tv Bloomberg Markets Americas Bloomberg December 6, 2016 12:00pm-3:31pm EST
from bloomberg's world headquarters in new york, here is what we are watching. stocks flirting with all-time highs ahead of the ecb meeting and oil slipping from a 16 month high. latestoss out with his -- boeing under pressure from the president-elect as he says the government's air force one order should be canceled. abigail doolittle is joining us. abigail: not a lot of action for u.s. not a lot of action for u.s. stocks. the three major averages are largely unchanged, trading very close to even. we do have these indexes very close to record highs, especially the dow so we are on record watch. we will see if the dow can eat out another record high. dow chemicals, we have a very
interesting chart. dow is down slightly but it is now above a critical level in the red line. share or theper trigger to essentially convert warren buffett's $3 billion in preferred stock into common stock. the difference is the yield. her for stock -- preferred stock yields 8.3%. a similar deal for a kuwait investment group. this could save dow $200 million a year. the this to happen down needs to close above this trigger level 20 out of 30 days. sticking with warren buffett, the oracle of omaha, his berkshire hathaway has done well since the election. up about 9% since the election, outperforming in a big way. to do with the
industries that warren buffett and berkshire hathaway are focused on. massive outperformance among those including the insurance industry along with energy, thanks -- banks. helping to explain that outperformance, not surprisingly this outperformance has trickled down to mr. buffett himself. his wealth has really grown this year, more so than some of the other wealthiest americans. he is now worth $72 billion with his growth of 15.4% this year. david: let's get a check of the first word news. : house speaker paul ryan is defending donald trump's decision to break u.s. protocol by accepting a congratulatory call from the president of taiwan. he weighed in this morning at the house republican leadership conference.
him to taked for congratulatory calls, absolutely. i spoke to the president when she was transferring in miami. is a much i do about nothing for this. for him not to take the congratulatory call would be in itself a snub. taylor: china still continues -- considers the item part of its territory. the presidential recount in michigan has expanded to its largest county concludes detroit. statewideof the recount push in pennsylvania is awaiting action in the federal court. are not expected to change enough votes to overturn the results of the election.
75% of new jersey voters disapprove of their governor chris christie, and 19% approve. that is the lowest approval rating for any governor in any state in more than 20 years of the quinnipiac university survey. think voters in the state that christie should have been a defendant in the bridge gate trial. union's chief brexit negotiators says the process will last less than two years. he predicted if negotiations start by the end of march they could be finished by october 2018. he also warned the u.k. would not be allowed to cherry pick what it likes about the e.u. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. david: let's get back to the markets. u.s. stocks have been fluctuating near all-time highs
ahead of the european banks needing on thursday. joining us now from sarasota, florida is bruce bittles. great to speak with you. let me ask you -- let me ask you about what is driving the markets. there is no shortage of politics. what is the driving force as you see it? december typically is a mixed market environment for stocks. you have a lot of tax loss of moving around in portfolios, and there is a lot of enthusiasm for a christmas rally that typically comes very late in the month. the fact that the markets are treading water today is about in line with historical precedent. david: i wonder whether you look at this month in the context and history, how different is this december in light of what we
have seen since november 8? bruce: we are coming off a big gain in november. december is one of the strongest months in the year and most of the gains come late in the year. my suspicion is they will be muted this year given that big gains we had in november. david: are you doing anything different? bruce: there has been a lot of rapid rotation in the market as you know, and i think that will continue. over the past five or six years most investors have moved toward bond and bond equivalents. now they are looking for much stronger growth in the economy so there will be a move toward the industrials, energy sector, and cyclicals in general, and i think that will be ongoing. david: we sell that take place the day after the presidential election. thoseof folks say
movements took place before the presidential election took place. is there room to run or has it all been oversold? bruce: it had a big run in the short-term but they have been under owned for quite some time. there has been a big movement over the past several years into dividend stocks and defensive sectors. now all of a sudden after a one-month gain i think we have a lot more room to run. maybe some consolidation here for a while. i think the trend is up in those areas of the market into 2017. david: i think about what we saw on election night and in the aftermath of the u.k. vote to and compared to italy, it seems the market reaction is muted. bruce: the polls showed there would likely be a no vote so
that came up as no surprise. after the vote, nothing is going to change in italy short-term. third, i think after brexit and the trump win in november, people are starting to get used to popular vote winning elections and not causing a whole lot of damage. i think those of the reasons why the market did not react negatively this week. ing in you have been wad the my new ship of dow theory. what can you glean from looking at that? bruce: they are the leading indicator for the u.s. economy, and if you look at a chart of the dow transports, they started outperforming the market this summer. after two or three years of lagging in the industrials, the fact that the transports are coming on tells us two things. the economy is getting better or will get better in 2017, and
most areas of the market are in sync if the dow transports can make a new high and that will complement the high in industrials. to 2017, iing ahead am wondering what your outlook is. after january 20 when we get a new president, what is your outlook? bruce: i think the market trends will be higher. we breaking out of a two-year consolidation phase. what we have to be careful of, that investor enthusiasm for optimism does not get excessive. if it gets to excessive that would indicate a lot of the liquidity has been used up. number two, we have to watch interest rates given the huge debt in the u.s., government and corporate. if interest rates get too frisky on the upside it could cause harm to the economy. , ient those things occurring
think the primary trend of the market is north and i feel it will continue to do that in the first part of 2017. bittles,at is bruce chief investment strategist at baird. boeingtrump is taking on have a saying the cost of the new air force one is out of control and the order should be canceled. shares of boeing are down on the news. this is bloomberg. ♪
by agreeing to not high linked into its windows software. the european commission says the -- kkr has agreed to by a majority stake from up to you. they will remain a partial stake in octave. seaworld plenty to cut more than 300 jobs across its 12 parks including salaried and hourly workers. revenue has suffered in the face of a campaign by animal rights activists. that is your business flash update. what's turned to politics and president-elect donald trump turning up the heat on boeing. he said boeing is building a brand-new 747 air force one for new presidents but costs are out
of control. $4 billion, cancel order. mr. trump: the plane is totally out of control. it will be over $4 billion for the air force one program and i think it is ridiculous. i think boeing is doing a little bit of a number. we want them to make a lot of money but not that much. david: a spokesman has responded we look forward to working with the u.s. air force on subsequent phases of the program allowing us to deliver the best lane for the president at the best value for the american taxpayer. we are currently under contract for $170 million. let's get more insight on what this could mean for boeing. george ferguson with bloomberg .ntelligence joins us why did donald trump tweet this,
and where does this $4 billion number come from? george: i am not sure where the $4 billion number came from. where this may have come from and why this is front of mine for donald trump could potentially be a washington post article that was published last about 120 $5 billion worth of administrative waste at the pentagon, which is a large portion of the defense budget. i think it is interesting because it seems like donald trump, he is returning to some of the campaign discussion he had about getting rid of waste at the pentagon. i think if you were a defense watcher it is also interesting. it does not mean he will give a blank check to the pentagon to increase spending on more defense programs. it seems that he is going to try to economize at the pentagon, and maybe this is front of mind because of this washington post article. it will not just be bowing that
will be in the crosshairs bo --eing in the crosshairs. david: that piece by bob woodward and craig whitlock, give us the history. why does the government need to replace the air force one planes? there are does go and three that are in letters of intent for boeing to ultimately produce. this airplane is now in the mid-20's. by the time you get a replacement out you would have a .0-year-old airplane if civilian fleet airplanes come out in about 30 years because they become more expensive to operate. part of the price tag, this is not all airplane. we think retail $150 million, that is the cost coming out of boeings production facility. we are hearing numbers between
2.4 billion for this replacement airplane. there is a lot of communications equipment, countermeasures that a typical civilian aircraft would not have. this carries around the leader of the free world and he needs to be in constant communication. there is a communications network and basically a headquarters in the air. this cost is all about building that. it is small lot manufacturing as well. there is no economy to scale. it is a very important airplane and is at the point where it needs to be replaced. my guess is that it gets replaced. david: help me understand what the president-elect might be calling for if we cancel this program. forould be unprecedented the president of the united states to fly around in an airbus plane. will wantthink you something with four engines just because of the redundancy, and
the only other offering in the market would be the airbus 380. i do not think they could deliver an airplane cheaper. the cost is the function of all of the stuff that is going inside. it is supplied by raytheon and lockheed. spoke the ceo of boeing to the illinois manufacturers association a few days ago and said their business thrives on free and global trade and it creates u.s. manufacturing jobs. would you put this in a broader context, and tell us how important a contract like this is to boeing? george: it is not a huge contract. even if all $2 billion went to that which we do not think so, and a single year boeing is a $90 -- $90 billion company. $2 billion really is not much of their revenue. they are all about the commercial business and that is
what they are talking to. china as well is a very important customer. we think 10%. we see about 10% over the last 10 years of revenues at boeing that flowed through china. dennis is worried about that china exposure. he does not want a trade war. david: that is george ferguson, thank you very much for joining us. aill ahead, hedge funds take hit as michigan state university says it will move along with a big chunk of money into computer investments. this is bloomberg. ♪
markets. at michigan state university it is out with the old hedge funds and in with the qantas. the endowment is moving about $100 million into computer funds to diversify its portfolio. the losses that michigan state had last year. how emblematic is that of what is happening? >> the majority of college endowments have years -- losses for their fiscal years ended in june. michigan state had a bigger loss, about 4.3%. they have a new cio who came in, in january. he has a doctorate in nuclear physics and is looking to get rid of funds that were not performing well and into quantum quant funds. david: --
janet: the funds that they got rid of were not performing well. fees are always a question in the fund they moved into charges less than typical fees. 10%n the management side -- on the management side. a lot of other endowments are considering it. david: tell us about the fund michigan state has moved this money into. janet: it is one of jim simons funds, equity driven. they were looking to do something new with their working capital. they put about half of it in tos fund and they are going find other funds to put the other $50 million in. david: how many endowments are making moves like this or considering it? we have seen a lot of renegotiation of the way endowments are run. janet: not just endowments, pension funds have decided to
reduce their allocations. michigan state did not really want to abandon hedge funds at all. .hey had similar allocations because they lost so much money in their hedge fund allocation the percent of the pie decreased. have a little bit of a different stance than some schools that are decreasing. they lost 9% in their hedge fund allocation so it was a big enough loss to make some real moves. david: lastly, you have seen the harvard management company change its compensation agreements with staff in light of some of the performance. these are endowments that are under a tremendous amount of pressure to do better. janet: exactly, and that is because most of them had fiscal losses this year. last year was a lackluster year. a determined their spending by what their average returns are
over three to five years. if the school is not making money they have got to make up that program -- their programs and that could mean cuts. we have seen schools decreased their spending rate so they are spending less annually than they had been. david: this other piece you wrote on bloomberg.com, the efforts of one congressman in new york. what is he trying to do? thinks the wealthiest colleges should be spending more on middle-class kids. these very wealthy schools spend a lot of money on the lowest income kids but his point is to family earners make a little bit too much to qualify and they are ofected to cough up upwards $60,000. it is hard to write a check for that. he is trying to move money into reducing tuition costs for those kids. he was a very early supporter of donald trump. september, donald
trump echoed a lot of his words on endowments. as congressman tom reed was named to the transition team. david: where does it go from here? what could happen next? janet: he has a proposal that will probably be introduced sometime next year. the house ways and means committee has also shown interest in endowments. david: thank you very much, janet lorin joining us. bill gross warns the trump rally will not last. what is behind his latest investment outlook. ♪ generosity is its own form of power.
