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tv   Bloomberg Go  Bloomberg  November 2, 2015 7:00am-10:01am EST

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valeant. and investors vote yes in turkey. what does this mean for president aired again, despite the victory in turkey's future? david: welcome to bloomberg go. i'm david westin. stephanie: we are coming off a big weekend. we brought in a big team this morning. joe weisenthal, and michael purves. david: when you say a big weekend, you mean for you. much bigger than mine. stephanie: it is not because i ran the new york city marathon -- clearly i did not. we are new residence on the upper is inside, so we felt like
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we needed to bring our signature. upper i am not sure our east side will ever be the same. stephanie: i had 200 kids come on saturday. say, i did this in a really big way. david: there is a new kid on the block. stephanie: there is a new kid on the block on the upper east side as far as trick-or-treating. joe? joe: no, i just stayed in. david: i had candy duty. my 13-year-old son roamed the neighborhood, i hope not causing too much mischief. stephanie: saturday night i went to heidi klum's party.
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thean talk about this for next three hours. but you would like some news. vonnie quinn is not here today, but david gura is. that: the russian airline crashed into the egyptian all 224 people on board., and experts say the plane appears to have broken up in flight. hasurkey, president erdogan solidified his powerful since that his power since 2019 -- his power through 2019. his party regain the majority lost in an election five months ago. turkey's benchmark stock index rose 5% in response, and the turkish lira stored -- the turkish lira sort. paul ryan made the rounds on sunday talk shows.
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he says the republicans will be a more focused and productive force. he promised a clear agenda on the economy, health care, and foreign policy. 2.5 hours, even after the news on the china come interesting that week manufacturing data in asia does not drive us down and european markets are rebounding as well. the reason may be because of a couple of deals. eps is missing on the figure, but a $5 billion share back and a $23.5 billion deal to buy back visa europe, which it sold seven years ago -- you can see they missed at $.62. shares are down a little bit. shire also making a deal to buy dyax. ats is a live trade, down 1% 48.67 -- at 4867. dyax will show a gain here.
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shareholders are happy with this indeed. david: besides being hollow wing, we are starting a new month. in october we had a great month in the equity markets. i guess i have really two questions for our guests i will start with you, joe. why did october happen? will it continue into november and december? stephanie: because it is the 10th month of the year. why was the rally? joe: i do not know why and what is going to happen next. there are two things that happened. one is we got this huge rally starting in the beginning of the month after a weak jobs report. strong rally after weak data, so people were optimistic. late in the month you had the fed statement, which was perceived as being hawkish. two-year interest rates jumped significantly, any expectation -- bringingke
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expectation of a rate hike possibly further in. anybody looking for a clear narrative on what happened is going to be disappointed. the one thing we know is that people will be watching did a very closely between now and december to see if a december rate hike is on the table. the data has not been that amazing. if you look at the citigroup economic surprise index, it is on a long run of being subzero, missing expectations mostly. it justifies a clear narrative in my opinion, and the data, where watching closely. for?: but what do you look you start with the fed? joe: everybody starts with the fed. david: what about things like earnings, michael? there are other factors besides the fed. michael: i want to big up on something he mentioned, about the weak jobs report, which kicked off the rally in a way.
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the thing i was focused on is that if you look at the emerging-market currencies, they were falling apart during a volatile september in the late august period. what the weak jobs report did was stunned the dollar rally as it relates to the -- was stunned what the weak jobs report did was stunt the dollar rally. it took the systemic risk off dealing with the market and allowed equities even with mediocre earnings to bring in an 8% gain for the month. does the: matt, what terminal tell? matt: investors may be expecting the worst-performing sectors to do better. i have broken this up. this is just a month of october for the s&p 500, broken into about 20 different groups.
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materials was the best performer, up 13.5%. energy was the best -- the third-best performer. these are some of the worst performers if you look at the year-to-date chart. people were kind of betting on the dogs to be the big winners going forward as oil prices could not really get much lower. stephanie: if they -- if the fisa says they cannot get much lower, walk us through how they will gain confidence in november. it was such a rough ride that and havingck in confidence seems so challenging, especially if we head into year-end, and it is about preserving capital. michael: first, you do not need great economic conditions to have great stock market rallies. what you do need is earnings and economic conditions to basically say -- to basically stay decent
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enough. ourwhen you have not just central bank -- joe was referring to the fed being central to the story -- but what we also had during october was every central bank in the world aligning together. you had the ecb with a strong dovish message two weeks ago, china coming in and firing their various forms of bazooka shells one after the other. that is instructive for u.s. equities. joe: something else you are talking about, fears that it was driving the market with currencies. about a month ago we were all looking at glencore everyday and watching that stock trade. that was emblematic that something bad was going to happen, that the bottom was falling out. what we did see over the last month was not necessarily -- no one is talking about things turning a quarter fundamentally, but if you look at the urging , it has come in. the fear of a huge collapsed has
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come off the table. thing i thinkther that has been happening over the last two weeks if you have -- is you have a big sentiment shift, things are very bearish. anecdotally, if you are talking to hedge funds and other forms of asset managers, they were walking into this almost expecting the top is in and we from with that cleared, you can facilitate a stronger rally to the end of the year. we saw several novembers and in five orutting six months. it is certainly a scenario, and a lot of people are in position for that. stephanie: we have to talk about china. china has been a huge overhang. what will over -- missing estimates mean in the broader sense? michael: they really started to
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show a basing and the less two or three months. that is what is important. we are not looking for china to be off to the races. we are looking for all of the stimulus we have seen out of that atarting to show basis is coming together there. if that continues to happen -- which it probably will -- i think it will facilitate a stronger risk-on appetite. is of a hard landing. if we have a soft landing, it glides past. a lower growth monomer -- and lower growth number. stephanie: gentlemen, thank you so much. michael purves as a -- is a chief global strategist. and thanks to our own joe weisenthal. up next, mario draghi joins other central bankers in stimulus limbo. this is a guy who will do whatever it takes, and we will
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get ready for him in this morning's "global scope." ♪
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david: time for your bloomberg business flash. ,isa is taking a huge step buying a former subsidiary of visa europe. they separated eight years ago. the lack of meaningful conference -- contributions from europe has long been seen as a weakness for visa. there has been transaction in the by affect yield -- in the biotech field. makes a promising treatment for a rare genetic disorder and will be bought by shire. buffett's berkshire hathaway is expected to report quarterly profit friday. the reason, a pretax gain of $7 billion on a staking craft times. that is a bright spot in a challenging year for berkshire.
