tv Bloomberg Markets Bloomberg August 28, 2015 11:00am-12:01pm EDT
of emerging markets of equities as an asset class is changing. the chic art galleries that put new york's chelsea neighborhood on the map for contemporary art lovers are soon to be extinct. last month was the busiest july ever for a merger -- for merger and acquisition activity. some of the biggest deals of the summer. good morning, this is "the bloomberg market day." i am pimm fox. let's take a look at how markets are performing on this friday, august 28. u.s. stocks a little bit lower. the s&p 500 at 1983, a climb of about a quarter of a percent. the dell down about 4/10 of a
percent, and the nasdaq giving up 1/10. barrel -- $1.86 a barrel. oil moving higher as the dollar also strengthens. we will take a look now at some of the top headlines. much of the talk is about interest rates at the federal reserve central bankers confab in jackson hole, wyoming. bankers have gathered for the annual kansas city fed conference. the question, when will the fed raise interest rates for the first time in nine years? bloomberg spoke with loretta mester. loretta: the fed is a credible institution and we want to set our policy based on the economic data. i think we are consistent with that. i think the discussion is going to be about, what is the
economic information telling us in terms of our outlook and risk. st. louis fed president james bullard says the recent market volatility should not encourage the federal reserve change its economic outlook. consumer spending increased in july. purchases rose 3/10 of 1%, similar to the progress in june. wages and salaries increased the most since november. market turbulence may be affecting how americans view the overall economy. consumer confidence fell in august to a three-month low according to the university of michigan consumer sentiment index. the shareholders at mylan have agreed to go ahead with the hostile takeover bid for perrigo. the price, $33 billion. now it is up to perrigo
shareholders. their management have recently offer value's destructive. the ceo of ashley madison has stepped down. note biederman stepped down. --ley's broke into ashley hackers broke into ashley theson and stole information of many users. wizard top stories at the moment. theng up in the next hour, apple watch, it is dominating the wearable device market. in less than two weeks, the apple is expected to unveil its newest iphone, and perhaps much more. we are going to be checking in with cory johnson. a skyhigh rental price has forced many art galleries who transformed chelsea -- new
york's chelsea neighborhood to close. we will also get you caught up on the big mergers and acquisitions that took lace this summer. all coming up on "the bloomberg markets day." let's take a look at the analyst who saw that china would selloff, an interesting take on the future of emerging markets. the old emerging-market paradigm is dead. analyst and joins us from london. thank you very much for being with us. jp, the your thesis, four, and what is it now? : the investors should underweight them relative to developing markets, and that has been my recommendation for the last five years. the reasons for that are quite complex. they are mainly governance
related. from an equity investor's point of view, the old emerging-market teradyne was based on the convergence of gdp per capita and also of governance practices towards u.k. and u.s. liberal standards of government -- governance over a. of time. i think with the event, or what has happened throughout a number of emerging markets has shown that that paradigm really is no longer valued. china is at the epicenter of that. in china, what we have is a state dominated economy but more importantly, a state dominated equity market with very blurred down trees between the private and state sector. ,here are all sorts of risks sts dolots of microeconomic not get. from an equity investor's
perspective, i think it is completely different. what we are seeing a structural factors in china starting to calm and influence the rest of the world. they have undermined hammadi prices, and -- commodity prices. i am astonished it took so long for the oil price to fall down to where it is now. and how suddenly the adjustment happened when it occurred. what i am making is a structural argument that over a. period of time, emerging markets will continue to underperform and as investors look at them, they were hit from grouping the whole asset classes together towards taking a more country focused approach. pimm: what would you do with new money to invest? call, is not an easy because the u.s., and i have indexed u.s. equity funds for
the past five or six years, is looking a little bit expensive. my view has always been that the u.s. equity market would go into hubris-induced bubble again at some point, but would set off when the china weakness became apparent, and i think that is what we are seeing. i think we are seeing an intermediate selloff in the market. i do not necessarily think it is the right thing to do because the volatility is going to be around for a long period of time. long-term investor, the u.s. is still the best place to have your money. if you look at other markets, you can see quite clearly that governance reforms which should be happening in emerging markets are helping -- are happening in some developed markets like japan and spain and italy. i think they are well worth looking at as well. i think for any investor at the moment, having some cash, preferably in dollars and having
