Transcripts For BLOOMBERG Bloomberg Best 20160813

Wellpositioned. And Disneys Bob Iger heads the list of the weeks top interviews. It is often ahead on bloomberg best. Hello, im ramywelcom inocencio, and this is bloomberg best. Lets start with a divided look at top headlines. On monday, republican president ial nominee donald trump unveiled his economic plan in a speech to the trade economic club. To slash taxes. It is time to move the anchor dragging us down. And that is what it is doing, it is dragging us down. [applause] upon taking office, i will issue a temporary moratorium on new agency regulations. Halting financial regulation, trump would lower the top individual tax rate to 33 and cut corporate taxes from 35 to 15 . Give us a brief overview of the plan. Did we get enough details . , a few new things in a speech we saw he changed his top proposed tax rate from a previous proposal of 25 to 33 that brings him in line with what House Speaker paul ryan we saw him pose a moratorium on financial regulations. Something that the financial industry will really like. A bigimately amounts olive branch to republican elites, elected officials, and donors. Get the regulations such as yes he can. We have disneys results earnings topping analysts estimates by a penny. 14. 3 billion top the consensus as well. Media Networks Revenue misses. It is the biggest part of the company. Resorts, 4. 3 billion, also missing consensus. In addition, disney says it has the option to buy a majority ownership in van tech. It will be by a Minority Stake in the company. What you think as far as the results are concerned . The topline numbers are pretty solid. Earnings he investors will want to talk about the media networks, specifically espn. Investors want to hear about subscriber numbers is impacting your affiliate growth rate in terms of fees and amortizing. Does that help blunt concerns about cord cutting . Disney is not afraid to make investments in the digital side of the business. You walk this timeline of trying to protect your core business, your core bundle of cable networks, that has been so profitable, while making investments in the digital side of business where consumers are spending more time. That is where the advertising dollars are going. You have to continue to play both sides of the fence. This investment is another example of that. The focus on the united kingdom, we dont usually get to say it. Not enough sellers of the bank of england to get to that 1 million target. What is the easiest way to get a rally in the market . Struggling to mina bonds. You got what you want. They are putting brave face on it. Bank of england saying the disappointed push this bit. Keep calm and carryon seems to be the story. We continue to get this very big 30s. N the tens and that is where we are seeing the real action. Saying itk of england will stick with its expanded bond buying plan after failing to find enough government securities. Was a much different story today. The bank says it latest purchases were not fully covered and we saw the 10 year yield pare back some of its losses after it hit a record low. Was this just a hiccup . Or is this going to be a bigger problem for the boe . Certainly, the results of todays operations indicate that different parts of the yield curve yielding certain amounts theuccess and noted to push in order to push things through. Ms. Clinton i believe every american willing to work hard should be able to find a job that provides dignity, pride, and decent pay and supportive family. One, we willon day work with both parties to pass the biggest investment in new, good paying jobs since were to. Since world war ii. She talked about Infrastructure Spending connecting homes to broadband by 2020 across the entire 50 states. She talked about student loans, making it easier to repay. And also highquality Union Training program. The most interesting thing was appointing a cheap trade prosecutor as she plans to the major things that the major thing he tried to per train the speech was clinton is trying to portray who wont someone make this a much more level playing field. Make mobility possible in america again. Did she explain enough in detail how she would pay for all the things she plans to do with new and take . No, she certainly did not. It is something we have seen both candidates not bring to the table. Not detailing how they are going to handle these proposals. Retail sales backing out cars, backing up gas, negative one point percent. 14 the overall retail sales is flat. If everyonee is spend money on autos and did not have enough honey. Money. When you strip out the orders, you strip out the gas. The market moves reflect that. What do you make of it . The autos number was quite solid, but we are renewed that with the incoming data. Ex autos is weaker than expected. Just remember the last several months here work white strong. There were quite strong. Retail sales is a very noisy signal. We take a stronger signal from your outright auto sales data than retail sales data. It is a disappointment relative to expectations. There has been a very high correlation between the retail sales and overall services. It is larger than retail sales if the correlation holds up. It says something brought about the u. S. Consumer and how they are spending. There is no signal and retail sales at all. In terms of durable spending, the housing demand, that really if you a true picture of where Household Sentiment is. We will have more on disneys billion dollars deal , part of a oneonone interview with ceo bob iger. Up next, more of the weeks top stories, including a set of problems for delta airlines. This is bloomberg. Ramy this is bloomberg best. Im ramy inocencio. The world brickandmortar biggest brickandmortar lets continue our top stories. Walmart has agreed to buy get. Com for 3 billion in cash giving them a stronger online presence. 