Transcripts For BLOOMBERG Whatd You Miss 20180221

The accident happened in southern peru are no word on the cause yet. A bill was presented today to enforce tougher immigration rules. Up bill is aimed at speeding the expulsion of people who do not provide better conditions to those who want to stay in the country such as offering more classes and job training. Organizations are criticizing the proposal as represses and unfair for silence asylumseekers. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im mark come Mark Crumpton and this is bloomberg. Julia live, i am julia chatterley. Lisa i am in for scarlet fu. Joe i am joe weisenthal. Julia stocks rapidly having gains with further tightening. The 10 year yield trading at 2. 9 4 joe the question is what did you miss . Meetingism in the final based on inflation. Pressures may be lurking. Stocks balancing. David fitzpatrick is talking about why facebook and taking a matter into its own hands. Why the boom in electric vehicles could make getting cobalt more challenging. Yellens final fomc meeting. Policymakers said they meet momentum that the optimistic reporting included some caution on wage gains. Here with more is the Merrill Lynch head of u. S. Economics. With us. Avy i will pull out is the fact that the fed majority says stronger growth could lift the like the hood of hike. There is a further word gain we heard in the meeting. What is your take . The idea of further into the statement was a way of three in the commit met to further rate hikes. Ory are not quantifying it suggesting they will go faster. They feel the risk factor to be more favorable, it made it very clear growth momentum is shifting up and they believe in their ability to execute as suggested. Joe every six months, you have a conversation, is the philips curve dead. Based on the minutes today, it seems there is a clear link between Economic Growth and as the growth picks up as they expect this year and that is what it boosts their inflation outlook. In the end, is that the model that will guide our thinking on it question mark one thing that was interesting is the inflation with three different specifications and models and how to think about inflation. The conclusion was that the majority of officials still believe the curve was a reasonable way of thinking about inflation, though there are questions about how in general, the reliability of it. When the rate falls, pressure should build and inflation should therefore trend higher. So i stick i think that is still the framework. If anything, they are getting clear evidence in the data that it is relevant. Inflation datand are starting to pick up and it is all gradual. You have to be careful reading into one or two months of data. These levels are presumably below full employment, and you of wageng evidence pressures. Can you explain to us what happened today . There was pretty much no reaction. 20 minutes later, i have a chart here, looking at the 10 year treasury yield, in an intraday about 22220an see five, boom, up it goes, and this is a huge move for the 10 year yield. What happened . It is around the same time stocks started to plunge. The most interesting thing is this saw a bigger reaction of twoyear yield and you can expect to react more to any idea of hiking rates faster. Five basis points, by the way. You that just told pulled it up as well. Read to the details of the minutes, and there was a conversation that suggests the tie in. Ot going to perhaps it is starting to move expectations higher. It is the idea that they will remain somewhat patient and exit good as you stock, they are welcoming inflation as expected. The other thing that could potentially be interesting is the idea around changing the inflation target. That came up in minutes. Moving away from an outright point target to a range. It is typically the range leading in a higher direction. Overall with the concerns trying to tie that to the market, they have not overall moved far. Talk about what you have seen since . Asse minutes are out dated well. The weaker reset retail sales data as well. Ut the meds in perspective ppi, and of course the moves and the stock market. A lot is happened since. You have to take it into consideration that it is somewhat dated. I dont think the data should successively alter what the fed communication would be anyway. View looking listen to officials, it has been consistent in the message. Philadelphia fed price today, it is a gradual hiking cycle. Year . Many heists this my view is three hikes this year and three next year. I think they will end up coming a little above now but i think they will probably shift next year given the momentum we are seeing in the data. The growth data has been coming in strong. Gdp growth, two point 9 this year. It is a strong number. The rate will fall faster. The question is around inflation. How quickly does inflation breakup and how words does that get officials about the prospect . Unemployment rate at 3. 