tv Bloomberg Markets Americas Bloomberg April 30, 2018 10:00am-11:00am EDT
vonnie: a show jampacked with big interviews today including the ceos of t-mobile and sprint billion dollar deal. a lot of questions to be answered. also, josh friedman joins us from the milken institute
global conference. first, breaking economic -- economic data. abigail: we are looking at a slight miss. the survey had been calling for a move up 7/10 of 1%. this compares to february, up 3.1%. this was revised down. a little bit of weakness. small misses. pending home sales are forward-looking. ahead.ests weakness
in terms of the influence on the major averages, not much. the king at the solid gains for the dow. s&p 500, into that. this comes after last week's declines for the major averages. for thepoint boost major averages, let's take a look. shares of apple on
pays for its best day since march 26, up 2.5%. dipe recently took a big below the 200 day moving average. now back above that technical level. the caution analysts have had over the upcoming quarter, including up and hire -- oppenheimer cutting estimates. we have rbc saying the magnitude of investor negativity likely over done. we are seeing that today. the report earnings tomorrow after the bell. pick movement not helping the
major averages today out of sprint and t-mobile. take a look at sprint, down 13%. t-mobile down for .9% on the news that t-mobile is going to take over sprint, a $26.5 billion takeover. the reason the shares are lower, concerns about whether this could be done in president trump's d.c. lots of antitrust enforcement. if we combine these companies it would be two of the biggest wireless companies. 70 million subscribers, $74 billion in revenue. investors think this is unlikely to happen. vonnie: caroline: -- caroline: 19 minutes into the close of training in europe, let's look at the big movers on that wave of m&a. increaseing a record in share price.
up 16%. i tracked sainsbury's's against tesco. they are going to have a bigger player in their group. the combined forces of the asdaart's and unit. it takes a key significant stake in the combined business. it will take 42%. it is a $10 billion deal overall. ouch if you had shorts on sainsbury's. trading 1.2ap pounds higher. it is not just m&a driving. it is also a key day for earnings. check out how much -- clearly the leader on the stock 600. wpp up 5.6%.
it has been a torrid time since they had to exit that particular business. the focus is not only on the numbers, but also potential divestitures. -- thataking a look at is what the co-ceo owes are talking about today. up the most in almost a decade earlier today. going to switch gears and drive in other asset classes. wcrf, a story of king dollar today. versus the u.s. a dollar. the euro off by almost half a percentage point. week inflation data coming out of germany. it tell you talks considering. -- weak inflation data coming
out of germany. the home secretary was a pro-eu player. welcome in david, being promoted to home secretary. for briggs ite initially but now he is an eu skeptic. concerns continue to swirl about wet sort of brexit deal will get. a busy it is going to be week. economics data continuing to roll in. monetary policy remains a focus. bruno braizinhaon glow . what do you anticipate -- what are you anticipating out of this? bruno: a slight upside.
-- it bodes well for this statement on inflation. togrowth we are relative the previous statement. risksught a balance of relative to the previous statement. to theks are skewed uptick on the inflation side. vonnie: how will the fed communicate that? will communicate by saying we have seen a significant risk towards the target. we are now a target for the first time in the last six years. this will need to be reflected in the statement. the question for me, how the markets will react to this. it is pretty expected by the markets. what is also expected is a theht transitory nature of strength in the first half of the year.
i expected to dissipate in the second half of the year. you expect inflation slightly lower. is not necessarily translated into a more hawkish pace of hikes for the fed. i do not think the fed is going to stop pacing the fourth hike on the back of the inflation outlook. king dollar is on. as king dollar not remain? -- does king dollar not remain? vonnie: king dollar stays king dollar? bruno: for the near-term we are tactical on the dollar. outlook is bearish on the dollar. we don't expect the environment to be one of adding to the dollar, to fade in the uptick on the dollar. we see convergence towards parity around the end of the year on the dollar.
