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tv   Bloomberg Markets Americas  Bloomberg  December 9, 2016 12:00pm-3:31pm EST

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david: we watching stories today out of frankfurt and johannesburg. they will economist meet next week in the markets is a 100% chance of a rate hike. executive steps down. we look at who will succeed him. and i visited the new u.s. flagship store for diamond jewelers in new york city. my interview with the ceo of that company on how uncertainty in the markets has actually been a good thing. we are halfway into the trading day. thatil: we have the news fox is in a preliminary deal to billion.or $22.2 to get a look at what that looks
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spikee see a massive higher. it is on pace for its best day ever sense 1994. now taking a look at the majors we have the three major averages the dow and the s&p 500 trading nicely higher, on pace for record closes. on trackight now is for its sixth highest close in a row. some of the nice strength year for stocks in the u.s.. we look at a bunch of different higher aheadn is of the release of that alzheimer's drug. there were some results that investors are taking as a positive. it is higher on the first and fourth quarter, while las vegas sands is recovered from the denying itmacao is
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will limit daily atm withdrawals. oil is higher on the day that comes a saudi arabia will stand by its commitment to cut ahead of the meeting in vienna with non-opec oil producers. david: thank you very much. now let's check in on the bloomberg first word news. taylor: goldman sachs chief operating officer gary cohn may be going to work at the white house. to be themp's topic economic policy adviser according to people familiar with the matter. cohn has been at goldman sachs for 25 years. donald trump's shortlist for secretary of state has grown, former ford motor ceo now under consideration for the job. campaign manager kellyanne conway says he met with trump yesterday in new york to discuss the decision.
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refused thedge has recount. there's virtually no chance that it will change the results of th e election. donald trump defeated hillary clinton by 22,000 votes in the state. federal judge in pennsylvania but hold a hearing today on whether that recount can begin. doping,port in russian a wide-ranging conspiracy involving more than 1000 athletes across more than 30 sports. the report includes evidence corroborating large-scale sochi swaping at the olympics. the russian sports ministry has denied there is any state-sponsored doping going on.
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news 24 hours a day powered by more than 2600 journalists in 120 countries. federal reserve policymakers meet next time and expect the committee will raise its interest rates by a quarter of a percentage but. that will mark the first move this year and only the second one sense the great recession. now here to talk about the u.s. economy, kevin low can, great to have you with us. your call for this meeting? kevin: it was settled over a month ago. the case ford tightening and strengthening. they were just waiting for some more information. janet yellen told us at the beginning of november when she testified to the joint economic committee of the congress that it would be appropriate to raise the rates relatively soon. david: some things have changed.
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in the last month or so, what do you expect to hear from this statement? hike hase policy rate already happened. we have already seen the markets move. has already happened. now, what can come out of this meeting other than forward guidance, or some hints about next year? they have projected two rate hikes for 2017. why so few? have decided the neutral interest rates in the economy might be close to zero in real terms. believe inflation is relatively stable and globalization and the strength of the dollar is going to limit any increased inflation. only modest and gradual rate hikes are appropriate. so, that is where they are starting. should they change that as a result of the election, for example? not now. is no,
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it is too soon to get any kind of assessment of what sort of policy changes we could get. we'll get some. tax cuts are on the horizon but we don't know how much yet. fed change the forward guidance at all? david: the first, maybe the second question will be if we get an infrastructure spending package what does that mean for the forecast going forward? conference,press she will probably be asked of those very questions. what do you think about tax cuts. all she can say is we have to wait and see. it will betime independent. looking back over 2016, the fed was independent and appropriately so. they began thinking four rate in january emerging markets blew up and they took a
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step back. the second quarter a big slowdown in employment. and in the third quarter we had industrial production. finally, we get to this point. with any -- was any harm done? i don't think so. inflation is modest and creeping up. we have one rate hike, now let's go forward. once again, this worlsd is uncertain. to adapt tove circumstances as they occur. david: let me ask how you are week after the election there was such enthusiasm in the markets. how do you forecast out what may be happening? as you see who the president-elect has picked. how do you forecast out what may bekevin: there was some clarity and not in others. the tax policy is spelled oout i n detail.
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the standardse deduction and all that can be calculated the tax revenue goes down in the amount of disposable income goes up. it's economic models we can calculate that. it will probably lead to 2018, if it is implemented, maybe a full percentage point boost to gdp growth of the things like infrastructure spending there are no disclosures. will there be in english archer spending bank, if there is what is that? there is no clarity on that and it is hard to forecast. there will be i think some fiscal stimulus. think mark's have done the same. it took a view that something will happen and will probably boost to growth and lowers the risk of low inflation. not a lot but a bit. interest rates have adjusted
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accordingly. forward, you will see what we actually get. willary the president support a budget and in march they should hammer out their plan that we get some clarity. david: how much to the principles matter here? gary cohn could be head of the nec underdog trump will stop what does that mean to you? the nationalc is economic council, they're meant to courtney the input the president gets from various departments like treasury, commerce, the energy department. although they don't have direct lines, the nec acts as a filter. who knows a lot about
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markets in that spot would probably be a benefit for the operation of this administration. that is what it has done. does it have any policy implications? none at the moment because the nec is not a policymaking body. if you have the right people that you probably get better results once the information reaches the president. david: last question about personnel, going back to the fed. the end of janet yellen's term nears. she will be asked about that. and a second term? what kind of fed up with looking at? he has five or six spots to fill. kevin: we may be coming to an end to the ben bernanke and janet yellen era both and it shift towards more transparency and towards more information may be too much information in terms of forecasts.
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we could be on the brink of a real switch. would janet yellen stay if asked? of course she would she is a de-voted public servant. she is good at what she does, i believe. i don't think she will be asked to stay that is my personal opinion. a new president on the republican side probably wants to put in someone who -- we don't know if they will take the fed in a different direction. but on the regulatory side maybe somebody with a lighter touch. some of these appointments might go in that direction. david: thank you very much. we have special coverage on wednesday beginning at 1:00 p.m. in new york when the federal reserve concludes its meeting on interest rates. res moving coke sha higher we have the latest on that. ♪
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david: this is bloomberg markets it is time for the bloomberg business flash, a union representative said he will return to think negotiating table after a string of recent strikes. they said they will discuss next week out to proceed with possible arbitration proceedings up for discussion. they said they will be no further strikes during the consultation. discussions according to people familiar with the matter on thursday the carrier ceo declared his interest in a deal for the pay-tv business. they are interested in business is in poland and africa where
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the carrier is also expanding. now to the chinese maker to popular selfie touchup apps could raise money after the ipo offering on the lower end of the marketing range. it is the biggest first time share biotech company in hong kong since one -- 2007 when ali baba raised $1.7 billion. that is your bloomberg business flash update. news this morning from coca-cola, the ceo will step down in 2017 after eight years at the helm of that company passing the job to the top lieutenant james quincey. he is credited towards steering the area towards -- company towards less sugary beverages. >> having worked closely with james during the past 10 years of his 20 year career with our company i know that his industry knowledge and strong expertise
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with the brand and values coupled with his acute understanding of consumer taste makes him the absolutely ideal candidate. david: turning is not from princeton, new jersey is ken sh ay, some kind words from the outgoing ceo. what do you make of this transition happening now? is it a comment on the leadership of mr. kent? investors should take away from this it is an expression of confidence by coca-cola that at a time when there still in the midst of a significant transformation in the midst of market challenges like soda taxes and consumers are moving away from sugary beverages that they can bring in an executive like this at such a time and have confidence. david: tell us about his background. his bed at the company for a while. how long is he been there and what can we expect from his leadership? ken: he has over a decade of
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experience managing operations internationally, which is important in latin america, europe, and in the u.s. of what strong grasp coke's biggest priorities are right now. that is to take a look at the consolidation of the bottle theally, and understanding significant challenges in developing markets. having the experience he has really makes him a top choice coke's history. david: let's talk about those challenges. good looking at the performance of coca-cola here over the last nine or so years. regularly beating
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the s&p 500 for most of that time but it is now like behind. what are the challenges here? we have seen coke get into making milk, for instance. what does the future of this company? ken: investors should look at 2017 as the year coke finishes up the transition of cost-cutting and getting higher returns going forward. 2018 when mr. quincy will be well versed in what these challenges are willing really set the chapter for the next generation. that will be targeting the top line of sales growth. that will principally involve moving away from sugary beverages. that is the operation, obviously. emphasis will soon be even more so on the still beverages and the enhanced milks. where the consumers are going
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right now. david: i couldn't help but notice that we got a statement from warren buffett, berkshire hathaway being a shareholder what is investor reaction like to the news this morning? ken: the shares are up a little bit. that shows confident in this choice. there is been some potential concern with warren buffett's son leaving the board. what does that mean for berkshire hathaway's 9% stake in coke? i don't see that changing. they look at it as a study performer. you have to remember some of the challenges are out of their hands. a strong dollar will hurt most u.s. based multinationals. david: it will leave it there, thank you very much. appreciate your time for more
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reports check out bi go on the bloomberg. federal gas tax could be back on the table in the next congress. what are the chances donald trump will support it? ♪
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this is bloomberg markets you might not want to get too comfortable with lower gas prices, the gas tax hike is back on the table in congress. donald trump could support such a move to pay for his infrastructure initiative. go now to the transportation reporter stephanie beasley. but is the likelihood we will see this taken up by cap -- what is the likelihood we will see this taken up by congress? what of the indications this
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could happen? it feels like some and that will be put back on the table. i caught up with a ohio republican hugh told me he plans to introduce a bill in the house that would increase the federal gas tax to inflation. hasn't increased since 1993. a bill introduced last year would not only move that to inflation but also create a task force looking into ways to make actually arer fees towards infrastructure projects long-term. groouse aboutts that, but what does it pay for? stephanie: federal highway and transit programs. fixing potholes, fixing bridges, but what has happened for the
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past few years is that it hasn't been enough money collected to actually cover the costs of these projects. so you have had congress sort of trying to figure out and coupled together ways to pay for large highway bills like the fast act which passed last year. that was paid for with several including some from the irs and other things that were unrelated to highway and transit programs. david: it is interesting to listen to donald trump talk about the motivation for infrastructure spending. there is job creation but also that infrastructure needs improvement. what are the signs you are seeing that a president donald trump would support raising the gas tax? still waitingre for details on this proposal that trump has discussed quite often. what i'm hearing from industry is a proposal that has
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been supported by industry groups and union groups for .everal -- for some time if you like donald trump as a washington outsider might be more likely to get behind a gas taxlike increase because he is not necessarily beholden to any sort of partisan views. gonelicans for years have against or opposed to gas tax increase. they typically don't like to hear about tax increases. it sounds like industry groups are thinking that maybe donald trump won't have those same sort of hangups about this. david: he announced his pick to the department of transportation used to be the head of the department of labor. what do you know about her on this issue and what role might cheaply in pushing this through? know that we don't she supports the gas tax increase but it is notable that
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she was part of the last administration to increase the gas tax. she was the deputy chief under george h w bush, and the last time the increase happened was under his administration. if she were to get behind this which industry groups are hoping she might have a sort of key position not only as the chief of the dot if she in confirmed but also the wife of mitch mcconnell. there is an opportunity for some sort of backdoor dialogue there and maybe she can help get senate republicans on board. david: thank you so much. denying it cuto daily atm withdrawals. ♪
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♪ david: live from bloomberg's world headquarters, i am david start with the-
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headlines. taylor: the president of south korea has been impeached. lawmakers voted to remove him from office after a -- remove her from office after a peddling scandal. the constitutional court will deliberate over whether to end her presidency or reinstate her. defense secretary ash carter says the u.s. will assist afghanistan for years to come. >> we not only continue supporting our afghan partners, but continue our cantered -- counterterrorism mission into the future to ensure no safetyst group can seek haven so that it can threaten the stability of afghanistan, the u.s. homeland, or of the coalition. taylor: this was the last planned trip to afghanistan
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before handing off his responsibilities to his successor. president obama investigating hacking attacks linked to the election, the report will look at what impact russian hacking may have had. senator mccain told the washington post there is little doubt that russia interfered with the election. space hero and former u.s. senator john glenn will lie in the ohio statehouse in -- and at ohiorial service is state university. the public viewing and other services are expected to take place early next week. the burial is at arlington national cemetery near washington. john glenn became a national -- national hero in 1962 as the first american to orbit the earth. he died yesterday at the age of
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95. global news 24 hours a day, powered by more 2600 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. david: a quick check of the u.s. stocks. all of the major averages up about .3 percent. the s&p at 500 of about seven points and the nasdaq up 20 points. let's go to abigail doolittle taking a look at casino stocks. stocks aree casino up nicely today in full rally. this follows yesterday's big macauf, on a report that withdrawals.tm look at the volatility, we have a two day chart and we see the plunge yesterday with a recovery today. shares are higher today as macau is placing restrictions on atm withdrawals that are less
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onerous than investors thought. the big story for casino stock related to macau over the long-term is gross gaming revenue. over the last couple of years, we see a massive decline in 2015. a small decline in 2014. this really wait on the shares of wynn resorts along with -- this really weighed on the shares of wynn resorts. here is the massive plunge as revenues declined. this year we see a bit of a turnaround. the shares are up more than 30% ahead of revenues actually turning around, gross gaming revenue turned higher in the month of august followed by september and october for some strength. that helped create a bullish golden cross in the -- and the 50 day moving average move upward of the 200 day moving average. the last time this happened we saw a huge up run.
