tv Bloomberg Markets Bloomberg June 4, 2015 10:00am-11:01am EDT
policy for the first time in my memory. i've never seen anything like this. stephanie: lisa abramowicz is here. joe weisenthal is here. from all the traders i'm speaking to in the market, this shows just how -- the underpinnings of this qe based, global economy are. the fact that christine lagarde is saying something like this. 70% in u.s.down treasuries since 2007. the fact that she is coming out, waving a flag like this, this is concerning. erik: don't stop the morphine drip. put anie: do she want to big band-aid on this because she cannot face a disaster on her watch? lisa: the imf has come out a lot of papers about what will happen if people start pulling their .oney out of emerging markets
she did raise concerns about emerging markets. if the federal government of the united states has a financial style -- a financial stability mandate that will change their analysis of the situation -- stephanie: carl riccadonna is here. erik: i want to remind everyone what christine lagarde, managing director of the imf said moments capturedhat is really our tent. best has captured our attention. lagarde: significant market volatility with financial stability consequences that go beyond u.s. borders. in weighing these risks, we think there is a case for winning to raise rates until there are more tangible signs of wage or price inflation that are currently evident.
words, we believe that a rate hike would be better off in early 2016. stephanie: we have to listen to joe -- with the let joe weisenthal time in. she concerned about emerging markets and financial instability. she is not saying the fed should never raise rates. there is a solid argument there are no signs of real inflation. she is saying a lot of people think the first rate hike will be in september so why not wait a few extra months? i think debate -- i think you could debate but it is not like a radically different proposal. stephanie: policymakers are praying that growth is going to get us out of this whole. as we get more data, it does not look like data will get us out of it, it looks like they're getting panicky. carl: these are explicit
instructions and i think it is unhelpful because it is trying to paint the fed into a corner. the fed's mandate is to steer the u.s. economy and do what is best in the interest of growth, full employment and price stability to be potentially sacrificing what is best for the u.s. economy is not the fed's mandate. erik: stan fisher the fed should take that into consideration. take these issues into consideration but their mandate from congress is full employment and price stability. this appropriate? carl: this is an inappropriate level of interference. now they're telling janet yellen you should have a press conference after every fed meeting. we would tell you when to raise rates. going too far.
i think it may create more reason for the fed to say one and done. shiva in september. -- see you in september. lisa: i would not expect -- joe: i would not expect the fed to take the imf fragmentation too seriously. issed itsas m inflation target for years. it does not strike me -- erik: hang on a second. joe: wait till 2016, that's fine. carl: wait until -- has moved beyond jobless numbers. we're looking at inflation closely. inflation is not one nation. it is a global affair. you can't have one nation so easily attached from everywhere else in the world. carl: the fed has the dual mandate. part of it is employment.
employment is a concurrent economic indicator. if you're setting policy based on inflation which is a lagging indicator, it lacks by six quarters, you're setting policy in the ripping your. we have -- in the rearview mirror. with the unemployment rate having potentially a four as a front number, we are going through full employment, we need to start moving off of that emergency policy rate. one rate hike is not going to up and the boat. erik: just because the fed has missed its own targets, does that mean the fed should allow christine lagarde to stick her finger in the air and say this is the way the wind feels like it is lowing -- the wind is blowing? joe: the imf is always telling other countries what to do. is this that unusual? stephanie: telling other countries what to do is different than what -- lisa: she also said something interesting.
a bigger risk of a fed hiking too soon then hiking too late. that is not -- there is a lot of disagreement about whether that is true. that is one question. if inflation is an indicator, it could get away from that. stephanie: i'm speaking to guys in the street who have said there has been a big buyer and the street does not have the balance sheet to facilitate it. if this was 2007, this is when the 10,000 pound gorillas who have that kind of conviction can come in and say this is my view on the market. the street has no bonds to sell them. note, market makers will come to an end for today. stephanie: really? erik: joe weisenthal, we sub from a let's, -- lisa abramowicz
matt: welcome to bloomberg market day. a big turnaround in the bond markets. a global selloff had been underway. it seems to been halted by christine lagarde and the imf giving possibly unwanted advice to janet yellen. neededt is the out she to push off a rate hike she really did not want to do this
year anyway. erik: mike's was an interview with the president of the carlyle group. lots to say about competition with blackstone. matt: how much is too much to charge for life-saving drugs? some treatment are far into six figures. matt: good morning. i matt miller. erik: i'm erik schatzker. interference underway. christine lagarde has urged the fed to delay a rate hike until the first half of 2016. stocks dropped and the u.s. 10 year yield has been declining. matt said the selloff we have seem over the past several days
has turned into a rally. bond prices are rising. yields are dropping. that is the situation with the u.s. 10 year yield. in germany, maybe the impact of a statement on the fed does not have as much influence over german bond trading as it does treasuries. you see german 10 year yields are down as well at 84 basis points. matt: oil seeing a big move. .ou can see the drop this has been going on already. before the announcement. $1.25. see crude down $58.38 per barrel. the same is not true for stocks. surprisingly little change. we have seen a bigger drop earlier in the day. the market has been open 41 minutes. esau big drop in european
stocks. -- you saw a big drop in european stocks. erik: u.s. stocks open to down. the selloff accelerated as people were digesting comments from christine lagarde. does it suggest is agreement lagarde and yellinen? matt: back to flat from down. equity investors do not want to see rate increases. erik: they have had an opportunity to think about it. with us to discuss this unprecedented commentary, carl andadonna, joe weisenthal scott deal. what do you make of it all?
