Transcripts For CNBC Worldwide Exchange 20121030

Second straight month with another easing move. Welcome back, everybody. One hour of the good stuff today. Plenty to get through today for Hurricane Sandy, as well. Europe went off daylight savings time a week ahead of the u. S. Back to full schedule next week. In the meantime, sandy is no longer a hurricane by name, but still making a major impact. Storm made landfall monday night along new jersey east koer. Still packing Hurricane Force sandy is expected to weaken, but the rain could linger. Already at least ten deaths have been blamed on the storm. U. S. Markets will be closed for a second day today. Still electronic trading. The last time by the way the New York Stock Exchange was closed for more than a day because of weather, 1888. When a snowstorm piled up to 40foot drifts. U. S. Refineries had to shut nearly all the east coast fuel supplies ahead of sandy and theyll begin assessing damage today. Three of the key six refineries shut down. Analysts estimate sandy could cost between 5 billion and 10 billion in ensured losses. It would be the fifth costliest hurricane in u. S. History. Sandy could cause more wind and flood damage than hurricane irene did last year. New york city and especially Lower Manhattan saw its shares of flooding monday with water reaching record levels in some areas. And speaking of which, cnbcs Bertha Coombs is live for us outside the New York Stock Exchange this morning. Thank you so much for joining us. Can you tell us what conditions are like where you are and what dnlg you damage youre seeing . Reporter its actually fairly dry. Last night in fact the New York Stock Exchange take to go twitter to dispel rumors that the Trading Floor was under three feet of water. If you can take a look behind me, the New York Stock Exchange floor is actually half a floor from the street level where those first balconies are. So for to be under water would be tremendous. We didnt have water in this part of Lower Manhattan despite that record surge. It was mostly over in the battery. Will is significant flooding in several low lying areas especially near rivers. Thats on the lower east side. We actually saw a transformer there blow because of flooding. As a result of that, con edison cut power to much of Lower Manhattan, some 250,000 people are out. I will tell you it was a very strange sight last night traveling below 23rd street and having everything pitch dark. Very few lights to be seen. The lights here are about the only thing in this area. Eight bridges closed at the height of the storm and tunnels, as well. All but one tunnel coming into manhattan. Much of that remains closed this morning as officials try to asset what the damage is. All of the transport in and out is also shut down, as well, was shut down ahead of the storm. Theres been some flooding in some of the tunnels like battery tunnel at the tip of manhattan. The airports were closed. Newark airport is open were told. Laguardia remains closed. At the height last night, we also saw the nyu Medical Center have to evacuate because their backup generator power went out. They had to evacuate some 200 patients including 20 babies from the neo intensive care unit to nearby mount sinai hospital. As we mentioned, the exchanges are closed for a second day, but they both plan major exchanges. The nyse and nasdaq plan to run tests this morning in order to run them, so they will be running tests between 8 00 a. M. And noon here at the nyse between 7 30 and noon for the nasdaq. If they need to remain closed tomorrow, the nyse will open up its electronic system, but kelly and ross, its a very important day for them to be reopened. The end of the month, a lot of Portfolio Managers need to square their portfolios. Thanks for that p. Hope you stay safe there. Joining us for more, chief economist at street talk advisers. Lawrence, thanks for joining us. Besides the disruptions in terms of physically being able to trade, what can impact does sandy have for investors . The issue now is really for investors for what they will and he deal with when we come back and markets did reopen. Last couple days, futures have been trading down fairly sharply and of course the concerns now are where are the impacts for the economy Going Forward here. Last month mostly seasonal adjustments, so the question Going Forward, the first week in november accounts for about 20 of all november sales. So its a very important week that were potentially missing here. And even if the Short Term Impact is felt in that way, theres questions about there can actually be a boone to economic activity. It will depend on what the damage actually is when we get through the process. Katrina when it hit new orleans was one thing about a it was so devastating, it wiped out literally homes and roads and bridges and caused a mass amount of devastation, so a huge amount of rebuilding there. Whats important here Going Forward is that you are