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tv   Whatd You Miss  Bloomberg  February 24, 2016 4:00pm-5:01pm EST

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♪ alix: u.s. stocks closing higher, what a reversal. is "what'd youon miss?" scarlet: are we headed for a bear market. can the u.s. economy kick into higher gear. and 3000 jobs a month as possible. how currency volatility may be impacting corporate america. we begin with market minutes, turn around gaining steam, erasing losses, nine out of 10 industry groups closing higher. financials continue to lag. dow down over 200 at one
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point. it looks like we might be seeing erasing gains, but pretty resilient markets today. alix: talking about individual one of chesapeake energy the biggest gainers in the s&p. that it can pay off its debt in march. it is selling a lot of assets, more than the market expected, buying back bonds to shore up the debt. the company posted almost $1.5 billion in losses last year, still a very rough road for the company, but there is so many shorts and any positive news causes a rally. eye on the my japanese 30 year bond plunging to new lows. i wonder if we will be here in a the japan 30 about
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year bond going negative. yields on long-term bonds have down to 0.92, now extraordinary. scarlet: when you look at currencies, the themes persist, china devaluing the yen, or the pound extending its slump, now below $1.40. the other thing to watch is emerging currencies under pressure. south africa's budget disappointed investors. will be downgraded this year to sub-investment grade. joe: that pound is incredible. alix: oil was down by about 4% and closed up by 1.5%. the department of energy inventory data was not as as the api data after the bell yesterday. of the marketse
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so short and so long that any kind of headlines whipsaw the market. those are today's market minutes. let's take a deep dive into the bloomberg. from s&p versus banks financial sector that purple line, oil price the green line, but the relative correlation we've seen between the two asset classes really isn't very typical. you do have some banks that have energy loans on their books, overall lower oil prices, weaker expectations, weaker yields come all of that wing on banks. -- all of that weighing on banks. what winds up happening? do they have to correlate? happens?o, what joe: fascinating all the , peoplet ways that oil
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are finding negatives. alix: now we are and exporter. joe: right. i want to talk about some economic data that was concerning. serviceshe market u.s. , anotherly an analog survey, another attempt to capture what is going on by talking to people in businesses. what is scary, and we've been talking about it for a long time, how bad the economic data has been for manufacturing. down,starting to turn anything below 50 is considered contraction, we came in at 49.8. people don'tord, look at it as much of the eye is him, but still something ominous
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in the decline, if manufacturing and services would start to connect, and unfortunately it is the services side coming down. alix: that historically has been the case when they wind up the verging. scarlet: another example of the , main streetonomy versus wall street expectations. the economice is surprise index. it doesn't show growth come but whether data is coming in weaker than expected. the white line shows consumer sentiment seems to be ok. investors seem to be worried about a recession. , energyg to j.p. morgan materials are more important for the stock market than the economy. driver ofthe key the economy, the consumer -- alix: fourth-quarter revenue
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coming in a $1.8 billion, better than essman's of $1.79 billion come also earnings coming in at $.19 a share, pretty much in line with estimates. support revenue, a key metric, $1.68 billion. some guidance for its full 2017 ,iscal year on the high-end $8.12 billion, eps between $.99 and one dollar and one cent -- $1.01. stock jumpng that higher in after hours. i also want to bring up hewlett-packard, numbers also crossing right now. -- we have revenue at $12.2 billion, right in line with estimates. of -- thatin terms was revenue, i'm trying to find
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eps number, but not finding it quite yet. here we go. full-year eps coming in -- i'm getting a, guys, sorry, hold on -- 2016, forecast were looking year, for the full backing out of george's -- charges. second quarter between $.35 and $.40. that is in line and estimates. first quarter at $.36, in line, as the revenue. the numbers are continuing to cross. earnings, seeing the stock do nothing in after hours so far. it's not the exciting company it once was. alix: it's the cloud. terror capital cios spoke to bloomberg today,
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talking about investor sentiment and said the volatility across asset classes reflect one thing, listen. >> they're scared of not they'reg because suffering from negative interest rates are getting no return, but also scared of investing and looking stupid in one year if the markets are way down. i suppose just fear, unhappiness, a very scary market. scarlet: how is that fear showing up in investors positioning? interesting. we have seen one trade really work for the last several years. ,ne has been buying high-yield no-growth stocks, utilities, staples, they've done surprisingly well in a bull market. we have also seen this cohort of idiosyncratic growth stocks like social media, biotech, companies
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that have nothing to do with the economy have done well. i think investors are a little bit confused by what is going on, i yield lives, growth was, bull market for the last 6-7 years, so that has pushed investors into the specific parts of the economic spectrum. i think what's happening right now is a leg rake from the trends we have seen over the last several years, so what is adding to this confusion is that we are now at a port were all these sources of liquidity that we have enjoyed for the last 10 years or more are going away, namely the fed staying at zero rates, starting to shift, and that has tighten for the first time in almost a decade. we are seeing lending standards grow tighter than easier. we're seeing credit spreads, the cost of equity capital, increase.
