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tv   In the Loop With Betty Liu  Bloomberg  July 21, 2014 8:00am-10:01am EDT

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with a 30%head correction for the s&p 500 and he will tell us which stocks are over value this time. beware of the price of your coffee -- starbucks will raise prices starting today and we will talk to their competitor in new york. markets are reacting to the malaysia air tragedy. european stocks fell and u.s. futures are lower. vladimir putin is being condemned for not controlling the ukraine levels -- rebels who may have down the jet. death toll oft palestinians is up to 500. this was the deadliest day since fighting flared two weeks ago. a british grocery chain has a new chief. first-half profits missed targets. dave lewis will take over.
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is ukrainian prime minister tightening his stance on those who shut down the malaysian airline. he said they would be held accountable. justicell bring to everyone responsible including the country which is behind the scenes. we go to ryan chilcote with more. the missilesaid that brought down the jet was supplied by russia. what increased rhetoric are you hearing? >> basically, the u.s. over the the separatists in the east of the country of a cover-up. they said they have intelligence reports of this missile system
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being brought into the east of the country. they have evidence of it just after that attack took place on brought out of east ukraine and back into russia. correctly accusing russia of providing the weaponry in helping the separatists get the weapon out of the area. and we are just inkiev heard about increased fighting in the eastern ukraine. our business is functioning and how is life on the ground? kiev, it feels like it is a million miles away from the conflict. the business people said there is a feel-good factor. the plane crash has really shocked ukrainians and in many ways united them against the separatists. people are more confident than you might think. come september, a lot of bad news will come.
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the currency has been devalued so all of the imported goods now will be bought in that d value currency and that will hit shops in the fall and there is the prospect of a trade war with russia which would mean that the economy will fall 6.5% for further. >> what happens when it comes to the conflict? how organized are the rebels in ukraine especially around the crash site? >> i think they are more organized than you would have thought for what would be an uprising in the east of the country that began four months ago. they are less organized than most militaries and less organized than the ukrainian military which is not the most organized military to begin with. it is also using militia groups because they don't have the numbers to take on this fight.
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one thing the ukrainian government says is the reason why they are more organized as moscow is running the show. >> thank you so much. secretary of state john kerry is calling the separatist actions around the crash site grotesque. u.s. is trying to turn up that heat on russia to intervene and de-escalate the crisis in ukraine. peter cook has more. it was a strong weekend for rhetoric out of d.c. how certain is the u.s. that russia played a direct role? no smoking gun yet though we had secretary john kerry on five separate sunday talk shows. he talked about the russian responsibility and said there is evidence pointing to the russians training the separatists on those missile systems. over theofficials
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weekend said they had corps operated some of the communications between the separatists and the russians. perhaps the best evidence we have seen so far comes from the ukrainian government security service with pictures over the weekend showing a missile system allegedly on a flatbed truck heading out of eastern ukraine and back into russia. has not drawntes of the stink conclusion that russia played a direct role but certainly the rhetoric ramped up over the weekend from secretary john kerry and the president friday and they are trying to isolate vladimir putin in russia and put treasure on him to do more and finally accept the pathway to de-escalation of this crisis in ukraine. next for thebe u.s. government? companies will get involved at some point and ramp up sanctions. at the end of the day, it is up to europe? >> that's right, the big focuses
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to put pressure on the europeans or encourage them to finally get more serious about the sanctions. here is secretary john kerry over the weekend. >> the united states has been europe diligently with trying to bring europe along. it included additional sanctions. need to beey may tougher. it may well be that the dots and others will help lead that effort because this has to be a wake-up call to europe. this has to change. >> some of the others include the u.k. with prime minister david cameron considering pushing for tougher sanctions on the entire russian defense sector and some of the countries that have been most reluctant like italy which relies on mayia for its energy supply be coming around and be more
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supportive to the idea tougher sanctions. see tougher sanctions on companies with european leaders meeting tomorrow. john kerry is on his way to egypt to relieve tensions in the middle east. what is the goal there? he's trying to restore a cease-fire put in place in 2012. he will havear success with that with the united states walking a fine line between supporting the israelis 'ability to defend themselves or try to deal with these tunnels leading into israel from the gaza strip. at the same time, having to acknowledge the civilian casualties. wellilitary casualties as -- john kerry would like to be a broker for peace and he is trying to get help from the egyptians and getting that end result but it is not clear he will be successful but he is
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making the effort in the united states is right in the middle of middle east conflict as usual. >> thank you very much. robert hardy,n the head analyst at geostrat which analysis global strife. so nice to have you. according to your sources on the ground, do you feel that russia is responsible for this attack? >> thank you for having me on. i think there will be no firm evidence that will prove this. all the evidence now which is very compelling is circumstantial. an sa-11 missile that struck the airplane, they are both fielded by ukraine and a russian-made and they will have the same explosive signatures. i don't think the black box will
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provide any forensic evidence that will be compelling. the west is apparently made up its mind so does not matter. agree with john kerry saying this is a wake-up call? >> it will be difficult for the european union to get all 28 leaders to agree on putting heavy sanctions on russia. it will be very damaging for their economy. i refer to it as mutually assured economic discussion and i don't see that coming. i saw vladimir putin earlier this morning on tv looking for cooperation in investigations in the crash. he looked drawn. perhaps the sanctions could include industrial goods or military. france was going to sell equipment to russia. >> i think the french will go ahead with their deal. minister walked
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into 10 downing street and was photographed with a document saying the british government was against sanctions because russians helped support the city of london which is the financial capital. i cannot see all 28 members getting on board with severe sanctions right now. >> what is the next at them? exxon,out companies like they are working with russia and halliburton and slumber j are in the country. what can they do? >> not to mention gm and ford and major european companies who have more closure. responsibility, they will have to go along with what the government says. >> can they apply pressure on either side? >> that would not be their place and i think that would be unwise. seeing as how bloomberg is in and for said -- and information services company, i would like to propose that the u.s. and
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russia, the two big dogs in this fight, get together and make a major geopolitical and economic deal before this thing gets crazy. for the u.s. side, i would like theye private interests -- are more competent than government -- i would like to see a negotiating team led by tillerson from exxon and the russian side led by the ofirman and ceo in russia energy production and those guys have made huge deals before. >> you want them to get together to make a deal? have with me because we more to come. we have some breaking news on allergen.
