tv Bloomberg Go Bloomberg January 20, 2016 7:00am-10:01am EST
>> welcome to bloomberg go, live from davos. stephanie: excited to be here. our own david will meet us here shortly. he is not skiing, but his meeting. i would like to point out a very important later. today -- the story today is all about the markets. you somee bringing insight on some of the biggest names in business, finance, and policy? next few hours, the coo and president of nasdaq, debiting many director of the imf and you will hear more from my conversation with blackstone weighing inhwarzman a market volatility of whether this is just a correction or something worse. first though, matt miller is in new york city. matt: a big selloff around the
world. first off, take a look at the nikkei, you saw a big drop overnight. i had to rub my eyes to see if it was really a three handle, and it was approaching a four. down 3.8%.ng the dax over in germany down almost 3%. it had been 3% earlier. -- stoxx 600 down almost 6 almost 3%. the 50 is down to its lowest level since november of 2012. futures over here off on those concerns. basically what happened was we were expecting, or the markets seem to be expecting further stimulus from china. . that did not come in. that roiled markets. many contracts and down.
,ow jones futures now down 290 although they were down more than 300. continue to fall further and further. down 3% right now to $27, where our people hiding? thne --cies for one, the yen has had an incredible year to date. a one year high for the yen. you see a red arrow, that means strength because we can afford less of them without u.s. dollars. take a look at yields, and of the place will be see real moves. seekinguying into bonds the relative safety of government debt. at 1.98.s this morning to
talk about what we are seeing. i'm sure both of you woke up to a start this morning. michael, what is this all about? michael: it is all about china and oil combined. punch. one-two if you look at asian currencies, the correlations are just getting tighter. a of dynamics are unfolding. oil continues to slide. getting --ning is continues to be each week more extreme than it was the prior week. the spring is coiling for a big relief rally. we are not getting it yet. we don;t -- don't know where that bottom is. buying into aren't
this. you write the books about the most wealthy people in the world. the most successful investors come what are you hearing from these people? routelobal stock market has white $17 trillion off of global market cap cents june 9. that is equivalent of one entire u.s. economy. >> first of all, that is no surprise. i think this is a healthy correction. it is much-needed. markets not only go up, they occasionally go down. the people i write about don't seem to be hurting in any way. i didn't notice anyone struggling. they still seem to be ok. at some point, this will become a buying opportunity. i think this is a healthy correction that reminds people that markets do go down. matt: how far down do we have to go? >> from a valuation point of 2013 atu are looking at
a lower multiple. one of the metrics and like to look at is the s&p dividend yield relative to the 10 year yield. that metric is lower than it was during the august-september lows . i think we're getting there. the huge question, why oil is so huge to this discussion, what did we miss last year? earnings growth. e this year -- what do we need this year? earnings growth. it is hard to get to bullish without the expectation that earnings are going to pick up. matt: the russian ruble hit an all-time low because of what oil is doing to their economy. they're much more dependent on it that we are, but it really hurts across the board. may, the role of the fed
in all of this. clearly, the sentiment has changed. when can we mark that? wobably back towards august hen people suspected the fed would raise interest rate which did punted on at first then in december. it is clear to me that there was a sentiments change reflected in the credit markets and now the equity markets. i think we have to get to this -- used this is the new normal. matt: back to you in davos. stephanie: this being the new normal, volatility? china sliding? you have world leaders who want upbeat. they want to spend the technology, and innovation. but i don't see innovation or technology, icy survival. jonathan: that was my take away
this morning. he tone of those conversations was so detached from the market moves. this is three weeks of relentless selling. i track to conversations i was having this morning, the dow peters would've been up 200 points. the messages, short-term is and welcome. you have to be a long-term investor and innovative. doubt thatt to play the chinese market was down less than 1%. looking for optimism in my conversation with one of the most influential business leaders in america. minutes ago is that some of the chairman of blackstone group steve schwarzman and asked him what is behind all the market volatility? you have economic things such as the slowing of u.s. economy. that has been pretty gradual.
but it is consistent despite the strong part of auto and housing. energy going down so quickly that you can almost get wind burn. adjustinghas trouble to things that happen very quickly. you've got china as an issue which is probably overdone. see chinaends to through its markets. there have been a lot of major flip-flops, and the mismanagement of the stock market. thatyou get afterward, creates in issue of confidence. the same with currency. when you put those factors together, you have an unattractive brew along with
the concern that the federal reserve will raise interest rates and slow the economy further in some effort to save it. doesn't feel right now that this is just a correction, or are we at the beginning of something deeper and more enduring? steve: it feels like a correction, to me. if i thought china was in freefall, i would be really concerned. i actually don't. and the service economy, is holding up pretty well in china. but there are parts that are way overdone. ,hether it is steel, coal overbuilding of residential, and certain interior cities.
so if you just take one -- paint you could get a really bad picture along with the stock market, and the currency. in terms of just the policy implementation. >> if the volatility continues, and the selloff doesn't stop, what happens then? a certain point, markets become reality if they affect the behavior of regular people. at this point, i don't think that is happening. it is certainly happening institutionally if you're managing money. anybody who really touches stock market can't be very happy. >> steve schwarzman here again at the world economic forum. mind,ings in everybody's
what is happening in china, and what is happening in oil. no one knows for the floor is. but steve is giving us an idea what he thinks the floor is for china. he doesn't think it is bottomless. he thinks the situation is better than many think and investors are overselling the risk of a slowdown. stephanie: he said it right there, this is a correction. he didn't give us timing on how big and how long this correction will take. the key is to have investors that can withstand the length of the correction. be an whether it will orderly correction. at least it has been reasonably orderly. we haven't seen second and third order a fax and fixed income markets that raise the alarm bells over the stability of global financial markets. everything is pointing down. at least, it is in an orderly way. jonathan: the picture he paints is a story we already know.
it is that in between bit that people can't work out. that is where the fragility of the markets is coming from. it goes intohether your world, the world of credit. whether we have a credit event in china. that would be much worse than what we're seeing right now. stephanie: if we see bankruptcies, and default, is it a sign we are truly in trouble. or that free markets are back, welcome to the global economy where there are winners and losers? we're no longer in a situation of qe infinity with the central bank will hug you for ever? i think, you know what i know stephanie things about whether or not these are free markets or not. his outlook on the country's markets, that is next. futures are down, and down hard. up by 300 and 26 points.
after markets tanked overnight. europe feels the pain as well. take a look at u.s. futures this morning, gearing up for a big down day. right now 2% losses across the board. have a day down more than 2%, it will be the fourth this year so far. it is only january 20. we had six in the entire year last year. had014 and 4030 we only three. -- 2013 we trillion only had three. we lost $17 trillion off of the cap already. one of the main drivers continues to fall further and further. seeing a commodities falling across the board. not a heck of a lot of cover in gold today. people are running for the safety of the yen.
as well as treasuries, right now we see the 10 year yield under 2%. at 1.98, the two year at 83. let's go over to vonnie quinn now. the experimental ebola vaccine has been submitted for approval. he signed an agreement with the world's biggest funder of vaccines. last summer, a study said he was 100% effective when it was tested on 4000 people who were in close contact with ebola patients. it looks like china's oral producers are succumbing to the global crisis. more the largest offshore oil companies. the company says that is one reason it will pump less oil. mcdonald's is cutting out some bureaucracy is part of its turnaround plan. it is eliminating 2 of the 4 zone presidents in the u.s..
