tv Whatd You Miss Bloomberg April 4, 2016 4:00pm-5:01pm EDT
inman rosenthal, and i am alix steel. >> stocks closing lower this monday. jim: the question is miss mills? scarlet: we ask fraunchfraunch this is rt start of a sanu relationship. >> plus two emerges markets whose presidents are facing possible emergence. alix: alix: and the scary similarities between the housing bubble and the energy crisis. >> we begin with our market minutes, stocks posting their worst day since march 23. they couldn't hang on to the gains they posted last week. still hovering around the highest levels of the year. when you look at the industry groups, eight of 10 major groups falling, led by the materials group. w.t.i. down 3%.
>> overall a quiet day. a sell-off, but nothing particularly dramatic. >> we came back and couldn't hold it. >> he apologize. >> one stock i was paying close attention to was nike. if you look at it versus moving averages, it has fallen below all three of these. i haven't seen any news trigger out of this. but it was a really interesting reversal. this is one of the most loved starbucks since 2009, and it seems to be tiring out a little bit. matt miller says it is not in serious trouble, but watch that $55 level to see how much more exhausted it could be. >> speaking of the overall quiet market, let's take a look at yields. two-year band yield ticking up just a little bit today. 10-year yields unchanged. just like the stock market overall. not much doing. >> and the dollar has changed
as well. the yen climbed to an 18-month high. more evidence that the bank of japan's negative sfwrate policy has had the opposite effect than intended. the big mover here is the brazilian rail, 1.8% against the dollar, drop in the brail. weakening in tandem with other commodities. the catalyst seems to be the president not resigning. >> the mambingt was really in love with the idea of impeachment, the action in currencies and commodities as well. scarlet, you mentioned a w.t.i. at its lowest level in one month, the lowest since november. even the story of falling oil riggs couldn't help oil prices. it was all about that april 17 oil freeze meeting perhaps not resulting in a freeze.
copper had its longest losing streak in two years. sugar also down as well. brazil may cut gasoline prices. its oil control companies, and that means perhaps less ethanol demand. you have industrials, energy, ags all taking hits. those are today's market minutes. let's take a deep dive into the bloomberg. can you find the charts using the function at the bottom of the screen. >> if you are long, you are crying right now. take a look at this chart. it is a measure of the speculative longs in the future market when it comes to the vehicles -- vix. this is a max out chart. we are along record highs. it is down 45% since ins february 11 high, not even highest of the year. but we are down 45% since then. you had a lot of hedge fund
guys in here, and we talked about this last week, that are getting really hurt. on top of that, you have a lot of investors pouring money into e.t.n.'s, exchange traded notes. $2 billion. they track the volatility, and they lost half their value. if you are betting on any kind of rise in volatility, you are screaming right now. >> back to the old normal. >> he prefebruary. >> exactly. i am looking at the fed labor market conditions index, talking about how the u.s. data is shaking out. people have been talking about the labor market in the u.s. being a bright spot. the fed created this composite that tries to put together a lot of data. it is actually negative 2.1, showing a loss of momentum. some of the interns and wage numbers, it is not terrible. you can see back in the depths of the recession it was much lower, but it has been kind of fading as we get perhaps to a
maturation of this recovery. perhaps there isn't that much juice left in the jacob market. it may be some cause for concern about possible rate headaches. >> so less lack? >> correct and less room for it to keep growing as robustly as it has been. >> and yet the fed hasn't done much but raise rates off zero. i am looking at the curious relationship between stocks and oil. the yellow line, i knew this one was for you, alix. the white line is the s&p 500 s&p 500 -- s&p 500. for most of this year, and you can see they were joined at the hip. they went down, recovered, went back down february 11. there is that low, and then they have recovered. however, people have seen this diverge enls reassert itself. this is after friday's close. the s&p 500 is rising. crude oil coming down. the s&p 500 as we mentioned,
setting a new high for 2016. what happened with oil? is it still a approximately for global growth concerns? >> or has it finally starred to make sense and they de-coupled from that? >> those are our deep dives. check them out on twitter. today is an expert, francisco blanch, head of commodities research at bank of america and merrill lynch. >> welcome back. as much of my deep bison chart showed, wherever oil went, the stock market followed. then came this edwige ens we have seen since the end of march and early last week. are oil and stocks breaking up for good? >> well, it is hard to say. nothing breaks up for good in the financial markets. one thing i will say probably a reason why equities and oil went down together is part of e drop in oil prices was perceived donovan mcnabb driven
