tv Bloomberg Markets Americas Bloomberg February 1, 2019 1:30pm-3:30pm EST
conference committee a waste of time. the committee is trying to agree to legislation to avoid another government shutdown. the president is pulling the u.s. out of a nuclear missile treaty with russia that was signed more than 30 years ago. missiles with a range of up to 3400 miles. officials say moscow has been violating the treaty for years. russia denies that. senator cory booker is the latest democrat to throw his hat into the ring for the white house. he announced he is running for president in 2020 saying the nation needs to see leaders and feel pride not shame. former mayor of newark, new jersey. the u.k. is beginning to lay the groundwork for a potential delay and brexit. they have canceled a planned recess next month so lawmakers can make progress on key business. theresa may said she does not want a delayed exit from the eu
but she is still try to come up with proposals after parliament voted to scrap the key part of her proposal. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. ♪ >> live from new york, i'm a vonnie quinn. >> i'm amanda lang. welcome to bloomberg markets. we are now joined by our audiences. >> here are the top stories we are following. u.s. stocks are mixed this friday. disappointing sales forecast way
on tech shares. >> hiring topping old forecast. pepsi is invading coca-cola's home turf on the super bowl. what you need to know ahead of the big game. let's get a quick check of the major averages. the dow is up for tense of a percent. the s&p has been flirting with a non-gain mark for some time. wonderful earnings, also negative stories as well. amazon is dragging down the nasdaq. this friday.s crude oil is up. it is trading above $55 per barrel. i'm amazon story, i know that india is something amazon is looking at. >> india is very much in focus. before we talk about that, i
want to show you where india ranks in terms of gdp growth. ashas now displaced france the world's sixth largest economy. what is notable is data from the world bank. france did not shrink. growth andy anemic france. india is growing at 7.2%. terms of the promise of indian growth, that is where it lies. that has been around for a long time. many companies are focused there. one of them has been walmart. walmart is another. regulate the karma's willcommerce companies affect amazon and walmart. they are the behemoths in that market and you are already seeing products disappearing
from the online shells there. >> it was one of the more negative aspects of the earnings call. have trimmedsts their price targets for amazon. in the longer term, analysts are bullish on amazon. we are seeing slowing growth trajectories for the cloud computing aws division. also prime subscriptions as well. >> it was a busy week for oil earnings. wall street was impressed. exxon and chevron had positive reports this morning before the bell. they both had better fourth-quarter profits.
these companies keep giving more and more cash back to their investors? >> it is interesting. chevron today announced a $25 billion buyback. if you are looking for return, that is a nice number two where -- wrap your arms around. exxon has not been buying about -- buying back shares. they said they are open to potentially selling some assets. that money would either go toward paying down debt or buybacks but they are not committing it to a buyback. >> how sensitive are these companies quarter to quarter on the changing price of oil? >> these companies move on oil prices fundamentally. they are also gas companies. you have to look at what the underlying commodities prices are. when you talk about exxon, what ,e have heard again and again
the ceo spoke on a conference call. they had a terrible 2018. they're fourth-quarter earnings, they managed to do well on refining. that helped them. ant the ceo said was we are integrated oil company. we can make money when oil prices are falling because we refine oil as well. >> are these good news stories just in permian basin stocks or will we see it other stocks as well? >> when you think about exxon, they were incredibly late to the shell game. -- shale game. they have gone into it in a big way. 2017spent $7 billion in and the permian. that permian production rose 90%.
the same for chevron. they saw their production in the permian go up 87%. >> let's talk about the picture overall for the refinery side. that has been mixed for some in terms of investments they need to make. does that play into the services and of the business? >> the margin has come down sustained shall he in the first quarter. is exxonave seen to expand theoing beaumont refinery. they are doing that with the goal of processing more of the shale oil for must texas. chevron purchased a refinery this week and that is one that uses shale oil. they are looking for ways to make use of the oil and west texas rather than importing the heavier stuff from venezuela or canada. >> great to have you.
hot jobs numbers for a cold month. employers added a 304,000 jobs in january. that topped x dictations. -- expectations. >> more people are working. it is not inflationary. productivity is rising. of lower tax rates and deregulation and tax reform are working. we are sticking with our 3% economic growth rate. >> dana peterson joins us. more people are working. in terms of prospering, does that show up in the data? are wages keeping pace? >> we have been waiting for years to see some wage inflation. it seems like it is here.
a point inmakes terms of the fact it has not been inflationary. you have other factors weighing on inflation. consumers are doing well. the real incomes are rising given the fact that cpi has not been rising quickly. they had seen higher after-tax shouldand for those receive a bump with the refunds for this year. >> with all of the data together , we also got the manufacturing i.s. and data this morning which shows a bit of an increase and better than forecast. that plus the jobs report, does that mean that the fed is on hold indefinitely? >> we think the fed is still has two more rate hikes that it could execute this year. we are looking at june and september or december.
the u.s. economy was doing very well ahead of the shutdown. that gave us a blackout in terms of data. the data we can see has been quite strong. even with the consumer --fidence, we are still there are still high levels indicating continued expansion. >> one thing we have heard is that there has been a lack of thein the deployment tax reform. companies did not use all of the potential that they were given. should that show up in numbers in the year ahead, the you expect to see a knock on that we have not seen yet from tax reform? reductionscomes to in tax rates, it takes businesses about a year to respond. the first response would be what we saw last year in terms of rewarding investors. theoretically, we should start
seeing more activity from businesses this year. we know the uncertainty is quite high in terms of the trade dispute and have it is going to affect bottom lines. >> i want to come back to the wage picture. muted inflationary pressures. gain -- is the wage ofimpacted by the distortion january and do we need to worry that growth in the economy is not translating into higher growth for workers? we learned from today's report is that the establishment survey which includes payrolls and wage data were not affected by the shutdown. counted as being on the payroll. the effects we saw were in the household survey which included the unemployment rate which ticked up a little bit. we think that there is still toential for rate -- wages
rise gradually. that is key for the fed. inflation is a key element for the fed to continue raising rates and normalizing monetary policy. if the fed starts to see the , that isation something they would have to take into account. >> thank you for being with us. interview with the cofounder of muddy waters. this is bloomberg. ♪
there are increasing calls for scrutiny on the conduct of short-sellers. should regulars be casting a closer i on the short side and if so where? i spoke to carson block. >> i don't know how the action is. i have noted that there are law forms -- law firms and lawyers targeted by activist short-sellers. i suspect that there is some real lobbying that is occurring. whether at least in the u.s. whether regulators are having a closer look. canada, it is difficult to say. there are real differences orween the understanding sophistication of the ontario
securities commission and some of the other provincial regulators when it comes to shortselling. it should regulators take a look? there are abuses, yes. i am skeptical -- really disbelieving the notion that there are widespread abuses. there is a reason why. one thatown from day because i am saying something unpopular and i am successful, retailers number of will flood of the regulator with complaints. i know that everything i say and do as an activist short-sellers will receive scrutiny from the regulators. that is in contrast to when you see analysts on alongside or alongside investors who seem to be much more careless with the things they say and often do. i think we get a lot of scrutiny already.
