tv Bloomberg Markets Bloomberg July 17, 2015 10:00am-11:01am EDT
going to happen today and what angela merkel said will have been if germany does not back the greece deal. -- will happen if germany does not back the greece deal. and make a run for the border. taco bell is joining a new initiative to get america's youth off the street and into jobs. brian nickel joins us live. goldman sachs ceo is worth $1.1 billion. number forramatic the new york city post man.
erik: i have been wanting to do , all the stuff of the last show, fling it in the air. it's friday. let's have a look at this morning's headlines. voted to lower house back new bailout talks for greece. hans nichols is in berlin. uni were talking about this before. -- as ifas if a vote the german legislators are enthusiastic about a bailout talk with greece. that is not the way to characterize this. hans: we have an agreement to go forward on negotiations. every step of this debate, you can hear members of parliament making excuses, saying if this doesn't go south then we have to go to plan b.
you could have a temporary grexit. with a negotiations for the 86 billion. let's say north of 80 billion. germany is going to continue to extract concessions. that gets you through at least a couple of weeks. brendan: there is approval for plan a. also australian parliament approved of. what has to happen for at least plan 80 word? hans: we need to have formal discussions take place in brussels. i know i try to do these without an acronym. , conversations and
negotiations will take place with them. the imf is saying the current plan that everyone is talking about is not going to past -- not going to pass. erik: they couldn't accuse you of being agonistic they can accuse you of being anachronistic. government says gasoline prices are driving a slight increase in inflation. the increases 2/10 of a percent when food and energy prices are factored out. a 10.4% increase in may. gas prices are rebounding after hitting bottom in january. and there has been a dramatic surge in construction of apartment buildings. climb lastrts to
month three of it is the season .f -- seasonal adjusted rate all the growth came in multifamily units. an improving economy will bring a new wave of renters. housing starts nationwide. that is a shift in the nature of the american dream. latest results from a general electric is starting to reflect the shift today. the new earnings projections --ges from one dollar 13 $1.13 to $1.20. the company is moving new emphasis on manufacturing. .o sell assets from ge capital those are your top stories this morning. new billionaire on the block.
he has seen his net worth rise to $1.1 billion. is arming a government agency with $483 billion. ruled to cut against mercury pollution, saying the epa did not consider the costs. all that and more on bloomberg market day. brendan: i'm talking about the financiallatility in markets at these times of economic upheaval and uncertainty. this is the fix for the past year. this is the volatility fix. there haven't been violent moves in stock prices in terms of volatility.
why aren't stock and bond prices swinging more? the chief strategist at convergence here. let's rewind the clock one week. the future for greece was very unclear. china stock market was in a freefall. there was still a concern how quickly the fed would raise interest rates. there are a number of things like uncertainty about the iranian nuclear negotiations. average is-term actually 20 when you go back to 1990. you think that would be some sort of anchor, and yet it is not. very concerned about a topic and they back away the minute they start to see some resolution. they are trained to sell every fix rally.
brendan: the risk of a greg's it ever has been. grexit is greater than it ever has been. nick: what happens is investors have gotten so trained to assume that central banks are policymakers -- central banks or policymakers will solve very quickly. survey a year ago for institutional clients. 50% said volatility would because by institutions worried about monetary policy in the u.s.. -- erik: it was really not broadcasted ahead of time. does that put the fear of god into people at all? nick: the central bank that something untoward and they saw --
erik: if these circumstances weren't enough, what would be enough to cause a breakout? nick: the bottom line is there may be some disconnect between expectations and monetary policy. when is the first federal rate increase? september. look at fed funds futures, less than a 20% chance of an increase. market say one thing, economists say another. right now folks are buying financial. assuming a steeper curve. if that steeper curve happens and in a orderly fashion, everything is fine. erik: do you worry about risk models and financials? they assume that low volatility is a sign of sinking, but it may not be.
nick: you have to look at it backed up for three or four years old. our clients are getting smart. they're not just looking at the last 50 days anymore. erik: were you looking beyond vix?ix -- beyond the is there any volatility beyond stock futures and that narrow swap of fixed income? nick: there is a very broad array of tools you can use. you see the volatility absent flows through different sectors at different times. that sector has been working so well. volatility and financial for
energy, much higher. brendan: i assume people are looking at the psychology of this. nick: it is a behavioral discussion more than anything else. are you more volatile with money you have already rated versus money you have just put in? and the answers is very often what you will see is you are much more freespending with house money and you worry less about it. erik: coming up, lloyd blankfein is a billionaire. ofsing projects to a member the exclusive free comic club.
