Transcripts For BLOOMBERG Bloomberg Markets Americas 2017020

Meanwhile, his attorney general nominee heads toward a final vote in the senate. We are about 30 minutes into the trading day here in the u. S. We did have a record close for one of the indices. Julie hyman brings us uptodate. Julie coming back down, but the moves remain muted. I relatively small move from the major averages. All them are trading lower with Energy Stocks helping to pull things down. We see crude oil prices continuing to fall. This is a chart that we have looked at very frequently. This shows the daily swings as of closing for the s p 500. Btv 5561. Moves of less than 1 with this muted activity. Movers when it comes to earnings and a lot of them on the downside. Gilead sciences falling to the lowest level since 2014. The company says its hepatitis c franchise is fading fast. There are fewer patients left a treat and theres also more price competition as rivals have also come up with drugs for hepatitis c treatment. Ismost its 9 billion, which 22 short of what analysts had been anticipating. Withi out with numbers forecast below analyst estimates. Humana not quite as part o poory with analyst also missing estimates. Facebook was added to bank of America Merrill lynchs list of Top Investment ideas. They are setting the potential for multiple expansion. Twitter not getting as much of a boost. It had been up as much as 3 after it was upgraded from buy to neutral. Seeing a boost from the twitter president as he called it in his note. Looking at the bond market, we have a fourth straight day of lower yields. Lets look at the bloomberg, shall we . We see the dollar fall. This is the fourth straight day that we have seen treasury yields fall and the united states. That is the longest stretch we have had since early june. Mark i remember that well. And yields are falling stocks are falling as well with bonds rising. We are down for the second day. Earlier we were up as much as 6 10 of 1 on the stoxx 600. We have been stuck in this eight point range coul. Lets talk about rio tinto. It is going to pay much higher dividends than expected. It is want to pay back 500 million of shares when the second biggest Mining Company reported betterthanexpected earnings. Prices irond ore prices. This is how the miners have fared. Lets look at angloamerican up by 499 . This is some game and this is some declined today. Denmarks Biggest Company unexpectedly losing money and in 2016. It wrote down some of the energy assetsassets and skimmed off sh lower. Wrangling between the imf and the eu threatens to block a greek bailout deal before euro finance ministers meet in brussels on february 20. The country has to repay 23 billion euros of bonds principle by the end of august. European creditors want the imf approval before overview of the review of the nations bailout before they disperse the next branch of eight. A greek crisis as a last thing we need says are Bloomberg View columnist. The bloomberg to year is approaching 10 so its coming down a little today. It is a politically heavy year. Vonnie for more on what is driving Global Markets, lets bring in our market reporter for bloomberg news. Hes looking at our technical indicator. Lets begin with this idea that with all the Political Risk out there, how are we seeing record closes. . Yesterday was the nasdaq and now its the dow. There have been many excuses to account for the Global Market rally. We have seen exchanges reached record highs. I think technical indicators are very important and probably underappreciated. Specifically the outlook for next supply of equity. In 2016, the supply of net it was actually actually fell for the first time ever. Suppliers net equity are projected to flat line. Buybacksecause share received a lot of attention. Share buybacks as well as leveraged buyout and m a, thats the activity that decreases the outstanding stock. It has offset activities that increase the outstanding equity stocks. We have a very benign outlook for supply and that has really helped to juice asset valuations. Vonnie surely less supply you would think would push up prices. Sid we have seen that obviously in the equity markets, but its also an interesting story in tech markets. We have seen investors are very much cashrich. Although we have seen a big rally in terms of economy markets, we have seen a big increase in issuance and growth term. We have seen investors be very cashrich thanks to waves of redemption and a wave of coupon payments that will boost investment firepower to soak up in increase in gross debt supply in investment great bonds grade bonds. Mark this great rotation that we have been talking about, the evidence shows it has yet to materialize. Sid after the election, you saw we tell investors try and fall in love Retail Investors try and fall in love with equity stocks. We have seen equity funds have not really been courted by Retail Investors for a long while. We have seen flows into bond funds have actually increased in recent weeks. Therefore, this great rotation has not really materialized. Thats a good technical indicator to try to boost bond markets. Whats interesting is though Retail Investors have not fallen in love with equity funds, the fact that Global Equity supply in net terms is set to be flat this year, that is a technical indicator that suggests that stocks actually can continue their upward trend thanks to the fact that theres not a huge amount of supply. Mark the billionaire investor has a great track record. He was back in goal post election. Theres a lovely chart that you are highlighting a few days ago vix versus gold etfs. There is a spread, isnt there . That is one of those charts that shows the unease underneath this lack of volatility. Sid many people might get annoyed by the suggestion of gold. Gold is always this indicator that suggests that anyone who uses it is an excuse to buy gold. We are seeing some inflows into gold etf being relatively strong , which some might say is an indicator to hedge against the risk for the rise in inflation. Global policy uncertainty is also really high. The relationship between gold and other metrics out there is actually quite complex. Probably whats interesting is as relative Interest Rate , we mightals increase see the relationship