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it will reduce its workforce by 1500 jobs. >> this is the company behind botox. thisompany came out morning with second-quarter earnings that beat analyst estimates. earnings per share came in at $1.51 per share. headline is they say they're going to cut 1500 jobs and eliminate 250 vacant positions. the stock is up more than 50% this year. nearly a 10%massed t to buy themvalian up and that's why stocks are surging. >> thank you so much. coming up, nearly 500 palestinians and 20 israelis have been killed as israel expanded its offensive in gaza over the weekend we are live from tel aviv with the latest and get ready to open your
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wallet a little wider this morning for the cup of joe. starbucks is raising its prices. will other coffee retailers follow suit?
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>> it is the bloodiest day of fighting yet in the gaza strip and john kerry is pushing for a cease-fire in the region. more than five hundred palestinians and 20 israelis have been killed since the start of the conflict two weeks ago. let's bring in elliott gotkine who is in tel aviv. what can you tell us about what is happening on the ground? >> i'm afraid it's up to dressing way familiar picture. more rockets are being fired from the gaza strip into israel. we had air raid sirens this morning. more people are dying in the gaza strip as well.
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forces asi defense part of their main mission of destroying the tunnel that hamas and other militants used to come into israel, they said they spotted to terror squads coming out of one tunnel it one of the militants were skilled in soldiers to engage the other 10. on one occasion, they discovered d tunnels emerging into a nearby kibbutz. >> has life shut down there altogether? you got the major who areional companies saying that israel's blessed by having a small domestic market. business,rnational three percent of its profit
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comes from israel. most of the factories in the towns near the gaza strip are struggling right now. >> thank you so much. for more on the situation in gaza, let's ring back robert hardy. we talked about the solution for the west and russia and you turned to private companies. what about what is happening now? a much more difficult situation and more than just thomas and israel. there is also two factions of the sunni-islamic world. you have turkey and those who support the muslim brotherhood put them in the says egypt and the palestinian authority soon to be joined by saudi arabia and jordan who are pushing the more reasonable solution. >> typically, it seems in the circumstances, some of the fighting has happened and been so terrible the international community cannot help but get involved and push for peace. why haven't we seen that yet
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? is the militant gaza child of the muslim brotherhood. their dedicated to creating a muslim state. they have never accepted a cease-fire until they can hang their hats on some sort of that they can call a victory. israel is focused on destroying the tunnels. there are dozens of infiltration tunnels. lord knows how many rocket firing tunnels there are. that could go very slowly. should probably let hamas know they are under threat before they get any sort of truce out of this. >> is israel taking a harder stance? >> i'm suggesting that hamas will not surrender unless they think their regime is at threat. israel -- benjamin
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netanyahu is plainly said he is out to destroy the hamas leadership which i think is a mistake. willing tobe sacrifice anyone to get what they want. it is difficult for egypt to become the moderator it normally badecause it's a very relationship with hamas and the muslim brotherhood. >> who then will become the moderator? >> perhaps the u.n.. i'm not sure the u.s. has enough sway here. external events that have to happen for hamas and israel to accept a truce. israel wants to destroy the rocket firing capability of hamas. wants the siege lifted and the blockade ended and they want some of their operatives who were arrested released. these are baseless demands. qatar is proposing that today.
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you are my expert when it comes to all things middle east. where is the next outbreak of violence going to be? >> iraq is the number one danger point in the world. yesterday there were five car bombs set off in baghdad. three were within 10 minutes of each other and the islamic state is changing from a guerrilla force into a national army. i heard of fighting reported that the baghdad airport. that is 12 miles from downtown baghdad. iraq -- thank you so much. coming up, mark faber will join me for a look at the impact the global market. stay "in the loop."
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>> you are watching "in the loop," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. for betty liul in and we are approaching 26th at sierra that means bloomberg television is on the markets. you will be jealous because it's time for futures and focus. our topic is gold futures. they are trading higher this morning after the precious metal suffered its first weekly loss in seven weeks. kevin hoffman and scott bauer with may. last week was a crazy newsweek. a commercial jetliner were shut out of the sky and israel
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started the ground war in gaza and things are going from bad to worse. why on earth did gold fall in that environment? gold is the area you go to when there are bad things going on in the world. beenre right, gold has stuck around $1300 per ounce for months and months. political actions that take it up and all of a sudden, it starts to fall below. one thing traders look at is the premium. how much do they have to pay for gold in their country versus the cme. on the bear case, there is china. its premium is zero right now and it's usually five dollars or $10. that's a little bearish. on the positive side is india, they aren't -- they're the premiums are declining but that is considered good because they had a bit of a bad on gold employ its -- they had a bit of
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a ban on gold imports. we are heading into wedding season. the new president will want to make nice with the indians who like to buy glowed -- gold. so perhaps it's the chinese premium dimensions that is putting pressure on the gold price. with that in mind, how are you trading gold now? there is also inherently about a five percent risk premium in the price of gold due to geopolitical tensions. what's going on in the mideast and ukraine is horrible. all the fundamentals actually point lower. i would be short at the 1320 level.
