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tv   Bloomberg Daybreak Americas  Bloomberg  February 19, 2020 7:00am-9:00am EST

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resources to support the country for the coronavirus. installation lives. u.k. prices rise for the first time in six months. pushing gold up. a bullish price target. we will talk to one investor that was burned on negative options. welcome to "bloomberg daybreak." i'm alix steel. the thinking is that the government will come to the rescue of countries struck by the coronavirus. the euro-dollar going nowhere. the dollar hitting a five-month high, the highest since october and crude has the longest winning streak as the coronavirus dominates headlines. we will bring in today's news
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around the world from hong kong to brussels, berlin, new york, and washington. our bloomberg's voices are on the ground with the top stories. we begin in asia. the death toll from the exceedsrus exudes -- 2000 in china. walk me through of what we're hearing from the government in terms of supporting the economy. the 75,000to get to new cases of shared of this virus -- new cases out there this virus. this may have been a lot worse -- a lot worse. there is a 70-year-old man in hong kong who succumbed to his illness at the hospital. he had underlying issues.
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but let's talk about the cruise ships. we have one in cambodia and we whichhe diamond princess have the most localized cases outside of japan. people are being led off that boat and being evacuated. if you test negative, it can reappear. it can remain dormant. what are we doing here? what is happening? they're suggesting a 14 day quarantine when you leave the boat. we were talking about how the chinese market was of third-biggest aviation market in the world, down to the 25th, even though the capacity is down. we have the economy suffering in the chinese government is taking things. to boost there is action taking place at the moment, but for the time being, we are all at the moment
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and a sense of siege. alix: thank you. we turn to oil. brent crude climbing $58 a barrel with an eight straight day of gains. as the russian ministry and his counterpart had a phone call discussing oil market as pressures rise to the been cuts. to beginssures rise cuts. what is going on on the ground? >> at the symposium, the world prince spoke and everyone was -- the royal prince spoke and everyone was excited. boardey or they not on with the 65 barrel a day cut? , they are not certain what the demand impact is just yet. he says people don't always
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agree. sources are saying, he equated this to a fire. if you had a fire in your house, would you use a small, garden hose or call the fire brigade? with a fire brigade, you could damage furniture, but you would maintain your house, and he wants to go with that. there is this divide between moscow and riyadh. riyadh wanted to have an urgent meeting to deal with the demand hit from the coronavirus, but moscow is on a more wait-and-see approach, and it all comes down to the price. alix: thank you. we want to head to brussels spokesperson. margrethe the stata -- margrethe vestager is holding a press conference. >> we were talking about how mark zuckerberg was trying to thatf social media rules they are going to impose on the
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european union. aboutre also talking performers. we are about to find out details. this conference is happening as we speak. introduce new to legislation when it comes artificial intelligence. we will get rules on issues, such as facial recognition, self-driving cars, and and someone, but the main takeaway is that the e.u. is determined to establish its own playbook. they want to move away from the u.s. they feel there has been too much of an american dominance in europe and they want to create their own sets of rules, which is between what you see right now between the u.s. and china. alix: thank you. looking at global businesses affected by the coronavirus, we want to focus on germany. china businesses are getting pummeled and they are forced to
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shut businesses with fears of contagion. we saw the apple warning yesterday. markets shrugged it off. what have we learned? >> kuma putting on a fairly brave face this morning when they released the numbers. they did say that february was destroyed. those were the ceo's words. since january. a lot of people are not leaving their homes. a lot of people are quarantined in any that has a dampening effect on businesses. puma, saying we could still maintain business elsewhere. a lot of people resigned to buy online these days. that out into shops isn't big of an issue anymore. puma shares are up 10%. there seems to be the resilience
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built into the market that we also saw with apple the other day. alix: thank you very much. we turn to the u.s. they will publish a january meeting minutes. here is michael mckee. what have we learned? mike: the question of the day for investors is how much longer will non-qe go on? speaking ons been capitol hill. the question of the day is how much longer is the fed going to go on with its buying up t-bills to balance the balance sheet? out toey isn't leaking force you to buy anything else, it has coincided with a big run up in equities, so equity traders want to know, how much longer will this go on? one thing to watch in the minutes today is further detail in the fed's framework review.
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you will get five fed bank president's -- presidents. course, the most important data today, housing starts and the federal rate cuts pushing mortgage rates down. will that continue? does that help contribute to gdp or a weak quarter? inflation isn't really the issue these days. mark: no, not even in the u.k. thanks a lot. we end on u.s. politics. u.s. democratic hopefuls take the debate stage with bloomberg taking the stage at the last minute. joining me is emily wilkins. what are we expecting? emily: all eyes tonight will be a michael bloomberg because it is his first time on the debate stage, and it is the first time we will see other democratic candidates going toe-to-toe with
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him. you see michael bloomberg go up in the polls, and a lot of that people attribute to the amount he has spent on campaigns. remember, he is running self-funded. the rules had to be changed because of the debate because previously, they were looking at what kind of donations candidates got, but because bloomberg has done so well, they changed the rules to make sure he is on the debate stage tonight. you heard joe biden, elizabeth, amy klobuchar saying this is a good thing that they cannot outspend bloomberg when it comes to ads and add eyes, but they thing they can go head-to-head with him on the debate stage, and make the case to voters why they should get their vote. mark: emily wilkins, thank you very much. michael bloomberg is a founding majority of the parent company of bloomberg news. we will be entering the democratic debate tonight at 9:00 p.m. eastern time. of yourp, much more
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news and analysis. this is bloomberg. ♪
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♪ takes within first news and trade analysis of the markets. adams --e is myrna brown.adams and evan good to see you. thank you for being here. taking a look at the dollar, around a five month high at one point. what are you looking at today? >> this is a trader's market.
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one date is is up -- monday is -- one day it is up , the next, it is down. -- the initialnt jolt untouched by human hands. the only way to make money is to make that first initial move because it is not sustained or holding. the dollar is holding. the dollar rally is coming on and that is virus-related, but on a daily basis, there is a lot of chop. but good opportunities if you have the latitudes. alix: what do you think? >> everything is rallying. god --lars rallying, gold is rallying. what isn't rallying? is persistence coming out of china, whether it is going to be a bailout of the airlines are
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more monetary policy, there is an anticipation that more money is coming over the course of the year. that is why everything is rallying to the extent that it is. really a tech-driven, tech-specific sort of breakout. you would like to see a little more participation, but you know, nonetheless, stocks are rallying, and they continue to push much higher than anyone anticipated. the way we pushed the coronavirus shocked even me any people are being pulled into -- >> there is a scare, especially. treasury, u.s. equities, and there is a lot of money that still needs to be put to work, right? we saw a lot of investors last week pulled their money out of will equities. now, there beginning to slowly put that back. they also want safety, so they
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are going to treasuries as well and people have to put their money somewhere. that reflect some of the price action in the market's ability to shake off negative news is a reflection of the supply and demand imbalance for most global assets. >> gina makes a great point. something has to give. everything cannot go up. all things cannot go upright -- all things cannot go up. alix: the dollar is still really strong in equities are still higher. something is not adding up. >> something is wrong. something is wrong with this picture. alix: you could see more volatility if you have a growth scare or a growth supply. where is not going to come from? >> yeah. the issue is everyone things the coronavirus is the growth scare, but the markets will look past coronavirus. they will look past it is a temporary growth scare that will be made up in the back half.
