tv Bloomberg Go Bloomberg February 1, 2016 7:00am-10:01am EST
are about to resume. wall street's favorite, as iowa is about to vote in the caucuses. stephanie: it is monday morning. we are in new york city, bloomberg world headquarters. you are watching "bloomberg i am stephanie ruhle. my partner, david westin, is off this week. if we thought it would be a weeklong dance party, i lost that bet. brendan greeley is here. brendan: i was told there would be a dance party. i are bringing in enda curran from hong kong so he and i can
spend the time talking about the irish economy, as we do. and with us in the flesh, luis keely. first, vonnie quinn. vonnie: after months of the iowa caucuses. still, on the question whether top supporters will show up tonight. for the democrats, hillary clinton has a slightly over bernie sanders. sanders is counting on young voters to help him score an upset. releasing oneare into thousand pages of information about the deadly amtrak crash last may. there may not be an explanation as to why the train was going twice the speed limit when it derailed in philadelphia. the crash killed a people and injured more than 200. the engineer does not call -- the engineer does not recall what happened. -- expectations for
the talks are low. the two sides will not be negotiating directly with each other. thatl needs 24 hours a day global news, 24 hours a day. i am vonnie quinn. ramy inocencio now on the market spirit ramy: futures are indicating a lower open on this first day of february. trading -- let's look at the numbers right now. mostutures are down, the by about half percent. a lot of the reason this is happening is because of what we got out of china. manufacturing came in at a three-year low, and the sixth drop in six months. that is having a weight on the global markets, and the shanghai composite is down by 1.8%. the nasdaq is down .7% there. not so much happening with the
nikkei. with oil, we are seeing that at session lows down, 1.7%. it is trading above the $33 handle. this will be breaking a four-they winning streak. with gold, we are not seeing what we might expect in terms of a risk-off environment. gold futures are trading by about half a percent, the 11.22 mark. -- the 1122 mark. in treasuries, we might not expect it here in terms of the 10-year yield, bite -- up by .8%. stephanie: we have to focus on one story driving markets. it has to be china. thrilled you are here. walk us through this. more bad news, more bad data out
of china at this point. what can the central bank do? enda: it is disappointing and another storage -- and it underscores how difficult it is to get traction in china. the injected hundreds of billions of dollars in terms of physical destiny less -- in terms of fiscal stimulus. they are still not able to get ahead. at the same time having to inject more physical stimulus. brendan: when you look at what is going on, the difficult they have -- the difficulty they have had a propping up the yuan, do you see china without tools are not using his tools well? louise: china has tools, and it has monetary policy tools, fiscal stimulus policy tools. but it is tricky. we are talking about a major structural transition happening takee economy, and it will
time and it will not be a linear, simple process. there are going to be some bumps along the way. stephanie: but how do you defend against these bumps? louise: there are still some brights lots in the economy. we see in the nonmanufacturing pmi numbers, that is showing expansion. when we look at consumer data in china, consumers still seem confident, and indicate that they are still spending. and that section of the economy is expanding. if consumers are confident, it seems like capital holders are not. this seems to have moved from the anecdotal -- people buying houses in the u.s. -- to the measurable. is this cache flight something we should take seriously? quite atare not capital flight per se. not all the moves with china are bad.
however, all said, there is a fear in china that if the retail investors really wanted to get the money out, it is a dam that could burst. a lot of the capital is trying to get around the existing tools. they have these capital rules in place, and we are seeing overbilling on trade. that says to me this is not just legitimate investment, this is fleeting. enda: that is another dangerous sign. people are skirting the capital account rules. it is technically a closed course but it is a very one. stephanie: investors who easily get spooked, how is that of one hand, and on the other the chinese goods are feeling good. what are they spending money on? louise: they are spending money in all categories. we are seeing consumers continuing to purchase discretionary at nondiscretionary products.
we are seeing interesting consumption across different income groups in different regions. we are seeing consumer confidence staying strong in the biggest cities in china and in rural areas. so for chinese retailers, is this a positive sign? when china is getting hit, are they -- is that a bright spot? louise: it is a bright spot for companies selling to consumers, and also for international communities. one of the bigger teams this year is going to be trade driven by e-commerce. you do not necessarily have to be on the ground in china now. you can be selling from outside , and there are still opportunities. brendan: we have seen the halting move away from manufacturing. demand?s that do to enda: labor market reform is on
the agenda here. up seeing the progrowth driver going forward. one point about consumption, it is holding up relatively well. the problem is, it is not at a pace that feels in a gap. that is the big problem. consumption is ok, but it is not enough. louise: that is where the bumps come in. those who make a bullish argument on china have said that it is just going to take a long time. do you agree with that? louise: i do. the world- china is pulse second-largest economy. they need to have a strategy or run china, thinking about china. it is concerning in some ways, but it is part of a natural transition. to your point about urbanization, a lot of urbanization has taken place and
it will slow down. there is the reforms of the registration system, so people will still be able to live in , and urbanization is going to be an important trend to drive consumption. a is currently working 100-hour work weeks because of all the volatility in china. that does not pay off with what the data it in the market showed today. enda: they are killing themselves along the way by virtue of poor communication. they are getting scolded by the imf, by ben bernanke, that they have got to tighten up the message and communicate clearly what they are doing on the exchange rate. brendan: exactly what you are saying, six months ago people were not willing to tell you that on the record. they would tell you after the show was over the china is not communicating. now there is the frustration -- what are you doing with your
reserve? what is your plan for the yuan? stephanie: people do not trust the chinese government to be giving them good data, and then they are not trusting the market. how important is china to the rest of the major economies in the world? to europe, to the u.s.? should they be panicking here? enda: they should. thebiggest -- those of kinds of spillover effects that might slow down global trade -- not necessarily china's stock market, but through the yuan channels and the capital flow channels. curran: when i hear enda say, yes, they should be panicking, i am writing down a note here, and then i will go to ramy inocencio to see what is moving. stephanie: there are participants trading today who need returns tomorrow. i would love to be a long-term investor. thanks for that.
enda: weere all week? are here for three days in washington, d.c., so it is great to be here. enda curran and louise, normally in chicago. thank you for joining us. we have someone else joining us today. take a look at our very special new green room. we are going to have a lot of great guests coming up from here, including the latest founder and miami -- the founder and miami dolphins owner, stephen ross. he was there when the super bowl was in miami. we got a quick look at futures across the board this morning. down, down, down. awfulhis in mind -- 2009, january, rough february. what happened? fantastic end of the year. this is the year where you want have iron gut, pick your places,
health insurer, aetna, posted third-quarter earnings that are better than expected. the company says it is on track to close its acquisition with humana in the second half of the year. james bond and adele get credit for a big surge in sony, whose shares rose 12% in tokyo after reporting better-than-expected earnings. bond film, spectre, was a hit. now a focus on argentina. the argentine government is set together with bondholders commingling hedge fund manager paul singer. katia porzecanski joins me now with what to expect. ways turn to you to make sense of this mess.
