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tv   Bloomberg Markets  Bloomberg  February 17, 2016 10:00am-11:01am EST

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>> u.s. markets extend the best two-day rally in five months. oil advances saudi arabia and russia. they push other nations. will iran and iraq follow. minneapolis fed president spieth out on financial reform. plus, we will preview the release of the latest fed minutes. tim cook denying a court order unlocking an iphone belonging to a shooter. the latest on the data security and the fight against islamic states. big day. we will head to the market desk. julie, what are we seeing? a lot of green. bounceback being the beat up groups and beat up
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passesdoing better today session. all major averages gaining and not only that, but building on the gains out of the gate this morning. similar to what we saw yesterday where stocks had a choppy morning. then they were up and stayed up at roughly the same level. take a look. i've looked at the s&p 500 over the past three days. gaine looking at a 4.73% over that time. this is the first since december. we have not been having when he as far as this year. when i talk about the groups doing better today, we are talking about cyclical groups, economically sensitive groups. ,e have got materials particularly industrials and tech. that is the theme we have been seeing over the past several sections.
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citigroup, bank of america, jp morgan. you could have taken any of the charts and they would have looked very similar to what we're seeing today. >> i am looking at priceline, a rocket today. what is going on? julie: priceline is the biggest contributor to gains, up by 12%. the company came with earnings that beat estimates by a wide margin. a sales of $2 billion above estimates as well. the effects of currency, it would be up 25%. the company gets a lot of revenue from abroad very the company's profit forecast for the first quarter leaves it room to miss estimates. investors are focused on the last quarter more.
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we are seeing a rebound in oil after the agreement we heard about yesterday to freeze oil production. we are -- now it looks like a ron and iraq are ins -- in discussions to do the same. we are seeing oil higher even though brendan, the freeze on production is still oversupply. ndan: it is not a freeze. it is a "freeze." first, we will check and on the first alert news this morning. vonnie quinn has more from our news desk. vonnie: president obama is battling with the senate and the supreme court over a matter of fair play. a constitution requires the senate to consider his nominee to replace antonin scalia on the court. leaders say they will not vote on a nominee while mr. obama remains in office. the president is expected to select a nominee to attract support from republicans. the chairman is open to on president votes
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and nominee. the obama administration reported he had planned to valet cyber attack against iran if the nuclear dispute has led to a military complex all according to the new york times. the plan was aimed at disabling defenses, to medications, and it's power grid. in the wake of the nuclear attacks, four u.s. fighter jets blew through. the fight demonstrated the resolve to mains -- maintain stability on the peninsula. now turkey is attacking that group. heavy artillery into syria against kurdish forces. the main fighting unit is a terrorist group. used them asu.s.
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allies in the islamic state. some 30,000 people are expected to gather today. outdoor -- just across the border in mexico. plans to visit the u.s. -- to give a blessing and honor of refugees. news 24 hours a day. i am vonnie quinn. brendan: investors have a lot of things to be concerned about. yellen dollar falling commodity prices list of concerns weighing on 7% so far this year. i pull the covers up and wait
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until 2017. >> there is always something terrible happening somewhere in the world or have we forgotten ebola scare?or the if you want to look at terrible things, there are always terrible things. help going to probably the most influential economist of the 20th century, the second half of the 20th century. who warned us that the market forecast, nine of the past four recessions. you want to use the markets as an economic indicator and there are a lot of false positives there. seeing a huge slowdown in trade in and out of china. there are things we can a measure -- can measure in the u.s. talk about another influential 20th century
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economist. he said, basically, you cannot beat the market. the market prices things in. is there a strategy or can you throw your hands up? told upon it and apply it in telogen late pharma taught us? markets are fairly random from day to day. if you're trying to guess what happened, the odds are against you doing that with any degree of accuracy and consistency. occasionally, you will get it right but most of the time, you will not. no one knows what the future holds. if you're -- investing thesis requires you to accurately predict a complex and somewhat random world market economy, you are destined to fail. using the academic work that nobel laureate jean has told us, we want to own a broad assortment of asset classes and we want that to be global and we
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want the bulk of that to be low-cost. if you want some portion of your portfolio to be active management, you certainly should feel free to do that. but a healthy chunk of what you're doing should just be by the planet, rebalanced on an annual basis, and wait 30 years to retire. nobeln: you bring up the prize, robert who won in the same year for taking the opposite side, so many americans have all of that wealth in housing. it is not balanced at all and when you look at the housing market, does that concern you question mark -- you? >> understand what he won the prize fourth it was not the opposite of what was said. it was a nuanced modification of, hey, there are times when the markets get crazy. markets are not personally -- perfectly efficient or rational, because of you humans who are emotional and misbehaved and duke's that are not rational or optimal.