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you have to have something else come up. one thing no one is thinking about are the implications of a slowdown in china on the u.s. economy. are we going to see slowing as ah in the u.s. manifest result of global growth? that could happen. you could speculate the u.s. consumer may get spooked by the upcoming recession -- i'm sorry, the upcoming election. will politics drag down consumer confidence. none of these are happening though, but you watch for these things. the fault asset for risk assets will continue until you get growth. >> the growth is an upward surprise. it could be the worse the coronavirus kids, the more you would expect china to stimulate, right? this is the first real test for president xi. i think he will err on the more aggressive side. you could get the all-out
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stimulus we have been waiting for coming through over the next few weeks and months, and that can recharge the global economy. >> there are two amazing things going on in china. 750 million people isolated, double the population of the united states. two things come out of that. your supply chain is cut off. no one ever talks about his inflation. if you have to source from some other part the world, not at the same, cheap cost of china, at some point, that has to be reflected in prices. other- and are there places to go that are as cheap or cheapish china? maybe. but the longer this takes, the more the cost of that product goes up. and at some point, that has to be reflected in the price. alix: but doesn't the six plain what is happening? that is why you would see gold go higher. that is why you would see equities go higher, right? >> the equities go higher
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because of if the cost of goods goes up? alix: the government will come in. >> it will translate into earnings or lack thereof. if you cannot pass that cost on, earnings go on and equities don't go up. alix: but they don't care. look at puma. apple yesterday, the markets did terrible. [laughter] [indiscernible] company and puma are still rallying. >> that is a good point. we have been fearful that we will have some sort of inflationary breakout. remember last year at this time, it was like all wages will take on margins. will be the cost
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of goods? not all groups are extraordinarily depended upon china. i think this is more of a tech issue than anything else. someindustries will have issues with their supply chain. most people are not shopping in the first quarter anyway. this will be an issue for late fall and winter. it could be difficult intact, and we heard that from -- it could be difficult for apple, and and we heard that -- it could be more difficult for tech, and we heard that from apple. those of the stocks leading the market. if there is any vulnerability, it is probably in tech. >> just to add on that, it has gone under o the coronavirus headlines, but the u.s. administration is taking more steps to limit tech supply to various chinese firms, including huawei. it is not a tariff.
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it is not gaining a lot of news, but this matters, too, the tech war is very much still with us. that is something we have to keep an eye honest well. >> that is a great point, especially when it comes to europe that does not have the technology. the only way they want to get it is to tax u.s. companies in either will become a major sticking point. for thatare waiting news as well. you -- u.k. inflation. 1.8% is the highest in six months. we will hear from the fed later. are we seeing inflation creep? >> there is something really interesting happening in the u.k. right now. you have easy monetary policy still. new boris johnson and his chancellor are going to aggressively push on fiscal
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policy at a time where inflation is showing a little bit of life, so maybe in the u.k., it is the first time we are seeing this experiment. the firstnt -- it is time we will say really aggressive monetary and fiscal policy, and maybe we will actually see inflation coming out of the u.k. it will be an interesting case for the rest of the world. alix: what do you think? >> every time you see a trade situation with the trade in europe, mostly not getting done in europe. that will raise import prices in the u.k. the ra -- they are a natural importer products. it starts with the u.k. and eventually transistor the rest of the world. >> i don't know if you can get inflation. the dollar will shelter the u.s. from any inflationary impulse, act ofh, an active
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fiscal measure with employment is a risky proposition. and we are potentially going to move with this enter the united states. you could be experimenting in the u.s. with modern monetary theory-type of policies. it is something we are on guard for. but it is very early to make that call. nonetheless, it is a possibility, and the u.k. is a pretty good test case. what happens in the u.k. could spread to the rest of the world if deemed successful, and then we will be looking at a different inflationary regime. alix: guys, thanks a lot. a you charge use throughout the two hours go right to tv on our terminal. you can go right to tv . this is bloomberg. ♪ mberg. ♪
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♪ this is your bloomberg business flash. cutter airways increased its
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stake in a british airways. the airline owns more than 25% of iag that will give qatar leverage. will be --the ceo now to palladium's record-breaking rally. the metal used in catalytic converters rising above $2800 an ounce. this year, it is up 40%. the reason? expectations. environmental standards will get tougher, meaning more crows only more palladium and there is already a shortage. grommetagon will give $13 billion in research spending through 2025. the company parcel contractor is replacing their program for a long-range missile. it is part of a trillion dollar effort to modernize the u.s.'s nuclear weapons triad. that is your bloomberg business
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flash. the: one more story, unexpected side effect of the coronavirus by the disease has reduced energy demand in an gestural output in china, cutting carbon dioxide commissions to the world's biggest polluter. we wind up seeing after the zero, after the chinese new year, coal consumption always picks up are the green line shows where we are this year. it is going nowhere. it estimates that may fall by 100 million metric tons in china. up, winding down view was earnings' season. we will break it down. this is bloomberg. ♪ when it comes to using data,
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no one else lets you do that. design your own data with xfinity mobile. it's wireless reimagined. simple. easy. awesome. alix: this is bloomberg daybreak. i calling it maybe government supported rally in that it feels like there's optimism. either central banks or governments will step in when
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needed. that is there the excuse that s&p futures up by 2/10. microsoft powering higher. a cyclicals that are really participating in the rallies. european banks up 3/10. if you switch out the board it's like by every thing off. the dollar index still supported 9948. at one point hit the highest level since last october. the cable rate pretty much going nowhere despite the fact that inflation actually tick higher. points,e, 13 basis having a bold plattner on our hands and money going into crude, palladium, gold, silver, you name it you are buying it. that prisons dichotomy in the market that will actually last? part of the issue, where's the support that could come from earnings? more than 400 companies in the s&p have reported so far this season on an average surprising to the upside on sales and earnings. earnings are up less than 1.5%
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year on year. evan brownare the -- of ubs management as well. it's obviously about this year but as we head into this year after earnings season wraps up, where are we? >> coming into the earnings season we were looking for basically more of the same out of the data on the estimized platform. tech, consumer health care goods, energy materials, industrials bad. the question was, coming in, we did not have the coronavirus quite happening yet. and with those trends continue, with the momentum and growth overvalued trade continue and everyone is looking for that the shift and we did not think it would. of thenot because general earnings landscape or has it not because the coronavirus got thrown in? and that exacerbates the decline in all of the sectors that has not been doing well already,
