Skip to main content

tv   Bloomberg Markets Americas  Bloomberg  December 12, 2016 12:00pm-3:31pm EST

12:00 pm
from bloomberg's world headquarters, we're covering stories from new york to the unit. exxon mobil chairman rex tillotson is the front wanted to be secretary of state. look at what this could mean for oil and the energy market non-opec member say they're ready to deliver production cuts. from dave rubenstein who weighs in on the state of europe and the most recent deployment by donald trump. mixedl: we are looking at the dowhere. we have slightly higher which puts the dow on pace for another record close. the s&p is trading moderately lower. at which time, did carve out another record high. the nasdaq is the big laggard
12:01 pm
today. having torgence are do with sector performance. we take a look at the s&p. tech is a big drag on the day. consumer discretionary is another. energy is really helping out. maybe if oil continues these gains, it can turn the s&p back into the green. as her with really happening, the dow performance, we have a few movers. johnson & johnson is trading nicely. on a bullish mention i parents, they see 20% upside on johnson & johnson. exxon and chevron are trading higher on that oil strength. and itgher this time could power the s&p 500 and the dow.
12:02 pm
what's dragging on the s&p 500, we are looking at pharmaceuticals and apple. apple is down after a big week last week they had their best week since september. pharmaceuticals is down 15% on paper. isthe news that the ceo resigning after an improper sales probe. shares are down and investors do not like that uncertainty. julie: getting back to the oil story, they are going to cut oil production more than expected. they are coming after non-opec companies. exclusive, oil companies are already taking measures to introduce the cost. stage of thest cuts, you will be able to see. we have already discussed this.
12:03 pm
companies are well aware of what they have to do. thesere considering steps. he understands the benefits of this deal. the deal is in place and they have agreed to it. they are already preparing for the costs which will take place starting in january. as we speak now, they are taking measures. >> how does that materialize? each company take a percentage? >> i would like to stress once again that companies have agreed voluntarily to this. we are aware of the terms. they said they would join in. this is concerned -- confirmed with my recent reading. this is been reached by the ministers today. we will do what is necessary. the production costs will be split portion at least between
12:04 pm
them. we would also create a production monitoring committee. we would be doing just as this applies to monitoring their compliance with agreements we reached. the objective here would be a regular basis. ofwant to have a quick set communication. i cannot stress this enough. the company's are on a voluntary basis correcting their production within this agreement. they just sold $11 billion to the qataris. what else to you see them bringing to the table the on they justcash? >> we are very positive on this deal. it has gone as planned. dealsone of the biggest
12:05 pm
in russia. and globally over the recent times. we view this as a positive sign, bringing foreign investment into russia. >> what is a healthy oil price for russia and mark what you targeting? deal got doneis because of the non-opec members, would russia ever join opec? >> as far as prices are concerned, we try to stay away from forecasting prices. what i can tell you is the current price level is fully satisfactory to us. russia is not a member of opec and does not have lance to join the cartel. enhance theady to size of its operation with opec countries.
12:06 pm
i think the deal plays a solid foundation for the future. julie: that was the russian interview -- energy minister. let's check in on news. mark has more. mark: donald's leading choice for secretary of state may have trouble winning confirmation with his ties to russia. senators from both parties are balking. he has ties to vladimir putin. spoke ondent-elect nbc. >> we want somebody who is accustomed to negotiating. he has been in yemen and china and russia. putin areike vladimir pounding down vodka at local bars.
12:07 pm
a federal judge is recountg a request to paper ballots in pennsylvania. jill stein was looking to recount going -- votes in a federal judge halted michigan's recount. the wisconsin recount will conclude today. money toho provided key suspect in the paris and brussels attacks have received prison sentences in the u.k.. years and the other was receiving three years. provided money to the bombing suspect in july 2015. is the man in the hat seen on video just before the march bombing at the brussels airport. he is in custody in belgium.
12:08 pm
global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. i am mark crumpton. rex tillotson is the front rater to be secretary of state. yes to decades of dealmaking with russia. his popularity in moscow is being seen as a liability. joining us now is bloomberg intelligence analyst. about the history here between rex tillerson and russia. he was able to push through a number of big deals. >> it's those ties that attracted the incoming administration as a possible selection. it's a deep relationship. it goes back to the 90's. continued off and thereafter, especially. it's a relationship that can be levered.
12:09 pm
it could reset the relationship between the two countries on something they can agree on, the importance of energy security. julie: there has been attention on his relationship with russia. what about his other countries? exxon, you head of want someone with a global scale. for then appreciation different cultures, different value systems, different social morals. thellows you to appreciate intricate relationship that one country must have with another country. it's transactional. he was there to do deals. , as mutually unofficial symbiotic relationship. david: he has been on the job since 2006. he had a quotation in the new york times he was taking this job.
12:10 pm
he said you see is the same old wine in a new bottle. exxon kind of runs itself. really, this company runs in the direction it always have. how has he changed the country -- company? his relationship with russia. the other is xt o, that was a major bet on natural gas. that was a $35 billion that on natural gas. i would say those are the two het significant issues that -- have occurred during his tenure there. darrenit looks like woods would be the heir apparent to take over from tillotson. how does he compare? how will he change exxon? vincent: the one challenge for
12:11 pm
him is to validate the integrated law. you all have certain challenges. there is a challenge and with environmental activists. you have renewables. you have upstream production that has not thrown in a decade. different side of the business. he comes from the chemical side of the business. the ballastlly been of the organization. he has rationalized the business. he has sold off some pieces. i think there is an appreciation and understanding that we are in a time of uncertainty and volatility in price of oil and gas. he can bring that expertise to the table and the overall organization. david: what do we know about tillotson's attitudes toward climate change.
12:12 pm
vincent: i think that his shifted somewhat. , as the headagine of an organization that deals with oil and gas that he would take a skeptical point of view. julie: that has been one of the early points of contention regarding his potential appointment is when you talk about the paris climate agreement, here is the u.s. maine representative around the globe and he would not be willing to support that. do we have any real indication whether he would or not? vincent: i don't know that he is offered any on the record commentary. energy security is a function of national security. if you view through the prism of the geopolitical tensions across the globe, especially in the energy sensitive areas, you can understand why an unconventional pick like this would actually help us better appreciate those tensions across the globe. david: thanks so much.
12:13 pm
deals coming up, it's our reporter. we will talk about the failed merger of viacom and cbs. this is bloomberg. ♪
12:14 pm
12:15 pm
julie: this is bloomberg markets. it david: the fire, cbs deal has relaxed -- collapsed. shares above companies fell as the plan dissolved. joining us is the m&a managing editor. how big of a surprise was this? >> it's a bit of a surprise. we picked up over the weekend
12:16 pm
that last was reluctant to do a deal. he wanted assurances that he was going to control or have control .f the sherry sumner redstone he wanted to know he could run these might companies which are big and would require a lot of work. our sense was she was reluctant for that. she and her lawyers at her side want to make it look like they were out front and they were the reason the deal fell apart. what she the one that made the call? jeff: it's not entirely clear. we were making calls yesterday. we understand he has these concerns. to that play into her coming out? he did not want to pay a premium. there were a lot of research analyst said this was going to be a very small premium.
12:17 pm
viacom has made a presentation around thanksgiving or before thanksgiving that showed they wanted a pretty healthy premium. it's a $15 billion company already. these duelinge visions. you have bob back issue is running viacom now. what is his vision? what happens to paramount? jeff: he's going to have to clean up. there are probably going to be some job cuts. i think you will push more into international viewing. that is place they can use themselves in return to profitability. cvs is doing ok. they don't want to give up control. i don't think were going to see cbs doing a really big deal. there are some smaller deals out there. likely, they both feel good where they are. julie: will they look elsewhere?
12:18 pm
jeff: i don't know. they've been focused on perhaps doing this deal. they haven't given a good sense of what their standalone plan is. by a, has been a bit more open with restructuring and trying to fix some of the areas like paramount that have been losing money. when these companies broke into in 2006, viacom was a stronger company. since then, it's gone in a bad direction. like cbs is the dominant studio. david: does this and the soap opera? is there stability for these two companies? jeff: i don't think so. i would not be surprised if in 12 months we were talking about something again. the deal is dead now. let's not rule out 2017 or 2018. at some point, the redstone family sees the importance of bringing these two companies
12:19 pm
together. julie: we're not done with you. he is staying with us. .oming up, his interview he has been involved in several major deals, including time warner, yahoo!, and dreamworks. this is bloomberg. ♪
12:20 pm
12:21 pm
julie: this is bloomberg markets. david: let's talk m&a in the media space. time warner sale to at&t is still pending. jeff is standing by with a partner. i will toss over two. jeff: it's good to see you. you have been on all of these big deals. what's going on in the media you
12:22 pm
got not just the at&t deal and yahoo! verizon. we have the comcast deal for dreamworks. what is pushing the sin consolidation? >> i think if you look at two of the deals, it's about expansion of an existing platform. when you look more broadly, one of the forces driving consolidation is the need to be able to adapt quickly, to changes how consumers are taking in media across more platforms and devices. people are looking for more personalized experiences with media. i think that process is going to continue as technology exponentially advances. i think one of the things you are seeing in an effort to find content with distribution is getting the production of content closer to the consumer so you are able to be more noble
12:23 pm
and innovative and address their needs. jeff: this is an international phenomenon. theyfriday, fox announces and sky are in talks. consumers in europe or asia are thinking the same way. eric: it's the same basic thesis. i don't think the forces driving this consolidation are unique to the united states. they are largely without borders. jeff: how much of this is driven -- how much of all of this consolidation is driven by tech companies becoming obsolete in a year or two? 2010?s the hot phone in it's dismally obsolete in 2016. very thehink that some phenomenon that i just mentioned is bigger than any particular advice. is of the underlying idea
12:24 pm
being able to adapt to those changes. we will see virtual-reality, we will see artificial intelligence. devices are going to change. you will have video on your refrigerator. beingk as that happens, close to the consumer is going to allow content producers to be more nimble. there is a little bit of what you're talking about. if you look at tech in particular, one of the strategic challenges of any incumbent in that space is working to maintain relevance, if and how quickly snapchat can become widely used and displace an incumbent. you have seen m&a strategy to deal with that. facebook has been very smart about its acquisitions over the last five years to make sure at&tthey of all jeff: the time warner deal was a big deal. further precautions, special things you did to keep this to a
12:25 pm
small group of people? know, it'su well very difficult to keep any public a -- m&a. there are only a few levers you can pool. you can be thought for about where you have meetings, particularly when you are dealing with a high-profile executive. you can try to get on and to an announcement or a quickly. it's that kind of blocking and tackling. when you have a transformative deal in the media space, with recognizable senior executives, the real difference is not so much the tactics. it's the vigilance. jeff: sometimes it feels like for any reason those deals seem to leak, more so than the industrial mid -- midwest kind of deal. i think you see a lot of those deals in the press before they
12:26 pm
are announced. eric: if you look at any public deal, you start the deal in this day and age parent for the possibility it's going to leak media is probably more sensitive than others because it is very consumer facing and high profile. jeff: got it. i wish we could keep talking. --k to you, david area david. david rubenstein on turmoil in europe and washington bureaucracy under a donald trump administration. that is coming up next. this is bloomberg.
