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tv   Bloomberg Markets  Bloomberg  August 23, 2016 2:00pm-3:01pm EDT

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.3% here. itsad been on pace for worst today drop. because of reports coming out with iran potentially open to freezing output, we are seeing a spike here and the effect with being the energy
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biggest percentage gainers on the s&p 500 energy group. let's also look at what is happening with earnings now. best but -- best buy coming in sales. it is the best performer as a percentage basis on the s&p up almost 19%. it is a story of earnings as well but with nordson, it is saying fourth-quarter earnings the. not seeing its highest since 1984. an ongoing story all day especially with what has been happening with the u.s. july home sales much better than expected. now up by 7.7%. what is happening with the u.s. two-year. it is a little bit flat today. abouto date, it is down 30 basis points.
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definitely falling over the course of a year. let's also take a look at the bloomberg dollar index and see that it is a similar story where the bloomberg dollar is also falling and heading for its first annual loss in quach years, down 5%. >> thanks a lot. let's check in on the news this afternoon. mark crumpton has more from the newsroom. mark: thank you. president obama is in baton rouge police dan at this hour. he got a first-hand view of the damage caused i flooding that killed 13 people and forced thousands from their homes. a live picture from the area. the president toward one of the neighborhoods devastated by the flooding caused by more than 20 inches of rain in a three-day period. the president has approved more than $20 million. has already been
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paid. he also said it is too early to know whether or not separate funding will be needed to help the state hear in other news today, the destructive wildfire continues to grow on california'central coast. nearly 58 square miles of brush in monterey county. the fire is 35%. trumpine accuses donald of using his campaign to make money for himself. trumpnted to reports that raised the monthly rent his campaign to his chum tower headquarters. itmp disputes this saying needs more space in anticipation of increasing staff. global news 24 hours a day powered by more than 2600 journalists and alice in more than 100 and 20 countries.
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this is bloomberg. david? david: thank you. the s&p 500 is hovering at guys. yields across all assets. could there be more value outside of the u.s.? jeffries think so. strategist -- thinks it is time to leave the u.s. for hong kong. >> the hong kong dollar, do not take any currency risk, yields in hong kong are around about 4% on dividends. the market, pretty much half of the price to book. we think this will push to hong kong now. >> we already had some upside here today. this is the free cash flow and the fact that a lot of these companies listed there have aggressively.
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>> pushed cash flows as much as possible, trying to protect the dividends as much as possible. we are seeing that in the chinese companies and i think that is generally a good time to go visit equity markets. >> everybody we have on this program talks about e.m.. where do you like it and is it in danger of being overcrowded? it has had news is better monetary policy. old-style fighting inflation taking rates up in places like russia and brazil. the good news is inflation rates have been rolling over. think there is room in russia and also brazil. brazil, impeachment. turkey, a coup.
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.ndia take a country, take your pick, and i will give you a political nightmare that they are experiencing now. the central bankers have done a very good job in a number of these countries. especially russia, which has operated in a difficult environment and has made some questionable decisions. giving people a lot of confidence about the potential for the central bankers to be divorced from the geopolitical risk that we have seen. >> it is a question of how much you are going to go down the risk scale to get returns. really that that long end of the bond market tells you exactly how to run things. anybody from old-school
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would do whatysis we've been doing of the last 18 months and em markets have always been run by what's happening in real rates in the u.s. jon: if you get a billionaire hedge fund manager in new york, it is easy to find a bearish one. when you get an asset manager program like this, typically, they are still looking for yield pickup. their mandate is to return and give them returns. rb at that point now where people are being forced to take excessive risk? >> that is what's happening with the insurance and pension funds. for other people come a generally, they have been relatively sensitive to what's happened economically. the world is not collapsing. too bad of anot
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way to judge markets. danger is if we are going to an overheating phase end of rates eventually had to move up much faster than what people expect. oliver: speaking of risky business and risk assets, research from bank of america merrill lynch shows that volatility could be set to make a major comeback. for now, things still remain relatively calm as investors assessed valuation. equityelly is an -- this putsnalyst a great lens on how we are looking at companies. i want to highlight the yellow exs, cap ask -- cap