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because we know that happens, that is why you cannot just be 100% stocks, 100% index, or a robot or you are not. housing, theout average american has a disproportionate amount of wealth tied up in real estate relative to the rest of the world. some of that has to do with the really limited regulations on where you can put up new housing. the most valuable land and the most expensive real estate is also the most restricted. try to put up a market building in manhattan. or parts of california. and san francisco, or wherever. he will find there is not a lot of space and legal opportunities to put up new property. you buy a house, you are putting 10% or 20% down and our financing it with the proceeds of your labor over the next 30 years. that ultimately turns out to be a good investment. what schiller has taught us is that after we take into account
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inflation, it will not outperform the stock market. brendan: we're running low on julie wasjulie -- talking about three developments of market. possibly oil, the two-day rally we are seeing in the u.s. equities index, and three, the movement for priceline. which of those to you is in any way significant? barry: priceline is fascinating. specific.e stock here is a tech company trading top of my and off the head, they compounded at 40% of year for the0% a last decade. it is still reasonably priced but we look at the banks and other things. maybe that is the jamie dimon effect. it is easy to create a narrative after the fact. who knows where oil will go and i do not know how significant the floor is. boyle will keep going down. barry will stick with us.
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join us as well. coming up in the next half hour, we are talking apple. investors like carl icahn have cut their stakes in that company cook islook at why tim at the center of a debate for data security, to unlock an iphone that belongs to a shooter in a terrorist case. ♪
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brendan: we will head to the market desk. julie: we have been getting over the past couple of days, sometimes move stocks. let's look at the examples.
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10%.tock is up by shares, have been battered over the past year. giving investors a snapshot of time what bigger investors are doing. in the case of berkshire hathaway and warren buffett, it is a safe bet he will be holding the shares for quite some time. that is his typical strategy. in the case of other investment managers, it could be more of a short-lived bet. carl icahn to take another example, he increased his stake in a number of different companies. adding 4 million shares to his holdings and each company for
quote
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his global 12 million shares. john paulson's an example of that. stake backed by gold. gold is up a little bit today. paulson's timing was somewhat unfortunate. he cut his stake by 37% and that was just before we saw the gold rally. we do not know what he did on january 1. this is a snapshot at the end of the year like so many of these 13 filings are. it can be educational to look to see what these guys are doing. cory: we will play a game, and we will do it right now. chief investment officer, let us
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begin. scaled back at exactly the wrong time. >> he's gildan at the wrong time. i have been critical of hedge funds in the bloomberg view columns. topss you are in one of the 100 funds, you are paying way too much for underperformance. i do not understand why anyone is paying two and 20 or some variation on that for an etf. add to it they were loading up at the top and dumping before a solid 100 point bounce in the price of gold. save for the to price of gold. >> could you apply for millet maybe would not have worked in decades past? necessarilynot based on inflation.
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gold used to be a professional's product because you were buying it through futures. gld, which has only been around for about a decade, really democratized the ability to buy what some of my friends called paper gold and not actual physical gold. that is a big change and has allowed more people to throw a little bit in a portfolio as opposed to having to deal with futures, which is a lot more complicated and potentially expensive. stephanie: hedge funds have not been doing -- julie: hedge funds have not been doing very well. , hedge fundsndex he or today. you see the declines, down 4.5%.
