tv Bloomberg Markets Americas Bloomberg May 14, 2018 10:00am-11:00am EDT
all of us are deeply moved. .ll of us are deeply grateful for me, being here brings back wonderful memories from my childhood. hebrew]g so, i know some of you did not follow every word that i said, and i will tell you i spent the first three years of my life in this neighborhood. not very far away, there were a
.ew charming houses here i remember ambling in the streets with my brother. he was six, i was three. he held my hand very tight. we would walk to this wondrous house of professor joseph. the renowned jewish historian was my father's teacher. i used to p through the slats -- where heugh the slats and the great is really -- israeli writer used to pray on shot it -- shabbat. but not so close. my mother told me you could not go to the border. it was exposed to sniper fire. that was then.
this is now. embassy ofday -- the the most powerful nation on ally, the greatest united states of america, today, .his embassy is open here [applause] what a difference -- what a difference. for me, this plot brings back personal memories, but for people, it evokes profound collective memories of the greatest moments we have known from this city on a hill. in jerusalem, in jerusalem, abraham passed the greatest test of faith and the right to be our
-- the father of our nation. in jerusalem, king david established our nation. king solomon built our temple and it stood for many centuries. in jerusalem, jewish exiles from babylon rebuilt the temple, which stood for many more centuries. in jerusalem, the maccabees read dedicated that temple -- read dedicated that temple and reestablished jewish sovereignty in this land. and it was in jerusalem that the soldiers of israel spoke three immortal words -- the temple mount is in our hands. the spirit ofted the entire nation. we are in jerusalem, and we are here to stay. we are here in jerusalem protected by the brave soldiers of the army of israel led by our
chief of staff and our brave soldiers protecting the borders of israel today. we salute them all and the .embers of our security forces we salute you all. all of you. we gather here today to celebrate another historic day in the life of the city, which i know will take its place alongside other momentous decisions in the history of our people. over a century ago, the balfour declaration recognized the right
of the jewish people to a national home in this land and exactly 70 years ago today president truman became the first world leader to recognize the newborn jewish state. president trump became the first world leader to recognize jerusalem as our capital -- --nie: prime minister been benjamin netanyahu speaking at the opening of the u.s. in busy in jerusalem. we are breaking news the supreme court has struck down a federal law barring gambling on individual sporting events and most of the country. it's a very important ruling. gambling could begin in a matter of weeks, which instigated the legal fight. and again, this is affecting the gambling stocks. let's get back to the geopolitical news of the world, the u.s. embassy opening in jerusalem.
had comments from president donald trump hiked to the ceremony. he is not there. many officials are. you just heard from israel he president -- israel he -- israeli prime minister ajman in -- benjamin netanyahu. we are pleased to be joined by ian bremmer. he will be addressing topics at the intelligence squared debate tonight in new york. these images from israel -- the -- embassy in jerusalem there will be a few staff there for the moment. people are saying it is symbolic, but is more than symbolic, isn't it? >> a fantastic week for the minister, after he tried to spike it by saying that lied about their
nuclear program. and then there were violence against irani and forces, responding to sent into israel heto israel -- israeli occupied territories. now jared kushner in a ivanka trump in jerusalem marking the opening of the american embassy. this is something they have wanted to see. i think only guatemala and honduras has said that they wanted to see this. the israelis really wanted this. net yahoo! had been besieged by corruption investigations. it has been a really bad number of months for him. this is the best week he has had in office and he is delighted to see all of this happen. how does a ron respond?
does it respond? ian: no, they do 100 times more business with iran then american companies. sanctions only matter if the europeans follow through. when the deal eventually breaks apart, the hardliners is stronger, then we see if we move toward confrontation. but today the story that we need to pay attention to is 41 palestinians so far shot dead, over 1000 injured in gaza. at the same time we are seeing the celebration in israel, something they have wanted for such a long time, you have palestinians throwing themselves against the wall. vonnie: and a week of protest.
