Transcripts For BLOOMBERG Bloomberg Surveillance 20141015

With some of the worlds le ading experts and how to take care of and protect Health Care Workers from ebola infection. Meantime, president obama defending his strategy against Islamic State. There is skepticism whether airstrikes by themselves will be enough to stop extremists from capturing more territory in iraq and syria. Be president has said that the campaign has already had success. So far we have already seen some important successes, sils advance on isil, destroying targets and fighters across iraq and syria. Back that has been the target of frequent attacks and Islamic State has come close to seizing the citys airport on the crackdown on socalled tax and versions may have its biggest yet. Abby says its board will meet by next monday to reconsider a deal to cut its tax bill to require shire and move its legal address to the u. K. , but new treasury rules make these inversions less attractive. Shareslunged in london, down as much as 30 in trading. A big acquisition and shipping, csr,omm agreed to purchase a pioneer in Bluetooth Technology in this deal would give while, more access to products using smart phones, cars, and personal navigation devices. And the Kansas City Royals one win away from their first world series appearance in 29 years. Billy butlers sacrifice put the royals up toone over the orioles. Stunning. In march, the Kansas City Royals odds of going to the world series was printed in scientific notation. Meanwhile, take a look at what is going on there, the national league, the st. Louis cardinals mishandled the ending, so that gave the giants a 54 win. Game four is tonight in san francisco. Data check,a equities, bonds, currencies, commodities and oil, oil, oil. Currencies do nothing. Nymex crude, that is a correct print on american oil, we do not have a 79 handle print yet, but there it is. Turning onto the next screen, please, the fix 22. 79, the better number from 24 yesterday but still shows the turn in the markets, a 30year bond, brent crude, not on a watch there yet and you can see the spread there too american, 80. 88 with texas. What are the knocked down affects to other parts of the market . Here is the canadian dollar. O, canada here is the weakness going back 40 years. We are allerrible, going to die, and here is the oil rally, call it the china rally, canada doing much better. You can see the abruptness of this improvement, and here is the first giveback of loonie , 1. 12, so there is a scale of how it comes back with oil. I remember when i was a Hedge Fund Guy and we were trading a lot of oil stocks. The demand for oil shares in canada was so high that we were going out and buy in canadian dollars. There it is, the carnage and it continues today. Helima croft joining us in the next hour. Of germany,data out our very own International Correspondent hans nichols is in berlin and german states are calling on Angela Merkel to boost infrastructure investment. What is her likely response . Nein. Is committed to having a balanced budget. Gavrielly sigman growth has made that clear. Everyone wants a balance budget and the federal level in that means no spending. Consistency within a greater germany of since of support of nonausterity. May be the auto sector, so down the rhine and visit and go all the way down to stuttgart if you can, even get on the canal and visit the auto companies. You look at the trade, the top trading partner for germany as france. Russia is about 11 on that list. They think the economy has a cyclical problem or a structural problem, look to see who they are talking about for experts because if they are concerned about russia, that is an indication that they think a slight downturn may just be cyclical. If they are talking about france, they are talking about a euro zone, that is a structural problem and for that the resolutions are more spending or something for mr. Druggie, by that i mean government bonds, not just assetbacked securities. Weaker certain extent, data undermines merkels leverage with italy, which is struggling under its own difficult Economic Situation right now. How is this shift changing the relationship between miss merkel and mr. Renzi . They are still sort of trying to you to know each other, so everyone is trying to get a sense of what renzis plan is, what his plans will be to tackle structural problems in italy, and in some ways all of these budgets it is a test for merkel but it is also a test for the new guy in brussels,. Anclaude all of these budgets will have to be midweek submitted to brussels and brussels can go you nay. Ate go yea or france buildy like get away with 4. 4 deficit duty spending . There were no exceptions for portugal, greece, why is there going to be an exception for france . But whatexpects it, does i do to the weakness of these european institutions . All right, hans nichols. Thanks for the perspective. We are pleased to bring you the global chief investment strategist at citi private bank. Profitsnows investment the way he does about Lisa Abramowicz is with us as well. Have there been any injuries . Not so far. Triage will be done a bloomberg news. Steve whiting, these are exciting times. What should investors do . Would be careful to think this is all about american stocks, for example, and you have been bringing in europe and the loonie. Yes it done this coming to grips with what is driving bats, the fact that the oil price could be down 20 in a world where we are always worried about geopolitical things, coming to grips with all of these across Asset Classes and should make investors parts not pause. Stors markets have had half the volatility. That is veryt of material in that we are having a real shift in policy certainty. Say imid2011, you could very certain that cash yields in the United States will be zero even 12 months from now because the fed told you so. They are not saying that anymore and you cannot be so certain. Within this conversation, this is what you do so well, oil prices up. Croftdy get her limlima quick. Eting, we all know intrinsically this is the benefit to american consumers, gdp, which means i should own stocks. Reallyenergy sectors are really big part of the american stock market and it has been deigning, growing, so American Energy investment has been growing doubled digits, and production has been growing double digits, and as we said, we will end up shrugging off geopolitical stocks but we lose the benefit when we have a drop. There are beneficiaries for sure but that is something we lose on the down front. One thing i keep talking about with sources is that energy plays a bigger role in the u. S. Economy arguably than ever before and it is hard to fuel some of the gains in the stocks, particularly the credit market. High yield bond fund shooins from Credit Companies have been robust, how much in this cycle will Lower Oil Prices certainly harm the market more than it will help them based on how much it will increase the growth will slow rate of energy investment, the idea of continuous, multiyear periods of doubledigit growth will subside when there is this much oil in the near term, but there will be stressed. I think you might have some worries in particular about marginal plays around the world. There are some marginal players everywhere, but think about the very vulnerable sovereigns and high oil prices. Steven, we started with europe, and you said investors should be calm rather than in panic mode over german data. There should be legitimate concerns about a very slow, toerate recovery, but suddenly say oh, my god, august had a 4 decline in Industrial Production when auto production still nearly in half and