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tv   Bloomberg Markets  Bloomberg  February 16, 2016 3:00pm-4:01pm EST

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here's what we are watching this hour. a provocative idea from citigroup -- should google's parent by aig? we will examine whether this could happen. russia and saudi arabia freeze oil output at january's levels. sign crudeility is a doesn't have much further to fall. despite reports leveraged buyouts are beginning to dry up, apollo acquires abt. more on this $7 billion deal ahead. we are one hour from the close of trading, so we had to the markets desk where julie hyman has the latest. julie: i'm just looking at volume and where we are at the moment. from the 20 day average
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at this point. a lot of folks off for this vacation week, at least in new york city schools. stocks rally for the second straight is -- for the second straight day on this low volume but people will take the rally however they can't get it. if you look at this two session rally we have seen, it amounts to about 3.5%, the best back-to-back games we've seen this month. it is also a broad-based rally. look at the sectors on the move, you have a lot of economically sensitive groups doing well. that's helping to lead the gains. these have been some of the most tattered groups we have had year to date. speaking of year to date, let's look at the tally. the s&p at the lows of the year was down about 10.5%. of ae seeing something
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bounce off the bottom. the question is will it last and did we indeed see the bottom? and can we define what we are looking at? is that just semantics at this point? has this given us a new chance to define -- could argue that for many individual components, they were in a bear market. so are we seeing a bounce from a bear? we are down 15% after having missed entering the bear market by the technical threshold. i also want to check some of the other asset classes today. the currency markets among them. interesting that we still see the yen higher versus the dollar and the dollar falling versus the yen. where we see other havens not doing as well, the end is still holding up, but the dollar is
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gaining versus the euro and the pound today. we got the latest inflation data in the u.k. showing benign inflation. and i finally want to check on commodities. primes one of the examples here, down by nearly 3%. oil prices falling on a freeze marketuction, but participants were hoping for more of a production cut. now we go to our first word news desk. ramy: first up, we had to iraq, where the u.s. is confirming the release of three americans abducted last month in baghdad. iraqi officials say they were handed over to the embassy and they were all in good health. they suspect a shiite militia was behind the kidnappings. the supreme court is honoring the life and service of antonin scalia i draping his seat and
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bench in a black drape. joins the court in 1986 and was his longest serving justice. justice will i in repose on friday and his funeral will be held on saturday. republican presidential hopeful, marco rubio, says he will release his tax returns even -- any day or even a momentarily. he's planning to release tax years 2009 through 2014. it is common practice for presidential candidates to release their returns. that's missing malaysian jetliner is approaching a milestone -- it's just weeks away from becoming aviation's biggest unsolved mystery. indianta may end in the ocean this june. only one part of the triple seven has turned up.
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the premise or of ukraine has survived a no-confidence vote after a motion passed either country's parliament. the motion garnered 195 votes, short of the 226 needed. the political turmoil has been threatening ukraine's economic recovery and jeopardizing ilion's of dollars in foreign aid. global news 24 hours a day come a powered by our 2400 analysts in more than 150 news bureaus around the world. brendan: it's an unlikely herring, but some are saying alphabet should by insurance giant aig. it would give the tech giant a foothold in financial technology. aig has come under pressure by activists to improve its financial performance and accountability. the company announced a management overhaul with two high profile executives leaving the company. insuranceovers the
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market. let's take a look at this note that suggested alphabet should by aig. is this just one of those notes that companies right so we will spend all day on television talking about it? definitely an interesting idea. google's largest deal ever is at $10 billion. is $64arket value billion, so it is a big whale to digest, but at the same time, it is worth thinking about. is it something google should inc. about making a splash into? i have to think about that metaphor of digesting a whale. that pretty much explains it all. experimentation a company like alphabet could force on them? aig has been struggling for decades. they just took a reserve charge