2 on the backside as well. In light of that number, where will inflation be . Thank you for joining us. The head of u. S. Economics oklahoma passes largest topping earnings estimates. Be discussing and hopefully explaining. From new york, this is bloomberg. Julia some may be surprised to learn they have been helping fund the firearms industry. The state pension plan held more than 40,000 shares of American Outdoor brands formally known as smith and western. Semiautomatic ar15 assault rifles used in last weeks attack. Joining to discuss, great to have you. Through the details. There were clearly a lot of people surprised by the holding desk surprised by the holdings of the fund. Absolutely. You get your reports where you go line item by line item. Many Firearms Companies do not sound like Firearms Companies. It could really be anything. Insaw they were invested four firearm companies. It has come up before in the past when teachers in california realized they were invested in the funds as well. Have they done typically in the past when futures realized they were invested in firearms and have we heard anything about what they are trying to do . Attack athe tragic the sandy hook elementary school, they decided to divest. So medially, they sold 3 million worth of shares to the company and moved to stop working with a fund that owned remington. In this case, we havent seen such action yet. We just broke the story yesterday and it might happen later. Joe what are the complications involved in devasting . Three years from between when they decided to divest, why did that take so long . It is a conversation they need to have. As an entireecide organization whether it is worth it for you. On the other hand, there are implications, managing your money for you, that is a conversation to have here a couple to from recent bike might take that long. President trump labonte stocks, you have seen those bump stocks, you have she seen shares rally. Financial implications as well. Awkward. I wonder whether the teachers pension actually responded at all. Them. Reached out to it is their responsibility to make money. They will trade them. Anything available to be traded. They have not done super well especially since trump was elected. It is called the trump slump. In terms of getting out of that iscks something teachers have to be considering. We saw this with firearms. Going not as advanced forward. Thank you. Time for the bloomberg is this flash, a look at some biggest is in the news now. Would be theat Biggest Technology takeover ever after broadcom today lowered its bid in rejection to qualcomm raising its own bid for the dutch chipmaker and semiconductors, which has been rejected twice. Directly to qualcomm shareholders. Elect a sevenmember board on march 6. In germany, the ceo says the exchange on a quarter of the euro clearing market next year, it tells bloomberg he had a strategy for luring business away from london. I strongly believe the market. E can live quite frankly, the markets will sort it out finally. Offering 1. 4 billion dollars according to a filing today. Boeing has been awarding larger dividends. It is the first trip to the bond market. Artificially inflating metrics. Out with his latest results, the company beat on earnings that shares fell. Alix steel joins us now with more perspective. Alix one of the most prolific areas in the state. The budget of 1. 3 billion and the stock fell to a new 53 week low. Joining on the phone is the ceo of newfield x duration. Always great to catch up with you. Thank you for joining me. What do you think the market was so negative about in your earnings . We issued a comprehensive threeyear outlook today. Double digits, oil growth rates through the plan time, and Program Performance in all areas, improving margins, stronger cash flow growth, all of the above. End of the day, as you indicated, we have got a strong asset is in oklahoma led by scoop and stack. We have done this long enough to know we shouldnt get fixated on single data points. Though i dont like todayss reaction and the stock price, i know we are making the right long time decisions for Capital Allocation choices. The rhetoric around it has also been perhaps that the wealthy what you are drilling is more gassy and less oily. Quarter of last year, how do you respond to that . That they will just be guess he or . We have got a large footprint. We do not control all of the drilling activities. These activities are initiated by others. Some of that work is hpv work to secure that for the future. E will participate in that the other will happen ultimately with the multiwell drilling units, you will have big chunks of production coming online. We have the Fourth Quarter operated by other pads. That piece around 250 million today. That will affect percentages on a quarter to quarter basis. Fairpoint and i understand the idea that you will not look chart that i have a shows surprising underperformance in the sector. Oil price versus newfield, the etf, taking into account oil and exploration companies. You have been really underperforming and my question is why. Is that that you have not delivered a buyback dividend or your focusing more on capex . I think were focused on a plan to Free Cash Flow. Want balanced cash flow for capex and generate Free Cash Flow. Clearlyhat plan forth and i would say everyone is like that to be yesterday but we expect to be in the situation the second half of 18 and we rates strong positive cash flow 19 and 20. To piggyback off of that, what is he doing about it for 2019 and 2020 two serve the cash flow when it has evaporated . We are 75 hedged right now 50 price chair we think we are good in good shape. Have nothing at 20 at this point. We continue to watch the market and see how the macro develops. Clearly, the curve, it probably wouldnt be prudent to add a lot of opposition here just kind of let it roll toward you and strike on that position they are a little poster in time. Lets get your view on the macro. His year, 55 oil anywhere between 55 and 60 for 2019. Was the main upgrade for that 14 to 18 . Was it an operational micro call . Primarily operational. Year aned around 55 this and we continue to talk about it. 55, it is not a bad premise of this point. We will be balanced in the second half of this year. We think that is a zip code we are likely to see. ,f things stabilize at 60 everything gets better and we throw off 1 billion of Free Cash Flow with the plan