tv Street Smart Bloomberg May 4, 2015 3:00pm-5:01pm EDT
alix: 60 minutes left to the closing bell. stocks are rising, advancing to all-time highs, investors betting on the strength of u.s. factories. berkshire hathaway beating estimates. we are counting down to earnings from anadarko. much coming up. "street smart" starts now. alix: less than an hour until
the close of trading. scarlet fu is looking at the action on the markets. scarlet: they want to pull higher. they have been meandering all day. you have two straight days where the dow average moved at least triple digits or close, more than 100 points. we are not continuing that streak. we have been positive all day long. we are up 66 points. trading in dow, s&p, nasdaq stocks at least 10% below the 10 day average. utility stocks are leading the way, up almost 1%. energy stocks leading the decline, down 0.75%. the dollar posted its first monthly drop since last june in april. it has resumed its rally, up for a second day. just barely, but it is higher up almost 1% in may. factory orders stronger than expected ending a streak in which manufacturing related numbers kept missing analyst
estimates. you can see crude oil down 0.3% and copper lower by 0.4% because of week china manufacturing data which indicates contractions. alix: very busy day. here are top stories we are watching ahead of the closing bell. shale explorer pioneer national resources plunging today after money manager david einhorn slammed the shale industry at the investment conference in new york today calling the industry wasteful, expensive, and a terrible investment. barry rosenstein of dana partners said qualcomm has a bloated cost structure and. -- cost structure. barry: there are a lot of similarities between walgreens and qualcomm. i could give the walgreens script and right qualcomm on top of it, and it would pretty much work. there is costs that need to come out. this company has a bloated cost structure. its r&d has been not run
efficiently or rigorously with the return on investment capital discipline. the company needs to change how it's management gets compensated. alix: for more from the stone investment conference, let's get to my colleague stephanie ruhle. you had some crazy interviews today. what was the biggest take away you got? stephanie: i am going to talk to you about bill acton, but i have to say david einhorn and his cleverness. motherfrackers, the frack attack. how do you not love the way david einhorn presents? he is clearly a crowd. extraordinary ideas today. he does not see that $5,000 a ticket seems so much. when i talked to bill, we talked about the values of activist investment, and we noticed some
criticism out of larry fink. he said his activism had grown larger and larger. we are seeing less ceo's do the right thing. i still think activism is here to stay and is a great thing for corporate america. take a look. >> the kind of changes we proposed, the kind of changes and excellent activist proposes are not short-term things that drop short-term value. they are changes that fundamentally improve a business over many years. they are long-term changes. stephanie: it obviously comes as no fries that bill is a big defender of activists, but remember oftentimes, critics are saying they come and attack companies and are not there to stay. look at the amount of companies will is in, whether we are talking about burger king, jcpenney, howard hughes. bill takes a major stake and he is not afraid. what he has done with herbal ask -- herbalex, he is in for a long
time. one thing he said is very difficult. he will not necessarily launch into another store campaign. whether we are talking herbalife or fannie mae, putting yourself in a position where you are dependent on government actions is harder than asking a corporation to take action. i asked what is easier for him, going after a small company or large. he said, works both ways. i said, what about berkshire? like so many, he is a huge fan of war and. -- of warren. he was praying at the altar of mr. buffett. but bill says his type of investment is not going anywhere. i asked about the hundred million dollar apartment he just taught. he things it is the cheap -- it is cheap. he actually paid around $90 million. i guess when you are spending that much, it does not make a difference but he never even plans on sleeping there.
it is an investment. alix: maybe he will let us stay there. there is probably room for both our families, right? stephanie: i could use a second place to stay. me and the tiger dog do not always get along. alix: ask the next time you see him. thanks for awesome interviews. i am joined by the chairman and ceo of market field asset management. great to see you. thanks for coming. what is your take on these markets as we keep grinding higher, to these record highs as to mark michael: -- record highs? michael: it has been several months since we got to the 2000 level. it has been much more interesting outside of the united states. within the u.s., i think overall the s&p looks ok. we survived another earnings season with a lot of negative and have come out the other side feeling a little bit better about eggs. we have survived -- a little bit better about things. we will see somewhat better
data, going forward. i think the u.s. equity market is ok. i just think we have given up something by only concentrating on the u.s. alix: kind of wishy-washy for your take. city out with a very similar statement, saying we are not calling an end to the rally. could see a reaction. things are not as good as what they were. michael: people have to work hard to make money. i do not think it is a bad market on a sector by sector basis. i do not think it is a bad market for investors. as an equity fund, we recently feel you have to work less hard with your money elsewhere. if you have a flexible mandate you might as well take advantage. alix: bill gross of jana partners came out with a note today. he said a successful portfolio manager for the next 35 years will be one that refocuses on the possibility of periodic
negative annual returns and miniscule sharpe ratios, and will employee defensive ratios that can be levered to exceed cash returns. it was a pretty bleak note from mr. gross. what do you think? michael: i think he has his own personal issues that need to be worked. i think he is right you are going to need to be flexible going forward. you talk about 35 years, there is no single way of investing money that is going to work over 35 months, maybe not even 35 weeks. my view is that the headlines i saw were important, with an endless bull market in sight. i think that is probably true in terms of fixed incomes. fixed income in u.s. long-term yield is already behind us. for the 10 year, it looks like it was two years ago. the three-year, probably earlier this year.