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it is down very sharply year to date. that brings up the question, is there any kind of usefulness to getting the information for the investor at home, for example. or is it just the toll for those who see these filings and then put down their bets based on that. cost ande the high underperformance, money continues to flow to two places. vanguard and the broad indexers, and hedge funds. i understand why money flows to vanguard, except for the renaissance technologies, appaloosa. there is a list. jim chanos famously said 30 years go there were 100 hedge funds and they all did well. there are a lot of questions as to the second and third tier hedge funds, why they continue
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to attract as much capital as they have. there is bloomberg.com story about a hedge fund manager who tweeted stuff out on social media and attracted $29 in endowment money. the game is changing quite a bit. brendan: get skepticism, which is fun. my favorite thing to feel. also, julie hyman. still ahead, we are covering apple ceo tim cook, who has rejected in order to allow the fbi to unlock an iphone used by one of the san bernardino shooters. him -- to spoke to charlie rose. charlie: i do not expect them to do things to help us that compromise their business position or international competitive position. but i do want to have enough of a bridge for the tech center where we can work where possible
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toward, solutions to a common problem. ♪
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brendan: welcome back. it is time for bloomberg business flash, a look at some of the business stories in the news right now. canada will cut more than 10% of its workforce, about 7000 jobs. the airplane maker recorded fourth-quarter profits that missed estimates. they have been hampered by .elays a blow to anglo american, the credit rating has been cut so that it is negative. a similar rating on monday. they have been battered by the bump in commodities and has been trying to sell off assets. the company lost three fourths of its market value last year alone to attempt cook accusing the u.s. government of an overreach that will set a dangerous precedent, rejecting an order that would help the -- the fbi unlock an iphone. he said it would be wrong for the government to force apple to
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build a backdoor for the iphone. he said that would undermine the freedoms the government is meant to protect. dig into the apple story. shares are turning in a muted performance at the moment. one of the biggest impacts of the biggest tech company standing up to the fbi. i am joined now from washington. help me out. i cannot quite understand from the story. is the fbi demanding that apple unlock this iphone, or that apple change it in the future? >> this is a fascinating thing about the issue. the fbi is saying they believe apple can write a specific software program just for this one phone, which will allow the fbi to unlock it and get asked sex asked to the phone.
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to use the customize software to hack into other phones. but also, this is another example of the ongoing tension that has existed for months between technology companies and the government over encrypted communications. know, thes far as we specific piece of software, it is possible. this is not a technical fight. it is a fight over principles. what the government is proposing is a relatively simple technological solution. they want apple to provide basically a software program the functionsable on the iphone that deletes data after you try to enter a pass code and failed 10 different times. then they want apple to provide an automatic way for the government to run multiple pass codes automatically against the
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phone. what the government is saying is they are not even trying to break the encryption here. all they want to do is find the right pass code and be able to get into that phone. it's beast to the larger issue of, while government officials are saying the encryption is such an obstacle for them, really in this case, they are proposing a simple technological solution to be able to get into the phone. brendan: i remember 10 years ago there were civil liberties activists in developing foreign companies that were demanding companies like yahoo! and google encrypt their e-mails so they could remain private. we now have a seachange where there is a demand from governments that they not encrypt these can occasions. fightingh company is this the hardest? is it apple question mark question yes. apple has been at the forefront of the encryption movement. other and -- other companies have come a long way, google, yahoo!, just to name a couple.
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last fewy in the years, since the revelations of government spying by edward snowden, there have been more and more companies providing encrypted services and providing their users and customers the control over the encryption and that is where the government says it is creating a problem for them. in the past, the government would go to company like apple and google and have them break encryption. they now say they cannot do it. brendan: thank you. this story is not going away. we will come back to you often in the future. anyng up, will we get clarity on where the fed is heading today? we look ahead to the release of minutes. that is next. ♪
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. >> live from bloomberg's world headquarters in downtown manhattan. i'm in for betty all week. we'll check in with first word
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news. vonnie quinn has more. vonni enchings: hillary clinton and bernie sanders are in a tie in nevada. that's according to a new poll. 48% say they support clinton. 47% say they support sanders. the democrats caucus being held saturday. ted cruz is close in second place and the republicans hold their caucus tuesday. president obama knows who won't be succeeding him in the white house. he says the american people on't elect donald trump. and he says holding the job is not like hosting a talk show. a dispute in the south china sea. fox reports china has deployed an advanced surface-to-air missile system on one of the disputed islands in the region.