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geico is struggling with higher costs in claims. over the weekend, the ecb -- great,you are doing david and we have way too bank many davids on the set today. we are going to europe for global go. mario draghi said in an interview over the weekend that further stimulus for the eurozone is still an open question, a little bit of a surprise after what he said in the press conference. our new york chief, jason kelly, is still with us. mark barton has more on this from london. mark: only about a year ago, mario draghi was accused of being unreliable boyfriend for flip-flopping on where u.k. rates were heading. somebody called mario and unreliable way friend. that the ecb will
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add to stimulus in december. now on saturday with an interview with an italian newspaper, he said it is an open question whether adding further stimulus will be necessary at the ecb's next meeting. he added that it was too early to pass judgment on the ring the deposit rate further below zero. only a couple weeks ago he suggested further options included a further reduction in the deposit rate. for a thirdrising day as a result of that. after mario draghi spoke a couple of weeks ago, the euro fall from the% dollar. is he unreliable boyfriend, david? stephanie: aren't they all you go i am not sure i ever met a reliable what you're it -- i am not sure i ever met a reliable one. tell me why greek banks are up. mark: it is not every day we get
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to say that greece is the best-performing stock market. -- the threes out biggest gainers are the biggest lenders in greece. efg, europe bank, and wilbur ross, the billionaire, owns shares in this bank. the ecb says these lenders have to raise 14.4 billion euros under the most adverse scenario, under the baseline scenario. they have to raise 4.4 billion euro. the question is, who will pay that? the baseline scenario, 4.4 billion, shareholders and bondholders will pay up. but under the reverse scenario, who will pay up? it will probably have to be the greek government. so more money from the greek government means these banks could be essentially nationalized. mr. ross is not happy with that because it alludes the equity he already holds. >> it is so interesting to look
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at wilbur ross in this scenario. onlyis a guy who has not gone into troubled companies but troubled countries before, via ireland, the asian markets, even the united states when it was in all sorts of financial distress and made a lot of money on central banks here. here,circling, circling and as mark said, if the government goes the right way, a lot of money to be made by wilbur ross. we heard from howard marks last year. these distressed investors are chomping at the bit to get in some of these markets. that jason is giving advice, but you are saying, what, billionaires are investing? be sending you down a scary path, and we will not do that. thank you to our favorite unreliable boyfriend from our london bureau, mark barton. we are not letting jason kelly leave. he will help you with more
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dangerous investments. next, we are talking pharma with a very special ceo. warren buffett's partner thinks ant's approach is immoral. ♪
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david: you are looking at london. it reminds me of when i lived there bank. that looks like london -- foggy, a little damp. we are now joined by richard pops. ."lcome to "bloomberg we still have jason kelly with us. let's start with -- let's talk about your new schizophrenia drug. richard: we have a new drug approved by the fda, a once a month injection for patients with schizophrenia called
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aristatda. you have to make sure that patients have the ability to take their medicine reliably. often they do not. stephanie: we see time and again so many illnesses -- we do not see drugmakers go after finding any sort of medication or cure because there is not enough funding, there is not enough patients, not enough demand. areo many companies developing high-priced drugs. rmes, we have been doing the opposite. it has been very little emphasis in funding. it is very hard to treat these diseases, but if you come up with new medicines, there is a tremendous amount of suffering and a tremendous commercial opportunity as well. david: take us through the process. when did you start working on this drug? stephanie: this is such a good
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point. i love this question. richard: at the highest level, i became the ceo of this company when i was 20 years old or it -- when i was 20 years old -- when i was 28 years old. we are really hitting our stride now. it takes a decade and a billion dollars to make a medicine generally, sometimes more. many things we look on -- many things we work on at the highest level of the finance still fail because human biology is so much more than we can attest to even in experimental systems, particularly when we're dealing with the brain. we have a major drug now in phase three for depression. we are in the midst of a gigantic program, with thousands of patients who will know the results early next year. we still do not know whether it is going to work. stephanie: given how short-term the public has become in your demand for results, has it
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become increasingly harder for you to be involved in such long-term projects? cleard: as long as we are with wall street and our investors with what we are up to, the cool thing is there are milestones along the way that investors can trade and make money around. is volatility around biotech seductive because there is not like there is a black box and then we get trial results, and the bulls and the bears lineup further speculation. have you seen the investor become generally more educated about this? how do you teach them to think about a biotech company, especially from a long-term perspective? richard: many of the top health care investors -- they know the science extremely well. dataeed to understand because most of the stories sound good at face value. sound like seductive stories because the ambition is so noble, but the science is very complicated. stephanie: in order to get
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investors, to get people to back you, you need a drug where the patients are willing to take it. to beed the patients willing to take it. oftentimes with mental illness, people forget to take those drugs. richard: that is exactly right. it is a major public health crisis. if you have high co-pays for someone with schizophrenia who has to pay $30 a month for their medicine, guess what, they do not take their medicine and they and up in the hospital or the emergency room and they cost the system more money. take a quick will break. we have more to cover. when we return. you are watching "bloomberg ." we are going big on big pharma. ♪
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stephanie: welcome back to "bloomberg ." here with us is jason kelly and richard potts and straight for radio,lance ray leo --
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tom keene. and itwent as a panda was beautiful weather and no one was injured. the full report is i fail. is atnie: the first news 7:30 a.m.. here's david with thes the first wor word. david: the plan is to disrupt the missiles of mesozoic and there is growing concern that north korea would find a way to put nuclear missiles. they may have found the right cargo ship el faro. investigators using sonar found the ship 15,000 the below the ocean service and they are waiting for confirmation that it actor frednd
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thompson has died. the republican out of tennessee spent number of years in the senate and appeared in a number of movies. he died at age 73. stephanie: he was one of my favorites on "law and order." "law and order" is my favorite all-time show. i love the original. i'm not so good on criminal intent. tom keene is here with us and not in its hand accosting. -- in eight hand accosting. panda costume. what is your morning must-read? tom: this is a phenomenon gap. given that the sec requires from formerporting figures to publish gap numbers in tandem that you would assume that investors stay focused on the fact.
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academic research appears to show that adjusted numbers five stock prices. the answer is that this is eant and a clinic on the nuances of gap among cap. david: i was really surprised because i knew about this non-gap and i thought it was more in the tech stock. i seen that before, but a company is established as val eant in that investors would believe those numbers is stunning to me. tom: with someone on staff and turning to others, what the hell are we doing? we have done this. that affects everyone. i did not mean for you did speak valeant, butabout the idea of excess and going to far is it temptation. >> is not always transparent. if you do these huge
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amortization charges, they really mask the list. investors can see what the money is gone. tom: how do you as a ceo police too much? the balance is loaded with goodwill in battle and whatever you want to color. it is there any need to adjust for that big hole in the balance sheet. desire to go a further. if you live by the sword, you die by the sword. there are all kinds of 10 tatian's in the system and you use whatever tools are available to you to maximize the profits. it is driven by the quality of the medicines in the pipelines. the numbers are the numbers. stephanie: valiant has such an incentive. you have to be looking at them. over the past three months and the past three years, you see a guy like bill ackman said that i look at them like a small parts are half away and say, man, what are they doing right that we are not? richard: it reveals for me that
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they are in a completely different business and we are. we have scientists and laboratories breaking manu medicines and taking risks. they have been consolidating products. tom: gretchen states fairly, she about the financial engineering and transaction nature of it versus the actual science. and they are buying rmb. up: office depot was a roll million years ago. david: matt, take us to the bloomberg. : investors believe what richard is saying. alchemy versus the rest of the if youers, they track, look past the five years, there is the drop in value. here's the rise in alchemy after investors stopped and assessed what was going on. this guide is doing something different than the rest.
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tom: does that mean you're buying lunch today? [laughter] david: my reaction is to let the buyer beware. investors should be sophisticated enough. you're talking about bill ackman and things and they should be able to read these stories. one of the interesting things is that it was about the presentation as well. and what itgo back seems gretchen is calling for is to say youg of that can use both and there is a fair case to use both, but you have to presented in such a way that regular investors, not just super sophisticated bill ackmans of the world can understand the mechanics of the financials. tom: i would suggest for regular institutional investors, she and comparing that with merrill lynch's treatment. i do not think mom-and-pop will ever get gap-non-gap. i never got that. stephanie: what do your
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investors ask of you? under a lotot of of pressure to perform in day in and day out. tom: quarterly financial performance is not driving the stock. richard: we are building projects and medicines that have the potential to be blockbuster medicines and 2-3-four years time. they are monitoring our progress. financially, we need to be able to pay for it. classic biotech companies raise equity dollars to pay for r&d. we are fortunate to have 100 million in revenue from products that we have developed over the years that find this r&d engine. tom: what will be the outcome on whether mr. ekman is right or wrong? stephanie: is bill ackman the person who matters or mike peterson? the assembly and investor. -- he is simply an investor . tom: i will say this in defense
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of value. richard: you can quarrel with the way that it is accounted for, but the core of it has a huge business here. they're are providing medicines around the world to lots and lots of people. there is going to be a court to the valuation of valeant. stephanie: if they have products that you see great value in, why would you not want to buy them? richard: we are not interested in products today. we are interested in the next generation. thehe health-care system, only medicines reimbursed in the future of the ones that are better and precedes them. those days are almost over. payers are too much fears now. tom: howdy do you respond the cancer researchers outraged by the cost of drugs that guys like you make? when someone says it is $70,000 to go three weeks or three months more of life, how do you respond? richard: if you understand the science, the reason that certain
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leukemia and lymphoma is treatable today is because the small increments added together. the first drug by itself might only save six or eight weeks of life, but the molecular mechanism is distinct. if you combine it with another medicine, researchers trying to figure it out. tom: did you see how he said molecular mechanism? yet the take chemistry. -- you have to take chemistry. stephanie: fantastic. thank you so much. david: we want to turn to turkey. turkey was a surprise. seem to be we have had a series of them could pose as a prize went to the present as the party regain for the majority in an election lost five months ago. markets are responding with the lira jumping the most. tom mackenzie is inestimable with more. tom, is this a temporary upshot i or is there a fundamental change in turkish markets? tom: in terms of turkish
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markets, the valley points to strengthening lira up more than its highest level. i think that was 2008. you can see the stock markets in istanbul of around 5%. ons are also up and yields are down. today, butpositive the investors that we have been speaking to throughout the morning have said to hold your fire. this is not over yet. this is a bleaker picture than markets are represented today. certainly the economic and political and social challenges that face the new government are enormous. this party has won a significant and clear outright majority, smashing those poll predictions. they got around 49% of the vote and increase their vote share by around 4.5 million. i do not know if you can see the bridge behind me, but crosses the river and connects the european continent and the asian continent. people said that a vote yesterday signals and other
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from europekey away and secular institutions and the process of democracy and more towards an autocratic system that is favored by the president. there are more significant economic challenges in his government and he will have to face them as well as the political and social divisions. stephanie: i know you want to weigh in on turkey. from the notes he gave me, he gave me turkey, chatter, grain, no pickle. that is not the turkey we were talking here. richard: i talked about turkey in this unique relationship. tom: what will be the catalyst for nato and other institutions to raise the dialogue with mr. erdogan? tom: you're right to point that out. a 600 mile border with syria. we know what is going on there. it is home to around 2 million syrian refugees. we know of russia's involvement in syria as well.
