tv Bloomberg Best Bloomberg July 21, 2017 8:00pm-9:00pm EDT
♪ shery: coming up on bloomberg west, the stories that shaped business around the world. major banks beat earnings estimates but there is more to the story. >> i think it was a little worse. vonnie: central banks meet to set policy. >> another return for the moment. vonnie: some big firms make outside hires as others boom while in. there could be the trump agenda for a loop. from oil to real estate to distress, bloomberg best offers insight. >> it will not rise by very
much. >> a phenomenal asset. the return on those instruments could be quite spectacular. vonnie: is the economic last half empty or half full? >> there is a lot of growth. >> i don't think there is a lot of confidence today that we are looking at 2% growth. vonnie: it is all straight ahead on bloomberg best. ♪ vonnie: hello and welcome. this is bloomberg best, your weekly review of the most important business news, analysis and interviews from bloomberg television around the world. let's start with a day by day look at the top headlines. the week began with a fresh batch of economic data from china. >> the chinese second-quarter gdp shows the world's
second-largest economy growing 6.9%. growth rate of >> all the numbers beat. 6.9%. >> all the numbers beat. gdp was better than expected. also, factories are pumping out goods at a faster clip. seven .6%, more than a full percentage point more than the previous month. we have retail sales much better than expected. 11%. we were expecting 10.6%. just inching above the estimates. this economy even though the authorities are trying to curb excessive debt and over leveraging, they are seeing still strong production and strong growth over all. >> i think all numbers suggest the economy has stabilized, led by strong fiscal policy. thit does not affect the real economy much.
vonnie: disappointing quarterly results from the central bank of america. trading fell 40%, making it the worst first half in that area of blankfein's term.oyd line.l trading coming in >> i think it was a little worse but equity is better. there is a little bit of trade-off. banking fees are also better. there were some bright spots in the quarter. on the other side, the cost rates show the lowest cost rate ratio in the first half for goldman. it shows me they are doing what they can in the tougher environment. >> bank of america is very tied to long-term rates. anytime you see the 10on the ott doing what we think it should be doing and picking up, that is bad.
what really sticks out is net interest income which is core revenue for any bank, especially for bank of america. that is something that fell twoite these productions months in the quarter saying we least $35 million least $35 million to $50 million increasing and they actually saw a decline. vonnie: after two more republican senators they would decline the health bill, not only is senate majority leader's mitch mcconnell's replace is done, so is repealed. president trump: i am not going to own a, the republicans are not going to own it. we will let obamacare fail and the democrats will come to us. >> this bill that failed miserably, let's go through the tick-tock. last night, u.s. senators coming out and saying they are against it. and then the majority leader
back to buy president trump himself saying let's revoke to appeal this. then senators like collins saying we don't even have a vote to proceed. there is already a new pat h forward but they will be relying on a very narrow path forward. vonnie: morgan stanley has reason to celebrate. traders posted more fixed income revenue than goldman sachs. the smallest drop among the top five u.s. investment banks. how did morgan stanley managed to better than goldman? >> one of the things we were highlighted in the choices of writing was the commodities sector. this is something morgan stanley has largely gotten out of. interestingly enough, goldman sachs did not exactly say we had a terrible loss in commodities. >> they said it was the worst
quarter ever. >> maybe not a lot, but certainly bad. that could be one of theforwardg on a very narrow things. one other item that morgan stanley talk about in terms of fixed income was they had the rates, they are not good for them. >> the bank of japan. as expected, they took no steps to downgrade their aggressive program. >> to central bank acknowledged it was the being too optimistic with 2% inflation target. >> the date for when they will hit of the 2% target around april 2019 which is pushing it a year. their quantitative easing, their relative control. >> there are a number of risks. one is the consumption hike schedule in 2019, that is bad timing. it would be best if the
government delays the consumption. what is much more important, the ability of prime minister abe. we are seeing the plummeting of his approval. our support for bank of japan. i think the bank may start to feel it cannot maintain the current aggressive stance. >> anticipation for all the build. the outlook looks less favorable or if financial conditions become inconsistent in part of inflation, they are ready to increase the program. then came the news conference. it certainly could be taken as hawkish. the financial position is the last thing the ecb wants.
