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tv   Whatd You Miss  Bloomberg  December 28, 2016 3:30pm-5:01pm EST

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says he still plans to act as his own lawyer. the trial begins next tuesday. house speaker paul ryan's crackdown is raising questions on both sides about its constitutionality according to politico. approving a package by gop leaders to combine lawmakers for taking photos on the chamber floor. that move is said to be a response to last june when democrats use cell phones to livestream a toy for our post death protest after a refusal to allow a gun vote. northernmost states in new england continue to see staggering or declining populations. experts predict that will limit economic growth in the region which sayso -- challenges are slightly different among the states with from losing -- in a muchire going
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smaller rate than in perceiving years. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ♪ julie: i am julie hyman. joe: i am joe weisenthal. oliver: i'm oliver renick. are fallingstocks the most in two weeks. energy, materials, weighing on the is hundred -- the s&p 500. joe: the question is what did you miss? >> the big moves are in currency and crude. dropping the highest level in more than a decade.
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bill films -- the phones may push the studio for 2017. yet another stumble in the rebirth of the nuclear power industry. >> we are looking at the clients for the u.s. major averages heading to the close. ,he nasdaq all trading lower trading more than 100 points at this point, putting down 20000 and record highs out of mind. this is the second worse selloff in u.s. stocks since the elections. on the intraday
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basis, looking at an intraday chart of the s&p 500, we see the end -- the index opened higher and steadily lower as the day has in progressing. 96% of members of the s&p 500 are trading lower in late 20 he higher here it is a broad-based selloff. all of 11 sectors as well. the s&p 500 is that it slows is 2008, a round-trip from the rally we have seen this month. on the day, we're looking at natural gas. a great chart here. look at this spark higher. the nasdaq has been up by about 5%. it had been up earlier after dropping 2.5% earlier. a lot of volatility in the marketplace on a report that the arctic chill could cause stockpiles last seen since 2013. the year, natural gas is up
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in a huge way about 6.8%. as for other asset classes, we look at the dollar index, the yen, the 10 year yield. we see a little bit of a haven bid. the bloomberg dollar index is up but earlier, the dollar index have been up. the yen is trading higher. a bit of a reversal from earlier. 10 year yield about five basis points, and it tells us investors are buying stocks or bonds as they are selling stocks. indexs hurting the dollar . we see reversals as the dollar is of of its highs. .e have in the bloomberg 2256.s in blue, we have the 10 year yield and and white, the five-year inflation swap. at inflationk
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expectations. typically, the 10 year yield goes up and then sits back down. we see several instances, right now, suggesting the 10 year yield the fall -- go lower. perhaps taking the bloomberg dollar index off of record highs as well, we could see a reversal in the new year. >> thank you, abigail. joe: u.s. stocks surging in celebration of the president-elect agenda. let's get insight into the year strategist.arket thank you for joining us. a huge split in the way people think about the trump administration since the election and since the night he was elected, futures and people
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are coming up with all kinds of reasons why some people are good for the market. will he deliver in 2017 or will it he ate this of women? >> i think there will be disappointment but i think he what the agenda is supposed to be and the market after going crazy the at the thought he could win, even remember the peso went down, gold went up and basically, it zero dan on a few key things. taxes, pro growth, lower and chances are, he will deliver on the rollbacks to some degree, fine-tuning and regulation, financial services, energy. they can take a while before they are actually simulated by the army. you know the market looks ahead and if you look at financials, that is one of the most
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important sectors. this was not, trump one. it was the 10 year yield moving higher, the 10 year yield suggesting a stronger economy. something financials badly needed. once they got that, the financials took off. you could say that is a byproduct of trump coupled with maybe a little bit here and there. no one is expecting and expunging of any of these regulations but a bit of fine-tuning. >> you look at what has happened in terms of strategists, i do not think we have seen a year in isch so many people contingent on something. a lot of it is related to tax cuts. thinking about it properly when we say here it is for next year, but if a certain tax cut or corporate test goes 20 level? -- to a certain level?