we do not see this kind of thing from the imf very often. we do not see an open its -- an open disagreement. imf cost comments probably are not going to play into the situation. janet yellen is far too busy to have heard them at this point. she might get a chuckle when she reads the news. my role is not to establish what the federal reserve should do but what they are most likely to do. i think the one thing we centered on is that regardless of whether the first hike date the path istember, going to be extremely gradual. i'm talking an average of five to 10 basis point. as a dovish statement that i think should be supported of the things that christine lagarde was talking about.
matt: i was thinking about this when christine lagarde was speaking. rights right -- if guy is , even if their whole quarter-point, what kind of effect would that have on global economy. ? carl: the risk is some sort of outside market reaction. we have seen these kinds of episodes of the past. if the fed can sell the market on the notion we are not going to go fast, one and done and a slow pace going forward, i think they are being successful. matt: sold. carl: they have to have it cemented in. if they do that, there are minor implications. the economy is growing. with a policy rate lifting up of 3%o, it has to get closer to or 4% before it is applying the brakes on the economy as opposed
to easing their foot on the accelerator. joe: our inclination is to pay attention to the timing of the next rate hike. erik: shouldn't we also pay just as close attention to what she said afterwards? that every move the fed makes subsequent to the first rate hike should be gradual? don't do anything to upset the markets if you're going to take the needle out, do it slowly. joe: i think most people believe the fed hike is not the real story, whether it comes at september or later. it is what karl was talking about, the pace. jobfed has done a good convincing people that the pace is going to be slow. lagardenot sound like is that far apart from yellin and the fed.
ethic is more the fact that they said it at all that seems unusual as opposed to this being some radical suggestion. fireworks between these two guys earlier on whether lagarde is doing which you supposed to do. carl thinks she oversteps. she gives advice, wanted or not to other countries. what do you think about this move by the imf? the imf's advice has been more on the not wanted side. see any benefit of it. the imf does not have a say in u.s. monetary policy. the federal reserve has a mandate to support the u.s. economy. there are interactions between foreign trade between emerging-market economies in the u.s. that could influence. is
such a secondary influence compared to the impact of u.s. policy. the secondt to hear point i want to remind everybody what we're talking about. the imf having assessed the u.s. economy, coming up with a statement saying the fed should hold off on its first rate hike until the first half of 2016. the managing director of the imf held a press conference today. ears an excerpt of what she said. -- here is an excerpt of what she said. lagarde: we believe the trade-off between starting to early and risking disinflation and having to return to lower ofe is higher than the risk slightly above 2% inflation moving forward. erik: that is christine lagarde, offering some of the imf's rationale. we are debating whether the imf
has any place openly disagreeing with fed policy. we will make a second point. guy: when did it become the mandate of the imf or federal reserve or any policy entity to make sure that markets were flatlined to slightly rising all the time? regards talked about -- lagarde talked about emerging markets. inherently risky investments. carl: the fed has already been under political pressure in the u.s. all these issues over how much -- the ur's best the new york fed, how much they report to congress. a lot of pressure building on the fed. if the fed says, we will let an asset bubble get bigger in the u.s. or we will
let inflation get out of the bag because we are trying to help emerging-market economies, that political pressure will double down if not come down tenfold. if we look back to the early 1980's. had no problem doing goes right for the rest of the world. erik: the inflation beast. highlighted it was a secondary concern of the fed, more like tertiary or further. erik: some call market stability the market -- the fed's third mandate. guy, we thank you for joining us. carl riccadonna, and joe weisenthal. thank you. matt and i continue. matt: opec ministers meeting in
erik: a close eye on financial markets and oil. oil prices fell after christine lagarde commented on fed policy, urging the fed not to raise rates until the second half of 2016. matt: oil prices begin their decline and our earlier. around 8:30 this morning started coming down. this as ministers meet in vienna where they are expected to keep their crude output target unchanged. ryan chilcote is in austria with the latest. we have alix steel with us on set. talk to me about what is going on in oil prices are you the decline started before we got these headlines. alix: i have no idea.