if not more. does this to generate even more, ian? it: it may, but i'm not sure matters. if you can have this kind of celebration in israel what we have this violence on the gaza border says something very significant, which is the to buildf the israelis walls keeping people out of strong. trump as it consistently, walls work. you want to see where they work, watch israel. not only do they have a wall come a they have three cement factories and they are building a wall underneath the ground to stop the tunneling. they have the iron dome the americans helped them with that stopped hezbollah missiles from coming in. you willtel aviv -- not be allowed unless you are who you say you are and do what you say you are going to do. the fact is today the palestinians really a have almost no sympathy either in
israel or around the world because gaza no matter -- no longer matters to anybody. vonnie: i saw you earlier on twitter saying that trump is like no other president in that he references the winners and losers. what does that mean for the middle east echo what does it mean for tensions in a broader geopolitical world? ian: it is because of trump that the saudi crown prince said that israel needed to come to the table because no one else would pay attention to it. i think that the americans have solidified alliances with traditional players wear under obama, there was the believe the americans were trying to create more balance between both sides. what it means is we are likely to see more sunni versus shia tension. the willingness of the
hardliners in iran to more proactively expand their proxy wars against saudi arabia, the, emirates in yemen them up her example. before trump ripped up the iran deal, the iranians were doing very little hassling american ships. they did not want to give the americans any reason to go after them. i expect that military confrontation will start up again. asuspect that will get worse iranian oil comes off the markets to the tune of 100,000 -- 100,000rels a day barrels a day. how do you advise investors withwe do see a situation geopolitical risk on the rise and oil on the rise? oil on the rise is good for
the russians. it means venezuela has more time before their regime implodes. united states gdp is not as impacted by oil prices moving up and down as it used to. ofhaps you will not see much a blush on american growth, though with these summer season coming up and people wanting to drive, certainly, people arrested by gas prices, they will feel that pinch in the pocket. i do not see this is happening -- having much macro significance to the global economy. we are talking about comparatively small markets. the big geopolitical interest is toward therientation europeans, nafta, and most importantly, the chinese. how do you see the
relationship between the u.s. and the rest of the world progressing? being willing to pull out of the iran deal. is this a time of trump's strength or erosion? say that trump is a divider. i think he is a uniter. no one brings countries against the united states together like trump does. when he pulled out of the irani small owl ilatively supported it, but everybody else opposed to the united states doing that. the same thing is true with the move to jerusalem. -- it does not matter if other countries do not like us. we can rule by fear as opposed to ruling by coordination and cooperation. number one, the chinese increasingly pushback on that, which is why trump is being nice to the -- nicer to the chinese
politically than european allies, and you saw that with what he said about zte. i do worry about the ability of the chinese to make gains at the expense of america first. but i believe allies do matter , when europeans have a choice between supporting the u.s. or not, they will go somewhere else. and america first will trade a lot more transactional is him on the part of our allies as well. it is a big day for jared kushner in a ivanka trump. more power does this give jerod when it comes to rewriting the rules of the middle east? ian: we have barely heard from jerod. his portfolio is far too big. use not doing much on china and mexico. he also has investigations increasingly swirling around him. i like using jerod for the
israeli-palestinian use process. he does not really know anything and could not do any damage, right? is impossible deal to get done. the israeli government is absolutely not willing to negotiate a two-state solution. the palestinians are in disarray and their government, such as it is, is incapable of coming to the table. you have palestinian leaders refusing to accept the holocaust in past weeks and having to walk that back. is in fact that jared jerusalem, it's a good relationship or him. it's a place where he, on balance, has utility with the israelis and he does no damage. ian, stick with us. we will be talking about china and other geopolitical issues in a few moments. we will head to break. before that, i want to reiterate there has been a decision at the supreme court level striking down the federal law that bans gambling on individual sporting events. where vegas was the only place you could gamble, now you can
bring you more as we get it. u.s. and china signaling desires to avoid a costly trade were, president donald trump offering a lifeline to china's beleaguered telecom giant zte. we are back with ian bremmer is this reversal on the part of resident donald trump or reaction to the -- president donald trump or reaction? is a shift. it is interesting to see that tweet that came from trump yesterday that he said he was concerned china was losing far too many jobs by him basically bankrupting zte. the back oft run on creating chinese jobs, so i think he might -- he would like to take that tweet back if he could redo it. that was a little shooting from the hip.