subsequently doubled in the month of september. That data is yet to be reported. We know these things. We knew the american durable goods order is still 10 because of a three quarters trop in aircraft orders. That is not permanent, so there is a sense of this being overstated. Steve wieting with us of city Corporate Bank citi private bank. The world is coming to an end. Buy bandaids. Speaking of bandaids, as we are noting, ebola has affected the second person here in the United States, so our question of the day, is ebola high enough on the u. S. Agenda right now . A second patient. Tweet us bsurveillance. We will be right back. Good morning, everyone. Ebola front and center dot the president of course speaking on the Islamic State yesterday. This is below the turkish and of course, with all of the challenges there of the Coalition Fights the Islamic State on two fronts, this is the syrian and Turkish Border nicely north and east of damascus. Good morning, everyone. Bloomberg surveillance. Earnings come from revenues and as earnings season is upon us, we must consider linkage of Corporate Sales to our american animal spirit, but is a better economy enough to make for better cash flows to si sustain . Steve wieting is for citi private bank. Things are great. John golub at rbc talks up 10 earnings growth. What is your number . Earnings growth for the year. We will see a 3 or 4 above the lower estimates, there may be that boostth 4q, but will help throughout the year. Said evaluation is a 10 return. Modest hysteria on a modest correction, down 3 , down 4 , down 5 . Do you froth at the mouth that this is the opportunity to buy new chips or you have to wait given what we see an oil in the bond market . I think it depends on your perspective. If you cannot tolerate knowing that you might have another leg down, this is not your opportunity. Absolutely cannot have variability in stock prices. Stocks are risky volatile assets that will lose money at some times, but you do want to see what happens to the highyield market, what happens to credit markets, and if you see stabilization across Asset Classes, i see no reason why we have a new global downturn. We see an example with j j news yesterday, blackrock Third Quarter adjusted 5. 21. Gs per share, a big beat here for blackrock, the worlds biggest asset manager. When you look at earnings results, what we be hearing, listening for from the companies on the Conference Call as the markets in the macro environment look drastically different than they did in the Third Quarter . You dont get that much forwardlooking guidance. You need to look at macro conditions. You need to look at what will be the drivers of future earnings and often you will not get that in the earnings results, but if the company can earn a lot of money right now, then you have to sort of challenge yourself and say why is that going to immediately change . When you look at the oil market, the futures significant drag on oil revenue and profits in a benefit for someone else. We thrilled to have Lisa Abramowicz with us as well from our bond team a bloomberg goes fromyone bond analysis to my prices down, my prices up, what is the swap factor in the bond market . Some of these are down 2 , down 3 , they have rolled over a little bit. What is the swap factor right now . The big question is one of the shorts going to get blown out of the treasury market . We have a very sensitive short position ongoing, and when that happens, that can allow deals to go a lot lower. Scarlet, you see the wall street journal com. Hedge funds hit. Rates are going down. And riskier debt is doing well, and that has been doing badly over the last couple of months that is the leading indicator you are looking at were Corporate Credit is moving. Corporate credit is the interesting spot that has arguably been the most inflated by fed policies, so if anyone can say there is a bubble, this is one area. The fed did not by corporate. Credit tht. The fed have left yield spread high relative to yield rates, but there is really no deterioration in future defaults. When you see generalized improvement in profitability, that would improve high yield. You can look at these markets as being bull markets. Many will say there is no risk of default or less risk of default, yet we talk about bubbles. Is there a bubble when full faith and credit goes yields down, price up . Wieting, i steve have never seen is, how do you participate as an Institutional Investor with prices . Here here. . Do you buy at the top of the market . Real aftertax returns for a long time are negative or slightly negative, but they are providing an offset for other assets that would like more from a valuation perspective. They are going up in price, and portfolio volatility, and you can take a look at the u. S. And market where a two per 2. 2 , youcent at have 50 basis points swiss i do not mean to cut you off, but adam, i miss to this this morning, the german 10year is. 8823. And it is negative on the twoyear. Seven countries in europe right now where the two year yield is negative. I completely missed this. Jon ferro in london, if you are listening, you failed. [laughter] i failed. I want to point out when we come back later we will be croft by helima formally of the cia talking about oil, down another dollar. You are watching bloomberg surveillance. Good morning, everyone. Bloomberg surveillance. I am tom keene, with me scarlet fu and adam johnson. Lets get to the morning mustread. A fellow economist, i would like you to comment on, steven wieting, and these numbers are stunning spending government was 49. 8 of gdp in 2013 yet output is lower now than it was at the end of 2011. Ynesians call this a liquidity trap in reality it is a Big Government trap. Keynesian experiment is failing once again. Ease andlow some budget positions, we do something and then you go onto a decade like grace had where you just like greece had where you just spend widely. What happened to inflation and depressed economies . There has to be a balance between short run and longrun. You can take a look at american history, all of the periods where Government Spending expanded, gdp was at its strongest often itd crowd out private investment and when the Government Spending came back, gdp slowed every time. Short run performance of the economy is very clear, performs ynesian. S keen th but you cannot build up an economy where government spend ing crowd out everything else. I would be careful about consolidation at a time when you have weak economies and fragile recoveries. I think that a lot of people are too pessimistic on where the eurozone is that if you take a lick of spain, the take aral, if you look at spain, the peripheral, easily adjusted 400,000 in he Second Quarter in the economy in spain, so that is an important thing to know while germany is slowing. This comes while the german state is pressing on july merkel Angela Merkel to spend more money. Our politics show with all due respect is tonight. Good morning, everyone. Bloomberg surveillance. Futures 4. Stabilities in the market over the last couple of days except oil, west texas, 80. 