the equity market is not the most interesting place in the planet, but it does not look to be in the terminal state of the bull market yet. alix: we will talk about the fed going forward. what is the most interesting in the u.s.? michael: emerging markets. whether or not we are seeing the beginning of a since actual new bull market -- substantial new bull market or a flash in the pan we will see later on. alix: before we go, mainstay markets sought redemptions particularly in september. i'd like to get your state -- your take on where things stand. that fund mirrored activist investor strategies. michael: we are a macro fund and we got the macro story wrong last year. we were looking for inflationary pressures that never came about. maybe they are coming about right now as we talk. but we paid the price for being early or to an extent being
wrong on certain things. alix: have you seen the flow has changed? michael: performance, but not flows. you have to do well for a while before people pay attention again. alix: lots more to come. thank you. you are sticking with me for the next half hour. chicago fed president charles evans said he sees no compelling reasons to raise rates in 2015. more on that story. plus, does cisco need a facelift? what chuck robbins has to address when he takes the helm. ♪
john williams speaking now, saying he sees some light at the end of the tunnel. carl, on this williams headlines we are getting, anything jump out at you? carl: it seems to be a fairly light speech in terms of policy or economic assessment, but it is consistent with the view the economy will perform better in the current quarter. that is a low hurdle to cross at this point. but to see the fed speak earlier -- the labor force participation rate we will get another update this friday in the jobs report. that has been steadily grinding lower. the key point i think for both speakers, who tend to be on the dovish end of the spectrum especially in the case of evans -- we have not gotten to full employment yet. we will know when we get there. we are not sure where that level is, but we are not seeing a lot of wage pressures.
they are also still watching this purchase patient issue to see what the balance is -- watching this purchase a patient issue to see what the balances. maybe as the economy gets closer to full employment, marginal workers reenter the labor force. alix: do you care when the fed raises rates? michael: we are arguing about whether the fed does nothing this year or very little this year. that seems to be the two possibilities. the range seems to be 02 50 basis -- zero to 50 basis points. this is an interesting monetary experience. we will get to see what happens when the fed does nothing throughout an economic cycle. my concern would be that you can abolish the monetary cycle but you do not abolish the business cycle. i think about what happened to energy last year. energy shows you it is possible for an individual sector within the u.s. economy to go for overproduction, even with the
fed doing nothing. for people my age -- i am nearly 50. i have never seen a cycle in which the fed was not the major participant in setting timing. i have shifted from what i would normally do, which is worry about the fed doing too much to try to think about the business cycle which is how i am starting to feel about this one. alix: if the parents are out of the house -- michael: the children take over and do what they want to do. i think we will be in the hands of individual business cycles in different sect is, which are not necessarily going to be synchronized in terms of time. i look at energy and medical. energy is a great reminder that the head can control the timing of the business cycle if it does a lot if you have an inverted yield curve that affects funding. but if the fed decides to do nothing, you can still go through a cycle of production. i think you are much better off right now looking at individual
sectors and trying to understand the internal balance of supply and demand within those sectors instead of worrying what the fed is going to do. they have told you they are not going to do much. carl: one of the natural regulatory -- one of the national -- one of the natural regulatory pressures for producers -- we are not seeing wage pressures yet. that usually creates a downdraft in the economic cycle. we are not there. closer to 5% unemployment is a story for the second half of this year. that will only be the early chapter of this saga. alix: i am looking at the year yield in the u.s. what kind of confidence is that reflect? michael: the long end of the yield curve may be influenced by the fed, but is not controlled by them. i think u.s. long-term yields
have already bottomed. i think the 30 year made its low in january or february of this year. although the fed has done nothing except say helpful things, yields have persistently crept lower. i do not think it is a problem at 280, but i do not think the fed is going to be in control of what it does look like. carl: it will take a long time for the fed to get into control. janet yellen has told us this will be a gradual cycle. there is no measured pace. for the fed to normalize rates will be a multiyear prescription. alix: you have central banks all over the world going in completely opposite directions so it is not isolated in the u.s. carl: the fed will have work to do, but it will have to be done in 2016 and 2017. i think janet yellen was wise in breaking the back of the dollar rally by dispelling with the measured pace notion.
and from the doves signaling the hike was less likely in june, and more likely in the back half of the year. alix: carl, see you later in the show. michael, you are sticking with me. china loosened its restrictions on a local bond market for foreign investors. we discuss the significance. is mcdonald's turnaround plan the happy meal investors hoped? ♪
the cash to make 200 million euro payments to the imf this week. brazil is considering opening its biggest oil reserve to foreign companies after a corruption scandal at petrobras left them unable to end projects. brazil's energy minister says there is no way petrobras can put down all the investments needed for the brazilian economy. the imf is close to declaring china's yuan fairly valued for the first time in more than a decade. that is according to "the wall street journal," who is not saying where they got that information. china has widened foreign access to its domestic bond market according to "the financial times." the country is giving access to 32 foreign institutions including hsbc and morgan stanley. it started an insurance system for its more than $16 trillion of foreign bank deposits on friday. the next step -- the end of interest-rate controls. for more on the significance of
these moves and all things emerging markets, the chairman and ceo of market field asset management is still with me. what is your favorite emerging markets? michael: i hate the term favorite, but we have been consistently bullish about chinese shares listed in hong kong since late summer. it has worked well, gone up a lot. we think we are at the beginning of a potential lucrative market. there is really two times enable market that things go straight up. they go straight up right at the end, but also at the beginning. alix: why now? is this purely a central bank play? michael: that equity market was in the penalty box for five years. it collapsed in 2007 and went sideways. you went from a massively overvalued market to a very cheap market. it is not abnormal that just as the bad news comes up, people start looking at the possibility of chinese equities ever doing something for them.
i do think the central bank has been absolutely key in this process. you did have to believe that they would understand monetary policy was much too tight, and they would start to move to a significantly easier monetary policy. i think we are in the middle of that process. alix: when you hear foreign investors can now buy bonds in china, and deposit bases, what does that mean to you as an investor? michael: i think a reasonable amount of capital will get drawn into chinese securities. they will not necessarily be the securities the government is most worried about. you have about 20% of the economy in genuine distress, real estate related. they say they will allow foreign bondholders to access chinese bonds. there will not be a great deal of demand for chinese real estate development bonds. there may be demands for consumer company or bank bonds.