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it has been bumpier today. deathesorts put in a cross and it will be interesting to see whether the bulls are the bears take over the shares of wynn resorts and give a clear directional move for 2017. david: abigail doolittle with a look at casino stocks. mgm casinos opened up a new casino at national harbor south of washington, d.c. on the potomac. contribution to the casino harbor. mgm resorts international's wasrman and ceo jim mirman there and commented on a report that china is opposing a 50% cut on union paid atm withdrawal limits. he spoke earlier today. jim: i think it was a massive overreaction in the hong kong list of stocks because i think
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there was a lack of context of what the chinese government is trying to accomplish. this is very consistent with what the government has deployed for many years. is a very strong underpinning of philosophy in china that they want to macau to grow, but not in an inflated way. they want to see gradual, consistent growth and one-way they have pulled back is with travel visas to macau. other ways have been reducing credit availability and that is what you saw this week. i am sure it will have some verily -- fairly modest revenue impact, but it will not be severe or long-term. affect of this particular action, whatever the immediate effect is, does it signal a larger issue of the possibility of china curtailing
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the flow of capital that could affect the casino business? the i think it signals of flow of excess capital. government,central is looking for abuse throughout the system and a logical, distribution of capital is completely acceptable to the chinese government. what they have an issue with is excessive outflows or trying to work around the system and i do not blame them. i think you are going to see those hong kong stocks settled down over the next couple days because the underpinnings of visitors going to macau, spending money, the folks that what wen pay -- this is are talking about, is a relatively small percentage of the overall gamblers and i think it will sort itself out. >> let's come back to where you are now.
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tell us about this project you opened last night. it is important for -- its importance for washington and for you and mgm. jim: this is the first time in the united states that a large integrated resort has been built in a major natural collagen market. we are eight miles from the washington monument where i sit right now. we are in the midst of three large airports within a 45 minute drive and we have 40 million people a year, a lot of them international tourists visiting washington, d.c. and here we are in the banks of the potomac. we spent $1.4 billion, we employed 4000 men and women that are working 24/7 since last night, and the casino was so crowded last night after 45 minutes we had to stop letting .eople in for a bit it has been going all night and all day long. >> we cannot think about washington these days without
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thinking about president-elect trump. as you look forward to the future, what might that mean for your operation in washington and, more broadly, your business ? the gaming industry is part of the hospitality industry and represents 1.8 million american jobs grade we are literally the past way to the -- pathway to a middle class that we all yearn for. my industry does best in a growing economy and i think we can all agree we want to see the u.s. economy accelerate the current relatively modest growth. that is number one and i look forward to working with the president-elect and his policies on that. we are an overregulated industry. i appreciate the high degree of gaming scrutiny, but we have been around a long time, we are pros at this. when you throw in a regulation that is bureaucratic, expensive,
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and in many cases outdated, that is a problem. i think the new administration may help on that. fundamentally, i am a capital intensive business. i raise capital and i deploy it for hopefully high return on investment projects to employ more people. my ability to raise capital at good interest rates, which i can do today and attract people from overseas, which are our best customers in the united states come all of those policies and those economic drivers is key to mgm and i think that is going to work in the new administration. >> finally, you mentioned overseas. there are other policies that the president-elect talked about, immigration policies, trade policies, how could those affect your business and maybe actually give you some pause? i am more of a
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free-trade businessman. i have strong trading relationships with canada and mexico, as an example. i do not want to rip up nafta. i do believe that we can improve our trading relationships, not only with those close trading partners, but around the world. very important country to the united states and the united states is a very important country to china, the two largest economies in the world. i think we all understand this and i think some of the new appointments by the president-elect is going to help, but this is not a time to alienate a lot of our trading partners. more a time to strike balanced, fair deals and that is what i think the president-elect is attending to do. david: that was mgm resorts international's chairman earlier on daybreak america. i visit the flagship store for
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debeers of diamonds, my interview with the ceo about how uncertainty in the market is a good thing for the company. this is bloomberg. ♪ ♪
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>> you are watching bloomberg. i am julie hyman. mark: and i am mark barton. uncertainty hit south korea as the nation's parliament voted to
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impeach the president. she was toppled over and influence peddling scandal. julie: some of the u.k.'s plans for the brexit negotiation are starting to leak out. mark: we take a look at the effectiveness of qe in the eurozone. are they seeing benefits nearly two years since the bond buying began? julie: the president of south korea has been impeached and now the country is bracing for the aftershock. lawmakers voted to remove the president from office over and influence peddling scandal. her it -- here is her reaction. >> this afternoon parliament passed the presidential impeachment motion. i keep the -- deeply apologize for our citizens for causing a national confusion of mid- national security and economic concerns due to my carelessness. julie: the prime minister steps in as acting president until the countries constitutional court
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discusses whether to formally end her presidency or reinstate her. mark: the ecb has requested more time to raise capital which increases the likelihood of a government bailout. all of this according to people briefed on the matter. they lost more than a billion dollars in the first quarter. inflation at the raised 3.3% in november and that exceeded estimates. indexs consumer price rose 2.3%. brexit secretary david says he does not want a transitional deal with the e.u. to cushion the impact of britain leaving the block according to notes of a private meeting with business leaders despite attempts to downplay the record, the account of the meeting threatens to undermine theresa may's desire
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to keep brexit plans secret until former negotiations begin next year. julie: it is time for our bloomberg quick take. quantitative easing has worked in the u.s. and other countries that used it, including japan and the u.k., but will it work in europe as well? for themen difficult to do the same thing. after the european central bank exhausted other options, they trust ahead with full-blown qe. european central bank began in marchvernment bonds 2000 15, 6 years after the u.s. embarked on qe. draghi overcame german led opposition on the governing council and initially embarked .n an asset purchase plan the program has expanded several times and now includes corporate
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debt, the latest adjustment takes a kurt -- total buying plan to 2.8 trillion euros. the first major institution of its kind to ever try such a move. the treaty that founded the e.u. prohibited the ecb from financing governments and abroad buying of government bonds tested the idea. makes the case that the move reduces the incentive from government to stop overspending and make the economy more competitive. here is the argument. overcomeope has political and practical challenges, they get most of their funding from bank loans rather than selling bonds and that makes european financial liquid.maller and less there is still a debate about the effectiveness of qe and concerned that it fuels asset bubbles instead of benefiting
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companies and households. you can read more about qe at ni quick at the bloomberg. had to bloomberg.com for more. ♪ ♪
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mark: this is -- david: this is "bloomberg markets." is seeing strength and double-digit growth in some markets. in theown with the ceo new flagship store on madison avenue in new york city. >> the u.s. market is extremely
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foreign for debeers. we had a presence in new york since 2005 on fifth avenue at least that's we thought it was the right market to offer an expanse which is more in line what they were looking for. onsaw that the prices madison avenue were more fitting. are housing rough diamonds here. why did you choose to do that and what role do they play? diamonds.e stands for to have a beautiful, polished diamond you have to start with a beautiful rough. we wanted our client to be able to experience what it is to touch and feel beautiful rough. we decided to come back with one
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of our rough diamonds that is quite beautiful because it has a white color. david: help me understand the market for polished diamonds. i understand it has been flat for a while. what do you attribute that to? is it a plateau of demand or something more? >> i will not be able to comment on the overall market research. what i can tell you is this time of uncertainty, diamonds have a big role to play and we seek more and more clients using diamonds as a way to store value. i also see that time of uncertainty where people have a smaller amount to buy and they want to make sure whatever they buy is the right thing and from that point of view they come to debeers because we are the most trusted diamond jeweler around. david: i think the uncertainty
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globally on a most every are there- continent, particular hotspots or areas where you worry about economic decline? >> i think we are all getting used to living in a world that is in decline. important is to continue to offer a consistent experience for your client throughout the markets, throughout the store and that is what we are striving for. you can see titles about the china market slowing down, we do not see that at all. the chinese demand is very strong. the chinese are becoming increasingly fond of diamonds and we are growing double-digit in china. reports about a crackdown in china on corruption and how that may have led to less spending on luxury goods, you are not seeing that manifest itself? >> we do not see because the
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diamond category has never really been part of the -- like some other products. david: you are usually based in london and we have been following what will happen with the brexit. has that affected business there at all? our is this,pact but in a positive matter. the british pound and the sterling pound sliding and that has attracted -- created more attractiveness for london as a shopping destination. i think it is reinforcing its role. david: david: how worried are you about synthetic diamonds? i know there has been a proliferation of synthetic or fake diamonds. how worrisome is that to you? >> lab grown diamonds have received more exposure over the last two years.
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dare to say that quality -- we know and we see our clients continue to look for what is real in the same way of the art market, you go -- you have a market for graffiti. out whate you forecast you expect sales to be in a store like this? >> forecasting is increasingly difficult. what we are forecasting is to continue to improve our store expanse and continue to make sure we continue to surprise our client and continue to make the diamond the most relevant purchase. mark: that was my interview with the ceo of de beers. for more check out pursuits come at destination for the finer things in life including travel,
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watches, dining. still ahead, root cause -- rupal bhansali will discuss the post election rally in what she is watching for in 2017. this is bloomberg. ♪ ♪
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david: welcome to "bloomberg markets." ♪
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what: from bloomberg headquarters in new york we cover stories from new york to washington and london this hours. rupal bhansali joins us, we will get her take on markets reaching record highs at her calls for 2017. advisors for president-elect donald trump are making plans for reshaping energy policy. a new way to ring money out of small towns they operate in. we will take a look at what walmart and lows are doing. abigail doolittle is standing by with a look at the markets. abigail: we are looking at small gains for the major averages. higher.ing modestly they put each of the averages on pace for yet another record close, the fifth in a row for the dow, record daily closes sent -- since july.
