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tv   Market Makers  Bloomberg  June 26, 2015 8:00am-10:01am EDT

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stephanie: good morning, friday june 26. you are watching "market makers." i am olivia stern. pimm: i'm am pimm fox. erik schatzker and stephanie ruhle are off. olivia: earlier today, a terrorist attack at a gas plant in france. we will bring you the latest bits give you the latest is giddy details on our top headlines. in france today, it have a net and era products and air products & chemicals planted near the city of lyon. attackers beheaded a man in the java card high speed into the plants, ramming into gas containers causing an explosion. two people were injured. police of made multiple arrests. and there is word that a lifeline is being thrown to greece. one says the program will be extended by five months in greece will get another $17 billion to no word yet on with the greeks will have to do in return. the current bailout program
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expires june 30 next week. prime minister tsipras had new proposal but pushed back when more cuts were called for. both plans are still in play. >> interesting the seminal colleagues disagreed and criticized the institutions. we decided that we shall continue and this will look again at the two documents. theolivia: the finance ministers will meet tomorrow for the fist -- fifth time in seven days. it is not yet clear where greece will get the money from. >> after upholding obamacare the supreme court has only five decisions left to announce before adjourning for the summer. those rulings are expected today or next week. the biggest of these moving --
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rulings is the right for same-sex couples to marry. four states have asked them to uphold bans on same-sex marriage. shares of nike arising in premarket trading, they posted quarterly earnings that beat analyst estimates. nike has been taking away market share from rivals such as adidas. they have it offended from casual trends shifting toward more casual and comfortable clothing. the chief executive of boeing jim mcinerney, he will get almost $4 million a year when he retires. he steps down as chief executive next week. but he will stay on as chairman and till next year. mcinerney will get $900,000 a year from two boeing retirement plans. boeing also is giving him another $3 million a year for 15 years. those are your top headlines.
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olivia: vonnie quinn joins us from the newsroom. vonnie: the french president is on his way back to hold a cabinet meeting in paris after details came to him, one person being decapitated into others being injured. it was at a gas plant near lyon which is in the southeast of france. we know the attack was perpetrated by one or two people . we know that one person is in custody. the security has been set up around chemical sites. the hackers beheaded the man and posted the severed head of the factory's good. the interior minister said they are doing everything to call for unity and responsibility today. olivia: it is unconscionable. thank you. pimm: five things you need to
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know this morning to a number one, chinese stocks down the most in five the benchmark index is on the edge of a bear market. morgan stanley warned that valuations in the market have declined to hide. -- have climbed to hyperion olivia: there are concerns that there is weak earnings growth. valuations are huge at this point. 814- this. market, the shanghai composite9234, has doubled in the past 12 months. there is this issue about the fact that these stocks are so levered and there is a record amount of margin tent in the system. pimm: casino or the turnover of the stocks you everyone trades at least once a week. these are retail investors that have recently got into the market.
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when the trenches not go your way that is a very painful. olivia: a potential takeover with valiant and zoetis. a deal could he helped along by activist investor bill ackman, who holds 8.4% of zoetis'shares. this is not the first time we have seen bill ackman try to team up with valiant to get an acquisition done. there is speculation that zoetis could go after -- could be sought after by others. pfizer has spun it off. it has been a very interesting
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business. pimm: duke i oliviat out. : i cannot julie hyman has number three. julie: sorry to be the buzz kill here peerless look at micron. down more than 14% and premarket trading. that is after a week fourth-quarter sales forecast was given. the company's sales fell last quarter for the first time in more than two years. analyst say almost, what can you do the company does make chips for things like servers and networking. but demand for that is not making up for the drop in demand in pcs. pimm: thank you a number four who is the best thinking chief executive. there is a tournament racket online. round number one the ceo's
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looking at return on equity. then stock performance compared to indexes in the regions in which they are based. round three, we measured the growth input value per share. then we narrowed it down. there were only four. goldman sachs, bnp paribas, citigroup, and wells fargo. and then percentage of profit. winner is -- the wells fargo chief executive beating out goldman sachs' chief executive. all right, congratulations. olivia: i love that legal bills were the tiebreaker. a study in contrasting business models between wells fargo who stuck with traditional banking businesses, and goldman sachs. pimm: yes. also in that context, that is a rather new thing to have to look at for all the banks. the kind of look at them as one-time costs.
