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tv   Bloomberg Markets  Bloomberg  August 6, 2015 10:00am-11:01am EDT

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billion stake in snack maker monda leads in a push for a deal with craft. ipo is atet fitness' the top of the range and we will have an interview with the ceo. matt: there are other ways to invest in island of puerto rico and its potential recovery. matt: good morning, i am matt miller. erik: i'm erik schatzker. look at theh a news. filings for u.s. unemployment benefits are hovering your the lowest level in four decades, a sign of a strengthening labor market, possibly bolstering
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growth. say wiringsxperts are down as employers hold onto more workers. the july report is tomorrow. on interestensus rate from policymakers in london's bank of england. officials voted 8-1 to keep the rate unchanged at .5%. speculation about the precise timing of the first move in bank rate is increasing. this is understandable and is another welcome sign of an economy that is returning to normal. matt: the bank also cut his outlook on the inflation for the rest of the year saying it is muted, and the recent decline in energy prices will have an effect until the middle of 2016. bank of america is pulling wealthy clients money from a hedge fund belonging to hedge
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fund manager john paulson. they are also reviewing another fun due to concerns that large position may be hard to sell. a bank memo tells them to withdraw the $80 million from the advantage fund because of illiquid investment and elevated volatility. erik: fannie mae will pay $4 billion to the treasury after recording a profit. fannie will have returned more than $142 billion to the government after making next month payment. mercedes-benz is steering clear of the chinese auto situation. the german automaker posted a 40% surge in deliveries in china, even as bmw warned about an increasingly difficult environment. sales rose to 29,000 vehicles and global deliveries were up
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15%. shares are tanking after elon musk says that they are facing challenges building the new vaccine in the forthcoming model x. deliverthe company may 50 5000 cars this year, down --m the initial target of 55,000 cars this year, down from the initial target. those are just some of the top stories on the bloomberg terminal this morning. erik: companies ranging from to timeto fox two time warner report that the cable bundle package is waning. matt: breaking news on planet
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fitness. it just started training. julie hyman has more. julie co. the stock is down by nearly 9% as it gets underway this morning. 216et fitness raised million dollars in its ipo, priced its shares at the top of the range. it sells memberships for about $10 a month, is known for a no-frills atmosphere. to initial range was $14 $16. that price, it is valued at $1.6 billion, plnt. it has not been a good day for these healthier ipos. we had the maker of skinny pop coming out yesterday, amplify snacks, and those shares fell in the first day of trading. down another quarter percent today. matt: thank you.
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we will take another look at the markets in 25 minutes. erik: bill ackman has found his next target. snack maker mondelez. shares are up today 1.4%. speculation is that ackerman may push for the company to be sold. who may want to buy it? ken shea. now is a lot of talk about the elez willty that mond be recombined with kraft foods and heinz. there is a lot of talk about that but i'm not sure it makes strategic sense. in 2012, these companies were separated, in theory, because could allocate capital
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better in emerging markets. i don't think that has changed from a secular point of view. since that time, the markets have softened a bit and that is one of the biggest headwinds that condoleezza faces. --mondelez faces. are those jumping to this conclusion totally wrong, mistaken? >> no, i think they are short-term-minded. surely, you are not saying activists are short-term minded. >> [laughter] they do have a reputation for that. to their credit, they are cutting margins,. . s havef the fair critic said, why isn't it doing better? these are beachfront property brands and investors expect
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in-line,rformance than although in the past couple years mondelez has outperformed. matt: what are the chances we see mondelez get back together with kraft? >> i think it is a long shot. most investors see the rationale for the separation. the allocation toward emerging markets, long-term opportunities. combining them together again, not so sure. allocations will not be quite as aggressive. it is hard to say. i think the rationale for the separation still exist. erik: doesn't make sense to you that bill ackman is in this stock with a position as large as he has? the reason i raise the question,
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nelson peltz and others are there. board,n activist, on the surely pushing for many things that bill ackman wants, and secondly, the stock has been in a performer because activist pressure has already been there. >> i have the same observation. the timing is curious. peltz has been there for years and has helped to influence the separation, margin improvements. it seems to me this investment could be late to the game. margins are already on the move higher. this is a layup investment, at this point. matt: green mountain coffee, keurig, looked good last year but now down 60%. what is going on with them? >> it could be a little k-cup