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china says it has limited defense capability on the island. european business groups are urging the u.k. to stay in the e.u. the confederation of british industry has joined with 21 counterparts from across europe. that puts the weight of more than 2.5 million businesses behind the stay campaign. the british prime minister david cameron hopes to complete renegotiation of the u.k. membership in the european union this week. the news 24 hours a day powered by our 2,400 journalists and news bureaus around the world. i'm vonny quinn. brandon snoop brandon: at 2:00 p.m. the federal reserve will release the minutes of the january meeting and investors will look for the clarity of how the market turmoil is feeding into their rate decisions. e have some insight. >> it is folked on the dual mandate of stable prices and
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deployment. we're pleased the last several years we've seen strong unemployment rate. it keeps going down. >> is that false? neel: there are more people who left the labor force who will come back in if they can get a decent job and so we have to keep driving unemployment down, keep bringing people off the labor force and that's how we'll get wages up and inflation back to the 2% target. reporter: why haven't wages gone up more than they have? neel: it's a complex issue. productivity appears to be slowing down the last several years not just in the u.s. but around the world and you're seeing some of these same challenges worldwide and there's a confluence of events. but in the levers we can control if we keep having accommodative monetary policy we can keep bringing people off the sidelines and bring people from the labor force and bring it back to the 2% target. reporter: the only way that happens is it corporations create jobs and we're in this environment where corporate america is looked at like
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public enemy number one. we're not offering accommodative policies and more and more manufacturers are creating jobs overseas. so until we start to work with big business in a positive way, we're not going to create those jobs and get those people back into work. neel: you're raising important issues and a lot of the issues you're raising are fiscal policy for the executive branch outside of the domain of the federal reserve. reporter: and legislative. reporter 2: is fiscal policy the one catalyst to get us out of this rut? neel: no dort fiscal policy that was growth oriented and pro competitive oriented could be a jump-start. reporter 1: how confident are we we measure productivity in this new world? neel: it's tricky. i saw a national bureau of economic research analysis that was saying some of the people who thought productivity was mismeasured, that they were wrong. it's complicated, especially with technology in place today, how do we know? is it being measured accurately? i don't know for sure.
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what we do know is we want a lot of innovation in the economy and creativity in the economy. these things are necessary to keep the engines going and i wouldn't trade place with anybody in the world. reporter 2: you know what keeps it going, lending? banks fuel the american dream. while you have banks sitting there frozen saying i have potential more regulation coming, hillary clinton says i want dodd franks squared, they're sitting there not doing that much lending right now. neel: how about the lending coming from a mid size bank and why does it have to come from your former employer or my former employer. why can't it come from a smaller mid size bank? reporter 2: those small and mid sized banks are eaten with regulation right now. neel: if we take the effort to stabilize and make sure the biggest banks are safe and secure, perhaps we can relax some of the regulation on small to mid size banks so they can step up. reporter 1: i have a friend who run as construction company in yonkers who says he has a devil of the time getting credit.
