think they do a good job. at the fed, yet janet yellen, stan fisher, dan trudeau, all of whom are brilliant academics, economists. dan has a human is back on in regulation. if you go to the control of the currency, the regulator of the big banks, you have someone there who i believe was a state they regulator -- state bank regulator before coming to washington. elizabeth warren's creation -- >> that sounds dangerous. i hear what you're saying and i'm saying, right on. elizabeth born has a much bigger megaphone than you do. i mom is sitting at home and she hears elizabeth warren. when she hears a quote, the overrepresentation of wall street, only -- >> she takes it as fact. >> my mom takes it as fact. it only feels wall street fat cats, when the truth is, that is
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not the truth. >> it isn't. it is not the case. >> but perception is reality. that is the problem. could we fix this, lee, by putting in and forced gardening leave, let's call it, on those who leave wall street to serve in washington so that they can't go back to wall street immediately? in other words, if you leave wall street to work in washington, fine, but you can then go back to work for a big bank or small bank, you can't go work for a lobbying firm that represents the financial services industry. you have to go and do something else. maybe that would end this revolving door cycle. >> you could do something like that. look, if we could take a step back. this confirmation process has gotten completely out of hand. we need to be doing -- these jobs are important and difficult. we have to do everything we can to attract --
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>> the best and the brightest. walks of life. we have to attract people from main street and people from finance. we have to have all those perspectives around the table. instead, as a country, we're doing everything we can't make it if not impossible, certainly, very difficult for people to come in and serve. >> you were there the treasury department and some of the darkest days of the financial crisis. came from wall street, former ceo of goldman sachs, was running the treasury department before tim geithner got there. he had some people from wall street helping him out. you have a wall street background. you are helping out tim geithner, even though everybody thinks he can from wall street, didn't. what would the world have looked like in 2009 had nobody with wall street experience in making economic policy? >> the question almost answers itself. if you have a financial crisis, you need people with financial background to help.
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not to the exclusion of others. i have to keep making that point -- >> but is it right that hank paulson gets to walk out of goldman sachs with the giant pile of money, gets all of his stock, doesn't have to wait for forfeited, then gets to sell it tax-free? is that anything we don't like? i don't. >> i'm sure there a lot of people who don't like that. but hank paulson and others had a big pile of money before they went to washington. serve from people to the finance background and they have earned a good living, you have a choice. if you tell them, you can't keep what you have earned, then the probably won't be a lot of people lining up to serve. and to your point, i think the world would have -- look, there's a really good chance the world would have looked a lot worse had hank paulson and
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others not come down to do that. others warren and rightly care about people on main street and small businesses and households and how things impact them. we all do. you do, i do. but in a financial crisis, if you don't have the right people in those seats, the people who are going to get hurt the most are just the households and businesses and real people who are all trying to protect. i think we have to take that into account when we go to these confirmation processes. >> do you think we would be worse off if we did not have hank paulson? >> honest certainly. >> absolutely. >> i think so, without a doubt. bills and goy the to commercial. coming up, too late to get into the housing recovery? looking at investing opportunities for 2015.
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>> welcome back to "market makers." we have tight about the biggest threats that the global economy in 2015. now we want to look at the biggest opportunities ahead for investors. our guest host is lee sachs. he said as a top treasury department official in the clinton and obama administrations. now he runs asset manager of -- as a management firm. welcome. clearly, you've had a great run an amazing track record. what do you like for 2015? >> we really like to allow follow chile to guide -- volatility to guide us for potential opportunities. no section has been more volatile than the energy sector. sharp selloff in oil, created
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weakness -- we think great opportunities within the sector, within different companies that are dependent on oil prices. basically, a lot of these companies are also in a position where because everyone is so scared with the drawdown, they no longer have access to capital what companies? >> i won't go into specific names, but oil-based companies that often have difficult times accessing capital. that is where we like to step in a selectively selected for companies. not from an equity standpoint, but more from a secured debt-type standpoint. a lot of these companies don't have access to capital still have great balance sheets and great secured assets, so we can use. while we don't want the equity, by being kind of the providers of last resort, we can create a situation where what we don't like this but we want on the equity, we would loan -- don't
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want to necessarily on the equity, we would like to own options. >> and these kinds of relativelyes are immune enough to the oil price? if you walk in and oil is at $65 in a box -- drops to $50, we would be fine. 30, that drops to might be a problem. we don't think that is a great likelihood. we're somewhat insulated. we're not completely dependent on the price of oil for the straits. yes, it will completely goes down to $20, then even the companies that we like will probably have issues. it would really take that type of a move. >> what about market dynamics? how hard is it for you to put these positions on? i think we could put a significant amount of money to work. i think -- >> everyone who says, volatility, kill the market, note liquidity, baloney? >> it has killed liquidity.