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>> it is the lowest we've seen in many years in terms of where the market will end. the consensus is we may move up 4.5%. not very much. every time we go into an earnings season, what do you see happening? why do markets go up? estimates go down. it is easy to beat those but also, you going to an earnings season and there are a lot of shorts in the market. you need positive surprises and the shorts covered in the market moves higher. strategists have been fairly conservative. very few said we would see 7% return or 8%. the consensus is or .5%. do andists have a job to they change those estimates along the way. else, you have to see the economy improve. if you can see the economy underpinning for the stock
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market, you should see corporate earnings move higher. today, you see the dollar pulling back a little bit. there is always something in the market. the multinationals are probably a beneficiary of that. emerging markets are probably beneficiaries of that today. as we go through, there are headwinds but -- but plenty of tailwinds. expecting,rkets are and i hate to use the term, and economist phd, the animal spirit , the return of animal spirits, the ability for companies to say, you know what, we could do this and we could do that. for the last number of years since the recession, it has been almost fear. just hebe careful, careful, just be careful. that is why we are looking at consumer confidence but also ceo conference -- confidence. it has to be implemented and materialized but the market is
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betting to a large degree we will see some of it. we have the election, seen stocks and risk assets go up but oliver and i talked about this briefly. high level of a dispersion. some sectors disproportionately lead the game. going into 2017, are you safe just buying the stock and forgetting it, order do you have to really be more careful about where -- where you put your money? >> it is difficult to say this because we have been wrong for years but it looks as if active 2017ement may work in versus passive investment. it looks as though perhaps, you want to be -- joe: something we have talked about a lot on this show is sentiment. we in the sentiment cycle? is there room to go higher given of election -- bullishness
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strategists? do you sense a reservoir of skepticism out there about the market? is still skepticism because we can see him much money goes into the market. if you compare today to the tech which reached parabolic stages, the fear of missing out, no one is in that camp now. perhaps we see windowdressing for hedge funds, institutional money managers tweaking their isurns, the retail investor skeptical this was brewed by cheap money by the federal reserve central banks, and now donald trump, it is one thing that always seems to work. money goes to where it is test treated. the pension funds are
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rebalancing and many people think the bond markets are doing well versus the equity markets as the rebalancing goes along now. they will probably be putting money into markets, all of the areas right now say the stronger areas hurt us. >> thank you so much. >> coming up, we will hear from another strategist, chief equity strategist from citigroup. this is bloomberg. ♪
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joe: the possibility of president-elect donald trump have his economic agenda reducing corporate earnings. bloomberg tv was joined last week to talk about this. >> let's start with the numbers are we are looking for 130 one dollars next year for the s&p 500 earnings. of the 9% in key -- increase, -- itpercentage points translucent to better numbers for the producers oil and gas. in terms of the stimulus program -- effective taxi for the s&p 500 currently. that would add only the fourth quarter's phenomenon.
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coming from the rest of the market, which is pretty modest. at 100 $46 and nine dollars of that improvement comes from the child tax cuts. we are not assuming anything about capital spending, giving a potential boost. we will find out a lot more details next here on this. result, we do not think you get quite the same bump to the market as we do for the earnings. value improvement because it is leverage. quite honestly, you have a future administration take away the tax cut.
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>> when you talk about valuing the earnings, i have a chart i am not sure you can see. price. the forward this is the five man chart. the five-year average of the forward pe we have this run since the election. given the outlook for earnings -- the run and we have seen, >> there are probably three problems, to be fair. even if i have valuation metrics, the notion of fair value, my opinion of fair value does not really matter when you have investors determining where they think the value is. arrogant that everyone would listen to them.
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we talked about putting up the price to yield on the 10 year treasury, we see fabulously multiple on them and no one ever talks about on markets being value. if you look at a 20 year or 30 year history, we have had massive diversions between the two. the stock did not get any of the benefit. the five-year history distorts the perspective. the third piece, we think about this, we do it in a normalized on guilt basis. profitability -- probability markets will be higher over the next months. >> before your earpiece falls for 2016, not quite
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an ape. where did you fall short, and let's also go to 2017 on a sector basis. what will give you the age rate in 2017? >> i did not get many a's in school because i did not apply myself. things we missed where the extent to which the rally would occur. i do not think everyone would assume that since the election. of0 for this year is part the -- the second piece was small caps have run hard here again since the election. most of these are tied to the stronger dollar which we had not anticipated here those were the two failures. we got a number of other things right. continuation of the outperformance and financials and energy. there is a fair amount of pushback that this may have run
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too far. given we do not believe in it -- may be wrong, mark: that'll each other over in the last couple days, lack of volatility. when you look at futures, you see a gap between now and three or four months. a large cap, a multiyear gap. does that tell us we are storing up volatility in months to come? is a returnor 2017 to volatility. i think most people focus on -- we look at the shape of the yield curve and it has been a two-year lien indicator for volatility. it is indicating the pickup in 2017 and 2018. with regard to political dynamics, a new administration and different bills that want to there's going to be some
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political backdrop to repeal and replace obamacare. issues around what the tax cuts look like, deductions from personal tax rates or a border tax issue being discussed in congress. it will not be beautiful and smooth sailing. buy, chief to strategist at citigroup. the biggest some of business stories in the news right now. .hey want to move ahead that is according to people familiar with negotiations. they circumvent an environmentally -- brain area that has been a flashpoint of controversy. -- decision
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260% for the year. a consumer related company with a market cap of more than $5 million. targetedand prices are at .4-year-olds. it is only much faster. kate spade is working with an investment bank according to dow jones and sighted people familiar with the matter. contacted buyers including other retailers after coming under pressure from activist investors. the company is not commenting. that is your business flash update. >> up next, we're taking a look at shutting light on the housing markets. and the relationship between stocks and inflation. ♪
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the home sales number four november out this morning, down 2.5%. analysts and economists looking for a gain of 2.5 percent. economists say do not get too concerned about the housing market. homeu look at pending sales and blue, you see a decline that we saw over the past couple of months. the white line is mortgage applications. in december and a 2.4% gain in november. , thats room for optimism we could not see an increase in the pending home sales. if rates are rising, it could be another tailwind for the housing market. willis something people not talk about much but will talk about and 2017, the debt ceiling.