the story in china is, you are betting the ease policy to deal with the crisis -- you do not put your portfolio right in the middle of the crisis. you put it to one side. you work out which portions of the chinese economy are doing ok and will start to accelerate as monetary policy starts to listen. alix: and what part of china is insulated from a fed rate hike? michael: i think all of it. alix: a temper tantrum. michael: there is no possibility of the fed raising interest rates here by 300 basis point, whereas in china you have already cut rates by a reasonable amount. there is a reasonable chance that chinese local funding costs drop by 200 basis points in 2015. that really starts to make a difference to the domestic economy. but what it really helps is going to be the part of the economy that was not distress to begin with. that is always the story in a problem like this. alix: and what banks lend to
alix: general motors celebrating a massive milestone. manufacturing of more than 500 million vehicles. matt miller is live at the event in kansas city. good to see you. you spoke to ceo mary barra today. matt: i spent a lot of quality time with mary barra one of the main reasons i wanted to come to this event. what of the topics everybody wanted to know from mary was whether or not gm was taking seriously sergio marchionne's suggestions of a tie up or possible partnership with either
general motors or ford. we had a private meeting with her a few journalists, after the big 500 million celebration. almost everyone wanted to ask her about this possibility. she replied that she is focused on general motors business now. they want to be the highest value automaker in the u.s. right now. they already have some partnerships in place for example a fuel cell partnership with honda. i asked whether she would consider partnerships with chrysler. she said she has not met with sergio. that was one of the pieces of news off the topic of the 500 million celebration that we discussed this morning. the main reason we are here -- the investment they are putting into this plant. 174 million dollars, but also $5.4 billion across the country. they are also investing $15 billion in china, billions more in mexico. i asked her in a scrum right after the press conference if she taught she was maybe
investing too much. listen in. mary, you are investing $15 billion in china, $17 billion here, aliens in mexico, billions in cadillac. are you worried about overinvestment? mary: we have a very refined process. our regional presidents read the marketplace, make sure we have the right product portfolio. we have a broad product portfolio across the globe. we want to make sure we have the right products, guided by customers. it is a thorough process to make sure we make the right investment. matt: $17 billion was sense 2009 -- was since 2009. putting a lot of thought into the new malibu and products across the board, coming out with a lot of new cars. alix: thank you for joining us from kansas city with a mary barra interview. some big calls by some of the biggest names in the hedge funds industry has a new stocks making major moves.
julie hyman has been monitoring all the action of the 2015 stone conference. it is always a fireworks show there. julie: it is always interesting, what people have to say. some of the fund managers talk more about very specific case. jeff just finished speaking and was more ruminating on various things. he has talked about negative income yields, as have many other people in the fixed income market. he also talked about how he thinks yields in the u.s. have summed. he things high-yield bonds are -- he thinks high-yield bonds are at risk and likes puerto rican municipal bonds, saying they priced in a lot of bad news in puerto rico. that would be the contrarian or big call coming out of his presentation. one of the other stocks we are seeing move the most today related to the stone conference,
is not one that is being mentioned there. there was the expectation on the part of some investors that bill ackman would talk about csx, potentially as a target or canadian pacific which he owns a big stake in. earlier today, in an interview at the conference, he said, i am not going to talk about csx. you can see there was a dramatic move in the stock as a result of that. he will be giving a formal presentation later. we have to wait. you are going to talk about a big call that probably had the biggest fireworks. that had to do with something near to your heart, the fracking industry. alix: fracking mother fractures -- frackers, i believe david einhorn said. pioneer national resources -- natural resources plummeting after david einhorn criticized the cost to rack -- frack a well. david: we used last june's
commodity curve and otherwise held our assumptions the same, including the cost cuts available in today's low-price environment. the result is a value of $78 per share, less than half of the $172 where the stock trades. pioneer is hermetically overvalued, even if you assume it has 11 billion barrels of resources and we see a return to prior peak prices. the problem is that oil fracking is high cost. alix: joining me now on the phone is karen morrow, executive at the american petroleum institute, looking at the industry response. you just heard david einhorn talk about pioneer in particular. what do you make of that? karen: i find it really interesting. i see frequently these days people that love to grab headlines by bashing the fracking industry. it is interesting to me that a guy that is obviously part of the 1% in this nation is so
quick to knock an industry that has done more for the middle class in this country than any industry in decades with the low-cost production of oil and natural gas. he has this incredible technology known as tracking combined with horizontal drilling. obviously, you just reported on it. he drove down the stock price on a private company. what he did not say is that the company has seen stock values up 13% this year. so it must be quite the experience borderline narcissism from my point of view. stocks go up and down because you get up in front of a group and make some speeches to a receptive audience. in the meantime, there are people out in the field across this nation drilling for oil and gas and piping it to places like new york city, that have
benefited tremendously from low-cost energy. alix: obviously very passionate about this, karen. i have to say, he is not the only one who has raised concerns about the valuations of some of these companies. for example, barclays said some expiration and production companies are looking at $95 oil prices in the forward curve. they are expecting oil prices to rise. that is what the share price is reflecting. but the current oil price investment -- environment is not reflecting that. so are these stocks a little high? karen: to try to paint this with a very broad brush, for anyone is a bit of a mistake. you are going to have companies in any industry that may be vulnerable to lower oil prices. but there are hundreds of companies involved in every phase of this amazing development. some companies are very strong. some of them might be weaker.