by a slow-down in china. i think it turned out to be less dramatic than some had anticipated. i also think the winter weather took down oil prices quickly and the market maybe took it as a signal of soft economic activity. we have seen the rebound. we have seen equities recover with oil. as you pointed out more recently, there has been a bit after twergeens. my sense is that we have seen the lows. the recent drop in prices for the last few days has been iven mostly by longer data futures coming down faster than near data futures. if you look at the brent market, we have actually tight spreads, which means that -- in the physical markets, it is actually quite healthy. remember, one of the things that happened last year is that lobal g.d.p. measured in nominal numbers contracted, and
inflation went to zero. some of that has reversed a bit with emerging market do better this year. we have had a bit of a rally in a number of emerging market currencies, giving the markets some relief. the emerging economies are actually not in terrible shape. that points to somewhat stronger prices into the summer. but this market is going to be a bit of a w throughout the course of a year, a see-saw. i don't see a stable price. certainly the next couple of weeks are going to be important as well. >> are you saying the end of cantengo and the start of backwardation? >> i am not calling for that this year, but we are getting pretty close. i certainly see backwardation next year. we have inventories gross next year. when you of that draw down in
global inventories, then you have the start of backwardation, meaning the value of ole in inventory is negative. that is the market signal and that happens when demand is running ahead of supply. we are pretty close to that point. production has been flat lining globally, and demand has been picking up. very strong demand numbers last year and this year despite the warm winter. i think we are getting close to that. >> so reiterate your call for us, where oil will be at the end of this year? >> we think again a bit after see-saw year because we are still seeing extremely high inventory levels. but by december we think oil could be north of $50 a barrel. and then for next year we think prices will be sustainably trading over $50. next year, again, we are projecting inventories to deadline structurally as the
drop in shale oil production is met with continued demand growth. oil, there or $50 is a lot of change in stuff. people are switching to propane in kitchens in low income countries. there is demand in emerging markets. so i think we are getting there. >> but the worry is that any kind of rally is going to cap supply. we have a chart you provided that shows much oil is taken offline at $40 a barrel at 400,000 barrels a day. but you hit $50, and production goes up. is any rally self getting at the end of the day? >> it is a little bit self defeating when you get to the $ 55 to $70 range. it shows an implicit lag
between the increase and response. our analysis is relating to 12-month futures price, not the spot surprise. which means that if the spot price rallies to $55, which is what we think will happen eventually over course of the dimension year, but if the forward price stays at $48, you will not get as much response as you anticipate at $55. most producers when it comes to hedging, they are going to look at the forward price, and when making the production decision, they are also going to look at the forward price, not necessarily so much the spot. so there is going to be a bit of a disconnect when the market does indeed turn into backwardation as inventories deadline. >> on market day, we saw how saudi arabia is on a mission to diversify beyond oil, programs private a'sing part of saudi
aramkco. this is a column on this? >> it raises the question, the deputy crown prince called the top in the oil market by going public this time after the oil price collapse. he is like no more money to be made here. >> it is indeed a bit of a strange plan in some ways. i have refered to it before in some manner. i am not sure that every detail has been thought out exactly, as it is going to shape up. but certainly there is a lot stuff to be determined here as the saudis move forward with their plan. i do think -- i do agree with you that it is a bit of a bearish story longer term if the saudis are kind of giving up on oil as the main source of income for the kingdom. but i am also concerned about reserves.of half of the value of the
reserves.al oil will oil come behind? is that the reason why saudi arabia is eventually moving to monetize those reserves and put them out in the public markets? i don't know. so there are many questions. as you point out. many open questions. >> love having you on. francisco blanch of the bank of america, merrill lynch. coming up, impeachment talks over brazil's rousseff and russo. we will discuss the market implications next.