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it used to be a big crisis every once in a while. it is still out there. here is a look at how much cash is at any given moment. the debt ceiling will be reinstated back in march, temporarily suspended. the treasury will draw down its cash on hand all the down from 1930 5 billion over and nearly 2 trillion to 23 billion in the months ahead as part of a conservation measure. keep an eye on this. we will see this is smoother for trump than it was for obama. thing for me, i am looking at expectations. inflation and stock prices because right now, they are moving pretty dramatically. in the stockidence market is shooting up to the highest it has been in years. our people under the impression
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the two can go together? out.ll find the market close is next. a quick check on the major averages. a little red on the screen closing down today. this is bloomberg. ♪
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>> we are moments away from the
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closing bell. breather, all a 11 sectors are in the red, financials, materials and energy leading the declines in the nasdaq falling the most in a month. meanwhile treasuries are rising eight-day on an winning streak, it's best in nearly seven years. we want to welcome our viewers who are tuning in live on twitter. you can watch our closing bell coverage on twitter every week they from 4:00 to 5:00 p.m. eastern. julie: we begin with the market minute, as we see stocks fall today. oliver: not a great day. another day and no doubt. here's what we did see, some opposite -- interesting moves in the opposite direction. real estate and financials in particular, bringing the s&p 500
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down. real estate was the biggest loser on the day. lower, not great news after we had some housing numbers for pending home sales that were a little worse than expected. then if we look at some of the individual features, there were some interesting movers. 7%, chesapeakeut energy down over 4% with energy not doing well despite oil flat on the day. twitter some chatter on on best buy, down over 2%. sector volume on my bloomberg, it looks awesome. there was a little bit of activity today, a big chunk and video right there, trading about 270% above average.
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then check out what happen in the energy space, chesapeake trading way above average. the will ofa was on volume yesterday, it was higher yesterday, the best performer in the as he 500 this year. let's look at government bonds. with a fair amount of action there, particularly at the long end, when we saw the 10 year .05, one of the bigger drops in yield for the 10 , fairlynce election significant move. interestingly the short end was higher, so definitely some significant flattening today. keep an eye on that, it's been a while since the 10 year yield made new highs, back to levels we last saw in the day of the fed meeting, so about two weeks ago exactly today. quincy crosby from
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prudential three minutes ago suggested perhaps it's in of your pension fund positioning potentially contributing to some of that reversal. let's look at currency, the dollar falling versus the japanese yen. a pound each weaker versus the u.s. dollar. the dollar not showing uniform weakness. if you look at the dollar index, it is now trading at its lowest, going all the way back to 2002. not the bloomberg dollar index in this case, because it was yonceived in 2005, but the dx trading near its high since 2002 as we see this pretty consistent run in the dollar. joe: i commodities, not a time of action anywhere. actually, basically nothing. we could just skip this part. oil harley changed and the one loser which was marginal was copper, but basically no action in commodities.
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it still had a winning streak. those are today -- that is today's market minute. finch, joining us is bob a global strategist. let's start by checking out oil. some interesting moves you have been looking at. showing some of the technical levels we've been looking at, this autumn in january and february, closer and $25. now $54 on crude. when you look at the gains, there's obviously quite a bit of rally here, but the past six months is basically flat. >> joe may regret these words, but today could have been a very important day. if you look back early in the year, january and february, we had a double bottom and then of
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potentially double top. technically we had a high early early december. we got as high as 54 point 37 today, close enough to a potential double top. it could be interesting that going into year-end, we might be here inin a double top oil. this could turn out to be a very important day. if you get conditionally through 54.51, that's meaningful that you are going higher. we may look back a month from now and say we had a double top .50,ecember 28 at roughly 54 and oil has come down since then. and the other thing pushing in that duration, inventories are higher than last year, and the rate count is starting to not only pick up, but in the last three weeks, it has been accelerating to the upside.