>> the may 2013 temper tantrum still haunts central bankers. the backpedaling from the meeting was very visible. this is a very delicately worded structure. dateid it was an autumn and would give us further guidance. nevertheless, tiptoe he will. quite a lot of uncertainty and i don't discount another. >> bloomberg has learned robert miller is the special counsel investigating donald trump's campaign. possible ties to russia and out examining a broad range of transactions involving the president's businesses and some of his associates. give us the details we know for certain. >> we know that bob mueller is looking at a lot of transactions that involved not president
trump but developer going back at least a decade or further. anything going into russian banking for trump apartments, miss soho, the 2013 universe pageant in moscow and the sale of a luxury property in palm beach almost 10 years ago. >> the legal authority that bob mueller has is very broad. the language says words to the effect of matters around the russian campaign collusion question and any other matter. hasink robert mueller decided these other matters are part of his purview. he was fbi director for a long time. i would call him a prosecutors prosecutor. he will go to where it have to take him even if it is unpleasant. i don't think he will hesitate to bring down the hammer on donald trump, donald trump jr.
-- any of the people caught up in the crosshairs. i think he views his mission to get to the bottom of this wherever that leads. vonnie: a staffing shakeup at the white house. white house press secretary sean spicer announced his resignation after president donald trump hired a financier as his communications director. let's get more with kevin cirilli. kevin: a clear shakeup in the communications department of the west wing. come out asat has the most combative against the media and the most visible. i have spoken to several sources that have said the president has grown frustrated with sean spicer. >> sean will continue to serve the administration through august. the president has appointed anthony scaramucci as communications director. >> i don't have any friction with sean. this is the white house and we are serving the president. wewant to make sure ou
put the president agenda first and we serve his interest. we have a little bit of friction inside the white house as a result of that. we can all live with that. i'm used to dealing with friction. vonnie: still ahead, as we review the week, neil atkinson of the iea critics oil prices will keep rising. plus, no love for president trump, but likes what he sees in the u.s. economy. we will also have a thorough roundup of the week's earnings report. week's topof the business headlines. a proxy fight with procter & gamble. >> it is not a breakup. it is very much acceleration of the plan. vonnie: this is bloomberg. ♪
vonnie: this is bloomberg best. let's continue our global tour of the week's top business stories. a legendary buyout firm is set to deal with the future without its founders. >> kkr has taken a big step in succession planning. the private firm has elevated scott russell, two executives in the 40's to the new role to co-p resident and co-chief operating officers. it is to prepare the firm when the cofounders are no longer at the helm. inthey founded the firm back since.d have run it they started with her mentor who left in the 1980's. this has been their shot. people wondered once they got 73, whoir 70's, both
was in line to take over. this answers the big question not just for the public investors, but also the investors, pension firms and endowments that give billions of dollars to them every year. >> the british broadcast confirming this morning for a new ceo. a successor and start a new position in january 8. there were rumors she wanted to go to politics.why did she land at itv? >> it seems like a strange move to go from aviation to broadcasting. for her, it is less odd because that is where she comes from originally. she worked for the guardian. she's probably at a point in her career where she would like to try something new again, something old to some degree. maybe trying to reinvent herself more into production, less on the advertising. the question is does she still have that touch?
