tv Bloomberg Go Bloomberg April 13, 2016 7:00am-10:01am EDT
oil demand.r this is a production cut may be in the works. numbers may be tell -- do the numbers may be tell a different story? david: welcome to "bloomberg ." has decided to pursue other challenges. we wish her the very best. vonnie quinn is with us. vonnie: think earnings season kicking off. that's bank earnings and season kicking off. to breakrd is here it down. a series of upside
surprises. that's how we started with jpmorgan. premarket, futures, where are we? points.res now up 99 the big story in the last 20 minutes, a bit from jpmorgan, and upside surprise. that upside surprises what takes is higher come up by 2.73% in the premarket. couple of fx to a pairs for you. some dollar strengthened the g 10 today. 13%.at wti, the output freeze meeting in the rumor mill -- and the rumor mill is in full swing. crime organized profiteers have raided the offices of the panama papers law
firm. the rainfall is the leak of millions of documents on tax havens set up for wealthy international clients. the attorney general searched other subsidiaries of the firm in panama and the firm has denied any wrongdoing. some 3500 candidates mine for he 250 parliamentary seats -- assad said he and his wife cast their votes in the assad library in damascus. vice president is drawing up plans to form a transitional government in brazil as dilma allegationsrpens that he is the leader of a coup against her. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. gura.vid jpmorgan first order
profits dropping by 7%. profits fell on lower trading and investment banking revenue. perhaps not as bad as we were anticipating. michael moore joins us now from london. the first thing people would have looked at come apart from the overall numbers, the exposure to oil and gas. what did we learn there? >> provisions their continued to move higher come over $500 million -- that continues to be a spot. on the metals and mining front, they set up another $160 million there. all of commodities is an issue. jon: a lot of stories in the first quarter. a lot of them were scary, primarily around the potential of -- that profitability would fall. you don't see it in the numbers, story spoiled by the facts
in today's numbers. would you say that? michael: this is a story of lowered expectations. roe was not great, only 9% for the company. that interest margin continue to climb. to see be interesting whether that is a jpmorgan specific story and whether they have some advantages with their deposit base there or whether other banks can do the same. a 2.3%, the net interest margin definitely higher than analysts had anticipated. david: return on tangible equity, how are they doing on that measure? they are at 9% on the basic are oe -- basic roe, below what analysts determined their cost of equity to be. they have a goal on the rot cited to be in the mid teens and
they are certainly short of that at this point. given everyone knew it would be a bad quarter, it is certainly not the end of the world, but well short of their goal. david: michael said it well, this is a game of expectations. we have hr comparing both with estimates and with the first quarter last year actual spared they beat their estimates but did not do as well as first quarter last year. ofard: this gets to the core the problem, banking is not a growth industry in the u.s. well in executing very a difficult banking environment, earnings are down, but not down as much as the street has inspected. there is value here as a stock. -- the street has expected. historically, a good entry point. youe is value there, but have to be a patient investor. into clipping those 3% coupons.
jon: a valuation player at this point. if it is just a valuation play, you keep in mind the upside we have on the stock for jpmorgan. what is the upside for the others? profit down on the year, down on the year, down on the year. howard: banking is a low multiple cyclical business that lacks growth in this country. there's a lot of regulatory push back against the banks. the regulators in washington have not been friendly to the banks. i don't think there is a calculator strong enough to calculate the number of billions of dollars that jpmorgan has paid the government in the form of fines, mostly for problems , which to bear stearns they acquired at the behest of the government. did well bybank nothing worse -- what will the
analysts be looking to ask jamie dimon on the call this weekend? s they the fragilitie will be pressing him on? michael: the outlook on the interest rate front and the credit front, certainly more about oil and gas and how big of a problem that will grow to be. as howard mentioned come if you are not going to be a growth , itk come a growth story will be about returning capital to shareholders and being a value play. jpmorgan has indicated they want to return more capital through buyback, through dividends. that will be a topic of discussion as well. david: take a step back here and look at the overall business of jpmorgan. where of the growth areas? -- where are the growth areas? michael: credit cards has been going for them over the last couple of years, but there's a lot of competition in that business. american express trying to grow
as well. that has been an area of growth. asset management has been an area of growth. here are pockets of growth , but so much of these businesses driven by the trading environment, that has been a tough one. jon: just want to get up to speed on what way are -- where we are trading the market. america up 3.24% premarket. wells fargo around 2%. that instinct is always the same, you get one and you have to read across to the others. what the you see in the jpmorgan numbers that would give you optimism about the other numbers? the biggest one is the trading numbers not being as bad as expected.
people were thinking maybe would be down 15-20%. it was closer to 10% drop year-over-year. that is the one people are reading across. we will see whether it was in storyy -- was an industry or whether jpmorgan had some specific gains that help them survive. vonnie: jpmorgan saying they are number one now in u.s. and global m&a, beating goldman. will there be enough m&a to go around? michael: the m&a is down this year. last year was a record year. i think jpmorgan will be one of the top two names in m&a longer-term. i don't think there has been ipo yet this year. back, it is
cyclical. there's no business i can think of that as a lower multiple business been trading. you can make a lot of money today and lose it all tomorrow. it's businesses that are fundamentally difficult to make consistently make higher profits year after year. vonnie: howard ward will be staying with us. jon: michael moore, thank you for joining us. jpmorgan, a beat. these and numbers out of china as well. that is next. chinese export numbers are out. all signs point to stabilization in the economy there. ♪
david: you are watching "bloomberg ." peabody energy filing for chapter 11 maker to protection. the company joins for other coal companies pursuing bankruptcy amid cheaper natural gas and glut ---- and a hans has agreed to reduce the payouts stemming from his earlier job -- move is to solve -- he wasover promised payment of 11.4 million dollars last year as compensation for leaving the higher paid cfo post. cable workers have walked off the job today, working without a contract since august.
the union says they are striking because verizon wants to make layoffs u easier and rely on contract workers. data out of asia today, chinese exports jumped the most in a year. the world's second-biggest economy may be stabilizing. -- theslump in february rebound could be due to seasonal factors as well as the pickup and commodity prices. for more, i want to bring in our in-house expert from hong kong. great to have you with us on the program today. clearlyptimism quite the markets are trading higher even had of those jpmorgan numbers we got about 40 minutes see solid you, do you signs that financials have started to firm up in china? >> undoubtedly, it is a good
number. we saw a pickup in demand from key trading partners, such as the u.s., pick up in shipments of goods. it comes alongside other signals that show the manufacturing sector is gradually stabilizing here. if you look at the export numbers today, the problem is, we are comparing it with weak numbers from a year ago. exports in march of 2015 were the leak -- weakest in all of last year for china. march follows the chinese new year in february when all the factories closed down. there's been an notable pickup in activity in the month. rather than looking for upside surprise, it is helpful to see some stability. no surprise to the downside,
which is reassuring about china. >> that is entirely right. the sentiment toward china has improved dramatically. has not keptmic it pace with that over the last few weeks. we see the yuan holding relatively steady. we are seeing capital outflows still happening, but at a lesser pace. the real estate sector is holding up, we are seeing positive signs on manufacturing. now a little pickup and exports. is cyclical stabilization. the underlying structural problems remain. out the trade between hong kong and china, there is a story there. speaking of capital outflows, what these chinese are importing from hong kong, you can see that the level of has shotrom hong kong up in a way that we have not
seen since 2012. one of the reasons we're hearing about this, the chinese are buying things in order to get andr money out of remnant b into hard assets. vonnie: a fascinating chart. overall imports were down seven points. what does that tell us about the shift, the tilt that china is trying to make to have the consumer be the backbone of the economy? impact, as theng oil price recovered, the story does not look so bad. the underlying transformation towards consumption in china is happening. just edit fairly gradual pace. look at the opening of the shanghai disneyland this week. an indication of how the chinese consumer is growing.