you can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues. don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. david: live from bloomberg world headquarters in new york, i'm david gura. let's start with the headlines. with the first word news, let's start with taylor riggs in the newsroom. or: the man who started the
fire in the warehouse is apologizing. he is telling the news he is incredibly sorry. investigator trying to determine if there was criminal liability and if so, against him. president elect all trump is back on the road for a second stop on his thank you tour. later today, he heads to fayetteville, north carolina, home of army fort bragg. the president elect will use the valley to debut his choice for defense secretary, retired general james mattis. talks have been set on the status of fighters and aleppo, the syrian city under siege. says thegn minister two countries were close to a foreign deal for the rebels to leave the city. the rebels who do not leave aleppo will be treated as terrorists. nato foreign ministers will meet for the first time since the u.s. election.
fisher each other that president-elect donald trump's foreign-policy shift will not weaken europe and their defense against russia. saidg the campaign, trump the u.s. may not uphold its pledge to defend all nato allies. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, i'm taylor riggs. this is blaber -- bloomberg. david: not a lot of movement in u.s. stocks. a quick check of the index on the dow is up barely 10%. the s&p 500 up 2/10 of a percent. at nasdaq barely moving 5312. for more, let's go to abigail doolittle. abigail: stocks maybe largely unchanged, but since the the u.s. president election, there are clear winners and losers. let's take a look at g #btv 1150. this is a three month chart of
the emerging markets index, the s&p index. we see massive underperformance of emerging market index. according to michael mcdonough, he says this really has to do with separate issues. first, the rising yields in the u.s. that pressure those emerging markets and second, what will the protection policies of president-elect donald trump be for certain emerging market countries? the importance of this really stands out. we take a look at the 20 year chart of the u.s. rebound and we see that we are basically at a increase492 billion since 2013, huge number saying that we import more than we export. we will break that down in one moment. look at the winner of the possible protectionist policies of donald trump, we are
looking at the dollar index. looking at the dollar index going back toward 2000, we see that the dollar index is really carving out a nice high. the dollar boosted by rising rates on the expectation that president-elect trump will extend growth. we take a look at the import balances, the trade deficits broken down by country, and we see that china has imported $343 billion more than we export to them, right behind germany, japan, and mexico. it is all made up by $154 billion. different trade policies, it could certainly heard some of these countries and companies involved. david: that will tee up our next conversation perfectly. janus funds bond manager bill gross is the present -- says president-elect donald trump may boost the stock market in the short-term, but looming
long-term economic growth could he wrote, "investors must that might negatives restrict trade and negatively affect corporate profits. " for more, i'm joined by john gittelsohn. i was look to these outlooks because of the biographical tidbit. there is something about imprisonment and then he pivots to what we have seen in the bond space specifically. john: talking about "oranges and black"- oranges the new and how the economy is keeping the u.s. in prison. the first problem is that the u.s. has more prisoners than other countries, but the other problem we have is a changing economy trying to figure out a way where a lot of people are being employed and having living wages and it somehow creates sustainable growth, increased productivity, and the key there
is that trumps policies are not doing anything to increase productivity. they may reward certain winners and hurt certain losers in the short-term, but we need some sort of sustainable growth plan. andd: what does bill gross his outlook have to say about the strength of the dollar? we have that chart showing how the dollar has strengthened. basically he is saying that is going to be a negative for companies that rely on .nternational trade those companies are tech companies as you mentioned. maybe bowling would be 1 -- boeing would be one, for example. that is going to be bad. capital is slow to the u.s. and the trade deficits are not going to be approved. david: let's take a look at the bloomberg if we could achieve #btv.- at g we are seen this diversion meant
-- diminishment at the bond market you seen this over the last few months and that is the backdrop to this conversation that bill gross is trying to have right now. mark: for a long time, bill gross was saying that rates have to rise because you need thinkers, insurance companies, you need individual investors who rely on fixed income and interest rates getting rewarded for savings. right now with the way the market is set up, there's no real reward. spending the keep your money in your mattress. he is saying to keep your money in cash because rates are high. under trump's, they will likely fuel inflation, which will push up rates. it will increase productivity and improve actual real growth. that is kind of like not helping anything. david: you look at these outlooks month after month after month and i wonder if the tone has changed here. for a long time, bill gross with talk about criticism of the
central bank. it strikes me that the focus of shifted to politics. john: one of his bottom line messages this month is that trump is no different from the central bankers. they are still the biggest deal in town. the interest rate environment that they've created with that at all costs and type -- type of environment is to what rules. it hasn't really turned yet. it will at some point, but keep writing it. japan's bottom line is to stay out of jail. [laughter] david: no question, some very good advice. how's the unrestrained portfolio doing? john: it's not been doing badly in a time where barclays almost 2% indown the last month, more than 2% in the last month. he is actually eat out a couple
hundreds of a percentage by, which is more of the fixed income fund very good. it has been a bad bond environment since trump has been elected because of rising rates. david: you are miles away from newport beach, thanks for joining us here in new york. we will be speaking with bill gross at 2:00 p.m. new york time and 7:00 in london. he moved to washington now. an insider trading conviction will make it easier for prosecutors to face people on wall street and other parts of the country. we are joined now from washington by greg. what did the courts decide today? what were they asked to decide on? >> the issue is whether some of you could be convicted of whether theing person who provided the tip did not get anything of value, whether just giving it to a friend or relative. that was enough to support a
conviction in the supreme court today. i could hear the cheers of rotting from the u.s. district office. this has to be a big deal. greg: people very quickly put that thetement noting supreme court only heard arguments in october. this essentially vindicates one argument that he lost a very important case at the second circuit in new york. it was one of the things that the court decided. to some extent, he is vindicated. he may be sticking around as u.s. attorney. david: he was talking a lot about that and watching to see what happened. what does this mean going forward for regulators, prosecutors possibility to go after insider trading? greg: one thing it will not do is that it will not revive any cases that the court has thrown out, like the newman case for example. it will make it harder for some of the folks we mentioned in
trying to overturn their convictions. it will make it a little bit easier for prosecutors to win cases could this up -- to win cases. the supreme court to not overturn the entirety of that decision. an element of the prosecutors have to show knowledge that the person who gave the trade knew that the insider was receiving a personal benefit. it is not quite back to where we were in the second circuit, but certainly it puts the lot back to where a lot of people thought aspect andne key will help him if he wants to revive his crackdown. david: give us a sense of the context as this is the first insider trading case of the court has taken in two decades. greg: it's pretty important. the court described it as narrow, and yes, it is narrow. the court does not take insider trading case is very often. this is a scenario with
uncertainty because there is no federal statute that says you can't engage in insider trading. this is based on a much broader securities fund law. we are seen the supreme court basically said that that is fine and you can continue on largely as prosecutors have been over the years until the second circuit decision. david: how much of the surprise was the unanimity? --re is that they can see vacancy that will be filled donald trump when he comes in to office next year. how much of a surprise was the unanimity? greg: it was a bit of a surprise, especially since the supreme court refused to review that newman case. it lets some of us to think that maybe the court was more hostile to the government in cases like this. that said, the argument seemed like the majority of the court was going to rule in favor of prosecutors and make it easier to press insider trading kisses.
the bottom line is that maybe it's not a surprise after the argument. the unanimity of the decision was maybe a surprise for people. david: greg, thanks very much. he is our supreme court reporter at bloomberg news. coming up, plan your next party with the push of a button. we will talk about the party planning start up next. this is bloomberg. ♪
toymaker. julie: is this a sign that europe's largest economy may be picking up speed as we head into the end of the year? take,and in today's quick the price of oil and how last week's opec deal could affect prices going forward. defense secretary asked carter says the u.s. must give that nearly 2000 acres of land to the japanese government. that land was used by the u.s. marines for jungle warfare trading -- trend could -- training. >> we show your commitment to the realignment and we are preparing for the largest land transfer in the history of our and we can confirm to you that we share your objective of completing that by december 22 of this month. mark: at the change of the world's most popular toymaker, lego. they will replace their ceo.
lego was losing a million dollars a day in 2004 when he took over. the stock expanded franchise deals for the plastic building blocks. plans to build a factory plant to make electric cars in china. earlier this year, mercedes said it would have electric models to show by the end of the decade. the chinese government says it may impose tariffs so that a percent of sales of its new energy vehicles. europe's biggest economy will pick up speed at the end of the year. german factory orders rose on most 5% in october. the increase was the biggest and more than two years and had a 70% jump in to market for investment groups. julie: time now for a bloomberg quick take where we provide context and background on issues of interest. oil is so much more than a fuel and even bigger than its trillion dollar market. here's the situation.
after four years when the highest oil prices in history seemed to defy our -- economic gravity, petroleum plummeted. he 5% inped over so the 18 months, the run producers and to toward oil -- into turmoil. middle east exporters engage in a price war to defend their market share. adding to the oversupply, iran began ramping up exports after agreement to curtail its nuclear program with did economic sections. in november, opec finalized a deal to cut supplies for the first time in eight years after saudi arabia and iran were able to set aside differences that had some earlier efforts to raise production. a group of multinational oil giants known as the seven sisters, including the companies that became exxon mobil, chevron, and bp, dominated the market. control of thee formation in 1960 of opec.