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i would look to buy that back at $1300. fundamentals are pointing lower and we have these tensions which is wrapping up the price. thehich is propping up price. everyone wants to see this go lower and i think that's where the pressure is. >> put your trade in layman's terms -- scott is telling -- the selling gold futures for 1320 dollars now and hopes to buy them back at $1300. if the trade is successful, the total profit per contract is at least $2000. you say five percent of the gold price is risk premium but consider the events last week. a commercial jetliner shut out of the sky and things are going from bad to worse and a ground war in gaza -- at what point do you change your mind about the risk premium? >> if i see this thing trade at 1325 hundred dollars.
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you can tell that the pressure really is to the downside. if there was much more risk or are there were buyers flooding the market place, we could see this thing trading at $1350. the pressure is to the downside and i think that is what is keeping gold around the $1320 level. bullish supply-side economics. thank you so much to both of you. we will be "on the markets" again in 30 minutes. >> thanks so much. i was jealous you got to talk about gold for five minutes. the maker of botox is cutting back reducing its workforce by 1500 jobs, 200 vacant positions will be eliminated. seoul areials in
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trying to ban uber./ they are telling citizens not to use it. there is a tainted meat scandal and china. one, is being accused of selling chicken after the expiration dates. in the u.s. economy, what happened to the housing recovery? the first quarter was going to be bad weather but now the job market will get that her and housing started to blondes last month. what gives? going to be were clear sailing with gdp up one percent, what happened? >> it is a conundrum. lost in the geopolitics last week, we got this on wednesday, homebuilder optimism rising to a six-month high. the winter is over and things
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should be getting better but not get that, the next day, we the big plunge in housing starts. not only did housing start to fall almost 10% in june but may housing starts were revised lower. this is a bad thing not just for the builders but for the economy. totraction and helping lead the first-quarter gdp fall and we are still short more than one million jobs in construction which means the economy. that issupposed to year be the year that housing got it back together. nobody knows what's going on. there is one group that knows what's going on, the homebuilders. a lot of them are reporting their earnings for the quarter and will have conference calls this week. a lot of them build down south.
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even with last month dropped, building permits are running well ahead of starts. maybe last month was an anomaly, can we look at it like that? >> is this a coiled spring or no momentum out there? new sales a been running at about the same level as starts which suggests they are selling everything they can build. what's missing is building for the future. >> what about improved confidence? our builders feeling any more confident down the road despite all of this? >> they say they are but when will they put their money where their mouth is? there is nothing wrong with the weather now. >> aren't we coming up on hurricane season? >> may be florida that will affect. existing home sales
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which are expected to be up a little bit but the real key will be new-home sales and they are supposed to be down and if they don't feel they can sell enough of them, they will not build them. >> we usually talk about how inventory is so low but thank you. for 30%p, get ready correction in the s&p 500. that is the warning from mark faber and we will ask him why he is so bearish right now. there could be a new subprime loan crisis ruling but this time it's in the auto industry. could this happen again? we will look at the numbers coming up. ♪
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>> investors continued to digest the news in the middle east in air crash in ukraine but the s&p 500 is trading around record highs.
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what does dr. doom think about that? joins me now. it's great to have you here. you think that there is no near-term economic impact and there is no fallout in the markets. >> i would say, at the present time, the news is always viewed as positive because even bad that the fed and other central banks will print more money. we are in a bubble. and a bubble, people are optimistic and there is euphoria about prices going higher. that may be possible. our stocks at good value is the question?
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i don't think u.s. stocks are particularly good value if you look at price to book, if you look at the market capitalization as a percentage now at theomy is second highest it's ever been, the highest was in 2000. market cap is the economy was of the this high, it ended in tears. >> you have been calling for correction on the s&p since 2012. you're calling for 30% correction but we keep not getting it. why will this time the different? correction ofr being positive about equities since 2009. 666.the s&p 500 was up keepsk the reason why it
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going up is the liquidity that fed and created by the other central banks around the world. of a brilliantse global economic outlook. as you know, the economy in the -- at agrowing at that very slow pace. it depends how you translate the economic data that the government publishes into reality. the european economy is hardly growing. in emerging economies, we have evidence and i repeat, we have the evidence that there is a meaningful slowdown. most of the economic growth in the world came from the growth , both american economy
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crises in 2008. at those economy slowed down, it will not be very good for corporate profits. >> does that mean you would be shorting u.s. and european equities and merging market equities? >> when you have a fed printing money like crazy and if the market drops 20%, they would probably increase their asset purchases. it's dangerous to short stocks. but we have a lot of stocks that have already gone down 20-40%. i was accused that i was calling for correction. i think there may not be a correction until there is a more significant decline. since november of last year, i have been calling for gold to and for the depressed gold
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miners to rally. year.s up 10% for the >> but gold is still down more than 30% since 2011. was that a bubble? has that bubble already burst? >> that is the view of some people and the majority of investors. view, given all the allrtainties that we have, the worsening geopolitical conditions that we have, i think investors should own some gold. index isr gold mining up over 40% this year. >> thank you so much. we appreciate your insights on the potential correction in stocks.