the president said he wanted a realistic and reasonable settlement. what do those words mean? katia: what they met with the last government was the exact same terms of the 2005 and 2010 debt swap, which was the holdout that had projected numerous times. the last government came and made a big to do and said we want reasonable terms. so we are hoping that it is anything better than that at this point so we can put it behind us. but there is a large amount of interest on these claims. a very large amount of interest, namely meaning that folks like elliott have most of their claims basely on accrued interest. that is what is going to be negotiated here. brendan: let me get this straight. mike ray comes in, there is all this hope -- this is a change in
tone but not in terms? katia: we are hoping that it is in terms as well. they have not even made a proposal yet. today will be the first time they present a proposal, and it will definitely be a change in term because they will not get it resolved unless there is a change in term. whether it is realistic, that is the big question mark. nobody knows what that means. brendan: one possibility is keeping discussions confidential. explain to me what that means and why that is significant. this disputeis right now that the holdouts want the government of argentina to sign a nondisclosure agreement for nda. the argentine government does not want to do that, and the reason is because congress is not in session right now in argentina, and there is a law that prohibits the argentine betterent from making a
offer to the holdouts than they did in the 2005 and 2010 exchange. this is the best way for them to avoid any problems. let's make all of our proposals public. but from the holdouts' perspective, that is inviting a lot of discussion and arguments perhaps, if the media and the public can weigh in on every step of negotiation. that may derail talks, stall talks. is thetopic du jour argument that they have now, and hopefully they will resolve it today and tomorrow. take a widerme view here. is it possible that there is -nomics,g called macri and is it working? katia: so far it is working. he was able to get $5 billion of loans from a bunch of banks in boosted city, and that
the reserves. if he can keep the reserves up enough, it will work. will transform the economy from one day to the next. brendan: so we are looking at a battle of the pockets right now, paul singer's pockets versus the banks that gave him the loans. thank you so much. katia porzecanski, always helping us what is happening with his morass of negotiations. check out shares of questar. 23% premium to friday's closing price. up next, hsbc is looking to save $5 billion since they started mobile hiring and pay freeze. we will discuss that next on "bloomberg ." ♪
stephanie: welcome back. you are watching "bloomberg ." brendan greeley is in the house with me this morning. shares of twitter are up in premarket, up at 6.5% at this point. earnings are out on february 10, next wednesday. we are seeing it trade right below 18 bucks premarket. , such an public all-time low, on january 20. is the company completely screwed? jack dorsey, what is going on? a report out that andreessen is considering some sort of deal for the company.
we will continue to follow this story. that is what twitter has been looking for. some sort of lifeline. changes, andement jack dorsey is back in the hot seat. they have more management changes. no one can argue the power of twitter. the issue is, can they harness it? that -- thean say problem with twitter is that it is hard to use. this is the challenge and nobody has been able to solve. are -- it is very intimidating and hard to find your way into. if they think about organizing things around themes and events, that does not solve the central problem. stephanie: if you have somebody like andreessen horowitz in, maybe now we are talking about somebody who is not feeling the
love. , the bank has announced a hiring freeze and a pay freeze. that is a way to build morale. here is what i noticed about that. it is a pay freeze and not a pay cut. which brings me to talk about -- are you taking notes? wage rigidity.l this is a way economists have of saying a basic thing that we all know to be true, that people do not like to accept pay cuts. here is the problem. ramy inocencio, vonnie quinn, will help us break this down. classical macroeconomics says that macroeconomics -- nobody lose their job. it turns out, this does not happen. it is suspected for a long time this does not happen. stephanie: so we are more inclined to fire people than -- vonnie: this whole interest-rate
cycle -- that is why janet has this indicator on her dashboard that she clings to. several looking at decades of this data, looking at bls data on the firm level, here is what we are looking at. this is 1982. see that spike? that is the spike at a pay freeze. if we move up to 1988, you see another spike. nobody is expecting a pay cut. 2001-2002, the same thing. 2009-2010, can we get to that? see how high that spike gets when you get to that last recession? here is the deal. not only are people not willing to accept a pay cut when it comes to recession, they are even less willing to accept pay cuts when it comes to recession. markets do not clear for labor.
stephanie: this is when you need an economist to come in and walk you through the mindset. i am not sure it is fair to extrapolate to the banks because this is not industry dependent. the banks are already going through their own hardships and structural change. if you look at new york city, there are fewer banking jobs but more jobs in financial services in general, so more boutique jobs and brokerage jobs. stephanie: when you say hiring wakee/pay freeze, who will up and say i am going to turn it out it hsbc today? we will take a dive into big economic data with carl riccadonna. ♪
brendan, take a look at this. s&p down. nasdaq, across the board, down. following more negative data out of china. brendan: that is the story over the last six months. bad news roles west. it is coming from the ground. crude oil down yet again. no one believes anyone when they are going to cut, because production keeps rolling on. here with an all-star cast to talk. in-house economist, carl riccadonna. we have a lot to break down. vonnie? polls show latest donald trump leading among republican voters. will trump show up?
hillary clinton has a slight lead over bernie sanders. the u.s. has expanded its fight against islamic state. in three weeks, u.s. forces have carried out a dozen attacks linked with the group in afghanistan according to the "new york times." world's least connected nations will be getting broadband internet service. cuba is limiting a pilot project in homes in two neighborhoods. broadband is currently only legal for diplomats. powered by our 2400 journalists and more than 250 news bureaus. brendan: and now i get a pleasure i have not had four months. thomas kean is with us to talk about -- tom: this is the single best
research note i saw over the weekend. -- in anaw what japan -- highent of limited report propensity where were sumer's -- consumers respond and food --y have to, gas, they told the line on everything else. this is the second and third round effects. brendan: we don't have a good the negativewhat rates will do. what we have seen in denmark and switzerland, companies prepay their taxes because it is the only place you can get some return. if you are not getting any return, you have to give it back. tom: every nation is different. how is japan different from switzerland?
there are two ways of looking at it. we have to look at the reaction in the banking sector and evaluate how consumers are responding to negative rates. there are two very different environments. an average size economy. like sweden, it is a very different reaction when you are doing things in the first, second, and third largest economies in the way -- in the world. there are several things that negative rates are supposed to do. one of them is to spur lending. that is the hope. recharge compressed. spreads are compressed in denmark, but not really elsewhere. this country by country idea -- canada.t brings us to none of this was in our
textbooks. brendan: this is uncharted territory. >> the real issue is can you force banks to lend? is, probably that no. what you need to do is stimulate demand, create an environment where businesses and households want to borrow and then that will jumpstart the credit cycle. just pushing rates into negative territory is holding a gun to banks' heads. stephanie: but don't negative rates take you back? the balance sheet as a percentage of gdp is something like 80%. nobody wants to be in that situation. brendan: it is astronomical. it is stunning the amount they are intervening into the market especially when you look at japan and either negative rates were quantitative easing relative to gdp in japan. it is off the charts. it sends a very negative economic message. what is happening is that -- as
central banks are running up the boundaries to quantitative easing, they have to take other measures. what we are seeing is quantitative easing is that it is raising asset values of people who are not wanting to spend. the question of negative rates, can you drive them down far enough so that will holders say the are not getting any value out of this, might as well spend it on new stuff. tom: i will paraphrase, the circuit are shorting. it is a cacophony of things. on oil, all of our viewers and listeners look at these little things here, there, and everywhere, and say, what is this about? >> in a globalized financial zerot, as you cut rates to in negative territory, you don't necessarily spur lending, you force the capital to flow elsewhere around the globe. as theefit from that is
capital flows outcome of the currency reacts as well. you are devaluing the the economy -- the economy. you never want to do it together. you want to do it most aggressively. that is what ben bernanke did. stephanie: i we holding hands to ? you're going to find out, tom. tom is going to get the answer today. it jean is going to be sitting down with stanley fischer on the council on foreign relations. there is a lot to discuss. i know i am going to be watching. hopefully you will to at 1:00 p.m. guess what? we have a lot more to cover on the economics front. you all sitting at the table, how can i let you go? we are kicking off our new weekly series, taking a closer
look at the week ahead. with all ofronment, this volatility, investors are data, we are going to start with today. personal income spending is out there less than an hour. what are you looking for? i am tired of talking while prices. you don't have to play -- pay to close of attention to that report. this is monthly data. all we are seeing is the intra- quarter of incoming spending. we will get the fed's corky seat of later -- core pce deflator. we will see if the manufacturing sector continues to be mired in contraction and we are very close to a manufacturing recession here. vehicle, we have motor sales, big-ticket purchases for households. after we saw the economy slowing
in the fourth quarter with very little help from consumer spending, just 2.2% of girls and a quarter, we want to see if they are spending on those big-ticket items. the preview for the jobs report starts with gdp. later on, we have the service sector i sm. they have been diverging dramatically. but the service sector doing well and manufacture doing very poorly. when that happens, the service sector slows down in a six-month timeframe. can the economy survive within manufacturing sector and for condition? the answer is usually, not very well. had an economy in the fourth quarter that created a lot of jobs -- over 800,000 jobs when the economy fairly grew. that is good news coming productivity held up and growth was doing slow, job growth would
be so. stephanie: this is why investors are sitting in cash. >> the highlight is friday's jobs report. the economy has benefited from very warm weather at the start of the first quarter. then it got cold. all the seasonal related hiring has come to a freeze as well. stephanie: now they can sell coats. >> i will come up with those job numbers. tom, you are talking to stanley fischer today. let's get data dependent. what is he watching? to look atgoing actual progress. he is want to make a statement before he speaks. statement of a some type. people like carl will hang on every single word. they're looking at core economic data. they are also looking at confidence. this is where larry summers comes in. he has been preaching confidence
and uncertainty overload -- overlaid across the data. i would suggest policymakers, like vice chairman fisher, are wondering about the confidence of the system? >> is there any way they can express, we make a mistake? tom: that is a loaded questions . fisher is not going to fall into that trap. stephanie: why is that a trap? >> if the fed says, we made a back 25 basising points does nothing. the psychological signal more important. they suspended the risk assessment. where do they stand? ask a am not going to bunch of questions, stephanie. -- it isonsidered considered a gotcha question.