12:27 pm
12:28 pm
12:29 pm
12:30 pm
david: live from bloomberg world headquarters in new york, i'm david gura. julie: i'm julie hyman and this is "bloomberg markets." let's start with headlines. mark crumpton has more from our newsroom. mark: president-elect trump is sending former presidential rival, carly fiorina, as director of national intelligence. he met with the former hewlett-packard ceo today in new york. >> we talked about the opportunity the president-elect has to literally reset things. to reset the trajectory of this the roleto b reset of government, to reset america's role in the world and how we are perceived in the world, and i think that is why he is getting so much fantastic people in his administration. mark: trump is meeting with an presidentormer shall rival today, former texas
12:31 pm
governor rick perry. he is reportedly a candidate for energy secretary . john kelly has been tapped to head homeland security. he joined the marine corps in 1970 and retired earlier this year, wrapping up the final three-year post as head of u.s. central command. he faces senate confirmation. a group of coalition airstrikes targeting the islamic state is alleging a lack of transparency and a sense of civilian casualties. the report by london-based air war says the number of civilians killed by last summer is at least 1500, much higher than the u.s. acknowledged. parasites have been used in the fight against islamic state in iraq and syria. the u.s. supreme court has decided not to take up unilateral sales taxes. requires internet
12:32 pm
retailers to turn over customer data to pay sales taxes that we.n a retail sales group says the measure violates the constitution. news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, i am mark compton. julie: let's get a quick check on u.s. stocks. the major averages are little changed. the dow is very slightly higher, only seven points. it did touch an intraday record today with the s&p and the nasdaq still declining. 'st's go now to bloomberg abigail doolittle for what is on the move. abigail: one of the big laggards is the shares of lockheed martin , which you can see in this drop in the today chart. this was after donald trump tweeted earlier that the f-35 costs are out of control that billions of dollars can be saved on military purchases of some
12:33 pm
others after january 20 of next year. this is about 20% of lockheed martin's revenues. the stock is on pace for its worst day since 2011. quite a draw. the company did respond by saying, "we welcome the opportunity to address any questions the president-elect has about the program. and sinceat program the beginning, we have invested hundreds of millions of dollars to reduce the price of the airplane by more than 60% from the original price." a bit of a conversation therebetween donald trump and lockheed martin. someis certainly draghi on of the other defense stocks, including general dynamics. when we take a look at spending over the last year, we see that some of the concern here in the u.s. is $600 billion in military spending. the next closest is china with $215 billion. present donald trump
12:34 pm
comes down hard on this, it certainly will be part of these companies. we are looking at boeing in a bus. -- and airbus. both of these companies have reached agreements with iran air for deals. is reason for this and this the first possible agreement since 1979 for $16.6 million in airplanes. it could require the agreement of washington. that is weighing on the shares a little bit. for airbus, iran air ceo says they are confident a deal will be struck within two weeks. be talking much more about lockheed martin and some of the other defense contractors in the 1:00 p.m. hour. david: from brexit to the upcoming french elections, uncertainty seems to be the only certain thing. david rubenstein discussed his outlook for italy and the european union. rubenstein: there's no
12:35 pm
doubt that europe is in a little bit of turmoil because you have french elections coming up in the windows with that is going to go. you have the u.k. try to figure out how to get out of the eu. germany will have elections in two years and an italian government uncertainty. that the united states has an interest in a strong europe, stronger than it is now. we not just sitting there saying too bad for you. it's really a situation where we want to have a strong europe and we probably should exercise our own influence if we can to have some impact on it. i suspect in the end that the ecb and the eu will create some credibility to what the italian government wants to do and be more flexible and working at this bailout. if the italian government were to be in such terrible shape, europe would be going south because of it and it would not be good for all of europe. jonathan: europe has been through two crises. with this political
12:36 pm
fragmentation now more than we did five years ago, we do not talk about the denomination at risk in the same way. when are we going to start having regular conversations about the domination? >> i think it's possible, but the greater interesting thing to talk about is whether or not europe can actually come together and leaders can come together to come up with something makes sense. the theory of the eu and the fury of the ecb and the theory of the euro is that it would be better off if everything worked together and was correlated. despite all of these devices, europe seems to not be working together as cooperatively as it should. you really need the leaders in europe to get together and recognize that they have a potential crisis there and they have to be more cooperative and recognize that italy cannot do everything that ecb rules require. if germany and others do not relent, you will have bigger problems in europe. >> d.c. evidence is moving in that direction? there was lots of complains about bureaucrats and brussels.
12:37 pm
the leading candidate for france is really for reforming brussels. is there movement toward reformation? > i think there's a recognition there needs to be some change. obviously the eu parliament the other day spoke. it's clearly a recognition that there has to be some adjustment, i believe, because the rules are little too strict. in -- a a broker see bureaucracy in brussels and everyone is disconnected from it. >> with this growth and stability pact, will they have this pile?ets on where we going to get some help there? you speak to a lot of financial leaders regularly. you spoke to goldman sachs recently. haveclear that the u.s. done a better job of allowing banks to finance the u.s. economy. when are we going to see a pivot? >> it's no doubt that after the they do notsion,
12:38 pm
clean up their balance sheets like the u.s. bank. they are also not lending as much as they should or u.s. banks are. i think they do need to look at that and the ecb needs to be more aggressive in telling the banks they ought to lend more and really provide more support. i think mario draghi has done a spectacular job. atortunately yes to leave some point, but i think he is probably the most important financial figure in europe for sure. when he does go, it will be a big problem. julie: we also asked david rubenstein about a donald trump presidency and specifically what will washington look like after not duration. >> there's no doubt it's a different group of people coming to government than the last eight years. we will see what happens. i do know these people. being successful in business does not mean you will be successful in government. being successful in government does not mean you will be successful in business. we will see how it works. sometimes business people going to government and do very well and sometimes they do not do as well. we will have to see. >> you have the cabinet looking
12:39 pm
like a c suite and that will be awesome for businesses and they will get to grow like bananas and the corporate tax rate really lower. is that the correct linkage to make? >> in the euphoria of a od of time,n peri everyone is happy who won the election. anything to people who have done well in the business sector and fe, you just don't know. when i worked in the carter administration several years ago, jimmy carter had a democratic congress and he had been and newly elected democratic present. we thought we we get everything through congress. turns out the democrats in congress have their own ideas. this time the republicans and commerce may have their own ideas as well. the biggest risk that the present elect will have is that everything he wants you will not get through congress, so he will have to pick and choose. there will be some disappointment that all the things he may want to get he will not get. >> it's one thing to be secretary of something. there's a standing bureaucracy
12:40 pm
in each one of these agencies. henry kissinger wrote about that. >> there are 2 million civilian employees in the federal government and the president-elect is going to take about 4000 of those new people. he may only take about 50 people or 100 people before he is inaugurated. you have 2 million people working for you and that bureaucracy does not change. it will take some time. when you hear the rhetoric and people being put out for nominations, your potential take for secretary of state, what does that tell you about u.s. foreign-policy? it's more u.s. focused and less global and company friendly. >> rexx is a very talented person and i respect him a great deal. he spent most of his life really running around the world working on energy projects. he's a talented enough person to figure out how to do this job. the biggest challenge he is
12:41 pm
going to have is that the state department may not like exactly what he represents. he will have to do with that, but i think is counted enough to do so. call, whatid get the would be the number one policy you would want to see that would be good for business and the economy? >> the most of what business people want is certainty. just tell us what you're going to do and what you want to a cop was. we can live with lots of different things. tell us what the policies are going to be. with certainty, business people can react to it. just have a very certain realistic policy. that's the most important thing. thatstic policy and things can realistically get done. i think the economy will reflect that very well if it happens. julie: that was carlisle ceo rubenstein. the italian prime minister is announcing the formation of the new cabinet in rome. the new government will be sworn in at 2:00 p.m. eastern .
12:42 pm
yesterday, the present as the minister -- the president asked the me minister and that swearing-in will be taking place. david: there's a new set of israel as well. ashton carter is speaking israel right now during a ceremony to welcome the arrival of the f-35 strike fighters. i don't think we're looking at the right footage. this was after president elect on thetrump took aim pentagon's most expensive weapon system you. coming up, we're going to the las vegas motor speedway to look at some of the most extensive cars at firs for a spin. this is bloomberg. ♪
12:43 pm
12:44 pm
12:45 pm
julie: you are watching bloomberg. i and julie hyman. mark: i mark barton and this is your global business report. the fallout from the runs a vote continues. -- brexit vote continues. julie: boeing makes its first cell to iran and more than three decades. now the company has sell the deal to president-elect trump. mark: insider trading. a look at what defines it and the wide range of penalties for
12:46 pm
this corporate crime. china has complained to the world trade organization about u.s. and european union terrace. the chinese want the u.s. anti-e.u. to quit using an example prices from other nations and anti-dumping cases . they say it has artificially raised tariffs on chinese exports. mark: it's the worst rate in six years for the london housing market. asking prices fell more than 4% from last month and house prices are down 6%. in april tax hike on property investors and worries about brexit have hurt luxury home prices. boeing says they will sell airplanes to iran. it's the first deal of its kind since 1979. now boeing may have to sell the deal to present elect donald trump. thep is opposed to agreement that used iran
12:47 pm
sanctions and clear the way for boeing sales, donald trumplect is rejecting intelligence assessments that russia tried to help him win the election. trump spoke to fox news. >> i think it's ridiculous. i think it's another excuse. i don't believe it. i don't know why. they talked about all sort of things and we could say another excuse. we had a massive, landslide victory as you know in the electoral college. i guess the final numbers are 306 and she is down to a very low number. i don't believe it at all. mark: a group of republican and democratic senators has called for an investigation. russia meddling in the election is a great threat to national security. julie: timeout for a bloomberg quick take where we provide context and background on issues of interest. it seems obvious that first
12:48 pm
glance that insider trading is cheating. hedge fund billionaire famously went to jail for doing it and george soros paid a big fine, but it is an obvious at all. here's the situation. in the u.s. where prosecutors have vigorously pursued insider trading cases, there is no clear law defining precisely what constitutes insider trading and what does not. there's also a huge variance in penalties with a maximum two years jail time and transfers is 20 in the u.s. and south korea. the u.s. up in court upheld a california conviction that resolved what sort of benefit the insider must receive to constitute a crime. yorkpeals court in new narrow the definition of insider trading and made it hard to bring cases. here's the background. insider trading became a crime in the u.s. through judicial interpretation of 1934 law in the cleaning of markets in the 1929 stock market crash.
12:49 pm
one of the most famous cases made a household name of ivan boesky, who was thought to be part of the inspiration for the character gordon gekko in the 1987 film "wall street." and the u.k., insider trading became illegal in the 1980's. while legislation was not enacted until the 1990's in germany. their insiderd trading laws after a scandal embroiled prominent firms. insider trading proponents contend it allows information to be incorporated into stock prices quickly, making them more accurate. the contrary view is that access to nonpublic information allows a select few to make big bucks. issue, thelocate the real insiders are allowed to train their own socks as long as the information they are trading on is generally available. more about insider trading and all of our quick takes on bloomberg. that is your global business report. head to for more business stories.
12:50 pm
♪ david: more breaking news out of italy. the prime minister announced the formation of his new cabinet. there's a finance minister in the new government and also there is a new foreign minister for the italian government. this is bloomberg. ♪
12:51 pm
12:52 pm
david: this is "bloomberg markets." for $12,000, lamborghini's most devoted customers drive exclusive supercars. matt miller attended the las ifas motor speedway to see the program is worth the high-priced head for drivers in for the brand. matt: here at the las vegas motor speedway, brand loyalists
12:53 pm
have gathered. >> it's a second day of the -- >> it's an advanced driving academy offered to lamborghini owners. >> everyone has to take the program because your level of appreciate is just higher. matt: they get a bit of classroom instruction like the best way into and out of a corner. the highlight is the hours on the track where they get one-on-one coaching from pro-level race drivers. $12,000 it's you a seat in the supercar as well as countless lapse in this road car. most importantly, since all these people own and lamborghini, the get to drive the super racecar. that is the super race the car in private racing leagues. it costs an extra $125,000. getting behind the wheels is one of the major selling points. >> this is it, dude.
12:54 pm
this is a combination of two days of intensive training. how was it? >> amazing. matt: i can't wait. >> how was it? matt: insane. all right, i will buy want too. when reading holds time trials were all the software developers, security consultants, and brain surgeons get to see who is really the fastest. those who went typically get an race weekend,a complete with tech crew and a helicopter ride to the tracks. >> it's for us who want to be something we will never be -- a professional racecar driver -- a pathway to get as close as we can get. it's a marketing ploy also. maybe i should buy the race car and started racing. matt: that's right -- by a team.