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we will be right back. ♪
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>> it's time for the big number which is 50% which is a rough percentage of bonuses this year. 20% of those surveyed say they saw bonuses dropping. they don't even expect a bonus at all for some. some of them look forward to large bonuses so we will have to see if they are right. starbucks already raised prices in stores last month and starting today, the packaged coffee sold at u.s. grocery stores will go up an average of eight percent.
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joining me now is caroline barrad the cfo of joe. welcome. what does this mean for your business when a huge chain raises their price? >> we certainly understand why starbucks needs to raise their prices. changes inbeen huge the market especially over the spring. it's a great opportunity for people who are standing in line to pick their heads up and see what else is out there. many of our stores are near starbucks. they can come over and try us. it's a good opportunity. >> does that mean you will try to keep your prices lower? >> we watch the prices of our contemporaries around the city closely. we monitor them regularly to make sure our prices coming equal or lower. starbucks is raising prices
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because the cost of coffee has shot way up. obviously that will affect you guys as well. does that mean you are eating your margins? >> we raised our prices slightly in april. we are constantly watching our margins, very tight. the coffee market fluctuates every day. to get that at a consistent price to the end buyer is a constant challenge. >> because starbucks is so big, they are able to source out longtime down the road, maybe 18 months. what's is that mean for you guys who are smaller? least 12o source at months in advance. that's just the way the market works. the coffee plant takes 3-5 years to yield the fruit. we are doing our contracts and negotiating six months out. that's the way the market works. >> how are you sourced right now? oure are just getting into
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manual that will be out next fall. we are just beginning and we're looking to buy for winter, 2015. >> what will you do with these high prices? >> the coffee buyer watches the market obsessively. while they are drinking coffee. as soon as he sees a window, he can't one of our importers and we try to lock in a contract. on theces are set based benchmark which is the market in our prices are at differential above that we pay to the importers. that the new york city coffee market is oversaturated might be an understatement. you only have eight locations. how do you compete when you have a lot of competition from small and big guys? >> we are opening our temp location in september. -- eric can't location in september. -- our 10th location and
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september. the quality of our milk and our customer service in the education our baristas possess, there is tons of ongoing classes. we think overall, the taste is uniquely different than what you can buy in the city but also the experience is uniquely different. we focus a lot on that. >> versus turning out a product rate you did not bring any with you. >> we have to get some upstairs. thank you so much. coming up, the old is new again -- 35 years after sony introduced the world to portable music, the company resurrects the walkman, i kid you not. a new report shows the predatory lending as loans have jumped nearly 130% in five years. ♪
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>> here is a story reminiscent of the subprime lending situation that led to the crisis. this type of perfunctory lending has found a new home in the auto market. subprime auto loans jumped nearly 130% in the last five years in which millions of americans with shoddy credit easily obtained loans from used car dealers. i am joined by matt miller who has been looking into this familiar theme. how big a market is this? >> i want to commend you on using the word perfunctory. that's pretty amazing. this is much bigger than the used car market. times" pieced a lot of digging with credit bureaus so they got a lot of information from experiaon and andfax who rate your credit
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if you get 640 or below, you can't as a subprime borrower. lending to those people counts for one in four of all car loans. in total, not just used car loans. used car loans are where it is use the most and rates can go up to about 23%. goes across all different classes. a lot of people buying new cars are taking out loans that go up , seven years, that's something you have not had in the past. used to be a car loan was five years maximum and that was a reason why investors could bank on that for a good and easy return. it was a fast loan. it also helped the car market. you got your car paid off quickly and then you bought a new one. >> so why? >> investors are chasing yield.