what people want to hear, like carl, is the broader spectrum. stephanie: i am not asking about gotcha i. amsaying the market continues to be disappointed because we assume too much. i take you to mario draghi -- the argument about why we are so unhappy about the data is how it is communicated. what about breaking it down and telling the truth? will they will do that in the press conference. >> what really stood out to everybody here with that last statement was they are unwilling to talk about a balance of risks one way or another. tom: you are right. they don't necessarily suspend the balance of risk. tom: i think we will get a reaffirmation of this. in december, -- if you look
now, they are looking for the first fed rate hike. dots going tothe be in the next eight months? waiting to see evidence that this economy is growing at 2% again. brendan: this is the show i always wanted. it is sports chat. riccadonnand carl -- thank you. brendan: the iowa caucuses officially begins. we will bring you a preview next. in the meantime, stephanie and i will be talking about downward nominal wage rigidity. declaring and cdc end to the e. coli outbreak according to the "washington
vonnie: i am vonnie quinn. shares of twitter are up as much as 6%. that privateeports equity firms silver lake has considered some sort of deal for the company. twitter is down 27% this year. hiring andreeze salaries. they want to cut $5 billion in costs by the end of 2017. kung fu panda was the winner over the box office. million in the u.s. and canada. dreamworks animation's teamed up to make the movie. brendan: thank you, vonnie. today's power play -- the
campaign season already starts to happen. i will caucuses kickoff tonight -- iowa caucuses kickoff tonight. john is joining us from des moines. let's get your prediction. give a happy speech and the less happy speech? ton: i would always like cite my favorite yogi berra -- he said addictions are always difficult, especially about the future. to our bloomberg politics register poll that shows donald trump in the lead on the republican side. he is still within the margin of error. ted cruz close behind him five points. we have a low turnout tonight.
hillary clinton and bernie coinrs -- it is a total flip. quentin up by three points, but that is well within the margin of error. that is one too close to call. -- itnie: a trump victory is a very good chance he gets the nomination? john: ted cruz said the other iowa,ich is, trump wins with set him up to win new hampshire. it might set him up to take south carolina. no one has ever done it in the history of the republican party, andiowa, new hampshire, south carolina. if trump wins here and in new hampshire, he may be unstoppable. that is the emerging conventional wisdom. it is hard to figure out. -- it is hard to figure out what would stop him. the race has been so volatile and so unpredictable.
stephanie: there is nothing unconventional about donald trump. john: totally true. be even crazier than usual to make any predictions about what would happen with donald trump. there is no doubt -- this is the ted -- this is the state where ted cruz has been the strongest. if he cannot win here, a lot of the air will go out of the cruz candidacy. part of the party coalesce? can they pose a real challenge to trump in the other states? 28% rubio atp as 15. is 15% enough for the establishment. ofn: there is a couple orch, there is no formula
science. a lot about it is about the expectations game. if you weeks ago, people thought ted cruz was in a pretty good position to win iowa. uz does finish second, it will be about his collapse in iowa. and the fact is, there is no other establishment candidate in iowa that is above 5% in our poll. although 50% on rubio's part is number,rribly powerful it would be better than all of the other establishment candidates, that it may be mainstream republican say, rubio does not have huge momentum, but he is doing so much better than the other alternatives that we should throw our support behind him in order to stop trump. stephanie: john, don't go anywhere. let's bring in jim higgins -- tim higgins. you are talking about the latest
finance numbers. kim: the real question is what establishment candidates on the republican side have enough to go beyond new hampshire? rubio who senator posted some impressive campaign-finance figures. one of the big losers is governor bush. his efforts really fell off in the last half of the year. brendan: tim, what happens to all that money if bush got some of the race? tim: it is still in the super pac and the organizers of the super pac can use it however. the dwindling of the right to rise pack is very interesting looking at the way money has blown in the past year. the first half of the year, that super pac raised a heckuva lot of money, making bush look like the foregone front runner. in the second half, it raised only $50 million. it just deflated. we are seeing the big money
donors really sitting on the side as donald trump just dominates in the polls for the last six months. stephanie: how much does money matter? big money is sitting on the sidelines. do they not want to give it to a candidate that is going nowhere? tim: there is certainly a lot of that in the big establishment voters. see which ofing to these four establishment candidates breaks away and is the one who breaks free of the pack. since no one has done that, there are a lot of donors who are waiting to see what the will be in iowa. what we have seen and a last year, although super pac money that has been spent, especially by right to rise has been spent apparently to almost no affect. right to rise has spent $50 million in the last year doing
positive advertising for jeb bush that has not moved his numbers at all. all the money that has been put into negative campaigning seems to create a lot of noise. no one has never dealt a real deathblow. that will be one of the big questions going forward. but is iters a lot, having an impact? stephanie: think you joining us in iowa. you for joining us in iowa. a look "bloomberg ," at the biggest events this weekend.
