tv Whatd You Miss Bloomberg November 13, 2018 3:30pm-5:00pm EST
mar i am mark crumpton with first word news. cnn filed a lawsuit against the trump administration for taking away credentials from white house reporter jim acosta. he had his pass revoked after a confrontation with the president at a news conference. cnn's is both a cost and the network have had their constitutional rights violated. the white house says cnn is grandstanding. senate democrats want acting attorney general matthew whitaker to testify before the judiciary committee, questioning whether his appointment is constitutional and concerned about his oversight of the russia investigation. senators dianne feinstein, the
top democrat on the panel, and a fellow member were -- raise their concerns separately. trumpnator said president appointed his friend against all laws, rules and practices as a way to stop or slow robert mueller's investigation into russian meddling in the 2016 presidential election. apo trial of drug lord el ch was supposed to begin in new york city, but opening arguments were delayed after a juror was excused because of her anxiety about the case. he is accused of amassing a multibillion-dollar fortune smuggling drugs. he escaped from prison and mexico twice, first in 2011 by hiding in a laundry bin and again in 2015 through a mile-long tunnel he dug in his jail cell. he was captured in 2016.
the emergency chief for the world health organization critics that the congo ebola outbreak will last into 2019. healthtor says facilities have become what he calls major drivers of the current debbie transmission. >> it is very hard to predict and outbreak as complicated as this, with so many variables out of our control. we are planning on at least another six months. that could change as we get more information. mark: he added that the current ebola outbreak is arguably the most difficult context we have ever encountered, partly due to activities of armed opposition groups in the region. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪
>> from bloomberg world headquarters in new york. this is bloomberg markets close. we're 30 minutes from the end of the trading day and all eyes are on the markets. s&p 500 in the red by 3/10 of a percent. a day of volatility, but firmly in the red at the moment as the energy sector gets smashed. 10 year yields, we are on the u.k. side rising. i want to keep an eye on the u.k., because we could be getting close to a brexit deal. what does that mean in terms of raising rates? not just the fact that we had brexit negotiations coming into near finality, we also had some stronger data of an expected out of the u.k. in terms of wage growth. we could see a rate hike in 2019.
a goodie yields in the u.k. and up goes the euro. we're sticking to our guns when it comes to our growth estimates. scarlet: up goes the pound as well. but so much$1.30, for that rebound in u.s. equities. .il is the story of the day a record 12 day losing streak. there was a catalyst here. president trump criticized saudi arabia's plan, saying oil prices should be much lower. sick the market is responding by pushing prices lower. a quick mention of one stock we're keeping an eye on. s&p,orst performer in the disappointing earnings, lots of oversupply of u.s. meat and poultry, because of the trade war with china and the unfinished after 2.0 means we are not exporting those things. caroline: it seems a long time ago we were talking about those things. perhaps a reprieve today could drive the stocks higher, but now it is all about oil.
scarlet: excess supply, darkening demand outlook and the president's tweets, it is a recipe for disaster when it comes to the price, extending a record losing streak. the red in oil bleeding over to energy stocks. the biggest energy group loser in the s&p. for perspective, let's bring in david neuhauser, managing director at livermore partners managing director. you have been looking at energy company's for a long time. you see prices not completely unexpected. explain the unceasing decline in crude and how you see it playing out? david: thanks, scarlet. oil is in a band at this point. we're a long select companies. has been on a strong trajectory higher. you have seen increased global growth and what you're seeing now is that the price is being capped by a bit of oversupply
and some weakening demand. we are still trapped in this same band of the branch and now we're in the middle of the range. caroline: not cause for concern from our perspective? are you seeing opportunities particularly in energy shocks -- stocks? david: there are opportunities, but we are very specific on companies that we are invested in. we are invested in companies trading at very low multiples that have strong cash flows and don't have a lot of debt on their balance sheets. i think those will eventually be the ones that outperform when crude begins to normalize here in the middle innings. scarlet: do you think this selloff is overdone? david: it seems so. it seems oversold, almost very oversold. i think there is basis to view that oil price for brent as around $70 or $75 per barrel as
a median. i would look at that as a gauge to her oil should be and that is how we are investing today. caroline: i want to move away from where you are adding money to on the long side, where you have been looking to bet on the short side. toticularly when it comes companies like goldman sachs, one bank we have been looking at . this company was battered yesterday and is down again today. has a gone too far on goldman? oversoldght now, it is and the evaluation is obviously depressed. we were shortening it before the news, obviously, based on a pure hedge for livermore. we are a hedge fund, mainly long. we look for opportunities. , theiew of goldman is
chaos that is been going on, the bank received a tremendous amount of fees, about $600 billion in there is potential for reputational damage from this. it is unknown or unquantifiable as far as what that could be. we believe that there was downside and we have seen that. scarlet: you see the opportunity here to go short on goldman. let's talk broader. extreme volatility this month is providing you with more opportunities, certainly in energy, in certain select financials. is this the case in november than in february and march when we had the last extreme volatility? david: we are trading more around our book. the increased volatility is a good thing for me, because my background first and foremost is as a traitor. when you're seeing volatility, you can add all fun to your -- add alpha to your exposure. we have been in this state a low volatility for a long time.
