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tv   Street Smart  Bloomberg  March 16, 2015 3:00pm-5:01pm EDT

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alix: welcome to the most important hour of the session. this is "street smart." betting on what we will hear from the fed this week. we grew than expected economic data fueling speculation that federal reserve may not raise interest rate as soon as the fifth. oil slumping to a six-year low. put $20 per barrel be that far off? "street smart."" starts right now. here are the top stories we are
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watching is the closing bell. mario draghi evening at a dinner in frankfurt right now. save the recent signs of recovery in the eurozone are a window offered energy is one. he says the euro area needs governance and structural reform and calling for a quantum we and institutional conversion. no mariah and world bank of scotland accused of fueling of global that led to the collapse of the u.s. housing market. the federal housing agency making the allegation over the trial of defective mortgage backed securities. the agency seeks more than one billion in damages in the trial. the fha has read almost 17 million -- has rebounded 17 million in profit. procter & gamble has sale of some of the single phrase in a sale. they have been reviewing each of its brand at the company look to ask and those where it does not command a market leading efficient.
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we have less than an hour until the close of trading. going for breaking news that were scarlet fu is looking at all of the action. another triple digit move. scarlett: action is thinking of. not the best levels of the day. led by health and m&a and the pharmacy. we are also recovering from three straight weeks of losses in the s&p and dow. a little bit of perspective on this advance. a pair of disappointing factory data. empire and industrial production at the wednesday meeting -- fomc meeting get some people reason to believe maybe it is not a given a will raise interest rates come june. a lot of the big macro themes including connotative evening and we euro are helping to benefit european stock. the fact -- the dax closed that
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another record high. the swiss market index we included this because it has recouped all of its losses from two months ago when the swiss national bank shocked investors by and thinking to the euro even after it switched it would not do that. all caps .8%. 10 year yield coming down. buying in treasuries. they was so attractive compared to europe and japan with the central banks determine tuesday stay on the easing past. alix: time now for the big story, the real threat of $20 oil. an incredible six-year low for prices. oil continuing to tumble trading below $44 per barrel. the biggest question among oil nerds like myself, at what point is $20 per barrel oil a reality
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and what does that mean everyone? joining me to discuss is the president of merck block and the author of the upcoming book she'll boom, shall vest. and john high -- john hofmeister . oil nerds unite. here we go. $20 oil. do we see it? >> we could, but i do not think we will very long. i think we will see equilibrium sometime this summer. does not mean we will not see a different i think it will be temporary if we do. >> i think john is being premature with welcome on in the oil business. rates are dropping like crazy but production is not. they have increased estimates $50,000 per barrel -- barrels
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per day. we clearly do not have one energy company projecting the drop in production. the only one staying even if eog -- is eog. the backdrop with fracking. that is how you get it. what it means is you basically take a well and continue to dril-quip do not bring it to completion. you have it ready and stand there on top and wait for oil prices to rally. once the valley of little, you start to let it go. it increases the amount of storage face. basically holding more oil in the ground waiting for an oil rally to come. basic you ever get the rally because everyone knows as soon as you get the rally, there is a huge surplus of oil. between the frack log and increase production, this is not going to end very soon at all. $20 i do not think as possible.
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certainly i expected them to go back and test the lows. sometimes it gets a little silly. clearly $20 is a catastrophic kind of number. alix: really do not want to see $20. what do you think about what dan's? the wells that are ready to go at a moments notice. what does that do when you are trying to measure your budget with and revenue stream? >> one thing that does not get talked about is the natural decline rate in the same field. i do not disagree with the analysis we just heard, but when i do take note of as a former operator is that i take note that every existing revenue or -- reservoir declined shortly after it has opened up. it is the rate of decline i think is not being factored in at a sufficiently high number to
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offset the increased production. that is why i think the equilibrium will happen sooner. every offshore field and on shore yield that all the client. the rate determines very much for the balance point would be between supply and demand. if demand does not grow or not at the rate it did, then yes, way too much oil for a far longer amount of time. very much dependent on demand oversupply. we are always changing supply. this situation is only because of soft demand out there. >> john is right, the decline rate is very fast. 50% of the oil out in the first year. alix: you have to drill more to keep up with the production oil. >> one of the chapters is the shame of the ponzi scheme.
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it had to continue drill more will. the production rate goes down so quickly. there is going to be a quick decay of the wells and production now. whether we can overcome what has been this huge crack block and close to 30 days, which is an all-time high of surplus in storage right now. we will run out of storage and a couple of more weeks. that is a major problem for price. >>alix: taking a stick-back, what does persistently low oil prices mean for other industries like alternative energy gekko tesla solar and wind. how big could this get? >> if you think about the size of the oil and gas and is three wind and solar and electric cars do not come close. this is one of the biggest industries in the world. and employs over 9 million
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people. when the oil industry breaches the scale it has, the amount of spending that has not taken place is really a detriment to the economy, more so than in many other sectors, because that is money just not floating around the multiplier syndrome of money being spent. while consumers are saving pennies of the gas tank, that is not enough money to make a material difference versus the capital and we have been used to. alix: interesting. hurting other industries i cannot get traction. quest you talk about alternative energy prices -- sources. this is a disaster. what do you want is a very high very stable price for oil. so that's a stable energy price can compete with fossil fuel a $40 and $50 oil. they cannot. alix: we will leave it there.
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thank you for joining me. great to see you both. coming up putin back on the scene. what is the speculation about his disappearance say about the country's reliance on him. but that may signal a return of risk in the region. -- protest may signal a return of risk in the region. ♪
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alix: welcome back to "street smart." a look at the top stories we are watching ahead of the closing bell. german stocks hitting fresh record today. topping 12,000 for the first time. the benchmark has rallied 24% this year. the qed program helping to push stock that for six straight week.
