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tv   Whatd You Miss  Bloomberg  November 16, 2016 3:30pm-5:01pm EST

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website to become a platform for anti-somatic and white nationalist -- anti-semitic and white nationalist views. [inaudible] >> fantastic example, someone who embraced diversity at every step. mark: miller describes the process is calm and structured and dismissed anyone making claims to the contrary as "bitter." the general counsel for stephen a.l. nds investment firm has left the trump transition team. o'connor was part of the team assembled by new jersey governor chris christie. o'connor was overseeing staff picks for the justice department. massachusetts senator elizabeth warren is endorsing keith ellison to leave the democratic national committee.
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warren says ellison has quote, pushed hard to hold wall street accountable and has consistently exercisable leadership for the congressional progressive caucus. ellison also receive endorsements from senator chuck schumer of new york and harry reid of nevada. syrian opposition groups say an airstrike in the northern aleppo province killed at least 18 people, including six women. russia announced a major offensive in opposition held areas, and the syrian president bashar al-assad's air force had been counting the city. it's unclear who carried out the airstrike. investigators determined that a london tram was traveling at nearly four times the speed limit when it derailed a week ago, killing seven people pray the rail accident investigation branch said the tram was traveling roughly 44 miles per hour trying to negotiate a sharp bend. the 42-year-old tram driver was arrested on suspicion of manslaughter. he is free on bail.
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global news 24 hours a day, powered by more than 2600 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. ♪ scarlet: we are 30 minutes from the close of trading in the u.s. i'm scarlet fu. joe: i'm joe weisenthal. scarlet: markets weigh the impact of president-elect donald trump's policies. joe: the question is, "what'd you miss?" up, jim chanos sitting down with us for an entire hour. which industries may be right for disruption. trump'sncerns about how global trade policies have spurred rallies.
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iswill talk about how chanos protecting his positions in china and europe trade one area that did miss the trumped up, tech stocks. jim has been extremely vocal on a number of names. we will see where he stands ahead of a major shareholder vote tomorrow. get you a check on where the major indexes stand as we head towards the close. abigail doolittle has more. abigail: we are looking at the same trading for u.s. stocks going into the close that we've seen all day. mixed, tired, lackluster. the nasdaq up slightly. the dow is on pace to snap a seven-day winning streak, weighing on the dow and s&p 500 are the financials you had mentioned. when we look at an s&p 500 bank index, it's down 1.7%, a dramatic drop there. on pace for its worst, first drop in 8 days.
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let's of weakness within the financials. we go micro and look at the individual stocks, lots of weakness there. citigroup, wells fargo, all lower. some of this could be taking a breather from last week's big rally. talking about valuation. when we going to the bloomberg and look at a chart of the xls, which had its best week last week and quite some time, we are looking at a chart provided to us by mkm partners. this is g #btv 4872. he was kind enough to share it with us last week. that in fact has happened, you can see that over here. the xls is above the 20 15th highs. is outperforming the s&p 500 over the last three years. it has snapped a downtrend. we reached back out to him today
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to find out whether or not he thought this breakout was legitimate. is, he thinks these stocks will trade higher into the year end, but on this weakness he would not be rushing to buy this. is,perhaps investors pick their points around the financials. scarlet: thank you so much. joe: "what'd you miss?" emerging markets for one area that got hit really hard after the election. i spoke with the berks mark cudmore and asked him if it made sense for all the em's to sell off the way they did. >> we are seeing a mega move up in u.s. yields, severe monetary tightening for emerging markets. a double whammy there in terms of accessing capital, especially if they have large external debt files. all emerging markets are getting hit uniformly. there's a real differentiation amongst em markets.
