tv Bloomberg Markets Bloomberg January 5, 2016 3:00pm-4:01pm EST
betty: good afternoon. i am betty liu. here is what we have been watching. an up-and-down day for stocks as they struggle to close in the green for the first time this year. stocks cannot build momentum after yesterday's huge sellout to trading days, of course. his fun is the top emerging-market performer in the past clutter years. it includes a heavy dose of investment in china. -- a little light in their sales numbers. about in hour away from the close of trade today. i want to bring in julie hyman. here. know direction
>> has been tougher for the markets to define that. we are back in the green again for the s&p 500. the dow and the nasdaq remained lower. we are seeing a mixed picture. look, defensive groups have taken over the top spots here. health care, typically, that reflects some trepidation about economic growth when you see that kind of pattern. doingre cyclical groups worse today, consumer discretionary on the list. there has been a little bouncing around even among the groups on the session. he does individual movers heavily weighted. apple and disney. apple, as we have been talking about, following a report from the nikkei. that the company was covering production of its iphone 6 over the next three months by as much
as 30%. are saying now that star wars is out and people do not have that to look forward to anymore, the focus returns to espn and some of the other weaknesses disney see -- has been experiencing. low.: oil is still trading julie: an interesting trade yesterday. tensions going higher between iran and saudi arabia and yet oil trade is lower. just in the face of this huge global glut we heard so much about last year. like not anytime soon. i wanted to look at the dollar and gold as well. it is interesting they are going up at the same time. we got inflation data that shows it continues to lag.
has been rising against the euro. the gold continues to get a little bit of a aid here. people are still looking for what they see as a little bit of safety. betty: let's get a quick check of the headlines. mark crumpton has more from the news desk. technology and uphill fight against the gun lobby, president obama outlined a series of executive actions to tighten and control enforcement of firearms in the u.s. the president noted this week is the fifth anniversary of the shooting of gabrielle giffords. he said that shooting was just one in a shooting -- a series of deadly acts of mass violence in following a firearm. president obama: fort hood, newtown, thereek, navy yard, santa barbara, charleston, san bernardino.
too many. mark: opponents responded swiftly. paul ryan released a statement which reads in part, rather than focus on criminals and terrorists, he goes after the most law-abiding citizens. from denmark, sweden, and german -- they are excited about new border control measures. sweden introduced iv checks on all people traveling to denmark and denmark tightened its border controls. admitted to giving money to terror groups, she will learn her fate and federal court today. she pleaded guilty in september 2 conspiring to provide support to terrorists, including islamic state, and al qaeda in iraq.
in 2006 u.s. citizen and was living in germany at the time of her arrest. sanders is ramping up wall street. he promised that in his first year in office, he will break up too bigs now considered to fail. the banks have too much economic and political power over the country, he says. senator bernie sanders will join us on bloomberg television to discuss his stepped-up attack on wall street. he will appear on "with all due respect" at 5:00 p.m. new york time. global news 24 hours a day powered by our more the 150 bureaus around the world. i am mark crumpton. back to you. betty: managing a merging markets fund is no easy feat. you have got to have an iron stomach. the index has fallen about 34% in the past five years.
the city national emerging-market funds in 2011, he has garnered 49% returns for investors. $807 million funds. it declined in the past year but still beat 96% of its peers for the fourth straight year. the managing director and senior portfolio director joins us now. people will say, yes, there were declines. so how did you do it? the research we do, we take a long-term approach when identifying investments. all the a lot of noise time. the idea is to filter all the noise and take a really long term view. focused on the rising middle-class in emerging asia. i can talk about the positives. that fromave heard
others because that is a big bet on the rising middle-class in the emerging markets. that,f you were to bet on you would have lost a ton of money. dahlias were absolutely wiped out. values -- values were absolutely wiped out. >> all of that supportive argument, it is a very bottom-up market, a disciplined investment process. i think that is where we make the difference. betty: you are the top 10 holdings. quite a bit of exposure to china. holdings,ur biggest aret wall motors, these some very big chinese companies. just in your top 10. saying they are
little worried about that? launched the fund with hardly $5 million, today it is about $800 million, grown with investors, we are focusing on stillegment in china growing and still resilient and that is domestic demand. we are not investing in all china. inare not investing manufacturing and not in focusing on cyclicals and the big investment teams. it is a very focused investment thesis. betty: some emerging markets are heading the investment. brazil for example. those whol view for are macro strategists is that the emerging-market is a tough place to be. i want to eat -- i want you to
hear what troy says. placefit is still a tough to be because so much of the growth was dependent on china. that is trending down even though valuations are cheaper than developed markets. morehould always be paid for emerging markets. our perspective would be until emerging-market growth turns around, what is the hurry? you are managing a fund that is emerging markets. he makes a good point p line not wait this out? >> you invest in the right space so those parts of emerging markets, based on investments, it would be in trouble. marketsodity emerging are in trouble and have been facing real difficulties on the macro fund equities investors would also agree.