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materials, anything associated with an industrial in ag and we see more of the same. an interesting part is going forward now. again, the coronavirus impacts those sectors completely. but, we have not seen the market budget all. the big question here is, is it going to matter at some point? i don't know because the liquidity they are pumping in is so massive it may never actually matter. it may eventually matter to domestic stuff. look at six flags, crushed, stuff like macy's, some of -- imax, some of these things are already taking a hit ahead of the numbers even rolling over and that could be where you see the actual impact. >> we have not given up on the trade.l let's focus on value versus growth. we think the global economy after this coronavirus is going
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to wreak salaried again. we do like industrials. we find materials interesting with this stimulus coming from china but we are not brave enough to go underweight tech. alix:alix: this encompasses what you are talking about. earnings estimates normalized at the end of january and chose exec ely -- chose exec we what you are seeing. discretionary estimates hold up whereas materials and energy and industrials totally take a bite. evan, it seems like you think that will end up rebounding andleigh it seems that you are more skeptical. what is sp ce, virgin galactic or whatever, there is a mania going on right now in tech. everything is stretched, really stretched because all the money is just flooded in. the place to make money right now. at some point, those multiples
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are going to be too high. alix: is it at some point? leigh: the momentum trade reverts on a normal basis and momentum traders get crushed .very nine to 16 months it happens. we seen it happen. i watched hedge fund friends get run over by that trade after making a whole bunch of money on the way up. at this point when you see tesla doing what it's doing and some of these other stocks and other names i really liked going parabolic it's time to sit there and say i don't know if i want that much exposure to this and if the coronavirus eventually businesses,reet those enterprise tech businesses , you kick down that revenue growth rate just a little bit and the impact for the multiple is going to be really high. alix: that's kind of what you want? because that would be good for
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cyclicals and value trades. evan: i think in the end what we are watching his bond yields. we pass this coronavirus, the worst of it, bond yields will rise and that is what triggers ighse big rotations which le is mentioning. we would like to see that and that would be a big -- alix: we were talking about this, when you continue to have monetary and or fiscal stimulus, that would argue you would not see a crash and tesla, you would not see a crash and virgin galactic because he will not get picked up in a 10 year so let's go by tesla. leigh: i continue to believe we will not see bond yields rise anytime soon mostly just because of demographics. you don't have -- we have basically cut off immigration to the country. there's no reason to believe we are going to get a commodities stock anytime soon. where's the inflation coming
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from? the majorink that is driver of the mania in some of these names. alix: what do you think it is? leigh: tesla was a short squeeze coupled with all the money flowing to tech in a one-way trade on momentum versus value. some of these other things that are going on, the virgin galactic, what's going on on reddit right now, there are idiosyncratic issues. when you see at the end of a big rally these things happening, it is liquidity driven for sure but it's also -- it is part of a broader beta trade. there are factors at play. alix: how do you handle tech? you can't not own it. if your benchmark is the s&p you have to own tech and you have to on the big guys. how do you deal with that when you're wanting to get a cyclical boost?
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evan: you do still own at you just tilt around it from our perspective. we are neutral weight on tech. we can see this running a little bit more. it's hard to call the top on these kinds of things. we know eventually there's going rating big multiple whatever causes it. for that reason, we don't want to be overweight here and we would rather let the economic story play out and hopefully some cyclical rotation happens. alix: pboc is going to increase monetary support for epidemic curves. to your point earlier, there you go. if you take a look at this other chart, global earnings downgrades, continues over the last two years. where is going to be the best place? where are earnings actually going to be good? we leigh: leigh: are at 19 times forward earnings now which is historically pretty expensive. but that also tells you what's
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working. the high beta, high pe name are working. we are going to take a hit in the next couple of quarters because of the coronavirus. actually do agree that if you get some kind of inflation and rates moving up that cyclical trade should come back because you can get a lot of pent-up demand out the backorder of the year. we are not seeing the numbers do that on the estimized platform. do. is what traders the stocks move with earnings revisions. the estimized numbers tend to move ahead of wall street numbers just why the data is valuable but if you can get ahead of the numbers that is where your outfit is. if you can guess where everybody's going to go first. a lot of people have gotten run over trying to do that and cyclicals for the last couple of years. it's a tough trade. you look at ag names and it
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looks like they are going to break down again. mosaic -- they are all at support right now and about to fall through. if they don't, i think that is a sign that maybe you take a stab at them when it stops. alix: i love the fact that you brought up virgin galactic. someone at the meeting brought that up. leigh: doesn't it mean something that i know the ticker and not the name? that just says something. alix: it means you are a total nerd. update onget an what's making headlines outside the business world. viviana: adidas and kuma have something in common, their business in china is getting hammered by the coronavirus outbreak. adidas saying sales have fallen 85% there. in china, houma has closed more than half -- puma has closed more than half its stores.
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bloomberg has learned william barr is frustrated or president donald trump's tweets and comments about justice department investigations. he issued a rare public rebuke of the president. bloomberg. michael inight he faces his rivals las vegas. taking part in his first debate. the latest poll has mr. bloomberg in second place with 19%. bernie sanders leading the way at 31%. mr. bloomberg is the majority owner of bloomberg lp, the parent company of bloomberg news. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: evan brown is still with me of ubs. it shows the probability of the different nominees. do you play? do you hedge of this in any way? evan: right now we are just watching it. i think it's a little bit too
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early to trade actively. there's too many moving pieces. what you do see a little bit is with these probabilities moving in favor of senator sanders. you are actually seeing the markets price in a greater chance of president trump winning reelection. there is a perception in the market that bernie sanders is more likely -- that he is going to have a tougher time against president trump who will say why move toward socialism when the economy is doing so well. he will be an easier candidate to beat. i do think it's a little early for the markets. a lot of things can happen. we have the debate tonight with bloomberg coming in. we have a lot of moderate participants, who are still in the mix. a lot of people have called for joe biden to be out. he could do well in south carolina. you have buttigieg and klobuchar
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. so many moving pieces at this point we would rather wait until we are closer to the election before we really try to trade this actively. alix: what our clients saying about it? evan: client wise, that a lot of discussion about it. but there's not a lot of conviction. especially because we see all these policies from these democratic contenders and some like sanders or warren would lead to a dramatic reshaping of tax and regulatory policy. the crucial thing to me, where does congress go? even if senator sanders is to win the election, if he does not carry the senate he's going to be very limited in terms of what he really can do especially on tax policy, health care and the like. it's all of these moving parts people are trying to grapple with and understand. i just think we have to get closer before we have a clear
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answer on what to do. alix: evan brown, always a pleasure. thank you for joining me. coming up on the program, the race to manage rich people's money. a look at the competition for talent in the world of wealth management coming up in today's wall street eat. if you have a bloomberg terminal check out tv . quick on our charts and interact with us directly. this is bloomberg.