it also depends on what part of the country you are developing in. the cost of development per barrel differs widely across the nation, depending on what geology or drilling is. it is too much of a simplified message to just attribute, you know, low-cost oil to the demise of the oil and gas industry. because of fracking. alix: how should a shale company respond? it was not just pioneer david einhorn made comments about. it was continental, eog, a bunch of them. how can the shale industry move beyond this? karen: i think the shale industry every day, through innovation and technology finds a better way to produce their product. by better, i mean safer and at less cost. today compared to a year ago, there are companies that can
drill a well in half the time as it took years ago. we also can drill deeper wells and with longer horizontal laterals from a single location then we could 10 years ago. that is due to drilling technologies. we are able to save on the cost and. one of the problems companies face is the uncertainty of governmental regulation. and depending on what state you are him, this adds an awful lot to the bottom line of an energy company. i did not hear mr. einhorn addressing that. alix: well, thank you for your perspective within the industry, and your mentioning costs that can be 20% to 30%. that was karen moreau. coming up, why the mcdonald's turnaround plan is leaving investors wanting more. ♪
alix: a happy meal for investors, a turnaround plan to boost sales. shortly afterward, s&p shot down the mcdonald's stock. what more are investors looking for from the fast food chain? i am joined by a fund manager with a fund which owns more than half a million shares of mcdonald's. what did you make of the announcement today for a turnaround plan? chris: a lot of it came in as expected. they really wanted to see more dynamics going on with the company in the way of menu changes, i believe. the division changes within the new segments make some sense. dividing it up geographically where they had established international and separating out the high-growth -- because the
u.s. and the established international make up 80% of the profit, they have to give the concentrated efforts. some of the efforts in the strategy is more of a xiaomi story. there are promises that have to be realized in order to make that happen. but mcdonald's still has probably the highest sgm a -- one of the highest spends per unit. alix: do you on this stock for any reason except that it pays a dividend? chris: that is probably a real attraction. we like to have companies that pay a dividend but also wrote their dividends. mcdonald's historically has been growing their dividend by 10%. recently they have cut that in half, only growing it at i percent. with the payout ratio running up to 60%, that is causing us concern. it is really to try to see how they can turn the margins in the
company. the buyback is fairly positive. dividend growth would be our first choice for investors. alix: they are paring back that growth somewhat. what do you want them to do on the turnaround for us to gain a little more confidence in the fundamentals of the stock? chris: one of the highlights of what they did today was improving the franchise ownership to a 90% level. that was kind of a key fundamental. alix: burger king is a must 99%. chris: it has taken mcdonald's a ways to go. i think this is a strong step forward, and hopefully they will take it to that. this is at least a great step forward within it. they have talked about closing underperforming stores to improve their earnings picture. improving the earnings can be done. alix: you say you like the
franchisee ownership, but they have to get faster, have to get their food out quicker. having so many franchisees makes it more difficult to implement changes. starbucks can make a change right away. chris: but there is also that local impact that can help. i use cincinnati. they developed the fillet of fish sandwich for mcdonald's. there are ways to filter back up some of that. but there is also a key concept in keeping a concise menu. that is one of the things they are working on, bringing the menu under more controlled items, so they have a little bit better marketing muscle behind it. alix: thanks for your perspective. chris rowane with ball and gainer -- bahl and gaynor.
alix: cisco formally announcing a successor to current ceo john chambers. chuck robbins will be helping the -- taking the helm in july, tasked to revive a company struggling since the tech bubble burst. joining me is cory johnson, in the studio. cory: in the person, in the flesh. if they keep us apart, it is a security thing. alix: will he be able to come in likes attaching a delaware microsoft? cory: -- like satya nadella at
microsoft? cory: whether an outsider or insider drives change is one of the biggest debates. do you need a king from north of the wall? cisco has been a marvel. long-term employees in cisco, with the vested stock options they got, do not like cisco. but what cisco has done to survive and thrive as all their competitive sup on a part is a great credit to john chambers and what he has done there. in cisco, the bench has been deep. to see john chambers -- at one point, we are to bureaucratic. we need to have fewer committees. they had to go through committees. they fixed a lot of those
problems. maybe he is already making those changes. alix: satya nadella had to change the culture of management. is cisco facing the same shift or are the issues different? cory: i think cisco houston a better job of being on the technical edge than microsoft. things that could have wiped them out -- not just competitors , virtualization. vm, it seemed like they were going to sweep the field with what cisco did. blackberry is a company that could offer things cisco never could. now you have software defined networks, innovators and technology, who thought they could do it and cisco could not. cisco was a dominant player in networking then and now. alix: good to have you here. you are here all week.
alix: you are watching bloomberg television. i am alix steel, and this is "street smart." stocks are rising, partly thanks to optimism about corporate earnings. we are counting down to earnings from anadarko. we go straight to scarlet fu at the breaking news desk. we are really close to a new high for the s&p. did touch above that closing level during the session, but not holding onto it. scarlet: we are going to come short of it. the closing high is 2117.69.
unless we get a burst of games at the very end, we are not going to get there. today, the dow is on course for its smallest point move in a week after two days in which it moved at least 100 points. the nasdaq is 1.4% away from its new high if anyone is keeping track at home. gains in europe and china helping to support this overall advance in u.s. stocks, but not a robust advance. if you look at some of the sector moves, you have eight sectors higher and to sectors lower. financial and health care shares are rising while energy and materials companies, commodity-related firms, are declining. a rebound in factory orders in the month of march. but that is with a revision lower from the prior month, so it is offset. let us look at the 10 year for a moment. it looked for a while as if
treasuries would rebound, but that did not last. declining european bonds leaving an impact in the u.s. because higher yields there make u.s. treasuries look less attractive on a relative racist. the big debate is nonfarm payrolls on friday. the consensus is for an increase of 230,000 jobs. we are going to keep an eye on that number to the how much it moves, whether it gets revised higher or lower. alix: always love the jobs week. i am here with lisa abramowicz carl, and the j.p. morgan chief investment officer. what scarlet left out is the yield rally in the 10 year. we were just talking about this before we came on you -- on air 2.14. lisa: you saw 30 year yields going to the highest level since december of last year, and
perhaps this is on the back of buffett's comments that if he could short 30 debt, he would, and bill gross agreeing with him. perhaps this is a recognition that the fed is going to wait longer before they hike rates, and allow inflation to take up. -- tick up. >> this is a big deal. the mood has been violent especially in europe. bonds have moved dramatically in the last couple of weeks. treasuries have followed. a lot of this is related to technical factors in the market. perhaps people were too much on one side. there is also the dramatic aspect significant in the stuff that happens when we get to the zero bound, lower bound of yields, when we get negative yields as we have in europe. a lot of stuff going on technically. what probably is going on fundamentally, to some degree which people have not pointed out that much, i think is related to the unwinding of some
of the deflation fears you had at the beginning of the year which were massive and sort of drove yields negatively. that is something i think people would probably watch more carefully going forward. alix: we have the closing bell. let's look at where the market settled. the dow looks to have ended up by about 45 points. at one point, the high of the session, the dow was up 109 points. so we are up for the day, but off session highs. the s&p missing another record by about three points. the nasdaq up by 11. in the s&p, about eight of the 10 s&p sectors finished higher. you had materials and energy the risk on sectors, the biggest laggards. we are awaiting earnings from anadarko and avis. bill gross says goodbye to the bull market super cycle for stocks and bonds. in his latest outlook, gross
rights credit-based oxygen is running out. i merely have a sense of a bull market ending with a whimper, not a bang. is this what you are talking about in terms of yields? tulio: perhaps that is more the yield side of the equation, but the equity side, i would not agree with you. whether it is u.s., europe japan -- on the bond side, we have to see what happens. i mentioned earlier that the deflation thing -- if you look at five-year inflation expectations for the u.s. and europe they have been rising since the beginning of the year. people have not paid a lot of attention. i am not saying there is not already inflation in the world but the worst fears have turned. that means we may have seen the bottom in yields. carl: i think there is limited upside potential. we are still at low yield levels. this is the thought of economic data transitioning to q2.
