tv Whatd You Miss Bloomberg October 17, 2018 4:00pm-5:00pm EDT
-- we're closing flat. our technicals at play as to why we suddenly see the dips as we lead into the close today? >> we are definitely in a volatile market as you see with blackrock's conference call yesterday. seeing clients do risking whether it is etf's or active investors. a.re will be of volatility. we have midterm elections coming up next month. we have some uncertainty in the market. banks, i think that investors need to focus on the strong capital return story. we are not seeing credit hiccups.
above the 100 day moving average. that james is the worst performer and the s&p 500 booster of the day. we close completely flat as we went into the close. scarlet: jump in here with a 200 a moving average. why does it matter these days. >> if you blow through it like it is not there, which we almost did compared to the last time, it gets people worry that the same buyers ready to redeploy when we hit it the previous times, this time they say i do not want to. sourceother hand, a worried today was the halo asml, for netflix and
it's really was not there. in the past, we have had one thing lead to another. now, let's dive deeper into the market action. ey has been marketing $2 billion of bonds in turkey thinks there are going to be plenty of investors to fight this currency crisis. also, this emerges so much from what we have seen so far year-to-date. you're looking at the total issuance of dollar-denominated emerging-market debt. that has declined 25% so far this year. lastis the same period year and the biggest decline since 2002. that does not mean emerging-market countries are not issuing debt, they are. they are just issuing them in other currencies to diversify their currency risk amid the
trade war. it's interesting turkey is taking this step in light of the dirt of this type of issue. stocks finished lower on the day and so did the bloomberg commodity index. it suggests the day has a bit of a risk off tone here. here's the gl function in the bloomberg global commodities. we see the energy complex up top in green on above average volumes. the sellers had confidence in it. mixed.als are overall, we have weakness and oil is down about 2.6% on the day. bearish report from the department of energy. we have takenich a look at so many times over the last two years, also suggests oil may decline. is 10%, andue line
below it is 10%. we see a viable range over this time period touching up to the top. below that 30 day moving average now headed toward 64 at the bottom. ae s&p 500 is in similar pattern. another silo of risk assets with the s&p 500 following oil. either way you look at it. romaine: let's take a last look at the pot stocks. that was a big story of the day with the legalization going on. analysts said the legal marijuana industry is real, here to stay, and they believe there is money to be made. therehe last few years, have been 140 marijuana related companies on the stock market and a lot of the companies are listing in the u.s.. analysts are saying you have to be a lot more collective --
selective about the company would best in. you cannot take these basket trades profitable -- that have been profitable over the last couple of months. you need to look at branding and competitive advantage to make a decision. one area they are focusing on his medical marijuana. despite all the talk of recreational use, medical is a much larger market, 10 times the size of the recreational market projected to be. companiesbenefit pushing into the medical space rather than the medical space like tilray and others. a lot of names to choose from and it will cause investors a lot of work. scarlet: yes. a lot of due diligence. is rj grant of k.d. w. i want to get your thoughts on the pot stocks. over nowg pot craze
and it is sifting through the winners and losers and picking spots? rj: i am probably not the right person to speak on pop stocks. searches -- scarlet: as a general argument there was a euphoria extending to this sector and it kind of faded. what does that tell you about the market cycle? year, you end of last sought with bitcoin and now pot stocks. it is definitely interesting and makes for good chatter, but i'm not connection with it and i don't claim to be. caroline: what about where do we go technically in terms of financial? where do you think the money that has been set on the be -- is to be to be placed elsewhere? have developed a defensive posture. within financials, we are seeing
money flowing to alternative method amateurs -- asset managers. very strong names like blackstone, apollo, a lot of the money they are raising is mocked up over the long-term. that has been an area where money flows out of the banks and into that sector. that is one strong pockets within the group that time seeing. scarlet: rj grant, thank you so much. that does it for the closing bell and for me. main bostick is stepping in for "what'd you miss?" -- romaine bostick is stepping in for "what'd you miss?" this is the close. ♪
caroline: live from bloomberg's headquarters. market closed its day and we were coming off of our lows. romaine: the question is "what'd you miss?" caroline: the road to more rate hikes. raising rates to restrict territory after signaling another rate hike before year-end. president trump plans to pull the u.s. out of an international postal treaty in his latest effort to turn the heat up on china. --, canada gets cannabis gives cannabis the green light. recreational pot makes his debut in the country today.