trying to pull the train out of its worst sales slump in a decade. jonathan: china shanghai composite index down overnight. 42% since the june 2015, but ubs chairman remains positive about china. stephanie: maybe because ubs has made such a massive push. they have gone big, they certainly can't go home yet. jonathan: where's all the money, where is all the wealth? if you want to manage some wealth, you have to go to -- >> it is not as if the chinese are under the same kind of pressure that the petrodollar economies are. they were in savings mode during at bull years because oil is
$100. now they are the ones liquidating their assets. china may have issues, but it doesn't have that issue. jonathan: we bring in francine lacqua, she joins us now. stephanie: i thought she was going to tell us what it is like traveling with tom keene. horse -- or freezing interviews at 7:00 a.m. davros time. he was more optimistic because that it is his pitch. he can't say go into cash. we talked a little bit about what asset classes people should be in. which things would keep your money safe. overall, we had a great conversation. he has a great perspective. they're looking to the volatility. in 5-10 years, it will get it right. >> i always compare china's policy reaction today with
europe in the 1990's. for the first time, we had privatized agents in germany, and a boom and retail investors the equity markets. the chinese are trying to prevent that which turned out not to be a wise policy. still trying to figure out what the chinese authorities are trying to do. or not,they devalue there will be deflationary pressure coming from oil and coming from the china story. is that the main risk we are facing at the moment? we can fight deflation. axel: i think central banks have tried to reinflate the economy now for several years. at the same time, the central banks tried to reinvigorate and haven't been successful at that i do. in time at point what used to be tailwinds from demographics and other factors that added some percentages of growth and produce pressures is turning into tailwind. it is hard to counter these.
china, in my view, will go through a correction that is ongoing. at the end of the tamil, i think they will come out stronger. we weres just announced doubling of her headcount in china. long-term we see a huge potential for china. they are rebalancing gross from , and more driven domestic gross. if you look at service sector grows, it grew at 8.5% in the first quarter. service-based growth is much more -- gross is much more indicative than job-based growth. is a tanker the needs to turn, and is turning slowly. francine: he was quite positive. the dollar rallies losing a little bit of steam. he really agreed with them. i tried to get out of him why the markets are fearing something. we are not really sure why.
the decline in oil price we have known about it. when you see the selloff today, it is close -- this close from a correction of 20%. you kind of think what other looking at? the credibility issue, the inability to get inflation back up despite what is happening with commodities. he markets down 300 point on dow futures, and equities getting slammed, isn't it remarkable -- >> i like when you address the markets. stephanie: especially from davos. morning, and a bear market despite a pedal to month on month on month but they're done nothing. that to me is very interesting. it is being challenged. francine: when you have this
market selloff and your mario draghi and about to address the markets you think what is exactly my message? so many people are saying qe is just losing its ooomph. stephanie: what he has done is give himself room, and a dry powder. janet yellen is backed into a quarter -- corner. she said she is going to raise rates. more pressure is on her to do it 3-6 months from now. toio draghi has the space pump with the tires more. francine: that is certainly how he wants to be seen. jonathan: thank you very much for joining us this morning. we talked crude down to $27 a barrel. the 2016 selloff continues. ♪
welcome back, want to take a quick check on oil because it continues to fall further and further. dropping more than one dollar, a lot going on right now. show came out and said it expects fourth-quarter profits to drop 42%. fullf the big banks, coverage of earnings from goldman sachs ahead of. ♪ the only way to get better is to challenge yourself,
"bloomberg ." we could only be in davos, switzerland. our own david westin, great to be here and outposts -- davos. we will handed back to new york. we're talking big here. day, iop story of the woke up and saw asian markets , almost 4%. european markets down 3% as well. take a look at u.s. futures. we still see a drop on the e-mini contracts. snp futures down. nasdaq futures down as well. set to open lower. big losers today include ibm which really disappointed markets with its earnings forecast for 2016. then, of course, oil is a huge piece of this market. right now, down almost another
4%. more than one dollar dropped. $27.40 a barrel. demand also just not picking up anywhere, certainly not in china. let's take a look at where investors are hiding right now. currencies are a safe haven, or at least the yen. that is one plays investors are going. the other is the 10 year treasury. michael is it with me, what are you seeing happening? is this finally the capitulation that tom keene has been waiting for? michael: we are getting closer to them. one of the problems with the markets is if you went back to the volatility, you asked yourself what was the problem back then?
it was a week september payroll ,eport, the dollar weekend emerging-market currencies and oil both rose up. this time around, with the fed having started its tightening cycle, it is not clear if we got a week employment data or u.s. economic data and the dollar softened whether that would really be enough to help with a meaningful relief valve. the question is, what is the catalyst to break the back right now? it could be earning season, but we will not see that for several weeks as they all come together. ibm wasn't off to a great start. matt: what about a chinese devaluation? as i recall, that happened right before we saw markets really tank in august. and index it 26, not superhigh. it is up there, we have been higher. michael: the chinese devaluation
was what drove that crazy. it went up to 46 right after dot, the question is -- how you risk markets react to a third devaluation. the devaluation per se isn't necessarily bad. it may be the necessary solution for china as it is going through this mechanism. when you step back and look at think that a high-level, you have the u.s. and europe all backoping their mechanisms and have a great financial crisis. this time around, the classic playbook doesn't work for china. they have to find a new playbook because their problems are different than what we went through. we're watching the chinese kind of growth through their solutions. it is not necessarily the end of
the world by any stretch. will continue watching the markets. the story of the day we want to goldman sachs because they are about to break their earnings. we will bring them to you live. stephanie: it is great cricketing goldman earnings, this week we're talking to the president of goldman. what is his jam, his dojo? it is specifically commodities. that is a huge focus. our own tom keene spoke with ihs vice president earlier today and had some interesting things to say about the future of the oil market, and specifically where we are now in the cycle. is it time to finally go along? look not just correcting for inflation, and take it back, where back in 2003. the super cycle is over. back to 2003.
it is one message at the great getting to the last day and a half, the road to recovery across markets is going to be long. put your seatbelts on. david: what i am picking up, and i'm sure you are as well, it should be about demand. it is not. they are looking for more demand, and they can't find a. they keep making more supply. they won't stop pumping. stephanie: keep in mind, china has been the biggest a buyer. china isn't in a position of their buying everything. they have got it, they have oversupply. jonathan: as you say, it is the growth of china that is critical. i want to get to those goldman sachs earnings. matt: we're seeing earnings 1.27 for thet at $ third quarter. earnings at rmbs cut
$3.41 with the settlement earnings. full-year compensation ratio which is always very interesting, 37.5%. it seems like goldman sachs is keeping compensation costs down as well. i have with me bill and elizabeth to go through all of these numbers. elizabeth, let me start with you. what pops out as you look at this headline? elizabeth: i am having some trouble bringing it up. definitely legal costs for what we expected to be a big part of the story. with that said, the settlement they announced last week analysts will be stripping that out. the big question is trading. the trading business continues to be top. trading has not rebounded. that is a big question that
investors will be looking for. matt: you been talking a lot about morgan and other banks down.g compensation costs how important is that for goldman sachs, which is traditional plays were kids go to make the most money? bill: who is keeping compensation costs down? i don't see it. it gets paid out in the form of competition at we see here. there were stories yesterday about how deutsche bank are having to give up some of their peopleation to the young to work this they don't go off to tech firms. people go to wall street to make a lot of money. i don't see anything like that changing. is it on a relative basis? as much as they might've made 10 years ago, probably not.