this is a significant challenge for portfolios at this point of the cycle, i think. vonnie: talk to us about what you are doing in terms of recommending the asset allocator is, what they should do. allocators, what they should do. bruno: portfolios are becoming more balanced. they are facing a challenge from the bearish outlook, with an global yields and equities. rotation inxt of the late cycle dynamic, what portfolios found and what we recommend in this stage is a significant allocation to em space which is more significant than at previous cycles. in asianm equities
space. , this is somewhat conceptual. it is necessary in the context of a bearish dollar outlook and a fed that is not that hawkish relative to previous cycles. vonnie: ok. caroline: going into the bloomberg you can see how much -- you see the dollar pushing theer, and at the same time crowded trade we have seen playing out and in terms of emerging markets. the yellow line, down in terms of local debt. that has been falling off. you think that is going to be turning down. cyclical play as well. where do we see a move into equities? u.s. equities a
laggard into this move. fairly low risk reward. we prefer em equities. we like japanese equities. storyly from the domestic in japan, which is supportive of the japanese equities space, but weo for the positive profile see in the japanese yen. the japanese yen has the potential to appreciate. in a risk of scenario where the trade collapses. it presents a reserve of value. 10931 today.ng at thank you for joining. allocation, and a fixed income strategist. now here is taylor riggs.
oflor: purchases rose 4/10 1% from february matching estimates. fed's for metric hit the central bank's 2% target for the first time any year, reinforcing the outlook for interest rate hikes. a year, that reinforces the outlook for interest rate hikes. the president tweeted numerous countries are being considered but he asked of the building known as peace house on the south korean zone would be better. souths where kim met with koreans president last friday. a double suicide bombing has killed 29 people in couple -- kabul. nine of the dead were journalists. the islamic state has claimed responsibility. british prime minister theresa may has moved quickly to replace a pro-european ally on brexit p on brexit.ed --
rod quit on immigration scandal. to stay in the eu but now supports brexit. by 27 hundred journalists and analysts in 120 countries, i'm tyler riggs -- taylor riggs. this is bloomberg. caroline: the global conference underway in california, a watering hole for those in technology and policy. one of the themes is tighter manager he -- tighter monetary policy. >> thank you. one of the reasons to come to milk is to talk to some of the world's greatest credit investors. our next guest happens to be one of those people. josh friedman.
those $26 billion being in hedge funds. drexel background. ,ack in january, when we spoke you made a scary prediction. financial markets could look 1994, where a lot of people lost a lot of money. what do you think now? josh: that could still happen. i think we have the same benefit of a relatively good earnings outlook with taxes lower, with capital expenditures accelerated, with unemployment decreasing. the business outlook is good. you have the fed raising rates. we started to see volatility since our meeting and davos. down 5% since then. you have sources of volatility going forward as well between korea, trade, tariffs, the trump
investigation in russia, etc. we will just have to see how they play out. erik: what about quantitative easing? it is something you have been paying close attention to and a dominant feature in the post crisis landscape. was moret year there monetary injection in the system, particularly europe and japan. that is being taken away as well. we will have to see how that adds up. it would not surprise me too in the year with rates higher than people expect. we don't predict rates, but we try to protect ourselves against the asymmetry of getting it wrong. ,ates are still not superhigh and spreads have gotten tighter. erik: how important is that yield? josh: i think it is important, but the spread versus other risk assets are more important.