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we know the tensions between erdogan and between turkey and as russia has become more aggressive and a itself into that conflict in syria. nato has a crucial nato ally in turkey, but they are playing a tough game as well in brussels. we saw merkel sitting on a golden throne in turkey, promising 3 billion euros of aid. those of the best efforts to stop the syrian refugees continuing their movement into euro. it is a crucial relationship, but are the one and their party have frayed ties with their traditional allies. will they repair those? that's a crystal question i think. stephanie: that is tom mackenzie from istanbul and tom keene, we will let you get back to he radio and your turkey sandwich. richard potts, thank you.
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the guy was ceo of the company when he was 28 years old. next, the business of betting. we are talking fantasy football. david make killed dollars on sandy will this weekend. make all that money to is for all those commercials. you are watching "bloomberg ." stay with us. ♪
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david: here is your bloomberg business/. liveouse has agreed to conagra's private label unit for $2.7 billion. the deal will start contributing to earnings in the second year. a much bigger deal was announced earlier today coul. these of will by its subsidiary for $28 billion. these is like of earnings from europe has been seen as a point of weakness. the on to that the federal
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reserve will increase interest rates by the end of the year has climbed to 50%. that's suggests that treasuries are poised to extend october's biggest monthly lost since june. that is your business flash. stephanie: we are done talking the business of halloween. now we are on to the business of betting. a big week for sports. at fort sites like tracking's and family will are under intensifying scrutiny test daily fantasy football sites dual and draft and draft kings are under intensifying scrutiny. our investors worried? >> not quite yet. genetic seen a shift in the way the public and the attorney generals are looking at these companies. there has been self promoted regulatory bodies that will be
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thesetart to look into countries. i do not know if that is enough yet and my gut says that is not enough. stephanie: i'm not a fan dual enthusiasts, but are people still playing? these past two months have been the biggest growth in business and the most worried they have been about the basic underlying tenets of the business. david: self-regulation -- is this enough? they did this in gaming. is this enough? formal government have to step formal government have to step in? anon: kevin brings up interesting point. there is big money behind you. not just big investors, but the leaks themselves are investing in this. there is a lot at stake. they have got to figure out how to make this work. it creates an interesting dynamic when the leaks that have been the biggest proponents against legalized sports
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gambling are the biggest investors income is like this. major league baseball, the nfl, and mda. they are major investors. david: is this a big benefit for the established numbers of fantasy sports? it makes it harder for new entrants to get in. eben: the amount of money they has spent the past couple of months to advertise and the money that they have spent to snatch up league and team partnerships and building partnerships -- they have spent so much money just to make the barrier for entry into this business so high. there are dozens of smaller fantasy sports companies and you will never hear the names because they are properties to invest in good they do not have enough money to put it up. stephanie: who are the biggest investors here? eben: kkr is a bigger one. shamrock capital and pain group etc. ande are teams involved there are sports owners. jerry jones, robert kraft, and then there are media companies.
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comcast is involved in turner is involved. the entire industry in some way has gotten involved moneywise. stephanie: if that is the case in knowing how powerful these groups are, let's be honest -- rb really going to see regulation hamper the business and these companies going away? not see themll going away. it's a most impossible to imagine these companies will go away. if anything, piecing these two things together, they may consolidate these smaller players. they are in and they will be the dominant place. other setre are one of players here and that is the talent. if you are a player, they are making a lot of money off of your likeness. you may want a piece of the action. jason: i want to point out a cool function that bloomberg terminal has been if you type in on your bloomberg terminal, you can search any kind of legislation that congress is considering could this is a house resolution on
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the online gambling bill. it shows you the bloomberg part of the function. that could bed tha impacted by the legislation like caesar's and mgm grand. there are a lot more players involved here. the investors behind these companies and the actual athletes that are playing the sports. david: how does vegas feel that this? eben: they are up in arms about this. the first state to ruled that this was gambling was from las vegas. you look at all the regulation in the casinos in the sports books go through in vegas. cap to the regular funds from the betting funds. it creates systems in place for problem gamblers. those are all things that draft kings and fan dual do not have to do. stephanie: the establishment hates the disruptor. thanks very much for
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being with us. jason kelly, you will stay with us, i hope yo. speaking of winning, american pharoah had one final victory before retiring. the horse when the $5 million breeders' cup on saturday. it will begin its next chapter at a farm in c kentucky. stephanie: he's going to go pick up women now. david: that horse is going to have a good life and he deserves it. in another race, 50,000 runners from different countries took to the streets of new york for the marathon this weekend. a was a clean sweep from country about running. if you know anything about running, you will know what country does. look at that nike from head to toe. ♪
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david: welcome back to "bloomberg ."
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than 50,000ore runners took the streets of all five boroughs for the 45th nnual new york city marathon. both runners from kenya took the men and women's first place. we have a marathon is sitting right next to us in jason kelly. how many, 12? but you set this up. jason: i left it to the 50,000. the new york marathon is singular in so many ways. five boroughs and you start across the bridge in staten island. one of the most memorable moments is that you are coming across the very quiet 59th street ridge and are no spectators on the bridge and you start to hear the cheering on 3rd avenue. stephanie: you hear those footsteps and the people pounding. where you do not hear the footsteps are the elite runners. they are so fast at this point that it is mind blowing. we have to share their times.
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two hours, 10 minutes, 30 seconds. that was stanley's time. mary, this is the second time that she has one. two hours, 24 minutes, 24 seconds. jason: i want to give you one speed.tep about 4:23 21, he runs a mile. for anyone who has run in central park, it is not flat. on mile 21, you are rolling hills. he found a second gear. david: they were running a 4:45 and they were cruising. stephanie: that's amazing to all who participated. when we return, we talk about these reuniting with these a year. reuniting with these the euro. ♪
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stephanie: more trouble for volkswagen. the automaker failed to report one debt that was caused by a suspected vehicle. this $23 billion deal is in the cars.
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these are agrees to buy a subsidiary. it has got a billion-dollar valuation and it is backed by carlos slim. he will talk to the ceo of the app that lets you find the song to love from tv and movies, shazam. ♪ stephanie: welcome to the second hour of "bloomberg ." it is monday morning and we are in new york city. i'm stephanie ruhle. david westin. and here joining us this hour is our friend, brendan greeley. brendan: i was running. i didn't do the full miles. stephanie: he has for children under the age of five doing trick-or-treating. brendan: that was one long sugar hangover. david: let's go to the first work. isid: a russian airline
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failing suggestions that one of its engines failed. they have ruled out pilot error and so that external impact caused the plane to crash. how far thethat on plane has scattered that the plane of his stuff broken up in flight. in turkey, the polls got it wrong as erdogan re-control parliament. afterab to control months of turmoil. erdogan has been taking a tougher line with kurdish nationalist and he criticized opponents as terrorists and traders. the vulcan presidential candidate jeb helping to jumpstart his campaign this week. today, the starts of three-day tour wrapped around the release of his new book detailing his eight years as florida governor. once considered a front-runner, now he is far behind in the polls.