the fomc september meeting came out the couple of hours ago and is probably one of the most important things -- and probably one of the most numbers. things is the we saw a few ticks upwards and treasury yields. much insight to we get out of these indicating maybe the treasury selloff is not quite over? >> i think it was about what you expected after hearing what fed chair powell had to say. he was hawkish and then you had trump attacking the fed. there was concern that maybe the stock selloff plus this sort of push back may be slow down the fed. as resolved the fact that the fed will continue to go, but the question is how far above that neutral long-range are they willing to push things before they get too
restrictive. caroline: at the moment, trump is saying it is his biggest threat with china. brian: i think it is very clear. the september meeting was before all of the stock market plan toce, but the fed keep going. we will see a rate hike in december and if you more next year. if the stockis market continues to gyrate, if this will change. for now, it is clear it is all systems go. romaine: is it accurate to say the fed is tightening financial position or that going too far? brian: i think financial position remains accommodative. he said that encourages them to want to push into restrictive territory and see how far they can go. they do not know what the neutral rate is in this new, lower for longer world. they have said as much, they are not exactly sure where neutral is. that is why they change the language a little bit.
caroline: we have data surrounding the housing market today. what do you think the fed could see into that? is there an issue that the housing market is slowing down? brian: that is a great point. looking at long-term rates, we're moving up to 320 on the 10 year, that affects the 30 year mortgage and will affect the housing market. the u.s. big part of economy. all of this feeds into itself. the fed is willing to say that we have this path and we think we will stick to it, but we are willing to change it if things change, especially on the housing front. romaine: one area they highlighted as a potential risk was the leverage of market. there has been a lot of handwringing over that. when you look at what is going on in the high-yield market, is there more of a backstop their? -- there? brian: when the credit cycle
turns, there will be a bit of a fallout because moody said as much. rates are lower than they were back in 2008. covenants are worse across every metric than they were back in 2007. i think the fed knowledge and this is piggybacking off of the former fed chair who said in an interview last month that regulators should be sounding the alarm bells on this. it's pretty interesting to see the follow-through between the past and present of the federal reserve. what about any other pieces coming into perspective when you saw these minutes? generally, it seems to be nothing new. everything is still being as we expected so we see the market reaction. the dollar is remaining fairly high. brian: i thought that was interesting. i also thought the late steepening of the curve was interesting because if you interior, short rates
go up faster which would stint economic growth faster than expected previously. you would think long-term yields would come down to flatten. i think there is a bit of a question mark over this. earlier in the year, we saw a lot of fluctuation over the past few weeks. romaine: are you still hearing from people calling for a bottom? brian: a few. there was definitely some buy signals. barclays said the by target was to 95 on the tenure. it has been -- to buy 95 on the 295 on the ten year. over the past several sessions, we have seen it is fairly slow going. a lot of one basis point moves here. caroline: we can all get pretty excited. brian, great to have you on.
alcoa is bringing its third-quarter earnings after the bell. the market was impressed. it has come in higher on the news that adjusted earnings per share beat average estimates. here,alumina player third-quarter adjusted earnings per share is $.63 and estimate had been less than half of that. was $3.3rter sales billion -- $3.39 billion. company that did not have a single celebrating on it. romaine: and they gave interesting word here to aluminum demand. that is slightly below the range ahead given before. they said some of the deficit we see in the alumina market that that is going to widen more --
caroline: looking at credit now. the credit benchmark has received a new round of capital. that analyzesany government strong data of banks and other financial institutions. is bill,alk about it the ceo of credit benchmark. tell us about how you are expanding what you are doing. bill: we have 30 banks and financial institutions.
