tv Whatd You Miss Bloomberg April 5, 2018 3:30pm-5:00pm EDT
julia: life from bloomberg world headquarters in new york, i am julia chatterley. julie: i am julie hyman. joe: nam joe weisenthal. julia: more than 8000 port swing from yesterday's close in the dow. joe: the question is, what you miss? white house officials say tough talk will not lead to a trade war. hedgee playbook for funds, white raising short-term rates to benefit large cast positions. an elephant charts in need of a tuneup. why they go to model for global income distribution may paint and inaccurate economic picture. ♪ miss?""what'd you
this morning the president's new economic council director larry kudlow emphasized reporters that the tariffs are just proposed at this point. but how are investors weigh the risks? -- we welcome benjamin segal. when you look at the back and forth rhetoric about the trade discussion and tariff discussions, what is your worry level at this point? benjamin: i don't did where at the extreme worry level, i think will are heads will prevail and that is what we are beginning to see with larry kudlow stepping in. it is clearly a risk. joe: how does the offramp happen? they're usually has to be a safe haven, what is a plausible path where the two sides can back down and also say they didn't back down? benjamin: i think might see
concessions out of the chinese. i think some recognition by the u.s. administration that china is making incremental progress towards opening its market can be a valued and important member of the global trading system. a statement of a moral support, if you will. julia: nafta is a different thing negotiating, whereas with the chinese into actual property is concerned, and we talk about the potential of a preliminary deal with nafta. how do you think risk response to the announcement we get a preliminary deal on nafta and whether or not people look at it and say, he is capable of negotiating something and perhaps the symbol happen with china? i look at it another way and that would argue most people assume we get there anyway. markets would become
concerned if we didn't get a practical deal on nafta, i think people are still assuming will seek the right way. these are allies in our hemisphere, they are next-door neighbors will get the right solution. julie: we talked about the effect of u.s. risk assets. i know you manage an international equity fund. your top holdings are not in the u.s. is there a concern on that and? end? do you look at it through the same lens as the united states? benjamin: the u.s. and china are economies in the gold. lobe. it could have a significant impact, and effect as if you are a european or japanese company will be less affected. lobe. more importantly, your shares will be less volatile because the be less impacted by the noise in the u.s. or chinese
businesses. for us, the opportunity is to really focus as bottom-up spot pickers of what is going on on the ground. the economic improvement in europe and corporate governance and japan, and valuations we think still have the opportunity to benefit from both an economic expansion and profit growth. super tight labor in manyand the risk markets, particularly in the u.s., incremental revenues and disproportionate revenue and capital. i think with europe, incremental revenues will go to shareholders. joe: there has been some data suggesting a modest rollover in europe of economic performance. not a downturn, but perhaps the peak of the cycle. does that concern you at all?
benjamin: i think we are clearly off the highs as the currency strengthened and you have exporters there which tend to add noise. the exporters are less optimistic than they would have been 10% ago on currency. i still think you have strikes in france -- and they think the overwhelming trend is towards reform and improve corporate governance. but we have from companies on the ground gives us a reason for optimism. in the tech sector, consumer, health-care sectors. julia: particularly as far as u.s. patent investors are concerned, the moment they see a pmi ise headline -- the that a lofty level, and u.s. investors cannot get excited about europe. they aren't investing perhaps the way they should diversify
portfolios? benjamin: that is what i see on a daily basis, i manage international equity assets for 20 years. the last year was a first year that international equities outperform the u.s.. but get excited about the u.s. and emerging markets, and europe gets stuck a little bit in the middle. i think with the valuation with now -- economic growth spinning over to europe and the slack that will allow profits to rise. you are at the logan cyclical profits, and where's you have a height in the improvement in the fundamentals will start gaining investor attention. and last year was perhaps a start. joe: you mentioned corporate governance improvement in japan. there was an interesting report talking about the number of companies that removed their anti-takeover provisions from their bylaws. does that give
investors when that happens? what is the upside for a company taking measures to improve? benjamin: we are talking about japan where things happen in incremental fashion. as like as the direction is positive and we see a series of measures that the economic level and corporate governance level -- which are consistently positive -- and they vary company from company. sometimes they can affect a corporate takeover or shareholdings or compensation packages. i think you are seeing increased recognition on the part of japanese companies. they are missing out. i think the opportunity there for improvement and opportunity for reform is a significant positive. that is one of the areas to get excited now. some copies are still expensive. some willfully or poorly positioned for the global economy.
