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tv   Money Moves With Deirdre Bolton  Bloomberg  December 19, 2013 2:00pm-3:01pm EST

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>> we show you what investors and entrepreneurs are doing as well as what's going on in hedge fund, private equity, real estate and more. today, michael steinberg is convicted of insider trading. what was it like inside that courtroom and what does his conviction mean for the fund and for the founder? plus it is the season for angels. i will talk to one of the largest angels -- largest angel investors that has invested $58 million in 58 female led companies. and it is day nine of the 12 days of bitcoin. we will find out where in the world you can use the virtual currency. turn on with the latest
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the insider trading program of sac capital. a former sac trader, michael steinberg, was convicted of conspiracy fraud for using illegal tips to buy and sell tech stocks. joins me more -- before we get into the nuts and bolts, you were in the courtroom? >> there is always high drama. -- anybody who has seen perry mason or "law and order" knows that they hand the jury to the judge and the judge hands it back to the jury and the four lady announces it. she was about to announce it and mr. steinberg fainted. they had to take a break until they attended to his blood pressure. >> the forewoman said the subtext of e-mails was presented
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during the trial and i convinced her that steinberg knew he was aware he was breaking the law. tell us about those e-mails. -- he said heiled was lying and making up the whole entire story, implicating his boss to save himself. a sickly, the government argued that there were e-mails that the two men had shared and swapped as well as instant messages and bloomberg messages, and they had shared them back and forth. the indication was -- one of the sources was another traitor -- trader and he would say what is he trading now? you could see the two men were aware of the scheme. >> now it is an electronics trail. he started at sac capital back
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in 97. one witness testified during the trial that steinberg was mr.idered by many to be cohen's right-hand man. >> they indicated that they socialized together. i believe that mr. cohen attended mr. steinberg's wedding . even though he was in charge of a smaller fund, like 100 million or so, he was a confidant. he provided a rare view inside of sac capital. what did the jury in public find out? >> we found out that sac had a database called tamale. collected information as a database to trade on, they put it into a hot file called tamale that is all recorded undertakers. there was also something called steve's ideas -- if a trader has
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a good tip that something's going to do well, they pitch it to steve and if you do well and make honey, you get money. --steinberg is sentenced scheduled to be sentenced in april. >> he has been convicted on four counts of securities fraud and five years for conspiracy. the judge in charge of this case has pitched some really heavy sentences. two other traders involved in the same scheme, one was sentenced to six and a half years come and the other was four and a half. possibly something between those two. in they rotondo was courtroom yesterday. thank you very much. the latest conviction could impact the ongoing investigation into sac and the trial the second fund manager. jury selection against matthew martel mug begins after the holidays. oma.atthew mart >> the government's case, they
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continue to say it is ongoing. the immediate question is does this raise pressure you -- does this raise rusher on matthew to cooperate? he managed money at an sac unit at has entered a plea of not guilty. his trial begins january 6. his attorney's only comment on the steinberg verdict is the facts of that case are unrelated. steinberg was convicted of roughing from illegal information on tech stocks. the government alleges martoma profited from trade in drug stocks. one former prosecutor says he believes steinberg fainted -- it is the same reason steinberg fainted and it is the flawless track record in this ever widening insider trading probe. 11 trials, 11 guilty verdicts for my staggering total of 76 convictions. roche roger rodham was sentenced
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to 11 years. trial.d be the 12 he's a husband and father and has resisted cutting a deal with prosecutors. legal observers says he has to decide whether the odds of acquittal at this point -- a former prosecutor i spoke with said the odds of granting a plea deal this close to trial go down because they already have the case prepared against him. >> what about the firm and its recent settlement of charges? >> that is a big question. agreeing to pay more than $2 billion to settle criminal charges against the fund itself is still pending before a judge who wanted to wait before giving its approval. any attorney's office has made it clear that the investigation into illegal trading is ongoing. this latest conviction put a notch in the government help.