79. Further datauick check, which is most of it when you look at oil moving today, futures again today 4, and there is nymex crude, that is enough on a data check. Lets go to hong kong. Protesters overnight in hong kong clash with police. There was pepper spray use, batons were also used in fourstar we will head over to ivan mann who joins us live right now. Give us a summary of what we have learned overnight with the protesters continuing yet arrests as well. Yes, scarlet, the old way we can describe it that it was definitely a very violent night here. Take a look at the backdrop behind me. Take a look at bc of people. We have not seen this many people for weeks now, i cannot even tell you how many are out here, but this is just remarkable. At the peak of this process we saw about 200,000 people out here. It is what some of the groups were telling us earlier, but they are right here now because of what has been going on right now in the last 48 hours with the clashes with police, as he mentioned, and overnight we saw some very violent scuffles here. Lets go to video to show you. This happened kind of at an underpass close to where we are standing right now near the government headquarters. Officers had to bring in the pepper spray, the batons. They were even confiscating paving stones and Manhole Covers the demonstrators had used. 45 people in total were arrested last night. Heroesght for the citys is as quitting in the last couple of days. The started again two days ago and we have just learned in the last couple of hours here that there was a government briefing that was scheduled for tomorrow with the chief executive and other government officials. We have learned that meeting now postponed due to security reasons. We are not exactly sure what it is but maybe it might be they are trying to avoid some of the student protesters with people here behind me, but right now we have learned that it has been postponed. The meeting has been postponed. To what extent has the protesters, the students lost the goodwill that they have earned in the last couple of weeks a . Well, i think people have just started to see kind of the pain that they are feeling right now. They are talking about it on the loudspeakers they are hurting from all of this. They are reacting to the video and again we actually saw some pretty graphic video coming in that we saw this afternoon. It exploded on social media. Theas created quite controversy. This is video from a local Hong Kong Media channel tv b. Bloomberg cannot independently verify it but it apparently shows a prodemocracy protester, also a member of hong kongs civic party, allegedly being picked up, brought to a corner, and then beaten by several police officers. The man, apparently has name is ken zhong, he was taken to the hospital. Hong kong Police Released a statement that they are now investigating a complaint that there was excessive use of force. Those officers, seven in total we have learned have been removed from their current post and reassigned to new roles, so at this point we have heard from beijing think they are deeply concerned with the situation, but they are still backing their support with the chief executive saying he will stand it and not resigned. All right, thank you so much, avon man yvonne man. I think of robert were mats, expect the unexpected, here is the unexpected in china. How does it impact the greater chinese spirit . It is difficult to detach and talk economics after a video like that, but we will try. Of september, you just saw doubledigit growth in gross exports from china. There is a big gulf between china and hong kong. Kong we went through this period of great concern over the summer months that there was a massive uncontrolled slowdown and i do not think it is actually they are. I think people do underestimate growth targets overtime will come down but stability is there. This is what you do so well, synthesize in the currenceies, the chinese currency is at new strength for whatever reason. It is a signal that it is not as grim as we think it is that not as big asr, germany, but surplus country which adjusted not have vulnerabilities in the currency to a really great extent. Not that it is so incredibly undervalued as it was before, but north asia was the place where you were going to see some benefits from energy or just more Stable Currency generally from a savings perspective. You did not have to have a lot of confidence to keep the chinese currency small. Dxy,ou look at th dollar, it does not seem that much. That creates a some stress and tension for hong kongs economy. You have seen more of an impact in hong kongs economy than the. Gger picture for china a big impact for hong kong, but i think anybody who has visited both the mainland and hong kong knows that there is a terms of the economy and the politics in these sorts of things. Ultimately what the students have accomplished, awakening beijing. They will not get what they want, which is elections a toy 17, but theyve changed the dynamic between hong kong and beijing. Do you agree, steven . It is difficult to comment on the politics of china, but i do agree that there will be big effects and hong kong and we have to consider that there are places like shanghai, which are meant to be future financial places. Martin wolf out with a very thoughtful essay pushing Christine Lagarde into mediocrity. New book out it will be at the council of Foreign Relations today or tomorrow as well. How to do better than the new mediocre we must launch reforms in both emerging and high income economies. Disappointments and to be kept in proportion. The imf has made no downgrade of its forecast for emerging asia since last april. This is the heart of the argument. 10 inorecasts are europe, all about the first quarter, the sorts of things are not. 08 at all. Growth in china has been really fueled by the shadow banking system, and i think that there is a big concern in u. S. Credit markets that if growth does decelerate in asia, will they be able to abstain to sustain . Reform, bondeping markets are allowing some companies to default. A real bond market with real defaults. That is what is ahead in terms of future reforms. Die. Are all going to of the indonesian stock market is up 50 in u. S. Dollars year to date. Lets go back to the negative yields. Lets rein on everybodys parade. Right now. 1. 40 arereeyear low today as we talking. Market . Is a stock actually, indonesia just 20s. T 25 a3 the fly carrier. That is a very growing economy. Sosteven wieting, thank you much for being with us, come back when you are more pessimistic. Steve wieting with citi private bank. He makes news, he retweets, mark over. Sen migrates look for that, 6 00 p. M. This evening on bloomberg west. Stay with us worldwide. We welcome you, it is bloomberg surveillance. Good morning, everyone. Bloomberg surveillance. 10 year yield, 2. 1990. And oil, 83. 53. Shocking news of bloomberg headline, on ebola in texas, that was stunning. Workercond health care in dallas has contracted the ebola virus. We have been talking a lot about this and we want to bring in someone who can give us a little perspective. A pharmaceutical analyst with Bloomberg Joining us from london, sam, there was a headline last week that effectively the u. S. Had run out the vaccine, how does u. S. Treat a second patient if there is no vaccine . Good morning, first of all. Unfortunately a vaccine would not help in this particular scenario because this patient is already infected and the best a vaccine can do is reduce the risk of infection of people who are in the front line of treating these patients, but if you recall this is exactly what we have been talking about earlier a couple of weeks ago that what they really need to do bring a sense to any situation like this, the normal scenario with that you would be that you would vaccinate the 60, 70 people on the front line dealing with the original patients, who unfortunately who has died. There is not much they can do now. You are so good as the comparing contrast of this terrific illness, disease with other viruses and a bacteria infection. Compare and contrast the pressures, cdc, and who are under this morning with ebola versus these other illnesses. Sure. We