tv In the Loop With Betty Liu Bloomberg January 22, 2015 8:00am-10:01am EST
up on the show two things you will want to know about today. what will the ecb announced in half an hour and where do i put my money? lee cooperman. i feel like i've been in europe all day. the ceo of morgan stanley joining. the cofounder and ceo of salesforce.com, mark benioff joining us from davos. we are expecting the european central bank to make its most controversial move ever. a bond buying program aimed at fighting off relation. -- deflation. announcing other measures in half an hour. may total over $1.2 trillion. consumer prices are falling on an annual basis and they keep declining.
not everybody is on board. some say the ecb is doing too little, too late. job cuts are on the way at ebay. they will cut 2400 jobs, 7% of the workforce. ebay is preparing to split from its paypal unit. american express will cut more than 4000 jobs part of a restructuring. google is raising the stakes for wireless wars are paring sell wireless service directly to consumers. google has reached a deal to use the networks of t-mobile and sprint. no word when the google service might start or what it will cost. an outbreak of measles linked to disneyland has now spread beyond california. seven people have been infected in five states and mexico.
urging those who have not been vaccinated to get avoided disneyland park. the ecb's qe verdict, we are waiting that. mario-- we are awaiting that. positive goals standing by in print for where mario draghi will be holding his news conference in 30 minutes. also joining us on the phone is mohammed olli mohamed el-erian. they say they are not going to cut interest rates. they will keep them as is. they did not announce any new measures. why not do it all at once? >> what was just read came from a press spokesman. what we will hear in 30 minutes
is from mario draghi. they said further policy measures -- that amounts to a strip tease. the expectation, 93% of economists surveyed expect quantitative easing to happen. the size of the package is $1.1 trillion. starting in march going through 2016 you look at each individual state, germany with 90 billion being sold. >> we will try to get him back. we just lost his mic. i'm sure we can say striptease and central bankers in the same sentence, we don't want to envision it. everyone is saying $1.2 trillion.
will that be enough? >> it depends on what you are objective is. is that large? yes. is it open ended? no. is it unambiguous? we don't know yet. what is the objective? if the objective is to restore economic growth and weak the expectations -- rake expectations, the ecb cannot do it on its own. the immediate objective of weakening the currency further keeping interest rates relatively low and minimizing the differentiation among member countries, it can do that. the question is at what cost. it is important to ask the question, what is it we want the ecb to do? a financial or economic outcome? >> speaking about the financial outcome, i want to bring up this chart. let's bring up the german one
year yield. which just a few days ago when negative. it is now at negative one point -.1%. immersing negative yield on your government that. -- you are seeing negative yield on your government that. -- government debt >>. >>strange things start to happen. look at switzerland where banks will charge you to keep your money. that is the strange world we are living in. we are relying too much on central banks and other parts of the policymaking apparatus. these parts are not responding.
>> i want to bring back hans nichols. you were talking about the program that will likely be announced. tell me about the dissent. are you hearing any dissent within the ecb? >> no. it is more important than his public. the germans don't support quantitative easing. there are radically divergent views on what is causing inflation. to the germans want to see what happens -- they think the low price of oil will stimulate the economy and they want a few more months of data on that. it's remarkable how public it's been. angela merkel with mario draghi in the audience, laying out her parameters for what a central bank should do. you have the president very critical.
a lot of us will be looking at a lot of things. top among my list is how many dissents there are. if this is indeed unanimous that may mean it is pre-circumscribed. that means national banks may carry some of the risks. it will be very tightly targeted and you won't have any debt from greece or cyprus. >> how do you think the governments will respond to a bond buying program? >> if they allocate the risk to the national banks, couple things will happen. it will not be as powerful as if they pull risk. it will be clear that now political compromises are dictating the design of the policy response.
markets will react negatively to both of these things. >> the bloomberg panel the head of bridgewater associates said you've gotten to a point where it's no longer interest rates but the currency that is the big lever for the government. i want to play what he said. >> we see this ecb policy -- it needs to have more money into the system. money can produce more purchases. it also means that when the two levers are interest rates and currency when interest rate levers don't work, currency lever becomes more effective. we must see more volatility in currencies. we must see an appreciation further in europe. >> what does it mean for the euro and other assets, including the dollar? >> i agree with him completely
that this is now about the currency. you've heard me say this before. be careful of what history tells us. when you get large movements in the major currencies that tends to break things. we have seen what happened in switzerland and the pressure denmark is under. the focus is now the currency. you cannot expect the currency markets to do the heavy lifting. if you expect them to do that something will break in the system. >> what about the u.s. having to do the heavy lifting now? >> the one country that is not opposing the appreciation of its currency. we are in a far better position than europe or japan. we are going along. you see companies starting to warn that this is not helpful for their profit. we are getting a positive shoct
from oil prices. the u.s. is carrying the burden of the appreciating currency. >> is that carriage going to eventually collapse? how long can we become the super economy for the world? aren't we going to get hit at some point? by not just the crisis in europe but what's going on in japan and china slowing down? >> that is the big question. can we decouple and continue? can this world of divergence continue in which both economic performance and monetary policy go in different directions? no one knows the answer. my guess is it will put some of stress in the system that one of two things will happen. either we get the correct policy response around the world and we unleash a massive upside because
there is a lot of cash on the sideline or currencies start behaving erratically and that causes so much financial market volatility that it undermines economic growth. we will have to tip one way or the other. it is hard to tell which way right now. >> how are the people reacting or anticipating this bond buying program? >> there is a great deal of concern among the germans that this will lead to -- when you talk about the currency depreciation it's going to help the big businesses, the big exporters. seven months ago when the euro was close -- you could not find the captain of industry that was not complaining about how
difficult the high euro was making it for them to be competitive. for all the auto exporters and airbus having a weak currency is going to help the economy. it will help the germans a lot more than other countries because germans are so export eliant and their economy is so carefully levered and calibrated to exports. >> i want to play larry summers at davos. a great point about the populace. how the germans feel like they are lifting the entire euro zone. i want to play what larry summers said about government and how they should react to this and how this set of measures will do. >> the era of central-bank improvisation as a principal growth strategy has to come to an end.