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- >> with stocks closing out a banner year, should investors stick with stocks? my guest is the global head of managed investment at citi private bank with 270 billion dollars in assets. welcome to the broadcast. you believe that 2014 will be the year of the illiquid because of returns from hedge funds and price to earnings ratios you believe will outperform. why so optimistic? >> we are optimistic on a couple of things. equities in general, this is a year will you -- a year where you will see synchronous growth for europe, the u.s., specifically japan and china. we like equities and we are overweight equities. the given what valuations are now, i think it is a time for alternatives, specifically hedge funds and private equity, which can provide you with different things -- different exposures.
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>> you have noted that there is a lot of money still sitting on the sidelines. why are wealthy investors holding onto so much cash? >> i think it is a residual fear factor from a long time ago. with the concerns of rising interest rates and their unwillingness to put that into fixed incomes, we tend to agree with that view. for certain sectors of the fixed income market, we think it's an appropriate time to invest. specifically in mortgages and asset backed securities and s.her we think the fed's tightening to tightening in a 2014. >> you mentioned the 10 year treasury yields. they are at a three month high after jobless claims unexpectedly rose last week. viewprivate bank doesn't the u.s. treasury as fully priced for lasting recovery. why not?
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>> our view is that the recovery in the u.s. may be underestimated. between the energy revolution in the united states, having gone through four or five crises and the last year, the last of which being the budget crises, we think the u.s. is poised for good growth. we are advising our clients to hedge interest-rate exposure. the 10 year could end up that 350 or 375 next year. those are our basic views. >> the dow, s&p and nasdaq are all up an average of 25%. if this is due to the fed's stimulus, what happens now that they are taking some of that away? yesterday the fed announcing that tapering will begin in earnest in january. >> we don't think the result in terms of the stock price appreciation is due to the fed alone. easy money was part of it. if you look at earnings today compared to what they were in 2007, we are not active the
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price earning ratio we had pre- crisis. we are pricing stocks significantly less than we were at that time and we think there is considerable upside. we are overweight about six percent -- 6%. -- isbal trade in 2014 there going to be a rebound and where would you reduce exposure? >> this developing story of the developed markets is going to lead and will drive trade, the stocks you like in those situations are shipping companies, multinational companies and we like them very much. things to avoid, the consensus view is that all quality stocks are going to do well and defensive sectors will do well. that is a question. specific and we like the macro trades which will
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give you exposures to the market you can't get in typical mutual funds. of managedal head investments from citi private bank joining us. >> have a merry christmas. >> coming up, we will talk to two different angel investors about what trends they are seeing and where they are looking to invest next. and we will take the pulse of the small business economy and find out which tech trends they are embracing. "money moves those quote continues in just a moment. ♪
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>> welcome back. i'm mark crumpton in 40 to bolton. it may be easier than ever to invest in your own start up. sarah group is the first structured angel fund that allows you to do that. it matches entrepreneurs and investors through its nationwide network. the founder joins me now from san francisco. welcome to the broadcast area
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lacks great to be here. >> nine years ago, you had a now what moment. tell us about that at how it transformed you personally and professionally great >> when a number of very successful business leaders were telling me they had no way to make better to embark on a, journey to create a better platform. we embarked on the next step to create the structure angel fund. >> you say your company is the charles schwab of angel investing. how does it work question mark >> i like to use schwab as an example. at a time the investing stock can go to the investor as opposed to a full brokerage service. we have learned from many angel investors who want to go invest intally versus investing large venture funds. in that sense, our next next generation
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is the broker industry. >> what does that entail and how does your portfolio reflect it? >> the data shows if you want to make this high risk, high reward investment called an angel investment, you have to have a large sample size of opportunities because the loss rate is very high. an average individual wants to find investment doing 123 deals -- with 253 -- has companies, you have a better chance of generating returns. >> what kind of gap do you see between individual angels and the traditional venture capitalist? >> for those of us in the market, when entrepreneurs start raising half $1 million and started business, they can probably get the money from friends and family. when they need $3 million to $5 million, there are venture capitalist firms out there. -- when an entrepreneur