but when we find the needle in the haystack, we get excited. about i was going to ask technology, and you look at the top 10 holdings and many are tech firms. only one i see is a u.s. based firm. my aztec more attractive to you outside of the u.s. -- why is tech more attractive to you i outside of the u.s.? benjamin: the approach is the industry leader, whether it is or aconductor government search engine and china -- whether i am the world's largest corporate resource planning software business. the winner is way more profitable and successful and generates more cash flow than number two or number three, and certainly number 18. we look at the top holdings, and see those leaders, and at the
bottom half of the portfolio hardly see any tech names. industrialller businesses and consumer financial businesses where we have individual bets on individual economies and individual markets. the tech sector is global and it is inherently bank. we are not seeing european and japanese companies affected by regulation or legislation or some of this political backlash that is below the surface. it is executing very well, and we like to see that. julie: i should be clear in your that in your international fund, -- benjamin: it has the dna overseas. manager, thanko you so much for joining us. datag up, tomorrow's job
julie: march his job report comes at a party m houston isorrow, and payroll growth expected to slow, but an employment is expected to fall and wages are predicted to grow. let's begin chief u.s. economist for bloomberg economics. he said hopefully it is going to be fantastic. i don't know what level that will be, but he is probably happy. >> i hope my forecast is fantastic. julie: scientifically minded. >> for the first fantastic chart
i brought with me here, we look at the underlying trend in hiring and we see this is a 3, 6, and 12 month average on the screen. when we look at that, there's an upward acceleration. not just a fluke here or there, we are seeing it in the underlying trend. that i will say is a fantastic situation for the labor market to be in, so long as we don't overheat. i think things are manageable at this point. we certainly can't repeat this dramatic aim we saw in february. nonetheless i think we should get somewhere north of 200,000 and tomorrow's report. this acceleration should continue the consensus forecast, which is 185 -- below all of those three lines we show in the charts. there are not buying in this notion of acceleration, regardless of whatever he does sigrid c-suite's we have to contend with in march, of which
there are some. the labor market is exhilarating. or more on the show, and has been the cliche, we're going to be watching basic job creation. chris -- we we are are carry us what it is going to show tomorrow. what do you see happening there? carl: i think there is the risk of a head fake tomorrow. march, youw about will be reminded in new york, it is the late and the winter. we had the nor'easter in the east coast and whether tends to impact not only the number of jobs created, but the hours worked. when we see the work week contract due to weather, that leads to a spike in earnings.
we see in january, on groundhog day, this is looking like groundhog day all over again with tomorrow's earnings report. if we get a surprise, look to the weather workers because that will tell you if this is a fluke. joe: we could see a average hourly earnings spike because earnings were normal but ours came in less and the denominator of that ratio -- carl: and if they adjust to this, it is a quark that shows up time and time again. so watch out. julie: will it go down then? carl: it did in january so there is a chance. watch the average work week. we have our curtailment due to bad weather. that is deep in the details of the report. julia: and it behooves who gained the jobs in terms of whether related jobs in order to assess if that is what we are seeing. carl: exactly, and another place
to work is construction, which could be hurt by that. watch for the head fake tomorrow. on groundhog state went through a four-day market swarm. the market is sensitive to that warning signal of labor inflation. julia: good news for the economy, not necessarily great for markets. [laughter] that. carl, thank you for it is time for the business flash and a look at the biggest is the stories in the news. the ceo of abu dhabi says ms of investment potential in the middle east that she spoke today the bloomberg tv. >> other than technology -- financial services firms, we have had recently different companies inferent
the gcc and middle east. we see this as a great opportunity. julia: been your stock exchange current company has agreed to buy that chicago stock exchange. didn't say how much they are paying people from other with they will value the chicago exchange 250 two $100 million. delta says the data breach of card information of several thousand customers, the cyberattack was a contractor provides online chat services to the carrier and occurred between september 26 and october 12. customers names, addresses, and card information, including security numbers and information date. movie pass, which provides access for a $10 monthly fee is teaming up with movie phone. the show screening times for
movies. verizon gains and an ownership stake could help accelerate the growth of the startup. movie pass has been warned of its longtime viability that is in question. and that is your bloomberg business flash. we talked about this earlier. julie: movie pass is a fascinating story, and my hero today, for referencing seinfeld, what will you tell me about the name of the movie would like to see? that is for seinfeld fans. higher, theopping best stock in the s&p 500 today. abigail doolittle joins us now to tell us why this educational loan company is on the move. what is going on? analysts are saying everything looks better, so he has reviewed credit performance and reserve coverage and other
metrics. he is also send, and this sounds interesting, they service federal and private loans. he is saying that in school origination volumes of private who are folio may hit an inflection point in 2020. stock, they spun out from sallie mae in 2014. they handled the federal loan servicing. you see the stock in origin shares in 2014, the 10 year yields in blue. there's a correlation for most of the two years leading to 2017. and early 2017, the consumer finance section bureau went after them, that they should be doing things in a better way. in there's a bigger got october of 2017 as the pennsylvania attorney general went after them. they do have offices in pennsylvania, maybe that is a piece of it. that appears to be a bigger
overhang of the fact that it has uncorrelated with the 10 year yields and that is something that could be ahead. julie: when you look at the year-to-date performance in them couple from rights, it is up 3.5%. abigail: it is higher on this upgrade today, which is interesting. stock before, the and it is about the student loan crisis. they do have a bad rap around the idea if they are a part of it. but they're are not a piece of the student loan crisis. what they do is the loans they service, they have collection agencies to go after students who are in default, so they can collect loans there. thosevernment is backing lawns, and some people are saying that is not entirely fair. overall this company put up a strong quarter in january, valuations are good, and they are diversifying into health care. may be an interesting stock to look at.