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across 12 months. here.e this big ride up it has been pretty flat since 2014, but still very high. what do you make of that? a common misconception that companies are not reinvesting in themselves. that is only one way to look at it -- if you look at r&d spending as well, that has been on the rise. companies are investing in themselves. oliver: i'm going to show basically what this looks like since 2014. point, the to the red bars are the research and development. that is huge. when you look at the blue bars down there getting smaller and
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smaller, how does that play into the research development versus cap x? initially cutll into those profit margins. overall look at the valuations come a lot of that is because we have not seen that earnings growth. r&dt of that could be among and other operations. david: take a look at growth. when you see this, what stands out to you? >> the consumer discretionary space. we have not seen a lot of earnings growth. we look at consumer discretionary, there is a light at the end of the tunnel. a lot of the companies are heavily tied to the consumer. autos, homebuilders, july new home sales and home furnishing
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companies. >> some of that economic data reflected on the corporate level. this is on that consumer discretionary -- you are looking at the white line, the p/e ratio versus the blue line, price relative to those earnings. there's not a lot of sectors where you see plat pe's over a three-year span. kevin: we've seen a lot of growth in terms of the stock price appreciation but we have not seen that earnings growth in the bottom line. bestmoves in line with the -- in tandem with the line. trading at a 17% discount. oliver: right stuff. -- great stuff. fedd: coming up, the great
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rate debate. this is bloomberg. ♪
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oliver: this is "bloomberg markets." david: chatter has revolved around a call issued by the san francisco bay president. ofliams urges a rethink monetary and fiscal policy. gina joins us now -- layout for us what john williams plus vision of the future is.
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sion of theliams' vi future is. >> a lower neutral interest rate. that means the fed funds rate can rise less significantly than it has in the past. lower productivity, lower potential growth, the complex of global factors. the big implication there is the fed has less room to hike. oliver: your story is about where this put williams on the spectrum. does it tell us anything about the imminent path of rates or is he just bringing up a philosophical point? gina: a lot of people took williams plus essay as a dovish sentiment. essay as a dovish sentiment. i think what williams is saying here is we need a rethink in the
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longer-term, but in the near term, he is still pretty hawkish. it's important to separate out what he's saying about the longer-term policy discussion and what he thinks in the near term. david: your article asks to questions. -- two questions. when will the fed next raise rates? how long can the fed raise rates until it is no longer stimulating the economy? what do fed officials think about that right now? gina: a lot of people focusing around this idea that we can definitely raise interest rates this year. we sell williams saying that last week, stan fisher says there's still potential for a rate increase this year. it is still realistically on the table.
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oliver: does the natural rate influence how far the fed can hike until they are no longer acting stimulative late to the ly tomy -- stimulative the economy? -- itwilliams sees it might only be a couple more hikes until the fed has reached a neutral level. they might even cross into contractionary territory if they go higher. david: the fed has to approach each of these questions separately. what are the difficulties of what doo do that? gina: we do in the near-term versus what do we do in the longer-term -- you want to have some sort of continuity in monetary policy. that is what williams is saying here. in the near term, we need to inflationaryis
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-- this model we are using is not going to work because we are living in numeral world that is economically fundamentally different. his challenge is time to communicate that in the broader term, we seriously need to rethink these things, but in the short-term, we should not disrupt markets to much. that has been difficult. oliver: great stuff. -- conversation of the week time for the bloomberg business flash. to end thehas agreed six week stand up -- the amount is well below the initial demand. the agreed-upon payment at about
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$15 million. david: at&t has reached a deal visitorse roaming for in cuba. more problems for louisiana, which is already suffering from record flooding and the collapse of the oil market. $500 billion in revenue anticipation -- first cash flow borrowing in three decades. the state no longer has the reserves officials once tapped to pay bills -- david: bloomberg businessweek takes a look at how lending club disrupted itself. this is bloomberg. ♪