we are looking at 2% growth instead of flat growth essentially for the first quarter. i do not think it is a signal of significant mounting inflation pressures. and i agree with tulio there are seasonal factors that tend to push yields higher just this time of year. alix: i do have breaking news on pimco. scarlet: pimco hospital total return fund loses its title as the biggest bond mutual fund. we know bill gross left a while ago, but the actual fund has seen a $5.6 billion net outflow in the month of april. is assets totaled $110.4 billion at the end of april, losing its biggest bond mutual funds title as a result. $5.6 billion net withdrawals or net outflows in the month of april. we should mention the fund delivered a net return of 6.2%
so far this year and outperformed its benchmark by about 38 basis points. alix: for more on this, mary child is standing by on the phone, who wrote the story for bloomberg news. give us some context of how pimco went from the biggest bond fund, run by bill gross, to losing that title a few years later. mary: i think investors across the board hate to see this kind of disruption at the top. when you lose a manager in such a contentious fashion, it ends up disrupting the whole process, and they tend to flee. you have 110 billion dollars that left since september alone. that is about as much as they have in the fund remaining. that is a sizable amount. bill is a bond legend, so it was definitely a brand issue. alix: pimco total return loses the largest bond mutual fund title. i want to reiterate that. mary, what is next for a company like pimco? they had a management resell --
reshuffle. trying to build the fund back up. where do they go? mary: four months this year they were at the top percentile of performance, so they are doing an incredible job of considering the outflows. if you are trying to meet redemption requests, that is a tall ask. they have held, in terms of performance. now, it is a matter of talking with investors. they are making sure people stay on board and stay confident. and they have to make sure their performance reflects that and reassures people, going forward. alix: thank you so much. i am going to keep you on this really quickly. when you take a look at this, is this a shift in the money of the world of fixed income, or is this a pimco-specific issue? mary: something of this magnitude is pimco specific.
this is very bill gross and pimco oriented. it does reflect a larger trend people have been talking about for a while. the biggest bond funds now is an index tracking form -- fund at vanguard. you have seen that percolating over the years, and this is a very big manifestation of that trend, where you have money going from a famous and admired active manager. people, as they are making those choices of where to put their money now, they are more and more saying, why don't i pay lower fees and track an index? alix: fair point. thanks for joining us on breaking news that pimco has lost its title as the world's biggest bond mutual fund. still with me lisa tulio, and carl. lisa: on some level, this is not a bad thing for pimco. the total return fund had gotten too big to manage, especially as liquidity of the market, the ability to trade in credit markets, declined.
if you are managing a smaller ship, it may enable them to perform better going forward. and frankly, it is better to's -- to slowly deflate in size rather than all at once, for the markets and the itself area -- for the markets and itself. tulio: i would say one observation which is there has been a shift in the last year to more passive managers, away from active management, a point that was made here. that is something we are seeing across the industry in general, as a whole. alix: is that reflective of a lackluster economy? tulio: we are not seeing the inflation you -- carl: we are not seeing inflation yet, so if we are just plodding along at a slower pace given fed projections for growth this year, business appointment --
the disappointment means the economy has to grow about 3.25% over the next three quarters to hit the target. we are not going to be growing at the -- at that pace, most likely. we are off to a sluggish start in the second quarter. you will probably see more significant cyclical outflows out of all these as we get into an environment of faster growth and eventually more inflation. inflation is a lagging indicator, after all. that is something for six quarters down the road. alix: anadarko earnings are just crossing. scarlet? scarlet: this is a next duration and production company, and upstream oil company. a loss was anticipated by analysts. this loss is bigger than what analysts were looking for. a 72 sent loss when you account for various one time items. analysts were looking for a loss of 65 cents, although the range
was wide. it ranged from 29 cents to $1.20 in terms of the loss. first order sales volume -- 83 million barrels, higher than the company predicted. it was looking for at most 82 million barrels. higher than anticipated production for the first quarter, but the loss is bigger than it had anticipated. in terms of capital expenditures, the amount of money it sees is now looking for capital expenditures of $5.7 billion. this is pretty much in mind with what it predicted. earlier it was thought it could spend up to $5 billion. alix: there was a lot of market making news at the stone investment conference, with david einhorn criticizing pioneer national -- natural resources. david: the equity has nothing more than option value.
some have suggested pioneer could generate more value by drilling faster. actually, that would make it worse as faster drilling brings forward the value destruction. alix: einhorn called the company a "mother fracker" and shares plunged. what is the potential of these energy companies? what did you make of this? tulio: i think it is symptomatic of a market that is going up and down. on the energy oil thing, we still think this is a market that has not found -- even though we have had a nice rebound, it has not found a lore yet. there is too much oil still around. the industry is going to major consolidation. alix: do you think oil stocks are not reflective of that environment? tulio: they may not have
bottomed yet. i do not want to comment on individual stocks. it may be taking too much this week. alix: einhorn really targeted shale producers. it was not oil in general. he said it is a cost too much for them to get the oil out of the ground, and they have levered up too much for this to make them worthwhile going forward and i think that is going to be an ongoing problem in the debt markets. it is a bit bifurcated. at the same time, people are starting to say perhaps this is gone to our, too fast. but no default? alix: health care earnings are crossing. scarlet fu? scarlet: this is a hospital owner. adjusted earnings per share last quarter is more than double what analysts had been anticipating. $.57 or share is the bottom line number, when analysts were anticipating 39 cents.