investors have an mold into a -- lulled into a false sense of security as a rates have risen, inflation has risen, and global growth is starting to wane. take all into that account, there is opportunities and we are trying to capitalize from it. scarlet: we like you coming on the show and talking to it. caroline: think you, david neuhauser. livermore partners managing director, joining us by the phone. coming up, amazon could go bicoastal. more on its pick for the long-awaited hq2. this is bloomberg. ♪
long island city and in virginia. your avc in new york. what does this pool of talent that will be fostered by amazon mean for you and what other companies can be built here? eric: it really validates and solidifies new york's position as the second largest center of technology and innovation in the united states and one of the largest in the world. it is part of michael bloomberg's strategy, when he tech here to transform new york into a tech has an his technology effect on every possible sector of the economy. new york has everybody represented. scarlet: full disclosure, michael bloomberg is owner of the parent company of bloomberg television. he mentioned cornell tech. higher education plays a role here in allowing amazon to get
its talent. that makes sense for new york, but how does it make sense for washington, which doesn't really have an established tech base? eric: washington has quite a lot of technology companies. aol was there, the defense industry, etc. i don't know if they think people will be also attracted and come from other regions to virginia, to the d.c. area. . people will probably come to new york. caroline: is interesting that they went to two separate locations rather than one city, which they said could never offer the full of talent that they need. you: it used to be that if want to build a huge campus, you went to the suburbs. oray, the young tech workers tech workers in general don't want to be in the suburbs. it went to be in a dense, diverse, culturally attractive city and therefore, the employers really have no choice
but to try to establish themselves in the big cities. splitting it up makes sense, split -- simply because of the size. thelet: i worry about strain of infrastructure. new york can barely handle the number of people have already and the airports were falling apart. if you add an influx of new people and they have to get around quickly -- eric: our politicians have to fix our infrastructure. the subway system is in bad shape. personally, i would prefer rather than give these companies a tax break, that the state and the city would commit the $1.5 billion that they were offering to amazon to invest in the infrastructure. caroline: we are looking at amazon share price down by 3/10 of 1%. we can't have you on and not talk about the impact on the public markets at the moment. it has been a slight correction situation on our hands. apple was in correction territory, amazon was on the brink one it comes to their market territory.
what does it mean when you are a venture capitalist and we have plenty of companies looking to go public next year, we have uber, lift, even airbnb looking at the markets. these exits that need to happen, what do you see? eric: the market has so far been good for technology for 2018. we don't really look at short-term volatility, because it doesn't mean much to us. we are building companies that we believe are the companies of the future. have a love you and they will exit at the right time. scarlet: what is your confidence that this is just short-term volatility? eric: i don't see anything in any of these companies that indicates that their growth will slow or that the business models will be impacted, perhaps with the exception of some regulation. thank youric hippeau, so much for joining us with your perspective.
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"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. caroline: this is countdown to the close. i am caroline hyde. scarlet: i am scarlet fu. you have in keeping your eye on crude oil the last couple days. on brent, 8% down on wti. back in 2014, we had that big selloff in crude, we dropped pretty 6% in the 80's down to the 60's. that took 5.5 months. on october 3, we dropped 27% on wti since then. 5.5 or six weeks, that is pretty
remarkable. caroline: the pace is phenomenal and the volumes are huge. we're seeing 90% increase on the average of the past 100 days on the delete shiite and brent. scarlet: exacerbated by tweeting from the president as well. amaine: you wonder if this is fundamental issue or a technical selloff. and he washauser on touching on this issue with the debt levels being a little more selective. scarlet: he also said crude oil looks to be oversold, even though it is in the band he expressed it to be. if you look at how the industry groups are performing, overall it is a mixed day in equities. red, on then and upside you have chipmakers, transportation companies, banks. goldman sachs is recovering after yesterday. on the flipside, legal back to those energy names. 2.3gy stocks off by
percent. how scared equipment, food, beverage and tobacco. some of the more safe place are down, but no one is down as much as energy. you put together and it is a miss in terms of the index levels, but it does not tell the story here when it comes to energy. tearine: we were on for a at one point on the trading day, on the backs of a hope that the u.s. and china were getting closer. now, of course, energy sinking. scarlet: we're moments from the close. that's dive deeper into the equity action with our markets reporters, starting with remain. -- romaine. romaine: what if i told you the best stock of the past 12 months was an automotive retailer? parts, this was a stock that got hurt last year, down 53%. it has bounced back in a big way and that has to do with the fact that people are holding onto
their cars longer and driving were. the ceo said the total miles driven are up 2% and the average age of cars on the road is between the 6-11 year range, which is the sweet spot for resellers that are looking to take advantage of customers to repair their cars. that is a forced need to prepare this cars. you are seeing the stock do well, sales up about 6% in the most recent quarter. that is double what analysts were expecting. quartertlook for next and beyond is looking bullish, so we will see this trade homes. -- at this trend holds. i am taking a look at a stock that is seeing a change of pace and that is general electric. this is a company that has had a rough year, but it has also seen massive trades in the past day and week, bringing trades down to the lowest since 2000 nine, below eight dollars per share. as you can see today, ge getting
a bounce up, 7.6% at the moment. that is after the ceo announced lands that ge is going to speed inplans to buy a stake hughes. you have to look at this in perspective. what might be the best day since 2015 doesn't help it so much in a year to date chart. 50% thisdown more than year, and that would still be the worst year since 2008. abigail: major averages are a levy map. chart for apple. a big three-day slide into today. only to percent, recover a 1.5%. the major averages really doing quite well. 1%,his point, down 7/10 of continued concerns around iphone demand and what we have been hearing from apple and suppliers, this is a matter of confidence.