if you are focusing on the pure consumption space within emerging asia, you would have significantly outperformed just hugging the benchmark there. betty: how did you know to stay away from some of the commodity producers? at earnings visibility. and ourle growth, investment thesis is based on a .efined macro hypothesis within emerging markets, asia is in a sweet spot. it is backed by a per capita income of $10,000. rapid urbanization. than the rest of emerging markets. growth is more sustainable. is are the macro pillars of the investment thesis but these stages are bottom-up.
our investment style is very detailed. it is a long process. we take a long-term investment horizon. we take a long-term approach. any one placee where the review is so ugly for you that you do not even want to bother going in and doing an investment of roach? >> one should not generalize like that, but if i were to look at steal, i would not go there right now. any who think they know what oil prices will be tomorrow -- i am quite focused and happy with where i invest and there is a lot of opportunity there. us.y: thank you for joining the senior portfolio manager. much more ahead in the next 20 minutes. russell wrote continues following that you emissions
settle accusations that it mishandled foreclosures according to a person familiar with the matter. jpmorgan was one of a number of banks accused of robo signing. fraudulently signing foreclosures. failed to live up to the earlier settles. would allowe that users to tweak things longer than 140 character limit. twitter could be looking at a customersracters ordered more than 23 million items on monday, up 40% from last year. and that is your update.
sales are slumping down over 9% last month as competitors see some gains. also with us is the short bloomberg auto reporter keith moss. let's start on the legal matters. tell us what the lawsuit is about. what exactly is the doj trying to achieve and how much will .hey get out of the w >> easily what the department of justice laid out was four violations of the clinton era act. obviously, those are very serious charges. total up the different levels of charges outlined in could face, they
theoretically up to $80 billion in fines. it is not likely they would pay anywhere near this to settle the suit. it will probably be much lower. it shows the level of scrutiny the department of justice has been basically how carefully they are looking into this. they will still face possible criminal charges. that could come later. a civil suit is not a clue that. penalties the company will face. ceo at thenow vw electronic show along with his brand, vision head, what do they hope to achieve in the u.s. and what are their relationships right now with the epa on this? >> they have always been trying to get a foothold in the u.s.. controversy,.is
can has not been a big player here. now they cannot sell diesel products, which is why the sales and they didrcent better in december, down 9%. betty: so they are a little better but not great. what has to be settled between the agency? >> there are still some struggles determining what vw is willing to admit and what regulators think the issue was. the regulators see a larger number of them. betty: how does this affect other lawsuits? >> a great question. vw is facing hundreds of private lawsuits, class-action's from private citizens who come
together and consume a company for hundreds of millions or even billions of dollars in some of these cases. from one more major issue a legal perspective at the company will have to resolve. you will see the lawsuits consolidated. you might see the k-smoove to the federal jurisdiction in the department of justice k-smoove there. they kind of work hand-in-hand with the private lawsuits as well. betty: being that it could potentially be billions of dollars in fines, could this potentially scare vw out of the entire u.s. market? >> they have been a small player to begin with. they have designs on trying to be the largest automaker in the world and you cannot do it without being a player in the u.s. market, the most profitable auto market in the world. they will richly entirely but clearly consumers have turned away, though not
entirely as we saw with better than expected results in december. betty: they were better than expected. the other sales numbers where fords, gm, fiat chrysler. they came in later, like? >> i think the analysts were expect whichecting a great deal did not materialize. basically equal to what they were in november because auto companies started doing year-end dealmaking early this year. we had a record sales for the year but the players did not reach the expectations that wall street had. betty: thanks so much. of course, keri geiger here as well. ahead, the markets are mixed today in an up-and-down trading session. a trend many top economists expect will continue as we had to break. listen to the bloomberg view columnist on bloomberg markets had to say.