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needs to raise a million dollars, that's the sum of money most right a check at one time. because the industry has changed, there's plenty of business that just needs about 700,000 to a million dollars. that's the capital gap in america and that's what we fulfill. >> how is the federal jobs acted that -- effective angel investing question mark >> it open the entire industry for waveiduals and opened the for them to advertise what they are looking for. that kicked all the entrepreneurs into high gear as well is making individual angel investors finding the next one they want to bet on whereas before you can't do that. thank you for your time today. we appreciate it. >> thank you. >> continuing our focus on angel investing, goldman -- golden
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seeds is a firm that seeks to female entrepreneurs. as the fourth-largest angel group in the country treated has invested $50 million in 58 mps. peggy wallace joins me in the studios area the areas that received your focuses aren't, the internet and telecom. >>, internet and mobile are the top areas of angel investing in encompass about 76% of the market. we are seeing a lot of women coming out with hard science degrees and a lot of the we are doing our technology investing is playing out in the health care sector. on diagnosticss and medical devices because they can be more capital efficient. we offer investing in internet aced companies, e-commerce and that sort of thing, but mobile is transforming everything. half the world is on mobile
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devices today. they are outpacing laptops and changing the human experience. we are always looking for investments that are gravitating to mobile. >> golden seeds is investing in three specific disruptive companies. let's start with cognition therapeutics great >> that is a drug discovery company. we are doing typically devices and diagnostics. this company is on leading edge of discovering drugs for alzheimer's. will be getting alzheimer's in our planet. i heard a statistic recently that the average life expectancy of the girl born in parts of the united states, scandinavia and japan is 93 years old. this is an epidemic coming our way that an experienced team coming our way -- the company is next year.get into >> you are also investing into rap media. >> this company is based in
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boulder colorado and it enables the creation of online mobile video for mobile platforms and -- dataers greater at and analytics. >> you talk about women getting advanced degrees in tax and life sciences. changing the playing field dynamic? >> more and more women are starting companies. we don't see a lot of women come out of computer sciences. they are only about 20% of the graduates. >> any reason why? lex we are not sure. they are entering in at a 50% rate. but women are getting these agrees. we see a lot of those degrees and these women are starting companies because they want bit -- because they want their science and companies to see the light of day. >> since the beginning of 2005,
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fda million dollars and 58 female lead startups. that vision began before the economic downturn. how does companies whether that? >> we did go to the recession and one thing that's interesting about our sector as we exist outside the macroeconomy in certain ways. disruption is almost a law of nature. there's always opportunities for the kinds of opportunities we are looking for. new companies are created and that's where we exist. really looking forward on the transcend even in a recession, new companies emerge. we've seen the demise of the publishing industry, physical books and things like that area that's what we -- that's what makes what we do so fun. always disruption is going on and that's where we play. >> peggy wallace is with golden seeds. it's a pleasure to meet you. thank you for your time. we will be back with more "money moves" after this short break.
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>> it is 26 minutes past the hour, that means bloomberg is on the markets. julie hyman is standing by in the newsroom with the details. >> let's take a look at what is going on with stocks. yesterday, we had the big rally taking the s&p 500 to a new record as the fed pulls back its bond buying program. and half insuries mortgage related securities. but it come down from that high yesterday as jobless claims came in weaker than estimated. it just could not sustain the momentum, at least not for now. dow jones did touch an intraday record but it has fallen back
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down just a point. the s&p down nearly three points and the s&p down nearly three points. in terms of movers and other types of markets, the -- heating fuel trading at a two-year high after a record drop in u.s. inventories. also unusually cold weather in the states. natural gas has risen 34 are sent this year, the most of all 24 commodities on the s&p's gsci gauge. let's look at the dollar -- the dollar trading a little higher but gold is the big story. gold has been pulling back since we got the fed news yesterday. if we see rates going higher, the dollar going higher, that could be bad news for gold. gold really getting hit and could potentially continue to get hit as we continue to see
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tapering. that is it for on the markets. we will have more in 30 minutes and you'll get more "money moves" next. ♪
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♪ is "money moves" where we focus on innovative alternative invest months. i'm mark crumpton, in for deirdre bolton. the sale of previously owned u.s. homes has robbed for the third straight month. the national association of realtors says sales dropped 4.3% in november, hitting their lowest levels of the year as rising mortgage rates and a tight supply cap buyers on the sidelines. the median price for an existing 9%. rose more than mark zuckerberg is selling shares of his company to help pay his taxes.
