tv Whatd You Miss Bloomberg June 3, 2019 4:00pm-5:00pm EDT
button all that much. i really think the focus will be on trade talks and to see how that goes. unwinds, theynd will probably have to accelerate on monetary easing. caroline: perhaps that saved us from bigger losses. the s&p 500 closing down just eight point. the nasdaq was a clear underperform after we saw concerns. probes from the sec and doj being aimed at the big tech companies. we are currently seeing the lowest since february 11, 2019. joe: let's dig deeper into the action with our market reporters. >> i'm going to pick it up where caroline left. the nasdaq entering correction territory, now down 11% since
may 3. >> it has only taken a month to fall this far. it fell about 2% today. came from those same stocks in the sec, doj probe. google off 6%. google off 6%. amazon off by more than 5%. if you added up, these names lost about $140 billion in market cap today. >>tech stocks and in particular some of the ones that might come under the regulatory antitrust crosshairs. if you look at the applied volatility spread between options that give you protection , kind of 10% decline compare i'm sticking on basicale same theme. that to more on the others, the generic three-month protection, there has been no
move upward. there has been a little tick essentially in the amount of versus theotection general market, it is lower than it was at any point during its lifetime in 2018, essentially the second half of 2018. emma: i'm taking a look at the bond rally continuing today as investors speculate that we will see the fed or month. st. louis fed president the first to publicly call for such a move. take a look, we have both of them here, the blue line is the 10 year yield. 1.75% bys i've -- years end compared to a prior forecast of 2.45%. they said it would hobble american economic growth. they specifically mentioned the president's latest threat to
impose tariffs on mexico. they said it would have lasting negative effect on business confidence. only shock asthe it is adjusting. goldman sachs also lowering its forecast for gdp growth and morgan stanley warning of epicentral -- warning of a potential recession. fromstill with us, chad washington crossing advisors and bloomberg's sarah ponczek. five days in a row we have seen em outperform the u.s. despite the fact that trade has been so important. do you have a theory for what is going on here, and could this persist, could this be a turn in the u.s. versus rest of the world relationship? >> no. i'm a strong believer that investors should be focused
u.s.ely or overweight the at this inflection point. i think this em outperformance over the last five days is because of somewhat softer economic numbers that have come in and concern about the yield curve. the em, we believe that andy is related to china the fiscal stimulus and credit growth that comes from china. we don't believe that is going to reemerge and accelerate. we believe that is going to decelerate and cause a substantial markdown for global growth over 2019 into 2020. again, we would be quite concerned about emerging markets at this point in the market cycle and we would be avoiding that area. >> talk to me a little bit about the bond market. earlier, you were mentioning high-yield, saying the grant --
saying they needed another 50 basis points to get the fed nervous to start cutting interest rates. >> when we look at the bond market, we are not looking only at government bonds but also the yield market. you are not right -- you are not quite there where you are starting to see financial stress getting layered into this market . started the when we interview, i was cautious that this could get much worse and accelerate. we would perhaps be somewhat more concerned if you start to out,igh-yield spreads flow the markets start to become a little bit disorderly and whatnot. that is where you will get that response from the federal
reserve that will be a lot more aggressive and where they will signal that they will drop rates perhaps not one time but twice. i don't think they will hit the panic button all that much. caroline: we were talking with scott from guggenheim earlier saying it is looking a little overboard, the bond market. however, you could see the two year hitting 1.5%. >> i would say, across wall street, we are hearing many people come out saying the bond market is overbought. again today, you see yields falling once again. we got as low as 2.06. bank of america made that call, saying we could see the 10 year go as low as 2.05%.