curry didn't even have a points, but p still. brendan: i wanted to hear a recap of the game. peopleie: listen, what will do for a free shirt blows my mind. is kung fud not see panda. biggest hit this season. we are talking real estate, super bowl, and of course the miami dolphins. you are watching "bloomberg ." ♪
ross. and our consumers doing their part? we will have the latest spending reports 30 minutes from now. ♪ stephanie: "bloomberg ." welcome to the second hour of "bloomberg ." stephanie: i am stephanie ruhle. i had to deliver another michigan alumni, a very special guest, stephen ross. >> glad to be here. stephanie: we are talking real estate, super bowl, and a whole lot more. months of speeches and fundraising, americans will
begin choosing their first president. to pick theirte party's candidates. pointed success for donald trump. ted cruz may challenge from among reporters -- challenge trump among voters. even the people who vote against me or don't like me, or say nasty things about me, i will cut their taxes, too. vonnie: the primary is eight days away in new hampshire. opponents of the president demands that he give up power within six months. negotiations start the day after a triple bombing killed 45 people. say it was -- the justice department will investigate the san francisco
police after the shooting death of a young black man. the shooting led to protest in san francisco last month. demonstrators want the city's police chief to be fired. -- part 24our 24 hours a day. i'm vonnie quinn. ramy inocencio on the markets. toy: futures are on track open lower and looking to be at session lows, potentially breaking a two-day winning streak we saw on the last two trading days of january. this is where we stand right now -- s&p futures down two thirds of 1%. one of the big questions i want to ask is will the s&p turnaround for january? a seasonality you function, reds and greens on the board, based on the performance. for the past six february's of the past six years, they have all been up in the positive range. whether it is been
in negative or positive territory. oil is on track to break its four-day winning streak. china factory data came out as lowest -- in the lowest in three years. we are off our session lows. dumb by 3.2%. -- down by 2.2%. i want to talk about twitter shares. lake is news that silver and twitter are talking about a deal. chipotle says the e. coli scared could be declared over by the cdc as early as today. stephanie: i still don't want to eat anything associated with that. [laughter] we are going to talk about the stock market volatility. stephen, does this stock market wild ride mean anything to you? stephen: we looked it is been a very good asset because of yield. there has not been yield for a long time. with the leverage you get from
real estate and other long-term assets, and you are buying a very, it is going to be a favorable asset investment. real estate has been great. the volatility -- people don't know way -- which with the market is going today. it has been good for long-term assets. stephanie: do you follow the market? do you see volatility, does it affect your decision making? stephen: it is an indicator. real estate lags from the standpoint -- you have to have a longer term -- i am a real estate developer. i am looking longer-term anointed a cost economy may not be the economy i am going to be leasing and. you are always looking at with the stock market is, but trying to guess where the economy is going. stephanie: from your perspective, where is it going? you are in hot markets. you are in new york, miami,
--ces where disparate ties where disenfranchised americans are not living. stephen: new york has been a great economy. miami is more dependent upon the international economy. york, i look at new york is the a great, global city. long-term is very good. there are always ups and downs. you try to see what the market is in terms of supply and demand. -- it istock market just an indication. you know we are going to have business cycles. yourave to look and see supply and demand factors. stephanie: many of us are scratching our heads. heading intoe are a recession by the end of the year. anyonent obama says that
saying the economy is on the decline is telling lies. would you make of this? stephen: people don't know which way it is going. if you look at retail sales, they had been down so much. there has been a lot of oversupply in certain markets with condominiums and people building from that standpoint. for newre waiting administration, getting new direction, if you will, and more confidence with business. what you have not seen his business having a lot of confidence. stephanie: how to china impact you? whether or not you develop anything in china, chinese buyers survey love luxury real estate. stephen: we use the eb5 program in china with the chinese can invest in the u.s. and they did a great card. that has been a very, very good program, attracting bright, young chinese with the skills we really need in this country.
forell as providing capital our projects. in addition for the projects, but we have been involved in, need a lot of capital. there is not enough capital in the u.s. to nearly supply us with the construction money. we have been doing a lot of financing with the chinese investors. stephanie: do you see that slowing down? stephen: not yet. we have not seen that yet. interested iny coming to the united states. the chinese developers are coming into the united states. the grass is always fuller somewhere else. i think you have seen a lot of the developers looking in cities on the west coast and in new york, maybe some of the other larger cities in the country and developing. actually, around the world. i can the same thing in london. the chinese are coming in and wanted to develop in london.
the best places to invest at this time -- take a look. term, you need to have quite a bit of cash. you need to go in places that central banks have not distorted yet. lots of tech startups, that is what you have the cash on the other side and you have a bit of this, a lots of this, and able to reposition this. the critical thing when you go up. to make sure you can hold it through area cycles. that mean it is a good time to raise money? >> when you raise money, that is always a good sign. there is a lot of liquidity in the marketplace. the banks have tightened up with all the new regulations. from our standpoint, in the cities we are developing and the magnitude of the jobs, we have been able to attract a lot of capital.
we have been fortunate in that worried about what other people are doing. you are worried about your own. doing theseeasy large projects and attracting the amount of capital with the regulations that the u.s. banks have today. -- theie: a fear of projects you are in our massive, long-term projects. what if things do tighten up? what does that mean for you? stephen: you have the guard yourself. i think survive in the real estate world as a developer. you have to think long-term. -- you have toe understand leverage and what they can do to you. equity inlenty of these projects. having equity in these projects will get you through the downturns that you are going to occur. stephanie: do you think we are
heading into a lot of downturns? how bumpy is the road going to get from one out of 10? stephen: it depends on what market. [laughter] real estate is local. new york is going to do well. disobedient hope you don't have the overbuilding in the condominium market read certainly will not have it in the office segment. stephanie: we are going to hope those retailers do well and then a couple of years in new york. stephen ross is staying with us. do you member this neighborhood? -- thepenn station hottest piece of real estate in new york city. and here is a look at our new green room. that is our new real estate. we had a lot of great guests coming up. ♪
graham is disney. it boosted the company over the top spot -- blago. apple remains most valuable brand and google is number two. stephanie: related companies its finished selling companies at hudson yard. stephen ross is with us. what message is that sending? not selling ae stake. owned theirenants space. we built it for them. they are moving in april of this year. today, we have 10.5 million square feet under construction. they are selling their share in the building. so everybody thinks we are selling out already. sharingst that they are
their share in the office building they bought, taking advantage -- they were the first tenant and made a great deal. they are taking advantage of the market. stephanie: or maybe one could argue, they are in the retail space, and retailers are getting hurt. endeavor, aassive flagship with neiman marcus. are you concerned at all? all from aat is leasing standpoint. we won't open retail until 2018. it is a little ahead of their time in the are being cautious. you are doing very well though. -- this was her office portion. reducing their cost going for it in terms of their occupancy costs in that building. but the retailers that we have seen that the time warner center -- vertical retail -- they said vertical retail would not work
in new york. it is the second-highest grossing retail space in new york. we have got a lot of interest for hudson yards. people are seeing the vision we are he saw in hudson yards and what it will be in new york. it will become the new art of new york and very exciting. we have leased, or sold, 7 million square feet of office space. kkr --lls fargo, to stephanie: our own dan dr. rocked. luxury apartment sale prices are down. they said the jobs picture in new york is not that healthy. do you agree? stephen: there is a lot of relocation in new york and that is what we are taking advantage of. the way you do business today is
a little different in the past. tenants can use a lot less , ande feet per employee they need a lot more technology in their buildings. that is why we are building hudson yards. stephanie: doesn't that cost more for you? intoen: we are building it it. that is our advantage. when you look at the new york housing stock, over 60% is over 60 years old. a lot of the tenants realize -- a lot of the tenants realize they need new space. what the shift of where people are going in new york. that is what hudson yards is all about. stephanie: the treasury department now suddenly wants to know who is buying new york condos. why do they want to know that, and doesn't matter to you?
stephen: there was an article in the "new york times" that people were buying condos in single purpose entities. in the name of a corporation instead of their names. they were trying to track money laundering. it is not really an issue. but since the "new york times" wrote about it, we have to look at it. people look to see who their owners are. i have not seen much, if any, money laundering in people buying condos, especially at those prices. stephanie: but you don't think this regulation can affect your business? stephen: no i don't. stephanie: and these buildings are 60 years old? renovate it, can companies of for these new spaces west mark they are obviously a lot more money. stephen: new york is a place for people want to be and that is the important thing.
amount of limited space. i think new york is going to survive. its best days are ahead of it. it is becoming a lot more of a technology city. i think it is a place for people want to be. it is where millennials want to be. it is an exciting place. there is no other city like it in the united states. change-yardses it the fact that kkr is there? we are the biggest, baddest place on 22nd street and we are moving to hudson yards? stephen: they said are tenants will never visit us. we are going to stay where we are. was kkr, butlient we cannot say anything. stephanie: that is amazing.
what we are seeing in the overnight action and we have given up our gains from the last week. essentially that we have done is because of the on again, off again, is russia and venezuela, saudi arabia, are they going to get together and discuss this quota issue? tables been taken off the for the immediate term. as far as the china issue goes, it is important not have the market acts, but how it doesn't act when you see this news. we saw this overnight. oil was not hit hard because of the slowing numbers out of china. it stabilize, but they were still holding up on 30. i can see that as a positive sign right now. about glut aslk well as cuts. we are talking about indonesia getting reactivated in opec. increasing production -- but we talked about the news that russia can cut. what are we -- when every going
to see something happen out there? >> i don't know if these guys can agree on anything. than spread is smaller what it used to be. they have a third of the global oil market. a lot of it has to be -- a lot of it has to do with perception. the acid market bounced last week. we are looking at stocks, gold, and oil. reversal we saw in stocks, we saw the same thing in oil. it built on it last week. there are positive signs from a technical perspective. let's see if quote -- let's see if crude oil can hold on. i think right now, it is a technically driven market. let's see if we can see a double bottom here. 30 and testip below people's will. i get the feeling that things have bottomed out. ramy: stephanie come over to
you. stephanie: we take a look at the most read stories on the terminal. here is the top five. jobs, freezing pay , people serving don't like it. burning, what are you looking at? i am going to guess it is china. brendan: i am. how speculators hurt big momma. we have been talking about in the last hour about how they are having trouble communicating. just about how much intervention they have been doing to get the offshore rate on track with the onshore rate. the first step in any currency depreciation is demonizing speculators, and that is exactly what the article is talking about, going after speculators. stephanie: how about real estate speculators whic? any level of consciousness?
