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tv   Bloomberg Markets Americas  Bloomberg  May 2, 2019 1:30pm-2:00pm EDT

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consideration today after losing republican support in the senate, largely over past writings about women. moore said he regretted the writings and they were met as humor columns. trump'ss an advisor to presidential campaign. a house judiciary hearing today featured an empty chair for attorney general william barr lasted less than 30 minutes, but the panel says it will continue its investigation. barr had been asked to testify about special counsel robert mueller's report, but the justice department said he wouldn't appear. committee chairman jerrold nadler says barr will be held in contempt if you does not negotiate in good faith. in the u.k., a secretary hit back at prime minister theresa may. he denies he revealed secret discussions about huawei's role in great britain, and he said that firing him was useful way to show that she is strong and bold.
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may said yet compelling evidence that williamson was the culprit. in india, nearly a million people have been evacuated ahead of what is expected to be a massive cyclone. it is expected to make landfall along india's eastern coast friday, with winds up to 124 miles per hour. forecasters say storm surges could reach five feet. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪ >> live from bloomberg world headquarters in new york, i am taylor riggs in for shery ahn. amanda: live from toronto, i'm
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amanda lang. welcome to "bloomberg markets." your other top stories we're following around the world. another fed pick is out the door. resident donald trump says stephen moore is withdrawn from consideration for a spot on the board of governors, hours after moore told bloomberg he was all in. tesla's cash drain. the electric carmaker is hoping to raise $2 billion through debt and stock offerings. and hedge funds are resurrecting the cdo trade. why this time they say it will work. here.check on the market we are seeing a second day of declines, ahead of economic data, jobs numbers tomorrow. we are seeing some consternation around trade news and maybe some disappointment emanating from farmers of what happened between the u.s. and china. it is a down day. we are seeing energy one of the big on the s&p 500. -- one of the big decliners on
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the s&p 500. big names including caterpillar and disney weighing on this market. tesla is a bright spot, though. if you like plant-based food from you might look at beyond meat. it rocketed out of the gate, as you can see. 34.3%.p a whopping off the height of the session, but they are gobbling this one up. taylor: i want to talk about positive stuff i'm seeing in the market on a more short-term basis. covering below the lows of the year. analog devices, a man -- on a long-term basis, amanda, this chart does not get more elegant. crossing above the 100-date moving average. you are getting very, very long-term support. this is as the ceo came out and made a $4 billion acquisition in the medical devices area.
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one of the biggest acquisitions they have made, trying to turn around a pretty bad first quarter. we saw some broad-based declines across the business. short-term, not a good story, but long-term, this chart looks better than you would have thought. amanda: it does indeed. we're looking for glimmers of reasons to be optimistic about the u.s. economy. we did get one in the form of productivity. as increase, 3.6% gain on an annualized basis in the first quarter. we can put that in the optimist category. taylor: and we have been talking about industrials, the classic industrial story. you today they had been a massive outperform or, outperforming -- year to date they have been a massive outperformer, outperforming the s&p 500. jerome powell said the economy is good. john state in the u.s. is shipping of -- jobs day in the u.s. is shaping up relatively strong as well. amanda: we are to figure out
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what the fed is going to do. it remains the top story, president trump's fed pick stephen moore reportedly deciding to drop out of the process, according to a tweet by the president. it was just an hour ago that in an interview with bloomberg's moore said he was confident he would win support. stephen: it will be different three months from now when i go before the senate and the banking committee and the full senate. i am not too concerned about this. amanda: we have with us bloomberg economics -- a bloomberg economics reporter. the other thing moore said today is that he doesn't think president trump's call for a full-point reduction in interest rates is the right one. you wonder if this was voluntary withdrawal or not. >> i am not going to speculate on the timing of the decision, but it was clear he was not going to get confirmed. we did hear very clear signs of
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that happening. i think that it just tells you they have to choose somebody who would really be balanced and have a very solid economic background. taylor: we know he had been a little bit critical of jay powell. we heard from trump talking about cutting rates. where did he stand come and how does that compare to herman cain, who was also out? what do we do next? polls reallyf the support in terms of no hikes in december. that would have made a lot of sense. in this respect it is actually a good thing when you have a diversity of opinion on the fed and i'm all for it. look at what happens when everybody thinks the same way. sort of collective thinking, right? you tend to make mistakes. we actually think the december
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rate hike was a mistake. in that respect i agree with him. at the same time, the key thing to remember is that you really have to make decision on research, data, and not political biases. amanda: we are seeing -- speaking of political, the politicization of the fed in a way it is hard to recall ever seeing before. picks being combed over. obviously the language from the white house about fed decisions. does that change your thinking about the power and control the fed has over their own policy going forward? yelena: i think going forward we have to think about what happens in 2021, what happens to the nomination of the chair. if president, trump gets reelected, he will probably have to fire chairman
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powell. at this point we have to talk about the risks of what happens next and who will become the next chair. taylor: who wants to become the next chair. and for more i want to welcome the female capital markets head of rates strategy. is you heard from yelena have to appoint someone who is a political, not politically motivated. can we get there? >> under the current administration it appears to be challenging to get there. the one thing the fed has an truly values is central banking independence, and that has allowed them to act truly in the best interest of the economy and not so much in terms of a political campaign or pre-election campaign as we move towards 2020. each sitting president would like the easiest monetary policy ever in order to get reelected.
