Transcripts For BLOOMBERG Bloomberg Markets 20160517

Docs all in the red right now. Let check in with Ramy Inocencio at the markets desk. Ramy we are now at session lows. The dow is the biggest laggard. Its 50 daylied past moving average yesterday and so we are seeing simple back. He nasdaq is down. 8 i want to show you the health of the s p path 10 sectors. It is a broad selloff across the board being led by consumer tables. Still down, number two. Energy is now the sole stand up in positive territory. Rising oil continuing into its second day. Lets take a look at some of the biggest oil movers. Schlumberger up and candor morgan up 3. 6 , its highest since the end of april. Boost,rton getting a being two and outperform and raising its price target. All of this happening because of oil, so lets look at how oil has been trading. Highs, itssion highest since november 4 or so. There is speculation ahead of Government Data that u. S. Crude inventories may have fallen by 3. 5 million barrels, so that is pushing up the price of oil. We have seen some interesting moves in the bond market. Ramy the cost of living we were talking about earlier today, climbing the most in three years. The implication is that it is helping the economy. Theres speculation the fed might in fact raise interest rates, so we might see rises on the yield rise in tandem. Year, we havent seen that, it fell earlier today but has pulled up against that. Yield curve has flattened to we are about a 94 basis point gap. David lets check on the bloomberg first word news with Mark Crumpton from our newsroom. Ryan House Speaker paul says efforts to unite the Republican Party with donald trump is the president ial nominee wont happen overnight. i wont get to the day to day, up and down on this campaign. Dont get in the habit of thinking what is up and what is down and what article is here. Im focused on parties and principles in unifying our party. We just began our process, it is well underway, and that is what were focused on. About a pollked that said voters asked said trump could lead the party. He said the person is going to get the nomination of our party is the person to lead our party. The House Armed Services committee has stripped a provision from the annual defense policy bill that would have required women to register for a military draft. A top democrat on the panel is against the move. But republican Pete Sessions of texas, the rules committee chairman, says he is opposed to color thing americans americas daughters to sign up for a potential draft. Defying the white house and saudi arabia, the senate has passed legislation that would allow 9 11 victims and their families to sue other countries for their role in the attacks. The move comes one day after the Treasury Department disclosed saudi arabias Debt Holdings for the first time in 41 years, 160. 8 the figure at billion. Saudi officials have threatened to sell its stake if the bill becomes law. Josh earnest said today that it is in his words difficult to see president obama signing that will. The number of People Without Health Insurance dropped to a record low last year. Disease control and prevention found 9. 1 were uninsured, more than 28 million people. 1864, thes ages percentage of people uninsured 2014 to 12. 8 in 2015. Global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. Act to you. Tomorrow, the fed releases the minutes from the latest fomc meeting. U. S. Economic data shows inflationary pressures are stirring the worst of america is manufacturing slump may be over. Chiefg us now is the barclays u. S. Economist. What do you expect to see with regard to tone . Do you expect to see a market difference . If you goont, but back to the previous minutes, they talked about the probability of action at the next meeting. That is pretty rare. The minutes dont often foreshadow or discuss what they would do next. That getsk whether repeated and whether they accurate whether they actually discuss the likelihood of a july rate hike. We are looking for one rate hike in september with a risk of two if the data call operates. David the data cooperates. David there are some who say june is still on the table. If that were to be the case, what would janet yellen have to do to prepare the markets . Michael she did the first thing, which is scheduled the speech. She will be discussing the outlook in philadelphia. He data is one thing if the committee is serious about going in june, the chair has to deliver a fairly forceful message. Are we seeing a lot of erosion of the unanimity we had seen . Is it becoming more difficult for this said or fomc to cohere . Michael i come out of the boards in 2010 and theres always been disagreement because we are in uncharted territory, so i dont think that has changed. I think making policy is harder and they are trying to evaluate what each incoming data point means. I think there is as much unanimity as there has been. Do you see a transition to a different metric where you have members focused on domestic Economic Risks . Think how much does that affect the u. S. Outlook . Look, china is more important and we have two listen to that. Others on the Committee Say not so much. That seems to be the split, how you should factor in the Global Environment for what it means in the domestic outlook. A lot of people saying why would the fed go if that risk was there. Is that on the mind of policymakers . Michael i do. If you think the uncertainty leading up to the election is having an economic impact, if , thatink a vote to lead would change the rest of the outlook. Ormay affect peoples views you can wait till the risk subsides or not and move in july. David we got the cpi data today. How is the fed interpreting that data . There are twonk stories its preclear the oil story is coming out of the headlines. Oil at a seven month, headline inflation is starting to move