Transcripts For BLOOMBERG Market Makers 20141031 : vimarsana

BLOOMBERG Market Makers October 31, 2014

Market makers. Happy halloween, im Erik Schatzker. Straight to get business. I can talk about the childrens holiday. Top business stories of the morning. U. S. Stock in record territory today. It is crazy. The dow and s p have been above their alltime closing highs. Investors getting a boost from japan central bank. The bank of japan unexpectedly increase the amount of money it is pumping into the system. That sent stocks jumping in japan and europe for the really moved over to the u. S. Isnwhile, the japanese yen getting hammered, falling to its lowest level in on the seven years. Earlier here, we heard from legend or hedge fund titan. I think it is a deliberate effort of the japanese to keep in their currency. Look, the governments all over the world are trying to cheapen their currency and cheapen bonds. Im in, we have a bubble now developing because we have forced bonds to almost no yield. Cheapen their currency. We will hear more from chilean oil, the julian price of crude tumbles. Exxon unexpectedly boosted earnings to the third quarter. The Worlds Largest oil Company Found falling Oil Companies made it cheaper to refine petroleumbased fuels. Refining gains more than made up for less profit from oil and natural gas production. Over a chevron, the couple he posted its first increase in thirdquarter profits in over three years. Walmart wants to get a jump on the competition before the Holiday Shopping season begins. This blows my mind. Tomorrow the Worlds Largest retailer will cut their prices of a planitems, part to end six to record as of stagnant sales in the u. S. Walmart may also match prices from online retailers if the customer asks. In pro basketball, someone forgot to tell the New York Knicks that the night belonged to lebron james. King james had a poor shooting night, and made 8 turnovers and the makes beat the Cleveland Cavaliers 9590. It was lebrons first game since returning to his hometown last summer. He spoke to reporters after the game. I just try to stay focus and maintain as much as i could. It was a special night not only for myself, but everybody. Im glad it was great, but am also glad it was over. , king james needs to focus well, just one game, we wont count him out. It is is great that he lost that game to the New York Knicks. Moving on, lets talk about markets. It has been in october to remember. Vshapedook at this onemonth s p. Prettyber 15, we were close to correction territory. Today, both the dow and s p 500 are trading at record highs. It is almost impossible to believe. You can thank the bank of japan thepushing the ball over touchdown line. That is just today. Pouring in more students into the economy, is expanding the Japanese Monetary base to 80 trillion yen. Today is october 31. Where everyone has to mark their books. A few weeks ago it was grim. Hedge funds were pouring out of those crowded trades. Guys and to real money everyone was saying, were going to sit back. We have longterm money. We felt comfortable buying. I remember speaking and say, really . You are buying right now . If you are, youre sitting like the cheshire cat. Those who are superlong going into that volatile moment went, sold out of the positions and the viewers are sitting on a mountain of cash right now. . A lotoing to do of those hedge funds were in energy traits. And as energy traits continue to be very punishing. Been trading below 80 bucks a barrel this morning. You probably heard about that Goldman Sachs report that came out a few days ago predicting because, be it in part of oversupply, will drop 70 a barrel but the end of the Second Quarter of 2015. Bearish a medium turn view that they have pulled forward dramatically. It seems there many investors who are sitting more in cash and they were even longterm investors definitely lined up, so sitting on a bunch of cash out of the market is so high, what are they going to do . Dip act thather were not going to set one. He is going to say, you cant predict that, stephanie. Hot as the market is right now with all of those investors sitting in cash, were going to get a correction . Did you feel that in september . Nobody did. You got me. The question is, how much volatility are we going to experience . We had this extraordinary first volatility in the middle of october, early to midoctober. It is really, really falling down. Stephanies getting serious. Hang on a second. Lets get serious. Doesnt it amaze you when investors oneday care about europe, the next day they dont. If you like to ask ago we were saying, the u. S. Economy stronger and then, forget the u. S. Economy, look at europe, china. Two weeks later, why arent we still looking at europe . Reason, yesterday, First Reading on thirdquarter gdp, 3. 5 . Economists on average were looking for 3 . In the Second Quarter gdp reading provides 4. 6 . Two quarters, those two quarters of growth, 4. 6 cluster. 5 , the fastest fork u. S. Economy. Fastest for, the growing u. S. Economy. Globally, were not doing well enough. Why are we ignoring that . They be the u. S. Economy will get a push to the global economy. Maybe . Well take a quick break. When conversations are going favor, we need to take a break. A slippery slope for oil. You like it when gas prices drop, dont you . Half artist will have to go down for the big producers start saying mercy. The one and only Julian Robertson talk to bloomberg about the market bubble and a whole lot more. You know when my bloomberg makes a cameo on the set, it is a big deal. You are watching market makers. Schatzker with stephanie ruhle. 79 oil. In the words of larry fink, a gigantic tax cut for americans, but for oil and gas companies, a gigantic headache. 