between gold and demand change. Theres a lot of different scenarios going on. Mark its all about supply. The net shortage of stocks Corporate Bonds could get another leg to the rally we have seen. Sid verma, markets reporter, bloomberg news. Vonnie definite check out his story on the bloomberg. Emma chandra has more from the newsroom. Emma President Trumps travel an is likely to head to the supreme court. Heres the Justice Department lawyer. The president determined there was a real risk. That is why the president determined the best course was a temporary, shorthaul in entry for 90 days while these procedures are looked at, and thats understandable. The president comes into office with an obligation to protect the National Security of our country. Emma one of the key issues is whether states have a legal right to attack the demonstrations immigration orders. We will have more in just moments. No longer run ground operations against terrorist groups. Yemenis are angry against casualties caught and the rate approved by President Trump. The british house of commons is set to take a final vote today giving Prime Minister theresa may permission to start the brexit process. She promised them and vote on the final deal with the eu. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, i am emma chandra. This is bloomberg. Vonnie emma, thanks. Bruce richards of marathon Assets Management is our guest. His fund was up 18 last year. Where he is now directing efforts next. This is bloomberg. Mark live from london and new york, i am mark barton. Vonnie i am vonnie quinn. This is bloomberg markets. President trump is speaking out again about the pending court case over his pending travel ban. Heres what he told Law Enforcement leaders this morning in washington, d. C. This isnt just me. This is for obama, ronald reagan, and the president. This was done for security, something you people know more about than all of us. It was done for the security of our nation, the security of our people cant come in who are going to do us harm. Vonnie the question over whether the travel ban can remain in place will be decided later this week an appeals court. Joining us now is Kevin Cirilli. The ninth circuit hearing took place in real time and was networks and it was fascinating to hear these arguments. There are three essential outcomes possible, correct . Kevin they could rule in favor or against President Trump, but they can also postpone and continue onward. The is without question best illustration of what we have watched unfold in our country during the election cycle and the campaign. It also has come to represent truthfully what President Trump has tried to advocate for in his first 100 days in office. It has rallied progresses. It has rallied the business community. It has also become the focal point and the central fighting issue here on capitol hill. Vonnie it goes to the separation of powers in so many different areas of this o issue. The executive order itself and now the president weighing in on the judiciary. What are gopers saying . Him onthey are behind policy and a note that some polls, including a recent poll, 40 9 of americans are actually supportive of President Trump policy on the temporary immigration ban. The messaging, the second point i would raise, there is widespread restoration, not just amongst lowerlevel staffers at the white house, but also among senior aides and republican members here on capitol hill. They tell me they are concerned that the president s rollout of these executive orders have contributed unfortunately to a loss of Political Capital as republicans in both the senate and the house look to craft key policy initiatives on everything from issues such as repealing and repairing parts of the Affordable Care act as repealing parts of doddfrank. A lot of moving parts behindthescenes as republicans try to craft their policy agenda. No doubt this has definitely clouded, to say the least, their ability to get that work done. Mark im looking at the agenda and i see betsy devos, the new education secretary, addressing her colleagues. Day yesterdayc with Vice President mike pence casting that historic vote. Elizabeth warren shut out of that debate. What drama can be expected and when it comes to the confirmation of trumps cabinet . Avin it was quite fascinating display to see senator Elizabeth Warren, the progressive of massachusetts, to be silenced on the floor while speaking out against her colleague from alabama, republican senator Jeff Sessions , speaking out against his nomination. She was reading a letter about civil rights. Republicans voted against allowing her to continue. That ignited widespread criticism from democrats, but republicans said she broke a rule. That ignited on social media. Right now, it looks like all of President Trump appointee picks will be able to move through. The next pick that we could see in addition to sessions is treasury secretary nominee steve mnuchin. Im hearing from the publicans that everything should move smoothly according to them. Vonnie thanks to bloombergs Kevin Cirilli reporting from capitol hill. Coming up, we will hear from new York Attorney general on his states efforts to block the travel ban. Hour, our00 eastern guest has introduced a bill to reform the h one b visa program. Mark still ahead, Bruce Richards, chief executive of marathon asset management, is joining us. Here why he thinks we are in the calm before the storm when it comes to brexit. This is bloomberg. Bloombergs markets. I am mark barton in london. Vonnie i am vonnie quinn. Mark the Company Getting the approval from regulators to make a plant in france. That is looking for approval for arthritis and another for a severe form of eczema. The chief executive set down an exclusive interview with matt miller and guy johnson. He was asked about the assertion that drug prices were astronomical and the new fda commissioner would ensure that Foreign Companies are paying their fair share for r d costs. There have been a lot of comments made by the new Trump Administration on drug pricing in the u. S. , which has been a a popic i would say for eriod of time. It is clear that the increase on prices which has been happening in the past years are not in all cases justified. , we need totime find a