i am skeptical there is a problem but anywhere that there has been wrongdoing, it is ideally an area that gets prosecuted. >> would you not between certain types of short-sellers, the activist who puts it in public, can we distinguish that from the anonymous? i think there is an obvious distinction. i will go back in time to when i started this business in 2010. i got ready to publish my first short report and there were not many people out there doing public short reports then. i was unaware of them. as far as i knew i was the first person to write this way. i decided to put my name and a and they on the website report because i thought it would lend credibility. 36 hours later, i was thinking i
had made the wrong decision. the amount of vitriol threats that come toward you are significant. i don't think the activist short-sellers who published anonymously do so to escape accountability. i want to be clear about something that relates to what i just said. ,s an activist short-sellers regulators can and will figure out who you are if they want to. regulators will see the trades and they will go to your broker who holds this account. you should know unless you are an idiot as an activist short-sellers that you are not escaping regulatory scrutiny. there are people who get death threats as a result of what they publish. when you are talking about situations involving overseas think of the situation where he was imprisoned in china for a report
that was quite credible and vindicated. as well as lawsuits, a lot of these companies have a far more resources than the activist short-sellers does. i think it is fair to say that in many cases, when an activist short-sellers publishes on a company, the ceo of the company earns more in one year than the lifetime earnings of that short activist. when you think about the distribution of resources, they like to sue people who don't have a lot of money just the way mcdonald's has famously sued food activists who did not have a lot of money. that is what is behind the .esire to remain anonymous i don't think it is because they are trying to get away with things they should not be doing. >> that was carson block of muddy waters.
just a short-lived thing? anybody thinksk they are going to lose market share. goodheartedt out a statement saying they wish everyone well including pepsi. to some extent, this will bring more attention on all soft drinks. nobody sees this as a long-term threat to coca-cola. out isthing that jumps that the league is usually so strong and powerful in keeping non-leading brands away from the super bowl. cannot dose, they that because coca-cola has real estate inside the zone. >> it is a bit of an embarrassment for pepsi. a bit awkward. coca-cola does have world of
coca-cola that is a few hundred yards from the stadium. that gives them a little bit of bragging rights. a little close to the stadium. it pepsi is out in force. just in baiting, they have already invaded atlanta. they have huge signs everywhere even on skyscrapers. there are building wraps of bud light and pepsi. they have already invaded the city of atlanta. makeey could actually something hilarious out of this. they could get some ingenious marketers to do things. birds talking any about that? are there any marketing plans in the works? >> we will have to see what happens during the super bowl.
done some parting shots. they are having a little football event at the world of coca-cola bringing in some form or nfl luminaries. is that a slap down of pepsi? you could see it as such. >> we are going to leave it there. that is a great story. you can find it on your terminal. problem,, canadians europeans will be turning in -- tuning in. .e are at a third record level $14.8 billion. how do people spend $80 on beer and nachos? >> i was thinking only $80. >> you must be a wine drinker. >> everywhere you go, there are entry fees.
spends $14,000 on a ticket, then it goes into the mix as well. lot of competition this weekend. sorts ofrugby and all things going on. >> i solve this problem by going to other people's houses. >> many tv screens. remember, you can interact with the charts shown by using gtv . stay tuned for markets next. this is bloomberg. ♪
wednesday and thursday had what i call a good vibe. we are not ready to put things on paper. much hard work still in front of us, but nonetheless, we did plow new ground. in so far as talking about specific set heretofore, the chinese did not want to talk about. mark: two days of talks ended with progress towards an agreement that would end the trade war between the world's two biggest economies. the record cold in the midwest in the northeast has had an impact on the economy. thegy prices soared and closure of a nuclear power reactor in jersey. the three largest automakers suspended some operations after a fire at a natural gas facility reduced their supply of fuel. turkey is pointing the figure at
crown prince mohammad bin salman in the killing of washington post columnist jamal khashoggi saying he remains the chief suspect. turkey said today it will let a u.n. representative listen to an audio recording of jamal khashoggi's last moments. he was killed inside the saudi consulate in istanbul in october. european union's foreign-policy chief says potential member states from the former soviet union must hold democratic elections if they want to be eligible for future membership. was referred to ukraine, moldova and georgia who signed association agreements with the e.u. in 2014. speaking in bucharest today, she .u. does nothe e get involved in domestic political agendas "free, fair elections, this is our compass." global news 24 hours a day on air, at tictoc on twitter, powered by more than 2700 journalists and analysts in 120 countries.
i am mark crumpton. this is bloomberg. in new york and 7 p.m. in london. hiring topping off forecast is factory show sign of improvement and manufacturing data from china to germany painting a bleaker picture. are citingina progress at the trade talks in washington. and wowing wall street. energy leading the s&p 500 higher. helping propel exxon and chevron to bigger than expected profits. all that and plenty more coming up. >> as you look at the markets we are losing some steam.
