tv Bloomberg Markets Bloomberg June 15, 2015 11:00am-12:01pm EDT
home, the 2016at campaign shifts into high gear with hillary clinton holding her first rally. jeb bush finally make his candidacy official. or avoidingllenials formal wear. -- our avoiding formalwear. scarlett: good morning, everyone. i am scarlet fu. pimm: i am pimm fox. we are 90 minute into the trading day. let's look at how markets are performing. down a little more than a half a percent. the dow jones falls three quarters of a percent after the disappointing factory production
numbers. let's take a look at european markets. scarlett: that actually set things off on the wrong course for u.s. stocks. they spell at the open with european stocks being pushed by athens. on friday it tumbled as well along with surging on thursday. you are seeing a selloff in european -- peripheral european government bonds. debt rising.oday's let's get to a look at some of our top headlines at this hour. the unexpected drop in u.s. factory production last month, industrial output down 2/10 of a percent in may. the report showing that the stronger u.s. dollar also a decrease in fuel prices, hoping back american factories. the head of the european central bank says the next move is up to
greece. cleardraghi making it that greece needs to do something to break the stalemate over bailout money. broke down talks after just 45 minutes. >> such a strong agreement with greece is needed, not only in the interest of greece the euro area as a whole. why all actors will need to go the extra mile. it lies squarely in the camp of the greek government to take the necessary steps. pimm: alexis tsipras said he will not give into european demands for pension plan cuts. united technologies is getting rid of the best known name in the helicopter does this -- business. sikorsky would either sell or spin off the maker of the black hawk helicopter. a couple of deals to
tell you about. target selling its pharmacy to the drugstore chain cvs for 1.5 billion dollars. cvs will run the pharmacy through a store within a store format. the stores will be branded as cvs pharmacy. cox automotive has agreed to buy dealer tracks for $4 million. their business includes an online marketplace and kelley blue book. there is no doubt who is the best athlete on wall street. mark ribbon run his fourth straight kaplan title. he is a former and state football player who spent time camps and nfl playing starts a new job with i week. pimm: coming up in the next hour, house democrats dealt a stinging blow to the president's trade deal on friday but the
white house spent the wheel trying to save it. more lobbying on a big day for the presidential race as you jeb bush makes his candidacy form -- official. both sides in the greek bailout talks are digging in. alexis tsipras earning his stance. returned to the negotiation table with just a couple of weeks until bailout funds finally run out. we could really be down to the wire. pimm: joining us from berlin is eric nielsen, global chief economist at uni bank. he is a former economist at the international monetary fund and world bank. and joining us from athens is nikos chrysolaras. i wonder if you could describe what the mood is in athens. -- ghosts:
nikos: it is bleak. the two sides cannot decide who is supposed to make the next move. mario draghi is saying the ball is squarely in the greek government's court date the greek government has said they have not had concrete proposals which are enough for the country to meet its budget targets, and it is up to the creditors to respond to the proposal. area financeo minister's meeting on thursday in luxembourg. there is no prospect for a deal inside by then. we are definitely entering the endgame. scarlett: i want to bring in something that the french president said on greece at the paris air show. all european officials have been
sounding off on this. here's what mr. along said. we are entering a phase with a risk of turbulence if no deal is found. greece must not wait. it needs to enter into discussions with the institutions again. scarlett: so the message is, greece must not wait. nielsen, delineate for us alexis tsipras' options. is he just fighting for political survival? the: as far as i can judge, two choices he is making, he is trying to get on the page of the europeans or he will descend, the country will descend into chaos for sure. at the end of the day, at one stage the ecb cannot continue the so-called ela anymore. if you really come to the
states, you come to arrears in the imf, so this is a very bleak eternity. i really do not know why they are still messing around with these exigent details. pimm: the ghosts, talk about the greek populace and the popularity of the greek government with the electorate. os: the vast majority of the greek people want the country to remain in the euro area. at the same time, most greek people do not want extraordinary measures, especially along the lawmakers of the government party and the ministers. minister, esther cyprus, is between a rock and a hard place. eurol which would allow area leaders and the imf to keep --ancing the greek economy and more belt tightening.
