It damaged the lobby were the first ceremony took place in 2004. The demonstrations have ripped the city for nearly three months since george floyd died in police custody. Global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Vonnie it is 1 00 a. M. In hong kong. I am vonnie quinn. In just moments, i will be speaking with the ceo of Arena Investors and discuss how he is finding opportunities amid the economic fallout from the pandemic. Earnings for target. The Company Posted record sales emerging as a winner in the covid19 era. We have the latest retail roundup. Ready set, opec. Roducers are meeting together we have the latest. Lets get to the markets. We saw a reversal of the trade with the nasdaq down earlier and other industries higher. We have the s p 500 up five points. The 10 year yield at 65 basis points so up from yesterday. We are anticipating results from a 20 year option in a few moments. That is taking place at 1 00 p. M. The euro is off of its highs of the day, just below 119. Trillionch topped 2 and is already close to being as equal in sight as the whole of 1. 25 nd is up. A veteran manager will receive assets and made his name. Now with Central Banks working overtime and new investors piling in, where are the opportunities . He joins me now to discuss. Obviously, the fed changed everything when it decided it was going to buy mostly everything. Hat are you doing to try to best the fed or central bankers . Dan it is obviously an unprecedented time in terms to which both the fed and comparables outside of the u. S. Have intervened in the markets. That has divorced the actual substance of what is happening with assets and enterprises on the ground from how secure is the associate. The securities associate. We are looking at areas where the degree to which the actual facts of the matter on the ground are showing through. I would divide that into things and oil and gas Credit Private transactions in aviation and retail and Small Business lending in north america where basically the damage has been so great that it has begun to kind of move independent of what any Government Agency or anyone else would seek to prevent. There are other areas like commercial real state loans that are just beginning. The realreal effects of the asset credit bubble we have had over the last decades, but also the adoption of technology and the way we work and live and its effect on commercial real state is just beginning to show through. Seeingloan side, you are we have seen Bank Earnings largely moved to reserves and i think we will see more of that with the expectation that those will move along as well as those properties, etc. There are things where we have not seen any movement in response to the facts of the matter throughout leverage loans, abs, mortgages. It is a question in time after which there will be a reckoning. Vonnie you are saying there opportunities but there will be bigger opportunities down the line. Where are you holding onto your fire and where are you strategically investing . You mentioned retail and energy and so on. Can you give us more detail . Dan we are certainly holding fire in a lot of these areas that have been particularly affected by the intrusion of the government into the marketplace across abs and cbs and rbs and leverage loans. The numbers are frequently very very poor and not likely to improve. Ultimately people have to stop paying their interest and ratings agencies have to get there before owners of those securities are willing to sell. On the other side in oil and gas credit, it has been very tough over the last three years. March was the final straw and you are seeing hard assets in and around north american oil and gas trading levels that even on an unleveraged cases that are very compelling unleveraged basis. , retail is aned big one. Hasously the experiential been taken out from under retail and how we view it is really just a pool of electoral property that really fundamentally needs to be restructured. We are involved in lending against that collateral and liquidating that collateral and there will be several years of that to go. Vonnie when do you anticipate that we will see the next leg lower . I know you mentioned this will go on for years at this point. Surely there will be a hit to the consumer if we dont get stimulus soon and that will cause another round of bankruptcy or automatic loans or what have you. Dan it is interesting. Since covid and government intrusion, we look at when we look at collaterals associated with Consumer Behavior, we have seen material over performance and obviously that is because in a number of instances, people are receiving aid that is not likely to persist indefinitely and so the reality is none of us really know what we will call the undisturbed consumer looks like and certainly the security is backing up those obligations that really take into account virtually none of the probability or conditional probability that could really take a leg lower. In terms of when, certainly, we are no macro experts but to expect anything to change before the election i think would be aggressive and it is really a question of much more of a slow grinding effect of looking at the collateral and how it respects