12:55 pm
lamborghini has little problems finding buyers for its products. are of the participants among the super and lamborghini wants to put even bigger bucks out to start their own teams for private racing link. -- private racing league. >> if i did well in the course, i will continue on as a racer. experience made me want to buy supercar. matt: since the two years and celebrity me has been running the program, only a handful of participants have started teams, but the number is growing and that's the kind of connection the company aims to foster with its academies, but you will want to sign up fast. it only happens twice a year. >> lamborghini was a self-made man. when you talk to lamborghini owners, so many of them are self-made individuals. we don't have trust fund. we were not given what we got. that is the spirit. david: that was our colleague, matt miller.
12:56 pm
, pursuits has the finest destinations in your life, travel, and property co. julie: let's take a quick check on markets before we go to break. the dow is barely holding on to its games. we still have the s&p and the nasdaq lower. divergence with oil prices, which are strongly higher today, but not helping the s&p 500 as the nasdaq overwhelmed their losses. oil prices getting a boost from that non-opec agreement on production cuts. david: former ambassador to syria on donald trump's possible pick for secretary of state. this is bloomberg. ♪
12:57 pm
12:58 pm
12:59 pm
david: it is 1:00 p.m. in new york and 2:00 a.m. in hong kong. i'm david gura. julie: i am julie hyman and welcome to "bloomberg markets." ♪
1:00 pm
julie: from bloomberg world headquarters in new york, we're covering stories from san francisco to paris and insmed pulled this hour. -- instable this hour. today's now from the federal reserve decision and we have a three charge you cannot miss ahead of wednesday's meeting. bill gates and more than a dozen of the world's wealthiest individuals reveal a new $1 billion investment fund to foster major advances in clean energy production. and a shakeup at to chipotle. the co-ceo leaves leaving the ceo to survive after a food crisis. abigail doolittle gaza strip. -- joins us now. abigail: certainly more red than green. the dow is on pace to close yet another record high.
1:01 pm
the s&p 500 earlier did carve out yet another intraday record high. much of this could come down the sector composition. the nasdaq is being dragged on by technology and biotech. it is helping the dow and what had been helping the s&p 500 is still having the energy sector. this is a chart of the s&p 500 energy index. , it isthe earlier today still nicely higher. if this energy sector can come off of the lows of the day, perhaps we will see the dow gains become much stronger and perhaps the s&p 500 can turn higher once again. it can perhaps join the dow for another record closing high. there's a lot to talk about the ideas that stocks of these current levels with all these record highs that stocks are frothy. take a look at g #btv 5285. this chart may give credence to the idea. this is a long-term chart of the trailing 12 month price to earnings multiple on the s&p
1:02 pm
500. it's basically a valuation metric. for a bulk of the time, it has traded between 12 and 18 times. backotable exception during the tech bubble is that we had pe go sky high. we now have the s&p 500 pe climbing above that range at levels last seen in 2002. perhaps this does give some idea that valuation is high. we all see back in the tech bubble that it climbed much higher. will be interesting to see how this all plays out. as for what is the top sector at this point, we're looking at the telecom stocks. at&t and verizon are both have an higher where we analyst saying that at&t should benefit from deregulation and lower tax rates. he did upgrade shares to an outperform. sprint is down for its third day in a row. it is worth noting that the fcc is auctioning off another wave of airwaves tomorrow.
1:03 pm
it is the fourth wave auctions around airwaves. perhaps investors are taking that into consideration. david: abigail doolittle with that market update. now let's check in on the bluebird first word news. mark crumpton has more from our newsroom. mark: senate majority leader mitch mcconnell says he has "the highest confidence in the u.s. intelligence community." 's leaking today on capitol hill, the kentucky republican defended the cia and its reported findings that russia tried to help donald trump win the presidency through cyber meddling. mcconnell also took aim at moscow. >> let me just because myself. the russians are not our friends. they invaded crimea. senator mccain and i and some of our democratic friends met with the dalla delegation of baltic countries just this past week to say that they are nervous about the russians.
1:04 pm
mark: mcconnell's defense of the cia puts him at odds with the president-elect, who has rejected the agency's findings. kellyanne conway says she "likely declined an offer" to serve as press secretary for donald trump. that is according to politico. she noted that whoever takes the position will inherit a hostile press corps. hinted that she would avoid a formal role in the administration. defense attorneys in the charleston church shooting trial are trying to get testimony from the first witness got from the record. a survivor from the attack testified last week that de la rue belonged "in the pit of hell." the defense teams attempt for a mistrial over the remarks fail. prosecutors say roof was trying to start a race war by killing nine black churchgoers last year. a manhunt is underway in france for four these who stole what
1:05 pm
could be millions of dollars in gold. they stole it from an armored truck on a major highway near lyons. they said the vehicle on fire and the two drivers inside. the drivers were rescued thanks to tip off from one witness. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries, i am mark upton. this is bloomberg. julie: federal reserve leaders are meeting in washington this week to discuss interest rates for the first time since the u.s. presence election -- presidential election. it's set bets on growth. matt mosley joins us now with a decision day guide. we could say the equity markets have been soaring in anticipation of stimulus anticipation with the fed. we are looking at this with charts. i believe i have your first chart of the her, which is a look at the employment rate
1:06 pm
among a segment of the population versus wages. can you talk us through this ?> matt: everything starts with the jobs report and it was solid. it gives them a good inference into this upcoming meeting where they are expected to raise rates. this chart shows the white line is 35 to 44 employment in the united states. it is that he middle demographic that you would expect to see most likely working of an you cay. you can see last month that hit a high and the cycle. the blue line shows primates wage growth. that has really left up recently as well. getting theitely strong employment trends and finally starting to see that wage growth we have been waiting for. it's a really good sign for the fed and it makes an easy decision for them. julie: that's the employment rate and not the unemployment rate among those folks. we are seeing strong employment growth and strong wage growth
1:07 pm
among the. that. david: when you look at the amount of fat speak going into this meeting, is there concern that we are at full employment and is there unanimouity? matt: the median of the fomc official said it was at 4.8%. report on friday showed that unemployment fell from 4.9% to 4.6%. it went from above the estimate of the natural rate to below it. that could be a potential fulcrum going forward. thatis like a key metric is a big part of the fed narrative. already we are hearing for example some fed officials who are considered more dovish saying maybe we do not need as much fiscal stimulus now as they were talking about a few months ago. that could be a potential big change. david: let's pull up your next chart. looking here at the goldman
1:08 pm
sachs u.s. surprise index. that is in blue. and why is the expected percentage points of fed tightening in 2017. matt: looking beyond the rate hike expected this week and the white line is what this for next year. it's right in line for the fed's latest projections. the market sees to rate hikes roughly next year could that is . that is basically where the market was last year. kind of a similar setup. the election has played a part in that. that white line was right around the beginning of number one -- november when the election happened. the blue line and this is really important, too, the economic data has gotten a lot better. this blue line shows how much economic data are beating or missing analyst forecasts and they are beating forecast by the most since 2014. that has really helped to boost rates and provide confidence in
1:09 pm
the outlook for higher yields as well. julie: let's get to the next chart. this looks at what is happening in the housing market and mortgage rates. as expected, because we have an increase in 30 year yields, that means an increase in mortgage rates i as well. we are seeing an uptick in mortgage applications. that's unusual. when rates start to go up, people don't panic, but they rush together mortgage applications in before the rates go up even more. is that essentially what is happening? matt: that does look like how it's playing out so far. we have had this big surge in mortgage rates as well since the election. mortgage applications have excellent gone up and not down. that is kind of surprising because if you go back to the temper tantrum and 2013 13, the other red vertical line in the beginning of the chart, you can see that as soon as interest rates really started going up, that was the top for mortgage applications and then they started to fall. the big question is that potential downside of buyer interest rates is tighter
1:10 pm
financial conditions. if we are going to see that, we will see that show up first in the housing market. it does look like we are getting some of that in bringing buyers off the sidelines now that rates are going higher. keep an eye on mortgage applications to see if those tighter financial conditions are starting to have a negative impact on the economy. that is something the fed might have to take into account going forward. julie: matthew, think you so much, giving us a little preview of the fed through these various charts. do not forget to tune into the special coverage of the fomc meeting on wednesday beginning at 1:00 p.m. on bloomberg television and radio. david: bill gates and of the business leaders are launching a $1 billion clean energy fund. where the fund will invest its cash next. this is bloomberg. ♪
1:11 pm
1:12 pm
1:13 pm
david: this is "bloomberg markets." i'm david gura. julie: i'm julie hyman and we have breaking news regarding apple. the reporting is that apple held talks to invest in softbank's $100 billion fund. that sun was just how be -- touting this fund at trump tower the other day i believe. reporting thats apple has held talks to invest $100 billion into that fund. we have cory johnson with us today who covers all things tech. what is your take on these ?eadlines cory: to me he's a very
1:14 pm
impressive guy and has done amazing deals. he does not have $100 billion. he would like to have $100 billion. i don't want to speak for you guys, but i'm going to speak and say we would all like to have $100 billion to invest. apple is a place you would want to go to raise that money. talk toot to softbank, an important company and tell me can occasions in japan and with their roles in sprint and beyond. they've opened up in office in london and hope to do a lot of investing. there's a lot of commitment of capital. some of the biggest commitments we have ever seen. some big funds in silicon valley raising even bigger funds to go forward, even as there's a sort of feeling a frothy this in the market and they may not be as many big ideas to invest in. timenk it's an interesting for these kind of investments because with the success of amazon web services and rackspace and other companies,
1:15 pm
the cost of starting a new company and technology is much less than it has been in the past. you have these bigger funds chasing companies that need smaller amounts of money. it's a very interesting time in venture capital. julie: does apple have a history of investing in these type of funds?? cory: it would certainly be a stretch and something new. apple made an investment in didi not even a year ago that turned into about a 30% or 40% gain in about a three month return after the group investment. apple has used these things strategically wants to get to a place that they are not otherwise. that was unusual for apple on paper, but it looks enormously successful. we will see these talks go anywhere. it to talks have about a smaller fund by comparison at all the $1 billion. it is the breakthrough energy fund that bill gates is chanting here. what do we know about it?