higher mainly on the retracement of oil prices. The second is at the beginning of the year, we had some upside surprises in inflation in the core goods categories. In march and april, that strength came out. They look at it more or less the same way. The Dollar Strength is coming out. You need some Wage Inflation and Services Inflation and i dont think we are there yet. Today saying that this is recessionary data come at that look specifically. Michael we have a strong view that is not the case. There are certain signals in the u. S. Flashing red things like manufacturing, industrial production, that is mainly reflecting the stronger dollar and the relative strength of the u. S. Versus the rest of the world. In my view, to get the u. S. Into a recession, you need these things to topple the u. S. Consumer. Growth look to payroll and if it stays in the 185 range, the u. S. Should stay in a recovery phase. David coming up in the next 20 minutes come a critical day for Bernie Sanders. If he has any hope of catching up to Hillary Clinton, can he racked up and wins in oregon and kentucky . Cars being designed in california threatening german automakers. Growingand mercedes are concerned about the upcoming tesla model three. And we had to the Goldman Sachs leverage conference. David voters in kentucky and oregon are heading to the polls cede anyfusing to clout any ground to Hillary Clinton, Bernie Sanders is still campaigning. She could be hurt in kentucky after making negative remarks about the coal industry. Our Bloomberg Politics reporter joins us from washington. Predictednie sanders to do today . Kevin he needs to do well because he is still significantly lagging behind in the superdelegate and delegate count against Hillary Clinton. But you only did to it and it is absolutely true that in the heart of coal country, Hillary Clinton is still battling back from a gaffe which he said against the coal industry and the Sanders Campaign has seized on that. Earlier today, we were reporting former president bill clinton is saying he would be looking for a job in the Hillary Clinton white house. The Sanders Campaign also seizing on that, saying he would be appointing people who are not so close to wall street. Reading between the lines, some jockeying still going on this late in the race. Who would have thought we would have a republican candidate before we have a democrat one . David the psychic issue here Hillary Clinton maintains this delegate lead the Bernie Sanders keeps winning races. It showcases some momentum and that has to be something the Clinton Campaign is worried about as we head toward the convention. Kevin it matters to Hillary Clinton because she needs to excite the base and make sure all these Younger Voters who are in the camp of senator Bernie Sanders, that they are still motivated to get to the polls in november and turn out. She cannot alienate them and needs to bring them on board. For this late in the game, for senator sanders to still be winning and keeping it close, casting a shadow over the democratic party, it pulls the party to the left and her to the left and that did spell trouble in a general election matchup. It has not been a great week for donald trump. There was a piece in the New York Times calling his relationship with women into question and women featured in the article called into question. We see a super pac aligned with Hillary Clinton releasing ads that use his relationship with women as a big issue. I was speaking with a top trump adviser who said they view this as perhaps their first test against the clinton machine in a general election environment. And think that they passed they can call into question and cast into doubt the report. But the bottom line is this for the past month, there has been a steady drip of reports and stories questioning Donald Trumps rhetoric on women. Aner today, he will give interview to megyn kelly who has been wrapped up in this controversy for quite some time. It will be interesting to see what he says there. The Trump Campaign feels they think the clintons are overplaying their hand on this issue and it might become a mute issue heading into the general election. David thank you so much. Legislationassed allowing september 11 victims and their families to sue other countries for their roles in the attacks. It defies white house objections and saudi arabia has threatened to sell their Debt Holdings. Isshould say that this something that passed with bipartisan support. Guest it was passed by voice vote which means they did not take a vote. Something that was led by Chuck Schumer, democrat from new york and john cornyn from texas. Its something they have tried to do for a couple of years running over the objectives of the white house. They have decided to push it group, which is interesting timing given what we learned yesterday about saudi arabias holdings of u. S. Treasury debt. We learned yesterday that their holdings are 116. 8 billion. Square that, if you would. If this law were to be passed by congress it has not been passed yet, nor has it been signed into law, but if it were to happen, saudi arabia would sell 750 alien dollars worth of assets . Square those two figures. Kevin no one knew what the original figure was and the reporting was vague, so was unclear where that number even came from. But with the release of the number being much, much lower, it may have taken away a little sting from those rats and might have made a couple of senators feel stronger knowing that it would not rock markets the way the larger number would have. Whether that really played a role is unclear. The timing is a little hard to ignore. It happened suddenly. Its funny the way things happen in the senate but if everything agrees, things can happen really fast. It still goes to the house where it is unclear how they are going to move on it. Paul ryan has