we are on low's in the s&p 500 unchanged. that was pretty quick. energy leading the advanced. on the decliner side, you have andreal estate utilities. the same stocks are being weighed down by amazon and a disappointing forecast for this quarter. let:.interesting news coming from india turn into chaos. they unveiled a whole new set of e-commerce regulations. >> crude oil passing $55 a barrel, the highest 11 weeks. you are seeing prices down for u.s. treasuries. that is why the color is red. solid economic data across the board. jobs, manufacturing, consumer confidence. scarlet: meanwhile, manufacturing china if poor. so, too, in germany. abigail, what are you watching? abigail: we just had the best
the s&p 500 since 2015. many are saying necessity with the fed over the last month. this chart may back up that point. if we take a look at it going back to december 2017 in yellow, we are looking at the 10 year yield. we see both went higher, bonds selloff as stocks rallied. as rates were higher, investors nervous about that. times volatility last year amid other rate hikes. then of course, on december 12, 2018, the fed still had a hawkish stance but on january more dovishirs along with ben bernanke and janet yellen and we see the down fromeld and there. the question is whether or not the fed stays in place.
wednesday's meeting with the just that may be the case. rally, it ising of friday at 1 p.m. which means we have the huge rate counter. i look at the number of rigs falling. oilaccording to the breakdown. the drop in supplies and part of what is pushing prices higher. you have now the lowest number of rigs going back since may. so, a lot of this drop-off is why we're pushing crude prices, 55, the highest since november. and you have citigroup coming out yesterday. undersupply is behind the recent rally. he sees prices going higher by another $10 a barrel in the next month. part of this is refiners are scribbling for alternative fuels. with no supply from canada or mexico. lost supply coming from venezuela. and deepening of iran's
sanctions could mean speculators could boost oil prices by another 10%. to 20% in the coming months a retail orsk restaurant executive about how their business is doing they will give you a 10 minute answer about the weather. this time, they may have a legitimate reason to blame the weather for any downturn on sales. polarou think about the vortex that pushed most of the midwest and parts of the northeast into this deep-freeze all week, you have a lot of people starting to wonder how that is going to affect some of the businesses on the ground. when you look at where it hit most, primarily in those 13 states in the midwest and upper midwest, states like illinois and nebraska and north dakota and kansas, just -- we looked at the restaurant companies with the greatest geographic exposure to that region and found the company's most affected, noodles and company, chipola, cracker barrel and olive garden. companies falling
this week despite a broader rally that we have seen in the market. he's basically saying even for three days, we're seeing about a thoseowdown in growth at companies and that could translate into a 50 basis point drop in their eps growth for the first quarter, should this sort of materialize over, even a prolonged period. he points out this only includes the midwest states and does not take into account some of the weather we've seen in the northeast. bute numbers could be worse with everyone barricading themselves inside, there is one segment of the market that is doing well and that is delivery companies. grubhub having one of its best weeks, up 5% this week. caroline: impact of the weather, great analysis. on, along with the progress trade talks, the white house is hailing a strong january jobs report. trump's top economic adviser larry kudlow spoke earlier on bloomberg. >> more people are working and prospering. and, by the way, it is not inflationary, ok? productivity is rising.
policies of lower tax rates and deregulation and energy and trade reform are working. we are sticking with our 3% economic growth rate. our analystet's get in now. why isn't it inflationary? >> that is a very good question. hewing larry and the way thinks, he is anticipating a big rebound in productivity that will mute inflationary pressures could i think that story is partially true, but if we do see wage pressures trending higher which we are finally seeing in 2019 after waiting for many years in the cycle to see it, that will filter through to consumer prices. if you have stronger household income creation, that will filter through a you get stronger income means stronger price pressures.
scarlet: how true is his assessment of the economy that we are 3% growth trend? carl: well, we have to see what that trend does and the population trend. i do not think that trend growth has moved to 3%. when we look at the gdp numbers first 2018 when we get them tallied up, they were delayed due to the government shutdown, we will see a strong year for 2018 to be sure. however, if we look at the types of things that should be driving that productivity rebound and keeping all the good economic news that larry share d from creating an inflationary problem we are not seeing the pick up in corporate investment that should be leading to that kind of eyed supplied cited miracle that would allow that to happen. there were some believes that the tax cuts would drive that, but if we look at business investment trends, it doesn't seem to be showing up. if he did not know what tax happened, and you just look at what businesses are doing in
terms of investment and capital spending, you would never guess that something unusual happened last year. the economyly as continues to expand and businesses face capacity constraints, they are modestly ramping up spending. eyed's a starry supply-sider miracle does not seem to be panning out, which means more inflationary than larry would like you to believe. caroline: interesting. so maybe some focus for the fed there, but also, not just the and numbers, but pmi confidence coming in better than expected. is the fed vindicated to be pausing and suggesting it is going to be as patient? policy in should a december. when you look at what was happening ahead of the december fomc meeting, stocks down 12% up to that meeting. that was not the right time to the tightening policy and circling off the right time to be sending a signal that not only are we hiking but we have more to come in 2019, and the arkets held and pinged as
result of that in the fed had to over correct to upset that policy mistake. that is where we are now. when we step back and look at the bigger picture, the economy still on very sound footing. we can look at the payroll gains in unemployment rate and whatnot and it all looks good, but if we drill into the data, we can see, especially in the absence of some of that ada due to the government shutdown, household income creation is strong. if we look at aggregate income in th e jobs report it is at the cyclical high. despite problems of the chinese slowdown, recession in italy, germany revising down gdp growth, there is a lot of external drags to contend with with 2019, a bulwark against all of that is going to be very strong domestic consumer spending. scarlet: we'll see how long that stands up. our chief u.s. economies for bloomberg economics. thank you. joining us now for his take on
the markets is wharton finance professor jeremy single. a long time -- correctly predicted 2017's market rally. the dow reached 25000 and 2018. now he predicts a solid 5% to 15% gain for stocks in 2019. clearly you see justification to be bullish in equities right now. the dow rounding off its sixth straight week of gains. this is despite markets climbing -- you have got trade uncertainty and other risks hanging out there. >> right, but some of the big risks was the fed was going to be to type. that is definitely off the table. stock pools could not have gotten a better gift from jay powell wednesday and the fomc. say they are going to pause, they say their balance sheet is going to shrink a lot less. that concern about liquidity is off the table. morning's jobless
numbers were absolutely great. what i love to see is strong payroll and a rise in the produce rate, and that participation rate went up to a six-year high. and that is very favorable because that is -- that puts less pressure on the labor market. we saw a pick up in unemployment, less tightness means there's less chance of inflation being. transmitted through the labor market that was great news. the report they came out was also better than expected, especially new orders. we do not see any signs of that recession that was so in the air at the end of last month. caroline: certainly the word recession coming off the agenda but i am looking at a performance we have seen since ish,ary as the fed got dov jose about the economy returning an united states, the best