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olivia: number five thing we are watching today which we have been watching for the last five years -- ever five is greece. creditors just propose a five-must program extension and $17.3 billion in funding. this is according to a european official. of course, we know that europeans really specialized -- i do not mean to be too rude but they have a way for kicking the can down the road. a five-month extension? pimm: what are they going to do over the summer? they all want to get away for their summer vacations. do you know what habits in august? olivia: that is why they set up qe. ryan chilcote joins us live from athens with the latest. ryan: good morning. look it is time to get a little bit of a perspective from the business community here what exactly it is like to do
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business in greece with the crisis underway. to do that, i am joined by the president of the ellen a american chamber of commerce. thank you so much for joining us. verse off, we have a global audience. give people a perspective of what it is like to do business in athens and around greece right now. >> nice talking to you on not such a sunny day. it is difficult. the last year has been difficult . the last six months, even more difficult. the quiddity is an issue. ryan: do the banks have any money to integrate businesses? >> not really. [indiscernible] for real business, liquidity is a problem. ryan: one of the things we keep hearing the greek prime minister say is that the greek people are already broke. you cannot keep all of this austerity. is that what businesses are saying? >> we have seen the retail side
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being stable or maybe a little up with the first quarter of the year. but people keep a lot of money at home. they are taking their money out of the banks and keeping money home for safety reasons. ryan: we listen to this tit-for-tat in brussels and wonder if we will have a deal on tuesday that keeps rates in the eurozone and keeps the money flowing from the imf and the eurozone. what is the mood like amongst business leaders? >> we're all counting that the prime minister will go through. we expect and hope we have a deal. ryan: do you want a deal at any cost or the deal on the table now? that deal would mean more taxes for greek businesses. >> actually, there are taxes for
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businesses and it is not good for business. however it is an absolute necessity to go through with the deal. it is difficult for me to say any deal, but in reality, we need any deal rather than no deal. i think the only way right now is to go through with a deal. ryan: measure what no deal means for business versus a deal. >> no deal, actually, we do not have any liquidity in the country. we will not have any assistance from abroad, from imf or the eurozone. ryan: that is an apocalyptic scenario. >> [indiscernible] manufacturing depends a lot on imported material. we need some kind of competitiveness. no deal means this is the end. couple weeks ago someone sick
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getting out of the euro and i would be absolute hell for greece. ryan: if there is a deal, what does it mean for tourism for people coming outside of greece to this country? >> those are two most critical points. imf and every videos are insisting -- and everybody else are insisting we boost for growth measures rather than new austerity measures. these are critical for the economy. tours of accounts for about 20% of our gdp. it would make the greek addict completely not competitive neighboring countries. shipping is an international industry. the cuts in that industry are number one in the world today. having more taxation on the
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shipping industry would only mean that shipping services would move outside of greece. shipping is about 7% of our gdp. ryan: we have to leave it there. obviously, a heavy price to pay. the message is -- any deal the deal on the table right now, even with all that pain, is preferable for business in this country over no deal. back to you. i love you: ryan chilcote, thank you for olivia: ryan chilcote, thank you. history may be in the making this morning with more supreme court rulings due at 10:00 a.m. eastern time. when will the justices say about same-sex marriage and a string of other issues? we heading straight to capitol hill to find out. ♪
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pimm: later this afternoon on bloomberg television, former
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u.s. and messenger desha besser degrees thomas miller will be on to discuss the lack of progress having to do with those bailout talks -- the former u.s. ambassador to greece will join us. olivia: the u.s. supreme court could legalize same-sex marriage fromsea to shining -- from sea to shining sea. it could be mandated in a matter of hours. other decisions are respective. greg stohr is standing by outside the supreme court. let's start with same-sex marriage. this is really exciting. it feels like the court is on the brink of making the biggest transformation to civil rights this country and nearly half a century. what is the buzz about today's ruling? greg: everybody is expecting this ruling to come on just the way you described, legalizing
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same-sex marriage nationwide. the court has given plenty of signals it is moving in that direction. it has led some 20 states start same-sex marriage basis test based on judges orders. it would be a surprise for the court to go back and say, no, it is actually a state issue. pimm: how do you get these decisions so quickly question mark there is a lot to figure out. you seem to be right on top of it. greg: well, they hand them to me. sometimes they're easier to figure out than others to they actually do a good job at the court having a summary at the beginning that lays it out. there are always a few nervous moments when you're waiting for it. pimm: are there going to be other nervous moments today or monday with the other decisions? the greg: we have five decisions is still have to come. four a pretty big. there is a case involving lethal injection and a drug opponents say risks putting inmates in
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severe pain and severed before getting executed. there is a case involving epa limits on mercury emissions that the utility industry cares a lot about. there is a case involving efforts to set up independent redistricting commissions so that state legislatures cannot gerrymander the districts. that is one that can surly go either way. olivia: quickly, can you talk to us about the significance of the health care ruling yesterday? does this mean that the supreme court is going to uphold obamacare in the face of future legal challenges? greg: this looked like the last big block to obamacare. there have been other cases, but i do not see any in the pub one that threatens the guts of the law the way this one did. olivia: greg, thank you so much we will be back with you at 10:00 a.m. eastern and i presume you will be the first to break the news, once again. pimm: yes, he is going to know.
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the supreme court decision up obamacare was cheered by the bulls, at least hospital stocks. hospitals leading the rally a month health care companies with tenant advancing by double digits. hca gaining 8% by the end of yesterday's session. olivia: subsidies guarantee. time for your top stories we're tracking. we start with the health care companies. aetna is closing in on acquisition of humana. we are reporting that a deal could happen as early as this weekend. humana has received an offer from cigna. any offer is expected to value m&f at more than $20 billion -- any offer is expected to value humana and more than $28 billion. pimm: two jpmorgan unit suing six former executives, and
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jpmorgan wants a court order blocking it. they worked at a j.p. morgan private bank office in new jersey. the lawyers that they do not do anything wrong. disney may invest up to $1 billion in disneyland. that is if the city of anaheim california, gives the company a concession on taxes. this thing was to make sure anaheim will not impose a tax in disneyland tickets for the next three decades. the sick of the will take it up next month. as are your top headlines. coming up, hank greenberg says the aig fight was not personal and is not over. why the former aig chief put up a legal battle. olivia: and we are staying on the story out of greece and brussels as talks continue on a deal to secure aid for the country. what are the people of athens thing about the impact? and the prime minister? prime minister tsipras: it made a fool agrees to the world.
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pimm: hank greenberg cannot be stopped. the former aig chief executive won the his abuse use government for taking control of the entrance giant during the financial crisis, but he still pursuing damages on behalf of himself and thousands of aig shareholders. yesterday, he spoke out for the first time in an exclusive interview with our own betty liu . hank greenberg: it was not just for me keep saying for me -- there are 275,000 shareholders that are involved in that. it is an obligation, not just for me, but for all of them.