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there's a real opportunity for macro investors to start differentiating between em currencies. joe: who are some of the countries whose financial accounts look better and are less exposed to the rising dollar and rising u.s. yields? >> one of the most obvious ones is probably chile. with thetrade deficit u.s. already, so it's unlikely to be the target of any pretentious measures. it's heavily dependent on copper exports. copper is boring at the moment. -- roaring at the moment. it's not that exposed to higher u.s. yields. . another one that is kind of interesting is russia. it is already quite isolated and doesn't have that exposure. it's already gone through the bad patch and is less effective right now. joe: how important to the russian trade is the prospect of
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a softening of relations and how much is just -- even if there's no softening, the fundamentals there look better than some of the other em's? is potential for a small boost if there is a softening of functions due to a trump presidency. russia's gone to an incredibly tough recession over the last couple of years, but they've the bottom.ussia's the change in the direction of growth is higher now. they already have very low external debt needs at the government level, at least. joe: let's talk about the opposite side of the the bottom. coin, which are some countries whose financial situation really makes them vulnerable to this new macro environment? it has a large current account deficit, a relatively large funding need. u.s. sensitive to higher
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rates, and the domestic economy is struggling anyway. being not quite in recession, but very subdued growth. another area that might be interesting in eastern europe, that might be squeezed from a more aggressive russia in the east and a slowdown in european growth if trump does impose protectionist measures to the west. globalt's talk about the growth story. there is the rates components, but there is the fear that trump to a greater the globalization of the world. world trade is already slowing down, declining by some measures, fears debt to could continue. who gets hit the hardest if those trends continue? south korea is an obvious one. generay in asia, some of the more vulnerable countries that slow down in trade. in the emerging market.
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japan itself is also in trouble. some of the economies with the most resilient domestic economy and more insulated are also in asia. indonesia is a good example. even india. you mention the philippines. they have their own leader who people have likened to trump the cost a lot of investor anxiety. you mention the philippines. they have their own leader who people have likenedwhat are the? >> philippines is a strong domestic economy. hindsight, people say his swivel to china ahead of the elections is quite smart in hindsight. china is her biggest trade partner, absolutely dominant. it is becoming so important for the philippines economy. the domestic -- economy is doing well. joe: that was bloomberg's fx market analyst.
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scarlet: coming up, active money managers are happy. we will check the winners and losers. this is bloomberg. ♪
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scarlet: jpmorgan is said to have paid $200 million to settle into itsestigation
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china hiring probe and is said as quicklytled this as thursday. it hasn't happened yet. reporting indicates this is imminent. this is a settlement over its china hires. the allegations were that it hired children of chinese decision-makers to win business. joe: as quickly as thursday. it hasn't happened yet. reporting indicates this is imminent. this was a controversy. it sprung up a few years ago about american banks hiring the children of influential chinese leaders. it looks like these are being wrapped up, sunday's probe. scarlet: the question was whether it violated u.s. anti-bribery laws. trump, his election caused the biggest dispersion among u.s. equities in almost 8 years. for professional stock pickers, they couldn't be happier. oliver? oliver: if there is one positive hear this from a stock picker's, things are starting to break apart in the market. let's take a look at what has been happening since tuesday, this historic election. there's been a massive
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dispersion within the market when you're looking at sectors. ction, this is group ranked returns. %, until today was of even more. it was up over 10%. this is a group that has been tied to donald trump's numbers since the get-go. indeed, they did spica pretty strongly. on the bottom half, some of the defensive stocks. people are now taking money out of those. you are looking at utilities , utilities down 6%. this is basically the trend. if you take the top and the bottom, that's the way to look at dispersion, which is the amount of variation within the stock market. arguably the most important thing if you are trying to pick stocks. you want to short stocks that will do poorly. dispersion that exists on the
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sector level, the white line is showing the dispersion for that period, five days after the election. this is the difference between the top and bottom performer. 17, that was the current value yesterday. that is a 17 percentage point difference between financials and utilities. if you look at how high that is, it goes back not until 2009 do we see that level of sector dispersion we've seen in the past week. people have been waiting for this for a long time. the amount of dispersion we have seen within the market has been incredible. you look at the blue line, the s&p, it's been rising. you look back, here are the instances in which we've seen spikes of dispersion in the market. it's usually when the market is going down. in 2011 we had dispersions spike up. taking back massive amounts as we had the crash in 2008, to get back even further, reminiscent of the dot-com era.
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you've got to figure out maybe where we are. finally, i want to point out that i think investors to some extent are recognizing this and putting money to work. looking at flows in the major etf's in these sectors. 738 billion in inflows. this is a huge amount over the past week here. 92 billion. this is a large amount over about a week period. you can see some money actually going to work here. this is sort of an opportunity that hasn't been around for a while. at the end of the day, this is what's important, being able to have returns that will reflect the fundamentals of companies and that only happens when stocks are going a different direction. joe: you can see why active fund managers are excited about this finally not everything moving together.