way and this has been recognized by President Trump as well in the meeting that he had with the pharma ceos in the u. S. That there is also need for room for innovation. And a vision has to be able to be priced appropriately innovation has to be able to be priced appropriately. It is difficult to know where this is heading. As we know, republicans in general are in favor of the free market and prices. Is it part d or commercial . What about different channels . Altogether we expected something to happen. A long as industry shows responsible attitude when it comes to pricing things, there should be a way forward. Have you got innovations in order to deal with the diabetes problem . Fi. S not just santa a lot of drugmakers are having issues with her diabetes treatment. You have a new drug. Wellu expect that to do so that you are able to retake market share in the diabetes market . That is a very good question. You are right. First of all, when you have a ,rug and its a very good drug which is in the case of our previous drug, you get under pressure simply because you get competition. What is now happening for the last two years, heading into 2017, we come with new treatments. First is a different treatment. Be the six and 49 40 . On euro space, up treatment. Class for we will be the first one to launch it and we hope it will fill a gap of needs for all patients who are not ago when it comes to diabetes. To remind you, 60 are go when it comes to go when it comes to treatment. At the same time, there is room for innovation and i just gave you t two examples. Its guy johnson in london. Good morning. The firm said this morning that you are in no hurry to do m a. Why do you think youre bigger rivals like pfizer nj nj appeared to be in a hurry your bigger rivals like pfizer and j and j appeared to be in a hurry . If i read well, i see them as well having some loss of exclusivity and some decline coming from some of their products. Concerned,e are while we do have new products coming to market, one is going to come to market hopefully this year. Important, really a new type of treatment. Its a biological treatment and we put a lot of hope behind this drug. We have a lot of things to launch. We would like to do some acquisitions eventually to enhance our growth. We want to do in acquisition which will meet our criteria. Mark he was meeting with guy johnson and matt miller earlier today. Vonnie Bruce Richards of marathon Assets Management. This is bloomberg. [ alarm clock beeping ] weather. [ laughter ] cartoons. Wait for it. [ cat screech ] [ laughter ] [ screaming ] [ laughter ] make everyday awesome with the power of xfinity x1. Hi grandma and the fastest internet. [ girl screaming ] [ laughter ] ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Mark live from bloombergs World Headquarters in new york and london, i mark barton. Vonnie this is bloomberg markets. Traders are thinking that u. S. Crude and Gas Industries will be climbing this week. U. S. Production has been edging higher as opec slashes its daily output. Julie hyman is here to bring us the numbers right as soon as they come. Julie which is in just a couple seconds from now. If you look at the numbers, it looks like we are seeing a much bigger bill that has been anticipated. 13. 8 Million Barrels, 2. 7 Million Barrels is what the traders we were surveying look ed for. There is a drawdown in gasoline inventories, which was also a surprise. We were looking for a record amount of gasoline inventories, but we are seeing a drawdown of 869,000. Climbing by smaller than estimated 29,000. Refinery utilization following by a half of 1 . An interesting mixture of numbers here. Lets take a look at the bloomberg because it looks like were not seeing the first reaction reflected in that chart. Lets look at the oil chart i have up. There we have it. We are sort of bouncing around and off by half percent. It looks like it is taking an initial leg up. Perhaps traders taking more attention to that gasoline drawdown, but we will continue to watch this reaction and be back with an update in about 30 minutes time. Mark lets check in on the bloomberg first word news. And that chandra has more emma chandra has more from our newsroom. Emma Senate Republicans have barred democrat Energy Stocks<\/a> helping to pull things down. We see crude oil prices continuing to fall. This is a chart that we have looked at very frequently. This shows the daily swings as of closing for the s p 500. Btv 5561. Moves of less than 1 with this muted activity. Movers when it comes to earnings and a lot of them on the downside. Gilead sciences falling to the lowest level since 2014. The company says its hepatitis c franchise is fading fast. There are fewer patients left a treat and theres also more price competition as rivals have also come up with drugs for hepatitis c treatment. Ismost its 9 billion, which 22 short of what analysts had been anticipating. Withi out with numbers forecast below analyst estimates. Humana not quite as part o poory with analyst also missing estimates. Facebook was added to bank of America Merrill<\/a> lynchs list of Top Investment<\/a> ideas. They are setting the potential for multiple expansion. Twitter not getting as much of a boost. It had been up as much as 3 after it was upgraded from buy to neutral. Seeing a boost from the twitter president as he called it in his note. Looking at the bond market, we have a fourth straight day of lower yields. Lets look at the bloomberg, shall we . We see the dollar fall. This is the fourth straight day that we have seen treasury yields fall and the united states. That is the longest stretch we have had since early june. Mark i remember that well. And yields are falling stocks are falling as well with bonds rising. We are down for the second day. Earlier we were up as much as 6 10 of 1 on the stoxx 600. We have been stuck in this eight point range coul. Lets talk about rio tinto. It is going to pay much higher dividends than expected. It is want to pay back 500 million of shares when the second biggest Mining Company<\/a> reported betterthanexpected earnings. Prices irond ore prices. This is how the miners have fared. Lets look at angloamerican up by 499 . This is some game and this is some declined today. Denmarks Biggest