performance since the 1980's. i'm looking at the bes chart. is that sustainable? >> well, certainly, we, as you said, last december i said 5% to 15% and we have got 7% or 8%, we are almost in that range right now. we might even push little higher. of course, trade negotiations with china is a wildcard. i don't think government shutdown is going to happen again. i don't think that is a risk but i do think the trade, that has got to go well p are the market expects it. but we will see a good 5% pop if we do get an agreement there. if interest-rate stay low, we in 2019. 210% to 20% that is still in the cards for this year. is earnings caveat for companies exposed to china and europe. we heard from a number of
multinationals that have warned about slowdowns overseas and what that means for their profits going forward. what do valuations look like if we continue to see the big multinationals feel the pinch from slowdowns overseas? throught checked bloomberg earnings estimates and, priceswe are now selling at 17 times last year's earnings, 2018. now, that is not expensive in a low interest rate environment. by any stretch. that's actually the median valuation that the s&p has had over the last a proximally 607, 70 years. we are selling at 16 times this year's estimating earnings, but this means we do not need a big 8% increase, 10% increase in earnings. if we just get a mid-single digits earnings environment, i think that is very supportive for equities going forward. of course, if a recession
development, all bets are off. markets always will decline if a recession. but i think some of those 2018 risks that we saw in december seem to be taken off the table over the last couple weeks. caroline: you were mentioning the fed come off the table. a key risk remains the china-u.s. trade talks. we could see a pop of 5%. >> i don't -- dow, 20, 15. i mean, the market has built in 80% to 90% this is going to be south. there will be a little bit of clapping if it is. wow, that is't, going to be big, we get 25% tariffs on a big range of goods on march 1, you will see a decline in the market i cannot sugarcoat that iat all. scarlet: aside from the trade talks and let's throw at the possibility of a trade war, what
constitutes a risk to your forecast? >> well, i mean, late last year warningctober, i gave a about the market. i was worried that the 10-year was going to 2.5%. -- 3.5%. the table2.75%, off with competition. i said over the last several weeks, after two years of strong growth stock performance, this might be the year of values stocks, because the narrative -- i won't invested value because interest rates are rising -- that is disappearing. we may see rotation here in 2019. scarlet: rotation into the value names. jeremy siegel joining us from philadelphia. thank you. coming up, some big banks getting downgraded. why morgan stanley and goldman sachs are under pressure according to one analyst. just ahead in top call. forget student loans and college tradition. how the growing trend of income sharing agreements could bring new investment opportunities.
scarlet: a look at some of the big news on the back of analyst recommendations. targets the price thehed as the analysts want investors to take more patient approaches. the shares off by 1.5%. goldman sachs cut. the analysts are citing credit cycle deterioration and saying no relief values as like -- getting close to an end.
morgan stanley also downgraded for it finally, morgan stanley cutting its price target on amazon, down $2200 a share. the revenue came in light, but key profit drivers remain in place. we are off by 5%. weighing on the nasdaq today. we want to move on to our stock of the hour, because shares of deckers surging as third quarter results beat analyst estimates. when we say deckers, we are talking about the makers of ugg's boots. >> that is 90% of their revenue, in the most recent quarter. mind, this is a company that is seasonal in terms of their business because fourth-quarter in the calendar, people getting ready for winter. ugg boots. that is what they are buying. that is the book of their business. caroline: and an international business at that.
how is it going to be affected by the dollar going forward? comedy companies will see this? >> whe--how many companies will see this? >> you can see a definite distinction between the u.s. and business.gn international down 2.6%. that fits in with the theme of copies having challenges when they operate internationally. caroline: we will keep a close eye on that stock as it up 10%. let's have a check on the rest of the market because the record high the most s&p 500 down a t enth of a percent. stellar gains in terms of the jobs numbers. interesting that the dollar is higher versus the yuan. the worst results for 2016 for china. look at amazon down.
caroline: despite good data, the u.s. retailer may not be over. retail distress continues to deepen. lisa? because was interesting today there was actually a phone call with the biggest mall operator, guess what he said -- we'll i get to what he saidd in a second. this is and you all stand your resting up with the default. so, the question is how much more is there to go, and if you look at what david simon had to say, the ceo of the largest mall operator, it should give you pause. there are some retailers we are nervous about, we are concerned
about a few retail banker sees that should shake out in the first quarter. very very auspicious -- a auspicious message when and a time when you have jcpenney, neiman marcus, petco and all facing pretty big debt maturities big big question. what are we going to see the big default? there are plenty more to come. that is the message from the biggest mall operator in the united states. scarlet: something to brace for. with student loan debt hitting an all-time high, is there a better way to finance education? we'll look at income sharing agreements. from new york, this is bloomberg. ♪
the president again called a congressional conference committee debating the wall "a waste of time." the president is pulling the a landmark nuclear missile treaty with russia that was signed 30 years ago. it covers missiles with a range of up to 3400 miles. officials say moscow has been violating the treaty for years. russia denies that. secretary of state mike pompeo russia." onus is on jeopardizedussia has the united states security . if rusisa does not return to compliance with the treaty within the six-month period, by there by way destroying its inf violating missiles, their lodges and associated equipment, the tree will terminate -. officials have
expressed concern that china which is not part of the treaty is deploying large numbers of cannotes the u.s. counter because it is bound by the treaty. the vice president is in miami for the people who fled washingtonas heightens its efforts to remove nicolas maduro from the presidency. pence is meeting with community leaders and florida senators marco rubio and rick scott to talk about the south american nation. the trump administration has backed the opposition leader as he has declared himself the interim president of venezuela. funeral services have been held in paris for composer and pianist michelle le grade who died january 26 at the age of 86. it included the score for the 1960's romance and the song "the windmills of your mind." he worked with frank sinatra,
aretha franklin and sting. he won three actors, five grammys at the cannes film festival. global news 24 hours a day on air, at tictoc on twitter, powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. scarlet: from bloomberg world headquarters in new york, this is "bloomberg markets: the close" caroline: we are 19 minutes from the end of the trading day. when it comes to u.s. exceptionalism student loan debt stands out. scarlet: it is approaching $1.5 trillion and it keeps growing. with dealing with the rates near an all-time high. one proposed solution, and
instrument called an income share agreement. joining us now to explain how this works is a report who covers wall street for bloomberg and a head of trading and sourcing for klim which invest in the alternative student loan space. set the scene for us. what exactly is an income share agreement. quite simple. you as a student go to school for free and when you get a job you pay a piece of the income in return. this is not a new concept. it has been around for a while but what is different now is that wall street is getting interested. why is that? let's at the broader figures. outstanding student loan balance today is about $1.5 towing. -- trillion. that is greater than the entire u.s. junk-bond market. that's why you are seeing a lot of these people -- there's a way to find an investment opportunity through this to problem that plagues america right now.