likened it to a mirror image. You spoke specifically about dengi, a virus transmitted by mosquito, so the probability of dengue infection is much bigger than getting in a bowl let infection because with ebola you need direct contact with the patient. You get two different scenarios. The w. H. O. Says about 60 of the World Population are exposed to dengue where here you see the number of patients. On the other hand, the mortality rate with ebola is much higher than with dengue, so that is the mirror image. In dengue, we have a vaccine coming soon. Unfortunately ebola we are still waiting for people to start manufacturing enough we do not have time to wait. Glaxo said it would in theory have 27,000 vaccines by december, today is october 15. What do we do for anybody who comes down with it over the next eight weeks . The best the cdc can do today is find out what lapses have taken place in the way the patient has been cared for. The nurse that had been infected said that she may remember touching her face after she was changing her protective gear. They have got to come down really hard on the way that they deal with suspected cases. It is the only way of containing it today. Sam fazeli joining us from london, thank you. Thank you to our producers for nonhysterical coverage of ebola. Speaking of hysterical, Lisa Abramowicz with us. I want to talk about a word unconstrained. That is a none of my books. Unm, help me here, what does constrained mean . Do not followu particular benchmarks, so you give managers more freedom let me to find that go make money. Fuss, one of my here he oes, they have been doing this for years and it is big bets, right . It is not clear. Funds, unconstrained they are betting on smaller gaps, not making big bets. Thinking of dimes in front of a bulldozer. That is not dan fuss. He could not make a move in the bond market lets make that a twitter question tomorrow. Speaking of twitter question, it goes to the topic we were discussing earlier is ebola high enough on the u. S. Agenda . Send us your answers bsurveillance. We want to hear from you. We will be right back with Lisa Abramowicz talking funds. Good morning, everyone. Bloomberg surveillance. Oil lower, yields lower, it is bloomberg surveillance from new york. Top headlines with scarlet fu. The drugmaker abbvie is discussing whether to scrap an acquisition of British Company shire. Abbvie says its board will meet monday. It had expected to cut its taxes by moving is legal a dress to u. K. , but the new tax rules make inversions less attractive. According to a person play with the matter, citis mexican unit five allegations of fraud which ceo Michael Corbett described yesterday as appalling. And apples follows apple follows facebooks lead and women whoerage for want to freeze their eggs, as much as 20,000 in procedurerelated expense. Apple will offer a similar coverage next year d. They do have to do what they need to do to recruit more women. Elective surgeries not covered at most companies that this is not surgery, but this is highly elective and a gray area that i imagine few companies will be able to replicate this is about creating and retaining talent, and any to speak to the demographic. Educated women are waiting longer to have babies. It is just a reality. Thank you. All right, matt egan, morningstar front manager of the year back in 2009, says credit risk has become his top priority as the fed debates went to raise rates. Matt, thank you for having you here, mr. Fund manager of the year. Lisa abramowicz is also here. Matt, how much has the fed skewed your highyield market . Move ande look at the rates recently, i think it is a bit exaggerated by the short current that has taken on. We have taken on key Technical Levels and caught people short so we have seen a bit of an exaggerated move. I would not read too much into this that we are entering into a deflationary bust. I think technicals had a lot to do with this downward movement. Do you think we have had a floor for the 10year yield . I think we have. Consolidatedve around this range. I think to be a bond bull here you really would have to expect the 10year treasury long part of the curve to go back to levels not seen since the 2008 crisis in the u. S. Or the 2011 crisis in europe. Both of those were systemic banking crises. I think we are beyond that. I think we are unlikely to test those lows again, so we have en out almost all of the from a year ago and we are about 20 basis points away, so i think that when you look at the flip side, it would only take about 20 basis points moving the 10year for you to completely wipe out your coupon over a years time and be in negative territory for treasuries. You are an iconic fund, you guys own a big bets in the bond market, you and dan fuss have been doing this for decades, decades, decades. Is what we have seen in the last few weeks an opportunity for the loomis fund, or are you and dan fuss under the desks . We are not under the desks. We are always looking for opportunities. Security selection is very critical in these types of markets. Credit seen a backup in spreads, and when im structuring a portfolio right now, we are trying to minimize interest rates. We do think there is a secular rise in rates coming and we are being prepared for that now, so we are working to pick up carry in other markets. I think we still have a green light to invest in the Corporate Credit market, for example, but you have got to be very careful. Nicely said, matt. I think of the way dan fuss and you have bet on ontario, bet on new zealand, the other big strategic bets you have made. Under you do not want to comment directly on. Bill gross. Will you please a slain what unconstrained means . Will you please explain what unconstrained means . Unconstrained means you have flexibility. If you think of traditional fixed income, like a core or core plus fund, they are tethered to traditional benchmarks like a barclays aggregate, and those are very high quality indices and they are very they are slaves to interestrate risks, so they move around a lot with interest rates. What we try to do is be very , and moving away from that benchmark and having a lot of flexible in the to move outside of that, different segments domestically and globally to look for value, so it gives us the ability to seek ,ut different risk premiums besides interestrate risk, but also look for as you mentioned good bottomup security selection ideas. As the talk about looking around for opportunity, and tom mentions mr. Gross now with janice, he was adamant about finding value abroad. Brazil is one example looking at dollar dominated bonds do. Good valuethere is overseas, i think there is still tremendous thirst for yield, and i think there easy Monetary Policy is bound to continue and pumping by the ecb and the bank of japan you are going to see money continue to go into emerging markets, lets say. We see a selloff there in both local rates and the currencies and i think some of those marks to look attractive. Security selection is important. We like mexico, for example, which has made great reforms, and you big 300 basis points in a currency that has gotten beaten up. A you know, lisa, you had great column yesterday about the linkage of oil, the drop in oil prices and junk bonds. I know that has caused some consternation among those companies that had pulled a lot of debt. Energy companies create a big proportion of the bond market, so funding oil prices release right the Balance Sheet of these companies to cause some fundamental problems that these companies could create an uptick into default, so it is definitely causing a to climb any higher bond market. Matt egan, thank you for joining us from loomis sales in boston. Lets get a forex report. The ruble at a 41 handle, and i walked in the door today, that is stunning, and there is canada, 1. 