no change in the forecast. the company, within the release, says that hospital growth and admissions went up 4.9% and paying admissions increased by 6.2% because of the boost in the number of newly insured patients. no doubt the afford will have care act played a role in that as well. -- the affordable health care act played a role in that as well. 67 cents versus a consensus estimate of 39 cents. alix: a busy closing bell. thank you to everyone. a pleasure to see you. thank you for coming. our tech companies still considered value stocks? one value manager thinks tech still has room to run. and new fronts in new york this week. the digital pioneer full-screen made its first presentation to advertisers. ♪
alix: here are the top stories after the closing bell. mcdonald's ceo revealing picks up plans including leadership organization, cost cuts, and plans to return cash to shareholders. the turnaround plan has investors wanting more. analysts were looking for specific solutions to pressing problems like a bloated menu and slow service. standard and poor cut the debt ratings to -a. oracle joining microsoft in selling their first 40 year bonds. they have issued a record amount of bonds that mature in more than three decades. robbins will succeed john chambers at cisco as ceo. robbins will be tasked with rising growth amid intensifying
competition from upstart software makers. jason then witt's -- jason joins me now to discuss the changing guard of tech at cisco. what did you make of this change? is it the right way forward? jason: we think this change creates an opportunity for cisco to potentially outperform over the next 12-18 months. we do not know for sure, but it seems like cisco is facing this threat of software-defined networking some of the most important company profit centers. they need potentially a fresh face in the ceo position. it is somewhat analogous to microsoft. satya nadella convinced investors microsoft was ready to compete and win in the crowd.
it is possible the same could happen at cisco. alix: oracle, microsoft cisco -- a changing of the guard. compare that to the opportunities in new tech. jason: if you look back over the earnings season we just experienced, whatever company was reporting, the themes were consistent that areas that benefit from a secular shift into new technology were growing, whereas legacy areas were stagnating. for large cap tech companies that made their money selling legacy products, they need to be able to shift and adapt. that is the same sort of problem that each of these large companies referenced is facing. new tech is totally different. some of the earnings hiccups we saw at companies like twitter or yelp -- the stocks sold off in part because of the company's own inexperience in dealing with growth. and basically it allowed
investor expectations to get to a point or they could not deliver. alix: linkedin and yelp got hammered after earnings. how do you parse the new tech world? how do you find value versus growth, and define the risk? jason: there is large-cap tech that people consider to be value stock with low pe, such as apple. the valuation seemed reasonable. within growth technology, some companies have high p s -- high p's on current earnings, but you do not have to look out that far. an example might be facebook. finally, there are tech stocks that are overvalued. there are areas we would avoid. twitter is an example. you feel like there have been too many management changes, too much changing of the metrics they used to measure themselves. alix: m&a?
yahoo! has bought over 50 companies so far. jason: there will continue to be tech m&a. the biggest deal was a semiconductor acquisition of free scale. there is debate over whether salesforce was taken out. outside of tech, there is lots of m&a, and i think it reflects confidence in the boardroom. within tech another area that confidence plays out is enterprise orders. very strong bookings growth for many enterprise tech companies. it is the same confidence permeating both areas. alix: good stuff. coming up, is the company behind youtube stars made its first presentation today. ♪
alix: fullscreen is a pioneer and powerhouse in original digital streaming content. it is the biggest player on youtube with more than 5 million -- 5 billion plays per month. you heard me, billion. the fullscreen founder and ceo made his first resin tatian -- presentation earlier this afternoon and joins me now. fullscreen, what is it? george: fullscreen develops online creators personalities being born on sites like youtube, instagram, snapchat facebook. these creators are the stars of a new generation. we help these stars become bright and connect with advertisers who want to reach their young audiences. alix: advertisers would go to
you and want to deliver advertising through your content. george: exactly. they are having a difficult time reaching their consumers sometimes through more traditional means. they know that a lot of their customer base has shifted to social and two apps sites like youtube. they want to find new ways to reach those consumers. we have the stars and the top talent that are influential. alix: what was it like at the new front? george: it was exciting for us, our first time ever at the new front. it was a big day this morning. i think we did a lot of telling our story, first and foremost. we wanted to introduce who we are. we start with the premise that the world has changed. young people are consuming media in a different way and creating media in a different way. i think there is a strong curiosity amongst advertisers and brands. they want to get involved and see fullscreen as a way to help
them be relevant in this new world. alix: how do you compete with major networks coming online, like cbs, nbc, or netflix? >> that is a good question. on the surface, you would see us as competitors, but a lot of them are partners. they like to do product integration. some of them like us to manage their social profiles on youtube snapchat, facebook, and other social platforms. alix: what is really hot right now on the web? george: it is becoming very personality-driven. you look at our bigger stars like embryo russet, jack and jack. they make a direct connection. they -- their fans, it in the millions or tens of millions, you feel there is a digital friendship. just making a show is usually not enough. you have to make a direct relationship with your audience.
you have to be in constant dialogue. alix: you bought a social media company. how is that going to help you talk more directly to people like me? george: the beard -- mcbeard has pioneered working across every platform. youtube is a platform i know very well, but every creator manages their presence on 4-6 social platforms. that is where their fans are, so they need to be that as well. mcbeard helps us create content across all those platforms, which is hard to do. they support some of the largest brands in the world, helping them create social media content. we thought it would help our talent and brand partners. one thing i should mention at bloomberg is, i think our acquisition of mcbeard this morning was the first ever m&a transaction completed by a snapchat. alix: how do you even do that?