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the last chart, they are starting to get into those positions. overall, there had been some money moving into the more beaten up groups, which is just so happen to be the financials, industrials. if you take it back to june, money started coming out of the more defensive side. i don't know if those investors were doniing it. know if it was the right reason, but it was probably more of a reversion trade. certainly good news for those active fund managers. i wonder how long before the etf industry comes up with multiform, multi factor strategy that encompasses all of this and puts the active fund manager right back out, flat on his back. >> that's why we chose to look at this right now.
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want to see, to have that dispersion in the market that has been so saturated with the passive investing, between passive and active. this is a breath of fresh air. ultimately, the market can go completely one way or the other. it can't be a completely passive he at and it completely active market. find that equilibrium. joe: is there any reason to think that we will continue to see dispersion, or is this a blip in and everything starts to he a completely active market. find that equilibrium. joe:move in a new direction aga? >> i would wager that we will now be in an environment where investors and analysts are hanging on every word that president trump says. within that comes volatility and within the volatility is bread dispersion. joe: oliver renick, bloomberg stocks reporter. awesome chart. scarlet: we want to reiterate the headlines we broke a few
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minutes ago. jpmorgan said to settle its investigation into its hiring practice of hiring children of chinese decision-makers. jpmorgan will pay about $200 million to settle these allegations. you're looking at jpmorgan shares. the first back-to-back decline for jpm since the election of donald trump. everyone -- it's time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. cleaner michael platz, blue crest capital management, is having what he calls an exceptional trading year. hedge fund is up 40% so far. platz is trading with high levels of leverage and he has returned all client money. now blue crest only manages platz's fortune. ceo of lending club
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is planning a return to the industry he helped pioneer. he has started a new firm called credify finance. credify was incorporated in maine. -- may. that's your business flash update. scarlet, you're looking at walmart ahead of tomorrow's earnings. scarlet: walmart is the next big box retailer to report earnings. we know the ceo doug macmillan last month said he expects income next fiscal year, and here we are talking about the 12 month starting next january to be, quote, relatively flat. let's find out why. walmart's outlook sent its shares tumbling at the time, signal the retailer needs to do more to compete against amazon and draw customers into its supercenters.
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walmart has been pouring money into its website as well as its mobile app, unless quarter online sales grew almost 12% from a year earlier. if you compare that to total u.s. online sales, those rose almost 16%. certainly a big difference there. this year walmart aims to grow online sales at a rate of 20% to 30%. over 200 million unique visitors. walmart is also looking to make shopping more convenient, holding and some elements from its online grocery ordering program. the company is the largest u.s. grocer. that company makes up 56% of its u.s. revenue. builds and reinforces
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its online presence, walmart is pulling back on new openings. it is spending more to spruce up its existing stores. the real deceleration doesn't take place until fiscal 2018, which is why you don't see it study off a plateau until later on. for walmart to remain the world's biggest retailer by revenue, he will have to make all these plans work. you will be following walmart's results before the opening bell. mark: jim chanos is sitting down with us for the whole hour. looking forward to his comments on the election, what it means for infrastructure stocks, metals. the president-elect donald trump at the helm. stick around. this is bloomberg. ♪
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scarlet: another way of looking at market breadth.
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this is a chart from one of our producers here for bloomberg television. the white line shows the percentage of s&p 500 numbers with the rsi strakes above 70. the purple line shows the dow and the yellow line shows the nasdaq. normally when there are big 70,es here in the rsi above it's usually the big have indexes, the s&p and dow. the white line for the s&p. the yellow line doesn't really show up as much, until this latest hire, the postelection rally. the nasdaq has more than 2500 members. many of them are small cap and midcap numbers. this time around we seeing a lot of participation across the cap space. interesting because the nasdaq has had several days that are weak because of the dominance of tech. interesting that so many of the smaller components we don't talk about must be doing well.
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it shows you have to dig beyond the headlines. i'm looking at the ramifications postelection rates spike. if rates go higher, you are less likely to refi your home. this chart shows in green 30 year yields which i have inverted so when it goes down, that means higher yield. mbaa mortgage refi index, year-over-year change, it lines up really well and it makes peoplehen yields spike, are less inclined to refi their mortgages. keep an eye on that blue line. scarlet: people were expecting me fed to raise people are less inclined to rates. don't forget, we have jim chanos joining us exclusively for the next hour. what donald trump's policies mean for different companies, we are getting a next bird's take on it -- expert's take on it.