but it has been clear trump wants to find a deal with the chinese on trade. secretary nugent -- mnuchin was sent. china sent their vice premier to washington. the chinese have definitely expressed a willingness to deal, to buy a whole bunch of american goods, to try to reduce the deficit numbers, for example. as well as they have been facilitating the north korea process. i think this is one of those places where, if trump can come up with something and say, see, i push the chinese, and i got a better deal -- you would really had to say that. vonnie: this is what i don't understand. admitted it illegally sold equipment to be likes of iran and north korea that included u.s.-sensitive parts. jobso you save these zte and at the same time these companies that you think might commit intellectual, you know,
crimes? trump'st implies priority is national security as opposed to getting the better deal. there's nothing he has done that would make you think that. he wants to get the better deal so he can say, look, i got this done. north korea -- do we want denuclearization? he says so, but if he can come back and say, see, no one else got the three hostages release, no one else can get them to see guy is under this enormous pressure. his popularity is comparatively low. the investigations are swirling around. the democrats will be talking about impeachment if they win the house in november. this is not someone who is , theing about in 10 years american national security, technology vis-à-vis the chinese is going to be a problem, he's thinking what can i do to advance my campaign promises and get something signed with the
chinese that is his? think thinking, i will about tbp, and then he thought going to.not he wanted to make this the trump pacific partnership. if the answer was yes, i think he would have done it, right? let's be clear. when you are the largest guy at the table, your ability to get people to do what you want is significant. zte is them with chinese are about as big as the americans. they are a technology superpower. we thump our chest and say we want reciprocity. chinese is, you know what, technology, we don't need you. facebook, google, amazon, none of them have access to china and the chinese companies are building their own. their own ai, their own systems, their own 5g. againstt to be dominant the american spirit that the long-term strategy. i do not see anyone in the trump administration doing long-term
strategy. >> in the short-term, what to expect from d.c. as soon as tomorrow when the chinese vice mayor is coming over? will we see headlines and more tweets? be prettynk it will warm. i think trump has seen his relationship with xi jinping as one that has been successful at home. basically since the mar-a-lago summit -- the chocolate cake summit where he hit the syrians further chemical weapons use, something trump was well it rise to do an obama did not do -- he was able to get the chinese to squeeze the north koreans. that has given him one of the biggest foreign-policy whence he has had so far to date. even if this does not address the underlying problem, i think the orientation of president trump right now is to try to find a way the americans and chinese can say they win. almost every tweet on china has
tried to find a way to say, he likes xi jinping, he respects xi jinping. he has been much warmer toward xi, if you read vr cabal of his statements, then he has been toward theresa may or angela merkel and germany. frankly, maybe even toward macron and france, who is his body. i think that is worth noting. what about the relationship common june 12 with the all-important meeting with kim jong-un? where do expect that to go, the north korean relationship? the the very fact of meeting is historic. no north korean leader has met with an american president. i suspect it will be warm. there will be physicality, there will be a lot of great statements. everyone is going to be focused completely on all of that for a few days, and both leaders strongly want to ensure the
meeting goes well. i'm sure that kim jong-un will save the right words on denuclearization. to comenk they will try up with something that feels like a framework for progress. what that means in the long-term, that's anyone's guess. vonnie: is there a schism between the u.s. and europe now? ian: the problem europe has is there isn't europe. with brexit -- europe was never coordinated and now the europeans are even less so. the fact the americans are hitting the europeans hard, they weekay -- merkel said last europe can no longer rely on the united states for security. so what? they are going to leave nato? they will start paying the two present they are supposed to pay, that they are committed to? -- the 2% they are supposed to pay, that they are committed to? there is no there there. it's united states, china, russia and individual countries, but there's no europe. bremmer, you have to
come back soon. we did not even get to talk -- "us versusk them: the failure of globalism." tonight he will be in the intelligence squared debate. do not miss it. argentina has ratified -- argentina says littrup ratified support for the imf talks. this is after the request from the imf for a credit line. i would point out that the argentinian peso is down 6% today. this is bloomberg. ♪
cvs, in a turnaround in the books, is suing national amusements in an effort to prevent it from interfering with a special board meeting that would dilute the voting shares of redstone's company from 70% -- from 79% to 17%. paul sweeney is with us. we did not see this coming, but a brilliant move. the: i would call it nuclear option if you're from the cbs camp. nationals that cbs, amusements, and viacom are nowhere near a deal. wants of redstone really , but theye together only wanted to come together under their terms. vonnie: what is the defense here?