Company<\/a> unexpectedly losing money and in 2016. It wrote down some of the energy assetsassets and skimmed off sh lower. Wrangling between the imf and the eu threatens to block a greek bailout deal before euro finance ministers meet in brussels on february 20. The country has to repay 23 billion euros of bonds principle by the end of august. European creditors want the imf approval before overview of the review of the nations bailout before they disperse the next branch of eight. A greek crisis as a last thing we need says are Bloomberg View<\/a> columnist. The bloomberg to year is approaching 10 so its coming down a little today. It is a politically heavy year. Vonnie for more on what is driving Global Market<\/a>s, lets bring in our market reporter for bloomberg news. Hes looking at our technical indicator. Lets begin with this idea that with all the Political Risk<\/a> out there, how are we seeing record closes. . Yesterday was the nasdaq and now its the dow. There have been many excuses to account for the Global Market<\/a> rally. We have seen exchanges reached record highs. I think technical indicators are very important and probably underappreciated. Specifically the outlook for next supply of equity. In 2016, the supply of net it was actually actually fell for the first time ever. Suppliers net equity are projected to flat line. Buybacksecause share received a lot of attention. Share buybacks as well as leveraged buyout and m a, thats the activity that decreases the outstanding stock. It has offset activities that increase the outstanding equity stocks. We have a very benign outlook for supply and that has really helped to juice asset valuations. Vonnie surely less supply you would think would push up prices. Sid we have seen that obviously in the equity markets, but its also an interesting story in tech markets. We have seen investors are very much cashrich. Although we have seen a big rally in terms of economy markets, we have seen a big increase in issuance and growth term. We have seen investors be very cashrich thanks to waves of redemption and a wave of coupon payments that will boost investment firepower to soak up in increase in gross debt supply in investment great bonds grade bonds. Mark this great rotation that we have been talking about, the evidence shows it has yet to materialize. Sid after the election, you saw we tell investors try and fall in love Retail Investors<\/a> try and fall in love with equity stocks. We have seen equity funds have not really been courted by Retail Investors<\/a> for a long while. We have seen flows into bond funds have actually increased in recent weeks. Therefore, this great rotation has not really materialized. Thats a good technical indicator to try to boost bond markets. Whats interesting is though Retail Investors<\/a> have not fallen in love with equity funds, the fact that Global Equity<\/a> supply in net terms is set to be flat this year, that is a technical indicator that suggests that stocks actually can continue their upward trend thanks to the fact that theres not a huge amount of supply. Mark the billionaire investor has a great track record. He was back in goal post election. Theres a lovely chart that you are highlighting a few days ago vix versus gold etfs. There is a spread, isnt there . That is one of those charts that shows the unease underneath this lack of volatility. Sid many people might get annoyed by the suggestion of gold. Gold is always this indicator that suggests that anyone who uses it is an excuse to buy gold. We are seeing some inflows into gold etf being relatively strong , which some might say is an indicator to hedge against the risk for the rise in inflation. Global policy uncertainty is also really high. The relationship between gold and other metrics out there is actually quite complex. Probably whats interesting is as relative Interest Rate<\/a> , we mightals increase see the relationship between gold and demand change. Theres a lot of different scenarios going on. Mark its all about supply. The net shortage of stocks Corporate Bonds<\/a> could get another leg to the rally we have seen. Sid verma, markets reporter, bloomberg news. Vonnie definite check out his story on the bloomberg. Emma chandra has more from the newsroom. Emma President Trump<\/a>s travel an is likely to head to the supreme court. Heres the Justice Department<\/a> lawyer. The president determined there was a real risk. That is why the president determined the best course was a temporary, shorthaul in entry for 90 days while these procedures are looked at, and thats understandable. The president comes into office with an obligation to protect the National Security<\/a> of our country. Emma one of the key issues is whether states have a legal right to attack the demonstrations immigration orders. We will have more in just moments. No longer run ground operations against terrorist groups. Yemenis are angry against casualties caught and the rate approved by President Trump<\/a>. The british house of commons is set to take a final vote today giving Prime Minister<\/a> theresa may permission to start the brexit process. She promised them and vote on the final deal with the eu. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, i am emma chandra. This is bloomberg. Vonnie emma, thanks. Bruce richards of marathon Assets Management<\/a> is our guest. His fund was up 18 last year. Where he is now directing efforts next. This is bloomberg. Mark live from london and new york, i am mark barton. Vonnie i am vonnie quinn. This is bloomberg markets. President trump is speaking out again about the pending court case over his pending travel ban. Heres what he told Law Enforcement<\/a> leaders this morning in washington, d. C. This isnt just me. This is for obama, ronald reagan, and the president. This was done for security, something you people know more about than all of us. It was done for the security of our nation, the security of our people cant come in who are going to do us harm. Vonnie the question over whether the travel ban can remain in place will be decided later this week an appeals court. Joining us now is Kevin Cirilli<\/a>. The ninth circuit hearing took place in real time and was networks and it was fascinating to hear these arguments. There are three