and serviceson inside of thing is not big enough to fill the gap left by the oil drivers. david: the imf weighed in yesterday, taking up their estimate. where do you think china is headed? >> it's the story of two economies. the 46% of their gdp that has been focused on fixed asset investment, that is in decline. we're getting a bit of a relief rally there now. that is been the drag on chinese growth. then, you have the chinese consumer. that is the bright spot. five-year consumption is rising, but still around 36% of gdp. that number has to get up. there are concerns there if you have a profits recession on that more heavy industry manufacturing side of china, that will filter its way into less employment, pressure on
order, up 2% on jpmorgan. citigroup, a similar amount and goldman sachs down there, up 1.4%. much in focus. around 13%. $41.39. the meeting on april 17, can they argree hugh freeze output -- agreed to freeze output? matt: a lot of interesting notes overnight. i want to kick it off with louis vuitton come in the green for a .ourth consecutive day its biggest intraday gain in two months after credit suisse idolatry goods group to its top ticks list, adding margin momentum.
far in 2016.so adding theuisse luxury goods group. shares of netflix moving higher. the pepper jefferies positive note saying netflix is still the one to beat in the video streaming business. netflix,en viewers use dominating other services like amazon and hulu. retail sales numbers will be coming out in just over one hour from now. increased by .4% after declines in both january and february. these data could give some guidance before the federal reserve meeting at the end of april. tell us how important these consumer numbers are for the fomc. any particular months
retail sales number may not be that important. consumer spending in general is huge because consumer spending in total, which includes services, is about 70% of gdp. for the last six months, we've generated 246,000 new payroll jobs in this country on average and some increase in wage rates. the consumer is in good shape. buyerition to spend, a of cars, we know that. will be moving directionally beyond cars and outlook for consumer spending is pretty good. not a big number. vonnie: we are at the peak of car sales as well. does the consumer stop saving? howard: the consumer has been saving a lot. as the labor participation rate goes up and the unemployment rate goes down, consumer
spending will be there. i have a lot of confidence, it's always been a mistake to underestimate the american consumer. we like to buy things. i think the numbers will come through. perhapspoint, it will nudge the fed to do something, but not in april. jon: i'm going through the jpmorgan press release. jamie dimon with a quote -- the consumer business continues to grow. the u.s. consumer remains healthy and consumer trends are favorable. if you're an investor in the come is that a theme you still want to play? long the u.s. consumer? howard: short answer is yes. there are many ways to play that. the consumer discretionary part of the stock market is a big chunk of equities.
we talk about media and technology, you can play the google, by facebook, retailing iner, or form of home depot, tjx amazon. there's a wide variety of investments you can seek out were the consumers directly involved. jon: howard ward, thank you for joining us program. this program. up next, we take you to crude. could an opec freeze be in the works? we take a look at that, next on "bloomberg ." ♪
our new european headquarters will appear out of the sky line. that is the focus this morning. the banks leading the gains. jpmorgan with a beat, profit down 7% in the first quarter, but it upside surprise. will that be the theme for the first quarter earnings? bank of america up, too. citigroup up 2%. says thenald trump republican presidential nomination is being stolen from an. -- from him. trump calls the system phony."ely rigged and this is after ted cruz outmaneuvered him and delegate contests in colorado, north dakota and ohio. it opened of statement from paul
ryan saying he will not be a candidate for the 26 and presidential nomination -- the 2016 presidential nomination. nearly two in three americans back the nomination of merrick gopand -- the poll shows the fines may not ultimately hurt the party because the election-year fight is simply not a big deal. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. thank you so much. tom keene is here with his morning must-read. the difference between casting.ing and now tom: we came in this morning and burned incense here.
are enough people involved here? phd's come a billy joel wedding tribute band from years ago. what is the weather today? take a look outside the window. that describes most of our economics. the blue-chip advisors, the best human forecasters. derby over the atlanta fed, new york fed. ,hey benefit is in a gloomy positive 0.1% and the new york fed incense at 1.1%. david: let's show how this thing works per have a chart from the morning must-read. we have a variety of economic
indicators. tom: this is great. david: the white line shows where they think the gdp growth is headed. , dobar chart -- those bars they underperform over perform what is predicted? tom: this is done with the best intentions by really, really smart people. it.e is an alchemy to there is a humility within the certitude. vonnie: falling a little bit. jon: i wonder, who is it for? more than anyone, the markets want some kind of certainty. data out of china, looks fantastic, then you break down the chart we looked at, the chinese imports from hong kong come up 117%. how can you trust the data when quite clearly come in the second
largest economy, you have this point? tom: there's a huge media uproar about the first call in the second call is -- the third call, we don't even go to the rate. vonnie: sometimes, revisions happen at the end of the year, years later, you look back and gdp was told different than we thought it would be. dour --ana forecast is the atlanta forecast is dour. a great chart that joe weisenthal once showed me. from economicses indicators we collect your happen negative. what we have done also is graph the atlanta fed forecast, here it is below the white line, the white line is actual trend gdp. what do you use when you want to chart gdp?
i have the change year-over-year. tom: i call that the alan greenspan series. this,itical point on every nation and every system is different. european gdp, jonathan ferro's talking greek, quarter on quarter. the only one i know on the planet that can get this right is vonnie quinn. everyone else screws it up. jon: a good thing we have vonnie quinn alongside us here. the supply side of the equation meeting for- the opec members, focusing on the likelihood of reasoning -- likelihood of reaching a deal to freeze output. tom petrie joins us now.
great to have you with us. you put freeze, given where production is anyway, is it bullish for crude at this point? tom: probably not. a lot of this is a game i think is being played by the leaders, the saudi's and the russians, dealing with setting up the iranians. the iranians will not concede anything, they have made that pretty clear-cut. the saudi's positioned themselves to do one thing very different from what they said. i expect two steps forward, one step back. their goal is to keep the western producers in their capital starvation mode while they worked back to a price they can sell the bulk of. experts at a better level than they had no last year.
this exports and a better level. they will have periodic reminders when they set this up to fail. that's what i expect on this one. i would be surprised if it --duces something subsidence substantial. includingthere a path iran somewhere that says there will be an agreement? tom: if we test the lows we've team, below 30, somewhere in the 20's, that might bring them around. that is a very expensive proposition for both saudi and russia to engage in. i don't expect it. the other key thing to recognize, they were -- the iranians frontloaded a lot of their production. they are already transit shipping oil the last six months through iraq.
the incremental supply out of iran, until they make major new investments, it will not be that bad. vonnie: there is a lot of theater involved here. behind the scenes, the rumor mill is active. when we get to the other side of dohar, will we have seen an agreement between the players? tom: i doubt it. with the saudi's and russians virtually going all-out, they are where they want to be. the agreement will be tacit between those two players. their whole goal was to bend the supply curve in north america. we are down by 500,000 barrels a day. it will be one million barrels a day by this fall. that will carry on with some momentum. that solves the problem. david: i heard a lot about saudi arabia and russia.
we have not talked about china in this context. matt: we put china in the picture, it makes saudi and frenemies, in a sense. what you think about this chart which shows they are fighting for chinese supply. this is chinese oil imports from russia in blue and from saudi biggesttheir previous oil seller. now, russia is selling more barrels of oil. are they competing for china market share? tom: very much so. you meant the man to fighting for, chinese demand. they are competing for that. for,mand they are fighting chinese demand.
they lost market share in nine of those 15. when i look at america and the oil, right now, we know it's going to be an orioles-cubs world series. in annning are we american oil companies clearing their balance sheets? you talk to the bankers, the balance sheet is a verbal construct of management. what inning are we in? tom: we have a long way to go. tom: what will be the outcome? tom: more consolidation, for sure. anticipatory by those who can look ahead and be anticipatory. the overall consolidation will not approach that of past cycles. for the big one
international companies in the late 1990's. we had the other one back in the 1980's. this one will not approach any of those because the combination has largely been done. david: we have one tom who will be staying with us. tom keene will be going back to "surveillance." next, how cheap credit for energy companies is affecting their stock prices. that is on "bloomberg ." ♪
vonnie: you are watching "bloomberg ." oming up at 9:00 a.m. eastern -- david: you are watching "bloomberg ." estimates withg cost cuts -- net income fell 7% from one year ago. return --n expects to valiant pharmaceuticals facing pressure from a notice of default from some bondholders. valeant says it is on pace --
the firm that back alley and air startups,ing in particularly those run by founders on their second or third startups. that is the bloomberg business flash. david: when oil was trading banks $100 a barrel, and saw opportunity to extend loans to energy companies, using reserves as collateral. reserves based lending was considered safe because banks historically got every penny they loaned come even after the default. see how these loans are affecting equity prices. we are joined by tom petrie. matt: i have a couple of interesting functions. to searche lsrc through various loans out there.