if growth is going to be maintained and enhanced in the industrial world it has to go way beyond the provision of liquidity. if we are to avoid the fate of secular stagnation. >> reminds me of your bloomberg view column where you said the ecb, if they were judged unexcused alone, they would get high marks but they will be judged on the success and that does not look promising. >> they are not able to reach the full things that trouble europe. they're not able to implement fro growth -- progrowth structural reforms. they're not able to lift excessive pockets of embeddedness or complete the economic union. the ecb does not have the tools to address the fundamental aspects holding back growth. therefore, they will not be able to deliver. the irony here is that people know that and yet we still rely
on the ecb. >> because there is nothing left. thank you so much. mohamed el-erian and hans nichols who will be live with us again as the ecb conference takes hold. we are waiting to hear from the ecb in 15 minutes. they will be announcing a new set of measures. we'll bring that for you live as soon as it crosses our wires. what the move means for countries in the euro zone. we go to davos and ask the prime in a stir of ireland. -- prime minister of ireland. ♪
>> good afternoon. we are minutes away from this mario draghi press conference in frank for. the central bank is independent and has a clear mandate. -- conference in frankfurt. had he been given any indication of what's bound to happen? >> is just the speculation of what's been in the media. the ecb is independent and has an official mandate anything the ecb can do that's good for the eurozone and good for governments. we are all waiting to see what -- >> is at extending into political territory? the mutual is asian of the qe program is what is up for debate at the moment -- mutual lies
asiaization. >> in the next few minutes, we will know to what they've done. whatever action they can take is good for the eurozone. >> you have already indicated that the cheaper euro will have a positive impact on the economy. >> it has been very positive for island. -- for ireland. ecb takes note of these things. >> you would welcome a cheaper euro? >> yes. it is good for our exports and people who visit our country. >> let's wait and see what
happens. let's talk about more domestic matters. the bank in dublin indicating that maybe it would like to see -- >> is concern about a repeat of the housing crisis that heartland -- ireland went through. there is some concern that this would limit their ability to enter the housing market. do you support the irish central bank and its objective? we will get more news on this next week. >> there is no serious demand for housing. the irish central bank has made some -- the department of finance and government have made it clear submission to the irish central bank because you don't want a situation that might evolve based on the decision
they make. in ireland comments important that people have the aspiration to own their own homes. for younger people coming into the labor market, they need to have a demonstration that they can actually achieved their aspiration of buying their own home. >> you would not support that. you would support the idea that the first time homebuyer should be given the opportunity. >> i support strongly the submission made by the department of finance having that aspiration to get into the property market and on their own homes without undue difficulty. >> can we talk about aib? do you think the wage cap was
taken to beating factor? this was a contributing factor? >> it was a time of great distress. it was not making any profits. he achieved those objectives. aib has been restructured and is back in profitability. the chief executive achieved his it objective -- achieved his objective. >> do you think in order to have quality candidates, you have to release -- eased the way the wage gap? >>would you rule out not doing it? >> the minister for finance has an influence on this.
the two with the process keeps in -- let's see what the process keeps in. we're restoring this bank to profitability. >> do you think it will be critical that you get somebody good? >> to continue the progress made. >> do you think you are going to be able to achieve that with the wage gap in place? >> their constraints. it has been a difficulty. the bank is now back in profitability. we want to see it back in lending and returning moneys to the irish taxpayer. >> do you agree with him when he
says he thinks the investigation is a pretty weak one and will likely end up being dropped? >> ireland is one of the countries being examined here. ireland has been very upfront about this. we will fight hard and fair. we are fully cooperative. we want to see an international response to this particular phenomenon. all of the countries in europe are being examined. we feel strongly that the case we have made and the actions taken my ireland do not constitute a breach of state aid rules. >> thank you very much for your time. enda kenny. back to you.