brendan: welcome back to bloomberg market day. erik: julie hyman is here looking at financial markets. what do you see echo julie: i'm seen stocks higher -- what do you see? julie: i'm seen stocks higher bid the s&p and the nasdaq are trading lower. -- the s&p -- i'm seeing stocks higher. he and the dow are trading lower. up google see shares are 14%. i am looking at both of the stocks for a reason. let's talk about a story. shares are at a record high and rising the most in a single day's october 2008. this after google reported earnings and after a brand-new ceo highlighted that the company
is going to try to keep expenses contained. the shares are indeed surging. take a look at the bloomberg terminal to see why i highlighted both of these. take a look, these are the movers in the s&p 500. big green bars here. that's because both classes of shares are included in the major indices. any contribution that google makes to the s&p, to the nasdaq, to any other indices, it contributes twice. why does this happen? they forwarded me a press release from march of last year. now we are going to start including both classes of shares.
see shares and a shares are and the averages. it is something worth noting up compared toq the others. the s&p would be up more if it were not for this double dose of google. erik: federal authorities are not pinpointing a motive on the attack -- suspected shooter was killed after yesterday's rampage in chattanooga. the suspect was born in kuwait. agents entered his home in chattanooga. two women were led away in handcuffs. the suspects and was not listed on any federal watchlist. left a policeo officer in u.s. military member wounded.
the suspect had no kernel history. needed just 12 hours to decide the case of the colorado movie killer. degreeer in the first come after to liberation, -- after deliberation, we find the defendant guilty of murder the first degree after deliberation. brendan: he wounded 70 in the attack three months ago. the jury rejected defense claims that he was insane. the same panel must decide whether he will die for his crimes. jurors will return to court next wednesday. somber anniversary in eastern ukraine. it has been one year since the malaysian airlines passenger plane was shot down, killing all 290 people on board. it was called a ruthless terrorist attack by pro-russian separatists. incidento said the
could not have occurred without an order from russia's top leadership. erik: bloomberg's michael moore is here to tell us whether the firm is at a disadvantage. the headline getting most attention on wall street is about morgan stanley's archrival goldman sachs and it's eeo lloyd blankfein. he is a -- and its ceo lloyd blankfein. he is a billionaire. why is it taking so long for the first prophet of bank in history? michael: he is been other top of the firm for a long time and the shares have quadrupled under the ipo. erik: he is pre-ipo by a long
shot. he had a big slug of stock when goldman went public. about half of it is the value of the company he has now. is his own of it divested assets. do we have any idea whether he is outperforming his own company? michael: unclear. assumptionervative about his ability as an outside investor. brendan: we have seen the big report. michael: is looking good for morgan stanley because what has outperformed his investment banking and equity trading. morgan stanley is much more weighted to equity trading and investment banking.
brendan: the big lever is still trading. what about the wealth management business? michael: wealth management continues to make steady progress. along inwly climbing the margins have inched up 22%, which is where they said they wanted them. they said they can get higher by the end of the year. brendan: what is best poised to take on the growing money added to wealth management? think everyone is competing at the very top. merrill lynch and morgan stanley are the two behemoths. wells fargo found a nice niche in the mid-level area. they have been pretty profitable there.
what management has become a much more attractive business. a push.is making jpmorgan has their private clients. everyone is making a push for that. and a number of brokers and firms. erik: he covers wall street for bloomberg and reports to goldman -- and reports that goldman sachs ceo lloyd blankfein is to become a billionaire. china unleashes $500 billion to stem its stock market growth.
shanghai rose 3.5%. the chinese government expanding to extend collapse. are looking ate these composite numbers, 19% of those stocks are still not trading. are worst several hitters out of the lineup, that is going to increase your average. erik: i want to play an interview we had with john cochran at the bloomberg institution, works with john taylor. , we know where he lines up in terms of economists -- terms ofmally economists. here's what he said about what we have seen take place in chinese stocks. all the things governments do by accident they are doing on purpose to inflate asset prices. their lending people money to buy stocks. they are banning short still --
short sales of stocks. usually these sorts of things end badly. erik: we learned china has a stabilization fund of 500 billion dollars to put to work in the stock market, largely let thy lending people money to buy stocks but also possibly directly investing in the stocks. my thinking is what took them so long. that might actually work. all these other things have dimmed the appeal of the stock market and made it seem like it is no longer a free market, if it ever was, because you can't sell what you buy. brendan: it was a management rise, so you have been talking about the fall they have been pulling off in the last week and a half. the rise was encouraged. consumers.hinese itk: we talk about it as if were a chinese phenomenon. the federal reserve wanted people to buy stocks to.
