Transcripts For BLOOMBERG Whatd You Miss 20170314 : vimarsan

BLOOMBERG Whatd You Miss March 14, 2017

Seen since world war ii. Speaking in geneva, he said the country has been a place of savage over an absolute injustice savage harbor an absolute injustice. He also said piece is not negotiable in syria. Global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Scarlet live from bloomberg World Headquarters in new york, im scarlet fu. Joe im joe weisenthal. We are 30 minutes from the close of trading in the u. S. Scarlet stocks and oil sliding ahead of a looming rate increase. Joe the question is, what you miss . Scarlet done deal. The fed all but certain to raise rates by 25 basis points, what it is the pace of hikes the next three years that is up for grabs. The price of crude continues to slide after saudi arabia said it reversed some production cuts it had made. Is the opec deal on the verge of falling apart . European political drama. The netherlands votes tomorrow while the u. K. Is triggering departure from the european union. Joe bill ackman has thrown in his valeant investment. Julie hyman has more on that. Howe we cannot estimate much he lost on diet but we know it is considerable. By one estimate he invested 4 billion into the stock before it tumbled to it is a heavily shorted stock. Wasysts say that if ackman not going to hang on after all this time, theres not much reason to own it. If you look at the longerterm chart of the valeant, you see the trajectory. He partnered with the company in 2014 to try to make a deal with allergan. That did not ultimately materialize. The companies had various troubles and the shares essentially collapsed. I want to look at the other holdings he still has. You can do this on the bloomberg by going to slng. This reveals the holdings through filings. Doesnt tell you options, doesnt tell you what he is shorting, etc. I know it is tricky to read on your screen but his holdings we should point out that he does not have many stocks in his portfolio. This has been traditional for ackman, that the holdings are concentrated in just a few highconviction bets. One of the is qsr, highest holdings according to his filings. It is restaurant brands. It is up 57 . They got into this stock in a previous iteration when it was wendys. Then it spun off tim hortons, then merged with burger king. In february it announced it would be buying popeyes ticket. It is backed by popeyes chicken. It is that by 3g capital and Berkshire Hathaway is another highprofile investor this has turned out better for ackman that has valeant thus far. Chipotle. Od bet is the stock has pretty much gone sideways as the company has been volatile, as you can see here, dealing with the food Safety Scandals plaguing it and trying to come back from that. In this case he has reached an agreement to add four new members to the board. He is pushing for changes to occur at chipotle. These are couple of examples of his various holdings. Like anyone come he has had some wins and losses. Joe, it seems like some of these losses have been a little more highprofile for ackman. Joe . Joe thanks, julie. For more on exit scenarios, i want to bring in an expert on the subject. Fabulous on the delhi is an adjunct professor at columbia fabioss school salvodelli is an adjunct professor at columbia business goal. Turned into as close as a complete wipeout as you can get. Matt levine did a calculation he might have lost more than. 00 of his total investment how often does Something Like this happen in the activist world . Fabio for someone like ackman, this is not his first rodeo, having a stock go bad. He is a very disciplined investor. He is old school. As julie pointed out earlier, a small number of physicians. Different from the paulson, who might spread that out over a large number. In the case of ackman, 2 things crushed it. Even if he lost a ton of money, there is an element of investment discipline. Ebitda ebitda ebitda. The strategy of valeant was relatively simple by up companies, incur debt, buy up incuries, and kurt debt. All of these things would have to be refinanced and they are perilously close. 1. 8 million is a lot of money you have to make it pay bankers every year. When that started to fall apart, the gasoline and the matches where he is disciplined is his central thesis that you can roll up companies and raise prices. It fell apart. I think he was disciplined to some degree from even if he is taking 200 million, roughly what he has on his metro card come out of his trade at this point. He may have lost more than that in total. All the way around, it is it is not his first rodeo. He is getting out. Scarlet how do activists usually exit their positions . Usually it is not as spectacular a loss as a way is one is perceived. How do they come out of it . The greatt is one of challenges because when you are an activist you are the elephant in the room. You are the hardest one to get back out. End in0 of these things stock sales, just what bill is doing today. Actually, the exit of choice is about the one third that gets done through mergers. You want to try to get someone else to take the entire position off of your hands. We have seen situations where people end up with the socalled successful activist positions but then they cannot get out. You are the last person to get out after everyone else has sold off the division or major structural changes. Joe part of what made bill ackman part of what characterized bill ackmans approach in recent years and other managers, too, is these big, showing presentations about their announcements, where they unveiled the traded then walked through this long thesis scarlet hours and hours of powerpoint. Joe it attracts a lot of attention for people, theoretically the people who want to take the opposite side of the trade. Do you think that is going to fade a little bit, or do you think is that sort of a sound thing to do for an activist . Fabio i think those are 2 different questions. What you are right from a lot of these guys come out like the start of a formula one race, they drop the checkered flag with the big announcement. But in reality, the reason people have to do that is if you look at the makeup of activist investors activists, professional fulltime activists are relatively fat in the number of campaigns. 