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the dow is actually on pace for its fifth weekly gain in a row and the longest winning streak of weekly gains since march of this year. real strength for stocks. #btvwe take a look at g 4879 this is another indication of strength. this is a chart of the number of stocks within the dow hitting 52-week highs and we see over here in the red circle, that level is the highest since 2013. we are looking at strong momentum for stock. taking a look at the last five days for the dow, it has been a five-day winning streak come -- of record winning highs. the longest winning streak since july. what stands out here, the dow is up nicely on the week almost 3%. the gains each day have been relatively modest with the exception of the big rally on wednesday. turning now to another big story, coca-cola shares are higher on the day on the news that the current coo amit james quincey, will succeed the
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effective may 1, 2017. our team reached out to ken ramsey, a bloomberg -- excuse me, ken shea and he told us that naturalcession plan is and the progression makes sense and that quincy has been groomed for this position. there are analysts saying whether or not this is the real news or distraction to the news that howard buffett is giving up his board seat. some analysts are saying this that he and -- a sign warren buffett, berkshire hathaway maybe considering a divestiture of the state. fox is in preliminary talks with four -- 14.1r billion dollars. sky finished up 27%, the best day on record ever going all the way back to 1994. david: abigail doolittle there with the market update. let's check in on bloomberg
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first word news. taylor riggs has more. taylor: washington state congresswoman kathy morris rogers has -- leaving the department. considered others for the job. rogers has served five terms of the house and is vice-chairman of the transition team. the president-elect is claiming to meet with carly fiorina, the forclash during the race the white house, it is unclear if carly fiorina is being considered for a cabinet position. trump is also expected to meet joe west virginia senator on monday, his name has been floated as a possible candidate for secretary of energy. republicannate's top is resisting democrats refusing to stop -- mitch mcconnell says the temporary four-month extension expansion is the best deal
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democrats are going to get, some democrats are pushing for a one-year extension. as senator richard german of illinois says his party has no desire to shut down the government and may not have the votes anyway. a japanese capsule has been launched with much-needed supplies to the international space station. the successful launch comes a week after a russian shipment was displayed -- destroyed shortly after liftoff. the spacecraft should arrive at the station on tuesday. global news 24 hours a day, powered by more 2600 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. david: the trump rally showing signs of abating with major equity indexes rising to all-time highs. even health care shares are leading gains today. bhansali oversees global
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equities research and manages multibillion-dollar portfolios for institutional and retail clients. i said the trump rally. are you using the term or du see what we are seeing here as at something that started well before the election? think the words are --ganomics and trump nymex cs.mp nymex -- trumpanomi equities are now the driver. i think it is a new era. david: how are you navigating this new era? there is so much uncertainty therein. we are paying attention to .ashington and trump tower he picks his cabinet. hattie you navigate the uncertainty? rupal: that is what i do for a living.
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we look for things that we always look for, how to make money for investors and not to lose money for investors. our attention is focused on what the market is overlooking or misunderstanding and so when everyone's attention is on the u.s. market and we do not look elsewhere. as you noted, health care stocks have underperformed a lot and been behind in the rally and a lot of the good news seems to be priced into the s&p 500 and the bad news is into the health care sector. you know what my trade will be. david: let's dig into that a little bit more. a lot of people were worried with health care stocks regard to the affordable care act and drug prices. have you respond the -- explained the reaction? rupal: during the election campaigning, there are a lot of metrics and i think legislation has to get past about exactly how these things would shake out. i think that people have latched onto the hope of things changing
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and the fear of a lot of things changing, but they never materialize in the way people think. one of the big concerns is health care cost. what people focus on is drug prices, but they only account for 15% of the health care cost. 85% is in hospitalization of the system cost. if you really want to take care health care far -- health care cost, it has to be on the big stuff. within the small stuff, there are some companies that come up with innovative drugs, ,ife-saving drugs, like gilead a company that came up with it to your -- that is -- with a cure, that is the holy grail of medicine and it is life-saving. there are some companies that help people and others that raise prices for no reason other than wanting to make a buck. david: you mentioned gilead,
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what are others you are looking at? rupal: gilead happens to be the most attractive from a risk reward standpoint. smithkline you get growth and income because the earnings are depressed, just like johnson & johnson a few years ago. get the same table from gs k and you get a 6% dividend yield. another one is roche, a swiss and oncology cancer is one of the fastest-growing diseases. it is also a very niche disease. what roche does. this is a company you can get a 3.5 dividend yield and low multiples. there is a lot of upside you can get with very limited downside,
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great way to make money and not lose it. -- youthis is g #btv have the u.s. 10 year and you see a lot of companies levered on a lot of debt. what do you see when you look at a chart like that? rupal: it is a great question because if you think about markets, the focus is on earnings risk and volatility and very few people focus on balance sheet risk and the biggest source of balance sheet risk is underfunded pension and the debt -- andrporate america other corporate markets have gone on a binge. you already see the low bond -- d in the u.s. go to i think that sort of debt refinancing risk, debt service
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ratio risk is not factored into the stock market. we actually think the market will be very attentive to that next year and indebted companies are likely to underperformed and net cash companies are ugly to outperform. all the more reason to pay attention to balance sheet risk. david: let's look forward a little bit more. i wonder what the biggest risks you see are on the horizon. a lot of people say there is not an asset class not to driven by politics. what is the biggest risk you see in 2017? rupal: i think it is the things people do not pay attention to. u.s.is global rally in the financial stocks have gone up, including european financials and i think europe is not out of the woods yet, we are not out of deflation. we have not got the banks sufficiently capitalized. i think the biggest risk out there is that european sovereign risk still in the picture. italy just lost the referendum.
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this is a pro-reform referendum and the people voted against it. the very thing europe needs, which is change, the people who are trying to affect change are being voted out. i do not think it roads well. i would say european sovereign risk is a big risk, european financials are a big source of concern because if they correct a lot, there is a big portion of the benchmark. the biggest one i think is yet not on the radar of people is emerging-market bonds. emerging markets suffered in two ways, the protection of policies we are. .bout -- we are hearing about also, they have gone on a debt inch because they have been fortunate and seen the biggest reduction compared to any other industry in the world. you see the reverse happening and these companies have seen poor economic growth.
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they do not have growth, they have debt, they will not be able to refinance because you see the float out of that into equities. i would be afraid and stay away from em debt. david: coming up, a new memo by trump advisors said that energy policy could be up for a big shakeup and we will have details, next. this is bloomberg. ♪ ♪
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david: this is "bloomberg markets." time for the bloomberg business flash. coca-cola ceo muhtar kent handing control of the company to his top lieutenant, coo james
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quincey is credited with steering the company toward less sugary beverages. >> we have been one of the most iconic companies because we have one of the most iconic brands because we have always stayed with our consumers and we will continue to do that with the broad staple of brands we now have. continuing to drive revenue across the world, smaller packages, less sugar and more their events, -- more variants. will stay on as chairman of coca-cola. italy is close to finalizing a state act rescue come a solution likely to impose losses on shareholders and bondholders. the plan comes after the ecb decided not to extend the deadline for the lenders $5.4 billion capital increase plant has to end of this month. shares were down seven -- 10.5% in european trading. brazil's inflation hit the slowest pace in nearly two
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years. starting next month the benchmark consumer price index saw a 6.99% in the 12 month through november. the lowest since december 2014. that is the bloomberg business flash. -- mayds of change make be coming to u.s. energy policy. advisors to trump sent a memo to the u.s. energy department seeking information on research methods. covers energywick policy and joins us from washington, d.c. describe what this memo is, what was included in this five-page memo? : it includes a wide range of 65 questions about energy department programs, staffing, budgets. it also asks for very specific information that we are not sure how it will be used.
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for example, a list of all the names of any staffers or contractors who have sat in on climate meetings who played a role in shaping climate change policy of the energy department. that sort of thing. it is very wide-ranging and hard to make conclusions about what the intent behind the questions were, but it is an interesting window into the thinking of the transition team. david: let's try to figure out what some of this might mean. you say there is a request for a lot of personnel and contractor names. what would this transition team do with that? catherine: i can't say the energy department staffers i were mostn to unsettled by the request for names because there is a fear that people who worked on climate policy under obama could be targeted under the trump administration because some of the names who have been floated as cabinet members are very hostile towards climate change and environmental concerns.
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there definitely is a fear that these people could be targeted. it is worth noting that someone close to the trump 10 -- transition team said that is not the intent of the information request, that they simply want the names as a matter of transparent government. that they are just doing something republican lawmakers have been asking for for years. david: a lot of this centered on the prospect for nuclear power. proposed depository site in nevada for nuclear waste. what do we learn about what donald trump and his team might be thinking with regard to new your power? catherine: i think we were most surprised by how many nuclear power questions were in this. partly because there is not a lot the department of energy can -- really to help nuclear plants that are suffering because of low gas prices, which is the feel of many of the questions involving your power in the memo.
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although the department of energy cannot do a whole lot on nuclear power in terms of making it more competitive, the fact that the questions are being asked suggests this is a top concern for the transition team and this is something that will continue to come up. it has been a priority for republican lawmakers for a long time to make sure the mountain is the repository for any nuclear waste. president obama said no to the plan. i think we can say with confidence that will be an issue that continues to rise to the forefront. david: stepping back from the memo, how detailed were donald trump's plans for energy on the campaign trail? the we know a lot from the campaign literature about what he might intend to do? catherine: he has not said very many substances things -- substantive things. we know he would like to unlock shale production. we do not have a lot of concrete
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ideas about how he would make that happen. that is one of the things we are trying to figure out and the questions that were asked by the trump team suggest where they may try to go with those, but we are still waiting for clarity on these brought ideas he raised. ,avid: thank you very much catherine traywick joining us from washington, d.c. later today on "bloomberg technology" we are joined for an exclusive conversation to discuss the impact of the incoming administration trade policy on technology. the sky is the limit for rupert murdoch, fox reached a full or married you -- preliminary deal to buy sky. more on that megadeal, next. this is bloomberg. ♪ >> i think part of making a
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sculpture is to make everything yourself. it is not important that you get it done faster or it should be easier. >> connecting to his country, creating through his land and working with his hands, gave him the freedom he craved. >> i feel like a butterfly. i feel like i am fluttering .round i was the happiest i have ever like sixyou just spent weeks making one sculpture, that is a beautiful kind of freedom. ♪ david: this is "bloomberg markets."
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21st century fox agreed to buy sky for $14.1 billion. rupert murdoch is trying to increase his stock in sky for years. stocks -- both stocks scoring on the initial news. joining us is alex sherman. let's talk about the history here. alex: this may go back and people way limit -- may remember it goes back five or six years when the news of a world phone hacking scandal happened. at the time the company was called news corp., both fox and the print division as one company. at that point, they had just started to acquire a company that is the u.k. equivalent of today's sky. the politics around the merger were not good and rupert murdoch stepped back. from what we have been able to gather from reporting today, what led to this deal was a couple of other sort of larger
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macro events, brexit which --hed down the stock priced stock price on sky recently, they are not only the ukip's come our version of directv plus ,ontent and sports ownership but also there are units in italy and germany that have been combined this -- with this new newony, plus trump -- this company, plus trump's election. the markets have gone up and fox felt like there was enough market confidence that they can make a big move in a get penalized from investors. david: help me understand the motivations rupert murdoch has what would they look --. what would they like to get out of having this? alex: they own about 40% of the company already and it makes fox more global. now you have international content rights in addition to fox's domestic content rights.
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sports, soccer, sportscenter is popular in europe. you also have entertainment movie assets and you get a distribution. it is sort of a vertical distribution. i guess i should throw out one more macro event, which was at&t's acquisition of time warner. a distribution company buys content. here you are merging a u.s. distribution company and -- a u.s. content company and a international this tradition company that owns content. the same idea of vertical integration only in this case it is international. fox took a run at buying time warner several years ago. james murdoch who is billion -- very familiar with the sky operation and has been for many foxs has a larger role at that he did five or six years ago. to buyback -- and trying sky, people thought that was a
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more likely scenario then selling it off and james murdoch said publicly that this ownership of only 39% stake was probably not a long-term sustainable option. they were either going to buy or sell. today obviously the determination is buy. david: regulatory, a big hurdle? alex: probably not because they already own 39%-40% of the company. with the hacking scandal, look different story. david: up next, short seller andrew joins us, he tells us his later target the express company scripts. here's a look at the shares. this is bloomberg. ♪
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david: live from bloomberg world headquarters in new york, i'm david gura. this is "bloomberg markets." taylor riggs has the headlines.