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david: this is "bloomberg markets." you can call it the first national bank of inflated numbers. lending club had started to unravel. max uncovers new details in this week's edition of "bloomberg businessweek." max: i got an e-mail from someone i've known for a long time who said there is more to this lending club story than you know. he is somebody interested in data science, he started digging into the dead and he found a bunch of loans that looked really questionable. the data datao dat. outbody was taking these and two weeks later, lending club disclosed just that. we have more detail about those disclosures. casts doubt ont
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the company possibly his practices over the past half decade or more. everybody felt they were doing it right. pick your accolade. in terms of the other data coming out that makes it questionable, does it have to do with the transparency issues? really funerg had a report about manny's company buying its own mayonnaise -- a mayonnaise company buying its own mayonnaise. management team was taking out loans early on and using the returns from those to make the case to wall street that these were good investments. pressou look at their from a few years back, they would talk about how well they had done during the recession. this casts doubt on the story and makes the larger story seem
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problematic, especially in light of the fact that there were additional issues with the company that happened more recently. >> what does this mean for peer-to-peer lending? is it a one company thing? max: it is hard to know. the industry has done a lot of smart things. the idea of getting a loan on the internet makes a lot of sense. think weher hand, i do don't really know how good this business is because we have not gone through an actual recession with any of these companies. that will be the ultimate test. >> what is next for lending club? max: they are trying to get past this. they've done some moderates, there is a new ceo. they are trying to raise
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additional capital. they were trying to disrupt the banking system. capital is not super reliable. we are talking about hedge funds and these investors who are flighty. the investors flew away in the wake of the scandals. they are trying to make the case that this is sustainable, it is real. it's not like this business is going to go away anytime soon. it just may have grown too fast. you can read his story in the latest edition of "bloomberg businessweek." ♪
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oliver: from bloomberg world headquarters in new york, this is "bloomberg markets." david: let's take a look at the day's biggest movers.
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gold futures headed to the first gain in three days, the dollar fell, reducing demand for the metal as an alternative asset. jenny owen speaks friday at an annual symposium in jackson hole, wyoming. oil closing up around $48 a barrel. iran may be more willing to cooperate with other producers seeking to increase output. also out with a note today saying if opec agrees to such a move, the resulting price boost may help other suppliers revive output. a note from citigroup on iron ore. the bank now saying it looks set to cool off that the raw material will average $51 a metric ton in the first quarter. for more on this, want to bring bearishnessbit of
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on a commodity that's done real well. joe: they are looking at the track between iron ore and steel. are we going to see more exports coming out of china, is there does thatbility -- mean they go to other markets, thus pushing down steel prices? iron or possibly going down -- even something that is something even more fundamentally, the possibility of a slowdown -- they do not have the demand domestically. the two tracking each other, falling in price. david: give us context on citi's call. joe: there is a bit of a split, some people who think demand does carry into 2017. china saying we will see
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continuing to support some growth through stimulus measures. there are some measures that are not on board with this. is taking the other half of the argument, yeah, listen, we think the market is amply supplied, we do see more production coming at the end of this year. why would we expect prices to go higher when this market looks more -- oliver: give us the 61% rally in iron. some there will be supply-side catch up? joe: right. still bullish are for the next 1-2 months. saying the way prices are moving right now, we are not going against that, per se, but if you are looking for the best
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further out, right now, that thing they are not recommending is that you go too long. onet of this and that, but of the analysts today said we wanted to look at our long-term outlook and say ultimately this is a market that is well supplied. let's check the headlines on the bloomberg first word news at this hour. obama is inent baton rouge, louisiana where he got a first-hand view of the damage caused by flooding that killed 13 people and forced thousands from their homes. the president toward one of the many neighborhoods in southern louisiana devastated by the flooding caused by more than 20 inches of rain over a three-day period. president obama: the prayers of the entire nation are with everybody who lost loved ones. we are heartbroken by the loss of life.