julie: what you missed? sharon sandberg joining mark zuckerberg saying the come when the companyted -- is committed to increase privacy and she did say some advertisers have pulled back a little bit, the question is, is it going to matter? this chart i find incredible. the percentage of global population that checks facebook on a daily basis. it is growing steadily and it is
near 19%, 90% of every person on the planet checks facebook on a daily basis. chart, andcredible it shows you the power of the company and how difficult it is going to be for anything to slow them down. julia: a few advertisers. just to be clear. joe: a lot of people using facebook. what is the relationship between trump and the stock market? it is kind of weird and i cannot explain it -- that starting in january, when trump's poll theers started rebounding, white line, they shut the in february, and we saw the stock market debt, and the trump approval rating dipped, and the stock market went back up, and the stock market did the reverse and it is probably just noise.
i cannot defend the chart, i just looking at it and i like how it mirrors it. i don't know how long it will continue and there is the explanation, but i am into this chart. julia: it resonates with his base. joe: it could be the answer. julia: maybe. what about the weather? about theeft a talk weather, but even the british member of this team, it is surprising. we are looking at the chart behind me, i am measuring actual snow on the ground. this is new york's central park. you can see a rise in january, drop in february, and march, we had snow flurries. look at april and what we are expecting for saturday, doubling the levels we have seen in april. expected in washington dc as well, so watch out for the cherry blossoms.
commission in washington dc, the most since 1924. julie: i expect julia to be out in her furry boots, giving us an update. julia: is there a correlation between bad weather in new york and my arrival? [laughter] julie: how do we chart that? julia: rainfalls, probably. julie: but that is not happening the spirit of the bulls today, as we see stocks rallying, edit than 1%. and the nasdaq also rising in the third day of gains for major averages. julia: and the volatility in the last couple of sessions, 8000 points between what we are seeing overall versus the lows we saw yesterday's trading session. joe: and look at futures because those bottom at 6:00 a.m. yesterday. julie: a smaller range in
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julia: stocks and higher for a third straight day. the doubt more than 200 points, and 10 year yields higher. chatterley.julia julie: them julie hyman and for scarlet fu. joe: ma'am joe weisenthal, and welcome you to closing coverage. julie: we begin with our market minute and stocks are rallying. cursem to have broken the of the darkest hour, the last hour of trading seeing a dip, but strengthening in the last hour and maintaining in the last hour or does last several sessions. all major averages up, and we continue to see a relatively light volume, for some does is a holiday or spring break week. let's look at the stocks on the
move. semi conductors were one of the weak spots, and we see macron fall by more than 6%. ubs be getting coverage of the group, and in particular macron is one of the two sell recommendations. that is one of the things weighing on micron shares, with concerns about the memory chip recall. and hearing from sharon sandberg, as julie was pointing out, she said a few advertisers await ford as they the company to answer questions on user privacy, but that hasn't slowed the stock gains today and it is up by 3%. and energy, and the third spot, the best-performing on the session as we saw a bounce in oil prices, which will get to in a moment. joe: let's look at the u.s.
government bond markets with the two and 10 year a bit higher and steepening. the tenure goes up and then down, and it is in a range, it is going up in the last couple of days with the risk on move steepening. at the two year yield up one basis point. julia: and the prospects of a trade deal, looking at what is going on at the dollar cap, relatively unchanged. -- a one-month low, and looking for canada to hike rates in april 15. and some of the most accurate sterling forecasts are saying don't panic about the brexit risk, they are overdone. and the top forecast thanks we could see sterling versus the dollar at 148 by the end of 2018.