3 billion, they have only had the site up for 13 months. It is not making any money, it is burning cash. This is a bit of a desperate move by walmart. A year and a half ago, their market cap was double of amazon. Now they have flipped. Desperate to catch amazon or to be more competitive in the online space. This chart illustrates exactly what you are saying. Your pretty desperate if you are walmart. Billion they do 14 billion annually in online sales. It is not bad. Marco lori is seen as a bit of a genius in the online space. They are not only by the Technology Customer relationships, they want him, they want mark. Valeants surprise, awarded Second Quarter sales that fell beneath estimates. We have had many positive earnings calls from valeant. What makes you think they can turn things around in the second half . They have a lot to do. They have to really drive Earnings Growth and a half to drive Earnings Growth out of businesses that are declining in the past. They have a really big task ahead. Theyre mistaking to this idea that there is a seasonality and natural pick up in the second half able to benefit from. Fundings of valeant today. Dashers a valiant plunging today. They are the target of a criminal probe. Investigatingare if didnt we hear from valeant saying everything was going to be fine . He did give what would have been what was positive essentially not negative. They basically averted more bad news earlier this week, but there was a little bit of a relief rally. These ongoing investigations, which we always knew where around, but the magnitude of them in the amount they could impact valeant are coming back to hot them. Haunt them. Delta woke up this morning and still had some of the headache after canceling 1000 lights yesterday, more than 300 wont take off today because of a computer failure monday morning in atlanta. What do we know at this point . What does delta know about what caused this . You would think with an airline of this size, they would have backup system after backup system after backup system . The big question is why those backup systems did not work. Delta says they had a power failure in their facility. Georgia power says the power was getting to the delta building, but then there was a problem with the switchgear and that prevented power from getting to the Delta Computers and to the delta operations. But delta have to figure out is why this that happen . Why did there that systems not taken yesterday . The stock is not been hit by this. How much is it going to cost delta in the end . We dont know yet. When southwest had a sort of similar outage late july, the canceled 300 flights and their flights cannot get up to their schedule for several days and they said the cost would be tens of millions of dollars. There are a lot of small cough that adept up to a lot, but we dont have a figure from delta yet. Indian bonds rallied after the outgoing governor said the central bank would conduct more open market purchases of debt Interest Rates were left unchanged. What does he leave behind as his legacy . Insightful n three years ago, india was facing an account deficit. In the last three years, you have seen a proactive bank of a that took measures [indiscernible] the Monetary Policy that will be deciding, Game Changing ideas that the governor pushed for. There were critics of his policymaking. Many believe he was more hawkish is expected to hold onto rates. Challenge is he was way too outspoken for the establishment and often spoke on policy that did not go down too well with the powers that be. Chinas factory deflation narrowed showing improving conditioned for the manufacturers. We have not seen figures like this in two years. It is interesting on the factory rate side. If it could prove to be one of the more interesting developments of the year. They could be heading toward northern territory. If that happens, it is a breakthrough. Beeneflationary cycle has one of the real drags on the factory side of things. Policymakers have in trying to crack. It is not because they are coming back to excess capacity for tackling over head of supply. It is a pickup and commodity price. Story. Ess of a brazil, the senate has voted to go ahead with the impeachment of president. That shego on trial used improper loans for government programs. The trial is expected to be held at the end of the month. What do investors need to see to push valuations higher . Anyhere arent going to be other signals on the political front. Where the action is really going theie is what exactly government is going to be able to pass in terms of reforms wants the impeachment process is over. We will then