Transcripts For BLOOMBERG Bloomberg Markets 20151223

Right now we are at session highs. We have been sticking to those for most of the day, especially after some data that came out this morning, including betterthanexpected u. S. Consumer sentiment and the drawdown in u. S. Oil inventory, a surprise drawdown, really. Lets look for the board is right now. Lets go ahead and take a look at the daily intraday chart right now, if we can do that. This is the oneyear right now. The dow is up more than 100 points for the sixth time in eight sessions. At the same time, the s p is well on its way to the second threethey rally. Take a look at the s p yeartodate, hopefully we have that we are now in the green for the year. There we are, about 0. 25 of. If we can hold onto that, we will be on for four years of gains for the s p. This is just happening today. Some really interesting developments today. So much of the days market events have happened because of oil. Nymex crude is up three days in a row, and it is still climbing, up 4. 25 . This is off of three days of gains. Brent crude is also seeing a tailwind here, up about 4 . Betty as you might expect, you see people going into the riskon trades, and then they are coming out of the safety. Ramy something i want to show you on my bloomberg terminal, this is the historical spread between the s p and the safe haven of gold. In your own terminal, this is the hs function. You today, the yeartodate, the s p has risen by about 0. 25 . But you can see this dropoff at the end of october, where gold has fallen and it is now yeartodate down 9. 7 , losing that momentum. Taking a look at gold intraday today, it is of course a similar story. Gold futures right now are down about 0. 5 . This is the second consecutive loss in a row. Investors are definitely in riskon mode. In addition to the other safe haven of treasuries, they are losing their attraction, the second day in a row. Two10year yield is up by basis points, 2. 26 , the highest in one week. Betty Ramy Inocencio at the markets desk. Lets check in on bloomberg first word news. Mark crumpton has more. Mark austria says that two syrian teenage brothers have been arrested on suspicion of involvement with terrorist organizations. One of the brothers is suspected of having fought for islamic state, and the other is accused of belonging to an Extremist Group in syria. A Human Rights Group accuses russia of killing hundreds of civilians in syria. Russian jets have conducted airstrikes in syria since deploying to a base in late september. Amnesty International Says russia is using cluster musicians munitions and unguided bombs. Some parts of cluster bombs often remain unexploded long after the fighting ends, killing or maiming civilians later. Three people, including two children, are dead and three others including another two children are hospitalized following a collision between a car and an amtrak passenger train in louisiana. Amtrak says the Sunset Limited from los angeles to new orleans when it hit a car on the tracks in new iberia, located about 115 miles west of new orleans. No passengers or crew on the train were injured. Prosecutors in new york city say stole movie and tv greg ipts, accused of hacking the email accounts of over 100 celebrities. He said he offered to sell scripts and private sex tapes to undercover agents. He is being held on Identity Theft and Copyright Infringement counts. Global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. I am mark crumpton. Betty . Betty thank you. As we saw earlier, oil is spiking on Inventory Data showing a fall of 5. 9 million barrels. However, supplies are still abundant, and opec predict lower demand for exports through 2020. What is ahead for oil . We have been talking about that today. Vince piazza joins me, the Senior Analyst on oil and gas for bloomberg intelligence. How do we impact reconcile what opec says about phone demand with the huge drop in stockpiles . Vince the drop in stockpiles is a shortterm, nearterm issue relative to the broader dynamics out there, the global oil market. Betty right. Vince even with the large drop of 6 million barrels, you also have to consider that imports were down about one million barrels, and gasoline down by roughly one million barrels, so you still have this issue today, vated inventory cross across the Petroleum Value chain. Crude and refined products. That will be the issue as we move into 2016, well into 2016. 35 above the fiveyear average on crude oil inventories. That will be the story to discuss. The story to focus on as we move into 2016. Betty vince, why are oil prices reacting so much, though, to what is considered just to be a shortterm data point, right . Liquidity less liquidity during the holiday season, perhaps. These are transitory, shortterm issues. We need to focus on the bigger issue. We sell have these robust, elevated inventory across the value chain. Not only in oil, but also natural gas as well. Crossing the hydrocarbon chain. Betty is anything going to change the longterm story at all . Could anything change the longterm story . Vince theres always the unknown unknowns. Perhaps geopolitics enters more in 2016, with issues with respect to the resurgence in iran, the resurgence in iraq, perhaps libyan barrels coming back online at some point in 2016. But i think the bigger issue is how the u. S. Reacts