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we are still less than half of k, butwe were at the pea u.s. suppliers are beginning to pick up activity. this could end up being a pretty important week for oil. joe: if oil does top here and sells off, what are the knock on effects of that? high-yield benefiting from the rebound and energy, oil tends to have movement, impact on inflation outlooks in the market. let's say we do selloff, where do we want to look for the damage? be the most interesting for me about this is whether it signals that opec is swing producer. if opec agrees on cuts and non-opec members agree on cuts, and yet u.s. production picks up in the oil price rolls over a little bit, i think that's going to be very meaningful from a big picture perspective. , the biggestr term
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beneficiary might be the bond market. the barn market quietly has retraced over half. the 10 year yield has retraced over half the selloff that took place on fed day. fedyield before the announcement, up to 2.64. halfway back at 2.53, we are under that today. if we do get some retracement oil, one of the beneficiaries could be the long end of the bond market. maybe that's a little bit of the flattening we referred to earlier happening today. julie: what about knock on effects on the u.s. dollar? what happens with the relationship between those two going into 2017? starting with an assumption, but it oil comes off and yields continue to come back down a little bit, that makes it a bit of a top here for the dollar. as we look at it, the dollar has been driven by interest rate
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differentials. the corollary is about as tight as it has ever been. earlier today it was suggesting a pretty good rebound on the dollar, which we got. lower yieldhese levels, that could signal we're getting a little bit of a top here in the dollar. they are all correlated, it's not clear what is driving which. i think the key driver here is probably oil price. we have this technical stuff going on, but from a fundamental basis, i see a lot of forces here. we got the stronger dollar expected, opec cuts expected. we have an energy friendly trump administration. how do you go about assessing it from a fundamental standpoint right now? which one of those is the most important? >> that's where we could be at a major turning point. who knows, couple of months from now maybe the president-elect will tell us that we can thank him for lower oil prices also.
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but if opec is cutting supply, and the cuts are only going into effect next week at the beginning of january. as prices still come down and we continue to see u.s. production activity picking up, i think ,hat has enormous ramifications it sounds silly, but for the next decade or more. what we are seeing is that it is not opec that can swing production. productionudi arabia cuts that can swing prices. it's really the u.s., and the u.s. has taken on a much more important role in the global energy markets than we have for probably the last 30 years. julie: the recounts are starting to creep back up. employment in the energy industry in the u.s. is starting to creep back up after falling for month after month for so long. oliver: and orders for equipment starting to creep act up. positive we are seeing
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signs. does that mean you invest in the energy industry in the u.s. going into 2017? >> i think a lot of is still reflects excess supply. i think it's difficult for me to see the oil price really moving significantly higher if we're seeing global ships and who is producing, i'm sure there will be some winners and some losers. general, we are in a commodity now where particularly if the administration looks more favorably on the coal industry and what role that can play in the energy mix, you could be at a time when energy is well supplied and probably not a great place to be investing. joe: we talked to boone pickens on this show not long after rex tillerson's name was put out there for secretary of state. he made the point that labor markets are really tight.
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a lot of people had been working in the oil patch have gone on to construction already and found different jobs. how do you think about the labor aspect of that, and in general, labor market tightening. how big of a story will that be for 2017, given expectations of more infrastructure spending and lots of different areas of the economy needing work here. >> there are selected set errors where there are some supply shortages of labor. certainly in the construction area, the energy area could be one of those where there could be supply constraints. don't forget we came from a rate count in the u.s. over 1400 and now back to about 650 or something like that. you would think there are some rigs that could be operated efficiently that could be brought online pretty quickly. if her going to have another surge in production in the u.s. like we had in the last 10 years, i think that is a
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problem. are a lot of these wells dog and operational, they can be brought back online without the same degree of labor -- once the wells are dug and operational. we will talk about the state and the global economy when we come back. this is bloomberg. ♪
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taylor: let's get to the first word news this afternoon. secretary of state john kerry has out late -- outlined a plan for resolving the israeli-palestinian conflict.