we have looked at oil and gas from energy exploration and that have companies revolvers outstanding in u.s. dollars. the biggest ones are $4 billion. itsapeake yesterday secured $4 billion revolver. of course, chesapeake has not used any of that money, whereas lynn has already used $3.4 billion. cast on the bloomberg, here we go, for capital structure, you can see with this screen, first lien loans. they mortgaged the whole company. lien, $3can see second
billion of loans there. $7 billion there. all in all, they have three times the debt to their equity market cap. a lot of debt out there, but a very interesting story. in my experience, when a bank things their collateral is impaired, they get very nervous. what practical effect is this having in the real world with oil companies? when you look at all those come matches to show, that is one million barrels of production, a lot of those companies will lower their capital and production will decline. but of the reason we feel confident that oil has bought is because u.s. production has declined. it will continue to decline for reasons similar to what you just explained. vonnie: who will be the winners or losers at the end of this?
the banks or the companies? at this point, i'm confident it will be the companies. the banks win when the companies win. i don't think the forced mergers and pick up to his will rise to the same kind of level that we've seen in the past cycles. jon: i want to bring up a chart that reflect what we've been talking about. total u.s. crude production, we've maxed it out. , where does that roll over off the top finish? how far down do they want that to go below 9 million barrels a day? >> look at the messaging from opec in december, it is we are going to wait and watch. that was a complete disaster. a watched oil prices go from the mid 40's in december of 2015 to the 30's come all the way down to the 20's to reach where we are at a low point.
when u.s. oil production continues to fall, if it continues to fall this year, you are moving towards 8 million barrels a day, that will have an , positive impact on crude prices throughout the remainder of this year into next year. david: is that much more important than any meeting might be? it's the reason of oil prices have bottomed and why we are constructive that oil prices will be closer to $50 by the end of the year. tom: the reason we get to 26 is last year, u.s. production did not fall mainly because you had deepwaterming on from . most of the estimates are one million to 2 million barrels a day of surplus. north america will cover that.
vonnie: we have to get to the bankruptcy of peabody energy. tom: coal is not the place to be. independent of the cycle. gas thatnough surplus shifts over are coming rapidly. vonnie: more bankruptcies in the coal industry, then? that area't know well, so i will not predict it, but i would not be surprised. rob: there are some challenged oil and gas producers. like from an investment perspective, we like the energy and researcher companies. if you think oil prices have bottomed, you win. if they stay steady or flat energy andse researcher company's offer great dividends. also get the, you
jpmorgan kicking off what many people thought would be ugly season for earnings. profit was down 7% in the first quarter, but an upside surprise. that's why see the premarket up 3%. likewise for bank of america, goldman sachs up over 1.5%. euro-dollar at 113. a printed north of 114, we've come back since then. wti after a big three-day pop at 13%, we are now down by 1.3% ahead of that dohar meeting. since february lows, the s&p 500 has rallied 12%.
we are asking if that rally is sustainable. you will get on us today. matt: i will show you some technical analysis, the first chart being quite simple and easy to understand for people who are not immersed in tech analysis. the blue line, the percentage of companies trading right now above their 50 day moving average. 86% of all s&p 500 companies are trading above their 50 day moving average. the purple line is companies trading above their 200 day moving average. -- a lot ofing companies are trading higher here. if you get into more complex technical analysis, we can look signals, divergence to divergence. we have mac the signals on the s&p 500. 38% of the companies on the s&p
are thought of as being overbought. only 1% are oversold. david: if you were just looking at these two charts, it is not looking so good for the s&p to keep going up. matt: even though all the major analysts on the street, all the major strategists are saying they still see the s&p target higher than where it is now. up, the chief investment officer of the u.s. second-largest pension fund. christopher will be here on "bloomberg " with us. ♪
can major producers agreed to freeze output. russia says there is hope. global equities rally on optimism that growth may be stabilizing. rose the most in the year. -- in a year. to our viewers worldwide, it is 8:00 a.m. in new york city, you are watching "bloomberg ." vonnie: we have breaking news, pretty serious for the banks. regulators rejecting the living .ells -- living wells -- living wills. this is according to the fdic and the federal reserve committee telling shortcomings and jpmorgan's resolution
saying jpmorgan lacks a contingency plan for trading activities. it is being faulted for the lack of -- david: i see guggenheim as saying don't go too fast. we have a lot of news to cover now. retail sales numbers coming out in just under 30 minutes. the fed as we will all be watching those numbers closely. jon has a check on the markets. jon: we have been news on living wills. still trading much higher. .pmorgan up by 6.25% citigroup up 2%. the jpmorganrom earnings quite clear, and upside surprise even with profit down 7%.route -- down around
wti three-day gain of 13% to the upside. $41.60. what does it all mean? david: more turmoil for the brussels airport. this time, a walkout by belgian air traffic controllers. disruptingike is flights to the hope that began disputes of extending the working age to 58. italy and malta may need eu support to cope -- half a
million people have been uprooted, enabling islamic state to establish a presence along the mediterranean sea. to $50rker is giving million to start a research -- $250 million to start a research institute systemto help the immune beat cancer. . global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. shares of jpmorgan up nearly 3% now after beating the street on the estimates about their earnings. the biggest u.s. bank by assets having its best earnings day since the second quarter of 2014. first order profit they drop nearly 7% on the were trading and investment banking revenue. -- lower trading. note havingled
compared your note with what happened, what comes out at you? >> if you look at what happened this quarter, this was a tough quarter in the capital market. numbers were down 25%, trading came down 11%, which beat those low expectations. e strength oftha jpmorgan overall. jon: ugly quarter, regardless of what the estimates were. fred: we have to listen to the call coming up in 30 minutes to find out what is really going on on the capital market side. there was pretty good news in terms of the net interest margin up six basis points. they were able to cover the increase in credit costs with this higher net interest income. it's the capital markets business people are keeping
their eye on. five of the big banks's living wills have been rejected. will they take it seriously? fred: they certainly will take it seriously. if they don't do this over a number of years, regulators have the right to break them up. investors, is this a big deal? we don't see that, because they will get this right. wasof the names on the list citigroup. citigroup has this thing called a single point of entry, be a credit ease. -- one of bureaucratic ease. i have performance, relative performance year to date of all the banks. on the living wills point, you
don't start negotiation too close to the other side, right? you want to start way out. let me focus on something i do know about. jpmorgan has been the best performer as far as equity is concerned so far this year. these banks, jpmorgan in purple, wells fargo and white, bank of america and green, citi in orange have all underperformed the s&p index so far this year. the banks have been a big drag. do you think we will see more positive surprises and that this will turn around after this next week or two is done with bank earnings? fred: you are seeing the have's and have not's. jpmorgan have outperformed the weaker banks. his citigroup and bank of
america going to be able to? will they exceed these expectations? financials are tough with the 10 at 1.7-1.8. jpmorgan's cfo talking big numbers. adding one million household and consumer banking since late last year. a lot of people looking to the read across to the investment banks on the session today, but i'm wondering if there should be read across to main street. a looking at them and thinking things look favorable? fred: things look ok. we've seen that from the small banks. reasonable loan growth, deposits are still good, credit costs are rising, but the net interest income is still positive.