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this is what the market snapshot looks like. the nasdaq gaining 1/3 of 1%. this is bloomberg. ♪
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scarlet: we are moments away from the closing bell.
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into slowcks drifting markets. i'm scarlet fu. joe: i'm joe weisenthal. income to our viewers tuning live on twitter. you can watch our closing bell coverage every day on twitter. scarlet: we begin with our market minute. a seven-day winning streak, retreating from a record high as well. if you look at the three major indexes, they closed mixed. you have a mixed variation of sectors that did well. you can see telecom and consumer discretionary they're the best. seeingteresting financials lagging. they have been a blistering rally. and tech is doing better. matt: expanding their rebound to
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a second day. target is up by 6.4%. the best rally in several years. it was mentioned negatively by andrew left. he was just on telling us about how the ceo of mallon cropped -- crodt -- joe: there has been so much activity here. little happening today. you can see the 10 year yield unchanged. to year yield up barely up to 1%. currencies, i'm looking at it versus the dollar.
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the longest winning streak since 2012. monetary divergence is the same at work. -- theme at work. we could see gains change. joe: and on the commodities front, gold marginally up. crude oil selling off a little bit. middle, that is another thing that is on a tear. today's those are market minutes. sounding off on donald trump's victory, sharing his playbook for the trump presidency is jim chanos. he joins us for the entire hour. great to have you.
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let's get your thoughts on this risk value we have seen. does it make sense to you? jim: you have to be a little bit careful because these things don't always go as people initially expect. you, isome things to remember the george w. bush ascendance where he had both houses of congress. following the clinton legacy, the economy was booming, it was going to be cut regulation. events overtook that administration pretty quickly not only because of 9/11 but a series of scandals. in fact the administration ended up being one of the most anticorporate administrations we have seen. aggressive justice
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department going after corporate wrongdoing. that is not what you would have thought november of 2000. whatever the election was decided. let's go back to 2008. inexpensive, and senator coming in, some thought a socialist. some thought even more to the left was going to tear apart capitalism as we know it and throw bankers in jail. pundit after pundit called for the end of the world. it did not quite work out that way. time to be not only in corporate america but one of the 1% and a financial asset owner. not exactly the initial knee-jerk reaction. >> for the people who think that he is the second coming of reagan, i are they getting it
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wrong? scarlet: it is too early to tell. a series of pronouncements by the president-elect as well as others. some say he wants to dismantle dodd-frank. but on the other hand bring back glass-steagall. those are opposite sides of the coin. that is raising questions in my mind, where is the philosophy here? we will know more as we see more appointments. events conspired to change your view. they end up being greater than the white house. that at the end of the day is something we have to keep in mind. the window to shape this policy is short.
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even with w and obama they got little done on the economic side in the first two years of their administration. >> the republicans under obama were famous deficit hawks. anti-deficite religion but they lost under the w years. people are betting they are going to forget about deficits again. people are making big bets on infrastructure. caterpillar surging. what do you think about this? jim: let's put this in perspective. anddriver for commodities construction is not going to be the united states. even with an infrastructure boom. we are talking $1 trillion over 10 years. $100 billion a year and infrastructure. china does that pretty much in a week.