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viviana: you're watching bluebird daybreak. shares of herbalife are higher before quarter earnings beating estimates. to give guidance for the year. herbalife says it's too soon to
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estimate the effect of the coronavirus outbreak but it says the disease could have a material impact. evaluating options to jumpstart its business. among possibilities, raising additional capital or selling assets. the one-time unicorn startup has a market value of less than $60 million. a fourth expected. trying to sell its professional hair and nails products business. adela could be worth as $8 billion. bloomberg has learned some of the biggest buyout firms are interested. among them, kkr and advent international. alix:alix: we cover three things wall street is about this morning. race for bankers to the wealthy. goldman sachs faces competition. the team of advisors overseeing $10 billion.
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softbank, the company plans to borrow that money and put up shares of its telecom unit as collateral. i knew chinese fund worth 17 billion in a day. closedi-based fund offering three days earlier than planned after receiving a ton of orders in just one day. joining me is chenal he -- >> to be fair to goldman this has been happening all over wall street. ubs has lost. morgan stanley as well. to break away advisors the last couple of years advisors really want to break out on their own, take their clients with them. but for goldman here's the issue . they want to increase their advisor count by 30% so 250 advisors. this conflicts with that plan. breaking consumer and wealth revenue. posted record read revenue in the last quarter of that
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segment. this keeps up with that plan. alix: it also came up for me. there been so many people leaving already. what part of this normal stuff and what part of it is goldman and their shift more market stuff? >> they are trying to grow that business. let me put the numbers into perspective, morgan stanley their wealth businesses more than 2.5 trillion dollars whereas at goldman they have 551 billion dollars of assets under supervision in the wealth business. $10 billion moves the needle when you put it that way. the bigger firms could probably stomach that a little more than goldman. this is happening across the industry so it's hard to say that this is just a goldman problem even with all the talent they lost. alix: it's not a rebuke on david solomon or any commentary on that. barring a $4.5 billion pledging unit what happened here? is highly levered.
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13.7 5 trillion worth of interest-bearing debt. $4 trillion worth of cash on hand. another $4.5 trillion -- last year summary asked me how much trouble is softbank in this year and i said as long as it has the full faith and backing of wall street it's fine. as another example, 16 financial institutions have agreed to these risky loans against softbank telecom shares. that's the good part of the business. that's the part of the business that's growing. it's not as risky but softbank already is pretty highly levered and you can see wall street rushing in to help feed that machine. alix: how does it square with paul singer? >> paul singer wants $20 billion worth of buybacks. he agrees with some sort of buyback plan but how much and how fast? there's no indication that $20 billion, the number that he would want to agree to.
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alix: he owns a small stake. let's get to the last point, day., $17 billion in a is that unheard-of? >> people would kill for that kind of money to raise and a day. 20 times oversubscribed. aroundmutual fund which, the world is generally out of. but in china it is more nascent market. people tend to roof -- 10 tour prefer more local players. chinalks that focus on are able to stomach a lot of this uncertainty that they've seen, hoping that china is a big long-term -- alix: is it competitive? >> it is for international players coming in because they are still gaining trust. that is everyone from guggenheim to blackrock. they are forcing in -- the financial system is opening up and it is one of the bright spots of the chinese economy right now that finances are
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excited about. alix: that's a serious payout. thank you very much. off the beaten street, a former junk-bond king has some powerful people in his corner. president trump mentioned them in an announcement pardoning milken for his conviction on security fraud charges. a who's who in the world of business and finance. sheldon adelson, the major trump supporter, another big trump supporter, tom barrack ceo and media mogul rupert murdoch puts the power of his news corp. channel behind the president and others on the list include transportation secretary elaine chao, married to senate majority leader mitch mcconnell, and a foxbusiness anchor. lots of tweeting about that as well. we will see a pause in the euros selloff. it could be the indicator you want to watch. and if you are heading out
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jumping into your car, tune into bloomberg radio. channel 119 and on the bloomberg business app. this is bloomberg.
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alix: time for traders and takes. --t joining me is vincent you can listen to vincent all day if you go on the terminal. i tease it as like is that you're a going to find support in your looking -- >> i've been really parish on the euros for two months now. we seem to be attempting to find a base. one of the things i was looking at -- and you can find this on the terminal if you go into apps ago, we have all these technical analyses that you can get a
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trial on and eventually if you like them you're going to buy them and they are not terribly expensive. wave it isok at the really forming a nice technical support and i overlaid it with the range average, standard deviation. getting standard deviation support which is the white line and at the same time you finish this fifth wave which suggests the end of a dominant trend and you are entering the next wave which most people actually tend to mistake as a minor correction . this technical analysis hold up, we could see a rebound in the euros. alix: is that what we saw 2007 when we saw a rebound from that? >> i don't think it's going to be that powerful. europe has a lot of things going against it. i think this is something maybe for the end of the first quarter but the second half of the year i think europe is still in a
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bind. we still have issues with brexit. that's not going to settle itself anytime soon. issues with germany, whether they choose to use it or not, the budget situation, all things going forward are probably more negative than positive for europe this is sort of a temporary trend. alix: thank you very much, vincent. silvermanp and amy wu will be joining me. it feels like a day where you may take on risk and buy everything because markets -- governments and central banks are helping you buy it. we will discuss it. ♪
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daybreak. here's every thing you need to know at this hour. this large reserve that we can use in this current government. alix: agent governments -- as the virus eats away at growth. >> chinese market was the third biggest aviation market in the world down to the 25th. then we got the economy suffering, the chinese government is taking measures to boost things. activity and certain industry groups as well. alix: the death toll now exceeds 2000. adidas and puma say business -- >> a fairly brave face when they released these numbers. they did say february was destroyed in the ceos words and added a similar picture as an s
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in asia and china down more than 80%. alix: chinese refineries deepen cuts. that want to make sure every employee, every business will stand a fair chance of reaping the benefits of digitization. alix: the eu seeks to dictate terms of tech competition. >> the eu is determined to establish its own playbook. they want to move away from the u.s. they feel there has been too much american dominance in the european union. > we are going to be trump and transform this country. alix: democratic president a .opeful take the stage michael bloomberg qualifying to enter at the last minute. >> all eyes are going to be on michael bloomberg simply because it's his first time on the debate stage. it's the first time we are going to see other democratic candidates going toe to toe with him.