we put out today. We like the plan. A solid plan we will execute against. I suspect we would look back today at one of those noisy days as people place their bets. Tolly good to keep catch up with you. Thank you very much. Julia great interview. Coming up, buying Corporate Bonds at a negative rate for the first time in 11 months. What does the move mean . The chart you cannot miss is next. This is bloomberg. Bank of japan for the first time in 11 months, this is the chart i have been looking at what i find it fascinating. Here we are talking about monitored lightning type monetary tightening. Look at that, just lowering the yields on Corporate Bonds in the region even more. Losing money for the Corporate Bonds purposes. Japanow, the bank of owning 70 of the etf market, they own to the Corporate Bond market, this to me is fascinating. It highlights how accommodative. Ll the Central Banks are i think about it from a corporate perspective. I love it. There is more restraint. I know. Stocks tech stocks p are people like them. I took this chart and you see the stocks relative valuation oh stocks versus the s p 500. The be regimet change on this front. It is incredible. I love the idea that amazon is worth 2. 5 walmart at this point. Absolutely. The market close is next. The sectors are weighing here energy down. Telco is down 1. 5 Real Estate Interest rate sectors. With the 10year pushing higher, this is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Julia stock split leg lower and raising gains off the fed optimistic limits. I am julia chatterley. Joe and i am joe weisenthal, and for those joining live on twitter, i will need to the closing bell. Julia we begin with the market limit, interesting price action as you look at the performance on the daily session for the individual equity markets today, we have snapshots of the concession anend. We were in positive territory, and then after that we saw the reassessment from the language of the Federal Reserve of optimism on growth and optimism about inflation and assessment of the reading and what i ultimately means for rate hikes, and you see the repricing of the u. S. Tenure spiking higher, impacting what we see as far sentiment and a leg lower into the close. Lisa if you look further into individual movers, lets look at some of the biggest. Energy falling nearly 12 after the Oil Exports Fell short of fourthquarter production estimates and felt to present specific plans on investment return. Garmin falling in fitness and a decline in automotive, and mgm resorts falling after reporting revenue in the Fourth Quarter at its las vegas strip. So there you go, some of the laggers. In the bondf action market coming from the fed minutes, with rates up across the board with twoyear yields at 2. 7, and 10year gilts up to 2. 94, and one more day like this we could be at 3 , and a quick look abroad, south africa 30 year yield sharply lower after the new president announced a new income tax sales tax that people perceive as good for the budget, so a huge rally there. A quick look at the intraday action, it is interesting as you see the jump, when the minutes came out, they digested them for a while because of the inflation talk, and then they spread into it and said this growth, inflation, more confidence in hikes, and we saw the jump into the close. Multiyear highs for the 10 year yield. I am looking at the session chart for the dollaryen and we saw instant dollar weakness as a result of those minutes, and then the dollar spiked as far as we solve the tenure in particular is concerned, and then reaction of five basis points higher. Right now you can see sterling weaker, it weakened earlier amid a combination of job data and Prime Minister theresa may under pressure once again from 62 members of her own party demanding a quick and clean break from the eu. Good luck with that. Bank of england governor talked about the outlook of rate hikes and chief economist saying pickup in the u. K. Wage growth is starting to take root, but it got blown out of the water by the Dollar Strength that we saw mentioned earlier. Up 5 10 of 1 , and the dollaryen plummeting than rallying, then coming into the back and of the trading session in the United States, and think at a quarter of a percent higher. As a result of emerging markets repricing, or flattening across the 2 10 curve, you have the dollar rand higher by 4 10 of 1 , and brazil weaker by 4 10 of thinning to tax of 1 , so overall a mixed abag. Joe and finally on commodities, some red, some green. Modestly it is interesting, emmett selling, some of the industrial leaning commodities and in green on the day, copper futures up a quarter of a percent and lumber that is on a terror lately and keeps pressing higher, up about 2 , and those are todays market minutes. Julia lets get perspective and bring in romain bostick. Talk to have you with us, to me about fed minutes and the repricing we saw today. Andt was a major repricing, as we came out of the gate, everything seemed rosy and we talked about the goldilocks scenario, and the pearly it was a the goldilocks scenario. There has been a major repricing or misalignment between what the market sees and the stock market sees and what the bond market sees and what the fed is telegraphing it there has to be some reconciliation. The do see a theory about minutes because we can focus on it but there is no clear answer as to why there should be a major reinterpretation. We talked about this and we are wondering what changed between 20 and what it boiled down to is this theres expectation the fed may telegraph a pullback of the ee rate hikes that we had once the market first scott the statement, it looked like there was pullback, but once they read between the lines, they realized that the fed is not going lower than three or higher than three, so we are basically back to where we were when we woke up this morning. Michelle meyer, who we just had on our show, was talking about in some ways that this showed some reticence affecting members to hike to quickly so they could allow inflation to pick up, and if you look at the bloomberg here, i am evenng at fiveyear break contracts, this is a measure of inflation over the next decade, and as you can see, right around 212 come up before the selloff began in treasuries and stock. Andsee a repricing expectations, and the longer the rates, you seeke longerterm rates, not the short end. You look at the 212 and similar trajectory on the five and twoyear break even, keep in mind last there were averaging 1. 