>> guy johnson speaking with enda kenny. we will have an interview with the morgan stanley ceo. that is coming up. you are watching "in the loop." i'm betty liu. there is a look at our top company news this hour. shareholders of family dollar expect a takeover by dollar tree. dollar general made a larger offer. microsoft pushing into the future with the windows 10 operating system. a version of the system is called windows holographic and includes special glasses that allows the user to see holograms. nasa will use the holographic elegy for mars exploration --
technology for mars exploration. tootsie roll may go up for sale. shares rose 7% after the death of the ceo yesterday. he was 95 years old. his widow will become the new ceo but she is 82 years old. tootsie roll may be up for sale. mario draghi will be speaking at any moment. they decided to keep interest rates unchanged at record lows. mario draghi said he will be announcing further also measures -- further policy measures. i'm joined by olivia sterns p review been following this all morning long. a bit of a striptease. they said they would keep interest rates unchanged. they would be announcing some new measures >>. >>further measures means quantitative easing.
i have been doing this since may of 2010. i was the field producer at the first overnight meeting in brussels. a long time ago. this is a critical juncture. the process of european integration that began with the purchasing of government debt in 2010. there desperately trying to stoke inflation. it's an important step at further integration. there is a lot of criticism. mario draghi has been aggressively campaigning, giving lots of interviews, turned to get the critics in germany on board. they say we have this new stimulus from cheap oil. what is achieved by government bonds when the tenure on the french shield is already at .7% -- 10 year on the french yield is already at .7%?
how will you measure success and how much is already priced in? >> how much is already priced in? we got news yesterday quoting anonymous central bank officials, the movement in the markets signal this quantitative easing is pretty much rest in and has been telegraphed properly -- priced in and has been telegraphed appropriately. talking about the ecb -- how do you think the market will react to these measures? they have been telegraphed so well. >> we are talking about this as it's already been announced because we have seen the league proposal of 50 billion euros a month. that is a proposal. we don't know what it involves. is that a proposal of bonds? does it include the abs?
there is so much detail we don't know. how big is this if we do get it? what are you actually buying? is it bad risk? is the national central banks that take all the risk? >> a lot of unanswered questions. the big unanswered question is how are the government's going to react to this. you can have monetary changes without having some fiscal in structural changes -- and structural changes. angela merkel coming out with some comments and of the press conference saying the debt crisis is more or less under control and not over. the ecb is making an independent decision today. the germans are a big part of this. any ecb decision cannot replace government action. it's all saying the same thing we have heard before.
i've never heard some people come out -- so many people come out who want this action and say this action will not do anything. >> how much of it has been priced in? it looks like it is set to disappoint markets. looks like chancellor merkel is protecting herself from her own domestic critics. one further indication that we will get u.s. style qe. >> we are still getting economic numbers in the u.s. 300-7000 -- >> 7000 above what economists had predicted. why is this number important? it gives us some insight into what happened with the job market as we got further into january. did we see an extension of the strength we saw in december? this number which does represent
a decline week over week could be seen potentially as a positive sign. the estimate was for 300000 and we got 300-7,000. not that significant. when you look at the continuing claims, 2.4 million and continuing claims. remaining below the key threshold that economists had been looking for. not that significantly off estimates to really derail the perception about the strengthening u.s. job market. >> we are the economy holding up the rest of the world at this point. in davos, you've been talking to various officials there discussing the ecb. many are saying that mario draghi is the most important
person in the world. it used to be ben bernanke he. it is now mario draghi. >> we got a lesson from ben bernanke. trial and error. this can take a long time. we have that still to come. that will keep you and i in a job. let's say you start with 50 billion. six months down the line, it's not working you go 60 or 70. the difference was recapitalize the banks and make them viable institutions again. they can't land. they are still raising capital. it is an ongoing story in europe and not in the unites states. -- united states. >> we know how the program worked here. we know what the effects are.
what about the ecb and what people are telling you? what bonds are they going to buy? what sovereign debt? how will they execute this program? >> if they do by sovereign debt and maybe investment-grade. it means you don't by greek bonds. you have a great election. it's very much about detail. -- you have a greek election. if it is just investment grade and you do it through the likes of greece and others, that can be a big disappointment for many because they are the country that really needs it. so many people that that story. look out for dissent. i don't think the germans will take this lying down. >> they have been very vocal about what's going on.
not just within germany, but also other countries and how much they have to pick up the slack as well. you've been talking with various economists about the possible ecb measures. how are people feeling about the success of this program? >> a lot of people are assuming it will be too little, too late. you have to ask yourself what success will look like. we've seen the euro fall against the dollar significantly. that might help growth. a weak yen did not help japan. is it going to work in europe? the comets from chancellor merkel what you need is a structural reform. the problem in europe is a lack of growth. what is government bond buying going to do? the banks are hamstrung because of new regulation.