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taylor: gary kuhn may be going to work at the white house. trump'sesident elected pick to head the economic council. he's been a goldman for more than 25 years. a top candidate to head the -- futuresmittee trading commission is calling for an overhaul of swaps trading regulation that he blames for fracturing global markets. j christopher giancarlo, a member of merrick -- the cftc says dodd-frank rules cause numerous harm to the global market. he says regular asians have taken trading away from banks -- regulations have taken trading away from banks and other firms. u.k. wants to stay in the emissions trading system once the brexit process is complete, according to a government official familiar with the matter. the program cap's greenhouse
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emissions for factories across europe. it's unclear if the eu will allow the u.k. to remain after brexit. jurors heard the concession of the man accused of gunning down nine black churchgoers in charleston, south carolina. roof was questioned after the shooting and said he planned to kill himself and changed his mind after no police officer showed up after the shooting. thursday, jurors were shown chilling footage of roof entering the church and leaving nearly an hour later with a gun in his hand. 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 bloomberg. taiwan is again a potential flashpoint in u.s. china relations after donald trump broke protocol by talking with the taiwanese president. they are reasserting its claim over contested territory. stephen engle reports.
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stephen: a red alert in the south china sea. fire off taiping island on the taiwanese coast guard quickly comes to invade. aid.m -- comes to its the crew abandoned ship, and we are right there with them in what is it real, the one that is critical to taiwan's claim to the largest naturally occurring island in the chain. taiwan is eager to show it is not an aggressor in the disputed waters. it is repurchasing the 110 acre island as a search and rescue center to assist in key uncontested international shipping lanes. alexis already of our country over the south china sea islands is a fact. want to show the international community would protect peace, show differences, defend free and safe navigation, and to defend humanitarian values. >> taiwan has been long trying to frame itself as a peacemaker in the south china sea. sovereigntyes of
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and i am resolved. that is the key fundamental issue. stephen: taiwan, 1600 kilometers to the north has held demonstrated control of taipei for six decades. china claims this rally is come along with 80% of the entire south china sea, march by what h line.s the nine das vietnam and the philippines also say this strategic islands belong to them. the hague could further destabilize the region witnessing a more assertive china. aging and taipei have dismissed the ruling is having a legal marriage. the wildcard is the threat of a more hawkish u.s. military under president trump. >> it could embolden claimants in their securitization efforts. it also embolden the united states and other major
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stakeholders to back up their policies with military action. stephen: taiwan, for now, is pushing a softer approach to legitimize its claim. they built a hospital with small solar will -- solar power plants. soew wharf, and the 100 or inhabitants, mostly coast guard personnel, raise their own food. >> taiping island is a self sufficient island, one that can sustain life on its own. stephen: the most dominant airstrip, this long and today's exercises designed to show the taiping island is more than just a rock in the middle of the south china sea. taiwan says it can serve and protect international trade routes through this very busy and vital part of the south china sea. news,n engle, bloomberg taiping island in the spratly islands. david: stephen engle reportedly is reporting from taiping.
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shares of express groups are rebounded after getting hammered following the call from andrew left, who tweeted the company is the culprit behind pharmaceutical price gouging. it's a charge express scripts denied. we talked to andrew left. 's 50%: specialty pharma of our drugs been, despite the fact that it's only 1% to 2% of unit volume. it's that spread and those rebates, and the profits of united by a source i'm questioning. not the company nor the analyst has ever broken up the difference between the pbm model and what they are making these other models represent in from simple companies. express scripts make off rebates on a high-priced drug, and how much of a keep for themselves? andrew: it's amazing. why would i have to answer that question? should they answer that in their
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filings? that's the whole idea. they should put how much they make on rebates, what would happen if there rebates get cut, this is not the thing that a short seller or anyone -- they should break out how much is coming from this division. 17.5% stock is down about , a big drop happened in january when health insurer anthem made public its dispute over pricing with express scripts. couldn't one argue that some of this concern about pricing is already priced into the stock? investors are well aware of the risk of regulation, etc., within the industry? andrew: you could say that if you want, of course, the price is trading there for a reason. but there's a lot more to go. through my experience in the stock market and shortselling for over 20 years, if a company does not disclose something,
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there's a reason why they do not disclose it. the fact that this division of the company is completely unnoticed -- is not the pbm part , is not what i'm saying. i understand the nature. it's a complete the different thing than their lawsuit with anthem. that's a whole other topic that could be discussed. when i want to know is in the role of specialty pharma and getting these drugs reimbursed from your clients, from the insurance companies, what is your relationship with the pharmaceutical companies in doing it? it's amazing, they are representing both sides of the business, but there's one side that no one discusses. and not one analyst today has actually broken out and said this is exactly how it's done. it's left to me and you playing guessing games on rebates. >> what led you to this conclusion? what research have you been doing that point you in this direction if the company doesn't really give that information? saw in the time
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magazine article this week with donald trump, when he mentioned bring drug prices down across the board, it's been adjusting to watch the past year, watching forth,ames, valiant, so just shoot him. but without actually looking at the whole system. with interesting about trump's statement is he understands their systemic problem. for some like me studying the industry, if you want to take care of a systemic problem, what's a good start? two words, express scripts. they are the gatekeeper to high-priced pharmaceuticals. andrew left, founder and executive director of citroen research, express groups denies the allegations that mr. left has made. moynihan, hisrian thoughts on deregulation of the banking industry. this is bloomberg. ♪
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david: this is "bloomberg markets," and david gura. let's head over to abigail doolittle for her chart of the day. abigail: we have a great chart of the day. 4695 and shows the financial sector since the election. here we see the massive divergence the financial sectors up about 18 since the election, the s&p 500 just up five. it doesn't quite compare to the financial move up. and we see this performance is
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also against the sectors, financial sectors since the election is up 18%. the next best sector come industrials up 9%. energy up 9%, to the margin of difference was really quite interesting, in terms of the big difference, the big outperformance. it is being driven by the massive move up in yield. we take a look at the chart of the 10 year yield since the election. 60 basis points higher, a huge move. most of it came during november. in november, this was when the 10 year yield put up its best, biggest spike higher in yields ever. just to round out the picture, one of the questions is whether or not the financial sector is overbought. we going to the bloomberg and 3433, thek at g #btv answer is yes, the financial sector is overbought. on the type we have the financial index once again, a big move higher, on the bottom, we have the relative strength index, well above 70 for much of the time since the election.
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many investors consider that to be a sell signal. morgan stanley did say they expect some sort of a pullback in the new year. morgan stanley would recommend buying any sort of dip in the financials if the sector does hold back. david: abigail doolittle with the chart of the day. time for the bloomberg business flash, the biggest business stories. we start with the u.s. government saying automakers will have a recall of vehicles with potentially deadly airbag a recall for the potentially deadly airbags might do,. only 12.5 million and leaders have been replaced. total electorate is boosting quarterly dividends for the first time in two years. g says distribution will be $.24, that's a 4.3% increase able to shareholders january 25. the ceo says the company is planning to increase the payout
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in line with the company's earnings. startups toking for counter the increase in smart is ramping upp venture capital investments to gain access to technologies for next generation cars. europe's second biggest automaker will invest through its business live unit with $107 million in starting capital. that is the bloomberg business flash. u.s. banking officials have a keen interest in what donald trump will do in terms of deregulation in the industry. once he takes the opposite president. and ceoamerica chairman brian moynihan appears on tonight's "charlie rose," and provides his take on the president-elect. >> i think all of us in the industry are trying to interface in trying to be helpful. trump? you think of >> i don't know him personally. when he represents is a belief that we have to drive growth and
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drive this company's success. they played well in the election cycle. --e our job is a company? what is our job as a company? the guy whoe we had played king george in hamilton. tough, but that one in 1800, our company was here. our job is to make the country successful in the president successful. we're going to work to try to make it happen. i think there's a lot of work we can do. do these equal stimulate growth? -- he do that you think will stimulate growth? is it trade? is it the stimulus package to my get congress to pass, a republican congress of both the house and the senate? >> if you think of what people are pointing out to that enthusiasm, it's probably the three basic tenants, tax reform. lower rates in the repatriation
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of dollars from outside. that's one. the second element is regulatory balance, having a fair interchange across all industry for the cost-benefit of regulation and smart, responsible regulation. -- there'ss really an enthusiasm and an idea that it's ok for a company to be successful because it's tied to adding workers and growing. that's been something that's not been talked about that much. believe a 4% growth in the gdp is possible? >> are experts are 2% next year. getting from 2% to 3%, let's do that, then we will worry about from 3% to 4%. >> etiquette should have a strong goal, but we have to make sure that you happens. last year we had 2.5%, we ended up in a one percent high.
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this is a big economy. as in $18 trillion economy. if you get five times bigger, six times bigger than germany, 2% toat engine turns from 3%, let's bigger than most economies in the world. i worry about making sure he doesn't go backwards. >> the tpp, was that about trade deal? -- a bad trade deal? >> think history will tell us. tva went through, so the concept of a bilateral stuff -- there's more power in the executive branch. it's really fascinating is this place through. the debate on tpp, the experts have it. >> republicans have been in favor of free trade. >> the business roundtable, we're all trying to get trade past, is generally good for america.
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it just gets lost in the job relocation question. wrong? -- was that wrong? those people opposed tpp, are they right in saying trade deals hampered jobs? >> you can get experts on both some -- both sides to come to conclusion. yet to think about the globalization that's occurred. you can't pull that back. at the end of the day, we have to be competitive and we have to find the jobs we are going to one -- to run on a global basis. david: get more of brian moynihan's conversation tonight at 6:00 eastern on liver television. coming up on "bloomberg markets," the chairman and ceo of pvh, one of the largest global apparel companies and licensors in the world. his outlook for retail is the holiday shopping season gets underway. and big-box retailers come up
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with a new way to ring money out of the small towns in which they operate. this is bloomberg. ♪
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david: this is "bloomberg markets," i'm david gura. big-box retailers have come up with a way to reduce taxes, they're calling it the dark store theory. shannon pettypiece joins us. what is the dark store loophole? shannon: that's what opponents of this call it. that asentially arguing relatively new open store should be valued for property tax purposes the same as an abandoned or vacant store, sometimes hundreds of miles away. what happens is retailers build a new store that costs say $10 million and typically property tax appraisers would appraise it based on how much it costs to
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build and how much the land is worth. years, and itve really aggressively lately, retailers and arguing you should be using comparable sales of our vacant stores in all other parts of the country, making this argument in court. the difference between the two can be drastic. sometimes big-box stores sit vacant for years, i have restrictions on that that prevent competitors from coming in. the prices can be very low. you can have a store the cost $10 million to build and sells for $3 million. that difference in property taxes amounting to a big budget problem for a lot of small towns. opponents called the dark store loophole. we talked to the lawyer who negotiated the legal framework kindness. what did he have to say in defense of that? lookon: while it might like why should a vacant abandoned to target be used as a thatrable sale to a lowe's cost $10 million to build, he says the value of the property to that particular owner is not
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the same as it is to anyone else. if you buy a suit and have a tailored specifically for you, it has value to you. it has no value or very little value to me. that's the argument that he has made. a judge in michigan agreed with it. that's what caused this to catch on very popular in michigan and other states the judges have ruled differently. it might only be a matter of time before they find it judge that agrees with them. david: what you do tell us how weighare two things that on these towns. they're not getting as much in taxes and wrestling with paying huge legal beagles -- huge legal bills to fight these stores. shannon: whether you agree with the strategy or not, i was interested in the application and impact of it. for these small towns, in marquette, michigan that spent over $100,000 arguing over this in court. it was another town about three
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hours away it is facing $100,000 legal battle with walmart, they could lose more than $200,000 a year in property taxes from their walmart. as a result of this, either cities go and fight and spend ort $5,000 -- $50,000 $100,000, or they settle and try and reach a compromise and keep it out of court. way, it's forcing them to cut everything from police and fire budgets, animal shelters, city meals. in marquette, they closed a group home for boys and put off park improvements. the fire chief wanted to buy a new fire truck to replace the 23-year-old one and that he just and have the money after the $50,000 year budget cut. david: i wonder about the balance here. a lot of these towns have been depressed.e been these stores offer a lot people live there. how does the anger balance out with the fact that they brought
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in economic activity? may have to worry about scaring off other big-box retailers. you did an important point, in the united states, the consumer economy is the driving force of the economy right now. in a lot of towns, they lost other industries. the city i mentioned are a mining and lumber interest community. the just lost the mine. other areas lost the manufacturing base. retail and big-box stores for a lot of places, this is the main thing they have going for them. when they lose this property tax revenue, it really hurts more than it would have 30 years ago when they actually had an industry. david: what do the companies say to you when you talk to walmart or lowe's about this? shannon: the companies say we are willing to pay our fair share. we value the communities we are in. but they don't want to pay more than their building is worth. they have a responsibility to shareholders to maximize profits and if they feel they are paying
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too much of property taxes, that's a way to do that. david: shannon pettypiece, joining me in new york. read her story in the latest issue of bloomberg businessweek. you hear more every saturday and sunday on bloomberg television. coming up on "bloomberg markets," martin crockett -- discusses a $14 billion deal. you can see that interview at 2:30 p.m. wall street time. this is bloomberg. ♪
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scarlet: i'm scarlet fu. julie: on julie hyman. welcome to "bloomberg markets."