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because the credit officer comes in and says i'm sorry, the regulators won't let us do it, it's too risky. neel: i hear it from small to mid size banks who feel they're caught up in the regulations targeted at addressing systemic risk. they're saying we're not part of the problem. we're too small and won't cause a big problem if we get into trouble. so i think that those concerns are warranted. reporter 2: are those mid size banks going to evaporate because with sin tech you have these startups that aren't regulated and are in a position to make those loans? nee lirks: i don't think it will evaporate but i think traditional banks will be around for a long time. neel : that was kashkari. he will not be a voting member until 2017 and will get a chance to air his views for meetings for more on what his remarks say as an inclination as a policymaker, something i'm starting to learn. we'll bring in the commander in
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chief economist for bloomberg intelligence. karl, i'm throwing first to a chart i just now made in my bloomberg. neel was talking about labor force participation rate. he wants to make sure that if we keep unemployment low more people will get into the work force. i looked at a long term tracker going back to 1950 and a little bit cheap -- you see the trend and you see the teenie tiniest dip up the last two quarters. my question there, hope, question mark. answer? karl: so the challenge here is to separate the structural from the cyclical. if you look from 1950 to the peak in 2000, you know, there was a lot of factors there but one major factor was women entering the labor force to a much higher degree since there are these big increase in labor participation and imagine the snake swallowing the egg and the baby boomers working through the labor force. so now policymakers are trying to interpret how much of the decline in participation is the
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fact that people are retiring and dropping out as the demographics age in the u.s. and how much of that is due to economic factors or cyclical factors and janet yellen and now we hear neel kashkiri is of the camp that believes maybe some of these fence-sitting workers can be tempted back into the labor force by allowing the economy to run a little bit hot and to perk up some wage pressures. and i think there's a compelling argument to be made there. it's too early to tell so we need to watch what happens over the next year and the next three years really to see what's happening. if they're right, that means there's a lot more slack in the labor force than some of the hawks would like to believe and therefore with a little bit of wage inflation, workers are drawn back in and you have more available labor supply. brandon: let's talk about upside down risk because i feel the fed is being coy where they see the risk and decided to
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punt when they released their last statement which basically says we see downside risk but aren't willing to him relate it and she gave her humphries hawkins speech again and said on balance we're not assessing it. when will they admit they're seeing a downside. karl: they're being coy because they took assessment of risk offensive the last meeting statement and that's the real question that has to be answered in today's interpretation of the fed minutes. before they saw risk was balanced, suddenly they removed the assessment of risk and that indicates that probably they saw downside risk to the economy. if that were the case, no in the just say it? so instead they're signaling that maybe there's some downside risk but maybe there's uncertainty so they want to wait to see how all these market developments pan out to make a further assessment. if they were looking for downside risks, that would move the needle in terms of the next fed move as being more likely to ease policy rather than tighten. they did want to go that far in january and instead they're kind of in winter hibernation and watch and wait mode.
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brandon: i have this quotas head of boston fed, and he basically says again, he's repeating this language, we're actually going to get both expected and natural inflation up to the 2% that we want. that's a change in tone for the fed. they've been consistent the last two months, not just modeled inflation but observed inflation. i ask you again -- karl: it's not a change in tone, because those remarks weren't spriging coming from president rosengrin but having come from the center of the committee i would be more concerned. brandon: what's the state-of-the-art inside and outside of the fed in figuring out when modeled inflation is going to catch up to observed inflation and inflation expectations. karl: in the last michigan sentiment survey we saw 10-year inflations falling to new lows and that's a shot across the bow.
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they are conscious not to panic. but they're watching what we saw in the p.p.i. today had a headline and core inflation are converging and energy prices can't fall too further and these big dramatic year on year comparisons are shrinking to almost nothing in the second half of this year and you should see inflation and expectations perk up and most importantly watch the speed of the economy if we're going below 2% in the fourth quarter because then you don't have much inflation pressure and if we're rebounding and the fed is confident we'll be back to 2% or better for the most of this year then maybe you have some data you don't like to see right now but you have the confidence that the momentum is there to pull it back in your favor. brandon: that's a conversation we know is going on inside the fed, william dudley, the new york fed is talking about consumer sentiment inflation expectations like that. carl riccadon is our chief economist. my colleague vonny quinn will be breaking down the fed
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minutes with mike mckey at 2:00 p.m. eastern right here on bloomberg tv. coming up on bloomberg markets, the great wage debate and fight over minimum rage has been affected the wages of wal-mart and two key bankers, agriculture shares jumping more in two years but the result different at a.b.m.amro.