that she still understand that industry having spent seven years away? ceo of the oil company has resigned, citing health reasons. his ongoing battle with the shareholder. he will be replaced by the former head of the sociology chemicals division. it is second fiddle to what is happening with the lax story. movie's resignations open the door for what is happening? because is the question that is june 1. it has six months that it can come back with a new offer. successor is currently the head of the chemicals division. until now, the market is looking when azko will spin off its chemical division. how can the attention be
of thed if the head chemicals division is now leading the company? >> what looks to be the biggest proxy fight in history, trian has nominated its founder to the board of procter & gamble. procter & gamble has a market cap of over $200 billion. they've been talking with roger for some time. why did they decide to move? meetingly, there was a where they presented their ideas for how this company could turn little fastera and more responsive to the market changes. get auggested that peltz seat at the board and the company's directors decided that was not the avenue they wanted to go because we already have a get a seat at the board and the plan in place for writing the ship. >> is this a restructuring situation? >> it is not a breakup and not a ceo change. it is very much acceleration of
the plan. peltz does not believe that will have any impact whatsoever unless they have somebody there guiding it and pushing it through. to reducery moving financial risk and stimulate growth, some bankers have lowered the rates they offered on wealth management products. >> the wealth management product part is important because they are essential cog in the china banking industry. on the one hand, they are popular for retail space, looking for higher yield. they have been averaging 4.6% in recent months. retail is happy to funnel their money. the banks like that because they are an alternative source of funding but cheaper. the reason regulators are worried, they are saying if you are paying yields that high, there is a risk you might pass it onto your customers and hurt
the real economy. regulators are trying to put a squeeze on the wealth management product, telling these banks to put down the yields for the customers to make it more affordable. squeeze on the wealth management it's generally part of this wider crackdown of containing risk. >> the german carmaker is recalling 3 million mercedes-benz diesel vehicles after potential in emissions cheating. the company could avoid massive penalties. what led to this recall? >> it has been bubbling along ever since the volkswagen crisis two years ago. they have been very adamant that they have not cheated like volkswagen but they may have pushed the boundaries in terms of regulations in turning off emissions controls to protect the engine. the boundary for those criteria is pretty loose. they are trying to come good
with the german government and saying, ok, we are going to get out ahead of this thing. we are going to basically recall every single modern or sadie's out on -- mercedes out in europe. if this fixes the problem for them, they get away pretty cheaply. >> trade talks in u.s. between th washington and china have gone off to a rocky start after news conferences were called off after the trade imbalance. >> it is time to rebalance our trade and investment relationship in a more fair, equitable and reciprocal manner. >> we will manage the expectations going into this dialogue, but it feels it is more acrimonious than expected. >> the opening statement was. the rhetoric was sharp. the chinese also warning the united states not to bring
geopolitics into it because any kind of sanctions would torpedo the talks. maybe a direct reference to the field of sanctions the president has threatened. no specific agreements worst with tech fest were expected at this meeting but -- were expected at this meeting but they could create an action plan of one year of negotiations to follow the 100 day negotiations at mar-a-lago. neither side is talking yet. fineutsche bank ceo john telling employees to prepare for a hard brexit in a videotaped message. he said there is a lot of detail and agreedd out depending on what the rules and regulations turn out to be. we would try to minimize disruption for our clients and own people. basically what we are seeing the big banks are making decisions, assuming they will lose rights from written into the eu.
they are looking into the businesses, trading businesses and deciding they will have to have parts of those in the eu to be opposite of those markets during brexit. iswe are finding that cryan saying we are preparing for a hard brexit scenario and that and move a this large chunk of the trading business into frankfurt. >> and agreed depending on what the rules and regulations turn out to be. we would try to talks between ss networks interactive suitors are heating up. to people familiar to be bytter, a deal could the end of the month. viacom anhas been holding separate talks with the owner of hgtv and the food network. give us a sense of what is to be negotiated? >> who will control this combined company? whether it be by the end of the month. viacom and is discovery or viacom, the control of a combined company is somewhat tricky because all three companies here are owned by families, or controlled to some
degree. scripps networks is owned by the scripps family. john malone own a lot of the entities. done with a cash and stock component as my associates are telling me, both sides will have to figure out exactly who controls the boats. those can present major complications to a deal being done and i am sure what the advisors of the companies are working on right now. ♪
investors that stockpiles could shrink and prices rise in the second half of the year. it is still a complicated picture. 's neil atkinson discusses the outlook for oil. >> next week, opec will meet with russia. are they going to achieve more production plants? >> we don't know if that will happen or not. what we are sure about the moment is that although the opec agreements and not opec agreements has for the six-month in a whole as it has been operating has been reasonably successful. for the month of june, the agreements haslatest data for wt reliable numbers, it looks as if the compliance rates have settled a little. opec is responsible for its own decisions and we are observing it just like everyone else. >> it is a simile difficult to predict the price of oil.