betty: welcome back. stocks are trying to shake off the selloff and rebound for two-month lows. julie hyman is standing by. kelly joining me is kevin . helping us kick off 2016. one thing we have been talking about with most of the options traders we talked to is we have seen the return of volatility. it sounds like a consensus in -- the consensus was not just that it was a 2015 event, that it
would stay with us. >> it was not just a blip. it was a harbinger of things to come. at is that last year, the vix averaged 15.6 but it has gotten higher over the especially by two points. we are giving off easy monetary policies. we are also seeing elevated. that is out of the money, further output options on the s&p 500. they have never been more expensive than right now. skew is really high. that has to do with regulatory pressures as well as other institutions need to have cheap insurance options. >> people are buying more insurance against the drop in the s&p 500. >> correct. you see options taking up
year-over-year. people are starting to a spouse a lot of bearish views, whether it is invictus and even an credit markets in the s&p 500 in volatility. that he caught i want to your trade for the day. it has to do with microsoft, and out performer last year. it was considered a value trap for many years. break out and now it finally has and it sounds like you are still optimistic. >> yes there is still optimistic on a stock because it is trading at a relative valuation cheaper than it appears. managing the it is death of the pc very well. what is nice about options is you can espouse your earnings view on it. historically, if you look back, you see the stock has outside moves, whether the upside or the
downside. it averages 5% if you go back to years. we see 10% recently. thisis nice to know is time around, the calls are cheap. if you think there will be a continuous run to the upside and the turnaround stories, you can actually do that through the weekly options. we looked at the january 29 weekly option. when the stock was down a little bit, a traded about one dollar 85. that is about the most we can lose. betty: we will watch and see if that continues. bloomberg markets will be right back. ♪ the only way to get better is to challenge yourself,
and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. betty: live, you're watching bloomberg markets. i'm betty liu. thes start with a check of
headlines. mark crumpton has more from our news desk. mark: the status quo is no longer exec will -- acceptable when it comes to guns in america. in an emotional speech, the president said the congress's unwillingness to take meaningful steps to curb gun violence served as a catalyst for his executive actions. president obama: the constant excuses for inaction will no longer do. it will no longer suffice. that is why we are here today. not to debate the last mass shooting, but to do something to try and prevent the next one. mark: critics are weighing in. mitch mcconnell says the president is more focused on undercutting second amendment rights than on fighting terrorism and republican presidential candidate ted cruz is, sing a repeal of the
president passes executive actions. france is remembering the 17 people killed in islamic extremist attacks on charlie market onee kosher year ago this week. francois hollande revealed -- to honor the victims. charlie hebdo is also releasing a special anniversary issue containing obscene and controversial cartoons. staff members say they are flaunting their freedom to lampoon everyone from muslim fundamentalists to catholic priests. the situation appears calm at a national wildlife refuge in oregon where a small armed group has been occupying the remote area since saturday. authorities have taken no action against the group, which numbers about 20. the activists seized the refuge as part of a decades long fight with the federal government over public lands in the west. in northern california, communities hit hard just hit
hard by brushfires less fall have another problem. inchesmay dump up to 15 of rain in the next two weeks and a flash flood watch is in effect. expected.f snow is global news 24 hours a day power our 24-hour journalists and wasn't whether 150 news bureaus around the world. back to you. -- betty: two stocks heading in completely different directions. abigail: micron has held strong all day. one of the top stocks in the nasdaq 100. it is ironic considering it is the worst stop in the nasdaq 100 last year. evaluate continue to calls late last year from morgan
stanley, credit suisse, and -- on the ideas that the week guide could have been a bottom for micron and there may be up side for numbers in the back half. mean that 2016 could prove to be a turnaround year for micron. turning to another top mover in the nasdaq 100, apple shares are down on a report that says iphone production for the march quarter could be down 30% sequentially. stock been plaguing the last month. for new perspective, i spoke with john butler, here at bloomberg. he sat on the one hand, slowing makes sense. the iphone franchise is great. but the massive organic growth opportunity is over on large numbers and the smart phone number being mature. reallyou have the ceo emphasizing the upgrade -- upgrade cycle.