as well. We have been very resilient of the production site here in the u. S. Maybe that changes in 2016, when these hedges in 2016 roll off and Bank Liquidity also enters the picture as well. The Capital Markets were wide open in 2015. Ifld that change in 2016, they are more heavily lover vered . Betty why do you think opec has said they expect demand to continue to slide into 2020 . What is to be gained by talking about that . Vince this is an issue for opec to decide. What it will look like in a few years, in terms of their ability to control market share, not only today, but also in the near future. Betty vince, thank you so much. Vince piazza, Senior Oil Analyst at bloomberg intelligence. Thank you. New homes in the u. S. Sold at a slower pace than projected in november. We saw the data at 10 00 a. M. This morning. Is momentum in housing cooling as the year draws to a close . Joining us from french from bloombergwith intelligence. Drew, sales were down 10. 5 , and today we understand expectations. Whats going on here . Drew if we go to yesterdays existing numbers, there was a little extra noise, more than the usually is, and that has to do with the implementation of the new mortgage disclosure rule, the truth in lending. Basically, it is requiring lenders to provide documentation sooner in the closing process, at a more detailed level to borrowers. A lot of lenders have not been ready for this. It requires new systems to be put in place, requires the rollout of new software programs, so its creating a nearterm bottleneck in terms of the closing process. Betty i know that we were kind of preparing ourselves for this. We knew that it might hit the Housing Market. How long will it take to, you know, channel those issues to the Housing Market before we start to get to some more normalization . Ew i would expect as we get to the early part of next year, this will be behind the industry. It is pretty much just a process that has growing pains in it. If we look at the broader financials of the market, there is still place for stay growth in the Housing Market, both resale and new homes. That is strong job growth. Still low interest rates, you have mortgage credit which is tight but expanding, so overall we are looking at 4 growth in the resale market and 10 growth in the new home market in 2016. Betty drew, outside of that, what is the outlook for a specific market in the United States . Theres no reports coming out about how there are some problems surfacing in certain markets, in particular frothy iness. The journal had a report that theres three cities to watch, new york, san francisco, and denver. What markets are you flagging as maybe having too much of a bubble . Drew good question. This recovery from the Home Building perspective is becoming much more regionalized than in the past, and its being driven by job growth. We are seeing stronger job growth across the sun belt markets in the south and west, and we are seeing relatively weaker job creation in the midwest and northeast. As a result, those markets are lagging. The ones i would flag as the strongest across the u. S. Are really northern california, san francisco, driven by the tech boom. Parts of the southwest, thinking of colorado, and improving markets like las vegas and phoenix. Betty drew reading, who follows housing for us on bloomberg intelligence. Much more ahead in the next 20 minutes. Star setting box office records. I finally saw the movie last night. It has not helped disney shares, though. They are underperforming lately. Is now the time to get into disney . And, generally increasing security measures after another scare over e. Coli. How can it reverse this pr disaster . Betty welcome back to bloomberg market. Time for the Bloomberg Business flash, a look at the biggest business stories in the news right now. Auto safety investigators identified in a fatality linked to a faulty takata airbag. The latest crash occurred in july, in the pittsburgh region. A minor driving a honda accord under recall was killed. Takata faces what might be the largest Highway Safety penalty in history. Staples made its opening salvo to block its takeover against the case to block its takeover of office depot, calling it financially flawed because they compete against numerous vendors, w b mason and amazon. Com. F says and office depot the federal trade commission failed to show their merger will harm competition. Comparable sales will be less than forecast. Bed bath beyond said profit dropped short of earlier projections. The company says fewer store transactions than anticipated, including the critical thanksgiving holiday and the two days after that. Retailers are responding by giving consumers a holiday gift free shipping. 93 of retailers are giving free delivery this year, up from 70 last year. Some are providing it on every purchase. Thers require a 50 minimum that is your Bloomberg Business flash. Up next, disney underperforming the market despite record breaking numbers from star wars. Betty more than 100 million americans are expected to travel this holiday season, nearly one in three americans and 1. 