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that is why you have to become people putting yourself in the shoes of being a liquidity provider rather than a liquidity take her. when you're dealing specifically with the liquidity provides to them. it is a significant difference. yes, if you want to go by existing bonds or sell existing bonds, it is very difficult. but if you're willing to be patient to liquidity providers, you have -- you create your own assets. >> paul, there's been a lot of talk recently and much more so since mid-october about disappearing liquidity in the bond markets. for instance, are you sing that in what you do? how concerned should we be? some of the largest investors out there have really been complaining -- >> blackrock among them. >> about lack of liquidity. >> i agree. i think it is one of the greater risks to the financial markets. >> really.
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>> yes. we feel it is very important, we've reduced leverage to the lowest levels we have had an existence. >> hold on. just yesterday someone was saying hedge fund leverage is creeping up. you have done the opposite? >> we've done the opposite. we think the biggest risk of positions, something like to call [indiscernible] >> that is some nerd talk. ring a bell for that. >> people like to give liquidity scores. we found liquidity is not static. we found even a mid-october, liquidity uneven the most liquid instruments has disappeared. what happened in mid-october was really nothing. it wasn't a major market crisis. it was a small selloff in the market and liquidity vanished, even on high grade corporate bonds. we think it is much safer to move down the liquidity spectrum
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into what is already deemed less liquid but reduce your leverage significantly. the greatest risk would be a very leopard portfolio -- levered portfolio. when the leverage leaves, that was the crisis in 1998. no one has near that type of , like long-term capital employed. if you have any type of leverage when markets disappear, you're really exposed. >> why? how does it play out? >> when you put on a lot of leverage, you are dependent on correlation between asset price and when liquidity goes away, that correlation can go anywhere. that is why the financial markets are normal shaped bill curve type distributions. we had 10 sigma events all the time, which should, like, never happened. >> can you short and right now? >> we can. the only area we really have
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been compelled -- and it really protection-type strategy, short european sovereigns. it is really because -- >> peripheral countries? >> yes, mostly. it is really a portfolio hedging mechanism that if there is major deflation -- >> right now, it is painful to be short spain and to be short ital yes, we are aware. y. >> we are well aware. standpoint an reward -- >> it is an insurance policy. >> yes. a great way to protect her portfolio. potentially, but the left tail and write tell type environment. >> what do think is causing the drying up of liquidity in the bond markets? >> it has really been restrictions placed on your main market makers, investment banks. >> isn't some of it a positive because now you're not competing with tanks? positivegenerally very
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for us. it is created great opportunities for hedge funds. also, others like us, to become liquidity providers make money as liquidity providers. what is scary about that from the financial markets is hedge funds in general can go from being liquidity providers to liquidity takers, like at the drop -- i mean, you can change overnight. if we don't have permanent capital and you don't have other things and you don't have, like, bank-type investments and balance sheets. and we don't have access to the fed, so our ability to be permanent liquidity providers is always suspect. that is why you can see things in october. it is great opportunities for us but in general, i think it makes the market is scarier place. >> that sounds right to me. one of the things that people talked about in part on the heels of dodd-frank's, but other things that have happened in the large financial institutions over the last handful of years
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is that it has driven some of this activity out of the banking system. in some ways, it is arguable that makes the banking system more stable. some of the riskier activities go elsewhere. >> at a cost of the system. >> it is at a cost of the system. some ofat a time when the larger players in the bond market, as we were talking about earlier, are starting to pull back, whether we're talking about the fed and the end of qe or some of the oil exporting countries who were investing hundred civilians of dollars in our fixed income markets. oil prices stay where they are or go lower, you can see that .ontinuing to dry up are we going to be in a position where we are relying on hedge funds to provide liquidity for the system? >> that would be crazy, would
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net? ldn't it? to mica say, we're shutting down and going to tahiti. a bank is not going anywhere. >> not every hedge fund would shut down at the same time. a great more diversification to liquidity providers. one of the biggest problems with investment banks is the too big to fill became the opposite. everybody became bigger and got consolidated and there became fewer investment banks being market makers. if you look at the hedge funds entering that realm, at least we're significantly more diversified. there are a lot more hedge funds and not every hedge fund with say, i'm going to shut down and go away. somebody else would step into the shoes of whoever left. but that is in a normal market situation. in a crisis situation, that changes significantly. >> should more hedge funds and institutional investors be locking up money for longer?