he says the supply chain community is huge and they have a tendency to talk when they should not an apple may be treading at more than 300 suppliers. it is likely we will have many weighing in on this tomorrow. thank you. let's get more perspective on apple. head to adam, who is in san francisco for us. how much is this just noise and how much is this you know, it really could be some trouble for apple? adam: there has been a lot of smoke as of late. a lot of analysts from jpmorgan, credit suisse, morgan stanley, have an putting our ports that point to some of the weakness in the iphone. this is a point in the apple
product cycle at the iphone, where demand typically does a dip. we saw this a couple of years ago. they have refreshed models that look similar and they typically do not sell quite as much. we know apple is likely to go ahead with iphone seven. will this have a big impact on that? adam: i think some of the concern is last year, tim cook be aery adamant this would new product refresh cycle, they would enter new product categories with the refreshed apple tv. results from that have not , still nothinget
on the scale of the iphone or the ipad yet. i think investors are further realizing the iphone is really what is driving this company's business. any weakness really makes them nervous. let's keep this in perspective here. we are talking about a company billion.over $200 this is a country doing just fine. immensely profitable. in terms of investors and where the stock is valued, they look at any sort of slowdown as an area of concern. there is an overarching question around apple about what the next big innovation will be. the iphone has been a huge success. people are looking for what is next. betty: how much of a stronger
dollar hurt apple? adam: i do not think it is hurting it as much as other companies. there are things they have to grapple with like other companies. it is not a meaningful impact on itir business where i think is something investors are not concerned about. you, adam.k much more is ahead in the next 20 minutes of bloomberg markets. stocks are selling off big time. they sold off big time yesterday. jeremy siegel things we can still squeeze 8% to 10% gains this year in stocks. sotells us why he is bullish. then, stocks are fluctuating all day today. is it a sign of a rough year ahead? the answer is calm down. it probably will not be. up, an interview with
betty: good afternoon and welcome back. it is time for a look at some of the biggest business stories in the news right now. a change at the top of spirit airlines. by ceo is out and replaced the board member, a longtime airline executive. shares have fallen 47% last year. fares tolines cutting beat their low oil prices. samsung is showing off a large
refrigerator. a 21 inch screen. what is inside without opening the door even remotely with a phone at. escalating the fast food price war. a five dollar mural -- meal sold for four dollars. it is not saying how long the promotion will last. you better fill it up the for that. that is your bloomberg business update. been fluctuating all day long after the big selloff to start the new year. jeremy siegel is a well-known bowl who thinks the dow could hit 20,000, maybe this year or next. he joined me earlier to talk about why he is still so bullish. >> we could get an increased or it would not quite put us -- it
would put us to maybe 19,000. i think the fed will not be as aggressive on interest rates. one-to increases at most. i think earnings will resume the upward course after taking a dramatic wallop last year, down 2013. seven dollars from i think the combination of a less aggressive fed, stabilization of earnings will bring back some money into the equity markets. didn't you say for 2015 that the fair value of the s&p was 2300? that. 200 points below what makes you think you could actually hit the target for this year? >> i was disappointed last year. the biggest reason why and it is not a big mystery, we were
looking for an 8-10% earnings increase last year. instead, a 7% earnings decline. that was the worst shortfall of earnings we have ever had outside of a recession. we got walloped by oil going all the way down. the strength of the dollar costs five or six dollars on the s&p. flat on thee were in index, despite a 6% drop operating earnings, it was not a terrible performance. that is why i missed my target. is iftential good news oil stabilizes, the dollar we can resume inorganic increase we saw in the earnings of seven and 8% outside the oil sector.
i think that will bring us back. we are about a year and a half what i thought years ago. i do not think the bull market is over. we stabilize, we would destabilize oil at new lows. stabilizing the dollar at new highs. the fundamental dynamic that are dragged -- dragging down earnings for the energy sector, they will not change much. >> do not forget it was going from $100 down to 30 and that brings it downward. if we stay at 35, at least the downward component will stay the same and then we can look at health care and all the other sectors that had good growth last year. i am saying we will not have the downdraft from the material ,ection and the energy sector and we will get the growth again
on earnings. i am looking for an earnings year,se of about 8% this stable interest rates. i think the bull market can resume. betty: that was the finance professor joining me this morning on bloomberg markets. almost 10 countries have weakened their currencies, to try to preserve foreign-exchange reserves. one question, is saudi arabia next? joining me now is the cohost of what did you miss. many -- soeen so much pressure here with the rising dollar. we have seen bets that saudi arabia will devalue the currency. floors market at some point in the next 12 months. -- it is alletting about oil prices. 100% oil prices.