4 more than last year. How are airlines preparing . The ceo of Spirit Airlines was on bloomberg this morning to talk about this, and how the industry is benefiting from all this low oil. Ben we are 30 bigger than last year, so we will carry a lot more passengers this year. A lot of people are traveling, and with christmas on a friday, it spreads the travel over different times. Some people leaving until the weekend. Betty 30 sounds like a good number. But the last time we spoke, you said you had your site set on sights set on the model of ryanair. Where are you in terms of reaching that plateau . Ben ryanair started their Business Model a number of years before we did, and they are now 350 airplanes. We will end the year with 80, so we are very early in our growth cycle, on pace to grow 15 to 20 per year 15 to 20 per year. We will be 150 airplanes by 2021. Erik are you getting a big benefit from reduced fuel costs . Ben they are a mixed bag. On the one hand, it lowers our largest cost, which is great, allowing all airlines to be profitable right now. On the other hand, its inviting more capacity into the industry, so all carriers even those with less efficient, cost structures, are growing. That poses a little dampening in the event that Energy Prices increase over time. But overall, its a good story, obviously great for consumers, because it means much lower prices. Is it fair to say this is the best of times for the Airline Industry . I cant imagine in my lifetime a better scenario for airlines than now. Fewer competitors, lower fuel costs, higher capacity, all the planes are full. Can it get better than this . Ben did some of the best times, but there is still uncertainty in terms of the overall capacity situation, so they could be a little better. But its pretty good times right now. You talk about capacity. What do you worry about from a competitive perspective . Who do you worry about . Ben our biggest competitor is probably amazon. Com, or someone like that, because the reality is we carry the truly discretionary travel. The people on spirit are people with a little extra money in the pocket, and we want them to use it to make a trip to see friends or relatives. Well think of the rest of the Airline Business as much of a competitor. Weekend to have a large cost of we tend to have a large cost advantage against anyone we compete against, so it is more about stimulative the discretionary traveler. Betty investors are growing more, with stocks, with the s p rallying for a third day ahead of christmas. Trading volumes are staying under normal levels, as you might expect with a lot of Market Players staying home and enjoying the holiday. Ramy inocencio is standing by with how the Options Market is trading. Ramy joining me today is an Investment Advisor at equity armor investment, joining me from the cboe in chicago. Joe, thanks for joining me on Christmas Eve eve. Talk about oil and volatility. The big surprise this morning was the surprise drawdown of 6 million barrels. How to me about the vix and that is coming into play with the drawdown in oil. Joe this morning, we saw a lot of people saying the bottom for oil was in, 34 at the end of last week. People say it will only be higher from here. Theres some Technical Analysis you can do with the ovx, the Oil Volatility index. We saw oil dropping to 37 in august. We saw higher levels of volatility in oil, the ovx with higher. This time around, were seeing it not trade as high. People say theres a little less fear, a little more complacency of their, and people are hopeful the future will be higher for oil, which the market is trading onetoone. Ramy a people say we might have hit a bottom for oil. Y . You agree, and whu joe i cant tell you one way or another, for sure. In the past when we have seen this indicator, it has been a bottom. The one caveat i can throw out there is that because its a holiday week, christmas and new years coming up, that sometimes dampens volatility and might be why the bottom, that might be a reason why this indicator might not be right this time. But historically, this has been a sign of a bottom. Ramy looking at disney, star wars, is all anyone have been talking about the last couple days. What is attractive about disney . Take us through your trade. Joe disney has been trading over 120 several times this year. Going all the way back to 105 even after the fantastic blockbuster of star wars. Of course, they were downgraded on espn, saying that cable the scriptures will be lighter. Will bee live sports supreme. People will always want to watch the nfl. I want to get into disney in a lowercost way. Stock todayhis at 105, and i will sell the 3 ch 110 call, give me a cushion to the downside should just the fall further. And i have 5 outside on this stock alone, cut out on 110. That gives me an 8 return in the first three months of the year. Ramy we will leave it at that, joe tigay. Thank you for joining us. Coming up next on bloomberg market day, we have a look at what is moving the nasdaq higher. This is Bloomberg Markets. Dont go away. You are watching bloomberg television. We will get a check on the news this afternoon. Mark crumpton has more. Are walking ats the mall of america chanting, what do we want injustice. When do we want it now. They will be outside the massive suburban complex in minnesota. More than a dozen Stores Closed ahead of the protests by likewise matter. They are demanding the release of video of the killing of an unarmed black man. Present obama will host a summit in california with Southeast Asia leaders. In november, he invited leaders of