going to get economic support from this at least in the short term. Is there a lot of severe structural damage that has to be replaced. But about dont forget one thing, when you can to this type of activity, there is one negative impact of this longer term which is that you pull forward future activity. So money spent today that would have been spent potentially later on. So a short term boost for the economy and longer it term still the concerns of the overall weakness. Especially when it comes to flood insurance, a lot of that comes from the federal coughers when theyre under more scrutiny than ever. Going into next year, do you expect this to change the tenor around Government Spending at all . Well, thats kind of an interesting question here, question have to solve the fiscal cliff first. And the spending in government last month, that was a big hit to gdp last month from government defense spending. The issue is a deficit which is a huge drag long term and the spending of government and a lot of this will depend honestly on who is elected. Stay with us. First well check on the markets to the degree that we can. U. S. Futures have been trading in the overnight and morning session. Currently trading a little bit more than 40 points below fair value. Lets show you european markets. A bit higher this morning by good numbers out of ubs and bp. Ftse 100 up 35 points. Xetra dax up 0. 8 . Ibex up 0. 6 . Lets remind you whats going on as far as reinsurers are concerned. Impact on Hurricane Sandy as well. All the big reinsurers are up. This is an expectation maybes wills arent quite as heavy, but of course if you to get losses, also hardening rates in the long term anyway. An auction coming out of italy today. Thats in about an hour or so time. We have three to four billion. Might raise more than that. Yields just a little lower today, just below 5 for italian. Ten year spanish yields, 5. 64 . Still okay for now for the spanish government. Eurodollar is 1. 2929 last wednesday. And we stand 1. 2933. So in the last four trading sessions, we havent gone anywhere. Plenty of people seem to be short of the yen. Sterling steady. And markets may be closed, but lets look at theed aed age. Case shiller out at 9 00 a. M. Prices in 20 major u. S. Markets expected to rise 2. 1 . October Consumer Confidence numbers were supposed to be released, but it will be delayed until thursday. Coming up at 10 00, Third Quarter housing numbers will be released. Several companies have moved earnings reports to other day, but if you still plan to release results today, and they include ford motor, archer daniels, valero. Pfizer, avon and sirius xm results are now due on thursday. Thomson reuters has moved to friday. And one of the Companies Set to report tomorrow, time warner, ralph lauren. A crucial week coming up ahead of tuesdays election. It seem well get the jobs report friday as expected. Is that where your attention is focused . Absolutely. In the last month when we got the last employment report, we had all the consternation over the number, such a big drop in the employment from 8. 1 to 7. 8, jack welch getting in on the conversation. The issue is will we see an adjustment to that number from last month, was it a real drop in employment. So just a couple days before the election, this is a crucially important number for obama obviously going into the election. But more importantly, it will help us see really whats happening within the employment picture itself and is it actually improving or not. Okay. Thanks very much for joining us this morning. Bp reported better than expected results for the Third Quarter. Underlying replacement cost profit 5. 2 billion, around a billion dollars ahead of estimates. Dividend has risen. Becomeky peck becky was talking to bob dudley. And he was talking about how the refining has helped earns this it time around. And he w the refining has helped earns this it time around. The difference denied increased by some 12. 5 is having big impacts on the stock today, as well. I was asking why they chose now to increase the dividend and if there would be further hikes in the future and he said they clearly have the confidence to raise the dividend now. They will continue to have a progressive policy in the future. Continue to sell off businesses. And he said they do still have some assets to sell, too, as they try to get back on track and he had plenty to say on the Bigger Picture stuff. In terms of the economies and how the economic recovery is going. He said he still thinks oil will become an increasingly valuable commodity and that there is rebasing of the mid cycle price for oil, he believes brent is 90 to 110 and thats what theyre pricing in for the future. The tnk deal with rosneff, is there any did he say about whether he hoped now whether they might resuscitate becoming the offshore partner for rosneff . Hes a little cagy on the details. He says they expect to exit that deal in the first half of