essential outcomes possible, correct . Kevin they could rule in favor or against President Trump<\/a>, but they can also postpone and continue onward. The is without question best illustration of what we have watched unfold in our country during the election cycle and the campaign. It also has come to represent truthfully what President Trump<\/a> has tried to advocate for in his first 100 days in office. It has rallied progresses. It has rallied the business community. It has also become the focal point and the central fighting issue here on capitol hill. Vonnie it goes to the separation of powers in so many different areas of this o issue. The executive order itself and now the president weighing in on the judiciary. What are gopers saying . Him onthey are behind policy and a note that some polls, including a recent poll, 40 9 of americans are actually supportive of President Trump<\/a> policy on the temporary immigration ban. The messaging, the second point i would raise, there is widespread restoration, not just amongst lowerlevel staffers at the white house, but also among senior aides and republican members here on capitol hill. They tell me they are concerned that the president s rollout of these executive orders have contributed unfortunately to a loss of Political Capital<\/a> as republicans in both the senate and the house look to craft key policy initiatives on everything from issues such as repealing and repairing parts of the Affordable Care<\/a> act as repealing parts of doddfrank. A lot of moving parts behindthescenes as republicans try to craft their policy agenda. No doubt this has definitely clouded, to say the least, their ability to get that work done. Mark im looking at the agenda and i see betsy devos, the new education secretary, addressing her colleagues. Day yesterdayc with Vice President<\/a> mike pence casting that historic vote. Elizabeth warren shut out of that debate. What drama can be expected and when it comes to the confirmation of trumps cabinet . Avin it was quite fascinating display to see senator Elizabeth Warren<\/a>, the progressive of massachusetts, to be silenced on the floor while speaking out against her colleague from alabama, republican senator Jeff Sessions<\/a> , speaking out against his nomination. She was reading a letter about civil rights. Republicans voted against allowing her to continue. That ignited widespread criticism from democrats, but republicans said she broke a rule. That ignited on social media. Right now, it looks like all of President Trump<\/a> appointee picks will be able to move through. The next pick that we could see in addition to sessions is treasury secretary nominee steve mnuchin. Im hearing from the publicans that everything should move smoothly according to them. Vonnie thanks to bloombergs Kevin Cirilli<\/a> reporting from capitol hill. Coming up, we will hear from new York Attorney<\/a> general on his states efforts to block the travel ban. Hour, our00 eastern guest has introduced a bill to reform the h one b visa program. Mark still ahead, Bruce Richards<\/a>, chief executive of marathon asset management, is joining us. Here why he thinks we are in the calm before the storm when it comes to brexit. This is bloomberg. Bloombergs markets. I am mark barton in london. Vonnie i am vonnie quinn. Mark the Company Getting<\/a> the approval from regulators to make a plant in france. That is looking for approval for arthritis and another for a severe form of eczema. The chief executive set down an exclusive interview with matt miller and guy johnson. He was asked about the assertion that drug prices were astronomical and the new fda commissioner would ensure that Foreign Companies<\/a> are paying their fair share for r d costs. There have been a lot of comments made by the new Trump Administration<\/a> on drug pricing in the u. S. , which has been a a popic i would say for eriod of time. It is clear that the increase on prices which has been happening in the past years are not in all cases justified. , we need totime find a way and this has been recognized by President Trump<\/a> as well in the meeting that he had with the pharma ceos in the u. S. That there is also need for room for innovation. And a vision has to be able to be priced appropriately innovation has to be able to be priced appropriately. It is difficult to know where this is heading. As we know, republicans in general are in favor of the free market and prices. Is it part d or commercial . What about different channels . Altogether we expected something to happen. A long as industry shows responsible attitude when it comes to pricing things, there should be a way forward. Have you got innovations in order to deal with the diabetes problem . Fi. S not just santa a lot of drugmakers are having issues with her diabetes treatment. You have a new drug. Wellu expect that to do so that you are able to retake market share in the diabetes market . That is a very good question. You are right. First of all, when you have a ,rug and its a very good drug which is in the case of our previous drug, you get under pressure simply because you get competition. What is now happening for the last two years, heading into 2017, we come with new treatments. First is a different treatment. Be the six and 49 40 . On euro space, up treatment. Class for we will be the first one to launch it and we hope it will fill a gap of needs for all patients who are not ago when it comes to diabetes. To remind you, 60 are go when it comes to go when it comes to treatment. At the same time, there is room for innovation and i just gave you t two examples. Its guy johnson in london. Good morning. The firm said this morning that you are in no hurry to do m a. Why do you think youre bigger rivals like pfizer nj nj appeared to be in a hurry your bigger rivals like pfizer and j and j appeared to be in a hurry . If i read well, i see them as well having some loss of exclusivity and some decline coming from some of their products. Concerned,e are while we do have new products coming to market, one is going to come to market hopefully this year. Important, really a new type of treatment. Its a biological treatment and we put a lot of hope behind this drug. We have a lot of things to launch. We would like to do some acquisitions