there seems like there is a never ending supply of money. it sounds good because it is going through the details, the decision-making -- one, there is a language barrier. two, trying to understand. they are moving fast, but you have to have a lot of patience working with them. trust me, it is not as easy as you think. we are going to have more from stephen ross when we come back. guess what we have to watch? oil will he down 4%. we will find out what it means for the market, and what it means for you today. ♪
also our very special guests, stephen ross. i extraordinarily in january. many people are saying is going to be the same story for february. to 2009, ago back itd start to the year, but ended up being a great run. investors are saying we are andg back to fundamentals many companies are coming out with their earnings. they are getting back to fundamentals, and getting out of momentum trading, which makes an argument that it is good news. how about breaking news? s it.hasn' in-line with what happened onto personal spending, breaking news, not in less than expected.
that is coming in less than expected. 040%. .0% .in brendan u.s. gas prices decline in 2015 more than the year before. low gas prices will continue to stick around for a while. how will this affect the auto industry? we discussed this in our morning meeting. john murphy from bank of america research. where are we in the auto cycle? >> thank you for having me. we are heading into the middle of the seventh inning of the auto cycle. there is a lock concern around the weakness we see in january. some of that has to do with the weather, but we are holding to volume bytion on our the end of the year.
one thing that gets forgotten is the real measure of demand in the auto industry is people's desire to move around. miles driven is reaching an all-time high. last year it was up 3%. that is a function of growth in full-time employment, and gas prices. oil glutyou know the going to stick around for a while, have manufacturers changed how they are producing demand? >> that is a great question. what happened last year was growth towards trucks and , one of the richest mixes we have seen in the industry. there is the expectation that that will continue to grow as gas prices stay low and the economy recovers. what we are starting to see her from a lot of large manufacturers, is that they are shifted over their car capacity to trucks to take advantage of this.
fuel economy improves on these crossovers and trucks, even if prices go back up to three dollars a gallon, we may see this rich mix around. to aan: are they looking review of the café standards in 2017? will that be relaxed a little vegetable or are they making the best purely on the price of gas? there are a lot of factors that are going into this right now. there is the mid-term review in 2017. now at two dollars a gallon, so there is a question of the economic environment we are in when the café standards were set. the administration may have a different view of where fuel standards showed ultimately go. the manufacturers are on board with the idea that the fuel economy needs to go up over time. we have seen fuel economy increase about 20%. f contenta lot o
that needs to go into meet these standards. there is concern from investors that these may go too far, too fast, and investors are not willing to pay for better fuel economy, they are willing to pay for better, larger vehicles. brendan: thank you. used car pricing remains strong of a defying expectations for all cars except the volkswagen 2005 diesel. stephanie: bad news for you. it has been bad news for oil all year long, and it is at its lows today. for more on the outlook for crude, kevin joins us from washington and stephen ross is still here. this.s make sense of what it feels like is that investors cannot get real when it comes to accepting were oil prices are. >> i think that is probably what is behind a lot of the bouncing is in the market. you have a cognitive dissonance.
even when analysts come out and say it is overflowing everywhere , it does not matter because the traders can still remember the taste of $100 oil. over the long haul, oil averages $35 a barrel in real dollars. over the last 20 years it is $65. you look to the upside when you are looking to the reversions. but that is not the reality of the market out there. it is hard for the traders to let that go. stephanie: why don't we get real about opec and what it could do? even the idea of brokering a deal with russia, they need to get a deal done with themselves. dismissed theg notion of having russia in the opec. the strong dollar gives them from structuring incentive they would not have -- production incentive they would not have .
out, iran has come back saying we will bring 500,000 barrels a day to the market. more talk thany anything, but they will try to do it to grab market share. stephanie: thank you for being with us. when we think about oil prices, you have a big investment. oil prices matter to you? >> we do not really follow them that much in terms of -- we are doing some work in the middle east, but that is in real estate development. the amount of dollars they still countries there are withdrawing a little bit. ,e say a little slow down because there's is so much volatility in the middle east
today. there is a shifting population of where people what to think. we are not developing in syria, we are not developing a rock. he plans these developments when oil was $100 a barrel. has this changed your price point? >> we are partners with one of the sovereign fund in abu dhabi. most of the capital is coming from abu dhabi. in abus a lot of growth dhabi because of the other parts of the middle east. be the lastobably project we do in the middle east. ,tephanie: that's right there the last project they do there, it makes you wonder, all of these sovereign wealth funds, so many are starting to sell. are you seeing sovereign wealth investors slowdown event? down a bit? >> yes.
they're still out there, they are very active in the marketplace. but i think they have to have about -- the amount of dollars to support their people. that is what they use these investments four. it is not the middle easterners who are doing all the work. the growth is coming from outside the region. brendan: it is fascinating to hear you talk about the cultural aspects of making a deal with chinese investors. we heard that there is cognitive dissonance among oil traders. understand that it is going back to replace it has been historically. do you see a slow release of this cognitive dissonance in the middle east? >> i do not know if they feel it .ill be the long-term future it is certainly today, so they are concerned. but they are diversifying.
if you talked all the different thereign funds, and governments themselves, they're looking to diversify their economy away from oil. they have been doing that from or sometime. it has all been about diversification. move toe: i want to brazil. when people have pulled money out of brazil. you have a number of projects there. , tot down with your partner talk brazil. here's what he had to say. we areave projects, building this project. we're selling slowly in those projects. we came in at a very good time. we are waiting. i have investments that i sold, and now bought back in public companies, which i think the real estate is really undervalued. i might be wrote them could be undervalued more, but you never know the bottom. stephanie: george basically said
we haven't best, we are not making more right now. have some investments there, we are not making more right now. doing business there is very difficult. we started a project there, we had all of our approvals, it was a large condominium project. the government all of the sudden suit after it invested all of this improvement. it is not a great place to do business. stephanie: rule of law, that keeps you out of someone market? >> it'll keep you out of brazil, going forward. cost of doing business in brazil, the acceptance of the discount when you make an investments there. stephanie: the food is great, the women are beautiful, you have a good time. brazil, youse for
have an emerging middle class, you have natural resources, it is crazy that they should be in a depression today. it is politics and people's up what could be a great thing. -- people messing up what could be a grace meng. stephanie: a beautiful quote strength inminal, growth comes only through continuous efforts and struggle. maybe that is a message for brazilians out there. the business of the super bowl. that is coming up next. ♪
i am here in our new green room. we're going to have a lot of great guest's coming up, onlyding the one in onand analyst for bank of america. >> here is your bloomberg business flash. this was bigger than previously estimated. incomes rose more than expected. james bond and dealt with the credit for a big surge in sony's market value. sony shares rose 12% in tokyo -- after the company reported better-than-expected earnings. that is your bloomberg business flash. . stephanie: is the business of the super bowl. the game is less than one week away.