is it still range bound? formerly predict oil prices but we are able to say that based on our current outlook for supply and demand in the rest of 2017, we do expect stocks to start falling during the second half of the year. on that basis, you could expect the price to be supported and the price to perhaps rise but not by very much because every few dollars that the price does begin to rise, it incentivizes more oil for the united states and other places. to some extent, any rise in the prices is capped by the availability of short cycle oil. vonnie: coming up on bloomberg best, more of the week's compelling conversations. andlock in washington movements in the markets. >> i would not be surprised if you saw london reprice 5% to
♪ this is "bloomberg best." with theresa may's political questiont a low, some whether she can rally the nation exit plan. we discussed the path ahead with jonathan ferro. >> a parallel between the u.s. and health care and europe and brexit negotiations? >> there are moments when it looks similar. there are people who decided
they would vote to get rid of obamacare without something to replace it with. kingdom, people decided to vote to leave the european union on what many would say was a dishonest prospectus without working out an alternative. that is why there is once again talk of thinking again and holding a second referendum. now it seems to be back on a number of agendas. >> what would that referendum be on what kind of specifics? >> it is not for the near future. i mention it because i think it is in the editorials and comments from experts. if there is a referendum, it could only happen if parliament decided there could be one. what would it be on? orwould have to be due you do you not accept the deal which the government has negotiated?
it has not negotiated one yet. any conservative government which said that it wished to hold a referendum, it would not survive, so they will be reluctant to hold a referendum because it would look like a vote of no-confidence on the deal the government negotiated. it is still on people's minds. nasdaqdow, s&p, and reached records this week despite signals president trump's agenda is stalling. televisionloomberg share a more nuanced view on politics and markets interacting. i first guess that business optimism may be starting to fade. >> there is a rising level of frustration. we are in july, and there is a
recognition that what we wanted to get done, tax reform, infrastructure, just using gathering momentum. you have a market at all-time high. you have growth according to cbo at 2%. fundamentally, that optimism needs to be turned into something real that is sustained, and the frustration expressed on friday really is broad. >> if the frustration is wrought or than jamie dimon, how is it affecting business, investment decisions, decisions to buy and sell? , weoday, in my world, m&a went into the year with projections for a record year come over for train dollars. it isn't. you have seen the volumes half
what they were a year ago. ofot is based on certainty decision-making, confidence and where we go next year, three years. when you make investments, you want a good tailwind, 12-18 months all-knowing that investment, and i don't think there is enough confidence today that we have broken out of a 2% growth world. >> the economy is good. growth than amore lot of the skeptics think there is. all of the numbers are not there is definite complete, and i mean complete and a pragmatic, but stimulating way, there was optimism. optimism, optimism. optimism orare that are you at odds with the consensus as it were that you
found there? , yes, i certainly think that for business that there is no reason not to be optimistic. bromide,try, this is a but our resources and basic way hasonducting business basically other than pockets of ,outh korea and technology certainly china in certain areas, nobody compares with in, i don't know, thousand miles, 12,000 miles, so yeah, i do. would you describe the state of commercial real estate in europe? is actually pretty good from a supply-demand perspective, meaning european cities have been typically difficult to tilt in. small urban cores, high
restrictions in certain cities come and london, but other cities. looking fortal opportunities to park in defensive asset classes, but on the other hand, opportunities for transitional assets, which we focus on, coming out of the uncertainty over brexit or political issues in europe. moments oflike us, instability create opportunity with respect to transitional assets. >> has brexit been fully priced into the london real estate market? >> we don't think so. we saw a deep reaction to the brexit vote largely because when the pound devalued, lots of global capital felt that by london would be cheap because the pound was cheap, but obviously there is a reason the pound was cheap, because of the anticipation of brexit and what that meant to the u.k. economy, so in real estate and other thet classes, we feel like
u.k. economy and the u.k. bid for risk assets should i just to a more normalized level. >> and that is a repricing of what percent? every risk asset is different, but in the real estate space, i would not be surprised if you saw london for core5% to 10% assets, thenon-core expected rate of return for transitional assets should reflect that risk, so i would expect transitional assets to repriced as well. >> i want to ask you about venezuela. you own bonds. there is a great deal of nervousness about the degree to which venezuela will be a will to fulfill those obligations. what is your view? >> this is a phenomenal asset that if it is allowed to operate normally will have enormous value.