1:16 pm
cory: it's a really interesting time for investment right now because you have this incoming trump administration that has been openly hostile toward the idea of climate change, which is a real thing, but they don't believe it. to find a group of people who don't believe it as much as they have done so in the trump administration. in particular they have been critical of programs and department of energy that have championed champion clean technology and investments in clean technology. now you have bill gates and jeff bezos and even jack ma at investing in curious things. the notion that cleantech investment will have to come from somewhere other than the federal government, it always has, but cleantech is under siege right now and likely will be under siege under a trump administration. these big investors looking at the problem of technology are saying these are long-term
1:17 pm
problems that take deep pockets and long-term investments to become a solution. i think it's really an interesting time for them. julie: it's also interesting looking at these heavy hitters investing in cleantech. cleantech on the one hand is trying to do good in the eyes of these investors, but then you have the success of these investments. --t part has not been so certainly has not been consistent if you look at cleantech. cory: and then determine success, right? was tesla a success for early investors? not at all. i do not know how you define success. i think this is where social investing gets challenged. their goals are greater than just a return on capital. of using have the goal capital to change the way technology or business works. that can make for tricky investments and not great for the bottom line. david: cory johnson, great to see. you'll hear from him in 40 minutes time on bloomberg radio. julie: the latest victims of
1:18 pm
trump's twitter account -- lockheed martin. shares are lower today after donald trump went after the costly program on twitter. the impact on the defense sector and a mechanism is next. this is bloomberg. ♪
1:19 pm
1:20 pm
david: this is "bloomberg markets." i'm david gura. julie: i'm julie hyman and shares of lockheed martin continue to stealth and -- tailspin after donald trump tweeted that the f-35 program and its costs are out of control. billions of dollars will be saved after purchases on generic 20. costly's cos program that has been plagued by delays and over o overruns. is bloombergw
1:21 pm
intelligence senior aerospace defense an airline analyst george ferguson. lockheed is not the only stock down today. another participant in the f-35 program is also lower today. is there a way to sort of reduce the cost of this program? does donald trump have a point here? george: i think there's a way to reduce the cost of every single defense program. it's just a matter of how hard you want to look into each of them. and how aggressive you want to get cuts. billions about saving of dollars per we are talking about a program that will become the largest defense program ever, some $300 billion to spend. of dollars inns $300 billion is not terribly aggressive, but it does send a signal to the rest of the defense establishment and that is donald trump and his and ministration is not going to increase defense spending and not look for more out of defense
1:22 pm
contractors. he is looking for more value. he said this during the campaign. i think you would like to be able to buy more defense with may be same or maybe a slight increase in dollars, but he wants to buy more defense. david: we are joined now by a senior defense analyst. how much of an outlier is this program, the f-35 program? the president elect holds it up as an exemplar. >> it's the biggest program, so it's going to be a standout and attract lightning strikes from time to time. a lot of the problems associated with the program have actually been solved. i think the question we the to address going forward is how much as the unit cost and how do we improve the curve? lockheed has done a nice job of recovering. julie: to george's point here, when you get, from tweeting something like this an indication that perhaps he is not going to be as bullish or as favorable to the defense
1:23 pm
industry as perhaps some had supposed postelection? howard: we can't tell you could it's only tweets and not full statements. you's important is that if ask the question about the average cost of the airplane, it looks big to the average consumer. you want to say, why does that exist? i think the questions that he asks -- why? is a great question. it's partly to protect pilots and partly to protect the most sophisticated fighter in the world and partly because it can do things that nobody else has ever been able to do before. there is a balance here between how much it costs and ho what the value to the u.s. military is. the whole point is that maybe he is asking the rest questions -- right questions and units to sit down and get really complete briefings both classified and otherwise as to what the right outcome is. david: george ferguson, question
1:24 pm
in light of boeing and the air force one orders. they are on order. i wonder how much a president elect can do when a deal has been inked in terms of bring costs down. george: there's a lot of follow-up contracts and for sure he will have an opportunity to really push his agenda with f-35. is what most military contracts. he's going to find out that there is a contract cadence that you can get inside and make changes to. julie: howard, does this affect your investment thesis on these companies to have these tweets coming up? is at the very least a risk you have to consider now? howard: i think it's a very fair point that it's a risk. we have not been recommending lucky. we prefer boeing or northrup. but you know what the beauty of that is? the ceo of boeing went and had a conversation. when you have a conversation and a dialogue with people learning
1:25 pm
about new processes, you gain an understanding to approve the decision-making. i think this industry in some ways is more complex than almost any you will ever find. 787.hink about the it's the largest civilian engineering project that man has ever undertaken. it takes years and decades to fully understand the application. to some degree, the f-35 is a little the same way. i also think boeing has got a competitive aircraft and f-18. we are too hot production lines. maybe the navy buys more f-18s and compensates for some of the f-35's. david: george ferguson, last question to you hear about the way that contracting is done in washington, d.c.. does there's a talk of reforming the process and silicon valley leaders talking about the difficulty of what is. with the contrast in washington in the year -- what is the
1:26 pm
contractor washington in the near term? george: i think it's a great idea and there's plenty of waste in the system that you could try to take out. the challenge here is that there's not many companies that can deliver platforms like the f-35, northrup bomber program, boeing's tanker program. you have a limited number of contractors that actually did on this stuff and i think that's where you start to run to some of the challenges where he is trying to reform contracts and drive down the costs. you have got a base of contracts you can build to maintain your health and then you have a lack again a big diversification to provide it. julie: we have got to leave it there. george ferguson and howard rubel of jefferies group. ♪
1:27 pm
1:28 pm
. . seeing is believing, and that's why we're opening more xfinity stores closer to you. visit us today and learn how to get the most out of all your services, like xfinity x1. we'll put the power in your hands, so you can see how x1 is changing the way you experience tv with features like voice remote, making it easier and more fun than ever.
1:29 pm
there's more in store than you imagine. visit an xfinity store today and see for yourself. xfinity, the future of awesome. i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. julie: live from bloomberg headquarters in new york, i'm julie hyman. david: i'm david gura. mark crumpton has more from the newsroom.
1:30 pm
mark: president elect donald trump has narrowed the search for energy secretary to four people. rick perry is said to be the leading candidate. democratic senators from energy producing states are also in the mix. that's according to people familiar with the selection process. in dallas investor and vice chairman of the trunk victory committee fund is said to be a candidate as well. president obama has agreed to spacee -- to lease office at the world wildlife fund in washington, according to the "washington post," citing to twotified officials -- unidentified officials familiar with the plan. turkey is still reeling of the aftershock of the failed coup attempt in the summer. beyond economy -- the economy
1:31 pm
fell at an and he will rate of 1.8%, the first time in seven years in turkey has announced a contraction. recent reports indicate turkish consumers are spending more in the fourth quarter. the victims of the pulse nightclub shooting in orlando, florida were remembered today. survivors, staff, relatives of victims had a moment of silence at 2:02 a.m., the exact time that the gunman started shooting inside the gay nightclub. the names of each of the 49 patrons who were killed were read. dozens of others were also injured in that shooting. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. julie: thank you. president-elect donald trump may be closer to naming secretary of state and the front runner comes from the world of big oil. yesterday, he tweeted whether i choose him or not, rex tillerson
1:32 pm
, chairman and ceo of exxon, is a world-class player and dealmaker. stay tuned. as enthusiastic as mr. trump is, some senators are expressing reservation because of his close ties to russia's president, vladimir putin. >> vladimir putin is a thug, a bully, and a murderer. anyone who describes him as anything else is lying. accommodation an with the russians until they understand what ronald reagan taught them, and that is peace through strength. right now, we have no piece and no strength. hisn't know what relationship with vladimir putin was, i tell you, it's a matter of concern to me. julie: joining us to discuss the geopolitical circumstances around the appointment to asretary of state has served
1:33 pm
ambassador to israel and syria and is the former occidental petroleum commissioner. having an energy industry background yourself, presumably you don't think that would disqualify rex tillerson from such a role. what would he bring to it, from having had this corporate experience? >> in my experience, ceos of major energy companies greatarily have international experience, because of the multinational character of these corporations. is thelly exxon mobil largest and has operations in at least 50 countries in the world. and rex tillerson as ceo and chairman of exxon mobil has the great responsibility in that withion of negotiating foreign entities, leaders of the
1:34 pm
world. and basically has to know a lot about what's going on in that country before a corporation like exxon mobil makes investment decisions. i think the qualifications on the international scene are really more positive than any negatives. david: you know the situation on the corporate side and the state department side, this is a byzantine network and hierarchy in washington and around the world. is it all worrisome to you that the person heading that organization would have no familiarity with how the state department works? mr. djerejian: that's always an issue when you have someone who doesn't have the political experience and has not worked in government. when they come into a top managerial position, as you mentioned, the bureaucracy can be quite byzantine. when you have someone who is a good executive and has good leadership skills, he or she can sometimes see through that when
1:35 pm
they take over the bureaucracy and adjusted -- adjust it to their own requirements. let's not forget george schultz, who came from deck tell. ofn he brought that type expertise and management skills into the job. julie: turning to the issue of russia directly, what is the proper positioning with regard to that country at this point? a veryrejian: we have difficult, contentious relationship with russia. it has deteriorated in recent years, and it's one of the most critical issues on the international scene. in my personal view, the new and administration, the trump administration has to take a look at the u.s. russia relationship. it's a relationship that matters and impact on u.s. national security interests in a major way. let's not forget that russia straddles the europe and middle
1:36 pm
east all the way to china. there are many issues that we need to come to certain common understanding, if we can, with russia. this is an opportunity to reengage with the strategic dialogue. i don't mean a phony dialogue, just for the sake of procedure and theatrics, but a real substantive dialogue. we are the issues that we differ on? is there any potential of resolving those issues, such as in syria or ukraine. interests,the common the common interest we have in defeating islamic radical groups, such as isis. i don't agree should see it as a problematic initial approach, but one that can provide a moment for us to restructure this relationship. julie: -- david: since rich ellerson's -- rex tillerson's
1:37 pm
name was floated, perhaps that tells us the administration's priorities when it comes to foreign policy. do you worry about other countries that you worry about at this point? i think about countries in the middle east and china. are you convinced that rex tillerson could engage with those companies as easily as he could with russia? he has extensive experience in the middle east and dealing with countries in the gulf. i think he has the knowledge base. we do not know how to stand to since his knowledge of china is, comes to the he state department, he will have a vast array of expertise that if he is listening to that expertise and gains the knowledge, it's really the leadership skills that are
1:38 pm
really important. that a lot of the is what isis missing essential -- no matter who it is, no matter who president-elect trump chooses, it's that personal, professional relationship between the president and secretary of state that is critical. if that relationship is there, as existed between bush 41 and secretary of state jim baker, they were a powerful scene because no one could get in between those two men on foreign policy. everyone knewke, he was speaking to the president of the united states. elements ofssential the choice of secretary of state. he or she must have the full andidence of the president has to be part of the inner team. julie: interesting perspective on the relationship is when the secretary of state and the president.
1:39 pm
ed djerejian. former u.s. ambassador syria and israel. thank you for your time. mr. djerejian: my pleasure. david: we discussed who is stepping down and who is resuming control, next. this is bloomberg. ♪
1:40 pm
1:41 pm
david: this is "bloomberg markets," i'm david gura. julie: i'm julie hyman. withil: the charts deal when will tightening with the possibility of the fed tightening hurt stocks. going higher with
1:42 pm
the threat of tightening hurting stocks. we first take a look at g#btv. surpriseberg economic index and white was down your lows, basically telling us the economy was somewhat on shaky have -- shaky ground. we see the s&p 500 and that economic surprise climbing higher, telling us the economy is doing better than analysts and strategists were thinking. perhaps that tells us the economy and stocks can handle rates going higher, that's what we do have a little bit of this dichotomy. take a look of the next chart, which shows in slow cycles, it's the second slow cycle the painful for stocks. possibly this wednesday, with with a lag, that
1:43 pm
could be what we're looking at. and finally, when was it a little long-term chart the gives great perspective in terms of yield and stocks, we see the s&p 500 has really shot to the record highs. the seems to have supported s&p 500 perhaps to some degree are rates going lower, really that extra ordinary monetary policy helping to fuel rates and stocks going higher. yields going lower tells us bonds are rallying. to have bonds and stocks rallying at the same time as a bit of a difference. it could be interesting, maybe we get back to the old paradigm of bonds selling off as rates go higher. idea that thethe economy supports that kind of returns that dynamic that is considered to be more normal. julie: maybe it's not. what we think is that normal paradigm isn't a normal after not -- after all. david: we will get some of the
1:44 pm
biggest business stories in the news right now. redstone,ith chair the proposed merger of cbs and viacom. today,tified both boards a person familiar with the matter says viacom interim ceo hermitcome the company's leader. meanwhile, the new york post says cbs is pursuing other potential deals. the broadcaster itself could be of interest to verizon. planning one is subleasing space in london's canary wharf financial district. the bank and said they would cut about 4200 workers by years end. credit suisse may sublet elsewhere, including all four yard, as it tries to cut rental bills. they will start offering graphics tips for artificial intelligence used in data centers. the chips of the company's first product to help computers train themselves in tasks like image recognition and they expect the chips to go on sale in the first half of next year.