joe: and finally a look at commodities. interesting reversals from yesterday. bit,nd gold up a little but that agricultural commodities are in the center of the action lately. barometer of how the market fuse tensions. we may have a soybean got here, corn glut. racing yesterday's losses, corn is up, and maybe the clearest signal from the market -- a recalibration of where they think these trade actions could go. and those are today's market minutes. julie: for more, let's begin cameron crise about the action we are seeing. make it three days in a row that we see gains, everything is great. maybe, today, as long
as you are a long index tracker. it is fascinating if you delve under the surface and open up the hunt to get the microstructure of the market. he could tell us quite a bit. there's an argument to be made that if you are an average investor it is worse than the green numbers you see on the screen. it is the least popular or worst-performing stocks of the last year that have done the best today. , and the highfliers relatively speaking, have been relatively poorly. joe: and we have to chart showing the space. does it mean the rally is less sustainable? this short squeeze not count somewhere? cameron: i think for it to sustain, what you need to see is either a reversal of the pattern, or the most shortstops are outperforming, or essentially a rotation with a
becomeovering stocks long. if they keep going. other than that the left f become ang and apples to take leadership again. joe: i am joking around but also serious, i get that perception that a trade war could unfold is based on how the stock market did over the last six hours, so when the market is up, trade tensions must be easing so they are firing rhetoric. cameron: i am glad to know you are joking. joe: i am half joking. you can look at soybeans, what do you make of the connection of the market moves on this? cameron: it is a tough question because, as you know, these things don't matter until they do, and when they do it gives participants something to anchor on. but we have seen over the last
couple of weeks during the downdraft -- i often talk about this on the program -- the correlation across all s&p 500 stocks have gone up to medically. while individual trash have gone up dramatically. tradet because of the tensions talk? perhaps they degree. is it a positioning unwind? perhaps to a degree. it is easy to fit the story tape action ex-post. we are all pavlovian. you could assume there is a correlation, but it is the sort of think you can't tell for post until youx have a large sample. julia: i was told that healthy markets have no correlation
between asset classes, and differentiate between risk on an risk off, and the lower level of volatility for a foreign exchange, particularly the bond markets. is there something overall healthy about what we are seeing despite the volatility? cameron: i think that lets some credence. there is no guarantee that currency and bond markets are " is " wrong",quity but maybe what we are seeing is it is more localized. the u.s. tax deadline date is in 10 days, and is now cheaper to cash in and fund your tax liability with stock returns. maybe that is partially driving it. julie: i have a chart showing the vix.
blue --cs volatility in fx volatility in blue. joe: are here when the dow rallied to hundred 50 parts, and one of the things he said is when you see these big updates, it doesn't necessarily tell you a turnaround, this is a volatile market. is it the same story? cameron: i have to wrap your knuckles about using technology. [laughter] i think it does speak to the underlying volatility climate. you don't go from a superhigh volatility market, which we have been in over the past couple of placid, calma waters overnight.
it is a revolution rather than evolution in terms of volatility regime. of course we can go up a lot, it is going to peter out rather than and with a bang. and it is below yesterday. [laughter] julia: cameron crise, thank you for that. coming up, should we prepare for a potential trade war? we are joined by the former secretary of commerce for international trade. coming up, shouldfrom new york,s bloomberg. ♪
first world news. president trump took shots at the centered in his home state, speaking in west virginia, the president told the audience it will soon have the chance to get a senator who is going to vote for our program. he says mansion is not giving west virginia the white house agenda to help it needs. he votes against everything, he voted against tax cuts and medical help and health care. that is bad. we can't have it. it is one of. and he does other things i do not like, i will be honest with you. mark: six republicans are waseting against manchin, running for reelection. a plan to deploy the national guard at the border in mexico while border closings were at the lowest levels. in decades kirstjen nielsen said illegal entries last month triple in the same time last
year. she added the situation reached what she called a crisis point. >> we are going to send as many troops as we need. -- is not alear partnership with governors. we are going back and forth right now, does is how we think we can separate the border patrol and pursue this on the front line. also was asked about mexico's assertion that any u.s. military troops sent to the border be unarmed. she responded that we are continuing the negotiations. the white house is german chancellor will be visiting president trump in the coming weeks, and that because of the visit are still being worked out. ball mark second visit in washington and her first since she was sworn in for a fourth term last month. the u.s. surgeon general is urging americans to carry an antidote for opioid overdoses.