alix: here are the top stories we are watching. pimco's total return fund is no longer the world's biggest aunt mutual fund. that no belongs to vanguard's total bond market index fund. investors pulled $5.6 million from pimco in april. goldman sachs is saying the bull market is coming to an end. goldman predicts the equity expansion will and when the fed lifts interest rates, which strategists believe will happen in september. floyd mayweather's victory over manny pacquiao was a huge payday
for mgm resorts. fans in las vegas filled up tables at 10 casinos, driving bets to a record, according to the company's ceo. revenue on hotel rooms have risen 30% farther weekend -- for the weekend. stocks finishing higher for the second straight day. we are going to get right to our breaking news deaths. -- desk. scarlet: avis reported an unexpected rise in profit compared with the year ago. first quarter adjusted earnings per share, $.17, topping consensus by three pennies. revenue was a hair lower and missed analyst estimates, the company saying the strong dollar had a negative impact of $85 million. in terms of its outlook, avis not making any changes to full-year profit. it was right in line with analyst predictions, which means
it is not looking to make up the first quarter revenue print as the company heads into peak travel month. let's move on to eog resources. another expiration and production oil company with a loss in the first quarter. you can see it is just nudging lower in after-hours trading. if you back out certain items -- profit of three cents a share compared with average analyst estimate of a penny. the company reiterating it is on track for a 40% drop in capital expenditures. one thing i thought was interesting is that eog resources reiterated its illusion outlook on prices saying it sees double-digit oil growth in 2015 if oil prices reach $65. wishful thinking, perhaps, given that crude oil is having trouble getting about $60 without coming back down. alix: i want to make a million dollars. we all have those dreams. money manager david einhorn slamming the shale dennis -- shale energy industry saying it
ushered in an era of u.s. oil production that was wasteful expense, and a terrible investment. shale explorers plunging in reaction to his comments. joining me from houston is the ceo of a $3 billion commodity services company that does business with all the big guys. chevron, exxon, duke energy, and rio tinto. thank you for joining us. >> thank for having me on the program. alix: what did you make of einhorn's comments that shale producers are wasteful? >> everybody is excited and happy about oil recovery, which we will be seeing in the prices lately. but i think the industry view this is going to be a long-term game compared to what we have men's being in 2008 and 2009. so this appears to be a u-shaped recovery rather than a v-shaped recovery.
we do know that many of the operations in the u.s. -- some of them are at the cost of about $67, $80, which means the current prices not many of them will be making money. that is what einhorn is referring to saying this has been a good strategy. alix: basically, certain producers are not economical at this price level. why haven't we seen massive bankruptcies are defaults? samir: as you know, many of these operators are small operators. some are big ones. but the majority of the smaller ones -- remember about half a year back, we had about 2300 drillers. the numbers went down to about 1800. definitely, 500 has been out of the business. the question is are we going to manage more the supply of the u.s. versus the world? and if that is going to change
we can get a better equilibrium between the supply and demand. but i think what is important also, at the same time, is that m&a is interesting, but you do not want to do m&a when the forecast is not predictable. you would like to do it either when there is a real downturn or a real upturn. at the moment, it is very turbulent. alix: your business as a services company -- we are seeing a 40% decline in this year in the u.s., 20% overseas. what does that do to your business where we are also seeing cost-reduction? samir: we are a combination of two companies. unlike our peers of the industry, we are one of the few who can play the upstream midstream, and downstream of the business, and we can work through the whole lifecycle. we have today about $10 billion in revenues.
because of that, we have been quite resilient in downturn years, because we are hedged by sick there and markets, and in terms of geography. alix: fascinating outlook samir brikho. we have breaking news from the stone conference in new york. julie hyman joins us with an update. what more can you tell us. julie: a member of appaloosa management has been talking about his thoughts on the broader market. one of things he says is that the s&p 500 is a little cheap in his words. he says, don't fight for the fed. in this environment where we see a lot of easing on the parts of federal reserve's around the world -- still true in the united states, although we may be going in the opposite direction, that things that are a little cheap look even more attractive as we see on that easing alone -- around the globe.
that is the big take away thus far. he says he would not be too long bonds or short stocks. giving a measured performance, in contrast with the only real guns-blazing talk we have heard today, the one you have been referencing from david einhorn. other than that, it has been a little more tame. alix: mother frackers? come on. that was awesome. coming up next, the theme at last year's met gala was "got chic." i will tell you what trend is not allowed this year. some of the most innovative product of 2015 on the other side of this break. ♪
world. it has raised millions of dollars for the costume institute. when it comes to social media, do not even think of it. security against selfies will be tight. i am joined by the managing editor of "bloomberg luxury." crazy night. put this $145 million in two perspective. lots of museums have fundraisers. >> not only is this the biggest night in fashion, but one of the biggest charity events of the year. the costume institute at the met is not that big. when last year made $12 billion, that is all the institute needed for the entire year. alix: who winds up paying for these tickets? how has evolved over the last few years into -- from society people to celebrities? chris: for a long time, it was an old-school new york society event. eleanor lambert founded in 1948 with the best dressed list.