not so much has changed since the apple report, but investors continue to trade these shares. this stock seems to go through boom and bust cycles. when the sentiment is to the upside, the stock only goes higher, but then turns bearish quickly. taking a look at a chart we've been looking at a lot lately. we look at this to see how they relativeth -- perform to what we are showing. you can see in this boom trend that investors consolidate the gains, but overall above that 200 day moving average, buyers are supporting it. right now, back below that 200 day moving average, at the bottom of the trend. the last couple times apple has gone below the average, those long-term buyers have supported these shares. it suggest that we could see apple go lower in the near term, but if apple does what it had done during this boom channel, it is likely it will hold. if that 200 day moving average , it could suggest
that deeper declines could be ahead, not just for apple, but perhaps the broader market. caroline: maybe going into a bear market. we thank you, markets team. minutes until market close and i want to focus on oil markets. the longest strike in wti crude, that means brent is in a bear market, too. equityring in the chief strategist. there was no wonder that halliburton was on the s&p 500. are you surprised by the extent to this selloff? >> i'm not surprised by the extent of the selloff in crude. once rebirth or 60, a look thick were heading for 55. there's a considerable amount of in 2015.rom some major expect some civilization. i am surprised by the extreme reaction in the equities, only because energy equities have been lagging s&p 500 for most of the year.
they have ignored the uptrend in oil, but now they are embracing the downtrend, so the extent to a standard puts them deviation below long-term valuation multiple, on a relative basis relative to five-year average. have a strong discount now in the energy sector, which didn't exist even two days ago. that is how much this sector has revived. scarlet: with two minutes to go, which bring in our guest, mark crumpton janus henderson group -- marc pinto, janus henderson group prayerfully a manager. what you make of what gina said that we have this discount in energy stocks? the great opportunities, doesn't it? it may create short-term opportunities, but we have had a negative view on the long-term basis. i some issues in terms of
demand, the supply picture seems to be fairly robust with the u.s. in large part being a producer. erweightchosen to und the sector. we do have some holdings and potentially with the selloff, we could see better opportunities. that would be in the backdrop of a cautious long-term view. romaine: how do you see the current selloff for the current decline we're seeing affecting other areas of the market? marc: in terms of energy? i think it just speaks to the fact that we have a nervous market right now. i agree that the reaction may be a little strong, given the change in fundamentals. a skittish market, we've seen this in other sectors, especially in cyclical sectors, where people have taken a little bit of bad news and gone a long way. caroline: earlier in the trading day, we saw it go higher on the hopes of china or u.s. talking once again ahead of the g20
meeting. how much are we trading off trade and how much are we putting that on the back burner? i think it is tough to put those headline risks to work. we are trading on two things, a decrease in expectations for earnings and revenue growth into 2019, which is our first decrease in expectations in more than two years. it is a bit of a shocker. we are trading on that and on tight fed policy. more than a month ago, the fed remove the language from the statement and that triggered a sea change. those are the two things driving stocks. i do think you can get to a point where trade drive stocks, but not until you actually have real action, as opposed to chatter. scarlet: mark, you've been saying you see the likelihood of a deal given that the president does want to great -- position wise, you are not very bullish on industrials.
mark: we are exposed to industrials but we have a lower exposure, and we made those adjustments because we cannot forecast where this will end up. i express my view, but at the end of the day, it will be between the administration and the chinese to negotiate. i think there are more reasons for a deal than not. their unpredictability is a sign of this administration so we've reduced our position, but a lot of our companies are driven by other fundamentals than just trade. while affairs watching, there are a lot of good things going on making us want to own these positions. caroline: there we have the closing board for you. the dow jones is off for point 4.11 -- .4%.