northern 150 news burr east. alix and scarlet, back to you. >> on "what'd you miss?," two impeachments hanging over their heads. jacob zuma and dilma rousseff accused of violating fiscal laws. markets like this impeachment talk. receiptsling in head of emerging markets, danny tenengauzer. indian, yes, we have steen a bit of a pause in the emerging market stock rally, but do you buy the impeachment rally and enthusiasm we have seen in brazil and south africa? >> the first question is what happens after impeachment? >> for both countries? >> for both countries. in brazil, it is very complicated because the corruption charges are wides spread. you have many leaders that could be have had video.
when it comes to south africa, t could be very good news. i would go for south africa. >> we have been talking to people about emerging marks, and one of the words we heard a lot was differentiation. they are not all the same. but it kind of looks like they have all been the same. look at malaysia, look at the turkish lira, they have all rallied. this suggests that the talk of impeachment is a distraction and the fact that they are all going up suggests these politics stories don't have as much impact on the market as we all imagined? >> you are preaching to the choir. the story so far has been two-fold. one, excess liquidity. you see negative rates, and we see a very clear backtrack to the fed as well. we changed our view to the fed hiking in december of this year. the third is the story of emerging markets have inflation
and higher rates. the fundamentals are still poor across the board. >> when you look at brazil, there are numbers that suggest things may be improving. trade balance is getting a little bit better. lso economists are now forecasting a rate cut for the first time this year. >> the chart you are looking at -- whoa, that one. >> we are going back to brazil. talk a little bit about the funleds men's of brazil right now? >> one of the issues of brazil is fiscal. the external, there is no doubt that the external picture has been improving on back of a weaker currency, but we still have a very severe problem when it comes to fiscal spending and the fiscal gap in brazil. that is the core reason that i am very worried about brazil. you have basically two rates markets in brazil. one is the 15% that everyone sees and the other one is a subsidized rates market. when it comes to approaching
the subsidized part of the market, that is where the uppings corruption takes play and needs to be eliminated. >> the first was a positive sign. that is consumer confidence is improving. they track retail sales, picking up. it is not all doom and gloom. >> you can see maybe there a bit of an uptick in retail sales, but depressed. how much do we need to see that improved before you would have confidence in the e.m. rally? >> when it comes to brazil, it is a domestic demand story. you need toe talk to people down there. nothing it happening in brazil right now. until we don't see an end to this political deadlock, transactions will not take place. >> if we continue to have all 6 these factors, easing out of the b.o.j., the fed continuing to not be aggressive, can we still get the asset appreciation? >> i think the central bank
will just cut very aggressively. again, you want to see the central bank cutting because everybody else is so loose. >> alix, you mentioned south africa earlier. indian, you said the indications of fiscal slippage in south africa would be more significance than brazil. we spoke with them last week. take a listen to what he said. >> the country's finances are in good hands. we intend to be prude. we intend to demonstrate in practice what we say in words, fiscal consolidation, and we will try to build the right kind of consensus to get all of the role players to focus on growth as the key issue. >> gordhan was the finance minister from 2009 to 2014. >> again, south africa is about
one strahan. this is what he addressed when he spoke. there 'twas a slippage that took place around the financial crisis, 2009-2010. since then we have been holding on to a deficit that has been very steady. zuma wanted to expand the deficit. it didn't work ut. he brought in gordhan, and as a result things are back on track. are we going to improve from here? difficult to say. again, there is still that battle going on. so all that i would say here going forward, south africa will not improve. it will steady. if zuma is out, then it improves. >> so zuma has to go for there to be an improvement? >> yes. right now there is an equilibrium. the moment the negative is out, the positive controls. >> in brazil, even if dilma rousseff is out, the confidence you have of anyone in the
government, any kind of political party to make a difference and not be corrupt? >> exactly. say the pmtb takes over. the party has been with the p.t. all the way through. it is very difficult to differentiate between the parties. >> indian, good to see you. >> thank you. >> next up, why european stocks are cheap. we have a chart that explains it.