when anna wintour came around, she turned it into a huge russian industry thing, and all the brands have to buy tables. that is at least $175,000 per table. they go, make a big splash, and that is where the money comes from. alix: what is the theme this year? chris: the effect of chinese aesthetic influences on american and international fashion. it is a lot of dresses from different designers that have chinese elements and themes. alix: you and i will not be there, but thank you for joining us. what kind of hair care products can change the world? nielsen says from shampoo to batteries to energy drinks, there are products that are breakthrough innovation winners from a pool of 20,000 candidates over six years. this year's winning brand, png craft, texaco, red bull -- pepsi
co., red bull, and kellogg's. who are the top winners? take your favorite. >> my favorite is mountain dew kickstart from pepsi. alix: what is that? >> the folks from mountain dew and pepsi identity i'd consumers were looking for something that was not quite the jolt they get from energy drinks and was not being satisfied by coffee or soft drinks. they found the point in the middle that gives a boost in the morning with a mixture of juice, mountain dew, and other products. alix: what is your criteria in terms of how you pick one an innovator really is? rob: this is an exciting day for nielsen and the innovation team. honoring breakthrough winners is really exciting. the criteria we use is we look at whether or not a product is really distinct. does it bring a new value proposition to consumers, not a "me too" product question mark
your one sales had to be at least $50 million in the u.s. and it has to have done at least 90% of your one sales in its second year. alix: do you think the apple watch will be part of that category? rob: i would imagine. alix: what about elon musk's new battery for your home? rob: we will see. alix: how to brands create a direct relationship with consumers? rob: the brands that succeed the most do that. they center not on competitors really centering on the consumer. those companies -- it seems so obvious, but those companies who really use the consumer and their circumstances for their lives as the central measure of innovation success -- those are the ones who really breakthrough. last year -- in 2013, 3500
products were launched in the u.s., and only 12 are what we identified as breakthrough innovation winners. alix: mountain dew plus red bull is a real jolt. thank you for joining us. coming up, the real cause of america's obesity epidemic -- no support is, doritos -- no's apprise, -- no surprise, doritos are partially to blame.
streaming business grant will to take down unauthorized feeds of the boxing match between floyd mayweather and manny pacquiao. the company received 66 reports of fans streaming the fight. surveymonkey ceo david goldberg died after collapsing while exercising, according to people briefed on the matter. goldberg was married to facebook coo sheryl sandberg. the couple was vacationing in mexico at the time. good news if you are a pasta lover, because carbs may not be to blame for america's obesity economic -- epidemic. a problem is the link between nutrition and flavor. joining me is mark schatzker, owner -- author of "the doritos effect." he is the brother of market makers host erik schatzker. tell me about this book. what am i going to learn? mark: this is about the profound way to flavor of our food has changed.
we have been fighting a battle against nutrients for 50 years -- sugar, carbs, fat. it is not working. obesity is getting worse. it is only by understanding deliciousness -- we all love to eat. when you understand how we have changed this, the story told through flavor, you will understand why people are eating the foods they are eating. alix: does that mean my chips taste that are to make me want to eat more? mark: the first to read oh -- the very first reader was a salted -- the very first dorito was a salted corn chip. flavor technology made itself. make it taste like a taco, like natural cheese. it becomes irresistible. we are adding those flavorings to everything. alix: it is not just chips, cookies, ice cream. this is like the tomato i might i at the store. mark: it is in sino, pasta
sauce, yogurt. the tomato does not have flavoring. but all the food we are growing the foods we should be eating -- cucumbers, tomatoes strawberries -- it is losing flavor, becoming more like cardboard. whole foods have gotten boring to eat. junkfood has gotten exciting. why are we surprised at how people are eating? alix: i do not want to feed my seven month old daughter any kind of chemicals. how do i know what is good to eat? mark: if you see artificial and natural they were in, someone has tinkered -- natural flavoring, someone has tinkered with the way it tastes. have the attitude of a great italian chef. find the best tomato, the best tasting chicken. they will grow to like those foods more, and that food will be more satisfying. alix: isn't that going to cost a lot more? mark: it will cost a little bit more.
there is interesting research being done at the university of florida. they created supermarket tomatoes -- great harvest disease-resistant, flavorful. we can have our cake and even it too, if we care about flavor. the scariest thing i have learned -- food addicts are caught in a cycle of craving food. when they include food, it does not satisfy them. they are in the grip of a craving they cannot satisfy. alix: why is that? mark: the food they are eating makes a promise it cannot deliver. it tricks their mind. alix: it tricks you into thinking you want more when you don't. what are you working on next? mark: flavor is such a big subject. alix: great to have you. nice to meet you. i am scared and interested to read your book. good news about food. i like that. coming up, why thousands are opting to live on $1.50 a day.
alix: a top nepal official saying today the country cannot be rebuilt without support. the death toll is at 7200. more than 180,000 homes were destroyed. nepal is one of the world's poorest countries. i am joined by the founder of the global poverty project, a nonprofit that hopes to eradicate extreme poverty by 3030. how does someone help the people in nepal right now? >> instead of volunteering time on the ground, the best thing we can do is make donations to organizations on the frontlines that are the most effective.
you noted that more than 7000 people have lost her lives. more than 14,000 people are injured. when nepal stops being in the headlines of the news, we need to sustain support over the coming six weeks in advance of the monsoon season. the best organizations making the biggest impact our organizations like doctors without orders or unhcr or the red cross, or care on the ground delivering food services shelter, the basic things that happen in response to any natural disaster. we need to get behind them. alix: the into structure was so bad to begin with. the building structure was so bad to begin with. so much of that country is still in poverty. which leads me to your new initiative, live below the line. can you tell us about it? hugh: we are challenging people around the world to live on the front of $1.50 per day to have a
small taste of what life is like for those living in extreme poverty, and to urge funds to support some of the best poverty-fighting organizations in the world. it is incredibly hard. i always find it -- i have done at the last four years. every year, i find it incredibly challenging. we are challenging people to raise money to support heifer international, the hunger project, care unhcr. we have amazing partners on the front line tackling extreme poverty. you get your friends to sponsor you for every day you do the challenge. you use a user profile on below the line that lets everyone get involved. alix: raising money is obviously a good thing. what is the link to continue this fight? how do you keep people involved and coming back? do you want them to do more than just give money? hugh: we really need to bridge
the gap of empathy globally. what we do at live below the line is, we have a campaign, global citizen where you can start to take action in your daily lives. while you might start through the live below the line challenge, we want you to become involved 365 days a year. every year here in new york city, we host the annual global citizen festival on the great lawn of central park, which is entirely earned. all your actions are new points you can use to come to the global citizen festival free. alix: what are some of the big names participating? i think joe biden was one of them. hugh: the vice president was amazing. we have had supporters like hugh jackman, ben affleck. some incredible names have really shown her support. -- their support. we are honored by these incredible personalities because this is the month where we need more people across america to take this challenge.