it is the organization of petroleum exporting countries. here's the argument. she analyst expect prices to return to the prices seen a few years ago anytime soon, giving rise to the idea that this could be a new era of energy abundance. environmentalists worry that cheap oil will increase energy consumption and slowly shifts the cleaner fuel that would help fight climate change. longer-term though, global warming could have a dramatic effect on oil if government policies keep it in the ground. oil companies say the future includes rising demand and population growth, making oil to fuel for decades to come. you can read more about oil and all our quick takes on bloomberg. that is your global business report. had to bluebird.com for more stories. to bloomberg.com for more stories. ♪\
♪ david: this is "bloomberg markets." in no longer has to be a hassle to plan holiday markets -- it no longer has to be a hassle to plan holiday par parties. the ceo and cofounder of bash joins us now in new york. great to see you here. how did you come up with this idea and how the business model works? >> after working in new york for the last 10 years, i kept running up against this problem where i needed to find a venue for my clients or a few offsites
. on top of that, personally, i've been a lover of food and restaurants. group nationally -- naturally tap me to find faces. typically he need to find something for researching and reaching out to the news, we get back to you. bash, you can see photos of the place, pricing, and whether you can reserve it. david: you are working with them. what have those conversations been like with restaurants? peyton: it was really important shed is toith ba build trust with the customers. we have to be very particular with the venues that we work with. we created a safe space not only for customers to know that when thatlook through bashed they will find something up their project share with their colleagues and friends and
families. on the restaurant side, we made it very easy. there is no fee to join from a restaurant perspective. from the consumer side, it is completely free to use. david: i imagine this makes things easier for the customers and makes it easier for restaurants as well. it might've been a hassle in the past for a big event like this. peyton: it does. it is just a timesaver on both ends. we really want to create an end to end solution, so when you go put your date,ou time of the event, and you can choose like a roundtable versus a square table. bashed will list results that are matching what you look for. side, it'staurant really just free money and process for them so they are not dealing with things that do not convert to bookings. david: you can search based on a number of criteria and data like the boys night, see celebrities, so give us a sense of how the
metrics work. peyton: absolutely. part of the cure ration aspect is going to each and every restaurant, getting to know the space, understanding the atmosphere. we know that if you're trusting bashed to book something without seeing it, we need to deliver on what you're looking for. andng this sort of tags specific occasions that you can search by is one of the best ways that we can do that. that securing a client for dinner mate -- maybe a different place than for a bachelor party. david: you are young company. so what are your plans for growth? peyton: we are in new york right now and our goal in the near term is continuing to grow in new york. we certainly want to expand to other cities in the u.s. on the general consumer side, we want to meet those urban markets where there are lots of corporate dinners happening and people have deep enough pockets where they're able to wanting to go out and have a good time and bashed help them do that
effortlessly. david: how competitive is the space? for an individual diner going up, i might look at opentable. how defend off something like that -- do you fend off something like that? peyton: we handle all the inventory that opentable doesn't. if you go to opentable and search for a large group, they will likely take you back to the restaurant because you have to put down a deposit for these large groups. also, if you're just looking for a space to entertain 30 people at a bar, that is inventory that no one else has either. opentable, butat for large groups. about you mentioned this the awkwardness of paying. you take care of this as well. peyton: another feature of bashed is our payment. you give usber, your credit card information. at the end of your event, you do not have to sign anything. we just email you your receipt. it's a cool way, especially if you're an attempted david: -- if
david: from bloomberg world headquarters in new york, we are covering stories from washington to vienna to tokyo in this hour. mortgage rates have spikes in stone trump was elected last month and they are expected to rise even further when the fed meets next week. we'll hear from zillow's chief economist. an exclusive interview with pure runhe run -- pierre on the who sees oil rising in 2018. ,acebook, microsoft, twitter all join forces. a look at how the tech giants are trying to remove terrorist rhetoric from their sites. julie: we are seeing a little bit of a strengthening, but a very little bit. as we are seeing, all three major averages are in the green. the dow is on a record on a closing basis and not on an
intraday one. we are seeing the news -- the nasdaq and s&p both positive. the s&p 500 on intraday basis is near the highs of the day, even though it is just showing a gain of 2/10 of 1%. one of the best performing groups within that index is the telecom. one of a couple different things going on. we heard from both at&t and verizon. the at&t ceo randall stephenson saying he is looking forward to fewer regulations and corporate tech relief -- tax relief under president donald trump. he spoke at a conference today. also, a trump administration may be willing to approve at&t's acquisition of time warner. for rising the green -- verizon agreed to sell its datacenter for $3.6 billion. migrating away from that business. the buyer here is a real estate investment trust and is up 1.75%. the other thing that could be boosting the telecoms today is .hat rates are doing coul
they are interestingly not doing much. the fact that they are going higher may be overly for those interest rate sensitive groups like telecoms, utilities, real estate, all which are seeing a little bit of a lift. the dollar is still going higher, up 1/10 of 1%. also we are looking at commodities today. oil is pulling back as opec pumped a record amount of oil in november. the production cut agreement notwithstanding. we are still seeing oil under pressure today, down 2%. gold is also down a half percent, but nasdaq it's a let -- natural gas gets a leg up, but not by much as we see this forecast of colder weather. david: more on oil here in just a few minutes. let's check in on the bloomberg first word news. taylor riggs has more from our newsroom. taylor: president elect donald trump is pushing to cancel the order for a new air force one. that was after tweeting this morning. trump emerged to speak at trump tower. >> the plane is sorely out of
control. it's going to be over $4 billion. it's for the air force one program. i think it's ridiculous. i think boeing is doing a little bit of a number. we want boeing to make a lot of money, but not that much money. taylor: the pentagon is looking to replace its aging fleet of 747s. they were built back in 1987. in a statement, boeing says it wants to work on the best plan for the u.s. president. a unanimous supreme court says sharing corporate secrets with friends or relatives is a legal even if the inside of providing the tip does not receive anything of value in return. prosecutorsory for seeking to curb corruption on wall street could the ruling upheld the conviction of an illinois man found guilty making investments based on information he received from a member of his extended family. travel toobama will florida's air force base today to thank some of the countries special operation forces and
deliver his last national security speech while in office mr. obama will use the visit to highlight the games the u.s. has made against extremist organizations, such as the islamic state. germany's chancellor angela merkel is making a pitch to critics of her liberal immigration policies. merkel says she will protect the country against future waves of refugees. she also will call for a ban a fullface veils worn by some muslim women. she spoke at her conference of the christian democratic union. the party formally supported her bid for her fourth term as chancellor. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, i'm taylor riggs. this is labor. presidentr since elect donald trump won the election, bond yields have soared. mortgage rates have reacted by rising the most since the july of 2015. finding higher rates was softer data on u.s. new home sales, economists wonder how this will play out long-term for u.s. housing.
joining us now is it was chief economist at as to have you here in new york. -- is chief economist at zillow. nice to have you in your. how's the housing market look? >> we have seen markets across the country seeing really good home value appreciations. some markets are more extensive than they have ever been, but the picture is not all rosy. as you start to big down into the data deeper, new home sales are down and we are seeing a fair amount of nec negative equity homeowners oh more than the house is worth. it's a little bit more with the recovery not being quite full force. david: we are seeing the headlines from recoveries and you look at something like mortgage application, the health of the market market, what do you see? svenja: the good news is that we are seeing really low mortgage rates overall today we are around 40%. we have seen upticks in that rate. we saw a spike around the election of about 50 basis
points. that was largest jump we have seen in quite some time. last week when opec announced it was cutting production, we also saw a spike of 10 basis points. this is making houses mark spencer for buyers out there. to see theset interest rates increases. for some places around the country, that means housing will get so unaffordable that they will not be able to participate anymore. david: for those waiting to buy a home, they will look at these fed meetings with some trepidation. can you forecast what effect that will have a mortgage rates? svenja: everyone's expectation for ratesweek is to rise at that meeting. that is pricing at this point. i do not think we will see much of a spike for rates. through 2017, i do think we will see continual increases from the fed funds rate, which will still year fixedthe 30 mortgage rate. it means buying a home will eventually get more expensive as
people have to pay higher costs for financing. david: you look at where the housing market has come since the financial crisis. how much do rising rates threaten to derail the recovery we have seen so far? svenja: overall, not that much. keep in mind that we are still seeing very low mortgage rates overall. affordability is really not a big issue across much of the country at this point. but look at mark spence of markets like seattle, boston, ndc d.c., and their higher rates could really start to have impacts on people's abilities to buy home. stretching that much more might not be an option. david: when you look at trends in housing, we were told after the crisis that there would be a much bigger inclination to rent. rights was going to be the growing sector. has not played out in that way. are americans interested in buying a home or has that been a reevaluated? about: people are talking
a renters nation for a while and i don't think that has come true. we have seen homeowner rates fall quite a bit, but that was due to overall generational effects we're dealing with. i do think that homeownership is the core of human can dream, the good life if you will. being the largest generational group entering the market right now are very interested in wanting to buy home. we will see the homeownership rate climb in 2017. i think homeownership will remain one of the most informed things in life. david: help me with trends in homeownership in terms of geography. i heard that greenwich, connecticut is the hotbed of new urbanism. people are moving to the center of town to be near public transportation. they do not want a big house on a lot of land or perhaps cannot afford it. we are seeing that movement across the country now into cities. svenja: it is not just greenwich. it is happening everywhere. i think this drive to want to live close to the urban core is certainly there. a lot of buyers nowadays want to
be close to amenities, walking areas. in that sense, we are all wanting that affordable home near a city center. that doesn't always work out so well. we have seen new construction numbers rather lagging behind. that has a lot to do with how high land costs are, especially in very desirable areas. often times people want to live in these urban centers, but their money usually doesn't carry them that far. a lot of people are buying in the suburbs and they have to do with the fact that they will probably spend some more time driving next year and their commutes will get longer and longer. david: let me ask you lastly about how this intersects with the sharing economy that you looked into with the effect of airbnb and the affect on housing values. what have you found looking at that data? svenja: we just actually released today a survey of economists asking them how significant do you think the impact of vacation rentals, such
as airbnb, has on affordability or the rental market at large? most economists agree that the impact that such companies have on rental affordability is not that significant. surroundingblem rental affordability goes deeper than that. we have to talk about how easy it is to actually increase supply and build. you talk about regulation impacts on that front and how high rental demand is right now. airbnb's impact does not seem to be as significant as perhaps headlines might make it seem at times. . david: the chief economist at zillow, thank you for joining us a bloomberg. cio,apital manager and members called him before deciding to commit the latest reduction deal. more on that and where he puts oil prices this year next. this is bloomberg. ♪
david: this is "bloomberg markets." i'm david gura. oil falls for the first time in five days as the opec euphoria begins to fade. this is one of the world's leading commodities hedge funds. an exclusive interview on "boomer daybreak: america's -- ,"oomberg daybreak: americas the founder was talking about how bullish he was. >> this opec deal has not been priced in yet. it's a go pretty fast to 60 or 70 next year. >> you say it has not been president. it hasn't been priced in because they're not done anything yet.