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>> they'd like to. >> hedge funds might like to, big and what you just described, maybe the institutions should as well. look, they're exposed to liquidity risk indirectly, right , yes, it will depend on trading strategies and strategies used. you always want your investment strategy to be aligned with how long you have your capital locked up for. that is what is critical. rmbs.ant to talk one of the riskier places, now you believe one of the faces -- safest. ,> it is the nature of especially the subprime market has changed so much, super attractive traits? no. but from a real money standpoint at the top of the capital structure, you just had a situation where you have seven years of borrower history. borrowers who have remained perfect payers. while they payers
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watch the ltv of their own go from 90 to 130 and now back to 110. they've demonstrated a willingness to pay the mortgage or all types housing market situations. even if we had another housing market selloff, it would not impact their willingness to pay. are notthe securities sexy at all. but from a real money from almost -- substitute standpoint, worry of a floating rate instrument that will yield that 4% to 5% -- >> rmbs, say. all, we have to leave it there. and lee sachs. we will be back. you are watching "market makers." ♪
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>> "market makers" will return with an exclusive interview with michael dell. it is been a little more than a year since he took his namesake company private. ♪
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>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. is getting akers" dell. we have an exclusive interview with michael dell. >> the republican house leader needs democratic help to keep the government from shutting down. >> sonic is the fast food chain feeding its fears. we will be speaking to the high calorie ceo. welcome to the second hour of " market makers" i'm stephanie ruhle.
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have you ever been to a sonic? >> i have not. >> they don't have them here. >> they don't have them in canada. you to thet bulletin. as timas important horton. morgan street -- mortgage rates have fallen to the lowest level any year and a half. it has not been that low since may of 2000 eight. we'll have to see what it means for the overall housing market. another quarter another loss for sears. the department store chain lost $548 million in the quarter. .t is the 10th straight loss the ceo hedge fund billionaire andy lampert has been spinning off assets to raise cash.