year. when line goes down, it means european stocks are cheaper relative to u.s. stocks. even with the slight widening today, it is at the highest since july. it is a good reminder of where we stanton as we head closer to earnings season. fairly rich. >> i think it is funny, just that idea that going into this year everybody was talking about buy europe. divergence in europe was easing, and the us -- and the u.s. was tiedening. since then the u.s. has had a much better year, and other came down. >> the market didn't behave. >> everyone is citing the two- -year divisions. it means the dollar has more down side if they want to track each other. that sums up the stock movement at the end of the day. >> and creates more headaches for who will makers as well. after the break, why the easy credit in oil and gas companies should scare you. why is energy like housing in
>> let's get to the news this afternoon. wisconsin voters head to the polls. cruz leads trullp by 10 percentage points. for the democrats, polls show sanders leading clinton. hackers have posted a data base online that contains the personal information of 50 million turkish citizens. it would have been one of the largest public leaks. the associated press was able to partially verify the authenticity of that leak. a man accused of illegally exporting technology to iran has been extradited to the united states. has been charged with
leaking. prosecutors say 16 of modules were found in unexploded .e.d.'s in iraq. joe.et ho-hum: felt like like a day when stocks powered to their highest level. but it didn't move the needle. joe: the economic data is a little weak and people didn't talk about it. markets sold off a little bit but didn't capture people's attention. a quiet start to the week after yesterday's or last week's impressive gain. scarlet: most of the attention will be focused on thursday when janet yellen is speaking with
alan greenspan. and what comes next? alix: the oil market could look like a 2,000 housing market. this is a chart showing the rise of construction investments, looking similar to the rise in drilling and the two seem to track each other on the way up and potentially on the way down. that's the blue line if you walk the projections out. well, joining us to discuss is oomberg data columnist and doctor, you have written on this topic, what are the fundamental similarities between housing in 2 thousand and energy now? -- 2000. >> irrational ex seib brans. . the housing and everybody thought we could build more houses because there
would be plenty of buyers. the people who were willing to get second mortgages and way overextend themselves because they saw prices going up. the oil industry has done the same thing. earlier in your you were talking about inventories and they are building them massively. and it will stay until it gets lick which dated. eventually the money stops and we are now seeing the industry not being able to raise the capital and just go to go get a collapse in expenditures and some of the collapse in drilling. the big difference between oil and housing is that the cost of building housing hasn't gone down but the cost of finding oil has dropped dramatically. this could be very low up until the middle of the next decade.
alix: you see $30. >> i participate in a survey and i'm at the bottom of the list. i'm at 30. scarlet: in terms of the fallout like we have seen in the housing crisis, we don't have the same kind of exposure or leverage but you look at emerging market debt but that is where the risk lies. >> we saw a very large run-up in borrowing by emerging market companies. and particularly in the energy sector. i don't think it's any accident that we now have saudi arabia crown prince talking about reforming that economy and trying to get away from oil. and i think it's kind of a double-edged sword. one thing that may happen is we are seeing investment come off.