u.s. treasuries is probably the right thing to do over the medium long-term. for emerging markets, we need to wait for buying opportunities in individual markets, maybe through etf's, country etf's. when those countries start to put in place the necessary reforms and governance practices and economic reforms that are necessary to put them back on a more even keel and better footing for the future. pimm: keep your money in dollars, if you have cash. take a look at japan, spain, italy. did you get any pushback from your call about china, which seems to have common sense, which is if you cannot believe the financial statements and cannot understand the business culture, maybe it is not a good investment? : i have been getting pushed back the whole a margin call her the past five years, although
over the last year the most active international professional investors have become much more bearish on emerging markets. i think there are still a lot of people who are convinced by the marketing spin on emerging markets to go into emerging market equities, and i think that is where the pushback is coming from. beingnd to get accused of anti-chinese or anti-other models of governance other than the u.k. and u.s.. taking a very u.s.-u.k. centric view of the world, and that is not what i have been doing. i have been bullish on the end in the early 2000's, and bearish on the u.s. in the late 1990's. the has been quite a bit of pushback. pimm: thank you very much, j.p. smith of extra. still ahead on "the bloomberg market day," apple is closing in on fitbit. fresh data on the competitive
♪ pimm: i am pimm fox. stocks moving higher, moving lower this morning. the s&p 500 on track for the worst month since may 2012. julie hyman joins us for a look at some of the biggest movers in the retail sector. julie: we were just talking about retail. bestots is one of the performers in the s&p 500 today. this is an overstock, off-price retailer.
that segment has been doing pretty well. tj maxx has been a standout. the company raised its full-year forecast for earnings and for revenue after the company beat what analysts had been anticipating. also apparently it is good to be in the beauty business. 1.33% has pared some of its games but still higher after its sales also beat estimates of about 10%. the company is boosting its forecast for the full year as well. another that we are watching is company that is quite small after having shrunk consistently. it has a new branding partnership in china. shares rose in the after hours after that news came out, and then fell quite sharply after the company's earnings came out
worse than had been estimated. --eropostale has been very troubled after its cop sales fell more than 8%. take a look at my bloomberg terminal. -- have abercrombie and fits and fitch, you can see all of them have been struggling. the zero line so anything below this means negative cop sales. there has been a bit of improvement for all three but aeropostale remains the worst. here's a chart of its market cap. plunged tocap has such a degree that it is worth less than $100 million today. pimm: shocking, as you say. thank you very much, julie hyman, in the newsroom.
let's take a look at some of the top stories crossing the bloomberg. george w. bush marking the 10th anniversary of one of the lowest points of his presidency, hurricane katrina. he is in new orleans he spoke about the region's recovery at a high school. the bush administration was severely criticized for its response to the natural disaster. one of the biggest losers in the collapse of oil prices was jefferies group. a team of distressed debt traders lost almost $100 million when the oil route battered the value of bonds and the loans of energy companies. about half the losses came in fiscal third quarter. jeffries is not commenting. ashton carter is busy recruiting in silicon valley. he wants top technology firms such as apple and google to join traditional defense contractors. his audience is skeptical of the
of excesswary surveillance and potential privacy violations. we will be speaking at ashton carter -- with ashton carter at 1:40. those are your top stories. siri, give us a hint. that is the tagline featured on the invitation for apple's event on september 9. showsile, a new report the apple watch is dominating the smart wearables market just one quarter after it was introduced. cory johnson is in san francisco .ow characterize it, how successful is the apple watch? this it has been part of trend of wearables with fantastic growth of more than
200% on a year-over-year basis. interesting that you mention apple going from virtually nowhere to being one of the dominant companies. the dominant company is fitbit, the recently ipo'ed fitbit. dominant a year ago, dominant still. garman still holding up strongly. when you talk about wearable stuff and the apple watch certainly gets a lot of attention, it is fitbit that has dominated this market and continues to this year, even as the market is growing fantastically. pimm: what do you think of the introduction of the apple watch to those best buy stores question mark -- best buy stores? cory: it will sell devices, likely. samsung just took it on the chin, lost dramatically on the market share. one might imagine, the couple
watch has something to do with it. i think the best way to look at the apple watch is as an accessory to the iphone. a lot of the analysts when they try to figure out how many will sell, they look at it as an accessory just like that. there are a certain number of iphone users that will have the watch and they figure out that percentage, thereby calculating the number of watch sales. pimm: in order to use the fitbit, you need to connected to a computer or smartphone device, correct? cory: correct. pimm: apple could make money in a variety of ways. cory: it is interesting to look at the success of garman and fitbit as different things. for whatever device and whatever kind of phone you have got, the garman is interesting because for have a smaller business sure but have focused on athletes, focused on outdoors, and have a real nish -- niche.