scarlet: what is not really captured in the equity index closes is the massive move down in oil. if you look at my bloomberg, i'm looking at the average volume at time of u.s. cell. -- sell. the white line shows how much trading there was in the ctf compared to the average over the last 20 years -- days. a lot of participation. romaine: it was just massive volume all around and pretty much all of the assets related to oil today. caroline: let's get our perspective from our market team. mark and gina are sticking with us. we go out to a deeper dive. remain, let's go to you. romaine: if you're looking for nuggets with regard to inflation, take a look at what happened with the small business optimism index. it came out earlier this morning and is a small data point. what we saw was small u.s. companies are confronting these higher payroll costs by saying
they plan to pass on some of the costs to consumers. we are not heard this in a while firmse net share of planning to hike prices jumped to a 10 year high in october up from about 24% in the previous month. we are seeing an adjustment by some of the small businesses to the higher prices. whether that actually triples down into the cpi reading -- trickles down into the cpi reading, it is hard to know. you're looking for anything to hang your hat on, that is one story for you. abigail: you were all talking about oil and energy sector, here is the oil on the day. before 10:00 a.m., oil was lower on pace for its 12th down day in a row. but then, around 10:00 a.m., we saw this cliff dive. a key level of support was taken out and the selling really kicked in. sincethe worst day february 2015. the relationship to the stock market overall, this decline may
suggest this other risk asset more decline on the s&p 500. this is that as a be 500 in the white. oranges oil. that is not a normalized chart but just to show the trading relationship between the two assets. for much of this time period, they traded in the same direction, up, until october. the s&p 500 took a steep dive, but oil continued to go. the s&p 500 up about 2% on the year. oil is down 9% and their big decline on the year they suggest decline on an annual basis could be ahead for the s&p 500. time will tell. >> also, a lot of uncertainty stocks.nology
i'm looking at the nasdaq volatility versus the s&p 500 index. if you look at the spread between the two, it is at the widest since 2004. the nasdaq 100 has been under a lot of pressure. it had mixed results in amazon to google, which remains to be seen what will happen to the index that has been driving the s&p 500 up since the 2016 presidential election. scarlet: the entire marketing, thank you very much. you set us up perfectly for our conversation with mark patterson and gina martin adams. the faang stocks have gotten hammered and they have recovered a little bit. the index is somewhat higher even as apple and amazon decline. how do you see this going forward? some argue there is a massive re-rating of the sector and other say it was because they were too growthy.
mark: if you look at the business of those companies in general, they are doing well. a lot of discussion of companies disrupting and companies being disrupted. clearly, the faang index and amazon being a great example, are disrupting and increasing the amount of industries they touch. in terms of valuation, a lot of the companies, alphabet for example, the valuations have not moved that much higher because the earnings and cash flow have grown. valuations in our view are reasonable and the growth outlook is good. bitink it is just a little of profit thinking. these stocks have done well and i think people are going into year-end and want to protect their gains to the extent they have them, but i do not think there is a fundamental change in these business models. romaine: just going to break in and we get an earnings report ray, one of the largest cannabis companies out there. the revenue was about $10
million which is what they posted in the most recent quarter prior to that on a year-over-year basis. that is about 26% growth. of folks are looking at the costs that these companies have to produce. their average net selling coming from $6.21 which is down $7.53 one year ago. caroline: an interesting time. gina, this is what you have been writing about, and that you feel the selloff we have seen is in some way driven by the re-rating we got an earnings. where do we go from here? at what point does the market say 2018 is as good as it gets? gina: this is the million-dollar question. coming into this earnings season, the vast majority of people in knowledge we would have a deceleration in earnings growth going into 2019. the surprise was not that we would have a deceleration, that that it would be bigger than expected and driven not only by taxation, butrate
a difficult margin climate and deceleration in revenue growth. that says you have to have a ready strong, stabilization. it's not just about earnings growth stabilizing, which the around thirde quarter at the latest. roaming talks about it. wages are want of the concerns but so is trade. increased marketing expenses one of the concerns. that has investors nervous. the same time, revenue is and a lot of people are paying attention to the topline desulfurization. you have to get to a point where they see stabilization. scarlet: we are in that adjustment period now. romaine: we are. i want to go back to attack for a second. a lot of investors are fleeing individual stocks. what makesto rethink
a technology company? marc: technology is in every company, so our strategy, we look at a lot of our companies are technology companies, but they are benefited from it -- benefiting from it whether it is cloud adoption, engaging with their customers. home depot is a great example of a company that has managed the e-commerce and retail format concurrently, and does a good job in terms of engaging with the customer. i agree the differentiation is getting smaller, but i think there is still a divide between newtek and old tech -- new tech and old tech. i think old tech is in the value category and struggling to be relevant in this world as we see more migration to the cloud. pervasive, but there were still be winners and
losers. for active managers like us, that is a great opportunity. scarlet: i'm glad you bring up home depot because the retailers will be reporting earnings this week. walmart is among them. you get retail sales on thursday. how is the consumer doing in this environment as we look at the adjustment for lowered earnings expectations? marc: the consumer, i think, is strong. we are getting wage increases which is helping. home prices notwithstanding the slowdown, and new housing starts are fairly stable. i think the consumers feeling good. the balance sheets are in good shape. companies that report consumer credit statistics report a good environment. the consumer i have heard is 70% of the economy selective me hope that the growth days are not over. maybe consumers are shifting the way they spend money. they are going more for experiences and travel rather than material goods. i'm told that is what the