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scarlet: we're live, covering stories out of california, london, and vienna. reports say the donald trump wants goldman sachs'ceo gary hn.ldn -- gary ku rupert murdoch appears to have finally won his long-running battle to take complete control of britain's sky tv. raise seriousay questions about competition. and more pain ahead for goldman's ear, or is the recent downturn a passing fad? we talked to frank holmes. u.s. markets close in just under two hours. abigail doolittle is keeping track of the gains. it's been a record week in terms of where the records are going to close. the trading action can
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be summarized into words, record high. on dow s&p 500 and nasdaq peak for record closes plus all carving out new intraday record highs as well. lots of strength for the u.s. stocks. when we take a look at some of the losers, we have dilutive holdings, the apparel maker. they lower the full-year forecast and chairs are certainly down by quite a bit, nearly 22%. on face with her worst day ever. restoration hardware, the furniture retailer is lower and they cut their earnings forecast , full-year earnings forecast by as much as 33% below where it had been. skyworks solutions lower on a downgrade. despite the record highs, we do have some weakness here. todayr stock that is weak , piper jaffray shares are trading lower on a report that the star analyst from apple is
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set to leave the firm, starting a new venture capital firm that going to invest in virtual reality, among other things. turning back to record highs, when we happen to the bloomberg and take a look at g #btv 5267, this is a longer-term chart of the s&p 500 in white and yellow, the s&p 500 trailing 12 month price to earnings ratio. both are just climbing sharply higher. this move up in pe at the highest levels since 2010. there are some investors that think that this high price to earnings multiple, high valuations suggest that the momentum we are seeing in stocks and the record highs may not continue. scarlet: thanks, abigail. still some investors who say that valuation is well worth it. let's check in on bloomberg first word news. emma chandra has more from the newsroom. emma: president-elect donald name aheadpected to
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of the interior department, according to multiple reports. mcmorris rodgers has served five times in the house and his vice chair of the transition team. goldman sachs president is the top president candidate for national economic council director, according to people familiar with the decision. manageroston red sox bobby valentine is a candidate to be u.s. ambassador to japan. that's according to boston radio station weei. donald trump is getting intelligence briefings about once a week, according to a report by cen, setting a u.s. official of knowledge of the situation. mike pence is said to be receiving the briefings on a daily basis. defense secretary ashton carter says the u.s. will stick with afghanistan for years to come, speaking at a joint appearance during the afghan president. >> we not only continue supporting our afghan partners,
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but continue our counterterrorism mission well into the future, to ensure no terrorist group can seek safe haven such that it can threaten the stability of afghanistan, of the u.s. homeland, or the coalition. emma: this was carter's last trip before handing off defense department response abilities to his designated successor, retired general james mattis. gatlinburg, tennessee has reopened to the public after wildfires killed 14 people and damaged about 2500 buildings. prosecutors have charged to two juveniles with starting fires within the park the later spread. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm a much andra, this is bloomberg. -- i'm emma chandra, this is bloomberg. julie: welcome to the new
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abnormal, among their predictions, monetary policy will give way to fiscal policy, global institutions will be challenged, and new trade deals will be abandoned. for more on the shifting landscape and how to position your portfolio, we are joined by michael. normal was what bill gross famously termed the previous time we were in. how would you characterize the new abnormal? ishael: the new abnormal addressed by monetary policy giving way to fiscal policy, tax reform or structural reform, and interceptor spending. it's a real recognition that monetary policy, which has been the single tool used to try and change the new normal has lost its luster reached its limits. it's a really knowledge of the things need to change, which is why these policies are starting
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to come into place. it's been out 10 years in which we been using monetary policy is the sole tool to change the new normal. that's an important difference. it's been talked about. fed officials for a long time have been saying it's not just on us. you guys have to step up to but politically, it hasn't been able to happen. they're are having a similar conversation europe now, but they don't seem ready for the fiscal policy piece over there. do you do what we are seeing in the u.s. is going to be spreading around the globe? do.ael: i i think the sea change. even if you saw what mario draghi did this week, sure, they extended the time which they will do quantitative easing, but they began to reduce the amount they're going to be buying. he did his best to say this is not tapering. but in fact, they're starting to back away a little bit for monetary policy. whats going to happen is will come in his fiscal reform. it needed to come in. this is a real seachange, and
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that's what we're calling it the new abnormal. scarlet: do we know when a shift from using monetary policy to expansionary fiscal policy looks like? is there historical precedent? michael: that's what we are describing it as abnormal. we don't know what to expect. that withe contradictory forces. on the one hand, i do believe that if her structure spending, structural reform like tax reforms are progrowth policies in the near term. we contradictions are, if have tougher immigration policies, trade restrictions including tariffs, the u.s. dollar continues to strengthen, widening the deficit, that's all likely to keep growth limited, a ceiling. from our perspective, it's abnormal. ,n terms of physical spending every administration since jfk has passed fiscal reform in the first two years. that's not abnormal. it's just where we been coming from that's the difference right now. where does this leave
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the international institutions that had called so many of the shots or set the tone for the last eight years or so? the imf, world bank? michael: the policy community. i think policy committee will continue to be under attack in terms of they don't necessarily have all the answers. monetary policy is the singular tool change growth. from our perspective, monetary policy is good at moving growth around. pulling it forward in tough times in pushing it out when he gets too hot. but can't change the growth trend rate, uni changes in population and technology. in the new abnormal, we're going to try a lot of different policies to change that trajectory. julie: let's bring it to markets. the scenario you are describing sounds like an uncertain scenario. it is ground that we haven't been on before. and yet judging from the markets, the rally we are seeing in stocks, the vix dropping precipitously, it doesn't seem like there's a lot of nervousness.
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should there be? michael: the market is definitely pricing in a sizable over structure plan, major tax reform, i think what's going to happen, this market is likely to continue to rally throughout your operation they -- through inauguration day. aree going to find out what their priorities, how big are the packages going to be, and what are some of the friction points? democrats pushhe back, how much will the fiscal conservatives within the republican party push back on what they are trying to achieve? my sense is some of these will be less than folks are anticipating. the other thing we're getting a stock prices right now are pricing in very solid earnings growth. we're going to find out around that very same time with her fourth-quarter earnings will support these stock prices. scarlet: how you position yourself for these possible missed expectations and his appointments? michael: three things we're telling investors to be focused on. income at reasonable risk, position portfolios for
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reflationary environment. we do believe that if a structure will push rates and inflation with an upward bias. and portfolios are not necessarily positioned to start pivoting towards inflation. the last one as we do expect some bouts of volatility. look to mitigate your portfolios for some episodic bouts of volatility. scarlet: seek income at reasonable risk. where is the income and what level of risk is reasonable? michael: our view is with rates backed up about 1% since the summer, rates have moved higher, but they are still very low. and real rates, once we take into consideration inflation, are incredibly low still. investors are going to need income. it's expensive in many different places. from our perspective, you're going to need to continue to look towards dividend paying stocks, for example. or we see a lot of folks moving towards bank loans. if you had high yield exposure,
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that's done quite well. spreads of narrowed. but we are getting to the later stages of economic cycle and the later stages of the credit cycle. andnot shorten the duration interest rate risk in your portfolio, move up the capital structure, and maintain competitive income? to us, that's reasonable given the risks. julie: what is the biggest risk in making sure you are low duration? what's happened is portfolios, there are two things that are really overweight or over allocated in today's investors for folios. so, the last decade or about $650 billion is coming to either foreign mutual funds 3gs 110 year treasuries have been a 2% or lower. in thing is that bond proxies, stocks that are correlated or move in tandem with moves in the 10 year treasury, at the last cycle peak in 2007, they represent about 1% of market cap. today is closer to 20%. utilities, staples.
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our view is that there's a lot of unintended interest rate sensitivity and portfolios. you need to start transitioning away from that. one way to do that is to think about late stage of cyclical parts of the market. that will benefit from inflation , higher rates, and if her structure spending. industrial, technology, materials companies. ,carlet: michael arone talking about how to position yourself right now. julie: coming up, the fed meeting is just days ahead heard. this is bloomberg. ♪
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scarlet: this is "bloomberg markets," i'm scarlet fu. julie: i'm julie hyman. the set is meeting and people are saying it's a sure thing. but overseas, stimulus is still in vogue. bloomberg "daybreak america's," ellen zener discussed central-bank divergence. >> what we saw from yesterday was typical consensusbuilding among monetary policymakers. in order to get that strong consensus that drug you talked about, you have to make compromises. the compromise is overall and implying more to even before, at a slower pace. something for everyone. in theeen with the said u.s., as they continue to try and move towards the exit, there's still some holdouts the don't want to raise rates further. how do you bridge that gap?
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when you do make strong decisions about monetary policy, next week, to raise the federal funds rate, you want to be sure it's unanimous. >> let's talk about the asset bridges program. you lived through 2013 taper down, your experience, stock versus flow. is just going to get bigger and bigger on the balance sheet. the flow, the monthly purchases, that pace is going to slow down. what's more important for bond markets? policywhen monetary maker will tell you, it's the stock, not the flow. any investor will say it's about the flow. in the u.s., if you look at measures such as the line offense shadow fed fund measure they use to put out, it clearly shows that tapering was tightening. the ecb may run into this, where they think it might be easy to take baby steps toward that and find it's much more difficult, which was the u.s. experience. , and: we saw this happen
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it felt like the g-20 got together in china and said we are nervous, let's get it back together. are they getting nervous? what is the danger of a stronger dollar and a weaker euro for the u.s. economy? for the u.s. economy, investors are encouraged at the prospect for fiscal stimulus. that results in a higher rate of growth for the economy. higher inflation, stronger monetary policy response. but what else happens? .he dollar soars not just because there's trade major uncertainty, and so trading partners currencies begin, but also, is reflective of investors expecting a better fiscal policy outcome for the u.s. we've seen in the past that stronger dollar, faster pace of appreciation has created difficulties, particularly for monetary policymakers who are looking for inflation to move back towards goal. is how theyuestion
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responded to any potential fiscal stimulus that comes down the pipe. how they respond, is one thing. how the forecast is another. this is the classic summary of economic projections, the things everyone goes to, where every fed official is, and where the market is right now. the red line is where it was. where it is now is the blue line, almost bang in line with the federal reserve. will we see them push their line higher? ellen: absolutely not. janet yellen was clear it's too early to take on fiscal policy assumptions. take on bird in terms of what it means for the forecast. reiterated that earlier this week. academics, these monetary policymakers are the last that will take on board some kind of fiscal policy assumption. we know that we could get fiscal stimulus next year. that's all we know. it's much too early for policymakers to make some assumptions about what can be
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delivered, what can be deficit funded, and how that might translate into the outlook. if you look at the bush tax cuts in 2001, it didn't -- it was quite some time for policymakers let another forecast. we expect almost no change in the immediate term growth forecast next week. ,carlet: that was ellen zentner morgan stanley chief economist speaking earlier. julie: has fox finally got its hands around sky tv? the latest on how the proposed acquisition could shake up television in europe. this is bloomberg. ♪
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scarlet: this is "bloomberg markets," i'm scarlet fu. julie: i'm julie hyman. rudyet: cnn reporting giuliani is ruled out for secretary of state. according to cnn, rudy giuliani likely not to be chosen at all times very of state. that leaves a seven or eight
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other candidates, the field has gotten wider in the last couple of days. seems like the decision-making is accelerating in terms of other x. we'll see. it could happen to minutes from now or two weeks from now. scarlet: meantime, let's look at gold assets in boy on back exchange rate funds. they contracted for a 20th straight day as of yesterday, of longest stretch since may 2013. our next guest says it's a passing storm for gold. u.s. goldes's ceo at investors. great to see you. extra coming in. -- thanks for coming in. why is this just a passing storm? frank: the decline in gold is similar to last year, it fell 18% and that had a surge at 24%. fomc next week, you had this big decline.