-- can get rid of les at any point. paul: that is probably her final card to play, if she wants to put these companies together. managementtall the team of, viacom, who has done a good job here, in the early stages of turning around viacom. the perfect scenario for redstone -- for national amusements is to put les in les has theause control of the streets. he has consistently delivered for shareholders. the street feels putting these companies together, if you are going to do it, i would rather have les doing it. vonnie: let me ask why she does not step in and do this, and if
it means les goes, les goes? paul: that might be the next major item here. suinges is doing by national amusements is to dilute them, let the public shareholders vote for the video. feels shareholders will not vote for the deal, but if they do, they will do so with him in charge. caroline: i am looking at viacom shares. is the street generally thinking a deal with cbs is less likely? paul: it appears they are. at least a deal where both sides get together and are in agreement with the board makeup, the management makeup, and the strategy going forward, that looks less likely. we either have a broken deal or we will have a deal where les cbsves and his team at
will not be part of the combined company. caroline: does cbs come into play -- we are seeing premium content king at the moment. consolidation, pretty vertically. we expect the asset will be chased by others if viacom does not make a move? paul: we think it does. there is a significant consolidation going on. disney, looking at 21st century fox, looking at sky. comcast looking at sky, potentially fox. there is a rush to gain scale in the media business. and is the logic behind cbs viacom getting together in the first place. to the extent that these theynies remain separate, would be clear acquisition candidates. however, you have to deal with shari redstone and national amusements, the 80% shareholder here. vonnie: what happens next?
a race among states to attract millions in legal wages. the deadliest day yet for demonstrations in gaza. tens of thousands of protesters gathered at the border, touching off a deadly confrontation. the protest took place while the u.s. was opening its controversial new embassy in jerusalem. lostaq, a cleric who once -- is also said to easily win control of baghdad. militia, dearer who now leads iraq's clinical establishment against corruption. and the president and kim jong-un appeared to be on a collision course. the question is what will come first? orchez really from the u.s. north korea giving up nuclear weapons? the u.s. must have proof
denuclearization is complete before sentence can be lifted, but kim is calling for a more gradual, step-by-step process. global news 24 hours a day on air, and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. vonnie: thank you. opec signals today it could fill in any supply of gas sparked by u.s. sanctions on iran. wtitrading slightly higher, above $71 a barrel. withberg spoke extensively bob dudley. >> what we're seeing is a withdrawal from the agreement, which seems to be another negotiation. you could lead to one million barrels a day off the markets, and that will affect things. there is a lot of uncertainty. that is more reflect the -- reflected in what is happening in venezuela. vonnie: we are joined now by
abhishek deshpande, jpmorgan head of oil market research and strategy. thanks for joining. cold changed from the iran deal -- call changed from the iran deal? paul: it -- abhishek: it plays well with what we were expecting. since is not being extended was part of our risk scenario. as of now, we believe there is a higher probability of prices remaining higher and going towards $80 plus benchmark for us for the rest of the year, at least. next year, the risk will play out differently, where we believe that high oil price risk demand route -- drought, but you also have more supply from your shale and possibly an ok deal not surprising -- not surviving.
vonnie: what would push the price to $80? around $71 now. it does not seem to be moving anywhere fast. does the market expects saudi arabia to make an announcement soon? abhishek: more than that, the way markets are looking at u.s. policies are far more unilateral policies. you have iran out of the way. i suspect you see more premium as the market digests what the iran deal means to the markets. on top of that, you have the risks of the venezuela election coming up the end of the month. what market start to price in is if venezuela has a less democratic result, you have additional u.s. tensions on even venezuela, which now brings in an additional couple hundreds of barrels at risk.