younger generation does so that has maybe shifted our view in terms of where we might invest so travel is a huge theme. i think the consumer is strong and spending money, maybe in different ways. caroline: i'm interested on your perspective on growth versus value. is apple now value or growth? marc: that depends on the day. [laughter] marc: so, apple is a very large company and by virtue of the law of large numbers, for to grow, is a challenge. we have heard a lot about how iphone unit sales are scrutinized number, but a lot of people have phones. penetration is high and they may wait a couple of years to upgrade. that is what we are seeing in the weakness to the supply chain. firm a valuation standpoint, it is somewhere in between growth and value. in terms of capital return and
its shareholder friendliness, it is as good as it gets which is why we own it. scarlet: is apple value or growth? gina: it's growth at a reasonable price of u.s. me. -- if you ask me. gina martin adams and mark, think you so much -- and marc pinto, think you so much. that does it for the closing bell and for me. we will be looking at one of canada's largest marijuana companies. we will dig into tilray. this is bloomberg. ♪
caroline: live from bloomberg's world headquarters, i'm caroline hyde. romaine: i'm romaine bostick. caroline: here's a snapshot of the u.s. stock market today. it's a mixed picture with energy the laggards. romaine: "what'd you miss?" caroline: brent's joining the bears and crude falling the most in three years. president trump's criticism to saudi arabia added to this. still rate is the latest to join green week at the cannabis -- the cannabis company reports wider -- romaine: marijuana stocks are all of the rage this week with all of the earnings coming out. report,s the latest to
and here to help us and break down the numbers is our cannabis reporter in the bloomberg news room in toronto. hi. got the numbers from tilray and it is a significant increase in revenue which is a pattern we are seeing from these cannabis companies. revenue and production numbers -- which isbecause not surprising because this is the quarter including the numbers post legalization -- not including post legalization. production,, higher but we also see across the board is lower average selling prices and lower margins with costs growing. the companies are saying that is not surprising when you are selling to wholesalers, provinces, like they were leading up to legalization. they are selling in bulk and of course prices will be lower, but
judging by the investor reaction to the earnings, they are having a bit of a time digesting these numbers. caroline: the cfo said you should have expected this when we move into a retail environment instead of a medical one. how does this set up for future growth going forward? are they living up to expectations of revenue increase? kristine: revenue has been going --ongly but the numbers growing strongly, but the numbers are in relation to the market cap. tilray is reporting revenue of $10 million in the third quarter and this is a company with a $10.5 billion market cap. you have that discrepancy between the numbers they are reporting in the market cap. revenue is more than 80% higher in the quarter. it is not fully reflect the legalization yet, but another thing these companies are struggling with is getting
production to the level in needs to be to meet canadian consumer demand. some investors are beginning to question if they cannot meet canadian consumer demand, are they going to be able to demand.ernational they say in a few quarters they will have more production online. that is true of kronos group reporting earlier this morning, but i believe that as a source of concern for investors. romaine: speaking of crows group, is their differentiation between how these companies are doing on recreational side versus medical cannabis use? kristine: that is a really important question and we will get a clearer answer to that in the corridors going forward. some of the analysts i spoke to said some of the reason their fallings today, was that kronos group provided little detail on the recreational market.
kronos declined to provide much detail at all. are putting as positive spin on things saying they are able to meet medical demand and recreational demand, but there are a lot of the question marks out there and we may not get answers to those for a quarter or two. caroline: thank you for the breakdown. kronos slid after reporting a loss last quarter saying despite the search in revenue -- surgeon revenue, we dig a little deeper with the ceo and he discussed the company's outlook. >> it is a new industry of altering. we think each quarter, when we get more and more information, it is easier for investors to model. many now, there are so developments in understanding the total adjustable markets, when those markets come online, and what products will be sold
in those markets. it's something we are learning. each quarter we will start moving towards it being a little less volatile. >> one of the challenges that all of the big pot companies have is that everything on the shelves is flying off. there is not nearly enough supplies to meet the current demand. however if do you figure out which products will be the winners here? -- how on earth do you figure out which products will be the winners here? >> if you ask most ceos about the fact that they have their they wouldling out, be happy. we can adjust the product offer off of that. >> can you give us detail on that? how do you plan on revving up growth and what products are you
offering? >> when you look at sales were reallyles moving quickly, but we see in all of the categories launched and we will get more data over the coming months on which ones .re performing better >> where do you think the business -- biggest value lies in this business? would it be the recreational use or in the more pharmaceutical and of the market? ultimately, are you a recreation company or pharmaceutical company will be a key factor in determining how valuation stick. >> i think you are likely to see more volume on the recreational side and higher margins on the pharmaceutical side. agnostic ands as can have annoyed specific --
canabonoids. if it's a commercialization analysis, and be suffering galatians, whether the product is going into from the cynical channels or into recreational channels. caroline: that was the cronos ceo speaking with bloomberg earlier. coming up, oil unprecedented decline is deepening. a darkening demand outlook and president trump's twitter critique. we will have the latest. this is bloomberg. ♪
plot. demand also came in time of steadily rising american -- hit to explain the slippery slope is the managing editor of energy commodities. is there support level? some say it will not go below 50. >> it could go anywhere at this point. i will not even know where the bottom is. it is already moved through bunch of technical levels that we thought would at least slow it. we saw today was a 7% decline, the biggest drop in three years. we have been on a steady rate of decline. it is not slowing. if anything, it builds momentum today. happeningk at what is from the investment side, positioning, we see open interests falling. money is coming out of the market right now.