spreads are relatively low. relatively actually flat for the year in spite of a bad year for treasuries. we will see how that he evolves. generally that is not a good asset point. erik: not being a good entry point does not necessarily mean overpriced. josh: not necessarily, if you are going to hold them over the cycle. one of the issues, we are in a world where people are hungry for yields. a are not as aggressive in terms of enforcing creditor rights, as one would like creditors to be. we prefer buying things that are -- when when someone they are forced to sell or where the market is having a hick up so it is not having to accommodate a lower rate. erik: 2006 and 2007 were marked undisciplined, irresponsible,
cavalier risk-taking by investors in many regions around the globe, principally in credit . products they did not understand. big decline in standards. do you see that happening now? josh: i would take issue on some of that in 2006 and 2007. bank debt road through fine. what was missed in 2008, the structural imbalance going on with the banks. huge leverage and were transmitting that leverage in an countable ways. the things that have been done to make the banks safer have may be made the rest of the world less safe. that is what i would emphasize. erik: the next blowup is where? --h: there is a liquidity the banks are not using them aggressively at all because of
the volcker rule and their leverage is lower. if you look at where capital has in mutualas gone funds, it has gone in lothian index products. there is a mismatch between the products. there is a mismatch between the assets they hold -- it has gone in low index products. erik: why isn't anybody doing anything about this? josh: a lot of people are talking about it. it is not clear there is a lot to do about it. are not institutions that are critical, the way the banks are critical. creating the safety in that system, there is potential perils outside, which are opportunities. erik: you have been paying attention about the refinancing deal that blackstone did for the homebuilder -- what is your view? is it right to engineer a default? josh: a good question, tough question.
there are certain things that go beyond the bounds of the way we would like to act ourselves as a firm. that is one of them. there is a way we would like to be treated, and a way we treat others. my own view, a personal view, as opposed to a firm view, though view,rm shares the same certain things go a step beyond where we would be willing to feel comfortable. erik: would you call it manipulation? josh: i don't know i would put a label on it, -- erik: unseemly? josh: certainly a little unseemly. erik: is the integrity of the cds market in question? josh: if you have practices that go against the intent of cds the which is supposed to be triggered by an actual default of payments, as opposed to one negotiated, it calls into question your ability to use those instruments for which they
were created. erik: let's explore that. if you can't use those instruments, those swaps, to hedge your explosion or -- your exposure or speculate, what happens? what is the end result? josh: i think people want to have contracts they can use to hedge and protect against risk, or to create risk in their portfolios. those have to be predictable. dave rose will be established. either this will be ok, or this will not be ok. when you get to the edge like this it gets people uncomfortable. erik: should the cft shut it down? josh: i think it is time to shut that one down. erik: nice to see you here at the milken institute global conference. , lots to chew on there. vonnie: can't wait for more massive interviews today with
erik schatzker reporting from know can. n, including steve .nuchin and david solomon he is coming up. an embarrassment of riches. aill ahead in new york, phone friend? after years of sales, talks, rivalry, t-mobile teamed up with sprint to take on verizon and at&t. this as sprint falls out of bed with investors. we will ask tough questions. tune in. this is bloomberg. ♪
vonnie quinn. caroline: it is time for the bloomberg business flash. we are focusing on mna. a deal that could create the largest independent fuel maker -- feel maker in the u.s.. -- fuel maker in the u.s.. the gulfis focused in coast and midwest. westerns are in the states. the world's largest warehouse owner will get even bigger. companies serve amazon and other e-commerce tenants. u.s. supreme court has agreed to hear a privacy case involving google that could have an impact on class-action suits. justices can make it harder to settle lawsuits without paying direct compensation to those involved. in the google case, much of the
money went to outside groups, none to google users. that is your business flash. vonnie: a quick check of the majors. stocks higher for the moment. 1%.dow up a third of a 70 six point game. s&p 500 up a quarter of 1%. , plenty of stories behind this. deals. endeavor is the biggest mover in the s&p 500. up 70% -- up 17%. charter up 3%. some stocks lower as well. to get back to that other deal we will be talking about for a lot of the morning, it is a done one, maybe. t-mobile and sprint green to team up.