some people do not think they will. what do you say to that? pierre: as long as it will not take 10 months to come to a deal. it is the first time they have a committee actually to deal with compliance actually. think it is coming from putin and companies will o obey. part of the reason why the market is so skeptical is that you have production over 34 million barrels a day for opec in november. even with the cut, it would not take them to the goal that they wanted a 32.5 million barrels. they could pump as much as they want in january. it does not become a real cut. why is that narrative not right for you? pierre: i think the increase
production going into the opec was needed for the deal to happen. when it actually happened, they would cut production. pressurek about the into the meeting, there were some reports that you were talking to saudi officials before the meeting took place before the opec deal happened. can you give us an insight into how that negotiation work and how that pressure was applied? pierre: i think like a few hours before the meeting we were going to see if they were going to cut or not. traders ond a few tuesday, the day before the opec meeting, to get the pulse of the market and understand what will happen if it was not a cut. they felt like they were still quite far with iran and iraq. they cannot get them to come to an agreement. they wanted to get the polls for it. the day beforek the meeting, they saw it was a
way to put pressure on the other and to to come to a deal understand that the markets would punish them if there is no deal. >> central banks do a similar thing. they send out staff to gauge the market sentiment and conditions. from what you get from them, what are they worried about at this point? are they worried about a floor and the crude market or taken of the places crude is going to go? from the conversations you had, which one was it? pierre: i think they want the market to rebalance. there was worry about a large deficit over the next few years. they felt like a lot of cap x being cut and we might have a super spike in the next few years. i think it's frustrating that the fundamentals are not being priced in. it seems that prices of not gone up. they wanted to go back to a normal level by probably
december of late next year. there is a worry about a lack of investment in that has happened. it is really not being talked about. about u.s. shale, but the rest of the world is declining really fast. backs,look at the oil many wall street banks think about non-opec supply going up next year, but that's because they assume a decline similar to 2014 when it's probably going to be similar because of cuts. >> you say you are not worried about compliance, but that is because saudi arabia is the guarantor of the agreement. when you look at the list, the iranians did not give much up. saudi arabia is really the one stepping up to the bar. are they guaranteeing the success of this agreement? pierre: pretty much.
i do not think you need a big cut for the market to grow. you get saudi arabia cutting for compliance. same for kuwait. the rest remains to be seen. it is not going to be 100% compliance, but i think 80% plus. what is your price call them? n? you are bullish in february when nobody else was. you really called the bottom and oil. you went bullish in january when it was not the thing to do. what is your call on the short-term for the 2017 forecast? pierre: there's a high likelihood to see $60 by the end of the month and $70 next year. that seems sometimes in the first half. it is funny how the market can become complacent and have a very short-term memory. they would think that $50 as of thecause of the range
last 18 months, but we are still at very low prices. we are still 50% lower than two years and two months ago. it is still a price not working for most producers. a lot of countries are in pain and most producers are not confident about this prices. >> you said there is going to be a committee overseeing production in various companies. th do you worry whether they cut or not? there could be a situation where they do not cut it all. what do you look at? pierre: we will know by mid-december probably exactly whether they're cutting or not. we have to look at the readings and denominations. with: exclusive interview the founder and ceo from "bloomberg daybreak: americas." for internet giants are creating a shared database of terrorist videos and photos. why facebook is hosting the database with partners microsoft, twitter, and google.
david: this is "bloomberg markets." i'm david gura. there are mixed emotions running across the university of pennsylvania's campus, president-elect trumps alma mater. we took a trip to the campus and was surprised what students their toll her. she spoke to all of her rent. renick.r >> donald trump graduated from wharton undergrad in 1968. the original idea was to go back to wharton undergrad. the graduate student have already had their ranks shaped the rest of the way they will be their lives, but undergraduates, let's go talk to them and see
how the election is impacting them for better or for worse and their outlook on life as they become the next generation of business leaders. oliver : you are hedge fund reporter. this is a different experiment for you going to talking to students. what was the first thing you take away when you step on the campus and started talking to people about politics? katia: i went exactly one week after the election. it was extremely -- i wouldn't say fragile, but it was a very sensitive time for the campus. several members of the freshman class had been harassed with racist messages. they were added to this group me . it is still being investigated, but it was extremely fresh. oliver: this is a chat community within the college campus? katia: there is this app called group me where they add people to a group text, if you will. and someone had somehow obtained the phone numbers of a large
portion of the black freshman. they added them to the scrutiny. , completelyroup me against the freshman's well, and started harassing them with racist messages, such as invitations to a daily luncheon, horrific -- lynching, horrific messages. all the students were affected by it -- black, white, doesn't matter. it was a very sensitive time. that was all in the wake of the election. the election had been kind of linked to those messages because they were trumped comments in them. it was a very sensitive time. oliver: there is tension building around the election. there is tension building about a lot of the issues here that have been on the forefront of the election. one thing that you do a good job of chronicling and the story is what it's like to be a conservative on campus as well. studentsd to a few
there, part of the college republicans, and the kind of documented some of the things that they have run into in terms of their displays getting destroyed or just a general sort of what they feel to be intolerant. tell us how that breaks down on both sides of the equation where some of these kids feel out of place now because they support trump. oliver: absolutely. katia: that was a surprise. that is where the story took a turn. thinking howally donald trump will impact their business decisions or life decisions as they impact the business world. the surprise there was that conservatives were feeling very out of place, very put down. that is what was really interesting. david: you can read her story in the latest "bloomberg businessweek." you can hear more every saturday and sunday on bloomberg television. the bloomberg business flash, a look at the biggest business stories in the news right now. cardgan's news sapphire will reduce the bank profit by $200 million according to ceo
jamie dimon. . the card has been embraced, but now the bank has to deal with the acquisition costs. mcdonald's japan says same-store stills best sales in november grew on a year-by-year basis. it is the slowest monthly result in follows -- and follow stall straight month of growth. batteries -- battery-powered vehicles could wipe out the most growth from cars only if their hit factor is high enough. that is according to two economist that say that ev's could grow more rapidly expected if they make it desirable statement. this is bloomberg. ♪ seeing is believing, and that's why
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visit an xfinity store today and see for yourself. xfinity, the future of awesome. speed always wins. especially in my business. with slow internet from the phone company, you can't keep up. you're stuck, watching spinning wheels and progress bars until someone else scoops your story. switch to comcast business. with high-speed internet up to 10 gigabits per second. you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. david: life from new york i am , david gura. this is "bloomberg markets." let's start with headlines.
taylor: a spokesman for president-elect trump says he's old all of his stocks in june. the aid did not specify which stocks had been sold, nor was he responded to questions about whether trump had stocks in boeing after trump ups of the government should cancel its order for a new air force one presidential plane. it was good from to the associated press. 60% of voters said the carrier about 1000save workers in indiana, and it gives them a more favorable view of president-elect trump. raising the support taxes on u.s. companies that outsource manufacturing jobs. 51% say it is acceptable for the president and vice president to negotiate directly with private businesses. u.s. regulators are approving commercial drone application so quickly that they are missing safety violations and taking few
enforcement actions. according to a report by the transportation department inspector general. it says the faa, over two years, granted more than 5500 exemptions allowing unmanned flights by businesses. but it only offered limited training for safety inspectors .o deal with the new operators defense secretary ash carter says the u.s. will give back nearly 10,000 acres of land on okinawa to the japanese government. the land was used for jungle warfare training. the giveback will be completed by the end of this month and has been in the works for 20 years, the largest by u.s. forces in japan since 1972. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. david: thanks four internet giants adjourning test joining forces to remove terrorist
related content from their site. facebook, microsoft, twitter, and youtube have been urged to do this. our reporter is in london today. there has been this pressure in the past him and it came to a head after the terrorist attacks in paris. why are these companies doing this now? >> these companies have been under pressure for so long, it is hard to know which is the comments from eu regulators that really caused them to start taking serious action. there is criticism of them as recently as this weekend. signis really a welcome that they are going to actually work together on a solution. they are going to share information about what kind of posts they are seeing, making it easier for other companies to take it down. david: talk about what led to this happening. i recall a large report commissioned by the european collective governments to look at this issue a couple months ago. what kind of stuff is being hosted by these platforms?