expressed some skepticism. The white house has essentially issued a veto threat. You mentioned john cornyn and Chuck Schumer spoke about this. Lets hear what Chuck Schumer had to say. Senator schumer we have a Good Relationship with the saudis and we want to keep a Good Relationship. Articulatesernment in terrorism, they should pay price. And it will be worse if they are not brought to justice. What do we know about the support for this law in the kevin there are some who would likely be very sympathetic , but there are some concerns about what this might do. The white house concerns center around the sovereign immunity how saudi arabia might view this law but other countries might try to turn it around. Asthe degree this is seen infringing on sovereign immunity, it might give others the excuse to do so. Thatmportant is it countries should have certain kinds of privileges . Speaker ryan in particular, having said that, passing so cleanly in the senate could give it a lot of momentum and trigger a white house the dow and a potential override fight which we have not seen yet. Still ahead, what is so scary about the tesla model three . Germany plus luxury automakers may be watching tesla with a sense of growing trend. The tesla three could lower away drivers laura way drivers who may have been drawn to their cars. Been very clear about how he wants the model three to be characterized. It would compete with these luxury cars, not the chevy volt. Guest he wants to position his brand as some thing that goes up against the m w or audi. Against the m. W. P. He does not want to be compared to chevy. This thing may start at 35,000 but as you add that rearranging get higher Speed Options they like to offer, you are talking about a 45,000 or 50,000 car or more. David what excites people about the tesla . Guest if you get into a model s and get the ludicrous version, that car does zero to 60 miles an hour in 2. 7 seconds, which is lightning fast. It gives you the kind of acceleration and handling you get in these higher in sports cars. It is not a people holler or everyday driver in the sense most people spend on a 20,000 or 30,000 car david . David there are german automakers with electric cars. But clearly some companies are getting into this. You are positing that they are getting into it a little too late and tesla is ahead of the curve. Guest tesla beat everyone to the punch. You have electric cars and plugin hybrids that can go for some time before the engine kicks in. But these are different propositions. They tend to be small hatchbacks, lightweight cars, very much pragmatic vehicles. Tesla came out with cars that look cool and are fun to drive. The model s is bigger in the model three will be a midsize car, but it is a sleek and sporty design and will be very fast. Expensive, built cool cars first and happened to be electric second. That is why people like this brand. Much. Thank you very you can read the story in the latest bloomberg businessweek. Coming up. Ty closes oil looking to extend its gains. Also we have an interview with the ceo of solera holdings. Bloombergs World Headquarters in new york, this is bloomberg market. Lets start with the headlines and the bloomberg first word news with Mark Crumpton. Mark Bernie Sanders is hoping to make it four in a row. President ial primaries are being held in kentucky and oregon. Overry clintons lead sanders is almost insurmountable, still he has won the last two primaries. Kentucky is considered the bigger prize. Vote by mail system and the demographics favor senator sanders. Saysr president l clinton he has asked for a role in a potential president Hillary Clinton administration. He says he wants to help parts of the u. S. That are struggling economically. Hillary clinton has said at Campaign Events that her husband would be charge with economic revitalization, but said he would not have a cabinet position. Bowe bergdahl posco courtmartial is being delayed until february. A military judge made the decision today. He said should give both sides enough time to review classified documents. Charged with desertion. He was held by the taliban for five years and released in 2014 after a controversial exchange for five guantanamo detainees. Of release of the names conspirators in the George Washington bridge scandal is being temporarily locked by a federal appeals court. Two former allies of republican governor Chris Christie christie Face Criminal Charges for allegedly creating traffic jams on the nations busiest bridge. Global news 24 hours a day powered by our 2400 journalists in more than 150 news euros around the world. Back to you. News bureaus around the world. David looking at todays against movers oil rallying again today. Inventories data coming out tomorrow. The estimates are that stockpiles are set to decline for a second week. That would be the first consecutive weekly decrease since september. Gold headed for a Third Straight gain has mounting concerns over chinas debt. Miners also rose after george investorsed a slew of piling into the bullion. To herbal Valuation Group up almost 1 today. He dow jones falling it is considered one of the biggest leveraged buyouts this year with the help of Goldman Sachs. Goldman agreed to inject preferred equity and debt to finance the takeover. The deal would have run afoul of Federal Reserve guidelines aimed at risky takeovers. With tony aquila. What was so interesting is that it was the first big lbo of the year. It was a great test to see that investor appetite. What did you learn from that experience . Tony this is not the first time weve 10 out there raising capital during difficult times, but we concentrated on the strength of the company, not the week is in the market. We felt pretty good about being able to hopefully on jam the market which was seized up at the time. We waited until we felt like there wasnt going to be