8 and 1. 9 on that tenure break, but this year alone, we 2. 12, so notp to only has a jump higher, think about the velocity of which we are going and the market that really hasnt reconciled with what is going on with what the fed might be doing and what inflation might be doing. Wildf course you have the card now with the fiscal stimulus and how that might change or alter the trajectory to some degree. Julia it sounds like a twoway risk in the market, and for investors to say, to go back to your point, joe, this outside ofk to the fed realization what they could do as far as hikes is concerned about it to a market that was reticent. Wrong. , somebody is [laughter] wrong,ould be the fed is so theyre going to test this new fed regime and we will see and get a look of him next week when he testifies the congress, and we have to wait until march for the first meeting. But theyre going to test him and see how serious he is to hikes,g with the three and look at the 20 if theyre serious about continuing that rate path. The right now it is not in the market. After last weeks huge gains, it worked again, we are going to alltime highs. This year, the short and rate may be it was a breakout. Of the twoway wrist on equities, maybe it is not going to be quite so easy. Fed meetings came out, theres the possibility of testing some of the lows. We had the big bounce on the 200 in six we have been up of the past eight days, so there is a huge vshaped rebound but theres a lot of people not buying into it. They want to see us go back down to the 50 day maybe even the 200 day, test that come and see if this has some legs. We shall see. Romain bostick, like you for that. News, wendys reporting fourthquarter earnings, and i am looking at what is going on here. Hanging in line with the estimates. Fourthquarter sales are coming in the estimates here accounts for some of the weakness we are seeing, down 6. 3 as investors digest that. As far as revenue lines, the over 300 million slightly higher than estimated, and the weakness as far as the revenue with some disappointment weaker than expected. Is reallye disappointing as far as some of the hopes, they received a boost from a offering on a fleet s. Store remodeling investors disappointed with those numbers, and we also have pandora reporting fourthquarter earnings. Average beat on range 65 to 96he the adjusted loss per share, . 21, and the estimated loss per share, nine cents, but that is in the middle of what the range was. See,e higher and you can that picked up more than 9. 5 , a tale of two halves. Lisa they have so much competition. Julia and continuing to outperform. Up, the australian Prime Minister and the most significant delegation ever set by the country to the u. S. Are a white house visit, what do australians want from President Trump . Will talk to their ambassador next. This is bloomberg. Mark i am Mark Crumpton with first world news. Thousands of students converged on floridas capital to urge legislators to pass tougher gun laws. Students from Marjorie Stoneman Douglas High School from parkland, where something people preskilled, or does ent. We have to protect ourselves being murdered. Why is my 10yearold brother braver, and on the day of the shooting, he said i am going to school, i am not afraid, i wont die, i promise. [applause] the students from Marjorie Stoneman also met with state lawmakers. Israeli media is reporting that prime mr. Benjamin netanyahu close confidence will testify against them regarding corruption allegations. Communications director under netanyahu and reported hundreds of millions of dollars to Israeli Telecom company in return for favorable coverage on netanyahu and his family. Calling the allegations a witchhunt. External players and the syrian conflict must begin a guy like with the Syrian Government to allow the end of bloodshed there. Make his comments in slovenia where he met with the countries or in minister that those involved in the war have to recognize the principle of sovereignty and territorial integrity of the syrian arab republic. Assaultaid the syrian was necessary to uproot Al Qaeda Linked militants. World renowned christian televangelist billy graham has died. He also became known as the chaplain to the white house, giving access to u. S. President s and other world leaders. Is considered the most influential american preacher of the 20th century. Global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. Crumpton. This is bloomberg. Australian Prime Minister is on his way to the United States for a fourday visit with President Trump and what that Australian Associated press is calling the significant delegation australia has said washington. The president is expected to roll out the red carpet for Prime Minister turnbull for a wideranging agenda. We welcome joe hockey who joins us from washington. Ambassador, great to have you, thank you so much for