the money is coming in, it is essentially coming into fuel and us keeping up with the pace of demand from the banks, new financial institutions who want to join the club, who want to give data and get data back. this is the business that we are in which is the consensus credit rating. we are also going to invest in product and technology so much -- technology. so much of what we do is keeping the stick to safe for banks so we will stay ahead of the curve. romaine: with regards to this data as an investor, what are you getting out of this? bill: every bank that we deal with cares deeply about creditworthiness that they do business with. they also have to report earnings to regulators, so it is quite high-quality data that we ingest.
the most interesting and good thing about the data is about thousand --'s 30 30,000 consensus rates, none of those entities funded sovereigns. they have no rating from s&p or moody. so what we have built is a unique and new window into credit risk that did not exist before. caroline: so you are shining a light on the credit risk within the banks. what is the data telling you about where we are in the credit cycle? we have been talking about fed minutes, rates on the rise, what you starting to see in the 30,000 you look at? william: we slice and dice any different ways. risk, and geography,
i do not know if you want me to jump into other retail stuff we have done. caroline: let's go with it. william: we've done a little quality,on roughly 340 large retail names in the u.s.. three years oft history in our data, you can see a pronounced downward trend in quality. in the last two to three months, it might be bottoming out, but we do not know. the u.s. department of commerce released interesting data on retail sales. is you more interesting split this data by loaded, high , and when doing that, the trend is much more pronounced. -- tell really is -- retail debtu look at the high
retailers, it has been a steady downward trend and much more pronounced in the last three months. the concerns on the street are they loaded up on cheap debt and they refinanced it in the coming months and quarters, can the cash flow and let? romaine: why has it been so hard for folks to assess this risk? there seems to be a disconnect with some of the official government data and industry data we get versus what the real risk is on the ground. we saw some folks taken by andrise earlier this year, a couple in the retail space. where is that disconnect coming from? william: if you look at our data, which is private and only accessible by the banks that contribute the data, they are not surprised. what you see in our data is you see trends on the trend line happening much earlier and much more pronounced. that is the power of what we're delivering. caroline: clearly a worry about
the zombie companies as rate start to rise. now, let's change here for little bit. tesla model three posted some of the best technology in any electric vehicle. a team of engineers say there is a major flaw. that is hurting tesla's product margin. >> detroit. you would associate it with building cars. in an engineering warehouse, we found a man who tears them apart piece by piece. his latest project, tesla's model three. >> monroe associates does quite a bit of engineering work. mostly in reverse engineering and benchmarking vehicles. andhe manufacturing grew his engineers toward on to model threes and compared it to a bmw
model three and chevy volt. tesla are ahead of the game in all areas but one. car's body is too complex, expensive, heavy, and difficult to build. >> this car has a lot of good features and a few bad ones. i'm standing in front of the worst one right now. this is the reason i feel tesla has problems. the body in white and the closures that go along with it are not designed for manufactured building. , thedo not do a good job weight is too high, the body is they have nine parts what would normally make up one part in a conventional car. the use so many different fastening methods that it is incredible. it goes on and on. in many cases, the design is so that am surprised no
one caught it before production. >> the model three they analyzed was about $50,000. he estimate the car would cost $34,700 to build. that means the gross profit margin of about 30%. but there is a catch. monroe believes it will cost that much to build if it was built at a conventional car factory. the model three was built at tesla's factory where they employ 10,000 people. the cost of labor and automation is high. people whoof the probably disappear from the factory based on what i know on car plants, and that would have to happen after they strip out lots of robots. at ahis product been built conventional ford, toyota, wherever kind of plant, it would have been a brilliant design and enter the marketplace in unbelievable fashion.
they could have clobbered everybody. no one would have been able to catch up. need a motor and the electric motor is one of the best. in the world of automotive's, every dollar counts. -- analysis the bmw has a more expensive motor and weighs slightly more. is morey volt motor expensive at $836 and weighs the most at 51.9 kilos. tesla declined to comment on the findings but the model's were built in 2017 and musk has previously said in response to the analysis that tesla has more efficient -- has gotten more efficient since then. they also a knowledge the body shop could be more efficient.