assets and securities in the actual marketplace versus exciting into the expecting government intrusion to end. Vonnie even if there is a change in leadership and the senate, how long would it take for different policies to filter through into economic behavior and Consumer Behavior . Ways oneknow, in some could say everyone is a democrat now or perhaps, a socialist. Here at an unprecedented level involving government in the economies of the major markets in the world. If this is what a republican looks like, it can only kind of get more aggressive from their. Ultimately what that needs means his major market currencies, more people focused on gold and other yielding assets to fight off the effect of the inevitable inflation that we will see not necessarily in consumer prices, but in the appreciation of hard assets relative to paper currency. Vonnie i was going to ask how concerned you are about hedgingn or any kind of around the possibility of inflation, but also the debasing of the dollar. What does that mean . What is where is the sweet spot . Ultimatelythink focusing on idiosyncratic yielding assets is the place to go because that is how you are going to out run the inevitable decline in value. Investor, wemacro see the reason why gold has such an appeal but at the end of the day, there is no cash yield coming off of it. Looking at the marketplace, finding things where there is strong income flow that is not a beneficiary of the wholesale buying of the monetary authorities is really where we are going to focus and finding those big unleveraged yields that are subject to process risk dont lend themselves to being affected by government intrusion is the name of the game and that takes a lot of effort. Vonnie is there a place out there that you are seeing the narrative all wrong rather it is about after company or sector a particular company or sector . Well, i think one good example might be in commercial real state. I think that in these types of situations where there are really fundamental changes, it does take a while for it to kind of follow through. Ining as lessees ourselves midtown manhattan where i have not been in quite a while, the whole notion of being comfortable that everybody is going to come back and work like they used to and do two hour commute and 14 hour flights like they used to, i dont think markets have fully absorbed the effect of that. Vonnie interesting. At this point, we are talking about regular equities which are setting highs every day, it seems like your it seems like. Dan i think you are talking about asset values, market values, none of that reflects what it will look like. Covidn see the post winners whose Business Models are geared toward this environment booming upward. Manye we have seen so funds being raised and some of them have not even gotten put to work yet because many investors are saying this is this going to be this is just going to be an ongoing thing. How are you finding the fundraising environment right now and is it unlimited . Dan i think if one looks at the numbers and looks at the sheer volume of the number of dollars yen that have to deployed, from artist from our perspective, the question is in what form does it,. There are very narrow mandates that require a certain type of investment. I think what this market tells you if they think is the ability to move very quickly from one thing to the next without having to have a set fund is valuable. Thatke to be in a position allows us to move into things that make sense and avoid things that dont. Vonnie thank you so much for joining us today. Very much appreciated. That is dan zwirn of Arena Investors. I want to bring you the latest auction results. 1. 185. H yield rate, just a little bit soft this particular auction. Versus 1. 22 rma in may. Took 26. 2 at and claimed 11. 2 . We saw 25 billion. This is bloomberg is bloomberg markets. It is time for the stock of the hour. No surprise it is apple because it is above 2 trillion. Abigail he really is amazing that apples is this years defense start. A 2 trillion market cap. Up about 50 after gaining 86 last year. Out of the march low, not surprisingly geared most of the gains came. Almost 1 trillion over the last five months among alone. Amazon is tapping on tacking on massive market value along with alphabet, facebook and tesla. You have to wonder, too far, too fast. Stockgh valuations, the is overextended. There is uncertainty into the allimportant holiday season, not to mention right now the street has his Company Model for decline. In addition, if you take a look at the revenue high on apple, we will see that most of this revenue comes from the iphone, 53 . They are trying to diversify, but 53 does create the question that if iphone sales falter, it could create a problem. If we go into the terminal, we will see this stock is overextended. 49 above the moving average, more than the 40 earlier this year when there was a big fall. The momentum indicator is going in the wrong direction. Vonnie how will that impact the stock . History, it should be bullish. Since the first split, it took about 12 years for the stock to double. The latest time, it took about 3. 