the economies are fundamentally in such bad shape that there is a lack of demand. there is a lack of credit demand in germany. i'm not sure what is going to do. a lot of people are worried it is too little, too late. >> mario draghi appears to be late. a live shot of the room in frankfurt. he was supposed be sitting down five minutes ago. he is a bit late to this press conference. what you make of that, john? >> can't read too much into that. he's had a busy couple of days. >> this could be the most important press conference he gives in his lifetime. >> i agree. the euro is the mechanism that this bond buying program will work through. zero zone will be a bit more
competitive with the rest of the world. -- eurozone. it won't help france and spain be competitive. yet the angela merkel remarks about reform. you have to match it up with structural reforms. otherwise, you are buying time and it runs out. >> is anybody talking about a breakup of the euro? >> not here. i have not heard it once. everybody is digesting the news that greece would have elections and this radical party would win. i think that discussion has died down a bit. the head of this party in greece , they will come to the table and try to negotiate something. trying to give a bit more comfort to the greek people. it is almost a drastic scenario.
if we do get a breakup of the eurozone, what's happening is happening on the political side. the five-star movement in italy, the national front in france and ongoing story. if they don't solve the economic problems in europe, we get a social and political crisis that could last for 2-10 years and then we have two consider the future of this monetary union. >> mario draghi about two approached the podium -- about two approached the podium -- about to approach the podium. they will keep interest rates unchanged. they will be announcing measures . we will be hearing this at any moment. we are carrying this on television and alive on our live
channel on bloomberg.com/tv and our free tv plus ipad app. you can watch this on your phone or ipad. while we are waiting for him to situate himself and get ready for what will be the most important press conference of his career, it was interesting couple years ago we were talking about a euro exit and now not. >> the crucial point -- >> let's listen in. >> ladies and gentlemen the vice president and i are pleased to welcome you to our press conference. i want to wish you all a happy new year.
i would also like to take this opportunity to welcome lithuania as the 19th country to adopt the euro as its currency. accordingly the chairman of the board became a member of the governing council on january 1, 2015. the addition of lithuania triggered a system under which national central bank governors take turns holding voting rights on the governing council. the details of this rotation system are available on the ecb's website. we will now report on the outcome of today's meeting of the governing council, which was also attended by the commission
as president -- vice president. based on a regular economic and monetary analysis we conducted a thorough reassessment of the outlook for price development and monetary stimulus achieved. as a result, the governing council took the following decisions. it decided to launch an expanded asset purchase program encompassing the existing purchase programs for mortgage backed securities and government bonds. under this expanded program the combined monthly purchases of public and private sector securities will amount to 60 billion euros. they are intended to be carried out until september of 2016.
and will in any case be conducted until we see a sustained adjustment in the path of inflation, which is consistent with our aim of achieving inflation rates below but close to 2% over the medium-term. in march of 2015, the euro system was starting to purchase investment-grade securities. the purchases of securities issued by euro area governments and agencies will be based on the euro system national central bank shares. some additional eligibility
criteria will be applied. in the case of countries under an eu imf adjustment program. the governing council decided to change the pricing of the six remaining targeted longer-term refinancing operations. accordingly, the interest rate will be able to the rate on the euro system's main financing operations. thereby removing the 10 basis point spread over the rate that applied to the first two. in line with our forward guidance, we decided to keep the key ecb interest rates
unchanged. as regards the additional asset purchases, the governing council retains control over the design features of the program and ecb will coordinate the purchases, theirreby safeguarding the eurozone's monetary policy. it will make use of decentralizing mentation to mobilize its resources -- implementation to mobilize its resources. the governing council decided that purchases of securities of european institutions which will be 12% of the additional asset purchases and which will be purchased by the mcb's will be subject to loss sharing. the rest of the mcb's additional
asset purchases will not be subject to loss sharing. the ecb will hold a percent of the additional asset purchases. -- 8% of the additional asset purchases. 20% of the additional asset purchases will be subject to a regime of risk sharing. separate press releases with more detailed information on the expanded asset purchase program and the pricing of the telcos will be published at 3:30 p.m. today's monetary policy decision on additional asset purchases was taken into account -- inflation dynamics have continued to be weaker than expected. while the sharp fall in oil prices over recent months
remains the dominant factor driving current headline inflation, the potential for second-round effects on wage and price setting has decreased and could adversely affect medium price the relevance -- medium priced of elements. -- developments. the fact that most indicators of actual or expected inflation stand at or close to their historical lows. at the same time economics -- credit developments will continue to be subdued. second, while the monetary policy adopted between june and december of last year resulted
in the material improvement in terms of financial market prices , this was not the case for the quantitative results. as a consequence, the prevailing degree of monetary accommodation was insufficient to adequately address heightened risks of low inflation. thus, today, the adoption of further balance sheet measures has become warranted to achieve our -- >> breaking out of the press conference. to recap the news. this was a bit of a surprise. mario draghi announcing a program of quantitative easing. the surprise has to do with the size of the monthly purchases and the timeframe over which the european central bank will be conducting this exercise. starting in march, the ecb will be buying $60 billion a month of
bonds, including sovereign debt and asset-backed securities. expansion of previous monetary programs. this 60 billion a month of purchases will continue through september of 2016. we had an idea of how this would work out yesterday. what we thought we knew that is different now and there has been market reaction. some volatility in the euro. i want to get some reaction from a terrific guest. james gorman of morgan stanley sitting beside me. a bit of a surprise. not a surprise that the ecb is doing audited of easing, but the amount and time frame. the euro trading down. -- is doing quantitative easing. do you think it will help europe? >> it is a positive.