13, weaker Commodity Prices worldwide. Stay with us. Bloomberg surveillance, helima croft with us next. This morning, another case of ebola in texas. This is the c. D. C. , goes in search of a robust response. Oil continues to descend. Is opecs very future atrisk . And bank of america carons a new and an ancient american banking. Good morning, everyone. This is bloomberg surveillance. It is wednesday, october 15. Im tom keene. Joining me, she couldnt sleep all night, scarlet fu is here. Well get to the earnings in a moment. Adam johnson is with us. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] we begin with ebola. We begin in dallas where a Second Health care worker has tested positive for ebola. The person one was of those who treated thomas duncan, the first person diagnosed with ebola on u. S. Soil. He is now in isolation. A nurse was infected with the disease thats said to be in good condition. A crackdown on socalled tax inversions may scuttle a 52 million takeover. Its board will reconsider the acquisition of a british proposition. Abbvie have tax it is having second thoughts about these kinds of deals. The price of oil keeps going down, falling 4 . Today, it fell as much as 2 in london. Demand for oil growing. At the slowest rate in five years. Shares of intel up more than 2 after the worlds biggest ship maker projected fourthquarter sales that would beat Fourth Quarter estimates. Were growing the client market. And it led to 30 operation growth versus a year ago. And the state of new york plans to unveil proposed regulations for bitcoin by the end of the month. This license plan is the first from any state. New york superintendent smoke to us on bloombergs street smart. There are many good things that bitcoin should bring. You have to do it in a way that does something to people who want to do bad things with the anonymity that they would enjoy. And those are your top headlines this morning. Adam, youve got some breaking news. Bank of americas out. The number is better than the analysts estimates. 42 . 42 cents. Revenues appear be better. Theyre up 9 , stronger than expected. Theres a settlement, scarlet u, with the d. O. J. Of 5 million. This would appear to be a strong Earnings Report. Whats curious is the stock is flat. Were not sure whether it is comparable to the consensus estimate of 32 cents. Thats very like the wrinkle. This goes back to august where allison williams, joining us from Bloomberg Industries as a banking analyst, back in august, the bank has said there was going to be a 43cent charge against the mortgage settlement. If you look at the 32 and you subtract the 42, does this get us to a better number . It sounds like the number came in better than expected. The 5. 3 was in line with the expectation. Are there any other legal charges beyond the 5. 3 billion . Citigroup took another billion, jpmorgan took another be. Elliott has been talking about whats going on with forex. There could be settlements coming. Are there any charges for that . And as for the revenue i dont mean to interrupt, allison, i just looked at the bloomberg headlines, folks, you have to see them come out to believe the adjustments to the adjustments, allison. Have you ever seen such a jumbo or an ad hoc sense to our Financial System . I feel like you see it every quarter. This is bad if business is bad, theres a lot of adjustments. Do you have any understanding of the dynamics of the key lines of any major banks income statement . Sure. And thats why i think that you have to look at the core trend so my guess is going to be as you flip through their massive supplement, youre going to go to the Investment Bank and people are going to be looking at better than expected. Merrill lynch revenue record earnings, there is well, to these legal expenses, do you say enough is enough . Sally said that on this program two years ago. When is enough is enough happen . When you think about every bubble, theres always fraud, right . And when you think about the depth and the breadth of the financial crisis, you think of morgans role. But weve had 130 billion now. If you add up all the big banks. Its 42 cents. Its below the comments that they had a net loss of 1 . I may be wrong on that. Bottom line, this is better by 10 cents, correct . Even if you take out bottom line, its better by 10 cents. Its whats the run rate, right . What am i going to forecast the next quarter based on the run rate of your result . I think the tooth fairy showed up. Is bank of america better positioned for the improvement relative to the rest of the world than the other big banks . When you think about whats been driving the recovery rate, its been the u. S. Housing recovery. The housing recovery has been a big driver of the economy, its been a big driver from improving earnings. Isallison, the best headline this bank of america, Third Quarter, 42 cents, may not compare. That is the challenge you have. But frightfully, allison just resolved that for us. Im not sure. I really wonder on the Conference Calls. That Third Quarter loss after preferred dividends. Is the critical message here dont worry about the absolute numbers but worry about the veck force and the trends in each of the components . Right. The key is what are the core operating trend . So whats happening with their net interest margins . By the way, book value up by 4 . Thats going the right direction. And in mr. Moynahans comment, he talked about simplying, which i think it means leadoffs . Sales, portfolio. Ok. Thanks, allison. All right. Lets move on to oil. Oil plunging, of course. What did you say threeyear low . Threeyear low for w. T. I. Fouryear low for brentwood, the International Branch market. Helima croft joining us. She started with r. B. C. Target and your new title is chief commodity strategist. Thank you. You came back just in time to see oil finish off at the fair market. When i left, it was 115 now its a fouryear low. Whats the Circuit Breaker . In a sense, they have not staffed up and thats what caught people by surprise. Why do you think that is . Are we back to an 1986 scenario . They decided to essentially flood the market to defend market share instead of price. They issued with opec saying were going for market share. Are we back to an 1986 scenario and thats where the premium comes in but a an 1986 oil plunged 70 . You were a genius for six months, about predicting higher prices. That has given way. Do you ascribe all of these drops to saudi policy . No. Demand is soft. Demand in europe is soft. Fierce of deflation i think those things can potentially trend. China may be a little more structural. But in terms of europe, if youve got better numbers, that would change the sentiment of 2012. I spoke yesterday to phil and hes framing 45 oil. What are the ramifications of 69 oil . You have certain countries and that type of environment that are going to be in so much pain. I put at the top of the list venezuela. We would have paid so much attention if we had not have russia and isis. That countrys going to face tremendous social instability. Thats why venezuelas calling for an emergency opec meeting. They have tremendous revenue needs. They have facing a terrible urgency. Right now the price of oil is above nigerias break even. Its below the break even but when they put out break evens like nigeria, theres a lot of offbook expenditure. I think helima croft is moving the oil market. No. Honestly, i just think there are certain producers that are going to be in so much pain, it