>> these companies are platforms for everything that people post, every kind of thoughts and video, the means that -- the memes better popular. all of human nature is on display on these sites, so it will of course include some of the worst of human nature, the threatening extremist content. the islamic state has found a lot of followers through social media, because it is an easy way to disseminate information among people who are like-minded. so these companies are starting to be hammered for having a role in disability and -- in disseminating the content whenever sending the could do about it appeared earlier this year, several companies agreed to start working on solutions, to think of counter narratives that they could post on her sites to kind of convince people the other way, show them other thoughts.
on sites like facebook, for example, there is this echo chamber effect, where people go and are surrounded by people who think the same way may not get other opinions. facebook is going to host this. i wonder what kind of data that company will hold onto. there is on the called hashing. >> hashing is a way of taking information,e of whether it is from a video or photo, and it is kind of something were no personal data will be shared, but against the other companies in the task force a way to easily search for the content and quickly take it down. so they will no sort of the information about the video that they can then find it on their sites and see what is being shared. david: will there be people worried about the kind of information being held by facebook in concert with these
three other companies? are there insurance is that the data they say they are collecting will be the data they collect? will my collect personal information related to the content posted. of course, everyone needs to be careful about what they share online. these companies are in charge of so much of our personal information constantly, and when it comes to extremist content, they are being held to very high standards by governments to take charge in figuring out where it is coming from. there have been actions that are more serious on twitter this year and musty or, and they have gotten rid of hundreds of thousands of islamic state and extremist accounts. consequences for posting this kind of content on the internet. david: the last weston is about the novelness of this kind of collaboration. they are usually fierce rivals with one another.
does this portend future collaboration? >> sometimes committees will work together on things that can make them overall better as a group. facebook has a lot of other projects that are open source. that is the term for a software that they share. one example is their data centers. they have data centers that are with a collaborative design, and many other companies can use and build off of them. they are not selling these data center servers, but others can take the design. it is not a new concept, but it is definitely very unusual for it to be used in an enforcement activity. david: thanks so much for joining us from london today. she's with bloomberg technology. p.m.an get more at 5:00 eastern, 2:00 p.m. pacific. luke we will hear from ellis, who has said markets are looking forward, and a breakdown
david: this is "bloomberg markets." i am david gura. let's go to julie hyman for her chart of the day you julie: this research,naissance and it looks back at all of the presidential elections going back over the past 50 years or so to examine the stock market reaction in the wake of them. basically, it averages them out for the us a b 500 -- for the s&p 500 and marks how stocks of performed since inauguration
day. on average, we saw a gain of about 5% in the wake of the various elections. this is going back since 1952. looking back under a variety of different administrations and circumstances here at the rally we have seen thus far since election day in the u.s. is about 3.2%. so thise average, suggests that potentially there is more room for this rally to go, a rally in which $850 billion has already been added to the value of the u.s. stock market. look at the rally we have seen in the wake of the election here. you can go back to 1999 of the last time we were singing simultaneous records for the major averages, something we have talked about. it is not only for the s&p, dow, and the nasdaq, but it is for the russell 2000, as well, the pink line, which has been rallying in the wake of the election on the view we will see
more domestically oriented companies potentially stand to benefit the most feared something else we have been tracking has been the groups that have done the best since late election. what is interesting is it is not a rising tide lifting off boats, not a universal gain for all groups within the various markets. overall, the as of the 500 is a 3.2%. financials have done the best run the perception that financial regulation will be more favorable. and bond yields and gone higher. on thestocks, next test opec agreement. and estoril's, materials, telecoms, services have also done well. utilities have been the worst performing group on the increasing bond yield. a stable set underperforms, along with real estate and technology in health care. it is interesting, this big divergence within the groups, even as the overall s&p 500 has still managed this gain of 3.2%. obviously, there is a still a
ways to go before inauguration day to meet that historical norm of 5%, if indeed that does happen. david: still more than a month away. julie hyman, thank you very much. time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. standard chartered is considering doubling for its legal basins of the european union. that is after britain does the former process of withdrawing. haveank has then said to approached irish officials about a subsidiary and getting a license to operate across the eu. standard chartered is also talking to german regulators about frankfurt. itsrning from chipotle -- loss is focused on customer service, according to the co-ceo, who says deteriorating performance has slowed lines and undermined a former strength. chipotle is struggling to bounce back from last year's e. coli outbreak. u2 tells the music industry that
we are not the bad guys. have been onutive the offensive against youtube, a choosing the site of letting music to enrich itself while giving little back to the musicians themselves. that is the bloomberg business flash. luke ellis says markets are looking for what happens next after brexit and italy's failed referendum. he did not anticipate events transpiring in 2016. in an exclusive interview today, he addressed some of his misjudgments are the year. >> i think i probably would have had the run position at the beginning of the year if you had given me those three things -- i think i would have had the wrong position to it i think the markets are looking for what happens next. they are looking forward quite aggressively. jonathan: i wonder what that means to put together strategies
for next year. yes, we got these outcomes many people did not predict, but emerging markets were the more surprising thing, the fact that the risk rally held up even after the brexit referendum, and then the moves after the trump election. what does that mean for 2017 for you? >> i think you have got two big effects. first, a lot of people have forgotten about big fx moves. it has been a long time since we have had significant moves. if you look at the u.k. equity market, that is all about fx. we're here today and still guessing about what trump is actually going to do. a lot of talk on the campaign and different talk over the cabinet. it will be january when we started to get a sense of what his real initial ideals will be, what he is focusing on. i think you will not really know what is going to happen in the
markets until we have some sense of an agenda. but sitting here today, i think the best estimate is that the last 5, 6 years has been characterized by a complete consensus between government and central banks, within countries and across the globe. we have been following the same playbook, same set of policies. the mixture of brexit and now trump and some of the other moves in europe suggest that we might see a situation where the consensus breaks down. the consensus of breaking down will be good for some markets and bad for other markets. with the breakdown, we might get that in the high correlations, and we might get something that is an interesting as it management environment after a long time of hard work. alix: when you look at the broad asset classes, which ones benefit from that scenario?
>> i think you have to look at it regionally, rather than by asset class. clearly, if trump does come up with a set of policies that are cutting tax rates aggressively in the u.s. or about increasing tariff into the u.s. that are about getting people to repatriate cash in the u.s., about making it easier for private-sector infrastructure building, i would say public sector infrastructure will take much to long to master over the next year. for theuld be bullish equities and the u.s. dollar, further steepening the yield curve. haverope, honestly, we recently the opposite policies. italy is just another round of the same exercise. we're stuck in a deflationary environment here in europe. and there is no great sense that there is either the sort of
political will or the ability to build the right degree of consensus to get through the processes required in europe to do some different. so i think you end up with a different of cap -- outcome in europe. it is tough to make a bullish european equity story, generally, look all right. i think you probably get a wider differential and interest rates within europe. in asia, it is a question of how china response to trump's maneuvers, assuming he keeps going. are they going to fight? just think of that in economic terms. ey going to turn their energies into the asian region locally and turn their buying power and trade power into local countries around the rest of the region in asia? that would mean you could get something bad for a lot of markets or very interesting for
some of the local markets in asia, assuming china can keep out of the debt problems. david: long u.s. equities, maybe -- whatropean equities about latin america and other emerging markets? before this, fundamentals were improving in those countries. now we have a strengthening of the dollar. how do you handle that trade? to be veryyou have selective about individual markets and individual countries. it is going to depend very much on where the trade policies go and where the commodities go related to those trade policies. you look at mexico, the answer being ae policy ends up 20% imposition of tariffs of sales into america, assuming it is done on one-time value added
in a product, you have things going backwards and forwards across the border. honestly, the currency devaluation we have already had means mexico is a great buying opportunity. on the other hand, if it is a very aggressive constraint on trade across the border, the mexico is a different situation. you could see a few emerging market countries where defaults are not far away. david: our exclusive interview with luke ellis. canada thisf morning, some imports falling for the first time in three months. will this affect the bank of canada's rate decision tomorrow? that is. this is bloomberg. ♪
david: this is "bloomberg markets." i am david gura. canada's trade deficit shrank in october from a record high the month earlier. its last major data point before their rate decision tomorrow scheduled for 10:00 a.m. with more, we're joined by our bloomberg reporter in toronto. what does the data we got today say about the health of the canadian economy? >> it paints a picture of an economy that is mixed at best, certainly looking vulnerable heading into the bank of canada meeting tomorrow. if you look at growth, it has not been an even trajectory. it has been a seesaw action. we have had inflation raising a
bit, which is a little bit positive, but it is still well below 2%. canadamployment rate in most recently fell, but it was largely because people were dropping out of the labor force, essentially giving up. then you look at today's trade data, and yes, the trade deficit shrank, which would seem to be good, but it was not fueled by a big surge in exports. inwas fueled by a big drop imports. imports fell 6.3% in october. you look at the trend of in the last 10 months, you have a trade deficit at a record high, and it all paints a picture of an economy which is mixed, at best. david: let's look at my bloomberg terminal. we use it to look at what the fed is considering here. the probability at the -- of a hike at the meeting tomorrow, 0%.
what can we expect out of the meeting tomorrow? what has been said about the prospects for what might happen at the meeting? was pretty clear that failing a major shock to the canadian economy, there is no intention to add stimulus. almost nobody is expecting any kind of a cut tomorrow out of the bank of canada. thecontrast that with united states, were the probability of a hike is him was 100%. it is pretty dramatic. some are still banking on the recovery in 2017, led by exports. the issue is that that has been much slower to materialize than anticipated. it was expected that that would be happening in the second half of 2016. it has not. you look at the trade data and were exports are gaining, and it is all on the energy side. he has been relying on non-energy to bring canada out of the works.
he wants to see more of a broad-based recovery, and that has proven to be elusive. itthe near term, certainly, is unlikely we will see anything from the bank of canada. divergencelook at and the probability in canada and here in the u.s., and we have a 100% rob of a rate hike probability of a rate hike next week. where is canada in the cycle? where is canada and the economic cycle? >> we were talking about this today. when you described a 15-year slump, is it still fair to call it a slump? when is it just the new normal? bank of canada wants to see a broad-based economic recovery led by non-energy exports, and we have not seen that yet. we have a canadian dollar that has been weak. further ifen
analysts and investors are right in the markets are right and you see the fed start a course of hikes and canada stays put. if you look at work for the outcome of the most probable scenario for 2017 is that the bank of canada does not do anything, so rates would stay the same. with a hike from the fed in december, spreads would widen and u.s. rates would move ahead of canada for the first time since 2007. that would weigh on the canadian dollar, which might help experts, but if you look at history, we have not seen that. david: we will check in with you tomorrow. coming up, bill gross is up with his december investment outlook. this is bloomberg. ♪
markets." "bloomberg ♪ >> we are live in bloomberg headquarters. here is what we are watching. an interview with bill gross is moments away. he will speak about his latest note. speaking of trump, what kind of president will he be for business? how donaldook into trump may change things for global executives. we will speak with the ceo of soda stream. two hours.s close in let's check in with julie hyman. are not seeing huge gains. because of these incremental the dow isgame in
enough to make another record. we are at the highs of the session. see depressed volume, 22% the 20 day average, at least the s&p 500, so we have entered this lower trading. in terms of the groups on the move, utilities and materials , telecoms leading the gains are along with financials, showing consistent strength since the elections. we are not sing big gains. energy is up a tiny bit as oil prices fall. in the mediaocks and telecom industries include verizon.