we have been waiting for something like this and we now have it. mario draghi is showing he's earnest. they take it seriously. it will be interesting to see the details. for now, let's put it down as a positive. this is 60 billion, not a huge some p surprise. it is good for the market. >> would inflate financial assets the way it has in the night states? -- united states? >> we have broader issues in europe to their structural. -- in europe. they are structural. the enduring presence of the euro and elections in greece this weekend. there's a lot of uncertainty and volatility. this is a very important first step in a necessary step paid --
and a necessary step. we are a global business. that's not will be a particular driver in terms of overall firm. investors in europe see some appreciation in the markets. network appreciation. >> you take the temperature of institutional and retail investors around the world. how do they feel right now? >> every day. i look at the numbers before i go to bed. confidence is growing in the u.s. even with the geopolitical concerns and terrorist concerns and economic news coming out of europe the confidence is growing. unemployment has come down. people's net worth has appreciated. the economy is recovering. >> the economy is recovering. we might get a fed rate hike this year. >> i would put good money on it.
the fed has been clear they will be driven by the numbers. let's consider what's going on. unemployment numbers and 6%. corporate balance sheets are strong. individual networks -- the dollar is strong. how could we not have a rate increase? the only question is which month. i think it's more likely come if we have a surprise, more likely to surprise on the early side. my personal timeframe is more likely sometime in the second quarter through july. >> is all of this priced into the market? or could u.s. stocks still trade higher? >> stocks should trade higher if earnings are improving. is this priced into the market? there might be some nervousness when this happens.
there should be day one positive reaction because it's a sign of -- >> your fixed income business is driving attention. what happened? >> we are a good company. pretty hard to be not performer in fixed income -- and now performer in fixed income -- an outperformer in fixed income. given the cost of capital required for the business and the amount of capital we put into it -- the misunderstanding about our fixed income business is we don't have to be big, just have a decent return. >> not being big means you don't feel the need to compete nose to nose with the giant dealers? >> you have to look at what it is.
it is commodities, currencies rates and various credit businesses. we have to do well in the businesses that are critical to our franchises. >> doesn't have the potential to be a highly profitable business again? or have the combination of capital requirements and volcker turned it into an agency business where your only choice is to grind down costs by cutting comp and replacing people with technology? >> we have brought it down from nearly 400 to 180 we dramatically shrunk the capital demand on that business. it could be a very solid business. >> is a less than 155 billion? or larger than that? >> we said 155 on tuesday with
the run up of dormant assets and we will take it from there. >> going larger or smaller over time? >> to get returns on the level were operating at. >> goldman closed the gap a bit in the fourth quarter but morgan stanley ended the year the top equities franchise. how do you defend that position? >> with quality people doing what they're supposed to do for their clients. it's the nine box matrix. strong in asia, europe and u.s. each of those nine boxes we check as solid and strong. that is a compelling proposition for global consumers. >> thanks to strategic decisions you made, the double down on wealth management and the emphasis on equities, morgan stanley has benefited. you could say -- what happens to morgan stanley when equity boom
market test bull market ends -- equity bull market ends? >> we have a whole series of pockets that have been winning. we get a $3.8 billion in revenue this quarter. that was a record in our history. a small portion of that is buying and selling stocks in the market. >> you want to be at a 10% are a week this year. -- roe this year. >> we said we would be 10%. we did not put a time frame on it. we don't control the global economy. >> this is the economy's fault? >> there is much morgan stanley has to get done. we expect to increase at this year. we have laid out a clear path to 10% and we will get to 10%. the business is performing well. >> great to have you here at the
world economic forum. the chief executive officer and chairman of morgan stanley. the sun is shining bright. >> indeed. thank you so much, eric. reacting to the just announced new measures by the ecb. 60 billion euros a month. it looks like this asset purchase program is pretty much in line if not under what some economists had estimated. $1.1 trillion in total. julie hyman at the breaking news desk has more on how the assets are moving. >> you think they would be moving lower. we have seen a lot of volatility. we did see a sharp move lower here which is what you might expect. it started to bounce around a bit. it is lower by .4%.
we are also seeing reaction not just in the currency market but across asset classes. you look at what's happening with stocks, just as we saw a move down in the euro, we saw a move up in european stocks. leading up to this, even though this quantitive easing by the ecb is a bit larger than had been anticipated, leading up to the press conference, there were a lot of questions being asked about the effectiveness of this stimulus. some of that doubt and ambiguity is being reflected in the market reaction. >> thank you so much, julie. while druggies continuing to hold his press conference. -- mario draghi is continuing to hold his press conference. this qe program will reinflate prices in the eurozone. you can watch it on
>> welcome back to "in the loop." here is a look at top stories. stocks will be higher at the open. big news coming from frankfurt. the european central bank president mario draghi confirmed he is taking a step to flight -- a step to fight deflation. he unveils a bond buying program. quantitative easing will begin in march, but what was not expected is the amount.