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fatigue. the brewer sales were soft, pod sales were soft. the company gave a lot of reasons, changing the models, adding new branded members to its portfolio partners. at the end of the day, consumers may be moving away from k-cups. there is a coffee shop around every corner. are they moving away from k-cups, or is it like soda stream, a fad stock. everyone got excited about soda stream taking over the world. it is back down now. i feel like green mountain-keurig could be the same story. everyone is enamored with this idea of starbucks-quality coffee in your kitchen, and they
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like with ant espresso machine, they would rather go to the store. k-cups have sort of hurt itself by coming up with new machines, hurting the customers of it. customers like the ease of use, but when you come up with a 2.0 version, different versions, it is not as easy. they have a host of remedies that they cited last night on the call, but the bottom line for investors, it may take time for that to stick. erik: thank you. matt: coming up, has the cable tv bundle finally unraveled? media stocks having a very bad week. ♪
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matt: and good morning and welcome back to the bloomberg market day. let's get a look at our top stories. police have identified the suspect to attempt people in a movie theater outside nashville. officials say 29-year-old no had a history of mental health issues and was shot by police. three people in the theater were treated for minor injuries. firefighters are making progress against a massive wildfire raging in northern california. it is now 30% contained. residents are being told to stay vigilant because changing winds can cause a flare up.
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the fire is the largest of 23 wildfires statewide. puerto rico is not only suffered through an economic crisis, it's also experiencing a severe drought, one of the worst in the u.s. territory history. july was the fourth driest month on record since 1908. those are just some of our top story this morning. erik: let's take a look at the stock market. one time highfliers are being brought back down to earth due to some earnings concerns. julie hyman has more. is one of them. numbers did not look too bad. tripledompany sales year-over-year, profit comping -- coming in above estimates, down, which iis guess is what happens when you are more than double your ipo. shares are down 9% today.
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the one number that seem to miss estimates was the gross margin number. 47%, 51% ater was year earlier. the amount they are spending is going up exponentially. in the first half of the year, spending on r&d was up 130%. marketing spending up 360%. on ais what the ceo said conference call. so it is spending money to make money. tesla, speaking of highfliers, not doing all that will year to date, but if you look at the lows it from march, it is up 30%. today, the stock is pulling back 10% after they brought down their forecast for deliveries for the full year, now looking 50,000 two 55,000 vehicles, when previously it expected 55,000. some problems due to the seats
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of the model x, proving to be a little trickier to manufacturer. one stock that is going the other direction on earnings today, one that we did not have high expectations for, michael kors. first-quarter expectations topping analyst estimates thanks to international business. shares getting a boost of 12%. netflix is trading at a record again today, at least on a closing base. 4%, and i guess we don't have time for my last chart. netflix is up a lot for the year to date. other media stocks are getting slammed for the second day in a row, trading lower. that is something that we will take a right now with paul sweeney of bloomberg intelligence. this mini meltdown. disney is leading the pack down,
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another 3.9%. comcast, time warner, cbs, the list goes on. we were talking about this earlier, have we seen peak media? >> for the short-term, i think we have. there has been a concern about what does the bundle mean now? people are getting more con tent outside of the traditional bundle. what does that mean for the viacom's of the world which have been successful for so long? is underusiness model pressure, everyone in that ecosystem is under risk. particularly with the espn numbers from disney, that is the canary in the coal mine.
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is really an issue across the industry and it is happening now. not detailed media investors, but general investors are kind of waking up to it now when disney says it is even impacting espn, the dominant cable network. if espn is vulnerable, everybody is. it is rare to see is p.m. take down their garnets were operating margin, specifically citing espn. that really brought it to the forefront. this is a pretty dramatic call for disney, viacom and fox look worse. we all knew this would happen eventually. disney is saying this is happening now. is that doing a lot to boost the winners? we saw netflix. are there others like netflix?