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activity has really dried up this year. is the end of one regime, but were moving into something that is very different going forward. out something you pointed and your research, the number of companies forecasting losses is on the increase, more and more companies see losses in the future. thatu look at this chart you can see at home, the last time we have seen this kind of surgical or anything resembling the surge was in the last two recessions, so it could be a recession indicator. could it be different this time? or is this telling something bigger than energy and it is something ominous? it is risk to growth. it is not just energy companies. it is mostly energy and materials and the commodity complex, but in the small cap tolm more companies starting forecast losses, but when i think is happening is that credit sensitivity is starting
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to emerge, and leverage it is going from being ok or not a again,to being evil leverages evil again. is evil again. increase,tarting to that's causing a lot of reshuffling of the deck, if you will, amongst what will lead and lag over the next cycle, if you will. alix: is this a harbinger of doom? in forecastede losses does not mean were headed into a deep dive, 2000 eight, to those nine, but what it does mean is that there are risks to earnings starting to emerge. another danger sign for one of the reasons we lowered our target was that companies aren't has optimistic, action more pessimistic, about the more
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prospects and they typically are heading into a year. alix: what is the tipping point then? have lowered your forecast and highlighted some risks? question, andt half the stocks in the s&p 500 already are in their market territory, the russell 2000, the small-cap index, bear territory, a good chunk of global equity markets are in their territory, so i have the fortune of covering the s&p 500, which i think will fare better than most other asset classes. i think the s&p 500 might be the best performing risk asset around. , thearge cap company benefit of under investing over the last six years, not hiring, not spending on capital expenditure, still sitting on healthy capital cushions.
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they actually look on the tobit better than a lot of their peers on a global basis. bit betterk a little than a lot of their peers on a global basis. alix: thank you very much. thank you for joining us. gdp growth and 300,000 jobs a month sustainable? our guest think so, next. ♪
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--k: the washington reports washington post reports that sandoval is being vetted for the supreme court vacancy, a former federal judge in nevada, also
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served as the state's attorney general. a day of endorsements, donald trump has picked up his first two congressional backers, chris collins of new york and duncan hunter of california on board. ted cruz has received the backing of his state governor, greg abbott, and harry reid announced his support for democratic presidential front-runner hillary clinton. general loretta lynch defending the government's push for apple to comply with the judges order to unlock an iphone used by one of the san bernardino shooters. lynch told lawmakers on capitol hill that there is plenty of legal precedent for requiring third parties to aid a search for evidence. to launchll attempt today, the second of 2016, looking to put a boeing built broadcast satellite into hike-earth orbit, sending television broadcast to india, indonesia, and the philippines on behalf of a european
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satellite giant. global news 24 hours a day powered by our 2400 journalists and more than 150 news bureaus around the world. i am mark crumpton. alix: "what'd you miss?" an open letter from the council of economic advisers to senator bernie sanders and professor darrell friedman, quoted as saying that we are concerned to see the sanders campaign citing extreme claims about the affect of senator sanders economic claims that cannot be supported by the economic evidence. want to bring in john jay college, assistant professor of economics at jw mason. thank you very much for joining , the economy can grow much faster than what we've been experiencing, experiencing work, 2%, you done some
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professor friedman kicked it off. the economy unders a sanders administration with aggressive attention on growth and demand per yearw 5% or more and it is more jobs. critics say that is fantasy. what are they getting wrong? >> they're missing the extent of the whole we are in. are talking about 5% of the growth starting from a position still extremely depressed. depression has been followed by a. period of strong growth. -- gdp is down 10 to trend 10-12% from where it should be. joe: the analysis put forth suggests that it is positing that growth can go on longer than just getting back to trend growth rate. nobody knows what the economy
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will look like in 2024, those sort of projections are not very meaningful. what is meaningful about what we can or cannot do now. a're having a debate about new presidency, and there's no question that over eight years, much faster growth is possible with proper policies. joe: we've talked on the show about what's going on with productivity, why is a productivity stronger, and part it is analyses suggest not some independent variable of the economy, but that it is a function of more demand and stronger growth, and so if we could push down the pedal on growth, we would see producti vity kick and a higher gear. stronge is a relationship between productivity and output. , the productivity falls
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opposite of what you expect, fewer workers more productive, but not true. labor productivity fell a lot during the great depression. as soon as growth resumed in the run up to world war ii, product to the growth accelerated. it's not a mystery. when there's more spending, more pressure to move people out of local -- at of low productivity activities. joe: is just a function of more growth? >> that's right. beenanother point that has made in criticism of this idea, senator sanders's economic plan would involve a lot more , theoretically a boost to gdp, but also claims that he would not blow out the deficit and it would be deficit neutral, so there would also be high taxes. does that undermine the idea of the growth? >> i don't think so. we saw the oecd say we should siststhis -- we should re
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the idea. they could go in the other direction. if different types of government activity have different effects on the economy, raise direct spending, taxes on the rich, you will get a positive stimulus overall. i don't think that is a bad criticism in particular. one of the debates ever since the financial crisis has been about the labor force participation rate read some people say there is a largely structural, large demographic him a lot of these people were going to leave the labor force at sortyou take a look of this gap between what we actually saw and declining labor force participation and what people expected several years ago going back to 1999, why don't you think this decline -- why do you think there is a large cyclical decline? >> we can correct. older.are getting fewer working age americans, but we can correct. age and sexach