1:45 pm
that is the bloomberg business flash. julie: chipotle shares are co-ceosoday and the leaving the embattled chain, following a tough year for chipotle. they suffered a series of foodborne a list outbreaks in 2015 and are still struggling to repair their image. mona --us is craig g craig g mona. how does this change how to pull it will be managing? craig: it's not clear that it was. baby and he isrs taking sole control of the critical time. the turnaround has been sluggish at best, is not evident that they can turn this thing around and he is saying i'm going to be solely responsible for running operations. he's admitting that these restaurants are not being run
1:46 pm
particular well. half of the restaurants aren't up to par. this is in taking control. creator of chipotle, and monty was the guided -- the guy who was brought in to be the business part. ceo whennty moran was it was flying. for yields, -- for years, the stock went up until he hit this major issue. i don't think it's a failure, he was the ceo in charge when they revolutionized fast food with their model. he says half the stores aren't up to par, what do you do to change that? craig: they made their brand by being simple. you walk in and see the assembly line, it was a novel concept. but all the food safety stuff has made a commentator to run these restaurants. they are nearly as far as food print and a new safety
1:47 pm
protocols, but we've taken our eye off the ball when it comes to the customer experience. they spent millions of dollars getting people back with free burritos. when they come back, they need to be reminded why they like chipotle in the first place. david: presumably it was the board that influence the decision. how much confidence is there on the part of investors at this time? craig: the board has been under they've been called old, male, and stale. he wouldn't specify if the end of this year or end of 2017, but we are going to see new board members. a lot of them have been on there since it was a private company owned partly by mcdonald's. they need some new blood, bill ackman says this decision was not at the request of pershing, it was his decision on the board. people did see size they can turn it around. julie: one to pull it was high
1:48 pm
flying to explore different ventures. chophouse, the pizza chain, what is the status of those efforts now that chipotle's businesses down. one questioned it, there was an asian concept, a pizza concept. now there's a lot of scrutiny. should they have their sole focus on getting the perrigo thing right? burritoerrigo -- the thing right? there's a lot of questions in the investment community about whether they should be focusing on side projects. david: he says the inability to run good restaurants is almost mind-boggling. how much can you extrapolate this to how the restaurants are doing? how do they shake out through the industry? isig: the thing for chipotle they have to figure out how to do the food safety stuff and run great restaurants. seems like they spent the
1:49 pm
last year making sure the food was safe, which they had to do. it's much work obligated to run those restaurants and they have to get back to doing that and doing great restaurants. it's been a struggle so far. , talkingaig giammona to us about chipotle. coming up on "what you missed," david wu will discuss why trump raising doubts about the one china policy is a big deal. that's a 4:00 p.m. eastern. researcher turned venezuelan whistleblower and potential advisor to the donald trump transition team. we should issue to him, next. this is bloomberg. ♪
1:50 pm
1:51 pm
david: this is "bloomberg markets," i'm david gura. the government of venezuela has a lot of enemies in washington, but few more connected or committed then martin mobile.
1:52 pm
we spoke to even broner about his profile of him. >> we started out looking for a this about how looking at shows you how venezuela has fallen apart. we found ourselves with him and complete fascinated by his world. of broker,me a kind bringing who want to give testimony, and feeling to have no choice but to give testimony to you as officials were pursuing cases of drug trafficking. >> take a step back. he was a low-level employee. at the imf. how did he become to be the center of watch -- much of what is bad in venezuela? ethan: he came here to study
1:53 pm
from venezuela. he is venezuelan. he came here in 2000 and he started working and met a guy in a party who became -- an israeli guy who went to work for a consulting firm that was hired by a big bank that was worried that money coming for a bank they wanted to buy in panama had iranian money coming through it, which would violate u.s. sanctions against iran. freelancer.he had a >> where did his business start up rock -- to prosper? ethan: to take it one step back, he had been an intern for several months they all company before coming to america -- at the oil company before coming to america. when this guy came to him and involvedhis company with iranian money, he called a friend and it all sort of opened
1:54 pm
up. the whole bunch of documents, he works the story and it was partly out of patriotism. he wasn't making any money. thatltimately, he realized u.s. agencies would pay him to bring these folks and he could act as an intermediary helping the people who wanted to talk cut a deal with u.s. agencies. in the agencies paid him. folks, some of them who were wealthy, were willing to pay him to help them get out. and ultimately, he went to work as a consultant for big banks and hedge funds. >> he actually brought something like two dozen elites from venezuela to the united states to tell about what was going wrong in venezuela. specifically, their giant oil company. talking about former generals. ethan: absolutely. these are very serious people, some of whom had been involved or seen bad stuff. some of them were suddenly being
1:55 pm
pursued by the regime in venezuela. martin became a guy they knew who had links to u.s. agencies, and became their intermediary. he also has a very charming manner. he since you down and often they would meet at a caribbean island. he would download what you knew, as someone who wanted to get that information out. and then he would figure out where it could go. he ended up being this amazing intermediary. >> you met him. ethan: i spent many hours with him. >> wednesday like -- what is he like? ethan: he's interesting guy. the world we are talking about seems like an underworld. andmartin is very charming he is sort of a bulldozer and the pussycat at the same time. he's a guy who can get his way,
1:56 pm
but also sort of moves you through his sincerity. you don't have the feeling that he is out to screw you, to be perfectly honest. he wants to move this thing along. is very upset about what happened in venezuela and he wants to have the government be moved out. you can read ethan's latest story in the latest issue of "bloomberg businessweek." hear from the reporters every saturday and sunday on bloomberg television. julie: coming up on "bloomberg cohen discuss the new television giants. at 2:20 eastern. this is over. -- this is bloomberg. ♪
1:57 pm
1:58 pm
1:59 pm
scarlet: it's 7:00 p.m. in london. i'm scarlet fu. oliver: and i'm oliver renick. welcome to "bloomberg markets."
2:00 pm
scarlet: we are live in bloomberg world headquarters in new york, covering stories out of the and a, moscow, and los angeles. oil is fighting to a 17 month high after saudi arabia puts deeper cuts. and the 10 year yield at one point touching its highest since 2014. exxon mobil ceo rex tillerson said to be under consideration for u.s. secretary of state with two decades of dealmaking in russia under his belt. the kremlin is a prodding the move while u.s. lawmakers are raising some red flags. president-elect donald trump takes aim at lockheed's f-35 fighter jet program, his tweet sending defense stocks lower on the day. u.s. markets close in just under two hours. as get a check on where equities are trading with abigail doolittle. looks like an extreme. abigail: -- a mixed breed.
2:01 pm
abigail: it is, but it has record highs. to a record closing high. the s&p 500 carved out another fresh intraday record high. it will be interesting to see a turn -- if stocks can higher closing. but the nasdaq has been down all day, dragged down by technology and biotech. as for what's holding back the s&p and the dow, we're looking at the financial sector, we have bank of america, jp morgan, all lower. of as are taking a bit breather, the financial sector is the top sector since the election, up about 18% ahead of today on growth expectations. , theelds of climbed higher 10 year yield hit a level not seen in quite some time. now those gains are repairing. we take an intraday look at the 10 year yield, and also the
2:02 pm
bloomberg dollar index in blue. the bloomberg dollar index has been down all day. it appears to be leading the 10-year gilts down -- 10 year yield down. this may suggest a fed rate hike is priced in largely on wednesday and that we are now starting to see a yield trade down into that. turning to a part of the commodity complex that has been under looked today because of oils gain, natural gas, is down sharply, down 6%. have for cold weather really been snapped, right now we are seeing warmer weather than expected on this. southwestern energy and range resources trading lower. as actually having its worst today in quite some time. there is some reason to think this could reverse. this is g #btw 42-28. the long-term chart of natural gas.
2:03 pm
they put in the golden cross in the golden cross and 50 day moving average moved out to the 200 day moving average. it speaks of the last of the bullish buying momentum. one was put in earlier this year, telling us while it might be a buffer and a volatile ride, the gains could be ahead for some of those e&p stocks as well. scarlet: abigail doolittle, we will keep an eye on that. mark crumptoner: is in the newsroom with more. mark: speaker paul ryan says the house intelligence committee will look into cyber threats such as hacking by russia of the democratic national committee and hillary clinton's presidential campaign. he says any investigation should not cast out on what he called the clear and decisive outcome of this election. meantime, josh earnest had this to say about the investigations. josh earnest: he didn't need a security clearance to figure out maliciousted from
2:04 pm
russian cyber activity. president-elect didn't call into question. he called on russia to hack his opponents. he called on russia to hack secretary clinton. mark: ernest called government intelligence officials accurate. has beenthe top sentenced to 10 years for racketeering scheme that included money laundering and bribery. the federal judge called the 60-year-old democrats crimes astonishing. and his tv anchor wife had a $500,000 annual income. he insists that just -- the justice department's racketeering cases lyrically motivated. said a president suicide bomber caused the explosion that killed 24 chapel in cairo.
2:05 pm
hundreds attended the memorial earlier today for those killed. it was one of the deadliest attacks on a religious minority in recent memory. the u.s. supreme court is allowing the nfl $765 million concussion agreement to stand. the justices left alone a federal appellate ruling that the deal, while imperfect, was a fair resolution of claims filed in behalf of more than 20,000 retired players. former players who oppose the accord feared it would inadequately compensate them for the brain damage they may have suffered. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. oliver: thank you, mark. will we see a downturn in the economy during a donald trump presidency? carlyle group steve rubenstein warned the u.s. do was -- was due for recession. >> we tend to have recessions every seven years in the united
2:06 pm
states. at some point, you can expect a recession. i don't think we are here now, there's no indication, but you do expect some slowdown after pretty good growth in the last couple of years. oliver: earlier today on bloomberg "daybreak america's," he back stepped off of any immediate downturn. >> when alan greenspan was the head of the fed, there was some talk that the business cycle had been repealed because we postponed recession for quite some time. that turned out not to be the case. since world war ii, we have recessions on average every seven years, but we've gone as long as nine and a half years. we probably pushed the recession down the road a little bit because the stock market is more bullish and there is more confidence in the market. ,nd whether or not this is a there's no doubt that we are not likely to have a recession in 2017. in parliament and said it's the end, boom and bust. if we don't get fiscal stimulus this late in the cycle,, jim of
2:07 pm
boom and how much of a bust will soon follow? >> no one knows. if you are pushing it down the road at some point, a decline could be greater than would otherwise be the case. i know that we are going to see anything like a 2006 or seven, where we are likely to go into a gigantic great recession. when we have it, we will have a modest recession. it's not like 2017 we are likely to see a stimulus out of the congress and likely to see tax cuts and as a result, you push down any recession for quite some time. >> how you process that as an investor and make decisions? where you and your cycle about buying and selling. are veryted states, we determined to make investments now because we think it's a pretty good time to invest. butes are not cheap financing is available. in europe, prices are cheaper and very attractive right now. about the animal spirit -- >> what about the animus spirit? someonee always selling
2:08 pm
is appropriate to sell, but right now, prices are high. as a fair amount of selling going on. in some sectors, prices are depressed and you can make good investments. the sectors that are doing well are the ones you would want to sell. >> help us understand which is which? inergy, he says i have nothing. where is the distressed opportunity? >> they not be in the united states right now. there may be other parts of the world. we're looking at global investments. in the united states, everything is doing reasonably well. right now, i don't see a gigantic area of distress. some companies may have borrowed too much and while the sector might be good, the company itself may not be in great shape your it -- in great shape. >> we've seen a lot of geopolitical risk in markets not being able to price it in. as you look at europe, how you process things like italy and france and even germany? >> there's no doubt that europe
2:09 pm
is more stressed than the united states. because what's going on in italy and the brexit situation and france, the uncertainty there in terms of who the next president will be, and there's no doubt that there's a chance for lower prices than before. europe is being helped a lot by qualitative easing that the ecb is done and they have to continue doing that for quite some time. there's no doubt the prices are cheaper in europe than elsewhere. >> you touched on the availability of financing. the price of credit is going to change in the coming years. perhaps significantly. what is that going to mean for you? >> of the fed were going to increase by 20 basis points this week, i'm built into the market. even if they were going 100 basis points, that's out of gigantic increase. if you were going to have an increase of several hundred basis points, that would be different. credit availability is a much greater problem than credit pricing right now, because there's plenty of credit availability. if that were to go away, it's a problem. i don't see any sign of that happening.