these will come with a heavy toll for the popularity of the greek prime minister. on the other hand, no deal would mean that greece would probably default as early as next month on its debt. and it would probably be followed by create -- complete chaos. there are no easy choices for s nevertheless because the bailout expires in two weeks it pimm: i want to bring out some comments by bill gross on twitter about greece and also referenced developing nations. "greece is the canary in the coal mine for a developed economies." could you comment on his notion that there is something more at work, that this is an issue not just for greek but other developed economies as well?
eric: you have fundamentally a country which has underperformed in terms of policy for a long time. remember when it started with the greeks remembering -- admitting having lied about the deficit. it was in the eurozone not your normal sort of restructuring and default, and then having a government now that just does not want to do any of the reforms other countries do. the exchangeut rate per se. it is not about anything else than a country that is spending taxpayerso the other and the imf members or european members are lending them taxpayer money until they can get their house in order. they are saying, please give us a plan so you can get in order sometime in the future if we are going to use our taxpayer's money.
i strongly believe it has nothing to do with the other eurozone countries. scarlett: how do you see this playing out? does greece began to impose capital controls? erik: if you asked me a week ago or two weeks ago i would say probably not so likely. not know what it will and with because we are at the 11th hour. if i can count the dates and processes and ready for european policy, even if they get an agreement on thursday it is a really close call to get cash into athens to pay the imf by the end of the month. we are really down to the wire. if you are in arrears with the imf, it is a real messy situation to get it going again and you really have to get to give themtries loans before the imf can get back on track.
the real question is how the ecb can continue to print money. we are really down there were cabinet control is a distinct possibility. pimm: i want to thank you gentlemen very much. eric nielsen and our athletes -- athens bureau chief the ghost crisil rs. scarlett: hillary clinton is siding with her party's left wing. >> the president should listen to and work with his allies in congress, starting with nancy pelosi, who have expressed their concerns about the impact that a workersld have on our to make sure we get the best, strongest deal possible. and if we do not get it, there should be no deal. ♪
♪ scarlet: welcome back. i am scarlet fu. pimm: i am pimm fox. let's go to matt miller who has a look at what is going on in the market. matt: it is a sea of red. the dow jones industrial average turns negative today. the drop here not nearly as bad as it was. we were looking at losses at over 200 points on the dow. about whatconcerns is going on in greece, no one knows in whose course the ball is right now. there are deadlines looming. the s&p recovering, adding eight points. one of the most interesting stories i have seen today is this downgrade at morgan stanley
for the chip makers, for both micron and sandisk. it is interesting because joe moore, the analyst over there, has put a cell and lowered his price target on both of these stocks. micronis saying $21 on because channel checks through worse than expected. sandisk, also lowering his price target and outlook. he is going against the grain. 24 analysts out of 33 are calling micron a by. only three are calling it a cell and he now joins that crowd. take a look at united technologies, i find it a fascinating story. they are spinning off or selling the sikorsky maker of helicopters. their biggest customer is the u.s. department of defense. they are selling this $8 billion business.
they have got to find a way to deal with the taxes on this because they have on sikorsky since 1929. a lot of capital gains to deal with. even though they are getting paid by you and me, they do not want to turn around and pay us to bring much in taxes. they have to find a way to avoid the taxes. scarlet: that's called fiduciary duty, isn't it? i am sure they gave us great prices on his helicopters, patriotic prices. scarlet: thank you, matt miller. pimm: the u.s. supreme court has refused to back a law forcing doctors to show women their ultrasound exams before having an abortion. forlina passed the law years ago but it never took effect and the appeals court said the measure violated the speech rights of doctors. the high court let that ruling stand. the canadian company that owns
sex 5th avenue has agreed to buy one of germany's oldest department store chains. billion. pay $3.4 the company will open sex saks outlets. source project will let people analyze large amounts of data quicker than with other technologies and that may allow ibm to attract more software engineers to use its big data tools. those are your top stories of the moment. tradet: president obama's agenda may be on life support but it is not totally dead. couldvote in the house happen as soon as tomorrow. this is like groundhog's day. pimm: deja vu all over again. let's find out more from peter cook. he has the latest.