the year, probably the First Quarter. Just to say that theyre progressing steadily. Thanks for that. That interview will be in short shortly. So still to come, well be out to switzerland, well be joined with the ceo from ubs. They announced its plan to cut 10,000 jobs and well have full details. Welcome back. Sandy roars ashore. Dumping a ton of rain on the u. S. East coast knocking out power to williams. Bp hikes dividend by more than 12 . And bank of japan steps into boost the economy for a second straight month. Its a big day for earnings here in europe. Usb is cutting up to 10,000 jobs. One of the biggest cuts in the finance industry since the 2008 crisis. The stock is up, though. Carolyn roth has been speaking to the ceo. Investors clearly liking the news of more cost cutting over the next three years. Very crass tidrastic moves, tho. Ubs is going where no other bank has gone before. It is closing down an entire unit. The fixed income unit. So really this is more than a paradigm shift. When i spoke to the ceo of the bank, he explained what was the rationale behind that move. It means a better time to market, being more close to our chintds, and at the same time, the effectiveness of creating an environment that allow us to reduce operational risk. So just not a cost cutting exercise. Of course in our industry which is a high people intensive industry, the majority of the cuts comes on people. Ntheyre cutting around 15 f the total workforce and areas most affected will be fixed income primarily in london an new york. If we look past the restructuring announcement, if we look at the underlying Business Performance in the Third Quarter respect that was actually better than many anticipated. Investment banking pretax profit beat by the largest margin by 48 . Investment revenues did see a strong rise. Wealth management franchise which really is what they want to focus on, net new money came in stronger than forecast at 7. 7 billion swiss francs. Kelly. Carolyn, thanks very much. And whats extraordinary is the ubc has been tweeting this morning this is a extra strategic acceleration from a position of strength. If youre in the fixed income unit, youve been strategically accelerat accelerated out the door. One way to describe whats happening over there. Investment hanging in general will be reduced across the word in the Banking Sector. So lets have a look at the way first of all the shares are reacting. Very positive reaction indeed to what was announced today. We had a teaser. Pretax profits up about 20 mainly due to Investment Banking income being stronger than expected. And also the equity unit action are action, they had the bulk of the income there. If you had to pick a bone with deutsche bank, you would have to look at the credit losses of about 20 and also the credit loss provisions at over 555 million euros. That wasnt that great. But net investment including income actually did very well. Still about 3. 72. But what i thought was interesting to see is what they see for the rest of the rear. And they actually think a little bit more moderately positive environment, so i like that in the Banking Sector even though they see a lot of headwinds. But starting to make a mark. And shares up about 3 in early trade. We talk a lot about cross border m a as a source of strength. So really different signals coming from a lot of these firms. The Banking Sector trying to focus on what is the core business. Their specialty. So with ubs, it was almost like a nobrainer to go of a after what they did. Glad to have patricia onset for us. Still to come on todays show, tokyo shares at a two week closing low after the bank of japan beefs up its asset buying program, but not by as much as expected. Why it disappointed next. Tokyo stocks sanged while the yen firmed after the bank of japan said it will ramp up it asset purchase program. Kged whi the yen firmed after the bank of japan said it will ramp up it asset purchase program. Ed while the yen firmed after the bank of japan said it will ramp up it asset purchase program. D while e yen firmed after the bank of japan said it will ramp up it asset purchase program. While t yen firmed after the bank of japan said it will ramp up it asset purchase program. There was hope the central bank could do more. Joining us is dan slater. Dan, just what more was the market looking for . I think the market realized this was tokenis tick atic and headwinds are much stronger than the 10 trillion yen. Also the bank of japan just add that had 1 trillion yen, so last time they increased by 10 trillion, this one 11. If you look at the broader problems, the bank of japan stimulus is really fairly significant. Very likely were looking at a technical recession. So its not really surprising that this announcement by the bank of japan failed to persuade the market that any meaningful change was on the way. It seems as though central bankers indicated that perhaps even more aggressive being a was