307 last year, 302 this year. What has been driving the flows are the parttime people, the people who view this as an occasional trade. What we see is much larger numbers of parttime people. By doing those big presentations, you hope to get that wave of people to follow along with you. That has been a large structural change. Firms that would never have gotten involved half. Blackrock when activist on a stock in hong kong. Not fulltime activist come but if they follow the investment thesis, you have pretty deep pockets behind you. Scarlet speaking of hong kong, one thing we have noticed is activists taking the approach globally. Activists targeted sony, samsung electronics. This is something we had not seen five or six years ago. Fabio absolutely. We will not say numbers of deals, massive offshore, but the u. K. Has been the leading edge of european activism. In fact, they had the first anivist Board Appointment on ftse 100 company, which had never been done before last year. In japannzo abe welcomes this. He is trying one way or another to drag the system out and make it happen. Joe was just going to ask about that. I note japanese corporates are famously resistant to the sort of thing. Do you see evidence that the culture is changing, or is it still just a goal at this point . Fabio two years and years ago we were an investor in the fund beating up on bulldog sauce, and i will never remember or taste bulldog sauce again because it was extraordinarily strange. You go to the large investors this Corporate Structure is just ripping you off and they would be like, yeah, well, they are friends. The cultural reaction will take the investment generation of it but if you sit flat in the stock market long enough, eventually people get frustrated. In asia we have seen there are about 77 activist campaigns, up from 52 last year. We have seen them in china and hong kong exchanges. 456, which istly what we saw in the United States last year. Scarlet we will see if bill ackman sets his sights on an Asian Company next. Thank you so much. Coming up, winter snowstorms are lighting a fire under natural gas prices. How the temperatures are hating Commodity Prices. From new york, this is bloomberg. Whatd you miss . Kingdom today after the decided to increase production. In november opec agreed to cut production. Why the latest increase its production targets below the agreedupon number, it may put pressure on opec to extend output cuts beyond june. Bloombergs managing editor for commodities joins us to last week was rough for oil and now the news flow seems to be getting a little bit worse. Perhaps saudi arabia not cutting as much as people thought. Tina last week they were very clear that they would not bear the burden of these cuts alone and it was a clear signal to those within opec and countries outside of opec that have agreed to these cuts that they needed to come through and have full compliance. What we saw today was an increase that scared the market a little bit. Shortly thereafter, saudi arabia came out with the increase went into domestic storage with a statement that said a lot of increase went into domestic storage. Scarlet so it is still in compliance and then . His saudi arabia still in complaints . Is saudi arabia still in complaints . Tina saudi arabia is in compliance. The rest of the world has to look at that and say if the saudis are not going to carry me, do i have to do more . Scarlet four others reversed the production cuts they have made . Tina we have people who are not complying. Iraq and russia have not been in hearing to the letter of the agreement, more like the spirit of it so far. This puts more pressure on them to do so. And it sends a message to the markets. This gives a warning that the floor they thought was there may not always be there. Joe looking at the chart on the bloomberg and i think you brought in last time we talked showing this sort of resurgent u. S. Production in drilling to the bar chart is the u. S. Oil rigs. The yellow chart is crude oil inventory. Weakness we are seeing in oil is everyone chalking it up to supply . Any demand side to the element here . Tina there is a demand side. The president is going to detroit tomorrow and people are talking about him taking off fuel economy standards. That could change the larger forecast in the u. S. That would be a great way to increase demand. That obvious it wouldnt happen in your term. In the near term people look at stockpiles and how they will be gone down. Joe are the automakers eager to have those regulations relaxed . Tina actually, and it is not just the cars they could been absolutely, and it is not just the cars they could be making if you dont have to pay for it, you dont. Suvs, there is the demand element as well. If we go back to the idea that saudi arabia is reversing production cuts, does that move give shortterm benefits . Tina well, you would think it would help to boost prices, but weve seen the prices come down in response. Obviously, they are trying to play hardball with the rest of the markets. The rest of the markets of the markets and the rains terrified and will be looking again later this afternoon for figures on what inventory numbers may look like for the past week. Tomorrow we get official numbers but this afternoon we get the numbers,guesstimate which have a spotty record of being true. If we see another record in well inventories, it doesnt really matter what the saudis do. Joe lets talk about the speculative positioning of traders. More recently they were long in terms of the number of futures ever, or at least in a long time. What do we see lately . Tina theyre starting to draw down, and what weve seen in the past two weeks is the first down taken a long time joe that chart right there. Tina you can see it is not dramatic yet, but those figures have come before the saudis spoke. We will get week those numbers on friday they could look dramatically different and it could show the start of the next this in the market. Scarlet tina davis, thank you so much for joining us. We are going to stick with this theme because the blizzard currently bearing down on the