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matt: i want to look at the futures and you can see that s&p teachers and many contracts are now unchanged. dow and nasdaq futures are unchanged as well. after the chinese manufacturing data, the public and private -- not a silly about outcome as we head into the open an hour away. take a look at some of the stories this one. first of all, behrens has a couple stories. one on pfizer that says they could outgrow its industry peers by the end of the decade and should return about 20% this year, including dividends. biggesttering into the deal ever basically in health care, buying allergan. right nowe shares up on pfizer. a story on chipotle -- 43 of their restaurants in a northwest have been closed because of an e. coli outbreak. six of those restaurants have been connected to e. coli issues in the last two weeks. that makes youow
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feel, but ie chipotle almost every day. it's down 5% so i may need to get checked out. stephanie: e. coli aside, i do not think you want to eat chipotle every day. matt: it is so delicious. stephanie: that doesn't really matter. matt: i quickly want to point getting news from barron's. baron says the stocks could double in two years. buying back about 20% of its ohares according to marcad capital. founder, mitch maguire, would probably go with what he named it. valeant, goldman cut from a buy to a neutral. changethanks start to their tune. not good news for mr. bill ackman. we have to cover in other story this morning. it is further inflaming the , revealingstable
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"volkswagen failed to report at least one death and three injuries involving its vehicles to a u.s. regulator database designed to save lives by spotting possible defects." jeff green is with us from detroit. you broke the story and it is only one death and three injuries that we know of. what will possibly turn it into a long list of transparency failures by vw? jeff: it is hard to know and this is our attempt to find anything missing. we know that they have low reporting rates from large automakers by significant amount. we said let's see if we can find lawsuits not in the database. we did this with honda and we were able to find them again with volkswagen. we do not look at hundreds of lawsuits. the fact that we look at 13 and found for is an indication that there are some missing beyond what we found. david: you mention honda. it is not unique to volkswagen. do you have a sense on how many
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other auto copies have this problem? jeff: to this year have excepted responsible before it. we do not know what will happen to fiat chrysler because they have not finished looking at that. ferrari was fine for this last year. regulators have asked all the automakers to look at this database to see if they are in compliance because there is concern that have not taken it seriously. when you look at the numbers, everyone has increased the reporting. people are reporting more coincidently around the time that regulators are starting to look and they are finding more when they are looking at. brendan: what do we need to look at to find out whether this was just an oversight or malcontent? jeff: they does not mean to be malcontent. of what isntext going on with airbags, you do not want to miss any incidents that to just that allegations of airbags or failing, for example. ata, there were not
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many injuries or deaths, that anything you miss is a problem. for the regulators, it's not that you didn't mean to so you have to do it. if you take a hard line and look at this, if you survey lawsuit, it should be in the database. brendan: was this a mistake made by volkswagen north america? jeff: it is hard to know because we do not know exactly where these things are catalogued and where the reporting is it is probably done in the u.s.. they will not comment on the lawsuit. they are doing their own independent audit now. since we brought this up a couple weeks ago, they agreed to do a third-party audit based on regulations from u.s. regulators to see how they are doing. auditook at this and this and we do not know where this was done or where it was missed. david: what are the possible fines or penalties for volkswagen? jeff: it ranges. for our he was fined $3.5
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million, but honda was fined $70 million. it depends on how much they want to come down on them and how cooperative automakers are. the maximum is technically $35 million, but honda did it twice. they found a way to make it even more. brendan: is it possible to say that this is something you found because volkswagen is already under the magnifying glass? similar find discrepancy from other manufacturers if we apply the same interrogation? jeff: we have been looking at this for more than any if it we found honda first and we mention that chrysler was underreporting. they are.aid that there are several automakers if you look at some the covers that we had. we mentioned nissan as being underreported compared to their peers. with otherme up automakers. it is not difficult to mess up on this database. was notsense that this taken seriously over time because regulators maybe were not looking at it. david: jeff green, thank you very much for joining us.
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brendan, more signs of trouble for china. i have to say that they expected 50 and it was 49.8. these misses tend to be quite small. to gauge manufacturing activity in china, what do you think of this? brendan: the better that we get at taking into numbers and see what they mean, there was an service pmi. this is a great transition that we have been looking for. it was not as much as we hope you the question has not been can china become a service oriented economy? it surely will. the question is can it do it fast enough to avoid real pain? we have these very we think real numbers. they are more reliable from the topline numbers that we get from the party. they are not encouraging while you have the plenum wrapping up to say what is the plan may have to make this transition possible? stephanie: matt, what does the terminal tell? matt: when you break them manufacturing into two components like old business and
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new economy business, you can see the white line that comes down. that is real state of textile and yarn and fabric, metals, that kind of thing. take a look at the red line here, clean energy production, computers, new economy stuff. it's doing must better. the problem here and we have a great story about this on bloomberg today is that the chinese parties needs to push toward these new and private businesses and stop funding these old public state run companies that are holding back a little bit. i think there is one number that jumped out is that new construction orders jumped five points. it was at neutral and now it's 55. that could be a direct consequence of the credit expansion. there are only so many levers you can pull to create economic growth. china has been yanking as hard as it can from grown credit.
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they are relaxing restrictions on banks. that might be what we are seeing. that letter might be working. another bubbleg if you are yanking on credit and construction? david: what numbers are we looking at and what should we be looking at? the party has chosen gdp, but there are suggestions that that is not the right dedicated. brendan: whenever we have someone on set, they tell us one thing and then offset, there no way they trust these numbers. he has had this experience and i've had this expense. i think the purchasing index is harder to gain and fake. you can do whatever you want to get a topline gdp. things that people tell us also is that you do not believe the numbers and this is tmi and this is the private index that basically tells you the story. it does not matter if you do not believe the numbers. the trend is the same and that is what is important.
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we had a guest in the last hour who said, at least it is bottoming out here. i think it was michael purvis. it getting flat and maybe that is a good thing. although the private number does not look like it is bottoming out at all. stephanie: if you are going in the right direction, you know that china's economy is finally in the way it's hoping for. we have to remember that this is a tanker that we are trying to move. brendan: i will tell you the number that does not lie -- capital movement out of china. they're people who understand that economy better than we do and they are working to get it up. we have some evidence that that is exactly what is happening. as china moves to take the yuan and make it freely convertible, we will find what assets will move. that is what we found the shanghai stock exchange. we thought the money would come into china. that's not what happened good it came out to hong kong and that is the number we should be watching. stephanie: we are not letting you out of our psyche you will stay for the hour. up next, what is the big deal?
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visa reuniting with visa europe. still much to cover. you are watching "bloomberg ." ♪
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here is your bloomberg business/give a big transaction in the biotech field. buy for $45i die billion. fiat chrysler has made jeep a huge hit. last month, consumer reports the second least reliable and the market, but consumers do not seem to care. they seem to be the fastest-growing major auto brand in the u.s. as cheap sales are
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up 23% this year. quarterly profit soared at europe's largest discount airline. 41% in thes rose fiscal quarter. they attracted a record number of passengers in the summer. the earnings will be at the top of the forecasted range. that is your bloomberg business/. david: today's focus is -- what is the big deal? visa has agreed to buy these the european jeff mccracken is joining us to explain the deal to us. when did they split? jeff: in 2007, right before visa did their ipo. the companies went opposite directions and these that has been clear since then that they would like to get the two back together. we reported may 8 that they were finally talking and they were moving ahead on the deal. it took a little while -- six months from when we reported. it's pretty long time to get it deal, but they did. stephanie: how do they do it?
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jeff: it's about geographic divers. mastercard and their competitors were much more diverse. they were other parts of the world bring in the world bring in europe and this gets them more into europe. i think europe does 16 billion transactions a year. obviously, a lot more revenue coming in now. mastercard has 39% from the u.s., a much smaller percentage. thise are looking at field, these that is went to have to take out debt to require visa europe. is it happening now because debt is cheap? jeff: that's part of it. there were 3000 banks that i think owned these are euro. it was like herding cats and they got the cat in the right 10. interest rates are low and ready to go. as everyone knows, they will go up the end of this year or early next year. i think deals are done because both companies think the timing is right and interest rates will be going up, especially on these multibillion-dollar deals. there's a lot of impact on financing. david: is this a windfall for
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european banks that could use the cash? jeff: it's all about time to get this money. david: who are the holders? jeff: i don't know. there's about 3000 banks that have holdings. when the deal gets close, there's another $5 billion that comes in. stephanie: one of the biggest risks? david: what the pom-poms? stephanie: were done cheerleading. what is the downside? jeff: when visa regrets more exposure in europe. that is always the challenge that you have got more impact in the heart of the world where people are more nervous. brendan: i think you also have a broader problem with a lot of other financial track transaction and that's how technology is changing and not guarantee that incomes go up in india and africa that they will adopt plastic and the slight that we have. jeff: you have paypal and apple pay coming along. aredan: developing markets
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actually competing with cell phone providers. cell phone service providers have these banking accounts and transactions work a completely different way. david: like africa, for example. jeff: it has been a huge day for mma. thenisa deal got done and she has spent a couple billion dollars on the conagra deal. hire just been about $6 billion on the deal. stephanie: were you surprised? jeff: i think they regretted the first deal and the ceo has been pushed out since then so they expected it would be sold back into the market. maendan: how many phar companies are left in ireland? have a mailbox address. i'm not exactly sure how many are left. david: let's go back to visa for one moment. both companies have had trouble with antitrust authorities in the past. jeff: they could be regulatory issues, but since one is a u.s.