still where you can go to make the most money without putting your own capital up. seeing banks make more money than they did last year by keeping their total payouts down. ll: that is because it is the biggest variable cost to that banks have. j.p. morgan chase has had two years in a row of record earnings. wells fargo nearly that long, as i have written, this is a new golden age of wall street. there is less competition, the raw material that banks used to make money is virtually free. they make money from money, and thanks to the fed that has been virtually free now for a long time. beginning toat is change. it will still be very profitable. they will continue to pay out a large percentage of their revenue. matt: elizabeth, let me ask you
about performance. $1.12 billion,o below wall street estimates. elizabeth: just a slight amiss on what was expected. that was in line of what we have seen with some of the other banks. morgan stanley reported along the same lines. investors will be listening to on this call.sed bank of america saw better-than-expected results. looking fortely some more details of where that is coming from. believe 8:30. matt: we will get all the details from you when you get on that call. thank you very much, we will continue to cover these goldman sachs earnings and these falling markets. trading unchanged in the premarket. ♪
wanted a good settlement costs job earnings back down to under two dollars. take a look at some of the stocks we are seeing trading in the premarket, goldman sachs shares still down, but not by a lot. they're basically unchanged, which i guess is a win today. morgan stanley and citigroup down more than 2% each. shares of netflix are rising in premarket trading again. the company added 5.6 million viewers. more than 4 million of those were outside of the u.s. they began service in 130 new countries. ibm is being hammered in early trading. sales by the new analytic services were up 16% last you. the company still had to offset slumping demand for traditional hardware, software, and
information technology products. joining us now, u.s. chamber of commerce president tom donahue. we have to talk trade. you we are in davos, you issued a statement of support for tpp last week. many lawmakers have said they will not touch this bill. how much is the chamber of commerce willing to stick your neck up to make this happen? : the steps in getting that done were first to get the trade promotion authority, which was very tough, to do both the house and the senate. we got that done. then, they had to finish the negotiation. they did that, is a perfect? no. there are two or three things that have to be fixed. but back to me that at home, or in agreement with other countries. the big question, we are going
to get this done, but went you vote on it? david: i don't know anyone who counts voting capitol hill better than you do. give me the percentage chance we get it? tom: 75%. if he tried to vote it right now, the senate would not let you do it. they will not take three or four important senators when they're -- morefor office republicans than democrats -- and put them at risk. i think it will either happen right after the election, or in a lame-duck session. everybody thinks that is a bad deal. we should push into now. you can't make it to go now, and i give you the second reason. we still have to go get some democratic votes. we have to get republican votes. , one votea trade deal to win and one vote in case
somebody dies on the way to the vote. let's say that we push it off. but to the election happens and we have a candidate like donald trump, who is clearly opposed to tpp. tom: i thought we were talking about trade? david: you can talk to the politics. tom: this is the most fascinating primarily of ever had. first of all, 17 people in the beginning. citizens are sort of mad, but they haven't voted at all. we haven't had a single vote. you're looking at what is happening in iowa, and up in new hampshire, and in the poll a camera this morning jeb bush had 13 points up from 3%. i'm not saying who is going to win, i'm just telling you that on both the democrat and republican side we are getting down to the real stuff. it isn't going to end of the way you think it is. david: why aren't you in some trouble?
hillary clinton has said she is against tpp. stephanie: bernie sanders. tom: he is one deal. when hillary has been doing in this primary is trying to run one step faster than the senator from massachusetts who has been threatening her and pushing her to take these far progressive, very left steps. if she were to get nominated, if she were to be elected, i have a hunch that what runs in the family is you get a little practical if you get the job. david: we used to call a triangulation in the old clinton days. thank you very much for being with us. now back to matt in new york. correction, on goldman sachs, we're looking at actually earnings if you take , thate settlement costs
arnie sorenson joins us now. last time we talk to you is the day you went out. what has happened since then? stock prices have gone down for us and the market as a whole. little else has really changed. that is one of the interesting things here we are focusing on. we see a business that feels a little bit like it did last year. we look at the group bookings for example of anna 2015. they are up compared to what they were last year. negotiations we negotiate rates every year. the data we have would suggest that 2016 will be a year about like 2015. stephanie: help us understand the disconnect. when we look at global markets, many are fearing you are telling us what is happening and a slant
across the world. the data you have is saying what obama has said. we are in a slow positive recovery. arnie: coming out of 4010, with the recession, we never had the robust growth we did to get out of other recessions. we haven't had it here, and i'm not casting you will have it in -- suggesting we will have it in 27 -- 2016. we will have continued demand growth and a you that looks a bit like last year. all things considered, that is not a bad. you have much more expertise than i do, you can never ignore them. they are the result of thousands , tens of thousands of very bright people relying on something and making a prediction. we don't see that idiot. david: what about foreign exchange -- we don't see that yet? david: what about foreign exchange? arnie: it certainly has affected
us, but in different directions. europe is much cheaper for american travelers than it was two years ago. europe is on sale for the rest of the world. coming to the u.s. is much more expensive. is a less international tourist dependent market than others except it is like new york and a few others. stephanie: some people say corporate america is on sale. you are not in the business of m&a this year given the massive deal he just close. so many companies facing this, could this be a time for consolidation in the industry? only because of where prices are. arne: we have an close that yet. there is a lot of work to get that not just closed but a company that site integrated. hotels, weim and his want to make sure we get that integration done in a way that
is constructed that builds the platform we think we can build on long-term. stephanie: because you have gotten so big, do you think your competition could be right? arne: i think so. the cheapness is not as profound. even our deal with starwood we're using equity. the stated value of the deal is less today than when we announce it. we are using the same number of shares as will me announce that. stephanie: but that can be china. for buyers. : it could be, or private equity platforms. i'm still hoping for mid 16. we filed with antitrust authorities and about 25 countries. that process is working its way through the sec and the filing approvals. we think we would get there about amid the year. data,nie: you got your
and the price. what is concerning you? rne: i'm more at about what the market is telling us. stephanie: you are worried about your share price? at what we know. i am very optimistic. part of that is personality, but also the data that we have. we have talked about the u.s. economy, we see good data. comparable to last year, i'm not robust about exert a stuff but good steady state data. look at the rest of the world, we see hundreds of millions of new international travelers. because of growing middle classes in china, and india, and elsewhere. we are consumed with news about china, that news is about infrastructure spending and export business. the chinese are trying to move towards a consumer economy. we live in one. stephanie: if you are focused on
global markets, where are you pulling back in your business? where do you want to be more we are note? arne: pulling back at all. every deal we do we do with a third-party real estate investor. we signed a lot of hotel rooms last year, and we think the long-term travel trend will be very powerful. stephanie: sheryl sandberg is in listening?e you we're back with more live. ♪ the only way to get better is to challenge yourself,
very excited to be here. so many questions to get answered. it was just said to us, where is he conservative? nowhere. he's leaning into a $12 million deal hard. tone.ish we will find out who else is a bull. the president and ceo of nasdaq. the ceo of paypal. a big day this morning. matt miller give us a quick look at the markets. maybe not good. matt: no bullishness here. if you are just wake up and tuning in, put the coffee down. markets tanked overnight. the nikkei closing down 3.7%. japan is in a bear market. hang saying closing down 3.8%, down 42% from the hive. the dance recovering a bit from
the 3% drop he saw a earlier today. the ftse in london fell down to the lowest level we have seen since november of 2012. if you could remember that far back. i cannot. look down across the board as well. s&p futures are actually recovering a bit. we saw losses earlier this morning and we are now only in a loss of 280 points on the doubt. a loss of 300 and change earlier. tech stocks look like they will be the biggest losers entering the market until you look at maybe anything related to crude. oil fell another one dollar per barrel. sachs, premarket, goldman sachs traded down two and a quarter percent. shocking number. morgan stanley and citigroup are down as well. gopro is down 3% and change
ahead of the market open. twitter falling to its lowest level ever yesterday and extending that today three point. percent. oil moverse of the here. exxon mobil and chevron are down. it will have fourth-quarter earnings, down 42%. let's look at crude, the underlying commodity down $27 and $.65 per barrel here in the u.s. down $.81. a little bit of a recovery. 2.9% is the loss there. at where investors are hiding their money. they are putting it in the yen. ¥116.61 and the 10 year down below 2% right now. goldman sachs reported a 65% drop in fourth order profit. if you take out a settlement, an
agreement to settle the approach cut hising securities, earnings by $1.5 billion. joining us over the phone is the international analyst, steven chu buck. i will start with you, stephen. it is a huge drop. if you add that act in and take it as a one-time cost, earnings were for .78 per share. $4.78 per share. collects the one thing a lot of metrics look at is the contributors on the revenue side, which ones are more consistent and predictable versus which are more volatile. the biggest contributor to beat on the investor side was investment and lending. private investment tends to be more volatile. they did -- they did beat in terms of private management.
they also beat on investment banking, really visit -- driven by m&a. alsoxpense discipline was impressive. goldman has a track record for being this up and on the cost side. they managed to low costs in the first year. expensey speaks to the to supplant and the results overall were actually quite good. >> how do you think they stacked up compared to jpmorgan or merrill lynch morgan stanley? >> they did miss the estimate by a touch. what was going to be a very challenging fourth-quarter for them. the results are little weaker than the group on a revenue basis. we have seen that over the last couple of quarters.