main street banking is coming out ok for this year. we know that investment banking and trading is off. what will make that upside? asset management is a big driver for them. fred: the one area that was not quite as positive was mortgage banking. that is a good read across to wells fargo who has very good mortgage banking. david: they touted their credit business. franklin first quarter tends to not be a very good credit card quarter. vonnie: where will new opportunities for growth come from? there is little they can do except for wait for net interest margins to increase. .> loan growth ,f you can get loans growing
even if the spreads are compressed, that will be the key. that is critical for banks as we go into the rest of the year. will the u.s. consumer stay relatively strong? if that happens, the banks will be ok. jon: january-february was ugly. getting a bit of guidance on what march was like. , do yout you've seen think that can continue into q2? >> the trading in january and february, the volatility was not that bad. the volatility fell off in march. more commentary here, but it is hard to get really excited about this markets --capital let's move to the other
side of the ledger. what about cost control? >> the big surprise was not material litigation costs. was $687ear, it million. a big deal, can these big banks finally get past this litigation issue? that could be a positive on the expense side. all the institutions in this global environment have to focus on cost control. a lot of these companies also come if you look at branches across the u.s., we are still only 3% past our peak number of branches in the u.s. amid all the changes going on. you have to believe those numbers could fall significantly. jon: thank you for joining us this program. the function on blog.erg, the top live
you can get insight on what's happening on the call. looking at the bank stocks premarket, jpmorgan stocks of 3% premarket. -- up almost 3% premarket. goldman sachs now up 1.33%. coming up, promising signs for the chinese economy. did the export numbers tell you the real story? that is next on "bloomberg ." ♪
opec nations are meeting with russia and other nonmembers in doha this weekend. agreedgen chrman retroactively to reduce the payouts stemming from his previous job as cfo of the company. the move is to help resolve a dispute over management woes in the midst of the commission's cheating scandal. -- emissions cheating scandal. landlinehousands of and cable workers for verizon are striking on the east coast. are strikings they because verizon wants to create pensions, make a lay-ups easier and rely more on contract workers. easier.layoffs rejected bywills
u.s. banking agencies. we got feedback from jpmorgan. with regulators's decision on living wills." blog on theat the bloomberg and have a look at how he reacted to that decision, jamie dimon saying the living will feedback more about legal entities. ford: is there a ready plan divesting yourself of certain assets in case you get in trouble? they were dissatisfied that they did not have that plan. vonnie: the cost of what it will take to comply with the living wills is what fred cannon was pointing out, there could be more of a cost or less of a cost -- do we know with the regulators are looking for? david: they give certain assumptions and the bank response and says you pass or
fail. jon: the next question about the panama papers. executives and say no comment. david: i will predict the next question. donald trump. jon: let's go to china now. stabilization. the nation's exports jumped the most in a year, rising 11.5% in march compared to one year earlier. joinsad of china research us now. great to have you with us. fascinating numbers. the first thing you say is, ok, headlight number great. is that really the number? >> on the trade number, they are close to accurate. there is no obvious manipulation of those numbers. we know the trade it has been terrible for the last six or nine or 12 months. a lot of other data for march was --
david: how much is timing? they had a week quarter a year ago -- weak quarter a year ago. >> the lunar new year fouls up the january and for very data -- january and february data. we seasonally adjust all 12 months. this was a legitimate better number. vonnie: you are traditionally pretty bullish china and say we should believe the numbers. number, no. the gdp numbers are made in beijing. they will come out on thursday night, they will say 6.5-7 percent. the same people who create the targets are the ones who report the results. this is not a mystery. the trade numbers are reasonably good. this is what we got last night. jon: the trade numbers were born
out of the fx market. here, we see chinese imports from hong kong. i'm sure you've seen this amazing leap year. up to levels we have not seen since 2012 and a lot of economists are taking from this that the chinese are putting out there cold hard cash and getting hard assets. don: fair point. we've always been a little suspicious of the data, especially when hong kong is an outlier versus all other places where the export to or import from. that is a relatively small part of their total trade picture. david: i want to talk about exports from china. steel is a fairly substantial portion of the export.
that is to the u.s. and other countries as well. we have the secretary of commerce on just yesterday talking about the trade disputes and whether the rest of the world will continue to be happy taking these exports. we are in active discussions with china and happen for at least a year -- have been for at least a year. i've personally been engaged in these as it relates to excess capacity as it relates to ste el. this is having significant impacts here in the u.s. david: is this a significant problem on the horizon? don: it is. are notsteel companies profit maximizers, they are employment agencies. and continue to make steel either stack it up in the back and put a tarp over it or they dump it on the global markets. they don't want to fire these
people. they don't want to have them sit in the lunch room and not make steel. steel.ke there is no quick fix to this because all the fixes are short-term pain for long-term gain and that is not what they want in the short term because they are tying to lift the economy. vonnie: we are seeing a much more active central bank in china now. communicating more. will we see more action from them? don: i think you will see pboc more active. i'm not a critic of their communications. what we know is, since august 11 theirhey devalued currency, they moved from a
currency that was managed versus the dollar to now being managed toward a basket. think of that as china wanting to play between the hash marks on the football field as opposed to being an outlier, where the super dollar was for the last decade. david: great having you here today. next, oil extended its declines from the highest level in more than four months as speculation swirls over the production meeting this weekend. ♪
oil is down, but still above the $40 a barrel mark. >> absolutely. this almost is setting up a buy news type ofl scenario could we've seen such a fast rise in the price. the saudi minister coming out and sing the role not be any cutback. the of russia, iran, iraq saying they are going to try to elevate prices. with the rise that we've seen and with the little boy that cried wolf scenario we've seen the last few times they have met, this is a great place to short oil. down a little is this morning, i would short it here with a quick stop on the upside of about 43. we get to sunday and nothing is decided out of this meeting between opec and russia on
sunday, we will come in monday morning and see oil trending downward. i wouldn't be surprised if we see $35 before we hit 5. vonnie: that is the popular trade? quick stop to the upside. i straight short on oil. -- a straight short on oil. vonnie: earnings season has started. we are seeing moves in currency markets and so forth. scott: the rest of the week here , we are focusing on bank earnings. the oil market right now for the next couple of days, though it has been coupled directly with the overall market, that is really focused on any sort of speak we see coming out of opec or russia leading into sunday. that is why i want a quick stop
to the upside. if we do see oil continue upwards, i will take my loss and take that on that quick stop. yen, it is a dollar trade. is the impacting oil? scott: absolutely. that has fueled also verizon this commodity. stabilizes and the weakening of the dollar stabilizes somewhat, that will help downward pressure in the price of oil. up, march retail sales at 8:30 eastern. ♪
the last year, retail sales never really reflected. what was the consensus? why did refit -- why did retail sales underperform? --a lot of people thought people were surprised by the extent to which people saved money, perhaps did not think the savings were in -- permanent. jon: retail sales month on month coming in at -0.3%. the previous month upgraded from -0.1% to 0% flat. the median estimate 0.4%, --ewise devious month likewise the previous month. checking out the markets, we do have a couple of moves. matt: let's take a look at what we are seeing as far as market moves. the dollar index, look at this drop. a big drop here.
-- still a gain of half a percent. you can see the yield coming down to 1.8 right now, 1.77 and the s&p futures, not as much reaction but still climbing down a couple legs lower. that retail news outweighing the positive news that we had from jpmorgan and the positive export news we had out of china. the question is what effect will it have on the cash trade when we opened in just about one hour? we are still seeing pretty strong futures trading. data point, but does it fit into a trend? matt: the trend is continuing seesaw. sometimes we have good months and sometimes we have that months -- bad months. the trend is what we have been experiencing for the last six
years continuing. isnie: what is striking me the producer prices are falling, which is not a good sign for inflation. matt: i had not even check producer prices yet, but there that doesthese signs show inflation pressure, so it will be interesting to see if we get that report, tomorrow. jon: you are looking at the autos. matt: march was a very slow month for the automakers. this is an inventory to sales ratio and you can see that in times of crisis, we have huge spikes here because there is so much inventory, they are making so much as far as cars and trucks are concerned. you can see that it has climbed up here. there is -- auto sales have been such a huge driver of total
personal spending over the past three years. are they curtailing production of vehicles, yet? matt: no, they are producing as much as they can. f-150's.ot make enough americans just are not buying smaller cars. plant running because you don't want to fire people are cut down the lines. you are piling up ford fiesta's when everybody wants to buy a king ranch platinum series. >> that eating and drinking number only up 4% year-over-year versus 11% in the previous. when the fed is or reading what's happening abroad, things that inwardly, -- this is the consumer.
i understand it is only one data point, but is -- it is a series of data points that have disappointed. this was a big number. that is disappointing. the latest indication from janet yellen, obviously pushing up the markets expectation of when the rate hike would the. i think the lesson is, at least so far, it does not look like we are getting any data that is going to threaten or force the fed to move faster than it otherwise would be inclined to. david: how influential will this be on gdp? you mentioned that there were some slight upward revisions, so i don't know, and it is important to note that retail sales are just one never -- relatively narrow slice of overall consumption.