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>> the two states the solution is the only way to achieve a between lasting peace israelis and palestinians. it is the only way to ensure israel's future as a jewish and democratic state. security peace and with its neighbors. taylor: israeli prime minister benjamin netanyahu denounced the excessivelyg it focuses on israeli settlements. in a tweet he thanked president-elect donald trump for his warm friendship and clear-cut support for israel. in apparent warning tweets, president-elect donald trump blasted u.s. policy toward israel. he tweeted, let's not continue to let israel be treated with such total disdain and disrespect. they used to have a great friend in the u.s., but not anymore. the beginning of the end of a
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carpal iran deal, referring to last week's vote. he continued saying january 20 is fast approaching. meanwhile u.s. senator john mccain said the country's relationship with latvia will not change with the new trump administration in january. he spoke after meeting with the latvian president. >> we will continue to have talks in the congress of the united states and in the united states senate. we believe the three of us and most of our colleagues in the united states senate that vladimir putin's behavior is unacceptable, the latest reading apparent attempts on the part of the russians to effect the outcome of the recent election in the united states. >> amid worries the u.s. may not be fully committed to the events of its nato allies follow --
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following statements by president-elect donald trump. after the baltics, ukraine, georgia, and montenegro. powered by more than 2600 journalists and analysts in more than 120 countries, i'm taylor riggs. this is bloomberg. julie: "what'd you miss?" update onestors an how some of the biggest global economies are faring, in japan, industrial output rose the most in five months in november as export volume mounted sharply. in italy, consumers and men rose to the highest in the year. in the u.s., fewer americans signed contracts to buy homes in november. what is the global picture telling us? japan, because you are actually looking at the picture there is relatively positive. >> i think probably what is behind a lot of this was a big
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global inventory liquidation. we saw it in the u.s., i think it was global and of course when inventories are coming down, you will see weakness in production. you saw a lot of weakness in industrial production in the first half of the year. you saw it in the u.s., china, and japan. we've now seen over the last four or five months that particularly purchasing managers index in the manufacturing sectors have all pick back up, which suggested there was a rebound taking place. that in the pmi readings in the manufacturing sector out of japan pan out now senate confirmed in some of the actual data. when you look around the world, we have had this bit of an inventory swing. inc. are picking back up a little bit. it looks like growth is firming into the latter part of the year. that was a significant part of the bond selloff, the realization that the global economy was gaining momentum. you literally took my
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next question out of my mouth. readng about trump and inflation and fiscal stimulus, there seems a could of been some of that. there was a sharp move right after november 8. i'm curious how much really was the result of being more aware of what's going on in the world economy. >> one of the relationships i do look at is the global economic surprise index. you take the average of the global economic surprise index for developed markets in emerging markets, and over time that tends to correlate reasonably well with 10 year treasury yields. there was a big rise in the economic surprise index to the top side during the latter part into the -- of the third and into the fourth quarter. the rally in bond yields is consistent with that. my view has been that a lot of the selloff in bonds and rising bond yields was a function of actual economic data that
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continue to increase in oil price and the potential spillover effect on inflation. very little to do with expectations about what's going to happen to policy as we go through next year. oliver: i want to jump into the chart real quick, this is addressing the topic we discussed the last time you were here. the dollar strengthened a little bit pass where you thought but were still in this range. i'm looking at the euro-dollar and dollar-yen. last time we said this is about 1.05. .he yen on the flipside at 1.17 is this just about the dollar strength powering through every currency, or is there an ability for some of these economies to push back due to their own economic growth? >> you are right, i did think .he dollar-yen at1.15 a lot of these were broken on
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the fed announcement. the fed was a bit more aggressive than we expected. i think most people expected that it would push interest rates a little higher before year-end and that has taken the dollar with it. in the same environment, if yields continue to come back a little bit here, we will come back and see those levels. joe: i just want to go back to your point about surprise indices. ones, what is striking is everyone of them is above zero right now. see this in we can rare situation, they are all above that redline. that almost never happens. they are not objective versus how people think. as they inevitably swing the other way, which they will, you would expect that would bring some yields back down again. >> and don't forget, markets
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react to changes and expectations. the economic surprise index is a classic measure of changing expectations. economic reports are coming out either better or worse than the consensus expect asian and in that context, that's where it holds information value. as you said, it's been a lot of surprises to the top side. julie: bob, thanks so much for coming in. joe: coming up, it's been a roller coaster year for crude, soaring to a 17 month high. i will have a chart that tells the story. this is bloomberg. ♪
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julie: i'm julie hyman.