caroline: wall street is getting interested but the banks are not funding the student loan market. are we seeing the supply-side action at late as well as your own demand? >> absolutely. from our perspective, there is a need, clearly a crisis in student loans today with default rates picking up. we estimate that total the default rates will be north of 40%. from our respectively are trying to be thoughtful and be a thought leader and try to a package that really aligns interests that are better for the student, such that risk is transferred away from the student to the school and the financing counterparty. trying to push them into a better careeeer. scarlet: this has worked in europe. in the usa did work a while ago, it fail.70's but explain what is different in this new generation of isa's?
a country between the individual and a school. in the 1970's that was a cohort. everyone that participated in that was responsible for everyone else repaying that. ultimately fail because some successful students did not want to be responsible for paying, you know, where there was a poor outcome. it hasquestion i have, clearly become a big problem to why should we trust hedge funds bein a little soft what is clear become one of the most pressingg crises in america? >> a couple things. hedge funds are willing to be creative. they are willing to be thoughtful. we are in a position where to the extent a school needs capital, we are going to hold that school accountable for delivering an educational program that ultimately leads to a great outcome for the student. be investor behind a school that would deliver an average or poor outcome. it is not good for us. caroline: how big could this market become?
have you run the numbers as to how much of a gap you can fill, how much demand there is on the student side? huge.and is over time we expect this market could develop into 5% to 10% of the total student loan market. we estimate $75 billion over the next 10 years. what we're seeing in terms of that we runprograms so far worse to has an option between a private student loan versus an isa, 95% of the time they are taking the isa. reason is is because these things make less money or you do not make a certain threshold income, you are not paying. it is downside protection for the student. the demand is definitely there. now we are working on to building programs with schools. caroline: that is how it always worked in the u.k. you only start paying it back if and when you hit a threshold of what you are. -- you earn. scarlet: why is it so difficult to get this started in the u.s.? >> it has never been needed.
the government has subsidized higher education for the last 50 years. scarlet: do you compete with the government loans? >> no. we are trying to provide an alternative to students from the private loan perspective. what happens is as you get to second or third year, you tap accessingms of additional federal student loans. then you have to access alternative means of financing. that is where private student loans come in. we think again compete there. ways it is possible to grasp the concept when you're talking about skill-based courses, but how do we shifted to four year programs and the other question people have is, does this risk becoming situation where students want to get into coding. those that want to get into liberal arts, what about them? >> the unique thing about an isa, a school can better and
more efficiently utilize their funding. if the school has a certain dollar amount for scholarships or discounting, what they can do isa for more technical degree where the outcome is clear and use the dollars that would have been spent there to fund liberal arts programs. caroline: i'm still hearing you see a 40% default rate potentially. how much risk upside do you need to get to into this alternate space? >> when we look at default rates, we are looking at the rates under the current construct of student loans today. when you default on the student loan, your principal balance goes up. fees are charged. there is an acceleration. that is putting people in a hardship position. when we think about isa's, it is different. if you look at the default rates in western europe and australia, lower because it is a flexible repayment profile in the contract. so, from that perspective, we do
not think the default rates where we offer isa's are going to be at the same level. scarlet: coding academies offer these isa's, and purdue university have its own version. are schools knocking on your doors? what is the obstacle to getting more people on board? >> it is just education. we work with a fantastic company education. they have signed a between 40 and 50 schools, four year universities, doing all of the implementation for isa programs. ad acceptanceal bro for this concept and there are dollars being found to support isa programs. we do expect over the next two years the hundreds more universities will be i lamenting -- implement and isa programs. outcomes for the students is the number one thing. aen a school selects into
program, what they're telling that stood in, i have enough -- or good enough program to deliver you a good outcome. over time, you will see the schools that have these programs, hard for students to understand the difference between the quality of certain programs, the isa ia -- is a good indicator. it will create competition which is good for students. caroline: we will see whether demand is whetted more by having you on today. of headene and founder of trading. we'll sit down with a ceo of a company that is famous if a ball commercial and get his forecast and the business around sunday's big game. this is bloomberg. ♪ >> they are playing betty white>> out there. >> that is not what your girlfriend said. >> bettefr? ♪
caroline: i am no expert but sunday's game will be the soup super bowl -- the first super bowl to take place after the supreme court legalized sports betting. they could generate a record $6 billion in wagers. we are covering the gaming industry which is ballooning in excitement in america. a year now. how people aret going to be leveraging this new ability, demoing? >> this is a big change. we will have eight states where sports betting is legal versus one last year. we could see upwards of $320 million in wagering and probably a much larger amount across the country, including illegal bets with bookies.
it is quite a big business now. scarlet: do sports books always make money on the super bowl? >> sports books only get about 5% of the dollars wagered. three of the last 12 years they had negative revenues, either because of lopsided bets on the tories underdogs or a favorite scrub by a lot. caroline: i come from the u.k. we have always put wagers on some sports. which sports are the biggest? is that all about football? somewhere buthere football is the biggest. it is about 36% wagers. but football is the biggest sport if you look at nevada as the longest standing legalized gambling market. guessing others
include boxing as well, things that do not do as well as well in the broader scheme but do well when it comes to money waged. >> also part of the traffic driver with a sports book does not make money on a revenue basis, drives a lot of traffic and restaurant and food and beverage activity to the casino. scarlet: thank you very much. now, speaking of the super bowl, remember this commercial? >> hut. >> come on! >> mike, what is your deal, m an? >> you have been riding me all day. >> you have been playing like betty white all day. that is not what your conference at. scarlet: the makers of that ad are. back at the super bowl on sunday. >> welcome to the dog show were humans compete for the ultimate price -- avocados from mexico. >> always in season. >> looks like the dogs can sniff the bum of victory.