2:10 pm
>> your center, and we are things like rex tillerson going to be secretary of state. adult of yesterday questioning the one child policy. how does that affect your investment will. >> we're really looking at longer-term investments, and longer-term projections. but you have to take into account when public figures say in terms of the statements. i don't think it will affect what we do in terms of a longer-term investments. we're still bullish on china. the markets were flying today but not on china. why are you bullish when there seems to be the risk of trade war with the u.s.? they want to burst the property bubble. there are 1.4 billion people in china. they are growing at 6.5% of their growing at 1.5, 1.7%. given the size of the population
2:11 pm
, while there may be temporary ups and downs, the amount of people are significance. it's a small percentage of their enormousthere's opportunity to invest in china not be crowded out by so many other people. >> alan greenspan used to famously say the manager looking at china is you could tell the number before the quarters was over. i think the economy in china is two different economies. the state owned enterprises economy may be growing at 2% or 3%. the other numeral -- the entrepreneurial economy is only 10% or 11%. together, is about 6.5%, and those numbers are legitimate. chinese leaders use many thing to figure out what the numbers are and they use electricity transmission and they would say 6.5% is a pretty good number. that was david
2:12 pm
rubenstein, cofounder and co-ceo of the carlyle group speaking earlier on bloomberg "daybreak america's." you can catch you show any time online and this wednesday. scarlet: president elect donald trump takes aim at lockheed martin, lockheed shares at a one-month low. you have robert brummond and raytheon each down by better than 2%. italyk glance at rome, the swearing in of italy's new prime minister, along with his new cabinet. this is bloomberg. ♪
2:13 pm
2:14 pm
2:15 pm
scarlet: this is "bloomberg markets," i'm scarlet fu. oliver: i'm oliver renick. scarlet: breaking news, barclays, citigroup, is helping the u.s. government brought in a currency investigation. ofy agreed to allegations currency tampering, but the information i gave up and return is now being used by the government to broaden this investigation into manipulation of the fx market. you have jpmorgan, barclays, and citigroup operating -- cooperating to offer evidence of an antitrust conspiracy in the fx market on different currencies than the one that were the center of the 2015 toestigation, all according court papers filed by the government and banks in advance of sentencing is scheduled for later this week. we'll even i on this for you. meantime, if you look at the defense sector, shares of lockheed martin are under
2:16 pm
pressure today after president elect donald trump tweeted the f-35 program at its cost are out of control. trump also mentioned the program during his interview on fox news sunday. i don't need a $4.2 billion airplane to fly around in. i don't need that. especially when it's totally out of control. they lost control of it. i let them know that i want this. things that's so good. the f-35 program with the money, the hundreds of billions of dollars, it's out of control. scarlet: meanwhile, lockheed martin said in a statement today it has worked to lower the price of the f-35 are more than 60% and we welcome the opportunity to address any questions the president-elect has about the program. it is a great program. for more on this, let's get to the press analyst for bloomberg. doug, give us some context. seems like the
2:17 pm
president-elect just brought up the f-35 program with my -- without much prodding. why is he bring this up now? it's the government's biggest defense program right now. in totality, the government estimates it will cost about $400 billion to buy all of the f-35's, and that's just the u.s. alone. program,r into this there's a lot of risks behind the program. if you look at it and will basis, the u.s. will spend about $10 billion on the f-35 this year. in terms of lockheed next year, they expect generate about $12 million of their total revenue. quite a bit more than 20%. genesisam, that's the to the point why president elect trump is coming out this. you mentioned the
2:18 pm
program is well underway, yet traders in the market clearly reacted and sold off lockheed martin pretty quickly today. what are people worried about? what would you be worried about when you look at what they have to lose here? doug: the biggest concern from abroad defense contractor standpoint, now that we are transitioning to the new administration under president-elect donald trump is the attack or focus on defense profitability. we think the biggest risks are if the new it administration focuses on cost and controlling costs. in all likelihood, the contractor profitably margins could see a decline from that. that's not to say we are not in more of a positive defense spending outlook and revenue and profits, we expect will rise. think profitability from a defense contractor is going to be the biggest focus as we move with the new it administration. scarlet: if you go inside the bloomberg, it's not just lockheed martin that has been
2:19 pm
suffering in the wake of his comments. raytheon is down as well. this is a chart from dan curtis, the blue part is how much raytheon gets from the department of defense, varies total, 60% to 60% of the clearly this is not -- 60% to 68% of the total. clearly this is not just lucky barton. doug: they were saying defense company's were going to benefits. scarlet: a little bit of a head scratching. .hank you, doug rothacker oliver: viacom is left out of in the cold as deal talks with cbs collapse. the change in plans may be good news for cbs. this is bloomberg. ♪
2:20 pm
2:21 pm
scarlet: this is "bloomberg markets," i'm scarlet fu. oliver: i am oliver renick.
2:22 pm
the viacom cbs deal has collapsed, they withdrew a proposed merger, ending negotiations for a colossal deal. drama from the get go, bill: -- bill cohan is in new york. how do we get to this point where things are falling apart? you know, they each established independent committees of the board to analyze the post transaction. they hired investor -- investment bankers and they had serious negotiations about all this. surmise, they were trying to buy viacom for as low as he possibly could and take control of it. andsure the viacom board its bankers didn't want to sell for the price that he wanted to pay. i think you should a lot of discipline here in this is
2:23 pm
probably the right outcome for both companies. scarlet: he also attached conditions to a purchase and merger as well. apparently he wanted control over the redstone families voting shares. do think he knew that was probably asking for too much? bill: not necessarily. obviously, he was the guy that the redstone family wanted to run both companies. is a proven media executive, he's done great things that cbs, where is viacom has fallen on hard times. it's not at all surprising that les would want total control and be able to get done what he wanted to get done and viacom. being able to vote the family shares is probably part of that. i'm sure if there was a serious disagreement, they might've been able to work since and now.
2:24 pm
i suspect it became difficult for the viacom board to get a fairness opinion over the price that leslie wanted to pay. oliver: how tough was it for the cbs board to back away from this deal? should we be giving them credit to not giving in and holding on? i think leslie deserves a lot of credit for being disciplined and not giving into the deal. feet was a lot of deal around this transaction. i'm sure a lot of icons shareholders would have loved if cbs had gotten control of this and had him run this. leslie has always said from the beginning that he did not want to lose discipline on price. he wanted to make sure that made sense. i applaud him and give him a lot of credit. a lot of ceos give in to deal heat. he should a lot of discipline. it does not mean this might not come back. it might be a negotiating ploy. oliver: you don't with a lot of
2:25 pm
this type of investment banking and dealmaking. whenever forces pulling both ways on the company's leader, is there more than just the deal to investment bankers, etc.? tol: the forces align wanted get a deal done, because that's how bankers get paid and everyone gets prestige and takes victory laps. i give leslie a lot of money for having discipline here. but just because this fellow part in december 2016, it is meant to be, these companies were together 10 years ago and were split apart. if it's meant to be, if the current leadership of viacom doesn't get the job done and they are kind of untested, they might very well turn again to leslie and have him be the savior again. to redstone family wants create value. iscomes back -- viacom stock down, and cbs has been on a tear. they want to get the value of viacom up and they are hoping
2:26 pm
that leslie can do that for them. this wasn't the right price at the right time. it very well may come back. this deal reminder was more about propping up viacom that cbs. bill cohan, what would you look at the next step of the saga? the disappointed by count shareholders are going to push for a deal and we will see it come back. scarlet: bill cohan. yourr: bloomberg tv get being editor and a contributor to bloomberg view. thank you. scarlet: a commodities close, oil climbing to a seven-month high after non-opec countries join in on the deal. this is bloomberg. ♪
2:27 pm
2:28 pm
attention homeowners age sixty-two and older. one reverse mortgage has a great way for you to live a better retirement... it's called a reverse mortgage. call rfree information kityour with no obligation. it answers questions like... how a reverse mortgage works,
2:29 pm
how much you qualify for, the ways to receive your money and more. plus, when you call now, you'll get this magnifier with led light absolutely free! when you call the experts at one reverse mortgage today you'll learn the benefits of a government-insured reverse mortgage. it will eliminate your monthly mortgage payments and give you tax-free cash from the equity in your home... and here's the best part... you still own yohome. call now! take control of your retirement today! scarlet: from bloomberg world headquarters in midtown manhattan, this is "bloomberg markets." i'm scarlet fu. oliver: i'm oliver renick. commodity markets are closing in new york.
2:30 pm
abigail doolittle has the latest. theots of movement in commodity complex today. within the energy complex we have a divergence between oil and natural gas, oil trading higher as opec and not members agree to cut supplies. natural gas lower as weather is warmer than what was anticipated earlier last month. as for precious metals, we see some strength as the bloomberg dollar index is falling. what stands on the most is the .erformance in oil, a big rally we wanted to take a look at how this looks for the stock. take a look at the bloomberg. on top we have the s&p 500 energy oil stock index. rebounding nicely from the lows of last january, up 50% since that time. the question is is this sector overbought? the rsi on the bottom may indicate yes, these stocks are overbought, hitting the sell
2:31 pm
level of 70. we see much of the movement higher in the rsi has come after the election. let's take a look at a few of the top-performing stocks since the election. transocean, chesapeake energy. interesting that there are two drillers there. absolutely huge gains since november 8. one sector that initially fell in the energy complex but has now recovered, the new energy index, the grain stocks. initially fell after the election but has now regained and is up 1%. pretty nice recovery there. scarlet: thank you. we are going to stick with oil. we caught up with russia's oil minister in an exclusive interview. here is what he had to say about russia's production cuts. >> although i have an important role from the ministers, the key
2:32 pm
role should be given to our leadership. i would like to especially note here, has beene very supportive of the deal, understanding the importance and the need for the deal to be done. having this political support which i just spoke about, this has helped us to build a very trustful relationship with our partners from opec and non-opec countries, especially saudi arabia, with which we now have a path to work together. >> are these non-opec cuts genuine or natural declines? >> i have to say the situation is different country by country. i was pleasantly surprised to see so many countries respond to the invitation by opec and russia to participate in this deal to stabilize the markets. i would say most of the countries which joined, it's important that they joined
2:33 pm
voluntarily, so nobody will force them to reduce production. most of these countries would take active measures to reduce production, and that's important. >> what about the remainder, who will make up to get to the 600,000 barrels a day target? >> it is important to understand we are not dogmatic. was notbarrels per day the only possible result for us. there will be countries which would join the arrangement, a different client basis, and i think we would likely be able to achieve an overall production declined higher than the 550 which we spoke about. another key thing which i would like to highlight, the agreement is open for other parties to join. this time there were 11 countries here but there may be others willing to join the could not participate today. what is important is that the doors are open and that the proceedings have been made, and
2:34 pm
now we have a framework to act. >> the saudi oil minister said that he was worried to cut even more, maybe below 10 million barrels a day. would russia cut below 300,000? >> we have signed a deal for six months. whichs the first stage would last until the end of the first half. there is a framework that allows us to extend the duration of the we will bebut monitoring closely the effect of this agreement on the market, compliance of countries, and we will be making a decision about whether another extension is necessary upon completion of this term. >> when does russia begin their curving? >> that is the first stage of the cut. he would be able to see as early as january. i would like to say that we have all of you discussed this with countries. companies are well aware of what they have to do. considering this is a voluntary step which these countries are
2:35 pm
taking because they understand the benefits of this deal and they also understand the deal is in place and have agreed to it. considering this, they are preparing for the cost which will take place starting in january. as we speak, they are taking measures and it is already in clear plans. scarlet: that was the russian energy manager alexander novak. oliver: now to president-elect's search for secretary of state. rex tillerson is reportedly the top candidate. he has ties not only to the oil industry but also russia. richard haas joined bloomberg with more insight into the tiller sin-russia relationship. >> this is a hard transition to read the tea leaves but it would seem that he is the clear favorite. until it is over it is over. the president spoke about him on fox yesterday. it was 90% likely but the last 10%.