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betty: 275,000 shareholders -- did you hear from them after the decision? hank: some here at betty: what did they say? hank: they were happy about the verdict, disappointed in the fact that the government did something improper, overstepped its authority and they benefited to the extent of $23 billion or more. the one who overstepped their bounds got rewarded and the shareholders who are the victim of that, they are not. that eco--- betty: i understand you are representing a class-action lawsuit review are representing 275,000 other shareholders. let's focus on that. how much of the percentage would you get of any settlement if you did get one? hank: i think it would be 10% to
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12%. betty: what would you do with that money? hank: it is not me. betty: but your portion? hank: very small part. betty: but the funds that you got if you were to win, what would you do with it? hank: some would begin to charity and some would be invested. what do you normally do? that eco-i don't know. i have never been in this situation. during the trial, who bothers you the most? you know, among the witness testimony that you heard, what bothered you the most? hank: i think what bothered me the most was the way the fed acted and went beyond the authority that they had. there is a section called 13.3 the federal reserve act. congress decides how much authority the executive branch of government has, ok?
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the fed had authority to lend money, and they did. they lent money to many institutions. they were not authorized to take equity. ok? the fed got 80% of aig. that was one of the major issues in the case. and who was in charge of that area? the three key people was paulson, bernanke, and geithner. pimm: betty liu is here now with more. interesting conversation with hank greenberg. betty: i was surprised by how forthcoming he was in giving details about this. 10% to 12%. how he got to that number. apparently, about how much he owed when aig would under back in 2008. also, he finally confirmed who
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was on team hank. ken lengonne is helping hank greenberg fund this lawsuit on behalf of 275,000 shareholders. he did not say how much. but greenberg said they are funding most of this lawsuit. olivia: also on team hank is david boyd. betty: bloomberg cannot say enough about david boyise. people thought hank was going to lose the case. everyone thought he was crazy to go fight the government on this. pimm: there are other people involved in this. of course, when hank greenberg says the fed in the people at the fed, he means i'm a what maybe three specific people? betty: he mention them. bernanke, geithner, and paulson.
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i think geithner gets no love at all from hank greenberg. he mentioned that he thought his testimony was "puzzling." paulson, he disagreed with what paulson did. he led this whole bailout. but i suspect he has a little bit of a soft spot -- i would not say soft spot he agrees with paulson on some things regarding china appeared that both have a huge interest in furthering relations with china. they both have that in common. one of the things i thought was quite interesting was how hank greenberg discussed what he would have done during the critical 3-4 days for aig. he says he believed aig should not have granted any of those collateral calls. if the counterparties one of the collateral maybe the leadership should have just simply said no and let the courtrooms find out.
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it's easy to armchair quarterback what happened during that time. it gives a glimpse into how would -- how he would have handled that situation during the crisis. pimm: a very interesting interview appea. you can watch the full interview on olivia: time for some more top headlines. creditors have moved to end the standoff over greece. the so-called -- they proposed extending the current bailout. they will add $17 million in funding. no word whether one from the greeks in return. the creditors had been demanding more budget cuts from greece before they would release anymore bailout funds. a terror attack at a gas plant owned by an american company in france. authorities say attackers
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decapitated one man and drove a car high-speed into the chemicals plant, hitting gas canisters and causing an explosion. one suspect arrested had been under surveillance several years ago. pimm: there was an attack on a beach resort popular with european vacationers. the government run television says 19 people were killed. along with one gunman. in illinois the republican governor and the democratic legislature are fighting over a multibillion-dollar budget short all. bruce round has be towed $4 billion for next years budget -- be towed $4 billion for next year's budget. the governor says spending cuts must come first. the budget must be passed by next week. olivia: coming up next playing in the deep end. if you're willing to crunch the
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numbers come a new scorecard could help you gain and get out before the position drags you wonder. -- drags you under. ♪
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olivia: it is a muggy friday morning in new york city. you are looking at a live shot of the empire state building from bloomberg headquarters. wouldn't it be nice when you knew a trade was about to turn against you? they have put together a scorecard that can help you determine when a position is overcrowded. there is a group that doesn't look so good. msci is here to explain how the system works. great to have you on. how do you identify an overcrowded trade? >> on the top of -- we have been
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working on identifying what are the traits. we have nailed it down to four measures. the first is mutual fund trading activity. mutual fund trades at times can be predictors or leading indicators of crowded traits. olivia: what is this chart showing me? >> the early 2009 period when the momentum strategy experienced historical drawdown by looking at mutual fund trading activity, mutual fund managers were sellers of momentum before it crashed. olivia: that's a good thing. you want to follow. >> that's a good thing. pimm: they telegraph what's going to happen in the future, in other words. >> you have to dissect it from their filings. once you go through that, you
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are able to identify the trading patterns and get leading indicators of what future trades are going to look like. pimm: what is a crowd -- how do you describe a crowded trade and why would an investor not want to be in a crowded trade? >>'s large pools of capital following the same or similar strategy. it's not necessarily a bad thing. this is where we come up with a scorecard. identifying the asset price implications of this trading activity. we are combining the trading information with the asset prices and valuations to identify credit traits. pimm: hence the use of not only tracking, but hedge fund tracking. >> exactly. on the trading activity side, we have mutual funds trading with hedge fund trades similar to
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what we have seen with mutual fund trading activity hedge fund trading activity also before momentum strategy crashed in the early 2009, hedge fund managers were also sellers of met him. they started selling momentum before mutual fund managers. they were even more leading indicator. olivia: what does this chart tell you? >> and basically shows you the short interest -- we don't have the mutual fund holdings data -- we are examining their short interest patterns and looking at the negative momentum stocks. when hedge fund managers are covering their shorts, as it relates to negative momentum stocks, they're getting out of momentum. pimm: they're getting out of those shorts to take advantage of moves.