interestingly shares of sprint are seeing their worst decline in six months. sprint down 13.1%. bloomberg senior deals reporter. is this an antitrust concern? has been tried before. last time they tried this regulators said if you try and push this through we will block it. 4 competitorsg down to three. there is skepticism they can get this over the line. theline: if you dig into bloomberg intelligence function, it shows how much combined force they would have. as well as teaming up with the likes of t-mobile, with 15% of the market share in 2016. what about the deal being done,
managing to come together in terms of who controls this going forward? >> that has forever been a stumbling block. give upver wanted to control of the company. he has had to come to the table and give up some element of control. softbank will be the minority holder of this. t-mobile will hold the biggest stake. ed hammond. thank you. we will continue to talk about this in our next hour. we will be joined by the two up., coming this is bloomberg. ♪
this is bloomberg markets, and this is the milken in beverly hills. back with erik schatzker. he is joined by a tight in the industry. erik: i am here with manny friedman. he has six and a half billion dollars in hedge funds. his name joins another firm, fdr. --fbr. good morning to you. you once described your investment philosophy as understanding big revolutionary andes in the markets, taking advantage of structural opportunities created by these changes. >> that is true. how are you taking advantage of it? : the: the biggest -- manny biggest change, small banks, medium banks, in the equity side and in the debt side.
there is a revolution taking place. they are getting the advantage swingsive pendulum and thederegulation, administration put in rules that favor small banks, so the playing field is not level. they have huge advantages over large banks. they are growing at 8%, with 12-15%.growing at that has become a positive theirck loop, where stocks are doing well. the capital markets are open. a new high today. that is a plus for banks because of the way they have structured themselves. we have more gasoline on the fire. we have new regulation coming out of the senate am a probably the house by memorial day, that
favors small banks. erik: when you say small, how much capital? system --have a crazy you have one class that is under one billion. billion.lass under 10 another class under 50 billion. 250, andlass, under then above 250. a complex system. i am talking mainly banks under 10 billion. erik: so these are small banks. branches,e have three across the street from each other in every small town in america. this is the only country in the world where there are 5000 banks all over the place. erik: it is not often i talked to a hedge fund manager and he says the best opportunity we have in banks. and half billion
dollars, six and a half, $7 billion. erik: an enormous position. a lot of that is the debt of small banks, a $30 billion market. erik: how much potential value you see has been realized already? how much room is there left to run? manny: nobody knows. obviously we are putting more therein, because we think is substantial room to run. i would not want to put an exact number on it, but it is large. what about the impact of rising rates? we have had a flattening yield curve. generally not a good thing for banking. history.at his past that is looking 20, 30 years ago where rising rates would scare the hell out of every investor. causingnks have zero
deposit. rising rates are a plus for them. the are barely affected by flattening yield curve. erik: what about the intrusion of private credit? to some borrowers to whom banks lend. hady: private credit has their heyday. it is now under pressure everywhere. private credit came out of the 2009 disaster. congress handcuffed every bank, and they could not do the loans. country theres are 36 trillion private credit. have 250the banks billion in excess capital they are squeezing the middle market. that is why you see middle-market credit rates, pressure is tremendous. at 50% of book.
that is where the pressure is. they cannot compete with the banks. banks, their cost is zero. erik: what happens if the government, both the administration and the fed, relaxed the rules on larger banks? corals want tond make it easier. isn't it a zero sum game? manny: there is a little bit of that. what you were talking about in terms of relaxing the rules are making little moves at the edge. there is no effort by congress, no effort by the administration to relax the credit off the big banks. the big ten banks have 75% of the market. they are the evil people in the united states. there is no political consensus that these bank should get
massive relief. you see you in today barely any relief. that is the least of my fears. erik: the least of your fears. if you were to take -- you are investing in public and private small-- if you took the bank stock that you like, this could do what over the next 24 months? double? manny: i don't know. i would not say it could double. we know it is undervalued. you have lots of private banks. at 125 a book.s at twon sell themselves and a quarter times the book. run the numbers yourself. that is happening every day. erik: banks can fetch two and a quarter? manny: sometimes three times book. erik: great to see you here at
the milken global conference. manny friedman, cofounder of egf capital. so much more coming up. vonnie: fascinating. thanks to erik schatzker for bringing us those wonderful interviews. you can go back at tv and have a listen to those you just miss the tail end of. with michaelback arougheti. let's check in on first word news. taylor: mike pompeo says a resolution to the conflict isstinian still a priority in the u.s. called on palestinians to return to peace talks with israel. administration will
extend relief to tariffs to some countries but not all. the commerce secretary would not say which countries will keep their exemption. house says ronnie jackson is still assigned to the white house but not addressing reports that he will not be returning to the job of president comes personal physician. dr. sean connolly became trumps personal physician. allegations that he drank on the job and over prescribed medication -- global news 24 hours a day powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. caroline: thank you. an acquisition that could transform the supermarket business in the united kingdom.