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noble will buy back stake in the nick business. nook business. in june barnes & noble announced plans to spin off the note k business. the noo russian banks do a better job of promoting women than the united states banks. of theake up 13% financial firms executive committees, that is up from 10%. in. banks trail those russia, norway, sweden, and canada. to be michaellike dell? 13 months ago the ceo took the company private in a leveraged buyout. it is better now that dell does not have to fend off carl icahn anymore. i sat down with michael dell at the council for foreign
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relations in new york city. he likes being private, he explains why. >> we are enjoying the freedom and flexibility we have as a private company. we are not bound by 90 day periods. we are focusing on our future several years from now. we have an enormous opportunity. we had a great year. we are growing all of our businesses. they are all performing quite well relative to the industry. it is easier to focus 100% on our customers, and not have to worry. that different? being private versus being public. >> 20% of my time has been freed up. >> really? 20% of the ceos time is pretty remarkable. >> you think about the time spent dealing with governance
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and preparing for investor activities. dealing with various shareholder requests. i watch her show and i see a constant discussion of should there be a bigger dividend or a share repurchase. should they split off this or that or merge with this? this really can be quite distracting. if you are trying to grow a business. >> that leaves an obvious question. you partnered with silver lake. there are other private equity firms that have lots of capital and access to financing that could partner with public companies. should more public companies go private? >> that is for them to decide. i've had quite a few contact me asking about the process. an easyinly wasn't
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thing to go through the process. when we got through it it has been a lot easier managing the business as a private entity. we get take on risk. we can accept risks and invest more aggressively. more, based on the discussions i've been having with other colleagues. have intrigued me. how many companies, i'm curious, if you could put on a little detail. how many companies have you theed to about doing transition? are we talking about companies the size of dell or even larger? size range,ells some larger, a lot smaller. more than 10. i can't tell you who they are. >> do you blame activism? you tangled with carl icahn in
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the course of taking dell private. that has given you a taste of activism. do you blame activism for what is happening to your competitors? hp splitting into ibm under tremendous pressure from investors for not being able to grow revenue and doing the wrong thing with its capital? onehere are two lenses should apply. the first is to say, is this something good for the customers of the enterprise? often, the answer is no. , if you ownould be all of the business, would you actually do this? marketm is a bull strategy. there is a risk that the temporary nature of that shareholder who is renting no shares for a time, it certainly
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benefits during that short time, but what happens later? that is a risk. certainly, as a long-term owner operator of the business, i have thought about this over a lifetime and beyond. >> what do you say to the growing number of public company directors who are popping up, and occasionally members of management, though, there are fewer of those who say activism is a healthy influence on corporate america. is that disingenuous? >> it is not all bad. i'm sure there are good ones. there have been plenty of good things that have happened as a result. anything taken to an extreme can be a bad thing. i think there are some bad examples, in addition to some good ones. phalen,failing -- john
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who i met last year, says you could have financed this on your own without silver lake. should you have? >> the process lent itself to ensuring there was another party involved. beyond me. that the independent board of directors went through a rigorous process. there were multiple shops. think it was about the most rigorous process ever conducted. in revenue terms it was the largest company to ever go private. >> how quickly is your industry growing? the markets you serve? how is dell doing against that? >> we have accelerated our growth rate. we had seven quarters in a row of share gain. in the united states, in the
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last quarter and our client business, we grew 19.7%. the industry only grew 4.7. if you take dell out, the rest of the industry grew only .2%. 2.7% for dell, .2% for the rest of the industry. adding new customers. today, we are the fastest-growing integrated i.t. company in the world. >> when you say 19% from the client business, what does that mean. how does that compare to overall topline growth? data that ise idc released publicly. for unit sales. revenue would be a little different. that is not the total business. that is a part of the business. we have been able, pretty much
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across the board, to grow the business faster than the industry. lowhese days, that would be to middle single digits? forot for writing -- not riding -- i don't have to answer that question. we are generating a healthy cash flow. we are paying down our debt aggressively. the business has a healthy rhythm to it. the year has gone well. >> where are you on operating margins? >> operating margins are pretty healthy. we are operating in a comfortable zone. we are able to reinvest in the business. again, -- a thing because it is that you have an opportunity to
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do as a public company that is easier than when you are -- to do as a private company then a public company. are you becoming more efficient? >> more efficient and productive . we are adding headcount in research and forgot to -- in research and production and sales. you think about the next billion customers that are being added. into the digital age. we have a dramatic expansion of capabilities. cloud, cyber securities, a fast-growing security business. our software business, data center business. we just introduced the 13th generation of the servers. it is growing at a double-digit growth rate. we are gaining share.
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look at our key competitors in the negative growth rate. >> their numbers are public. >> we can see that. it is fun to be a little stealthier. we can look at what the business is doing well. most importantly, the customers are happy. we had a great event a couple of weeks ago. we had 5000 customers at dell world. many showing off what they are doing with our technology to drive innovations and success in their businesses. we have focused our energy on making the customer successful. the customers when and the company wins. >> my interview with michael dell. he has a private company. there will be more at 1:00 eastern time p.m. on bloomberg west. he will talk about the outlook for the can your industry and
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concerns about cyber security in the cloud. if you were to look at facebook or yahoo! or amazon, you would find they do not buy computers from dell. they don't buy servers from dell. they buy white box servers. servers made by companies in china. they use linux or their own software to customize the public cloud. the dropbox functions or google drive. what facebook does is driven off of the servers that they use to manage a public cloud. that is a fast-growing business that dell does not have. that is one of the challenges i went into with michael dell. >> do you remember when dell was one of the first names we said when we talked about computers and technology? in the world of apple and social media?