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"what'd you miss?" let's dive into the bloomberg and you can find all the following charts using the function as a bottom of the screen. speaking of something you probably missed, this is on the watert authority. everyone is watching this all day. julie: this has to do with flint, michigan, and the spreads were looking at here on these bonds. the five your car on these bonds maturing in 2033. we have actually seen a tightening. what does all this mean? new criminale seen charges recently stemming from this that, the bondholders don't appear to be concerned. they scene the spread tighten since this happened, rather than
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widen out. there's an interesting disconnect between the headlines and the investment in what we are seeing. venezuela.inds me of speaking of surprises, let's talk about oil. put in perspective what a crazy year it was for oil, going back to january and february, near $25 aling down barrel at one point in february. it just seemed like this was the total in, then it rebounded. then in june there was a failed deal by opec. it reentered a bull market, then in august it reentered of bear market and then it reentered a bull market very fast, huge 20% swing. then in september that preliminary deal where they started talking about they might get a deal, and then earlier in december when opec said it not
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only had a deal but it had details. oliver: you remember what a crazy year it was talking about january february and how much a year can surprise you in how it in sup. -- how it ends up. it seems like everybody thinks the new trump era, industrials are doing well. but it's very specific where they are doing well. areas,ally in a few construction and engineering up 20%. that's really where the gains are coming from. the places they rent out materials in space, it's going to be interesting to see if they can maintain those gains. ahead to theok new year stocks. here's a look at some winners
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this year, five comments down a lot. this is bloomberg. ♪ with the xfinity tv app,
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taylor: let's get to the first word news. hillary has told the judge he plans on calling no witnesses and will present no evidence to try to persuade the jury to spare his life for killing church worshipers. he still plans to as for his own lawyer when the penalty phase of the trial begins next tuesday. saudi arabia received notice that a mine is heading a -- oman is heading a terror coalition, sign that it's ready to improve its relations with the kingdom. 's ties in the gulf have
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been strained because of its close relationship with iran and on capitol hill, house speaker paul ryan's crackdown on live streaming on the house floor is raising questions from experts on both sides over its constitutionality, according to politico. to houseboats next month find lawmakers for shooting video are taking photos on the chamber floor. the move is said to be response to last june when democrats used cell phones to live stream a 25 hour protest after ryan refused to allow a gun control vote. 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. julie: that's get a quick recap of today's market action. we saw an interesting reversal of the postelection move. stocks moving downward, but we saw yields on the longer end of the curve going upward. sorry, the shorter end of the
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car going upward. it's kind of a strange reversal, each down about .8%. joe: "what'd you miss?" over the past few weeks we've been looking at industries and what to keep your eye on for the upcoming year. today we will focus on the outlook for media and advertising. here to help guide us is our bloomberg analyst, thank you very much for joining us. a lot of anxiety out there in media land, pretty much wherever you look. tv, print, everyone is worried that facebook and google are swallowing the whole thing. is there a light at the end of the tonal for media? what's it going to look like in 2017? joe, you pointed out, there's going to be a significant slowdown in ad spending, which is the building block of most of the media sectors. were not going to have the benefit of some of the marquee
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events that we had in 2016. with the olympics, the election cycle, we won't have that heading into 2017. another factor causing a lot of nervousness among a lot of the investors is of course brexit, which happens in june, and more recently, donald trump's victory. that is really expected to cause some near-term pullback from advertisers, which is causing trepidation in the short-term. with brexit we really didn't see any substantial evidence of pullback, but i think it's safe , atay that the general tone least in advertising, is one of a fair amount of caution. julie: we've been talking a lot about consumer confidence that has been improving. the metrics in the past month or so since the election, we've seen optimism about tax cuts and the effect on corporate america as well.
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are these factors that are potentially going to help ad spinning and help these media companies as well? >> i deftly think it will longer-term. another big thing that most media investors are looking to with a lot of relief is a lot of potential deregulation. that is expected to definitely help the cable industry, which is really been subjected to a lot of onerous regulations from net neutrality, from open competition for set top box and whatnot. and mergers and regulations offer of four -- more favorable outlook for the merger scenario among content owners as well as distributors. like everywhere else in the markets it's very risk on, you get pumped up about this year and go out and spend money on the economy. it seems like in the mainland state -- landscape, it's having the opposite effect where people are more hesitant.
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is it because of his comments about at&t? >> there are two different views here. for the ad spending in general, and this is really general ad spending, were looking at a little bit of nervousness and a cautious outlook from both the forecasters as well as the big ad agency networks. if you look at the cable companies, for instance the pay to -- pay-tv operators like comcast and charter, we're looking at a much more favorable climate, especially as a lot of these companies have been burdened by stiff regulatory environments. with the fcc and transition right now, i think they will benefit a lot from a much more pro-business, more business friendly climate oliver:. oliver:they won't have the trump debate ratings anymore either. abouteople are talking
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the skinny bundle an alternate ways of getting people to pay for media in a modern 2017 world. when you look at the various skinny bundle endeavors out there, are there any that really seem to be taking hold and getting traction? >> as you point out, the whole media landscape has been shaken by this whole cost-cutting peace. there's been a proliferation of streaming services, the most recent one being at&t's directv, which seems like a very compelling offer. $35 for 60 channels. put ite is going to do well. the general consensus is it's going to do pretty well. there are a lot more services out there on the horizon. amazon, apple,e, hulu coming out with one in the early part of 2017.