that shows the dumbbell approach to the market. being very unique and focused, like the garman devices. the apple watch is a whole other thing on itself. pimm: when you say dumbbell, you read barbell? cory: in my case it is dumbbell. pimm: could you comment on the resignation of the apple executive who left the beats one acquisition? julie: they got paid a pretty penny -- cory: they got paid a pretty penny. apple is swimming upstream on this one, facing very tough competition against pandora, spotify, and others in that arena. this has been a bumpy ride, this latest launch of apple music. pimm: is there anything specific we should look for in that september 9 concept that will take place in san francisco?
cory: the speculation, of course we will expect the new iphone. -- update usually interesting that they are making theykind of focus on siri. gain improvements every time somebody uses it, and the speculation is that they may launch something with the apple tv set or tv box which has not been updated since 2012. pimm: amazon has a competing product for that. cory: and indeed the product is almost one year old. pimm: thank you very much. you are a smart fellow, cory johnson. coming up on the bloomberg market day, is new york's chelsea neighborhood becoming a victim of its own success? we will look at the people who transformed this neighborhood and find out why they are getting pushed out. ♪
♪ pimm: i am pimm fox. the art galleries that helped transform the once deserted streets of chelsea into a major global our destination are being pushed out. rising rents have pushed out all but two galleries. what does this mean for the u.s. art scene? tell people that may not be familiar, it happened in chelsea and what is happening now. ago,out 10 or 15 years chelsea became this mecca of art galleries. all the galleries moved there. there were over 300 or 400 galleries at one point. because real estate prices were less expensive than let's say midtown manhattan?
exactly, and then they came to chelsea. they had very big spaces which were conducive to opening galleries. because of the high line, they sort of became victims of their own success. walkway whichic traverses much of the west side of manhattan. katya: it became an incredibly desirable neighborhood. pimm: i think hot is the term everybody uses. fors a hot neighborhood hotels, restaurants, condominiums. katya: now you just see a mess of because there are buildings going up every time, and prices are going up. leases are coming up this year and next year, and galleries cannot compete because they have to compete with huge companies and real estate developers who want his ground for properties. pimm: they are building a lot of condominiums. this is residential development as well to compete with
commercial enterprises, correct? katya: exactly, it is everything. million dollar condos in those buildings and you have neiman marcus is going to move in, coach, huge companies. are having a hard time competing with all these companies. pimm: we have established that the people who run our galleries somehow are able to sniff out a real estate bargain. .hey did it in soho, in chelsea where they going now? katya: a lot of them have moved to the lower east side. they probably have to move to bushwick to be honest. pimm: so a move from the lower east side where we have seen an increase in rents, and maybe move to bushwick in brooklyn, or atlantic yards? outside of the borough of manhattan. katya: outside.