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alix: bernie sanders cement his lead in california ahead of the important super tuesday. michael bloomberg is the founder and majority owner of the bric lp, parent company of bloomberg news. in the markets i'm calling it a safety net that governor governments are providing. s&p futures up 3/10 of 1%. maybe china is going to be supporting its government and that may be lifting equity futures. i'm saying maybe because i'm skeptical as to the long-term potential from that rally. euro-dollar pre-much going nowhere. the dollar index hit a five month high. our yield goes nowhere but crude and oil and gold and the dollar, something does not make sense to me. me, barry, good to see you. i have tried to start drawing people's attention -- a look a little along the a look beyond the coronavirus
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and to start to look at what is the next risk in the market that totally is off the radar screen. is aith that i believe it pickup in inflation, a cyclical pickup in inflation. the structural forces that have repressed inflation or suppressed inflation are likely to continue. innovation adoption and the services sector, global excess good capacity and the greater elasticity of supply of energy. but in the near term, housing costs are going pushed higher by using fed policy. medical care costs particularly in the cpi series are rising at a 5% annualized rate. import prices will start to put upward pressure as the effects of the trade war and coronavirus dissipate. all those things -- also comparisons from a year ago are low. so by the time we get to april and may data, write about when the fed is considering winding down bill purchases, we could have a cyclical upturn in inflation that would hasten the
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unwind of those purchases, which for me is the most likely cause of the next equity market correction. alix: let's get more take on that. senior global market strategist. i'm assuming in the options market known his position for that? >> no. we have talked about this before where tales to be fair since the coronavirus have started to pick up. you look at 10 year historical's and we are at decade lows. a 10% correction cost relative to that history and so something like that i think would be an unknown unknown almost where you are not priced for it and you're much more likely to see investors position for coronavirus which they know was
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a headwind versus something like that. >> or trades around the election. >> you definitely see that bump because of vix. we know tangibly there is a deadline. the other things in the market, like when iran came up, that was sort of out of nowhere for the market. volatility got sucked back out. alix: what do you think, sameer? >> quite a bit of complacency. you have seen quite a lot of risk measures rolloff whether it be spreads, vix, it is worrisome how complacent markets are. it's very difficult to call these short-term inflections. the feds talked about how they are actually ok with letting inflation run hotter. markets would probably be ok with inflation overshooting given how long we've been in a lower for longer environment for inflation. the trickier part is the coronavirus, whether it is contained and whether does last. we think the former but the risk is to the latter. alix: how do you think about
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that when you look at your call, barry? i get that it's an unknown unknown risk. how do we really start to see it? does the fed pullback and it changes the whole thing? >> your guest from wells fargo is right. the bias is asymmetric. the fed is willing to let inflation run persistently above the target before they were to change rate policy, do something like they did. in 1995 or 1998 where the action back the insurance cuts. sinceument really is world war ii every business cycle has had one policy normalization related correction. the economy strong enough, we can start normalizing policy. this cycle has had eight and most of them have been related to these balance sheet programs. they claim until they are blue in the face -- last time i was on bloomberg was right before bill dudley was on.
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he had done his essay, it is not qe -- ackley grabbed him a little bit before we went on and set it creates a reach for yield so if you think about the parts of the equity market that are acting really well right now, utilities, all the bond surrogates, those are benefiting from that program so when that program gets unwound, and i'm talking about the 60 billion bill purchases not the overnight repose as those do naturally runoff. when that -- when they start to unwind that, if you have inflation picking up in the meantime, that could knock out forward expectations of rate cuts and exacerbate the whole move. i'm talking more about rate expectations than exley getting a fed policy response. alix: you're removing the cuts from the market instead of adding a hike for example. how would you position for that? >> on the qe it really is if it
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walks like a duck and quacks look a duck but we are not saying it's a duck. that's the sentiment. alix: it's not the duck on the buck -- >> the market is priced as if it is. that is important to acknowledge. in terms of how to play it, given where we are in this market, the only thing i can really say because no one wants to hear about hedging -- is some sort of overwrite on your portfolio. everyone acknowledges that valuations are full, there are headwinds no one wants to be the person to spend premium. into see,n the skew upside skew bid as well? >> it depends on what under liar. in most major etf's, skew is still bit to the downside. that said your implied real live -- realized spread is not bad even though the call wing is not as good as the put wing. you are still collecting yields and you still get to be relative along the market retaining
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upside. >> the 90's in equity delivered -- equities derivatives at lehman brothers. alix:alix: can we dumb that down a little bit? we will in a moment. hang tight with me. we do want to go to brussels now. maria tadeo is with margrethe vestager. take it away. good morning. i'm happy to say i'm joined by the european commissioner. this was a big week for technology in europe. before we go into the presentation you just gave i want to talk about mark zuckerberg because he was here monday and seems to be saying i'm happy to see more guidance from governments. i'm happy to do regulations. some will tell you it's a big shift in tone. i'm not sure if i buy it. >> there's a difference between a shift in tone and a shift in behavior of course. and i think everyone appreciates that we can have another debate
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by now about the responsibility of giant platforms. but i think the important thing is to see real change on the ground. in that, we are still considering. it's not regulation -- if relation is needed to make sure the things we have decided in the real world also is represented in our digital reality. >> some of the critics will tell you they were concerned about hate speech, the impact this is happening -- the impact is h having on people's lives. if you don't comply with current regulation, is that something you would say is the point? >> two things at stake, one is our digital citizens rights that we have the right to our own data, to understand what it is that we sign up for. i still think we have some way to go. i'm the kind of person who reads terms and conditions for fun. we are very few.
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most people just sign off. i think we still have a way to go to make sure we not only have rights but we can also exercise our rights. the second thing is what kind of responsibility will a platform have. this exact posting or this item, but what kind of system should it have? what kind of responsibility do you have when you become a giant intermediary? a giant platform that works is that the keeper to important parts of our society. > when you look at company like facebook or social media overall do you hold them liable for what goes on on the platform or do you just look at them as someone who publishes the information but is not really responsible for the content? >> that is the big debate. one should be careful because if , i take something like ebay think there are millions and millions of people putting up
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things for sale every day. to make them liable for someone for sale ia fake bag think is very far-reaching. it's a different thing to have a system say we don't want our customers to be cheated so maybe that is the discussion to have. we have made no conclusions yet. i think it's important that as many people as possible engage in this debate so that our digital reality is as good as our nondigital reality. >> in terms of today there was a presentation made on artificial intelligence. issues such as facial recognition, that poses some problems in some countries. i'm not sure how concerned you are about the use of that gets done in countries like china. what is the way forward for europe? the thing people are aware of the implication technology like this carries? >> this is why it is important to debate it. for me, i really love my mother. it's rare that i do something
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she would not approve of. i did not want her to watch me all the time. the risk is that we enter into a society where everyone is watched all the time, not only watched but identified. that i think takes thorough condition to figure out if there are any things that can actually justify if you enter into that kind of society. say noow the gdpr will only on the very specific circumstance can you do this and i think that is a good start because then people still know i have rights and only in specific circumstance will i be the object of remote identification. >> when you look at everything you put on the table some will say this is a wake-up moment for europe and the takeaways the european union has been too lenient, we have to find our own way. is that something you would say is fair? enough of the old system, we need our own.