there are some people talking about in a few years eer -- years' time, the supply not being there and that leading to a price spike. u.s. interest rates start to rise, that is going to put pressure on the emerging markets and supposed to come from, that could easily undercut things on the demand side, too. alix: that is significant, not only dealing with the leverage they have in u.s. dollars but might stop buying as much oil as we're used to. that? ried are you about >> i'm quite worried and we have been going back and forth on this for years. it's not just when interest rates rise, the country is slowing down. when interest rates rise, the oil goes into inventory, but
lots of oil pushing prices down and macroeconomic effects both in emerging market countries and here in the united states and developed countries as well. alix: part of what many people look at, you are cutting investments now and at some point we will have a price spike, perhaps 2017, 2018. why in your opinion does that not happen? >> it's quite possible we do have a price spike and one of the thing about commodity prices, they are volatile. we could see it 120. liam had a wonderful piece talking about vashe and trangsing governments is never smooth and held russia as an example. we could see a disruption, but basically saudi arabia has recognized they have no market power and going to keep
producing and see the push for tesla, see the push to limit the increased use of fossil fuels and they are in a rush to produce their oil before some other country produces its oil and see that in the prince's transcript as well. this is a situation where there is going to be a lot of oil and downward pressure on prices pierced periodically by shortages and high prices like we have crop failures in corn. alix: in some ways, the deputy crown prince calling for them to leave money on the table if you thought oil prices would recover. so some cases calling peak oil. >> clearly saudi arabia isn't banking on prices getting back to an economic level for them any time soon.
their fiscal break-even price, the estimated price they need to alance their books is close to $100 a barrel. nd talk of -- we hear this periodically in other countries that depend on commodity exports and always comes out when prices have crashed. but it is a sign that they don't really see a swift rebound coming because there is no way they would go through what is likely to be a very wrenching process unless they had to. alix: great point. doctor, you made headlines when you said they are overestimating gas demand by 500,000 barrels a day. how did you get that number? >> i went through using -- looking at the weekly data where they compute increased
consumption and they show 400,000 barrel a day year over year growth and federal highway administration data, data from the department of commerce where they measure consumption and tried to pars it out and it is the way they treat exports in their weekly calculation. and my report and i'm happy to send it out to other people, it's buried in the footnotes but they underestimated exports to other countries by 300,000 to 400,000 a day. they came out with updated foyer. they show a drop of gasoline consumption in january and increase in exports. and when they factor that into their math model to predict what it is today, when the data comes out on wednesday, they will show
the consumption is up. commentary. thank you. julie: c.e.o. of disney is said to be stepping down. he will step down effective may 6 and only been in the job for 14 months. he will, according to the paper serve as eab an adviser through the rest of the fiscal year. tom stag gs depepping down from his position. and the stock is trading lower. protests over the panama papers in iceland and why thousands of people are calling on the prime minister to resign. ♪
scarlet: time for the bloomberg business flash. . report filed by pimco the filing said he had no employment agreement and acknowledged his departure and would render him ineligible. no response from gross' camp. more legal problems, creditors e seeking from its holding company. nd claim it owes $1.9 billion. and this is after the company
says it delivered 14,820 vehicles in the first quarter. that is short of the 16,000 it forecast. esla has 276,000 reservations. delivery on that vehicle won't begin until 18 months. tom stag gs is stepping down as chief operating officer. he will remain employed in the company as adviser to through the current fiscal year. and that is the bloomberg business flash. thousands of icelanders taking to the streets to voice their anger as their prime minister was in the global leak of documents revealing offshore documents. they are being dubbed the panama papers. and in your call-in today, you talked about yes there is going to be a huge head ache for
political leaders, but really perhaps, the industry that might stand to suffer the most is the finance industry based in particular. explain the case. reso basically, you don't have to look very far how entrenched banks are in the world of tax havens. all you have to do is go to the annual report of a large multinational bank, which we did lost can see they have 100 subsidiaries in these jurisdictions and the banks have a point but that doesn't mean there is anything illicit going on but any publicity or pressure from the politicians and people are saying there will be a response. that is clearly going to crack down further on the network of banks and subsidiaries around the world. joe: when they see this news
about the panama papers, of course, the rich and powerful of the world are using loopholes nd offshore structure to not pay money and not pay taxes. what is new? what do we know about the nature of offshore finance that we didn't know two days ago and how does the panama papers leak change the equation? >> we have current leaders, current politicians, current government ministers being embroiled in this and we are seeing big protests in iceland. that is interesting and new, because that gives the angle for politicians to do something. and it's interesting, what you say is exactly true, but every time we say this is nothing new, there is a pressure package of leaks around the corner that makes us realize that maybe what
they have done so far isn't enough. publicity, publicity, every time there is a package of leaks that sets off another around that could change things again. >> when it comes to these panama papers, the president of russia. we spoke with a c.e.o. of a russian bank and here's what he had to say about it. putin was nd mr. which is notedding expensive and used for weddings every week for dozens of people. i don't know how it can relate putin to any of these businesses. >> very strong words but at the
end of the day, banks aren't accused of wrongdoing. shell companies aren't necessarily illegal. >> no, they are not. but every time we get news on it and repeat it as though it's the kind of answer when clearly it's not. if there was no chance of being illegal done and the french president said this was an issue and public finances and see the twin pressures happening right now and i would also say this isn't right. this is very early in the game and no idea what kind of long-term or short-term fallout will happen. but it has been fascinating 24, 48 hours. one can only guess. alix: thank you so much for joining us by the phone. f you want to read the column, type in gadf on the bloomberg.