a shake and a stay. i'm sure he's making someone very proud right now. ah, the guac -- that will land you in the penalty cone. scarlet: joining us now is andrew robertson, president and ceo of bbdo. a lot of money state to super bowl ads. millions of dollars. when it comes to the risk that companies are willing to take, how much risk are they willing to take when it comes to how they showcase their brand? are they going the more cautious route because of how much money is involved? >> no, i don't think you can be cautious in the super bowl. you have the world's biggest advertising platform. four hours. it is not just four hours, it is now a weekend in some case, two weeks for some brands. so, you have to go big. and it is an unusual event in
that all, whatever it is 110 million people probably will watch, and they actually are paying attention to the ads because they know they are going to be good. in betweening segments of the most important game of the game. the thing that really distant heshes it is -- distinguisee it is the multiply you get from shared experience. it is watching commercials live with other people and laughing together. that just create extra value cannot get when you are watching on your own. the world of social media, such a multiplier effect, driven up the price? >> the pricing of the spots in the game itself has gone up every year. caroline: about $5 million right now. >> that is what they are quoting. what has changed is all of the work that you add around the game itself. so, now anybody who just buys a
spot , they are missing a trick. you have to plan a proper campaign around the super bowl. not a spot in the super bowl. and social media is at the heart of that. already this year, there have been 100 million views, we're two days away from the game, 100 million views of super bowl advertising related video, 60 million on youtube, the highest we've seen in five years. scarlet: football has become more political in recent years. we have a lot of artists not wanting to produce a paid in the halftime. andhave blown ref calls quizzes about whether the rams and the patriots should be in the game. there is a saying that all attention is good attention, but is controversy not good in any way for you guys? >> i think that if you look at what is happened through the course of the year, the audiences for nfl games are up about 8% across the year. adon't, i think you've got
matchup that a lot of people are going to be excited by either because they love one side or because they hate that side, seems to be. i think what is important is for, you know, brands have to make a decision about whether you're going to lean into those controversies or just accept that the people that you were talking to, if they care about them, they are not going to be watching the show anyway. caroline: lean in to controversies and lean in to social dialogue, i remember the airbnb campaign and immigration. have gott the fact we pretty good jobs data, the u.s. economy, the stock market wobbled in december but are you seeing companies fighting out that much more? >> i mean, you are going to see the super bowl a lot more fun a nd a lot less politics. i think that, you know, people
are reading the mood of the public and what the public wants is to have a good night. scarlet: escape. >> have some fun. i think you're going to see a lot of funny, entertaining ads. there are fewer celebrities this year, but so far there is only 34 celeb these that have been announced. last year it was 51. that is a significant reduction. some of them have chosen to stay away. the other hand, the number of rappers who are appearing super bowl commercials is up this yyear. scarlet: you guys are bbdo worldwide, we have to ask you how things are looking overseas. we have data that shows china's economy slowing. jimmy's economy is a lot slower than people feared. how is that showing up in demand? >> i think what you're seeing right now is low, low digit growth almost everywhere. there's not a lot of places
where seeing things going backwards. but some of those bright spots where you were seeing 10% or 12% growth in demand for brands, those are coming down. so, i think there is real growth, but it is more planned than spikey. caroline: what about under the hood of individual, we heard for beenom the u.k. wvp has shifting and changing. there is been a lot of changing at the root of advertising. what about the shifting that we see with the company's employing you? how are you seeing the willingness to change their providers? >> i don't think there's more churn in the business than there has been. it always feels like there is when you are on the receiving end. i don't think in total there is
significant lean more churn. the needs of clients are changing, though, because the world has become so much more complex. and the need to find a way to create seamlessly connected m agical experiences for consumers throughout the entire journey they move through from first hearing about to using to advocating for a brand has become much more important and much more complex. and so, our clients are looking for ways for that process to be both simple five but also for the individual moments along that journey to be made more magical because that is what changes the way consumers behave. magic. caroline: we will see how magic it is this weekend. >> we will. caroline: we thank you. scarlet: we have some breaking news. ford u.s. sales are reportedly rising 7% in generate -- in a gm sales dropped.
give us another read of what consumer spending might've looked like in january and you had a couple of different things at work, including the government shutdown that began december 21 and was just concluded not so long ago. rising 7%d sales while general motors vehicle sales dropping about 7%. we'll continue to keep an eye on both of those shares. this is bloomberg. ♪
costs rising would hurt auto demand at the start of 2019 as well. we'll continue to keep an eye on this when you look at the broader market here, we have a mixed day for u.s. equities that has turned south because the dow has given up its earlier moved and is now lower as well. the nasa, the big decline of, off by half of 1%. by amazon and is disappointing sales forecast. the sang index off by .7%. been releasingas vividly after we had america's move to withdraw from nuclear treating with russia. scarlet: treasury prices are down, yields are higher. this is bloomberg. ♪
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supporters, hookers says the nation needs to be able to see its leaders and "feel pride, not shame." he also called for a deeply polarized nation to unite around what he called a solid purpose. >> i believe that we can build a country where no one is forgotten, no one is left behind. parents can put food on a table with a good paying jobs with good benefits. where our criminal justice system keeps us safe instead of shuffling more children into cages and closets. mark: booker has been a senator since 2013. he is the former mayor of jersey.new president trump says he never spoke to advisor roger stone about wikileaks and the stolen democratic females posted during the 2016 residential campaign. stone was arrested last week as part of the special counsel's russia investigation. the president also told "the new lawyers haveis
been reassured that he is not a target of the special counsel probe. the u.k. is beginning to lay the groundwork for a potential delay in brexit. the government canceled a planned for recess next month so lawmakers can "make progress on key business." prime minister theresa may says she does not want a delayed exit from the eu but is still coming up with proposals after parliament voted to scrap a key part of her plan. the most successful female skier in world cup history is retiring. lindsay von says she will retire from ski racing after this month's world championships in sweden. the 34-year-old has had persistent pain in both of her knees following numerous injuries. on instagram today, she wrote that it was the hardest decision of her life, but she said "my body is broken beyond repair." global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg.