mark: i'm mark crumpton was first word news. president trump and mike pompeo are cautioning against putting the entire u.s. saudi relationship at risk over the disappearance of the journalist. last year, the saudis agreed to buy 110 billion dollars in american weaponry. the president dismissed speculation and said he is providing cover. said, saudi being arabia has been a very important ally of ours in the middle east. iran and weing took away that's ridiculous deal. was $150 billion
and 1.8 billion in cash. mark: secretary pompeo is a route back to the u.s. after meeting with saudi and turkish leaders. the president says he expects to meet with pompeo later today or tomorrow. florida, an event in nancy pelosi was asked about president trump's handling of the disappearance of the reporter. >> he is a leader. he should not be the person that makes decisions for the country -- hopefully he will get better this that strikes at the heart of our democracy. frankly, [indiscernible] mark: below see added even though the saudis are u.s. it does not mean we
surrender our bill of rights." is sounding more optimistic about a brexit agreement saying one is possible within weeks. may spoke to reporters before heading into a summit. >> what i expect his tonight we will be able to talk about issues we face. i think we can resolve the issues and achieve a deal and the deal is in an interest -- the interest. mark: expectations of a breakthrough of the summit were dashed over the weekend when negotiators failed to agree on terms. insistsosition leader may enter conservative colleagues are too busy fighting among themselves to put britain's interests first. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg.
caroline: day one, canada is the second country to legalize recreational marijuana nationwide. shoppers have been lining up for their purchases and celebrating with a so-called smokeout. despite the green light, cannabis companies have been trading in the spread today. -- read today. -- red today. was there euphoria on the streets even if it was not in the stock market? >> this relief has been a long time coming. across the country, there was a giant bud dropped from a tower in the main square and like times square new year's. a lot of festivities and interest. we will see where it goes. once you get past the more amusing aspects of the launch, what does this mean for the canadian economy and
potentially tax revenue? david: this is almost like prohibition 2.0. if you think back to the 20's where alcohol was banned in the united states and was legal in canada so there was a huge opportunity. we see this here. canada has the opportunity to develop global countries -- listings and the track -- attract listings. there's a lot of opportunities for the companies in the government is legalizing this. they are trying to take this out of the black market so they can tax it. there is a huge windfall potentially for the government as well. caroline: interestingly, there were concerns about demand and supply. was demand there and was supply able to match it? david: there was a fair bit of demanded judging by the lines week saw on the stores. some source crashed because there were so many people trying to get it. estimates were about 100
purchases per minute at one point today. there have been some supplies concerns. some of the stores said they only got 40 to 50% of the product they expected to get. they will take time to play it self out. it is day one so hiccups are understandable. there are legitimate concerns expressed by the companies that they will not be able to meet supply over the next few months. caroline: thank you for your insight, david. he has been on the ground joining us from toronto. sticking with the pot theme, breaking news. constellation brands has been a company that got into this space making acquisitions. interestingly, we have reports from the washington journal, a ceo is to step down. the third in his family to lead his company. he will step aside as chief executive as of march the third. he will be interesting the constellation feature on one of his new tenants. we will keep this
conversation going about cannabis. we will bring in vivian who is a senior analyst at how when and company. constellationth and the general idea of some of these bigger beverage bans -- brands moving into the cannabis and marijuana space. are we going to see more investments like we saw with constellation and canopy? >> i do think we will see more cbds with traditional companies dipping their toes into the cannabis market. constellation brands started with an investment last october and then they wrote a 4 billion -- $4 billion check in august. constellation's motivation is different from their peers. they are the best in class. they are also smaller and more agile which is why they are first to market. we have seen their competitor do a drink venture with another company.