the association of Southeast Asian nations to meet in the u. S. But the summit could annoy beijing which also seeks to develop and improve relations with the leaders in the those nations. David cameron is looking into claims that officials prevented a muslim family from flying to disneyland for a family holiday. Officials gave no explanation for refusing the family for boarding the flight. And a woman accused of plowing a crowd through pedestrians on a Las Vegas Strip sidewalk over the weekend has been arraigned. The 24yearold stood in shackles and it did not enter a plea during her brief Court Appearance today. She is charged with murder, hit and run and child abuse. There is a genuine 20 date january 20 date for a further hearing. Journalists line betty we will get to abigail with more on the rally we are seeing for a third day in a row. Abigail a lot of strength. Three days in a row. It is up 1 and it is causing and it is caused by selgine. This is the top influence. This is after the company settled a patent dispute for the topselling drug. Jpmorgan has an overweight rating on the stock. Now the consensus price target is 100 for four dollars, suggesting it may move up by 15 . And the secondbiggest influence on the composite index is apple. Shares are solidly higher ironically as other analysts bump their estimates. They are concerned on the supply chain. One analyst downgraded their stock this past summer when it was about 19 higher than current levels. Yesterday he was out with a note suggesting that it could be too bearish on the march quarter and that the guide is not awful, there may be reason to get optimistic about apple again. Betty thank you very much more ahead on Bloomberg Markets. Inside chipotles contamination crisis, will new measures be enough to resolve this disaster. And 2015 has been a tough year for currencies. Donald trump sees economic clouds hovering above speaking at a rally he said that the market has gone down over the last couple of weeks. We could be in a bubble and if it crashes it is a problem. Donald trump discussed the economy while taking shots at rival jeb bush. We have an economic adviser to jeb bush and we spoke to him today. He responded to some of the attacks. Governor bush has said many times is that he really wants fundamental tax reform. He wants budget reform. He wants to make sure that we can invest in the future and not just the past. And he wants Regulatory Reform come all of those are doable. We just have not had president ial leadership to do it. Betty give me something specific. As specifically, lets say on tax reform. What would be the first step . What do you need to do when you talk about tax reform in general . What he has emphasized is that we really need to make marginal tax rates on income and broaden the tax space. Andy is the tax code to give opportunity to more people, strengthening the itc, cutting payroll tax on all the workers and cutting marginal taxes that are second to the earners. These are things that are doable and we can afford them. Betty there is debate on whether we can afford them, how we will pay for things like that. I remember when you are advising romney, one mitt of the promises was that he was going to create 10 million jobs. We have created millions of jobs with the obama administration, do you give them credit . By the men created and women in the private sector to make those decisions, no president , republican or democrat deserves all that credit or blame. The issue for the American People is not just jobs, but incomes. Into the right tax reform can raise rages wages. Or we will be stuck where we are now. Betty how do we get wages moving, they have been stuck. We can get them moving up we raise productivity, if we raise productivity we can improve investment, make people want to be in america again. Which is again a statement about tax reform, about Regulatory Reform, it is about the steps we can take. Betty witty repeal doddfrank . I would not refill it, i think there are pieces that are useful. The bigger question for doddfrank is did it make it safer . No. We need much better legislation than doddfrank. This is not an unfamiliar pattern. Hubbardhat was glenn who is an economic adviser to jeb bush. And to places chipotle says that they are fixing their methods. They say they will take extra safety precautions to make sure the food is in fact safety to eat. Once that for instance, dipping onions in boiling water to kill germs before they are chopped. All changes will, in the coming weeks, but will it be enough to save them from a growing pr disaster. Nick is here, he is a restaurant analyst joining us from los angeles. Next, what do you think about the steps so far . What kind of a grade did you give them . cprobably ac plus a plus. The steps they are taking need improvement. I have not done a good job. They have been reactionary, so Going Forward a lot of things they are doing is not really ensure that these things will not happen again. And to me they are not being very up front about the things they are doing. Locally sourced, it seems like now they are centralizing a lot more with the food, i think they are still putting a nice rosy color on it. They will continue at that leaston, when in fact, at they are going away from it. Betty it seems that way. Bully a rating on to chipotle, a low rating. What would make a