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that was higher than the expected cost. if we took the google analytics and brought it to aig, maybe they could mitigate those cost and return to profitability. have a grasp of what financial technology could do for banking. there's all sorts of things you can ease even if you get rid of the branch and with lending, it begins to make sense. it is when we reach insurance that it takes down -- what does it mean? they have collected all of this information for decades and now cars are driverless. google could help aig say this is what happens when cars go driverless. let's take the data from this technology and figure out how to make this profitable for how the new technology is disrupting this world. brendan: is anyone ahead of aig on this? guest: i think the whole industry right now, if you go to
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any insurance conference, technology is a the forefront. look at cyber insurance. we don't have 100 years worth of ada -- -- worth of data. this is great because it she says if you go to an insurance conference. but let's talk about aig more broadly. there has been a management shakeup. what is it most immediately that needs to get done there? just get rid of -- aig is trading down and they had let go of their chief of structuring officer. he's done deals at aig for more than 20 years. who is going to lead asset sales ? that supposed to contribute about $8 billion. brendan: so the idea that this could be a much leaner company, we don't know who is going to
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leaving it out and how it's going to work. what are the assets ripe to be sold? everything into modular units and did not identify which ones are going to sell. whether they are going to sell different life insurance businesses which might be first on the block, they want to strip it down to property and casualty. brendan: thank you very much. coming up in the next 20 minutes, apollo pays a 56% premium to buy a security --pany just weeks after its after the said financial markets were shut. the chairman of re/max tells me what he is seeing and goldman sachs says it's time to bet against gold. why we could see prices near $1000 a troy ounce one year from now. ♪
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brendan: welcome back to bloomberg markets. i'm brendan greeley. time for look at some of the biggest stories in the news right now. of directors word is split over competing offers according to people with knowledge of the matter. both companies have support from at least four of their 13 directors. it's a test case to see how much to hand is willing to open its economy. he agreement is expected at the end of the month. groupon shares are on the move, searching for a second straight day after significant investment by alibaba. they by 5.6% stake, making it the fourth largest shareholder in the website that has lost 80% of its value since going public.
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those shares are down about 50% over the last 12 months. boeing and lockheed martin have lost their chance to be the pentagon's choice to northrop grumman that is now going to build a heavy bomber. the company can still pursue the dispute in court. business flash update. apollo global management agreed $6.9y adt today for about billion. apollo plans to combine them with protection one, a home security company they already own. shares are trading up by about 53%. for more on the story, we ring in our reporter on this. i see the 56% premium. why is this deal such a big deal? guest: it's a big deal because it signals the world is not ending. day, we were worried after
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two record years that perhaps things would slow down. markets have been going down, so people were concerned about how that is going to affect dealmaking. plus there are concerns about will people actually do deals now? only two weeks ago, the apollo cofounder was saying financing markets are shut and our pipeline is looking pretty troubled. brendan: what did they have to do to get a deal done in a not deal doing environment? guest: they offered a bit more inity than they would have booming that market times. they've also given existing bondholders and upgrade so they would rank on the same level. there are a few protections built in for existing bondholders and they are writing
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a bigger equity checks and they would have. is itn: are they fair -- fair to say that is healthy? private equity groups are seeing a lot of cash trying to figure out what to do with it guest:. especially when things are cheap, this is a 56% premium. but only two years ago, this company did a buyback that was slightly higher than the prices they are being bought at today, so they have dropped a lot. this is the kind of thing you are going to see now that rings are looking cheap again. here is what i am trying to figure out -- i don't understand what adt is worth. had to shareuote i -- adt's assets consist of intangibles and goodwill. that's like when you lend your child money. that's were the assets are. can they actually make something out of this company?