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the money manager owns more than 7 billion of ukraine bonds. a spokesperson from singleton templeton declined to comment when contacted by bloomberg news . the russian president vladimir putin is that making his first public appearance in 11 days. the disappearance parking speculation on his health something both leaders to today. like the president of russia is not only walking, he drives his guest around, even drives pretty fast so they say in russia, don't get ahead of yourself. >> it would be boring without gossip, just boring. alix: he disappeared for 11 days , and it was all anyone could talk about. with he a a way for the birth of his love child. the rumor mill was crazy, but it does underscore how reliant russia is not just one man area and the iom emerging markets at
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ubl wealth management is an expert on emerging markets. you call russia one of the fragile five. what does that mean gekko it now includes russia unfortunately. they have a few things going against them. oil prices and sanctions. the market going through tough time. interest rates going up will not make it easier for them. alix: what did you make of the crazy talk about where he was? >> clearly the reliance of one man. also the reliance on the rest of the world dealing with everything he has to do with russia and the ukraine. in absence of someone with that caliber trying to determine the negotiations going on to settle the ukrainian issue. >> what was your take gekko >>
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probably on vacation dealing with the reverberations of the opposition leader. alix: why not just say i am on vacation? >> he is putin. transparency and clarity is not particularly what he is famous for. when you look at the russian economy, with is the problem? >> oil dependency, and the aggressive stance for ukraine, which has alienated the country and the rest of the world. he decided to go after one of what was supposed to be part of its territory. alix: isolating goes for a second. falling oil prices mean less revenue. at the same time, you have had the ruvell default by the fifth against the dollar. the revenue is actually more.
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quite a lot of russian companies need to refinance in dollars or euros. they are receiving less in the currency's. so it is the external debt financing that is the problem. from an oil-producing perspective a little flushed because oil prices have come down to more or less as the ruvell has. or other countries, particularly banks and retailers and companies that have issued external debt, it is more complication. alix: at the end of the day doesn't rush of really need foreign investors. what is the endgame with all of this aggression. >> russia does not need foreign investors, unless they want to -- they need to defend on the public sector. the public sector needs to learn -- more or less maintain capital
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to operate freely. the rule of law and the problems we -- they have for their own making. russia does need private sector to be part of the market community. alix: you mentioned rush being one of the fragile five. we tend to think of the brick nations. what nation the you think is stronger and russia is not? >> india clearly much stronger. china very strong. brazil not as strong. alix: we are getting to brazil don't spoil it. russia is strong in a sense. you have a lot of foreign-exchange reserves don't. it has spoilt against it and sanctions against the. i think interest rate growing -- going up around the world is not going to help them. alix: you are sticking with me to talk about a lot of different topic. over a million brazilians take
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to the streets to protest the president as she faces charges of corruption. will the call or impeachment gain momentum? >> does greece have an image problem? and how was it complicating negotiations with europe? we will be right back. ♪
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alix: this is "street smart." i am alix steel. corruption, high inflation, call for impeachment -- just a few of the issues facing the brazilian president. what is result way out? still with me to discuss the
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emerging markets chief investment officer with ubs wealth management and julia leche from bloomberg news. what was the catalyst for the protest gekko one million people beat is a huge deal. >> the biggest demonstration since june 2013 for you have to protest against the increase in bus fares. there was no clear specific trigger just general discontent with the way things were going politically with the petrobras scandal and the economy with analyst cutting estimate growth falling into inflation high. alix: you were just in brazil and are from brazil. how unusual is it to get the intent\to the government? >> i think it is unusual. so what is interesting if there was one call in the
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demonstration was an end to the government. that is unusual. that is unusual given the context for wish -- for which this is a socialist government. alix: what are the author what happens? -- the odds this would happen? >> i think very low. what will probably happen if the government will be weekend. a weaker political think will be of better economic manager. forced by the circumstances they may have to do the right thing on the economic front. alix: do they have the tools? they have to satisfy a government to run it. they have to satisfy the society that has been deemed down. can they do what no matter what? >> it is a difficult situation. it is likely it is going to get worse economically.
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analysts expect the economy to contract .8% this year. two months of negative growth already. inflation it to rise to reach 7.9 by the end of the year, way above the target range. alix: slowing growth and high inflation. what can the central bank do it this point? >> what they are doing is raising interest rates. they are doing the right thing to do. alix: that is the right thing even though it will hurt growth and inflation is still quite high? >> they need to do fiscal inflation in order to cut rates later. today they have an upside down policy. they have him will all fight on all the --i will deliver. all alix:alix: will when
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you look at the landscape who is holding you >> that is really hard to say at this point. alix: kickbacks by the construction company for breath. >> that is correct. what is interesting this weekend is getting hit by the former presidential one of the force -- most popular presidents. getting calls asking him to get the money back and things like that. alix: not only that, but chairman of picture back in 2003 in 2010. will this wind up moving on up to the official? >> she is not been implied in the investigations. she was not listed. but the overall sense from the population is that she knew there was something going on.
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alix: it has to the firmer against the government. thank you. julie with bloomberg news here to thank you for joining us. coming up next the greek finance minister says he regrets doing a photo shoot for a magazine. we will discuss his reputation. ♪
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alix: here are the top stories we are watching ahead of the closing bell. israeli prime minister benjamin netanyahu saying that he will not accept a palestinian state if elected. hbo will be offering hbo now to opt him now customers via the internet. this makes poptum the first cable partner.