2:36 pm
as you saw from john mccain, as you are hearing from others, more than anything else, this question of russia is going to be central to his confirmation and it's coming at a time when russia is everywhere in the news because of the whole intelligence brouhaha, to what extent the russians were trying to interfere in our elections. >> assuming it is mr. tillerson, is it an advantage or disadvantage? of course, he has dealt with mr. bruton. question that a lot of people have been asking, the nature of those deals, what has he advocated for in the way of sanctions, and what does he think going forward? it is wanting to be a businessman, and russia is an important piece of real estate. what they will want to hear now is what are the policies toward russia on ukraine, syria, the continuation or not of sanctions? all of that will come to the
2:37 pm
four. >> in the new yorker, rex tillerson to the state department. how much is this an advantage? >> rex tillerson, who i know -- he spoke in my organization several times. he knows the details of the places he operates. he has also met with a lot of global leaders. all of that is clearly to the good. that said, he has not had the public-sector experience. it is different. if you remember what happened to paul o'neill when he went from alcoa to the treasury department , is not exactly in the annals of bureaucratic success. there is also a difference between knowing the ground truths about the world and american policy. more than anything, what don trump thinks. tillerson, that
2:38 pm
is the essential prerequisite. when you cannot do as a secretary of state, what will make it impossible to succeed, if people around the world see daylight between you and your boss. they will believe that they don't need to take you seriously. oliver: that was richard haas earlier. bookmark this conversation about rex tillerson with some other appointments the president-elect could soon be making. joining me now is our next guest from trump tower. cathy mcmorris rodgers just enter the building, she had been seen lingering in the lobby. will she be named interior secretary? she has been listed on the shortlist. >> our report is that she is at the top of the list. right now they are meeting again to try to seal the deal on this appointment. she is very much a proponent on drilling more on federal land. she wants to do more drilling on federally owned land. that is something donald trump
2:39 pm
has also supported. if she gets this position, we will see a departure from the obama administration's policy regarding federally owned land. oliver: we are looking at representative mcmorris in the lobby right now. as you are talking more about this, what else are we looking at in terms of appointment we have been seeing at trump tower? have seen donald trump meeting with a number of different people that he ran against in the republican primary. he met with ben carson, who will be is helping and urban development secretary. fiorina,et with carly who is reported to be looked at for the department of national intelligence. he will also meet with rick perry who is at the top of his list for the energy department. he is meeting with people that he ran against and is trying to mend republican fences and get a strong start to his administration when he takes office. scarlet: mending republican fences, that's an interesting phrase.
2:40 pm
when different members of congress heard about rex tillerson as possible secretary of state they did not react kindly. marco rubio and john mccain both protesting against a possible secretary tillerson. what can you tell us about this divide between mainstream republicans and the president-elect? >> this is going to be a tough choice, it donald trump selects rex tillerson for secretary of state. he is already getting pushback from a number of republicans who are the people that he would have to rely on. it's a tight margin in the senate. we expect democrats to be staunchly opposed to all of donald trump's picks. if you choose is tillerson, he will have an uphill battle to be confirmed with senator mccain, rubio, and even people like lindsey graham, concerned about his close ties to russia and vladimir putin. obviously, donald trump
2:41 pm
has talked about energy on the campaign trail but it was not his biggest rallying call. now he is putting a lot of emphasis on tillerson, a big energy guy, we have a lot of texans heading to the white house. what is perhaps behind us refocus on energy? trump says he wants to make america great again, and part of that is rebuilding a lot of the jobs that have been lost in energy. he wants to make sure america uses all the resources it has and is sort of inching away from president obama's focus on climate change. donald trump has said he is not sure if climate change is caused by man. he wants to make sure america is using all of their resources. at the same time, he is not so sure about climate change. that is what we are seeing with these picks. we expect donald trump to continue along this path. scarlet: thank you.
2:42 pm
a very busy fifth avenue there, thank you. we should mention as well, dan your again, the pulitzer prize-winning energy author says that potential pickup tillerson would be tremendous. his experience and intellect would be tremendous and he would separate himself from exxon. oliver: plenty to say about his relationship with russia. scarlet: let's get a look at the first word news. mark crumpton has more. is official, john kelly has been tapped to have the department of homeland security. the announcement from president-elect trump came this morning. kelly, who joined the marine corps in 1970, retired earlier this year, wrapping up a final three-year tour of duty as the head of the southern command. kelly faces senate confirmation. the kremlin is disputing claims it used hacking to interfere with the u.s. presidential election to aid president-elect
2:43 pm
trump. the press secretary to vladimir putin told reporters today that allegations are "nothing to do with reality." trump and his team are pushing back on those claims as well. the former portuguese prime minister was sworn in today as secretary-general of the united nations. he succeeds ban ki-moon at the end of the month. he is the ninth u.n. chief in the body's 71-year history. the u.s. supreme court has decided not to take up a battle over internet sales taxes. justices let stand a colorado law that requires internet retailers to turn over customer data in an effort to get shoppers to pay sales taxes they owe. a retail industry trade group says the measure violates the u.s. constitution. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg.
2:44 pm
scarlet: thank you. coming up next, in the midst of the rally in crude, treasuries are selling off for a third day. the 10-year touching his lies levels since 2014. this is bloomberg. ♪
2:45 pm
2:46 pm
oliver: this is "bloomberg markets." i'm oliver renick. scarlet: i'm scarlet fu. official now, goldman sachs ceo and president gary cohn will be joining job trump as director of the national economic council. the president-elect putting out a press release saying he intends to appoint gary cohn as the assistant to the president for economic council.
2:47 pm
oliver: there was a story out today looking at who could replace cohn. they mention some of the front runners include david solomon. also the issue of whether or not lloyd blankfein will choose multiple executives to replace cohn. a lot of important development is therefore the bank, which is on a tear, the election. meantime, it is time for the bloomberg business flash. the u.s. government is using information from barclays, j.p. morgan chase, and citigroup to expand its currency probe. the banks have cooperated to actions indence of the spot markets. deutsche bank could opt for a merger, according to a report, citing the head of investment
2:48 pm
banking for europe, africa, and the middle east. he also dismissed speculation about the banks possible withdrawal from the u.s. market. executives defended withdrawal from the obamacare health care exchange in testimony today. told the judge that the company should have exited all of the affordable care act marketplaces because the program is not economically viable. the withdrawal came after the government sued insurers to block the merger. that is your business flash update. the selloff in treasuries extends to a third day as oils rose. treasury on 10-year bonds rose to 2% for the first time since 2014. for some perspective, let's bring in joe weisenthal. not a huge selloff today but more red and more weakness in the bond market. a bit worseite
2:49 pm
earlier in the day, yield shooting higher again. the big question is, is this of wheret a function we are in the cycle, economic data, data looking strong, inflation firming, or is this an expectation of real policy regime change? if you would believe that, that is why you kicked into high gear after the trump administration. we don't know the answer to that yet but that's the question, do we hang out in the 2 area or do we should hire? scarlet: which only takes us back to about 2014. >> if we are here and this is a reflection of where we are in the data and then you look at the long, we are still basically nowhere. if you think this selloff in treasuries is about something changing, and that would be a meaningful handoff from monetary to fiscal policy, meaningful change on trade policy, deep
2:50 pm
policy changes, if they come to fruition, then who knows where we could go? about: what i'm curious is the fact that today we have yields up again today but some of the bond replacement stocks that we always talk about are doing well, they were back on friday as well. are you interested in whether or not these companies can do well as bond sells off? >> i am very intrigued by that. on friday, we were talking about this sweet spot of people going stocks in bond-like the equity market to get the both of both worlds. they want that coupon, the yield, but they also want the upside so they can keep a foot in both worlds. especially the summer, people loved it. everyone was talking about how they would buy reits because they were being spun into their
2:51 pm
own thing. it is important to look at those as a gauge of market enthusiasm. scarlet: i wonder to what extent the theratechnologies the selloff in bonds? we have not figured out what is driving the selloff. whether it is cyclical or structural, maybe it is just safer to wait. we will start to take more note of it once we get higher than 2.5. joe weisenthal, today on "what'd you miss?" david will will give his outlook on currencies ahead of the fed. disney goes wrong with his latest star wars film, jumping out of his trilogy and testing a new standalone movie. but will the strategy payoff? this is bloomberg. ♪
2:52 pm
2:53 pm
scarlet: disney's newest film rogue one opens up on friday domestically.
2:54 pm
disney is testing on some new tactics here. joining us from l.a. is chris palmeri. talk about the new tech takes that disney is using here. they have planned is six films, five more left in the series. they are doing one every year through 2020, alternating between the traditional trilogy format with what they are calling standalone films. rogue one is the first of the standalone pictures. it fits into the overall mythology of "star wars" but the characters will not be recurring. oliver: give us some perspective on what disney expects to make from the films. aboutought lucasfilms for $4 billion. the budget for rogue one is about $200 million. what will be the benchmark for them to say that was a good job, let's do it again? has not said specifically what they are hoping to do. whoave talked to analysts said the movie may do a hundred
2:55 pm
million dollars worldwide, and in that case it will be profitable. it can probably do more than that, likely the second-highest december opening in film history, after rogue one. it will have a big opening, it will do well. it is just that last years films it so spectacular. $2 billion. if it does half of that, it will be a huge hit. scarlet: i find it fascinating the company is trying to manage expectations here and talk down the kind of merchandising opportunity that rogue one presents. >> they expect this quarter merchandise sales profits to be down about 20%. year-over-year comparisons, you just cannot top force awakens last year, that was 10 years of pent-up demand, people waiting in line to buy the toys. there ist feels like some risk because there are new characters, new plot line. they have another nest egg they can tap into story wise, han solo. they have more coming out.
2:56 pm
>> there is a standalone picture and then a third one which they have not said what will be. they found a way to keep the stories fresh. marvel has done a great job of that. no matter how many superhero movies they have, they continue to do well. it is really like a war movie. you feel like you are on the beaches of normandy watching this. it will do well. scarlet: we shall see. thank you, chris. oliver: i shall see wednesday night. the russell 2000 record. our more gains in store for the small-cap index? this is bloomberg. ♪
2:57 pm
2:58 pm
2:59 pm
oliver: it is 3:00 in new york, 8:00 in london. i'm oliver renick. scarlet: i'm scarlet fu. welcome to "bloomberg markets."
3:00 pm
oliver: we are live from bloomberg world headquarters in new york. we are covering stories from denver, moscow, and china. stocks are mixed today as the dow tries to close at a new record while the s&p is going back-and-forth in the red as telecoms and utilities leading the way. cutting corporate taxes has been one of the central themes of the trunk campaign. which companies will benefit the most? is the door closing on aaa'-- chipotle's chance for a turnaround we are one hour from the close of trading. let's get a check on the market with abigail doolittle. thisocks are mixed at point and this may not look like a picture of strength but we have a record high. the dow is on pace to close at yet another record high. earlier carving out an intraday high. the nasdaq has been the laggards
3:01 pm
today, being dragged both by its overweighting to technology and biotech. much of the divergence we are seeing among the averages today seem to have to do with sector performance. take a look at the s&p 500. this is a terrific function, it gives a quick snapshot of the sector composition within an index. mixed sector composition in the s&p 500. not too surprising. as oliver mentioned, telecom and utilities have been the top performers. financials.rst , wecom stocks rising today are looking at at&t and verizon. another boost for the telecom sector beyond yields falling off of their highs of the day, an upgrade at baird. likely tot&t is
3:02 pm
benefit from the possibility of new regulation and lower taxes. verizon trading higher in sympathy. as for that worst performing sector, financials are taking a bit of a breather. lots of bread here. -- red here. of course, as i mentioned, yields are off of their highs. this could weigh on these stocks a bit more, too. and it is worth looking at the 10-year i yelled, not just happening today, but ahead of the fed meeting policy meeting -- policy meeting on wednesday. most expect the fed to raise rates. this is a long-term chart top,ng at the 10-year on on top of a dissenting trading range him a but at the bottom we have the rsi, hitting 60.
3:03 pm
times this has happened, it typically signaled a reversal, so we may see a move back down for the 10-year. a bit of a consolidation, a pause after november's biggest move up in the 10-year yield ever. oliver: thank you. that is a great chart. scarlet: i'm sure it will come up again. moving on to equities, president-elect donald trump's plan would reduce taxes for most individuals and corporate. joining us now is the credit suisse chief equity strategist. you are looking at small caps in particular. they have had quite the run-up. cannot continue? >> we wouldn't be surprised to see a small control of digestion, but the trade is not done. a chart that is dan curtis put together, showing the russell 2000 20-day of performance versus the s&p 500.