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and then you had a massive rally. -- you had this year, rates have risen. last year, and strays were positive, and when they went negative, gold rallied. they are still negative, creeping back, so gold has declined. nextsay will rally in the six months. historically in the past five years, we had a 7% rise from this point until february. basically, chinese new year is that the. if you look at other factors such as the commercial trade sector in the commodities pitch that davis does, we are at an all time important factor that says we can expect a 16% rise over the next six months. i think it's a crowded negative trait. if you are comparing it to last year, the difference this year is that rates have really taken off in a more decided fashion. the dollar has taken off in more decided fashion now. what makes you think all of this
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is going to reverse? besides looking at historical patterns, what makes you think it's going to reverse? inflation. we believe the markets are underestimating inflation by 30 to 50 basis points. and that's the real key factor here. if you look at standard deviation moves and the use of the bloomberg terminal, you can look at the oversold, it's down to standard deviations, over 63 days, down to standard deviations. the methodical probability of a rally between now and february is extremely high. scarlet: you think the markets are underestimating inflation. yes, inflation is going to be higher, just like they underestimated last year when inflation was going to be and then we had a drop in rates. what happened last year is negative registry -- select one goal hit 1900. the tenure government bond was -300 basis points. and then quietly, because fed funds with zero, real rates went to plus 200 basis points.
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that's 500 basis point swing took gold down almost $900. now we are still fluctuating back with negative interest rates. scarlet: we will start to see people price in the idea that inflation will surpass the movement of the dollar. julie: looking at gold getting ready to close out its fifth straight week of losses. deutsche bank settling u.s. charges against spy or to manipulate gold prices. banks thate of five was sued by investors. does this have any impact on the price movement of gold? there's always my thought process of conspiracy. it's a profound case. we had a settlement on silver, and the market place now is gold. what happens is in the first week of october, china is now the biggest consumer gold, on holidays. the futures market, where you can leverage 25 to one all of a sudden, gold got knocked down in the hit trigger points were created a cascading. they did this in 2013, this argument is that they come into
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the capital markets when the big buyers are to there. gold is the fourth most liquid asset in the world. it is money. it backs currencies. i think it's interesting that the suit came out, and now the lawyers want to come back and try other cases. scarlet: frank holmes, thank you for joining us. frank is the ceo of u.s. global investors. julie: still ahead, we look at other commodities in the commodities close. here's a look at oil ahead of the opec talks with non-opec producers as we can in vienna. we've been seeing it strengthened today. this is bloomberg. ♪
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scarlet: this is bloomberg markets. i'm scarlet fu. julie: and i'm julie hyman. let's get the latest from the
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markets. >> one of the big stories from today is still water mining is being acquired for $2.2 billion, this as we're starting to see a recycle of m&a for the miners. and we take a look at a bloomberg world mining index. we see this year just a huge gain up nearly 46% on the year as we have seen a rebound in many of the commodities. it has been a good year, but just in perspective, the miners have really outperformed. gb-tv. a look at we see down here on the bottom, that's the bloomberg commodity index up about 12% on the year. but the mining index in white outperforming, against up about 46%. a good year for the commodities but a great year for the mining stocks. now one reason recently that we have had gold coming under pressure is the dollar. we see the inverse relationship when we take a look at the chart here. and there we have the dollar
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rising and gold dropping. gold is still higher on the year, but the big question is whether or not gold can rebound, as you all were just discussing. and we take a look at yet another chart. this is 5218. and on top we have a five-year descending trend channel with gold. we see that gold is starting to hit the support of the middle of that channel and perhaps suggesting the idea that gold can rebound on the bottom. we have the r.s.i., the relative strength index, and it is in oversold territory, well below 30. but it appears to be creeping back higher, so perhaps as you were just talking about with the last guest, perhaps there is some strength ahead for gold. julie: now to the big media story of the day. rupert murdoch's wish to get full control of sky may finally come true. 21st century fox has reached a deal to acquire the rest for $14 billion. shares of fox initially surged on the news. since then, however, they've come down.
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are investors skeptical a deal will be completed? joining us is our guest from washington. he has a market perform rating on fox. thank you so much for joining us. >> happy to. julie: so this is a deal that is a long time in the making, of course. 21st century fox or what was newscorp tried to acquire sky several years ago, in part because of the tabloid hacking scandal in the u.k. >> right. julie: is the deal actually going to happen this time around? >> well, i mean, time will tell. you know, i think that there clearly are still political sensitivities to the murdocks. but a lot of time has passed. a lot of political kind of damage is really behind him now. i mean, james is fine. they no longer have the newspapers. it's a different government. and i think fox is moving now because the stars have aligned to make the asset a lot cheaper in many ways.
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the pound is down a lot. sky is down because of concerns about the economy and brexit. so in some ways it's opportunistic. and it's interesting, too, that this comes at a time of at&t trying to buy timewarner so maybe content fits together and you get more value from that. you know, i think this has sparked more debate and consideration of that point. scarlet: glad you bring that up. because, of course, regulators here in the u.s. need to scrutinize that deal and give it their blessings before that can move ahead. in the u.k., department of culture for media and sport. taking a look at fox and sky. are they more likely to be stringent than, say, the u.s. d.o.j. or f.c.c.? >> well, look, i think that you have different regulatory regimes, and different standards. and so you know, i'm not going to say which one's going to be easier or tougher at this point because that's not really my wheelhouse. i would say that the last time
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through, you know, fox had this in the bag until the phone hacking scandal. it became more of a political issue and an issue of was there any corporate malfeasance? that question is now behind them. so it would seem to be better positioned now than it was before and it nearly went through before. julie: is fox a more attractive investment with all of sky under its ownership? >> well, look, i think that that gets to the question of whether there's incremental value from putting content together. and maybe. it depends on how much freedom the regulators give the companies to differentiate things with their content. i think in the u.s. we thought for a long time there was going to be really no flexibility. with the new regime, it seems like maybe there will be flexibility. and that's why at&t-timewarner looks more attractive now than it did maybe before the election. in the u.k., it's less clear what the restraint will be.
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but if we liberalize in the u.s., that might flow to the u.k. there's also this idea that you need to get more direct to the consumer. and sky is a brand, sky is a company with expertise in selling direct to the consumer. that might be something that fox could import to the u.s. so i think for strategic reasons, it could be interesting. you know, financially i think they're moving, you know, at a time when the price is in many ways more attractive than it could have been. i think they're moving before interest rates go up for a deal that will have a debt component of it. you know, so i think it could make sense. there's going to be some tax benefits as well to combininging these two. financially there could be a dent argument for it. scarlet: also financially though both sides have been paying up a lot for sports rights. fox in its quest to compete with espn. and sky, of course, has done the same with european football, european soccer. does that concern that you they're both coming in and paying up at a time when it seems like viewing patterns are
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changing, there are declines in that field? >> well, you know, it's an incredibly interesting question that gets existential for the whole sector. yeah, sports rights are a real problem. you know, a cost pressure. you know, the -- you know, i think that the video bundle that directv is coming out with, it's a no-margin bundle, a description package. i think the idea is evolving in this industry where people are using the other ways to make money off of consumer relationships. maybe content helps you sell more cell phone, more broad band. you might need to make money in different ways. and you know, so the value of content might be something other than just how much p&l you can draw from it directly. julie: now, james murdock, i believe, is the chairman over at sky. what does this proposal say about sort of the murdock dynasty, if you will?
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i know at various points in time the various children wax and wane in power. does this have any implications for that? >> yeah, i mean, there's no waxing and waning. i mean, the kids are running the company now. and i think that james used to run sky, and so by buying sky, you know, it certainly makes him more important, as if he wasn't already incredibly important to that company. so this is a family-run company. i think if you look at companies that could be bout, you know, this -- box is a buyer, someone that will not be bought and someone that's going to be doing buying. and this is their deal to get into it. julie: thank you so much. this is really helpful perspective for us. let's check the headlines and the news at this hour. here's more. >> more news on president-elect cabinet at this hour. cnn reporting that rudy
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giuliani is out of the running for secretary of state. meanwhile, donald trump is planning to meet with republican presidential primary rival carly fiorina. the two clashed frequently during the race for the white house. some think she is being considered for a cabinet osition. president obama has told intelligence agencies to investigate hacking attacks linked to the election. the report will examine what impacts hacking by russia may have had. meanwhile, senate republicans will conduct a similar probe. senator john mccain tells "the washington post" there's very little doubt that russia interfered with the election. president-elect donald trump has downplayed talk of russian involvement. the south korean president impeached today over an influence-peddling scandal. at the national assembly in seoul, lawmakers voted overwhelmingly to remove her from office.
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the first female leader later offered an apology. >> this afternoon, parliament passed the presidential impeachment motion. i deeply apologize to our citizens for causing such a big national confusion amid national security and economic concerns due to my carelessness. >> she is suspend fred power with the country's prime minister assuming leadership. the constitutional court now must ratify parliament's decision. that process could take as long as six months. and space hero and former u.s. senator john glenn will lie in state at the ohio statehouse and a memorial service is being planned at ohio state university. the date and time is still being worked out. but the public viewing and other services are expected to take place early next week. a burial is being planned at arlington national cemetery near washington. in 1962, he became the first american to orbit the earth. he died yesterday at the age of
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95. global news 24 hours a day powered by journalists and analysts in more than 120 countries. this is bloomberg. scarlet: thank you so much. goldman sac's c.o.o. may be heading to washington. who stands to benefit? should he ultimately join the trump white house? we'll discuss. this is plerg. ♪
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scarlet: this is bloomberg markets. julie: the trump transition moves forward. goldman sachs president is said to be named the president-elect's national economic counsel director.