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you are looking into the world of mutual funds. they give you a clue. looking at the world of hedge funds, they give you an even better clue. what about the third group? >> the first two is not enough. if you aggregate all of the trading activity in the marketplace come all the buys and sells cancel out. what we really need to look at is the price impact the impact on asset prices and valuations. there are two major ones that a price based. pairwise correlations -- as large pools of capital flow into a strategy what tends to happen is the correlations of those securities in the strategy go up or increase significantly. pimm: they become more correlated.
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money chases more money and you end up chasing the money rather than the investment itself. >> exactly. by monitoring the trends in pairwise correlations, we are able to identify potentially crowded traits. valuation is the final measure and perhaps the most important measure. a measure that puts it all together into the valuations -- we are looking at the valuations and spread or the valuation of the securities in the strategy. we are focused on leverage here. highly leveraged firms versus low leverage firms. the financial crisis -- olivia: this one makes the most sense to me. give us an example of a trade out that is overcrowded. >> if you look at this chart, after the big spike, you find
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the spreads are historically low levels between highly leveraged firms and a low leveraged firms. olivia: give me an example of an overcrowded train. pimm: it's how you leverage firms -- by looking at mutual fund manager trading patterns we've identified the high leverage firms against low leopard firms are overpriced. we don't have the list of names but we do produce -- olivia: thank you so much for joining us. pimm: coming up, oklahoma has a rising earthquake problem. why energy companies need to watch their frack. ♪
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olivia: still ahead, discussing a potential greek exit from the eurozone. also, technology in china. that's coming up at 9:00 a.m. eastern time. pimm: certain states are experiencing more and more earthquakes. particularly oklahoma which has seen a steady rise in earthquakes over the past decade. the cause, research points to fracking. an analyst for bloomberg intelligence and energy joins us now. >> good morning. pimm: what do you think? is this telling us all something we knew? >> the scientific data is catching up -- the relationship between earthquakes and oil and gas activity. one of the clear misconceptions i need to clear up here is it's
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the fracking or hydraulic fracturing causing the earthquakes. that is not the case. the colbert is the wastewater being pulled out of these wells -- the culprit olivia:. it's the removal process. still part of the fracking process. >> it is the byproduct. exactly. pimm: what is the solution? do we need to find a solution? >> we definitely need to recycle more water. one of the problems you have, you're talking vast quantities of water. you can pull 10 barrels of water. olivia: worse than the ratio of water to all mints -- almonds. >> it's very saline.
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it's incredibly salty. saltier than seawater. using it for productive means is difficult. the game changer would be economical t-cell a nation. -- desalination. pimm: you could use the natural gas in the oil you get out of the frack dweled well >> now, you are onto something. it means a tougher regulatory environment. these companies face the regulatory environment and potential lawsuits. these are activities causing real damages. both of those could impact the cost structures of these businesses going forward. olivia: can you now say that fracking is causing earthquakes?
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>> based on the evidence i have analyzed, i can say that wastewater disposal wells -- >> part of the fracking process -- >> is linked strongly to earthquakes. a stanford study came out recently which confirms research we've done that definitively links it. pimm: where can people check out this report? >> the research is available on the bloomberg terminal. pimm: bloomberg industries. well done. >> bloomberg intelligence. pimm: i beg your pardon. you are an expert in that industry. >> thank you for having me on. pimm: let's move on. olivia: you will like this be from dirty dancing to billionaire yoga -- baby has the time of her life. ♪
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pimm: let's check out the markets and bring in julie hyman. she has all the analyst action you need to know. some calls. julie: let's start with target. yesterday, the company said the ceo would be the parting. we have analyst reaction. they are lowering their rating talking about how important the ceo's role was. there is uncertainty over how to fill that role. we don't believe we can overstate her importance in developing target's brand, style, image and apparel. in developing the present segmentation strategy. it is difficult to find a replacement for that person. those it shares down 20% this morning. -- those shares down .8% this morning. there is some skepticism of being expressed after surging yesterday that that offer could
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happen. the math shows this would be a stretch for valiant. william blair is looking at -- the likelihood is relatively low. we are seeing that expressed by a number of different analysts. you can look at valeant acquisition history. if you take a look -- the blue lines, blue bars are the deal volumes and the green lines are the number of deals. we have not had a lot of deals but we've had the acquisition by valeant.
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why will they go out and make another large acquisition when it is still digesting this large acquisition? bill ackman is the largest shareholder. he is also a big shareholder in valeant. looking at inflows and outflows of funds that track different kinds of asset classes. try to handicap which ones are most at risk when we see rates begin to rise. what you are looking at here the flows as a percentage of assets under management since 2009. what has happened to the flows here? hi outflows? no. the have had high inflows. real estate investment trusts, that is the spectrum that way. these are the most at risk and they have yet to unwind.
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olivia: interesting. what is above the red line? julie: those that are more at risk. olivia: thank you so much. time now for picture this. we start with a serious story. protesters have been flipping over and sending cars on fire, hanging effigies of uber drivers. pimm: it's been 30 years since baby had the time of her life. now the resort that inspired the location for the movie is going to be turned into a quarter billion dollar yoga retreat for wealthy new yorkers. the chairman of vessel group transforming the hotel.