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can they combine it with the other company they own and do something with it or are they just saying it's cheap right now, let's sit on it and see if it gets less cheap? guest: you know how private equity works. they wouldn't put money into it if they didn't think they could reap some reward out of it. they've struggled to retain customers and sign up new customers and some people say being a publicly listed company has not helped them because they have to do quarterly earnings not able toey are do things as freely as they might be able to now. by no means are people saying this is a deal that is going to save the company. some private equity groups really specialize in operations, turning the company around and ringing the value of it. some specialize in understanding
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the finances better. which is apollo known for doing? guest: the first one. they know how to ring value out of things. so we have been looking at dramatically bad markets for the last two months. what does this tell us about him and a into the summer? earnings are declining and companies will need to acquire to grow them. perhapsll continue, but deals will be structured slightly differently. it's about what you need to know to get it done. more equity and skin in the game, it's good for everybody. making judgment calls on television. staying on the topic of housing dropped indence february to a nine-month low. a report shows sales in january were still strong. i asked the chairman and
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cofounder about the shift away from buying houses and holding on to them. guest: i think this is a short-term phenomenon. most people would like to own a home if they can, but there are a lot of economic circumstances that have occurred in the last 10 years that has put that off for a lot of people. to the chiefoke economist from fannie mae about a month ago and he said they are building a new headquarters and the rooftop observation deck, they are referring to it as their millennial observation deck because they're so desperate to figure out what millennials are doing. you don't see any difference in the appeal of buying and holding onto a home. guest: the appeal is there. we did 32% of our sales to millennials. they have a lot of school debt and a lot of them did not get the jobs they anticipated on
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getting when they got out of college and just have not got the financial wherewithal to buy yet. it is interesting to hear you note that because that is what the new york fed has been focusing on. rates -- welk about median --9% for the i'm sorry, the lowest for new mortgages. given all the fed prognosticating we do here, what do you see out in the field? do you sense people are jumping to get a lower rate or is the market confident those lower rates will extend the while into the future yet guest:? i think everyone is confident the low rate is going to continue. when the fed changed their rates, it had no impact at all. haveroblem is, we don't
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adequate inventory for people to purchase the property they want. brendan: i appreciate hearing that because i have to disclose that the greeley's are attempting to refinance. i want to talk about central-bank policy more broadly. in olden times, when rates were low, we would see housing bubbles. can you talk about this the virgins between the u.s. and the sorry, and japan, and whether we see the housing markets actually respond? guest: if you watch the stock market, people are frightened. they don't understand 300 point swings day in and day out, so it makes them hesitant to invest in real estate or anything else. before we had to break, let's take a look at the major ad fridges. , spx up 28%.wn
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the nasdaq, after a terrible two months is up 2% on the day. ♪
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brendan: welcome back to bloomberg markets. time now for the options inside with julie hyman. is a: joining me today momentum stock strategist, joining me from this cboe in chicago. volume is a little lighter but we do have this two day rally and a think a lot of investors and traders want to know have we seen the bottom put in for stocks? david: i'm going to go out on a limb and say no. this rally we have on light volume, we came down below the
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level we saw on january 20, got down to 1810 and now we are creeping upward. we have not really found out where the big shorts are camped out. highu look at the february of 1947, there will be some action up there. up you could take this thing to 2050 and there's going to be someone waiting to slap it back down. julie: we have had some of the same concerns in the markets -- lower oil prices, concerns about chinese growth and european banks. has anything fundamentally changed on any of those points? .avid: i think so i think the european banks are a bigger problem than they were a few weeks ago. we were all distracted by oil but we found out that europe is cuckoo for coco's -- those bonds could be a problem. it is one of those things where
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they have not erupted yet and we are not sure what would happen if they were to abrupt, so that's a problem. the ecb isi said going to do what it takes to help anybody out and they are ready, but the market is just not buying it. your trade this week is looking at deutsche bank. the stock has fallen quite a bit and not just on recent headlines, but over the past year. talk to me about the trade here. of you stepping out ahead something that might have potentially seen a bottom? david: there's been some short-term optimism, especially -- look at the stock on friday. i want to sell into that optimism. rather than thinking these things are going to go down, putting out a bearish call spread. i'm going to sell the $16 call and by the $18 call for $.90.
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i've got $1.05 my pocket and my risk is only $.95 going out to march. a vampire ofst optimism on european bank stocks. re: going to see pressure asthe u.s. banks as well well? sentiment is they are exposed. david: as far as banking is concerned, i think we are ok. to the european stocks, if they blow up, we will have a problem in those european stocks. we will have more bloomberg markets coming up next on this second day of our rally for u.s. stocks. ♪
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>> live from bloomberg world headquarters, you're watching bloomberg markets.