louis iss from st. sports impact president pat rish and also the miami dolphins owner, stephen ross. >> it will be a fun event. we are looking at various locations where we will collect data throughout the bay area and san francisco, san jose, and santa clara. several months of research after that, we will have ever or later this summer. stephanie: you host of the super bowl in miami just a few years ago. does it really help the economy, it is only a weekend. >> it brings people from all over the world. it shines the spotlight on miami, which is great for the future economic development as well as the current economic development. the amount of people who come and spend the week there, i think there are four day minimums at all of the hotels. people are spending a lot of
dollars. it is great. it, andes were levi for it wants to give the super bowl because there is such a great economic benefits. stephanie: do you think that san francisco is poised to win? when i think about that stated, it is a luxury experience, heavy on technology. >> they have a brand-new stadium. it is down in santa clara. they have done a great job down there. most of the festivities will be centered in san francisco. do not forget this is super bowl 50. the nfl is going out of its way to celebrate the super bowl, and a lot of new activities will be there. i'm looking forward to it. i'm going out there the middle of this week. it should be a lot of fun. stephanie: it will be a good time. it will cost upwards of $400 million to build a stadium. how long before you make that
money back? >> it is more like $1.2 billion . stephanie: that is a great experience, but there is no way you can think i'm making money off of that right, left, and center. >> there are a lot of events that can take place that you could try to fill the space with you but i'm back to the point of the long-term potential benefits it isting the super bowl, tough as a researcher to measure some of these things. what kind of exposure when you see the gain worldwide, how many people are coming to san francisco, san jose, and the bay area five years from now because of watching the game and seeing all of the beauty shots as the buildup toward the week. as far as the financing of the facilities, it takes time. stephanie: so when do you make the money back? , we havehe activities
10 home games publisher playoff charge, thehat you television revenues that come with it, and the different events you can have, it is great bringing the community together. being the owner of the football team, you have a responsibility to the community. you are looking stewart owning a utility company. winner. to create a there's nothing like a winning team that brings a community together. stephanie: you are bringing on a new coach. is it about having a winning team or a beautiful stadium? rightning cures all ills in new york, you will for the stadium no matter what. in miami, in los angeles, there are so many other activities. they love football, but they will only show up if you are winning. about gettingrry the fans out there today,
because the series at home is so great. -- experience at home is so great. you want to make it something special. that is why these new stadiums are being built today. we renovated our stadium. we spent $450 million in renovating our stadium. it is great for the economy. miami is a great from aspirational city, if people want to be there and have great events. you say you want on a team for a small time, do you want to sell? >> no. you on the team like a steward of a utility. i love owning the team. stephanie: that takes into ally. cities like lar miami have other things to do. when all three going to do on a sunday here? nla, there is a lot to do. in los angeles, there is a
lot to do. >> there is a great market there. to see the return on investment for public investment for new facilities, it helps if it is a multipurpose facility. in indianapolis at in dallas, facilitieshese within posted so many events sporting and nonsporting. but there is a facility in hazelwood that will be one of all-around sports centers ever. they could have so many events, on that will help the return investment. stephanie: i hope to see when you are back from the super bowl next week. when we come back, we have to talk donald trump, and his real estate records. you are watching bloomberg go. ♪
stephanie: welcome back, you are watching bloomberg go. stephen ross is here with us. joining us now, bloomberg executive editor tim o'brien. we have to talk donald trump with you today. , saying quoteook a well-documented and widely dealsed trail of bad litters trumps past as a gambling real estate mogul. he?real is >> he is probably the world's greatest promoter. that is the best thing i can say about donald. the economy turned bad, and he in a little gun shy developing. so he used his name to promote. a lot of the buildings you see
that are trumps this or trumps that in different parts of the world, he is using his name. it is more of a franchise. it is great, nobody does it better than donald. no question. >> but he also, as you know, you are legitimately considered one of the largest real estate developers in manhattan. he lays claim to the and on the fact it is not true. he has a casino company that never earned a profit, he put it up for bankruptcy. investors and employees were hurt by that. on his real estate holdings him he came out of the 1990's as a reality star. we put his name everywhere. he has been successful at that, but he is not the largest real estate developer anymore. stephanie: let's go to iowa. you have been a
supporter of the republican party for years. is this a shot? ck? >> and surprises everybody. i think it even surprises donald trump. run for he says he will governor, for mayor, he withdraws at the last moment. he is a great promoter. this started as that. >> do you think he would be an effective executive at the national level? >> i have my reservations. he makes people feel good about themselves. time with him for long-term you cannot not like him. [indiscernible] jeb bush and mitt romney. jebhanie: why can't
bush get his groove on in selling his story? >> it is hard when you are going against donald trump, because he goes against john more than the other candidates. it is unfortunate, because i think that jeb bush would be a great president. >> where he think he goes from here? i think of those three --erate republicans stephanie: who do you go with? >> jeb bush. you.anie: thank we will be back with more. ♪
bloomberg news christine harper with me for the hour as well as michael gorman, chairman and ceo of franklin square. only likee i mayo. let's get first word news. s its say t tonight. hillary clinton is leading the democrats. bernie sanders is not far behind. he is still pushing his populist message. >> you want a radical idea? going to create an economy that works for all of
us, not just the 1%. [applause] >> bloomberg world review the caucuses, and found that -- and there results will be on all due respect. a crisis meeting right now in geneva. the world health organization is deciding whether or not to declare a global emergency. the last one was during the goal of -- the ebola epidemic. flynn's water was poisoned with life's two years ago after the source was changed to save money. mark is now with ramy inocencio. futures are on track for a lower open. this is where we stand right now. s&p futures are down 6/10 of a percent. the s&p an nasdaq and dow are nt
too far behind. missedrsonal spending estimates, coming in flat for the past month. that is also having an effect on the price of crude. let's take a look at what is happening there. session lows right now, down by 3.5% or so. we are breaking a four-day winning streak that we saw in the past four days of january trading. it having fx here on the s&p 500. this is a comparison of the s&p in white and wti crude in yellow. this has been falling is moving in tandem. we are now at session lows or both -- for both. stephanie: we will get you the three stories that matter to markets now. ,e are seeing the headlines
alkaloid naming three directors to the board. we do not have their names yet. number one, china. 2% to a three year. the pmi slumped last month because of a weak demand and efforts to reduce capacity. oil and metals fell after this data was released. does this matter to you? been a story for a long time, and we expect it will play out over the next several years and we are in the credit funds., we sponsor seven we came and i and all the macro economic factors, and certainly china is an important one. markets move every day, but we are defensive and we expected to move over time. >> what about the knock on
effect? >> we have energy and credit funds. we are very cognizant of what is going on in the markets. of a supply and demand issue playing out in the middle east. in the commodity producers, we have seen a selloff in the past few years. we will see where the bottom is. we invested for the long term. we can take advantage of the opportunity in these markets, unlike what you saw with the other structures like 3rd avenue. we do not have to manage liquidity so we can take a long-term view of the markets. we have nice cash balances invested into these markets right now. we are seeing real lows in the energy market as well as the risk market. >> the result is lower rates for longer, with slower growth.
as a relates to the u.s. banks, it means you need to have banks be an engine for additional economic growth. leveling slow is only one third of the typical rate of growth. we need to fullback on -- pull back on regulation so that banks can pick up some of the slack to facilitate growth. hsbc imposing a global hiring and pay freeze. how does this work? employeesy keep their in the building if they are not going to pay them anymore money and they are not going to hire anyone new? have pressures from the three r's, race, revenues, and regulation. not revenue growth in the past few years. therefore, you need a plan being. if you do not have a plan b, you will hit a wall. stephanie: they are making a
global to curry -- decree. they are not doing like the other banks say. the brakes that have not announced programs are still doing it. goldman sachs does not telegraph when they are reducing expenses, they just do it. other banks still have over one half of their $5 billion expense reduction plan ahead of them. the other banks are doing it. it might be a field day and other banks want to hire. one of the questions that hsbc is whether they decide to move their domicile to hong kong away from london. with that make sense? bank, if youlobal are not generating returns above the cost of capital, you have to do whatever it takes.