change that . Requirements, our we see about a 10 downside in their spot. And i think that we are probably close to that downside but not over it. Why do you think betty why do you think im a well it will be very extensive for them to change logistics, at the same time while they are taking some steps as you play how they have been slow responding to this, more reactionary than proactive, how do you think that is . Ick i do not think they know what the issues are internally. Going forward, i think that they are waking up in the morning and try to see what they can do differently today. And that of having more instead of having more of a topdown approach. I think that is the problem. Betty morley really quickly, blaming the founder . I think he has to be more in control. Betty that is a hard question to answer. You do not want to the story is still developing so it is difficult to pass judgment quite yet. Nick, thank you. You can check out the story on bloomberg. Com. Much more ahead on Bloomberg Markets 2015 has been a terrible year for currency strategists. What one next year what will next year bring for them . We will explore that. Betty welcome back. 2015 has been a terrible year for currency strategists. Predictions were the worst. It was off by an average of 11 . The peso sank 35 , this is one of the many topics that we will be talking about in the next hour and a Joe Weisenthal joins us now. Joe, this is like damaging of a wound. Why is everything so wrong . Driver of everything was commodities. And if you look at almost any emerging market currency, there is a good chance that it is associated with the commodity selloff and so few people saw these crashing a severely as they did, the big story, that given the length it wouldve been hearted to get hearted to get commodities and currency and the added factor, there is a moreore divergence did than people divergence. More than people expected. And it became clear that the others came in the time soon, so that made it clear. Betty i know you will be talking to one of the currency strategists. Yes we will be discussing why this was such a frustrating year. Betty is anything going to get better in 2016 . Joe there is some hope. I have not heard strategist come news,th very optimistic but there is an argument that the currency has been devalued some us that trade so much that trade, there will be greater surpluses. You do not have to change the economy Business Model, you just import less because the currency is weekend weakened and things start to improve naturally. It is not an incredibly bullish assessment, but eventually you import so little that you help the economy and it helps the currency. Betty i know you will focus on the South African currency. Hotlyhat is one of the debated one. It is an interesting currency, because they are starting to see improvement in terms of trade. On the flipside, the fundamentals further economy remain dismal. Productivity is not good. It is a tough question. Some things are starting to improve, but on the flipside things are so miserable. Remember what happened last week with the political turmoil, they sacked a prime minister. So it is hard to get investors excited about that when that is going on in the government. Betty some people are predicting optimism for south africa. Joe because of this idea that it has gone so beaten down that some trade issues are starting to improve or at least stabilize. Betty joe, thank you so much joe, the cohost of whatd you miss . And we will take a look at the big business stories in the news. It takes years to lift a ban on most oil exports, but only a week for the first shipment to be announced. Enterprise will load 600,000 barrels of crude onto a tanker during the first week of january. They sold the cargo to vitol who will probably send it to europe. And a new bid from Canadian Pacific railway, possibly moving this over to a fight. Of the board decision was unanimous. They have said that the company is willing to go to nor folk southern if the board will not discuss a takeover. And carl icahn has a swing does offer for pep boys. It is a promise to talk any bid from bridgestone for . 10 a chairshare. Bridgestone has until sometime today to respond. 3. 4 to anre up , the saleste of rate for october was revised betty year today, new home sales are up 4. 2 helped by job growth and relatively low mortgage rates. And the year is starting on a brighter note as consumers are in the holiday spirit. We will look at the index not jump to 98. 6, that is the highest level since july. It was 91. 3 in november. That is the business flash. We are 15 minutes away from the closing bell. Amy has your market check you can feel that the markets are spinning out as we get closer to christmas. Ramy we only have about half of the trading day left tomorrow. Looking at today, we can actually see that some of this volatility is pushing the market into the green. It has been green, green the whole day. Markets are at session highs and we are three for three in the past 30 days. The s p 500 is up by 1. 2 , maybe at its highest for the day. And the dow is up 1 . Aboute nasdaq is up o. 8 . We are now positive year to date. 2 , we wereut higher about a quarter of a percent, but i want to bring this up to look at the volatility happening over the past year in order for us to get to this little green. I bring this up because the s p 500 is actually flipping flop flipflopping back and forth. A record 24 times in flipflop ped. If it closes above one marker today, then the number will rise to 25 and that flipflopping could bode well for 2016. 