coming. This wasnt just markets sort of out there pushing them to do more. So why knowing they were falling short potentially, why do you think they didnt act more aggressively . They did act slightly moring a aggressively. They also have a funding prog m program, the boj will fund to a limited amount loans japanese banks make to their customers. But hes fairly hawkish. He believes in the bundesbank principle of central banking. He believes that the mandate of the bank of japan is to protect the value of the currency. He believes that monetary easing can only go so far. And his contention of course off the record and he would never say this publicly is that its the government that really has to get its house in order and balance it budgets and find reforms that will stimulate on the real side of the economy rather than relying on monetary policies. So people know what were talking about in terms of the weakness for japans economy, the expected rewound in the aftermath of the tsunami and earthquake hasnt necessarily materialized which is interesting to keep in mind at a time when were looking at a storm that hit the u. S. So to what extent is that weakness help to go exacerbate some of the problems that japan is facing . The gdp picture in japan is quite slippery. You have various base effects. You had a huge impact of the tsunami last year. And then you had a Huge Positive impact in the First Quarter of this year, which was the 5 . And since then, youve had the consumption tax going through, so that will be introduced fairly soon. So overall, a lot of noise out there which is masking the state of the economy. But if you strip all that away, youve basically not a great deal has changed. You have a huge economy which has a very dynamic export sector, but the export sector is still a relatively small part of the economy. When exports slow, clearly that will feed through. Having said that, the u. S. And china do seem to have bottomed out. Dan, thanks very much for joining us. And speaking of Hurricane Sandy, a levee break in new jersey is prompting rescue operations for new jersey. So the fallout continues. Still to come, more on the super storm sandy as it sweeps across the eastern u. S. Welcome back. These are the headlines today from around the globe. Sandy roaring ashore, powerful storm dumps a ton of rain on theest east coast, knocks out power to millions and floods parts of Lower Manhattan. And shares of bp rising, hiking its dividend by more than 12 . And ubs will cut 10,000 jobs an weaned down it fixed income business. Deutsche bank sees revenues boosted by debt trading. We hope you survived the night safely. And were starting to get more of a sense of how damaging sandy has been. While Hurricane Sandy may not be a hurricane by name, its still having a major impact. The storm made landfall monday night along the new jersey coastline as a tropical cyclone, a technical term as it was still packing Hurricane Force winds. Sandy is expected to weaken further, but rain could linger for several days. At least ten deaths have already been blamed on the storm. The u. S. Financial markets will be closed for a second day today. Still electronic trading of stock futures and options, energy and metals contracts. The last time the New York Stock Exchange was closed for more than two days straight because of weather was 1888. Three of six key refineries shut down. Ports were closed. Analys analysts estimate sandy could cause 5 to 6 billion of losses. That would make it the fifth costliest storm in u. S. History. There could be more wind and flood damage than hurricane irene. New york city and especially Lower Manhattan saw it share monday. Joining us on set a Charles Nenner founder and head of research. Thanks very much for stopping by. Youre welcome. From i just want to ask you off the bat about Hurricane Sandy if there is a broad impact on the u. S. That you expect. I want to mention two things. The crash in 87 started in europe. The crash in 9 11 started before terrorists attacked new york. So i forecast markets. So whatever happened here already is already in the price of all the markets, so it wont have much of an effect. The philosophy of market forecasting, nobody ever does the research how is it possible that european markets were tanking before the terrorist attack because we say listen, the market came down because of terrorist attack. I say it didnt happen because the markets knew it. So same thing with the hurricane over here. The market seems to knowen down issuesly whats going on and everything already in the price. Then lets look at some of the specific names youve been watching. Apple just last night announced a Significant Management shakeup. Whats your take on shares here . We have a chart on over here, i dont know if we can show it, the apple chart, we dont explain why things happen, we always explain what happens in the future. And this is a chart that we send out in august. And you see it went