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down.slowing joe: this is small potatoes. jim: relative to the global commodity market. that plays in beijing, not washington. scarlet: one of donald trump economic advisers says donald trump is looking into may be setting up an infrastructure bank to fund these projects. nevermind the fact that hillary clinton proposed that and the track team said it was a bad idea. ideaus about what the could mean. again,e idea here is from just reading his website. it would be a public private partnership. it would not be let's just pass
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a law and build bridges. and borrow money. it would be a hybrid. if we look at the hybrid partnership projects, toll roads. selling parking. they have not been great successes. the amount needed to get a return tens to make it less of a good deal for the taxpayer. you only get projects that will have an immediate economic return. sputter lot of other things. replicating a toll road between two busy cities doesn't help is new as putting in something somewhere. this is the problem. joe: when you hear public-private partnership, all start tooney, do you sense opportunities in the days
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ahead? jim: no, no. it is too early to tell. we don't really know specifics. we don't know implementation. we don't even know people yet. it is too early to tell what a roadmap for political aspects are. we are going to be looking at the companies. to indicated this has led ways to play things. usually that ends up disappointing people. the idea that immediately this is going to how -- help is much more problematic. unwind andw and collapse coming. are you still bearish on caterpillar? jim: we are. it has not mattered. in 2012 caterpillar was supposed
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to earn this year, $15. the stock is up a little bit. the cruelty of markets. rightn get them really and get the stocks wrong. at the end of the day that is going to take a lot more than an incremental $100 billion. what's going to happen to interest rates, the construction boom that has occurred may more than offset the infrastructure. a lot ofw the chart that caterpillar rally was before this election. what is the market? market -- le the jim: it was china.
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most of the moves started a while ago on the back of china increase stimulus. also, they cut back production in the coal mines over the winter. a shortage. created this has dragged up copper prices. the whole complex has been going up all year. joe: you have been warning about balances and overcapacity in china for a long time. is there still some huge reckoning out there? jim: we are just climbing to higher rungs in the dimon -- diving board. what cannot grow to the sky will not. we are as bearish as we have ever been. scarlet: to wrap up our
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conversation on donald trump and his policies, i understand it is too early. in general the since the regulation will get rolled back. what opportunities does that bring to someone like you looking for corruption or wrongdoing? too sure.ot one of the interesting developments we have seen this year was in the congressional hearings. in the drug area and wells fargo. onthe past you could rely the republicans in the senate and the house to provide cover for business executives who are brought up for a grilling. that is not what we saw in 2016. republicans were every bit as aggressive.
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the populist movement is also being affected on the hills of congress. they are the party of the working man. the behavior is hurting the consumer. we are going to pick up on that thought and a bit. he is sticking with us. could we see more populist uprisings around the world? this is bloomberg. ♪
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scarlet: breaking news on cisco.
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the company reported results. theoutlook missing consensus forecast. down by 4% int is after-hours trading. -- no supplies it is down by 4% in after-hours trading. with jim chanos. now that the elections are over, it appears people are sure to pay attention in europe. we were talking about populism rising on the right. it is not a u.s. contained story. what do you attribute it to? is there an underlying element to it? jim: we may be seeing one of sawe see changes that we going back to 1932, and 1970 with fdr. labor and then the
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80, thatcher and reagan. and we solve the breaking of the unions. basically 34 years of the advent of capital over labor. of a was a better part fair market in bonds. street rates wall for 14% in bonds were called certificates of confiscation. this is something that is global. if we are seeing an ad that of the middle class and the lower classes fighting back, income capitalism,, crony then it is a big deal. it is something that you will have to adjust your lifestyle
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to. scarlet: you made that link. instances of being on democrats, do you think populism leaves too good or bad governance? jim: that will be different. a more populist set of viewpoints in many ways will be more regulatory. enforcement, more criminal actions. you could get the same thing or worse. that is an important thing to figure out. coming,the referendum we have the rise of the right in france. if you see the dissolution of the eu then you know that is
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something much more momentous. scarlet: you mentioned the italian referendum, the dutch elections,rian german federal elections will be a big one. joe: the was a great headline about the french election. obama was in greece this week. you paid a lot of attention to the eurozone crisis which started in greece arguably. how much are we paying the price for having done a bad job dealing with the financial crisis? jim: a lot of that drove this election. the resentment of what happened ,n 2008 with the bailouts
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we arewalking scot-free, still paying the political price for that. it has not been forgotten. europe's crisis was more after-hours. they are still almost white-hot. the difference between north and south of europe. right there it is still playing out. >> give us an update on how your portfolio picks are planning. >> we are not short anything. idiosyncraticmost . a lot of one offs. bad businesses. you would see much more thematic things in asia or america.
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i will pass on the idiosyncratic names in europe. we are still short the commodities base. a lot trade in london. joe: what is the thematic trade in the u.s.? jim: we got lower to the ground in our energy shorts late last year. we have put a lot of them back out. i continue to believe the north is anan production space uneconomic business model. a lot of what people thought and hoped would happen, these companies would be put out of business and would not get capital. that has not happened. they are getting capital to increase production going into next year. none of them have generated anything. joe: they sound like zombies.