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this will be available before the debut of the fifth season of "game of thrones." oh, yeah. organizers of games are looking for alternative locations. i totally want to play hide and seek in ikea. let's go back to our breaking news desk where our chief markets correspondent scarlet fu is not laying hide and seek. she is looking at the movers. scarlet: i think that that was inspired by an episode of"prtlandia." they were playing hide and seek in the portland library. we are going to start with -- they are looking at new players in the video streaming space. we just got headlines that cablevision and hbo will provide hbo now through optimum online. there's a good example.
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netflix will need to increased investment, but returns are uncertain, so they lowered the price target to three to $80. dupont's -- raw materials, the only industry group falling in the s&p 500 -- after bank of america and merrill lynch gave it a double notch downgrade shifting from a buy to underperform. tupac has technical --dupont has technical headwinds. and paring losses, the north dakota oil spill trying to sell itself following the plunge in oil prices. it has attracted interest from exxon mobil and other companies but an outright sale of the company is a low probability according to one analyst. he is looking for near-term weakness in the stock price from
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current levels and ultimately the market discounting the likelihood of an outright sale. alix: thanks, -- alix: thanks scar. we will have you later in the forecast. does greece have a image problem. he posed with his wife. he is hostile and interviews. all of this while greece is trying to hammer out an agreement with creditors and it is headed to the wire yet again. joining me, a expert and bloomberg's lisa abramowitz. is this news or is it just something that the media love to talk about? lisa: a little bit of both right? people are getting sick of it. go ahead and leave the eurozone. that is what the bond market seems to be saying as well. in greece, the yields are
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widening. i think people are saying, you know what? we are sick of this. alix: the majority of germans. lisa: a majority of the population is ok with a greek exit, but at the end the day creditors want to get paid. guest: i do not think greece can do whatever they want because they are dependent on the funding from those countries and the euro zone. this is the popular media capitalizing on this clash. currently the current arrangement is not amenable because grace is running out of cash fast. there has to be concessions from germany, but greece also has to make a good-faith effort on their part as well. the perception in germany is not that they are making those steps. this is kind of like the keynesian economics, not keynesian economics. alix: nerd alert. [laughter]
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karl: when you are in debtor's prison earnings slave wages, you cannot repay those loans. what germany means to do is maybe give greece a little bit more air to breathe so that greece can start to grow. if they are in contraction, they will not be able to repay the debt, so give them space to grow. lisa: i'm sorry, you can blame media as much as you want, but you have alexis tsipras saying that germany owes them money for reparations from world war ii -- are you kidding? carl: this is brinksmanship. alix: is it brinksmanship or just a really young government trying to make good on promises to the voters and voters to creditors? carl: they have to have popular
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support. otherwise there will be no confidence would -- votes and whatnot which would undermine their legitimacy. unless they get a blank check from germany, they will have to make some pretty brutal reforms and cuts. lisa: they have to make cuts and serious decisions. the unemployment rate is a 24%. that is crazy. that is a difficult position to be -- carl: which is why this is the keynesian economics. lisa: why not -- why all of the antics? why do you go to the french magazine and have a photo shoot with your wife. alix: it looks like a very nice house. lisa: what kind of message are they trying to send? he said that he regretted it. alix: two lisa from point, eric
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nelson who previously worked for the imf and goldman sachs has been very optimistic that greece would stay in the euro and today he said, i'm throwing in the south. if they do not want to play by the rules, they should get ready to leave. this is someone supporting greece. they do not play by the rules, get ready to leave. carl: when the economy is in recession you cannot expect them to run the kind of purchase -- budget surplus the europeans are expecting them to achieve. you cannot expect it to go on forever, of course. but let's let greece have a little bit of growth -- lisa: it seems like they were willing to do in that first -- alix: it seems like they were willing to do that in the first agreement. thank you for the nerdy discussion lisa, carl. coming up on "street smart," it is m&a monday. we will be right back. ♪
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alix: here are the top stories we are watching i had of the closing bell. according to people with knowledge of the situation, the private equity firm has grown uncertain over the evaluation after months with dealing with american apparel and urban things that american apparel is more interested in finding capital then finding a buyer. the german sportswear maker deciding not to renew its contract with nba. that means its logo will stop appearing on team uniforms after the 2016-2017 season.
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a pair of perms are buying -- a pair of firms are buying life time fitness one of the biggest buyouts of the year. lifetime operates 400,000 fitness centers in the u.s. and canada. shares of all three pharmaceutical companies gaining today and valeant is one of several heated pursuits in the drug industry. valeant lost out on allergan. that has brought the takeover trade premiums to a record high. joining me now, a bloomberg reporter joining us here. we are looking at $11 billion. that is a huge number. what do you think? reporter: it is a huge number and it is a huge bump from where valeant was two weeks ago when they agreed to 148 dollars a
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share. that looked to me to be full price even then. they have pressure from the rival bender -- bitter that came in. they drop in cash and valeant says, you know what? this is something we really, really want. trish: it is going to add about of billion -- alix: it is going to add about a billion in cash for shareholders. and think about the premiums for biotech and pharmaceutical companies actually hitting a record in 2014. we are looking at 60% 70% premiums. why the urgency? ed: it is an interesting question. it comes up a huge amount in the sector. you see the multiples. a lot of it is basically people take bets on individual drugs. say they have drugs that valeant really wants. some are in the pipeline coming through.