they still seem to be the outlier. now we are pretty much there. it is amazing how quickly we have moved. we are also dealing with headlines saying we may see cuts. at the same time, he has been a dove, he has always been a dove. people are saying, i don't know if he represents the entire fed board. joe: there is so much news right now. whether it is the fed, now tech, trade, what is next? it is hard to keep a straight line. the one common denominator seems to be that the reason the stock market is still lower is because the labor market is strong. the portions of economic data that you would need to really see rollover to portend worries have been fine. job day on friday. i would say that is probably what i'm looking at next. forline: i will hold out
thought. the s&p 500 down in the green. the nasdaq, just a hit. , apple,rutiny, facebook amazon shares tumbling on reports of a potential u.s. antitrust probe. wall street rings the recession on trump's trade war. democratic presidential candidate andrew yang tells us how he plans to stand out in his crowded 2020 race. joe: we begin with big tech tumbling. the companies appear set to undergo u.s. antitrust probes after the apartment of justice and federal trade commission agreed to split up oversight of the technology giants. joining us on the phone is scott calloway from nyu and the author four." people have been wondering about
this moment or a theoretical moment like this for a long time. when will washington get serious about regulating big tech? is this the turn tech investors have been concerned about for a long time? >> it appears as if we are definitely one giant step closer although this really isn't a commitment. they haven't announced a case or an action. this is some folks going on background saying, how will we divide up our responsibility. ftc, you are taking amazon and facebook and we, the doj, will twitter and google. it is definitely a flare across the bow and a sign of things to come. taylor: bank of america merrill lynch analysts this morning said that long-term it could be good for the evaluation of companies like alphabet and google if they were broken up.
what is the case to be made that this is a good thing? >> that is exactly the correct question. we saw what is arguably one of the worst days for these technology firms in along time. they shed tens of millions of dollars today. if you look empirically at what happens, either doing a spin like ebay did with paypal or what happened to the telco companies after they were broken up, and almost every instance in the medium and long term, the aggregate value of the spun companies is much greater than the original conglomerate. this might actually be a buying opportunity. what do you think the president is here to look at? you think it is finds we might see, or do we look more toward perhaps trying to change the business model as the eu has potentially done but really just
tinkering on the edges. what do you actually think congress could really pass that might turn into some realistic regulation? >> there are fine, -- there are fines, but they have proven themselves to be somewhat negligible. i would argue they actually embolden these companies. a $3 billion to $5 billion fine on facebook is equivalent to seven days of income or seven weeks of cash flow. it almost sends a signal that you can get away with these things. antitrust, breaking these guys up, i think in my view solves a lot of the problem i think competition here would give each of these companies an opportunity to try and make the case on different dimensions whether it is content that has been screen, or perhaps the opportunity for more venture
backed companies as they see and opening it companies not dominated by monopolies. i don't member what year it was but a long time ago when facebook bought instagram, i don't think anyone was talking about regulators and whether a deal like that should be blocked. i wonder if an equivalent deal today probably would see a lot of scrutiny. i wonder if this has a ripple effect across the startup whoseape with companies future was premised on flipping to a facebook, amazon, google, will have to admit that will be as easy and the current environment. >> i would argue that the fec -- the ses -- the fcc's clearance was probably -- it will probably be unwound. here, the doj and fcc have not done a great job.
the attorney general and the fcc are worried about sprint and t-mobile merging. they see that as a threat. we have one company talking about creating one network across a population greater than the southern hemisphere which could reach 2.7 billion people with an encrypted back on of whatsapp, instagram, and messenger. a population greater than the southern hemisphere decided by the algorithms and controlled by one person cannot be removed from office. this is overdue, frankly. we have a long, proud tradition of antitrust. caroline: you are saying you think it will be unwound. i fail to see how perhaps that might be supported really by -- really in a bipartisan nature that widely. do you really think that we will see whatsapp, facebook, and instagram redistributed. and again, what is the answer for alphabet?