what is the next move? peter: republicans are debating whether or not it makes sense to move forward with another vote soon as tomorrow. we heard from kevin mccarthy earlier this morning telling reporters they are weighing their options, confident they can move forward but the timetable remains in question somewhat. this would be, as you said, a do over of the vote that happened on friday when the democrats abandoned their president in droves. republicans want the president to push forward and convince democrats to reconsider their embarrassing vote. here is paul ryan from fox news sunday. paul: the president has a lot of work to do with his own party. i'm optimistic because i think people will realize just how big the consequences are for american leadership.
peter: i have no news that democrats are reassessing. scarlet saw nancy pelosi leaving washington on friday. she had a hop in her step and a smile on her face. scarlet: she was fairly quiet about how she was going to vote. hillary clinton finally spoke out and bashed nancy pelosi's position over the weekend. peter: she came out and said the president needs to do more to work with nancy pelosi but if you listen to what she said, she did not officially weigh in on the vote that is in front of the democrats. there is still some wiggle room. what can the president and republicans trade in order to get this done? : the president has offered a campaign for anyone that
supports him and whether that will factor into the decision-making, it did not factor in on friday. nancy pelosi is asking for republicans to consider a highway bill sooner rather than later. congressman mccarthy said he does not want to link these two items together but there is still something out there. there are some bargaining chips for john boehner and the republicans to dangle for democrats. we should get a decision this afternoon whether we will have a repeat performance. scarlet: peter cook, i am sure you will catch us up on this when that vote takes place. pimm: a do over. scarlet: a mullican. we will see you later. scarlet: i am not gone yet. i have one more segment. pimm: how do you measure bond volatility when bonds have
♪ what stories are the finance interested in? the most read story, the collapse of the greek bailout talks. the second most read is bond markets. we will bring in our specialists, lisa abramowicz. lines have become so extreme that even lack rock is rewriting -- blackrock is reminding -- rewriting bond models. elson wrote the story. scarlet: you are here to help
interpret it for us. when quote in the story which kind of encapsulates everything market "the german bund is incalculable." ds are the u.s.n version of the treasury market. they set the tone for borrowing costs for companies and people looking for mortgages. if you have extreme volatility in this market, it creates a possibility for ripple effect to other markets in the area. how do you calculate it? do you just throw up your hands and say, oh well question mark you cannot do that if your job is to manage money. areanies like blackrock changing their models to account for greater volatility, particularly and the longer dated debt, as well as new correlations such as the german
yields ande treasury how they sort of play together. with central-bank dominance, you are seeing some correlations that during stress times in particular, really pick up. pimm: what does this tell you about the validity of the models in the past if they are so willing to ditch them because they do not like the results? lisa: my father is a national petition -- a mathematician and he said models are fantastic and less you get the wrong parameters. you have to have people who question those models and say, let's think logically about what the scenarios are. no model will be absolutely perfect for every financial cycle out there. the idea is to measure some way in thehedged are we, cases something that is unexpected. liquidity concerns have
gone to the bond market. did the ecb ad or takeaway liquidity? lisa: i think they definitely suppressed or when cost. when you have such low borrowing costs, it gets tricky to have a true two way markets. scarlet: because of crowded trade? lisa: yes. scarlet: lisa abramowicz, thank you. pimm: sounds like it is time for new models. scarlet: i am out and a new model is coming in. ahead, jeb bush officially gets into the presidential race. we have got the details. ♪
latest bailout talks. alexis tsipras says the lenders are making unreasonable demands and mario draghi the ball is now in greece's court. there will be something new inside of target. they have agreed to sell the pharmacies inside more than 1600 target stores. the buyer is cvs 1.5 billion dollars. they will operate the pharmacies as a store within a store format. the new york prison worker accused of helping two prisoners escape was in court. she agreed to be the getaway driver but backed out because she felt guilty. the manhunt is in its 10th day. colorado butgal in you can still be fired for using it. that is a result of the ruling