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>> we were showing the divergence over the last 12 , new media versus traditional media names. the divergence has been extraordinary over the past few days. say, ats are trying to the end of the day, let's allow some of the generalist investors wash out over the next several days. then people will step back and say, is content still king? if it is, how much value doesn't have, and which content will step above the rest? matt: are some company then being fairly -- unfairly punished? time warner is getting crushed but they are still developing content, doing well in their offerings. erik: let's look at time warner like we do yahoo! if netflix is worth $54 billion, ago, has little while
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as many subscribers and is inside time warner, how much are they worth? is 63arner's market cap percent. >> what would espn be worth it in the programming and the viewers they have? what investors are trying to figure out is, i have this great bundle model which has worked so ,ell for me and these companies but i know consumers are going a different way. they are accessing content outside of his bundle and the media companies have to be there. that is why you are seeing hbo now, cbs on demand. bob iger saying they are not going to put cbs directly to customers right now, we believe in the bundle. but clearly, huge value for the content creators. it is just a question of if they
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can get paid and generate the same economic returns in a new direct to consumer internet world. this is a huge unknown. what will consumers pay for it? we know they will pay $80 a month or video. will they pay something similar to that for a direct, over the top kind of world? matt: will they pay enough for espn, now that that company has lost its howard stern? erd.loss of colin cowh >> i think you might be the only one. they are losing a lot of their big names. it is cost-cutting. question,le ask the why doesn't amazon by time warner -- buy time warner?
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if they were to buy time warner, he would double his ebitda. nobody wants to jump back into that tech buying old media. erik: paul sweeney, thank you. we will be back in just a moment. ♪
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erik: welcome back to the bloomberg market day. matt, harvard mba grads used to always brag about how hard they work. 21 hours a day, grinding it out on wall street. not just harvard, of course. still, here in new york city, on the streets you hear guys bragging about putting in 80 hour work weeks as a badge of honor. perhaps it is no surprise that fewer and fewer of these grads want to go to wall street for a job.
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in 2013, 13% of harvard mba graduates were to work in finance. last year, 5%. this year onlyts 4% will work for a bank. matt: it makes sense when you look at the alternatives. -- can go to silicon valley a notch or what the hours are -- day, surf for a few hours a day. that is the aim, you want to work 8, 10 hours max and then spend some time with your family, doing things outside of whatever you are doing. erik: it's also a different kind of job. you are working for a startup, you may get some equity. matt: sox are unnecessary. erik: apparently here as well. matt: it is supposed to be a chill place to be. erik: that is not the case. go spend some time with them.
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matt: when i go to our office in wander overo, i with some of the other employees to get some ice cream at the luxury food court that is down there. there is an ice cream called secret breakfast. cream that people have in the afternoon or the morning which has bourbon and cornflakes in it. that is what it is like on the west coast. there ice cream has bourbon. that is it for you today. why don't you get some secret breakfast. erik: ice cream and bourbon, coming up. ♪ ♪
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(ee-e-e-oh-mum-oh-weh) (hush my darling...) (don't fear my darling...) (the lion sleeps tonight.) (hush my darling...) man snoring
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(don't fear my darling...) (the lion sleeps tonight.) woman snoring take the roar out of snore. yet another innovation only at a sleep number store. matt: welcome back to the bloomberg market day. thain isman john
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warning about a crisis in china banking lending. >> this is being pushed out of the bank space into the hedge wanted to so, if you worry about the next crisis, you would worry about that space. that is where the more risky pieces are going. t just completed its purchase of one west group, creating a new financial institution. it has done over $50 billion in assets. says the threshold for those too big to fail institutions should be raised to $100 billion. ibm is acquiring merge health care for $1 billion. big bloomberg to incorporate the company's imaging managing platform with its watson analytics tool. the deal is subject to regulatory approval.