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jim: they are much more than zombies. they are growing again. unfortunately they are growing on an economically -- an economically. scarlet: jim chanos is sticking around. on wallhe big stories street is what donald trump is going to do about financial regulation. ♪
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scarlet: we're back with jim chanos. i want to show you a chart on the bloomberg. how the financial stocks have zoomed higher after underperforming financial estimates. this is the average price target
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for the next 12-18 months. thate now have moved above analyst estimate target. joe: i was thinking about how a populist administration could be more regulatory than a regulatory climate. do you think people who are flinging their money at this election are ignoring a lot of signs that the administration it may be hostile to banks. >> more punitive too bad behavior. what hasok at circulated steve bannon. he advocates a hard capitalism. that is something i find refreshing. failure is failure. taxpayers should not be on the hook. joe: he thought it was mistake
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that no bankers were jailed. jim: he did. you are success and penalize failure. not the taxpayer. that would be a change. go with how does that speculation jamie dimon to be the treasury secretary. jim: i guess that is speculation. we will see. it appears to be the trunk. you have a handful of populists. mike pence, handling the transition. not chris christie. traditionale establishment wall street hedge fund private equity types as well. stay tuned. mentioned, wall street
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raged against him and thought he would be horrible. financials have done extraordinarily well since then. seen the apartments of tim geithner, ben bernanke, , you would have realized quickly that the president at least an economic and financial matters was going to be more of the conservative democrat. that would have shaped your views. don't go anywhere. we want to get more of your calls on commodities and everything else. this is bloomberg. ♪
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with us. he is the founder -- we talked about china. they are skeptical on them for years now. the concern china has dissipated over the last half year and it is no longer the front page. would behought this the year we would talk all about china. scarlet: do you think the chinese government has used to -- been able to handle the economy better? jim: it is off of the back pages because it has been off of the back pages before. what is relentless is the economic model grinds on with more and more debt, more and
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more reliance. wasbuzzard was -- buzz word reform. . that has not happened. joe: how do bubbles and? jim: they end for a variety of reasons. including short-sellers. typically the furthest they get on in which you are borrowing , that ispay interest when you are and the last of one of these. we are in that realm and china. more and more of the banking system is getting stretched. the banking system is relying on shadow banks despite warning against it. involvement, stay not less and less. the idea was government was going to pull back. every time the economy takes a step down the government has
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stepped in to alleviate that with aggressive spending. playbook.o other that is the only thing they know. scarlet: is the government supporting alibaba? which you are sure on. the government may end up having an impact very this government is very anti-digital. they see the internet as a power base in in itself. certain internet entities get powerful. alibaba is a commerce vehicle. when they get paranoid about the size of the company. speaking of the power of digital's, one of the biggest losers, big tech has not done well after the election.
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a lot of theories for why that is. people concerned about facebook growing to influential and there being a crackdown on that. amazon workogle, can't lose stocks. what is your take? >> portfolio managers have to sell something to buy a caterpillar. narrativeome basic beingtechnology out-of-favor. who knows. it is too early to tell. election, is this what we see in these tech stocks bubbly? jim: it depends. we are stock guys.
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there are certain things we think are overvalued. other things are borderline cheap. the point being that everything is moving together right now thematically. i think over time that is going to dissipate. take a look at net neutrality which the obama administration embraced. he has talked about that not being fair to telecom companies. companies that have benefited from net neutrality have been hit pretty hard. will he enact anything? we don't know. scarlet: what he think what president donald trump will mean for it deals that are pending
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such as at&t and time warner? if we are right about our populist dairy i think there will be fewer business combinations. they tend not to happen. he has indicated some skepticism on a couple of the deals. >> i want to go back on the populist question. it is undeniable that it is there. you have steve bannon. you have a lot of rhetoric. it doesn't think like investors are thinking about that at all. jim: you have noticed that. joe: is this a common bias investors have? i think willful blindness. wall street likes to think of itself as being able to shape
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candidates. it shaped the last president who came in not knowing much about economics and finance and relied on people who had been there before and were wall street insiders. you can make the case that donald trump may be doing that. but there are some signs that is not the case. i think this is going to work out over the next handful of weeks but wall street is not counting on that. that would be the wildcard. we get a move to a hard capitalism. government is not assisting the 1% to the extent that they have been. scarlet: wall street things they can shape the president. this that mean donald trump will be keeping score? by the yield curve? what is he going to use?