60 billion euros instead of the 50 billion rua -- rumored yesterday. they are dealing with consumer prices that have been falling. a threat of deflation. news of this sent the euro lower. it is at an 11 year low. it has been sliding in anticipation of this move. in eastern ukraine, the violence is getting worse. artillery fire kills at least 13 people. forces have pulled back from airport terminals in donetsk. violence has stepped up since negotiations broke down last week. one of the most powerful lawmakers in new york state arrest on corruption charges. sheldon silver surrendered to the fbi today. the case involves payment from a
law firm that specializes in seeking reductions of real estate taxes. silver says he hopes he will be vindicated. back on the market after the dramatic move by the ecb investors are flocking back to safe havens. >> the fact that the united states is the best looking girl in the brothel -- >> i have not heard that one. >> well, we are. our success is predicated on the ability to trade and sell goods and services all over the world. >> the best looking girl in the brothel. that is how sam zell describes the united states. someone that agrees the u.s. is the best place to put your money is lee cooperman. he is an investor and chairman
and ceo of omega advisors. he is joining us live from florida. it great to see you this morning. >> thank you. >> before we get to the case you have stocks here in the u.s. are going to rally. i want to get your reaction to the ecb move. $1.1 trillion in total, is it going to work? >> we do not know if it will work, but it was expected, a little larger. it turned out to be 60 billion a month. it is somewhat open-ended. terminated earlier than expected. the goal of the ecb is to get inflation expectations up and to get the euro lower to improve their trade position.
ultimately, they will succeed, but it will take time. >> maybe it will succeed. speaking to economists hearing larry summers who says deflation is the biggest threat to the global economy, i am not sure it will succeed. i feel like people wrote it off before it began. >> i do not minimize the challenge. i think all i said was they did what was largely anticipated by the market a little bit more. that is probably recognition to the fact that they understand the problem is serious. they are trying to get the inflation expectations up and get the euro down. they will do whatever is necessary. >> how will this affect the u.s.? >> i think we are of global
economy in europe as part of the global scene. you cannot the united states cannot be a nylund of prosperity surrounded by despair. we need china growing, japan growing. >> given what is going on we still see the economy is on the mend. jobless claims came out showing the job market is improving. you have charts you want to show the viewers. number one among them, you do not see signs that a recession is brewing.
>> i want to make it clear, the markets are not undervalued or overvalued. bear markets do not materialize out of immaculate conception. they materialize because of various factors. first and foremost the stock market smells a recession and starts to decline in anticipation of a recession. or, we get into an overvalued period and people get sloppy. third is a geopolitical event. fourth, the fed pursues a tightening regime. as i look at the scene, none of those conditions seems to be likely in the near term future. everything we look at, initial jobless claims, leading economic
indicators, etc., it suggests we are on eight 2% to 3% growth path. i do not see signs of euphoria, maybe a pocket or two of overpriced equities. people have been conservative in their approach. the fed i do not read call -- i do not recall a market cycle where we had a tightening. the last time the fed moved his 2006. >> the prevailing notion is once you see the fed tighten that is going to signal the peak in the market. i know you crunched some numbers. you have a chart that shows this. a bull run continues about 29 months after a fed rate hike.
>> you read the chart right. on average, the market has risen for about 29 months. the shortest period of time was 10 months. i would guarantee you, going back to the 50's, there was never a tightening regime where the fed rate was zero. the notion that the market is 16 times earnings is discounting 0% or 1% fed funds or tenure governments is foolish. that is 50 odd years where they average about 15 times the 10 year government averaged over 6%. as -- one has to assume rates are beginning to rise. from the level of interest rate
that presently, a rise in profits and expanding economic growth would be milk once a dental with -- would be more incidental with -- could push the stocks can run up for the shortest amount of time. in your best hunch how much further do you think our stock runs pushed >> there is no basis to call for market peak. it could be a few more years. the stock market reflects economic and to the and corporate profits. the issue is whether this isthe only thing to worry about
his people did not see the recovery after 2008 and they say they see no recession for the next three or four years. if you don't have a recession for the next three or four years -- warren buffett says -- about economics. there's no basis to forecast a recession. i do not see any euphoric behavior in the stock market. bull markets are born in despair and grow with skepticism. they mature in optimism and diane euphoria. we do not have euphoria. a pension plan is less than 50% equities. you do not have the sense that people are exuberant. there is something wrong. there has not been focused on
bringing people into the game. it was kind of ironic. if the president wants to redistribute income from the wealthy, all of this money was created by his people. the only way of doing better is getting well far. >> hang on one second. we going to go through more on the markets. i want to get back to julie hyman, who is getting the reaction. >> we have to look at what is going on in the fixed income markets. we have seen the yield on the spanish and italian 10 year notes fall to record lows. keep in mind that the yields are below that of u.s. tenure.