eventually to enhance our growth. We want to do in acquisition which will meet our criteria. Mark he was meeting with guy johnson and matt miller earlier today. Vonnie Bruce Richards<\/a> of marathon Assets Management<\/a>. This is bloomberg. [ alarm clock beeping ] weather. [ laughter ] cartoons. Wait for it. [ cat screech ] [ laughter ] [ screaming ] [ laughter ] make everyday awesome with the power of xfinity x1. Hi grandma and the fastest internet. [ girl screaming ] [ laughter ] ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Mark live from bloombergs World Headquarters<\/a> in new york and london, i mark barton. Vonnie this is bloomberg markets. Traders are thinking that u. S. Crude and Gas Industries<\/a> will be climbing this week. U. S. Production has been edging higher as opec slashes its daily output. Julie hyman is here to bring us the numbers right as soon as they come. Julie which is in just a couple seconds from now. If you look at the numbers, it looks like we are seeing a much bigger bill that has been anticipated. 13. 8 Million Barrels<\/a>, 2. 7 Million Barrels<\/a> is what the traders we were surveying look ed for. There is a drawdown in gasoline inventories, which was also a surprise. We were looking for a record amount of gasoline inventories, but we are seeing a drawdown of 869,000. Climbing by smaller than estimated 29,000. Refinery utilization following by a half of 1 . An interesting mixture of numbers here. Lets take a look at the bloomberg because it looks like were not seeing the first reaction reflected in that chart. Lets look at the oil chart i have up. There we have it. We are sort of bouncing around and off by half percent. It looks like it is taking an initial leg up. Perhaps traders taking more attention to that gasoline drawdown, but we will continue to watch this reaction and be back with an update in about 30 minutes time. Mark lets check in on the bloomberg first word news. And that chandra has more emma chandra has more from our newsroom. Emma Senate Republicans<\/a> have barred democrat Elizabeth Warren<\/a> the the rest of debate over nomination of Jeff Sessions<\/a>. Attacking letter sessions written by the widow of Martin Luther<\/a> king jr. She was apparently impugning a rule that you cannot attack fellow senators. Possibly ending alone to a program earmarked for 20 billion. Turkeys president is looking to consolidate his power as earlier this week he is expected to call for a referendum to improve changes in the constitution. Those changes would concentrate all executive power in the presidency and give him greater control over appointing justice. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, i am emma chandra. This is bloomberg. Vonnie marathon Assets Management<\/a> is based here in new york. Toy 16 was a banner year for highyield and distressed opportunities if you made the right calls. Bruce richards and his team certainly made some good ones. The Flagship Fund<\/a> was up for the year. The cofounder and ceo is joining me now. Congratulations. You have the stomach for it and the resources to go check things out, emp and oil was a place where you could make out like a bandit. Bruce i would say two main sectors are coal because you have companies emerging out of make bankruptcy now. You have 10 billion of debt coming out. A lot of those Companies Got<\/a> restructured at a time when that coal prices exploded to the upside. A lot of those restructurings occurred and that became new equity. These companies are now filing for ipos or trading their shares in the secondary market post bankruptcy. A lot of money to be made there. I will give you one example, a fascinating example. If you go back from the last two quarters of 2016, july 1 to year end, the price of oil oscillator around 55 a barrel and did not move much give or take a couple dollars per barrel per day. Relatively a flatline. We went out and bought the Linn Energy Bonds<\/a> at . 16 on the dollar at about the same time frame at the beginning of last summer. We just sold it at around . 48 at the dollar. Here you have a copy that went into bankruptcy with 5 billion in debt that comes out with equity,neing the new so 2. 5 billion of equity post bankruptcy with only a revolver in place and less than a billion dollars in debt. With that, the bonds tripled in price. Oil flat, Distressed Company<\/a> in bankruptcy triples in valuation. Vonnie sometimes the underlying commodity price matters and sometimes it doesnt. Bruce it does matter, but the value if you think back when oil was at 30 a barrel and oil rallied to 55 a barrel, you would say i missed it. The truth is in the commodity, you missed it if you didnt invest for lows. In the debt, it was only really beginning. We have more of those place to play through. We have a few other names playing through as we speak. Vonnie how risky will you get with that . Will you go to companies with negative cash flow . Bruce absolutely. When debt is trading at that level, obviously they are burning through cash. The key is restructuring the companys post bankruptcy when all the equity all the debt gets equity ties. Meanwhile the Energy Prices<\/a> have recovered and at the new level, they can start to make money if they have good acreage. With lynn, very good acreage and very good deals. Vonnie you have utility in the permian basin. Bruce we have a few names in the book now that we have yet to monetize that have further significant upside. I cannot mention those names. You know how much i like to share with you. I cant share that. Vonnie share a little bit about health care because thats an area your particular concerned about in this administration. Bruce at a citizen of the united states, it is most corrupt if i can use that word for the industry that exists in the markets today. Pricek there is a lot of manipulation and rigging that goes on in the industry. Just a month ago in the new york times, there was a breaking article that showed 20 states attorneys general had filed a classaction suit against the former industry. You have eric excitement Eric Schneiderman<\/a> on and you should ask them about this. They go to vegas and go to their conventions and sit behind closed doors and they fix a lot of who has what territories and what prices they charge. You have the specialty pharma take a drug in their case, its motrin and pepcid. Its very simple compounds with no real r d that went into it. The government issues a monopoly basically when they give them a patent, when they give them ip rights to the drug, but they dont regulate the price. What do they do . They take the price from 176 for a Monthly Subscription<\/a> to over 2000. Paidou have a ceo getting i believe the number was 93 million in total compensation. Vonnie youre talking about that ceo specifically. 