one thing goldman has continued to highlight is the focus for them is not just on driving revenue share gains. it is about driving our lead improvement. from that perspective, they continue to stack up well relative to the group. how do you set south and outlook from his earnings report? what does it tell you about the quarter we're in now? >> i probably read more into it from what we have heard from appear group so far. would say the commentary from jpmorgan and morgan stanley on the start to the year from trading was actually quite wastructive, which reassuring, especially for someone like goldman, where 45% of revenues come from the trading side here it that was something that was reassuring. that would garner some airplay on the call. outlook talk about the
being up year on year. another positive data point. there will be questions about how much of that will function, delayed underwriting deals, simply because the volatility is so elevated, versus increased deal activity really spurring that increase in the backlog as well. the backdrop for m&a continues to be constructive. people are being vigilant given the increased volatility we have seen in the market. broadly speaking, trends continue to be favorable. >> with the markets pretty much in turmoil in the first few weeks of the year, it is not going to be great for confidence and ceo's and doing m&a deals. i am not sure the out look comments by jimmy -- jamie dimon by the labor market will hold up as the year unfolds. >> it is interesting you mentioned that. even last year when we saw a
decline in some of the ceo confidence measures out there, the messaging from the management teams at the investment banks were that the dialogues continue to be quite constructive. just given the challenges, growing organically and the current macro backdrop, it is driving increased consolidation at me as well. you are right that confidence can be shaken up during extreme volatility. we still saw constructive messaging from the management teams. i think that was more measured than what we were hearing three months ago, just given what is happening in the market. but overall, indicators continue to suggest that m&a activity should continue to held. fair point, something we will have to monitor in the coming months, whether we see any deterioration in the backlogs, likely a reflection of leanings ceo confidence.
>> i want to go to michael to get your take. last year, we saw increased and the day activity. ceo's's were looking to drive growth and could not do it organically, as stephen says. what we have seen in the beginning of 2015, do you worry that ceo's is just go to the mattresses? >> i do not know yet. if you look at the basic gdp within this country, i think it is strong. markets a lot of violence we are seeing on the screen right now, but that is also an opportunity for ceo's is. dampener there, but i think a lot of dialogues will be able to push through, assuming we do not get into a real recession. that is a game changer. is this a time where you see goldman sachs as strong as you have in the past? >> absolutely. it is the kind of market that goldman sachs outperforms.
they still have the best traders , the highest intellectual capital still. fromhave less competition even american banks. european banks are an wholesale retreat. i think it is a great time to be at goldman sachs. i do not know it will necessarily show up in earnings immediately or even in the stock price, but this will be a great goldmanbe working at sachs. goldman sachs will do for its clients with very few other banks will for their clients. you so much for joining us on goldman sachs. i want to talk -- toss it now to david. david: thanks to we may be here in the swiss else but we are not entirely removed from the markets. everyone here talked about it here the message i'm getting is yes, it is bad. there is no question. but it is not that bad. that people might be
overreacting. stephanie: i think people feel it is bad. they do not feel it is in freefall. this is possibly a massive correction but let's not throw the baby out with the bathwater. maybe this is the time for investment. >> i have heard that perspective from steve schwarzman this morning. but last night talking to a couple of real money investors, i was surprised by the degree of bearishness. i wish i could share more with you, but these are people who have many billions of dollars to invest and they are legitimately worried that what we see now -- where the bottom is is very difficult to know. they worry is sustainability and technology. with market's down, will that money disappear? cleantech.ting
we are coming off of top 21. bright future, a clean future p are now that we feel we are in survival mode, you do not want to get the positive future whose investments are lost. we will be back with more. when we come back, we're talking about public markets and all of this volatility with the coo of nasdaq. ♪
let's look at u.s. futures after asian markets fell almost or percent. european markets seem to be recovering a bit. futures as well. still down 292 points on the dow jones contract. 2% as we look at ibm saying it will make as much as 13: d -- 13.5 per share. that has hurt the stock in premarket trade. hitters are down in the premarket and that is pulling have real -- heavily on futures. the other part of the equation. earnings, china and crude oil down. .t continues to fall here the world is a washington oil and demand is not picking up
either your i will hit that to you. thank you. we are joined by the president and coo of the naz act. we will different into these volatile markets. >> let's talk about what is happening in the markets today. it will be another rocky ride. volatility is rest taking. how much from what you see is just read pricing and how much -- morecap will technical? ofthere is a fair amount emotion. supplying oil will be lasting. to continue to understand the growth rates in china and the economy. i think there are fundamental things.
i do think it is more fundamental. planning to go public this year, are they going to pull back? they are now looking to see where they can go in february. to do it week by week. investor demand in a normal market violent. the question is -- they want to make sure they are going into in an writing environment. are you preparing for a pullback to affect your bottom line? as this.e a resilient when there is volatility, about 30% of the revenue is volume related. is whendo find companies are unsure of things, they tap experts. why are they buying and selling
it? that is a service we offer to 10,000 companies around the world. services, daschle in these types of markets occur, they tend to try to tap the services. i was asking about market structure because august 24 is still fresh in people's minds. what has market taken overall, since then, to prevent another august 24? >> i think that was an important day for us. we have done an enormous amount to examine the market structure elements of the 24th. august 20 fourth definitely exposed some issues related to how the markets open in particular with the new york stock exchange.
if the markets are not open, what prices are you using to price them? they up and down and how you reopened to that type. david: have those issues been fixed? >> we're working on foundational issues making sure the opening of the markets is on time. together specific recommendations. we are leading the industry we dotive to make sure these things, we're doing this holistically. stephanie: more and more companies do not want to go public. are you telling us you think the private market will get bigger? to support private markets that exist? business weeparate have here a broker-dealer and not an exchange or it is there to rotate private companies having liquidity and managing
equity private companies. fundamentally change the ability for companies to stay private longer. that as a make sure private company, they have the ability on capital, and more and are looking at making investments in the companies. i think that is changing as well. companies are looking at episodic liquidity as private companies. to allow for an even more efficient way. one thing you are responsible for is to sell technology to other exchanges >> that business tends to do quite well. several changes are going on here volatility tends to bring volume and volume means they need to make sure the are up to
task. new systems that they want to implement that might the able to better facilitate more volatility. more of a central clearing type of environment. suddenly it has become innovative here and we have been working with them to implement new trade technology to allow them to take advantage of the trend in the market. david: thank you. and chiefe president operating officer at nasdaq. much more and we will be talking about the markets all day long. the paypal ceo is coming right up. ♪
matt: time for futures and focus. i am matt miller. breaking below $28 per barrel, extending its 12 year low. what could possibly put a bottom in? from the cme in chicago, phil, i we even ready to start talking about a bottom yet? it looks like we are in a freefall here. >> we are down over 6% in the last 48 hours just tracking equities lower today. a lot of little growth concern out of china. concerns will weigh in for quite a while. the question is iran's output. everyone is expecting them to ramp up 500 barrels per day. if it comes in lower, you might see some kind of rebound here.
these guys have been waiting a long time. really what has to happen in is a to get a bottom credit crisis in the energy markets and the u.s. you need to see the little guy shut down and you really need to droppedy production millions of barrels per day, then i you get a turnaround rank. you are not seeing that so far. producers losing money cannot afford to lose more money by selling any oil? >> the credit will only be extended so far before they have consolidation. some of the big players are having huge misses on earnings and revenue. you will see a consolidation and a shutdown occur. training back tire. link crude may stay lower. you will watch the trend
wide-out. before we see anywhere close to any kind of bottom. matt: what you think on thursday, they will put out inventory numbers. do we see a big climb and key is that number? >> yes. we will probably see another production no. the key is you need to have the drawdown occurred we are not seeing it now. the global growth is just not there and the u.s. growth i think is stagnant despite what anyone else says. that number is not significant. it just puts a little more pressure on the markets. matt: thank you very much. more bloomberg is coming up next. ♪ stephanie: welcome back.
you are looking at beautiful switzerland. you are watching bloomberg . earlier today, miles anderson said container volumes are kicking up this year and he said -- suspect that from asia to europe, their business will be better. he spoke with jon ferro, who joins us now earlier today. >> at the forefront of all this is china's civic. when you have an industry that chance boards 95% of manufactured goods, here's a look at what is happening with global trade. listen. >> you look at china, they are towardg the economy domestic consumption just asked some years ago. an impact on raw materials and energy and so on. part of making the global economy more healthy.