markets have more to go, especially from risk to supply-side. caroline: talk to us about the next leg higher. where do you see prices going? you said $70 per barrel -- if i look at brent, we are basically there. where do you see the next key price point? abhishek: when we raised our price forecast to $78, that is based on fundamentals and partly on geopolitical risk in hymns. riskan and venezuelan premiums were not as high. now, we would like to highlight that now we have iranian sanctions green stated, definitely, we are going towards a high risk scenario, where we could see brent going well above $80 in the short-term, given the seenwe have recently speculative market conditions have been reduced in the market,
which is fundamentally balanced. you will not see those dips last long. you will see investors get back in and fill in the gaps, and you see prices go above $80. vonnie: what about the premium between brent over wti? i am looking at $7 or $8 between the two. term, it in the near would remain around the levels we see now, perhaps even narrow, between the time u.s. refiners, online and increase what they are doing, perhaps putting pressure on stocks. you would see that support over wti, bridging the gap. however, the back end of the curve towards the end of 2019 is where you see, perhaps, more weakness in wti-brent, given the
fact you will see a lot more u.s. crude hitting the market as well in terms of production growth. also, some pressure on wti-brent because of logistical constraints in the u.s. such as midland pricing in the u.s. vonnie: curious as to correlation. what other commodities are you keeping and i on? is a giving you a hint of where the complex is going? on the other side of things, how ach do interest rates and sickening dollar, should itching for an, have to do with oil prices? abhishek: commodities in general are a good asset class this year. if you look at the bloomberg commodity index, it has done well. its highest marks since january. it has more to go given the fact we have seen commodities in the back and. -- back-end. you're getting better return on commodities at this time. we are getting late cycle
dynamics. from the past cycles, towards the end of late cycle dynamics, commodities are in. even metals tend to get that boost. so far, most of the boost has ,ome from energy than metal but you will see the boost coming from other comedies -- commodities. vonnie: since you mentioned it, we will show you the bloomberg commodities, bcom gto. our thanks to abhishek deshpande . coming up, we will hear from joel greenblatt of gotham asset management about how he is making adjustments to changing equity markets. that is an interview you do not want to miss. in the meantime, a quick look at casino stocks after the supreme court ruling.
vonnie: in new york, i am vonnie quinn. joining you live from boston -- joining me live from boston is caroline hyde while volatility has emerged as a theme this year , in value, something will follow -- joining us now is erik schatzker and a manager who is volatile.r to : he is the author of a book, and an adjunct professor.
good to see you. joel: nice to be here. erik: we established one thing, which is you still believe in value investing. why? joel: our definition of value investing is finding out what a business is worth and paying less. it has nothing to do with -- ofy are ownership shares this miss. our definition is value the business and tried to buy at a discount here definition, that should never go out of -- erik: go out of fashion. joel: it can go out of fashion, but eventually, it should work. erik: value investing, in sensible, is active management. joel: correct. erik: do you believe there is a role for passive products? joel: absolutely. i was asked to give a beach at google -- a speech and google.
i started even warren buffett says most people are better off at indexing. i agree with him. i did not stop my lecture there. then again, warren buffett does not index, and neither do i? how come? theree the opportunity is , if you know how to value businesses, to take advantage of the fact that market are emotional over the short-term. erik: you have had success with a hybrid of passive and active management. you call it the cost them plus plus index-- gotham fund. explain how it works. plus, it is index precisely that. most activewith management is to beat the market, you have to do something different. so returns will zig and zag differently.
only see returns, and that is what they follow. when funds do well, people pile in. when they do badly, they pile out. even if you are a good active manager and have a good long-term record, many people do not stay with you. i wrote a book called "the big secret" in 2011. it is still a big secret, because no one bought the book. one fund was up 18% on year. the average investor in that a dollar rated return of -11% per year. and the market was flat. reasonst by 11% of the for that is every time the funded well, people pile in. when they did not do well, people piled out. that is what people do. because that is all they know.