google is the main priority. do they have to split that is this in some sort of way? exact i don't know the format but what i am comfortable predicting is that these four companies will be most likely six to 10 companies in 2-5 years. the competition is destroying innovation and jobs, and we have seen evidence that leads to really bad behavior. in the case of google, i believe that overnight you would have two viable search engines. google decides to go into video search. rather than coordinating and cooperating, you have two viable competitors in market, search, that is bigger than any advertising market in any nation other than the u.s.. all the free marketers out there, i agree with you. the answer isn't more regulation. the answer is competition. we need to oxygenate the
marketplace with the doj and sec breaking these guys up. the aggregate value of these companies and shareholder appreciation here is substantial as independent companies as opposed to conglomerates. taylor: thank you. that was nyu stern school of business professor scott galloway. coming up, trump trade war goes multinational. china, india, and mexico all caught in the crosshairs with warnings of a possible recession. this is bloomberg. ♪
trade war on multiple fronts. the pain of the trade war as wall street worries about recession and china gearing up for a long-term trade battle over tariffs. forave the senior fellow international economics and a former u.s. treasury department official. u.s. treasury officials will be pretty busy right now. it felt as though sentiment shifted last week, particularly as another area of attack, the mexico focus, opened up. do you think that argument will be fought -- will be fought with tariffs? will they say, you will shoot yourself in the foot if you do this because you will cause more immigration coming from mexico if you hurt our economy? >> i will not try to read the president's mind. it is pretty clear that it came against the advice of his trade advisors and reflects his own
personal decisions, whether he chooses to go for -- to go forward or not is probably a decision of one. i understand why the market acted so negatively. it was a surprise and he rolled out a new legal authority that could be used in an unconstrained way. of underminesort the notion that if the market dips a little bit, trump pares back his rhetoric. time for him to start talking more conciliatory about free trade. brad: that was one view. the other view is that we are seeing a trump increasingly strained by these processes. this is in some sense what trump arguably thought he was going to do when he was running for president. taylor: we have sat here and said tariffs are the wrong approach.
we have had previous administrations who have tried to get china to play the same game, to get us all on the same playing field. what is the right approach? brad: the right approach to fighting a trade war with china is fighting trade war with china. not with china, mexico, the eu, india, and so on. you do have to make choices, prioritize what you want to achieve. i think tariffs can be a tool. i think if you use them to enforce supply chains, they can be effective. they also hurt yourself. there are other tools. investment restrictions, limits on financial flows, which haven't been deployed as aggressively as they might have been. then there is the weaponry around national security, the designation of huawei, which is extremely powerful and needs to
--viewed caroline: let's focus on the major trade war that has been ongoing, china and the u.s., and the fact that china exerted some retaliatory tariffs over the weekend. do you have a base case? should the market have any sort of hope that something could be struck? brad: there are more pivots than i can keep track of. two months ago, i thought we were on track for a deal. you certainly shouldn't have a high confidence in a straight line. my baseline is that the u.s. will go ahead and make tariffs on all chinese trade in july. i don't see the basis of a deal right now.
is oney possible deal where trump and xi agreed to resume negotiations, the u.s. agrees to defer, and probably china buys a few more soybeans. joe: going back to mexico. the interesting things is that these tariffs were announced just as people were getting optimistic about usmca getting past. what do you make of that process now and can usmca move forward? can they be disentangled? brad: in theory, yes. a nationaln done as security tariffs. nothing precludes and normal trade agreement as you are securing tariffs over immigration and the border. in practice, of course not. there's no way mexico, if the tariffs --head with
nor do i see a shot for pelosi to bring it to the floor? taylor: there is a thought that vietnam appears to be winning the trade war. how feasible is it for some manufacturing companies to leave china? who would be the beneficiary? how fast would it start to show up in the data? brad: it already has showed up ready strongly in the data for vietnam. ,or some east asian countries there has been an increase in korean and taiwanese imports to the u.s. it has exceeded the reallocation to southeast asia. it can happen with time. i don't think you can reallocate in full on a 3-6 month basis.