the fed and decided to inflate its balance sheet to $4 trillion. a lot of money went into the equity market. it took them a few weeks but they finally figured out money is the answer to this problem. me question is always for whether or not the stock movement is in anyway tethered to the actual chinese economy. number is important the numbers they released yesterday. china always had a target for gdp growth at 7%. low and behold at 7%. they showed a lot of skepticism about these numbers. thedan: to what degree does price appreciation in the chinese stock market reflect what is happening in the real economy? -- ieory it should be don't want to get into theory.
the chinese stock market underperformed dramatically until a few months ago. one is the lack of institutional investors. you have more consumers invest in that market, you don't say have pension funds are things like that dissipating equity. they were considering putting china in that index. it is going to push that back. all the management they have seen that the last week is going to cause them -- erik: so that he raised a similar question, how long is it going to take for the chinese to become one of the world's reserve currency's? braided bank we will see. -- brendan: we will see.
honeywell international posted earnings that topped forecasts and they are raising the low end of their forecast for the year. it adjusted second-quarter earnings per share which are higher than a year earlier and that beat estimates. they save being helped by the rebound in commercial construction. president obama is holding onto his support among the obama coalition of liberals and young americans. it indicates mr. obama could play a role in turning out votes for hillary clinton if she wins the presidential nomination. obama hispanics view the administration favorably. president george h w bush may need three or four months to recover from his fractured neck on but it will heal on its own. he was injured wednesday in a fall at his summer home in kennebunkport, maine. he did not suffer any neurological impairment. the 41st president never lost consciousness. he remains hospitalized in fair condition and he is 91 years old, the oldest former living president.
google reveals one of itself driving car prototypes was involved in an injury accident for the first time. it was outfitted with sensors and cameras and was rear ended in mountain view, california. three google employees on board complained of minor whiplash. they were checked out at the hospital and cleared to return to work. groupon is acquiring order up and continuing to ship daily deals print they purchased the online mobile food market place. order up offers services in almost 40 u.s. markets outside top metro pollen areas. -- metropolitan areas. coming up, netflix stock soared over 15% yesterday. we look at which other stocks could see a big boost. the tocco belt new app is a big success.
tackle bell debt tocco -- taco is doing better. all that and more. last month, the u.s. supreme court ruled against the epa plan to cut mercury pollution saying the epa did not consider the cost. the decision is leading industry to challenge another plan to clean power plants which would curb carbon pollution by 2020. public service enterprise group owns a disturbance electricity and produces natural gas in the northeast and mid-atlantic and it's the ninth largest utility owner by market value. we have the chairman and ceo with us. let's look back at the decision that the supreme court made.
do you agree with that? did the epa failed to consider the cost? >> i don't think that was an accurate outcome. there was a tremendous amount of conversation throughout the posting of the rule and the discussions of the role as to what it would mean as cost to customers. whether that fit a legal definition of what it means to review costs, i'm not a next for. cost toquestion, the comply was an integral part of the dialogue throughout the process. brendan: this is a broader issue in general, looking at regulators in d.c. with the move to consider the marginal cost of regulation. are they getting that right? >> i think for the most part they are. the epa has been constructive to talk about anything from air to water issues. the bigger issue is how long it takes to put forth a clear set of rules by which we can make investment decisions. after theargue that
clean air act amendments of 1990, we still don't know what the set of rules are that we need to comply with because they have gone through multiple iterations and the courts have had a few x of the ball -- if you wax at the ball. i'm concerned about the time. definition of uncertainty is we don't know how excited we are about the uncertainties. >> that's fair. this has played it some -- itself out on something as prescriptive as mere kerry. what does that mean? brendan: let's move on to carbon. the president has released his plan -- his clean power plant. >> we are advocates of congressional action to create national standards for carbon. it's global climate change we are talking about not just u.s. brendan: we have to sit here and admit the reality that
congressional action on climate change is not going to happen. >> absolutely right. i would much rather have congress doing something then the epa. it's better for democracy to have a broader mandate but i don't see a forthcoming. what is the right way and washington to deal with the reality of climate change? >> this is the second best approach. i agree with you. what we would like to see is to the extent possible, little more of a tightening of the targets on a state-by-state basis. there will be some real strange behaviors. you have one state at a target of zero and another tape at a start in a 500 pounds per megawatt hours in another state at a target of 1500 pounds per megawatt hour. it will simply shift power production to the states with easier targets. brendan: i have read that psg could do arbitrage. >> it will be other states as well. commerce --d that