much difference other than we would get priced a little bit for the market issues. Alix you wanted to issue some debt in euros and could not do that. Tony some of that money was not flowing under the bigger houses, so it is a little difficult. We had a lot of support from the guys that invested us in the past. Including customers in the insurance industry. Dollars and tilt the book a bit, which isnt uncommon when the market is difficult. Alix we have seen issuance pick up. i think the market is schizophrenic because its digesting too much data and there are too many issues in the system. Ironically, we are a bit of a bull on the european market. Countries, we have very interesting market share and we are able to peek at whether consumers are using credit or debt. Or whether they are just paying cash. In europe, we see they are just paying cash, so we have been growing and being more aggressive because we think any longterm, its going to be a better market and will work itself out. Doesnt mean the u. S. Will be weaker or will europe he stronger . Tony the average american has a couple thousand dollars in the bank. In europe, when you see the european people starting to raise cash with their Balance Sheet its an interesting time. The Biggest Issue is the countrys sucking up a lot of cash out of the european union. Its a handful of countries. When you are talking to investors, whats the biggest concern they have right now . Was what we started on content software that automated the process what customer has an accident. Overtomated that space and a decade, we took about 65 market share of the world. We became very successful, but we are very innovative. Our real aspiration was to think about it like this you have 52 or 54 transactions of your car life when you own a car. We want to be 20 or 80 of all the data or software associated with those transactions. Doorder to do that, we dont them and a, we do i and day we event we event and acquire. We want the Historical Data to give you the better experience and then just keep innovating things. Alix you say the amazon of cars . Tony any participants, whether insurers were banks, they are starting to come into play because people expect their provider to know about them and to protect their identity and security, so the game is changing and that is why you will see more lbo related stuff isthe Management Team innovative and focused on not just thinking that the contact of software but the content. Alix he felt as a public company, you are not getting credit for that transition and thats part of why you want the lbo rally. if you read the transcript the year before, i had said to the Public Market that we are doing the right thing. Future, you have to have content and you have to bring these things to bear. We app war is coming and have been on the fofront of things like this before. As we were investing that capital, we were not getting the same will return. Companyis a profitable and knows how to distribute product and as the yield was becoming negative, the opportunity to protect my shareholders was to talk to private equity which understands that from a longerterm perspective. Guys like me, even public equity is short term. Alix it was hard to sell that story to investors. Whats like to sell the story to investors . Wey we hit the wall and open the markets. Ourave the right story and bonds have traded significantly up. That just kind of help the market and i honestly believe some of the guys dont understand some of these transition stories in tech, but if the market is good and trajectory is good, they do a few customer checks and they just buy it. Alix what other companies are doing the same transition . Tony customers trying to make the shift, that is what microsoft is trying to make a run at. Innovation is the biggest problem with the biggest companies. They are not set up to innovate. Solaris is a very innovative culture and we have good momentum, but that where you see Companies Like that. You have to have content for your customers at every level and it has to be about the product you dont provide them. Good to see you. Thank you for the insight. David, back to you. David more from that conference later today. The global head of Commodity Research and Goldman Sachs is coming up at 4 30 p. M. Eastern time. Why are voters all over the world angry . Triesairman of lack rock to answer that question in an exclusive interview. All the major indexes down more than a percent. The s p basically flat for the year. David this is bloomberg markets. Time now for the bloomberg is as flash, a look at the biggest business stories in the news right now. The california grand jury has indicted a high plane company. Than 100,000ore talents of oil along the Santa Barbara code Santa Barbara coast. Isrterbacks management pressing planned or pandora for sale. They say they have not been able to boost sales but despite having a great product. Women typically earn less than men but the pay gap is worse for highly educated women. Analysisreet journal found women in elite jobs earn much less than men. Its widest among doctors and personal financial advisors. That is your business flash of eight. About a month ago, larry fink tweeted Great Britain would vote to leave the european union. He spoke about the brexit and the anger we are seeing in the electorate around the world. This was from the lack rock asia wealth symposium in hong kong. Larry i think president obama changed the mood. 78 a 78 approved percent Approval Rating in the u k and convinced many voters it would be the wrong thing to do for the u. K. And i think all the around the Investment Patterns have been fully digested in those issues are behind the Prime Minister. More momentum toward a no vote. why do you suppose there is this political rise against anger . When you look at the has and havenots, many of those field they have