they look in the rearview mirror and chase returns. erik: so how does gotham index plus get around that problem? joel: that is the big question. it took some thinking. one thing we did was compromise. we said we will start with the index -- erik: that is an unusual term for a money manager -- "compromise." is to helpr goal people save money, the reason why warren buffett to just people index is because they will not underperform or outperform. we move one other impediment sticking with the investment should we looked at that and said we do not want to make the pain so bad that people leave. we want people to stay and capture active premium. if you give us a dollar, we will we go out the s&p 500 bottom of. that is how we start. then, we add active stock picking. by 95 first -- $.95 of our favorite stock and sell $.95 of
our least favorites. eur favorite half to b -- hav to beat our least favorites, and we add to the index. but we make some compromises. balance the portfolio so they are not to out of whack. long forh hundred 95% the most part. -- 195% long for the most part. the cynic might look at it and say you have outperformed. the past three years, you have outperformed the s&p 500 by seven percentage points. now, the s&p is up a lot in the past three years, and certainly a lot more in the past 10 years. anyone would be happy beating the market. justhe cynic says if you take that leverage and put it in the s&p, you would be up a lot more. what is the counter to that? joel: sure. we kept the same beta, meaning
the 90 by 90 short-term overlay has zero exposure to the market. we are adding return without taking additional exposure to the market, which, if it had gone down, would have heard you a lot -- hurt you a lot. this is probably the worst environment i can think of for a long-short manager. the markets have gone straight up without correction of the the the last few -- other than the last few months, which was minor. we are short on stocks trading 50 to 100 times over earnings. people get hopeful and like those hope stocks. stocks,s, out-of-favor to keep up and beat hope stocks, that was a great performance for us. erik: we are talking s&p 500, large-cap u.s. equities. if you look at the universe of u.s. equities, how fairly are they valued? value allottoms up
stocks in the s&p 500 and weight 500.e weights of the s&p we can do that for the last 20 years. so you can contextualize where we stand today -- in the 15th percentile, meaning the market has been cheaper 85% of the time during those 28 years. then, we can go back and say what has happened over the next year or two from this valuation in the past? 10/2.rket has been up 8% the market averages 10% returns over the whole period, but not negative. the all caps are a different story. erik: meaning much more sensitive. joel: yes. the russell 2000 has been 98% cheaper over the last few years. you really have to look at the individual stocks.
they are expensive, but there are opportunities. erik: thank you for spending time with us here. good seeing you. inside him one of the world's great value investors. vonnie: wonderful conversation. erik schatzker and the legendary value investor joel greenblatt. caroline: i am out in boston for the entire week, shining a light on the tech ecosystem here that has not once but twice seen boston voted the number one hub in hub -- startup the u.s. i want to bring to your attention which could supply a lunch spot near you. take a listen. this may look like your typical all thetopped with fixings, including leafy green cooked, cut, washed, and -- farm to table greens.
but it is a different type of form. a husk of a shipping container in the heart of downtown manhattan. we first -- we purposed, it is -- re-purposed, it's called the leafy green machine. part of a new wave of vertical farming that is set to be a more than $6 billion industry by 2023. trucks. a dockyard on shipping containers are available, durable, and infrastructure is already built to move them. on top of that, you get refrigerated shipping containers off the secondary market, so they have insulation already built in. caroline: designed to be eco-friendly, using only 125 kilowatts hours per day. that is as much amateur city as two family homes -- that is as much electricity as two family homes.
h20 then --8% less traditional farming. there are around 200 wiki green machines in 12 companies -- leafy greaen machines in 12 countries. >> we are producing the same 12.8 acres of of farmland, but we are doing it in 120 square feet. caroline: yields per week could he 35 pounds to 80 pounds of leafy greens. according to the united nations, in order to feed another 2 billion people by the time 2050 rolls around, we need to produce 50% more to eat. for people who live in harsh climate conditions, an old shipping container might be the delivery they need.
pretty cool. we will be here the entire week, bloomberg technology shining a late on the boston tech ecosystem. ofill speak with the cochair bain capital. but he also heads up the boston celtic's. -- celtics. vonnie: oh, the celtics. they always cause heartbreak somewhere. a i want to mention some gambling stocks are really soaring after that supreme court ruling, including scientific games, up 10%. this is bloomberg. ♪
quinn and this is the blue -- european close on bloomberg markets. nejra: here are covering from the bloomberg and around the world. italy's populist leaders push the president for a massive shot of public spending to boost the economy as they debate over the next prime minister. president trump had a lifeline to a big chinese company ahead of key trade talks in washington. deadly violence breaks out in gaza as palestinians protest the u.s. embassy move to jerusalem. we are about 30 minutes from the close of trading in europe. julie hyman will be coming up