>> one challenges the volume of global trade. in the third week, heat knowledge that. the other is technology. you have to plan five or 10 years ahead of when you need them. the problem is the shipping globally is overcapacity. it is not quick enough. stephanie: look at opec members. people continue to put their foot on the gas. to whereg attention you will store this. >> the tanker business is doing fine but business is like iron ore shipment is not doing a greater that is a basic materials side. he is talking about finished goods. >> that enough being in the containment industry. take a listen to what he had to say about crude. collects we also take dramatic
as issuance. was not a may be healthy mood. everybody has had to do that. that is good. are in a position for the future. we have a strong balance sheet. john: the question for anyone, is your balance sheet ready for $30 crude for the rest of 2016? he thinks it is but i do not know if it is for everyone else here it stephanie: also, how my going to get around? tomorrow, cooper is a health-care we will be hearing from the paypal ceo. stay with us. ♪ the only way to get better is to challenge yourself,
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.t could not be more timely it makes me think of 2009, the last time we were going to market volatility and economic uncertainty. it was worse back then. now we want to go back to new york for matt miller. matt: housing starts coming in lower than expected. we were looking for 1.2 million. we got 1.149. java 2.5%. we were looking for a gain of 2.8%. some disappointing u.s. economic data. let's look at cpi. that is coming across the ticker as well. that is in line with expectations. if you look at the big numbers people will focus on, year-over-year, food and energy, a gain of 2.1%. if you look at the year-over-year number, ill a game compared to an estimate of 2.8%.
numbers, inesting line but over the 2% we know here the set focuses on a slightly different number. housing starts are missing the mark by little bit. still 1.14 9 million housing darts. i want to ask michael it you think about the inflation number first because that is the only game in town. >> a huge part of what is happening in the global and u.s. economy. the fact that we will never get any of nation ever, but there are some things where you may start seeing the base act contributing to stronger inflation metrics, not just today but in the coming months. 2.1% food and energy seems healthy.
>> we will see how the numbers come in because that is what the fed focus on the most. oil has been a huge factor. this also magnifies that what we may be seeing is realized inflation, actually climbing pretty strong air we have a breakout and wage growth. if you look at wage -- inflation expectations, those are going down and down. lockstep with oil prices. the fed will look at realized inflation being relatively it manages that in the coming meetings will be very interesting. matt: i wonder if janet yellen is happy to see such a sharp chop and oil now. it is behind her. it will not fall much further than 20 dollars per barrel. quite exact. the bottomnow when will really get started, now or
25 or 20. you hear a lot of calls for 15. one way or the other, the medium-term price of oil has got to rise higher than where it is now. we can have debate as to whether it is 45 or 60 five, but that will help the inflation, realized and expected. that is more a back cast type of the year environment. it will be interesting. some point, you will probably see a sharp rally in oil which will drive the expected inflation metrics right up with it. matt: we are continuing to watch the following markets. but i will pass it back to david. with 173 million active customers, nearly 808 thousand dollars in payments every singles academic global payments advisor is not slowing down anytime soon.
we are joined by paypal's president and ceo here you have got a request business here it percent year-over-year revenue growth. how are you going to keep that out? >> there is a tremendous amount of secular tailwinds behind digital and mobile payments. for the first time ever on black headache, more people shopped online and with their mobile phones than shopped in store. there is a tremendous amount of secular tailwind around the movement of cash to digital in the explosion of mobile phones as well. you have all the power of the bank branch in the palm of your hand right now. i think there is a tremendous amount of tailwind behind us. david: is there a limit to the number of digital payment platforms? >> a great point. you hear an announcement almost every single week about another
payment form going on. what merchants are really concerned about is not digital payments, but using mobile and software to get closer to the customers. most people conflate digital payments with tapping your phone at the point of sale. i think that is just a formfactor change. a matter oft tapping your phone versus wiping your card, that is not very fighting. a real value proposition change where for instance you could order ahead, you could get the line, pick up your food and get automatic rewards on your mobile on and pay for some of the transaction with those rewards, that is the real value proposition change it when that starts to happen and retailers are looking at that now, you will start to see an acceleration of digital aim is off-line. you are already seeing it online and in at. >> from traditional providers
like mastercard and people like that, as well as from apple and apple pay and rings? >> there are a tremendous number of announced as. like exploding market digital payments, you expect a lot of competition but the real competition is not those you mentioned, it is cash. eight percent of the world's transactions are done in cash. an incredibly efficient form of current. our goal in the financials is to take an inefficient use of cash and turn it into a date -- to digital payments, which are faster and easier and cost less for consumers. >> the transition from cash to digital will continue to happen. but i want to make sure we understand. you do not feel any compositors -- competitive threat from visa check out? >> of course there is a petition, but for me, the biggest thing is we have got a
tremendous amount of secular win going on. we placeadvantages against competitors out there. company, let's focus on executing the game plans. -- isdo that, our valued externally strong. we are getting now. the thing is how you get people to move from using cash to digital forms of payment. you have very strong value brand thats, a stands for trust and security, that is what we have to double down on. heart of every good ceo's's efforts. how do you measure whether you are making good progress or not? i you measuring the competition? do you measure number of transactions with dollars? you look at number of active
subscribers that everyone has, the number of transactions per subscriber, and for us, we look at the revenue growth and cash flow. those are four key metrics that define our business. we look at the customer needs out there, and do we have a value position pushing those boundaries? we just watched a service called one touch. it allows you on a mobile phone with you register it to not have to put in your username and past. you literally touch a button and you have checked out. significant advancement in check out those kinds of enhancements can only come when you have the risk algorithms that we do here they are really what advance us against competition and most importantly allow us to satisfy customers. david: i want to know how you'll make money with ben moke here it are you going to put advertisements on november -- on demo or generate some
revenue? >> as you know, it is the way the money will stay right now. it is growing over 200% for year. a typical customer opens the venlo app for five times per week to do peer-to-peer payments. as we said in our last earnings call, what we will now do is open up than most of people it atit can pay with merchants. that will allow us to start to monetize than lopez. david: the world economic forum conservatives of with many issues, including inequality pier 1 aspect you focus on its financial inclusion. is your meshes -- is your message resonating with what you see here? >> absolutely the financial inclusion, i think of it as financial health.
want,something regulators something that is essential to reduce income inequality. if you are outside the financial system, and over 2 billion people in the world set up to the financial system, the easily take granted like paying bills they are verycks, expensive and time-consuming. with technology, we ought to make those transactions fast, easy, cure, and less sense of. our credo as a financial services industry ought to be that managing and moving money should be a right for all citizens and not just a privilege for the affluent. that is the message we are advancing and we believe it passionately. we believe technology is a way to move toward that. thanks very much. great to see you here. dan schulman is the chief officer at paypal. take onget the imf
we are only down 260. a look at oil, you can see the recovery there. $.59 at 2.5%down in oil. if you look at the terminal, i have just the trade in oil this morning, ramped up against trade and s&p futures. you can see there are well correlated today, as they have an earlier in the year. i will toss it to vonnie quinn. vonnie: goldman sachs reported first-quarter profits, 65% slower than last year. boost profitsy to by scaling back the bond trading unit. meanwhile, audi is trying to move past the diesel emissions and bill of volkswagen. in 2018, it does it will start
building its first all electric suv, a plan in brussels that will make the vehicles and the batteries. that is your bloomberg business flash. >> thank you. welcome back to our live coverage of the world economic forum. i'm here with -- you and your colleagues at the imf study very closely economic and financial conditions. are the economic and financial conditions we see today going to improve, or will they worsen from current levels? >> we still have growth of 3.4%. not what we wanted. we expect to see a little bit of a stronger growth in the year ahead for 2017. many of you talk about the market volatility is.
