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tv   Whatd You Miss  Bloomberg  May 23, 2016 4:00pm-5:01pm EDT

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scarlet: u.s. stocks lower this afternoon. oil falling for a fourth day. the question is "what'd you miss?" been israeli spearing sing the worst recession in decades as international reserves are at a 13 year low. must the commodity that everyone knows about but nobody wants to buy. >> stocks down nearly 20% this year. we look into the luxury homebuilder. scarlet: we begin with our market minute. like trading marking today's session but the s&p 500 down and nasdaq closing at session
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lows with the indexes off by at least .10%. the dow pretty much little changed. last week we saw the s&p 500 rebound from a seven-week low. we are having nasdaq don't -- difficulty gaining any kind of traction without the catalyst of earnings anywhere. alix: the stocks you would think would selloff, you will see an interest rate rollover. volume was light, all by double digits at this point in the trading day. >> up not even .10%, the smallest range in exactly a year . was the last day summit move this little in a trading session. a couple of the big movers, the materials sector led the way today. stories, months and so -- monsanto had a big
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move on the buyout announced today. the deal on oci is not going to , investors like the idea that they will not be putting that cash out there to make the deal happen. the stock got a little bit of a boost as a result. in the bond market you did see the two year yield into its way little higher, the 10 year yield relatively unchanged. that pattern remaining today. .eal action was over in greece take a look at the 10 year yield for greece, it's now at its lowest level since november. lawmakers approved additional austerity measures to try to unlock the bailout fund. we saw that reflected in the bond market. scarlet: the dollar slightly lower. the pound was in focus today because were one month away from takerakes it scheduled to
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placed on june 23. were looking at the measure of the options market in one month's time for the town. it's at its highest since going all the way back to be wary. think at a two-year low. imports into china were down 49% in a and 10 also down. china did by a lot of nickel but it was not able to shake off the downtrend from its peers. it worries me when we see that unable tos participate in any kind of rally. that is a warning sign to me. scarlet: let's take a deep dive into the bloomberg. alix: i'm looking at the price difference between brent trading now and that in one month.
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when it goes into positive territory, that means the price right now is more expensive which implies a tighter market. itn you go below this level implies more oversupplied because prices now are weaker. does this chart make any sense? you have almost 4 billion barrels a day of supply, twice the average yet you do not see tighter prices today versus next month. that is a big question in the markets. why is that, or people not paying attention, or is there so much oversupplied at the out just cannot soak it up? scarlet: people can't get over the fact that the outages will have a material effect. i'm taking a look at financials. up as it has goes
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, there's that 16 move straight up, that means financials are out arming the s&p 500. last week we had better than expected economic data. it prompted investors to reprice for increases in that will be good news for financial companies whether they, big brokerages, or insurance companies. a lot of stuff still need to resolve with those be cap financials. i'm looking at what's going on in the m&a space. themes,at one of these shareholder friendly activities are showing signs of slowing of what this year. , so far thiss here back to 2008 you can see a huge jump last year in
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2015. now those deals are falling apart due to regulatory concerns , due to prices getting a little elevated in some of the companies -- you have the white line showing the number of deals down this year. the first quarter the slowest going back to the first quarter 2014. the question is whether or not these things cause slower dividend growth and if it will have a negative impact on stock. it's a bearish sign in the market scarlet:. scarlet:you can see all these charts and more on twitter. .lix: let's bring in our guest michael, good to see you. you were with us in late march and you said you were worried about credit risk, but that seems to have eased a little bit. what are you worried about now? michael: looking in the months
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ahead, i think we are shifting to a situation that people will be concerned about. we've moved a tremendous amount of money into the long end of the yield curve. it's a relative value story. i think we've got to the point 2016 it in mid to late will start to be an issue. i think we will see steepening yield curves globally and investors understanding the battle against deflation has largely been one in the developed world. scarlet: you're looking at the cleveland median and the atlanta fed. that's where you're seeing the risk, not taking into account that things are getting better. >> there are two kinds of inflation statistics, the kind that shoot up and down and then
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there's the much less cyclical numbers. cleveland atlanta fed have a couple of measures, both somewhere between 2.5% in three percent. that's almost exactly where the 30 year yield is. it's abnormal to have the long enough the u.s. yield curve and this sticky inflation in the same year. the only other time it happened was in 2008 when the financial market were -- hike had our first rate last year and treasury yield has come down even though this been hawkish speak lately. what is going to make those yields jump up if we have negative interest rates around the world and all these other non-us related influences keeping the yield low? >> it would have to be a global phenomenon. times in thisew
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long, messy cycle that the yield curve come down and move back up. the most obvious reason would the affirming of global energy andrices, food. that would make global inflation metrics look a lot stronger than they are today. if you have a global move away from the overarching on the long edge of the curve. u.s. -- other developed countries have things beyond 30 years. should the treasury be looking into something like that? michael: i read your story this morning, the treasury makes a good point, is there a smaller amount of demand for the 50 or 100 year u.s. bond? i'm sure the market would buy it . it's not going to have a significant influence on the total cost in the united states. people inng a lot of
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the equity market have been talking about is the idea that environment.ard i have a chart that looks at standard deviation quarterly going back a couple of years. we've seen some variation among returns but in the first quarter we know it was a difficult time for fund managers across the board to go in and find the stocks they want. what makes it so difficult even now there is more opportunity? leadership within the s&p 500 has switched without warning three or four times over the last couple of years. our guess is that leadership is about to switch again. if there's been one thing that's the right thing to do over the last couple of years is to have looked at what has really worked and realizes not going to work going forward. the safe stuff.
