Transcripts For BLOOMBERG Whatd You Miss 20160726 : vimarsan

BLOOMBERG Whatd You Miss July 26, 2016

Trading between gains and losses for the last week and a half. Dispersionnteresting , telecoms, materials, but headline moves on any major indices not very much. Some stocks weighing on those moves, apple weighing on the nasdaq. There was some support out there. Jetblue did an ounce, industrials a real strength to the nasdaq, this was one of them. Telecoms led down, weak as a group, weighing on the s p. Izon, weeks of viagra week a subscriber growth. We had an auction of fiveyear government bonds, and the basic cover ratio was the weakest in several years. We also had a week to year , not a lot of appetite to buy new bonds. Also, a onemonth chart of the 210 spread, flattening again lately. Its deep and a little bit, but with the shortterm demand weakening, shortterm yields rising, longterm going down we see that flattening. Standout, the a big performer, big mover, strengthening 1 against the majors. The reason was that the japanese finance minister said the government has yet to decide on the size of a fiscal package, refuting a report that it would include ¥6 trillion of new spending. That is crude oil there. On the commodities front, crude tumbled, but came back as the chart showed, down less than 8 10 of 1 . Iron ore having a big rally, very controversial commodity, some saying stockpiles are growing dramatically, over a 5 gain, but people are skeptical whether that can be maintained. Lets take a deep dive into the bloomberg. Joe, get us started. Joe this chart is so awesome. It is still amazing. This is a chart of egg electricity prices in new york city. Of electricity prices in new york city. The rain was leaking in the subway, very hot, you could see electricity prices explode yesterday afternoon. There it is around 3 00, prices soared, then came back down again. It shows the sensitivity to the weather from traded electricity. A fascinating chart there. That was before the storm had hit. Joe right. You could see the warning and everybody anticipated it. Makinge oil no longer new lows, stability around the mid40 range. It seems like a market where everybody loses. The white line is wti. It has recovered from january lows, but trending down again since june, putting pressure on upstream companies. Falling gasoline prices, the can see thatu falling gasoline prices are risk squeezing refiners. 45 drop ina secondquarter earnings, producing and Refining Division suffered. Valero net income dropped. See ae are starting to lot more of these charts pointing out the underlying factors that are not so supportive. All that margin pressure. Weve been talking about strength in existing and new home sales, very strong, but take a look at the price, a disappointment. The actual increase in the price u. S. Cities rose less than expected for may, 5. 2 5. 5 was expected. Forome ways, this is good buyers and sellers, and what we are seeing is the pace of sales is keeping up. The big question remains whether inventories will be drawn down. You would expect drawdown and inventories to keep prices robust, but we are seeing some softening. Hugely important. Joe lets turn back to todays market action. Strategist at bank of america with insight and a preview of tomorrows fomc meeting. Markets close to alltime highs. The fed pose any risks to this rally continuing . Market, 17ok at the times, it looks expensive on every single valuation metric. We think a lot of the good news is priced in. Just like in february, where we overshot to the downside. I think we have shot to the upside. Six expensive, what is chasing up prices . Bond investors who can go after bonds a need to get the yields from equities . Is that,k there foreign money coming in, yield money coming in. Date,ms up 26 year to utilities up twentysomething percent year to date. That has been the best trade this year. You we look at the markets, want to play that yield story, but do it at a reasonable price. A lot of these yield stories are trading at record highs, but storiese some yield playing at the low end. Yous there some catalyst would look for that would create a broader selloff . There does seem to be consensus that violations are high. That is one of the issues with have. We see a macro minefield over the next 34 months. Adont think we will hit three handle on oil. That is the psychological point where you get investors worried, but that is just one thing. We have not seen any hard data hit post brexit. , theould see corporates combination of election uncertainty, brexit uncertainty, some corporates could pull back investment. One function i like to look at is the rotation of different sectors. What it shows is that the sector and proving as technology. The sector leading his health care, which is the green line. Else is in the weakening or lagging category. If that significant you have eight out of 10 sectors and a weakening phase while only technology is improving . I think part of the reason that markets rally has been the excitement and data and improving profits dirty story. Consensus has Earnings Growth going to a percent this year and 8 14 next year. I think those numbers are unrealistic. I think the market has gotten ahead of itself. If you look at the earnings season coming in and exclude you arend financials, seeing a continued deceleration and profits growth over the last couple of quarters. Just so you know, i do Like Health Care and technology. Go to a question scarlet asked earlier, the relationship between ultralow nominal yields bonds and as you said relatively high valuation. How close is that relationship . ,s the yields and bonds plunged by automatically the multiples of the market have to go up, do you buy that is a thing . It has been interesting to see the wave of phone calls we are getting from people dusting off their own academic books talking about the fed model. , itou look at the fed model first got published by the fed in 1997. If you look at that chart, it is a 94 correlation. Right after that was published, the