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dell is not in that conversation of influencers right now. >> this is why it is worth tuning in for more. he believes security concerns will keep big companies, and small companies, i'm using a public cloud. amazon web services, which has been a huge home run for jeff home runy not be a much longer because of security concerns about loading their information onto public servers. they will build their private cloud. >> that sounds like a sales pitch. what else is he going to do? of course, it is his sales pitch. he may be right. he was right about the buyout. that dell was undervalued. that people were doubling down on the personal computer business. what happened in the 13 months
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since he went private? the pc industry bounceback because of a refresh cycle and he doubled his money. >> ask carl icahn what he thinks about that. --he thinks that carl i he think that michael dell snickered the world and doubled his money in 13 months. if everyone was so smart, they would not have sold dell shares down. the company would have been valued more closely with what michael dell thought it was worth. >> that is a good point. >> more of that at 1:00 p.m. on bloomberg west. balancing act.'s the house speaker wants to keep hard-line republicans happy, while trying to avert a government shut down. good luck with that. >> the recipe for beating
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mcdonald's and burger king. the rest of -- sonic things he has it.
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i amis is "market makers" erik schatzker, this is stephanie ruhle. john boehner is facing a rebellion over the budget. the government will run out of money next week. conservatives say a spending bill must take action to stop president obama's executive action on immigration, even if it leads to a government shutdown. this is a big test for house speaker john boehner? >> it is. it looks like a test that he will pass. perhaps only with the help of his nemesis nancy pelosi. let me walk you through what is happening. john boehner has a two-part plan to respond to the immigration
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action and avoid a shut down. republicans will vote on legislation blocking the emigration action. they will vote overwhelmingly. it has no chance in the democratic senate. it is a show vote. next week they will vote on a spending bill to keep the government operating. only 11 or 12 will be covered by that. he will leave out --. that is an effort to take another crack at the issue. house conservatives say, that is not good enough. we want to challenge the president here and now. they're being lobbied by ted cruz. this is what he had to say. >> congress should stand up and use the power of the purse. to say, we will fund the government and the operation of
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the federal government, but we will not allocate taxpayer dollars to lawless and illegal amnesty. >> the question is, how many house republicans will side with ted cruz and not vote for john boehner's spending bill and reopen the possibility of a shutdown down. a real embarrassment for john boehner. >> you mentioned he will need nancy pelosi to get this done. what did she say? potentially provide the lifeline for john boehner. he can suffer some republican defections, but can get the margin he needs if enough democrats vote for that spending plan. >> i have reached out to the speaker and said, we want to work together to pass a bill to keep government open. as we had to supply the votes last year to open the government and to keep the government open. we cannot do it unless we have a
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bill that is worthy of our support. >> she is ready to step up and help the speaker, but she wants to see the bill. there is a risk of that john boehner and republicans may add provisions to the legislation that she and other democrats would oppose. have thee again, we possibility of a shutdown. there's still a risk, albeit a small risk. >> in that scenario, would it not be possible for republicans down on thehut democrats as opposed to the way it was before? that would certainly be an option. there is the possibility. the dynamics are different. republicans feel confident that they will be blamed for a shut down. john boehner wants to avoid it. mcconnell and pelosi want to .void it
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there's still room for disaster in between the politics. this is not a done deal. , with the odds of a government shutdown. something i hope we do not get. >> me too. will be back." stay with us.
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>> coming up, who are these guys? the two men in every sonic driving commercial. the sonic ceo will explain why the ads work. . .