u. S. Eastern seaboard has pushed natural gas futures to highs on speculation demand for the heating fuel will surge during the storm and that would shrink the supply glut. Stellat as the storm groove,s groove, or her how does it impact Commodity Prices . Lets bring in a Commodity Trading advisor with the hedge fund association. Lets start with natural gas futures. We are at a pretty late point in the winter here, and we have had a pretty warm february. Tell us about the conditions that led to people speculating heavily on natural gas futures. Jim it has been a crazy, volatile winter. Perhaps a cold winter it is in heaven and we became bearish on natural gas in february. One of the warmest winters on record. We recently saw a 10 rally in natural gas late last week on a that is not going to put a dent in the natural gas supplies this late in the winter. If we have a cool april, which is possible, we could see natural gas rally again. But he does not bullish necessarily on longerterm natural gas. 2 may have a cool summer and hurricanes next fall. Joe was just going to ask you to expand on that. What is the earlier agreed on the weather for the summer and fall . Jim typically when you look at the warmest winters on record, which february was, and a week nino, you see cooler summer and weaker hurricane season. We may see a cooler spring that will create a shortterm spike in natural gas again, but any longerterm change in their fundamentals come with the crude complex in natural gas, is unlikely now. Scarlet in terms of grains, one thing we have noticed as you might see more supply from south america for commodities like corn. It seems like all the commodities have this supply glut new matter where you look. Jim ive been pretty bearish on list of them. Coco has seen a low. Weak el nino, we may see promise from africa. A theth america, this is biggest corn crop in history. A year ago we had flooding and wiped out about 15 of the argentina crop and all that excess demand got diverted to the United States and use the big demand market in soybeans last march and april. This year, not as bad a situation. I think the odds of a drought in the midwest this summer is probably less than 25 . The longerterm fundamentals for grains is bearish. Scarlet one commodity and wanted to get her thoughts on his caution. It is not whether it is not weatherrelated at all. Jim that is based on what is going on in china. Certainly in the spring and summer months we see whether margins develop. The biggest move in the last 15 or 20 years is 2010, when cotton ant to over two dollars bale and the price of blue jeans doubled. That was because of problems in pakistan and india and china with a reduction in crops. We will have to monitor that and see what happens in china and the United States. Unless we have a major weather disaster, cotton is pretty hard to come by longerterm as we could see an increase in cotton for planting the next three or four months. Joe great stuff. Thank you very much, jim roemer, president of best weather. The trump andxt, administration has pursued an aggressive policy of deregulation. How are Small Business owners responding . This is bloomberg. Scarlet i am scarlet fu. Whatd you miss . Lets consider volatility or lack thereof in equities. Vix, note line there, longer below 11. 12 and change. Still holding your a 2. 5year low. The blue line here, the second panel, the cboe index and to the european and asian developed markets. Yesterday in that yellow square it recorded its biggestever now at its lowest since data going all away back to 2008. The third panel, emerging market etf volatility index. Volatility coming down there. Falling 17 in 2 days. No matter where you look, lots of complacency. Joe at some point volatility will come back in equities but people have lost a lot of money betting on the bounceback. Lets look at one of my favorite surveys, Small Business optimism survey. They asked one of my favorite questions, which is what is your biggest problem . They asked Small Business owners what is your biggest problem youre facing high taxes, then you can define workers, that you cant get a loan, whatever it is. One of the things they ask is red tape, regulation of problem. Small Business Owners are always complaining about red tape. This is the month over month change. As you can see in this recent month, the number of Small Businesses complaining about red tape, who say this is the number one problem, had its biggest plunge in all the data we had on bloomberg, going back years and years. Donald trump, the new president , hasnt really done anything yet on regulation. A few executive orders but mostly small bore stuff. Scarlet yes promised to look into it. Joe already the biggest drop weve ever seen of Small Business owners say it is the biggest problem. Scarlet market closes next. Less than four minutes to go before the close. Modest losses. This is bloomberg. We are moments away from the closing bell. . Hatd ya miss the fed, although certain to raise Interest Rates tomorrow. Scarlet im scarlet fu. Joe we want to welcome you to our closely closing bell coverage, every week. Scarlet market minutes, u. S. Stocks limping to a close, falling for the day. The s p 500 losing, the nasdaq down by one third of 1 . The real mover here today as crude oil, moving past 48 per barrel after saudi arabia disclosed production. Joe kind of a quiet day ahead of the fed, oil is where its at. Groups ishe industry where it is as well. The biggest decline in the 11 industry groups. Consumer discretionary, you can say, was little changed. A pretty broad decline across the board here for the 11 groups in the s p 500. Taking a look at the xle, the sector spider etf that tracks the energy sector, its at the lowest since the election. I needed to include valiant, because yesterday Pershing Square exited its position, at the lowest level since may of 2000. Among the movers today, looking at a couple of companies benefiting from m a speculation and talk. Hudson bay, gaining in talks to buy Neiman Marcus according to the wall street journal. Excuse me, it is lower. Neiman marcus had been looking to go public but had shelved that, hudson ba

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