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raimi has more from our news desk. had to politics. charlie grassley says he supports mitch mcconnell's you that obama's successors should make the appointment but he did not rule out a vote on the present's nominee. russia is denying warplanes attacked a hospital in syria. the air raid killed at least 11 people. eight others are missing. a hospital was supported by the orders,ctors without and vladimir putin, that those who blame russia cannot backup their claims. on july merkel makes no sense to talk about new quotas for refugees for european companies. that is when the old have yet to be divided. it can with turkey to reduce the flow of refugees.
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the u.s. and cuba signed an agreement today for the first time in 50 years. as 110 per day, more than five times the number. commissioner with $34 million in 2014 according to the tax filing released today. down a bit from 35 million in 2015 and 2012 one rather -- roger goodell earned more than $34 million. now we headendan: back to abigail doolittle. abigail: a big day. the nasdaq is having its best day of the month on the heels of a strong friday as well.
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fell back a little bit mid morning and it is now up more than 2%. many investors may wonder whether this is the real deal and what it means in the context of this year's selloff. the managing director said a big theme on institutional trading desks with the idea markets are cap at 16 times on the s&p, that he was 1900 to 1920. not a lot of upside from brendan 1% or 2%. the idea is also that nobody is arguing for multiple expansions. one of the best percentage performers, groupon, shares are soaring on the news alibaba is taking a 6% stake. this is on the news of the company's strong and bullish report last week. this all has the stock up 90% from a record low just last week. groupon is a penny stock and it
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reflects the fact it is down more than 85% from its ipo back in november of 2011. another stock is down sharply from its ipo and now is one of the biggest percentage laggards, go-go shares are off after american airlines told the carrier they may look at competition for faster and cheaper service. the airline is go-go's second-largest customer. could set a negative precedent for the largest customer, delta airlines. about apple. to me down more than 8% this year. abigail: today, apple is literally the biggest boost to the nasdaq on the news the be in a fifth to .ultibillion-dollar bond deal investors would clearly chair andagain, down 8% this year
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it is the biggest point drag this week. we'll know more as time goes on. brendan: all right p abigail doolittle at the nasdaq. him -- all right. abigail doolittle at the nasdaq. to prevent another financial crisis. joining us with more is chris condon. these opening speeches are a little like the speech in the well of the senate. it establishes who the new president is. what did we know before this and what did we know in the course of the speech? >> he got off to a good start. came to prominence in the last decade under the george w. bush administration, when he was put in charge of the $700 billion fund used to bail out
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parts of the financial industry and parts of the auto industry. verynk we can say this is much in his wheelhouse when he chooses this topic of what to do with banks considered by many to be too big to fail. brendan: there is always a tension among predators -- federal presence of people with some experience outside and -- ivory tower. where does this fit into this? think he is creating the place where he fits in, quite frankly. as you know brendan, when it comes to the most important monetary policy decisions the fed makes, the agenda there is really driven by phd economists, not that there are not strong contributions from principles, but those principles tend to traditionally look for other places where they could carve out a niche and gain some
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visibility within a system. that is pretty much exactly what he started doing today. it is a good match, i have to him given hisfor experience and his background, but a good match for the indianapolis fed here at the bank has a strong history of doing a lot of research into the area of bank bailout and the impact of bank bailouts in the financial system. you could also point to some of his assessors in the presidency there. book all the way back in 2004. a pretty strong legacy there he is jumping to. he is doing himself a favor by helping us carveout a spot within the fed system. i think it was an under appreciated aspect of what the fed does. they vote every once in a while. in the meantime, they have a
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bully pulpit. look for whatu they say will follow the research and they have a chance to drive the agenda little bit. me understand better the relationship between a fed president and his or her phd is already off on their own tangents? >> well, you are right, they generally have areas of expertise and specialty where they are pursuing research and it is part of the job of each reserve bank president to let them do the type of research they want to do on one hand and also to try to corral them in a particular direction he thinks will be fruitful. of lookingthis area at too big to fail and what else could be done in the banking system. brendan: thank you, chris.