up .3%.furniture was electronics stayed the same. building materials are the same. a are seeing a little bit of disinflation tendency in things like personal care, clothing. ,e knew this from economists that health care would not be such a big component when it comes to inflation. health care disinflation has been one of the big stories in recent years, catching a lot of economist by surprise. that would definitely help the main levels get to their targets faster than i think people are expecting. vonnie: thank you so much for joining us. joe will be on later, this afternoon. in the.s. futures still green as j.p. morgan shares rose in the free market after the
bank posted its best earnings since 2014. supporting -- he has a positive equity outlook and joins me now from morning meeting. tobias, thank you for joining us. let the ask you about your reaction to this retail number. i say it is a fairly big disappointment. listening to the previous discussion you are having about consumer general, one of the problems is -- in the retail data -- i keep your from a lot of people that there is -- has been the case for at least a year. i talked to my daughters and they tell me this stuff in there are not these clothing must have. think that is part of what is weighing on them. of the other side, you have seen furniture sales be better,
things like going out to eat and entertainment. i think you hit an important point when you talked about health care. if you look at consumer spending , it is about 57% of gdp. and that has care been the fastest-growing component of consumer spending over the past 20 years, primarily because of pricing and also demographics. if there is a slowdown in health care, you will see sluggishness in overall consumer activity because the other stuff is pretty baseline, it stays in that consistent space. there is this kind of feedback. it is good if health care costs it did -- do not go up for consumers, but not necessarily good for the gdp numbers. matt: what do you think about health care as a sector? >> let me answer that question
which is, we are underweight, we have been underweight for nine months and we were underweight with healthcare services and just brought that back up to a market weight. with respect to the areas that would you like, places where people are not well-positioned. ,nergy, capital goods semiconductors with an technology. but mainlymedia because it has been been -- it has been beaten up so badly. investors like the growth with fun names. -- it is the area that people are poorly positioned then because they were worried about recession earlier, this year and that change rate of reversing the position is part of what i think takes the market higher. matt: jamie dimon is not worried
about that recession. what are your thoughts on the global picture as far as growth and recession go because the u.s. can only hold up the rest of the world for so long. growe u.s. can actually when the rest of the world does not and we are still very much a domestic economy. it is hard for the rest of the world to grow if we are not. we are worried and our chief economist will tell you he is worried about sluggish rates because of gm not growing as quickly. developing markets in europe and japan struggling as well. we could slip into recession but we are having what's called a rhodes recession, relative growth rates are the weaker than what we saw before, and that is still a struggle. what is positive in the u.s. environment is that energy and the dollar have been huge problems for earnings and that should start to dissipate in the
second quarter. it will hurt in the first quarter but then even turn more positively on the cops, later, omps,year -- on the c later this year. this if we are in recession, does that mean the fed stays steady and helps your s&p target to get hit? >> i think the -- if growth is good enough to generate in the stages, better earnings, i think people will allow a fed rate hike to occur. i think ultimately, people would prefer there be economic growth and earnings growth to support markets, more so than if you are moving 25 basis points. there was an interesting comment i heard earlier this year that when the dead moved in december, the market was not just pricing that fed rate hike, but the next four.
of is that the fed is likely to do one, maybe two by the end of the year and the first one could come as late as september. matt: thank you so much, tobias. go, next up on bloomberg yahoo! outperforming this year in ticking higher. we will reveal the analysts when bloomberg go returns. an hour and 20 minutes away from the opening bell. future stay higher even with the ugly retail sales print. doubt futures of 70 points, s&p 500 futures up eight and a half points. i will tell you why those futures have remained relatively high. jpmorgan of 2.4%. rita cross, that means that for the first quarter, it may not be that ugly. i will get to the other asset classes.
shares -- trading peabody shares in new york was suspended immediately. -- received a notice of default with some bondholders. a person familiar with the matter says partners have notified the drugmaker of its intent to issue a notice of default. facebook ceo mark zuckerberg has a 10 year plan to alter the way people interact with each other and a brand to keep at dollars rolling. zuckerberg says people may one day interact with virtual representations with places and objects instead of actually purchasing the object or traveling in real life. that is your bloomberg business flash. jon: what a busy morning.
let's cross over to matt miller. matt: let's take a look at the movers from notes out, overnight. i want to start out with steel. creditsk is, after suite upgraded it to outperform, so by a prevalent and raise their target on the shares to 750 from six to. the analyst to says it is the start of the first of cycle in five years for steel and these longer-term upside for restructuring closed at a seven-month high, yesterday. investors have already seen this and taken some advantage. yahoo!'s trading higher after suntrust raised its price target. suntrust thinks that bids for yahoo!'s core search business may exceed its previous estimate. end, driven bygh hidden underappreciated assets like japanese royalty plant and equipment.
sprint shares are falling after being lowered to an underway or sell equivalent. michael bowen says a lack of competitive tools besides just cutting prices. 50% off is not working, what will, in a research note that came out. it also expect customer turned to be worse than previously thought. sprint has already seen so many -- so much bad news. we turn now back to jpmorgan, the largest bank in the u.s. and is having a very good earnings day. net income did fall 7%. care to discuss more is michael foreman, franklin square's ceo. what does this tell you about the banking industry? >> they have the benefit of scale and a great management team. we have seen that with diversification that they have.
we will see how the others report. wemanage franklin square and are in middle-market lender, so we invest in noninvestment grade large bankse see exiting that space because of all the regulatory changes we have seen. from our perspective, we see opportunity. we are seeing the big banks rely on trading, fee generating businesses and exiting the middle-market and creating activities for middle-market lenders like us. vonnie: a couple of headlines. the ceo of valeant pharmaceuticals will comply with a subpoena and give a deposition to a senate committee on april 18, at of the 27th hearing in washington. 2.1% -- valeant
is down 2.1%. how will you cash in on these opportunities? >> at franklin square, we are the largest manager of business development companies. continue to look to our business, lent in the middle-market and provide yield to our investors who are looking for yield in a low interest rate environment. jon: just on the call for g -- jpmorgan, saying that some items of the market are liquid, prone to rapid corrections. i'm assuming we can talk about the high yields market. we are very conservative folks who are concerned about everything and we are seeing less liquidity in the markets these days, which leads to greater volatility. we focus on credit, not high-yield, though we have some exposure. volatility creates opportunity banks stepping
back, middle-market lenders have a great opportunity. jon: would it be conservative to be lending to energy producers? >> certainly, we have a large energy fund. we have fairly significant exposure to the energy space. we are seeing a little bit of a recovery. commodity prices have recovered over the last -- days. we invest in companies with liquidity, hedges and good management teams. it, thes you put regulatory situation has created an opportunity for you to grow your business. doesn't make sense that as you grow it further and further, that the regulators would not step into your business? >> we think we had the most transparent model out there. we think the regulators will -- look favorably upon the way we do business.
putting investors interest first and we have the most transparent model out there and that is one of the reasons we have seen the growth in our franchise and the growth in some of the -- jon: thank you very much for joining us. next up, battle of the charts. we can be down to the market open. -- count you down to the market open. ♪
year was markedly higher benchmark 10 year rates. one factor is oil prices. the past few months, this is oil prices and this is treasury yield. they have been moving in tandem. people have been wondering, well what happens when oil prices rise significantly, as they have been over the past few weeks and you can see, treasury yields have not followed all that much. is, will treasury yields continue to divert or will they follow oil prices higher, leading to higher benchmark rates in the u.s.? vonnie: i think that depends on what saudi arabia decides. >> the correlation between benchmark rates in the u.s. and oil prices is pretty high which is strange because in general,
there is not a connection. david: let me understand what this means. people are using oil prices and 10 year rates as surrogates for what they -- whether they think the economy is going to grow or shrink, that might be why they move in the same way. >> well said. matt: i have a chart that is important to all of the people on the streets who are viewers, and that is headcount. we have been seeing layouts all across the street at banks with the exception of jpmorgan. the problem is, this chart shows that back in 2007, they were making $30 million in revenue with 170,000 workers. now they are making $24 billion in revenue with 240,000 workers. they are making less money with more people, that is not good for headcount going forward. so timely because
headlines crossing the bloomberg in the last 30 minutes. i think, and i apologize lisa, i think this one absolutely is critical in the years ahead for an industry that is under pressure in terms of headcount. vonnie: it is a tough one, i guess i haveo go with matt miller because it is so on point. david: a lot of that is compliance. how many of those people are compliant? >> they have to add more jobs to make less revenue, no good. jon: thank you so much to matt miller. next, we break down sales, jpmorgan and much more. ♪
drop raising concerns that consumer spending is losing momentum. theney -- running is for hour, christopher aleman -- joining us for the hour, christopher aleman -- ailman. ♪ vonnie: about 30 minutes away from the opening bell. david: as you just said, joining us for the hour is christopher ailman. here.e, good to have you christopher: good to be here. jon: we've got so much to discuss. retail sales, upsides of price with jpmorgan.