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it will be opened at the end of next year. ♪
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>> live from bloomberg headquarters in new york, this is "market makers." pimm: good morning and happy friday. you are watching "market makers ." olivia: eric and stephanie are off today. pimm: here's a look at the top stories of the morning. greece's creditors have found a way to break the stalemate in brussels. the property to extend the greek bailout program by five months. we will have an update in just a moment. greece would get another $17 million in aid. that offer coming from the imf european central bank and the european commission.
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angela merkel says she spoke to alexis tsipras, urging him to accept a generous offer. jack lew warned waiting until the last moment -- >> the thing about the conversations around greece that has been of concern to me the number of deadlines, the number of times it has gotten right to the edge. the risk of an accident goes up the more times you have these rushes to a deadline. pimm: the greek bailout expires tuesday. the same day greece must make a loan payment to the international monetary fund. in france, there has been a terror attack at a gas plant owned by an american company. authorities say attackers decapitated one man and then drove the car into a chemicals
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plant come hitting gas canisters and causing an explosion. two additional people were injured. there was no attack on a beach resort indonesia. -- in tunisia. the government says most of the victims were tourists. olivia: the supreme court has five decisions left to announce before adjourning for the summer. those of rulings -- those rulings are expected in the next hour. the right of same-sex couples to marry. four states have asked justices to uphold bans on same-sex marriage. the court will decide a case on the use of lethal injections. we will be live from the supreme court at 10:00 a.m. shares of nike raising -- pricing in the premarket. future orders were better than expected. nike shares up yesterday about 3%.
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nike has been taking away market share from adidas and has benefited from the fact that everyone wears leggings. those are your top headlines. valiant with a buyout offer. shares surged 11%. drew armstrong joins us now. what is bill ackman's role? >> act man began to build a position in zoetis. things for pigs chickens cats. he was going around wall street and mentioning he thought the company could cut some costs. he managed to get himself control up to board seats. we are hearing talks that maybe there is a buyout offer coming from valeant, a preferred
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partner of bill ackman. olivia: he is a bit bitter because he did not get allergan. >> that was a huge price. the guys at valeant did lose out. pimm: bill ackman owns a little more than 8% of zoetis. why would they make a good fit with valiant? >> that is a great question. valeant makes drugs for people. one of the interesting things about zoetis, you are not negotiating against insurers. this is cash paid business. poor people around the world are getting richer. we'll make sure the cows grow up and chickens grow up. you are betting on global growth
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. they think there's costs to cut. they cut a quarter of their workforce earlier this year. olivia: does there need to be in acquisition? zoetis does have great macro tailwinds. it's incredible, the growth trajectory for a stock that has not done that well. >> not compared to the rest of the health-care industry which has been going gangbusters. when you think about -- they have done some cost cuts. you roll into the valeant machine. pimm: how are the numbers? looking at the sales. $4.7 billion, right? net income of about 626 million.
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that's pretty good. >> not that. these guys are the biggest animal health company out there. if you want to be in this kind of business, they are the place to go. they're one of the only independent animal health companies out there. there's not a lot of opportunities to buy in this space. pimm: drew armstrong enlightening us. olivia: we do have a couple of headlights coming out. alexis tsipras speaking in athens right now. these are crucial times for the euro. the greek government rejects the ultimatum. he says he won't accept blackmail. we've heard conflicting accounts of the progress of negotiations. france hollande sing a deal -- saying a deal is near. angela merkel saying it feels like the greeks have gone backwards. pimm: maybe if you said what
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they would accept specifically that would be better. olivia: a way forward. finance ministers meeting for the fifth time in seven days. tomorrow, again in brussels. pimm: a money manager with over $2.5 billion in assets season ultimate solution to the greek crisis. -- sees an ultimate solution to the greek crisis. ♪
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olivia: greek prime minister alexis tsipras has just finished speaking in athens, zynga greek government will not take ultimatum and will not accept blackmail. let's look at how investors are reacting to the drawnout bailout negotiations. the ceo and chief investment officer at -- which has over $2.5 billion in assets. he joins us now on set.
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great to have you here this morning. how do you strategize around potential outcomes for greece? jacada depends on whether his short-term or long-term. short-term there will be some sort of settlement. -- jack: depends on whether it's short-term or long-term. our managers take positions. they are reasonably hedged positions. i don't think any of our managers are making an all-out that. -- paul at-bat. -- all out bet. it's almost the same strategy for both. the strategy has to do with the dollar. the dollar will strengthen no matter what. that's the strategy. pimm: the dollar will strengthen. where is best place to put money?
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jack: the opportunity could be the debt and the equity side within the u.s. or just north america in general. you can step into canada, which has been ignored here. pimm: a natural resource play in canada? jack: natural resources we are on both sides right now. we are going where the strength is and that's where all these assets will end up before this is over. i think you can buy the beta play on the u.s. market here. we are not talking about a substantial beta play here. pimm: explain how that would work. jack: you would buy the spidr. i don't think it pays to try to be too cute here. we are in an economy that is a bit messed up right now, growing slowly.
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it will grow very slowly over the next 5-10 years. i'm not so sure that you are looking for sectors. i would go to technology. olivia: the west market grinds 5-7% higher by your end -- year end. jack: type two nominal gdp. you have profit margins at a high level. -- tied to nominal gdp. he left topline growth that will be low. -- you have topline growth that will be low. olivia: we have a guest coming on later in the show who says what if wages start to accelerate. jack: it will not knock us back into recession because if wages accelerate, that is more consumption. it's not recession. it's lower profits. lower profits are not a
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recession. pimm: you mentioned technology. these valuations of privately held companies like uber still good? jack: the valuations are very high. not valuations you can actually realize in the public markets. that's what's going on here. pimm: that fitbit ipo that came out? do you have one? jack: i would not buy the stock. valuations in the public market a very high. private market are high. we are extending the period. the average time is 11 years. it used to be seven. we are at a different era. olivia: what does that tell you? jack: there is a lot of money available in the private market.