12 years with the most numbers back and forth were followed by byrs rid the s p 500 was up an average of 9. 6 . And looking at the terminal, i want to show you this function. This is a seasonality heat map. This puts on a monthly basis since 2001. We have some christmas colors. I want to look at a couple of the red blocks. One of them is from december 2015, we are on track for a negative december. 8 . The last time we were lowered then that was back in 2002 when the s p 500 closed by 6 down. Because of the rise in markets, the s p 500 is getting closer to closing positive for december. So maybe we will see this santa balance. Betty we still have a few more days. We are also watching oil. That was a big story. Been thet really has main signal to the market. Crude was rising today. Nymex was up. This is a session high because of the crude inventory numbers. Brent is also feeling the tail end a tailwind. Poponal gas also hit a today, bringing natural gas up by 5. 25 . And we might be having 60 degree weather in new york, but for january the forecast may drop below normal harkening back to this time last year. Before i wrap it up, it is a risk on day, save havens are losing their shine. Gold is falling about. 5 , hitting session lows. And u. S. Treasuries, the 10 year has been falling. And the yield has been rising two basis points. And this is closing near its session highs. Betty thank you. Stay with the markets and the s p rally, we are joined by mark for some fast commentary. What what do you make of we were just saying, we are finally eking out a gain for the year for the s p 500. What do you read in that . Mike i love how he talks about the index crossing for the year. Rare, this move for the full year. 1940s to the 1940s, theyre usually followed by strong doubledigit. It is hard to say. But i will say it has been a very interesting week for a few reasons, mainly a lot of the technical reasons that move markets that you do not think about too much. Starting with friday, we had a quadruple wishing. Period. We had a ton of options expiring. These were to protect against the feds moves. Then on monday we come into a very strong open, doubledigit gains in the dow in the morning, doubledigit rather, but then it starts to fade. And a real strong close. And there was an adjusting note explaining that, saying that monday was the day that index fund payout the dividends. So most investors do not realize these are dividends, they just reinvest. We saw a sharp rally, so they had really bizarre things moving the market back to back. Betty and it is hard to read much into that. Mike yes. We have the gdp, we of consumer data that was good, but otherwise betty but it was not that great, subtitling. Know, it was sort of a wash. Not a lot of earnings. Then we get today and there is rapid rebound in energy stocks. The biggest movers today, it would like southwestern energy, williams come to the, range resources, really what we saw this week was some of the beatendown stocks from the year making a comeback. And you think, what could that be . The big gain an oil is part of that. But there is also some heavily shorted stocks. Part of this might be people saying now oil is up, now we should cover this. Or it could be value, the question is about value, the beatendown stocks like Energy Financials that are really going to lead the way next year as opposed to the growth stocks, the amazons, and so on. Betty very quickly, i see a headline coming across. One company could be delisted from the nasdaq. Resigned, ando they are involved with Martin Charlie everybodys favorite punching bag this week. In any case, stuff like that has not affected the overall market, obviously. Right, there is plenty of other drama in pharmaceuticals. Betty that is right, but it does raise the issue with biotechs and pharmaceutical companies, if there is going to be legislation around drug pricing. Mike it is a big question. Obviously the president ial numbers are playing a big role in that. Health care in general is again forecast to be the bright spot when it comes to earnings next year, doubledigit earning growth. Betty again. Is otherwiset is going to be pretty lackluster next year. There is a big margin of error trying to forecast the so far out. We will see. As of today, it does look like a bright spot. Betty m thank you. For more information, you can go to the web. The market close is next. A reminder, tune into bloomberg west tonight at 6 p. M. We will be talking to the founder of great cost partners partners. Ft we are moments away from the closing bell. Im Joe Weisenthal. Alix and im alix steel. [closing bell] alix u. S. Stocks closing higher. S p 500 pushing a rally to 3 . Joe the question is whatd you miss . Alix the commodities heading for a second yearly loss. We have the charts everyone in the oil industry will be watching. Where americans are moving. States with the biggest population increases. How one might be jeopardizing credit rating. Does it actually matter . We begin with the markets. Another rally into the close. We closing around session highs. Off 27 volume was versus the 10 day average. Oe