93 million on compensation. Meanwhile, stock went down that year. Something is wrong with the industry when there is price gouging. The truth is and its a very civil truth. The drug companys are making all this money. The lobbyists that exist in the ,ndustry are lobbying congress that oversees the fda. They are able to buy the drug company stocks. The fish think that the head. Vonnie donald trump says he is going to fix this. Bruce well, he should. In the u. K. , they provide health care and youre not allowed to escalate prices of drugs i more than say a half percent of 1 . Meanwhile the government grants the fda monopolies and you can jack prices on these monopoly like drugs. You can jack prices up to 20 times today. We pay it in the form of insurance premiums. The insurers dont really care because they are passing it through. Our insurance costs go up every year. Vonnie what special pharma stocks are you short . Bruce horizon is one and there are two or three others that i would like to share with you, but i probably should not mention them. The specialty pharma and some of the generic drug companies, the two Biggest Generic Drug Companies<\/a> are teva and mylan. There are problems there. Teva ceo just that down. Stepped down. My land and their ip pram heir epipen drugat th gouging. To pay up for that compensation, they are gouging the public. Know you do. Bruce reach out to the congress and the president and the fda because the system needs to be fixed. It is truly broken. Thats one of the key reasons why the united states, who has got the best research, the best drug companies, has the highest drug prices in the world by a multitude beyond any other country. Vonnie lets move on to other promises this administration has made. In the area of deregulation and tax policy, there could be a potential whole shift in the market. Bruce specifically what would you like me to comment on . Vonnie lets talk about tax reform. Bruce on tax reform specifically, the reform is multifaceted. It is to lower the Corporate Tax<\/a> rate from 35 where it is now. Speaker ryan once 20 . Donald trump and the in ministratio and the administration wants 15 . Thats probably too much of an add to the deficit. 25 . Ink 35 to repatriating dollars from overseas operations and paying a 10 tax on bringing it back and Incentivizing Companies<\/a> to bring it back will be a second part of the Corporate Tax<\/a> reform. With that Corporate Tax<\/a> reform, the administration is also talking about a very important other aspect. As you bring down tax rates for companies, doing away their Interest Deductibility<\/a> and accelerated depreciation on true investments. The Interest Deductibility<\/a> compartment does not give doe component does not get enough airtime. Vonnie particular for highly leveraged companies. Bruce particular for highly levered companies. We have a metric in terms of Corporate Tax<\/a> rates. If you bring the Corporate Tax<\/a> rate down, thats good for a company. The bottom line is they pay less tax. For a Certain Company<\/a> that has debt outstanding, depending on how much debt, if they can no longer write off that debt, then that is bad. The plus and the minas offset. Vonnie where is the Tipping Point<\/a> . Bruce four terms of leverage. Heres the scenario. If you are in Investment Grade<\/a> company and lower the tax, you have very little debt bolted to lower tax. Its a windfall to you. If you are a strong double the with three terms of leverage, you make out marginally beneficial for you, bring in the corporate rate tax down to 25 and doing away with Interest Deductibility<\/a>. If you are four times levered, you start to lose. The big companies, you really lose. Let me just walk you through one last iteration. Company, aa triple c lot of these companies actually do not pay tax currently because they have losses carrying forward. It doesnt really affect the triple c today, so its the middle. It is the single be, week double k doubleingle b, wea d. These companies simply put have too much debt relative to equity. Vonnie are you preparing for that . Ifce we are looking at donald trump and the administration gives a new tax measure what it means for the companies. Vonnie not across the board . Bruce across the board. What companies are most affected. Vonnie what industries exactly . Bruce we know those companies. Industries that have little cap x and a lot of debt. Retailernce, a highyield would be profoundly impacted. It goes throughout the rest of the system. Vonnie are you buying retail or shorting retail . Bruce shorting. The real reason is that bricks and mortar relative to the Amazon Effect<\/a> is the most impactful. Vonnie secular change. Bruce back to tax redux ability for one second. I think it affects the private equity business and Real Estate Private<\/a> equity because the message is going to be, put more equity in, use less debt. Why should you when you think about it as a company be able to deduct your interest . It doesnt make sense. Vonnie unfortunately we are running out of time. I want to move to your thoughts on brexit. You are actually quite positive on the immediate aftermath of brexit. We have not seen article 50 triggered yet. You think it will be triggered in the next month. Bruce we think it will be triggered in the next 30 months or so 30 days or so. When you move closer to an exit, it will be a hard exit. It will profoundly impact a lot of companies from retailers to exporters. Vonnie what do you do then . You have retail place in ireland and the neve netherlands . Bruce real state itself is very well insulated. Those countries are the main beneficiaries and should be impacted by brexit. Vonnie hard assets. Bruce hard assets is the place to be. Areie a lot of people moseying around places