will be ripe for instability in this environment. Wow. Were blaming everything on oil. Which is good news for all of us. U. S. Consumers. Yes. S. U. V. Drivers, right . Helima croft, our guest host for the hour. Our twitter question of the day is ebola high enough on the u. S. Agenda . Tweet us at the surveillance. Well be right back. Good morning, everyone. Bloomberg surveillance. Il, west texas, nearing 79. Scarlet, lets get to our chart. Its on a break even oil prices. Its from Francisco Blanch and what were showing you is the price at which each countrys government budget would move to he budget. For saudi arabia, the break even is 70. And blanche and his team have cut their average 98 from 108. They have downgraded to 92 because of growing surplus. Helima croft, chief commodities strategist, do you believe these numbers . I think some of the breakeven numbers are higher. Some of the expenditures that i talked about, saudi arabia has had enormous rampup in the military. So in 2011, saudi bought half of all u. S. Weapons put up on offer about 40 billion. Its not necessarily always in the official statement. But arent you mixing appearles and oranges . In other words, youre lumping expenses that have nothing to do with the production of oil into the breakeven. If you look at the cost of were talking about what it costs for a government like saudi arabia or rare. Military expenditure and expenditure of Foreign Policy are the queue card of our budget and thats a huge driver. If you want to look at the true price you need to balance your budget in terms of revenue, it may be higher for some of these countries. As Oil Prices Keep falling what, does putin do . Hes already losing money at his breakeven. Luckily for putin, the sanctions for oil are affecting future productions. Theyre not targeting current productions. Its different from the iranian production. Russia is not facing a situation where their current production is shot in but theyfa economic pain. So its double trouble. Does that change putins political calculus . Hes quite popular. Hes got a 60 Approval Rating . No, its around the 80s. For him, hes lucky to have a high approval at a time prices erode like this. More on oil as we monitor today. We descend to the midterm elections. We will do that with all due respect tonight at 5 00 p. M. Good morning. Good morning, everyone. Yields move lower. The 10year yield, 2. 18 . Wow. And our top headlines this morning. The second ebola case in texas. And like the first one, its another Health Care Worker who treated Thomas Eric Duncan at a dallas hospital. Duncan has since died of the virus the World Health Organization warns that the ebola infection rate could hit 10,000 a week by december which brings us to our twitter question of the day. Is ebola high enough on the u. S. Agenda . The drug maker, abbvie is consider whether to draft an acquisition shire. Its board will meet monday to discuss this. Abbvie will acquire shire and moving its legal address to the u. K. But new tax rules make these inversions less attractive. And apple follows facebooks lead offering insurance lead for women who want to freeze their egg. The social network offers full coverage or as much as 20,000 in procedurerelated expenses. Apple will offer similar coverage similar next year. Lets talk about these bank of america earnings. 4 cents a share. Before you adjust for the previously settlement with the d. O. G. , that would imply 50 growth versus last year. Thats better than citi and j. P. Morgan. Eric schatzker knows these banks inside and out. Whats the priority right now . Getting the bank back on track, putting history behind it, getting countrywide in the rearview mirror. Same goes what theyve inherited with Merrill Lynch. The thing that strikes me most out of this Earnings Report is this. If regulators globally secretly behind closed doors want banks to get smaller, its working. At bank of america, this is a smaller bank than it was last quarter. Book value is down. Loans are down. Deposits are down. Thats not necessarily a good thing. But that contrasts with what we see happening at j. P. Morgan. Brian moynihan is trying to turn bank of america into a slightly smaller, more manageable institution. There are fewer branches a year ago by some 300. There are some 229,000 employees now, down almost 4,000 from last quarter. Its working, right . Expenses down 2. 2 . Doesnt sound like a lot but thats very meaningful when it comes to the bottom line. Its one of the reasons that bank of america reported better than expected. Is that a good thing . Do investors want moynahan to make the banks smaller . Well, from an expense standpoint. But in terms of the different business lines and how they integrate one another. Bigger isnt always better. Its an enormous institution, very difficult to choose the response but look at j. P. Morgan. It makes it distinct from j. P. Morgan, for example, Wealth Management. They have the largest brokerage business in america and this thing is on fire. We may find that Retail Investors have been put off by the market volatility but through the tend of the Third Quarter, they had a 27 pretax margin being sort of the standard by which you judge a Wealth Management business. Better than anybody else out there. The europeans, the u. B. S. And the credit sweetieses run different kinds of operations and they have better preax margins but this is better than Morgan Stanley in a couple of days. You can check the box on a number of different things. The return on equity is still disastrous in part because at a 5. 3 billion pretax reserve for the litigation. But underneath it all and thats why off 42 cent number on the adjusted e. P. S. Line, things are getting better, tom. What does adjusted mean . That you take out that 5. 3 billion settlement figure. I dont buy it. Its a total c. F. A. Hogwash. And there are gains as well. I wish everybody watching and listening could see the set of bloomberg headlines come across. Its one big adjustment, eric. They did a net loss of i dont agree with that. Bank of america is a complicated bank. But over quarter after quarter after quarter, you have to look at what moynahan and the pore executives of the bank are doing with the problem. Absolutely. So the number of loans that are delinquent by 60 days or more, this is in the l. A. S. Bucket, down 44 year over year. Thats a meaningful improvement. That doesnt mean that bank of amazing nt an investment yet but theres a lot they can do before they can earn their cost of capital. Theyre trading at significant amount at book value. Theres nothing to suggest to the investor that it is going to start minting money. Tom t i would say that yes, there are a lots of adjustments but underneath it all, theres an institution thats getting smaller, more efficient and arguably better. I like what you said about every quarters a kitchen sink quarter. Now we have goldmansachs and Morgan Stanley to look ahead to what is the takeaway . People want to see goldmansachs and then everybody else. Goldmansachs is supposed to be better. Bank of americas fixed income rating came in 11 higher than it did a year ago but down from the Second Quarter. If goldman truly is, you know, the Gold Standard in fixed income, we should see at this quarter. And in Morgan Stanleys case, how competitive is it with the bar set by Merrill Lynch this quarter . Eric schatzker, coanchor of Market Makers covering the banks. Mark we got a little andariesen coming up . Stay with us. Its bloomberg surveillance. Good morning. This is bloomberg surveillance. Im scarlet fu with tom keene and adam johnson. Sales poised to top estimates. Companies replace aging machines. Says to expect revenue of 14. 