correlation went massively negative. These fundamentals worked until the people started focusing on them, then stopped working. People are grasping for reasons to be bullish on stocks. Are the only ones they can hang their hat on. When you look at the fed model in the various forms, they will tell you that stocks are expensive. When you look at that and the relationship to future returns, the relationships are week and you are better off relying on the profit multiple. Can you look at profit Margin Expansion is one reason quick as . Most of the questions i get our people worried about margins collapsing. You did see margins come down last year, but it was just an energy story. Energy markets got crushed. Without energy, markets held up fine. I think there are certain sectors that have a lot of margin risks, Consumer Discretionary with the highs exposure to wage inflation. They are seeing a lot of wage pressures. Industrials and materials could get an uplift if we see an improvement in growth, but overall i would not look for a lot of Margin Expansion. Joe thank you very much. Day two of the Dnc Convention in philadelphia, Bernie Sanders calling for solidarity, but have the reason supporters been receiving the message . This is bloomberg. Breaking news out of twitter, secondquarter adjusted earnings per share . 13 for the quarter compared with consensus estimate of nine cents, an increase from a year ago. Topline revenue 602 million for 607uarter, compared with million anticipated. This is an increase of around 20 from the same time a year booked 502tter million in revenue. 313hly active users million, a little bit higher than what analysts were looking at, 312 million. That user growth has tapered off. The beat on user growth, not really all that impressive. You can see the reaction to the result, stock down 8 , the revenue not that impressive, a quick verdict. A quick look ahead to this quarter, 590 million to 610 million for thirdquarter revenue. Analyst were looking for 681 million, so a huge miss. The giving quite a range, but expectationsering for the next quarter, so monthly users will disappoint. When you look past that to how they are operating the business, not a lot to and excite an investor for growth. We might learn more on the conference call. Over 10 ,tock down 10. 5 , investors not impressed. Story that jack dorsey was slated to deliver. This oneeep an i on and look out for apple results at 4 30 p. M. Eastern time. On apple, buting watching the Democratic National Convention Going on in philadelphia. Apple will come in just over 10 minutes. At the, bill Clinton Center of everything at that convention. He will address it delegates after the dramafield opening day. Is a fantastic speaker historically, is he going to be booed tonight . I find it hard to imagine. Last night, after a day there was a fair amount of jeering and booing, by the time we got to prime time, michelle obama, a warren, Bernie Sanders, the crowd had given up its booing way. Vote,l have the roll call and that will be a moment all sides hope there will be catharsis and a final closure and a big picture of unity. The time bill clinton gets on stage and his capacity for oratorical fireworks, im sure he will get through it. Joe you say it is unlikely he likebe booed, but it seems this Democratic Party and 2016 is different than 20 years ago during his last president ial election. Explain to us how much the center of gravity has shifted during that time. Vastly. If you think about bill clinton when he ran in 1992, a guy trying to take the Democratic Party from what a lot of people thought was suicidal liberal excess, losing three consecutive toional elections, and tried move it decisively to the center, free trade, welfare reform, death penalty, all those things where huge in 1992. Now the party is further to the left than it was in 1988. Nominatedhe Party Michael dukakis, a pragmatic liberal from massachusetts. This year we got a socialist and Bernie Sanders, who was the runnerup, so the party is much more to the left when bill clinton tried to bring it back. Clinton nominated by a party further to the left, not putting up any kind of fight. Clintons mainy advisor if he could name one area where she was violating liberal orthodoxy. He could not come up with one. She has gone with a party to the left. That tells a lot. I want to go back to the point of unity in the party. Floor of the dnc, Hillary Clinton suspended the roll call and released her delegates to the president. With all this jeering and booing, what should Bernie Sanders do for the sake of unity . Ofagain, to be clear, a lot the jeering and booing when away by the time we got to prime time. It was raucous at the beginning, then quieted down considerably. Theyre still have been some protests in philadelphia today, but we dont know yet what will happen on the floor tonight. Bernie sanders has a plan whereby he will release his delegates to the vermont delegation and have the vermont delegation unanimously vote for , and that will put her over the top tonight when the roll call happens, so that will be a big symbolic sign of unity and unification. Sanders has been doing everything he can to present a unified face for the party and to get his people, his followers, his delegates and supporters, to do what he has done, which is to side with Hillary Clinton, but the truth is that sanders has said all along that he is the figurehead of the sanders revolution, but not a topdown authoritarian leader. He said i cant tell my people what to do. What we have seen is that is true. His and oarsmen has influence some of them are saying they are still in favor of these ideas that sanders has champion. We leave what we believe and we will never be for Hillary Clinton. Big there feels like a increase and perceived ahs that trump could win in november. How does that feel and play in philadelphia . Look at, i think there is no doubt a lot of people are keying off forecasters and prognosticators looking at the bump trump has seen and some polls. Here and mostne people in the