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>> live from bloomberg headquarters in new york, this " with erikmakers schatzker and stephanie ruhle. >> welcome back to "market makers." hope you are hungry. the fast food industry is facing headwinds like rising labor costs, higher commodity prices, and an increased focus in the u.s. on healthy eating. u.s. quick service restaurant index is trailing the s&p 500, but sonic drive-in, for one, is outperforming its biggest peers. its ceo is here now to help us look at the recipe for fast food growth. chris, how are you growing right now at a time when i feel like
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we talk more about juicing, going gluten-free, low-fat, all natural -- you are kind of the enemy of all natural. >> well, what we are the friend of his our customers. all of our food is made to order. make when our we customer comes in line is what they order. one of the things that probably makes a difference -- when we all think about how we eat versus how we go out, americans it 78% of their meals at home. when they go out, they are almost invariably thinking about a little bit more indulgent experience than what they would be doing at home. i'm happy also to talk about how it is we've got this momentum in our business. our business is quite healthy, has been for the last couple of years, and growing well, and it is in no small part because we offer our customers and array of products, a lot of choice. if mom wants to order a grilled chicken sandwich on the , we'veain shibata bun
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got that, and it is a delicious sandwich, but if the kids wanted tater tots want and a hotdog, we got that, too. >> what percentage of your customers are ordering the book -- the grilled chicken on the ciabatta bun? the >> the chicken accounts for about 10% of our sales, and hamburgers account for about 17% of our sales. the dough? en or >> we've got an array of chicken. as i said, we only make what the customer orders. terms oficken piece in the 10% that is chicken sales, i don't have the breakdown for you, but --
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>> that's not why people come to sonic, though. >> that's not why they go out to eat, by a large. the customer that comes to a fast food restaurant, it's a little bit more utilitarian -- >> you try to make it fun. >> if i'm going to a fast food restaurant, i'm not going to that meal for a healthy option. that is my treat. >> i'm not suggesting sonic drive-in should not exist. >> there is an array of items we do offer on the treat front. about 10% of our sales is ice cream. we also offer a wide variety of drink's, and it's all custom-made. once again, customers can add all kinds of flavors, etc. that sets us apart compared to competition because usually, in our business, our competitor's business, drink's are coincidental to an entree, and in our case, people come in just to buy the jinx. >> the issue is not whether fast food should or should not exist or whether sonic drive-in should or should not exist --
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>> it showed. >> the question ultimately is do you worry that too many of your customers spend too much time and money eating at your stores and mcdonald's -- >> he wants them to do that. >> no, it means -- if everybody -- again, 1240 calories with a bacon double cheeseburger, 440 calories for the onion rings. if you order the blue coconut smoothie with the nerds, you have met your full days dietary allotment just at lunch. >> in a way, what you are describing in terms of individual choice and individual discretion -- if you did that at home, sat and ate chocolate all day at home, you would be in a different place. it really is about individual education, individual choice -- >> to you care about that stuff? >> of course i do. if you look to us and ask what we do about it, we're offering a new product called sonic splash, a no sugar low calorie fruit drink, fruit and water mix.
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>> i'd rather have onion rings, but that's just me. >> it is there, so we offer it to the consumer, but we are not there eating police. >> you guys are killing it, right? your stock is trading at 27 times forward earnings. >> it's those commercials. >> five are sent year-over-year. we have been hearing for months, right, that fast casual is fast food for breakfast, but it's not happening at sonic. why? >> a variety of reasons. to back to the issue about choice, it is made to order food, and the customer gets what they want, but we are also addressing the customers' needs or desires in a variety of ways, -- fastlast casual casual you just mentioned, our customers may go to a fast casual get made to order food, nice sandwich, whatever it is -- we offer that. it's made to order, fresh when they get it. we are addressing the needs of that customer as well as the customer -- the fast casual
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folks -- quick service restaurants get hit on two ins. you say fast food. we say qsr. convenience stores take away the lower end, cheaper food, tricks, etc. we offer both. we offer both made to order in a lot of promotional ways, so we are capturing both, capturing business that some of our rompetition in the qs businesses losing and convenience stores and fast casuals have been getting. this is why our our same-store sales are positive, and the momentum of our business, including our stock, is very positive. >> burger king -- how much of a threat is that possible deal to your business? >> the deal they are doing makes almost no difference to our business. kind ofsee what strategy they pursue over time. >> tim hortons suddenly shows up here, that's another fast food
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restaurant on your block. >> tim hortons has had extraordinary success in canada. it is not a brand for which there is high recognition in the night it's it's. >> sonic was not a high recognition brand a few years ago. >> sonic has gotten momentum built over a long time. it's a 61 year old is this. we have 3500 stores, and we are spending over -- >> they came up with the name sonic 60 years ago? >> they came in -- they came up with the name sonic in 1959. >> important has an incredibly aggressive growth plan. 3500 stores now. two years from now? >> a little longer than two years, we barred he said in a public market place that over the next 10 years, we expect to open another thousand stores. we will have good growth over the united states. it's focused on domestic growth. this year, we will open 50 or 60 stores. >> in the meantime, you've got great commercials. >> good. >> thank you so much for joining us.