5 years to double. It is unclear whether that will happen with more ripples it will be straight out. There are reasons to think that apple may cool off in the months ahead. What strikes me is the idea is it works the same amount as all of the companies. Almost there. Abigail doolittle with the stock of the hour. Still ahead, hitting the target, how the retailer surpassed expectations and its history. Of thethe latest peertopeer conversations. The secretary of the smithsonians additions Smithsonian Institution beard the first to story to oversee the Worlds Largest museum. That is tonight at 9 00 p. M. Eastern. This is bloomberg. This is bloomberg markets. Target shooters skyrocketing today. Up 12 . The fastest sales growth ever. Is matthewnow mcclintock. It is only now that the stimulus checks are going away. There were plenty going out in this quarter. Target tohave held the disadvantage of coming . Uarters matthew thanks for having me on the show. I think stimulus played a part of it. When we see the core competitors like jcpenney and macys and strength at target, it means there is something more than stimulus. They gave us numbers or samestore sales growth for the months throughout the quarter. Decelerate but they still remain double digits in august. We believe it is widely because the growth is coming from the weaker players out there that quite frankly are only going to get weaker Going Forward. Vonnie was it makes techtarget had in it stores . Online is up 195 . That can mean anything. It sounds like a lot. They tripled their online sales in some ways. Averaging that or did they get that into place immediately . Matthew this is a great question because target has had some of its best results in decades over the course of the last two or three years. They improvedwas their merchandising, they started improving their physical stores and it in Digital Initiatives like drive up. They accelerated their Business Model before covid and it put them in the perfect position to accelerate their market share gain during covid with weaker retail players that could not respond at all. To summarize, they put a lot of this in place over the last couple of years. It was driving market share gains before. What we are seeing now is probably what would have occurred over the next five years and is occurring in one year and we expect it to continue. Vonnie home depot did really well even though on a massive load today. s missing given that it has had advantages over home depot and that it is not in the urban center but more of a suburban chain . Matthew i have to say, the result is beyond belief. People were believing that the number is going to be as highest 30 so there was some as high as 30. Lowesger question is is more of a do retailer. Their business is more slated toward doityourself. Home depot is more of a probusiness. In order for them to close the gap, they will have to start taking market share from home depot and not business. We have never seen too much of that occurring. They did mention that the business was growing just quarter. They acknowledged it was primarily diy. Really this is consumers in the shut down going to the store, fixing their long, painting their fence, doing things by project that theyre able to do during the shut down, Going Forward when the shut down and, it will go back and we still have to see greater evidence that lowes has built the capability to start to capture pro sales from home depot. Vonnie you cover everything from nike to the exporting goods, best buy, for whom are you the most concerned . I am most concerned about dicks sporting goods. Greathey put up whatever sales next quarter, do not hold that against me, i am thinking about Going Forward. This is probably the best it will get. A lot of their sales this quarter came from higher ticket purchases like bicycles and gym equipment that are onetime items and are also out of stock. If you go into a store, you cannot get a bicycle because they cannot replenish that. Even if there is continued demand, they will not be able to sell bikes. That is part of their business and the streak this quarter will go forward. Point number two is a lot of their business is team sports and as we know, team sports not happening and that will be a problem. Vonnie thank you. No team sports this year which will be a problem for the exporting goods. We will keep an eye out for reporting this week. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Where you can find games, news and highlights. All in one place, right on your tv. The xfinity sports zone. Use your voice to search every stat and score. Follow the teams you love. And, even get notifications with breaking news alerts and more. With the xfinity sports zone everybody wins. Now thats simple, easy, awesome. Say xfinity sports zone into your voice remote today. Mark in turkey, president erdogan is promising to deliver good news that he says will usher in a new era for his nation. Turkey has made in Energy Discovery and the black sea, most likely natural gas, at a time of heightened tensions over territorial disputes with greece and cyprus in the mediterranean, where turkey is actively searching for oil and gas in contested waters. Barack obama will draw on his experience as joe bidens boss to make the case