volatility for the year. -- increasewth indicated, the market valuation [indiscernible] i think that is the whole process. the market will continue to readjust according to the interest level and the growth level in the years ahead. >> is that to say the fed made a mistake raising interest rates? >> it was good because the u.s. 2.5%.y raised the labor market, particularly good. we always encouraged to be more cautious and careful the is the labor market is good but if you are looking for 1.8%, it is almost at zero. looking for investments and
growth. a lot of room to maneuver. to balance on financial sector reform scared i think the fed is doing a good job. of course it is a slow for this year. i think those are the key issues we also have to look at. >> you looked at the 3.4%. how confident are you and that number? is there more upside and downside risk in that? one thing to do is to help us know where we are. >> a few things. emerging markets, we see brazil has 3.3% gdp growth. continue 3.5%. 3.7% last year, and 1% for this year. china from roughly 6.9% last year to 6.3 forecast this year. always on thets
downside. in the financial sector, the industry has changed and liquidity changed. those are the big issues. it is not only that the dollar becomes stronger which will have a global impact, but dollar liquidity, when the fed stops tapering and they stop quantitative easing. roughly in the past 18 months, 2.5% of gdp. 5% soaking up out of the market. that will have a global impact on emerging market. we change the balance sheets for company with high exposure. >> tomorrow, we will hear from mario draghi and the ecb.
should central bankers in easing mode trying to support asset prices? they have a very different situation. in european cases, they continue easing. they should continue easing. >> yes. we have observed here that the market is easing. the transition mechanism has improved dramatically. banking increase particularly toward a household. a very important part of growth. critical growth last year and we expect even stronger growth for this year. david: what beyond central-bank policy can promote growth? what policies could you recommend? >> that is an important point.
we do not have that policy p or we do not have a fiscal the on the demand side. interest rates are so low. the real thing to support growth is structure reform. that is the area everyone has to pick up. we see the structure reform earlier. it is very important on the market. it is very important on the labor market. very important on all those things that lay the base not only was growth today but also the gross for the next few years. the real thing we have is that we have found is the growth is not as strong the potential growth will be lower. that means we have a potentially low investment growth, lower labor growth, which clearly is because it has changed but also lower productivity growth.
they estimated. of other tech stocks selling off today. you can see twitter down 3.i percent. down oneand google point i percent as well as amazon and apple. big move the index is moving. let's bring in cory johnson. kick it off with netflix. scriber growth around the world seems better than what they were looking for. cory: international subscriber growth is strong. subscriber growth doing better. lotaw the content costs a higher. continuing costs in a very competitive world. and showtime, a lot of
companies spending a lot of money on content that netflix is after. now that they are in the geographies they will get to, international content will be tough. spain, netflix is not present and eight -- hbo is pushing to bake a cake there. >> the hits will cost money, particularly now that you have got strong opposition. matt: i was looking at the earnings on the bloomberg terminal and wondering why they even bother trying to make money right now. cory: the question is can they make money? can they get to appoint were content costs are low enough? they are taking from nine or 10% of sales to 13%. are spending a lot of money on marketing and content. .oth the costs to the rising they'll be tough for them to
make money. ibm, 13.5 is what they're looking for. cory: they keep bringing money down and down. tremendous trouble turning their business. they are competing just like netflix, competing with amazon. trouble selling software and services. the turn toward software has been week p saw that again last night. been aichael, it has pleasure spending the morning with you. thank you for dropping by. more ahead. ♪
market selloff. the opening bell on the new york stock exchange and the nasdaq, half an hour away. you will be hearing from great guests on market volatility, on the outlook for the global n will be here. lorenzo will be here. gene sperling. as well, john as -- of the blackstone group. the story of the year thus far is financial markets. matt miller is in new york city. many we are seeing so indexes falling to bear markets. starting in japan to a bear market. nikkei overnight, down 3.7%. 42% that europe has a rough time of it.
we saw european markets down 3% and some change. we now see only a 2% drop on the dax. the ftse fell to the lowest level we have seen since 2012. u.s. futures showing a little bit of a recovery from the low levels we saw a earlier this morning. to 53.es down as of the futures now down 1.5% from a loss of more than 2% earlier this morning. down one into quarters right now. goldman sachs comes out with earnings when you add back in one time costs from settlements from mortgage-backed securities, we are blowing the cover off. 357, and yet goldman sachs is down.
ibm really disappointed wall street with an earnings will forecast after the full year. down more than 6%. netflix, as i was just talking to cory johnson about, facing international subscribers, it's gains. i believe netflix is still down although they were the best performer last year. crude oil, a massive part of the story. it begins to make a little bit of a recovery this morning after having dropped more than one dollar per barrel. it is down only $.56 per barrel. 2% at 2794 nymex crude. back to you. erik: thank you. we are here in switzerland at the world economic forum. john is here of the blackstone group reprising a fantastic conversation we had last year.
stephanie: 20 years. talk about somebody with experience here. erik: here is one thing. ofckstone does all kinds things. principally, the real estate business. i want to know about the mood among your limited harness. you are investors right now. how do they feel? >> everyone in alternatives is in alternatives for reason. credit, hedge, funds, and real estate. they are in it for a reason. we are probably in one of the most volatile periods in a long time. 2016 will be volatile. alternatives are investments people make or sustain for a longer cycle. why do those investors ask for liquidity?
mismatch in investing in alternative, high yield, and also liquidity at the same time? it depends. it is focused on italy, one of the largest. our credit strategy rules are very liquid and you can have any kind of liquidity. as long as there is no mismatch on underlying, you're fine. has been etfource because liquid is suddenly no problem. they start buying houses. even if you are investing, used all have a problem.
a partnership like ours, which we love from a shareholder perspective, is we are extremely focused on the mismatch. they do not want to mismatch any of [indiscernible] senior subordinated debt right now. is this a trade? >> we have been historically short. vocal to thevery regulators. , thecb last year institution told you the level of capital. at 8% or can invest 9%. you can invest in hybrids and yields with 20% maturity. in my view, if i take the calculation the ecb has given,
there are good returns in any circumstance. it is clearly a question of size. so we do the opposite. that is our job. we understand much of what underlies has to do with sovereign wealth funds. is, they only figure out in the test you years how to lie -- buy. do they know how to sell? >> why are you asking a general question like that? stephanie: he punishes us every time he is here. >> the reality is sovereign wealth funds are much more disciplined about how they do things.
while the press picks up on a number of funds with big oil exposures, which is what they are doing, they have got big teams of people who are disciplined about how they divest. many of them have been rebalancing a lot earlier. they have not talked about it because the oil price was not in the headlines. some ofit is norway or the mideast funds, that is getting a lot more attention. i think the better question is, should they have been more balanced five years ago or three years ago on the way up. should they have been more disciplined taking oil prices? i spent a large part of my career doing m&a deals where the oil prices were between $10 and $20 per barrel. erik: a lot of people forget that.
>> exactly. a lot of consolidation took lace . he talked about exxon, shell, bp. built between 10 and $20 per barrel. i think it is a time when people to pursue consolidation or rationalization. stephanie: when you look at where shares are going, they are going nowhere. people cannot decide. your overall outlook on financials. >> first, the u.s., the numbers are great. more progress than the top 2010 years ago. capital has gone up three times. obviously, if it is three times as big, it has to be lower. it is simple math. the actual amount of dollar their printing, that is great because the u.s. remains ahead
of the pack. and asia are tractive. if you look at the european banking index, it is at the same level, 2011. from an institutional point of view, the ecb is engaged in qe. even italy, all doing well. that is something that was not the case for five years ago. times, lows are around. that is where we were at the bottom. that is what we are today. i see opportunity. but not think it is as bad that is what prices are. europeparticularly in and financials, it is positive. stephanie: where will the banks make money? when you look at headlines, cutting jobs, not giving big bonuses anymore.
if you do not have talented humans in those seats, where will they make a? >> i disagree. my view is people are being overpaid and financials. the excuse was, we are the capital. the reality means less people. human capital would priced down. financials has a huge scope for pricing down. british telecom, that is wrong. take head of legal. less than thepaid head of legal, jpmorgan. employers and regulators -- i thinke sure conversation is going down, which is good. then, it mightk be too high.
i said i will tell you, golden for a long while because it takes no sense. >> that was when these people paid -- were paid like rock stars. great deal,worth a but it is smart on my behalf to say that will not be sustainable. clearly, we were not rock stars. what an absolute treat. thank you both so much. when we come back, crude plunging today, trading around 2%. that is helping to drive futures even lower. at justnext take a look how much red we will see in the open. you are watching bloomberg go live from the world economic forms here in switzerland.