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>> these loans have been packaged and securitized for investors -- >> all of them are packaged into collateralized debt education. investors are looking for yield and businesses are pouring money into this sector. sequel to thed subprime mortgage crisis, like a cheap sequel, because it will not have the same horrible effectiveness not as difficult to repossess a car and sell it later. it is more difficult for banks to do that with loads of houses. >> you don't have the same kind of equity in your car. nonetheless, it's a terrifying comparison as we still recover from the crisis. thank you so much. -- 35 yearsmeback in the making -- this is the
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first sony walkman introduced in 1979. the portable cassette tape player sold for $200 in the u.s. despite the high price tag. it was well received. it had dual headphone socket send separate volume controls and that is sony's newest walkman. selling forthe zx-1 $700 and aimed at upscale users meant to resemble the original prototype. itsas 128 you give designated by its of storage and has wi-fi capability. zx-1 has been selling well in japan of was introduced in parts of europe and asia in a launch date in the u.s. has not been set yet. who would've thought? bloomberg television is "on the markets." futures are lower into
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the open as the s&p rallied on the most since april on friday. . ♪
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>> we are 30 minutes from the opening bell. u.s. futures are slumping this morning. european stocks finished lower and this is what we are working on -- russian president vladimir putin is facing worldwide pressure to diffuse the ukrainian conflict and rebels there of being blamed for the downing of the malaysian jet. allergan is cutting 1500 positions. russia andtween ukraine are intensifying after the shooting down of the malaysian flight 17. u.s. and europe are threatening further sanctions against russia
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and vladimir putin accused politicians of using the crash for selfish political aims. joining me now is ryan chilcote. how likely is it we will get more sanctions placed on russia? we sought the u.k. prime -- we saw the u.k. prime ministers suggesting and dust trail boycotts -- industrial boycotts. >> the way they make decisions at the european union is by unanimous decision. everybody has to be on board and there are 28 countries. there appears to be more momentum than there has been in the past going into the eu meetings. it will be the foreign ministers gathering tomorrow and great britain was talking tough in the netherlands is talking tough as well as germany who have not been particularly aggressive in a comes to adding more sanctions. then you get countries like france and italy which perhaps might not want to see more sanctions against russia because they are concerned what might
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mean for their own economy. given the outrage over not just the shooting down of the plane but also the investigation of new what many people view as a cover-up. that has been a mess. many countries will feel they have to do something so we will see how bad the sanctions will be. >> if you think european countries will need direct roof or do you think the inference is enough? >> that's a tricky one. youch officials will tell what's the point of having a probe or an investigation at the site which is not been conducted of everybody has made up their mind already? the feeling is that they know enough that they are prepared to take some action. they're not just upset with they find is which outrageous but the whole picture, the whole idea that
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this conflict is continuing. they see president is part and parcel of it and they think that's enough for them to act tomorrow and maybe further down the line. >> trickle down is what that means for businesses. we heard that perhaps russian parliament might wean their dependents of companies like ibm and microsoft. was the bigger fallout? russia's main problem has always been that exports thing like oil and gas but it imports everything else. movement been this since the annexation of the crimea to make more of those goods in russia. remember when the sanctions against russia began, mastercard and visa stopped servicing some credit cards. that free to the russians out. the russiansed
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out. this is part of that and i want to produce their own software so they are less dependent on the west. >> thank you so much. let's talk about media. if 21st a lot of money century fox acquires time warner? eye-popping $79 million. ath me this morning to look the wave of deals this year and the money behind that deal is my guest host, robert profusic. also with me is ed lee. does jeff bewkes when the most of this happens? terms ofe money but in the narrative and his legacy and career, in a way it's a bit of a loss. that was never his endgame.
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he might have foreseen that it might be sold in a few years time and his contract runs out at the end of 2017. reiki for he goes out, he would --e made a big teal but t a big deal but he did not want rupert murdoch to comment. >> does this wind up happening? we heard that perhaps fox would use the proceeds from the sale of its german pay-tv access to boost its offer for time warner. >> i don't think it's a question of money. money is everywhere right now. markets are so liquid. it's not really cheap but the terms -- it will be a question -- there have been many recently very large transactions that are hostile.
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>> does that mean that we could see an increase in the $75 billion but that's not the issue? >> there have been lots of deals recently were there have been six dollars. >> you think 75? >> that's just the opening bid. there will always be a back-and-forth. the shareholders want more than this. pointk 75 as a starting but $100 per share is what shareholders are suggesting they would like to see. the structure of the deal is a factor. it's not just how much cash or shares or kind of shares, fox has a dual class share structure where rupert murdoch has almost controlling interest in the rest are nonvoting public shares that don't get as much right. >> there is a lot of cash out
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there and money is really cheap but at some point, do companies wind up take up -- taking on more debt? times" broke down the potential debt structure if they got this deal. we are talking like $80 billion worth of debt. >> there is a limit. thingslook at step-by-step, you can always add $1 million, what's the difference? tipping point and at some point it gets to be too much. guys like me have been saying be hot for ald long time but it only started in the middle of 2013 but there has been a lot of d leveraging and there is a lot of cash. media is a great example of not that many big media deals. maybe there are some deferral of
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activity. >> the free cheap cash is been there for a while. >> and what companies are doing with it mainly perhaps because of the aftershock of the financial crisis, they are buying back stock and bringing up their dividends. you can only do that strategically so long. it is financial engineering and away and eventually, you've got to do something strategic. /comcastwarner cable merger happens and that was the big news. that forced everyone else to consider if they should have their own consolidation. >> if you are not buying, are you going to be bought? i appreciate both of you. inwill talk much more m&a the big pharma sector. british open champion rory
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mcelroy, the 25 there'll be came the third youngest golfer to win three majors holding up late round pushes by two others. he was not the only mcelroy was a winner yesterday. his father jerry is a barkeep in northern ireland. he bet some friends 10 years ago that his son would win the british open before his 26th birthday. he did and his dad netted $170,000. no word yet on the size of the party at the mcelroy's last night. coming up, we will talk more on to and dive into the deal buy shyer pharmaceuticals. ♪
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>> you are watching "in the loop." let's go back to the business of deals. shire was bought for
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$18 billion in this is the latest of a huge wave of m&sa. this year. 53%activity has climbed from last year. is still with me. the biggest distraction for you between m&a and back in 2005? happened -- it's don't think we are in an animal instinct environment but these numbers are crazy. the fear is gone. all of this stuff going on in the ukraine and the middle east and the rest of it, if this were 2011, everything would have come to a halt. there has been some impact but not the kind of ferocious impact we had in the shadow of the financial crisis. . inhink the fear is gone and
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the meantime since 2007, companies have told a lot of cash and deleveraged and bought back tons of stocks and you can only do that for so long and you have to do something strategic eventually to buy or build on that usually results in people buying. you make a good point about buybacks. a few analysts said to ge to just buy back stock. they have been buying back stock, everybody has. there was 1.6 trillion dollars of buybacks in the u.s. last year. that is a lot. and is a lot of money fundamentally, buybacks are financial engineering. in the home market of this market, is it is strategic. fire. has been on
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i thought the most interesting pharma deal was novartis about six or seven weeks ago when they announced for deals in one day in the multibillion-dollar range. they were repositioning a strong getwhere they may be won't to the top in our market space. >> is that why we have seen these stocks actually go up? >> yes, they are strategic. there have been a few examples but generally buyers are rewarded in their stock price because it is strategic but utilizing cash that is otherwise sitting on the balance sheet earning nothing. financing is very cheap and they've got synergy especially in pharma which is so research and development intensive. ge is relatively flat after the deal.