as to why the nominee should be elected. Mr. Obama will highlight bidens record under his administration. He will also argue that this election is too important to sit out. No end to the violence in portland, oregon. Police acquired a riot last night after demonstrators broke the windows of a county government building and set a fire inside. A lobby whereged oregons first gay marriage ceremony took place. Have been ins oregons biggest city for almost three months. Historyarris will make when she becomes the first black woman to accept a major partys nomination for vice president. Joe bidens campaign is hoping harris will win over black voters, younger voters, and women. Former also hear from president barack obama. Biden will give his acceptance speech thursday in delaware. Global news 24 hours a day on air and on quicktake by bloomberg ,powered by more than 2700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. I am greg the nell. Vonnie i am vonnie quinn. We are joined by our audiences. The top stories we are from around the world. Calling for compliance. Opec and its allies calling for producers to show unity and a commitment to a deal to curb outputs. Some of the murky us to trades at global banks murky estate trades at global banks. We will examine the trends. In the fedinsight today. A look at the markets, greg. 500 closed at an alltime high. Any green on the screen today tells you it is building on that high, getting back all of the losses from the pandemic selloff. 3396 right now. Up 6. 5 points. I know you talked earlier about target getting people back in the store. Quite a feat. Apple facing a 2 trillion market cap. The 10 year bond on a. 66 handle. Crude under some modest pressure today. We have opecplus, really the saudis and the russians, getting together today. They will figure out how to get the other members of the group to comply with what they have been talking about in terms of production curbs. Lets bring in alan wald ellen wald. Now, it seems like it is about the two big players, russia and saudi. Opecplus as a whole has been doing well. They all congratulated themselves today for a 95 compliance rate, which is very good when you take all of opecs history into consideration. It is a bit down from the last, which was 107 compliance. Andntially, saudi arabia russia have been increasing production. Saudi arabia was really overcompensating for some of their members. Now the focus is going to be on iraq and nigeria because those are the two over producers. Iraq really did make some strides in coming down and cutting its production, but it still is showing that it is overproducing by about 300,000 barrels a day, which is a lot. Nigeria, theyto are Still Producing about 100,000 barrels per day, but they are making this argument that a lot of their oil production, this excess production, actually should be cost cited condensate and excluded from the total quota, just like earlier in the year, opec decided it would allow russia to exclude its own condensate. Nigeria is kind of making a play to get the same treatment as russia, and we will see how that goes, whether russias condensate is more special than nigerias. Vonnie it is difficult as well because we are in covid times now. Every dollar counts. These countries are suffering even more than their regular suffer then they regularly suffer due to all kind of things from oil prices to sanctions. Could saudi do something to , maye the compliance rate be offering an olive branch to the likes of nigeria . Ellen it definitely could, but i am not sure they are particularly inclined, unless nigeria puts forward or makes an effort to cut production. The saudi perspective is we cut more for you earlier this summer. Now prices have been pretty stable. Right around the 45 mark. Things are kind of smooth sale, so lets tighten their belts a little bit and make sure we can keep this going. Saudi arabia is really looking towards asia and china in particular to consume most of its oil exports and chinese demand is pretty strong, but the real question is demand in the rest of the world, really the United States and europe. Things are looking rather shaky. We have seen some good and positive signs that oil demand is increasing, but without airplane travel and diesel demand, it is still looking very flat. As we end the summer months, which are typically much higher gasoline consuming months, there is a question of whether demand in the u. S. Will pick up anymore, and it could in fact start to decline. That would really hurt Global Oil Prices and destroy some of the work that opec is put in over the summer months. Greg well have about a minute left, but i wanted to ask you about that. I do not see any demand forecasts that look all that rosy, so how long can opec continue to exert that persuasion . They will not be very happy for too long. Ellen we are looking at very incremental changes. There is not a lot that any of these governments can do to tamp down right now, so i think we are basically as good as it gets at this point. Next meeting is likely to be midseptember, ellen. I guess it depends on what the Global Economy looks like then. Things might change before then. Ellen when we get to september, we are looking