3:04 pm
here last week the performance widened to 9.3 percentage points. that is the most since 2000. you can see what happened after that, a massive underperformance. i am curious because there is this outperformance, but how do we figure out why it's happening? is it because people looking at trade policy thinking it is domestic and favorable, so they want to get into small-cap stocks? this year, earlier our model on small versus large was back down to 1991 not quite that attractive in early november but still very deep in terms of small versus large. oliver: so some of it is a valuation story. >> that is how the party got started essentially. today you are back to fair value, but it's not expensive yet. as long as stronger economic growth comes through next year, we see some promise on this tax reform. also, the impost toward
3:05 pm
protectionism benefits domestic names as well. it leaves the trade here is different than what got the party started. scarlet: to what extent do you think investors have begun to price that in? >> in terms of the tax reform? it's the number one issue we are hearing about postelection. at the end of the day, though, there is still a lot of uncertainty on the timing. the street will be looking for progress to be made. it is partially priced in at this point. oliver: i know for a while, you specialized in small-cap, but when you look at the broader market overall, what stands out --you when you think about we have heard a lot of people talk about how we may see more capex under a trump administration. what does that due to the shareholder friendly stocks, the buybacks? >> we have seen that kind of
3:06 pm
activities of done meaningfully. dividend activity is also stalling out. his money goes toward capex, it will borrow from the dividend story. at the same time, if we are reputed dollars back on, lower the tax rate, i don't think there is any guarantee it goes to capex. you could see them go back to these shareholder from the strategies as well. aarlet: last week, we had guest talking about how a lot of people are picking up on small caps because the big caps certainly suffer from the stronger dollar. stronger dollar means tighter financial conditions, which tend to be worse for small caps. oliver: i think there is an understanding that may not always be perfect, that a rising dollar is large -- bad for large-cap companies. but if that's happening while the economy is expanding, are these stocks going to do well? to be age caps tend touch more sensitive to the strengthening dollar, so even though it is negative for everything, small caps may be a
3:07 pm
little better off there. one thing have to think about next year is higher volatility in the markets. traditionally, people think about as bad for small-cap stocks. remember, when the next swings up, historically that is a good buying opportunity for the long-term. we did a study looking back varies years at different average levels of the vix. as the yearge level stays below 25, small caps can still outperform. when you cross between five threshold, that is when all caps tend to have trouble on an annual basis. as long as it is not too bad, you can still get outperformance. oliver: to your point, this is a inrt looking at your point terms of volatility expectations. this is the vix and the russell 2000 expectations. capsumber goes up in small . when i think about the
3:08 pm
volatility, i think back-and-forth, small caps having a higher data. i feel like there is risk associated with that. >> the way i describe small caps, it is a show me story. you cannot buy them anymore because they are cheap. the news flow has to come through at this point. what's interesting, if we get if wespikes in the vix, get those spikes, we are going to get cheap in a hurry. then you will have the buying opportunity. i think it will be a volatile march higher, but you still have those opportunities. scarlet: and of course, we need to delegate between sectors. financials have been on a tear because of expectations that they would benefit. which sectors do you want to be in verses which you want to stay out of? >> we like the banks but we see more opportunity in areas like insurance. there is still a lot more room for earnings expectations to come up.
3:09 pm
one area that still looks very compelling is retail. that is another area we are looking at. transportation is another. oliver: the genesis for this is a note from your former looking at his macro trend where investors are looking at riskier parts of the market, looking at some of the beat up names as opposed to those that will show growth. an associate that with emerging market a lot of times, but investors here in the u.s. have preferred to keep the money here. instead you have these are stocks lagging a bit. any chance that if you look at more risk on, they would move that to emerging market capital? >> we definitely hear that from an asset allocation perspective. stocks, sowork on em i cannot comment there, but you tend to see those rotations from sign -- time to time. thank you very much. let's get to the first word news. mark crumpton is in the
3:10 pm
newsroom. mark: goldman sachs president has accepted ahn job as president-elect trump's chief economic policy adviser, according to mr. trump's transition team. he spent more than 25 years at the investment bank. senate majority leader mitch mcconnell says he has the "highest confidence in the u.s. intelligence community." hill, then capitol republican defended the cia and its reported finding that russia try to help donald trump win the presidency through cyber peddling. mcconnell also took aim at moscow. >> let me speak for myself. the russians are not our friends. crimea.aded senator mccain and i and some of our democratic friends met with a delegation from the baltic tontries just this past week say that they are nervous about the russians, to put it mildly. defense of the's
3:11 pm
cia puts him at odds with the president-elect to has rejected the agency's findings. in italy, paolo gentolini has been sworn in as prime minister after he submitted the lineup of .is new government matteo renzi had been serving as caretaker prime minister after resigning last week following voter rejection of his proposed constitutional reforms. the european union will set up for the first time thursday. how it will discussed its brexit negotiations with the u.k. according to a draft, eu governments will be asked to proceed swiftly in authorizing the opening of the negotiations. that will occur once british prime minister theresa may triggers article 50 of the lisbon treaty to formally start
3:12 pm
the withdrawal. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. coming up, shares of aaa on pace for their best day in nearly a month. founder steve bell's retaking the top job. this is bloomberg. ♪
3:13 pm
3:14 pm
scarlet: this is "bloomberg markets." i'm scarlet fu. oliver: i'm oliver renick. time for the bloomberg business flash, a look at some of the biggest stories in the news right now. top republican is mourning the current level of u.s. debt is dangerous and may want to tax overhaul in order to
3:15 pm
add to the deficit. mitch mcconnell made the remarks on capitol hill today and possibly put himself on a collision course with president-elect trump. he is proposing to and i can biggest tax cuts since the 1980's. o'connell also poured water on a massive stimulus package. apple has held talks about investing in a $100 billion technology fund. this is according to a person with knowledge of the discussion. apple may contribute $1 billion to the fund which would give the company insight into incoming technologies. credit suisse says it plans to sell their space in the london financial district, according to people familiar. the move comes after the bank said it would cut 4200 workers by the end of the year. credit suisse may sell other space in buildings in the eastern london financial district as it seeks to cut high rental bills. shares of chipotle are
3:16 pm
rising today on news that monty moran has stepped down as the head of the burrito chain, leaving steve ellis as the sole chief executive. the move follows a tough year as the company tries to recover from a series of foodborne illness problems. our twous now is guests. greg, let's start with you. who is monty moran, what was his , how will the company feel his absence? >> he was coo when the company was doing well. steve ells is sort of the culinary background, the foodie, moran was the operations guy running the restaurant, making sure the trains ran on time. that has been a problem with them, this recovery has faltered. say that he isls not happy with as many as half
3:17 pm
of the restaurants, which is startling. running ao people company, one leaves after a while. does not sound like a whole lot, but as you have been writing, you have been talking for a while that this make sense. >> people have been pushing for them to disband the co-ceo structure. they say they needed someone in charge responsible for everything. when there is one person responsible, you know the buck stops with them. but it is not just moran, we are waiting to see if there will be more board changes. i wrote a column today saying that ells just bought himself some more time, but he could be next. scarlet: we have seen this play out for about a year, and these tend to show signs at this point. i wonder if you can compare and contrast this food safety issue compared to yum! brands, who also had its share of problems. i think the difference with
3:18 pm
schiphol larry, it hit at the heart of their brand. they were known for higher quality ingredients, and they o around thelth hal company, and this hit them hard. it has been a sluggish recovery. inple are getting impatient the investment community about when the numbers will start to turn around. some progressee there going to -25, they should be able to do better on that. that would be a bad sign if they cannot put those numbers of. oliver: what is the benchmark where investors will say, it looks good, but six months from now, we need to see the numbers lineup? >> there just needs to be a sense that it is moving in the right direction, and that's been in short supply right now. scarlet: we have seen former founders ride to the rescue, howard schultz, jack dorsey. those company going in different directions following the return of their founder. chipotle hoping to do by
3:19 pm
installing the founder back in the position of sole decision-making? has thenk ells credibility of starting the brand, he has the passion for it, not unlike what schultz did with starbucks. so you see these folks coming in and re-energizing folks. s has beenis, ell there these past years, so i don't know that it has had the same push it has had before. a.b. if he says to his employees, i'm in charge, i'm going to do something differently, maybe he will get people expired again -- inspired again. oliver: we also know about theher player on this, on investment side, bill ackman. what do we know about what role he will play in this as this company starts to get the wheels moving in the opposite direction, improving the situation? >> at extent to hear more about that today at 5:00, they will be
3:20 pm
having a call with analysts and investors. bill ackman has taken a 10% stake in the company. he has praise the founders, he thinks chipotle is the greatest. he eats there. this is not something where he is coming in and saying i'm really going after them and all with their heads or anything like that. he wants them to do well. we will see what he can do. scarlet: i'm glad you bring up the conference call they will be holding tonight. what are investors and analyst looking for the company to answer tonight? >> probably some specifics about what you are asking, ells has been there, so what does this mean for the company structure, what does this mean for 2017? he has specific ideas for how to get the sales going again. he says they spent all of these millions of dollars getting these people back into the restaurants with free burritos, but they are not paying like they were. so how is he going to change that? oliver: who knew that bill
3:21 pm
ackman likes chipotle. thank you so much. in today'sll ahead options inside, we are talking potential. the stock is up 12% this year. -- potash. this is bloomberg. ♪ >> welcome back to
3:22 pm
3:23 pm
oliver: this is "bloomberg markets." i'm oliver renick. oliver: i'm scarlet fu. --scarlet: i'm scarlet fu. it is time for the options inside. >> joining me today is jim stricker of mk m holdings. things were joining us. with you a terrific chart of implied correlations. talk us through the chart. >> lots of talk about a paradigm shift postelection.
3:24 pm
dispersion. the question is out there, what does that mean? this is a graph of s&p 500 implied correlation. it has moved to cycle load. this measures the forward-looking expectation of correlation among the top 50 components of the s&p 500 by market cap. historically, if correlation is low, the inverse of that is dispersion. individual stocks, sectors are flying all over the place, moving on their own idiosyncratic facts. that, over the course of time, has been a very healthy environment, particularly for active managers. that is one way to put context to put context around what's been happening after the election. thatd that is an indicator stocks are overbought right now, the data with an rsi above 25. but this suggest that they could go higher? have beenly we
3:25 pm
talking for the last several weeks, use options to exploit this. we want to remain long, levered into 2017. if you need to sell long stocks, look to epocrates that via options. if there is a stock you love, look to add long. that could mean buying calls out right, it could mean buying call spreads that are stock specific. we want to keep the pedal to the metal into 2017. to your trade, i know that your technician is saying there is room in the fertilizer stocks. your trade is on potash. talk us through that. flatltiyear downtrend, line blows all year. what jonathan talked about today is a bullish reversal in this sector. you could potentially layer on a reflation element to this trade. plenty of fundamental analysts have come out and downgraded a few of these docs.
3:26 pm
what we want to do is take advantage of this positive backdrop we see, implied volatility being low, go out to march of next year, buy the 21 strike. you pay about $.75 for them. nice tray to get long directional exposure. >> we have to leave it there, thank you. scarlet: still ahead, bank of america merrill lynch head of research david wu joins "what'd you miss?." he is calling u.s. china relations one of the biggest things to watch for in 2017. it should be a great conversation. oliver: we will definitely be watching. thanks so much. this is bloomberg. ♪ ways wins.
3:27 pm
3:28 pm
especially in my business. with slow internet from the phone company, you can't keep up. you're stuck, watching spinning wheels and progress bars until someone else scoops your story. switch to comcast business. with high-speed internet up to 10 gigabits per second.
3:29 pm
you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. mark: a federal judge is requesting debt rejecting a request to recount the ballots in pennsylvania. green party candidate jill stein had sought recounts in
3:30 pm
pennsylvania, michigan, and wisconsin. a federal judge halted michigan's recount. wisconsin's has been completed and the state elections commission is planning to vote to certify the results. donald trump narrowly won all three states over hillary clinton. >> at the director james comey swung the election. they had to the presidency to downfall. won thes would have white house and regained control of the senate's internet for comey's handling of secretary clinton plus email server investigation and allegations of russian hacking. in philadelphia, a congressman has been sentenced to prison for a racketeering scheme that included money laundering and bribery. a federal judge called the six-year-old democrat's crimes


info Stream Only

Uploaded by TV Archive on