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where is the next slew of deals going to come from? will it still be pharmaceuticals? question is where a deal will not happen. and health care in particular, we are going through a phase where something has to happen. a lot of what is going on to try to reduce the cost of the delivery of the drug or the service or whatever because of obama care and everything else. health care has gotten too expensive. and one thing you can do is synergize the unit cost in the process. we have not seen as much -- there are not headline grabbing deals in the financial institution there is a lot going on there. energy as well. what's driving all of this? technology, globalization, fundamental forces -- this is strategic contrasted to 2006
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which was mostly financial. >> thank you for the fascinating conversation. we will be right back. ♪
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>> netflix reports earnings after the bell today. the fate of its subscription dvd service? jon erlichman joins me now. i finally cut the cord on dvd delivery but i am still in online believer. give me the numbers. when you look over the last couple of years, the growth of how many netflix customers there are. that tells you a lot.
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the company basically estimated that for this quarter, it will have in the neighborhood of 50 million subscribers, streaming subscribers. three years ago, they were hoping to get to around 10 million so the numbers having were -- have grown incredibly. the original shows are part of that. i think a lot of this is just about the plan to make the service available in a bunch of countries with huge expansion over the last few years in latin america and europe. later this year, they will open and another half-dozen nations. they yet the opportunity to get more to subscribers and help their profitability story because it costs money to get the towing. >> what kind of pressure do they feel? especially when you hear about these media deals? >> it's costly. they have talked about having $7 billion worth of content costs.
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sometimes you got to cut deals that maybe aren't the best compared to others you can sign because maybe you cannot get exclusive content. is not looking for as much content but stuff they can promote in a big way that they think their users will like. that's one reason why they went to original programming. are they going to abolish dvd subscriptions altogether? of saturdayrid delivery. they're cutting costs. there is still six point 5 billion people using the dvd subscriber business. hastings said something like this business will steadily decline for us every quarter forever. when he made those comments, they had more than 11 million subscribers. >> jon erlichman, thank you so much.
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we are a few minutes from the opening bell and we have the top 10 traits you don't want to miss after this break. ♪
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>> welcome back. it is 26 men is passed they are which means bloomberg television is "on the markets." >> futures this morning are a little bit lower. risk premium has returned to the market following the friday rally. focus asare back in tensions rise in ukraine and the eastd war in the middle affected some companies. netflix is out after the bell today as well as chipotle.
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allergan says their earnings came in above estimates and they will cut jobs. >> it is very busy. let's count down to the open with the top 10 stocks you need to know about today. number 10 is suntrust bank. it reported second-quarter earnings and revenue that beat analyst estimates. the atlanta-based company said profit increased daily six percent as is loan portfolio grew. >> number nine is oracle which is falling in the premarket. it is among u.s. tech companies caught in the middle of rising tensions between the u.s. and russia. russia is preparing new regulation to reduce its reliance on foreign technology after the u.s. imposed sanctions this last week. eight is in go pro. been rated as
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overweight. they have surged 45% since they went public last month. number seven is mike donald and yum. there were allegations that they sold chicken and beef that had not expired. >> nothing worse than a food scandal. is a lawsuit with reynolds american ordered by a florida jury to pay $22 million to the window for her husband's death from lung cancer. reynolds is expected to appeal the decision and the verdict is likely to be cut to a much lower payout. five, elliott management has taken a $1 in an investment that would make the hedge fund the fifth largest shareholder
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and will push the company to spin off the vmware. unit. number four is halliburton and plans for continued development of fracking. it expects third-quarter profit margins to be near 20%. >> number three is phillips which saw 23% drop in net profit during the second quarter. it also said his budgeting for improved earnings at its health care equipment unit at the end of the year. >> number two is hasbro. the company sales continued to grow in the second quarter. chilleden is still felt debt fell short of analyst estimates. >> i love monopoly. i am terrible at it. i lose every time.