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sonic drive-in ceo cliff hudson. >> when we come back, the great donna karan. >> we are celebrating "businessweek's" 85th anniversary, and we will talk to the designer who changed what it was like for women to get dressed and come to work. ♪
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>> it is a big week here at bloomberg media because bloomberg "businessweek" is celebrating its 85th anniversary. five different covers on are the people and things that have been the biggest disruptors in the business world. obviously, once like apple, but also some not so obvious ones like the air jordans and the ak-47. one name on the list -- donna karan, who has changed women's fashion forever, especially women in business. we recently spoke with her about how she started out her line. >> when i started out, women were wearing jackets and ties
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and shirts and kind of feeling like men, which was great, but where was the sensuality of a woman? i put together what i called seven easy pieces, and i think that is exactly what a woman needed. >> how did you go from seven easy pieces to the iconic global become- brand you have today? >> that's the problem. i'm always looking for seven easy pieces, and i want to be seven easy pieces for dkny. i needed a pair jeans, a t-shirt, and iraq. my husband needed clothes, so i asked why men couldn't wear black, and i was and to stretch, so i got men into a stretch suit. his seven easy pieces. then it was fragrance.
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it's basically essential's of what one needs in their life. but then, like any fashion designer, next season, next season, next season, and the rest is history. >> how did a woman go from wearing boxy shoulder pads, live users, blouses, into being so committed to being in stretch? is it about confidence and women becoming more successful? we used to hide behind giant navy suits. >> look how hot you look. women are women. we are sensual. we are comfortable. we want to move. we've got too much to do in our lives. the other was kind of holding us back. i guess in the body and the motion of the body, the body was was desiring.t it also, the idea of you can wear that to work, and you can go at , so nothing better than a jersey dress, especially with stretch, holds us in and lets us
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breathe. >> you taught women -- where black day and night, wear black to work, where we used to be in florals and patterns and blouses. how did you get us out of those buttons and flowers and into chic black? >> the first person who cared it was bergdorf goodman. >> good place to start. the collection was presented, and i was shocked, really, really shocked how people had taken to it. the bodysuit i was a little concerned about. what do people want to do? at the end of the day, you want to look in the mirror and you want your husband to go, "honey, you look great." lookant people to say you
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fabulous, but it's not about your clothes. it's about you the woman. >> has she changed? >> no. now i have urban zen and dkny, so it has expanded quite a bit. when you talk about the expansion, how do you keep true to the donna karan identity and have so many collections or collaborations? >> it's not easy, but i think that's where the designer in me .omes because i'm constantly being inspired. about a tells you fabric or should i put a stride into the grave. because my senses are alive and constantly moving and constantly changing and constantly being inspired. >> you are a true artist who has taken her artistry and turned it into a mega business. what do you make of these
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celebrities of the moment who want to become lifestyle brands, who want to become designers. for what yout mean created in your extraordinary business? >> i feel everyone has that , and those who will make it will make it, and those who won't won't. just because for me, i started at such a young age, and i think we are moving at such a fast pace right now. i think we are more personally involved of what works and what does not. i don't think there is a sign that says you must wear this to be in fashion. i think it's a little broken in .he fashion industry right now think we are personalizing fashion a little bit more. so with the personalization of fashion, i think people are empowering themselves to feel that they know how to guide
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fashion. >> icon donna karan. read more about the disruptors in this issue of "businessweek," out on newsstands and online this week and. if there was ever a time to pick it up -- i think it always is -- this is the weekends to do it. when you read about all these not likely,they are but i love them. kitty litter, the pill. do you know why kitty litter is in their? before any litter, people just did not have cats in their house. cats.appens to like >> don't dog on cats. come on. >> i like that. >> not only can you read about it, on tuesday, you can see a lot more of these disruptors themselves in a very special bloomberg tv primetime special. you do not want to miss it. .:00 p.m. eastern >> donna karan, impressive lady.