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the new york times is posting second-quarter profit that beat estimates after slashing expenses faster than revenues could decline. $.13,ed eps came in at two cents better than an analyst anticipated. revenue fell to 383 million dollars, just short of estimates. 5.5%, draggeddown down by declines in print as more readers got their news online. the top 10 republican presidential candidates will face the glare of national television cameras for the first time tonight and nine are probably making plans to deal with the political elephant in the room, donald trump. he is leading the polls heading into the debate and one strategist says his rivals has to make sure he does not feel the spotlight. " leslie explains why -- ed gillespie explained why. >> you have eight minutes to convey to the audience something
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about you, your policy, and why you want to be the next president, and why they should vote for you. if you waste time going after trump, that will burn up a lot of the minutes. at the same time, if he goes after you, you have to demonstrate to the voters that you can fight back. matt: the debate starts at 9:00 eastern. the seven other candidates who did not poll enough -- high enough to make the prime time will appear in the undercard at 5:00 p.m. golf is in the rough and is hiring an analyst. second-quarter profit missed estimates. they slash their forecast for taylor made this year after a 26% revenue drop. the companies ceo is trying to streamline the business and concentrate on shoes for running, soccer, and their other main businesses. those are your top stories at
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this hour. let's also take a look at the markets. u.s. markets are down, being weighed on by media and technology companies. the top 10 losers in the dow jones include disney, fox, warner, viacom, and time cable. coming up, puerto rico misses a bond payment earlier this week, but could tourism keep the cash-strapped island afloat? lastht is jon stewart's night as "the daily show" host. and we will bring you more of our interview with john thain. costt fitness, the low change engines james hit the markets today. top of thet the range but is off by 9% in early trading. let's find out what the company ceo had to stay.
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-- say. ofwe are here on the floor the ceo of planet fitness, chris rondeau. ,ou want work to the front desk now worth over $2 billion. what you envision for planet fitness? >> we grew the model, we had great franchisees that keep on putting money back into the stores. we have 1000 gyms in the pipeline. >> what model do you expect to use, franchises or company-don't stores?- owned plan to focus on franchising. we are a franchise company. >> your ipo is at the high end of the range. now. percent in early trading.
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what are investors missing about your story? >> we are in it for the long haul. we have been at this for two decades. it is a good opening and i'm looking forward to the long haul. of your revenue generation, i saw that equipment is the biggest revenue generator for your company, which is surprising, considering you are a gym. can you grow that beyond opening up new stores? >> it is our biggest revenue but our franchises are the most profitable. the equipment is based on store openings. as clouds remodel in the coming start putting in some new recruitment, you will start to see some growth. terms of competitors, we saw some competitors while last week. how do you envision more of these niche studio businesses
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compare to yours? do you see them as competitors? >> a different customer that they are going after. we are going more after the first time user. seen more kinds of those dual memberships. we have plenty of treadmills and circuit training. one direct competitor has declined about 43% this year in the stock market as their sales growth has slowed. when you look at that, how do you see yourself differently? >> and they really cater to the avid exercisers. we are not really in the same ballgame. they have a lot of different moving pieces in their model. have a lot of pieces of
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cardio and we cater to the first time exercise person. >> in terms of your price point, you have expanded after the recession. how do you envision your business looking in a more recessionary environment? years, theast few pressure on e-commerce has really helped us. you look at the big box stores, they are freeing up and our franchisees are taking advantage of that real estate. >> chris rondeau, thank you for joining me. you, leslie. still ahead, investment opportunities in puerto rico. it is not all about distressed debt. how you can invest in a potential recovery. ♪
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matt: welcome back. we are one hour into the market day. we want to get you caught up on the market action around the world. let's start in europe in london. today, i'm focusing on u.k. markets. it's been the bank of england's super thursday. the ftse 100 has recouped its losses. looking at the u.k. 10-year gilt , that is the bond going higher, borrowing costs, the yield coming down. the pound showing losses against the dollar. when we got from the bank of england was an unexpectedly dovish stance. only one out of the nine monetary policy committee