jpmorgan stock up by 2.28%. citigroup 1.8%, goldman sachs was of about 15%. on matte screen, it stays unchanged. we get to the other asset classes. wti crude retreating from a four-month high. salesdisappointing retail , yields were higher on treasury earlier in the session, but now on 1.17%. the euro weaker, at one dollar 1312 -- 58 percent of republican voters say the candidate with the most delegates after all the state contest are finished should be the nominee, even if he does not have a clear majority according to a new associated press poll which says
40% believe it would not be acceptable the delegates to choose a different candidate. nation's most the expensive medical marijuana and governor chris christie says that is just fine with him. he recently blocked democratic lawmakers latest efforts to broaden the list of treatable conditions. people who eat fast food have elevated levels of industrial chemicals and their bodies according to analysis from the federal interest in surveys. some of the chemicals with tony curran nature are common in cosmetics, soap and other products. research suggests fast food is a significant source of the chemicals. jon: thank you very much. that time of the month -- morning, 27 minutes away from the market -- the opening bell. jpmorgan earnings, and upside to
price, u.s. retail sales a downside to price and chinese exports jump in the most in about a year. jpmorgan, off with shares gaining in the premarket, up over two percentage points after recording its first-quarter profits thanks to cost cuts and a smaller drop in trading revenue than most analysts had predicted. enough in those numbers for you to think -- christopher: we will get earnings out all week long and we often forget these banks are brokerage firms and the first quarter as you already said was a really brutal quarter for trading. i'm not surprised they beat earnings. i thinkerestimate, but it has been a rough market for banks and as was discussed earlier this morning, profit margins -- almost a quarter of the world. david: what is your view on the
financial services sector? we have people say it is a good time to buy because the stock is so low and other people say they have regulatory problems and growth problems and to stay away. christopher: we think the financial services sector is fairly healthy and that is important because the key is bank health. look at other countries. banks andk at british french banks and the german banks, the u.s. banks are in good shape. vonnie: you get to it in and out of different industries and you are almost -- always -- you can tell us what the environment is going to be like for banks in terms of and the day and deals -- of an and a and -- m and a and deals. christopher: i don't know how they make margins. i was meeting with societe
generale and it was so hard to find out with customers, putting in deposits, they don't want the a negative interest rate on their savings, but margins on loans are terribly razor thin. david: let's go to the second story, a surprise drop in u.s. retail sales for march. economists surveyed by bloomberg had forecast this at 0.1 -- 0.14% gain. the decline was led by the biggest drop in auto sales in the year. i often say that main street is more important than wall street. the reality is, it is the rest of the country that matters the most, because that is what drives gdp. we pay a lot of attention to what consumers are doing. auto sales matter, but they are darn healthy overall for the year. this is not a surprising downturn, look at how the market has been looking.
and thisave auto sales is seasonally adjusted, so you can see as i get rid of the legend, the rollover. this does not mean it necessarily stays here, it does not necessarily keep this trend if it stays at 16.5 million sales and year. if it continues to come down, that becomes a problem, not only for retail sales, but for employers because a lot of americans are making the trucks that we are selling. christopher: i can't continue that kind of momentum. you will not sell cars to infinity. i'm not surprised it will flatten out in this range. that is a ton of auto sales around the world. jon: just to break down the jpmorgan numbers and tidy stories together, the executives at jpmorgan say the consumer is strong but if you are an
investor looking for returns, you care about return of change. the rate of change you need to generate the returns that you need, will it be there and can the consumer drive it? christopher: we think that the economy is very flat. you are hearing about the atlanta fed and the new york fed. tent of a percent versus 1%. the bottom line is we are talking about 1% gdp growth which is next to nothing. . we need closer to 3% gdp growth to get equity returns it is nice to see this market rebound as nicely as it has, but it is tough to continue with the consumer at this point. vonnie: you will not get the gdp growth in the u.s., we saw china. can we develop a chinese consumer? christopher: flat out, i say no. recessionctually in a and will never print that number, but i think their economy is shifting from a manufacturing economy to a services economy. david: they were reporting 6.5%.
you are saying it is negative, not just that it is 4% or three, but in the negatives. christopher: they are going through an enormous transition from manufacturing to services. that is going to take time with rough patches like this. look at the employment numbers and other retail sales numbers. it is hard to tell what the government -- with the government producing the returns but china is in a flat patch where we will not see growth. does not hurt the usa, but definitely hurts the emerging markets in other regions of the world. vonnie: i know you weren't really in china except for maybe a select number of things, but -- christopher: we are still in emerging markets, but we are underweight of emerging markets and we think it is a good place to go in the future, but still a rough patch. a lot of those economies have been hurt by lower oil prices even though some of our
consumers -- most of those countries have not benefited. jon: second largest economy of the world, climbing off a higher base. that is a lot of dollars and you are saying it is negative. i wonder what pockets or what areas are considerably overpriced. christopher: a lot of people have been worried about the chinese real estate markets. i don't think it is a bubble, the growth pattern has been climbing up very steeply in it has stalled -- and it has stalled. they are residential and retail markets are certainly overbilled. we are seeing a lot of chinese money come into hard assets in the usa and europe, which i think is an interesting find. they would not rather be -- they would rather not be in the currency. vonnie: chris aleman is sticking with us.
david: federal regulators say five of the biggest u.s. banks held to persuade them they can go bankrupt without disrupting the financial system. jpmorgan, chase, bank of america, wells fargo and others were cited for gaps in their bankruptcy plan. the regulators are giving the banks until october 1 fix the problems or possibly face more stringent requirements. elliot pharmaceuticals ceo will comply with congressional subpoenas and give a deposition
to a senate committee investigating drug pricing. u.s. retail sales fell last month as americans cutback on car purchases, elitist signs consumers are looking to spend freely. auto sales plunged 2.1%, the steepest in more than a year. jon: just want to whip through some of the market boards, about 17 minutes away from the open. futures stay positive despite u.s. sales prints in the u.s.. futures up about 90 points on the dow. , s&p futures up about 10 points. you see the rally in europe continuing. switch of the board and i show you the banks, this is what is upsetting. 2.1% on theck of back of an unexpected set of
numbers. the red cross is pretty clear, now goldman sachs up its .1%. the outlook interesting, cautious about the market but if you listen to marion late -- an improvement in march trading carried into april, so it will be about the guidance as this continues. a basis yields now up point, raising the rally we saw treasuries after retail sales. -- 4169 is your print on wti after a big three-day rally. let's cross over to matt miller for some of the calls ahead of the open. matt: harley davidson, i obviously am a big fan of the brand and own a couple of the bikes. shares are spiking after ubs said they expect marseilles to impress.