hsbc is teetering at that point where they generate returns above the cost of capital or below. below, likeanks are citigroup, bank of america, and morgan stanley. hsbc, they better do whatever they can. stephanie: how will you do that if you are not paying your employees? >> i would ask if this was cyclical or structural. obviously the big banks are dealing with the regulatory changes, they are dealing with the changes in the macroeconomic economy. rates are going to stay low for a well, that is not the story. is this going to change the way they do business in the future? >> the cyclical element, at some point they will go higher in rates. but some of this is structural. the regulatory changes are permanent. decadeenue growth this is the slowest that has been in 80 years.
you are not going back to the growth rate you have a decade ago, that is around to stay. stephanie: there may be a structural problem with twitter. has considered some sort of deal. shares have jumped as much as 6.8%. they have billions of users, but they cannot get management grooving. can they really develop the kind of robust revenue model, and compete with the big guys? they have a huge number of users. but can they developed the same diversified revenue levels of the other tech companies have developed? >> when it comes to mergers, that is a bright spot for capital markets. second-biggest merger
backlog in history as with all of the capital markets pressure, and capital revenue year-over-year, the one bright spot is mergers. >> goldman sachs is trying to push a stronger into silicon valley. twitter had a goldman sachs guy as the cfl. stephanie: if you look at these 1 tech companies, will the way they get to the next chapter be m&a? mike, i thinkh that consolidation is healthy. i think you will see consolidation, you have seen it before. will be anow what it mania consolidation, but those who have lagged will look for strategic opportunities. stephanie: the unicorns, you do not need liquidity. do you need to invest?
>> we look for capital preservation, not returns. we are looking for 8% to 10% annual ideal. seems to be a little bit frothy at this point, so from my perspective and is overdone. stephanie: in the last year and a half we have seen non-core tech investors flooded into those silicon valley private deal because of that fear of missing out factor. >> it always seems like that is the sign of the top. we are defensive and we do not invest in the pre-revenue companies. we see all of us money flooding into the space, you wonder where it is going next to. . >> whether it is boutiques, big banks, restructuring, you wonder where it is going. stephanie: at the end of the day, the lawyers always get paid.
then usual, leading to less spending. parts shortage because of an explosion at a steel plant toyota is feeling the shortage. that is our latest bloomberg business flash. ramy: i'm taking a look at some of the monday morning risers and one of them is twitter. six and a up by about third percent. the news here is that there are reports that mark andreessen and ight -- might be in some sort of deal talks. right now to boldly is up by nearly 4%. sticker the e. coli
scare over command that could happen is soon as today. but here today they have lost about a quarter of their value. world. the pharma at the shares also rising by about 4/10 of a percent. profits came in, beating estimates. to $21.8% that is about $90 million more. patient care costs went down about a penny. coming off of session highs in the premarket. of we will talk to bank of america, and ask why mike mayo has changed his tune on the company. ♪
jumping 5% onimax friday. of another 9% in premarket trading today. guess what else, kung fu panda, we noted earlier, number one movie this weekend. setting an imax record for an animated title. it atbt my house will see least three times. imacs is feeling it. imax is feeling it. mike mayo is here. he has been a longtime critic of banks in general, but also especially about native american. -- bank of america. but now he has turned the ship around, o upgrading to a buy. have a mayore to
acxiom, it would be that banks with low returns and poor oversight should have their roles separated. things with good returns and good oversight can have their roles combined. bank of america has some of the worst oversight and worst returns in the industry. bank of america's boards needs to reduce oversight. >> worst oversight, and now you have changed your to? une? >> i still have major issues with the board. i'm still curious on behalf of investors that there is no timeframe for any major financial target. what i do not have an issue with is the balance sheet which has been scrubbed the entire decade since the financial crisis. tangible book value.
we did the math on the fourth quarter numbers and the 2015 numbers, and we convinced ourselves that even in a recession, bank of america's tangible book value would still grow. so the stock is 20% below the year-end book value, which is still growing, and then we need to change our to. you do not think there is so much downside in this stock. what is going to drive investor excitement about the stock? >> they are buying back their own stock. they will buy back $20 billion in the next three years. when you buy it at 20% below tangible book value, that by itself creates book values. the banking industry, every quarter, every it, where they generate consistent earnings without blowing up, that gives investors confidence. the month of january was the worst month of performance in seven years. upgrading bank of america was
our way of saying a creature allocation to u.s. bank stocks. they have gone down despite their improved resiliency. stephanie: this is almost a competition with banks at this point. isi think would mike says exactly right. we have seen the big banks become a little bit more like utilities. they have built their capital bases, and they had exited the middle market lending business. we are middle market lenders. we have $17 billion of middle market loans. there is less competition out there from the big banks. be an advisory businesses, they want to make really big loans to investment-grade companies. but we are investing in noninvestment grade credit, and increase opportunities for us to create that -- to fill that void. stephanie: seeing regulation, seeing all of the cuts that they have made, do you see a difference in how you are being
served? >> we are big as an institution, so we are a lender to a lot of big banks. they want to lend as attractive rates and low interest rate environment. the real news is who will fill the void that banks will leave? of those wonderful super regional banks, a lot of them were consolidated into large banks. it has created a major shift. correct one point that you made. i generally agree, but the -- stephanie: nobody but mike mayo would say i want to correct rather than i disagree. [laughter] >> jv market is expanding to new cities. but as the energy issue is expanding, the energy loans, banks generally have the first
lien secured. it is generally not the large banks, it is other funds, other bond funds, liquidity funds that are holding the mess, not the large u.s. banks. >> isn't that part of what the regulators were trying to achieve when they cracked down on the banks from making the riskiest types of loans after the crisis? capitalto the requirements, and they made it harder for them to do some of the kinds of things that your fund is now doing. >> exactly. the regulators have required the banks to rea -- the risk and d lever the entire da decade. is fed stress tests, this new work that we did, it is as harsh as the actual local financial crisis. in times like this i do not know how the macro will play.
it will not be as bad as the global financial crisis. stephanie: i will bring back a disconnect. the point you are making, we have heard from some of your peers that banks have gotten out of the business, this is a shadow banking world. , someone, no names said we are planning to lending to the middle market, and we're doubling down. how are the banks telling us one thing and you are telling us something else? >> we are in the market every day, and i think the middle market companies have some leverage on it. there is a huge amount of supply of loans that are not being met right now. banks have pulled back, certainly of loans are leverage more than four or five times. said, if you are a really strong company, it depends on how you define middle market. our middle market is $50 million
to a couple hundred million dollars. you will see banks making the good loans. the loans that have more risk, more leverage. hedge funds and others are stepping in there. then good credit decisions. >> from a regulator standpoint, if you make loans, and your average yield is 9%, they must have a fair amount of risk. the people who suffer are your investors if those do not work out. they are not as systemically important for the global economy as bank depositors. investors those get left holding the bag. they are not just the super wealthy families. you have pension funds, insurance companies. >> we invest the senior secured
credit. the default rate is about 3%. the recovery rate is about 80%. we are not talking about investing in subordinated debt, we're talking about the top of the capital structure. the large banks, based on the regulatory environment today, if this is more than four to halftime lead church, -- four and a half times leverage, they will not step in. stephanie: where is your stock going? your target? >> the high teens. this is the bottom. stephanie: there you go. we will be back with more. ♪
piggy ringing the bell. she has been an icon, a hero of mine. loyal girlfriend. i have always loved her. there you have it. markets are open. this was your monday, abbott labs. so why is the device industry consolidating. the beat continues to be great for bankers. we didn't let mike mayo leave. how are we going to let him leave the building? already.id it the medical device industry, last year they did $58 billion
worth of deals. already a massive consolidation and health care. they are buying a lot of money that does a lot of diagnostic test work. and they do a lot of things like research for fluent hiv. goes along with how medicines are used. there is testing for the zika virus. i wouldn't be surprised if they morethers are working on rapid testing for that. likely topetitor's feel the heat from this? muchis isn't so necessarily an issue of competitive consolidation. hospitals have been putting a ton of pressure on price makers. obamacare is out there squeezing
us. you guys need to get your costs down. trying to suck out cost as much as they can so they can deliver those margins. delivering to hospitals. >> i we see in the same banks involved in this deal? >> jpmorgan was involved in two different deals. we have done so many deals and health care. there are so many banks to go around. >> do you think there will be a lot more deals ahead? stop. its not seem to was this momentum thing last year. people are continuing to shop and see bargains out there.