the most intrepid people are moving their today. pimm: south bronx? because they have industrial spaces that can accommodate art galleries? katya: they need those big spaces to put big art. pimm: i know where we are sending you next. thank you so much, caught yet. still ahead on "the bloomberg market day," summer loving, in light of companies courting each other. we will run down some of the biggest mergers and acquisitions of summer 2015. ♪
the session. it is up about 3.5 points. the nasdaq is also trading at the high of the session. a lot of movement in champions, oncology, real goods, solar. we will be looking at that in a detail -- in detail in just a moment. let's turn to julie hyman in just a second. what's take a look at some of the stories right now. the head of the minneapolis federal reserve says the central bank should not take steps based on the work volatility of the last few days. -- she spoke to us in jackson hole. >> we should be telling a coherent story that we are not about what happened the last 10 days on wall street. we are about to trying to shape unemployment in a year to two years. if we tell the story convincingly, i think we can have the right of fact, and upward pressure on inflation
expectation which is needed at this time. a voting member of the market committee. he is set to step down from his job next year. tradercalled flash crash has lost the delay for extradition proceedings. a judge in london rejected his request. united states wants him extradited over the 2010 flash across -- flash crash when stocks lost $1 trillion in value in minutes. they say he was responsible for one in five sell orders during that activity. general electric is preparing to sell off another financial unit. bloomberg news reports was fargo was the first to buy the finance business. they have more than $4 billion in assets. ge has been selling off finance businesses so they can focus on manufacturing and engineering. is trying tomusk
engineer an incentive. he is going back to the days of paypal for the electric carmakers incentive offer. thebuy a tesla s and after you are referred by the current owner, you receive a $1000 discount. the referrer will also get a $1000 credit to a new automobile. you must do this through a file which she -- through paypal which he cofounded. those are the latest top stories. the markets are closing in a minute. >> what an incredible week for the european stock market. it started with a 5% drop. what an enormous fall we experienced on monday, the largest drop since 2008. it reminded tuesday, fell wednesday. re-rose on thursday. i will show you how it finished in just a second. that is the end of the trading day. much of the week, attention has been focused on china. authorities there popping up the market ahead of this.
attention now turning to jackson hole. will fedofficials -- officials give clues or cues as to whether u.s. interest rates are rising sooner rather than later? here are a look at a big movers. the big downward movers. this is the biggest provider of temporary workers in the world. by three .2%. -- the 20%. , the italianragamo luxury shoemaker missed estimates, 5.6% down today. when jenna co -- the worst-performing stock is in a percent decline, the worst in seven years. ldid promise it, let's
ook at the stock 600. didn't break the zigzagging trend? it looks like it did. , a friday close was a gain key one., this is the did it finish after two weeks of decline? yesterday, .3%. back to you in new york. pimm: mark barton reporting from london. coming up on bloomberg market day, it has been an up and down week for markets today. during the week, richard fowler -- today, richard fowler will join us to discuss how markets react -- how people react to market filtrations. it remains popular today, but how should a fashionable person where one and who makes them? we will tell you. also hear from secretary ashton carter as he makes a visit to
silicon valley. all of this and more coming up on bloomberg market day. ins summer, an increase market merger activity. this july was the busiest july for deals ever. with insight on the acquisition market and for big deals, i want to bring in bloomberg market policy resident expert. let's start by giving them an overall picture. like i said, you have not had a vacation. actually, i did. i managed to get away for a little while. my colleagues here managed to pick up all the facts. it was excellent. basically, no. this summer has been unrelenting and busy. let's start with monsanto and its agenda deal which is kind of not a deal. the very bigone of deals of the summer and one which we tracked closely. monsanto had come in earlier in the year around april and may into --posal for surge
sargento. they said there was too much risk. monsanto spent the rest of the summer talking to shareholders and convincing them of the merit. the cap try to push this. you put these two companies together and it makes sense. at the end of last week, they came back with a revised bid at $40 billion. syngenta came around and said we are still interested. pimm: they will do a share buyback and figure out something after this. ed: yeah. pimm: that is a contrast -- a big deal that they announced that they try to make happen didn't happen. deals, we are reporting today about all of these, tell us they deals there. ed: everything that seems to be happening -- health insurance, we saw the big five health insurers go down to potentially three. that would be massive.
on the biotech front, this is where most of the traction and volume is in the space. the big fight in the summer, one which has occupied all of us, mylan try to buy para go and one hostile. they were getting beaten up so badly by mylan that they ended up buying a generics position. the crazy thing is this whole circus is going on, but the numbers are astronomical. you're talking about 10 allegan up a $40 billion deal. these huge deals. there's this aspect with the mudslinging in the press every day. the bb&t banking deal announced.