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the money really poured into utilities, staples. possibleanks are one beneficiary and the materials sector is the other. they're starting to do a little better against the index even on days you wouldn't expect it. -- where at some point do you think the money will end up flowing into? back towardt goes some kind of economic sensitivity. in the sense that inflation is normalizing. it's not going higher but it will go to normal levels. alix: michael, good to see you. scarlet: coming up, venezuela on the brink. it has more poverty than brazil and more money than saudi arabia. ♪
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mark: it's time for first word news. republicans are following the presidential election much more closely than democrats, according to a new gallup pole. sayy half of republicans they're following the election news very closely, but only 39% of democrats answered the same way. the irs commissioner plans to skip tomorrow's house impeachment committee. fire by some republican lawmakers for allegedly failing to cooperate with an investigation after the irs reportedly targeted conservative groups. benjamin netanyahu is again opposition leader
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into his coalition saying a partnership could lead to a peace agreement, but he says the doors close, citing the earlier education to hardliners. accused netanyahu of backing away from the peace process and being a hostage to political extremists. a veterans group says an american held by japan during world war two will accompany president obama to her roast them at this week, but the white house said -- to hiroshima this week but the white house said no such imitation was issued. local news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. back to you. alix: venezuela could be the next catalyst to rock oil markets. the country's economic prospects are at risk. we ask an energy economists what can happen to venezuela oil
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production if it's economy continues to spiral out of control. >> i think venezuela could go all the way to zero. it is just falling apart. they don't have any investment. >> of that is not priced into the market right now. let's not at all. alix: joining us is that the -- director of latin american development. is a lot of debate on whether venezuela were really give up oil production because they need to keep pumping for the cash flow. what do you think? experiencingis worsening economic, social, and political problems, but oil is the government's lifeline. it accounts for 96% of the government's foreign exchange. the government will do everything in its power to make sure oil keeps pumping. the government is experiencing serious cash flow constraints, problems with service providers and financing. were seeing some decline in
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production this year that we think will continue. do you think it will go to zero? >> it would have to be a real political crisis driven by a social explosion, chaos in the streets, that leads to a more significant disruption in output. i don't see a scenario where it collapses entirely. we could see the state-run oil company becoming a bargaining chip during negotiations between the country's various stakeholders, or you could see in a maybe violent scenario when there are massive protests and lyrical uncertainty that its partners and workers just stop showing up to work. capitald have human issues, potentially strikes causing a disruption in output. but scenario will really be the catalyst to watch. i was talking about the time spreads and how they are
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not factoring into the disruption. >> there are so many questions surrounding the direction of oil , and one thing we've looked at, you mention cash flow. there was an article today about how it starting to have an with economic factors. coca-cola saying it cannot produce there because there's not enough cash coming in. the question now is what is the next chip to fall. if the government has upon payment coming up, is that going to determine the direction that things go here? has provenrnment extremely willing to service its international debt, more so than the commercial debt it had with companies like coca-cola, which is one reason we see companies locally and venezuela scaling back production.