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there is no need to have to deal with the public. olivia: certainly. pimm: thank you very much. jack rivkin. dueling press conferences this hour. we have to ryan chilcote in athens before an update. ryan: we have just heard from the greek prime investor he is still in brussels. he says greece will not given to ultimatums blackmail. greece will fight for european values as this bailout program continues to be discussed. that is just rhetoric. what's important at this point is who he is directing the message to. he was talking to the greek people. increasingly, this debate going on in brussels this spat
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between greece's and greece itself is going to boost here -- whether there is a deal or no deal, the greek prime minister will have to come back here and sell his message to the greek people. pimm: i wonder if you could give us a little more detail. it's a lot of political rhetoric. the negotiators in brussels here ar this. ryan: i think they think it is just talking. the eurogroup meeting is tomorrow. the greek prime minister met with the french president and german chancellor. they probably place a lot more value in what he says behind closed doors and are trying to find a deal that he can accept. that is the real big issue here. he has to come back and sell the deal to his party. if he doesn't have a deal, he
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has to come back here and prepared this country for what ensues. that might involve closing the banks as early as monday. thank you. pimm: we have more coming up on "market makers." ♪
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pimm: of the biggest providers of mortgages in the united states is bringing back a type of home loan that has nearly disappeared since the financial crisis. interest only loans. united wholesale mortgage cheap executive matt joins us now from detroit. thank you for being with us. can you explain this idea of an interest only loan? how did this reassert itself gekko? matt: before the crisis these
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loans were being done but not as they are being done today. we are excited about bringing the program back because it gives homeowners a choice. people that are savvy borrowers that want to look at the best payment for them and their house, it makes sense for them. when they were doing them with 100% financing lower scores that doesn't make sense. these borrowers are buying at higher rates and can afford the payments. when they decide to choose to have a lower payment and can do things at their house, it's a great program. it's a great thing to bring back. we think this program is a conservative program and a great program for a lot of borrowers that really need it. olivia: a lot of people would say the rise and return of interest rate -- interest only mortgages is a sign that consumers are getting in over their heads again.
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americans are levering up and this is destabilizing the housing recovery. how do you respond to that? matt: that would be without understanding the market. that is true if people are not putting 20 or 30% down. people are putting significant equities on houses. this is not back to 2006 or 2007. we never did those loans. these programs are strong and are good for borrowers. a lot of loans are being done -- this is a loan that can help our worst. -- help borrowers. they had equity already built in. they don't have to pay down the mortgage to have equity. those borrowers should have the choice and that's all we want to offer. you have this choice and that choice. take whichever one is best for you and your family. that is a safe thing to do. pimm: what are the terms of the
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loan? matt: there's different options. it's a five-year adjustable-rate mortgage. five-year arms that go up after five years by 2%. it's not a risky loan. we are qualifying and making sure the buyer can afford the worst-case scenario. wouldn't you rather pay $1100 a month? we are excited to give those right now. pimm: thank you very much. the president and chief executive of united wholesale mortgage. olivia: the one thing that could derail the bull market, coming up. ♪
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olivia: it is a muggy friday morning in new york city. the market is opening in just a few minutes. we are speaking with t joe
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weisenthal. let's start with you. joe: i want to start off by talking about eurozone credit. here's some good news, has nothing to do with greece. credit is starting to flow. if the lifeblood of the economy starting to accelerate. olivia: omg qe is working. pimm: the yellow line shows credit growth from banks to nonfinancial corporations. that went positive on a year-over-year basis. it's more subtle with the blue line, the households. but that is also up. poor credit, more spending, more growth, more investment. olivia: can we think mario draghi? -- thank mario draghi? >> you have these targeted ltr o's. olivia: i've lived in new york
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five years -- how are we going to get money to the real economy? that chart shows it might be happening. >> if it's a demand issue where there is more interest in the capital, that is much more positive. joe: it's a mix. if there is no demand, it becomes like pushing that she had to give the pipes -- you have to credit the ecb for clearing up the pipes. the second story of the day investors are pulling their money out of turkey at the fastest pace in 10 years. there was the recent election coming stability related to that. it created uncertainty. they still have not formed a
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government. it's possible they could have another election. the possibility of a fed rate hike that would pull money back to u.s. dollars has an effect. pimm: number three? joe: i want to talk about a commodity we don't talk about very often. a new u.n. report came out today on the state of the global drug market. cocaine is in a serious bear market. demand is down. olivia: why is that? joe: there has been a lot of eradication efforts. what is booming is marijuana. if you had the long marijuana, short cocaine trade on you are doing well. i don't think there is an etf.
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supply and demand and everything else. pimm: supply and demand is beginning today. the opening bell on the new york stock exchange. olivia: we want to ask you a question about greece. we go back-and-forth about whether or not we think markets are overreacting or perhaps under reacting to a greek deal what is your take? joe: the markets are right, greece won't be a lehman style moment. there could be political ramifications and long-term slow-moving impact on the eurozone. the probably isn't this interconnectedness on the financial system that would cause a crash. pimm: let's go to julie hyman
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who is looking at stocks as the markets opening -- markets open. julie: it looks like it is the biggest one-day drop in december since 2008. this after micron came out with sales that fell by 3.2%. that is the first decline in revenue in two years time. the company's forecast for sales also alling short of that. there is a secular issue for micron. the majority of chips it makes is for personal computers. we have seen personal computer demand compliant -- demand decline. it also makes chips for things like server. that has been strong, but not strong enough to make up for the shortfall on the pc side. if it decline in those shares. in addition we are seeing it spread among other semi conductors. jeffries saying intel will perhaps suffer from the same trends, and as a result is cutting its price target.