retail sales at the deal or level will likely climb 10% because of the warmer months. -- they will come out with earnings next wednesday, and i will interview the ceo and find out what is driving sales, or not. are also heading to a third straight game. cobbler also sees the fitness were maker with positive guidance for the following quarter, that is what so key in moving these stocks. the guidance really does it, not the backward looking numbers. because of encouraging early sales for its blaze bands. foot locker shares trading higher after piper jaffray getting more details and more data out of that team survey, it
says this stock is a by, and used to be a hold. it may the said upgrade because they samuel and you that semiannual team survey. there is what they got out of footwear. but was a positive outlier and footlockers number one vendor, nike. i've been having this discussion since i was six. nike made new highs as the preferred brand among teens. foot locker up 2% in the free market. jon: i grew up calling it nike. [laughter] christopher ailman, do you want in? christopher: no. [laughter] i'm more interested in the interview with the ceo of a motorcycle company. jon: next up, we speak to the
cia of the world's largest pension fund that sits alongside us, his view on chairs and strategy for maximizing long-term wrote and with fields negative in the eurozone, in japan and beyond, when does this get a return?futures are positive ahead of the open . bears are clinging onto that ugly u.s. retail sales report. ♪
last year was a very low return year and this year, we thought it would prove to be a low return year. vonnie: where do they stand? christopher: we have a 30 year horizon. you will not change that, you broad market and the u.s. economy around the world and it is a reasonable assumption, this is a low patch. a look at returns over decades and so far, the teams are looking to be -- david: what is your target? christopher: long-term target is 7.5%. david: if you are making 2%, you have to make that up someplace. christopher: it's like a pace in a marathon. it is a pace per mile marathon and we have a slow patch in the middle of this decade, but the first part of the decade, we had double-digit returns. i think we will see that growth come back within the extended future. david: when you face a patch
like this where you have relatively low yield, the you adjust your risk at all to get some yield up? christopher: think of us like a giant cruiseship. the board picks a horizon, we will shoot for that. we will make subtle course corrections based on what we see, but we will not turn that ship on a dime. we make little moves in the asset allocation. we are at market weight and the u.s. equity market. we are going a little bit into the non-us equity market. it is coupon and come and rental income that matters the most and watching your risk, not trying to overextend. jon: we're going past japan, then around europe. we are talking about an incredibly low yield world. the you get off the ship? you look at those markets at do you get off the ship or look at those markets at this point? christopher: it is amazing to
see parts of the world with negative yields all the way out to the 10 year mark. we are very underweight, fixed income. u.s. fixed income is cheap when you look around the world and look at yield, but we are underweight overall with fixed income, and we think that we will settle in with trades, particularly into europe. we have been in japan for a long while now. it has been tougher as the implementation of -- jon: japan have the nudge to get out of jgb. our pension funds being pushed into places they don't want to go? we sit here and say this must be hell for pension funds. finallyher: -- it rebalance is into more of a normal retirement portfolio. he has a 30 year time horizon,
very long retirement, so he needs to have some growth assets built into that portfolio. we stay invested in this market, we will be underweight and not chase negative yields at all. we will look for coupon income and other areas. --id: give us your long given your long-term horizon, does this mean you will go for more long-term investments like real estate? are you changing your mix in that regard? christopher: we have a very sizable exposure with 13% of the portfolio and about 9% in private equity. steady-state investors in those markets all the right now, u.s. real estate is priced to perfection. we will be selling some buildings and taking some profits. the other place to make profit is to build up to court and then sell it. we are looking at private equity and real estate in other parts of the world because as jonathan said, europe looks pretty reasonable and inexpensive compared to the usa. david: where are you making
those minor course corrections? we have a negative cash so we pay out more in benefits for a mature plan. we are taking profits in the u.s. market and we just shave off some of the profits on a regular basis and use that for cash flow. we will selloff a bit of extra income. vonnie: he said your investment that you are reallocating $25 billion. where are you taking money out of and where are you putting it into? christopher: i'm not going to broadcast my trades. we will take it slowly and the board made a decision to be more global. with we have had a home -- we have had a home country bias. we will now be more global in the portfolio. about 50% u.s. and 50% non-us.
it will be a larger allocation into europe, slowly and overtime because europe still has a lot of problems to get through. we will be increasing our investment in infrastructure. the u.s. at some point will be finding a new way to get infrastructure financed besides just municipal bonds. we held some of the cables that in here, to new york, i always like those kinds of investments. jon: you have given us some insight, you don't want hedge funds jumping on them, but here is a question. we have been talking about hedge funds and miniatures, you putting pressure on money managers to cut? are they responding? christopher: the two and 20 model and equity has been broken. the model in real estate and infrastructure was not there for very long and now in hedge funds, and we are only in two styles out of the 22 sales of
hedge funds. havee -- in the two we touched, we have broken through the model because it is competitive, people can outperform and demand a high priced but i think there is also the recognition that you have to lower fees and the more reasonable. it is a matter of trying to figure out a long-term business relationship. to stay with going us ahead of the opening bell on bloomberg go. jpmorgan and earnings ahead of the open. ♪
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future state are higher. the bell, rings, in new york, switch up the boards. here is your scorecard. dollar yen through 109 and euro-dollar down to 11316. higher, 1.79% bit on the u.s. 10 year. big rally, upe 13% on wti. touch, down to a $41.07 a barrel -- $41.67 a barrel. the open, asat futures indicated, looking at gains across the board, the s&p 500 up nine points. 4/10 of a percent and the nasdaq, the biggest gainer,
7/10 of a percent as tech stocks are rising. even stronger than tech stocks are the financials after jpmorgan, coming out with a 6.7 decline in profits, what better than the street had estimated -- the street had estimated. take a look at the other bank stocks and see what they are doing, as a group, they are up 9/10 of 1%. bank of america up 2% and change. goldman up 2%. wells fargo of 1.5%. -- up 1.5%. they tend to live the indexes. i will tell you that financials are the worst performer this year as a group. they are down 5.5% year to date. this will make up some of the ground that they lost and we will get a slew of financial earnings over the next few days and we will see if this holds. david: it is a big chunk of the
s&p 500. now we will turn to those bank stocks. for more on jpmorgan's earnings and look ahead to other big banks. bloomberg's michael moore joins us from london. it looks like this was a good day for jpmorgan. is this a clean win or is there subtext that we are missing? >> i think it is a clean when compared to the expectations which have been lowered significantly over the last month. if you look at a typical first quarter for them, it is typically much more profitable on our oe basis than this one, but given that we knew this was going to be a tough trading quarter and top investment banking quarter, they did well enough on the revenue side and cut costs to 60% cost ratio which was about in line with what people thought. jon: we look ahead to the
earnings for the coming year, the cfo saying on trading, the stability from march is carried into april, but seems to be a cautious optimism around that. >> i would say that cautious optimism is a good way to put it. certainly after january and february were significantly volatile, there were some concerns about people stepping back, but i think if they get a few more months of stability, the hope from analysts is the second quarter could pick up some momentum and help offset what is a tough first quarter because the first quarter as is typically the biggest of the year, it is tough to make that up in the rest of the year. vonnie: it is on to the analysts and is still going on, what has jumped out to you? give us an example. one thing that came out
during the media call was the news about the fat and fdic rejecting the living will from the banks. that has been a very hot topic on both calls. jpmorgan saying they only got this news in the last day or so, so they are still kind of grappling with what it means, but certainly, that will be a big focus for investors in making sure that they can satisfy the regulators on the living will issue. as you say, they did well in a tough situation, but at some point, they are coming back to the living will, can they do that with shifting and even increasing rate -- regulatory pressure? >> that is the question for all the big banks, and that is why about a year ago, they were facing some questions of would
you be worth more, broken up, facing fewer of these hurdles from the regulators and jamie dimon has been consistent and they cann saying that grow at this size, that they can continue to use their large deposit base to fuel some loan growth, but it has been a few years now are people have been waiting or it. i think that there is room for them to grow, certainly on the consumer side, and if investment banking picks back up, he will have to show it. david: your concern with investment and ultimately growth, we have had people come in and say we are not going to get growth unless we have healthy banks, but the road to growth lives -- lies in the banks. christopher: i don't think that the road to growth lies just in the banks. we need help the banks and.
bank and have a brokerage firm. they are stuck to wall street and trading is razor thin margins, so it is time for them to make a profit. the key is to be healthy. the stress tests are a key measure and the living wills -- in living will is a hard thing to do as a company or a person, it is tough for them to figure out how to put that together if they were in a situation where they are fairly able to survive. it is a critical step in the need to do that as part of their financial security. jon: where does the growth come from? christopher: i think it will be slow and steady. employment is definitely in a good situation, but that big swath of long-term unemployment, part of the generational transition, baby boomers who don't have the skills anymore are leaving the workforce and we are seeing all the millennials come up in at low wages which is what is causing the lack of growth in the income levels.