toward the next opec meeting at the end of november, when they will make changes to their quotas. Allies will be on the recommendations of the committee in all eyes will be on the recommendations of the committee in september. Vonnie ellen wald of the Atlantic Council joining us there. Coming up, sudden surge. What exactly it means for the Global Economy. That is next. This is bloomberg. This is bloomberg markets. I am vonnie quinn alongside greg pennell. J. C. Penney, j. Crew, Neiman Marcus applied for bankruptcy. One company is betting on brick and mortar. Recently won approval to buy booksellers. We spoke to the chairman and ceo earlier. Brickandmortar is an important part of building a brand, not just locally in the u. S. Market but globally. If you do not have brickandmortar stores, it is very hard to build a brand and it is hard to build your ecommerce business. Ecommerce traditionally does extremely well when you have brickandmortar stores. There are very few brands that have been able to build a real brand name on chest clinics. On just clicks. If you look at the best brands, they both have brickandmortar and ecommerce. Do you see the physical Retail Stores as more of like a warehouse, like a good pointofsale, or do you see it as an experience . I think it is both. Verynk you are definitely do we see it going higher . Yes. Buto see it going higher, we are also getting smarter. Everything that is happening with digital, with ai, you are starting to carry the right merchandise in those stores based on the customers that are in the area around those stores, so i think that physical stores are still very, very important in servicing the consumer, and, yes, the stores have to become more experiential, and there has to be a reason why people come into stores, not just to try on the product, but to also experience the product and get a better feeling than they had in the past with just traditional apparel retail. Brands authentic chairman and ceo james salter speaking with alix steel. Tradesof the murky is to murkiest trades. Some lenders sitting on trades they say are worth about 250 billion. We are joined by a Bloomberg Finance reporter, who wrote a book about zombie banks back in the day. Talk about these murky trades. They are a little bit harder figures, the these level 3 assets we are talking about, which are the scary things, are not like to be seen on bank ballots sheets balance sheets, were much bigger during the last crisis. 1y were almost close to trillion, not just a few hundred billion dollars. So it is not as bad. [laughter] but they still happen. These are the things there is no pricing for so they use their own models to price them. That is why they are not so liked by investors, but they are still around and they really surged during this current crisis. Greg given that, what is the risk . I noticed some of the comments saying forget about market to market. This is markets a myth. That got us in trouble before, a decade ago. Yes, we were especially paying attention to level 3 assets at the beginning of the last crisis, 2007, before Lehman Brothers even collapsed, because the big crackdowns were not taken yet by banks worldwide. They had not really acknowledged the 1 trillion of losses they were sitting on, so they were shunting them into level 3 and pretending they were still worth . 90 on the dollar when they ended up being zero cents on the dollar some of them. That is the fear. You do not know if these are correct, if they actually lost money on these trades, but we will not find out for a while. Eventually, we always find out, but not immediately. That is why nobody likes these things and they have grown in size. Worse about these trades in this regard, european or american banks . The most important way to look at it is how big the absolute dollar values of these assets are in comparison to the banks capital. As i said it, instead of . 70 on the dollar, they are really zero that will wipe out a chunk of your equity if you have a lot of these. Measure,ok with that that yardstick, european banks are in much worse shape. Because, starting with deutsche bank, they are in bad shape with a million things, including this one. Their level 3 assets are almost 60 of their capital, so if a lot of those are actually lower value, you see their capital going down. Banks,f other european 30 , 40 , 50 range. In the u. S. , the numbers much lower, it is more like 10 , 15 . Losses they have big hidden, when they do acknowledge them eventually, they will not really hurt the banks. Greg is there a sense they are that the coordinated Central Banks responses to the crisis, led by the federal reserve, has allowed this to take place . Rushing to the rescue, lets go ahead and place our bets on the market. Complicatedhese are derivatives that are all over the place, cores. Byse are made more possible the reaction from the Central Banks, including the fed. Not just the fed, but all the Central Banks in the . Came to the rescue of the markets with massive liquidity. That leads to all kinds of weird trades. Some of the level 3 increase is there. Eventuallyhose will make the banks money, but it is hard to tell, and maybe some of it depends on whether the central bank