>> we are back with lee cooperman. i am going to get to the point. you see it as fair valuation. that means there is some right picking here in the market. we had sam on yesterday who said his big bet was rich picking and some good companies. >> we came into 2014 thinking what was going on in the middle east we got hit.
>> did you fall? >> we reduced modestly. a lot of the smart people like sam will be looking for credit. going back to august of last year, about 17% of the high yield index are credits. they have collapsed with the price of oil. there is some interesting paper being acquired by --. you will get a spin out company.
we are creating it for near zero. we continue to buy that one. >> if you are a betting man, and i know you are, do you think oil will go up this year? >> i do not think anyone knows where oil is going. the best solution to lower oil prices is low oil prices. in 2009, the united states was producing 5 million barrels a day. fracking is high cost to maintain. the high yield index has gone from eight energy credits to 15 or 20. the stocks have collapsed. will happen is there going to
lay down legs. production will probably start to decline by the end of this year in the dates and if the global economy is growing 3%, there will be an increase in demand. the price of energy will and higher than it is now, but you have to conclude the prices, you will not be looking at for several years. >> you are on a conference call recently and you do not like the way they're allocating capital. you have a sense of humor. you said, and a conference call, i am trying to figure out whether your testicles are bigger than your brains or your brains are bigger than your testicles. you were talking about their buyback program, whether they are buying the stocks back at two high of a price. did you get any response? >> yes.
i own the stock. i like the management and respect management. thus far, the capital allocation decisions have been wrong. they spent about $200 million buying back stock at $104 a share. the stock dropped to 15. it was a misallocation of capital. it is significant in respect but the guy who is the quasi-founder he owns 6 million shares of stock. when you are buying back stock like they were, you are hurting yourself if you make a mistake. he owns 6 million of the 20 million shares. my point was the company gave guidance on the call. i understand why they want to buy back stock.
>> we are back with more thoughts from lee cooperman. i know you want to finish your thought. you are not critical of the management, you do not want them to make the same mistake in buying back the shares, right? >> basically, i judge management in their management. they were the first to admit buying back capital when the stock was 20 was not a good use of capital.
now, we are sitting here and they are giving guidance and the question i was raising is if you kept 80 million, which is only for him dollars -- which is only $40, that would still give you the ability to buy back your company. >> i want to bring back andrew. he is the chief investment officer of global fixed income i know you issue reports ahead of the ecb announcement and you said the devil was in the
details. overall, the details you are seeing today are they going to be enough to spur bank lending to get her firm -- the referrals that you need? >> it may be a touch higher than 60 billion a month. importantly it is open-ended. all of the talk about risksharing, i do not think it is a big deal. overall, it is a positive. i think it validates market expectations.
>> what grade do you give mario draghi? >> he is very good, but he is very constrained. he has a -- he has to win the battle. they have this element which i do not think it matters much. it is a bit of a fig leaf, but he gets it done. in terms of the outlook the ecb is doing its part. >> doing its part. lee i want to bring you back into the conversation. in one of the charts you mentioned the returns we have seen in the cycle so far. in other cycles, we have seen
you could put it into equities. i look around the world, a 10 year government bonds in france, about 70 basis points. 25 to 30 basis points in japan. these are unattractive interest rate levels. in time, companies will benefit from growth and from higher inflation so i would think i am better off taking my risk in stock. >> andrew? >> in fixed income space, one of our most successful areas has been the income fund.
>> thank you. andrew balls, the cio at pimco. you have a big announcement to make today. you have put your money, not just in equities but you put your money in students in new jersey. i know you are part of the buffet giving pledge. is this part of it? >> i made the determination with my family that i will follow the advice of andrew carnegie. he said he who dies rich dies disgraced. i am going to take my good fortune and hard work and luck
and recycle that back into the economy. i have figured out there are only four things you can do with money. consume it. i have been fortunate and the only way i can consume my money is if i was an art lector, which i am not. i have given my kids some amount of money, but not taken away their incentive. you can give it to the government in the form of taxes or you can recycle it back into society. the youngsters today deserve equal opportunity. it is vital for the success in the future to be educated. we decided to endow the cooperman college scholars. if you enroll in a precollege
program to orient 12 -- two orient one -- to orient one to college, we have allocated $25 million to that program. >> great to see you. thank you for joining me from florida. >> thank you. my pleasure. >> lee cooperman. mario draghi still speaking. we will continue to bring you all of the headlines. you can watch it on our live event channel. ♪
mark, the ceo of the cloud computing company. >> thank you. mark, thank you for joining me. i want to talk to you about. posts. -- about davos. what do get out of it? >> i love davos because it is built around one simple idea. in 1971, a professor, the founder of davos came up with an idea that stakeholders were more important than shareholders. he started to build a community around that multi-stakeholder dialogue. he started to aggregate and bring people together with like minds. it is a celebration of the
stakeholder theory. >> has it lost its authenticity? you tweeted their work two kinds of ceos in davos -- those that are committed to improving the state of the world and those that are not. >> we live in a complex world. we have to pay attention to a lot of different stakeholders. we have our customers, employees, communities and the environment. today's world is complex. we have to be ready to buy into the stakeholder theory. a lot of people come here, maybe for the first time, and they do not get it. they think that milton friedman
was right that the business of business is business. >> went to get out of it? >> we have conversations, dialogue. we share concepts. the idea is trust. we are going through a trust crisis. everybody knows we need more transparency. cyber security is mission-critical for everyone. for many executives, they realize it has become an oxymoron. there is no finish line when it
comes to cyber security. we live where the internet is unreliable and insecure. we have to work harder to get the security happened thing -- happening. you can invest heavily, i modern technology, have the best people and capabilities. we have had a couple of pretty high profile cyber security issues. it needs to be everyones' agenda. >> how much to these economic factors enter into how you run your business? >> you have seen. most -- if seen davos have been.