dr. jerome adams says sammy 7% of overdose deaths occur outside it isedical setting, and available without a prescription in 45 states. the national advisory is the first since 2005 when the government urged pregnant woman to abstain from alcohol. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. crumpton. this is bloomberg. miss?", the'd you trump administration walk back trade rhetoric today, and larry cut no insisted tariffs are not around the corner. this is part of the art of the deal? our next guest negotiated deals with china under the obama -- administration.
great to have you on the show, making for joining us. >> great to be here. wara: you said a trade looks unlikely, but do you believe this administration is missing vital cultural differences between the two administrations that are required to reach a deal? end, andk that is just that and i take issue with the diagnosis. real tradeortant and issues with china, in particular, the question is are the tariffs and approach proved to be effective? that is where i question the current approach. julia: i spoke to the commerce secretary last week and i was pushing him, is someone planning to go to beijing? he talked around the issue and wouldn't confirm. is that part of it, getting everyone around the table? you negotiated with these people and you were there a lot. >> five trips in two years, and before that i was an investment banker.
it is hard to do a deal of this complexity over the phone. you have got to go there and build relationships. the fact is these folks have been in their offices for a short period of time. one of the pieces of advice i would give to the secretary and administration is to take the time to build relationships and build the relationships with friends and allies. these are global problems that demand global solutions, and working with others will help us. julie: what about the argument that the trump administration says that approach did not work before and we got to this place with this trade deficit with china because we were perhaps too gentle? we build relationships instead of bringing down the hammer and negotiating from their. re. right,ink that is quite we have been on an approach for a number of administrations, affect the since china joined the wto 17 years ago. we made a bet as a country that
having them involved in global commerce but likely expedite and lita reforms in the country towards a more marketplace system. that turned out not to be accurate, another question is what do we do. we should be focusing on creating rules and we should be focusing on impacting their behaviors to do two things they can control, and not trying to affect the bilateral trade deficit, which is the outcome we cannot negotiate to. joe: the question of technology transfer and to enter chinese markets, u.s. companies have to transfer a lot of their know-how is a key thing here. what would be an approach within a rules-based system that you mentioned that might get china to deviate from a practice that is abnormal globally? >stefan: getting china to follow those rules is a place to start. issues a complicated
because u.s. companies have decided historically to make 1.4 billion had reasons to make a bargain because they wanted access to that large and growing market. the question is are we biking our nose to spite our face? with them, be tough and are the policies we are putting in place, these tariffs that are a blunt instrument, likely to be effective? the administration is realizing it might not be as they continue to walk back the tariffs they already announced. julia: how do you fix it and establish a better relationship with united states? a critic would say, the president said that there is no trade war, it was lost years ago and the work of the obama administration is at fault. stefan: i would say not all problems are easily solvable.
the notion we have a magic bullet to do this is frankly naive. dly, some of these actions are going to make things worse. i think one approaches to do no harm, and we make that consumers and businesses in a worse position than they were even before we started. julia: this china get it, do they accept they have been caught with their hand in the cookie jar as far as intellectual property is concerned? even in recent days, they said they will respond in kind, but we would like to do a deal here. do they get it, because surely that is part of the battle here? joined then they wto, they were in fact a developing country. now they want the benefits of a developing country, despite the fact they are the second-biggest economy in the world. they have to start to play with the global rules and behave in a way that is consistent with the
size of their economy today. julia: do they realize that? stefan: i think they do, and the question is what we do to get force that. julie: and north korea as part of that discussion as china has levers when it comes to that. is that also a risk that china comes back and uses that leverage in a more overt way? stefan: this goes back to the negotiating strategy. one of the things i would be concerned about is if we have a chance of impacting china's position as it relates to north korea. despite the fact we might put tariffs on their economy, i think from their perspective they would rather have the punishment of those tariffs and have a unified korean peninsula with the allied on their border. my concern would be quite logically, it would say that outcome is worse for us than with ever penalties when they
suffer in the context of tariffs. joe: the proposed tariffs have not been implemented yet. stefan: and they may not be. joe: is it a political position? stefan: at the moment, what the market is telling you, up 300 points in the last couple of days, is going to be more bluster than policy. julie: shrug is where we are at this point. current managing partner at bridgeport advisors, thank you so much for the interesting conversation. and everyone came soybean experts this week. and we hear thoughts on why soybeans matter. this is bloomberg. ♪
julie: a trade dispute between the u.s. and china is taking aim at the martin farmers. jeff currie, the head of global research at goldman sachs joined alix steel. jeff: the import soybeans from the u.s. best and one think unique about soybeans, and he 5% of election comes from four countries, china, united states, brazil, and argentina. brazil exports 12 million tons elsewhere in the world. there is no possible way they can replace soybeans from either brazil or argentina. knows i have poor weather going conditions in argentina and brazil, so the supplies are being curtailed. implementation will be difficult, but it goes to a broader point, as you dig deeper into goods production and flow around the world, it is not elastic.