i'm mark crumpton. president trump's promise to impose tariffs on all mexican goods over illegal immigration threatened to increase costs for automakers and other manufacturers and left mexican officials calling dialogue to resolve the issue. a high-level delegation from the mexican government held a press conference at the embassy and wash, making a case against -- making an washington, case against the president's threats. >> what if we have a common vision of how to solve this. this is the question here. -- if thereonly way
are only punitive actions, it is not going to work. it's not working. so we need something else. mark: mexican officials worn the tariffs could cause an additional quarter million central american national to migrate north this year. the president is calling on the uk2 "get rid of the shackles of european union membership and stricken you trade deal with the united states." he says they should walk away from the negotiations if brussels refuses better terms. he suggested nigel faraj should be put in charge of the process. british prime minister theresa may has failed to get the negotiation she negotiated with brussels ratified in parliament. she will step down next month. house democrats are trying to keep the focus on special counsel robert mueller's report.
jerrold nadler said today that his panel will hold a number of hearings on what he called the alleged crimes and misconduct in mueller's report. the first will be a hearing next monday on whether president trump obstructed justice. chicago's police chief is condemning what he called a " despicable level of violence over the weekend. 52 people in the city were shot, eight of them fatally. >> it is ridiculous that we cannot get this right in terms of holding people accountable and finding alternatives for certain individuals. we know who a lot of these people are. how do we know that? we keep arresting them over and over again. it is just a vicious cycle. mark: chicago police believe most of the violence was gang-related. more officers are being deployed around the city.
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. this is bloomberg. the first debate in the presidential -- the democratic presidential race is later this month. one of the candidates on stage will be andrew yang. he joins us now. great to have you. i think you are on the show like a year and a half ago, really early on in your presidential aspirations. i want to start off with some timely news. a lot of your focus is on automation and tech. today we get news that d.c. are beginning to ramp up antitrust scrutiny over some of the bigger tech companies. would you support breaking up a facebook, google, amazon, and so on? , are therehink excesses, yes.
our -- is our antitrust regime out of date? yes. but if you break up amazon on google into four many amazon's , it doesn'tle's necessarily solve the problems you want to solve. we have to be nuanced. tech is unique in that no one wants to use the fourth best navigation app. there's a reason we google things and we don't bing things. taylor: in your book, you open up on a chapter about youngstown, ohio. bringing jobs back, how do you this in yourself in yourself and that aspect against a crowded them aquatic field and wrapped against a current president who has touted his ability to bring jobs back to places like ohio. andrew: donald trump is our president today because we automated away for million
manufacturing jobs. he campaigned saying that we will bring them back. i'm instead saying that we will share the bounty with new innovations with these people in the form of a dividend. the reality, if you go to a car plant, it is a bunch of machines, not a bunch of humans. that is not going to change. we need to own the reality of the one he first century and start distributing the bounty. caroline: this is your freedom dividend, all is -- dividend, as you call it. versatile basal income -- universal basic income as many know it. in some of000 carry the states, and how are you going to ensure that people ?etting retrained as well so they cannot just live off 1000 but something else. thatw: the great news is $1000 goes much further in youngstown then it does here.