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if this drug comes through than this number we are paying today looks very cheap for a five years out. if it does not get approval, you can find yourself in more trouble. you find yourself in pharmacyclics, which gw's ago, an enormous, and enormous number. a 21 billion dollars deal. and you are taking a bet there. a $21 million bet. and that is priced 21 years out from now. alix: investors are buying into that at least in the short term. switching gears, procter & gamble have a plan to spin off parts of the beauty business. what do your sources tell you? ed: what we understand is they are not looking at a spin off for shareholders. if they could find a buyer they would perhaps sell the unit. i think the interesting thing about this, procter & gamble have been very public that they want to divest of about 100
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brands. they are saying, you know what? were not want to do this piecemeal. we are going to load these together into a separate company and either try to put it in the market on its own or find a buyer. alix: pg said that it was a huge hit to the earnings -- does the currency in the world's play a role in this? ed: they are focusing on brands at home, trying to build up domestics. a lot of these brands could perhaps be brands that have exposure outside the u.s.. one of the ones we have been looking at is xki, a very big skincare brand in asia. alix: interesting. is there anything about current market conditions that makes spin off and ipo dealmaking really sudsy? ed: anything whether it is a
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carveout, it's been off and ipo -- it is being well perceived -- well received. look at the public reaction. people are putting stuff out there across sectors. whether they are in consumer, health care, tech, industrials. if you have something you know you want, you can put it in why not go that way? alix: all right, thanks so much. ed hammond, joining me bloomberg deals reporter. ge -- where is the conglomerate focusing attention now? we have the answer. ♪
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alix: the general electric ceo out with his annual shareholder letter promising to scale back the company throw banking line
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to scale its industrial business. "taking stock" anchor pimm fox joins me now. what stood out to you? pimm: what stood out is that ge has been able to sell the business in australia. but they -- he has managed to be the chairman of ge for her teen years and i tried to find a timeframe in which the shares i've ge outpaced either the s&p 500 or the s&p industrials index and i could not find one area so, shareholders, they are getting about 3.5% from ge, but clearly this is part of an ongoing attempt to move away from the financial business and put their money into things like all, -- that was a big 12 billion euro acquisition.
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they are trying to do what they did in the past, which is remake this company into something that is more relevant and more shareholder valuable, i guess. alix: it seems like they went from a banking company to an industrial company and they really want to he and oil and gas company in the next decade. the problem is -- you have a backup of weeks oil prices and they still make most of their revenue from the banking industry. it is a really slow turn, to your points. pimm: it is 100, 100 $50 billion in revenue. market cap, $250 billion. this is a transition that has been taking a long time that jeffrey immelt has been trying to make this happen. this board has 17 members. you asked people, what does ge do? they scratch their heads and you cannot figure out the balance
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sheet of the coming. it also has big pension liabilities -- alix: i once said they have an oil company and they said, why? yeah, that is what they are going to be. pimm: obviously they want to be in a business they think is going to grow and will be a harness to industrialization in developing nations, but having said that we have to see what this deal turns out to be. alix: which gives them energy exposure and opportunities in south africa, which is an area they had difficulty operate before. but they are in oil services and that is a sector of energy that was hit very hard, so their timing is still there. pimm: a little bit. alix: what do you have next on "taking stock"? pimm: meb --there he is. he was the boston marathon champion.
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we will see if he can do it again. alix: the close is coming up next on "street smart." ♪
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alix: welcome to our viewers around the globe. you are watching bloomberg television. this is "street smart." we are counting down from the closing bell. analysts speculating that the federal reserve will not be forced to raise rates as soon as expected. for all the market action let's go to scarlet fu at the breaking news desk. every time i talk to you, i feel like it has been a triple digit move on the dow. at scarlet: and
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it continues that way. empire manufacturing -- missed economist estimates. the reason why? you can your finger to the bad weather and the stronger dollar. but these two data points are part of the larger trend of mrs. according to investor expectation. we have the eco-supply index. it does not show the degree of weakness in the actual reports. this is the trend over the past month. a steady decline lower. if you go to the longer term here, and this goes back 15 years. the eco-surprise index is at its lowest level since march 2009. today's reports prompted the dollar to weaken. alix: all right, scarlet. thanks so much. we will check back with you at the closing bell. here isme, joe weisenthal --
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here is me joe weisenthal, lisa abramowicz, our guest. what do you think will happen? guest: the consensus is the fed will take away inflation, what do they replace it with? did they replace it with something that will balance? alix: does the triple digit move on the dow to the upside reflect that view? guest: i'm not sure if that will change their view. there is the fact that you have a lowering environment and the impact on wages in the near term. alix: how much are you looking at any language the fed might insert in the dollar, strafing of the dollar? guest: that would be pretty unusual. they mentioned the international
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outlook in their statements. realistically, the dollar does not have the type of impact on the u.s. economy as it does on places like europe and japan and elsewhere. the way that we look at it, in the real world, the inflation adjusted world, it is helped by a stronger dollar. we have cheaper ebitda imports. that means more purchasing power. that long-term should be good for the u.s. economy. reporter: what else are you looking for? what are the other markers we should be keeping our eye out for? ira: we saw that report of the data indexes coming down. that has come down quite a lot over recent weeks. i think that is important. but they will be data dependent but they will look at the longer term outlook.
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we will look at the statement of economic projections. and those projections are really important because that will drive what they will do in the future. alix: there we are. 10 seconds to the close. there is the bell. the dow up triple digits. 226 points. the dow rallying to a one-week high. the s&p 500 at its best level since the beginning of march. the best days since the beginning of february. we'll continue to build on this rally, the dow closing near the high alix: of the day, a triple digit rally again, up to 24 points. on the other hand, it has its worst drop in about a month. maybe the fed will do something different on wednesday due to the weaker data we have seen how the u.s. let's get right to scarlet fu for a look of the biggest movers. what have you got, star? -- scar?