talk autou production, oil production, or even grains production. the key there is, tariffs are likely to be a regressive tax on the people. your ability to create any big shifts in trade or production is difficult. case in point, look at the aluminum industry in the u.s. you haven't seen any significant research. we'll see if it actually happens. it goes to a broader point that i would say, outside of shale, the supply, whether it is commodities or other goods, it is limited. one of the reasons for that is how capital intensive the production is. even if you take intellectual properties, it is a sunk cost. if you make that sunk cost, and the ability to respond to some movement and pricing is limited. i would go as far as to say, one of the reasons we haven't seen much volatility in this business
cycle is the fact that production is becoming more and more capital intensive and less dependent on labor. reallyline here is difficult to create significant changes in trading patterns. a tariff acts like a regressive tax on their own people, which means we'll see how it evolves as the politics and negotiations go. cycle is what the short was imparted to the entire world because it changed the dynamic. goant to get our next chart, to has been in a tight range for a while. are we going to get a breakout? jeff: our target for the end of the year is 1450. >> that is a breakout. jeff: it is a breakout, and what is happening is the strong emerging market demand. our framework, fear in wealth. let's go to the two but adds of gold prices.
in 1999, fear was zero in developed markets. you had the dotcom boom. and you had the asian financial crisis. let's go to 2011. yet the european sovereign debt crisis in the financial crisis in the u.s.. what about wealth in asia? stimulus going on in asia, so we get high wealth. the get the market going forward, fear is an evolved markets is modest. but what about wealth in asia? we talked about saudi arabia raising its price of oil into asia. asia is doing incredibly well. oil demand is growing at 750,000 barrels a year. similar to 2011. both creation is going to come up what they do with that wealth, they buy gold.
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>> a.l. mark crumpton with "first word" news. president trump is planning to make his first trip to latin america since taking office. the white house is hoping to promote democracy in the western hemisphere while countering china's efforts to increase its economic influence in the region. administration officials say not to expect announcements on nafta or new sanctions on the venezuela government. to thesian ambassador united kingdom said today the international community is under pressure from the u.k. and the u.s. to blame the kremlin for that nerve agent poisoning of an ex-spy and his daughter.
alexander? venoco believes countries did not support russia's call for a joint investigation. he says they voted "against transparency." >> we wanted to see the evidence. we wanted to have access, but not only russia. we believe it should be available to the whole world, and that was the purpose of our decision. course, some countries were not happy with that. he says many countries doubt moscow is behind the .ttack a special session was scheduled for this afternoon. at least 15 people were hurt after a tour bus on its way to the masters flipped over on a georgia interstate. officials say the bus ran off the side of the road and overcorrected before it turned on to the median.
the 61-year-old bus driver has been charged with dui and failure to maintain lanes. after the costliest atlantic hurricane season in history, early forecasts indicate 2018 will be above average. researchers at colorado state university predict 14 named storms with a 63% chance of a major chance of striking the u.s. this comes after hurricanes harvey, irma, and maria caused more than $15 billion in damages in 2017. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. >> let's get a recap of today's market action. third straight day of gains for the major averages. for the s&p 500, it is up by about 3%, and it's the first
three-day streak we have seen since march 6. it has been a little bit unusual. materials and energy stocks, among the best performers, and utilities, also joining the party. not quite finishing at the highs of the session, but still, another up day. you miss?" with the middle class already spending $35 trillion annually, we toss to the brookings institution senior fellow who says the next decade could see a faster expansion of the middle class than at any time in history. from the brookings institute, there is whom he care of for joining us. why is the next decade going to be so potent? the big question is, who gets left behind? hopefully, nobody gets left behind.
one of the things that the middle class can do is actually create a wave of strong economic demand that can benefit everyone . who is behind this wave? obviously, it is the large economies in asia. you have china and india. he also have indonesia, southeast asia. many of these economies have hundreds of millions of people who are just now about to enter into this range where they have enough discretionary income to be able to choose what they spend their money on. they are already starting to eat out. they are buying consumer durables. cars in record numbers. they are buying insurance. it's a range of products from material goods to services. >> the chart you are looking at is the infamous elephant chart,
which shows the global middle class having done really well in , but that has been outside of the developed world. some people doing this for some of the political tensions. years,t 10 years or 20 how will things be similar, and how might things be different? >> when you look at that chart and see the big dip in growth of a certain segment, that's a mixture of a whole number of people.