>> i love hedge funds, don't call it a come back. 1.4% in january. after his firm had his biggest decline ever. we have a cover to turn around. where are the changes we see the industry last year? could this be the end of hedge fund of -- hedge fund forever? >> it has been ethical for the hedge fund guys, the equity driven guys. it is tough to be in the mist driven investor in the declining market. einhorn is a great investor, i suspect he will come back through this. is market driven. i think a lot of the same players will play out over time. one of my favorite bloomberg
, you see the shift into consumer discretionary and pulling out of financials and infotech. >> go long financials. a lot of the far -- a lot of the shareholders are behind the scene sing so many parts are worth up to half more than the current market cap. i will give you your first play on bernie sanders as president. he wants to break up the banks. the parts are worth 40% more than the whole right now. activism could have a role in the banks.
why are they so outspoken for the big bang's? >> this is the first time the activist had a director on the major bank. you have seems some changes. solar -- have some more activism. you have a lot of trapped value. does not invest in complex structures. people love them, leverage returns. one of your funds is down 8% this year. >> our business is a very simple business.
you can leverage a one to one appreciate. very low-end financials, services, and businesses. there is some market to market volatility. we are not an a lot of cds is. , we don't invest a lot in clo's . we make loans. we do have an advantage because of some of the regulatory changes. overve seen some decline the last several months but we think that is market to market volatility. >> what does it mean for your business that high-yield junk had a horrible end to the year and your business is down? >> we have done much better than the come set, much better than our peers. we are paying across our funds. a great yield in today's
markets. we have no defaults. 75 percent of the ceos in our portfolio company says they expect to see rising at the dna and rising revenues in 2016. market companies are unhealthy. companies that have significant exposure to china. we think our portfolio is safe. business a very simple and we make loans. >> people worry about they don't have a lot of time for bad performance, the investors are pulling the money, they have these redemptions. you said earlier we don't have this liquidity problem. third avenue. if theynvestors respond feel their 8% decline is not working for them? >> it is the difference between the open and structure like some
of the mutual funds and a closed and structure. can sell their shares on the marketplace. we sell a million shares trade every day. we don't have to worry about am i canredemptions you talk more about the competition against the banks. bank balance is sheets are twice as high as they were a decade ago. tougher to make those loans so it competitive advantage for funds like yours. >> i think it is a competitive advantage. our average loan is 50 million to 500 million on the upside.
where the loan several large banks do business. we are not competing with jpmorgan. we know the occ and fed have been very aggressive with the banks. they could be very good companies but they are not investment grade. >> this is the year where we see legendary investors saying we could face a recession. to say we have no defaults, nobody does. >> certainly there have been some defaults in the energy space. the implied default rate is about 35%. i don't know if we are going to get that high.
the market had priced in a 30% default rate. while we got some struggles, this is a much different market today. there is not much leverage in the market today than back then. >> it is a whole new world on bloomberg . we are not 10 minutes into the trading day. it is still already. >> this is where we stand in the first several minutes of trade. dow down most by 6/10 of a percent. factory activity coming at a three-year low end u.s. personal spending coming in flat when there wasn't an expansion there.
eight out of 10 sectors are in the red. knows price falling oil is down right 1.9%. materials and industrials down by 1.3%. we are off of our session lows 3%, tradingwn by off of the $32 handle. let's take a look at individual movers. down nearly 5%. this is after they lower their price target from $7.50 to nine dollars. herbalife is going the other way. turns out there is not enough evidence that supporting not one cases, onerminal
bill ackman accusing herbalife for not having the business model. down by 1%. this is the first time were they are going to get 18 months of documentary films and tesla down 2.5% right now. cutting their price target to -- to 450.0, >> google will reported fourth-quarter earnings. amazon put up a bad quarter. both of those stocks are down percent -- down 10% year to
date. interesting to see where alphabet fits in. analysts are excited to see where this current -- where the first company segmented. so far we have seen lots of surprise and volatility. seems like a lot of that could still be ahead. >> our own abigail doolittle at the nasdaq. when we come home we are going from new york city to puerto rico. details on their plan to cut debt.
little history lesson, green, stocks down across the board. one bright spot. >> welcome back to bloomberg , here is your latest bloomberg business flash. that strengthens the medical diagnostic. hiv, malaria, and other diseases. credit the force for making disney's the most powerful land -- the most powerful brand. in terms of value apple is still number one. and partnership pays off for dreamworks. kung fu panda three pulls and $40 million in the box office.
it is the first animation coproduction between the u.s. and china. >> puerto rico, government released the tells on the plan -- etain -- on the plan from a cool 49 billion to 29 billion. that is a 46% haircut. about the debter dilemma. -- whenyou addressed you adjust stock and debt, making an apples to apples comparison, they are the lowest of any state. problem and aural willingness to pay the problem. keller. bring in laura break this down for us. >> this is a problem for puerto rico. >> the investors really weren't
looking -- this is what puerto rico has been given. a 46% cut. there also concessions the creditors are being asked to take, which is a two-year moratorium on this. then 5% for certain things. >> they are being asked to take this the they have a right to say no way. >> there is a median schedule later this week for the creditors to come in and say this is what we wanted to see, this is what we would agree to. >> are creditors really surprised? are they shocked and amazed that prater rico is starting here? >> i think they were a little surprised. where do rico has taken so many
months to bring them a plan. they may not have been in the room to talk to puerto rico. but people who devised them have. i think the surprising part is what besides the 40% -- 46% cut, it is not just one bond. bonds are being treated exactly the way the creditor had anticipated. groups thatrtain say we expected to be higher on the totem pole here. >> let's take you inside the terminal. this is the yield, a two-year yield curve. we have been all over the map.
>> we watched and looked at it. we don't really deal significantly with sovereign credits. i would ask the question is this going to be what we see with argentina play out? >> they do have that example. obviously they have the experience from argentina. there are a lot of similarities. plan, even what puerto rico put out today, is predicated on the high number of creditors accepting the plan. >> where does that leave or to rico? negotiation. creditors want to talk. now, when a year from
you experience worse returns, that is what they start to do. the bond insurers -- they are taking certain sets of bonds. if this lasts for a long time. they are not going to be able to pay our bills. >> people are not looking to stay there. they have raise. >> giving the latest out of print or three ago, when we have final thoughts on bloomberg opiate the latest company chairman says investors want to give their money out of china. you are watching go.
>> how about some highlights from the show, here is a look for our conversation on go? -- for our conversation. use the program in china where the chinese can invest in the u.s. and they get a green card. skills really need in the country -- as well as providing capital. >> we expect it will play out over the next several years, so we are in the next credit markets. bdc.f them are
certainly china is an important one. the equity markets were defensive end we expect it will play out over time. , they face pressure from the three r's. like the other global banks, they haven't seen revenue growth in the past year or few years. ,f you are another global bank what is up to hit a wall. >> let's get final thoughts from a team. we manage five bdc's with a couple of other funds. and while there has been some market to market volatility. weed on regulatory issues see opportunity and we think we can take advantage of that
opportunity. >> right time to buy energy, or too soon? >> your message from the day, bank of america. >> you talk about issues with china and energy and puerto rico and you talk about the reset -- about the risk of recession. the large bank balance sheets are fine. we changed our tune and now we are buyer. want to see whether the activists come into these banks. >> tomorrow, stephen curry and me.
from bloomberg headquarters in new york, this is what we are watching at this hour. a record amount of crude last month. adding to the selloff. slowing factory output in china, a key manufacturing index dropped in january for six months in a row. it is decision day in iowa. donald trump and hillary clinton where it front -- were in front but be a tight race for the contenders. has the latest. we have news on manufacturing. : 48.2 is the number. the med