♪ caroline: 3:00 p.m. in new york, 8:00 p.m. in london. on caroline hyde. scarlet: this is "bloomberg markets: the close." caroline: surprise strength. americans show signs of improvement. meanwhile manufacturing data from china and germany thinking a weaker picture. scarlet: goodbye -- caroline: good little progress on trade talks in washington but no word on a breakthrough that would end the conflict. production in the permian basin propelling x front desk caps on at chevron -- exxon and chevron. scarlet: first let's get a check of the market. the doubt was higher, but now it
is down 14 points. rounding out a sixth straight week of gains. christmas, but it does show people are taking a little money off the table as "into the close. caroline: what a seller january we had that stellar -- stellar january we had. maybe little bit of risk aversion. not so in the energy. when it comes to big oil, exxon and chevron outperforming. scarlet: we will talk to rebecca shortly on this. symantec the best in the s&p 500 after a beat and a race. keeping an eye on the pmi data. caroline: not pleasant. ongoing concerns around brexit continue to keep us on our toes. scarlet: of course. keep everyone else on their toes as well, especially brussels. let's take a deeper dive into the action. abigail, what are you watching?
abigail: if we go back to the fourth quarter of 2018, that was a difficult period for stocks. not so for private equity. nearly 5%.o days, up a really strong fourth quarter as the private equity firm beat topline and bottom-line byimates, topline 9.9%. very strong quarter. that is expected to continue on rising. all of this having to do with very strong fundraising. take a look at this chart of other private equity firms. what we are looking here, in blue, blackstone, yellow kkr. stellar month for each of these private equity firms as strong fundraising activities expected to continue. sayingresident of kkr many of their investors seeing the possibility for volatility, wanting alternative investments. as such, these shares of these private equity firms rising. we will have to see whether that
trend does continue. taylor: of course we woke up on friday morning and the focus was on jobs. two other key pieces of economic data that were much better than expected, and i wanted to highlight those because they were really showing the effects or no effects really of the u.s. shutdown. the first, the manufacturing index. that came in better-than-expected. beating estimates of 54. also over a two-year low. a more stable outlook for the manufacturing index in the start of the year. our bloomberg economists are saying while the conditions and a decline in prices paid means production levels and profit margins should remain solid, no effect yet of the u.s. government shutdown. the university of michigan consumer sentiment index. that fell less than expected to 91.2 versus estimates of 97. the fact that that fell less than expected again shrugging off the u.s. shutdown. the expectations going forward,
that index rose. at theector over there university of michigan saying consumers are definitely more optimistic about the outlook for the economy. of course, all of this comes on the heels of the better-than-expected jobs report. all signs point to everything moving higher. romaine: despite the downturn in the broader markets, cybersecurity stocks have been on fire all day.they have been on fire for quite some time. a lot of expectations here. a lot of corporate customers will be up their systems -- beef up their systems. up 2.2% today. a 4% gain on the week. expect to see information-technology security spending increase 9.9% per year through 2022, so $134 billion. that spending going to emerging technologies rather than the larger legacy companies. take a look at the mid-cap cybersecurity companies. names like proof point.
up about 17% this week alone after blowing past its estimates. it is the second-biggest gainer in the russell 1000 today and the third biggest gainer on the week. you mentioned symantec. symantec on fire as well after beating estimates. this was one of the larger cap companies to transition to become ap or play company through the acquisition it made a few years ago. that acquisition appears to be paying off. scarlet: fantastic. now we want to go back to energy stocks because big oil is in focus. uc see energy stocks getting the top of the s&p 500 as the biggest gainers. wowing wall street with permian basin fueled gains. we are joined now by rebecca. rebecca, great to see you. >> good to see you. scarlet: is there a direct cause and effect between what caps on did?at exxon and chevron
isecca: i don't think there a direct correlation between what they said today and the commodity, which encompasses a much bigger set of data points. i think what is driving the commodity today is we have a solid number, solid jobs report out of the u.s. there is concern about demand. we are still seeing demand look ok in the u.s. and starting to see the barrel that opec has --ked about start to go to start to filter out of the market. crude is becoming a xiaomi story and the numbers are -- a show me story and the numbers are becoming reflected. a trend to less production potentially, and the demand number that people are very concerned about still remains a huge risk to the commodity market. but for now, the data seems to be saying, ok, the u.s. at least is holding up its end of the bargain. caroline: the fundamentals being held there. the russia-u.s./point been built -- the russia-u.s. flashpoint
being built in. how will that treaty affect things? rebecca: it is relevant when you talk about geopolitical risks in the commodity market. you cannot ignore them. the number of barrels or a price move on it is really hard to say but conditioning within the commodity at least in december when people got absolutely destroyed might be a little lighter. geopolitical headlines may have contributed to upwards momentum. scarlet: you mentioned position in december but not more recently, and part of that is because we are in a data point today where we do not have a good read of what is going on. how much of that is weighing on price action or driving price action? could change things up once we get a read on positioning? rebecca: i think it has made it more difficult for people who may be sold in december to come back into the market without that data rich environment by knowing how positioning looks. there is a lot of headwinds as
to why you want to change the rally. if you look at january last year , we rallied like this and it got sold aggressively.but i think having that data impact s certainly some of the money coming into the commodity. caroline: next, we turn to the corporate nature of all of this. they have had blowout numbers.how sustainable do you think things are? rebecca: you know, i think the way i would look at that is chevron and exxon are in a class of their own. no other energy company is going to be able to say, we are going to increase and not get absolutely annihilated -- to increase capex and not get absolutely annihilated. so in that respect, they have a sustainability that i think maybe does not get read through two the entire sector. -- to the entire sector. they do think the permian is a great opportunity.
you just need to be positioned within the companies that can drive growth without spending too much or how the luxury of having an investor base that will allow you to increase capex, which exxon and chevron at the moment due. scarlet: what kinds of companies are you looking at that can capitalize on those opportunities? rebecca: companies that have the leverage aggressively last year, that continue to execute efficiently, and our kind of within the right areas in the permian and the different basins , essentially executing on every line of business. and it is a super high bar for energy companies right now to be able to drive that back into their story because energy still is a really, really unfavored group. and that is part of why chevron and exxon are rallying today. the setup into both of those numbers was definitely not long. scarlet: quick question on oil prices. we are now about $55. what is next? are likely to go up or down?