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the general consensus is that the pay-tv ecosystem is not going to be as badly hurt as investors had feared. i think the general consensus is that as more of these services come out there, it's good for the content owners, because more view the content. the risk of sobriety -- subscriber losses might be wrecked -- might be mitigated. julie: we've been talking a lot about tv. let's talk about the movies. wrotebeen talking about one and the big box office it has done so far. every year feels like the year of the blockbuster. is 2017 going to be the year of the next big blockbuster? we started 2016 we had a lot of pickups as we went through the summer season. it has recovered really well. we headed for a new record in 2016, $11.3 billion in domestic grosses ahead of 2015.
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if your looking at this late for next your, it looks equally impressive. i think we are headed for another record in 2017. of course disney is keeping up a lot of the momentum. sector,within the media any companies that you guys think will particularly be newsworthy that you're keeping your eye on? >> one of the big things we are tracking is definitely the whole convergence topic and the entry of cable into the wireless space. that has been a big announcement that has come out for comcast and charter. it's like it's the next thing for the companies in the cable landscape and is being precipitated by at&t's acquisition of time warner and the watchwords mobile and video. that's something we will definitely keep our eyes out for. joe: thank you very much for joining us. julie: coming up, we'll hear
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atm the executive director ubs. he will tell us why he is cautious about the market rally. this is bloomberg. ♪
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oliver: "what'd you miss?" julie emanuel has one of the lowest s&p 500 charges at 2300. he explained why on bloomberg daybreak last week. >> this bull market has climbed and absolutely unprecedented wall of worry and i would even
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say discussed on the part of investors. whether it's uncertainty about earnings growth which we've not had for two years and we are about to have once again, whether it's the implication of an oil price crash on the economy, or incredible divisiveness within the political sphere in the u.s.. conversely, in the lot to go markets, the last six weeks have really taken down that wall of worry and replaced it with a really deep sense of optimism, almost your fervor it -- almost euphoria, that we think in the medium-term is reflected in prices. >> so that's why you're at the lower end of the target on the street for 2017. when do you think that catches up with the rest of wall street? we believea that will get those things. one of our guest said it's not a wall of worry, it's a wall of hope.
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take a listen. >> we are due for a pullback. we've had a straight move up. the question is, how deep of a pullback? the pullbacks are likely to be shallower and shorter. we are not all in ourselves on equities, but we're advising our investors to find the dips as opposed to sell the rallies now. >> we continue to think it will be the story in 2017. however, where i would differ, we are at 11 right now and that signals a sense of complacency. again, it could well be that the hope that is built up over the last six weeks does get materialized over the course of 2017, but the fact is that 19.2 times 2016 earnings, and in applied growth rate of 12.4% in earnings next year, a lot of it
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is in the price, and where we would differ again is we think the volatility episodes are likely to be sharp on the order of what we saw prior to the election and prior to the u.k. referendum. >> so it's one thing to have this narrow spread, but it's also unanimous. i wonder what point do we get nervous just because of anonymity? we are well into the cycle. at some point is going to have to end. doesn't make you a little nervous just on that ground alone? would prefer being contrarians, make no mistake about that. again, this surge of optimism is something that strangely in the logic of markets does have is concerned. where we would be even more concern is actually if you got a surge of optimism, a wall of money come into the market, and then the legislative agenda starts grinding as opposed to moving quickly. it really is about what can get
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accomplished. >> if that's really what we're wonder if -- i just we are really expecting donald trump to defy gravity? what we are expecting is a tall order. >> we are. if you look at it, by the logic of past situations where the republicans have dominated both the executive and legislative branches, they have been able to deliver in terms of equity market returns. but this one is a little bit different. the bad feeling that has been there for the majority of this year still seems to be below the surface. but the confidence in the economy is there. >> let's talk about emotion, they will go crazy by 20,000 points. is down emotion important?