accrue to thel benefit of all venezuela's and improve the economic circumstances on the island. the key is can you get from where we are today to a point it can operate like a regular economy. >> and? >> it will be a rocky road, but there will be a point in time when there is no other choice. >> how much time does venezuela have left? >> they had $10 billion of reserves for the last debt payment, and they had $10 billion today i'm a so perhaps there is more capital there than may be evident to the public markets as a result of the disclosures that are made, but i think they have in that this entity on 16-18 months depending on the level of liquidity outside officially ordered sources. we think the return on those instruments could be quite strict tackler if the companies are allowed to operate as a normal business. ♪
♪ you are watching "bloomberg best." a busy week for quarterly earnings reports. let's dive into our roundup of results, starting with netflix. >> netflix is dominant in streaming video, and its latest numbers three and horse that with global subscribers a estimated to reach 108 million. ands all about content, momentum is expected to continue with analysts raising price targets and estimates. all good news? >> investors focus on subscriber growth. the company is trying to get them to focus on revenue,
profits, traditional metrics. and it a momentum stock, is tied to subscribers, and that is the focus. they blew out second-quarter numbers on domestic and international numbers, and it is not like they pulled some of the growth in the third quarter into the second quarter. they are forecasting strong subscribe growth in the fourth quarter. has reported a decline in second-quarter profit than projected. that is amid signs of revival in one division. does this give you more options? how committed are you to spinning off this business? >> i was pleased to see the turn. it grew 3% here it at the beginning of the year, i said we will undergo a review of the business everywhere from keeping the business to capital markets exit. to beginning of the turn in proves the options that we have
available to us. if we were to do a capital market exit, we would want to see consecutive quarters of canth, so hopefully we continue momentum and drive additional growth on the back half of 2017 and 2018. >> ibm out with numbers. operating earnings $2.97 tops consensus estimates. falling short of forecasts, $19.29 billion. it was expected to drop, and a bigger drop. >> i can't find the last time booked a revenue gain. >> it has been i while. the company is undergoing a massive transformation, going into in technologies, and some 30%, but itabout looks like the drag because of legacy businesses is continuing.
i think this is where the big story is at this point, a lot of the pricing pressure. >> how much more cost savings can ginni rometty ring out of ibm? will they have to take more restructuring in order to have growth again next year, he cuts that is something they focus on. that is an area of focus for investors. on to fall vote shares trading lower after second order earnings jump 39%. the swedish truck maker delivered more vehicles and construction machinery. are you starting to see the fruit of the reconstruction plan? you raised your forecast for north america on the all, but demand is below last year? >> we have seen on the truck
side that the market has bottomed. levels for new trucks and use trucks will be better. economic and if it's the in the to., so we are guiding up 225,000 units. int is a sign of recovery our truck market. also the construction side, a slight improvement as well from flat to a small improvement. that is the situation. ever reported growth, clearly in the m&a crosshairs. does the current business model and plans going forward justify that? or is the m&a story back online? >>does the current business we r
value creation, our continuous investment model, and this shows what enormous value can be created. total shareholder return over the last couple of years, so a model is a good model for many shareholders. microsoft shares rising in extended trading, up 2.7% after reporting sales and profit topping estimates. adjusted sales rose 9% as the mandalas doubled for the cloud service. it all points to the company's turnaround plan working. closely following the ceos plan to reshape microsoft as a cloud computing powerhouse with a new services. it is a shift that led to a massive salesforce restructuring earlier this month. we have to talk about the cloud
first. >> it is amazing growth. biggest businesses in the cloud and shows you they have used the strengths they had , particularly microsoft office, to move corporate customers from office to office and the cloud. , a lot of business their dedicated office customers storing stuff using office 365, already using the cloud with some comfort with that, the willing to go to microsoft for their needs. ge getting hit after reporting earnings come the third biggest point drag on the dow, subtracting eight points, the lowest level since october 2015, an ugly date for ge. what happened? >> they set expectations at the lower end, talked about power,
oil, and gas worse than expected, so they have to make it up and costs and other actions. , i don't want to say they warned on the dividend, they said three-four times that the dividend is ok, but that almost creates concern. they did say they would back off on the buyback, so there is some worry about that. they also pushed out to november when they will talk about flannery's plan. i think people were thinking early fall, and now late fall. >> it is a big company, so it is taking longer. retailer-based fashion is not a public company yet, the growing fast, aiming to disrupt the market for luxury italian shoes, $50 million in revenue this year. the founder and ceo tells the story on the latest addition of small to big.