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or north american business and that is visa. i do not think there is much overlap in terms of consumers and the customers. stephanie: all right, jeff, thanks for joining us. up next, we are taking a look at what is trending most on bloomberg this morning. stay with us. ♪ >> time now for futures in focus. oil is falling from its highest level in two weeks. it signals contraction for a third straight month in china for oil sales have sustained a rally above $50 a barrel in october as opec paces the limit. the group has set for itself. joining us now is built and he joins us from the cme. talk to me first about what these chinese manufacturing
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number means for oil. is it a continued bomber for people who are long for the bulls? it's not a good number. it's a contraction could it did come in better than expected. there are two ways of looking at it. it slowed at a slower pace. that is not that bad. really what we're looking at is the production out of russia. it is at post-soviet highs. this is putting pressure on oil. really, the major focus is the technicals. the friday in oil, the markets have it at $47. this is the major retracement that we have seen on the range that we had in the last month and the market failed. it got there and rejected that area and we are more than a dollar from that. that is what we are watching this morning and that shows weakness right there. matt: what you think about the effect of the dollar on oil as we go towards a meeting where at least 50% of economist that we
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surveyed are expecting an increase in ratews? mattbill: the dollar is going to be a head wind for crude oil and it should be heading to $100. we are looking at the dollar that once they hike rates to start topping out. that, itbit after would help the ability for crude oil to move forward and move higher. until then, as the dollar goes a majorit's what put headwinds. ♪
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stephanie: welcome back. you are watching "bloomberg ." and it is time for trends. we are looking at what you're reading on the bloomberg terminal. we talk about all the stories that are important in the general news world this is specifically what market professionals are all over this morning. brendan, what is years? brendan: the fastest pace at more than it appeared i think this is important for political reasons. we have gotten generally good data out of the u.k. and cautiously good data. this is enthusiastically good data. we are looking at is the referendum by the uk's want to face on its relationship with the european union. the more momentum that david cameron has going into that referendum, even though it has nothing to do with the relationship with the european union, the more authority that he has the results that he wants to stay in a renegotiated agreement with the european union. david: even that or the brits say that we do not need your europe.peared brendan:
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actually, i think europe has david cameron to answer to. thehanie: you want to take deep dive into angela merkel and christine lagarde and the overall global needs. he was just in reykjavik last week meeting with ic prime ministers and the reason why he was there is is if he wants to do a relationship with angela merkel. how do i get this close and not this close? the other thing these numbers tell us -- stephanie: he wants to be a friend, but does not want to be in bed because now they have problems. brendan: i'm not going to go to that. we do not get controlled experiments and economics. we have to take countries as they come. britain is seen as an experiment in austerity. i do not know if that is necessarily correct. if this works, britain is want to have been seen as pulled off
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austerity. even though that is not fair to say that that's what they do. david: it's a delicate thing with what cameron is trying to do here. readanie: my morning must is so big and so special that i had to make my way over to matt miller. nt haven't talking about valea all morning. ackman has been defending this. warren buffett's business partner came out months ago warning saying that he felt like this company was an abuser. he compared it to the 1960's access we saw from: climate running their companies. just this weekend in an interview, while it is legal, he thinks the way the company runs the business is deeply immoral. he actually compared it to the for-profit education scam. load to bille ackman, who really trust the model himself in his own mind after warren buffett and even
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draws parallels. he looked at valiant someone to approach her heart the way. -- similar to berkshire hathaway. let's look at the chart. matt: valiant takes a big dive. we are seeing a game free market, but this is no good for bill ackman or for sequoia. sequoia, which has such a huge and close tight relationship with berkshire hathaway, its biggest holding is valeant. that's crazy. stephanie: is it ok to be exercising a loophole? or the fact that it's deeply immoral going to hurt it even more? that's my must-read. we are going to be back with more. what do you say, david? ♪
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halloween for me. david: we want to welcome rich riley. and brendan greeley is still with us. stephanie: did either of you dress up this weekend? >> i went cowboy. i did my standard lazy dad dressed as cowboy with the kids. stephanie: there you go. let's take you to first word with our own -- you kind of look like clark kent to me. president obama resumes his push for a massive overhaul of the criminal justice system today. he will be at a drug treatment center in new jersey trying to focus on what happens to drug abusers once they finish serving their time. u.s. safety investigators may have found the wreck of the faro.ship el
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it disappeared in the bahamas with 33 people on board. sonar has found wreckage 15,000 feet below the ocean. fred thompson has died. the republican from 20 been almost nine years in the senate. -- tennessee spent almost nine years in the senate. order and isnline a real-life lawyer -- on law and order and was a real-life order in the watergate scandal. , also a behrens report saying the stock could drop 20% this year because of high valuations and waiting pipeline usage. shares are down 3.1%. cardinal health beating on earnings. beating on eps and on revenue. finally, zoetis may buy
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the animal care business of santa fe. about 10%.take out you see shares down 9% in the premarket this morning. let's get to the morning meeting. we are hearing from wiki banks are looking at today. bank of america's head says high-yield and loan strategy michael contopoulos joins us now. what is driving the high-yield? >> there has been a rally over the last month or so. it's really driven off of the increase in cash balances. coupons, maturities, tenders, retail inflows into open-ended mutual funds and etf's have
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really driven up the amount of cash our clients are holding. lack ofhat with issuance and you have the taelor makings of a pretty strong rally in october. take us behind that a little bit. when money comes in like this is because more people want to lend and more people want to borrow. does it tell us something broader about what the parlors and lenders think about the economy? i think it has more to do with the fact that we had such a strong selloff in the late summer and early fall of this year that there is some bottom fishing. i would call this a dead cat bounce. we would save the rally. we think 2016 is going to be very challenging for the market. fundamentals are generally weak and high-yield. i think this has more to do with the fact that there are are some bargains out there. they sector that rally the most are the ones that got hit the hardest in the late summer. i don't think this is a real indication that investors think that the economy is on fire
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anything of that nature. david: what does that mean for investors in your area? >> i think the opportunities lie in the safer regions of the market. credit, we recommend having higher than normal cash balances. don't think we should ignore those names that have art he realized their event and sold off and have strong conviction on. it's not that you don't want to be involved in those plays. you just need to be very careful. barbelling the portfolio. if you do that going into your and and you take some opportunity to pick up some cheap paper while at the same time selling names you don't go comfortable with in the long run, i think you will do well in 2016. david: michael contopoulos from bank of america. thank you for joining us today. riley is the ceo
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of shazam. let's start with the idea of going public. i feel like you have been talking about this as a possibility for some time. where do we stand? >> we are trying to build the best company we can build and i think building a company that would be a great public company is one of our goals. we recently completed a fundraising back in january. we raised over $50 million. who knows if an ipo is in our future? stephanie: because you are able to raise so much in the private market does it make you not want to even go public? >> it gives us a lot of flexibility which is great. david: you are an expert in bubble. stephanie: wow. david: when and how will we know?
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it's so hard to call bubbles. of us focus on building a business that can stand alone. it isn't just continuously burning cash and avoiding getting a business model. advertising is our primary revenue stream. building a company that can break even and generate cash flow. stephanie: if advertising is the name of the game, you are getting into a very crowded space or you've got all the traditional media platforms that want advertising dollars and then you've got the facebook and twitter and snapchat. how are you going to compete? fortunately most advertisers are trying to allocate their spending more towards mobile and digital. million monthly active mobile users. it's highly relevant to what they are doing. we like where we are positioned.
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david: is your growth path a manner -- a matter of getting more users? more andtinue to get more users. most of those are outside the u.s. and then try to deepen engagement with users. we recently launched a feature where artists can share what they are shazaming. they have over 2 billion edlowers, so now when sheeran shazams, we send a notification to his followers. stephanie: this is sort of what jay-z and the title crew claims that was so special about tidal. they said this was going to be a platform native to them and they were going to build a relationship there. jay-z and tidal
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as a threat? >> we have a switzerland like position. we partner with everyone. david: that's an invitation. stephanie: are you listening? musicn we look at streaming, we tend to see it as a two player market. it's really spotify and apple. what does it look like from your perspective? >> clearly spotify and apple are huge. google has google play which is meaningful. youtube just launched their offering. and then you have these are and rhapsody and others around the world including tidal so it's a robust market. david: if you are switzerland within all of these other services, one thing you have to be able to rely on is there sustainable long-term. --this model that apple uses
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is it sustainable? spotify recently raised an enormous fund-raising round. apple has made a huge push into music. amazon is doing really smart things in music. sustainablertainly and increasing its focus on music. investmentsncreased into the music space as opposed to decrease. stephanie: are you an acquisition target? >> we have close commercial partnerships with lots of these countries and certainly that could be an eventuality at some point. we continue to focus on having smart business relationships with them. stephanie: you are not talking to anyone now. >> i can't comment on that. we will see where things end up. david: it's interesting that you didn't mention pandora. was that conscious? >> they are one of our partners. they are u.s. and australia only so not as much of a global player. but the clearly to her in radio in the u.s. and an important partner of ours.