if you extrapolate what's that -- what that does, it creates over 2 million jobs right there in their local neighborhoods and economies. it can keep some of these places frankly from boarding up and closing. jobsine: i thought legal where the main ones that were going to go. ohio,st everyone in manufacturing jobs that are going. the major employment sectors in this country are retail and sales, administrative and clerical, food service and food prep, transportation and tuck -- and truck driving. the retraining myths, and i call it a myth because we are very bad at it. the effectiveness rate of federally funded retraining programs as between 0% and 15%. politicians talking about retraining is essentially responsible. joe: i want to clarify something
about the $1000 a month freedom dividend. is it not in? in?s it opt if so, do people lose benefits to other things? andrew: it is universal. you would get it, mike bloomberg would get it if he wants to. if you opted in, you would be forgoing benefits from current cash like programs including housing assistance, fuel subsidies, ebt cards. it does not include social security, health care benefits. joe: so people would be losing food stamps, things like this, in exchange? we leave no one worse off and people can make the determination of whether $1000 in cash is better. a lot of people don't love the
reporting requirements and how they can spend money on certain things. taylor: is that the policy that you feel i can really make you stand out? we often sit here and talk about how polarized we are, that there is no one in the middle really to bring us together anymore. is this your tool to start to bring people together? andrew: the freedom dividend is very bipartisan. i'm going around the country saying that technology is the oil of the 21st century. this policy is not left, not right. it is forward. to take youm going back to potentially other areas you are looking at disrupting. how we have a different health care system. i'm fascinated by the presidential campaign in the u.s.. it's sort of seems an extreme point of view to think you will have a single-payer health care system. in the u.k., this is totally
normal and not wildly socialist. how do you actually bring it to bear? i worked in the health care sector for four years. incentivesem, the end up rewarding activity and protecting from lawsuits, not necessarily increasing her health and well-being. in the u.k., that is really where the u.s. needs to head. what seems extreme here is really mainstream and other parts of the world. on twitter, i asked what should we ask andrew when he comes on? like half of the responses had something to do with bitcoin. i'm curious why you think that your campaign has really resonated with this sort of extremely online demographic of people who care about things like bitcoin, internet, make a lot of memes and stuff like
that. andrew: the problems that we are solving, we have to have 21st. folks that are in the crypto community, a lot of my supporters have contributed to a political campaign before this one. we are already drawing trump supporters, independence, conservatives, as well as democrats and progressives. just to play devil's advocate, we talk here all the time around the table on unemployment. how do you improve from there? what makes you different. so far, maybe his approval numbers don't reflect that the fundamental data we look at every day is good. andrew: it's we are in year 11 of an expansion. that may not go on forever. donald trump the candidate in 2015 was saying that these numbers don't reflect what is going on on the ground.
he got into office and all of a sudden all the staff are real. the truth is that he was right the first time. age one in five prime work americans haven't worked in a year and our labor participation rate is at 63%, the same level as ecuador and costa rica. the stats truly have been measuring the wrong things for quite some time. talk to us about the democratic party in general. you come out the other side, maybe you win and you don't and maybe look at taking a role in the white house. how do you keep the democratic party together? it is going to divide itself during this campaign. how do you then ensure that it is on together? what is it doing right and wrong? andrew: the democratic party is fixated on one fundamental question, how do we beat donald trump in 2020? democrats will be so thrilled
that we are going to come together and have a ton of unanimity about making good things happen for the american people. here's the great thing about the freedom dividend. conservatives, people in red states, people in rural areas will love the dividend, too. the united states, we will look up and say, wow, our government did something right for a change, what else can we get done? joe: will you ever start the pink hats? andrew: we are starting with the "math" hats. make america think harder. but we are happy to expand our store over time. caroline: we thank you very much. democratic presidential candidate andrew yang. coming up, treasury yields continue to plunge but is the bond market a false reading of u.s. market? this is bloomberg. ♪ ♪
caroline: quick check on the latest headlines. ftd has filed bankruptcy productions. pro flowers unable to find a buyer. i lackluster valentine's day. the company has already reached $95 million. chipotle mexican grill could face an extra $50 million in costs this year if the u.s. imposes tariffs on mexico. the biggest cost, higher priced avocados. they say they won't resort to pre-mashed or processed avocados. in a sign that president trump's trade war with china is weighing on the economy, the lowest level since october 2017.
the index missed the median forecast. that is your business flash update. taylor: investors convinced that the fed will cut our own costs over trade tensions. bond yields lower at the fastest pace since the financial crisis. ontt minor on his call treasury yields earlier today. scott: if the fed starts to deliver on rate cuts, i would expect they would cut rates. that would easily accommodate a 2-year note somewhere in the neighborhood of 1.5% and would give us some downside room for 10 year notes. taylor: joining us is bloomberg opinion economist -- bloomberg opinion columnist brian chappatta. we've heard a lot of calls with economists cutting two-year forecasts, 10 year forecast. you are seeing something very different than the numbers out in the basic data.