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>> art crosses boundaries. unites culture and connects us in the world in new and exciting ways. >> just love to take things, we work them and then just put it in front of people as if -- and they see it as if they've never seen it before. >> watch brilliant ideas at the following times. brandon: welcome back. this is bloomberg markets. it's time for the business flash and a look at the biggest stories in the news right now. manufacturing output rose in january by the most in six months. factory production was up 1% and may be the worst impact and weaker markets overseas is diminishing. there was a surprise drop in housing starts last month, falling to 3.8% to an annual
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rate of 1.1 million. that's the lowest level in three minutes months. economists forecast an increase. all four regions showed a decline. and a blizzard that crippled the east coast probably made matters worse. that is your latest business flash. now it's time to get you caught up on the action all around the world. we're going to start in asia where stocks dropped as energy shares sank. one big story out of the region, china reported the largest amount of bank loans on record. this signals beijing is up to ramping up debt to support growth. david english reports. david: the last time china's banks went on a lending binge for the same magnitude was in 2009 when beijing allowed local governments to basically spend their way to a recovery. following that announcement back then is was massive fiscal stimulus and the shanghai composite doubled in less than a year in order to eventually fall the next five and then eventually she had these chinese companies and banks had to deal with those debts coming
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due which is up until now still -- well, an ongoing concern. are we back to square on and will this create future problems? that's why you'll have to watch the space very closely ahead. david ingles, bloomberg, hong kong. brendan: abigail doolittle has the latest from the nasdaq looking at two stocks gaining on earning startinging with fossil. abigail? abigail: fossil shares are soaring on what was predicted could be a short squeeze after the fourth quarter sales beat across the board and analysts are somewhat lukewarm on the sidelines on a stock down more than 70% from its peak in 2012. analysts rick patel at stevens lowers target by 25% to $38 saying tough market conditions, the possibility of foreign exchange pressures. he says over the long term wearables could be a bright spot on a stock that is bullishly back above its 100 day moving average for the first time in a year. boosting the nasdaq the most
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today, priceline shares are up sharply after the online travel company beat fiscal first quarter estimates. kevin koppelman says the results show priceline is seeing strength despite the overall slowdown in the travel sector. his praise target suggests there could be 20% upside. at 1,540. a level well above the trading range this stock has been stuck in for more than two years. brendan? brendan: thanks, abigail. t-mobile the nation's third largest wireless carrier reported rising profit and predicted as many as 3.4 million new subscribers this year with two new uncarrier promotions in the work on success of their binge on plan. could t-mobile make a play to take on verizon and at&t. for that we turn to bloomberg editor at large, cory johnson. all right. let's talk big magenta, cory. the basic strategy here i'm looking at it right now. they've been taking it on for the last two years, drop our poo, a monthly avenue per user
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and see it attracts people and they haven't dragged the rest of the industry down with them. how long can that continue? cory: what he's done is amazing and turned around this company and was such a lower tier player and got them to at least a sprint level. brendan: it was a hot magenta mess. cory: he's fixed this problem by adding users and breaking some of the biggest rules in the business, not the least of the two-year rule of having to sign into a two-year commitment and he's gotten rid of that and that's brought a lot of consumers over and brought him principally from at&t for the market share gainers after market share losers and at&t has been the loser and t-mobile has been gaining market share. the long term is how long the customers can stay. when you open the doors, the doors work both ways, you can walk in and walk out. the question will be over the long term can they do enough to keep the customers happy and keep them on t-mobile without these people leaving as quickly. a lot of the users are younger and the brand imaging among the
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carriers work successfully and created a brand that's cool and had a t-mobile phone that was not the case five years ago and matters in dollars and cents. brendan: in a way this is a regulatory success story and told no, you cannot sell t-mobile to at&t so you have to make a company and they went and made a carrier but did it with a lot of spectrum and money to invest in new capacity. is there a distinction still, a meaningful distinction between the different networks of the carriers? cory: there is in terms of the coverage and t-mobile is not there yet in terms of deploying all the capacity they have and that's going to be a very expensive process and they've got to have the revenues and recurring revenues to make the network stronger and better and have the network adjust to where it has to adjust and be ready for the new technologies as they roll out. the focusous on quarter to quarter and what to look at is how many customers they're adding and they add 2d.1
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million and that's powerful it. the turn around plan is based on that and it's working. brendan: how much leash does he have with investors in terms of the number per user and can only go down so far until they say let's try and act a little more carrier and a little bit less uncarrier. cory: this is the opposite of twitter who has a company getting more revenue per user and falling number of users. t-mobile is trying the exact opposite trick. in a perfect world you want both. here's the secret to business. brendan: i'm listening. cory: only three tricks in a successful business. you sell something more than at cost and sell to more and more people and you raise prices. so t-mobile -- now you turn off your tv and go home. that's the source of every business, they're trying to sell something more than cost and add users and raise costs and keep those customers and adding customers and keep selling for more than cost. here's their problem. they're getting less money and lowering prices effectively as
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adding customers and works for wall street as long as you're adding customers. if the customer growth slows down or the quality of customers is worse when you worry about the story. brendan: i wrote a story about tom ledger asking basically how long can he hold on to the uncarrier strategy and so far it's worked two years. so far brendan greeley zero and ledger with one. thank you, cory johnson. we'll hear directly from john ledger at 11:15 a.m. wall street time. and before we go, quick look at wti crude climbing 6% at a session high on iran supporting the accord by saudi arabia and russia capped their supply. more on bloomberg markets next.