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he joins the company and ward member mark andreessen in an offering of about 27 million shares worth nearly $4 billion. facebook says it will use the proceeds for working capital and other corporate purposes. dennis rodman is back in north korea. he is working on an exhibition basketball game in the country next month. he is scheduled to meet with the country's leader, kim jong-un. he said they planned the visit and they were not affected by the recent execution of kim's uncle. those are some of the stories we're following in this hour. the federal reserve decided to reduce its $85 billion in monthly bond purchases by $10 billion starting in january. the fed said it could further reduce the pace of its purchases next year if the economic improvement continues. for how the taper impacts emerging markets, particularly the so-called fragile five, i am joined by bob rice, managing partner at tangent capital. and we are not talking about the
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new york knicks. >> we could be, but that is a different show. >> emerging-market indexes are mostly down today. tunedot of people are not into how much the taper impacts the emerging markets. we have a chart that will show you how much emerging markets have done over the course of the last several years. for a while, they were doing fine but when we hit the last year, you will see they are down on average about 5%, depending on which when you're looking at. our markets are up 30%. one of the main reasons for that during the course of the last year has been the fear of tapering. over the summertime, there was a complete collapse in the emerging markets and now it's starting to become a reality. >> let's start by reviewing who the fragile five are and why they are vulnerable to tapering. >> they are the most vulnerable. your we have a nice little map and we can get a geography lesson at the same time.
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brazil, turkey, south africa, india and indonesia are the so- called fragile five. these are come -- these are countries that are available on -- that are dependent on large amount of foreign capital to keep their emerging markets emerging. in particular, indonesia is a troubled spot right now. that's largely because deutsche bank has estimated they will need about 9.4% of their gdp paid out in foreign currencies over the course of the next year. that's almost exactly the amount they have in the reserves. that implies they will have to attract more foreign capital fairly quickly. >> is that a problem? >> it is because what is happening, and this is where the taper comes to bite them, as rates rise in the united states, investors go that looks like a safer place to put my money. now they're able to earn a return on the money, so instead of investing in indonesia, which i have been doing because i was
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stretching for yield, i will come back to the united states. so indonesia's darling costs go way up great >> what is going to be tougher if the u.s. is competing for those investments? >> for all of these countries, it's the same problem. our when costs go up at the same time they need the capital. that will negatively impact their markets and economies. investors are looking at these countries with a very wary eye right now and all five of the fragile five have big elections coming up. >> how are the politics going to change this dynamic? >> or are two ways and both ways are worse. one of them is it's just change and investors are always afraid of change. elections are inherently bad and frankly, emerging markets, local politicians tend to turn on the money machine to facilitate voting. so all the cronyism and
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inefficiencies of those markets tends to get exaggerated and make it a less friendly place for foreign investors to be. >> is there an upshot for foreign investors? they arent to save emerging and there is opportunity, but you want to be investing behind experts. i would not want to be an etf in this kind of thing. active managers -- that is the place to be. >> this that tapering in a nutshell, did it start some sort of domino effect? >> yes. it did already. the reality is a domino effect and as those rates keep going up in the united states, these emerging markets will have more and more trouble replacing the foreign capital they are repaying with their existing sovereign debt. >> bob rice from tangent capital partners did to see you. still to come, day nine of bloomberg television's 12 days of bitcoin. matt miller shows us where around the world you can use the
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virtual currency. ♪
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>> welcome back to "money moves" on bloomberg television and streaming all day long on your phone, tablet and bloomberg.com. i'm mark crumpton and for deirdre bolton. for us last minute shoppers, it's easy to take overnight shipping for granted, but what goes on behind the scenes to make sure packages are delivered on time? ups delivers 14 million packages a day, but this holiday season, that will jump to about 28 million, about 300 packages per second. how does it all work? "bloomberg business week" got a look at how the company prepares for the holiday season. >> this is the biggest challenge i've had in my career. at how to build most efficient network that we can.