turning back to pharmaceuticals, valley and -- valium pharmaceuticals as well. the viagra drug they but less week -- pimm: a billion dollars. ed: a billion dollars. the fda approved this drug on tuesday. the lowest level possible. on thene day she is program, the next day she gets a billion dollars. what is crazy. the fda is saying take this drug at your own risk. there is a lot of risk and a lot of transit doesn't work. the fda rate this point. is willing tont buy for a billion dollars. pimm: here's the chronology. get the idea. they did the pharmaceuticals deal. and then they acquire -- this is what valeant is all about. this is their business model.
ed: they think of themselves as sort of a pharmaceutical conglomerate. gastrointestinal, none have viagra. whether or not that works remains to be seen. the one thing we can be sure with valeant, they will continue to make deals. we will see more deals from them this year. pimm: we keep talking about the federal reserve and when it will raise interest rates, money is expensive for corporate ours -- borrowers. when will they use it to do something? ed: money is expensive. the confidence is so high among these companies. and every sector, we see a time and time again that companies are willing to take on the big, very risky, what would normally be considered very messy deal. the cheryl -- the shareholders back them. pimm: then we go through another cycle where was put them up. ed: and restructure banks.
is "bloomberg market day," i am pimm fox. let's take a look at the top stories crossing the terminal right now. one place where general electric will not be locating its headquarters. that is the city of dallas. bloomberg news has learned that general electric has dropped dallas from the potential list of headquarters cities because some texas lawmakers are opposed to the export import bank, a
source of financing for some of ge's large overseas sales. d it may move it take orders from connecticut because of a change in tax laws. it is a sign that americans may be getting more nervous of taking risks in any form. for the first time since 2008, both stocks and bonds have reported outflows in back-to-back months. usually when money is pulled out of stock funds a goes into bond funds. not this time. it is a familiar sight. is familiar goodyear blimp retiring. do not fret. the company is going out three new airships. a will have three engines instead of two and be able to cruise at freeway speeds of about 75 miles per hour. those are your top stories. whereas been a week
investors have had to hold onto their stomachs. the fear index shut up 50% earlier this week. an increase of investor uncertainty as markets sold out. university of chicago professor of behavioral science richard thaler joined us. he studies how people react to the situations. thank you for joining us. let's start off by talking about that one word that investors love, fear. how does operate on the human psyche? humans are afraid of things and that is privately natural. that is how we survived. it is good to be afraid of lines and things i got. -- and things -- it is good to be afraid of lions and things like that. in modern day, we are afraid of losses and the unknown. when people get afraid of losses
-- research shows that losses curtis twice as much as good things feel good. then we panic and panic is not good. pimm: panic is not a good thing. turn your attention now to greed and how that plays into the relationship with fear. richard: i am not sure exactly what greeted means. --greed means. we would all rather like to have more rather than less. it is not so much greed as overconfidence that we should be worried about. people think they can outsmart everybody else. of course, it is not possible for everybody to outsmart everybody else. outsmartyou cannot everybody else, i am wondering as a professor of behavioral finance and understanding the human psyche, what do you recommend people do at times like this when they see a stock 3%?et that may be falling
richard: maybe take a walk, the cap a good book -- pick up a good book. go for a swim. turn your show off. pimm: oh dear. [laughter] and thus we are giving calming advice. richard: and unless you are giving calming advice. this episode is ok. pimm: having said that, is there an opportunity -- if you see the crowd being fearful and doing just as you described. .ehaving in a panicked way a more sanguine investor can take this as an advantage? richard: possibly. here is a sobering fact. we know that individual investors as a group tend to buy high and sell low. justmeans that if they had
-- take any portfolio they own -- if they had just held them rather than change them, they would have done better. when they see something going on like the turmoil in china and they think i'm going to be smart and do something, chances are, what they will do is the wrong thing to do. is to hold diversified portfolios, and then stick with them. try to pay as little attention day to day to what is going on. attention, they more chances you do something stupid. pimm: thank you very much. that is why we are going to watch this, so we don't do something stupid. university of chicago professor of behavioral science richard thaler, thank you very much.