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off to an ambitious start. coming up in the next 20 minutes , from a bet against gold to the cap of oil, commodities from goldman sachs. corporate bond offerings, we will have the latest on the biggest debt sales. on bloombergnders later today. do not miss him at 5:00 p.m. eastern. ♪
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brendan: welcome back. time for a look at some of the biggest business stories in news
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right now. legislators in puerto rico have approve a last-minute bill that seeks to reduce a power company's $9 billion debt as well as we get -- re-diversified . the bill was not approved by today policies deadline. city hill locked down 200,000 square feet and a new skyscraper in manhattan part -- avenue. glass ceilings and a view of central park. about $300s to pay to help validate the developers decision before securing. saudi arabia and russia will freeze oil output at record levels, the first coordinated news -- moved by producers. the first significant cooperation between opec and not opec producers in 15 years. saudi arabia said it is open to further action. is your business flash
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update. bearish call had a on gold today. spurreded bets have demand and goldman is saying cell. joining me now is joe weisenthal. you will talk to the author of that no later. let's talk about gold first. joe: it has been around for thousands of years. some point, i think you have to here andat it will be the arguments we will make about whether it is a barbarous relic, arbitrary.pletely it is here and it has stuck around. place it around commodities but it is really a currency. oe: typically when you think of commodities, you think of something industrial related, something that goes into something.
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gold is used for jewelry and there are modest industrial applications. but really, it is a financial instrument but tends to do well when the fed interest rates suppressed for a long time. golda did very well. golda did that in that seems to be the closest thing there is to a pattern about it. hedge for financial the rest of the year. joe: it is not surprising we would suddenly see people back into gold. brendan: i'm cranky about gold but let's talk about goldman sachs. it basically says everyone come out from underneath your blankets, it is fine. is that a way to look at it right now? joe: it probably is. if weight be wrong but are going into a deep downturn like a recession or something
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where we start having concerns about the banking system or whatever, they will probably be wrong on that call. if the general call is that things are not that bad, they will probably be right. joe: -- brendan: financial markets would require oil markets for the next seven years. i had never thought of it that way because i look at the fes targets and say, the fed, how will you get where you say you will get when the markets say this? but maybe the markets are wrong? >> it definitely seems all we can have a bubble and debt against the fed or something like that where people become so pessimistic. we were talking about everywhere was central-bank, no credibility, they will never get there. you could have a thing where everyone gets -- central banks
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are completely useless, cannot do what they are trying to do, and you overshoot to an extreme. there was an article looking at short-term and long-term spreads, when they turned negative and the yield curve basically inverts, that is a sign of a recession. maybe the same thing is true now that has always been true, that the real curve is not inverted and therefore that is not where we are headed. i like the occam's razor approach to this sort of thing. maybe the world is not ending or they are not going into a recession. brendan: all right. joe weisenthal, maybe the world is not ending. you. -- thank you. democratic presidential candidate bernie sanders is firing back at former president bill clinton. sanders told bloomberg politics
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that bill clinton's comparison of his supporters to those of the tea party was unfortunate. he said the tea party just told people what they wanted to hear. here is senator sanders response. mr. sanders: i think it is unfortunate. some of the things president clinton has been saying our unfortunate. i understand he is trying to do his best to get his life to win the nomination. i understand that my wife is doing her best to get me to become president and we should not make silly remarks. there is not a comparison. we discussed the skepticism that you are telling people at they want to hear. >> i am not telling people what they want to hear. people want health care and educational opportunities for their kids. they want to do with climate change. they want the wealthiest people to pay their fair share of taxes. that is what i'm telling people. that is exactly what the american people want.
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the right wing says what the american people really want is taxut social security, breaks to billionaires, cut medicare and medicaid, and by the way, climate change is a hoax. peopleference is i tell what i believe to be true what is true. you look at the polling. do the people want the wealthiest folks in the country to start paying their fair share of taxes? the establishment may not like that. it is true. should we raise the minimum wage? yes. that is what the american people want. we are saying to the american people it is about time that congress listened to you and your needs and demands. classes fair to say you would reject bill clinton's comparison. mr. sanders: i think that would be fair to say. coming up on bloomberg markets, after the corporate bond sales freeze, apple and
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toyota are back with a boom. we will tell you how these companies keep convincing debt investors. we will always have stockpiles of cash. ♪
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brendan: julie hyman has your markets check. julie: a steady rally. relatively low volume. a two-day rally for stocks, the biggest gain we have seen thus far in february and without a lot of catalysts. in asia spread to the u.s. and skipped europe. it has been a puzzling day. over theok at the s&p course of the day, it has been relatively steady, a little bit of a bouncy morning. throughout the afternoon, hovering at the highs of the session.