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scarlet: more than 330 billion dollars worth of m&a deals with u.s. companies. that is down 10 .3% from the same time last year. more than a quarter of all the announced deals -- and we have more. selig pharmaceuticals agreeing to revise terms, sweeten terms from valeant. and all cash offer. there you have a rally, almost 2%. activists also trading -- they got approval for their purchase of allegan. so, this goes back to the idea that within pharmaceuticals and the market at large, everyone loves the pipeline, everyone wants access to that multimillion, multi-billion-dollar blockbuster drug. alix: thank you so much, scarlet
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fu. here with me now, lisa abramowicz, joe weisenthal and ira. i always look at oil. yes, i am an oil nerd. but it felt to its lowest level since march 2000 nine. if you see a record decline -- the question is, will we wind up seeing $21 oil as production keeps rising, and what will that do? yes, you might have gas prices but that will have an effect on businesses in the u.s.. ira: i think business investment, such a large part of business investment has been in oil and gas in the shale fields and the like. in the cyclical market what i look at what happens to inflation expectations. one of the things we have definitely seen, with lower oil prices you are spending lower breakeven's. it is down quite a lot. i think that is something to
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differently take a look at. from the question you ask, what will be fed say about inflation? will they passed the oil related cpi shop? and they will say that is not important at the end of the day? lisa? they have been ignoring any oil related deflationary force, dismissing it as something temporary. ira: but that would be a change to something said by janet yellen in her press conference -- if they change there and say they are worried about it, that is a shift in policy. we do not think they will do that, but that is only a risk. alix: speaking of janet yellen and when there will be a huge press conference, we saw that economic data, the forecast economic data really pushed stocks higher and weighed on that dollar. this is happening right as the fed starts its meeting tomorrow. will the fed remove patience
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from its statement, giving more flexibility on the timing of rates? however this is happened as the dollar has resumed its humongous highs for the last year. the euro almost at parity with the dollar. the dollar really climbing against the yen and you see the brazilian real getting destroyed. this has huge implications. joe: yeah, i think one of the fascinating things -- we have had stories about it, all of the dollar denominated debt around the world. maybe we will be fine because of the strengthening of the dollar but the strengthening of the dollar is raising costs for all of these are words who borrowed in cheap dollars over the years. like that is a huge story that is going to play out. that is going to play out. lisa: and there is the issue of
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all of these countries doing so badly. this will import deflation to the u.s. we are importing from companies that have weakening currencies so does that actually -- at what point does that negatively affect our economy or will it just be a positive? ira: that depends. there's a lot of moving parts obviously to the global economy. something that a lot of countries around the world have done over the past 10 or 15 years, basically since the agent crisis, the low bottom markets have become a larger share of the funding sources instead of people funding as much in dollars rid they still do that. do not get me wrong. but as a share, there is more local currency issued. there is less of that. that being said the impact on the u.s. is certainly nontrivial. the fact that we can buy toys for kids at cheaper prices is
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not necessarily bad for me as a consumer and we can do a lot of services in this country. the fact that we have more money for services that are domestically-based can be positive for the economy. alix: --doing the federal job for us? ira: i think to some extent. the speed of the rate hikes will certainly impact the rates market, that we look at and that is something that they are focused on with inflation and how much the dollar goes into that is going to be important. alix: then of course there is the -- lisa: then of course, there is the japan factor. they are america's second-largest overseas creditor behind china. so we have japanese money coming
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into the u.s. treasury. is this is this just going to offset the u.s. fed -- their lap of bond purchases? or will this actually be an effort to further suppressed deals and cause yields to go lower? ira: i think one of the reasons why long-term yields in the u.s. remain depressed is global finance and the debt market. the fact that you have german yields at 1% or lower. the fact that you have japan buying u.s. assets. all of these things have brought money into the treasury market. that is one of the big reasons why the long end of the curve end of the -- the 10 year bond in the 30 year bond -- have remained at extremely low levels. at the meantime, look at what the 2-year note has done recently. it has moved a little bit, but it has not moved much. that is because the front and curve will be adjusting to what the fed does. alix: when i take a look though,
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the fed is still existing -- it seems that we will see increased demand in the market. joe, what do you think? joe: there is this ordinary global bid for u.s. assets. one of the stories has been the shortage of safe assets and in particular safe assets that contain any sort of yields whatsoever. there is so much of the eurozone debt market is negative yield. it is hard to imagine the bid disobeying too much on u.s. treasuries benefiting from the rising currency and they are still a little bit positive. alix: and we are also watching shanghai overnight. they climb to their highest level after beijing pledged to take action, and something that investors are starting to a attention to -- chinese buyers spending 239 billion dollars on
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u.s. real estate. that is up from 92 million dollars in 2008. is this going to lead to global property market distortions? has it already led to distortions we will suffer the unraveling option of that wealth disappear? alix: hmm. ira: turnover in housing is significantly more than 39 billion dollars. but any time you have changes in flow, whether it be from china or europe or japan or out of the u.s. or into the u.s., that will create market -- i do not want to say bubbles, but it creates marketplace moves. one can imagine that some of this money coming out of china could certainly help some real estate assets in different places. joe: you know there are buildings and neighborhoods where chinese money came in and no one is living there. that seems to me to be the definition of distortion. that does not seem particularly
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natural. not only is there not more money coming in, but it's only in a few key cities. london and vancouver. ira: presumably some of it is in the natural resource space as well because china is a large importer of resources. lisa: you have to think the fact that there is this global chinese investor appetite that was not theirs 6 7, eight years ago, you do have to wonder -- what happens if that wealth does depreciate? at some level, what assets will get hit hardest? is it the risk to credit? it is hard to say. it is a factor to watch. alix: ♪ duh duh duh ♪
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thanks for joining me. coming up next, republicans facing difficult decisions. will a resolution for the majority leadership in jeopardy? and we will hear from the creator of a new powder form of alcohol that is stirring up a lot of controversy. it is real. i swear. a margarita in a powder. ♪
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alix: $18 trillion. possibly the most hated number washington. it is the dreaded debt ceiling that america is bumping up against after a one-year suspension. secretary jack lew is recommending bumping it up as soon as possible. when does the government run out of money? joining me, my guests. stan, when does it happen?