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segment and assume we have that same population today with the actual labor force participation we see in each of those groups, and it looks higher than -- in other words, most of it is not explain in terms of the change in composition. that affect is real. it is only about a third of what we see. joe: jw mason, thank you very much, more spending, more potential for growth, higher productivity, 5% gdp growth is possible. thank you for joining us. that was joe weisenthal speaking with jw mason. shares of the 7% in after-hours trading, the results and the latest announcement as well. ♪
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scarlet: i am scarlet fu. "what'd you miss?" salesforce and hp reported results. salesforce was in line with expectations. its forecast for first quarter revenue and profit beat estimates, reflecting a shift. in cory johnson digging through the numbers to give us more context and color. let's start with hp, it feels like that company has passed its heyday as an exciting company driving silicon valley because of the split you. >> yeah, you see some the problems the company had.
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covers, look under the you see a continued slow down in pc sales and a surprising slow down in printers, personal systems. you see this business slowing down at the worst rate we've seen in a very long time. the's slow down for personal systems is down 13%, but auarter worse, significant downturn in that big business. printers, ink and we have seen aut big slow down and that business as well. still profitable, paying a attractive at these beaten up levels, but not only rpc slowing down, printers are slowing down some 16% in the quarter, a significant decline.
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those are all negative numbers. what is the role we are still seeing with the dollar in effect? that's something we have been hearing about in earnings for a long time? is that something still hammering the companies? >> fundamentally both businesses slowing down for hp. salesforce, the opposite thing with hp, killing it across the board. >> unless you count profits, beating and raising, playing the well, andt game spending an incredible amount in ,arketing, over 50% of revenue 890 million dollars in the quarter in marketing and sales. great, thank you very much.
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were talking brexit and all the risks associated with it. ♪
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mark: apple ceo says unlocking the iphone of one of the san bernardino shooters would be bad for america. cook explains why the company is challenging a judge's order to unlock the phone. we know that doing this could expose people to incredible vulnerabilities. this is not something that we would create. this would be bad for america. it would also set a precedent that i believe many people in america would be offended by, and so when you think about those which are knowns compared to something that might be there
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, i believe we are making the right choice. mark: the full interview with tim cook airs this evening on world news tonight with david muir. donald trump is discussing potential running mates. he says he would likely look for someone with political he did not mention any names, but says he wants someone who could help get legislation passed. paul ryan says republicans are taking legal steps from preventing president obama from closing guantanamo bay. they will overwrite any veto. that is your first word news. back to you. quick recap on u.s. markets, a turnaround in the late part of the session and closed near highs thanks to a gain in technology and commodity
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shares. the nasdaq the big winner. , theextraordinary comeback dow back into green helped by oil bouncing. that upward trend we saw last week is not necessarily over. alix: it was an amazing reversal when it came to crude. to drag stocksed up as well. the: one stock dropped is tunnel, tunnel -- euro the worst day for the stock since 2013. the stock and the pound are under pressure amid worries that britain may leave the eu. spoke about it. >> it is important to be inside the tent trying to reform and
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change read their being outside the tent on a totally unknown situation, where it would be difficult for many years to figure out what written's role is in the world, where trade is, employment, jobs are. the: joining us now is director of global strategy at the eurasia group. he sees chances of a brexit around 30%. au say that if there was briggs said that it would be good and speed up the integration of the eu. that it would be good and speed up the integration of the eu. >> our view is somewhat different. that's for two reasons. have seen these moves towards greater integration in response to
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shocks. that is something that would kick in among the other eu negate to need gate -- the negative effects of departure. the other point is that britain being in makes it a lot more difficult to do the kinds of things that the eu needs to do to make the eurozone more stable. side, you think that leaving the eu would be bad for the u.k. walk us through specifically how it would hurt the economy. >> there is a huge argument about how bad it would be. wonderfulying it with -- saying it would be wonderful, the in saying it would be terrible. what kindsstion is
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of access to u.k. industries have two eu markets. i think goods markets will be ok, not terrible, still see some impact on sdi and u.k. manufacturing. dotain is a great place to access and you have to have free access to the eu. would you have a dramatic rise in goods tariffs if the u.k. left? probably not. financial services are a different matter. there are strong reasons for the eu to want to repatriate as much financial services in euro -denominated assets from london. reasons that all point in the same direction. do we presume the u.k. would be similes set up where
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they would have relationships the way that norway and switzerland do with eu? >> it would be difficult. norway has a relationship, but it's not what the eurosceptics want. they have to pay into the eu. have a lot of the migration issues. what yoursis exactly skeptics -- eurosceptics want to get out of they would not yet. -- get. switzerland is not happy with the way things are right now. i think it would be very difficult. evenikelihood that you get a remotely favorable deal is lower. we have a falling account balance and a rising to gdp.