not participated in the kind of growth we have seen in the market and the anger is only growing. Larry i think you are right. Working twolies are jobs. Withny have left jobs security, sony many people have left jobs for the manufacturing side and so many cases have a not your job they have witnessed any increase in the competent and a compensation or the compensation has not kept up with inflation. If you put that all together, you see a disparity of wealth. The average participant in society doesnt have enough savings to be in the equity markets. Cap anda widening of those who have had a lot of that have benefited but the typical middleclass have not and this is the anger. Middleclass throughout the world have been crunched. Donald trumps what is tapping into. What does a President Trump mean for the Global Economy . And what this he mean for Financial Markets . Larry i think whoever is president , whoever is going to be the leaders of the u. K. And leaders inver is the countries not having an election, i think it is a wakeup call that we have this anger, that we have families that have lost hope. They are worried about their children and their childrens future. Its essential we need this fiscal policy response and why it needs to be directed toward infrastructure, that we can create better and higherpaying jobs and building necessary infrastructure for a Better Future for their children and grandchildren. Whoever is president , whether it is donald trump or not donald trump, mr. Cameron or boris it means you have to respond to these issues. Blackrock Ceos Larry Fink speaking to angie lau. Markets are tumbling today. Lets head to the markets desk where Ramy Inocencio has the latest on to etfs starting with gold. Is continuing the bull run have start we have talked about. Take a look at gld the spider of the gold share index, up. 2 , reflecting the price of gold bullion. Lets see how it does reflect that. It has been trading within about day, band over the past 1278 per troy ounce. It has been trading within a 10 band. Because of the soros and George Stanley druckenmiller. Stakebought 264 million is of that implication is hes preparing for worse times ahead. Up 2. 4 , itssing, highest since may 2. , the reads real estate sphere, we can see the retail sphere is down at session lows, its lowest in about three months. If you are not so sure as to what happened here, north american reits with the largest part of their investment are down 10 year to date. According to a report from bloomberg gadfly. Lets look at couple of others Simon Property and just more of the same here. Simon property down 2 . This is its lowest since february. Especially with what is happening in macys and nordstrom. David coming up on bloomberg markets, its not just president obama speaking out against the brexit. Microsoft is throwing its hat into the ring. David this is bloomberg markets. A quick check on the markets before we talk about tech with emily tech with emily chang. We had seen the s p 500 erased all its gains for the year and is now up just slightly. Now to the intersection of tech and politics. Say englishd hps should stay in the european union. Joining us from San Francisco is emily chang. We have had other Companies Speak out. Why microsoft and why now . Emily microsoft is saying the fact that the u. K. Is part of the eu has been a huge reason why we have been investing there and investing wholeheartedly. First lab inir cambridge and youve got the u. K. Ceo of microsoft saying the u. K. Being part of the eu has been one of the most attractive gains in europe for the we have made. They are not think they would pull out if the u. K. Pulled out of the eu, but theres an implication we would not see as much future investment. Theres one very important thediate impact and that is u. K. Being part of the eu has enabled much more flexibility for workers coming from different countries. There is a perception the u. K. Talent fool is limited, so drawing talent from across europe has been a huge plus for all of these companies. The polls we are seeing have been varying widely. That brexit at a likely you can gosays thepile all the polls of people shows 39 people out, but 15 of are undecided and have until june 23 to make that decision. David let me ask you about what microsoft is most worried about they are concerned about trade and what it might mean for immigration. Emily i think talent is number one for these companies. Weve been talking about it being a war for talent in silicon valley. Theres such demand for the engineers and developers bring to Technology Companies and its very difficult to find. U. K. s a perception in the its even more difficult to find good talent. A 3e talking about trillion economy leaving the eu and that could have huge ripple effects and the Prime Minister could end up stepping down, which is another part of this story. And Boris Johnson hes been assailing all his chances to talk about it as meaningless as though there are huge economic implications. Companiesechnology have not even discussed it if this were to happen, what would they do . They are not even having this conversations at the board level. June the vote there on 23. Thank you very much. You can watch emily chang on bloomberg west tonight. She has an exclusive interview with microsofts chairman, john thompson. Welcome to bloomberg markets. Betty good afternoon. Im betty liu. Heres what we are watching at this hour. Tocks are close to the session economic numbers show the economy may be Strong Enough now for the fed to raise rates. Rest itonger have to just risk your investment in the startup. Give the rest of chance to get up in the ground floor. A crowdfunding website. And andrew has gone long. He is now long on valeant. He sent the stock into a tailspin. He says he is a buyer now. He will join us to tell us what exactly has changed on valeant