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when do we run out of cash? stan: no time soon. they can take money from the left-hand pocket and put it in the right-hand pocket. no one picks this coming to a real head until september or october. alix: we have a little time here, but why does anyone care? a year ago always talked about was the debt ceiling. the markets were going crazy. it is a ex-month issue. what gives? guest: nobody has ever wanted to vote for it. the house used to have an automatic debt walk-up roll call vote. this has become a political football. republicans have tried to use this to extract things from the regrets. this will probably become an issue, which will put up right against the annual budgeting and
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i could be another cliff experience for everyone. alix: do you agree, do you think we will see the same hostage situation like we saw in the past? stan: i think there will be a faction of the republican party, some of the more militant conservatives in the house in particular, are going to try to do that. but let's remember the president, the white house has said they won't not negotiate on it. the republicans have control of those houses and have to pass something. the president has shown he will veto if necessary. and then you have wall street that says, do not mess around with the debt ceiling. it's too important. i suspect we will come to a head on this in the fall, but i do not think it will be quite as an issue as it has been for the reasons i mentioned. alix: do you think this will hurt republican contenders especially be very conservative ones like a ted cruz? stan: oh, sure.
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but by september several people will have dropped out. and they will have other members of the republican presidential group three of these are folks who are trying to appeal to the most conservative members, the ones who vote in the primaries, and for them holding the at ceiling hostage -- the debt ceiling hostage is actually good politics. alix: speaking of which, a potential rift between the clintons and the obama administration. no, it is not two thousand eight. reports indicate that valerie jarrett, a senior advisor to the president, led to the leak that revealed that hillary clinton used private e-mail. does this have any validity? guest: what i cannot figure out is why that would be strategically valuable for valerie jarrett? they would either have to support the 2016 presidential
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candidate for their party who is likely to win the nomination and risk their own credibility, or throw her under the bus and risk the fact that there would be a worse contender in 2016? it does not make sense that she would be the source of it and the reporter for the "new york post" is often right, but sometimes wrong. alix: stan, what do you think? stan: i think jon has it basically right. one of the reports was valerie jarrett was worried that hillary clinton would undo much of what president obama has done and heard his legacy. the bigger harm to the legacy of the obama administration would be a republican winning. i am taking a wait and see attitude. i agree be reporting from this particular reporter is questionable. alix: does this speak to a rift
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in the democratic party that not everybody is behind a potential a hillary clinton run? stan: look, not everybody is behind a potential hillary clinton run, but it is hard to believe that an outgoing president who needs a democrat to be elected after him to demonstrate his administration's esteemed is going to allow something to be done that could hurt that from happening. alix: fair enough. thanks so much to john and stan, coming up -- call it a leader ship exodus from snapchat. is there an adult at snapchat? details to come. ♪
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alix: "street smart this is." i am alix steel.
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jack ma is attending a conference speaking about improving relations with europe's tech community. he says the day is coming when women will assume more power. jack ma: the day is coming we will have a lot of women leaders because in the future people will not only focused their muscle powers, they focus on wisdom. they focus on responsibility. alix: go, jack ma. he showed off a product alibaba that -- a product that alibaba is working on that will allow consumers to make payments using facial recognition technology. the tesla model s as a test to end range anxiety. and new details about apple's rumored electric automobile. according to a report from an insider, the project may be
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minutes away from apple's cupertino campus and is codenamed sg5. snapchat ceo emily white is leaving the company. she follows the hr director sarah sperling and the ad executive mike randall out the door. what is going on? joining me bloomberg west editor at large cory johnson and on the phone from sxsw in austin, alex brink go. cory: you know, you are supposed to take a picture and the executives careers disappear. i think startups are hard. and founder run startups are even harder in some ways because
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they have a clear notion of what they want the country to be right -- the company to be like. they are getting so much attention and are launching into so much scale and have such high valuations for companies that are barely out of the gate -- maybe that is why we are seeing some ugliness that goes with startups. alix: it's interesting. emily white was building the sales ad business and that is still in its very early stages. alex, is anyone saying anything about this on the ground in sxsw? alex: it will be a key area to pay attention to. they have the full discover thing. it is not showing up on videos. and they are trying to bring in customers in a different way. it is super important. and of course we are buzzing out here in austin in the sxsw team. i will play devil's advocate and
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say, he is a young founder, known for sending massage and is the e-mails to his fraternity brothers. he has been in the game for a while. he has turned out -- turned down big offers from the likes of facebook. maybe it is time that he takes more control and writes his own footprint instead of bringing in outsiders. alix: is the $15 billion valuation on the floor being chatted about, alex? alex: it is always being chatted about. valuation is always on the table. that is a particularly rich one, as you shall he went alibaba, which is become so much more active in the u.s. market as well. it is really a justification -- for the company that still does not make money on the top line. alix: does this speak to nontraditional models that, sure, snapchat was to be a real, professional company? cory: pre-revenue seems
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ridiculous. people are messaging more than ever and running away from text messaging. that is why some people are excited. alix: fair enough. thank you for joining me. "street smart" will be right back. ♪
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alix: talk between the u.s. and iran continuing today. they're working to ensure a deal to make sure iran does not require a weapon. john kerry says important gaps remain and iran cannot say yes and the kind of deal the international community is
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looking for. benjamin netanyahu will not allow the us that was made of a palestinian state if he is reelected. he rolled back the acceptance two years ago of a solution. scarlet sue taking a look at all the action of the day. scarlet: i was looking to see often we have had these triple digit point moves. we've seen the return of some volatility because the dow has close with a gain or loss in seven of the last nine days. in an apparent disconnect, the vic does not seem to be reflecting thes e gains. that is relatively timid. kevin kelly was telling me it is because the vicks measures into volatility. the dxy had its biggest drop in the month now at 99.70.