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the fact that what is going on in the fed right now happens to correspond with trump's reelection campaign is more serendipitous than anything else. taylor: this is the news of the day, but we cannot let that overshadow what we got yesterday, jay powell, and in your notes it comes down to inflation. at what point is inflation so low for so long that it is no longer transitory? when is it more of a structural issue? ian: we saw on monday a year-over-year core ece percent that is very low, trending in the wrong direction. the chair hopes it is transitory. the chair hopes that this drop we have seen in consumption also rebounds, and we have a stronger economy in the second and third quarter. there is a lot of optimism baked into that. if we look at what has been driving inflation, the two major components, one is shelter and the other fluctuation into apparel prices and to a lesser extent autos, and if you take
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that outcome of the trend has been pretty dire for inflation. in terms of real yields, which arguably is going on in the market today in terms of the selloff in equities, there is tightening being done for the fed. amanda: regardless --sorry -- taylor: go ahead, amanda. amanda: regardless of what you think the fed did in december and there are differing views on that, what is your thought on maintaining the stance as they did in terms of the many uncertainties that remain out there? ian: i'm very much on the same page that we are at the end of the tightening cycle. the question is, how long can the fed hold that stance before they have to cut rates? obviously, the parallels have been drawn between the current situation and what we saw in the 1990's. in that situation, the fed was able to orchestrate a soft landing for the real economy,
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and that is what they are trying to do at the moment. we did see an adjusting weak to thet interest on excess reserves from which the market responded to quickly, assuming it was a real rate cut. how will was able to -- powell was able to walk the market back from that assumption. amanda: we just saw that reversal from goldman sachs and the call on commodities as they rethink the macro geopolitical risks in the world. those have a big very on the u.s. -- big bearing on the u.s. dollar and attractiveness of u.s. treasuries. what is your thinking on whether those are properly priced or could change in our it? -- change in a hurry? ian: as we saw this year, they can change very quickly. the pendulum of economic optimism which had been focused on recession is now something closer to balance. in that context it makes complete sense for people to be incrementally more optimistic.