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there are people who are still desperately trying to track down friends and family. we will keep on helping them every way that we can. mark: the federal government has approved $120 million in assistance for residents affected by the flooding in louisiana. an american soldier has been killed, another wounded when their patrol was struck by a roadside bomb during an operation in afghanistan. six afghan soldiers were wounded. after 100 came a day u.s. troops were sent to the area to help defend the city against the taliban. boosting thes rented charges to what of its tenants, the donald trump campaign. the payment began increasing may. rateampaign says the as the team expanded
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to include two additional forc floors. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. developing news in south africa, the rand is plunging against the dollar on a report of the country's finance minister has been summoned by police. us on thisor joining breaking news. what do we know about this summoning? thehat we do know is that official investigative unit has written a letter to the finance minister asking him to report to his office on thursday. he isokesman said currently taking legal advice on the matter and reserving comment at this stage. the rand plunging against
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the dollar. what market reaction have we seen? amo: the immediate market reaction coming through strongly -- after gaining following the positive elections we had earlier this month. we saw the rand plunging to its weakest level against the dollar -- local and international investors not reacting very well to the news that the finance minister may possibly be arrested this week. oliver: was there any sort of indication that he was under investigation or anything like this was going to happen? mo: there were media reports and may basically stating the hawks unit was reopening this case. the finance minister was heading the tax revenue collecting
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agency -- you may have -- he may gue agency -- rop questions as to whether he will be arrested later this week. he has denied any involvement in the formation of that road unit -- rogue unit. david: retailers have used it in earnings reports -- the good old rhether excuse -- weathe excuse. what is the real cause of delays in the skies? ♪
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oliver: this is "bloomberg markets." david: we turn to politics and the ongoing controversy surrounding hillary clinton's e-mail use when she was secretary of state. the fbi says it has recovered 15,000 previously undiscovered e-mails from the private e-mail server. the state department has one month to process them. generales as the presidential election embarks on its final months. to -- about how clinton should proceed. to answer all the questions that are about these e-mails. if you look at public opinion public thinksthe they've heard too much about the e-mails already. this is just part of the drumbeat. on theare really focused
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two candidates themselves and who would be the best president and the best commander-in-chief. republicans saying the e-mails show a dubious connection between the clinton foundation and secretary clinton. what role do you see the clinton -- is it possible for them to continue if she is elected president? memoe sent out a yesterday about pulling back in terms of the fund raising the clinton foundation does. spentinton foundation has the last decade really trying to address the globe's most pressing problems.
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in africa today because of the hiv medication that has been provided via the clinton foundation. that is a really important aspect of this story. this is a foundation that has raised money, but in order to solve the globe's problems. theyhave outlined steps will take to pull back on fundraising, but there's a lot of good that's been done by the foundation. >> great to have you on the program. move on to the standardized tax deduction for small businesses. has also said capping his corporate taxes would benefit small businesses the most. how can clinton differentiate herself with her proposal? >> there is a huge difference between the two proposals. one thatproposal is
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provides a massive tax break, tax giveaway to people like formlf to convert into a of corporation to lower their tax bills significantly. hillary changes the standard deduction. it is much more targeted to the needs of small businesses, actual small businesses. addresses the tax complications they face. it is a big difference. have said's advisors they worried about the kind of would need tax plan revisited -- this proposal is targeted to your needs come up a proposal -- your needs, a
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proposal addressing the needs of small businesses. is addressing their concerns in the range of proposals she is putting forward today. time for the bloomberg business flash. willo global management pay $52.7 million to settle allegations about the security exchange commission's that the manager misled investors about bees. the ftc says apollo failed to supervise -- oliver: sales of new homes in the u.s. on soared last month, rising 12%. -- unexpectedly soared last month. david: you can blame the airlines and not the weather for the most flight delays in the u.s. by aarrivals triggered
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mechanical problems and lack of crew -- that is the bloomberg business flash. oliver: for more, let's go to alan in washington. us.k you for joining this is not necessarily a weather thing. this is an airline thing. >> it has been a sea change. i've been looking at these numbers for way too long. byk in 2000, the weather was far the biggest cause of delays. that has gradually reversed itself. last year, we saw the airlines take the lead in total number of
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delays. if you look at the minutes of delay, that is a bigger indicator of the misery passengers feel -- airlines had -- 20 millions of minutes of delays. something like 450,000 hours of delays more than any other category. david: how much does this differentiation matter? peopleere plenty of blaming the airlines come even though the weather was involved. the passengers care? alan: at some point, it doesn't really matter. airlines, the delays they
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create, on average, last longer. airlines deserve a lot of credit for working with the faa and each other to mitigate the impact of delays. they have lowered the number of in airports in new york to allow for them to recover more smoothly after a thunderstorm. using this dramatic improvement on the part of the system as a whole. i'm assuming the weather has not changed over the years on average. what is it about right now that haveusing the airlines to more and more delays? not reportdo
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specific causes of their own delays. in the past four or five plus years, the airlines have cut way back in an attempt to become profitable. that is part of it. delta, which has prided itself on having a low delay rate, has said we operate in the same system as everybody else. reason our delays are lower is because we do a better job. if you talk to the other carriers, they say there are underlying issues with the faa. david: how do the airlines deal with the ripple effects of these delays? there anything more they can do to stave off the delays we've seen?