a $10 million -- $10 billion deal. saidcfo of sainsbury's's it is a perfect fit. >> so much choice for customers, so many new entrants coming in. it is a dynamic time, hence the benefit of combining these businesses, which we believe will be better for customers because we can lower prices on the shelf, better for our suppliers, better -- and good for our shareholders. your scoop. what a market move. phenomenal reporting. you heard the cfo talk about for customers. you think regulators will see it as good for customers? >> that is the point, when he
says the market has changed so much. it has changed since regulators looked at a similar kind of deal. i think the case they are making -- thee online discount online discount, they have 13% of the market. even if you say this is going to overtake tesco, you do not know in the next few years how the retail landscape is going to look. they are betting on the fact that geographically they do not have all of that. we have been doing a poll as to how many have been to an asda store. the answer is no one. they are saying they don't plan store closures because of this. that is one of the points they are going to be making to regulators as well. caroline: when you have a
diverse focus in terms of geography where does senator he come in? wase heard that walmart looking at acquiring argos. they are looking at the online retailers and what they are doing right. caroline: to take on amazon. >> absolutely and the discount retailers. names?y have these three can you buy sainsbury's stuff in the stores? that consolidation will make them stronger. the one thing about retail, seen two big changes. one is brexit. challenges in terms of the fall of the pound. then you have the online retailers.
they are leading this group of retailers saying how do we face this disruptive market where we hope that will strengthen us? vonnie: what about the short interest in the stocks? a lot of people would be caught off guard. point it wast one among the top 10 most shorted stocks. this morning, short sellers would not have had a good time for which is why the stock went up 20%. investors are backing this deal. short-sellers are looking for an exit. they always said sainsbury's and the likes of them would not be able to the discount retailers. the big question in on lines, what does this mean for morrison's? could amazon be looking at either of them? what analysts are
saying, is there more consolidation ahead? >> that is absolutely a view. what does morrison's do next? and analyst reports said they could make a bid for sainsbury's, which -- i.e. am not sure how that will play out. there is also icelandic. , may be moreay be since can look to buy them. who does this leave them with one sainsbury's has done this move? caroline: no industry untouched by amazon. ruth david.omberg's another megamerger, that could upend the oil industry. this is bloomberg. ♪
caroline: live from london, i'm caroline hyde. quinn. i'm vonnie this is bloomberg markets. a titanic merger in the u.s. oil industry. the new combined company would be the largest independent fuel maker in the u.s.. of's bring in david marino our oil reporting team. what does it mean for the industry in general? david: you have two companies in different parts of the country, largely. the biggest refiner in the country. they have 15% of fuel making ability in the country. not only that, they both have
large pipeline assets. , in the permian basin, west coast, midwest. they are a real giant presence. vonnie: marathon has seven refineries and endeavor has -- andeavor has 8. will they be problems tying the companies together? david: the companies feel they spread across the country well. they have identified synergies already come a billion dollars worth. they feel they have a lot of pipelines and ports. refineries are able to process cheaper crude. this is a way they can capitalize on the company -- the two company's strengths. -- thee: the preemie and
premium, where they rather surprised? david: marathon shares were down 9%. the rebounded a bid. they may have paid a big price for andeavor. the question is do they pay too high a price? will it be too high of a chunk to swallow? vonnie: how much of this is predicated on the fact all prices remain at or above $60? is this happening while the market is running hot and we see stability? david: u.s. refiners are among the best in the world, the most complex in the world. they are sitting on relatively cheap crude oil and natural gas elsewhere.th american is close by. a steady demand for fuel. refineries are attractive. vonnie: refining margins have
been nice -- refinery margins have been nice. what happened to margins? david: you should not see much in terms of a deal. as long as demand stays strong in latin america, there is going to be ruled changes making ships burn more clearing -- more clean fuel, they are well-positioned to produce more diesel, which is going to be the fuel of choice for ships. they should be able to capitalize on increased demand. vonnie: this combined company would be bigger than valera. is valero shaking in its boots? david: that is the question. do you see the o or philip's -- need tor philip say we pick up a competitor? the question could be antitrust.