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they're facing serious scarcity in terms of the goods to keep production going and in terms of debt the government owes them. in terms of international bondholders the government has continued to prioritize those payment due to concerns about the impact the assault would have and the government's ability to maintain the cash flow. we think the government will continue to do everything in its power to service that debt. there's a lot do in the fourth in terms ofhis year the debt service schedule but the government is going to continue to aggressively/imports and deplete reserves to meet those commitments. in 2016?so no default >> i think it is contingent on where social dynamics head here, much like the destruction scenario i was outlining. the first couple of months of the year and five have
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contracted by 42% -- imports have contracted. the population is bearing the brunt of this adjustment in terms of rising goods scarcity. so far social conditions are becoming more tense, people are obviously of that, but we don't see massive protest involving the government's base of support which will be key in for them to rethink the strategy. if social conditions hold out we don't have that social explosion scenario and they continue to make payments and get through this year, but if they do see more coordinated unrest coming from their base of support, then they will re-examine their debt service commitment and think about imports over debt service. we just saw a great chart looking at the misery index of venezuela and how bad it is compared to other areas like ukraine or russia. what happens to venezuela is loyal -- if oil stays below 50?
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>> it's going to be tough. the country needs a shift in the economic model. the president has chosen not to do any sort of economic adjustment since he assumed office in 2013. doesn't change the scenario? venezuela'soint, oil basket is up to 37 and that feels better to the government and 25 which is where it was in the first order. current oil price environment is providing them with a little bit of relief relative to where they were. lower oil prices exacerbate discontent. you still have deep structural problems in the economy that someone needs to address. the government has a little bit more risk to maneuver than they did earlier this year. fertility rates
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inches to the highest since the mid-90's. we have a chart that you can't miss, next. ♪
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scarlet: japan's fertility rate, we know that demographic changes happen very slowly. , but it hasdged risen ever so slightly. they are now at the highest since 1994. on average, the average woman in japan in 25th team was estimated
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to have 1.46 children during her childbearing years. they want to get the average up to 1.8. no amount of yen devaluation is going to help that situation. scarlet: they credit the slight increase to the better economy in 2012 and 2013. that is the health ministries ask for nation. i'm following my theme of the day which is why is oil not reflecting the tightening apply market with all the outages. one possible theory, the blue line is the oil price and the white line is iranian production. what is more important are the orange bars in the second half of the graph. that is how much more production iran has added in the last few months. 294,000 to 650,000
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barrels a day in three months. that is unreal. it's now it's highs level since pre-sanctions production. if that continues, you can argue that's why you're not seeing a lot of pressure, but can they ,eep pumping without cash without big oil coming in at putting money into wealth, literally. >> there are so many conflicting signs, it's hard to get a grasp on something so global. if joe here all would have an unsecure commodity somewhere. , not a the mid-cap index group of stocks that people talk about a lot. thisteresting trend so far year, if you look at 2016 onwards, a strong rally in the mid-cap index. .his is outperforming the s&p
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so for your to date it did not fall as much since february 11 it has been rewritten -- rebounding even more. smaller starts going in the direction of larger indexes. what it's about, if you drill down into the actual ratings of the index, mid-caps have a pretty big waiting in financials, 27% compared to the s&p's 16%. s&p financials are not doing that great. they don't have capital markets of business that have come under a strain recently. you would think they would be more reliant on energy margins but the story has been largely about the capital market problems they have encountered. scarlet: great stuff, a forgotten group. coming up, approach european union candidate just barely eke
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out a victory over his rival in austria. we will have the latest from there. ♪ okay, ready?
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whoa! [ explosion ] nothing should get in the way of the things you love.
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♪ get america's fastest internet. only from xfinity. mark: her month senator bernie sanders will have major input in the democratic party platform -- vermont senator bernie sanders will have major input in the democratic party platform. he has selected five members for the committee that writes the platform. sixary clinton has selected members. the party chairperson selects the final four. the board has decided not to hear an appeal from former illinois governor rod blog lawyer which. -- rod blagojevich.
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freddie gray died after being injured while in police custody. a judge found officer edward nero not guilty of misconduct in office and reckless endangerment. the other officers will have separate trials over the coming months. president obama has ended one of the last symbols of wartime animosity between vietnam and the united states. the president, lifted the embargo on weapons sales to the country. mr. obama: this change will ensure that the unum has access to the equipment it needs to defend itself, and removes a lingering vestige -- that has access to the equipment needs to defend itself, and removes a lingering vestige of the cold war. it improves strong ties with vietnam in the region for the long-term. mark: the improvement in relations is being driven by mutual concerns over china's influence in the region. global news on a four hours a
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day powered by 2400 journalists -- 24 hours a day powered by 2400 journalists in 150 news bureaus around the world. betty: breaking news tudor investment, the firm run by a billionaire hedge fund investor, is going to cut fees on some funds to keep investors on board. its fees are among the highest in the industry. the at your investment, fees will now go down to 2.25 -- , the fees willt now go down to 2.25% of assets. alix: amazing. betty: this was according to a letter sent to clients that we obtained. alix: so basically, we will cut it, but still be above the industry average. amazing. we want to do a quick wrapup on the markets. a relatively quiet day. now off by about eight points. s&p off by four.