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stephanie: what if apple creates its own app with shazam like features? -- that apple ecosystem is so deeply entrenched in our home. stayedthing we have focused on is always being the world leader in music identification. it keeps getting faster and more accurate. when apple decided that siri needed to be able to identify music, we partnered with them and that is actually shazam. so we have a great partnership with apple. we just continue to make sure we are the best in the world. david: the first time i downloaded shazam was about 10 years ago. iger said, you won't believe this brand-new app. stephanie: it also makes anyone cool. i love this. i have seen my dad do it.
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talked to us just for a few moments. so many people are saying, without alibaba, what's the value of proposition? >> it still has a lot of people and history. i'm glad to see them focusing more on -- stephanie: they have been saying that for a while. >> i think there renewed focus is the right way to go. david: they need something to focus on once they have focused on focusing. >> there are still some very strong verticals at yahoo! they have places where they have real strength that they could double down on. stephanie: i'm not familiar with this yahoo! finance you speak of. [laughter] >> it's when you log into your yahoo! e-mail. david: rich riley, shazam ceo. thanks for being here.
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the all-important job numbers are out this friday. is the data reliable? we discussed next on bloomberg go. ♪
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david: here is your bloomberg business flash. the capital has agreed to buy med asset. the price is just under $1.9 billion. that represents a 32% premium. treehouse foods is creating the largest private label business in the u.s.. the price, $2.7 billion. warren buffett getting one big investment right can make up for a lot of laggards. berkshire hathaway is expected to report quarterly profit on
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friday. a pretax gain of about $7 billion on a stick and kraft heinz. -- stake in kraft heinz. railroad is spending heavily to regain market share and guy: is struggling with rising claims cost. markets wait with baited breath for data like the job creation numbers do this friday. but do these data show the real picture? yamarone is here to explain his doubts about these numbers. >> i don't know if it's down on the numbers and the validity. i think they are the best statistics in the world. my argument is, the fed policies of lower interest rate are not going to have an effect on the services sector as much as it used to have on the manufacturing sector when we
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were a manufacturing behemoth. we're just not interest rate sensitive. are notay we interest-rate sensitive, i mean with respect to employment. -- that sincetice the end of june 2009 at the end of the recession, the worst performing group for job creation is manufacturing. we don't need jobs. we don't use those jobs as much as we do services jobs. 82% of the economy is comprised of services jobs. the only thing the fed can do is expand or contract credit. get a credit expansion, they're going to go out and buy more equipment and the plants are going to start humming. it doesn't matter as much for services because there's not as much of a demand for capital. we talk all day about extending credit through the fed. it's fascinating to hear you point out the very obvious. thend historically, look at
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first post-world war ii recessions when we built stuff. assembly lines and all that. it would take 20 months on average to get all the jobs that we lost during the recession back. two in the second recessions from 1991 and 2001, those were jobless recoveries. it takes 40 months on average to get those jobs back because we are just moving farther and farther away. we have data coming out her ears. what don't we know? >> we have no idea what productivity is. measure hours worked. because people aren't punching at clock. we used to check in. productivity has always been difficult to measure but used to
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have things like the unit labor cost. we are not producing units anymore. we are different things which makes it very difficult. >> take a big step back. we have gone from approaching 10% unemployment down to approaching 5% good for something has gone right. are you saying what the fed did didn't have an effect? >> i think it had little effect. and the problem is -- we don't have a fiscal policy so that engine is shot. and even if you do believe that the fed policy is going to do anything, you are not going to get a big fan for that anyway. david: we have been running an experiment with america. what happens when you do only monetary policy and no fiscal policy? you get a tepid drawnout recovery. you can't point to the and say monetary policy has failed. it has done about as much as it can do. >> i take what richard is saying
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is that it hasn't failed but it hasn't done that much. but the notion of changing how we measure these things seems to me -- can you imagine the political wrinkles over who is winners and who is losers in changing the way we measure? >> there are amazing techniques when you look at massive data sets. computing has gotten cheaper. bureauossible that the of labor statistics is going to start adopting big data techniques instead of the traditional surveys? >> i think it usually happens in the private sector and banking and then figure quantitative research groups. i can't imagine that some of the big houses are not doing that already. and then they catch on. that is, the government. this is not the 1950's. there is no poodle skirts and bobby sox. these banks don't want to be known as big houses. just so you know. they don't want to be known as
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the big house. >> i'm showing my age. stephanie: we love having you on. this is richard yamarone's maiden voyage on bloomberg. i'm going to give you an a. >> that's the only one i've ever gotten. stephanie: you crushed it. david: he's showing me how it's done. luckily he has a great shirt and tie and jacket combination saving him today. up next, what heidi klum, j. lo, and beyonce were wearing on halloween. and who really won the costume contest. that's heidi klum. i was at her party. let me tell you, that costume defied gravity. you are watching bloomberg. go. ♪
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stephanie: time for news around the world. this is something that would make you smile and share with your family. halloween happened this weekend. take a look at what some superstars were wearing. jay-z, beyonce, and blue ivy channeled the family from coming to america. that is outstanding. jay-z's if you remember this movie from 1988, they were spot on. david: that's beautiful. stephanie: i went to heidi klum's annual party. check out what she was wearing. prosthetics, prosthetics. tim armstrong was dancing all night long. jennifer lopez was there as a skeleton. my husband didn't know that was her sitting right next to him. i would say the biggest winner of the weekend was the baby pope d.c. in d.c. -- down in
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its own little pope mobile. ive.d: that is creat there was a world series play. the kansas city royals won the world series last night. the commissioners trophy is the only thing they're bringing back. this is fascinating. they estimate that about $12 million only came to new york and only $6 million went to kansas city but kansas city is 1/16 as big as new york city. so they made out like bandits. stephanie: this is not a good night for fox. david: brendan greeley, thanks for being here. stephanie: we will be back with more go. ♪
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david: we are 30 minutes now from the opening bell. welcome to bloomberg go. i'm david weston. stephanie: and i'm stephanie ruhle.
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erik schatzker is here. david: and the ceo of algebra is here. it is a hedge fund that specializes in financials. welcome. last time you were here you were on crutches. >> yes. david: i notice they are gone. do you feel good? >> i feel good, hopefully. david: let's take you to the first word. david: thanks very much. here are the latest developers on that russian plane crash in egypt through the irish aviation authorities as the plane was registered in ireland. all 224 people aboard the plane died when it crashed on saturday. experts say the plane appears to have broken apart while in flight. in turkey, the leader is rising after that election victory by the president. the polls and slipped
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back into office. that strengthens his 13 year grip on power. a record number of refugees crossed mediterranean sea last month. more than 200,000 people fled across the majority than all of last year. more than 3000 people died or went missing while crossing. now over to matt miller with some markets news. matt: let's take a look at futures. board andacross the we have moved up from no change. can see that s&p futures are four points and dow jones futures up about 29 points. a lot of individual company stories. interesting, very to see it beat on earnings. $.70, beat on revenue as well. and the shares are up but the company says its fiscal full-year outlook is still the same. so it beat in the fiscal first
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quarter but it sees the rest of the year the same because of slowing growth in china and a decline in spending from russian and brazilian tourists and unfavorable fx across the board outside the u.s. i also want to take a look at conagra. treehouse is going to buy conagra's private label bands, making it the biggest producer of stored goods in the u.s. those store brands that are a little bit cheaper. conagra is up 3.5%. shire also buying dyaks right now. this is a live trade in london. the main trading post is out in london. .6%. now it is down about x is getting a solid 4%. erik: we will begin with this.
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to five visaed europe for $20 billion, reuniting the credit card brand in one company after eight years apart. the companies split in 2007 and now the company has a market cap of $188 billion, bigger than citigroup or bank of america. the reunion has been in the works for years. if the dirty little secret in financial services. recession like conditions for the banks, gangbusters for the payments business. >> yes. this is going to be a value creating deal for visa. visa europe started as liberty mutual. it was not properly run institution. every bank in europe at a small percentage and it wasn't run as aggressively as it could have an. been.
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visa europe can really add to the visa franchise. it was weaker in europe but it could add lots of growth. after the financial crisis, companies wanted to get out of europe because of the overall economic outlook. why do they want to be there now? earnings surprise and economic surprise over the last 30 months. is a surprise every month. we have 28 nationalities. it doesn't really matter who runs the show. if you look at the growth prospects for europe, we have no oil tax and an improvement in corporate governance. i think in the next couple of years, payment penetration and economics will be a surprise in europe. stephanie: i want to stay on
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europe's growth track. manufacturing rekindled hopes that the region's recovery is strengthening and in the u.k. specifically, factories produced at the fastest pace in 16 months. this contrasts with the official data out of china showing manufacturing contracted for a third month. that and speakn about the strength we are seeing in europe. >> what you need to highlight is the following. in china, people have been focusing on the production sector because 70% of gdp used to be investments and production manufacturing. through the new leadership, they are shifting this. and now their gdp growth came out of service sector. services are flying. gdp is still 5%. the composition is shifting. in europe, you're seeing the opposite. the companies which are expert driven are doing fine.