by the state's high court. an employee was fired by the dish network after being positive on a test. those are your top stories of the morning. the markets are closing in europe and for the very latest, we go to london. classic risking aversion in the european markets today. if we start with the equity market, it is read and it has declined across the board. it is about greece, the meeting it had with its creditors. the talk down after just 45 minutes. i have had phone conversations with friends longer than that. the attention now turns to the eurozone finance meeting in luxembourg on thursday. looking for a resolution by the end of this month which is when the current bailout runs out. the athens stocks -- stock
exchange is the worst performing market in the world. it is greek banks leading the losses on the european equity benchmark as well. if we look at the bond markets, greek borrowing costs have been moving higher and greece was the worst performing sovereign debt market this year. you can see a slide to safety as investors have been buying german debt. as we moved to the euro, that is not only been declining against the dollar but against most other major currencies. t, fear of of a grexi contagion. volatility has jumped to a three and a half year high. pimm: thank you very much. coming up on the bloomberg market day, tuxedos are in trouble as more americans choose not to get married. we take a look at the wedding industry and how menswear
companies are coping. evolving trends and costs in the cruiseship industry. we will talk to arnold donald. airbus chief executive talks to us from the paris air show. all that and more ahead on the bloomberg market day. presidentialn politics for jeb bush is here. he will make his candidacy official in miami. hillary clinton is holding her first big rallies of the campaign. here she is in new york on saturday. >> to see corporate -- corporations making record profits while yours have barely budged. while many of you are working multiple jobs to make ends meet, you see the top 25 hedge fund managers making more than all of america's kindergarten teachers combined, and often paying a
lower tax rate. pimm: mark halperin of bloomberg's "with all due respect" is in miami to cover the announcement. mark: this is a big day for jeb bush. he started out making it clear he was running and since then, except for the fact that he has taken in tens of millions of dollars, he has not had the best time. his candidacy was seen as something that might wipe out other candidates. the normal physics of the republican party suggests he should be. he has run into scott walker, marco rubio, and others who threaten his ability to get the nomination. this kickoff today will be closely watched by people in the political world, the fundraising world. it is a chance for him to finally start as an active candidate, trying to reestablish himself as a dominant and maybe the dominant figure. i wonder if you could tell
us a little bit about the competition that jeb bush faces. let's start with marco rubio. mark: they are friends. marco rubio put out a statement saying, in this case they really are friends. they share a political base and this is a state that is critically important for both denominations. marco rubio has something jeb bush cannot get no matter what he does. he is a new face that would represent a new kind of face is a young, hispanic man. get bush cannot do that. for him, the challenge is to come across as new and exciting in some ways, even though he will never match marco rubio in that respect. ,is campaign is doing something it has been on snapchat, clearly an attempt to show that he is not a man just of the present of the future.
marco rubio and scott walker have probably come the furthest in establishing themselves as top tier candidates. on scottollow-up walker, when distinguishes him from jeb bush? mark: that he is in the arena now. jeb bush last was in public office as the governor but from a different time. not in the obama era. scott walker has been in the arena, elected and reelected, fighting today's fights, and he makes that point. something jeb bush cannot match. he cannot claim that he has come in and has been involved in our elections and political process of late. -- jeb bush will try to convince people he is the right person to lead the republican party and the country.
walker compellingly makes the argument, i am in the arena now as a governor, and he is contrasting himself with the senators like rubio or somebody like jeb bush, who has been out of the game and therefore not just rusty but is not associated with the big fights that the republican party has been taking on. pimm: i want to thank you very much, art halperin in miami. officialn jeb bush's announcement. let's keep the politics discussion going. we have a needed done, a former white house campaign advisor for obama. joining us from washington. and terry holt was the national spokesman for the bush-cheney campaign in 2012. he is a partner at hdm k in washington. beginer if you could just by describing the bush announcement today.