that's interesting because if you are facing a market where you have more sellers and buyers and fewer people in the market in general, what happens next? romaine: so we have the report from opec that seems to suggest global demand was light going into next year. tina: correct romaine: when we talk about the supply side, have we ever been at a point in history where we had so many having so muchs control over the supply side of the market that opec has been rendered somewhat irrelevant? tina: before opec existed, that was so the case. if you thinkt -- about, there has not been a time in my lifetime where the u.s. was the world's largest oil producer. when you are looking at the top three oil producers, you are talking about u.s., russia, saudi arabia. saudi arabia is third so if you talk about opec as a major constituent in the debate, they have less sway than they used to.
the president has been increasingly vocal on oil prices and he is speaking from position where we are one of the largest producers of oil in the world. caroline: also, the u.s. can be deemed to blame first up running access and supply right now because the weight has gone to iran to have the market built into the forecast. still, they want this to come out of iran and then game is people will reduce their imports. will supply come back? tina: what is interesting in the iran waivers, you had a lot of noise from the administration from reducing it to zero and it became apparent in the last week so that zero was a different number depending on how you look at it. by branching those eight waivers, they made it clear to the markets and was going to be supply going forward. so all of the bills we have seen in october came out of the market incredibly swiftly.
we are starting to see that again in the most recent cftc numbers. we saw the short increased by 30% in the space of a week. that means the negative sentiment was building. romaine: quickly, for a lot of these oil companies, we see free cash flow double this year. what are they doing with that cash? tina: they're not spending it and i think that is wise. companies, they have had a surface cash and some are talking about buybacks. a lot of them are holding onto it. if you watch the market for the last month, you might think that is a smart decision because you are not sure the wti will stay over 70 and brent over 80. thesese markets, businesses are looking 10 years out and you have to look at the average. caroline: thank you very much indeed. tina davis, always great to have your perspective across the oil mud bath as it is. let's talk about italy's battle.
mark: i am mark crumpton crumpton with bloomberg's first word news. there has never been a wildfire in california like the one burning in the northern part of the state. authorities have raised the death toll to 42 making a california's deadliest fire ever and it may go higher. more than 200 people remain unaccounted for. more than 7000 homes and buildings have been destroyed. in southern california, high wind is still a problem for firefighters, but they appear to beginning the upper hand against two of the fires. the associated press sites two people with knowledge of the matter saying christian nielsen is expected to leave her job as
soon as this week. sources say president trump blames her for not doing more for addressing what he sees as a crisis at the u.s.-mexico border. jim mattis says he plans to visit the border where troops are helping you write barriers and performing other tasks in support of border security -- t barriers and performing other tasks in support of border security. trump ordered troops to the border in response to a caravan of migrants making its way through mexico toward the united states. >> we will update you on costs if they become known -- as they become known. capturing costs and i will visit the border tomorrow. --k: mattis
hamas and other groups say they have accepted an egyptian cease-fire to end two bank days of intense fighting. during the hostility, the region has seen hundreds of attacks in southern israel and scores of israeli airstrikes on targets in the gaza strip. the united nations likened latest violence to an earthquake. >> u.s. is warning the gaza is the mostnto -warructive or in years - in years. mark: at least seven palestinians, among them five militants, have been killed during the fighting. israeli media reports benjamin that now you -- benjamin had aahu and his cabinet
meeting today. 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: it's down to the wire. it really -- italy has until midnight to submit a revised budget. the commission is standing -- demanding it shake its growth forecast. italians are doing neither. our next guest joins us over the phone from london. seems they're sticking to their guns when it comes to growth expectations and 1.5 percent and the budget deficit target of 2.4%. they are not budging. >> it certainly looks that way. we never expected the government to meaningfully change its budget but they suggested they
would do so going forward. for sovereign debt so far noticeable, there are signs of its wing on economy growth. a rethink onced the part of the government just yet. marketableis that stress is sustainable in the political benefits of moving forward with the budget far outweighs any economic downside. the government has been actively intentions to support domestically. romaine: if the eu does not follow through and impose the same force it did with portugal and others on italy, are we at risk of the euro losing some degree of credibility? all, this is not a fight the eu has wanted or sought in any way, however,