alix: welcome back. matt miller is here with what is moving in the premarket and also the lows of the morning trading. matt: we are not seeing any more of the big 2% and change drop that we saw earlier this morning. we are seeing a slight recovery in european markets. the dax only down 2%. three in change. we are seeing big losers here in apple. apple is one of them.
trading right now in premarket at the lowest level since august of 2014. saying iphone shipments appear worse than initially expected. the iphone demand, the fact that people may not be upgrading as had been originally expected or estimated has really been earning the price of apple. is also below $16 here, almost, in the premarket, l down at its lowest level since the first day of trading. it closed at 4490 on the first day of trading. take a look at oil. this is part of the reason we brought her in here. oil stocks are down big time. you see shell there. i believe that is the u.s. trade, it looks like. in london, the announced fourth-quarter earnings could be
down as much as 42%. a huge drop here and i finally want to touch on mining. getting a little bit in the premarket today as gold seems to be one of the havens investors may seek, not as much as the yen and the 10 year, but a little that are today. alix: the plunge and crude oil is worse. nevertheless hitting its lowest level since november of 2003, denny mitchell year low -- extending the 12 year low. fork --ect fourth-quarter profits. joining us for more reaction on the phone is the editor. the biggest question now is, technically what does the bottom look like? >> the bottomless like zero. i know oil cannot go below there, whether we can get there, that is the $64 question. the problem now is with wti, a
look at my bloomberg screen under $28 right now, we are so far disconnected from the economics of pulling a drop of oil out of the ground that we are obviously not trading on the economics. we are now trading on psychology, trading on emotion. how low can we go? we are below on every market now. in market tends to trade five dollar buckets. the fact that we broke $30, what is the next psychological target? my five dollars in the here and now. alix: you made a good point about how much oil is uneconomic in these prices. you can kind of see just how bad ae construction has been on full recurve basis. the green line in my bloomberg terminal is the price where it was a month ago. the orange line is the price it is now. over the course of one month,
traders now expect prices to be $10 lower than in the future. you cannot make an investment if you are in oil company based on this. >> right to i want to caution , it is veryahead important but also important to appreciate that looking at prices out along the curve is not really the market path's of where a price is. it is really telling us the disconnect between supply and demand. a commodities such as oil or corn or any other consumption commodity is driven by the spot market. what we're actually seeing now is the formation where prices today are much cheaper than prices at some point in the future. that is telling you demand is well below where current supply is. this and it ise actually growing, that is the
>> that implies things go up and down. over the last two weeks, it has been mostly down. but it is interesting. felt thisnagements about the economy for a while now. i think the slowness and the inability to maintain price has been a concern in boardrooms around the world for a while. erik: what percentage of the ceo's is you advise our ready for the recession. areany in their own mind planning for slow growth. it is hard to say because what happens is you come on the camera here and people portray their best side. in public, you will hear people's optimistic hopes for the world but i think what you're seeing with m&a's peoples realistic lots that they have to keep cost out of the system, any youe they can hear it if
are in the junk market in the lower end, it is very different and there is a pricing reset going on. inc. retail will , closer toand harder the edge of the economy. i think credits are going through a reset and it will be reset. no credit spectrum. the difference between high grade and low-grade two years ago was ellis. we are now going back to normal. repricinghere is a and some borrowers are shut out of the market, what effect will that have this year? >> we have not seen any downturn in the conversation. the amount of discussion about what to do, i will not say it is better, but it has not stopped. you think there is a
chance we could see 2016 be as good a year is 2016? measure it on volume, maybe not. a large transaction. they are hard to replicate. number of transactions, possibly. last year, it was fairly flat on number. i do not have it on the tip of my tongue but i think you will see the milk companies come on the market companies, try to find ways to take cost out and up their credit and do things to solve problems coming as a result of the slowdown. will we see another $100 billion transaction? you're talking to a few people. >> m&a is about taking out cost speared in order to take enough to be relevant to a company, you have to merge to a sizable company. erik: there has been a lot of
talk about restructuring oil that little action. what will it take? >> it is hard when oil changes by five or 6%. most people entering into transactions are regretting the time at which they did it. i think oil will be tough to do it these prices. it depends on your situation and what you want to do. some do not want to wait. it is hard to find somebody on the other side. i think there will be a lot of discussions on energy and the question is, can this change and your underlying commodity really come to the table and decide to do a transaction at these prices? erik: what kinds of conversations are you having with sovereign institutions? >> i was watching your show before i came on and there is this feeling there is a
tremendous thing going on with sovereign wealth runs but i do not sense that. i sense there is just as much rejiggering going on, mutual funds, as there is. i do not find them acting any differently. erik: good to see you. that is the founder and ceo of mullis and company sharing with us some insights he gleaned from his clients. to -- an interview you do not want to miss. ♪ the only way to get better is to challenge yourself,
i should point out though futures are off the lows of the session it it was much worse earlier in the morning as the global route continued from asia into europe. the dax in particular got hit hard as well as the footsie and that has spread to u.s. markets. moving intoey is the treasury market with the 10 year yield under 10%. and oilthe opening bell is a part of the story. it continues to roll over, dragging stocks along with it. the correlation is not always perfect but recently when we see oil selloff, you can see a filter through. i was looking at s&p futures versus oil and it was very tight. the s&p 500 is down about 1% and phone isith us on the michael o'rourke, at a jones trading.
what do you expect from markets today? it was bad in asia overnight. it was pretty bad in europe but it does not look as bad in the u.s. right, i was putting we would close down with the lows in the future and have a capitulation move lower after the opening and that's what this market needed. we keep getting these 1% rallies. it has prevented the washout that this market needs. is what you want to see but what's the level we need to hit to have a constructive balance? right now, it's still relatively calm and people are looking to see how the market the first one .5 hours, i would like to see a lot of selling and the s&p 500 get -- down toto keep in
1820. . there was a support level in april so after the move we have had lower year today date, if we can watch out to that level good short-term buying for the market. matt: how much does oil matter? do we need to it see a bottom? >> that's a great question. my note last night talked about these correlations on the intraday charts and whether it's oil or the s&p futures with the strength of the yen or the weakness of the dollar or the trend -- tenure treasury yield. moving based on other asset classes and that's not hoping for the market. we should not be going up and down because of oil. soup -- is an
oversupplied market right now. whether we find a bottom or not, it should not matter because the rallying to $100 is not good for the consumer or the economy. there's too much focus on the wrong thing. that is one of the reasons investors are concerned this year. walk in and futures are trading overnight and they are down 2% based on macro moves, that's not investing in stocks and companies. you don't know what you are getting into so that's why people are pulling back. alix: thank you so much. should note we are seeing drops of 1.25% on the dow. the s&p 500 and the nasdaq are down more than 1% but not the levels we saw earlier. where only five minutes into
training but it's not the levels we saw this morning or overnight in asia. eightwe are seeing dollars up in gold which is not the kind of panic you would think we would see. let's go back to dollars, switzerland. francine: thank you so much. what's dominating the chatter is whether we will see a bear market for global stocks. we are joined by the founder and ceo of one of the largest refiners. it's great to have you here. for a very rough time russia and a rough time for commodity producers with the ruble touching a new low. will things get better? >> not immediately. commodityseparate markets and the russian situation. the ruble look for commodity companies.