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he has spent more than a quarter century there and his departure could have a number of implications for one of wall street's top banks. joining us now is a reporter who covers the banks for us and also on the phone is bloomberg contributinged tore and author of "money and power." bill, i want to start with you. thank you so much for joining us. before we get into sort of the implications for goldman, maybe can you set the scene for me. what is it can goldman and washington? we don't hear about j.p. morgan or bank of america or wells fargo or some of the other big banks in the u.s. getting this kind of currency in d.c. that goldman tends to get. what's the deal? >> well, i think if you want sort of instant credibility on wall street and with the financial markets, there's really no instant brand that you can recruit to your team that makes that point better than hiring people from goldman. and when you add to that the fact that there's this long tradition of public service at
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goldman and that they tend to push people out. now they didn't in gary cohn's case, but they tend to push people out after seven or eight years being partners and force them to sort of do other things, and many of them want to do public service. so it's kind of a natural fit. but no other firm really has the cachet that goldman does when it comes to doing this. scarlet: has gary kohn been looking for an opportunity to spread his wings? as c.o.o., he would be next-to-in line to attend to c.o., if he steps down? >> that's right. gary has been looking for quite a while to spread his wings. he initially thought years ago that that would be into the c.e.o.'s job when lloyd stepped down. nd you know, lloyd last year went through treatment of lymphoma and there was some question about whether he'd be able to return to the job. and gary really stepped into lloyd's shoes there and saw a lot of clients, did a lot of
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the public speaking. and so there was a question of whether lloyd would step down after his treatment was done and maybe gary would get his chance. and since -- lloyd hasn't basically. and lloyd seems to be back in good health and back enjoying the job, and so that, i think, was a signal to gary that hey, lloyd's going to be here for a while and maybe i need to look elsewhere if i want a top job. julie: so what does this then mean for the leadership over at goldman with cohn -- we haven't confirmed, obviously, but presuming he's not going to be there any longer? >> i mean, this is big news at goldman. i mean, gary was the heir apparent and has been the heir apparent for the last 10 years. it's clear though that lloyd wasn't going anywhere, and he was happy being back in the job . goldman's stock has had an incredible run in the last month. it's up near its all-time high
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or at its all-time high. and by the way, as we know, existing c.e.o.'s tend to somehow reach down at goldman into the organization to pull up the next generation and gary was only five or so years younger than lloyd. i'm quite surprised that he would, after putting in his 10 years, would want to go this route. obviously, there probably is a tax benefit for him by going into the government and what he can do with his goldman stock. but this really creates an opening for the next generation at goldman, and we all know they have a deep bench and so they'll fill it. scarlet: so what exactly will gary's role be at the n.e.c.? can you tell us more about the job, the contours of the job? >> yeah. i mean f. he gets the job that we think he's going get, it would be chair of the n.e.c. and so from what i understand, that is largely an advisory role to the president, to the cabinet in some respects. you know, advising on markets,
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on the economy, you know, maybe not wall street specifically, but certainly you know, policy implications and you know, it's an advisory role. julie:, bill, there's been a lot of talk, of course, since the recent appointments by the incoming trump administration about the rising connection, one could argue, between the business community and wall street specifically. and the administration, despite some rhetoric to the contrary on the campaign trail. what's your take on that? i was talking earlier and there was a distinction between active and former wall street and then folks who are business but not wall street. >> well, i mean, look, one thing that -- donald trump is a deal guy, right? and he has surrounded himself with other deal guys. especially on the economic front. mean, he has deal guys.
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they've been loyal to donald trump so, they get rewarded. gary kohn brings sort of the instant prestige of the president of goldman saks coming into the organization and national economic council, which was a job that bill clinton created for another goldman senior partner, bob ruben in 1991. julie: if i can interrupt you for just a second, you talk about this instant prestige of goldman. but didn't trump work on the campaign trail to distance himself from goldman, ridiculed ted cruz for his corrections to the firm through his wife? >> yes. and that's another one of the ironies of donald trump. i mean, donald trump was a person that goldman would never do business with, stated publicly that -- or stated that they didn't want to do business with him, never did do business
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with him. but you know, he is an enigma. and he obviously wants affirmation in some way and goldman gives it to him. but you know, the incredible thing also is how the tone has changed so dramatically in one month's time. we went from never having anybody from goldman getting anywhere near washington to now donald trump surrounding himself with all these goldman people. scarlet: that's a really good point. bill mentioned that this position was created by former president bill clinton who appointed robert ruben to the chair of the n.e.c. he went on to become treasury secretary. do we know anything about gary and his political aspirations? is that something that he wants to do, become treasury secretary? >> very good question. as opposed to lloyd, who has been a little bit more up front with who he supports, you know, he's come out and said he thought hillary would be a -- hillary clinton would be a very good president.
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gary has kept his cards much closer to the vest. both in terms of the candidates that he supported and any political aspirations he might have. so we don't know per se or i don't know, i should say, but you know, he'll get into the n.e.c. job. obviously, there is a path to go on to bigger jobs, like the treasury secretary. and i think it will just depend on probably how well he gets along with donald trump and how uch he likes the n.e.c. job. julie: a lot of unknowns at this point. >> that's right. ulie: thank you so much, guys. thanks to you both. scarlet: coming up, we're going to speak about trump's impact on biotech. this is bloomberg. ♪
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scarlet: this is bloomberg markets. one of the industries most affected by the trump presidency is health care. what would the effects be? michael mussallem was asked what changes are coming from his perspective. michael: it seems as though obamacare is going to be certainly, some kind of change that will be dramatic. i don't think it will be completely disassembled. our business in many ways is less likely to be affected in a big way. many of our patients are elderly and already on medicare, and that's not likely to change. what is likely to change maybe is what has been a tax on our industry. there's been a medical device excise tax. that's cost our company around $to million a year. right now it's suspended for a two-year period. that's scheduled to come to an end at the end of next year and we'd throuf see that become a
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permanent peel. >> we haven't heard that one before. what about the mcfadden approval of devices? because that must be important to you. we heard a name, jim o'neil, who is an associate. how could that affect your business for the better or for the worse? michael: you know, one of the things that businesses like us really like to have happen is to allow our innovations to get to patients. there's quite a substantial structure that's in place between mcfadden and also c.m.s. to guard against bad actors and so forth. and there's been a lot of discussion of dismantling some of that. some of that bureaucracy actually slows down the pace of innovation getting to americans. and so we look forward to that being a real positive development that happens along the way. there's a bill that's actually moving through congress right now that's passed, that's likely to be implemented called 21st century crures. >> let's turn specifically to your business, which is largely has to do with replacement of valves.
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many of which are in catheters. so it's not open-heart surgery. you've been growing quickly, but can you keep up that pace? michael: well, the growth of that business has been spectacular. so our company was founded with heart valves way back 60 years ago, and we're the lead ner surgical heart valves. but this new technology that allows heart valves to be replaced without opening the chest and without stopping the heart has really been remarkable. the growth that of business has been more than 30% this year, and it's approaching $2 billion in size. and so it's significant. it's going to grow slower next year, but in our stilt ks it can still grow at 15% to 20%. >> i think why q before 3 -- michael: this is natural. but our projection is, today there's a market that's about $2.5 billion. we expect that to be more than $5 billion by 2021. >> you're also moving into mitro valve. how safe and secure?
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where are you on that? michael: it's still early in that development. there are many patients that suffer who regurgitation. there's other valves of the heart affected as well. we think it's possible to bring catheter-based technologies to that as well. we have almost six initiatives in humans at this point that will be pointed at doing exactly that. >> and that eye a bigger business? michael: potentially. but it's early and we have a lot to learn about what it takes to help these patience. scarlet: that was michael mussallem. julie: coming up our guest is the c.e.o. of a clothing giant. we'll be right back with him. this is bloomberg. ♪
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julie: it's 3:00 p.m. in new york. 12:00 pk p.m. in san francisco. and 8:00 p.m. fm conscious p.m. in london. scarlet: welcome to bloomberg arketings.
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julie: we are live from bloomberg world headquarters in new york for the next hour, plus covering stories of out of chicago, italy and china. stocks trying to extends their record highs so far he had seem to be on track to do so. consumer staples and health care lead the gains. then we'll be talking to manny chirico. head of one of the world's top rats. g klahn glom how donald trump could impact the retail bills. and the you a knewity company goes public. we'll hear how apollo is benefiting big had been time from that i.p. ofment -- is benefiting big-time from that i.p.o. stocks are rising. let's go check on markets with abigail doolittle. just keeps on going. reporter: it does the. the reallyy that won't stop. lots of green here. the dow, s&p and nasdaq are also trading nicely higher. on pace for record closes.
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in fact, carving out new interday highs today. lots of strength. a little bit of red there, slightly in the red. the russell 2,000 earlier did carve out a new record high. but right now is not on pace for a record close. let's see what the next hour of trading or so can bring. taking it across asset class and looking at the bloomberg dollar index, the 10-year yield and oil, we have a bit of a confirmation of that risk on picture. we have the bloomberg dollar index trading nicely higher for the second day in a row. really being boosted by yields. we have yield as up for the second day in a row. represented in red, of course, this represents a selloff in bonledses, price trading inverse to yield, the second day higher for the 10-year yield in a row. up more than 10 basis pointsle. relatively big move. we have oil trading higher by more than 1%. this ahead of the meeting tomorrow in vienna of non-opec members and into this meeting, saudi arabia has pledged its commitment to the supply cut deals, so investors seem to be somewhat bullish here on oil.
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turning to one of today's big stories, coke cola, shares are trading nicely higher on the day. we do have a nice ridse here, up more than 2%. almost up 2 1/2% on the news that james kinsey, the company's current c.o.o. or chief operating officer, is set to succeed the current c.e.o., kent, affectedive may 1 of 2017. our bloomberg analyst said this is a natural progress, that quincy has been groomed for this position but it's very interesting. there are a few analysts out there saying they wonder whether this is a cover or if the real news today is the fact that howard buff set going to be leaving the board and perhaps this is a signal that warren buffett's berkshire hathaway may be getting ready to divest some of its $16.6 billion stake in coca-cola. another big story on the day is the fact that fox is said to be in a preliminary deal to buy britain's sky for $14.2 billion. initially the shares popped
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higher, now they're lower. but this will, if it goes through, give fox full control of sky. scarlet: thank you so much. let's get you to bloomberg's first word news at this hour. reporter: thank you. president-elect donald trump is getting ready to rally supporters in louisiana ahead of the state senate runoff election. we're looking at live pictures there. trump is campaigning for republican john kennedy in baton rouge, before making another stop on his thank you tour in grand rapids, michigan. republicans will have a narrow 52-48 senate majority next year. if they hold the louisiana seat. the sweepstakes for the position of secretary of state and the trump administration may now have one less contender. cnn is reporting that former new york mayor rudy giuliani is said to be ruled out by the president-elect. the network says mr. trump is looking closely at exxon mobil chief. and u.s. defense secretary
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asche carter is in afghanistan on an unannounced visit. he met today with the country's president and gave assurances the l.s.u. stick with afghanistan for years to come. carter is also consulting with military commanders and delivering a preholiday pep talk to u.s. troops. it's his last planned trip there before he hands over his pentagon responsibilities to his designated successor, retired marine general james math ills. -- mathis. global news, 24 hours a day, powered but more than 2,600 journalists and analysts in more than 120 countries. scarlet: thank you so much. let's turn now to the topic of retail. with the holiday shopping season in high gear. joining us now is manny chirico. chairman and c.e.o. of p.v.h., which is one of the largest global apparel companies with over $8 billion in revenue last year. its brands include tommy hill figure, calvin kline and speedo. thank you for joining us today. holiday shopping, last couple of years, has really been marked by discounting.
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especially in apparel. promotional activities. i wanted to get your stake on the promotional activity over the past couple of years. has it gotten more intense, how has it evolved? guest: definitely promotions are part -- the nature of the holiday season and what goes on. i would say that the the two prior years to this year, were disappointing years from an apparel point view. last year everyone talked about weather, how warm it was and inventory is backed up. margins were under tremendous pressure last year. so, it's a promotional environment, but inventories are in such better shape this year, we're seeing very strong gross margins. i think this year's story will be reasonably good sales, but much stronger margins as we go forward. i think that's what will drive profits as we go through the fourth quarter. julie: of course you all are a manufacturer and supplier. so i'm curious about your relationship with the retail channel and how much bargaining power you have when it comes to promotions, etc.