my assumption was, we have lagarde making the statements. my suction is the dollar is down and oil is up. is not we are -- my assumption is the dollar is down and oil is up. two very influential in terms of what the price moves. looking back at headlines, perhaps this has to do more with opec. maybe ryan's comment on this -- maybe ryan can't comment on this. -- can comment on this. erik: there has been some chatter. alix: it is a commitment to, we , keepeep overproducing flooding the market. erik: let's bring in ryan chilcote. i've heard that already. colleague was on yesterday
talking about the possibility that opec will raise its quota. what are you hearing? ryan: more likely to raise the quota. i've been here for two days and i've not heard anyone say that they think the quota should be cut other than the iranians but they are kind of out of the game anyway. they always call for cuts because they want a higher oil price. at the end of the date they will increase their production if the sanctions are removed. even if they think the price is too high. is, thesest likely opec guys will do absolutely nothing because they are happy with the situation. the price of oil is falling but at the end of the day if you look at the direction of the oil price over the six months, it has been upwards.
it has stabilized mostly. the saudi's thank that their strategy is working -- think that their strategy is working. alix: iraq is also putting more oil into the market as well. shipping tanker estimates about 800,000 barrels a day. almost a record high of 3.7 5 million. adding oil to the market. cibc says iraq is saudi arabia's biggest competitor. erik: when we talk about opec quotas we are talking about saudi arabia? we know that other countries will produce more than they are allowed to and do. ryan: that's right. the only thing you can say new on that front is that the
saudi's spare capacity is diminished because they have been pumping so much oil recently. they pumped more last month than any on record. they do not have that much room to ratchet up their production. everybody wants to produce oil right now. the saudi's are doing this and i think if you're going to watch anything in the fine print next to the opec decision and what the cartel has to say about enforcing their production targets, the target is 30 million barrels. 33 out of 34 analysts think they will keep that. but they could say is, we should stick to that. you will see oil,. come up. matt: we will continue to talk about this. ♪ ♪
matt: welcome back. i matt miller. erik: i'm erik schatzker. the imf calling on the u.s. federal reserve to hold off from raising interest rates. matt: here is christine lagarde. lagarde: hire u.s. policy rates could result in significant witht volatility consequences that go well beyond the u.s. borders. in weighing these risks, we think there is a case for waiting to raise rates until there are more tangible signs of wage or price inflation than are currently evident. words, we believe that a rate hike would be better off in early 2016. matt: the imf cut its u.s. growth forecast. the dollar iss
overvalued and if it gets much stronger it would be harmful. the imf says "the fomc should remain data dependent and defer its first increase in policy rates until there are greater signs of wage or price inflation than are currently evident." janet yellen said she still expects to increase interest rates this year if the economy meets her forecast. erik: the last key employment figure we get before tomorrow's jobs report. the government says fewer americans applied for unemployment benefits and the total people -- total number of people getting jobless -- job insurance payments is a smallest in years. steady gains in hiring with about 236,000 new jobs. consumer confidence fell to a six-month low. the eight straight week the consumer comfort index has dropped.
higher gasoline prices could be the culprit. the average price for regular gas is the highest december. matt: a lot of this is market moving news. a look at the telecom sector. even before christine lagarde's comments. julie: obviously this is big but theremarkets is other news that we should be looking at when it comes to the markets. it does involve the telecom group. t-mobile and dish after a wall street journal report that the two were in talks potentially for a combination. we have seen dish and t-mobile rising. this would bring together two of the biggest personalities in telecom, charlie ergen who would be according to the journal, chairman of the new organization, and john ledger, who would be ceo.