joining us. What concrete actions doesnt Prime Minister hope to achieve as a result of this visit. Yourwe can build on a 100 relationship we have the with United States. The u. S. Is the biggest investor in australia, but china is our biggest trading partner, and we are in a Crucial Point in the region with a relationship with the United States is crucial for both the United States and australia in that region. Lets talk about some issues that may come up, we recently saw several republican senators sent a letter to President Trump urging him to reengage on the transpacific partnership, which he is directly open to. Is yourmistic government that perhaps something can get restarted their . Re . Joe it is a matter of the president and the United States congress. The tpp 11 will be signed by the remaining members and participants of the agreement, and there is room for the United States or any other country to join, provided they adhere to rules. Case that thethe president has reservations about the tpp, and i wouldnt be surprised it was raised in discussions. But we certainly want the United States to be in a deeper Free Trade Agreement in the transPacific Region. You expect there to be a discussion of what australia would like to happen in the region, from a diplomatic standpoint, with regards to china and north korea . Joe of course, we are the only country was fought sidebyside with the United States in every scene no major conflict for 100 years, and that included the korean conflict. We have a deep and abiding interest in what happens on the peninsula. And like the United States, who would like to see the peninsula denuclearized and encourage china to be even more proactive. And there has been successful resolutions from the United Nations security council, but, an important part of the conversations between the Prime Minister and the president there is common interest in ensuring that north korea changes its behavior and changes it quickly. There is strategic rankings of what is important as far as the chinese relationship different from a United States perspective versus an australian perspective. You believe the president is calibrating his policy response correctly as far as both china and his handling of kim jongun in the north Korean Leader as well . On every leader is focused doing what is best for their country, and the United States in theery long history indo Pacific Region, stretching way back to when Teddy Roosevelt sent the great white fleet through the south china sea. Or 50,000 dead american soldiers buried in the sand between australia and japan , and of course, United States has had a deep and abiding economic interest. Is theo Pacific Region Fastest Growing region, not only in the next few years, but the fastest rowing economic region in the history of humanity. In order for the United States to be prosperous, they must be active in the region, so there is a common interest. We want free trade and fair trade, we also want to see growing trade. So of course, we want to help the United States to be more active but also, there is self interest in our part that the more the United States engages in unlocking the potential of the indo Pacific Region, the more prosperous our people are going to be as well. Julia speaking of prosperity, theres talk about Infrastructure Investment from the u. S. How optimistic are you that australian Pension Funds coming with the Prime Minister can invest in u. S. Infrastructure assets . Pension funds starting at around 3 trillion to invest are always looking for brownfields and green fields if researcher projects, and certainly you want to be in the United States marketplace. The fact is, the United States has a 4. 5 trillion infrastructure shortfall between now and 2025. In seven years that the fight in additional 4. 5 trillion of new additional infrastructure, otherwise the u. S. Economy is going to start to drop. To beeans it is going operating below its potential rate, and fundamentally australia has a very good story on infrastructure, the sydni has the most number of operating cranes and tunneling machines of any city in the world. Has come about because we have strong commitment to new and upgraded infrastructure. There are many lessons we can learn from the United States in relation to run the economy like tax cuts for business and flying through to improve wages for workers. But also we have some examples and infrastructure that might be able to help the u. S. To grow. Julia certainly we are willing to listen. Lisa joe hockey, think you very much. Julia we are looking at live pictures from the white house were President Trump is meeting with high schools students and teachers in the wake of the florida shooting. Session andstening will be monitoring any comments that get made by the president and bring you further details as they come. From new york, this is bloomberg. Lisa it is time of our weekly segmentlisa both charts go with abigail doolittle, abigail. Joining me is richard ross, and rich, it is great to have you here, i admired her work and volatility, we are seeing it in the last two weeks and less todays, and we seek a bearish reversal. Can give us your view of the s p 500 . Sure, we have transition to a history of low volatility in 18 months and has exploded in the shortterm but im a big has bearish connotation. I think in fact, we are starting correction,k 10 and want to show you the chart of s p futures, this takes us back a year. The yellow line is the key support, and you see the downside reversals two weeks ago, those should mark the end of that textbook correction. But what is the straw that stirs the drink . Interest rates, the fear of inflation picking up, and that has given us the