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i'm cautious that it might go too far. the reason i'm more worried about that is this is all predicated on the fed not hiking very, the fed retaining a easy monetary policy and presumably cutting at some point. if the fed takes on a more hawkish stance, we might see a reversal on the global front. taylor: in the midst of this hawkish stance, i want to talk about great calls. you talk about a tactical view 262. range on between 250, it seems like we recovered with expectations on the 10-year coming back to 250. where do you see short-term range bound between this the?-- this view? ian: the most exciting part of the treasury market right now is the rate of the yield curve pushed up against 25 basis points yesterday. for -- this balance
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could occur with 10-year yields between that range because it is bullish and nature led by the two-year sector as we price in -- obviously, that is not today's trade, but in terms of that specific range, we are going into a very large 10-year option next week and we have the cti data. it follows intuitively that we would see more pressure on rates. pressure on rates will bring in buyers. the question in my mind is does 262?occur at 257 or taylor: conversation on your kurds steepening. thank you. in the midst of all this conversation about stephen moore, he did write a letter to the president. "i respectfully asking that you withdraw my name from consideration. the unrelenting attacks on my character has become untenable
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for me and my family." coming up, tesla is changing lanes on its capital needs. the carmaker is charging up to raise $2 billion. that story is up next. this is bloomberg. ♪
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taylor: death amanda: this is -- amanda:
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you that the story can change from and where does, -- when it does, it hurts. amanda: to that point and even though the credit default swaps show optimism for this name, we talk about the cash burn rate every time we talk about tesla. when you are offering of high-you'll debt -- high-you'll debt, cash burn is not your friend. craig: and that is what it is surprising to see them go to the bond market in particular. there is debate on what the best approach is here going to round of equity or debt. i think it is a company that is potentially going to have some catalysts of having local production up and running in china later this year, and there is an expectation on the part of tesla that that will be a big bump for them in the sense that they have local production
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eligible for incentives, and that is a huge and growing market for them. there is still -- they are still some of getting the sea legs above them in europe. there is reason to think this was a bump in the road in the first part of the year. we see this as cyclically one of the toughest times of the year for all auto companies and that is one of the excuses you hear musk make. it remains to be seen whether they are able to get back to the level of deliveries we were seeing from them in the second half of 2018. amanda: great to have you with us, craig trudell. thanks. coming up next, signs that perhaps as it managers are .racing for a market slump we will bring you that story. this is bloomberg. ♪
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taylor: hedge funds are reviving a securitized product that blew up during the financial crisis. money managers are resurrecting ceos and saying this time they will work. our bloomberg credit reporter is here with the story. my first concern is you have seen a massive compression of spreads on the high-yield indices coming in about 200 basis points this year. is thisval of the cdo, another way to grab onto anything with yields? >> i think we are seeing some of that, taylor. if you are there is an insurance company and you need high-yield, you need something that is safe by can also get the higher return. that is kind of what cdo's are. they are referred to as a form of ratings arbitrage, which means you take high-yield debt and package them and securitize them and they become a aaa security. amanda: what are some of the tweaks being undertaken this
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time that might protect against the downside? we are seeingo's comeback are not subprime housing. this time we are looking at corporate bonds, corporate loans. the level of leverage overall is much lower. that is what you will hear issuers saying about why you should be investing now and why some of those fears of a downturn, these structures not holding, are overdone. taylor: but is that true? we have heard some people talk about how corporate debt could be the next bubble. there have been a lot of concerns about the amount of debt they have been taking on. is it different this time even though we are looking at corporate debt relative to mortgage backed securities? claire: i think it is a good question at this time. you have money managers say that we are comfortable and cdo's in a downturn could do well because you are flexible and could buy that beaten-down bond and ride the rally.
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on the other hand, these are untested in the new environment and there are questions on how they will perform. amanda: one of the day questions would be how they perform in the event of rising defaults. that core people who -- that caught people who sought to weigh the risk in 2008. are we doing well? claire: so for the default rate has been low. these securities could perform better in a downturn, so the issuers say. we will have to see. a lot of people are expecting the credit cycle to turn at some point because we have been in this period of stronger for so long. amanda: great to have you with us, claire. prime minister abe is back in japan after a trip to ottawa where there were diplomatic mishaps. during the welcome ceremony, prime minister trudeau twice referred to the strong ties between canada and china before correcting himself. the japanese leader did not let the gaffe get in the way of
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enjoying himself. he brought a souvenir wouldn't beaver doorknocking which he showed off in an instagram post. iylor, i don't know which like better, that shinzo abe has an instagram post, or are we -- we don't have these up here in all our houses. it is not a canadian thing. taylor: it sounds like instagram videos are much more exciting. amanda: quick reminder, you can catch all of the interviews on the bloomberg. the function is tv . catch anything you missed. from toronto and new york, this is bloomberg. ♪
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mark: i am mark crumpton with bloomberg's "first word" news. house judiciary committee held a brief hearing this morning with lawmakers facing nmb chair after attorney general william barr
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informed the panel he would not show up for the panel on special counsel robert mueller's pressure report. chairman jerrold nadler says that barr has a choice to stand up to president trump. at one point representative steve cohen place a plastic chicken at the witness he. representative doug collins, the ranking member, was not amused. rep. collins: you can disagree with him all you want but he sat for six hours in the senate voluntarily even after the second round was taken up by democrats wanted to ask questions. did he do good, did he do that -- we are not getting the opportunity because the circus continues here. mark: barr's decision not to show up came the day that the department mr. committee deadline to provide it with a full unredacted version


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