it is a new luxury brand providing the customer with the highest quality italian shoes at prices never possible until now. at the luxury marketplace, and there were so many things about luxury that were great, but some qualities that needed reinvention. the incumbents were not reinventing. be a category we fell in love with because we love them and want to be an a business that occupies a place in the customer's mind all the time. choose create that need especially. we think you have to be newsworthy, different, got to have a story to tell. our consumer knows there is must-see tv every monday, and it's not markdowns, private sales. it is about great new product. we don't release more products than other retailers. we just don't do it all at once. we are old world meets new
world. we identify early on in the business creation 18 in italy i have some history with that we could hire. there was a group in italy in florence in the shoe manufacturing business for generations. there was a bunch of challenges historicalthe old, shoe manufacturing industry and putting this on top of it. unlike most fashion blends that produce things four times a year, where you see big spikes, we are providing constant demand, keeping factories moving all of the time. we had to get them start producing products of the pace we wanted them produced. the only way to solve that was learned. they have done a pretty good job of learning through our data and learning through our forecasting. opportunities they can receive by moving faster than ever before. they have been open to listening
about ways to improve their demand forecasting and ways to improve their speed of production, but not so open to listening to better ways to make shoes, that's for sure. probably rightly so. bought intomers who our soho store by their second purchase online. if you are buying things at the frequency our customers are buying them, the multichannel drives their purchase pattern. wee they buy a second time, average for purchases within a year. we are seeing 100% growth year over year in total sales, and ofgin improving in each those years. it's not as fast as you can grow, the goal is controlled growth to ensure you can double your business for a number of years. ♪
♪ bank of america and goldman sachs weaker in pre-markets, reporting earnings. goldman sachs down almost 1%. take a look at the bloomberg. fixed trading revenue down 40%, the week is to sense 2008. >> it is a new function on the bloomberg. tv , they did for a month back and you will see clips in that month and stories related to that company. we are always adding new functions on the bloomberg and enjoy showing you the newest ones on bloomberg television. here is an old favorite you will quic ,useful,
quick takes into timely topics. here is a quick take from this week. >> amazon's planned acquisition of whole foods highlights the most of growth in organic food sales. the u.s. department of agricultural says foods labeled inanic must be grown synthetic fertilizers and free from genetic organisms. animals raised without antibiotics or growth hormones and access to the outdoors. foods haveay organic greater nutritional benefits and can even help fight cancer. that is why they sometimes been newly twice as much for an organic product compared to a non-organic one. our organics really help here? are they really worth the money? here is the situation. concerns about the growing use
of pesticides and the use of antibiotics in animal feed prompted consumers to look for so-called organic food. the990, congress passed organic foods production act to develop national standards, and organic products became more common. larger food companies began acquiring smaller health food companies to get in on the action. now from the big boxes to the specialty stores, three quarters of u.s. groceries sell organic foods. here is the argument. proponents say organic produce is more nutrients, including antioxidants and vitamins than conventionally grown fruits and vegetables. they also suggest eating organic limits exposure to toxic -- thats, but may lead may lead to certain cancers, but while it does not reduce -- does reduce your exposure to
pesticides, there's no evidence that trace amounts are in danger. scientific surveys have not found organic foods are much justnutritious, and because food is organic, it doesn't mean it is good for you. it may be nearly as high in sugar, sodium, and other unhealthy ingredients as nonorganic products, yet more firms are going organic to feed the appetite. with big supermarket chains like kroger selling more organic products and amazon's determination to drive down prices at whole foods, organic foods should only increase in popularity. healthy or not. ♪ that was just one of the many quick takes you can find in the bloomberg. you can find them at bloomberg.com along with all of the latest business news and analysis 24 hours a day. that will be all for "bloomberg best" this week. thank you for watching. i am vonnie quinn.