joe: "what'd you miss." greece's debt crisis rears its head once again and being pushed out of the euro if it can't find common ground on how to agreement.ts bailout mark, what are the challenges that greece and its creditors face leading up to the debt payment this summer, how far apart are they? >> same challenges they had last
year and the same the year before and the same challenges the year before that. essentially the country is bankrupt. last year, we had a government elected by every single voting area of greece and said we aren't going to take this anymore. and russia lick which dated the banking system. g.d.p. has shrunk and everyone is still playing extend and pretend. the question is how far, but why are we even playing this game. joe: people who don't pay close attention to this will say, didn't they come to an agreement last year, didn't all sides in this deal shake hands and that was it the end of it? why wasn't it the end off it? >> they lost over 30% of g.d.p. and euro zone economy which is stagnant at best and keep squeezing.
the last agreement, yeah, we will do some more cuts on what we already lost and they are taking pensions which is part of the consumption and they want to cut that farther. they have been cut down from 100% to 60%. there is little to cut. joe: over the weekend there have been a lot of leaks lately and everybody is concerned on these panama paper leaks. a leak from an i.m.f. meeting about pressuring germany on providing debt relief on to greece. it seems it damaged any hope of you trust between the parties. how does that leak play into it? >> i'm not sure that it does. if you go back to last summer, the i.m.f. was hard on greece and they were trying to get the same thing, debt relief.
creditor or state losses and the creditors are backed up by the germans saying we are marking this debt and no way they are going to get this bank. they are trying to pressure greece to such a point and get relief on the table. publicly, there is no way that the greeks can say, pressure us. but that's the way the circle has to be drawn. joe: kind of complicated bank shots. thanks for joining us. alix: don't miss our interview i.m.f. chief tomorrow. next, walgreens having a problem with getting its lending. the court: ♪ ♪
scarlet: "what'd you miss." rite-aid look for headlines. walgreen are to report its earnings and investors want to ow how its purchase of it is progressing. rite-aid was walgreens ack which situation. that is reflected in the sharp pickup in sales. last quarter, their earnings beat estimates with strong pharmacy sales. nonpharmacy sales, the blue bars turned negative. draw in customers, they are renovating stores. there is an overlap in several states notably, california, new york, michigan and ohio. the deal cost 1,000 store
divestitures and likely outcome is fewer than 500. if they nix the deal, they willow a termination fee. buybacks are on hold because of the pending deal. walgreens success pented its stock program. completed $1.2 billion in buy-backs. look for details on the deal to generate the headlines, so maybe just this once it's just not about the numbers. alix: lots of other things going on. euro zone retail sales coming out at 5:00 a.m. and is the e.c.b. lending program heating down to the consumer and will it boost growth. joe: interesting report out has the e.c.b. brought out the helicopters. is it spraying money everywhere.