you have a lot of latin americans in that group. they, of course, have not performed strongly in economic terms during this period. you've got brazilians in there, even some mexicans, etc. the number of people from the developed middle-class in that group is quite small. take a country like the united states. almost two thirds of the united states in that chart will be in the world to 99% or 100%. when we think about the developed world and the middle class in the developed world, it is actually quite far to the right of that chart, not in the middle of that. >> when you look at what we have seen in terms of what joe was
alluding to in the populist movements around the world outside of the united states, how do you predict that will continue to affect that income growth curve, particularly for those at the lowest end of it. i think what is clear is the way in which global growth is being distributed is quite uneven, and in different countries, you have different distributions. it seems to be the case that in almost all developed countries, the distribution of income is getting worse, and there are distinct segments of people being left behind. i would argue that is not necessarily because of the evolution of the global economy. to dolso in large part with the domestic policies and politics. countries,some including france and the u.k.,
or people towards the bottom of the distribution or middle of distribution have done quite well. of course, you have the scandinavian model where income distribution is much more even, as well. what is happening is that the global economy is putting pressures on various countries. those with stronger safety nets are performing well. those with weaker safety nets are seeing the political ramifications of not having that kind of strong, public safety net. >> your conclusions are somewhat different than the previous research, and one other area that looks different is that the superrich, when everyone says, they are taking everything, maybe their incomes haven't grown as disproportionately. what did people get wrong in assessing the extraordinary gains of the super wealthy? >> i think the superrich have done very well, but they are actually quite small in number.
they are gaining a lot of labor income and returns to capital and returns to intellectual property rights from firms they have founded. it's not that they are not doing well, but the income they are getting is not income they are taking away from others. are getting athey larger share of labor income as much as they are getting a great deal of the benefits of capital income growth, and the share of capital in total gdp has gone up. >> it's not a zero-some game. thank you so much for joining us. coming up, searching for the next ceo.
j.p. morgan would be the right ceo to run deutsche bank? erik: let's start with the fact that jpmorgan has been a fruitful training ground and hunting ground for bank ceos. bill hunter who runs standard chartered was former cohead of investment bank j.p. morgan. nonetheless, he's the ceo of a major bank. it wouldn't be crazy to think of someone else like matt zane's becoming the ceo of a bank in need of new leadership. to your point, why if j.p. morgan decided that matt sainz was not the right guy to join the bank, and that is the case -- that is what happened last year, and it's one of the reasons he left the bank -- why would he be an appropriate choice for deutsche's? believe heeasons to
would be. one of them is the fact that he has a great deal of experience and fixed income, and that's one of the areas where deutsche bank has gotten themselves in a lot of trouble. matt sainz was one of the guys who analyzed the bear stearns portfolio when jpmorgan had to make more or less an overnight decision about whether to buy bear stearns. trickyealt with some situations, and he brings a lot of expertise, but in other ways, he might not be the right man. >> do you think he wants the job? sorry, eric. >> the other reason why he left a jpmorgan is he did want to be the ceo. if the chairman decided he wasn't going to succeed dimon, and that was my understanding, he's got no choice but to go somewhere else. the job. taken
my understanding is he has had one offer to run a company. to be a scholar, executive in residence at m.i.t. what is that opportunity? is it to run a competitor to jpmorgan, or is it to run something smaller that may be more appropriate given his skills and his personality, perhaps, as someone suggested to me, a hedge fund. >> john cryan has said he's committed to being there, but they are looking for somebody else. >> the moment he says he's not committed, he's out of deutsche bank. >> if we are writing stories that they've talked to matt join , why would cry and stick around? >> because he has a job. it's not like the job at deutsche bank has become any easier. >> he still thinks he can convince the board otherwise, he can turn it around? >> it's as easy as john cryan
waking up every morning and saying to himself, why am i putting on my suit? why am i cinching up my tie and going to that job? it's not an easy job. i like to believe that all four of us, faced with the same challenge, would rise to it similarly. >> what about the tensions we have heard about between the chairman and john cryan himself? this is a chairman who has presided over a number of ceos over the last six years. this is a supertanker to turn around. john cryan may not have to fall on his sword. his head may be cut off with said sword. if you are the chairman of the board, you have to make a decision about whether the current ceo is or isn't the
right man or woman for the job. if he or she isn't, you are duty bound to find a replacement, but the moment you name the new ceo is the moment you yourself should walk out the door behind him. >> interesting point. thanks to bloombergs erik schatzker. next, rising hedge fund rates and hedge fund returns. what is the critical link? stay tuned. this is bloomberg. ♪