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>> this is not a new invention. this is the european method area we have done that for decades and decades saying this is great. this function, that is a challenge to our fundamental values. here we say thanks but no thanks and for the rest of it, go go go. been know that the eu has pressuring hartford tax reform and digital services. is that something that you think this year will finally be the ?ear we see the move >> we would want to tell the many businesses who pay their taxes and the many people who work and businesses who pay their taxes that they are not faced with unfair competition from digital businesses. able to escape because corporate taxation does not understand digital value situation. we will do our best to create a global consensus. >> i know you're meeting a lot
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of executives. overall do you think that they get a sense that you are serious about this and they have to pay more tax in europe? do they get it now? >> i think so. i think they find it is also tricky if each member state makes their own system. then they have to deal with one set of rules in run -- in one country and another set in another country and maybe it is easier to say this is how it's done in europe, one stop, here you go. >> i know there has been a lot of focus in ireland, a lot of focus on the dutch government, do they get it? you also need to get the countries -- >> i think the discussion is ongoing. part of the ocd proposal -- in that respect there are technical discussions that remain to be seen. the last time we had the european debate i think there was meant in positions because i
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think a lot of countries can identify with this sense of most companies pay their taxes why shouldn't all companies pay taxes? to youys great to speak on bloomberg television. thanks so much. with that i'm going to throw back to you on a very tech heavy week for the european union. alix: maria joining us with margrethe vestager. amy andth me, barry, sameer. -- sameer i will give you a shot here, you have to own tech to beat your benchmark area how do you own tech? >> i think you can still focus on software. a lot of what i heard from regulation standpoint is tings like privacy, taxation, those some of issues, people get of the software companies they skirt those issues. there are only's about antitrust.
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it could be they also come back into the crosshairs. we would focus on those mid and larger cap names that tend to be more business oriented as opposed to consumer oriented. as far as the tax issue goes, it will probably impact all of them equally. >> i could not agree more strongly. if you think about what has driven growth in the u.s. since 2014, the first five years of the recovery, growth averaged a little better than 2% consumption averaged less than three quarters percent. it's average more like -- the investment boom that's taking place on the enterprise side is really starting to become evident in the productivity numbers. if you think about last year's productivity number, it was 1.8% . manufacturing negatively contributed to that, down seven tents of the percent on the year. you could see it everywhere around you.
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go to newark airport and try to .ay human being for coffee just the delivery of services through software is really proliferating. the stocks are expensive but just the absolute boom that's taking place, since the tax cuts and jobs act was passed, we've got research and development spending at the s&p 500 averaging better than 11%. software investment is booming showing that in the natural -- the national accounts. my bottoms up numbers for the s&p are stronger. the gdp figures that come out every quarter, there's a boom and taking place and i think it's likely to continue. although the stocks are expensive, it's a pretty strong persistent trend. >> just on the more tactical level, few things we like, the first is i think next quarter it's going to be difficult for
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the derivatives market to accurately price that implied move. while we know coronavirus is out there, we really don't have a good sense of magnitude and it's also not over. one way to do that is we recommend selling options and names where the reporting line is after an xp or he and using that fund to own the ones where the earnings is coming up so we did that with amd in the video as an example. looking at names that report after that april bucket versus before and using that as a cost litigation strategy. >> from a medium-term perspective you take a look at earnings and estimates for technology really held up for 2020 materials and industrials really rolling over. do you feel like that could continue even if the coronavirus and the shape recovery is not in the cards? of the clear signals
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thus far about coronavirus. we recently rolled out a report yesterday upgrading communication services and downgrading energy materials to most unfavorable, with the thinking that the one thing the coronavirus makes it harder to do is for the global economy outside the u.s. especially in emerging markets to bounce back quickly. so we think commodity prices will remain depressed and we think energy materials will continue to suffer and you're going to want to focus on those steady areas like technology and communication services. >> sameer made a good point. i would probably play it differently. the coronavirus is a bigger deal for germany trying to sell capital goods into china. all of asia, trying to exist off of this within a deglobalization trend that has been further exacerbated by the coronavirus and u.s. is leading the world in this software revolution. you listen to the european
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regulators talk about it, this is their way to promote this, by more regulation. the u.s. is going to stay out in the lead. it's also fairly immune to the whole coronavirus spend. if you are a u.s. company trying to drive productivity, it's one thing if apple sells a few less phones but the fact of the matter is you are still going to continue -- going to continue to move to the cloud and business confidence is on the rebound. capital spending plans are getting better because of the trade war ending. for me the argument for that sector is going stronger. navy that's part of the issue, i can't see any flaws in the argument right now. maybe that is the point when it is played out. i don't see that yet. thank you so much. good to see you. much more coming up. what is gold doing? we will break that down. this is bloomberg. ♪
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viviana: this is bloomberg daybreak. qatar airways increasing its stake in the parent of british airways. the airline owns more than 25% of iag. qatarwill give leverage. gold is close to a seven-year high. today it rose again after opening above $1600. there's concern the coronavirus could be a disaster. investors returning to gold as a safe haven. alix: thanks so much. barry knapp of iensense macroeconomics as well as amy silverman of rbc. i wanted to ask what the options market was telling you about what the upside now is in the potential for gold markets. >> i would say this is usually true in the commodity complex but the wing in these commodity
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complexes typically have -- so that is fairly normal. if you sit here and you say this high is something that is downsides,nd we see at downside is actually relatively inexpensive to that call wing. alix: would you want to buy gold right now? >> i'm not sure i would want to buy it now. i would be more interested in an opportunity to some downside when we get to the april may timeline and the fed starts to -- clearly this is being driven .y monetary policy i'm just looking at this chart and you can see at the points when it really started to lift off and consolidated, you could trace in little fed announced not qe at this time and it broke out. it has a lot to do with expectations of monetary policy and even within this whole coronavirus dynamic, we are hearing consistently central-bank activity, physical activity, they are going to
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solve the problems. the interventionist central-bank world we live in. is, 15 billion of negative yielding bonds there's no loss of opportunity cost. alix: i was covering gold 13 years ago and if you told me all this was going down i would've called you crazy. barry knapp sticking with me. amy silverman as well from rbc. .he latest ppi numbers first american deputy chief economist will be joining us. we will also look at housing numbers. fed speakers trickling out relatively positive outlook on the economy. this is bloomberg. ♪
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alix: this is "bloomberg daybreak." i am alix steel. about 30 seconds away from the latest read on housing as well as producer price inflation in the u.s.. futures up.