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-- dow off by about eight point, s&p off by four. telecom and health care fell the most. materials led the rally over 1%. any kind of good sign came from materials today. eric: as you point out, those sectors at the bottom are going to have the more volatile traits going forward. people were expecting lower rates for longer. betty: what of my favorite gauges is to look at how many points though down on the intraday. points of the dow goes intraday. -- point the dow goes down intraday. 70 points. last year, day pretty much the same thing. alix: what did you miss? a nailbiter of an election in
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austria. an independent candidate one over a far right candidate -- won over a far right candidate by a razor thin margin. he won by 30,000 votes according to officials. is not final, pending possible legal challenges. they have a process of a recount in austria? know, there is no automatic recount. -- no, there is no automatic recount. if you wante to do to challenge the vote is actually challenge and provide evidence for wrongdoing in polling stations or on ballots.
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the vote can be challenged successfully and has to be , or depending on the scope, what has to be done. there is no automatic recount. >> where does this election outcome or potential outcome position austria as far as that story goes? >> if the freedom party would have won, which it didn't, this could have been another catalyst and givenlar movement more distance to the european union and other member states. the fact that they did not win on this platform means that the catalyst is not happening at this point.
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it really shows that in austria -- and we have known this before -- but it really crystallizes the support that there is for a policy that takes more distance from brussels and the european union. as you point out, the right-wing did not win, but 49% of the vote shows the hostility toward eu relations. going forward, how does the nation manage this? it's not like 49% of voters are going to go away anytime soon. >> it is a challenge for the government. 50% want toe that leave the european union, but they are clearly not happy with politics in austria. government doesn't find a solution for that and doesn't
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the a way to bring together people by reviving the economy, getting unemployment down, and dealing with the refugee crisis, then it could be a problem very soon. now is whatstion happens to the losing candidate? does he disappear from the headlines? is he going to make another run at this? how does he reappear on the public stage? betty: that is -- >> that is a good question. he didn't come from nowhere. he is one of the key people in parliament. he was a prominent figure before and a large reason for the party. of the freedom they won twice as many votes as
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in any other election. be watchedthing to in the next week that will be , that could force a decision in the party at some point. alix: looking at the data for austria, it looks to be inching higher. what kind of economic policies does austrian need to implement to move the economic need all? unemployment used to be one of the lowest in the european union. it's still low, but for austria, it's almost unbearably high. ae people here are used to different level of unemployment. main things that has to be done is to get the pessimism out. in austria, there is a
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disconnect between the objective economic situation and the on theive feeling situation. it's the widest in the european union. is in every part of the economy and has to be overcome by some kind of feeling of upswing again. that's probably the best the government can do in the next month. that's my sentiment. betty: thank you for joining us and for staying up late to give us the recap. up, it's the commodity nobody knows about, i didn't even know about it, but now everyone wants to buy it.
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scarlet: i'm scarlet fu. it's time for a look at the bloomberg business flash. the fcc wants to know if the banks delayed reporting losses theortgage bonds backed by u.s. government. deutsche bank says it is cooperating with the probe. a federal appears court has reversed a decision on bankamerica.
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a $1.2 billion penalty was imposed after trial. the court says there was insufficient evidence that mail and wire fraud were committed by countrywide in 2007, 2008. more on tutor investments, run by paul jones. it is trimming some fees because of losses this year. go down to 2.25%. all this will take effect on july 1. the hedge fund industry's losses this year have caused a lot of people to question if the 2-20 business model is still worth it. so muchhave competition. you have to draw people in somewhere. what did you miss?
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the commodity everybody needs to know about. niobium. being purchased at 50% more than the valuations set by some analysts. jesseg me from london is rice bro. it's great to talk to you about this. i don't even know what this metal is. jesse: nader did a lot of people. it is a large gray metal used -- neither did a lot of people. it is a large gray metal used in steelmaking. grams of nairobi him to steal it lowers the toght by 100 -- niobium steal, it lowers the weight by 100 grams. alix: it was part of a hot craze that happened five or six years ago for china's rare earth metals. china had a monopoly on rare earth. prices shot up.
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valuations for the company shot up. is this the same kind of thing? jesse: potentially. we have seen two really big transactions in niobium in the past couple of years. that is what p/e dower interest in the space, a huge number of parties interested in the options process -- what he our interest in the space, a huge number of parties interested. had a company purchased by the former ceo of barrett gold in a 500 million-dollar deal in 2014. random interest from different players. how many countries or regions that'sy produce this? >> what so attractive about it. there are only three producing assets in the world. 90% of that comes from brazil. the assets were bought by china.