[indiscernible] the eu will have to act to preserve what little credibility they have left. austerity is not really a stake here. those companies were wrapped in bailout programs and they are far away from that stage. the things we will potentially look at our milder. i suspect they are not easy to enforce. i think this will be a lengthy process in the very earliest sanctions could be on the table would be next spring at the very earliest. caroline: it's the market that has th to force the hand of italy it wants to see a lesson budget? >> that's right. this has been our view for some time. the roles are significant and symbolically important. the overarching point is that eu effective with
significant market pressure. so far, we're not quite seen enough of it to force a change on the part of the government in rome. romaine: we see a lot of trading activity in the euro-dollar pair and a lot of people are potentially positioning for the downside risk of this falling apart. more risk the needs to be priced into this market that we are not going to reach an agreement? >> i think so. the confrontation between italy and that you will only get worse over the next few weeks. bear in mind, italy is openly challenging that you and eurozone on the governance rebuild theat would crisis here and they are doing so at a time where external
conditions have been uniquely supportive of becoming much more diverse. for company like italy particularly. caroline: it's great to get your perspective. federico santi, thank you. meetsa may's cabinet tomorrow to see if they support a deal or not. remains driving higher on it that we might see rate hikes as soon as 2019, but the cree question -- the question is what do she get back? romaine: the divorce agreement is not between may and the eu, it has to be between the entire house. all of the people that want brexit seem like they still want the status quo of the benefits being aligned with the eu. until they sort that out, i do
not know how theresa may gets a win out of this. caroline: the key question is how she can marry the two --two factions. we still have calls coming for a second referendum which many feel is not feasible. she has to somehow get the right wing to come on board and say these compromises made on the irish border is ok because eventually -- --dst fields of housing fears of housing slowdown, home depot keeps beating expectations. what is driving the strength? that's up next. this is bloomberg. ♪
caroline: now for a look at the stories trading across the bloomberg universe for you. subscribers are reading about boeing's close. .hares tumbled bloomberg.com is leading with amazon's new digs breaking down the decision by the giant and examining potential impacts. tictoc has a story about the first u.s. approved canada spaced medicine -- cannabis-based medicine. you can check out these stories online. romaine: home depot beating estimates for the most recent, third quarter however the shares fell today as there is still lingering concerns about the broader housing market and whether that will affect home depot's earnings and sales going forward. from hall's sex joins us washington to talk about this. zachscribed -- herr hall
-- how does home depot outperform in a market that seems to be getting weaker? -- it is is a good job and serving the customer and it has done a lot of simple things in its stores like wayfinding signs to make it easier getting around and its role in out same-day delivery on contractors who have to work on tight turnaround times. things seem to be paying off. target is a bit of a cautious outlook going forward. how does home depot stay ahead of the curve? sarah: the concerns are around the mortgage rates are going up and perhaps that will make it the folks are not willing to invest in their homes. i'm not sure we see a lot of evidence for that and the data i have seen says remodeling activity is slow -- growth of
remolding -- modeling activity -- remodeling activity is going strong. romaine: given the selloff in of market, right now, a lot investors are hanging their hat on retail sales and earnings. we have two bank big ones coming up -- two ones coming up. what you looking for the most out of macy's? sarah: clarity. the first two quarters of the year tough to parse because they had this friends and family shale with a time shifted from one quarter to the other -- sale with a time shifted from one quarter to the other. it will give us a clear picture of how they are faring and how they have dramatically shifted their online assortment. we will also be looking at their backstage concept. is at the store within the store
and bases are seeing an -- increase in sales because of that. caroline: [indiscernible] sarah: i think this is a quarter of great expectations. we all know the consumer sentiment is strong right now. about retailting for years and i feel like earnings season is kind of a funeral. in q2, we saw a lot of upbeat results. walmart and target saw their best results in decades. i think investors are seeing that in saying this to pretty favorable environment and those who do not deliver are doing something wrong. caroline: always good to get your perspective, sarah halzack. $100 million gamble. petco is ditching pet foods with artificial flavorings and preservatives. by may, all of their food will be 100% natural. as people shell out an increasing amount of money for
their cats and dogs, the company is betting customers will spend more for that piece of mind. right now we have the petco ceo. it is a sizable bet the kids it is $100 million worth of sales you will just get off of the shelves. >> it is a bet, but for us, doing the right things for pets -- thing for pets has always been the right thing for petco. >> 87% of customers do not one art officials in their products and many do not even know they are buying products with artificials. us saying we will eliminate those products gives us good business. romaine: are you working with the manufacturers to get new products or help refine the products? >> there are three classes there are already those not having the artificial brands, and there are others who are going to reformulate or loss natural lines, and there are those that will not respond and those we will take off of the shelves.