support for the Financial System is going to last forever, or, when it is not there, if it is withdrawn, what happens to these trades . Greg fascinating stuff. Thank you for joining us. Yalmanman owner and of bloomberg. We have some perspective on how jd powell and the fed feel about how things are unfolding. Lon erickson joins us. This is bloomberg. Greg this is bloomberg markets. At the top of the hour, we are going to get the minutes from soncon see meeting meeting. Always a great opportunity to pull back the curtain. Lon erickson, lets start right there. We know the fed has concerns about how love this about how all of this will unfold. Lawn lon yeah. I think the fed is terrified by the idea of what it does not know or cannot know. That is the darkness casting over the Global Economy as well as the economic outlook. They are pumping the markets, but as chairman powell has said any times, we need the fiscal part of it because, i think the monetary has certainly helped arrow Financial Markets our Financial Markets, but the fiscal is what gets into our real economy. Vonnie what happens if we only get very minimal Fiscal Movement at least until january . What happens to the economy, which is, by the way, made up of consumers . Lon markets would take that as a negative, but i guess in the grand scheme of things a little bit of something is better than nothing. I think we would have to readjust our assessments of Economic Growth for the second half and that would have to be ased in to market prices well as earnings for companies as well as the health of households in the ability to service their debts. I think you would see some repricing in certain Asset Classes and we should take note of that, but it would still be helpful. As you were saying, you thesee sense, though, in times, as the fed and other Central Banks make these coordinated actions, there is not a lot of dissent. Is that your sense, that they are all rolling in the same direction . Lon exactly. They all know they do not know how to handle a situation like covid. They know they did put a lot of extra money into the economy, but they certainly also know that is not a vaccine to take care of the pandemic. Ist we will be looking for what kind of concerns are out there. Looking for guideposts as to what they are looking for in addition to a vaccine or some for covid thatnt can help people and the economy get back to normal, more normal activity. But we will also be looking for, i think, some signs. What they really want to know is not so much near term, but what is the fed thinking in terms of its Strategic Review it has been conducting of its policy tools, and what that means particularly around the inflation target. The market has builtin something maybe around a greater averaging. Looking for signs of what that might be. People mightously, have said that Market Pricing was distorted because of the fed, but given the coronavirus situation, how much distortion is baked into prices these days and how much of it is reflecting new fundamentals . That ittill believe reflects a lot of what the fed, but also the expectation of the fiscal stimulus. I think it is built on an artificial propping up of the economy both on the monetary and fiscal side, but you are right that those two sources of stimulus have really help the economy and we are seeing people spend in those. The retail sales that have been coming out, home depot, walmart, lowes, and the like, we have seen stronger numbers. Some of that is ongoing. But i think to get this turned around and going as we get past the covid because we have seen, every time we start something, we have a couple steps forward we have one step forward, two steps back. We will need to keep the fiscal and monetary stimulus coming and the markets will look to that to keep the stock prices and, frankly, credit spreads, you know, nice and highly valued. Greg we have only have less than a minute left. I wanted to ask you quickly. To fixt on fed everything for us when it comes to financial plumbing. Can they mess up the yield curve . Lon i think they can, but certainly the market as a whole can push it around a bit. I think the fed at this point still has a reasonable amount of credibility at this point. I am sure some other people might argue otherwise, but clearly the market has been responding to what the fed has been doing, and i think the next step, instead of negative rates, could be yield curve control. That would be a positive if rates started going higher. The market would respond. Vonnie lawn. Lon. Thank you. Lon erickson. From new york and toronto, this is bloomberg. Live from bluebirds world headquarters, im caroline hyde. I am romaine bostick. I am taylor riggs. Markets. Head after a record markets. At ahead after a record high yesterday. Record quarter for target. At alltimeofits highs with little fear over a lack of stimulus to come. Shares jumping as much as . 13, the highest price ever. Kamala harris, the night to shine. All eyes on joe bidens president ial pic tonight is the california senator makes her speech in prime time. All that and so much more, including. Keeping an eye on the minutes on that july 29 meeting
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