it is a good question. in the near term, the show me numbers will be constructive. the fact that we do not have trade headlines or it got kicked down the can down the road to march is probably a little constructive as well. near-term, you can probably lean a little long, but i would not get over your skis. caroline: nice way of putting it. maduro's regime hoping the shipment of 20 tons of gold. forget the patriots versus the rams. why pepsi will be taking on coca-cola. one can company just hit the jackpot this week. we explain. this is bloomberg. ♪
caroline: it is time for today's deals report, and the spotlight is on agriculture solutions. we are joined now by a dominant player in space in india. >> thank you. that's right, i'm here with a ceo of one of the biggest reason the world. billion tobout $1.2 buy the agricultural chemicals business. why is it a better company today? >> it gives us critical ties, tremendous mental -- things so we can advertise our research, r&d, development, or portfolio for both companies. we have german does between both so we are really excited. >> this is an industry with a ton of consolidation. you look at monsanto.
a lot coming together. a lot of those deals not quite the home runs that people expected so why is this deal going to be any better? has been one of the fastest-growing companies or the fastest growing company in our industry. we have been able to continue to grow in a relatively flat industry, but a lot of consolidation goes around the growth of the industry, but we have been able to grow even amidst the division which we acquired. continuing to grow quite nicely. we believe that it gives us a completely component three -- complimentary business. we can continue to grow our business much faster than the industry average or much more than the industry. >> post deal you will have 45% sales exposure. sorry, to the americas i should say. you have one that
trades in the u.s. any plans to list it? jai: were focusinga: -- are focusing on consolidating the businesses. that is something we will look at three years out. >> would you look at doing more m&a potentially in the u.s.? on: we would look to add complementary businesses. our whole platform is an open platform. we like a lot of technology from various places. i just had a fantastic technology position platform. nothing imminently. >> so talk to me about the difference in philosophy. platformcompanies like who have the special products business. you have a lot of companies that have been diversified exposure. you areust have ag, subject to the cycle, which is notoriously up and down. you now rap or play ag company
and a very substantial one, so how do you deal with that? that nature of being in a very particular business. jai: i think it is a lot about risk management and being purely ag, we invest all our energy and making sure that we are growing and we are distributed. so if you look at our portfolio, pretty evenly distributed around the world. 25% of our business comes from europe. 20%,u add asia, it is 15%, latin america, brazil, so it gives us a balance. ag markets do not collapse around the world at the same time. you always have whether which impacts them -- weather, which impacts them a lot. we are able to manage our business much better, i believe, than having an integrated market business platform -- multi-business platform. of companies doing
scaling in india. for as long as i have been a reporter, india has been the next country to come up, on the cusp of being the next big market opportunity. has been moment arrived? goingndia has been fantastically well. 7%, 8% growth. i believe in the next seven, eight years, food consumption is going to continue to grow. this is an exciting place to be. i believe the ag sector is going to grow. the government has done a lot of interesting reforms. they are sending money directly to farmers so farmers have a choice. there is a lot of investment in food supply chains, and all of this is increasing. and a focus is on increasing farmers's income. i think that is going to help the whole food systems and the industry. >> so let's just wrap up.
back to the deal. owned by platform. both of those owners are known to be pretty efficient in the way they run businesses. so buying an asset like that, what cost does it take out of the business? jai: a lot. we believe the two synergies -- we believe the synergies between the two companies, sales synergies on top of that which we will be able to capture. upl has a very strong manufacturing base. a primary supplier around the world with china.the costs in china are going up . it is the perfect match at the perfect time, and we believe we will be able to do fantastically well out of this deal. creative that's lucrative for -- very lucrative for upl.
>> time now for options insight. joining me today is andrew scott. thank you for taking the time, of course. let's talk volatility because in 2017 there was none really. lots of volatility as if it was raising rates. this year, you would think it was not there, but we have a chart from you that suggests there is volatility. andrew: yes. if we bring up the chart, volatility over the last two years. we have three very distinct periods.
we think about events. there is a tendency to focus on a higher volatility regime, the real extremity of events, but the reality is i would argue 2017 was the event. we had a naturally low volatility. 2018 we picked up something closer to normality. 2019 as you can see from the chart now, we got -- we have gone up a little bit again. consistent with this stage of the economic cycle. abigail: so you are talking about the economic cycle as well as in 2017, saying that was the end of no volatility. but did not have anything to do with the president trump tax plan and also just stocks rising? how do you tie the fundamentals? andrew: sure. for me, we have been telling clients for some 2018 was going to be a game changer for volatility. abigail: because of the fed or why? andrew: exactly. you had this inflection globally. the fed's unwind of that balance
sheet was not a guarantee of a higher volatility regime but was really a necessary prerequisite. abigail: a clue. andrew: absolutely. we have to do that before any of the escape valves of volatility can come to fruition. abigail: now in 2019, fed jerome powell was dovish on the third. this has wednesday, the fed pau sed. would that suggest we will see volatility come back down, or will he continue to rise at reasonable levels? andrew: definitely a short-term relapse of volatility just because we can breathe again. markets are up. my screen is green now, not red anymore. i think shorter-term that absolutely the case is higher rates was clearly what was destabilizing us to the end of last year. but i just think over the course of this year, we will have a higher volatility regime. abigail: very quickly, how do we trade that?
andrew: i guess what i'm advising clients right now is to get a little long. no. my second best idea would be dispersion. i think it is an interesting way to play this dynamic. if we think about everything going on in the system, all the structure volatility pressures moved, it allows an generation -- a generation of individual stocks. abigail: thank you so much for joining us for options insights. caroline: great conversation. let's check on the rest of the markets because we are going lower. amazon tugging on technology. oil rallying. jumping on the back of opec cutting down on his production -- its production but also the u.s.-russia flashpoint. ♪
mark: i'm mark crumpton with bloomberg's first word news. judge said she is concerned a gag order in the special counsel's case against president trump's confidant roger stone. the case already received substantial publicity, including from statements stone made himself. stone has pleaded not guilty to charges including obstruction and witness tampering. he is the 34th person charged in the special counsel's investigation into potential coordination between russia and the trump presidential campaign. goodrump says there is a chance he will declare a national emergency on the southern