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the biggest player is a private brazilian company. they control about 80% of the world's supply. it's a $3 billion-$4 billion global market. alix: that's relatively small for the commodity world. how frequently is it reading used? scarlet: -- being used? >> in china, the use is very low. if you compare it to european americanls or steel mills, it's very low. alix: you are kind of betting on the fact that china will be using it down the road, but now, they are not using it that much. that's kind of a problem. >> yes, it's a risky bet. alix: how do you price it? lithium is hard to price because companies have to tell you what they will price it out. >> exactly. london came out and said they could not price it.
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we only know the pricing from what we hear from producers. it has an fairly stable at about $40 a kilogram. alix: a lot of companies are dealing with supply and demand that analyst seem to be questioning. >> large players dominate the market. the biggest risk in the outlook for niobium is that a private producer could easily bring on production and flood the market, and kill off all of the potential new entrance we talk about. raisempany is trying to $2 billion to build a mine intends any a. that is a factor involved in this. it out ofdo you get the ground? >> traditional mining process. it's actually tied into a phosphate mine and produced as a byproduct. alix: so a lot of companies wind
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up with it and don't really care about it. exactly. that is why anglo american holds the asset. a very troubled company right now. alix: niobium. thank you so much for teaching me something. jesse, good to see you. , we dig into the numbers for the luxury builder ahead of earnings tomorrow.
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scarlet: i am scarlet fu. what did you miss? price -- a frustration in the decline of stock price. inl brothers is down 18%
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2016. over the past year, it has trailed the broader market following comments in february that there was a slowdown at the start of the second quarter. revenue plunged during the housing crisis. it came back, but it stood once again -- slipped once again last year. toll may regain 20% this year. unit are keeping sales from rebounding even more. california is a key market, we are told. it provided instant scale in that state's high coastal markets. the northeast corridor has corner oflly been the their business. demographic trends are also turning less favorable. as for the city living business, it really helps differentiate
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toll from other homebuilders, that in the near term, increased reliance on incentives may be a drag on the margin. over the long term, toll has struggled to expand into new markets. it now makes up two thirds of all home closings versus 91% in 2000. toll brothers reports before the closing bell on tuesday. to discuss toll brothers is a homebuilding analyst. if toll is looking -- it operates or at the higher price than its industry peers. what can we expect from that business? >> it's a good question, because toll is a different animal. isir average selling price about 780 thousand dollars, compared to appear group of
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about $420,000. based on some of the conversations i have had and what we have heard from other builders, it does appear that demand at the high end has off and am what. i think part of that has to do with some of the financial market volatility we have been seeing. one of the things we will pay attention to is whether or not that persists. will make this quickly about myself. i have not felt any softening in my rent. exactly what part of the market is that and to what degree is it weakening? >> this is something investors are really going to be paying attention to in fiscal q2. a lot of the inventory softening demand in the new york city condo market has been on the premium and, $5 million and above. exposuresomewhat less
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to that market. they have been focused on building smaller square footage properties at lower asp's. they are somewhat insulated. that's something we will definitely be looking for. thatet: we have mentioned toll is looking to emphasize california as a focus of its growth story. contracts there were down 28% last quarter. >> it's a good question. california is a key growth driver going forward. some of the assets they acquired in the chapelle deal were considered premier coastal california assets. contracts were down 28% last year, but that has to do a little bit with how they are running the business. california is actually up 138% year-over-year. they raise the price and focus on margins. the stock is down about 26% in the past year.
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do you feel that is reflective of all these risks going into the quarter? >> i think if you look across the home-building space, you are seeing stocks trading at look value, which is indicative of a slower economic environment. that is something they will continue to have to battle, the sentiment on economic growth going forward. breaking news on jpmorgan periods private bank --'s private they have announced another round of layoffs following previous rounds of layoffs across the country. coming up, what you need to know to gear up for australia day. ♪
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gdp imports and exports all coming out it to :00 a.m. tomorrow. right now, economists are tomorrow. 2:00 a.m. i am looking at another emerging market, brazil. the brazil foreign investment coming out at 9:00 a.m. about investors feel giving money to brazil in the long term? >> also, new home sales taking on an extra degree of import at 10:00 a.m. tomorrow. alix: that's all for now. thank you for watching. ♪
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mark: with all due respect to you might need to boost your name recognition. >> bob corker seen going into a meeting with donald trump. >> who is that guy? >> i don't know who that is. >> who is it? >> i don't know. mark: tonight, we are uncorking fresh polling data because the political world has now guzzled down the general election head-to-head dead


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