what is it going to do to the field? terry: it will widen the field. his entry is a great one for the party because he does represent a lot of name id. people will be familiar with the name but now his challenge is to talk about himself and differentiate himself. i think his announcement yes it's very -- his announcement yesterday, when he announced his campaign , what they are trying to get out there is he is powerful player. as mark reported, there are plenty of other options out there with a different profile and he will have to get in there and rub shoulders with these guys, and show the republicans and conservative voters what he has got to offer for the future.
anita, if you could just comment a little on hillary clinton's campaign speech and who do you believe she is running against? i need a: -- a: i think her speech was emblematic of where the democratic party is now. she spoke with a personal voice in a way i think a lot of democrats were waiting to hear, and addressed the issues that this party thinks are critical. now that we have this economy out of the hole, how do we make it an economy that works for everybody and not just a small number of people question mark it does illustrate the problem jeb bush and the other republican candidates have, they do not have an answer to that question. hillary clinton and all democrats running are addressing that question. pimm: thank you very much to anita dunn and terry holt. you can tune in today live at 3:00 p.m. for coverage of jeb bush's announcement.
miller of to matt bloomberg news with some breaking news on hank greenberg's lawsuit against aig. this has to do with a court ruling. matt: hank greenberg is winning his but it does not look like he will be getting any damages. the u.s. set a legal terms in for an $85ig's stock billion bailout, that is what the judge ruled. but does not mean that aig investors deserve compensation. hank greenberg has his day in court. no doubt he will not be pleased with this ruling because he is not getting any compensation. i'm going to continue to look deeper into this and see if it is possible for him to come back and do anything else. but for right now, it looks like he has won his with no compensation. i do not know if that is what he
♪ back to bloomberg market day. i am pimm fox. i want to get back to some breaking news on aig and hank greenberg. peter has been following the trial that hank greenberg has been undergoing in washington. what exactly was going on and what is this ruling? it is a split decision, if you will. the judge hearing this case just a few blocks from the white
house and just a short distance from where i am. the judge who have been hearing this case for some time, he knew a decision was coming in judge thomas wheeler has concluded that yes, the federal government, when it stepped in and took over aig and effectively took stock in aig as part of its compensation for that original $85 billion bailout, the federal government provided at the height of the crisis in 2008, that the government went to bank far -- too far because they took stock as opposed to some other collateral. at the flipside of that, the judge has also concluded that had the government not stepped in at that moment that the company would have gone under any way. and so there is no remedy here for aig. specifically for hank greenberg
as a shareholder. sued as the has biggest shareholder in aig. what we are talking about, billions of dollars on the line. one and theenberg judge decided that he and other shareholders were due in essence, some compensation for the loss of their shares to the federal government, they could have one as much as $45 billion. that was what was at stake here for the government. it would have been the biggest settlement ever in a case involving the federal government. it is a split decision because they have concluded that the government did go to bank far -- too far. pimm: thank you. i want to bring in my cohost betty liu. you just got off the phone. ty: it certainly is going to evoke a mixed reaction.
they are now trying to get all of the fact from the ruling. they had not realized yet the court had ruled so we were giving them this information and hank said, i need to get off the phone and assess exactly what all of this means. i told him that there are no damages here and that is going to be a big outside for hank greenberg. it is almost a hollow victory. aig trials won the but there are no damages associated with this ruling. this is a very key point for him. as peter was noting, this was a trial that looked, the odds looked completely against hank greenberg. it was not until he brought on david lloyd and his legal team at the trial began that people began to feel, wait a minute, he may have a shot at winning this case. whichthis is a trial in ben bernanke testified.