up for a week or so, but then the system below shows a cliff. Its falling over cliff. This is an old chart, this is a chart we sent out before it came down and we had a target of 710, it went as high, a 707 and we went short apple. Markets know everything and we build a system that can predict whats going to happen. Maybe its difficult if you say you dont know what apple is doing. This system can predict interpretation. So lets say apple is up 50 about that two things can happen, apple can go up an apple can go down. If it goes up, the wall street journal and other papers results were great, apple goes up. And if it goes down, paper will write people took profit because they dont think apple will do better. So we work with the interpretation of the facts and that and he how we can predict what a stock or Financial Market will do. What about ibm another name you singled out . Ibm was doing great and we sent out a chart on ibm. And i dont know if you can show it, it shows the same cliff. It shows you also ibm is falling over cliff. What is the yes, maam low line or how are you creating that bottom line . Theresen a algorithm that we developed many years ago. And thats a lot of mathematics. What you do actually is just gave the example the interpretation is more important. In order to predict a stock, lets say at t has a quarter of 1 . I said thats not important. What and he important are people going to pay five times earns or 30 times earnings. How are you measuring the psychology . We also measure prices. Its based on the fact that things move up and down, not a trend, but a certain mathematical formula. So if something goes up with a certain momentum, you know how high it goes. And i want to mention, too, when you look at u. S. Bond yields, you see them now entering a phase of going higher. It accelerates and you have a bear market for the next 30 years in bonds. All right. Charles, well bring you back to check in on these calls. Did you consult ubs on that . Because they just got out of fixed income. Have you told them . I wont say yes, i wont say no. I can tell you something about night securities. I said 15, thats the top. Everything goes downhill. I didnt know why, but ybut you knew it was coming. If only he were a meteorologist. Coming up next, ubs has confirmed 10,000 job cuts through 015 as it swings to a loss. Bp hiking its dividends. These are the headlines. Sandy roars ashore dumping a ton of rain and knocking out power to millions. Bp hikes its dividend. Well hear from the ceo in a bit. And the as falls at ubs. The firm will cut 10,000 jobs and wind down either fixed income business. In corporate news, bp reporting better than expected results in the Third Quarter underlying replacement cost profit 5. 2 billion. About a billion ahead of estimates. It cited tight supplies in europe for high refining margins. And the group also raised its dividend from 7 to 9 cents a share. Bob dudley has been talking to beccy meehan. She jones us onset. Rush back from the interview. Literally just brushing my hair, trying to get myself organized. I have literally just walked back in and bob dudley was pleased with the shares. The stock up by 3. 5 or so and he said about time. So he was pretty happy that the shares were moving higher. I asked about several elements of the story, as well, including of course the fact that they have increased the dividend. Lets listen to what he had to say about that dividend policy and if we should get used to these high dividends. Were working to get it closed through the normal processes on a steady pace. Rosneff is a Great Company and we look forward to that relationship. Obviously the relationship with btp wasnt efficient. And if this is good. How does the timing look right now . You say youre progressing well. We have a 90 day exclusivity and then 30 day Regulatory Approval process followed by another one. So i think the earliest could be sometime in the First Quarter. We said first half of the year. We also updated on the trade deal. Bb d bob dudley told me they feel confident about how the business is going and thats why the earnings are better than expected and they increased the dividends. They do plan to have a progressive policy. Thats how he described it. So we sha keep our eyes peeled for more of the same. All right, beccy, thanks very much. Plenty more to come. It will be on the web, as well. Sandy is no longer a hurricane by name, but still having a major impact. The storm made landfall monday night along the new jersey coastline as a tropical cyclone. It was still packing Hurricane Force winds. Sandy is expected to weaken further, but the rain could linger for several days and already ten deaths at least have been blamed on the storm. U. S. Financial markets will be closed for a second day today. There is still electronic trading of stock futures and options. And again the last time the nyse was closed for more than a day because of weather was in the 19th