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it is a cyclical rally in europe as well as in the u.s.. what does not make sense of the other board, the dollar index still grinding higher. two 10 still seeing the at 14 basis points. crude up over 1%. the numbers dropping. housing starts on a month by month basis following 3.6% -- falling 3.6%. permits higher 9.2%. barry: the headline as well as the ppi numbers. alix: on a year on year basis, if you back out food and energy, coming in 1.5%. on a final demand basis, 2.1%. over that 2% level. let's break some of these numbers down. joining us from washington is odeta kushi, and here in new york, michael mckee. barry knapp and amy wu silverman
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as well. do you have a wow? michael: you look at where ppi jumped to. that is a huge increase. a big increase in services inflation. went from flat in december, up white seven during the month. inde services down .3 december, up 1.2%. this is definitely going to get the fed's attention. beyond that, i cannot say a lot. it probably gets the markets attention. we are so far from the idea of a fed rate increase in any traders mind we would have to see this confirmed by a lot of other places. i brought along a chart that shows the relationship of the ppi and cpi and the pce. pce is the feds favorite indicator. you can see the big jump in the blue line.
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now we see the ppi confirming. the pce runs below that. we will see if we get an increase in the month, then maybe it starts to creep into the fed conversation. barry: and the mark -- alix: in the market you are looking for selling in the front end of the curve. we are still going through the numbers, but what is your take away? odeta: my focus is on the housing market, which is looking especially strong in 2020. permits are indicators of future starts, and what the housing market needs as more homes for sale. we have seen a rebound in building and 2019 and 2020. a lot more building means we start to make up the housing deficit that has been occurring since 2008, where demand had been outpacing supply. this is good news for my ankle. report ofmost-read
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all of last year was in april called housing, another echo of 1988. when the u.s. tax reform act was passed it crushed high end housing for a year. you watch new home sales drop to around 500,000, the identical move that happened in 2018 as a result of that tax act which limited state and local tax reductions. in 1988 housing spent the year recovering just like it did in 2019 with fed policy easing. if you looked at yesterday's survey, what you saw was the strength in the northeast, which is the area most impacted. that effect is almost completely gone. with single-family housing starts over $1 billion for two months, you can see that construction is roaring back. we have a strong housing market. i would say for the first time since the financial crisis.
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people were beginning to wonder if housing had peaked because the fed rate cuts have lowered. that pushed upstarts. we know there is still more demand than there is supply at this point. the motivation is there. now we have had two months of extremely mild winter weather, particularly in the northeast. we are seeing the results of that. does that continue through the spring when we get into more normal numbers? that will be interesting. the permits numbers suggests we are likely to see that. barry: i love the big picture numbers, not so much anecdotal stuff. we live at ground zero for this. my wife went back to work as a realtor about five years ago and the market is on fire. they had office managers telling them to keep open houses going all the way through the holiday season because there were so many buyers. a lot of it is millennials moving out of the city, forming
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households, you see it in the household formation data. there is a lot of strength. we should get a not to the ppi number. mike makes a great point about poor pce versus cpi. the spread versus the health pce whichre, or core is largely medicare and medicaid, as opposed to cpi, which is based on out-of-pocket costs for consumers where deductibles have risen precipitously, that spread is over 3% right now. i do not know whether it will flow through the core pced number or not, but using that measure is not reflecting what is happening to true household cost. alix: to pivot back to you on housing, what about housing prices? you're seeing health care costs move higher and what that does to the consumer. what are they dealing with when it comes to buying a house? ,deta: on the prices side
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because we have this period of increasing demand against limited supply, that is econ one of one for house price appreciation. see a more heated spring homebuying season, especially on the low end for that first-time homebuyer. we cannot overlook the fact that 5 million millennials are nearing 30, peak homebuying age for this generation. that demand number will grow. we need a couple more years of positive housing starts to keep pace with that demand. michael: i want to support what barry just said. i was smart enough. i brought along a chart, that shows cpi in health care, you can see the impact. the white line is the ppi for healthcare services. it is one of the few things in ppi that goes more directly into the other inflation indicators, including the pce.
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you look at pce and how it follows along with the health care number. now the health care number has jumped significantly. does that push pce up and what does the fed think of that? alix: what does the fed think about that? barry was saying you would not see a rate hike. is that what is on the table for the fed? michael: not really. what is sort of on the table is we have a coronavirus and everybody on trading desks is saying the fed has to cut rates because the coronavirus could be a problem. in terms of the normal fed reaction function where they raise rates to contain inflation , nobody has that on the table at all. you look at the breakevens for inflation, they have gone down. the question is does is start to change people's minds? the fed has been warning about this. comps are fairly easy from last year they expected pce to rise.
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the question is does it stay stable once it gets there? barry: robert kaplan was talking about this before the proliferation of the coronavirus . his quote was expanding the balance sheet is not free. that all faded into the background when the coronavirus heated up, but here we are at equity market highs. it looks like that risk is trying to dissipate, then you may get other fed governors talking about that risk and financial stability concerns. for me it is a market movement. i would agree with where mike was going -- the fed was never going to cut this year. taking those cuts out of the market could be a market event. i would also add one final point, which is the amount of convexity in the fixed income market is as large as it has
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qe3 purchases of mortgages, when they basically fought the mortgage market and not hedge the mortgage prepayment risk. they have now returned 300 billion dollars in mortgages to the private sector. much like we had a 50 basis point drop in august that quickly reversed in september, if the coronavirus is to dissipate, you could see all of those desks that are long, all of the mortgage prepayment risk just hedged simultaneously and a real convexity volatility move higher in rates up to 2%. convexity is another way of saying there'll be potentially violent swings as dealers have to continue to do some sort of dynamic hedging. it is also true in the options market. it is one of those things where if the market is not getting what it thinks it is getting and what is priced in, and again people have not been position for.
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people in the equity markets are under hedge. when that swings in the direction, it will be passed. alix: convexity means if we wind up seeing a mortgage repayment we will see people going out on curve and selling that? barry: think about it as follows. the biggest source of risk is that mortgage prepayment risk. if you are long on mortgage, you are sure that option. your mortgage goes away, your bond goes away. weekancing, as of last they were running at 206 percent above one year ago. you're getting that refinancing and also getting new mortgage issuance. the fed does not hold as they used to. when fannie and freddie held at precrisis, they hedged. the fed did not hedge. now as you put the wrist back -- whoever holds the mortgage bonds will have to hedge.