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members voted. the bank actually cut its near-term inflation forecast. just to focus in on the pound, we were expecting a lot of volatility at 12:00 when the data came out, but instead, i cannot really say we have seen volatility, but simply a drop against the dollar. it has also weakened against other major currencies because of that more dovish stance. part of that was due to lower energy prices but also a stronger pound previous to this. there is no question, the strength of the sterling is having an influence on policy. the factors, but it has to persist. we will take it into account. today, sterling was
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the only currency out of 16 major currencies to have gained against the dollar this year, but not anymore. look at u.s. stocks, we have some declines once again. you can see the s&p, the dow down .4%, the nasdaq taking the biggest hit, down .8%. take a look at the sectors. you can see what is going on. consumer discretionary is down the most with a decline of more than 1%. declining for the second day in a row. energy is the best performing group although oil was down. we had a couple of companies beating analyst estimates. within that group, it is the media selloff, day two. the median index down the most since november 22,008. first century fox
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having their biggest one-day decline in almost seven years. all of the media stocks are being pulled down. disney is falling for the second day. comcast, news corporation are down for a second day as well. i mentioned oil, and i want to look at that. we are seeing it at 1.3% down. goldman sachs saying we are still seeing crude oversupply and we may not see supply and demand come back into balance until 2016. i have showing you this chart before but it is worth seeing again. these are crude supplies right now compared to the prior five years. we are still running on a 90 million barrels rate above the past five years on average. still, a lot of supply out there. goldman says, in the fall, the storage for crude oil may be filled up. thank you.
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in asia, the nikkei rose as investors weighed company earnings and a weaker yen. 1%.csi 300 declined almost the shanghai composite fell for a fifth time in six days. losses were led by telecom and health care. china's government failed to prop up the recent $3.4 trillion stock market route and now goldman sachs analyst have put a price tag on the country's efforts. china's government spends as much as 900 billion yuan, $145 billion, in the past two months to prop up the ailing stock markets, according to goldman sachs analyst, who say it amounts to about half of the allocation is meant for the chinese rescue. say buying likely focused on blue-chip and defensive stocks and that the government still has another one trillion yuan to provide a
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cushion as deleveraging unfolds. the government is yet to disclose a figure on its intervention. here now are some of our top stories on the bloomberg terminal. former los angeles clippers owner donald sterling has filed for divorce from his estranged wife. they had been married for more than 60 years. sterling is suing his wife and the nba over the sale of the withwhich she negotiated steve ballmer, after doctors found sterling in competent to handle his own business affairs. stolenivarius violin from a renowned violinist has been recovered. it was stolen after a performance in 1980. the chief suspect in the theft died, no one will be charged, and the violin will be returned to the family. he performed with it exclusively until it was stolen.
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hitching a ride with russia to the international space tatian is costing the u.s. a pretty penny. nasa says it needs half $1 billion to do it. its own does not have rockets right now, so they rely on the former soviet empire. tough times for puerto rico. the island nation defaulted on a $55 billion bond payment and is morning that that is just the beginning. some distressed investors are betting the tourism industry can save it from a collapse. joining us now is kate smith. thanks for coming on the program. about the prospects for increased tourism in puerto rico. i know recently they have places to go.r everyone wants to go to cuba now. who is going to puerto rico? >> that is really on the minds
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of the people listening to what the government is saying. in puerto rico, you have a former imf official, current advisor to the island, and she says tourism will be the saving grace for puerto rico. but if you look at some other 164th outt is ranked of 184 countries for long-term growth potential. last year they ranked below cuba. before cuba was even open to u.s. tourism, exports, car division to gdp. to answer your question, it depends on who you ask. matt: we see investors going in there. john paulson got in there. you are seeing some distressed investors flocking to the island, specifically for the hotel industries. introduced --lson
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purchased the san juan hotel. a few miles away, another investor purchased the hotel and casino. so you have two big names in the distressed community placing their bets there, so perhaps they see something else. matt: maybe they will get behind efforts to boost tourism. it is actually an awesome place to go. i have been there, i had a great time. who is doing what to try to boost tourism, are there any efforts do so? >> it is unclear right now. these are investors for the hotels, those municipal bonds we keep hearing about. everyone is waiting for the august 30 restructuring plan. that is the date it is supposed to come out. there are so many moving parts.