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number one is allergan, the maker of botox is cutting 1500 jobs or 13% of its workforce as part of a restructuring as it fights a hostile takeover bid by valiant pharmaceutical. it reported second-quarter earnings that topped analyst estimates. there you hear the opening bell. we're are nearing the opening bell. john iie says it is time to go long on volatility. olivia and mike are staying with me as well. you want to buy the dollar, but where is it? you could not get worse headlines in the news now. >> i think the headlines have az andery bad, with g what is going on in that ukraine. one of the things to remember is that, unless that leads to a sustained supply shock for energy or it puts a big crimp in global trade, it should be sort
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of business as usual. >> at what point do energy prices get too high? another --think you're never sure to what level it is going to translate into a big crimping in economic activity. risehere, maybe a $20 more in prices would certainly raise flags. >> if that does not happen, where do you get the volatility from? growth has not been very dynamic. the fed is getting out. what is going to bring on the vol that you want to buy? >> you never really know what will bring on the vol. the fed has sort of created a environment where people think not much bad can happen. they have everybody's back. we know that there are periods
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of volatility that lead to spikes. you want to buy volatility when it is low. it is like you want to insure your house when it is not on fire. once the house goes on fire, insurance is really expensive. >> at what point do you want to buy in? >> when is the house going on fire? >> when does the house ignite? >> i am not sure when the house ignite. when things are cheap, you want to buy it. volatility is cheap. you want to buy it. if stocks are cheap, and there are a few like trw and hewlett-packard, you want to buy them. >> i spoke to the gloom and doom report earlier. we talked about whether stocks make good value. the question is, are stocks good value? i don't think that u.s. stocks are particularly good value, if
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you look at the price. if you look at the market cap as a percent of the economy, it is now at the second-highest it has ever been. >> so what do you think about that? would agree with mark in terms of small cap stocks. i respect fully disagree with the large cap stocks. particularly if we see a revenue acceleration. there is always -- even if the level is high, there is always opportunity. stock selection is paramount. n, i know one of the stocks you like his gilead. it has been a poster child of biotech stock. it has a blockbuster -- they cure hepatitis c.
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there are a couple of problems. there is a proposed $84,000 price tag. a lot of pressure coming back from the government. will private insurers pay for that? they are also working on drug to treat hepatitis c. given the fact that janet yellen warned that there may be a bubble, why are you looking to buy? >> first of all, i would say -- this may shock you. we think gilead is cheap. we would not say that about all biotechnology stocks. you have to remember -- this is for a cure. this is not for a chronic condition that you are continually paying for. it is cheaper than other standard treatments. because it is a chore, you will so likely -- it is a cure,
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you will reduce the likelihood of a livered transplant. >> they will not have 100% of the market, but they are the premier molecule. premier drug regimes coming out with a platinum standard. they have the gold standard right now. the platinum standard will be approved in the fall. the hepatitisly, c market globally is gigantic. i think it is massively underestimated. that is why merck is so interested. we think it can be good for merck, abvi, and gilead. gilead will be the leader. >> they're the new excited biotech space. most of your other calls are in large caps, existing companies, industrials. those are the kind of things you
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move into in a defensive phase. gilead is a small cap stock. that is what you look for with more volatility and growth. where are you at this point? is the just individual stocks or is there a trend? >> i would say there are some individual stocks. gilead is an exception in terms of high volatility stocks that we like. there is a huge market opportunity. in general, we like stocks that are generating high, free cash flow, that a returning cash to shareholders, preferably through dividends. and what types of stocks are those? they are selling back shares. most likely to start a dividend. that is subject to a takeover by a european company. hewlett-packard is another one, with a yield in the low teens.
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heat and industrial has an above market dividend growing its dividend and buyback. capital one will increase its dividend. they're one of the cheapest financial stocks out there. we think it pick up in interest rates pick up in consumer lending, which we saw last week, that is going to lead to capital one ultimately seeing strong revenue and free cash flow growth and outperformance of the financial sector. to thank you so much, john ohey. also, mike and olivia. coming up, cbs is betting big on sports. why they are putting their money on foot wall and leaving basketball on the sidelines. google may have found a use for all of the outdated phone booths in new york city. we will tell you what they're going to do. stay "in the loop." ♪
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>> here is a look at the top tech stories. apple is discussing job options. that is according to a friend of arne duncan. he left back in may. save phone booth from extinction. a plan is being considered in new york city. several other test firms like the project. uber hits a roadblock in seoul. people are telling rideshare users not to use the app, saying they are breaking rules. rory mcilroy was the big winner at the british open yesterday. he is the youngest player to win three majors, only behind jack nicholas and tiger woods.
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he is a fan favorite, being called the new tiger woods. i can be good for golf and for tv ratings. it is not just my dad watching. expiringnba tv rent soon, a bidding war could be brewing. to not expect cbs to get caught up in that. jon erlichman-- caught up with mcmanus. what did he have to tell you? >> a lot of interesting stuff. we talked about netflix earlier. there are a lot of ways to resist paying for cable. it is hard to get live sports. you talk about the context of players like espn. some of the biggest players in golf and football -- they recently acquired the rights to thursday night football. now they are focusing on the nba
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in 2015 and 2016. the rights to nba basketball become available. about that ands he poured the cold water. here's what you get to say. >> i love the nba. it is a great product. they have done a great job so casing -- showcasing it. because of our schedule, we do not have room for a full slate of nba games. unless you can make the commitment to an entire slate, i think we probably will not be able to bid on it. be interesting to see if we do have some kind of deal reached before the end of that contract. there was some reporting that there are talks underway with potentially espn and others. >> i never thought gulf would trump nba. you mentioned thursday night football. . that contract will be for a year. can we expect that to heat up? >> we're certainly curious about
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it, alix. the nfl has decided on a one-year deal. they want to boost the ratings for thursday night football. it is available on the nfl network. they're interested in seeing if they have it on a major player like cbs and what they could accomplish on a thursday night. there are expectations that they will get a huge audience. the nfl did not want to go beyond that. they just want to test the waters. manus, isk sean mc there a possibility that they could negotiate something longer during the season? >> we talked to the nfl almost daily. they're one of our most important partners. anytime they want to talk to us about extending a one-year deal, we will make ourselves available. we will talk a lot during the season. >> the numbers behind football are pretty amazing. cbs is paying in the neighborhood of $1 billion for sunday football. it is a profitable business for them.