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does a brexit wake the markets up to this fundamental issue? >> it could. current accounts have been a problem for a long time, financed to some degree by sdi, capital inflows into -- u.k., some of which people say there is a lot of youarch money come but if question the nature of the relationship between the u.k. and the eu and financial services, the u.k. cannot export financial services and you would expect to see a drop in sdi. profile of at the the financial sector in britain, you have a large amount of bank assets. does this raise the question of whether it is sustainable over the long term? joe: one of the arguments that
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the out come painters make is that the eu would be some sort of safe haven. it does that look like the eu is a club working that great. that argument seems to make anse, u.k. might be attractive place to put cash, by real estate, hold assets. do you think that argument holds any water that it could be a safe haven? of ant is the growth rate economy where you have taken away potentially, downsize one of the biggest industries, underlying imbalances, and other issues. we already have switzerland. switzerland already exists. it is a private banking-based model, net international
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investment position of 100% of gdp. scarlet: the g-20 begins tomorrow. a lot of people were hopeful that something would get done, some site of joint currency action, one time at yen device way should, settle some concerns, why does anyone think that 20 nations can come together with some kind of agreement over a few days? a there has been talk about yuan devaluation. a one-off is unlikely. the chinese don't want it. the u.s. doesn't want to. the u.s. maintains that the yuan is still undervalued. scarlet: yet the expectations are built in of this g-20 meeting. >> it doesn't make sense to me that the u.s. would sign off on something like that. is what isyuan
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necessary for the rebalancing of the chinese economy. based on the drawdown, they don't seem to want it either. alix: thank you very much. scarlet: housing data coming out this morning, new home sales dropped 9% and more. ♪
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scarlet: i am scarlet fu. time for the bloomberg business flash. thereceo tim cook says are no easy answers when it comes to the standoff with the u.s. government. the techas ordered titan to unlock an iphone use by one of the san bernardino attackers. here is cook responding to his
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another terrorist attack. >> some things are hard, some things are right, some things are both. this is one of those things. airset: the full interview tonight on world news with david muir. pioneere shale oil reported a loss compared with a profit a year ago. continental fourth quarter losses were worse than expected by analysts. they have shut down rigs in the u.s.. mergers andising on acquisitions, vice chair of investment banking, working at citigroup since 2011. he will continue his affiliation
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with bloomberg view as a column this. that is your bloomberg business flash. "what'd you miss?" new home sales dropped more than 9%. millennials, a bigger group than the baby boomers, have been delaying the purchase of a home, getting married later, having families later, and therefore instead of buying your first home at 26 or 27, you may be buying at 32 or 33, so at the entry level there has been a fundamental shift to where the homes are being bought later, and that has stalled at entry-level a little bit, but those millennials are getting , and when surveyed said they want to own a home, they're just delaying that a bit. scarlet: when you look at the new home sales numbers, do
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you blame it on the millennials? >> i would not blame it on the millennials at all. he makes a good point about millennials delaying home purchases. i think we will see them buying entry-level homes in the coming years, but this is one data january.4,000 for compare that to last year with 500-1000 homes, so down 1% or flat. ,000 homes, so down 1% of flat. some areas will be soft, like houston. they are in a recession, or maybe even a depression, so sales will stop there and existing inventory go up. joe: the tailwind for housing has been seen as a reason that the economy has room to grow. you have said you don't see a
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recession on the horizon. when you look at housing data, thing you'reny saying that makes you nervous about the overall economy? >> not about housing. several analysts are expecting new home sales to go up 12% this year. i think that is on the high side, maybe 4% or 6% because of problems in houston and other areas of the country, but i don't see any problems at all. i think the economy will do fine. look reallyies good, so i think things look good. alix: you do have areas like san francisco, killer home prices there as opposed to new york, bumping around the bottom. what point do prices eat into purchases.