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here to explain the relationship between higher wages and share prices, here is shannon. wal-mart saw the writing on the wall and raised its wages, i would have assumed this would cut in share price, why is that not happening? shannon: investors reacted negatively when they saw the cost of what these wage increases were going to cost wal-mart but we've been seeing wages go up and we're talking about the minimum wage workers and people making under $20,000 a year and those are people who shop at wal-mart and dollar general and shop at rent a center. there's a niche area of the economy that caters to minimum that will benefit
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from the wage hikes whether it's wal-mart increasing wages or these 14 states that have done similar things with their raising minimum wages. while macy's might raise wages and not see a benefit because how many low wage workers are buying their clothes at macy's when dollar general does and bob's discount furniture does. they're increasing wages for not only their employees but customers as well. brendan: who is making this bet? shannon: as we've seen the stock market go down and luxury retailers do bad, not only do investors see this bet of low wages going up at the bottom end but it's also a great defensive play. so if you're betting there is going to be a recession that the middle income shopper will have to trade down like they did in the last recession, not only do you have wages rising at the bottom end through minimum wage increases which are probably not going to go away, nobody will cut back their minimum wage and at the same time you might have slightly higher income shoppers trading down so it's actually
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the low end is a pretty good place to be right now at least investors think. brendan: i love the story because it's sort of up-ends some conventional economic wisdom we've gotten used to, there's dogs and cats sleeping together which is you have capital making a bet that the problem right now is not on the demand side, it's on -- sorry, not on the supply-side but on the demand side. what do economists say about this? shannon: economists had their own view about the effect of minimum wages and can argue all day. all about whether minimum wages are bad for the economy or good for the economy and when you look at the big picture, you know, the economists are divided about what a minimum wage does on a macro level but when i ask them what about on this level we're talking about, you know, dollar stores, rental furniture, used car sales, they all pretty much agree that the low end worker spends what they get. they don't save it and live paycheck to paycheck and when they get a little extra money they're going to spend it and where exactly are they going to
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spend it? they may be paying down debt which people have accumulated during the recession but, you know, there is this section of the economy that they shop in that we don't think of the dollar stores and wal-marts that people kind of forget that really cater to the low income shopper. if someone is going to benefit, it's probably going to be the companies catering to the low end shopper. brendan: can you also think of it as a bet on the fed continuing to find slack in the labor market. and really as they hold on to that, right, and they're finding more slack, they're letting wages grow but we've got to leave it there. bloomberg news with shannon, thank you. coming up on bloomberg television, europe and stocks climb for a fourth day rising higher with gains in oil prices not to mention glenncor leading gains.
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brendan: 11:00 a.m. in new york and midnight in hong kong. from bloomberg world headquarters in new york, i'm brendan greeley. > live from london, i'm with
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the european close. brendan: taking influence new york to london to moscow, here's what we're watching. unemployment in the u.k. holds steady in a decade low 5.1% in the fourth quarter but the pressure to raise pay remains eak and we'll look at why. mark: and then shares jumping the most in cole after announcing plans to sell stakes in regional banks and pay as a result were very different at a.b.m. 5 amro. brendan: and what could affect the whiskey market? we'll ask an expert. we're half an hour away from the close of trade in europe. mark, tell us about today's market action and tell us ether i brownsed glenmorangie.

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