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you are talking about mario draghi's leap which do not have an impact on the euro-dollar rate. there were factory pieces that didn't miss the economists' estimates. on the economic docket tomorrow, we will look at new housing starts and building permits in the morning and the start of the fed's two-day meeting with a press conference on wednesday at 2:30 p.m. alix: thank you. where in the world is vladimir putin? he made his first public appearance in 11 days. his absence fielding a ton of rumors about health, love child you name it. it came a few hours after he ordered troops to be placed on full comment readiness and snap drills in western russia. they say they are facing new challenges and threats.
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a russian documentary showed he was ready to put nuclear forces on alert when he authorized the annexation of crimea. so what is putin's and game -- endgame? i'm joined by foreign policy's michael white, the editor-in-chief of a newspaper that has russian media. everybody is talking about this 11 day disappearance. what did you make of it? michael: i think something has happened but every person i have talked to, including those i work with, think there is something afoot in moscow. alix: internally in the government? michael: there have been so many rumors. it is hard to pin down the reality as opposed to speculation. one idea is that he killed. other rumors are the strongmen
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in the security forces have had it with putin an mighty trying to work straight a soft coup. the fact he emerged this is not making any sense. i looked at the video footage of him. he looked like somebody who just had a heart attack or was being told his time was up. he did not really speak -- he whispered. alix: is in his approval rating like 86%? michael: 90% of the population gets their news from state television. there is no crime known to man that the cia and the state department and the ukrainians have not committed. this is off abrogated. -- fabricated . alix: what would be the biggest crime against them? michael: the russian elites, the business community -- billionaires who essentially owned the company -- are very uneasy about what is taking place.
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the might have been in favor of the annexation of crimea by they think this illegal war in east ukraine is causing russia -- coffee russia. sanctions have taken a toll. it is a pariah affected his head on russian businessman -- it has had on russian businessmen. there can be a growing frustration. putin himself has been in power for 15 years now. he is in his 60's. he has a relationship with this olympic business -- whether or not she had a kid, who knows? you might be growing weary and old and he lost a step. thepeople are saying who is going to take his place? alix: isn't he also kind of old? michael: like 62 or 63. alix: when he orders 40,000 troops in northern western russia for drills, what is he trying to respond to?
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michael: putting nato on alert that russia is a return to military power. it is an aspiring superpower in the making again. nato has put troops in eastern europe in the baltic countries. snap maneuvers are designed to frighten people. alix: is it meant to secure his position in the government as a bravado? michael: not necessarily. one of the most popular russian officials is the defense minister. he would be technically responsible for holding these military exercises. alix: who would be in charge of the country if putin -- michael: that is the million ruble question. particularly in this economy -- nobody knows. it could be somebody who was much hartline th -- hardline than putin. may be more of an amenable business type who can do business with the west again.
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something is not right. there is a c reality to all of this -- seriality about all of this. alix: thank you so much. i really appreciate that. we have a lot more to talk about. the iraqi army fighting back islamic state in the city of tekrit. is baghdad ready to take mosul next month? we have some amazing insight. plus, what investors want to hear from the bank of japan tonight. all of that on "street smart." ♪
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alix: i'm alix steel. the iraqi army is allowing people in tikrit to escape the city but the fighting a spartan -- is far from over. joining me is michael. first on the news of the day michael iraqi forces are
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letting people leave. you get the impression that the islamic state is behind that as well? michael: no i think is an evacuation of civilians. i think the ice is military component left in tikrit his very limited at this point. at most they had maybe 2000 guys there versus iraqi forces -- which are really shia militias which comprise about 80%. we knew it was only a matter of time before the city had to be given over. what they are doing now -- what they have done is laid ied's, bombs, hoping to kill as many people as possible. a civilian evacuation -- look i have heard estimates that as much as 99% of the city had already been evacuated in the last few months. i don't know what the contingent of actual brilliance is left. -- civilians is left. it is difficult to get credible
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information. alix: what does that tell you about the future battle of mosul? michael: mosul is a trickier scenario because that is home to about 2 million people. the second most populous city in iraq. how many people are still there versus who have become refugees we don't know. my guess is isis will put up a much stronger fight there. it is in berkeley important victory for the shia militia groups backed by iran which is running this war. they have built the retaking of tikrit, saddam hussein's hometown as a continuation of the 1991 shia uprising. this is a conquest for them of parts of iraq they never held before. the problem with this is if you go back a decade to the origins of isis when it was known as al qaeda, the founder had is
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very apocalyptic plan. the plan was to attack the shia of iraq which is the majority sect, prompting an overreaction or retaliatory against them. what we're seeing is that game plan being born out with essentially u.s. at we essence -- acquiescence. isis is going to gain in the long-term by the strategy because we are handing them a free propaganda victory. the u.s. and iran -- the un is coming out with a report this week which finds the pro-government groups have committed atrocities. they had expelled sunnis from villages, torch for them -- tortured them. i have seen videos of these groups play soccer with human heads. are the good guys actually the good guys in this? alix: to that point, you have lived and breathed islamic state for your new book.