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jim: i think you will hear from his voters. his power base is different than previous republican administrations. the republicans are now saying we are the party of the worker. .hat is an amazing turnaround the democratic party was always seen as the champion of the little guy in the republicans of big business. >> is everyone saying that? >> no. that is what makes this interesting. the republican party is divided over the spoils of winning. the democrats are in the corner tending to their wounds. that is what is interesting. this is a fight for the heart and soul of the republican party. it is going to be carried out in
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the halls of power. they have the levers of power now. joe: going back to china. sort of jumping around. , you mentioned caterpillar had a great year. the hard commodities have done fantastically well. iron ore and copper. what is next? should this last for a while? let's say china is doing whatever it can to keep the engines of the economy roaring. could this keep going for a while? jim: the indebtedness of the commodities, the great thing about china is when china once a bubble going it does get one. when they told people to buy
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bonds, or real estate, they did. now china has encouraged people to buy commodities. it's crazy. even a futures are breaking records. recently they have told the cold mines they would shut down to balance prices. it could begin again. that is worth keeping. , theof these things chinese economic model, people are paying for inputs, watching coal and iron ore prices go through the roof. are helping the coal industry. joe: the steel companies are getting squeezed. jim: exactly. this is the problem with the state directed model. to help one area and her another.
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-- you think you are helping one area and you hurt another. scarlet: they are looking for something that is yielding significant or meaningful. it is from one direction to another. joe: right. and some does leak out. we have seen gaming revenue pickup year over year. or start to accelerate. is this money leaking now of the system? jim: the government is trying to the currency from going down faster. one of the interesting side notes, as it relates to the u.s., because of depreciation china is not catching up to the u.s. anymore in terms of jvp -- gdp dollar terms. that is one side now on this. people are finding a way of
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getting money out of china. now we have giant corporate mergers by chinese companies. joe: is trump working out of a updating -- outdated playbook? most people think the currency is being intervened. that it would plunge much further. advisers, theyf are relatively hawkish on chinese activity. scarlet: jim chanos is sticking with us. the big story tomorrow, shareholders voting on teslas deal with solar city. we are going to get his thoughts on that. this is bloomberg.
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scarlet: shares of first solar are plunging because it's forecast for earnings was below analyst estimates. the consensus estimate for was for $1.82. first solar says they are restructuring two years of unexpected losses and cutting workforce at manufacturing facilities. down by 11% in after-hours trading. joe: we are back here with jim chanos. first solar is down from $70 earlier in the year. what do you make of that? jim: it's a pretty bad business. i am bullish on solar becoming a source of renewable energy. it is not going to be great for
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shareholders. it is going to be good for consumers and some utilities that get into distributed solar. large installations where they distribute it. but the business of putting things on peoples roofs is not economic for the companies doing it. that is the real problem. that is why we are seeing disappointment. joe: speaking of solar, we are a day away from shareholder vote on the merger of tesla and its sister company solar city. you have been negative about tesla and the elon musk family of companies. it is still very high compared to where i was. -- where it was. what do you make of this combination? jim: i think the combination is absurd.
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i don't know if i can sugarcoated anymore but it is ridiculous. rooftop company. it just shows the risks that are inherent. there is deflation going on. tesla is taking on these debts. there is negative cash flow at solar city. the shareholders have to have their heads examined. they're are going to rule the day they did that but they may in fact do it. i was looking at the bloomberg , back in lateate 2014, the estimate for tesla earnings were $18. they are now $12. interestingly the multiple on his, which is our benchmark about the same. now about 190.
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yet what tesla and solar city have going with them is elon musk. he is a master of generating capital. jim: raising capital. joe: an important clarification. whether it is through investors are subsidies. what is the story he is telling? why is it effective? jim: i was at a conference and someone asked about silicon valley. merger asked about this and the business models. i made my usual snarky comments. came upat night someone to me and started poking me in
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the chest saying you don't get it. i think that is part of the problem. we are wall street focused on numbers and business models and something sustainable. are you competing in competitive businesses. there it is a different viewpoint. it is a holistic viewpoint. if it doesn't work, it could work something else out and he is a genius. so far that has been right. joe: how is it different from amazon? there have been people that say they are different. jim: completely different. and alibaba are compared to amazon i have to laugh. amazon went public in 1996.