congress has not given us the tools but you got to have more rationalization of the disparity in the targets on a state-by-state basis. brendan: what's the right message for america on climate change? >> the science is compelling. that a report this morning 2014 was a warm year with more extreme weather conditions and further diminish and of the glaciers. you have to adopt a no regret strategy and let's take action. brendan: how do you have that conversation with duke energy or some of your partners like the edison electric institute which has been skeptical about the science of climate change? 10 years ago, five years ago, we were talking about this in earnest. what you folks argued against his the dash to sgas. it would create a big demand and gas. it is two dollars per mbt so the
dash to gas is nothing to be feared. brendan: there was a report that i read this morning that rig counts were plummeting but had somewhat stabilized in the various shale deposits. where do you see that affecting the price of natural gas? did not see the ubs reports s have goneough rig down but the productivity per well has gone up. it's not just a question of rig count. this is no longer in your you demobilize the rigs, it takes a long time tore-mobilized. you are essentially turning a valve so the producers are quite sensitive to pricing. that's why you see prices not going much below $1.80 and never getting much higher than $3.25. the ability to produce at positive economics of a low price. brendan: fascinating
conversation about the realities of climate change, some of the work i recommend you read about is coming from bloomberg new energy finance. adopt a nophrase " regret strategy." we are approaching that particularly with the paris talks in the fall which is an important time. ralph izzo, i thank you for being with us and being honest. that was the chairman of pseg. still ahead, earnings season is upon us and what companies are the most volatile around the season and you will find that out next. ♪
time to talk to london. we will start in europe. mannis cranny is in london. back some are giving of the gains we have. forave an agreement agreeing how to bail out greece. there is liquidity being added to greece or a lack of agreement in terms of how to deal with the imf and they are openly debating the fact that the debt these if it's sustainable. stocks are up this week so it's the best week of gains, around 4%, the best run since january of this year. the board is giving a little bit act. the individual names are worth bringing to your attention. you get in an elevator or the escalator, these guys are
involved with that. the stock is up 8.5%. is also up in north america has stabilized and our mail systems up a review in the united kingdom. it's down 3.25%. the governor of the bank of get ready foring turn of the and the year is when it will be in this is ultimately the euro starting at a seven-year high. --ie: let's look at the u.s. we had a mixed picture. the snp and the dow are lower and the nasdaq is higher. we were talking about exactly why earlier. it has to do with the google. i spoke to s&p dow indices. if you look at the google a and c shares, they are listed in
the major averages but these add up to the old google. the market cap is about $416 billion and that means that together, they comprise about 2% of the s&p 500. that is why both of them are listed to be crystal clear. it'su look at the imap, clear what's going on today. information technology is green and nearly everything else is red. energy and materials are a drag on the major averages. look no further than the underlying commodities to find out why. oil prices are lower again today and we're set for the third straight week of the kleins for wti -- week of declines for the wti. there is the continuing prospect of a glut in the oil market especially with iran coming back online. if you look at brent crude, it is set for its longest run of weekly declines since january. gold prices bear mentioning
today. the plunge and gold rises is down about 1.17%. this is after china boosted its reserves. analysts who follow the gold market survey expect china to boost those reserves by a lot more. one analyst said by as much as three times what they actually boosted it. that's why use of a big drop-off in gold prices. . brendan: thank you. don't completely understand google but we'll get back to it. chinese markets continue their recovery as the government announces the existence of a cannon. the shanghai composite closed up by 3.50%. is samsungry prevailed in one of the most dramatic pickups and shareholders approved a merger
of two samsung units. filed this report from hong kong. >> this was the common nation of six weeks of the very public battle between the inner activist investor paul elliott inger and samsung. the approval of the merger under or the resilience of south korea's corporate dynasty and boosted the countries track record of repelling foreign influence. 72%ly 70 to 2% -- nearly voted for the merger which some are it was undervalued and not there. the result paved the way for the founding family to tighten its grip over the business empire. brendan: here are some of the top stories crossing the terminal this morning -- hacking pays in frequent flyer miles. rewarding hackers for
finding flaws in their system. the awards were made under a security right graham that united started in may. japan's as it is scrapping plans for the main stadium for the 2020 summer olympics and starting over. out-of-control costs are the problem. the primus or says the venue will not be finished in time for the 2019 rugby world cup. there is growing criticism that the estimated cost of the new stadium skyrocketed to $2 billion which is twice as much of the original plan. a robot created by two researchers in canada is beginning its hitchhiking journey across the united states. it has caught rides across canada and europe and now will rely on strangers in the u.s.. it begins its journey in salem, massachusetts with a goal of reaching san francisco. the world is an amazing place. those are your top stories at