she spoke to bloomberg tv and took responsible before the cambridge analytica data manipulation scandal. oure didn't build operations fast enough, and that is on the. onhad 10,000 people working security of the year. at the end of this year, we will more than double to 20,000. we are massively investing in smart technology. we are doing this to make sure we get to a place where we can proactively protect people's data. >> she also said a few advertisers have paused their spending. credit card in savings customers may not be the only ones misled by wells fargo. 'sme clients in the bank wealth management division were steered into investments that maximize revenue for the bank and compensation for its employees. that is according to people familiar with the matter and documents reviewed by bloomberg. wells fargo says its actions did not harm clients. and investment -- investors pershing square capital management have asked for their money back. moneytwo thirds of that
that could be withdrawn at the end of last year was indeed pulled out. pershing square has had three years of subpar performance. that's your business flash update. >> "what'd you miss?" the fed raised rates last month with two more hikes expected this year. with us now to discuss the top strategies is donald steinberger, managing partner. great to have you with us. start by explaining the mechanism upon which a rise in short-term interest rates benefits some hedge funds more than others. >> when you think of rising rates, you think of it hurting bond values. you think of it potentially hurting equity values. there are a number of hedge fund strategies that hold a lot of cash. one example is commodity trading advisors. what they tend to do is buy future contracts that are fairly leveraged. 80% of their portfolio tends to
be in cash that has yielded 0% over the last few years. the feds have taken rates up to 3.5%. that is a huge windfall for those strategies. another strategy is reinsurance. basically from insuring property. they collect premiums. they make claims, and they put the money aside in a big fund in case there is a claim they have pay. it has been yielding close to 0%. if rates go up to 3.5%, it's going to be a huge tail wind. strategies with a lot of cash are going to benefit significantly. >> what strategies lose out? strategies that lose out are fixed income strategies that have long-duration, and you've seen a lot of money come out of structural credit. most structural credit managers lost money last year. when rates go up, you want a short duration. you also don't want a lot of credit exposure. spreads are really tight, and
they are going to widen out. >> when we see this point of the interest rate increase cycle, how sustained are these benefits and risks you are talking about? ?oes it last >> for those who have cash, the further short-term rates go up, the better. the market neutral fund gets a lot of return from the short part of their book. the higher the rates go, the more the tailwind that is going to be. >> here's my question -- why do i pay a fund manager when i could hold the cash and earn it myself? >> you aren't hiring these managers to invest the cash. historically, you invested in them for whatever the strategy is, and this cash return is going to be a benefit. there are a lot of institutional investors who say, wait a second. you are generating 3% in cash
or? benefit, you are hiring them for a strategy. if the cash yields more, the strategy does better. >> the difference between 0% and 3% is clearly a lot when talking about short-term rates, but that has happened over a period of lots of years. basis, what are we talking about in terms of net income performance? how fundamental is it that we are talking about this on average? >> i think it is pretty good. the're looking at, what is expected return for each strategy? strategy that is now returning 1% to 2% higher -- >> that's what you are talking about, 1% to 2%, incremental benefit.
>> that's a huge difference. you're going to see a lot of money shift from some strategies to those that have big cash portfolios because expected returns going forward are higher. a lot of those strategies are benefiting as people move from risk on to risk off. people are looking for strategies that are not correlated, and a lot of these strategies are not correlated to the capital markets. >> thank you so much. donald steinberger, founder and managing partner. we appreciate it. >> breaking news, president trump addressing reporters on air force one. is not on a level playing field, reiterating some comments he has said recently concerns. trump, also saying that he didn't know about the payment to stormy daniels. i think that story needs no
>> "what'd you miss?" a third straight session of gains for the u.s. majors, but volatility once again. >> don't miss this. economic data, the jobs report, out at it: 30 eastern tomorrow. >> fed chair jay powell speaking at the economic club of chicago. >> that's all for "what'd you miss?" >> "bloomberg technology" is up next. >> have a great evening. this is bloomberg.
lawmaker's home state. >> he votes against everything, and he voted against our tax cuts. he also voted against medical help and health care, and that's bad. we can't have it. you know, it is one of those things. and he does other things that i don't like, i will be honest with you. >> six republican contenders are vying in the primary for the seat. president trump says he still has confidence in e.p.a. chief scott pruitt, but bloomberg obtained a new memo from an official that found fault with an snirble review that cleared pruitt of any wrongdoing related to his rental of a d.c. condo from an energy lobbyist. the surge general is urging markakis to carry an antidote for opioid over doses. it is marketed under the name narcan and is available without prescription in the united stat