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sandisk and amd are also falling along with micron. a broad pullback in the chips today. take a look at nike, people may not be buying personal computers but they are still buying shoes. the finish line benefiting from that. with these companies coming out with earnings that beat estimates. nike's futures orders orders that have not yet been delivered, that company is seeing a worldwide futures orders of 13%, excluding the effect of currencies. analysts were estimating on average a gain of 10.4%. that 13% is better than estimated. geographically it's what it looks like around the globe. sales were strong in china and japan. olivia: that is also leggings. julie: also the shoes. it is leisure as a whole that
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has been doing fantastically. olivia: thank you so much. pimm: still with us, capital markets strategist jonathan you have been watching the bull market closely. anything going to deal rail this? -- to derail this? jonathan: i think the only thing is if you see a meaningful pickup in inflation. it is not that wage inflation rises, it has to really accelerate. what is not on this chart is recession lines. whenever you have these massive moves from low inflation too high you tend to get recessions. right now we're smack in the middle of the chart. olivia: it shows we are nowhere near a sharp acceleration. jonathan: i think we are not going to see a seven-year cycle
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but a 12 year plus cycle. it is simple, if you look normally act at the last six years gdp has run about 3.5% per year. less than 2% for the last 10 which means it will be a more extended cycle. pimm: why extended because it is lower? jonathan: we have a spare amount of capacity coming out of recession. if you are growing at half the speed takes twice as long to burn through that spare capacity. olivia: are you in the camp that the bull market dozen and because valuations run up to high, only because of the recession? jonathan: partially that is the case. one was the crash of 87. look at those recessionary indicators, they are the only thing that matters.
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pimm: the depression indicator scorecard. expansionary territory -- what does this mean? jonathan: the number one thing i was looking at was the pickup in inflation. the second thing was the shape of the yield court -- you curve. as long as it is steep, which means the 10 yield -- the 10 year yield bond is beyond the one year yield bond, you are in great territory. right now it is quite steep. expectations are still having a positive yield curve. olivia: if the yield curve inverts it is like mercury -- like mercury in retrograde. earnings going into this year, everybody was so concerned about earnings, they said there is going to be zero growth in corporate profits. what is your take on earnings halfway into 2015? jonathan: there are headline earnings and core earnings.
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earnings got absolutely killed by lower energy prices because the energy sector is down 65% from last year. if you take out energy and financials, you are looking at a trend of 7.5 percent earnings growth. that is why the market is not freaking out about what appears to be a low single-digit kind of trend. pimm: doesn't it strike you as bizarre? let's find the things that make this analysis not right and get rid of them so the analysis comes up right. every company in the world uses energy. jonathan: we are talking about energy is a drag force in the sector. why throw it out? pimm: it's like saying i didn't like the way it works out. jonathan: an average number where one single data point can skew it -- it's earnings aren't a reflection of the fact that
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oil prices fell apart. to be fair -- >> if you sold things to the oil industry. jonathan: in the consumer sector it would be an incremental positive. the banks have a get out of jail free card because a year ago they had huge legal expenses at places like city and bank of america. therefore they have earnings numbers that are high. i am throwing that out as well. pimm: you are like that olympic judge. we have a gymnast winner. olivia: thank you so much. still to come, it has been a very good week for president obama and the white house. we will find out what these major wins for president obama means for the 2016 race. ♪
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olivia: it has been a very good week for the white house. you are looking at a live shot of capitol hill. president obama racking up several victories, including passage of the transpacific partnership. a huge win at the supreme court appeal -- the supreme court which upheld a key division of the affordable care act. with this now is bloomberg politics managing editor john heilemann. this has been an incredible week for the guy. frame it for us if you will. what does this mean for president obama's legacy yet: -- legacy? john: not only is south carolina a tragedy but a big reminder of something the president wanted to get done. after sandy hook, people put a
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lot of effort into that. that was a legacy that didn't work out. he is reminded every day that human tragedy of south carolina. these two other things were legacy things that happened this week. there was a time not that long ago when people were saying the court was going to rule against obamacare and the trade with debt. people were confidently predicting those two things would go down. having the supreme court decision is more important than did trade deal, because in the end the affordable care act will be the centerpiece of his legacy. the trade deal is a big deal. it is a big deal in the sense he has not got much done in his second term, and this is one thing we can point to that is of real big significance. pimm: in washington people like to go with a winner, i'm thinking. it depends.