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for that, directly spoke to a young member of the islamic state. talk to me a little bit about the recruitment process. how did they wind up getting into this group? michael: in the west, the way the media talks about foreign fighters, we make it seem like your next-door neighbor in new york or london is going off to join the islamic state. that is certainly true but the minority of foreign fighters are coming from the west particularly europe. the majority of foreign fighters are coming from other countries in the middle east. the case of the guy we interviewed, he opens the book. he is a syrian by heritage but grew up in iraq. the went to syria in 2011 which was then the nations free syrian army. he became disillusioned and then joined an islamist battalion. while he was there, he connected on skype with the brothers from isis. they convinced him to return to syria. he joined with them and the way
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he describes it -- it was almost like a psychological giving oneself over to something profoundly historical. if you talk to anybody who is ever joined a cult, it is a similar process. in his case, he was not a very devout muslim. isis broken down and built him back up in their own image. he said it was like finding the one true pacifist. and everything else is a denatured version of the faith. alix: in your research, having written the book and hearing many stories like this are you more afraid of islamic state before he wrote the book? michael: i'm afraid the current strategy to degerdrade and ultimately destroy them is not going to work. they are being pushed out of cities, but in syria, they are gaining territory. they have lost in kobani but they are also taking different
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areas with the stroke of a pen virtually when boko haram joined them. it was accepted and now boko haram is a west african affiliate of isis. they gained 20,000 square miles of terrain overnight. they are seen as a going concern, not just the going jihadi concern but as far as ideological movements are concerned today, this is it. this is -- i saw an article that describes them as a global counter cculture. this is the alternative to capitalism. another an anecdote from the book -- i spoke to an anthropologist and he told me of a spanish imam the kind of guy the president of the united states want to see in the muslim community to denounced isis.
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he admitted when he heard the caliphate was established, the hairs in his back of his neck went up. isis is a little of everything. there is a political project here. what they do very well is to happen to these wellsprings of islamic theology and history and lori. glory. first, the mosques that he preached from in june of last year. the historical residence of what they are comes -- proclaiming what they are doing is very powerful. that is the narrative. that helps with their recruitment and sow in the message. alix: thank you, michael. it was a pleasure to get your insight. you can check out his book "isis: the army of terror." tons of insight into the islamic militants. coming up, japanese investors
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could be piling money into u.s. treasuries over the next couple of years. find out why as we set you up for the trading day in asia. we will be right back. ♪
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alix: as a look ahead to the asian morning, but this on the radar -- japanese investors could channel millions of dollars out of the country and into u.s. treasuries over the next few years. we will break down the numbers. does this mean one point of and could be a bigger buyer than china. >> it very well could happen but it is not going to happen just right yet. within the past hour or so, this has crossed across the wire showing how china and japan are separated by $1 billion. china has about $1.4 trillion in u.s. debt and japan has about $1.2 trillion. may be this year, this might flip over. alix: why the flood of? ?
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>> japan is buying $300 billion worth of bonds through 2018. yields on japanese government bonds are falling and at the same time japan has been buying these bonds to make these interest go lower. looking at the bond yields right now. we look at the first one and talking about .07 is pretty negligible. the 10-yeaqr benchmark -- .4178. looking at the u.s., you want to put your money there. these are the best rates you can get in the world. alix: bank of japan making his motley statement tomorrow so we will definitely be looking on that as well. thank you for joining us. coming up wine beer, powdered alcohol? which one do you want? a new drink option may be coming to a liquor store near you. it is a thing, coming up next.
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alix: this is "street smart." blasco as agreed to by the willis tower in chicago. the price is a record for chicago office buildings, according to blackstone executives. it is the second tallest building in the u.s. china becoming the world's third-largest arms supporter passing germany for the first time. is increasing exports of military equipment. the u.s. and russia are the two top sellers of weapons worldwide. lenovo group's largest shareholder is planning a new opipo.
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it would be one of asia's biggest listings this year. we are approaching 5:00 in the east coast and that means happy hour. rather than opening a can of beer, uncork some wine, all about some powdered alcohol? a new product called palcohol just got regulatory approval last week and it is already stirring a lot of controversy. joining me now is alcohol creator, mark phillips. mark, how do you do it? tell me. mark: do what? make top all -- palcohol? alix: what is that mean? mark: if you can imagine a shot of liquid vodka on the counter and you can make it into powder. there comes four flavors -- powdered rum, powdered vodka which would mix with mixers like orangenge jews and
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coke. -- juice and coke. you had water to it and it is an instant cocktail. alix: if we take a look at stuff -- it is banned in 10 states already even though you have regulatory approval on the alcohol and tobacco tax and trade bureau. how can you run a business if you are already band in 10 states? mark: it is unfortunate because it is really irresponsible and it violates our right to choose to ban the product. kids will get a hold of it much easier by banning it and that is clearly wrong in my mind. alix: my concern is when i hear about powdered outlaw, kids could probably buy it. they could sneak it in places more. you can snort it. it seems a lot more dangerous that could happen. mark: a concerned parent over the weekend said to me she did not want powdered alcohol to be
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on the market to protect her 15-year-old daughter. i responded and said which would be easier for your daughter to buy? marijuana or a bottle of vodka in the liquor store? there is no way that 15-year-old girl could go into a liquor store and buy vodka but you can easily buy marijuana on the street. when you been a product -- ban and product, the state loses all control over just region and that is why provision has not worked -- prohibition did not work. we need to regulate it to keep it out of the hands of underage drinkers. by banning it, it will allow the kid to get a hold of it easier. alix: with this only be sold in alcohol stores? mark: absolutely, just like liquid alcohol. there is no difference, it is only in powdered form. alix: does it taste good? what is your favorite? mark: we have lemon drop coming out shortly.
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if you put a cosmopolitan and lemon drop side, you would not be able to tell the difference. alix: mark phillips, thank you so much. we will see you tomorrow. ♪
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john: with all due respect to bobby hearst, if you admit to being a serial killer -- mic off. ♪ john: my mic is back on. on our lineup, hillary versus democrats and jeb versus walker and walker all by himself. first jeb versus hillary. these candidates that had enough practices that worked


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