we view that as a little more defensive. caroline: i know that this is new breaking news but the fact that we have a new ceo coming into constellation, what do you make of a new leadership at constellation brands? bill was the heir apparent and ceo. he joined the company as the -- growths officer officer and got promoted to coo and then-president. this is expected. romaine: so that is good. when we talk about what has been going on in the cannabis space. most of the talk is people going out and tricking cannabis drinks, smoking joints, but a lot of the market potential is in terms of medical. wise that's not getting a little more attention in all of this? vivian: that is something we have been trying to draw investors to contingent. inhave been focused on that
particular in europe. it seem to be falling faster and faster. the united kingdom will have legal medical cannabis on november 1. that was dramatic to relative to six months ago. -- reason i think you will see people lined up outside of the stores. we need to do a lot more clinical research. that is what these large capitalized companies in canada are capable of doing now. you have companies like kennedy growth, that by the end of the year, -- canopy growth, that by the end of the year, will have like 15 human trials. they are focused on epilepsy, ptsd, and oncology. caroline: i'm interested in the fact that you have outperforming in canopy and tilray. how can these companies sustain the edge they have? got into the market first.
if we see more countries starting to legalize. -- would all of the greatest why would innovation remain in canada. vivian: they have such a head start in terms of the recent development they're doing with defensible ip around medical applications and r&d they are doing. they also have the scale. by virtue of the scale, they have been the first to be vetted and approved by government like germany. you can imagine as an entity goes to a new jurisdiction, saying we have been approved by canada and germany and have the capacity, that makes for a tough supporter. romaine: 140 companies go public in canada. a lot are listing in the u.s.. we have a lot of companies on the edge of it. do you sift through 100 plus companies and decide which one will be the winner out of all of these? discover do not
cannabis either so we favored scale. the management teams bring in real competencies into the organization which we think make a great, durable competitive advantage. will we start to see tobacco and alcohol gets hit and that is where cannabis takes be workedn they together -- working together? vivian: we will see what happens in canada. tobacco and cannabis i do not view as substitutes. great insight and great to have you respond to the news coming out of constellation brands. vivian, great to have you in. coming up, the bond bears are beginning to pounce.
caroline: smart judge with abigail doolittle. a new segment where we dig into the top stories with the top technicians. abigail: joining me now is achieved technical strategist. thank you so much for taking the time. with recent that's what it time -- recent volatility and now perhaps we are seeing some bearish volatility. let's tied into what we are seeing in china in the bear market. shanghai,low is the the white is the nasdaq. what concerns me is it looks
like the last leg up in the nasdaq was fueled by refugees from the shanghai. abigail: so money flows. >> money flows. there is a question of wisdom leaving a market that is finally getting undervalues toe market that is probably wildly expensive. nevertheless, one has to be shanghai that if the stops going down, what might be available in the next leg up in the nasdaq? abigail: it is interesting that in october we have the shanghai and the nasdaq going lower. guests whoother charted futures makes the point of how much exposure the nasdaq has to china in terms of not just the edr but also the technology companies. could you see a case where both of those will go lower? walter: absolutely. if the shanghai breaks 2540, down to 1480, i'm wondering whether the nasdaq and even make
a new high at that point. abigail: it looks like that could be a bear pendant -- pennant. speaking of oil. you have a great chart of oil. brent. this is what concerns me is not only this ugly, bearish, ominous ledge but at this high, brent hit 59% goals on the bullish consensus. the last time that were -- there were that many bowls was august 2013 at 107 dollars. at -- bulls at the top of a wedge is scary. abigail: two questions. first of all, could you educate us on what the convergence means and why that is bearish? also, the target this close to 40, isn't it? walter: yeah.