century. U. S. Reteenries shut nearly all east coast fuel supplies ahead of sandy and theyll begin assessing damage today. Analysts estimate sandy could cast between 5 and 10 billion. It would be the fifth costliest storm in u. S. History. Oast betw. It would be the fifth costliest storm in u. S. History. St betwee. It would be the fifth costliest storm in u. S. History. It could cause more flood damage than hurricane irene. Water reached record levels in some areas. And Brian Shactman is in the hamptons specifically on the south shore of long island. Youre getting used to this wet weather. What has the night been like and how is the day shaping up . Things have settled down a bit even though the rain has picked up. Were getting as of rain now as we did yesterday. Were three hours east of manhattan and its a very swanky area in terms of summer properties. Jerry seinfeld, robert de niro, paul simon some of the name 2s s that have properties out here. We wait for sunlight to assess the damage. Its almost like a video game on the roads where you have to duck under things and around things. Took about a four hour nap, went to bed with 600,000 customers on long island without power. Woke up with 900,000 customers. Thats not people, just homes. So a lot more people do not have power. Overall, its about 6. 5 million customers that did not have power. Here it was about the surge in the ocean and the wind damage. The rain didnt create the issue. It will be about property damage. And as soon as we get first light, well go out and see what the damage is. A lot of downed trees. Weve seen huge trees coming down in the surf through late yesterday. And in terms of the equipment, its really so difficult to model that now because we just dont know what were going to see when we get out there. Its been a tremendous element of electrical fires and in terms of first responders, we havent been able to get to some. Two fires on the beach they had to let them burn out. And dozens of stories similar to that. Its amazing, im told outside of the entire storm where the cnbc coverage srk i thi, i thine a lot more of this. I didnt get a lot of rain, just six hours of 50mileanhour wind. So a little better off than the last time with the will hurricane town down in texas. Our storm chaser, Brian Shactman. It was a little warmer in new orleans thats all ill say. And just after the break, well take a closer look at whats coming dawn in the u. S. [ male announcer ] dont just reject convention. Drown it out. Introducing the allnew 2013 lexus ls f sport. An entirely new pursuit. Sandy is expected to weaken, but since its big, could be rain for several days. Here with us onset, dan greenhouse. Probably about the last plane out of new york sunday night. That is probably accurate. And what impact is this storm having . We have to wait and see tomorrow morning exactly what the impact will be. We have to wait for the lights to come on so to speak. From a trades standpoint, we can virtually assume that when the New York Stock Exchange does open, everybody wont be back to work. Trading volumes wont be what they were. And in lift fact that tin light the u. S. Election is imminent its the last trading day of the month tomorrow. We have to get up and running. Bob pisani was talking about exactly that. The exchange wanted to be open for the last day or two of the month. And you to sdo see action on th last day of the month that you dont otherwise see. Truth be told from a positioning standpoint from a Portfolio Management standpoint, you want to have at least the option if not the ability. So many key reports this week. Typically the first day of the month brings the ism report. Jobs report is crucial. I dont know it that it was as big a deal over here in the uk, but in the united states, the last jobs report was no, it was a big deal. From a client standpoint, the attention has moved on to the election and the fiscal cliff 37. And the worst case drought cough the hurricane . I dont want to speculate. You have to wait and see. The damage im already seeing estimates that are saying that the damage could be well beyond irene, which was pretty bad. I know theres flooding downtown. Rumors. Ive been in meetings, but flooding at the exchange. We heard that was not. I assumed thats not true. So we really do have to wait and see. Could be of course quite big. All right. Tha thanks very much. Time now for squawk box. Dealing with sandys wrath. The super storm makes landfall knocking down trees, taking out entireboard wa entire board walks and leaving millions without power. Nearly 50 homes were destroyed by fire. A crane top he willed from what will be would not of tallest luxury apartment buildings in all the world in new york city. It now dangles precariously above the treats of manhattan. 90 stories below. And the New York Stock Exchange and nasdaq remain closed for business. No bond trading either. But futures will trade until 9 15 a. M. Eastern time. Its tuesd