test the mettle of the president to see if these measures get diluted, or they or if they proceed is expected. If they proceed as expected, that more than justifies recent market optimism. If i looted, we have to see the extent to which they get diluted to see whether we can optimism is justified or not. Undermining the nearterm outlook for the u. K. Housing market. That is according to the Market Survey that saw both demand dropping in july. How much does this have to do with changes that we saw in the tax surrounding by second homes and Investment Properties and what happened with the brexit . But with the two competing forces here . It is really important to mention that that tax issue in the First Quarter the First Quarter was particularly strong. It was inevitable things would slowdown. Lets not minimize how markets reacted to a big event. An electionis i referendum. These highprofile events always lead to a degree of uncertainty. It is been visible in the feedback we have gotten in the commercial survey in residential survey. The commercial survey was more noticeable because it was so dominated by investors. Ramy you are watching bloomberg best. Im ramy inocencio. Another week and another parade of earnings reports from companies around the world. Lets review some of the most interesting results setting with alibaba. Alabama posted Quarterly Sales and rose 59 bd estimates. Their core business held up despite chinas slowing economy. Revenue from Cloud Computing services soared. It remained relatively resilient. How do explain that . We are more than resilient. We defend the fastest growth rate ever in terms of revenue since our ipo. Regenerated for 20 billion of revenue. That is 59 year on year growth. If you look at our core commerce business, where we are facing consumers, we generated 2. 5 billion of operating income. And that, in itself, is at 30 year on year growth. So, from our perspective, the Chinese Consumer is very, very healthy. You look at the chinese households, there are 4. 6 trillion u. S. Dollars of net cash savings on the Balance Sheet of chinese households. This is because over the last two years, they have had real wage increases. They dont have a lot of mortgage debt on the books. And this is all going to provide the foundation for very, very strong growth of consumption. Prudential has reported firsthalf profits and beat analysts estimates. This is a share price reaction, up. 3 . Not only saying that they beat estimates, but actually on good track. How difficult will be how difficult when 17 be . 2017 be . Up,arnings up, cash performance outstanding, 50 increase in their profitability. These are on u. K. Currency basis. You look at the local currencies and their more dramatic. We have been derisking the portfolio moving away for about a decade. You got a 50 of the groups earnings that are spreadbased, so the book of the earnings arent affected by rates directly. Accounting noise without question, but as far as pure economic value, we are pretty wellpositioned. Has announced the fall and trading. It is kicking off the Earnings Seasons for all the australian lenders on a bad note. What is the reason for this weak event . The bank itself to the revenue environment for banking is more constrained and Interest Rates, very low at the moment. It knows that its net interest margins stable. The word on the results from the third quarter, 3 decline in cash profits to 5. 3 billion. This is a Trading Update not the fouryear result. The capital ratio, and i. 7 , but really, this result is down on the higher expenses of that debt. Club shares plunging. Said cfo haslso resigned. Lending club is regrouping after surprised leadership change back in may. Are the hits going to keep coming . From the tone of the Conference Call it suggests that they tried to figure out all the problems. They have gone back to their customers and saying this is what where we are doing due diligence. It is a fact they were selling loans and not telling all of the truth about the actual underlying loans of these deals. That was a great concern of the company and that is what caused their covering to seize up back in may. , but thathow growth is down from 87 . This thing went from being a rocket ship to a skateboard. What are they go Going Forward . Legal and general firsthalf profits fell short of analystss estimates. Lng results underscored concerns about Britains Brexit vote could shrink the value of the insurance industry, 2. 6 trillion worth of investments. There are a lot of of Different Things going on in the world that people find it difficult to interpret. On any given day, it could be interpreted positive and negative for us. I dont because it is a lot of noise around at the moment, we seem to respond to any typos noise. To any type of noise. Just a Staggering Amount of extra money. You and i think so. As a consequence, anything that moves, whether it is equity or bonds has an impact on the business. Checking the mineral stock and say me. It is at the moment to visit 1 . It is up two thirds of 1 . Gold expected to rise. Strong growth this year, gold prices remaining strong. Is a commodities slumped over with . The longterm fundamentals for copper is down. Our team focuses on is what they can control which is inside