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that just means you are selling in the same direction as price. yields start going up, bond prices are going down. you are selling more bonds to keep your duration at the level you wanted to keep it at. it is selling into a down market and buying into an upmarket. in this case will be selling into a down market. alix: odeta, if we wind up seeing no more cuts except from the fed, how is that wind up playing into the refinance world and new millennium homebuyers. odeta: mortgage rates are not as highly determined by the fed, but more by economic and global uncertainty. the irony here from the coronavirus and some of the uncertainty going on in the world's mortgage rates have benefited from that. 3.45%e mortgage rates at and they follow the 10 year treasury yield. as that floods to safety happens , we see a decline in mortgage rates and that is where your
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first-time homebuyers are benefiting from the affordability boost. that is where the millennial demand will get stronger and stronger. we cannot overlook, when we talk about the federal reserve, we cannot talk about inflation. we have to talk about employment and unemployment. the labor market has been surprisingly strong. that is showing more strength into 2020 as well. alix: odeta kushi and michael mckee, thank you very much. barry knapp and amy wu silverman will be sticking with me. we want to give you an update on what is making headlines outside the business world. viviana: u.s. attorney general william barr told associates he may quit. williamg has learned barr is frustrated over president trump's tweets and comments about justice department investigations. he issued a rare public rebuke of the president. china is looking for ways to help airlines hurt by the coronavirus. beijing is considering measures
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such as mergers and direct cash injection. one would allow the biggest chinese airlines to absorb smaller ones. britishith the government wanting to end the immigration of unskilled workers. a new point immigration system going into effect. skilled workers must prove they can speak english and have a job paying at least $33,000. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. alix: thanks so much. coming up, amy wu silverman of rbc said tesla was her widow maker. does she want to continue betting against the electric carmaker? bloomberg users, interact with the charts shown on gtv . save the charts. gtv . this is bloomberg. ♪
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viviana: you're watching "bloomberg daybreak." i'm viviana hurtado with your bloomberg business flash. we begin with shares of herbalife today are higher. fourth quarter earnings beating estimates. the company declining to give guidance for the year. herbalife says it is too soon to estimate the influence of the coronavirus, but says the disease could have a material impact. blue apron was a pioneer of the meal kit by mail and is now evaluating options to jumpstart its business. the one-time unicorn start up now has a market value of less than $60 million. blue apron reported a fourth-quarter loss worse than expected. we end with shares in tesla searching past the $900 mark this morning. they are set to surpass the
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record high close of $887 set earlier this month. analysts increasing their price target by more than 27%. tesla shares have more than doubled in the past four months. i am viviana hurtado and that is your bloomberg business flash. alix: time for bottom line. we look at companies worth watching. we will focus on tesla. getting a street hi upgrade to $928. barry knapp and amy wu silverman of rbc. amy, you've called tesla your widow maker. why is that? amy: this is totally a personal thing, but it is one of those things where i cannot get it right. at some point you're like i should just stop. stock still the higher? who is buying it? amy: i will totally attribute this to an article i read, but i an air men's like
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burkett. it becomes completely disassociated from what it does, which is holding stuff, and it is more about the higher it goes the more people want it. there is the dynamic where it is completely disassociated from where valuation is. one thing i like to do it sometimes when you read the comments about an article on tesla, it is like they are arguing about good and evil. it is not normal comments about fundamentals, it is if you do not like it, you are on the dark side. is that how you understand but all options for retail investors for tesla, for virgin galactic, for those kinds of stocks? is that what we are seeing? amy: absolutely. this is not normal. normally in an options market, are more expensive than the calls because people are usually hedging. this is not true with tesla.
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weighing is more expensive than the put wing. a lot of people saying it is short-sellers. i do not think that explains it. i think it is exuberance. barry: i will add my good versus o the story. back in 2011, when it became obvious we had a 100 year supply of natural gas, i sat down with every analyst that had everything to do with natural gas, as a producer, developer, it was a cost. the holy grail at that time was getting natural gas into the transportation system. when you consider our energy needs, one third of our energy needs went to powering automobiles, but it is all oil. we do not have as much oil at the time. in a way, the good side is we are actually getting natural gas into our transportation system. the bad side is building a plant
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in china is helping them get coal into the transportation system, not exactly getting cleaner. it is getting dirtier. germany will get nuclear power into it, maybe russian gas. i can see why people think this is clearly a disruptive story. edisonlso reminiscent of company at the turn-of-the-century or amazon in the late 1990's where it will be a huge trend. there were five advertisements during the super bowl for other ev's. this will be the year the empire starts to strike back. alix: nice. barry: i do not have a strong opinion on tesla one way or the other. perspective, macro they are leading that trent to get natural gas in the transportation system, which is good for the environment but also good for the cost of energy. from how do you look at it
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an automaker perspective in terms of the options market? you will have hundreds of new ev's online from the new automakers, but they do not make a profit. they have to shell out billions of dollars while still having to produce their internal combustion engine cars. do investors do anything with that? they are definitely differentiating. the options market, even if ford has an eb unit, they are not currently being rewarded for that in the options market. you do not see that the same as tesla. the second thing i would say is esg has become a huge part of the investing trend. one thing someone pointed out to me is a lot of this is just money chasing tesla because it is one of the few liquid pure plays. part but what about the g part?
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the part of the problem is united states sometimes disagrees with itself. play.s clearly the e governance, mosque tweets something -- musk tweets something and there goes your governance. barry: the coronavirus and this esg phenomenon, energy will become drafted. alix: he says that as we are leaving. you're throwing me about. amy wu silverman and barry silverman -- barrett -- amy wu silverman and barry knapp. great to catch up with both of you. my special will give you an in-depth look at the entire industry. coming up, we look at tesla and the key retracement level you want to be watching. tune into bloomberg radio heard across the u.s. on sirius xm channel 119 and the bloomberg business app. this is bloomberg. ♪
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alix: time for technically speaking.
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though maloney joints me now. listen to bill all day at squa on the terminal. let's look at bold. -- let's look at gold. bill: it is around two dollars right now. still trading above the key $1600 an ounce level. 2013 to 2019, had the breakout in 2019 but not a breakout above the $1600 level. pullback supports around $1500. if it was -- of it does break above 1600, the next step is $1630. alix: i remember gold back in the day. let's get to tesla. what are you looking at when you look at the chart? bill: i thought i was done with tesla but you guys were talking about it. it is up 6.9% in the premarket. up 7% yesterday. piper listed the price target to 9.28. your first price will be $932.
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if it breaks above that, then you're looking at the all-time high, $969. $902 is a key level today on the open. alix: unreal. we will leave it there. bill maloney joining us. squa on the terminal. withg up on "the opening" jonathan ferro, mohamed el-erian. ppi surprises to the upside. futures holding up .5%. this is bloomberg. ♪
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jonathan: from new york city for our audience worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. ♪ jonathan: coming up, stocks bouncing back as china mulls
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more economic support. investors looking for clues on the fed's next move. sandersnners senator said to take the stage in nevada. here is your wednesday morning price action. positiveup, futures .33% in the bond market. toasury yields higher, up 1.57. of 1.08 atill south 1.0 794. let's begin with the big issue, the uncertainty in china taking a jackhammer to corporate outlooks. theircutting or scrapping guidance altogether with efforts to contain the virus weighing on the demand and supply side. you will hear any guests talk about a v-shaped recovery, of


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