we will donate any remaining products to shelters. caroline: when it comes to humans, it is much cheaper to buy food worse for you in some way than it is to buy healthier food. how you cope with a higher costs going forward? are you going to take it or seltzer pass it on to the consumer base? ron: i don't want this to be thought of as a cosplay. price, have entry-level midpriced and then we have a higher-end products. at the end of the day, do our pets the glycerol or sulfur dioxide? and we willnk so not make people pay more for those products. romaine: i want to broaden this out. . go to petco a lot now, when i walked into whole foods or fairway, i see them stocking many more pet products. how will you differentiate your self in a way that will make me want to go to petco instead of
just going to some of these other sources or might find something for myself? ron: there's a lot of growth in the pet industry and people are betting on it. it starts with higher-end nutrition products unique petco. i talk about wholehearted and we have other products unique tobacco that those competitors won't have. the second piece, they do not offer a total experience. you can't go to fairway or whole foods and get groomed. you can't go and get trained unless you are training them to pick up scraps on the floor. you are not going to get a checkup at a whole foods or amazon. it is our ability to do the whole experience and be the pet parent partner. caroline: are you adopting -- we're just hearing how the likes of home depot card staving off amazon. how are you embracing the digital age some people are more enticed to come into your store? ron: we need to play in the digital age, but we cannot play amazon's games. we have to take advantage of the
brick-and-mortar capabilities. buy online and pick up in the store is launching this year and scaling rapidly. we also have suspicion delivery for folks -- subscription delivery for folks. i want us to participate in the digital growth, not be a victim to it. romaine: your background is primarily in marketing. i wonder how you leveraged that. you worked at hewlett-packard for some years. i wonder how you leveraged that experience to create a brand for a retailer that can sort of stand out and not just be another commodity. ron: petco has a lot of trust but it is somewhat dormant and has not done extensive marketing. bringing some of the sizzle i learned a pepsi is relevant. my last 11 years at hp we had 3% margins. at petco, they are going six to 10% and they did not have that rigor. we are fighting amazon and we
need to have that rigor. i'm trying to bring both of my experiences to bear and we are seeing results. caroline: is a size and scale, organic, m&a? , whathe future of petco we are taking our first big step on is a services business where we provide the whole pet parents partners. think about your phone with an app, you schedule grooming, that, reschedule your repeat delivery. so you manage the entire pet's life on that app. that is the state of where we will be. romaine: i love how he called pet owners parents. .he is a real pet owner caroline: my child is my pet. just a child. ron: soon your child will insist on a bet. my daughter named our pet yummy. a yellow lab.
i will fight that one when the battle comes. i have a few years on the yet. ron, thank you. a quick check of the business flash headlines. softbank is continuing to push money into its biggest investments. the company has landed $3 billion in funding from a firm. the agreement values them at $43 billion -- 40 $2 billion. women make up 30% of the directors on top british companies. that's according to the annual u.k. health and alexander review. the study found some tokenism remains. [indiscernible] jeffrey goodlatte is speaking about the market now. riseid bond yields could in the recession and says the bullish move in the dollar is likely near the end. that is your business flash update. coming up, talking again.
caroline: not to asia ahead, after a discussion between steve mnuchin and the chinese vice premier, the u.s. and china have resumed contact at all levels over trade according to white house economic adviser, larry kudlow. let's bring in shery ahn to break it down. that weis is better the are talking the not talking. does this mean the g20 will mean something and agreements will be set? shery: that is the biggest question for all market investors. anyone watching china and the u.s. -- given the fact that last friday we heard from peter navarro saying no one but
president trump and the ambassador to negotiate with beijing puts a little bit of question and out over who really is leading the negotiations coming from the trump administration. romaine: was this the same type of confusion is the last time? shery: secretary mnuchin and ross both had a deal but since president trump put a stop to china saying they want to buy more energy and agricultural goods to stop those u.s. tariffs, really nothing much has happened. caroline: you are educating the earlier to the role navarro has made. shery: he is the hawk. i think he really portrays that when he is dealing with china. he is like the china hawk. he was warning wall street bankers last week about not
putting too much open on these trade negotiations and investors to not think about relations with china but invest more in the united states. romaine: what else is going on? tencent earnings are expected to come out after the market in hong kong closes. we see slowing growth there for the past three or four quarters. shery: we're going to see growth. it is still 23% which is not bad but that is the slowest growth in three years. we have been talking about the mobile game industry taking a hit. that's a $30 billion industry in china, but given chinese authorities have stopped approving all of these games to getting to the market, this will take a big hit. however, right now for the third-quarter earnings, analysts are expecting some sort of growth in mobile game sales given they have been rolling out games previously approved. if you see gross -- growth
margins, we had a little bit of a bouncing march -- bounce in march. we expected to come around 45%. given that they are trying to diversify. a way for more profitable sectors and into less profitable ones so that will take a hit. caroline: we will keep all eyes on tencent. not a single cell. we will see if they can live up to those expectations -- single sell. we will see if they can live up to those expectations. jerome powell discusses economic issues in an event hosted by the dallas fed. romaine: and the numbers for u.s. cpi for october out at 838 -- 8:30 a.m. eastern. that's all for "what'd you miss?" "bloomberg technology" is up next. romaine: have a great evening.
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