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john: there is a counter thing there. pimm: what happens now? able to turn this into something more? john: this is a very unusual thing, the trade vote. the supreme court decision not relevant in this context. the trade bill doesn't provide much of a model going forward, because you have this unusual left right coalition. you have to cobble together that centrist coalition. that doesn't exist in a lot of places. they haven't decided if they like him now. they haven't decided if they want to be partners with him. what they have decided to stay care about free trade and their constituents care about free trade. the business community in particular. i'm not sure this is going to open the door to a lot of other big things. i think this is probably the last substantial, big thing he's going to get done. olivia: how does the president when this week -- how does the president's win this week
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changed the 2016 elections? john: there are two things winning drives the president's approval ratings up. the president's approval ratings matter to secretary clinton. as a historical matter if you are incumbent president, it is hard to earn a third convention term for the party, you're probably a -- you are probability of success rise and falls with the president's approval rating. the supreme court thing doesn't help her at all area -- at all. you can play that either way. there is a chance there will be a lot of enthusiasm on the republican side. that is a mixed blessing in terms of the political implications. olivia: she wouldn't be railing against free trade. i'm saying when she goes out there speaking to unions and labor groups the conversation
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will be different. john: it is a little bit more grubby than that. she doesn't want to rail against pretrade. her and her husband have been free traders for the -- for their entire life. she has tried to fuzz up there it's shoes -- fuzz up their issues. she cannot wait and see what the deal looks like pre-the longer she gets delaying talking about free trade, the more it impacts the democratic primary. she likes the idea of putting this discussion office long as possible. olivia: thank you so much bloomberg's politics managing editor, john heilemann. pimm: you guys are so awesome. let me tell you about some of the top stories of the morning.
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almost 60 people have been killed in terror attacks in four countries. officials are saying there are no evidence the attacks were courted native. into knees yet a gun man opened fire -- in tunisia a gun man opened fired. one suspect has been arrested. in southeastern france attackers targeted a factory owned by the american company air products & chemicals. police say they decapitated a man. then they drove at high speed's into the plans, hitting gas canisters. one suspect has been arrested in that situation. >> the has been a crime of a terrorist nature this morning. the identity of the criminal is not exact, but we know it could be a part -- could be a person part of a radicalization that
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was not renewed in 2008. within the inquiry there are other elements that will allow us to have a better idea of this. pimm: in somalia and islamic group says it attacked a peacekeeper base and killed more than 30 troops. the group is trying to overthrow the western backed government in somalia. and in kuwait, a bomb exploded at a shiite mosque during friday prayers. at least 16 people were killed. this is the muslim holy month of ramadan. officials say there is no evidence these attacks were linked or coordinated. olivia: chinese equities tumbling today, increasing fears the bull market there has peaked. the benchmark shanghai composite lost its biggest in five months. morgan stanley urging its clients not to buy shares in mainland companies. the country's second largest
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health insurer is close to acquiring humana. bloomberg is lou -- limit is learning a deal could be reached as early as this weekend. humana also has an offer from sigma area -- from sigma. pimm: those are your top headlines at the moment. we want to bring in julie hyman with a look at how stocks are on the move. julie: this deal that may or may not be happening, there was a report they had made some overtures. a lot of analysts throwing cold water on this, saying the math doesn't work. they don't see these teed making sense getting together. now shares are pulling back at 9% while valiant falls at 2%. wedbush remains an underperform on these shares. analysts saying the new offering by amazon will be more
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attractive to resellers who will migrate over. watching target, it announced the departure of its chief merchant. analysts at bmi were saying that creates some uncertainty because of its large brand image. off by just one third of 1%. olivia: a lot of stuff going on. these terrible headlines of attacks around the world. the situation in greece still very much fluid into the weekend. finance ministers once again meeting in brussels. that does it for "market makers." we will be back at our new time, 8 a.m.. we will be told why it is not just investors who are scared about the bond market. have a great weekend, everybody.
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stay tuned to bloomberg. ♪\
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>> coming up on the top of the hour and the end of the week. it is etf friday. more and more etf's are being used by investors for tactical news around events. to give you an example is etf analyst for bloomberg. as olivia was just pointing out as their show -- as their show was rolling up. there is a lot to choose from. let's start with greece. that is the big event that won't go away. eric: it isn't going away, and the etf that is perfectly positioned is the global x greece etf. it is global x as a company. greece is the focus of the etf.
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it is a bit concentrated. greece is just a miniscule waiting in here etf's. single country etf's are the way to go if you are playing a political crisis. the options activities are increasing. with options and the ability to shorten etf you can go bearish or bullish. we have seen assets go from 100 million to 360 million in this etf. i remember when this came of it operated at 30 million for a while. when these single country etf's become in the middle of the eye of a hurricane, you see assets go up, you see volume go up. >> people betting on a positive outcome with those inflows. the next one has to do with china. it is an inverse etf which is interesting. morgan stanley saying now is not the time to enter the chinese
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market. eric: there has been this china bubble headline. this is the direction, inverse bearish china. this is a new, it is a week old. already up 7%. this basically gives you the opposite. what it does is it shorts the etf. the borrowing costs on this are pretty high. there is a 10% that it cost per year. you are now short. this has seen assets flow and has 64 million only after a week. that is a lot for inverse or leverage products. usually you don't see assets off the bat. >> the fed is already -- the fed is another big looming event. eric: this is the best performer
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in june right now. if the fed is going to raise rates for september -- we see flows into bank etf's. this particular one is regional. they are going to see a benefit more from rising rates. this etf is about 6.5% this month, and all four bank etf's have seen inflows. you are taking money out of real estate and putting it in financials. >> thank you, have a great weekend. bloomberg market day days starts right after this. ♪
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>> it is 10:00 p.m. in shanghai. >> blow -- welcome to the bloomberg market day. >> a historic decision on gay
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marriage. our eyes are trained on washington. >> and mirror, mirror on the wall, who is the best banking ceo of them all? >> and the greek economy is in shambles yet it is still seeing record terrorism. could that be the spark leading to recovery? >> good morning. i am scarlet fu. pimm: and i am pimm fox. a measure of consumer confidence is out and michael mckee is in the newsroom with the headlines. michael: we go from 96.1


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