the business. Down asyour cost low you possibly can. Well in theu to do price environment. Solar city shares are down after the Company Reported earnings that showed less than a los angeles to made it but that growth was slowing. Chairman elon musk said investors should focus on the short term. Sntslowing of growth, i that alarming . Of solarday number panels installed, in terms of the amount of wattage generated, was down to 15 yearoveryear. That is problematic for the company. Call,roughout the phone there were concerns about how the business was running. They talk about exciting projects far in the future, but for now, solar city is not a good one. David beyond that, they are running out of cash, it appears. Cory the company burned through over 2 million worth of cash again. Say they are cash flow positive for the year, yet the company is burning through a vast ocean. 212 million loss, at worse than the last quarter. It is a concern for the company, not least of which they have less than 400 million of cash left on the Balance Sheet. Macys has pretty much taken and asked to some of its stores to the headline is it is closing about 100 fullline stores. That will result in a 200 million charge. The other big headline is it is looking for options for four large flagship stores. What can we expect in terms of changing the Business Model . It is definitely pulling back. You are seeing retail brands pullback from department stores. Department stores will have to respond. They have to continue to close, continue to get inventory in control. The thing that was interesting to me was that macys did not announce something bigger. You will close 100 fullline stores. How did you come up with that number, is that the right number, and how long will it take for the federal books . Ande looked at populations growth in the u. S. We look at Shopping Mall density. Recognized there were 7. 4 square to shoppingle stores. The reality is that the United States is overstored. We are getting in front of what we know is a trend that has been occurring. Coming up on bloomberg best , disney made a big investment in streaming media. Ceo bob iger tells us what it means for the company. The scotians of economic plans proposed by donald trump and Hillary Clinton. This is bloomberg. Versus this is bloomberg best. I am ramy inocencio. Disney opened its shanghai theme park in june, then open a billion dollar stake in streaming baseball media coverage. Iger spoke with david westin about how he expects those bets to pay off. It strikes me that this is the first time you have made a major investment into distribution. Is this a recognition there is not it is not enough just to have content . Bob itll be safe to assume this is our largest investment in what you may call distribution. We call it an investment in technology. What we have been saying for more than a decade is our Strategic Priorities include making highquality branded content, then using technology the quality better. Also used technology to produce distribute in more modern ways and more efficient ways, possiblyconsumer enjoys more and is gravitating towards. That is what this is. A is safe to assume that as distribution play. We view it as a Technology Plan for that is vital to the future of this company. As far as the quarter, and you have two consider the company has grown over 60 over the year, it has delivered a record for the company, maybe the highest a studio has ever earned in a year. And we have a quarter to go. That is quite a performance. And the parks and resorts had a fantastic performance, and given the startup of shanghai, it was no easy task. Early give us a sense of on how you are doing. What are your plans for some high . Bob shanghai is one of the madest investments we have outside the United States in the most populous city in the most populous country in the world. Journey, fromar the moment i set foot on the happy to where we cut the ribbon. I was obviously quite involved. We built something that is large and unique, in that there is a lot of original product in shanghai disneyland. The reaction to it in china has been great. From allation has come over china. It is taking advantage of shanghai as it tourist destination, particularly in the summer. Awareness is extremely high. People are staying about two hours longer per visit than we expected. That suggests people are enjoying the project. We had estimates, but we were really guessing about how we would do. It is a brandnew product in a brandnew market for us. We are extremely pleased with what we have seen. Well over one Million People have visited the park since it opened in june. The prospects for the business look strong. So much so that we have Broken Ground on expansion. We feel great about it. Contendersor party for the u. S. Presidency laid out their Economic Policy plans. We examine their proposals from a variety of perspectives. Lets start with the president of an cema global, and senior economic adviser to donald trump. What, for you, with the key elements in what donald trump laid out . I am glad you pointed out the regulatory side. A lot of people were talking about the tax reform, trade reform. Regulatory is critical to every business. The key proposal is have the cabinet were to actually reduce