a callout of at&t and verizon regarding their own recent acquisitions. corn to jpmorgan it is upgrading at&t to an overweight saying the direct tv deal should close soon and that should be positive for at&t. verizon's acquisition of aol is not going to be as exciting in the eyes of jpmorgan. that stock was downgraded to neutral. the move we are seeing in casinos. a rebound for the casinos that depends on macau. las vegas sands wynn resorts, mgm all on the rise. deputy chairman that the gaming business in macau should rebound in the second half. these stocks, many of them down for 11 sessions in a row. a bloomberg index of macau's casinos is down. erik: julie, thank you very
much. the carlyle group oversees $193 billion in assets, making it the world's second-largest manager of alternative assets. carlisle has trailed the blackstone group in diversifying beyond private equity. i sat down with glenn young can and asked him, how do you dispel the notion that carlisle is good at private equity and not so great at real estate, credit and energy? glen: we had been in private equity for 18 years. with our acquisition of an gp in 2012 and in the raising of an international energy fund and now the raising of an energy mezzanine business, those are two and three-year-old businesses. the performance has been really good. three years versus 28 years will eventually catch up. interestingly, on the real estate side, our u.s. real
estate fund is rated as one of the top performing real estate funds. while the great developments in the second half of 2014 and again in 2015 is our two most havet real estate funds both moved in to carry. the performance is been good. our par 4 leola was up 11% three of bash our portfolio was up 11%. up 11%.ortfolio was i think there are some real estate businesses -- our competitors at blackstone are very much the standard of the industry that people talk about. i do not think that diminishes the performance of our business at all. .'m 6'6"
when i'm standing next my kids i look very tall. when i stand next to them washington wizards, i look short. energy?at about why hasn't it been more active? this was supposed to be the opportunity of a lifetime. everybody concluded it is the opportunity of a lifetime. like all good economies, everybody moved capital in place. the capital markets relieved a lot of the stress. the amount of equity placements in the capital markets and credit placements have alleviated a lot of what would have been early stress in the energy space. erik: stress still exists. glenn: it still exists. from a business standpoint when you look at what has happened to operating margins in the services sector, by definition the services that there is usually the first get hit when comes down because people have
to -- when comes down because people have to price. , but have seen developed is the credit side of our energy business maintains a very active pace because that is where people go first. there is not an overlap between buyers and sellers expectations to have a private equity transaction happen. with oil prices rebounded, a lot of the expectation that they will be great deals to be done .as when wti was low 50's it has crept up into the low 60's. sellers were thinking 70. we are beginning to see a period spread where the bid/ask -- it is not going to be second quarter but i think the pipelines are busier. the spreads are tighter and i expect there to be a meaningful
amount of energy investing that happened. erik: one of the menu work for told me last year -- one of the men you work for told me carlyle may have to buy a mutual fun to close the gap with asset managers like say it blackrock. where you stand with that thinking? glenn: david thinks out-of-the-box all of the time. i think that is his role. we have so much to do right now in our alternative investing platform. we have got more funds to raise. happy investors, more capital to invest. erik: shareholders would be happier if your stock was trading at a that are multiple. that is one of those gaps in valuations that most of us in
the private equity world don't understand. you will hear many of us talk about it and yet it persists. one of the reasons it persists as we are a young industry. when you get -- blackstone went public in 2007 and the rest of us look back to our birthdays in 2011 in 2012. we have not had a chance to show the markets what we will do through cycles. what it means when we expect to happen and it happens. there is an understandable give and take that i think will happen over time. the market will understand how well we perform and i expect what i think is a strange gap between traditional asset managers and the alternative is we will close overtime. erik: it is not easy to explain the complexities of alternative asset management. you get the feeling that the folks at carlyle wish david
crawling back. some decent form into the market. the imf story seem to help that. since then we started turn around. still negative on the day but they've come up. let me show you how the market day has shaken out. let me show you what is going on with the dax. that is the climb back. a nice double top around where the imf story came in. greece is coming back onto the agenda. we're watching that carefully. looks like we will hear from alexis tsipras tomorrow night. greece the center of the action. this was the euro firming early in the day. part of that, what is happening with greece. a comment that came out earlier a which may have been
mistranslation. some people support -- support that was supportive not sportive. since then, we're faded off with trading at 1.1263. see a lotwe will coming through surrounding greece. the imf is a big story. you look at where u.s. averages are at the moment, we have had a bit of gyrations in this early regular session. all down but not by much. 2/10 of 1%. it seems the big weight has to do with commodities. energy and material stocks. material stocks up and falling the most. that is as the underlying
materials and commodities are also declining. take a look at what is going on in the bond market on this side of the pond. a snapping of the losing streak. you see this reversal we saw in the bond market. yields are turning lower after the street hired they had been on. the straight we have seen here and in europe. the site that was triggered by comments coming out from the imf's christine lagarde. we saw that reversal happen in the two-year. now yielding two thirds of 1%. i mentioned what is going on with oil and the dollar. still dollar today, trading lower. not seeing as big a really action -- a reaction. the big event here will be the jobs report.