it is seminal for people to come here and stabilize economies. we are in a growth crisis. we need more growth across every in comedy. -- and every economy. in europe we have to find more ways to employ people through new innovations in value and commit to lifelong learning. the word innovation annoys me. you invest in other tech companies. what are you excited about? >> we do not want to annoy you. you have to understand,
technology is a continuum. innovation is flowing out of that. you can see the changes in the last decade, mobility, and now we see systems of intelligence and artificial intelligence. those have been huge topics. >> you are not feeling a tech bubble in any way? from new york, it seems like funding is falling from the sky . >> any time a company gets a funding event or goes public or has a valuation, all of a sudden you hear about a tech bubble.
there is more innovation and value being created than in our history. you can see that in these new companies things that are possible today that were not possible. everyone at this conference has a smart phone and maybe you have a couple of smart phones. 10 years ago, we were walking around with dedicated devices that the world economic forum supplied you when you got here. we have more exciting shifts happening in the decade ahead. >> are you all about the wearables? >> i love my fit it easy -- i love my fit bit. you know it is cool, i am not going to going to that right now. on the new one, it has a sensor on the back. you can see your heart rate see
if you are dehydrated. we are in a new world when it comes to this technology. i had an interesting experience. i have a minute to minute view of what is my heart doing and at the end of the day it has this line. i have a continuous stream of information. i sent it to my cardiologist and said what do you think of this and he said i have no idea. he said he had never seen a continuous stream of information like this before. we are in a new world. >> you had a call to action to the silicon valley community. how has that work? >> the number one thing we have to do is do more. that is the purpose of davos.
the best way to do that is improve the state of the world. >> is silicon valley giving enough? >> no. silicon valley has a history of indigenous. most important thing is business visa realize they are part of the solution, not the problem. we need to work to employ people. this is something we have to do together. this is why we are here. >> mark been aenioff here. >> stephanie ruhle on "market makers." we are roughly 15 minutes into the trading day. happening right now, patriots and bill belichick speaking at a
>> 20 minutes into the trading day. i want to get back to julie hyman. >> earnings reports over the last 24 hours 12 hours, even. ebay moving up. earnings disappointing, but ebay is cutting 7% of its workforce annexed loring options for its enterprise unit. it came to a standstill with carl icahn. he will be adding to southwest profits because of the benefit of fuel and the increase in demand for travel. f5 networks forecast short of estimates.
bill gates for an interview. he talks about the mistakes he encountered while running the world's largest charitable foundation. >> i have learned a lot. the biggest impact we have had so far has been in childhood health. we created a group and have saved over 10 million lives. a lot of kids are not fully developed. >> it is hard to top, saving 10 million lives. what was the biggest mistake? >> a lot of things required us to get in and try out pilot programs and see what woodward.
the structure of high schools, trying to make it so it was not so big. how you get teachers more feedback about what they are good at and how they improve letting them be exposed to other teachers. we have some high lit sites that have gone well. today, the secret to how you raise the average teacher up to be as good as the top 10% not yet solved, and yet, so valuable in some places where we have that result and we do want to figure out how to scale it up. a lot of things take more time than i expect. >> the most valuable lesson you have learned? >> we were so naive we thought we should work on our own invest in science, not try and team up.
we saw all we needed to come together with the government budgets and the groups in the field. how you develop those partnerships country groups nonprofit groups building on our complementary strength where we understand r&d better than these groups. they understand the fields better than we do. it has been a huge learning curve. i think we are better at it now than ever. >> that was bill gates speaking with erik schatzker. bloomberg will air more from that interview all day. be sure to tune into that.
>> life from the world economic oregon in davos -- world economic forum in davos this is a special edition of "market makers." >> the central bank launches an unprecedented bond buying program to fight off deflation and boost the economy. >> one thing going on. how about this? a breakthrough in the war on poverty. the world's richest man says there will be historic improvement for the poor in the next 15 years. i sat down with bill gates. >> the dell founder