70 a barrel, some or production doesnt make sense anymore. Who are the winners and losers in a world of 70 oil . That is the question for our roundtable. The owner and cofounder of cressotti Capital Management which invests an Oil Companies. The chairman of p true partners, oil and gas industry with us from the great state of texas. Good morning, gentlemen. I guess we should probably throw it to you first, tom. 70 dollars oil doesnt seem so they new longer because bulls are capitulating. Goldman sachs, pretty optimistic forecast earlier this week, saying, actually, we were wrong, and we think the oil could drop to 70 of the middle of 2015. You advise oil and gas companies. What do they do in the situation . Remember,hing to prices tend to both on the upside and downside. The surprise in what has happened in the last month is that it happened in october and not in june or july. Now were dealing with the possibility of an overshoot. What the companies do is they focus on the core of the court. Their very best prospects. Their very best prospects. Sort it out. For most of the companies that players, theree is still economics at 70. Not to say it is automatic we will get there, but if we do, this is still a different kind of downside test then we went through in 2008 and 2009. It is more healthy. It is more understandable. It is driven by some geopolitical factors that have to deal with, and that makes it a bit of a challenge for them, but not one that is out of the zone of manageability, in my view. What do you think . I mostly agree with tom. I like to disagree part. The only part i disagree, i dont think youll go whole lot lower. I think we have too much oil in the United States and soon, all around the world. Having said that, we have an Economic Growth story here in the u. S. That i think will catch fire in europe and the emerging markets. That will pick up the slack. Tom, im going to share with everyone him and im not sure you can see it, but i know you seen this chart before, a chart of wti, brent versus natural gas priced in barrels of oil equivalent. I know you know with this chart shows. It suggests there is a disconnect here. For years and years and years, up until about the financial crisis, oil and gas treated more or less in lost that when you priced gas in barrels of oil equivalent. On that same basis, wti is at gas is at 25. How long can a situation persist without some kind of correction on either side . Will cover the notion of convergence is a good point. I think there will be some opportunity for convergence, that it does take time. Gas doesnt have the same utility as oil in transportation, for example, and absent that, theres always going to be a differential. , high oile degree prices should pull natural gas. Rices up some and as we see gas play a bigger role in the directly or indirectly in transportation, thereby through the electric vehicle, then you could get some degree of convergence. But that is measured in half decades or decades, not this year or next year will stop that said, there are other factors. The big factor that will probably create some convergence will start about a year from now when we export natural gas from sabine pass and the Houston Ship Channel and it starts to grow thereafter. I think that is right. I live in a new york city apartment and we just paid half 1 million in our building to change from oil to natural gas. The payback is less than five years. To convergence is happening. If you put coal on that same chart, you would see cold drop so much as power plants move from caol to natural gas. Coal to natural gas. Tom is right, that is on the way. Fracking has changed the entire equation both of that chart, our political, economic and you dont have it overseas. Direct. If you do that chart in europe, he would be on top of oil. The good news is, we have a tenfold plus expansion in the gas resource availability. On the oil side in north america, a fourfold expansion. That is good, but the gas availability looking out over the balance of the first half of this century is likely to be very, very positive for the north American Economy and the u. S. , in particular. Lets just pause it for a moment. The goma sex scenario is right, 70 a barrel Goldman Sachs and arial is right, 70 a barrel by 2015. What tom said, with the notion overtime, half decades, we will see further pressure on oil because of the availability of cheap gas here in the u. S. And big lng exports, we wont see for some time, yet to come, what does that mean for the winners and losers . That is what i am trying to understand. , who is at aenario debate edge and a deep disadvantage. Goldman sachs has finally come around to the view that tom and i have had for a couple of years. What i was at the big winners are folks that use oil and gas. Airlines . Airlines. Everybody is worried about ebola. Low oil prices, 10 lower air prices oil prices for a s is huge gain. For American Airlines is a huge gain. Longerterm, the United States geopolitically will gain from being a gas exporter may be a crude oil exporter. Tom . In addition, the supply availability, reliability of gas supply these are petrochemical business will continue to really prosper in a way that was unimaginable as recently as a decade ago. We can look out to 2040, 2050 with the u. S. Being in a dominant position, i think, in the petrochemical industry. It was looked at as a sunset industry in the early part of the last decade. Plus, autos and aluminum, manufacturing renaissance is an offshoot of this. Thank you so much. Great to see you here. I said tom was from houston, i am wrong, youre in denver. Thank you for joining market makers. We will be back in a moment. Were looking at todays recordbreaking day on wall street with the one, the only threw from jefferies. Time to get back to the market. U. S. Equities are back at record highs just days after a lot of investors were freaking out about a possible correction. Lets take a look back at a very spooky month. On the phone from los angeles come the chief Market Strategist at jefferies. David, we heard your deep in getting your makeup done for halloween, so you cannot join us live. What do you make of these markets . You. Ppy halloween to it is great to talk to you guys. I wish i was on camera with you. Your lay to be here in office. I think the markets are exhibiting a lot of the behavior we talked about last time when i was on the show. 18 pointrading below 70, 18. 