they are selling their data center business. charter communications ceo speaking at a conference today. they are in advanced talks with netflix on some kind of tv interface. this would include netflix on space. in he stocks wesome other are watching today that are not going in a positive direction. at a conference today, the ceo hipotle's is the company is nervous about meeting guidance
for next year. terpublic one of the big ad firms, and nike as well, down 2.5%. was downgraded to market perform from outperform. to under armour and adidas. hisill gross issued investment outlook letter today. he writes president-elect trump's agenda may boost stock markets in the short-term, but mustr-term, investors consider the negative of trump's anti-global ideas. joined now from newport beach, california for more. great to see you again. istelection and narrative about an expansionary fiscal policy with tax cuts and more
spending. theave seen stocks and dollar rally, yields climb, what are investors getting wrong in front running policy like this? are: a lot of things getting right. if a lot of these policies are followed through on, the biggest the corporate tax cuts and the ability to bring money back into the united states at a 10% or 12% tax rate. that money is in the hundreds and billions, and the fact that they come back and buy stock is an impetus. what they are getting wrong longer-term, there are a lot of negatives in terms of his anti-globalization policies. many are anti-trade to a certain extent, and many promote a strong dollar, which sounds good come up but puts u.s.
corporations at a disadvantage. none of it of which we know will come to fruition with 100% probability. what will cause the market to reassess and start pricing in the long-term negative effects of that stronger dollar? what would be the catalyst? anything int think the short-term, right? he has not even been sworn in. perhaps some statements by some of his appointees in the cabinet perhaps, something america interprets negatively in terms of capital, but for the moment, smooth sailing. for the moment, we have sailed 5%, 6%,in the green by
seven percent on most stocks in the market, and one could argue that much of the positives have been built then. i think, for instance, that plans for 3% or 4% real growth are suspicious. the old standard, which was 10 or 20 years ago, this is affected by structural factors that can't be dismissed, and i'm looking for a 2% economy, not a 3%, 4% economy. until investors agree with me, their expectations for profit growth are diminished to some extent. i want to switch to europe, the european central bank meeting is on thursday. what might we expect to hear from mario draghi on qe? if he does not extend the program, it could be construed by investors as tightening. i'm think so.
the language will be important. the press conference will be important. ultimately, investors have to expect because the ecb is running out of funds to buy that the quantitative easing program will be reduced, if not eliminated at some point. the market to a certain extent has begun to anticipate that instead of $15 trillion worth of negative yielding bonds, we have two or 3 trillion, so yields have gone up in the eu by 30-40 almost asts, o much as the united states, so the real world is coming back to bear in terms of the central bank policies that stress negative interest rates and ultimately in my view and central bankers view, deleterious to economic growth. a tie indo think the
referendum changes how mario draghi moves forward with policy? bill: he suggested before hand that what ever it takes in terms of a potential negative reaction, in terms of the tie in a 5-10 basis point moment, but not much. the most important things are the situations with the italian eu andnd the stance the the ecb jointly taken terms of potential he bailing them out. in any case, it is not a positive for the italian economy, it is merely a smooth over attempt that i think covers italy and another countries as well that have nonperforming loans that simply can't be dismissed and swept under the rug. supply: we mention the
of bonds in the european context, let's bring it back to the united states. donald trump's pick for treasury secretary float the idea of selling longer dated treasuries to cushion the effect of rising interest rates. what do you think of this proposal? it is a good idea. it was a better idea for basis points ago. being the bonds, with assets, being the longevity of the country, the united -- that is a long proposition. all the better, it locks in a lower rate and gives industries a choice for a higher-yielding treasury as opposed to a lower yielding treasury. to a certain extent, it allows
investors to move out on a yield curve if they think that interest rates aren't moving up very much. buyerlf would not be a unless it offered an extreme reward in terms of high yield, but we will have to see in the next six months. quantify whatou you mean by an extreme higher yield? the markup in terms of the tens and 30's, probably 70 or 80 basis points. what would be the markup for a 30 and a 50 or a 30 and a hundred, we get some idea in terms of the foreign markets. be atd say this should least 40-50 basis point premium on a longer-term issue carried to duration. it 50 years or 100 years, a significantly higher proportion
a 30, so ana 10 or investor would have to be cautious and demand that type of reward for the maturity extension. people pointt of out all obstacles to contend with. is seasonal toit periodically sell fifty-year debt and treasury auctions and worry about liquidity and the challenges that might be there. what do you think? bill: liquidity in which market? liquidity challenges in selling 50 or 100 year treasuries. bill: , there wereith tips liquidity issues for a number of years, and probably still are to the extent that you build up at sizable issue in a longer-term maturity, it is all the better for liquidity, but i think it would have liquidity problems in the first several years, and therefore demand a liquidity
premium relative to the forward curve, so i think iris would have to analyze that and realize that they would not necessarily be the most liquid of securities like a 2, 5, 7, or a 10. scarlet: your fund has avoided losses compared with other fixed income funds. give me two reasons for the outperformance. duration, maturity extension as part of the portfolio. taken the view here in newport beach in terms of the unconstrained fund that there are substantial negatives in terms of donald trump selection beinge bond market, that higher fiscal deficits, potentially higher inflation, and those are always the enemy of bonds. to the extent we started off it very low levels before the election, it was only prudent,
and certainly after the election once trump with select it, to get out of bonds and to prefer tradesarried types of which are more equity oriented as opposed to bond oriented. investorsou also said with an unconstrained strategy should increase cash or cash alternatives. is that mean you are not immediately worried about the threat of inflation? but yout immediately, did quote it correctly, my note suggested they should be underway duration and underweight equities relative to their index, and that timmy me simply reflects a view that valuations on the stock side 5%, 6%, 7%,ated by and potential inflation as you just asked may be a problem going forward and the fed may
have to be a little more aggressive than they are suggesting. i think next week's meeting will be important an in terms of how the dots are proportion. investors have gotten used to the dots coming down every meeting, and this time perhaps with inflation potential and the trump policies, perhaps said members will not lower their dots. the dots, by the way, are 40-50 basis points higher than the market forwards at the moment, so there might be a rude shock come next week if the dots are not lowered. to watch for.hing bill gross, thank you very much. coming up, we are joined by the ceo of soda stream, why enlisting a games of thrown star has helped. this is bloomberg. ♪
♪ is "bloomberg markets." i am scarlet fu. i am oliver rennick. 's promises paying off big time. the company has enlisted game of thrones stars to shed light on bottle pollution and advocate sodastream as a possible solution to plastics. here to discuss that is daniel birnbaum. those commercials, hilarious. they get a point across and went
viral. you guys have had this big , a change of mind in terms of what you are pursuing is a company. will that growth be sustainable? p we are justk so beginning. we shifted from soda and chemicals to water. that is what consumers want. in a convenient and economical way, and provide help to consumers who want to drink more water. so it is working, three consecutive quarters of topline growth. we are just beginning. our household penetration is just emerging. scarlet: what will be the next innovation when it comes to water? what is next? it's about increasing household penetration around the globe. we are in 45 countries. germans are our top market.
we provide an easy way to access it. they take tapwater and transform it into sparkling water. the next day is to increase household penetration. in germany, 6%. have 50%, 60%. in the u.s., 1.2 5%, but we think water should be a staple in people's homes. oliver: what is it about americans that is making it more difficult to penetrate the household? is it because you started elsewhere and it is a matter of time, but is it our addiction to soda? doiel: it has something to with the addiction to soda, but soda consumption is declining rapidly. consumers are shifting to water, but we had a strategic error two years ago, because we were positioned as a cola alternative, but consumers are
looking to drink more water, so we shifted our strategy, and it is right on right now. we are seeing the growth come back. scarlet: the name soda is still in your company. daniel: that's true. we do have that dilemma, but the awareness of soda stream as a at 85% awareness, so it is a shame to throw that away. nevertheless, we are a water company. oliver: you are being disruptive with these commercials with the mountain. it is about the shame. -- shame,inting out shame, shame, but you're basically saying a lot of the bottles don't go to recycling. you are getting a lot of feedback. i want to bring something up quick which is a statement you
made in response to some cease-and-desist letters that you receive from some companies they are all trend growth process at the expense of the earth. they want to gag our message, which is those plastic bottles represent a very real, present a threat to our global environment. gain from lot of getting rid of those bottles as well because you are offering an alternative to that. is there anything disingenuous about the environmental message here? daniel: the fact we have something to gain and are doing business in the right place is not a reason there is something wrong with it. we are speaking truth. the others are not. they are in the business of scaring consumers, seducing consumers. they sound as if they come from
italy, they are coming from the same source that human missable water is coming from. it is very misleading of consumers. consumers are being misled that they need bottled water to live safely. all tapwateress of is as healthy as bottled water, and there is no reason to hurt the earth. is generating $7 billion of water revenue a year, and $1 billion of profit. oliver: you have a pilot program with whole foods. it has struggled elsewhere. are you concerned that shifting towards a health-conscious consumer puts you in a corner? daniel: not at all. u.s. sales represent only 20% of global market revenue. growing again.