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i want to point out individual movers who have seen big moves over the day with capital changes, the overarching theme of the movements. out for $42 per share rising, not quite to that level but again a 42%. and gold, saying it is selling a $1 billion stake, metal mining. groupon, for a to the -- today onn of 88%, it rose sharply friday as well following its report today. the gains related to alibaba taking a 5.6% stake in the company. these are the standouts we have been individually walking -- watching today. gold is continuing to sell off as a risk back on kind of sentiment by investors. gold futures trading lower and crude is trading loader just lower. we got russia and saudi arabia
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and another agreement to hold and freeze production of oil, but not to cut it. oil is coming off a little bit on that basis as well. i finally want to talk about the 10 year. when you talk about risk being back on, one of the places money being out of is the treasury market. this is the yield for the year to date. it says we see people by treasury. seen a shift in the past several sessions as we see the yield coming up but as this illustrates, that is on the back of a lot of lying of treasuries that we have seen thus far this year. bond salesrporate are seeing the slowest start in years since 2005. today is a special start. apple and other large tech companies are offering after issuances were frozen last week. lisa abramowicz for more context. our commentary section. lisa is the person who explains debt to us. what is going on? boys i will tell my little
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it was a special day for debt today. the capital markets reopened after being virtually frozen for a most two weeks. there are concerns about global turmoil and roll global growth. you are seeing the most respected companies come to the market, apple, ibm, toyota, these are the balance sheet tech companies coming out with big issuances and saying, let's take advantage, yields are still pretty low. if it is like the old adage in home finance. you can only get a mortgage if you do not need one. >> he raise an interesting point. what does apple need more money for? they have got $38 billion of cash on a balance sheet available to them. $70 billion of annual revenue. got $56 billion of debt, but it is miniscule in the theme -- scheme of things. they just pile it on. >> a monty python skit with two
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grandmothers and they're sitting next to each other and one just bought a car engine and she is displaying it probably any other says, why did you buy that, and she says, it was a bargain. >> i think this is the question, in my mind, there has been a closure of capital markets to higher risk companies. that persists. the case is the slowest since 2003 for this year. yet you are seeing in issuance of safer debt for what? apple will use this to buy back shares, maybe this or that. people give them their money, and the tech industry is notoriously fickle. people are really not getting paid much, but it is perceived lookingy and people are for safety. you see a bifurcation in a market where people are willing companiesalance sheet
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and lend them their money at yields that are at all-time lows in some cases. brendan: do we see investors making a distention -- distinction? >> yes. there has been a big diversions there. we have also seen a massive split between high-yield bonds and the highest rated tier. the diversions there is the most since 2009. you are seeing a lot of discerning activities by investors. it raises the question of, perhaps one of these sectors, these tears, is incorrect. these are historically. aboutn: this is not technical what is going on to we wake up and we look at what is in bloomberg and we would see yields down on treasuries and yet another flight to quality. is it that simple? yet come you have to for debtu are not good
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investors. you are ultimately by -- borrowing money to go back and support them. brendan: thank you for helping us figure this out. for more commentary, type on the terminal or search bloomberg and fly on the web. that is it for on the markets. what did you miss and the market closes next. plus, president obama will hold a press conference that you can watch on bloomberg television, radio, and on bloomberg at live go. he will likely be talking about the supreme court but not nominating a successor. ♪
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joe: we are moments away from the closing bell. i am joe weisenthal. "what'd you miss?" and i am alix steel.
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♪ alix: u.s. stocks closing at session highs, the best two-day gain. opec and non-opec members work together to freeze output. will it work? us forldman sachs joins his take on oil. alix: we begin with our market minutes. what a day, what a rally. the s&p closing around the highs. the best two-banged date rally

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