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>> extraordinary lady. "market makers" will be back in just a moment. ♪
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>> that is going to be it for "market makers." we need to take a break because we have a very special guest. what do you think of the economy? nothing. thank you so much. great day. be heregoing to tomorrow. >> people need to know who reese is. >> reese is my youngest son. five years old and all his glory. >> tomorrow, everybody, it is the last jobs report of the year. this may have been the best payroll report since 1999. >> i will not be here. i'm headed to miami. monday, we'll be sharing with you all the tips of how the
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luxurious like to live. they are buying million-dollar art. >> have a great time. >> thank you. taking a break. that's what's next. then "on the market" on the other side. see you tomorrow. ♪
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>> it is 26 past the hour, which means bloomberg television's "on the markets."
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i'm matt miller. looks like we are still seeing losses across the board. this morning, we saw a slight gain in futures, and it turns out about a half hour before the bell, and we have been at these levels most of the session so far. down .3% on the s&p 500. the dow jones industrial average also down. stocks are on pace even at these levels. since october 22 after the ecb said it will wait until next quarter before considering additional stimulus measures. joining me for today's options inside is an equity options trader at option hacker. let me ask you how much attention you guys all pay to the ecb. they did not move rates at all, but the press conference was rather depressing. >> we saw a big move lower ones that news started to come out. lows of we took out the
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the session, the market started to come right back. we are well off of the lows of the day's session, less than 10 points off the all-time highs in the futures here, and i think we are going to see a slow, choppy grind higher into the close here as traders position themselves for the jobs number tomorrow. >> one of the stocks we are keeping an eye on right now is sears because that stock really , falling astoday much as 7% earlier. you can see it down now 1.6%. loss than arded year ago, so what does the options market look like? >> we are looking at a lot of bearish activity. i was short sears through the report. i'm still short and will be a seller on any rally. they reported a smaller loss than what was expected and reversed hard throughout the day and have made new lows into the later part of the morning here. revenues fell by 13% over last
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year. their loss widened. they saw their margins shrink. sell on going to be a any rally going forward. >> retailers have had a tough time of it. ostale and abercrombie came out yesterday. retailers, oren does retail look bad in general this holiday season? >> i think that this holiday season, i'm generally bullish retail. we talked about how the price of gas moving lower is putting money in consumers' pockets. were talking about billions of dollars in next to cash that should be floating around this holiday season, but it's important to understand which retailers that money will be going into. it will help retailers that tended shop -- consumers that tend to shop at more discount retailers. ultau got a trade today on
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salon because medics. they report today after the bell. what do you expect to see? >> it's a stock that is historically very strong on earnings. it has rallied six of the past eight quarters on earnings day, and this time around, the options market is implying a move of $12 by december expiration, which would give me ofupside target just north 135, so i can look to buy call spreads for about $1.50. i can risk 100 $50 to potentially make $350 if it trades that move higher. >> thanks very much. on the markets again in 30 minutes. stay tuned here on bloomberg television. " with olivia sterns is up next. ♪
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" whereome to "money clip we tie together the best stories, videos, and interviews and business news. protests in new york over another controversial police .omicide will cameras on cops actually help? around the world, put in valve's to punish speculators who bet against the ruble. he defends russia's annexation of crimea and likens his foreign adversaries to hitler. today's innovation story, bloomberg

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