pimm: this is "bloomberg market day," i am pimm fox. ring has been around since the old testament. an item of jewelry that makes a statement. it is one by many women around the world. how should a fashionable person one?ar we have to fashionable people. here.you for being chris, i want to start with you. explain to us for those who may not be familiar with the signet ring.
chris: signet rings were traditionally a person's signature. if you wanted to sign a document with a seal, you would take it and seal it and wax or clay. over the years, it became a symbol of aristocracy. now, because we use electronic signatures or we sign something or use a fingerprint, i don't have any use anymore and are just for decoration. ear one,ts, you where what is the origin of this? matt: in germany, you were inditionally where a crest your gold ring. in england, you would typically wear a school ring on your finger, mostly all gold. in my family, we just have initials that are passed down from father to son. -- forou see this example, if you are a graduate of any of the military academies, you would be able to spot someone from the naval academy or west point because of
the ring, or even a university. what is the twist? what is the new part of the signet ring businesses? chris: they have been around for thousands of years and have remained popular. they have seen a resurgence and pop culture. everything from the tv series gatsby,"" to "great you see a lot of male stars wearing them. as a result, some of the companies that have made them in the u k and the u.s. of notice in the past few years there has been a real resurgence in demand. pimm: does that mean that men are leading this trend? seems like it. especially with jewelry like this. there has also been a resurgence for women. designers are starting to make signet rings just for women. pimm: i want to thank you gentlemen very much. you can compare your rings. time to take a look at what is going on in the options market
with julie hyman. julie: let's take a quick look on markets right now on this friday. what has been an incredibly turbulent week here. right now, the s&p and the dour trading lower, but the nasdaq is trading higher. the s&p was trading higher briefly before dipping lower. that has been aired touristic in this volatility. joining me is a traitor from our sharp trading out in chicago. jim, it has been a crazy week with regards to volatility. we have been seeing bouncing around today as well. and this market, are you seeing a lot of conviction one way or the other when it comes to people putting bets on volatility? or are people too nervous to even make big bets right now? at: i think you could look futures on a day-to-day timeframe and see there is a lack of convictions in this market right now. we have had some massive swings and unprecedented moves throughout the day. that points to the fact that
markets cannot find direction right now. they are struggling to find direction. we have spent such a long time in a broad trading range that we of out of it, there is a lot headwind out of china. that has to do with weak money getting shaken up. julie: when you look at the vix, it is trading around 26. a little higher today. it had a big week last week. what do you think the appropriate level is for the vix right now and where do you think we'll see a? jim: we have spent an above average. of time with above-average volatility. looking at options trading right now, investors need to be careful about how much premium they are trying to buy. this is setting up a situation where call buyers may see their stocks move higher and not make any money in their call
divisions if volatility comes crashing down. it is difficult to look at right now. i would not be a buyer of volatility right here. i do think we will settle on a 21 historical average. looking at dollar tree. the company is reporting earnings on tuesday. the shares are up 9% this year. dollar general just reported numbers. they were not strong. the stock was down. what are you looking at? this is exactly the type of trade i'm looking for in this type of environment. short-term trade this catalyst given. the last 10 out of the last 12 quarters. take a look at what we are implying right now. and upside target just outside of 82 by september. i can buy the cheap option spread. risking $95r $.55, to make $195. we trade up to that target by september expiration.
losses $.55. i'm playing it ahead of the catalysts. julie: what is your level of nervousness given that dollar general disappointed? too nervous about this. i have defined level of risk your. i know that dollar tree has a historically stronger record on earnings data and auto general -- dollar general. julie: we will see what happens come tuesday. we appreciate it. we will have much more "bloomberg market day" after the short break. stay tuned. ♪
that is what central bankers around the world will be talking about as they gather in jackson hole. >> hurricane katrina wrecked havoc on the coastline. tenures later, what efforts to restore the state mean. matt: in a few moments, we will .e speaking with alan blinder vice chairman of the federal reserve. ♪ grexit good afternoon from bloomberg world headquarters in new york, i am matt crumpton with matt miller. fluctuating and red arrows across the board is to check your at noon. s&p down about six points at 581 -- five dollars 8