this hour. netflix went up by more than 15% yesterday after reporting they have six to 5.5 million glover subscribers -- million global subscribers. mike reagan joins us with more. that i don'ttain yet understand what you are about to explain. it's friday and it will be tough and i'm a five-year-old but continue. this is me showing off what i think is one of the coolest functions on bloomberg. it's called an earnings surprise snapshot. you take a company like netflix that will give you every quarter they have reported and it will show you how they beat or trailed estimates. brendan: this is looking back five years? >> i think we go back to 2004 when bloomberg started compiling its own consensus. it gives you what is called the
earnings related in five move. you take a company and you look at where their options are trading. there are calls to buy the stock and the puts to sell them and you get a number called implied volatility. brendan: it's expectations. >> it's where the options market is rising in the type of move they expect out of a stock. in this case it looks at the volatilities around the date of the earnings. it's the options expiring one month or two after the earnings report. it's amazing what spits out. it tells us what the options market is and the size of the move they are expecting. very near the top of the list for the s&p 500 was netflix. options were pricing at 9.5% move. it was obviously more than that. it will not be 100% accurate but it gives you a good idea of where the market is looking for big moves in following earnings. brendan: netflix did what they
expected. you proved the tool works. what happens next? some you want to look for of the big expected moves coming up, the biggest iskeurig. the options imply more than a 10% move in that stock. over the history of their earnings releases, it's not necessarily that surprising. their average move after an earnings report is 12%. that's either up or down or in those are big moves for a single day in a stock. their average surprise or how much they beat or miss estimates is 20%. that is on the high end so that tells you why they expected these things. list of we will have a where to expect some volatility right after the earnings season. regan is showing a charming amount of faith in options traders. still ahead, taco bell has
welcome back to "the bloomberg market." more than 5 million youth are unemployed and starbucks launched a plan to change that and more than a dozen big want to employ 20,000 young people calling it the 100,000 opportunity initiative. one of those companies is taco bell. the ceo joins us from irvine, california. what will this initiative do? brian: it's exactly what you mentioned from the beginning -- there are a bunch of jobs out there that are going unfilled and unfortunately, there are 16-24 between the age of
that could use the opportunity of having a job. we have joined this coalition because we think it's critical for our future leaders to get jobs early on in their careers. it helps them build skills and discipline and frankly, like so many of us, sometimes that's where you find a person that becomes a mentor or someone that believes in you and can help you change the direction of where you are going in life. brendan: usually, the reason for jobsmatch in availability they go unfilled is because of a lack of skills and training. taco bellany like which relies largely on low skilled labor am a what is it you can do to get those positions filled? focus one of our big areas as education and future leader development. our jobs are great jobs for somebody getting someone going in their career and the great place where they can see the importance of education and the
importance of teamwork. we have a robust training program. we bring young people into our organization. thatf our employees are in sweet spot between 16-24 years old. when we invest in them, in return, we invest in their community and what you discover is that they stay in school and get their high school degree and, in some cases, they go on to be big leaders at taco bell or yum! brands or big leaders in their communities whether that is a doctor or an electrician or a lawyer but playing a huge lowland their local community as well. brendan: one of the stories for wages in the last year or so has been other low skilled consumer companies like walmart and target raising their wages above minimum wage to hold onto labor. where do you see that going for taco bell? brian: in every market, we see
it's a different environment for what the wages need to be. one thing that is true as it's the total proposition you have to present to your employee. if you want them to be excited about working at your respective company, wage is important and we have to be competitive but what we do is make sure we are investing in the individual and investing in the team. big push on supporting them on education to get the high school degree or a secondary degree. yum! brands know and taco bell, we have a recognition culture where we celebrate the first downs and the touchdowns. this is important for individuals because of bills confidence and let them understand that we as a company care about them and we want to grow them. for your line workers, if i have this correctly, you
pay minimum wage. will that change over the next six month or one year? brian: we actually pay more than minimum wage. to get the team may bridge to provide the service experience that matches our brand promise, we have to end up paying more than minimum wage. as they develop, they move into bigger opportunities throughout our company in the field. brendan: thank you very much for being with us. bloomberg market a will be right act. ♪
have passed a measure this morning after chancellor angela merkel warned members of the bundestag that there would be chaos in the streets if they did not. brendan: will you have to pay up for paypal? it starts trading on monday but where does that leave ebay? pimm: from paypal to pay less in the air, we will introduce you to a new private passenger airline that offers all you can fly for $2000 a month. all you canu go and fly? we will find out. brendan: good morning. pimm: we are 90 minutes into the trading day in new york so let's take a look at how markets are doing now. there is a