rise in volatility. Chart,ring the longterm we seek to our left admittedly based takes us back to the early 80s. 32 years since we crossed this aqua line. Of a see you are not going to try against that, but it comes to that structural resistance, that 3 level, and actually think Interest Rates are reaching inflection point, and when they back off, the ease and consolidate that search, and provide or of a tailwind and continue to see in the s p. Markets and to have an issue with that. Julia, back to you. Julia coming up, tech stocks on the rebound. Why facebook is trailing its large fears, coming right up. This is bloomberg. Mark i am Mark Crumpton with first wrote news. Trump is hosting students from the Florida High School recovering from the mass shooting during a listening session. Ae white house would hold conversation to improve school safety, and groups representing survivors of the sandy hook and columbine shootings. Administration is seeking to respond to the shooting in parkland, florida that left 17 that a week ago today. The white house says the president hopes to hold an open discussion on how to keep students safe. In the meantime, students from Marjorie Stoneman Douglas High School held a rally in tallahassee to urge lawmakers to combat gun violence. Special Counsel Robert Mueller charged Paul Manafort and rick gates with a filing, and a filing specified the nature of the charges and whether or not it will be expanded, the case will be expanded against both men or added others. They were indicted in october for Money Laundering and failing to register for Political Consulting work performed in ukraine. Held talks minister with british Prime Minister theresa may on 10 downing street, and rude had told reporters that Prime Minister may is aware of outstanding concerns that have to be addressed before brexit. The new relationship will be one no it will be inferior to being a member of the markets are a member of the customs union, and exactly what the u. K. Represents of course is up to the reason made to tell you. The Prime Minister added the u. K. Represents postbrexit, and his words to theresa may. Antonio guterres is calling for an immediate end of the violence of the rebel held suburb of damascus, where he says 400,000 hell one living in earth. Of people of hundreds needing Urgent Medical treatment the terrorist toll on the Un Security Council is a human tragedy that is unfolding in front of our eyes. Global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. I am Mark Crumpton. This is bloomberg. Julia you are looking at live pictures now from the white house were President Trump is meeting with High School Students and teachers in the wake of the florida shooting. This is a listening session, as mark mentioned, and the president said will be strong on background checks, Mental Health checks, and will have a serious talk with governors on school safety. He said we will do something about this horrible situation, and any further headlines will bring them to you at that listening session. Marketsts look at how performed, and were saying earlier what was a positive session turned into a negative one beyond the Federal Reserve minutes, a reassessment once again of the language and meaning of what a further assessment of rate hikes in 2018 could mean for Market Pricing and the disconnect we are seeing with what the fed is saying what the market is currently pricing. We see the dow down at 6 10 of and thenhat s p down, enter performance of Interest Rate sectors with utilities down. The overall sector there we have real estate down and energy getting a pounding in the session, don 1. 6 to overall in the session. Some breaking news crossing the terminal, ford motors head of north american operations is leaving the automaker immediately following an investigation into reports of behavior. Ate the executive Vice President engaged in behavior that was inconsistent with the companys code of conduct. That according to a statement from fort ceo, jim hackett. Iid in a statement that sincerely regret instances where i have not exhibited leadership behaviors consistent with the principles the company and i have always astound. To 10 correction in two years, all except one, facebook. s social media giant has gained 3 since the selloff and has but gains behind off the bat, apple, and amazon, which posed record high today. Joined us now to discuss is david kirkpatrick, and also of the book, the facebook effect. Facebooksto mention Growth Potential remains great, and it is attractively valued, however, they are in the midst of a multifaceted crisis, both in communications and a tremendous failure to understand what the rear priorities real priorities are. Meanwhile, there losing younger you users and the publishers are mad at them because of the way they change their newsfeed. There are a lot of issues here, what should investors be looking for . What concrete numbers and words indicate whether facebook is a buy or sell . David they are willing to take a lower profit, but they havent said by how much. I do think they are forced to say by how much, but even that weird thing that happened over the weekend with the tweet from the Vice President it made the sense of urgency greater for anyone who is seriously trying to understand where facebooks head is that as a company. They need to say, how much is it going to cost, how long is it going to take to fix political problems if they are fixable or to instill humility that they dont know. Joe how does it happen with a company there is so much scrutiny about the russian advertisers and fake news and all that, that their head of advertising goes up and does this tweet storm that seems to downplay all of