betty: tim geithner, hank paulson. it was a who's who. we saw them paraded down washington. pimm: because they had to, in a sense, relive the days in which the u.s. government came in and took the stock of aig as collateral for money that was pumped in to help the company survive the financial crisis. betty: david boyd made some good ,rguments that were published and followed closely by all the news media. that seemed to, judging from the way the judge was questioning the witnesses and counter witnesses themselves, the judge seems to almost be siding with aig. hank greenberg was not on trial during this whole case. pimm: he brought the case against the u.s. government. betty: of course, and he was down there several times watching the various witnesses
testify. point, was very good this a taking by the government? pimm: a confiscation of private property. aig have to pay double-digit interest rates when others were barely paying any interest at all? his lawyer followed up with some strong ammunition but as i mentioned, it is a mixed reaction, a mixed except it's by by hanked acceptance greenberg as they were seeking some pretty big damages. i'm going to get back on the phone with his office. hopefully we can get him back on the phone for his immediate reaction. pimm: you were delivering the news to him? betty: that is right. i am sure he is going to be on the phone or is on this bone -- is on the phone as we speak. pimm: i want to thank you very much, that he lived.
i want to bring in peter cook who has been monitoring this. any updates you can give us? the contention was the u.s. government a sickly confiscated the shares of aig and as a result, there was financial harm. the government was entitled to seek collateral in taking over aig, the one thing it could not take stock. that was the central thrust of the argument and i sat in the courtroom for several sessions, heard most of the testimony from the major players, and that was the basic gist. i know he felt confident that he had made his case in front of this judge. effectively what we learned today is he did. the second part of this case that the government had maintained was that even if the judge ruled against the government, there was no damages because the only consequence that the government had would have been bankruptcy. pimm: one of the consequences is
at least right now, the shares of aig are up about 2%. and i would also be watching the shares of fannie mae and freddie mac today. they could also be affected by this court ruling, not because they were related but the cases mirror each other because of the bailout terms. there are separate lawsuits involving any may and freddie mac. the other thing i would like everyone know is it is quite likely this case -- and i would like to hear what they will do itt -- but everyone expected to go to the supreme court so this is probably not the final chapter. pimm: we are going to have more on aig, inc. greenberg, and the u.s. government coming up. ♪
♪ >> we are approaching the top of the hour. it has been a down day but much worse at the open. we were off almost 200 points in the dow industrial average but now down just 100. the s&p 500 down about 4/10 of 1%. the the.he level on the nasdaq down half a percent. joining me is jim stricker, derivatives strategist of them can't holdings. stocks plunging, fixed spiking. it is a back-to-back day of gains for the fix. it is looking pretty bearish. jim: we think more is to come.
impliedain has been volatility has been low. there has not been an inversion of any kind in the fix future curve. the prior long was about three and a half months so we have kicked off these weeks where we have argued for increasing instability. now you have fomc this week, greece escalating. certainly some ingredients in place to drive up u.s. equity volatility. matt: how far does it go? how high does volatility go? jim: i think low 20's. the two x is europe's equivalent of our fix. that would put us into the low 20's but net net, and we did that volatility blowoff, we will know it, we will feel it. above 30ve spot vicks so it is worth thinking about.
we think that they will get into the low 20's. matt: it could get back there. one of the deals -- there are a lot of interesting deals -- but when i have been thinking about the standard persisted buying -- standard pacific buying ryland homes. volatility,t rate u.s. treasury volatility has been elevated for some time. you can look at the index that shows that. typically that is well correlated with the reit etf and homebuilder etf. matt: in what way are they correlated? jim: implied volatility. pretty much it moves in unison with the move index. we have had a significant diversions. x hb volatility is sitting on it all time lows. we think even with this deal today, we could see higher implied volatility in xhb that
suggest downside. matt: how do you do that, do you sell? xhb one would be to buy volatility, buying 31 and a half put off right -- right so you are short and long volatility. another way would be a volatility pair, by a straddle put andyou are buying a buying a call. you sell the straddle there. a little more complicated. matt: jim, thank you very much. do not go anywhere. we will be right back with more bloomberg market day. ♪
of the government bailout but investors will not be cashing in. pimm: hillary clinton is officially in the race and jerry buss formally enters the race for the republican nomination. betty: carnival is betting big and green on europe, commissioning the largest cruiseship ever. ceo arnold donald will join us for an exclusive interview later this hour. pimm: good afternoon, i am pimm fox. betty: i am betty liu. let's have a look at how markets are trading, it it has been down across the day so far. the dow is off by 114