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smith.going to see mike rex about 40,000 additional packages. >> there are so many variables you have to deal with. it is controlled chaos every day. weather is a big issue. we have a debriefing every morning and do a weather update and tell us where they see the next 24 hours. our guys are better than the local weather folks. >> we're going to see about the two sort. >> we set it up to get the packages delivered on time come aware they are supposed to be. >> it's all based on what is going on that day. >> the wind shifted. >> we are down to one runway operation, which is a top operation. based on what is going on, we regionsworking with the
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to come up with the right movements. every peak season is little different. we have to react. we have no choice. everybody will come together and it may be something not that big , but it could be anything. >> we are good to go. >> just in time. it is day nine of bloomberg television's 12 days of bitcoin and it's less than a week until christmas. for most of us, that means vacation. matt miller is back and we are asking that if you wanted to skip home for the holidays and take a trip around the world. where could you go using bitcoin? >> want to make one thing clear -- people say you can spend it going in china, you can still spend it in thailand.
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you can spend it all over the world, and that is true. you can spend it going in a russian gulags of you have access to a wallet. no one is stopping you from exchanging the currency for goods great but regulation could affect bitcoin in a negative way. i was thinking of taking a vacation like forever and staying there and working with bitcoin. i wanted to see where i could go and set up a coin shops. you can see from this map that some areas are colored green, some arered, and yellow. china, setting of a bitcoin shop would probably be risking your life. told third-party software developers you better not use it. then they told the biggest exchange in the world -- it has become the biggest hub in the world until tuesday night in china. no more. life,o, scared for his
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said no, sir we will not be trading bitcoin there anymore. been've noticed you following this for the past several days. what about in new york city? lex as far as using bitcoin, there are a ton of places to do it. online, obviously this guy is the limit. takean buy gift cards and it almost anyplace. 15,000 merchants accepted in the u.s.. if you want to know the brick and mortar picture, there is a coin map.org. you can see places all over the country come a but especially here around new york and san francisco, look at europe and it covers europe. you can zoom in on any of those places and click on where to use it. especially berlin, which is the european hub for bitcoin. price. us about the >> i'm looking at a price of about 650.
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it depends what exchange you check out. >> look at that spike there. >> the big spike that you see is the result of the chinese falling in love with bitcoin and people trading it like crazy. the big drop is a result of chinese regulation saying no more of this. we are going to let you in the bodies exhibit if you continue to use it. >> you set a couple of days ago that you don't have a full grasp of what this is and what it can do. >> a lot of people describe it as a rabbit hole. but the more i learn about it, the more i want to learn about it. it's not incredibly complex to understand. it takes about 10 or 15 minutes to get your head around it but there are so many interesting complexities and interesting possibilities for use that i am enthralled. enthralled.
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>> i'm going to a bitcoin christmas party tonight where i will likely buy some more bitcoin. >> bloomberg's matt miller and the 12 days of bitcoin. giantot just vague tech in raising the cloud. i will tell you how the cloud is transforming the way small businesses work. we will be right back. ♪
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>> looking at some of the biggest issues facing businesses, a cloud-based company conducted a survey taking the pulse of the small business economy. small businesses are embracing the cloud. the vice president of marketing joins me now from los angeles. welcome to the broadcast. >> inc. you for having me on the show. >> before we get to the survey, your company provides internet services through its two divisions. tell us about the business cloud services and digital media. providentent is to companies ways of moving their
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back office to the cloud so they can be more efficient. our brands include keep it safe and a number of other tools. on the digital media side, we have pc mag and others and they provide great content to consumers and great advertising opportunities. >> interesting when you use the ax in the 21st century. >> it is incredibly strong in the back office of every business, ranging from a guy with a startup in his garage to the biggest companies in america. when it comes to moving moneys around, whether it invoices, are still at the core of the way a business works. with mobilebile apps on different cloud send digital can