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that is always the issue, supply, demand, and price. francisco and new york, that graph you sent me was the top tier. those are special markets. san francisco, foreign buyers, a yorkf tech buyers, new finance buyers, tech has been better than finance, and san francisco has more chinese buyers. there's a lot of chinese buying at the high end in california. scarlet: thank you so much. coming up, australia was of they indicator commodity super cycle ending, so what can it tell us now? gaining salesforce better than 8% after revenue and profit topped estimates.
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restoration hardware tumbling 22% after missing estimates. ♪
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alix: i am alix steel. "what'd you miss?" have commodities bottomed? was one indicator of the commodity super cycle ending. what is australia telling us now? we spoke with the minister of resources and energy and asked if commodities have hit their bottom. bottomn't know where the is, but a lot of that heat has come out of the market as a result of supply and demand dynamics. in the energy space, we've seen
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the shale gas revolution in the encouragetes production from saudi arabia and iran coming into the market in a big way, all putting downward pressure on prices. , where australia is the largest exporter in the a massiveve seen investment in new production capacity, which means that australia is now exporting three times the volume of iron ore than we were a decade ago, and other major companies have done the same, so we are seeing more supply in the market. a result increasing as of demographics, increased urbanization, increase middle classes in populations, but at the same time supply has been growing faster. there have been avoid a that china can heart economic landing.
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to a servicestion driven economy there might be opportunity for australia and commodities. talk about the outlook there? we are optimistic about the economy in china. we have around $150 billion trade, ouro-way largest trading partner, and australia has been a great beneficiary of the rise of china , and particularly the demand for hard commodities. the economy and china is transitioning, but it is also continuing to grow, and andnization is steady leading to an increase in demand for resources. we are optimistic about china. is growing off of a larger base, so even though it is no longer double digit, it is still a larger base than it was a decade ago, and australia continues to strengthen its
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relationship with china and sees it as a major market for us, not just in hard commodities, but also increasingly for services and the benefit of a free-trade agreement recently concluded. australia a major exporter for coal used in steel and directly in power, given plunging prices and the rising political opposition to: as a use of power, the rise of alternative energy resources, what is your prognosis for the coal industry and further investment in that industry? we are the largest exporter of coal in the world. have seen a reduction in forecast demand for coal out of a number of countries, but at the same time demand in india is increasing, and also in other
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parts of southeast asia. theresue for coal is that is a strong movement from environmentalists against it. , but is downward pressure if coal can capitalize on , andology which can reduce australia's coal is low sulfur and it's going into plants they can reduce carbon aissions by 40%, this can be better story for coal to tell. i report that the death of the coal industry is greatly exaggerated. diminishing as a mix of overall energy, but even by 2040, still 30% of the overall
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energy mix. you seem pretty optimistic across the board. how much morerm, capital expenditure will be cut in australia? >> we have seen massive investment in capital expenditure in recent years, about 400 billion dollars put into resources and projects over the last decade, half of which was lng projects. will be coming online and will be the beneficiary of that flow. seeing a reduction in capital expenditures spending, a 20% reduction in the energy space of the last couple of years, the first time that has occurred globally on record, so i think it will take some time for the capital expenditures spending to rise again as companies start to tighten their balance sheets and cut costs. the australian
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minister of resources and energy. what you need to know to gear up for tomorrow's trading day, next. ♪
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scarlet: i am scarlet fu. "what'd you miss?" japan's monthly economic report released tonight. boj adoptedr the negative rates. joe: also tomorrow, initial jobless claims. if i were to go to a desert island and i could see only one economic indicator, this is what i would pick, high-frequency, solid lately. i'm also looking at
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southwestern energy earnings out tomorrow after the bill, and earning decline potentially of 108% and revenue decline of 18%. that is all for "what'd you miss?"
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with all due respect donald trump: are you bored with winning yet? trump: winning. winning. soon the country is going to start winning, winning. ♪ mark: we are never bored with donald j trump. talking presidential candidates will debate tomorrow night. donald trump is the man to beat. last night in nevada trump 1%


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