bed bath & beyond is a wonderful retailer where we carry our latest products, and hopefully another growth retailer. we are in 80,000 stores worldwide, so whole foods represents a small portion of that, but they are a great retailer force because they represent health and environmental responsibility. oliver: thank you. tower,: we visit trump donald trump tweets that he has agreed to invest $50 billion in the u.s. and create 50,000 jobs. we will have the details. this is bloomberg. ♪
tower today. donald trump said he has agreed to invest $50 billion in the u.s. and create 50,000 jobs. oliver: he has been on a tweet storm the past day or so. we note six hours ago, he talked about boeing. it was interesting because he was saying that the $4 billion being spent on air force one 747s is way too much, so may at his own cause. the commodities close, oil on pace to snap a winning streak. this is bloomberg. ♪
rally. showed after new data opec palmed a record amount of crude in november. opec last week agreed to a production cut. rallying.prices are there sugar gaining 3%. falling inower, sympathy with other metals. let's send it back to oliver. oliver: thank you. it has been a huge year for basic resources. miners in europe have rallied 60%. president-elect donald trump will introduce a round of fiscal stimulus. ceo affirmed that enthusiasm in interview. see some positive
impact of the trump administration in relation to the u.s. it i will give you a couple of examples. any investment in infrastructure will be a good element for us. infrastructure is good for copper. the other potential positive for us is in relation to permitting. we have a series of greenfield projects currently being permitted, and anything the drop administration can do to improve the permitting process could be very good for us. our early days, we don't do politics. rio tinto has been around for 146 years, and we will be working with the trump administration. >> we do business plans. i wonder how you recalibrate the strategy for next year. are you accelerating development schedules at the moment? >> know, we are not changing our
development plan at all this stage. we want to be focused in terms of growth. current planin our is three main projects. in relation to iron ore in australia. we have another project in bauxite. to wal the other is a copper and gold project. , we will be able to deliver 2% growth for the next 10 years on the back of this program, which is better than any other miners. then terms of the price and rebound in underlying materials, copper, iron ore, we have had a but the strategy
has been value over volume. as prices pick up, will the miners maintain the strategies or go back to old ways? >> i can talk only about rio tinto. we have been clear on this one, value over volume. ande means being selective in proving the quality of our to payand performance superior cash returns. cashis what it is about, returns for shareholders, and we believe we have a good story to tell in that space. having spent a couple of days in the u.s., people understand well our equity story. >> the other theme has been rising costs to many analysts think the cost inflation has bottomed. what do you see and how will that affect your production capacity? good question.ry
we have not seen too much inflation come into the system. to $50prices go back plus a barrel, inflation will come back, so that's why it is important to work on productivity improvement. we have a plan to increase cash flow just by improving productivity across all operations. that will offset whatever cost inflation happens. oliver: that was an exclusive interview with the ceo of rio tinto. get a check of our bloomberg headlines. >> president-elect donald trump says masayoshi son, the founder and ceo of softbank, has agreed to invest billions in the u.s. investas just agreed to $50 billion in the united states
, and 50,000 jobs, and he is one of the great men of industry, so i just want to thank him. >> thank you. owns 83% of sprint and is running a $100 billion investment fund. house conservatives looking to launch an effort to force the vote on the impeachment of the internal revenue services commissioner. after he ands other members of the house freedom caucus agreed to delay action in september. probelaim he impeded a into whether the tax agency improperly targeted conservative targets. theresa may will reveal more details for brexit, but is challenging lawmakers to go back to her proposed timetable. theresa may accepted the wording of an opposition labor party
member seeking more details. attain prime minister matteo renzi will confirm his decision to resign his post at the meeting of his democratic party tomorrow. cites lawmakers who say matteo renzi will not push for snap elections. matteo renzi offered to resign after a crushing referendum defeat. italy's president ask him to remain until the budget is approved. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: coming up, we dig deeper and to donald trump's relationship with china and the implications for the business community. the latest on donald trump's meeting with masayoshi son. this is bloomberg. ♪
♪ oliver: this is "bloomberg markets." i am oliver rennick. scarlet: i am scarlet fu. elect donaldal trump is firing up twitter. this morning, he had a harsh critique of boeings price tag for the air force one program. >> it is totally out of control, over $4 billion for the air force one program. i think it is ridiculous. i think boeing is doing a little bit of a number. we want boeing to make a lot of money, but not that much money. joining us from trump tower is jennifer epstein.
has made son investments in the u.s. in the past, but specifically this is a new investment that donald trump claims only came about because of his election victory. yes, this is something mr. trump said in trump tower just now came about from their conversation, $50 billion, 50,000 jobs. we don't have a lot of details. we don't know if this is something that happened because of the trump win. he pointed to deregulation being this, but we don't know for sure what the back story is just yet. we also know that other issues softbank is involved with it is a t-mobile merger, and t-mobile stock up in the last few minutes. a president we have
who tweets everything, it all comes as a surprise. do we take this with a grain of salt or wait to see how this filters through? jennifer: yes. you had both sides. you had the president-elect and the company weighing in. it is different when you have something like president-elect this morning tweeting about boeing, then coming to cameras briefly in the lobby and saying the air force one project will cost $4 billion. boeing put out a statement saying that this is actually so far contracted for $1.7 billion, the same thing the air force has smaller price tag than the president-elect said. you will have to see the interplay between when the president-elect talks about any company any time on twitter, and then a company has to respond in real time.
i think this is the way it's going to work for now at least. find interesting is sometimes he will come out and elaborate on a tweet, for instance with boeing. other times he will put the tweet out there and leave it at that. have you picked up any kind of pattern here as to when he elaborates? jennifer: we have seen him twice in the lobby today. he usually does not come down to the lobby at all. i don't know if he's just trying to show he can be influential specifically with business. after he went to the carrier plant last week, he is trying to takingt the acts he is will create jobs and investment in the u.s. economy, and he's trying to very much show cause and effect. it is less clear what he's trying to do with boeing. he first ofr why all started in on boeing today,
ly the airecific o force one project. based on his financial disclosures from earlier this year, he did on some stock in boeing, between $50,000 and $100,000 since may 15. he has since sold all his stock according to his team, so it's not clear where this is coming from exactly on boeing. i think we will see more of this day in and day out when he feels the need to weigh in on what a company is doing. scarlet: i was perplexed as well as to what his intention was with that tweet. oliver: president-elect donald trump has promised to get tough with china on trade, but what does that mean for u.s. companies? joining us now, michael mcdonough.
trump made china the focal point of his campaign. we have seen him surround himself with people with various visions for trade. where do we stand right now michael: chinese officials want to see what the action is. if he follows through with 45%, 10%, 20%, then there could be repercussions for those tariffs. china has a lot of domestic issues they are trying to resolve. they don't want to be engaged in a global economic war with the u.s.. they want to spend the next decade cleaning up in-house, but then the next decade after that they will compete with the u.s. on a global scale. scarlet: donald trump brought in
taiwan as well and ruffled feathers when he spoke with the taiwanese president. thathing with taiwan is donald trump has attacked china for currency manipulation, undercutting american industry, stealing ideas. michael: if donald trump wanted to send a message to china that we were going to be influential in asia, he should have stuck with tpp. we are going to do this deal to show we are still influential, but we have now pulled back from it. what will our allies do? they will probably turn around and do something with china. not passing tpp opens a lot of doors in china. oliver: you said it sounds like maybe you think donald trump
could be overstating the impact china does have in the global economy when perhaps they're not even in the realm of thinking about taking on the u.s. in terms of economic competition. is that a proper characterization? michael: anything they do will be reactionary to any action trump takes. if he does minor changes to trade policy, they could butably live with that, anything dramatic, they will have to respond. they don't want to respond, but they will have to respond. we have become a very globalized economy codependent on china, mexico, supply chain dependencies. any broad change changes could -- trade changes could be bad. look at mexico. were not just importing products that we buy. putre importing parts we and other things, so some tariffs could be bad for u.s.
manufacturing in the short term. oliver: thank you michael mcdonough. scarlet: let's get a check on stocks. julie hyman has the sector reports. one etf tracks oil itself, one tracks the oil industry, and there is a diversions that has been going on all year. is falling, of oil uso is down, but we are seeing people by the oil producers through the xop. down onerude oil today point 6%, the dollar higher, that does not help oil prices. opec said it pumped a record amount of oil in november. but again, you have this diversions. itself it is expressing is looking at these flows we have seen into these two etf's i
was talking about. you can see that on the bloomberg. interestingly as we came up to the opec agreement, we saw big fund flows into that xop and outflows from uso. the oil and gas exploration and production etf's in orange have risen this year by about 40%. uso has risen, but not by nearly as much. scarlet: coming up, promoting diversity and a divided america. this is bloomberg. ♪
diversity and inclusion have the come front and center. of a down with the author new book, crossing the thinnest line. i asked her why we struggle with inclusiveness. made like to think we have lots of progress, and we have. we have become one of the most inclusive places on earth. we have huge numbers of women and the work force, extraordinary numbers of minority-owned businesses and receiving degrees, marriage equality, and yet we also continue to struggle with a very deep divides, and much of the nation is still segregated, psychologically segregated in many ways. this last year, the experience of this election has brought that to light in ways most americans did not really appreciate. in a post-obama world, many of us felt that some of these big
problems were solved, and clearly they were not. were solvedbe they in places like new york, san francisco, l.a. the line itself is being shifted around, is moving? sure i totally agree that places like new york and san francisco are that different. we like to think we are. everyone has biases. whatl carry it no matter who we are what we look alike. what has happened in american cities is that people who live and cities have voted with their feet. they chose to live there because they are attracted to diversity. it does not mean they don't struggle with some of the same and challenges understanding people across those lines. we do need to focus as the nation on solutions big and
small. there are some big policy decisions we need to make, but we need to learn how to become a more empathetic and understanding nation. scarlet: the commitment the democratic and republican parties have made is that they will empower working class americans. is advocating for this particular group of people who have been ignored for a while antithetical to diversity? >> part of what happened in this thetion is we had exploitation in a sense of people suspicious of one of another retched up and amplified , some of which has never gone away. segregation ended 40 years ago. keep in mind that places like st. louis did not try to integrate their schools until 1988, so we have huge pockets of
america still segregated, so it becomes easy to blame people you don't know or know well for our problems. deploy hard data to show the gap between men and women, white and black, the different groups in the country, where have we made progress and can build on that? >> participation of women in the american workforce is one of the signs of our greatest progress. it is a straight line ups and from 1970's, and now 38% of the women in this country are primary breadwinners. in recent years, the labor force position patient of women has begun to decline, and it is a complicated set of reasons, expensive childcare and other factors are contributing to that, but were we to close that one gap, the gap between men and wage, say nothing of the
cap, just the labor participation gap, would add $5 trillion to the economy, 3% gdp. that is a huge number. that is a significant uptick. scarlet: what is the diversity case for corporate america and an america first environment. you have a president-elect looking inward rather than outward, how do you make the case for corporate america that diversity still matters? >> i have to disagree with the president-elect. the fortuneority of 500 have 40% or 50% of their revenue from outside the united states. you can't sustain economic growth without engaging with the rest of the world. if were just looking at ourselves, there is overwhelming data from think tanks that demonstrates that having diversity, particular he women,
in leadership drives extraordinary correlation to increase growth and profitability for those businesses. even if you subscribed to the idea that we need to be less globalized and businesses should be focused in the united states, one of the best drivers for performance is diversity in leadership. was my: that conversation with the author of, crossing the finish line. lookr: coming up, we will at what is next for 20 17th, and in particular for the equity markets. here is a check on stocks right now, some green on the screen. this is bloomberg. ♪
♪ >> we're live from bloomberg world headquarters in new york for the next hour. here's what we're watching. u.s. stocks are edging toward of the session. tell comment financial stocks are leaving the game. after that we will get more market perspective. globalization could eat into profits for years. we are trading apple. our shares ready to go higher? tim cook says the apple -- apple watches set for its highest sale in a quarter. we're just a half hour away from global trading. julie: stocks continue to move to the highs of the session. we are near record low are getting closer.