it's more competitive and if you look at the commodities, you can look at oil in agriculture and metals and metals in every commodity has a different story. in aluminum last year, it was not a bad year. we had 57 percent growth in consumption. it's still a productive product for the customer and we believe growth will continue. francine: aluminum is not as bad as others. aluminum is at the lowest of since 2009 at one that market recover? see intendment and production cuts. we have over production and we need to reduce output. china, three years ago,
there is still more than 45 different producers there's aluminum. go through a consolidation process or some bankruptcies. situation, the valuation supports them and it might take another 1.5 years. thehanie: what does chinese slowdown mean to you? not importing aluminum, they produce at themselves. they produce too much because they use: there is no regulation. we can see that there is pollution which creates a problem for them. if you look at china and the implications, there is consumption and the fact that many people say there is oversupplied in aluminum and oil
and copper. the demand in china over all is falling but we are not realizing it. it's not because of lower consumption. people invest too much and have been too optimistic and are looking for the $100 price. we are not looking at growth's loving to where we had a recession worldwide. >> china might be stable but they have to do with overcapacity. they will slow down when they deal with that but in my view, not growth but eliminate capacity and make it a healthy market environment. we know they will develop to keep their banks alive and their industry competitive. they need to go through this process and it may take another year or so but in reality, the need to pay more attention to capacity and the environment. stephanie: that takes us to
pollution. when does pollution force of them or us to change behavior? peopleked earlier about going green and clean it right now it's about survival for companies. do they think about the impact of pollution? onlineat all, they put more than 60 gigawatt call and will more in the next three years. to not get sign serious. is for everyone to pay for emissions of carbon into the atmosphere. it's the only way to deal with the first consensus. stephanie: what will force that to cut -- to happen? >> people, we need to survive. francine: social revolt? there is an easier way it we
have the world trade organization in there is a consensus that carbon must be placed globally. there is a place in california and canada and other regions. people understand there should be global pricing. properly onpriced co2, it should be part of the wto regulations. it's the only way and it's easy because business will control it . you said it will take a long time for commodity to recover. which will recover first? is it aluminum? >> nickel, palladium, aluminum. francine: which one is first? it's like looking in a crystal ball. the market is not perfect.
it does not reflect real supply and demand. there is no physical set on them which is quite oil should drop when people realize there is oversupplied but it takes one year to do so can stephanie: was to blame? who is gaming the system? should blame ourselves. it's all infrastructure built 50 years ago. now we need to do a new marketing model. we can sell directly to the customer. you can buy directly everything now online. it's complicated now. francine: i don't know i did where i would store copper and aluminum. you say we blame ourselves, it's oversupply of oil but it's part to sing -- at what level does a
touch $20 when everyone comes together in says -- and the countries come together say we need to work together to stop oversupply? signsnie: there are no that is happening. people look at opec like a joke. >> may be another year of suffering. francine: and then the get together? noor maybe they'll will be investment. and the rest of the market, there is always supply in steel and copper. we need to consolidate the market and reduce. no one produces a car if there is not demand. we produce now because there is a wrong market system that encourages commodities to dump into the market and we need to stop it and it's a good lesson. stephanie: it sounds like bankruptcies are on the horizon. >> a lot of problems would be solved through that.
china, there are not many players but inside china there are 40 players. we need to assume that technology and environmental demand will change the landscape. we need to put this product in terms of more lightweight cars in the transportation sector and aluminum is in good shape. overcapacity in china must be addressed. stephanie: thank you so much for joining us. we are in. bows and will send you back to new york but we need to look at stocks -- we're in davos. matt: if you are long and stocks, they continue to fall deeper throughout this morning's trade it we are down 2% almost
on the nasdaq. the s&p 500 is down 35 points in the dow jones is down 292. monthlythe worst decline for the s&p 500 and the dow since february of 2009. today afterlosers goldman sachs had that big beat are the financials and the tech stocks. us spooked the market with 2016 outlook of $13.50 per share. netflix pleads the market and it was a gain or in the early trade. crude oil is the problem. it came down more than one dollar per barrel this morning and is still down $.92. joining us next is a consultant on yours economic policy for pimco, gene sperling and he will
joining us now is the editor-in-chief and pimco consultant gene sperling. welcome. john.nie: and he is the boss. stephanie saves my bacon once again. let's start out with the u.s. economy. you are a student of this. why aren't wages going up more than they are? we hear about the employment level but not wages. >> they are going up but moderately fit the median family is now a higher than they were in 2010. if you want to understand their
frustration, the median household income was close to $57,000 adjusted for today in 2000. it's nearly $4000 lower than that now. you are seeing some increase but it has been relatively moderate. fred this is difficult long-term trends that we worry about like all the exciting things happening in the economy, the challenge of broadening or narrowing the middle class. there are questions about the labor market. there is no doubt we have had dramatic improvement and no doubt that every part of the labor market is strengthening. if you look at involuntary part-time employment and you look at the duration of u6-term employment and the which is the broadest measure -- david: participation rates. it does not represent the
tightness that is represented historically by 5.0 unemployment. participation rates are complicated because most of the fall there is for demographics. there is a small residual that's not as easily explained. whoill worry about people are long-term unemployed struggling to get back in. my michigan wolverines, it's the same thing. 10-3 but we still not -- haven't beaten certain teams. wish when i was with president obama that we could have gotten more of the infrastructure and other things to help tighten the later of market even further --
the labor market even further. i was not somebody who thought the fed should have been raising rates quite yet. i was still like to see more certainty in the global economy and more tightness in the labor market. do you think something fundamental has changed? >> i don't know where i go on the overall secular stagnation. if you ask me what is the great struggle or challenge of our time it's that we have an increasing globalization and technology and digital economy that is dramatic. it's doing fantastic things but there is one thing that is not is, withind that countries, is it leading to a broadening or hollowing out of the middle class? in each advanced country, they are wrestling with that right now. when you talk about something like middle-class wage growth,
part of that is having to tighten up a labor market. when i was in the clinton administration we were down to wage growth soat it's a tighter labor market and more demand would be helpful but that may be masking underlying issues of whether the economy is in a way where the prosperity that comes through or we get the productivity gains going, are they flowing to the typical middle income family? that is a challenge in the united states but also around the world. it's an underlying challenge in almost every advanced country. should janet yellen be raising rates? you are negative already. >> i was on record as being against it. it's a risk management issue and i think janet yellen helped and
it was good to start to raise now. she felt it guarded against having to raise too quickly. all of the risks are on the downside. from a risk management point of you, i would have waited. the other reason i would have waited is normally people say that monetary policies like direct a gay steamship or an ocean liner, you have to start early or you will hit the iceberg. in this case, i don't think hitting the iceberg is so bad. if labor markets tightened and there was a wage push, would that be so bad right now? after all the stagnation we have had, it would not be bad and even the fetid and san francisco has suggested -- and even the fed in san francisco have suggested you might want wage growth and inflation up 2.5% to get more people into the job
market to give more companies the incentive to give workers a chance. you and i were at dinner last night. the whole talk was about hillary and trump. why hasn't hillary could away? >> it's a big issue. the middle class are not overly represented by the elite. there is a degree of worry on the republican side and the democratic side. do you feel that as well? what you are seeing on both sides as well as the u.k. is that the nonconventional candidates, there is an appeal there with an anger. has manyernie sanders policies and positions that clinton agrees with but he is message that is always
broader. simplistic might say always the most expensive possible. that feels good for people to hear. college will solve everything -- >> if he supported hillary and i supported bernie sanders, i would more likely get a date on campus. >> people just going for the simple feel-good message has felt good to people. if the campaign goes on and if democrats realize how high the stakes are where they might run against donald trump or ted cruz, what hillary clinton offers which is the same sensessive values but a of prioritization and pragmatism of doing things that will
actually get done and improve people's lives like paid family medical leave and college opportunity, i think people can iagine her in the oval office at the desk dealing withsis. i feel confident but i admit that bernie sanders has been a compelling candidate so far. stephanie: these markets are not confident. davos andday into world leaders want to be optimistic every year that the dow is down over 300 points. what will be the dialogue tonight? >> i think it's beginning to start. there has been a disconnect between the markets doing this stuff and this place is in denial. i think we'lloday push into people's minds. you are seeing real big numbers flashing on the screen, down 300 points, 18 month low, markets
are lower and people are just beginning to realize this. people are looking at what happens with loans. those things are out there at the moment as possible things that could come back. davos wants to look at the long-term and people are talking about china and america still has a lot of good things. stephanie: the sky is blue. redthe markets are in the that will do it for us, the dow down 300, you are watching bloomberg television. ♪
half an hour into the trading session and stocks are taking another beating. more than dropping 200 points after stocks in europe slid to a 13 month low. in japan, stocks are plunging into a bear market we are now down over 300 points on the dow. emerging-market currencies are getting crushed by the rising dollar and also plunging oil prices. the russian ruble is tumbling to a record low against the dollar. saudi arabia is defending its currency peg to the u.s. currency. on bank ofng news canada -- i want to get straight to pamela ritchie. the bank of canada has decided not to cut rates for leaving them at .5%. we are watching the loonie down but bouncing up and in