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how is that -- has that relationship changed? guest: a couple of things. first is, we get to see the whole market. as you move internationally, and even here in the states, i'd say on balance, about 30%, 35% of our business is direct to consumer. either our ecommerce or our own retail stores and about 60%, 65% being retail. being wholesale. how the changed, here in the united states, dramatic changes. mostly caused by consolidation first, seeing department stores, macy's has now become the player if you're a premium label. and -- or if you're in a more moderate space, j.c. penney and coal mine's. higher up is nordstrom's. the other big thing obviously is e com. brick and mortar versus e com. what the forced the manufacturers like us, wholesalers, like us to really do is connect more directly with the consumer. prior to that, we would advertise, but we would have to work through the retailer more
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directly. we're taking more and more responsibility for our own business on the floor, and as retailers have gotten bigger, i think it's forced apparel companies to become bigger, better stewards of their brands, and committing to really do more with the brands in order to make it work. especially here in the states. scarlet: when you look at the trends overall in retail, especially at department stores, the been weakening. we certainly see that with the kinds of moves that macy's has to make, where a lot of its value lies in its reals i tate -- estate. how do you position yourself or adjust for things like that? guest: yes, you close 100 stores, it represents 12, 13% of their stores, but it probably only represents 4% of their sales. and it's the least profitable sales we have with them. because of the pressure that those stores are under, they tend to be secondary. or the fact that they're in malls where macy's has another
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store that's reasonably located nearby. so especially with brands like calvin and tommy, where we really play at the premium, we're not in 900 macy's stores. we're in probably 400 to 500. it has a limiting impact on us. your overall question, there's going to be less brick and mortar stores overall. everyone has a plan. over time, some taking a more dramatic step like macy's has, and others closing 30 or 40 stores a year, more business as usual. but it's an evolution. and online is becoming bigger and bigger. for us, it's two stories. direct to the consumer on our own flagship sites around the world, but then also working with some of the pure play players and, as you watch macy's, nordstrom's, cole's and pennies, i -- kohl's and penny's, 10% to 20% of their business is happening online. play there, engage the consumer there. and it become much more of an
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omni channel play. it's hard to determine where the sale is originating from. pick up in store, sell online, sell in store, ship home, so you really need to have the capabilities to answer all of that. julie: when you talked about the balance of your business between whole sale and direct to consumer, where it be through your own stores or online, is that balance going to change? do you expect to take it more directly to the consumer yourselveses? guest: especially internationally. here i think it will continue to be just about the same balance. the ecomportion of the business will grow. both -- ecom portion of the business will grow. julie: do you have a target for where you want it to be? guest: if you had asked me that question three or four years ago, i wouldn't expect it to have moved as quickly as it has. i expect it to continue. the best thing we can do is position ourselves, that we'ring a not tick about where -- that we're age not tick
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about where it goes. we're very profitable in whole sale. as the online piece of our business grows, those incremental sales are at the same profit levels. need over the past three years to get the platforms up to speed. those investments are being made, have been made, will continue to make them. but that hump that we had to get over and the level of business that we had to get over, we've reached it. internationally it's becoming more and more direct to retail. especially for us, 6 to 3rs of --% of our -- 60% of our profits are offshore. given the nature of calvin and tommy and how they're positioned throughout europe, asia and south america, those are true global brands. more and more of that is become either by concession or directly our own stores, we're running those retail businesses more and more. scarlet: speaking of online. you of course have an agreement with amazon which does sell some of your brands. calvin and tommy, for instance. how would you characterize this relationship where amazon helps you boost your online sales but does it affect your brand and
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how does that change in five years from now? guest: the second part of your question is the tough part of the question. right now it's a fantastic relationship. very profitable relationship. the positioning of the brand on those sites, you know, one question that i deal with is, a brand in one way define as themselves by their channel of distribution consistently. if you were in sack's and niemanns, those were the types of brands you were. if you were in a more moderate department store like jcpenney or kohl's, you were a stronger national brand, you were in those stores. now if you go on to amazon, you'll see prado, calvin kline, tommy, and then you'll see $9.99 t-shirts. it's a very democratic pogging. so you have to do -- positioning. so you have to do significant things off that channel of distribution to enhance your brand value.
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marketing today is 70% digital, where if would you have asked me five years ago, would have been dominated by television, print, and outdoor. it's completely changed how we connect with the consumer and it puts more of a burden on the brand to make sure that connection is made. you used to be able to tell your story just at retail. you can't do it now. scarlet: what will that look like five years from snow -- from now? guest: if you think about fashion brands, there's certain magazines and there's periodical us that need to be in. but i think on balance it's going to be more and more intense online. that's how you're going to connect with consumers. it's much more -- when you connect there with the consumer, it's a more lasting impact that you have there. the not just flip a page, see a great ad, and then move on. julie: i have to ask you about the political environment, of course. you guys are so dependent on international business.
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how can concern -- concerned are you about some of the trade policies that have been bandied about, particularly between the u.s. and china, how concerned are you about the rise of the dollar recently also? guest: so -- julie: i know it's a big question. guest: there's a lot there. i have a great deem of confidence with the new administration coming in. the excitement in the business environment is being built up, from tax policies that looked very positive. so a number of issues there i think could play very well for business community. you have to be concerned about some of the talk and the rhetoric around trade and is it just that, talk and rhetoric? as they are trying to negotiate a position as they move forward. if that were to become more than that, i'm a capitalist, i believe in free trade. i think it's critical. but i also believe in a level playing field and the not always that. so i understand what president-elect trim is trying to do in position and i applaud him and i just, you know, how the process is going to work
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out, so i am unbelievably concerned, currencies are a major issue for us. because some sovep of our profits are offshore. scarlet: thank you so much. chairman and c.e.o. at p.v.h. we appreciate it. coming up, shares of a scene are higher and its trading debut today. we'll look at why the insurance company has become a jewel for leon block's apollo. this is bloomberg d. ♪
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scarlet: this is "bloomberg markets." julie: shares of athene are rising after the insurance company went public. we asked athene c.e.o. about the impact of higher interest rates on his business. >> everything about athene's business is better with higher rates. we have 29% of our $70 billion
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investment portfolio in falling rate securities. as rates go up, that helps us. and the absolute demand for fixed annuities in a higher rate environment are higher. both sides of the balance sheet are helped by higher rates. julie: let's get morin sight on athene's business and -- more insight on athene's business. joining us now is bloomberg insurance and boutique investments bank reporter and bloomberg news deals and private equity editor. i want to start with you. when you look at athene, we heard from the c.e.o., what's the management team look like there and what about its connection to apollo? >> right. so it has a very experienced team. so jim seuss used to be an executive. he worked directly for brode. he said he wants it to look like cenamerica. so he has a lot of experience in this bills. and he founded athene with
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chip, who ran the insurance solutions group at bear stearns. they founded it in about 2009 and they had the timing just right. they got into the fixed annuity business when pretty much everyone got out. and at the same time they got into a lot of rnbs at low prices when all the banks were getting out as well. now they're benefiting from that. that's what they were selling during the i.p. ofment as well. julie: this i.p.o. you a louis them to cash in a bit as well. scarlet: talk to us about what apollo's been doing. there's a lot of movement there. >> first on the athene point this was perceived as a really smart move by apollo. a lot of these big alternative asset investers have been looking for ways to get more sort of permanent capital afloat of money that they can invest with longer duration or at least choose different durations to invest these assets, so these sort of lump sum payments that they get from athene customers, they can invest in different ways with different durations, so i can tell you, many of their peers in the alternative asset sector are fairly a jealous they have this permanent capital pool and
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they're looking for ways to replicate it. the higher-up gary par yesterday, i think he's starting in january, very interesting move. i think it's reflect of apollo's explosive growth. if you look at their assets under management, i think they've tripled in about five years. so a lot of these firms, these private equity firms, alternative asset managers, started as a group of guys who love to do deals and investments. now they're 1,000 to 2,000 employees around the world, dozens of funds. hundreds of different funds they're investing. many of of them have looked for outside professional management expertise to just come in and help the firm think about day to day operation, to think about strategic expansion opportunities, so that the founders and the deal guys can really stick to the investments. i think that's partly his role. julie: when it comes to par, tell us a little bit about him. how big of a gain is this for apollo? how big of a loss is this for lazard? >> gary's actually probably arguably one of the best
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financial minds at all. this is a guy who helped sell bear stearns to j.p. -- jpmorgan. he's had a decades-long relationship with jamie diamond. and sandy while. and actually apollo as well. lazard was one of the underwriters on athene's i.p.o. so it's a huge gain. he was an investment banker so he worked on tons of deals on the advisory side. places. other at the same time you want to think of him as a buyout guy now, maybe, i don't know. he also at one point, he invested in his own investment bank too. i'd like to think of him a little bit entrepreneurialy as well. he invested in fox fit with countries flowers. another private equity guy. ended up selling that for about $150 million. he's done his own deals too. we'll see what he brings to the table at apollo. scarlet: we will indeed. thanks a lot. covering a lot of different bases for us today.
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thank you. president-elect donald trump is speaking in baton rouge, louisiana, at this hour. he's campaigning for republican senate candidate john kennedy. kennedy faces democrat foster campbell and louisiana senate runoff tomorrow. this is bloomberg. ♪
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julie: this is "bloomberg markets." scarlet: it's time for options insight. reporter: thanks. joining me today is david, moment umstock strategist. he joins me from the cboe in chicago. thanks so much for joining us. another day, another week, more records. you put this in a very colorful way to our team earlier. you said, quote, i appreciate a good christmas story, but this miracle on pentagon avenue is getting out of -- pennsylvania avenue is getting out of hand. talk to me. guest: yeah. there's a lot of optimism, of
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course, i'm in the holiday spirit, i've already got my santa beard. but there's a ton of optimism here surrounding the markets, surrounding the keynesian philosophy that donald trump is going to bring in and everything's going to be great. but what i want to remind the market of is he's just met donald trump on tinleder a month ago, let's not go picking out bridesmaids dresses just yet. really haven't done anything. so i appreciate the optimism, but i don't want to just blithe blindly get in this market and start buying everything that moves. you still have to stick to the fundamentals when you are investing for the intermediate. especially throughout 2017. reporter: you're not a buyer of the idea that there's going to be a big infrastructure plan, despite the big moves we've seen in yield and the dollarering suggesting some growth could be ahead? guest: i think it will happen but a lot of this is already getting priced in right now. if you take a look at some of the financials, like the smaller banks, which make up about 1/4 what have you're going to see inside of the ,000, they've had huge runups.
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they've already gone up 25% since the election. that's supposed to be on a smaller, on a small beta part of the market. when you have those players that are just going absolutely bonkers, i just want to take a pause and re-evaluate the situation a little bit. reporter: so sounds like you think there could be a bit of a pullback ahead. turning to your trade, it sounds like you're bearish on sear's holding. pretty braver to bearish here. guest: yeah, but have you been to a sear's? it's the death of the american mall and it's happening all across the country. no matter how great america is, again, you're not going to be going to sear's to buy stuff anymore. i've been bearish on this company for a while. it's like the sears and jp penny's of the world, holding down these malls that are lower end anyway that no one goes to, they don't offer a good experience anyway, i'm looking at the 12-7 foot spread on sears, going out to march, the holiday season cuments, the only going to get worse. today they're getting beat up.
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i think the story just continues here for sears. it's a shame because i love craftsman tools. reporter: good stuff there. very colorful as always. have a great wednesday. thank you for joining us. back to you. carlet: thank you so much. he thinks the small cap rally may sizzle, so we'll get his thoughts as well. and also as we've been talking about, president-elect donald trump speaking in baton rouge, louisiana, at this hour. he's campaigning for republican senate candidate john kennedy. kennedy faces democrat foster campbell in the senate runoff. for tomorrow, bloomberg customers who would like to listen to his speech, live go, this is bloomberg. ♪ >> the u.s. senate.
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republican is coaxing democrats with that make to put a stopgap spending bill. mitch mcconnell of kentucky says
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that there is a four-month extension, it is the best and that they will get. some democrats are pushing for a one-year extension. obama is using his executive power to add protection to the other cost. the what how says that the creation of a northern bering sea climate resilience area are protected for marines resources, it will cover more than 12,000 square miles. balloont of a hot air crashed in texas killing himself and 15 others. cocktail of drugs before liftoff. that is according to documents. it is said that alfred skip nichols was under drugs. he had been convicted five times for driving while intoxicated. aleppo

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