think the bond market is forward-looking and saying, this is what we think the outlook is. i think they might be too soon. forecasting cuts, cuts, cuts. timenk the fed for a long -- i think james bullard came out and changed that. he is a voter. i think as long as the data -- we have a jobs report out friday. if that is going well, i think they will be hard-pressed to cut rates. he tends to be a little bit all over the map compares to the other people. it is almost like he is the avant-garde here, priming the pump a little bit. brian: he is considered one of the more dovish fed speakers. my view on twitter, even if he is the most dovish, it still
says something if he's willing to come out. he's not going to deviate at such a pivotal time when you have these trade tensions ramping up. he's just not going to be completely rogue and get bond traders whipped up into a frenzy for no reason. he's saying, maybe this is preemptive, but your concerns are valid here. told us: as scott earlier, he is pretty prissy end when it comes to quantitative easing. he tends to be the canary in the coal mine. we heard scott calling for 1.5% on the two year. how much further even if we do rebound -- how much further could we fall? brian: i thought jeff gundlach was right on when he was saying we might be at the top here when 10 year yields were at 2.20,
2.21. we are starting to really test the 2% level. i've been surprised a little bit -- mindless rally is i think how one strategist put it. about are's this cliche bond market being smarter or more subdued. in the end, it is just like any other asset class. bubbles,ave overshoot, euphoria is just like anything else. brian: i'm very into the idea that the bond market is the smart market. treasuries are a hugely global asset class. there are reasons behind -- reasons beyond just outlook on the economy. investors from europe and japan are loading up on safe haven assets like treasuries. taylor: in the bond markets, so often we have to take a look at spreads. i believe it was a few weeks ago, the fed really wouldn't
move unless he started to see high-yield yield spreads really blowout. they are nowhere near levels of 2015 or 2011. is that what it takes? the high-yield market really blowing out to get the fed to move? brian: you take a look at what was happening in december, that caused the powell pivot. it was really risk assets that took a hit, then financial positions which are a proxy for risk assets. --k bonds i think did have the spreads are still nowhere near panic levels. caroline: coming from the smartest asset class out there, bloomberg opinion columnist. brian japan a. -- brian chapatta. some quick breaking news.
enterprisehe software company and dropping as much as 11%, falling at one point below the lowest price since 2016. down,lined pushing stocks and it had previously saw 700 million. having to dart back on its overall views of where 2020 might go. signal onsingle -- a enterprise spending? taylor: coming up, the latest escalations in the u.s. china trade war and the companies in the crossfire. this is bloomberg. ♪
china opens an investigation into fedex. let's get to bloomberg's shery ahn. with the white paper, what caught your eye in particular? shery: the tone. and reaffirms the view from china that this is all about the u.s.. it is laying the blame solely on the u.s. it is interesting because the take that china has on key intellectuals property, they are accusing the u.s. of turning a blind eye to in --s on protecting protecting intellectual property and improving the business environment for foreign investors. this is not what the united states alleges china is doing when it comes to forced technology transfers. gapsee that there is a huge in these trade negotiations,
which brings you to the conclusion that this will take a long time to solve. brad andere talking to he was saying there's not going to be a deal anytime soon. you could have a deal with the g20 where at least they approved keep talking. does that seem plausible when you read sort of latest sign? shery: even in the white paper, china is willing to cooperate. they want to keep talking. they are saying that the u.s. accusing china backtracking is not true when the negotiations are still going on. i do personally think that the g20 will be a good opportunity for both leaders to shake hand and pretend that the high level that they remain very good term, that personal relationships are still a thing and that could lead to a breakthrough of sorts. what i find really interesting
is the white house stance, how it is weird. we have just had mexican tariffs coming in june 10, 5%. you have just got to think, the white house is not backing down on just against china but against other trade partners as well. taylor: the kinds of red tape china can set up. shery: they're talking about blacklisting companies like u.s. has donna huawei. -- u.s. has done on while way. caroline: don't miss daybreak asia and daybreak australia starting 6:00 p.m. eastern. jay powell gives welcoming remarks on the trade framework. joe: i will be watching economic numbers for u.s. durable goods.
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