regulation. So all of the cabinet will be asked to list regulations that do not benefit the safety. David you are a senior economic adviser. Have people penciled out how much this would cost . Thate going to get numbers this is how much this will cost and this is how we will pay for it . David m. down the line, we will score it, but i am skeptical of how accurate that can be. You do not know how dynamic the economy can be. I think we are underestimating america now, because we have been so many years in slow growth. If you speed up grows, you will have more businesses in estimates, more tax revenues. He will make it easier to get the reforms you need to get done. It strikes me that this is largely a redistributing approach to economics. It is not particularly progrowth or proamerican business, unlike mr. Trumps. Is that a fair characteristic . Why is that the right prescription now . I disagree with that characterization. If you want to grow the economy, the lesson is that trickle down economics do not work. If you have a stronger middle class, you will have people who will consume and buy. Consumption is the overwhelming driver of the economy. This is investments have been challenged, in part because businesses do not believe consumers will be there. We have to make sure the middle class have more money in their pockets, and more people aspiring to be in the middle class can join it that will be the source of growth. I do not think we can turn down to go down will get you far. They got us a hundred thousand jobs a month being loss, and an 8 decline in gdp during the Global Financial crisis. I think Donald Trumps plan is likely to throw us into recession and lead to a similar type of economic crisis that we saw in 2008. What are the things that jump out at you the most . In the fundamentals between mr. Trumps and ms. Clintons approach . Here so we need to ask. As these candidates look at the economy, what do they diagnose as the central problem . When i look at Hillary Clintons plan, it seems to me she thinks the central problem of the American Economy is rich people have grabbed too much money from poor people and middleclass people. If you look at Donald Trumps plan, it seems he thinks the central problem for the u. S. Economy is that businesses do not have an incentive to invest. And the plans on both sides derived from that supposition. So we can start with the basic question. Who is right about that . Tend to pronounce other problem with poor people is that rich people took their money misunderstands how capitalism works. I think it is undeniably true that businesses have failed to invest. And it is undeniably true that u. S. Corporate tax rates are not competitive. That they are higher than nearly every other trading partner they do business with. Also undeniably true that a large part of the u. S. Economy is consumerbased, that that is driving the economy now. And if we can get more money to consumers, the middle class as mr. Green was saying, that would help the economy. You agree with that, dont you . Todd yes. By do you look at spending now and the economy, you see consumers are doing ok. The overall level of retail sales are not terrible. Auto sales have been quite sure wrong. Housing has been ok. The failing has been either the lack of businesses or the disincentives. I think what we had here are two very distinct visions for how Economic Policy should be conducted. A smallp once government, to stop all relations, to stop cut taxes. Cuts massively favor the rich. The one place he is not probusiness is on trade, where he is on the popular side. He is basically against free trade. Hillary clintons vision is one of a robust government that can get its hands dirty in the economy. Is there a redistribution aspect, yes. That would provide more benefits to the low and middle class. Why she is also talking up that investing in america, infrastructure, education things that have been cut the last 10 years. That is a progrowth agenda. How do you tax carried interest . Should it be as ordinary income, as Capital Gains . Steve as ordinary income. And i am a beneficiary of , still am fromt my private equity days. But what i did in my private equity days was work. [laughter] see why thatot should not have been taxed as work. It is a very small revenue. Roughly 50 billion over 10 years. It is a principal matter. On principles, both donald trump and Hillary Clinton are correct. Ramy you are watching bloomberg best. I am ramy inocencio. It seems uber are finding out what many u. S. Tech Companies Found out long ago. China is an alluring trap. Most american web companies, including google, facebook, and amazon, have either been banned from china or have flopped. We explain way why it may be time for u. S. Tech firms to give up on china for good. No u. S. Tech company has really cracked china. It is time they stopped trying. Google, facebook, amazon, microsoft, ebay all have china. Been taken out of the latest is uber. After a lost billions of dollars in the company. Apple has done well but has struggled recently. Why cant American Internet Companies succeed in china . Chinas web titans are unimaginably big and broad, making it tough for foreigners to compete. Alibabas ecommerce website handles more online sales