like are moseying around places like brazil. Bruce the administration has a harsh stance towards mexico because mexico relies about 2530 of their gdp on exports to the united states. Brazil, peru, and shall a only have roughly 1 of their gdp going to the united states. Its relatively not impacted. But we see is the emerging markets now growing again. We have a bond a commodity prices. With russia, when sanctions eventually fall, we believe on a forwardlooking basis will go away. The u. S. And russia will improve relations and thats a primary objective of the new administration. Russia should be an ally of the united states. Couldhat, these sanctions fall, which is highly beneficial to their copies. Vonnie do you have action in russia . Bruce we are bullish russia. We are bullish middle latin america. Mexicos main impact so far has been in the currency. Weve not seen the impact to the real economy yet because we have not really negotiated nafta yet. This too much information to digest to see how it impacts the companies and its economy. The adjustment has been for the currency thus far. Vonnie you typically had for currencies anyway. We will have to have you back. That was Bruce Richards<\/a> of marathon asset management, cofounder and ceo, joining us for next was of interviewed. Mark excellent chat. The chief executive will join us for an exclusive interview. He will discuss whether italian banks can rebound. This is bloomberg. Vonnie you are watching bloomberg. I am vonnie quinn. Mark i am mark barton. This is your Global Business<\/a> report. Here is what we are following today. Rio tinto reported its first gain in annual profit since 2013. The companys ceo tells us about the challenges of diamond mining. Vonnie carlsberg is warning Growth Prospects<\/a> will be stunted thanks to a ban on large plastic or bushels in russia. Mark the battle over greek debt. Why the troubled nation is battling over bailout funds. Vonnie rio tinto has reported its first gain in annual profits since 2013. The worlds secondlargest Mining Company<\/a> will pay much higher dividend than expected. It is also buying back 500 million with of shares. Heres the ceo. We love diamonds, ok . Tractason why its so a of is because its very difficult to find those new mines. Just to give you an example, itn you look at the rug, is 25 years on average. When you see an area where there could be some diamonds and you have cash flows, you have 30 years. It is very difficult to find them. When you have them, you make lots of money. Mark he has high boutique investment banks to invest in the Worlds Largest<\/a> ipo, according to a person familiar with the matter. Saudi arabia wants to sell less than 5 of the oil company. Them estimated size is 100 billion. That arg is warning ban will stunt Growth Prospects<\/a> for the brew. Those earnings have plunged because of problems in russia. Vonnie time now for a bloomberg quick take, where we provide context and background on issues of interest. When Alexis Tsipras<\/a> became greeces Prime Minister<\/a>, he vowed to undo austerity, the economic medicine that shrunk growth by quarter. His european counterparts have a simple response no. Six months later, the country stood on a break of expulsion from the eurozone. He accepted a new bailout on harsher terms. Since then, an uneasy peace has held and greeces place in the euro area seems assured for now. Bailout, theyd made a turn to make the debt sustainable. The bailout fund extended repayment schedules. Still the imf insist easier terms are not enough to prevent the countrys needs from exploding. Creditors are pressuring secrets to do more. Alexis tsipras to do more. They ended a 40 year era in which the socialist party and the conservative party traded power. In 2009, they reveal a deficit four times what your rules allowed. To avoid devault, they received euros in eu and imf funds and forced creditors to write down 100 billion euros of bonds. Deep wonders forced spending cuts. They voted to reject the last offer. German chancellor Angela Merkel<\/a> led the push back, saying that the deal would likely make the eu with the draw aid. Alexis tsipras gave him. In. The refugee crisis lowered the debate into the finances, but there is a risk that they will not reform without continued pressure. To the greeks, it is the folly of the austerity imposed on the country. You can read all about greece and are quick takes on the bloomberg. Had to bloomberg. Com for more stories. Mark still ahead, we are going to follow stocks as we head to the close. This is bloomberg. Mark live from london and new york, i am mark barton. Vonnie i am vonnie quinn. This is bloomberg markets. Mark lets check out what is coming up today on the european close. We will follow stocks 45 minutes left in the wednesday session. It has been volatile today. We have been upanddown, rising a 10th of 1 . Declines in london and germany, but gains in france. How about a look at the currency board today . The pound is up against the dollar today. The euro is down against the pound. The pound is down against the japanese yen. In the bond markets, it has been a performance for stocks. Yields declining in the principal markets. Coming up in the next hour, do interview atnew 4 30 p. M. London time. To close his next. The close is next. This is bloomberg. Mark it is 11 00 a. M. In new york and midnight in hong kong. 30 minutes left in the trading day in europe today. I am mark barton. Vonnie in new york, i am vonnie quinn. This is the european close on bloomberg markets. Mark we are going to take you from new york to london in the next hour. Plus, we are covering stories out of italy, greece, and australia. Hero the top stories were following on the bloomberg and around the world. Where are the best spots to invest equities in the coming months . Why she is overall neutral a global stocks but has lingering concerns about europe. Trump then, will the fueled rally in financials continue to march and will european banks get in on the game . Our guest is the ceo of algebras investment. Challenging President Trump<\/a> travel ban with the ruling expected in less than an hour or so perhaps. We will hear from new yorks attorney general, Eric Schneiderman<\/a>. 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