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consumption europe is strong. which is the reason europe lead surprises in the coming months because the strength of the consumer in germany and france and the u.k. and even now in spain and italy will eventually catch up with the industrial sector. matt: the bloomberg just proves stephanie's point. just how significant the gain is in your compared to a drop. this is a private sector source pmi for china. youstrong is the signal for in europe? talked abouthave the chinese situation ad nauseam but not so much the european manufacturing situation. >> to me the key point is europe is the surprise. because think about it, over the last five or six years -- in 2011, i presented at a bloomberg haderence and i said europe
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to hang together and the audience was angry. they kept listening to your competitors with the view that europe would have blown up and it hasn't. and the institutional framework is coming together. we are copycats some of the decisions taken in the states and now these are leading fruit. in america, you have quantitative easing for five years and you've expand the balance sheet to 30% of the u.s. gdp. we started five years later. that means we have five years to go. and we are only 7% of europe's gdp. it's like when you take a little supplement good just like a vitamin plus. we just started. it's ok and asow a result i think the future is rosy for your. david: bullish on europe. erik: hewlett-packard has now
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officially split into two different companies. it is hewlett-packard enterprise and hp ink. enterprisekard focuses on servers, high-end software, and services. hp ink includes the printers and pc business. they will start trading separately today. it's always interesting who runs which company. it's usually a signal of how well they think the company is going to do. whitmane: what meg needs is strategy. if you think about pcs and printers, they are simply not the future. they are not. suddenly, corporate debt is hot again. companies sold $103 billion worth of investment grade bonds in october. a record for the month according to the wall street journal. this a healthy sign
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or a sign we are getting closer to the bubble? is we are in a wait and see moment. people and the pair are fighting. -- the ball and that there are fighting. bear arell and the fighting. indications ofof overheating. i hope they go in december and i -- credit markets sold off aggressively since september and has for the first time the spread on the credit curve is actually worthwhile planes. between a good credit and a bad credit as you shift from the top credit to the worst credit, 3% if you think inflation is going to be higher, you start getting paid for that risk.
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that's why buyers are back in. not mean there is a credit bubble in my view particularly in the high-yield me theand what worries most is the high liquidity mismatch. since the financial crisis, regulators have said i want risks out of banks. and so they took it off taxpayers money indirectly by the banks, directly into taxpayers pension account. and retirement savings accounts and insurance. means thereically has been an over bubble with a view of fake liquidity. there is no way can have a daily liquidity etf and credit with us -- with assets on the line. it's wrong and that has been a failure of oversight and regulation. stephanie: there you go.
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amen to that. the french franc is seeking to raise $1.9 billion selling a 20% stake in europe's biggest asset manager. the ipo will value the a monday $10 blackrock, the world's number aboutney manager, trades 1.2% of assets and a two times forward earnings. what's the story here? is bigger better? is that with us companies going to trade at a discount to blackrock? >> i think it is a fantastic european project. we don't have an institutional blackrock in europe. when i beat management in europe, we always refer to blackrock, blackstone. what's our european version? we don't have any. it could be amundi. that managedy one
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to combine. they joined forces like blackrock. secondly, the ceo. known for 20 years is a fantastic manager. he came from planning to banking. this is a person that has the european long-term committed mission. and they are doing the copycat. generating -- credit and bonds, which is what you're really needs help and the reason is because with the democratics we are more credit than bonding. david: terrific perspective. those are the five stories that matter to markets now. stephanie: and we have davide
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here for the album. join the conversation. we want to ask you, what banks are going to be on top? avide will do a full banking report cards. and what's moving up and down in the premarket. send us a tweet. what do you want to know from erra will he is in the house? you are watching bloomberg go. ♪
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david: time for the bloomberg business flash. eight years after their breakup, these the entries in europe are getting back together. visa and fisa europe are getting back -- visa europe are getting back together. the irish drugmaker shire will buy dyaks for $5.9 billion in cash. it represents a 35% premium over friday's closing price.
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dyaks makes a promising treatment for a where genetic disorder. the fed will increase interest rates before the end of the year have climbed to 50%. treasuries are poised to extend october's biggest monthly loss since june. that's the latest business news. matt: let's take a look at some of the movers. these are casinos that have interest in macau. union gaming analyst came out and said that the communist party may relax the visa regulations on big gamblers headed to macau or another country and they can stop for 14 days rather than seven days. and on the way back they can spend seven days rather than two days. big rich chinese people traveling will be able to spend more money -- give more money to win las vegas sands and mgm resorts. also activision blizzard is being downgraded at bank of
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america. to a neutral from a buy. the reason the analyst is downgrading them while he raises his price target is because he thinks they are going to beat on earnings tomorrow with the launch of the new call of duty black ops three is going to be a huge hit. and take a look at valiant. the charlie munger story on the number of terminal is just incredible today considering bill ackman's admiration for berkshire hathaway and the fact that valiant, his biggest holding. charlie munger says it is in a moral company and he's against it. an immoral company and he's against it. we may see a bit of a dead cat bounce today. stephanie: we want to talk about banks for a moment. gotten third-quarter results from both u.s. and european banks.
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it's time to give them a report card. isding their performance davide serra. let's talk about who you speak plain vanilla and have really found their groove. wells fargo. >> i give them an a plus. the reason is because if you look at the global institution, it's the only one that remains extremely focused. earnings growth is consistent. vis the stronger vis a financial crisis and managed to increase tangible equity. so to me it remains the strongest franchise. and how well they have managed to capture domestic synergies. why does that banks seem to be so much more disciplined in its focus than the others? isi think the key reason because it's one of the largest
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and never had an investment banking seal. that has to do with corporate culture. of theent banking ceo old generation were failed hedge fund managers who wanted to get the same upsides with the downside being protected by taxpayers. david: or shareholders. >> or shareholders. and as a result what happens is they weren't line. , ithe case of wells fargo comes from deeply rooted commercial bankers. and the same happened with bank of america when it started. reason why through the financial crisis, they stick to the nitty-gritty. which is the largest market in the world and the most profitable in banking and they kept on generating -- david: and their headquarters are far away from new york. stephanie: is that what we have seen european banks do so
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poorly? deutsche bank is going through a massive overhaul. ade?you even give it a gr to compare the european global banks with the money in the state. jpmorgan, you have citigroup, bank of america which are the equivalent of deutsche bank and ubs. and then you have the pure investment banks, goldman and morgan stanley. morgan stanley and ubs are the closest peers. let's put the goal at 2006. jpmorgan earnings-per-share plus 60%. they used to make 360 a share and now they six dollars. you take goldman sachs -10 eps and that period. you go for morgan stanley, -50. bank of america, -70. citigroup -90.
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so the clear winner here has been jpmorgan. everyone wants to copycat the jpmorgan model. strong domestic franchise like barclays. consumer credit in your home market. and a management operation and be competitive in investment banking with your home client. you'll be able to compete with a chinese institution as easily. and you need to shut. david: can any of those banks copy the jpmorgan model successfully? >> in a way, yes. the mistakes made over the last five or six years have a cause. and i think the key in my view is deutsche bank. take the early 2000. over the last 15 years, they have grown. for 15 years, all the
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compensation has been basically for management and employees. and shareholders had to pay any dividends that has been paid. goldman sachs has been growing their value per share by 10% each year. of course for the european perspective, the easiest way to get paid is to say i want to be the goldman sachs of europe. it is a justification to pay yourself a crazy ludicrous salary. bankingou have been dutch backing goldman sachs, it has been day and night. in europey boards helped by the single european legislature which has been the best news that happened in europe after the european crisis. they say, ecb, manage the banks. called -- a division that means basically you have about 2000 european central bankers of 20 nationalities supervising the banks. they don't care whether you are german, french, italian, spanish.
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they have 28 languages overlooking you and there are no more excuses. has been the key change in my view in many institutions. ifs goldman sachs model is still so appealing why do you give it a b plus? >> both goldman and morgan stanley have been in the toughest spot. on saturday, the fed announced the new t elect requirements they got together and said, this is how much debt you need in case there is another tough time. the only banks' tester goldman sachs and morgan stanley. they kept saying, we saved you. regulated by the sec, you came into the said, we transform the banks, we give you
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access to the fed window and as a result, you have to compensate. glencoe withe greg us next. he is the global head of m&a. serra onre with davide bloomberg go. ♪
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david: welcome back to bloomberg go. m&a is on track to smash records. $4.5 volume will top trillion by the end of the year. today we have seen an additional $40 billion of transactions. quite the merger monday. here's one familiar name. that would be goldman sachs. greg lamkau deserves some of the credit. he is goldman's global cohead of m&a. welcome. see what deals have been done. what deals have been announced. and which deals are under discussion. we can't see the pipeline.