Republican Party expect Hillary Clinton to get a bump out of her convention as well and we will be back to where we were in a couple of weeks, a really close race. Joe thank you for the dispatch from philly. Up, the chart you can miss before apple reports earnings. This is bloomberg. Scarlet whatd you miss . The before the apple store. Calm before the apple storem. , inough the vix is calm the past it shot up after the fact. What does that say about the mentality around this report . That applenderstand has forecast another iphone sales drop. They dont want to overreact to something they know the results to. Will take aand it few more quarters for iphone sales to pick up again. We will know based on the guidance. To going toused that iphone sales line and that being the key determiner of how we read the report. You are saying Everybody Knows that will be unimpressive. What is going to drive guidance . What will cause it to pick up . With a newmes out iphone in the fourth quarter, and the first 1012 days is the opening window of that launch, so that usually affects significantly given how many iphones apple sells at each launch. Services, versus there is a seasonal pattern to iphone sales, but services has not gone anywhere. It is significant in terms of the dollar amount, but this is still a Hardware Company. The chart is showing it is a Hardware Company at heart, but also showing services are stable for apple and growing slowly. Years, appleof has a big services launch. Hardware isfard falling, services are growing steadily. That isa company sustainable. Apple still has a Services Business to fall back on and they are showing new ways to leverage that from the new programs. Stay with us and help us break down apple results. Another look at shares of twitter, trading lower after revenue forecasts disappointed and miss testaments. We are just minutes away from apple results. You can follow all the headlines in the conference call. This is bloomberg. Apple reporting, 1. 42 a of one dollares 30 nine cents, a beat, although a dropoff. 40 point 4 million iphones sold in the third quarter, the estimate was 39. 9 million. Higher than anticipated. And cash position 231. 5 billion compared with 232. 9 billion. The cash level decline. 5. 5 ck check of shares, up. Versus 37. 9 . 38 joe nice pop in apple shares. 9. 9 5 billion versus 9. 1 million expected. 595ge selling price at versus 606 expected. Million sales 17. 9 versus 19. 1 billion last quarter. The cashays watch position, 230 1. 5 billion, down slightly. In terms of revenue for the point 4rter, 42 billion, estimate 42. 1 to you in dollars, so a beat, but still represents a decline from the same time year ago, so were looking at a Second Straight Quarter of revenue decline on a yearoveryear basis. Droprevious quarter, a 30 in revenue. This is working out to a 14 to 50 range for a Second Quarter fiscal thirdquarter drop in revenue. , 4. 2 fivef macs 25 million. The aftermarket so far positive, outlook for gross margin fourthquarter narrowing slightly to 37. 5. One headline that strikes ininterest, iphone sales up japan, russia, and brazil. Because you bring up those markets, china thirdquarter sales 8. 85 billion compared with 12. 5 billion dollars in the preceding quarter, so a drop off their. On a sequential basis, Greater China sales have declined. Lets bring in david kirkpatrick. So negative, gloom whereom pervasive, investors to focused on looking backwards . I think everybody is learning to deal with the fact that apple is succumbing to gravity. Company of the highest order not seen in business history. Theiphone is probably hardware product of all hardware products with the highest margins. Its sales are declining. To quarters in a row of declining iphone sales is bad news. Not as bad as investors were expecting, but generally bad news. 47. 5 billion in fourthquarter fiscal revenue, a joe quarter of drop. Joe could this be a fundamentally different time in the maturity of this company that is unlikely to see a revival . I think the circumstances are similar to 2013 after apple released the iphone 5s. Right now, investors and industry watchers are expecting this years iphone model to look similar to the current model, so the first time that apple has used a similar iphone design for two subsequent models. Looking ahead to 2017, the 10th anniversary of the iphone, so industry watchers are expecting something bigger there. Eps, butnical beat on a 27 drop in profit. That is gravity, but thats gravity moving at a fast clip. I think it is serious for a company seen as one of the great Growth Stocks for most of its recent history. It is not a growth stock anymore. Smartphones, which the company essentially invented, are a category that is of decreasing importance. To the degree it is important, it is hugely competitive. There are great smartphones coming out for 60. Thats hard. I have a samsung and an iphone, and the samsung in some ways is better. Release saidn the we had a successful launch of iphone se and are thrilled to responses to services we premiered. Joe this company as the charts show is an iphone company. Big tech, other players have done some interesting things. Amazon, huge and services. The echo one of the most exciting hardware platforms people are talking about. How much is there to blame apple for not having in the last several years gotten another big business rolling . Watch, aping the apple new product category with hardware and software for that, it is a lot of time and resources. I think the apple watch has not paid off. I totally forgot about it. We should look at the other products category to see how that fared. I think it was slightly up from last quarter. The Current Apple watch is nearing the end of it cycle and people are not anticipating a model, but the new Software Updates previewed in june set the stage for new product introductions such as an echo competitor. I think joe is making an important point. We have seen size it moves, until trying to become a cl

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