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signatures but don't need a fax machine. >> how was the cloud transforming the way small business works? >> imagine if you and i decided to go rogue and start our own business. 10 years ago, we would need to get office space, a fax machine and cass -- cash register. if you and i wanted to do it tonight, we could go online and get a business phone number and get a fax number and set up a website and do everything we wed so that when we got up, would have a fully functional virtual business. you could be a bit east coast, i could be a west coast that we could be up and running in hours. >> let's talk about the semi annual survey. your end ofut at your survey? >> businesses really want to save money. one of the ways they can do that is to move to the cloud. wanted to move their
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business solutions into the cloud area if they can get them out of the office and into the cloud, they save more money and they can do business on the road or from home. .hey can have the cord >> what about social media? what is its role in all of this? big thing ine next marketing? >> there tends to be something new and hot all the time, but facebook has risen to the top. we are finding respondents are tying their facebook together with e-mail. for 2013.good combo >> what are your biggest concerns for 2014? >> what we saw from our theyndents is as much as saw, moving things to the cloud, moving things because of the
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affordable care act creates a cloud of uncertainty they are constantly trying to navigate. a lot of businesses said they want to take better care of themselves. --y may not be able to take they have to take a deep wrath when the stress of business gets to them or be able to work in some exercise. so we see their micro response as taking better care of themselves while waiting for the bigger picture economic stuff to the viceway out. >> president of marketing at j2 joining us from los angeles. thank you for your time. >> i appreciate it. >> next up, an update on the markets when "money moves" continues in just a moment. ♪
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>> on friday, we will talk about andend of year tech trends early-stage web and mobile companies. i will see you on "bottom line." 56 minutes past the hour, which means bloomberg is on the markets. julie hyman is back with the
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details. >> let's take a look at where stocks stand now that we have an hour left before the closing bell. the dow jones higher by about a point and a half, not at the intraday high but it did touch the record on the back of the fed saying the economy is strong enough to pull back slightly on its stimulus. the s&p and nasdaq are lower. worses claims came in than had been estimated by economists. now it's time for today's sector report. the conventional wisdom is banks will be one of the groups most affected as the fed begins to taper. etf surge the spider yesterday in the wake of the fed posta system. it is a lower -- it is a little bit lower today. so will that give a boost to the banks of bottom line? i'm joined by our senior u.s. banks analyst. thank you for joining us. boost to see that big
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financial stocks yesterday. what does tapering mean for the banks? think for the banks, one of the pressures for the industry has been the incredibly low rate environment and the flat yield curve. we have seen the yield curve improve, first with the anticipation of the fed tapering and with the decision announced yesterday, not much movement .ithin the rates but for the financials, what analysts and investors are looking for is to start moving toward an environment where we can at a steeper yield curve and a move up. >> you have to balance this widening yield curve which is good for the net interest margin of banks. on the other hand, when you see higher rates, that can crimp the mortgage market. how do you see these two elements balancing out as we get into 2014? >> that has been a difficult
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part of the fed's job. when the fed had said they were going to start tapering and they saw the impact of the commentary on ahe effective as having mortgage market, they said that was something they would be watching very carefully. most expectations, when you look will see anast, you improvement in the purchase market and continue to see home prices go up. i think what analysts are watching for is that rates go dramatically and not so rapidly that it kills off the health of the mortgage markets. >> historically, and i know it's hard to compare to history because it's unprecedented, but in times of a widening yield yield curve,ing have we seen bank stocks outperform the market? >> the interesting thing you saw last year in may when bernanke came out and started talking about tapering and the markets start selling off, you saw bank
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stocks starting to rally. 23m the timeframe of may through early september when we got the employment report and people started thinking the fed would start postponing tapering. you had bank stocks rallying about 5%. at the same time, you had the s&p down about 80 basis points. that gives you an idea of what people are looking for and tells you that interest rates are going to be the focus heading into 2014. >> we will check in to see how the bank stocks end up doing. thank you. we will be on the markets again in 30 minutes. "street smart" is next. ♪
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♪ >> ok. we've got the market taking a bit of a breather after yesterday's sharp rally. the s&p on track for its best week since october. welcome to the most important hour of the segment. we have 59 minutes until the closing bell and we are scouring the market with your first trade for tomorrow and last trade today. investors liked the news yesterday. >> they loved the news. >> theem

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