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>> in the short-term, it is. to 20,000s, crossing is not likely to bring that surge of money. when we look at our data, in fact, the asset allocation that the fed has engineered by keeping rates low for the last eight years has caused equity exposure to move to its highest and money market exposure yielding zero to move to its lows. about thest talked fear of the idea that the fed will take market share from you so you should do this same. the fear of mixing the upside in at markets, you're looking the dollar of between 2500. the fear of missing out, is it becoming a little more dominant? >> the option market is sending up your message that fear of missing out is ruling the markets at the moment. out of the money calls are now priced historically expensive
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relative to at the money calls. 2500, moving to 2400, which the surge of emotional get us to in the first quarter, people actually fear it rather than trade for it. >> so it's neutral but it's also an opportunity to go short. x what it is is an opportunity to look at the sectors that are likely to work. basically we found that if you look at the past 20 years or so, there is a pronounced effect for the prior year's losers to outperform in the first month of the new year. what is interesting about this particular cycle is that post the election, areas like health care and technology have really usualeft behind more than , given this sort of surge of confidence in infrastructure and so on that has carried in dust real and energy and financials to new highs. we think those sectors are
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likely to be brought once tax loss selling is over. emmanuelhat was julian speaking on daybreak last week. julie: up next, to shiva plunges the most on record as the u.s. nuclear renaissance turns into a potential financial nightmare for that company. this is bloomberg. ♪
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julie: "what'd you miss?" the once heralded nuclear renaissance has turned into a nightmare for the japanese company to shiva. shares plummeted the most in his 1974 after to shiva said it may have to write down billions related to an acquisition made by its u.s. unit, westinghouse
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electric. let's bring in our analyst who covers utilities. what exactly went wrong here with this investment? >> the year ago, toshiba bought through westinghouse, the u.s. unit, they bought a company called cg&i. contract to build the nuclear plants for southern company, the four reactors under construction in the u.s. apparently in the year since, to shiva has gone through and realized that their exposure here, their costs are going to be much higher than they had previously anticipated, so they are talking into the billions of u.s. dollars as their possible hit. from what they oh under the contract to southern company. what exactly was there
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thinking in getting into nuclear at this point, when i think it's been pretty well chronicled that the energy source is struggling. mainly in the u.s.. if you look at asia, china is building nuclear plants, india is talking about building nuclear plants. clearly, toshiba has the idea that there is potential gross out there, and with the size of these contracts, you only need a few of them to make it a significant play. on the other hand, when you have very few contracts like that, and something goes wrong, that is a big problem. obviously they thought that they would make this acquisition, get into the u.s. nuclear construction business, maybe in a few years things would look different, and there would be more business. as it turns out, they are looking at much higher costs and much more extensive problems,
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apparently, than they had ever thought. the regulatory environment in the u.s. look different with the change in administration? >> i think the general sense is that the trump administration would support existing nuclear plants. not clear that they have done a whole lot with regard to whether we want to build more of them, and given that the demand for electricity is quite flat in the u.s., frankly, whether we need a whole lot more of any kind of plants for now is in question. but certainly to keep the existing nuclear plants in thantion is less certain under the prior administration. i don't think the idea has been specified that some of the programs like new york state and illinois have put into place so far, where they subsidize i'm a forwer the way
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example, renewable power, solar and wind, has been subsidized. this situation with toshiba give pause to any future plans? what was so much more expensive than they estimated? >> apparently the payroll costs were higher -- i'm not sure what they were looking at before. payroll was one area, and apparently there was just a lot more material that they needed to acquire. they haven't been specific enough, i think, to really understand, because obviously, 200 something million dollars for the whole company, and now they had exposure beyond that. so it is a bad mix, obviously. to your other question, they really have raised a question that has to be in everybody's mind, whether in the year -- in the u.s., europe, etc., with
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this kind of uncertainty, who would want to go into building a nuclear plant, when you can build a gas plant these days for 1/10 of the capital cost. so much for you giving us some perspective on this toshiba situation with bloomberg intelligence. now for theme bloomberg business flash, a look at some of the big missed -- biggest business stories in the news. virtual reality, terms of the deal reported were not disclosed. facebook aims to take the lead .n social interactions vr following i movement lets them understand people's expression and communicate in a virtual world. u.s. banks will no longer be able to deal or invest in physical forms of industrial metals after april 1. the office of the comptroller issued a new ruling today. the decision comes after
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lawmakers accuse u.s. banks receiving unfair metals in recent years. to yum! brands says it plans re-french as its restaurants in turkey and add 400 locations in the country in the next five years. awayrt of a global shift from owning its own outlets. own --it says he will 98% will be owned by franchisees by 2018. oliver: coming up, what you need to know to gear up for tomorrow's trading day. that's up next. this is bloomberg. ♪
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emily: don't miss this -- weekly coming upntories tomorrow joe: that's all for "what'd you miss?" thanks for watching.
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taylor: you are watching "bloomberg technology." your start with a check of first word news. john kerry today criticized israel settlement policy, arguing if there's any chance
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for a peace deal, it comes after -- a united nations resolution last week, which secretary kerry said was in accordance with u.s. values. israeli prime minister benjamin netanyahu assessed the speech was skewed against israel. president-elect donald trump also took aim at u.s. policy toward israel, tweeting, "we cannot continue to let israel be treated with such total disdain .nd disrespect stay strong, israel, january 20 is coming." roof has no plans to try to convince a jury to spare his after killing nine black churchgoers. house speaker paul ryan's crackdown raising questions over its constitutionality according to politico. the


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