they have recently had to announce consolidated budget measures to reduce spending. to thea is if they were take, they would still get oil and revenue and dollars overseas . the domestic cost would be a lot cheaper. moreuld give governors space. betty: don't they have enough to last them for years? >> absolutely. they have enough to last for a long time. how confident do they feel it will stabilize and that they will be able to grow therefore exchange again at some point. they have not taken measures to increase the price of oil. marketshare strategy, pumping it
as much as they can and open to squeeze out high cost producers, they have had to cut government spending to fiscal consolidation. there are concerns. were to happen, what would be the immediate impact? joe: most people think it will not happen but it would create more strained domestically, cause inflation, import goods would suddenly surge. the big problem is their economy is not very diversified. everyone knows that. they are just really at the mercy of oil prices. the good news is they did build cash pile.ic they want to keep it. joe.: thank you, the cohost of what did you miss today. a member of the u.s. house of lords discussing the outlook for
betty: welcome back. chinese stocks rebounded today after yesterday's massive selloff. all the stock markets around the world. this comes after a reported government intervention including a massive bit of cash in the system p what is the underlying problem in china? it may be the country's move. the chief economist for the organization of economic cooperation and development. >> it is a challenge for china. the transition for them from investment heavy to investor led love -- to consumption, they have been wanting to do it for
quite a while. they tend to revert to a standard set of policies that estate rather than focusing on policies that would purport consumption. betty: speaking their the conference in san francisco. markets close. in eight minutes time, julie has your markets check, a remarkably different day than yesterday. julie: yes. as we head to the closing bell, it is a mixed day. has been trading higher by little bit. the dow and nasdaq, all three major averages have bounced around a little bit in the wake of the selloff. seeing is there is concern about growth. yes, you are seeing a mixed
picture. it is the defensive stocks and groups doing better. telecom, those seen as more resilient than any kind of downturn or weakness doing better today. microsoft counting back from declines yesterday. apple, has been declining on that report that the company might be cutting the reduction from the iphone 6 and iphone 6s. we get the weekly inventories report tomorrow. there has been concern about an increase in inventory once again into an oversupply markets are have oil and various kinds of oil stocks falling. transocean is also
on the list here. i wanted to mention something we talked about yesterday that i want to put a fine print on. of trading first day going back to 1932, that is the yellow line here. these are the drops. what is happening arrest of january, it tends to be a better predictor for the years performer. was nott day being down a predictor for the rest of january not even 50% of the time. you know i like to give a little reason for optimism here. thank you so much, julie hyman at the markets desk. let's stay at the markets as we discuss. the s&p has settled. in the new year, what should investors put their money on? joe joins me now with some of
26 --p strategies for 2015 and whether they should be followed this year as well. year, the best performing strategy, just buying stocks over the last 12 months, kind of hoping past success is an indicator of the future. that was the most profitable strategy up in 2015. betty: some of the momentum stocks? joe: if you want the ones that have gone 40% two years in a row, which winds itself, a semiconductor company, monster beverage, they had some m&a activity this year, and companies like that. you had big high fires like netflix, also components of the strategy as well, which compounds the amount of price movements we see in them.
that was the big winner. an interesting take is that it could be a bearish sign of things to come. it normally transpires near the end of the market cycle. it does well because people lack better ideas. they go to improving quantities. back to kind of going the wishing well. they have done well for them. is, do you buy into the idea that this happens near the end of a bull market, that in 2007, according to the data, in 2008. it is definitely something to approach with caution. energy still in the market right now. it remains to see -- to be seen where it will come out for this year. just depends on
u.s. stocks recovering after yesterday's worst start to the year since 2001. >> the question is what did you miss. the central bank and jacking the most cash since september. are these enough to put out the market fires. >> market ripples across the world and europe. we discussed the consequences. arabia be the first country to devalue its currency? we began with the markets. , a big struggle for direction. we found some at the end.