oil as we close out, we are seeing oil prices move 1.4% ahead of the opec meeting. matt: the biggest move we are seen in oil and like four days. it was a 5% on friday? julie: it has been on a longer-term bigger rally. matt: i wonder if the opec nations they give it, as long as we -- think of it, as long as we do not have insane volatility it would be better if we stay at one price. thank you very much for that wrap up. erik: we want to bring you up to speed on some of the top stories is morning so that you know what's happening. chicago came from behind to win game one of the stanley cup finals. blackhawks scored two goals in the final seven minutes of play.
the game-winner was scored with a little over four minutes of play. game two, saturday night in florida. matt: hundreds of people watching that game. erik: nba finals get underway tonight. curryiable player steph and lebron james, both teams have first-year coaches. american apparel -- american pharoah has been named the favorite to take the triple crown of horse racing. the number five posted position for saturday's race at belmont park on long island. matt: i think i live a stone's throw away from belmont. i've never been there. erik: you live in bronxville. matt: how far away is it? erik: it's all long island. matt: it's a stone's throw if
you're driving a 1990 mclaren f1. as part of a private collection of 30 classic cars. this mclaren would could go for $12 million or more, it is very special car. it will go over 200 miles per hour and get you to long island at midnight in about 20 minutes and during the day in about four hours. the sale is set to take place during a classic car event at pebble beach. it could establish a new price record for the model. , $8.5st record was 2013 million. this is an upgrade from the standard one million-dollar f1 dragmore of a gt three greg k t kit. there's a great documentary. google elon musk, mclaren documentary.
old grainy copies of it. erik: maybe that was part of the inspiration for the model s. matt: the mclaren has one seat in the middle in the front row to drive and two passenger seats on other side. one of the coolest cars ever. erik: quite a few flurries of for auction. matt: at least nine in this pool of 30 cars but there are always a time. -- always a time. on they are beautiful. erik: if you are bored by ferrari, what excites matt miller? matt: as far as auction cars, the f1 is up there at the top. , the dino would be .
enzo changed it to dino because he was not willing to put a ferrari badge on a v8. now, of course they do. erik: i don't have that much more to add. i will take this opportunity to say thank you and i will check out. matt: we will continue covering that breaking news today. he will continue to cover it after he leaves the set right now. we will talk about how much you would pay to cure a previously on curable, life-threatening disease. how much is your life worth? stay with us. ♪
matt: welcome back. i'm matt miller. new drugs that can prolong life or patients with fatal diseases or even cure the previously un-curable. they can cost upwards of $100,000 for east treatment. -- almost 100 grand for the full treatment. you will no longer have had see which is a -- hep c which is a good thing. you can read the story today on bloomberg.com. paul barrett wrote the story. it is fascinating, thought-provoking. the kind of story people would read and talk about with friends and family. is this a new development that drugs cost this much? paul: a development that is becoming more obvious in the last couple of years. we had a decade where overall
spending on pharmaceuticals, growth of that spending was plateauing because the big blockbuster drug, lipitor, millions of people took, were going generic. spending was somewhat reduced. drugs for cancer, multiple sclerosis were coming on the market. these drugs were being set at high prices. as these drugs come forward, people are realizing we have a new spending issue with pharmaceuticals for these narrow drug diseases. this one of the aspects of , on the one hand drugmakers that are charging this much seems that they're being unfair. they're holding people's lies for ransom. -- people's lives for ransom.
how much do you value life? paul: when you have a collision of vision. companies say this sounds like a lot of money to put up front but you put this , and up, american society we will save you hundreds of thousands of dollars in the out years. we'll avoid surgeries and hospitalizations. hepatitis c which affects livers. pay now and be sensible and you will not have these payments in the out years. isl: a liver transplant hundreds of thousands of dollars. matt: $94,000 for one of these treatments. a point you make, you and i are not paying this out-of-pocket. people who have seasoned health insurance do not pay the full cost.
paul: the pushback does not so much come from individuals but the significant pushback is coming from companies like ps, the benefit management company that operates on 85 million individuals. it works for insurance companies. , we will not reimburse for those. we will only go with drugs that are less expensive. paul: living some customers -- matt: living some customers untreated as a result. my recommendation, go out and pick it up. i like the paper version but if you want to read it right away, you can check it out on a website whit right now. ♪
pimm: welcome to the bloomberg market day. a global selloff has turned into a rally in just the past couple of hours. we will look at what is behind the bond market volatility. rate why the imminent fed hike is bad news for utility is imminent at all. not if christine lagarde has her way. these are still the worst industry performers. there were 10. rick perry entering the presidential primary contest for the 2016 elections. hillary clinton faces another challenge -- challenger for the democrats. ♪ "market makers."