the first point is, every single time we have had this many bulls you get a multi-year decline. not a full market correction what a multi-your decline. why is this bearish, because of the support lines converging like a giant wedge of cheese. and up trend channel, -- in an up trend channel, the should be parallel. this is showing upward momentum is leaking out and that is why this is known as a bearish speaking pattern. you take up the support line. abigail: that is interesting because the chart of oil, the daily chart shows a bearish pennant that was confirmed on the equity indexes. . this was seem to support everything. walter: whenever equities break, crude oils get slammed. abigail: let's confirm this
picture or not confirm it with a look at bonds. this is interesting. this is traditionally what we would expect with risk off in oil. walter: coming off of this low, your traditional elliott a, b, c targets 2%. since this low last year, 3.32 has been my breakout point. we are knocking on that door and the door of this long-term downtrend line. you take this out, my next step up is 4.1%. my next step up above that is 5.4%. abigail: if that happens, that would suggest if stocks and oil goes lower, rising rates continue to be a pressure. otherwise you would not have investors selling stock. walter: absolutely. this is the nightmare for stocks. this line is decisively broken. bad news for equities. abigail: interesting. walter zimmerman, thank you so
caroline: it's time for a bloomberg exclusive. the imf managing director is hearing about a pending -- she sat down with david rubenstein for an interview. do have to worry about chinese growth or chinese debt? goingnese growth has been down regularly for the last 10 years or so. today it was double so it has gradually come down. every time it was moving from a , i heardne to an eight
so many times china was going to collapse. it has not. deal in thea great because it was one of the first companies -- countries to come out with a huge package of stimulus to kickstart the economy. conducted, yesly they are trying to wayne, but at the thing time, it is a country that has a huge population which has massive transition issues to deal with. and, where the necessary reduction of growth we are seeing by virtue of the size of the economy now has to be monitored and under control in order to tame any risk of conflict. that is how i see it. >> what about the tariffs? president trump has been talking about imposing tariffs against china and other parts of the
world. is that a plus for the global economy or not? >> i think that tariffs are not a good idea in general. if they impact trade to the point that trade no longer plays the key role as an engine for growth. years, we see trade growing faster than growth. it has been a driving engine for growth. we see lots of people taken out of poverty. insee the cost of living advanced economies including the u.s. nowhere by virtue of cheaper television sets or phones and so forth because they are made in countries where costs are much lower. there has been huge benefits. not only benefits, but huge benefits. fix it, dothat is
not break it. trade needs fixing. there is no question about it. president trump has put the finger right where it hurts. there are issues about the trade rules and organizations that need to be addressed and dealt with. caroline: that is the imf managing director speaking with david rubenstein. catch the full interview at 9:00 p.m. now for asian ad, china is getting a squeeze from president trump as trump announces a from the postal treaty that gives the u.s. discounted shipping rates. this is a very little-known treaty to many, but how big an issue with us before chinese retailers? shery: president trump have been looking at this issue for a while. to 192ficials had talked treaty officials telling them about their concerns since september.
apparently no changes were made. the problem is that the u.s. withdraws, it could be causing a situation where it is a free-for-all and other countries to join at their own rates developing. developing import countries receive better discounts. this means there will be winners and losers and losers could be the chinese exporters that bring the products here in the u.s. and we see favorable postal rates. the national association of manufacturers come out to say this is a good move. outdatedthis arrangement contributes significantly to the flood of counterfeit goods and dangerous drugs entering the country from china. this cost the u.s. postal service $170 million in 2017. romaine: what is the real issue here? if i buy something from someone in china, there is a general idea that it will be cheaper shipping to me than if i bought something from someone in
illinois. shery: this is why some exporters in the u.s. have complained about this system to officials,ding chinese shippers could get a discount of 40 to 60% when it comes to the pulse rate. they have been -- postal rate. they have been complaining about talkbut u.s. exporters about leaving the treaty altogether because it could bring about retaliation from these other countries. caroline: 92 -- 192 countries. shery: 100 92 countries on a treaty that is 144 years old. the concern is mostly for these chinese makers like alibaba and so forth. what the impact will be for their sales in the u.s.. ifing said that, the caveat, you look into alibaba financial statements when it comes to retail, revenue is only 5%. caroline: could it hurt even amazon?
how much of the goods that are being put on amazon are coming from china? who pays for all of that? shery: that is a good question. right now from what we are getting when it is just a headline, we see amazon could benefit from this move because they ship a lot within the u.s.. we are getting amazon shares up 7/10 of 1%. ups could also benefit as well as fedex. they could better compete with usps, although fedex has its own use today with some downgrades and funds going out. caroline: breaking it all down for us on the 144-year-old treaty. romaine: that's quite a run. caroline: sherry, thank you. homer's her on "bloomberg daybreak: australia" and a brick asia. -- and "bloomberg daybreak: asia". romaine: american express and pay paul report that the recordings earnings after the bell tomorrow -- paypal report their earnings after the bell
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