7 billion. The worlds biggest chipmaker beatThird Quarter sales records. Another recall for 20. For toyota. Flaws in breaking feel systems. Among affected models. Toyota is not aware of injuries or fatalities. Converse sues over chuck taylor sneakers. A dozenter walmart and other retailers accusing them of selling knockoffs. The sneakers date back to 1917, named in 1934 for chuck taylor, a salesman and basketball player. This matter is now to helima croft, head of commodities at Rbc Capital Markets. Tehran 810 miles from riyadh, 970 models from jerusalem and light years from a settlement on uranium, ability to make bombs. This is on the front burner for the cia and, council on Foreign Relations. This is a great story nobody talks about. Does iran have the ability to make a Nuclear Missile . Well do they have a Delivery System . They have chinese missiles that could be warheads. They have centrifuges. Theres a debate of her six to 12 months away from having a crude nuclear device. They have significant capabilities. Significant capabities, can they go up and down . Nobody thinks they can do that now. Leave them with 19,000 centrifuges, they can one day flip a switch and reserve the right to be a nuclear power. We has a history of saudi arabia, against persia and shia. Henry kissinger covers this in his new book. Thatat tension or stability at risk because of oil moving . One of the things people have been talking about, are the saudis letting this go . You have analysts saying that the saudis are fine, they have large reserves, the iranians are not. Some people would say maybe they want to push them to a deal, the saudis do not want a deal. Most americans are clueless wart the massive iraniraq before saddam hussein. Why theu think about iranians might want a nuclear weapon, he ryan officials talk about the use of chemical weapons against iranian star during that war. They believe the saudis blessed the iraqis using chemical weapons. The tension in the kissinger book is between very strict islam iran and a sophisticated society. A complex and middleclass society. Can we gain traction in tehran with a nonislamist . Theres been some momentum in the talks with the election of hassan ronning. Hassan rouhani. You have a foreign minister who has spent years in the u. S. Can we trust him . Theres a sense of goodwill to the foreign minister. He was here for the u. N. Meeting. I was struck by how many senior people in the u. S. Knew the foreign minister socially. He somebody they are comfortable with. What does john kerry need to do to move negotiations for . Offer the iranian something significant on sanctions relief. Leave them with residual nuclear capabilities. The Supreme Leader has said he is not going to dismantle his program. Theyss how much uranium produce as opposed to how many devices. Helima croft with a briefing on the story that will not go away, iran. Cant say enough about secretary kissingers book, world order. Lots to talk about with oil moving south and yields grinding lower. Let me show everyone what you are talking about. Look at the red. 10 year yield stands out, 2. 17 the lowest weve seen in many months. Crude oil at a threeyear low. A res down down. 75 of point. This is bloomberg surveillance. Ebola, a second confirmed case among u. S. Healthcare workers, the cdc has announced a team of doctors will travel within hours to any u. S. Hospital where new ebola patients are diagnosed. We are joined by willem marx, it has been looking into the logistical and financial ramifications of hosting an ebola patient. Any indication about how caregivers in dallas, the nurse and the second worker, might have contracted the disease . What are people saying . There is an ongoing investigation. A few experts in the seal in terms of contamination experts are saying that the chances are that it was something to do with the way that a protective gear was being taken off. Details, a lady in australia was talking about this. You take one glove off with one hand and have to use a bare the other glove. That may have been a point of contact. Up in thew case crops u. S. , what preparations are being made to prepare and care for that patient . People have had time to see the worst practices and the best practices. You mentioned a shot seen that the cdc will be sending around the country. The effectsabout that there will be 50 different hospitals, each state will have a designated hospital. Some epidemiologists saying this could be a concern. As a patient walks into hospital a and is transported to hospital b, another possibility of transmission. Is the cdc coordinating all this . Are hospitals and states acting hoc . Acting ad we reached out to hospitals. All of them to us, very few, said they are coordinating with cdc. Its seemingly ad hoc. After yesterdays guidelines, that will be something they will try to estimate uniformly. That there is a sense of disbelief. What happened could not happen here. To,he professionals i spoke there are smaller hospitals that are not prepared. Dallas presbyterian may be one of those. The Large Research places like much more prepared for this kind of outbreak. The thousands of hospitals around the u. S. , many of them are too small and without experience. I tell you what scares me, not to be alarmist, we are out of vaccine. Glaxo says it will have 20,000 Vaccines Available in december. 8 or 9 weeks away. Vaccines will not help anyone who is affected already. It will be expenses. All the hospitals are going to have a huge impact on their bottom lines in terms of the way you treat these patients. It is a very expensive process. At Rbc Capital Markets. You just returned to work after changing jobs. You walked into a selloff and oil prices and ebola situation getting worse. Does this, and your conversations with clients does this come up in your conversations with client . It comes up in emerging markets. Nigeria is a great story people like to talk about. They were very lucky that they were able to contain ebola. I would look at a country like that and say if you get into a situation there that could have ramifications. Yourselfde a name for at the cia as a risk analyst and as what took you to wall street. Can you quantify maybe this is unfair, quantify ebola as a risk to Financial Markets . Atpeople have been looking what it could be shaving off in terms of african economies. Right now, im interested in em story. Ans as an countries like nigeria, everyone was focused on it being in engine of african growth. They were lucky. If you get a second wave, you could have problems and derail that story. Investors are not going to want to lift want to live in lagos if you have an ebola outbreak. Willem marx, thank you for sharing your findings on the second case of ebola. 2 in the u. S. Our twitter question, is ebola high enough on the u. S. Agenda . I we making enough of a priority. Some hospitals not responding, bigger ones are. With us at bsurveillance, helima croft. Good morning. Bloomberg surveillance. It you need to know is continues. Adam johnson mentioned, futures deteriorate, 6. The s p. 13 on to the yields. Never seen anything like this. Data check midway through bloomberg surveillance. A lot going on within Venture Capital people trying to get smarter. Betty liu has the story. Ankers think Venture Capitalists are down and Venture Capitalists think bankers are dumb. There is a company that is basically a forum, a reddit where people can upvote and downvote apps. It is crowdsourcing. What is key is that teenagers love this site. They have been uploading and downloading apps. It has gotten the attention of big vcs. They say this could be the big idea i could invest in. They want to invest in the website. Some of these apps are ridiculous. An app where you can have a human being give you a leica call every morning. Give you a wake up call every morning. Another, you send messages only to a person named ethan. Thousandsownloaded of times. Are there that many ethans . Theres one ethan. The big problem we are seeing in the Venture Capital well, there is too much money and trying to find a place to park it. Companies buying apps for billions of dollars. A great app doesnt mean it is a great company. Ceo ofare joining the the company. Hes getting money thrown at him by investors. 