then amazon and ebay combine. Of webas a bigger share searches in china. And chinas laws favor local companies. Facebook and twitter are banned in china. Google pulled out a few years ago because it was the target of massive cyber attacks, and it did not want to comply with censorship rules. And Chinese Technology has become really good. Local Companies Make smart phones as good as iphones, but with features tailored to chinese tastes, like guessing your age from selfies. And chinese tech ideas are being copied elsewhere, like facebook message or changing to a version of bchat. This has hardened china into an economy where locals rule. China seems to big to ignore, but it is also too big to crack for americas web powers. Ramy this weeks addition of small to big focuses on an upandcoming yogurt rand. As its founder explains, it story began down under. I was visiting my family in australia and tasted what was essentially the most yogurt delicious yogurt i have ever had. I figured out a way to license the recipe. Generationfourth dairy farmer to go into business with me. Focused on our backyard market. We did a large sampling and wordofmouths thing happened. In 2012, target came to us. Trynted to distribute out our format. Years later, target came back that they wanted to extend it to another 1000 stores. When we launched noosa, we did not have a business plan, no real strategy. It felt like we should say yes to every opportunity. One of those was coming east to a retailer outside of new york. We did not have the right resources from a marketing standpoint. We did not have the right supply Chain Logistics resources. It was too far afield to soon. Too soon. We took a more regional approach, working with the right retailers that were really invested in us as well. Fortunately, we were able to pull back without self imploding from the financial aspect. Towards the end of 2014, we could see the business was getting bigger and bigger. We tried to find the right partner to help us grow and take noosa to the next level. In 2014, and they helped us plan for building capacity. We just finished a 20 million expansion. We are in over 25,000 stores. As an emerging brand, we want to focus on what we did really well. That has put us into over 100 million in revenue. We want to have that fundamental wow. I have a really interesting chart. Is for Insider Trading pay what this is showing is the s p index here, the price of that against corporate insiders. It shows the buys. So executives or anyone important actually buying. This is the kind that is fine, that we can track, and it is all good. There are about 30,000 functions on the bloomberg. We always enjoy showing you our favorites. Here is another function you will find useful. Quic. It will take you to our quick takes. There are five Major Energy Sources in the world. Petroleum, natural gas, coal, renewable energy, and Nuclear Power. Thanks to the u. S. Shale and fracking boom, and the fact that it is cheap, plentiful, and clean, it is natural gas that may be the energy of the future. Turning ites are into liquefied natural gas, a, d that can be shipped all over the world, reshaping the politics of local energy. The trickiest problem with natural gas now is right in the name. It is a gas. Most gas travels through pipeline. That makes it difficult if the u. S. Wants to sell its gas to, say, korea. By few things make shipping natural gas possible. Gas, is cooling natural converting it to a liquid, then reducing the volume by about six hundred times. It is like going from a beach ball to a pingpong ball. This makes it possible to transport gas on really big ships, which leads us to a fleet of 250 million tankers, some the size of four american football fields, that can carry lng all over the world. The problem is these ships are too big to fit through the panama canal. Until now. Canalillion panama expansion project was finally finished in june 2016, allowing for faster shipping of lng to key markets like asia. So what does this mean for Global Energy . A growing number of countries are trading in lng. Here is the argument. Overall demand for lng depends on how fast countries will turn away from coal, the largest source of Power Generation in the world. That itelling point is is cleaner, producing half as much Carbon Dioxide as coal Oil Companies are pushing into the lng to embrace a clean your future. Shalls acquisition of bg group, the industrys biggest deal in a decade, made the dutch giant the largest lng trader. But countries like japan focus on Nuclear Power after starting to get its ,eactors back up and running after shutdowns prompted by the 2011 tsunami. And some u. S. Gas utilities are opposed to exports in lng, saying longerterm, it could raise gas prices for american consumers. Ramy that was one of the many quick takes you can find on the bloomberg. You can also find them on bloomberg. Com, along with all of the latest is this news and analysis, 24 hours a day. That is bloomberg best. Watching. I am ramy inocencio. This is bloomberg. The contemporary art world is as vibrant as never before. It is a Global Industry in its own right. Brilliant ideas looks of the artists that the heart of this. They have a unique power to inspire, astonish, provoke, and shock. Artists like