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alan: it is expensive and they decided this was worth it, but if you add crew -- if one group of pilots is late but you have another pair you can sub in. -- you cand next are add extra aircraft. that is quite expensive. the real benefit is on the margins. hustling people on board the plane, trying to taxi out more expeditiously and things like that. thank you for confirming what cynics have been saying for some time. coming up, google is taking a new approach to virtual reality come increasing spending and recruiting some of its youtube stars. this is bloomberg. ♪
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david: this is "bloomberg markets." oliver: google is had to be spending big on virtual reality firms and programs to head the launch of its streaming service. it is also enlisted a number of youtube stars to boost its biggest virtual reality initiative. lucas, welcome. what is daydream and how does it fit into google's strategy for vr? --as: it is a conversation combination operating system and store. within your phone, you have the google place store where you can download apps. daydream is that for vr. daydream also comes on your phone because it is part of google's plan to go after the mobile-based virtual reality
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market. david: how much is google investing in this right now? lucas: in the content side of is spreading out to a lot of different players come anywhere from low five figures on something to as much as mid fundingsix figures, people making short films, making little vignettes and experiences. it's trying to get as much different content out there around the time daydream appears in the fall so you have a lot to on it -- a lot to do on it. sony,, like facebook and which went to the top of the , google is trying to go after the mass market. it wants as many different fungs, as many different experiences to draw in people as possible.
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oliver: i'm excited about sony's vr on playstation four. that speaks to the different demographic they are targeting. they're looking at vr for practical stuff. is that the idea here? a hard-coreu're gamer, you are more likely to -- sony's project morpheus whether that is in the form of short films or in video games -- google is taking a more mass-market approach. for the super consumer who tends to spend more on music and movies and all that. android is for the mass market. google is trying to do something very similar in virtual reality.
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it will let facebook take the uppercrust and they will go after everybody else. david: you see facebook buying oculus for $2 billion. cardboard. has its it is focusing on the services side. lucas: exactly. they have been working on their own pr -- vr headset, but they're more focused on the software side. which is why they have a company like samsung as a partner. samsung has partnered with facebook on the oculus and google on this. it wants anybody who makes a vr headset to accept an android device and run daydream. david: more tech headlines on "bloomberg west."
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don't miss our interview with the cofounders of reddit. oliver: also keeping an eye on shares of tesla and solarcity. muscat sent out a tweet -- elon theysent out a tweet that will have a product announcement at noon california time. all about the tweet and the buildup of vengeance of patient. desktop anticipation. -- all about the tweet and the buildup of anticipation. ♪
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>> to :00 p.m. in san francisco and 8:00 p.m. in london. >> welcome to bloomberg markets. ♪
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>> we're live from bloomberg world headquarters in new york for the next hour. also covering stories in san francisco and washington, d.c. are higher but investor sentiment is shifting back and forth, trying to figure out if and when the fed will raise rates. >> on the heels of a tweet from newsmusk, expecting some from tesla. monitoring the headlines, of course. to launch gearing up drive willis cars in pittsburgh in the next few weeks. we will hear about what the mayor thinks about this plan in .n exclusive interview we are one hour from the close of trading. let's head to the markets desk wherein he has more.


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