100 . Im going to throw in a little skepticism. Thank you. Betty liu, joining us at 8 00 a. M. Minutes. Oop in 15 tom, putting up the 10 year yield. Back to 1994. This is stunning. The 10 year decline. Back to the great moderation. Gary shilling looks like a genius. Weve rolled over back onto the 20 year. 2. 18 at the start of the show. The lowest in over a year. Stay with us. Good morning. From new york city, bloomberg surveillance p o. Us on nardelli will join the new Corporate Governance and responsibility. This given boosting forecast and better free cash flows against some stunning market moves. Here in moments. Lets get the company news. Sap agreed to a Cloud Computing partnership in an effort to keep pace with a new generation of competitors. Ibm will let sap use data centers and the Software Company can deliver its Cloud Database and platform to customers through the web. Ases ibm cloud revenue demand slows down. Americants the north marketplace. Plans tosed hailo focus on europe and asia as well as products like a planned concierge service. Qualcomm makes a 2. 5 billion acquisition, buying csr. At 19 timesues csr projected earnings and gets qualcomm access to more products used in smartphones and other devices. That is todays company news. A good amount of tension. Futures 13, 10 year yield plunges. 12. 16 . Yen strength. Oil, inflationadjusted oil. Getting back nearly 80 support seen in another time and place, 10 years ago. The prize is not looking so good. With us with Rbc Capital Markets. To further this discussion, what does 80 . Dollar oil mean for north dakota . The Conspiracy Theory means that the saudis are letting it go to bankrupt shale. That is going to be a challenge like saudies arabia. If this continues, that will really put pressure on saudi in two years to three years. The notion that they could drive down the price and wait this out, it would take 18 months to 24 months to really stop this. That is why i dont think this is you are rereading Daniel Juergens book. 86 waswas like this like this. 1986. The difference in 1986, the saudis and opec came out saying we are fighting for market share. This time, we have whispers. We had the saudis not making a lot of statements. They are producing 200,000 barrels more now than they were in the middle of the summer. The difference, they are producing 200,000 more now and saying were going to put millions of additional barrels on the market. So it is marginal. Willm not sure the saudis let this go for 18 months to 24 months. Can we have a moment of silence for doug, he said there is going to be a lot of turmoil. Everyone was saying that during the summer. My must read is from thomas friedman. He does not write about Financial Markets but on geopolitics. A is asking whether there is pump owar going on. Hes referring to the drop, the decline in oil prices. You say theres been no communication saudi arabia this time. Are we likely to hear anything . What could they say to explain what is happening . Item not anticipating an official statement. We might want to look at what happened in 2012 when we saw a similar steep drop in oil prices. Fears of europe and it was mario draghi who came to the rescue. There may be some wait and see on the part of the saudis to see whether seasonal demand improves or whether you have something happen in terms of libyan production falling off. What are you doing at Rbc Capital Markets . I will stay in terms of what i always cover, geopolitics and oil. Watch out for prince ali. Is oil separate from other commodities . Oil is one of the most geopolitically driven commodities. Can say wea and opec will remove millions of barrels from the market to defend the floor. Theres so much of a political decision that comes in it is not linked to iron ore or copper . Jeff weiner that is not china. Thats all china. Demand is a china story. You dont have the same cartel arrangement. Its political. It is a head of the midterm election. Some are saying the government once oil prices to decline because it puts voters in a certain move. There might be a little bit of a concern about potentially some countries having some instability. If you were having a beverage of your choice on a saturday afternoon she has three kids and does not have time for that. If simply says opec, what do we need to know about this cartel . What really goes on . [humming] it is a scene from lawrence of arabia. The decision is what does saudi do. Thecountries could absorb ability to cut millions of barrels. Right now, all eyes are on saudi arabia. Do they do they talk to caracas . Opec meeting be an in november. The decision is taken in riyadh and abu dhabi, this will be the ones that affect opec. Weve seen cheating among the members. Shock what is shocking, on my agenda. Economic data. Shocking because retail sales month over month are expected to decline, according to estimates. By. 1 . We sit back and say what is driving this economy . Why is the tenure trading at 2. 16. That is at the top of my agenda. The president will be hosting an 11 00 a. M. Video conference. Discussing Islamic State, isil, as well as ebola. Which should be isis. L is levant. S is syria. The president will be participating in the conference with reddish, french, german, and italian counterparts. Ebola will not go away. 4,400 people dead. How about twitter answers . Is ebola high enough on the u. S. Agenda . Worker hasalth care been diagnosed. Should we shut down travel from nigeria, helima croft . No. Weiner t managedhe to contain this but i will be watching closely. Interesting. Opinion. Ebola should be the number one priority. Just getting the garments off. Take it off with one hand and takeyour pinky through to off the other one. What we are to do is get away from the hysteria and try to speak to the smartest people we can. What does it mean for the workers who have to clean up everything . Im surprised there is not more resistance. The woman from liberia said that is the number one risk. Going into the houses. She runs a charity in liberia. As described liberians people who are accustomed to hugging. 16,000 the000, math is real. Helima croft, thank you. Thank you for having me. Bloomberg surveillance on the radio continues. In the loop is next. 8 30, retail sales numbers, coming up. Morning, it is wednesday, october 15 and we are live from bloomberg World Headquarters and you are in the loop. This is midweek already. We will be speaking with the former apple ceo, john scully, on the future of payments plus, i will quiz the former pepsico ceo who spent a long time at pepsico and we will talk about a possible breakup of the company. He will be my guest is this our. What is the next big cap are teenagers . About the surprised results. Venture capitalists are all years about what is the hot new thing in the apple world. Ryan hoover will be joining me. The Kansas City Royals are seemingly unstoppable, one win away from facing the world series. We will speak with the kansas mayor slide james. Sly. Inecond Health Care Worker texas has tested positive for ebola and