this, not in light with apparently the message they want. How does it happen . David what makes it more weird as other facebook executives endorsed his tweets before the Company Started walking them back. There are people who say we have to be careful and take us seriously, we have a ton of work to do, and people who say, we really did nothing wrong, which is more or less the attitude. Joe there is also the issue of usage at the data for people going to the site and using the app it is not looking great right now, is it . David it is not going to weigh it was, this is the first year in 2018 where less than half of americans 12 years old to 18 years old will not be on facebook. Halfumber will be below for those young people, and one of the things that is interesting is that there is a lot of speculation that snap and twitters recent success selling ads may be a reaction against facebook targeted ads, because you cant target as well on twitter or snap, so some advertisers are getting spooked about the whole environment there. To bring people uptodate of what ron goldman said, he is saying the majority of russian at spending happened after the election, and it isnt as widely published and he says yes, people are divided, but it wasnt necessarily before the election. That statement directly contradicted the indictment that Robert Mueller put out on friday, so that is one of the clumsy things of him saying that. Julia it is missing the point as well, particularly with the midterm, which is one of the fear factor see her. Concerns te our what that ultimately will meet for advertisers and how they choose to react versus the concerns about interference in elections. Engagement they are getting, and concerns about the discourse and how that spreads, facebook is alone in that and we should point this out. We are fixating on facebook, but there are other concerns of youtube, and what they presented relative to advertisers, twitter of course, and the bots reacting there as well. Be penalizedok today in the market versus others . David because they are the biggest platform and specifically the mueller indictment said it is extremely confusing to understand what is going on, particularly for the general public. The way these russian actors were, they are intentionally confusing us, and to deconstruct what is happening is hard, even for facebook. I would use the word humility that the attitude the facebook needs to take more publicly on these issues, they havent spoken publicly enough and zuckerberg has never in the last taken unscripted questions from a journalist about these issues in public. He needs to do that. Julia it is tough to contain because it is showing discourse wraps in one direction or the other, which a New York Times article in the weekend pointed out. Joe that is the issue we are seeing today, and best julia mentioned, it is not just facebook having these issues in the last couple of days. Up onvideos showing youtube regarding students at parkland high school, they had a fire they had to put out because that video got promoted to a trending section. Is possible these big platforms will never be able to find a way to actually police their own content . And that it is not going to work, it is going to be a game of whackamole, wherever they do, that actors will find a way to exploit them . I think it is quite possible they can solve it but it is probably a longterm process. We have only been aware of this problem for six to nine months. I do think fixes can be found, but i dont think it will be easy, and it may involve fewer page views and adds big sean, and that is the competition. Julia debate allow regulators . David i do believe. Or will . Ould david both. Lisa free look at underperformance, what is going on here . David the redesigned newsfeed, publisher content commercial content pages, broadcasting into the newsfeed, reducing that dramatically and making it more of a personal medium where we talk about our personal lives with france that is the change they have said they want, but nobody really knows how that is going to affect traffic and before,ia was not about how much you actually see and how much time we spend their. Re. Said they are going to do these things, and a lot of these changes have been implemented yet, but they are under a microscope can certainly, they are in the thick of the most complicated story of our time, which is russian interference in american democracy. David to, thank you so much for joining us. Coming up, apple is negotiating to buy the commodity kobolds directly from minors and what the move could mean for lots of different users of the mineral, including electric vehicle makers. And you can get involved in the conversation, send me a tweet, let us know or let me know what you would like to see on the show. This is bloomberg. Lisa apple is moving to secure its supply chain and the company is in talks with cobalt mines to buy directly from them with no middleman. Apple is worried the demand for cobalt and electric vehicle batteries could that in its own supply, which it means for iphones and ipads, and joined us to discuss from toronto is bloombergs danielle. Leigh at out for us, how big of a change is it for apple to negotiate directly for the minds for its Global Supply for the longterm . Certainly, were told this is unprecedented for apple, and it is really indicative in broader terms of how crazy the market for cobalt has become as a result of all of the carmakers trying to rush in to secure we chargeable batteries. It is a massive disruptor of the industry, at to fight it in perspective, one of the thing see notes in the story is that a smart phone uses about eight grams of cobalt. A tiny amount even when you