we need to see some improvement in the wage, average hourly work -- earnings and the wage growth, and that will help the consumer and keep it going. the u.s. is steady, but growing at a very slow pace and coming from california, we think you will see a lot of continued innovation to help spur on growth. jon: well that help wages? christopher: overtime, but it will not be immediate. the rest of the world is still growing very slowly or in recession and so we will need to see the rest of those markets continue to improve. vonnie: does the u.s. need it's banks to grow in order to use of gdp -- goose up gdp? christopher: the magazine to be stable, not necessarily grow. credit is available and at a very low rate. european banks are fairly strong, the french banks and the
german banks are doing well. the south is still the weakest part of europe. you need to see some growth out of the european consumer and that has been a very difficult market with the refugee crisis and all the different issues going on. draghi said he will support the euro so the currency is stable and i you have brexit -- and now you have brexit. add or would you want to take positions in u.s. banks are european banks? notstopher: i would look only at that one sector but as europe -- and europe as an opportunity to invest, slowly over time. looking at the rest of the world, european equities are cheaper than the rest of the options and i think that is the place to slowly invest in, overtime but they are not out of trouble just yet. david: you are in a unique
position as you have a long-term horizon and you said growth will come from innovation. how do you invest for the long term and innovation? -- in innovation? christopher: i wish we could. it is very difficult for us to invest in venture capital and the rules and regulations we are under make it even tougher. we will be investing in innovation in more of the latter stages after it becomes national and has picked up into other firms. we are not investing as much as i like in venture capital funds and unicorns. silicon valley has plenty of capital and they don't want to deal with public funds like us. jpmorgan talking to us, expecting a nasty first-quarter -1%.s weak as hi question to you would be, we had some scary numbers and forecast for the banks.
we seem to be over that. somerowth going forward, of these numbers, how ugly are they going to be and do you think it will really shake consumer confidence? christopher: i don't think it well. we knew the first quarter was very weak -- i don't think it will. we knew the first quarter was very weak. 1% is good news for me because that is a positive number. if we went negative, that would surprise me. that is part of why we saw so much weakness in the market in january and are wary. now we have seen the rebound -- february.ary -- now we have seen the rebound. has either been frozen or just a week perio --
-- i am in our hpe greenroom. you are watching bloomberg go. energy is peabody filing for chapter 11 bankruptcy protection. the industry endorsements first floodrn in decades in a of cheap natural gas and a glut that sent prices for steelmaking metallurgical coal plummeting. thousands of land lines have walked off -- thousands of land line workers have walked off the job at verizon. 39,000 employees in nine eastern states and washington, d.c. say they are striking because verizon wants to raise pensions, and rely were -- rely more on contract work. -- airbnb is raising the money to invest in startups. part of the money will go to
early stage companies in china, particularly those run by those who are on their second or third startups. that is the bloomberg business flash. vonnie: let's head over to matt miller. matt: let's take a look at some of the movers. shares of netflix, we have been talking about this. netflix is still number one in streaming. the results were revealed from a semiannual teen survey that shows that 64% of teenage viewers use netflix over other services like amazon and hulu. these are kind of upstarts from big companies, but upstarts in this universe. inflix shares are down 6% 2016, up 2%, today. yahoo! is in the green, suntrust raised its price target. -- thelyst says yahoo!
bid for yahoo!'s core business could be over $8 billion. he says there is hidden under appreciated assets in yahoo!, -- i should say -- in-line earnings for the first quarter despite a big slump of coal shipments. shares are taking higher as the railroad touts $250 million in efficiency gains this year and says it expects continued strong pricing, particularly in -- the collapse of the coal industry, despite the fact that it still produces 40% of our electricity, has been a problem for the railroads. david: that is for sure. now it is time to hear from the nasdaq. abigail doolittle is live.
reached -- we start with jetblue. >> shares are trading higher as the company reports its traffic for the month of march rue by 21%. bloomberg airline analyst george ferguson told me these numbers are likely -- largely in line with what the company would do as they continue to build up capacity. the stock fell down sharply from its peak, last year. the estimate could be just a brief pop before the stock revisits its recent lows. another stock on the move is wynn resorts. analystcite valuations but citigroup says they believe that gross gaming wreck -- revenue could grow in the first quarter. the stock recently put in a bullish cross, suggesting there could be some upside ahead for shares of wynn resorts. jon: stocks up across the board.
we are joined by a security senior. sasha, i want to talk china. exports look terrific on the surface. chris says china is actually in recession. >> my own estimates of growth in so are between 4% and 5% articles or to four, which with be below trend growth and typically and recessionary levels. those exports were highly flattered by the chinese new year, last year. if you look at q1 over q1 of last year, we are still down 10%. david: does the absolute number matter or the trendline? i guess it is perception versus reality. if we have a growth target of
extremely is aggressive and actual rate of growth of my estimate, what does that tell us? it means monetary and fiscal stimulus will have to pick up the differential -- because your obvious chinese -- your ordinary chinese guy on the street is not going to feel 6.5% growth. they are trying. crispy the point that this is making him very tentative on some other emerging markets. what looks ok to you? sasha: the way it looks in northeast asia, these guys have been canaries in the coal mine. we've heard international policymakers warning about the international state of demand. this guys are going to be pursuing further monetary easing , probably through currencies. i think we may have some
downside for a lot of em. we have had stabilization and commodity prices and there has been a lot priced into them already. do you expect that to continue through 2016? christopher: lat amp is an interesting area. you don't think that will hold the rest of the region down? sasha: brazil is a political play right now and i would think that the market is actually pricing a little bit too high that we get an impeachment, which would then lead to a new government or at least a replacement president and a potential fiscal adjustment. brazil is readily one of the weaker spots -- probably one of the weaker spots. until we get that pickup in global demand and civilization,
it is really hard to get bullish again. christopher: emerging markets isn't a single thing. it is a basket of regions of countries and so when we look at e.m., it really is south korea, mexico and south africa. are really the leaders china is coming up and it may be a huge part of the index. jon: to break down the bricks acronym that we all love to hate over the years, just looking at some of the valuations in brazil, a lot of money has gone in there. matt: this is the price to earnings ratio of the brazil divided by emerging markets. peers, it is at the highest the level that it has been since 1995. for u.s. investors, brazil is so expensive because not only has it run up like 22% year to date, it's local currency, but the radel is up like 17% year to
date against the dollar. it is up by 35% year to date, even if you put in dollar currency. thing,it is not just one pick one. >> i was very optimistic on mexico what all the constitutional changes, but the implementation has been rough and it is interesting when you look at emerging markets and you look at oil. they have been highly correlated in wti. david: td security emerging markets are just, thank you for joining us. a special thanks to our guest for the entire hour, christopher ailman. jon: almost becoming a coanchor. christopher: thank you for the invitation. david: they will talk about whether it is a promotion or not. david: coming up next, bloomberg markets with betty liu and mark barton. >> we have a lot ahead, just
about an hour ago, the imf double financial stability report, hoses and yell, will be the author of is that report. that does negative interest rates we see around the world to be a net positive in terms of stoking demand. well sir have the oil inventory report, that will be helpful as we look toward the opec meeting over the weekend. sailing, the america cup is coming to new york city, so we in our studio.eo david: we will be right back with bloomberg go. ♪
jpmorgan kicking off bank earnings. tomorrow we get bank of america and wells fargo. next week is morgan stanley and goldman sachs. the facebook book, federal reserve beige book out later today. we will be live from washington. china's gdp, bank of england rates, tomorrow. later today onp bloomberg television, director of monetary and capital markets bloomberg emily chang will have a conversation with facebook's chief technology officer. jon: a lot to look forward to. thank you very much, that does it for bloomberg go.
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mark: i am mark barton and this is bloomberg television. betty: we will take you from new york to london. we are watching jpmorgan's first-quarter profit beating estimates. 6.7% ande dropping wall street sending shares of the bank of higher, up more than 3% today. it is just the beginning of what is forecasted to be one of the ugliest weeks of bank earnings in years. mark: facebook announces its plans for the future, including artificial intelligence and virtual reality. 's will bring mark zuckerberg blueprints to keep advertising dollars rolling in. betty: very cool. look at sailing.