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they could change the minimum wage, labor laws. they could change the whole breakdown of how central government works in puerto rico, to the point where it is hard to determine how this could play out in the next year, three years, even five years. tot: are there other ways get in on investing in puerto rico other than going with john paulson's hotel? >> blackstone is still selling their hotel, the alcock used to do her. conquistador. matt: if blackstone is selling, i am not buying. >> you do have some people lining up and there is some different opinion on this. matt: we always ask, is puerto rico our greece? there are a lot of big differences, however. number ofre a big differences. first of all, the debt. only $72 billion debt in puerto
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rico. the population is also very different. what i think is the most interesting thing, probably the most important factor, what makes the situations completely different is who owns the debt. in greece, you have eu countries owning the debt. if they default, there is a massive ripple effect in the entire continent. europe would be rocked by that. in puerto rico, people that own puerto rican debt, they are in mutual funds, probably in your 401(k). the other 30% are hedge funds. it would be similar if connecticut or georgia owned puerto rico debt, but because the holders are so different, and probably the restructuring will be completely different. matt: thank you for joining us, kate smith. still ahead, how google deals with europe and why it is now facing $6 billion in fines.
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matt: welcome back to the bloomberg market day. google thought its relationship with europe was a good one. looking at the numbers, it's easy to see why. they have a bigger market share among their products than it does in the u.s., but now they are facing $6 billion in antitrust fines. vernon silver has the details. i love this story. it starts at with this -- inside avos.ting in doll working out a deal with the eu boss responsible for regulation. thought they had it in the bag. >> the cookies are on the table, untouched.
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two hours later, they walk out with a handshake deal. eric schmidt thinks he has it in the bag. months later, it falls apart and they have to start from scratch. the reasons are manifold but really they have the one-two punch of increasing anti-google sentiment in europe and competition. usually it is microsoft versus google. it turns out, it was german publishers who ramped up their opposition to google. europeans are much more intent on privacy, especially on the internet, than we are in the states, at least wrongly. is that my they had their issues with google? this groundswell of support that happens. already in germany, which is superpowerful in this way -- they have a history of eastern germany, surveillance, then you
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have google and the other tech companies coming in collecting personal data, profiting off of it. however, is this, that they are hugely popular among europeans. google has about 90%, some places more, marketplace -- market share in places. they are popular but also feared. believe they only have 75% market share in the u.s. you are not using bing. >> apparently some are. matt: google loses out because the european partner had made a failed bid to become the prime minister of spain. he was unable to execute. who are they dealing with now? >> timeline out on the first deal. they went from the frying pan into the fire. ,he new competition commission
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that group is led by a danish politician. the first thing she did when she came into office was to ask to give herpetitors a reason of why she couldn't crackdown. matt: i am looking at google's cash and equivalents. i feel like they could part with $6 billion. >> that probably will not happen. they could also pose changes in the way that search happens. maybe it would have to be unbiased. to find out want more on the story, check out the latest issue of bloomberg businessweek online right now, newsstands tomorrow. we are back in two. ♪
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matt: it's 11:00 a.m. in new , 8:00 a.m. in san francisco, and 4:00 p.m. in san
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francisco. tonight, the presidential debate. nine of the contenders wonder if donald trump will call them a loser. john talks about his acquisition of one west end the future of financial regulation. why john stewart is signing off. his last daily show tonight, and even the president is sad. matt: good morning. i'm matt miller. and i'm pimm fox. let's take a look at how stocks are trading.


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