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that's where you have some visibility into the future. doesn't look as good -- does it look as good as it feels today? >> the pipeline continues to be strong. we have seen record volumes through 10 months of the year. if you ended the year today, you'd have the second m&a year on record and we are on pace to talk to thousand seven. top 2007.on pace to the shareholders seem to be receiving these deals quite well. the logic of these transactions make a lot of sense. we are encouraged about activity going forward. david: there were how many big transactions? >> i was in seven of them. it was a good morning. david: there's a lot of competition. goldman sachs is at the top.
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but you have plenty of competition. morgan stanley is just a hair behind you and jpmorgan and bank of america are there. and there is a bit of a gap before we get to number five. how intense is that competition? >> it's an incredibly competitive business. it's a good business for the banks and everyone focused on it. and on the heels comes a bunch of additional business. it doesn't be the core of a goes on of these investment banking firms and it is quite competitive. meg whitman, ceo for the new company, hewlett-packard enterprise. when we hear greg talk he is on seven of 10 deals, more to come. them this is the -- it won't be simple because of the leverage they used to have in the trading
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business is no longer applicable. that has only been the franchise, little have little capital with higher attempts. thatu represents lust presents less than 5% of goldman sachs earnings. >> what you are saying is the jewel of the company for the overall company, you are not going to get this back in the trading business. >> when you mention financing and the things that come along, is that still an advantage for goldman sachs over a boutique? it comes down to who is the banker giving the advice. some boutiques have high quality bankers. i think the nature of the m a day we are seeing in this positive reliance on
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show reaction, which are long-standing relationship and understanding of the capital markets, now the shareholders will respond to the steel. the full-service bank provides a much broader capability. >> i couldn't agree more. five or six years ago you saw some of the best bankers meeting goldman sachs and morgan stanley. now though regulatory pendulum has swung all the way through. is they canpens start a war. you need a combination.
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that is why if they have hundreds of cash they only trade 10% above the cash. i say these remain very good investments. the results speak for themselves. >> what will cause it to flatten out. >> fundamentally the core conditions have kept a strong part in place. limited growth opportunities. those things will try to find growth through m&a. volatility is not the friend of m&a. when you walk away from the deal table, it just takes a little bit to get that going.
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the last piece that has gotten bigger and bigger is regulatory. not much beyond that and they will start to see the regulatory framework. >> how much of that is political? i will point to the new york times calling for the justice department to crack down. evidence saying it is great for shareholders and terrible for america. there are people who are reading that. >> the headline was mergers are bad for the economy. -- article is based on ap based on a paper about income inequality. thatreates companies outperform their competitors so much.
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now it is effectively saying inequality is bad, it is a bit of a stretch to say mergers are bad for the economy. the second piece of the article you do have the sectors that are building market power. the shareholder returns are great. i think the health insurance business in the u.s., i'm not sure there are any trades after that. u.s. cable has seen maybe another trade or two. those companies can go internationally. maybe a trade or two left. >> 65 in europe. basically europe is six years
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behind states. what happens is going to be the next wave of consolidation. as soon as the european economy can keep printing, the vision will be copycats. basically you borrow a tool, you make money, you create that, and you become stronger. we will see server m&a going forward. i want to showcase the functionality of the bloomberg terminal. you can get so much information. jpmorgan, it is interesting bank of america has done 116 fewer deals, average deal size.
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if you click into legal, the biggest legal advisor. blue being the actual dollar, yellow being the number count. we are already ahead of 2014. there?latten out we are at the level we were at before the financial crisis. you have a couple of companies who have been on an m&a warpath. lt's is another one that has been buying a lot.
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ingredients are not president that are not present -- >> i think private equity transactions is 4% of all m&a volume for 2014. it is an unbelievably low level. more like 30 or 40. that is before you put leverage on it. cannot -- aegment significant amount of capital. find ways to do it. that has been a plug they have used quite effectively. >> we are eight minutes into trading. give us a quick market check. >> green across the screen.
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that goes through the rest of the major indexes. a heat map of the industries and which is moving up area health care financials. energy and telecoms are at the bottom here. going to buy the european unit dollars isbillion the total price tag. early trading at 3.5%. a treehouse up 2% right now. chipotle, as you head towards lunch, because of and e. coli scare in the northwest.
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six of those restaurants are linked to customers who have got sick. >> it is m&a monday over a nasdaq. shares are soaring on news that shire is going to buy the tech company for $5.5 million. that it could go higher on the approval of a drug for a rare disorder of genetic treatment. shire's ceo calls it a strategic fit. shares are up more than 30% at this time. news that endurance international is going to buy the marketing tool company for $32 per share. at represents a premium from friday's close.
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generate aow performer revenue growth of 10%. >> thank you so much for the nasdaq. we are talking bank consolidation and how it can affect the u.s. economy.
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david: a more problems for volkswagen. the german automaker failed to tell regulators about at least one death and three injuries. -- vw do with a database will commission and outside audit to help complies with u.s. safety reporting laws. treehouse is buying the private label for $2.7 billion. the deal will start contribute
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into earnings in the second year. assets.ital software the price is just under $1.9 million -- $1.9 billion. that is the news you need to know at this hour. now this is where we stir up a little bit of controversy. cohead of global m&a and the ceo and founding partner of the hedge fund algebra investment. should be -- should take banks be allowed to merge? one of the industries we didn't talk about was financials. it has also happened in airlines and pharma. there are still several thousand banks in america. shouldn't they be allowed to do a little m&a for a change? >> we haven't actually seen much activity in the financial
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sector. the world is waiting to figure out if the regulators want these banks to get bigger and stronger. there has been very little tank consolidation. we have seen brought institutions and insurance transactions. m&a has broadly happened. it is likely to continue at small levels for some time. >> if you look at the gini index , it is the most diversified. the largest one, the one of the financial institution, about six events.
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when you have a balance sheet you are looking like a french or english economy. there is no way the ceo can be as good as the prime minister. as you grow in scale in financial, yes it has more and more capital. recently in the states they free up. think about how much time has been lost. my view is not clear.
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the regional franchises are more valuable. think the big ones will ever merge again. >> where is the sweet spot in terms of asset size? banks are the biggest going to be difficult for the new deals. there currently benefits of scale. the sweet spot is going to be mine that going to be by market value. it will be piece by piece. >> you penalize 50 million assets. even hard to say 100 or 500. >> i think that will beget further consolidation. because of the compliance costs. think the regulatory
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picture is certain enough that companies are wary about going in and pursuing it. regulatory framework has taken three years to get a transaction done. especially on the chance that at the end of that deal -- looked atu ever bizarre types of firms with where you goreas to those boutiques. you can't offer financing. >> we don't have a balance sheet. as a result they can add on. anyone will be in the big firm. this is -- the regulator has been focused on hitting that. is improving.
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it is now i type of war with an early morning raid -- people are going digital. mark, the governor of the bank of england has that the business model may be disrupted. i'm in trouble anyway as a regulator. >> it is like worrying about microsoft and this is google. look atare taking a some top moments from today next on bloomberg .
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ml welcome back, let's look at some of today's highlights. >> the volatility is actually seductive for any investors. it is not like there is a black box. the bulls and the bears lineup. some -- thehealth health system that is going to be reimbursed's are going to be the ones that precede them. i think those days are over. >> we partner with apple music and google play and rhapsody and would love to partner with title as well. we view them as a potential partner. >> are you watching, are you listening? >> we always stay focused on being the world leader. decided series needed
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decide to go to music -- easing is when you take a little bit of supplement. you had it for five years. we understood now it is ok. >> let us get final thoughts. you were in new york seeing investors, money centers. what is most important to you? we have a view that china is adjusting services. europe is getting better. the u.s. has been growing. if you look at the s&p, this year has flatten down.
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i guarantee the next six months. >> in the level of economic , the borrowing that is going on in the bond market, does it suggests there is underlying help we don't appreciate? >> the ceo conferences quite as high. the growth outlook is great. as they look forward they feel their stability in the marketplace and given the ability of capital they are in a position to deploy that. i think that is what we expect going forward. that does it for bloomberg go. we are going to see you tomorrow. a big day with tina brown.
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three in london and 11:00 p.m. in hong kong. welcome to bloomberg markets.
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i am ready league. here is what we're watching at this hour. america makes its maiden flight to hawaii. where will the discount airline go next? we will talk to richard branson in a few nuts. jeb bush needs a bestseller. the frontrunner -- the one time frontrunner is hope in the book will be a comeback on his campaign trail. and game of thrones. another area for drones. half an hour into the trading session for monday. desperate for matt miller -- desperate. matt miller has latest.


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