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they have been free cash flow positive every year since then. amazon's business model was brilliant, it was the glorified dell model. we buy something on amazon. our credit card is charged immediately. 180 dayshe supplier later. we financed amazon's growth. amazon only has 20 billion invested in its business over 20 years. that is nothing. his genius was to create a there wasn which synergy off of the platform. elon musk is in the car business. that is a different business. cutthroat margins. needed.mount of money it is a completely different old business.
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it is an old economy business. he has electric cars but beyond that he is competing against audi, mercedes, gm jim:. jim:what does the in game look like? how do you see that company getting restructured? jim: i think tesla survives. it becomes a large niche are the maker -- automaker. not the scale investors have priced in. jim: it is not going to be greater than gm. scarlet: what do the silver cities in alibaba's need to do for you to change your position on them? jim: we are numbers junkies. we're going to look at every quarter. in the case of some of those, accounting. if something changes we tend to change our mind. that the companies you
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mentioned, things are getting worse. not better. joe: one more thing about elon musk. whatever you think of tesla, extraordinary salesman, raising capital, that video walking all of those people. is there anyone you can think of in recent history that is a good analog for him? jim: his supporters would say steve jobs. being ahead of the curve. joe: what about his detractors? jim: i will take a pass. i don't want to make this ad hominem. i think the business model is problematic. scarlet: jim chanos is sticking around. joe: coming up, -- scarlet: jim chanos is not leaving without is asking one more question. stay tuned. we will get you up for tomorrow 's trading day.
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this is bloomberg. ♪
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jim: we're back with jim chanos. -- scarlet: we're back with jim chanos. what is the next enron of our era? jim: the largest frauds we see right now beyond a shadow of a doubt are in the people's republic of madoff in china. the counting the banking system, individual companies, there is just a low standard for accountability and accounting. they make u.s. companies that are aggressive just look like
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child's play. here in the u.s., one of the things i teach in my fraud class, it is almost easier in this cycle because some of the accounting fraud i see is staring you in the face in terms of earnings. thing the ease -- fcc is concern about -- sec is concerned about. valeant, people believe it's going to earn six dollars this year. a well-known investor said it was cheap. they lose money. there is a reason why those are expensive. use, we areead
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going to present numbers any way we want. hewlett-packard has been taking restructuring for years. at what point is something not in a restructuring chart is just a cost of doing business? endemice indemnity -- everywhere. joe: speaking of industries in distress, hedge funds. lots of critics. lots of universities and endowments. pension funds not seeing value in investing. is this a cyclical thing or is this structural decline? they're just don't need to be as many? jim: i have been a critic of my industry for a long time. the fees are just too high. a large part of our industry has been charging is excessive fees for not a lot of excess performance. less than market performance.
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if you do the analytics correctly. that has to end. committeesvestment and they see it from both sides. there has been some movement in the last three years on that. capacity in lot of the hedge fund industry is simply overpriced glorified mutual funds. that will change. one of the things i worry about is the move by large funds to take money out of hedge funds which have underperformed. and put them into venture capital and private equity. that is a leverage directional investments. with the same if not higher fees than hedge funds. that is a little worse.
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i would much rather see if that is your concern, to go to low-cost equity exposure than high cost leveraged equity exposure. we covered everything. we started with the election, china, europe. one thing joe and i have talked about is the developed world. how there have been failed political states. with all of the upheaval, are we likely to see a western european nation join a failed state? jim: what worries me in this question is the movement we have been talking about of more authoritarianism in the developed world. , we havelary to that gone from the haves and the masses and thee scapegoats. those that we must victimize and
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target for our misfortune. that is a little frightening. scarlet: very well put. thank you for
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mark: with all due respect to the 21 club thanks for the heads up. on our magic show tonight, chuck schumer tries to pieces party back together and transition team times to make that press vanish. there is a new contender for secretary of state. our friend and colleague msnbc joe scarborough reported donald trump is considering nikki haley . that


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