50. We talked about communication errors at the fed. I think those are still an issue. I think the fed will have a lot of trouble communicating his next steps. You also have this divergence and policy that we talked about. That came through here with a very aggressive and i think , maneuver by many the bank of japan. This is not a central bank that is known for big surprises. It is not a central bank known for taking aggressive steps. Only at the end of 2012 in the beginning of 2013 did we see material changes in the way japan was operating. It is largely worked, but people were getting frustrated with the timing of all of this. And they have come through again with a very aggressive and powerful move. This is a very large economy in a very wealthy economy, an economy where the portfolio balance effects from these types of qb exercises can be very aggressive. I think this is kind of Game Changing stuff. I think it will add additional volatility to the market because the fed is going one way, you have the ecb next week, which might have to step up and do Something Like the bank of japan did, and figuring out where global liquidity conditions lie as the fed is going in one direction and the two other larger Central Banks in the world are going another direction, is when to be pretty hard work for investors. But overall, the commitment is to a reflation area outcome. That is something we all caps keep our eye on. Does this mean you like Haruhiko Kuroda more than janet yellen . Talking about janets jello shots, as her exciting way to distribute stimulus, i think we have to come up with some sort of sake drink for mr. Kuroda. I was working on that commentary this morning. David, im looking forward to that. You are saying the ecb is going to have to follow the bank of japan was something similar. What could possibly be similar to what the boj is doing . Draghis hands are more tight. You had the legendary Julian Robertson on the show. He was making the point is really is a kind of currency a growth battle, more portly, and there is no sort of pride in having a strong currency in these types of markets. People are fighting for the limited amount of growth thats out there and fighting the Deflationary Forces that are definitely within the global economy. I think this just puts additional pressure on mario draghi. He is a difficult choice. The bank of japan, amazingly enough, has so many pools. These guys triple the amount of equities theyre going to buy. The triple the amount of Real Estate Investment trust theyre going to buy. These are things numbers were big. They went from it doesnt even come close to what theyre talking about at the gpif. These that purchase easily. It certainly cannot happen in the fed. What japan is doing is super aggressive when it comes to monetary policy. Tools over the ecb are limited by all of the treaty structure and financing of government debt. We hear about the potential for qe with government bonds. They talk about buying corporate bonds. Theyre going to have to come up with something pretty clever because the last thing they need is a very, very weak yen going into 2015, stealing their exports. David, it took six months for , what isve,s resolve going happen next . I think we will see a continuation of the inflation data coming out stronger. We will see the portfolio balance effects kick in with real estate prices and equity prices rising. We will see those animal spirits, which have been question japan for 20 years we have to leave it there. David zervos of jefferies. This is market makers. You are watching market makers. I am at schatzker. Im stephanie ruhle. Julian robertson is investing icon and most people would say one hell of a guy. Doesnt give many interviews, but he did come on bloomberg surveillance this morning with the one and only tom keene. Also a hell of a guy. Here he is talking about his bullish bet on the far east. The golden place for hedge funds to be is in asia. Asiave two hedge funds in well, three, actually, but two and of all of our 30 hedge funds, they are 1, 2 in terms of performance. In excess of 20 this year. Have a great field to play in. Here to tell us why asia is the place to be for hedge funds is the one and only tom keene. Nice orange. Thank you. , but going to go with elsa it didnt work out. A costume for so right now in new york city for 3200. It is sick. I was a the ratio is 40 14 elsa. It was great to see Julian Robertson. Today,n to get him here it brings us back to asia. It gets us to the immovable forces that are the Central Banks and underscores the optimism we heard from him on asia. Optimism on asia, but has concerns. He said is is not a good idea longterm for countries to be fighting the currency war. He is greatly concerned that what were doing right now is not in the textbooks he studied. It is not in the textbooks i studied. There were textbooks that were classic, stephanie. This is not classical economics. This is an ad hoc strategy against deflation defined growth. I am yet to find a Single Person this morning that says this will work. If Julian Robertson says were off the grid, does that mean he is going to remain invested in all of these funds . That is the money question right now and the answer is, he says, there is a bond bubble from the Central Banks and there is an equity bubble, but he is in equities. You have to be in the game. He made it very clear he likes apple. Talks and google. And google. I think you put google at a higher level than apple. Fully passed to be the top hightech managers out there. What you might not think of Julian Rob

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