or they don't command too much of a market share and raise questions too much, that is always a question for these refiners. can they pick up one of their competitors without running into too much hassle, too much difficulty. vonnie: david marino, thank you. the u.s. oil reporting team leader in new york. caroline? caroline: time for the business flash may look at the business stories in the news now. a new deal would create the largest luxury brand for timeshare vacation. ,arriott will buy ilg representing a premium to ilg is closing price on friday. shares of the fitbit have been rising. the company has agreed to use google's cloud services to integrate its wearable devices
into the health care system to allow data to be economy but combined with electronic medical records. allow data to be combined with electronic medical records. vonnie: telecom takeover. we sit down with the ceos of t-mobile and sprint following the announcement of they $26 billion deal. the market is not taking it too well. john legere and michael arougheti coming up in a few minutes. this is bloomberg. ♪
year, 5% after the company posted sales gains that the estimates in the first quarter. the gains? lot behind the gains. investors loving the report. the second-best performer in the s&p 500 because the company beat on revenue, shares gain are the real story. percent. that slashed estimates. there was strength across all regions in international markets. these are the markets like canada, u.k., germany, sales beat estimates by far. these are like latin american markets, asian markets, and in the high-growth markets like wherekorea, russia will there are more franchise opportunities as well. caroline: fascinating the way they are having their geographical reach. it is about innovations.
is it paying off? >> absolutely. bloomberg has multiple big mac indices. they have one dollar, two dollar, three dollar options. the estimatesthat shows this was not going to take with consumers. this proves that wrong, saying the new prices are working. mcdonald's adopting some premiumes, introducing sandwiches, offering fresh beef rather than frozen, trying to compete with wendy's, who already offered that option. it could continue on, after the results that this seems that donald is going to take more market share back because of the strategies. vonnie: it is interesting the
peers, they are definitely lower today. sonnet, jack-in-the-box. the stock of the hour, mcdonald's. thank you for that. coming up, t-mobile ceo john sprint ceo the will join us in studio. how will a merger reshape the wireless markets? .oth stocks decline credit agencies making moves. analysts are out with questions. we put all of the skepticism to both ceos. this is bloomberg. ♪ . . retail.
under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store
near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. mr. elliot, what's your wiwifi?ssword? wifi's ordinary. basic. do i look basic? nope! which is why i have xfinity xfi. it's super fast and you can control every device in the house. [ child offscreen ] hey! let's basement. and thanks to these xfi pods, the signal reaches down here, too. so sophie, i have an xfi password, and it's "daditude". simple. easy. awesome. xfinity. the future of awesome. emily: was --jonathan: from bloomberg's european headquarters, i mark barton. vonnie: in new york, on vonnie quinn. this is "bloomberg markets: the
european close." mark: here of top stories we are covering from the bloomberg and around the world. sharesonnection, spreads onsprint shares plummet worries that a proposed merger with t-mobile will be rejected by legislators. we will speak with john legere and marcelo claure. and then we speak with david solomon from the nelson institute in beverly hills. and the brexit balance shifts. theresa may names the eurosceptics as home secretary. we are 30 minutes away from the end of the monday session and stocks arising for the third day