consider how many smartphones are out there, and an electric car uses a thousand times that. Cobol, andunds of Bloomberg New Energy Finance estimates there will be a million electric cars sales this year, and there is a report that says if you are going to replace cars on theillion road with tesla model axes, will be twice the amount of reserves of cobalt that exists in the world that we are aware of. Massively disruptive to this industry, and apple is clearly worried. Joe danielle, what is cobalt . For those unfamiliar, which is me, what is it . It is an element and nickel, silver, which is complicated because you cannot ramp up the supply of it like you would with other mining elements. It has to be economically viable, the entire bundle. Used, myof how it is 13yearold explained this recently, as a battery, they have the cobalt, and the battery works by sending electrons over and you replenish and reversed the electrons when you recharge it. [laughter] joe that is great. Of these new elements and mitch commodities that spike and certainly news supplied down the road comes on, because after anything triples in price, people that go to look for more. Are there areas of the world that has a lot of cobalt that isnt the mind right now, which theoretically could become economically viable . Maybe. Right now half of what is supplied is coming from the democratic republic of congo and there is a bunch of problems that dont make it an ideal supplier. The next players are quite behind, you have got canada, china as well, russia, australia, they all produce cobalt, there is a ton of green field exploration going on. I went to cobalt ontario in september, which is a tiny town in canada that is filled with prospectors are now were combing through the old abandoned silver mines try to find if there is cobalt to their. Sweden,ing explored in a hundreds of these projects, and green fields, it takes a long time to bring into production, sometimes a decade or more, so it doesnt solve the immediate supply problem given how fast the demand for electric vehicles is. Obviously apple is trying to deal with that. Julia what about smuggling, because i read it is being smuggled and is a significant cough when you have two thirds of supplies coming on the , ascratic republic of congo you mentioned. I dont know much about cobalt struggling but there is Serious Problems about the drc. It was alleged that chinese suppliers were supplied apple balt fromng with co the drc, which employs child labor, and theres questions if they are ethical and it makes things collocated and problems dealing with the drc directly, even though the drc had said they would like to deal directly with car manufacturers, and it would be happy to deal with apple. I do know if apple would want to deal with the drc. Julia thank you so much for that. Coming up, south africa meanwhile has a new president and a new budget. With southpoke africas finest, and will hear the conversation next. This is bloomberg. Lisa some of loses its a no budget today, and an effort to stabilize debt and avoid another credit downgrade, Bloomberg News spoke with South African finance minister following the release. Take a listen. The president is saying he is going to take personal charge of companies coordinating in concert and take charge of this structural reform and companies, and giving direction as to start structureconomy the economy, it is not only going to stave off a downgrade, but also to also realize a and then the outlook s p, but i think the focus at away from is staying the downgrade and beginning to improve the outlook on the kinds so we can improve our investment rate. Downgradedalready south africas credit as junk, but sees Reform Efforts that the need economy and the local rent currency. Rand currency. The markets will self correct and place of the rand at a required rate so that we can know exactly where is the equal price of the rand. Quite a lot of people have said a lower rand to the dollar range was not necessarily the equal level of strength of the rand. It can still grow, and so we will need to adjust and reform our programs and economy given those realities. Coming up, what you need to know about tomorrows trading day. This is bloomberg. Julia a weaker and to the session in u. S. Equities, down 6 10 of 1 for the dow, and a spike in the u. S. 10 year relative unchanged as far as this to this of the curve is concerned, digesting a lot of supply as well from the u. S. Treasury, so a lot of things for investors today. Supply. A, fed, julia barclays with fourthquarter earnings tomorrow. Joe and i will look at Economic Data and does come out at 8 30 a. M. Eastern the people are expecting fed to raise rates faster, and hbe reports fourthquarter earnings after the foul, trying to close up this earnings season that we see, so many beats but just a few misses. All the focus continues to be on earnings. That is all. Julia Bloomberg Technology is next. [ ] im selena, you are watching technology. Lets start with a check of the news. President donald trump is osting students from the Florida High School recovering from a mass shooting. Survivors ofenting the sandy hook and colon bin are in attendance. The shooting spree left 17 dead. Survivors of the shooting joined lawmakers in tallahassee to violence. Ion on gun i beg people that deny this, their want to claim by god given right of their second amendment. We are not trying to away all your guns, just the ones used to almost ocent children every year missed a republicans rifles. Nning all the House Democrats want to add 300 million to a government month, g bill next wanting the us to bolster defenses against elections and media. Counter government funding runs out march