potential m&a news has been moving things up into today'session. deregulation under the trump administration. at&t is more likely to get his approval to buy time warner. centers for data $3.6 billion. at clinics is higher. off by 1/10 of 1%. we have been following a developing story about softbank saying he will be investing $60 billion in the -- in the it i've trump tower.
majority it will get approved -- buying virgin america come up $2.6 billion even though was it -- it was expected to get approval after the justice department made some noises about not approving it. both stocks are getting confirmation of that approval. this after toll brothers said its orders rose by 20% last quarter and delivery is up 22% and the average selling price is up 5.6%. biggest u.s. luxury home builder by 4%, and also getting a boost today. >> let's get you to the first word news. m a has the news headlines. m a: -- a: does not receive anything
of value in return. prosecutorsory of on wall street pit the ruling upheld a conviction of an illinois man found guilty of lift what he face received from members of extended family. donald trump has his decision to break u.s. protocol by excepting a gradually call from taiwan's president. speaking today in washington. >> it is prudent for him to take congratulatory calls absolutely. i spoke to the president of taiwan when transferring planes to miami a couple of months ago. it is prudent for the president-elect to take congratulatory calls. i think there is much to do about it -- much ado about nothing for this. to not take a congressionally -- congratulatory call would in of itself be considered a snub so i think it is fine.
>> china still considers the island part of its territory. hacking allegations. they date back to 2009. is overtaking canada as the second-biggest exporter of goods to the u.s. this year. totaleds from mexico $245 billion in the first 10 months of the year ahead of 200 30 billion. if the trend continued, it would be the first time the u.s. bought more imports from its neighbors in the south. global news 24 hours a day powered by more than 2600 journalists and alice in more than 120 countries. this is bloomberg. investors have been
placing big bets on how donald trump's policies will impact the economy. the devil is in the details. ross and the dollar rallying and the bond selling off here at what he thinks investors are getting right and what they're getting wrong. >> the biggest one i think is that for tax cuts and the ability to bring money back to the united states, perhaps a 12% tax rate. in theoneys are numbered hundreds of billions and to the extent they buy back stocks, there is a definite in protest. that is a positive. what they are getting wrong in the longer term is there are a lot of negatives in terms of his anti-policy. many of them are anti-trade to a certain extent.
many of them promote a strong dollar which sounds good but ultimately puts u.s. corporations at a disadvantage. there are negatives as opposed to positives to all of this and fruitiont will come to with 100% probability. scarlet: the devil is in the details. what will cause the market to inssess and start pricing the long-term negative effects of the stronger dollar, for instance? what would be the catalyst? bill: i do not think anything in the short-term, right? not even sworn in. that takes place in january. by his some statements appointees in the cabinet, perhaps the market interprets negatively in terms of capital, but it is smooth sailing. insailed upwards in terms of
the green, by 5, 6, 7, percent in the market. much of thegue positives have been built in. three percent to 4% real growth are facetious. standard, which was 10 or 20 years ago, is really affected by a structural factor that cannot be dismissed. i am looking for a 2% economy and not a three or 4% economy. to the extent investors begin to agree with me, perhaps the expectations for profit growth are diminished to some extent. is waiting everyone for those details. the european central bank meeting is on thursday. what might we expect to hear from mario draghi on qe? if he does not extend the program, it could be construed but -- by investors as
tightening. bill: i think so. the language would be important. the press conference would be important and it always is. ultimately, investors have to ecb isbecause the that theut, qualitative easing program will be reduced if not eliminated at some point. certain extent has begun to anticipate that instead of 15 shine dollars worth of negative yielding bonds . we now have 2 trillion or $3 trillion. it has gone up in the eu by 30 or 40 basis points almost as much as they have gone up in the united states. in the real world, it is coming back to bear in terms of the thatal bank policies stressed negative interest-rate ultimately in my view and i inc. in the central bankers view and
maybe even in mario draghi's feel, economic growth as opposed to positive. scarlet: do you think the referendum changes how mario ?raghi moves forward bill: in terms of potential negative reaction, in terms of italian bonds, five or 10 basis points, and i think the most important things are the situations with italian banks and the stance that the eu and the ecb jointly take in potentially bailing them out. in any case, it is not a positive for the italian cup -- italian economy. up a lot ofrs perhaps in italy and other countries as well, to have that simplyg loans
sunny california. jealous. what is goingut on. it has been an interesting year. off.tty decent run postelection rally europe where do you think we stand right now? going into last month? >> we moved forward some of the rally. i have seen coming into the holiday season i am really encouraged by. consumer discretionary part of the equation, there has been some misses in the retail side. things have started to get a little bit better. we have seen consumer spending start and stop. i think now we are getting to the point where we are talking asut capital expenditures,
labor becomes tightening. . see it get better, it will certainly be a glass half full approach as opposed to glass half-empty. scarlet: we don't have any details and probably will not get details until probably the first quarter of next year. given all of that, what will be the catalyst to push us forward? >> it will be the topline nevere growth that has materialized. you can cut costs and do everything to get it down as low as possible. topline revenue
growth, we are just inching along. now that you have got potential to 24y on the horizon 12 months, maybe you start to see the ceo's is learning microsoft -- central money. think it will really come down to how well we do in the first quarter, and do we get a positive outlook from the ceo saying with a business environment is improving? >> i find this fascinating. a lot of conversation about the trunk of policy and you look at what is happened in the market, it really has not been among -- it is companies with shareholder friendly activity.
>> we have done acquisitions and we have instituted them. want.something you really horizon, we2 month go out a couple of years, we have to go of the capex and look to the future of the business. clarity,we're getting a lot of businesses will look at it and say ok, this is our environment for the next four years. once you do that, you get everything with wage pressures and all of the low unemployment rates and when you factor everything into their, it is a perfect storm. , when all of the services told it away. right now, a situation where we
could see domestic spending -- for the next 18 to 24 months. couple ofe a requirements. domestic companies only. no foreign companies. positive stock rice depreciation over 12 months. likesounds suspiciously smart data etf would screen for. >> we have looked at history and we will go back to 60 years of data and we know the markers within their say ok, this is what a good company looks like. a repeatable, consistent, timely process year in and year out using these attributes. etf wants to try and do
something, i cannot preclude someone from doing it. what we try to do is simple and straightforward and laid out. we do not deviate from that or let emotions or hunted -- or fads let us to lay from the model. you can get somewhere in the ballpark, but we think we offer a portfolio that will output the relative benchmark and that is really all we can ask for. scarlet's point, a next conceptual level, at the beginning of the year, you had all of the volatility in the market tanking in the first month, hedge fund closers, people talk about the longevity. suddenly we get a trump win. now we hear the story of dispersion in the market.
everything we said in the first half of the year, a conversation about whether or not the -- whether or not it will be conducive to that management? >> i never really thought it went away. we didn't. it difficult environment. there will always be alternatives and new strategies and some will work out and someone not. you kind of get back to that philosophy and manage risk and you look at fundamentals and what is important and why you buy companies, i do not think that ever really went away. scarlet: thank you. today's'sd, in options insight, we are looking at shares of apple. remember the apple watch? oliver: people were walking into
oliver: this is bloomberg markets. scarlet: time now for options insight. julie: joining me is kevin kelly, chief investment officer at recon capital. we have been watching the drop , the drop in volume going on. highlightedaces you where we are seeing elevated volatility. it is overall lower but there are particular groups where the volatility is still intact. >> we need to start finding out places where we can go and see
an increase in yield or we want to put on hedges. staples,ok at consumer starting to see that people are putting a lot of trade because much. not risen that people are staying away from utilities, so people are still very nervous about that even though it would not be subject to the strengthened dollar or you see people go in to the area where they look at the names coca-cola, austria, phillip morris, those names are trading at 20 times etf. people are trying to hedge and protect themselves there. >> to you think it is unjustified that they are doing that? are they misguided hedging's? >> no, it is smart.
other defensive sectors have elevated volatilities. the selloff of etf. volatility isn't extremely elevated compared to the market and putting on hedges there. that is what is nice about the market and how correlations have come down. want to talk about a stock that is not a consumer staple, depending on how you look at it. , somewhat week following the election. you are looking at a two legged trade here on apple. let's talk about why. buyhe trade is you want to a stock hit -- a stock here. also sell the january call against that. 2.4%ll generate about underneath that. 20% annualized return.
basically, it is a trade to fund the purchase of your stock. >> yes. you are trying to go back to what we talked about earlier. the implied volatility of apple is around 20. that is elevated considering its pe level and the bunk it could get where it could increase dividend and buybacks as well as purchase other companies. it is a good place come if you're trying to find a way, this is a very conservative and safe way to do it. you consistently sell against, especially when you can get an analyzed yield scarlet: just under 20%. the holiday season for apple has been mixed. apple has been reducing some of its orders for iphone seven and the demand at its peak, and then there are analysts optimistic about it.
where do you come down on it? >> everyone is wondering when the super cycle refresh will happen. tim cook said they had the best holiday record and sales on record to date right now. he is enthused by that and he said they are selling more apple watches. they have got their ecosystem. they have got great margins as well. >> we have got to leave it there. thank you so much. scarlet: thank you so much. still ahead, a take on oil. he sees $85 per barrel by the year 2018. he says the market has not yet priced in the production cuts. this is bloomberg. ♪
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