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it speaks to the power of live sports. >> absolutely. you cannot just watch it on dvr, right? thanks so much. still ahead, american billionaires get richer as their counterparts get poorer. how the crisis in ukraine is hurting russia's wealthiest. ♪
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>> time for the global outlook. financial professionals are not optimistic about this year's
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bonuses. that is according to a global poll. less than half of traders expect their bonus to be bigger this year, if they get one at all. climate change will be an issue this year. tom stier gave $2 million to a super pac climate action committee. san francisco philanthropist herbert sandler committed $1 million -- prosecutors cindy u.k. are preparing to open a criminal investigation into the manipulation of foreign exchange benchmarks. that is according to a person familiar with the matter. authorities have been invest getting whether traders raked up the currency market. no individuals have been accused of wrongdoing. moving to the crisis in ukraine, it is now affecting russia's billionaires where hurts the most. there 0--their pocketbooks.
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the richest russians have lost over $13 billion. their counterparts in america have gotten $50 billion richer. can we blame all about money lost on what is happening in the ukraine and russia? >> a lot of it coming us. you have seen a huge economic surge. they're losing money and energy, commodities. know if everyone knows, but russia is one of the biggest producers of -- ukraine is the biggest exporter of wheat. it is not just gas. >> the sanctions are starting to have an effect, not just on the economics. you see the losing a ton of arey whileamer americans gaining, but you also see the fear. there all calling in horror. as the fear starts to play into
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the scenario more, you can see more money lost, more fear loss. >> not only that, but we are seeing some of the biggest billionaire movers. what is their relationship to vladimir putin and their influence on the next step going forward? >> if you are a billionaire in russia, you sort of do business -- definitely, the blessing of vladimir putin. you cannot become a billionaire and own huge swaths of the economy in russia. billionaires control massive chunks of various industries. you cannot do business without getting vladimir putin's bless ing. the more attention and nuance they can push on him -- he pushes that toward him. becausee funding sochi vladimir putin asked them to do that. it is not a two-way street. the billionaires have to live in fear. >> what is the worst-case scenario?
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business sanctions, more money taken out? >> it is business sanctions. you can take the control of the asset out and put it in gibraltar. but, can you actually do business? if they are centric, they can get their cash out. but you cannot take the assets out. that means that other portions will decline. >> matthew miller, thank you so much. that doesn't for today on "in the loop." tomorrow, i talked to the ceo of american petroleum institute. we will talk about the u.s. role in the industry market and why the industry is not getting enough support from the president or congress. we will also talk about how energy companies are dealing with the crisis in ukraine, as well as russia. that is tomorrow at 8:00 eastern. have a great morning. ♪
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the hour, which means we are on the market. we are 30 minutes into the trading day. let's get you caught up on where to stocks are trading. equity markets -- in the red following friday's rally. seems like investors are reawakening.
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onsre are rising tensi with russia and the fact that israel has escalated the ground war in gaza. equity markets are broadly lower. also, very much back on earnings. s&p 500 companies will be reporting this week. we heard from allergan, who sales topped estimates. they said they would cut about 1500 jobs today. keep an i out for earnings from chipotle and netflix. for more on the markets and what is driving them, i am joined by mike reagan. mike, it was incredible last week, given all of the headlines. terrifying stuff. equities rallied. if that does not rally the market, what will? >> people were more cautious than they were. the last record was on july 3. we're entering a third week without a record.
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obvious to see new records every day. market spikes after the plane crash and the israel situation. the rebound the next day was a sigh of relief. once we got caught up on what caused the plane crash, it became clear that it was not something we would have to deal with again. it was an aberration. notcrisis in ukraine was escalating to the point where we had to worry about planes being shot down. that is what you had that big rally rid the sales forecast was pretty good. we are not ready to push back to record levels yet. >> why haven't we seen volatility levels pick up? a corrected on friday. is it being pinned down by forward guidance? >> that is part of it. thursday was one of the biggest jumps.
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the sixth biggest jump since the bull market started. definitely something to look at. >> it is very historically low. >> it is confidence in the central banks. also confidence in the economy. are right.recasts andwill see growth earnings that should follow suit. >> so none of that seems to be causing a correction. what are investors telling you and when did they think we will see a reprieve? >> there have been any number of calls for correction. really ratcheting up the last couple of weeks. people are really expecting it. that is why another will not be one. it is out of the blue. depressions are not caused by valuations like we have. it is usually some kind of shock
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that causes it. we have had some kind of shock, and so far, nothing. investors are very much focused on earnings. ?an you glean any trends so far >> this was another quarter where the expectations were low. they have been able to beat it ready well. less than 100 companies reported so far. his neck quarter after quarter, 75% of companies beat? >> about 10% growth in 4% sales growth. >> same old story. mike regan, thank you so much for joining us. "market makers" is coming up next, ♪
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>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> pay up in ukraine. the flight went down, victims bodies still have not been recovered and the victims rebels are blocking the site. >> crumbling infrastructure. you can get from midtown manhattan to laguardia faster on a bicycle than on the subway

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