tv Market Makers Bloomberg July 9, 2015 8:00am-10:01am EDT
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china rebalance today. another greek deadline. is it a real one? computer malfunction, you probably know about that right now. all of that as we play -- pay close attention. stephanie: economists carmen reinhart on greece and china from sun valley. and steve rattner. martin sorrell and tim armstrong. what is happened is almost listed -- almost the theme of a wall street movie. erik: take a moment and go on bloomberg.com and read this piece by carmen reinhart. stephanie: it is really illustrative. erik: i am doing my best, folks. stephanie: this is so valuable.
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it is. we will be talking to carmen reinhart about it at 8:45. stephanie: greece has had deadlines before. european leaders gave a greek prime minister alexis tsipras, until midnight tonight. they want more spending cuts before agreeing to a bailout. greece will not get special treatment. >> we remain fully engaged in order to help find the solution that will be most conducive to our mission, to try to help with restoring stability, growth. stephanie: wieters can decide how to respond to the greek proposal. greece has extended capital
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controls through monday. in china, stocks bounced back after losing more than one third of their value in one month. the best marked shanghai composite index rose 5.8%. steve engle has the story from shanghai. steve: confidence and liquidity returned thursday as stocks rose the most since 2009 on a trifecta of announcements from authorities, including on the curate's regulator, banning major shareholders from selling for at least six months. the banking regulator also allowing backed by shares and even the public security bureau. they announced they are launching an investigation with what they call a malicious shortselling in the market. it is improved sentiment for one day. half the market 1400 stocks,
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remain halted from trading. stephanie: valuation from the shanghai index are still twice as high. erik: we're calling 4.5 more cars -- crossovers are in japan. recalls either in the u.s. or check -- or canada. the new ceo took over last month. early this morning, the south carolina house joined the senate and agreed to remove on capitol grounds. more that 14 hours on debate. the movement to remove the flag picked up momentum 19 black church members were killed in charleston. steve ballmer has won the battle of the billionaires with mark cuban. agree to return, the clippers just days ago, committed to a contract here from more than $89.
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those are your top headlines. stephanie: i love the top five. specifically today. you can go to a meeting and dinner and lunch and business -- erik: we will start with the obvious the countdown is on. the government has until midnight tonight to present an economic reform tack -- package. for more, we take you to hans. time is running out. has the situation changed since yesterday? hans: there are more voices calling for a debt restructuring in greece. you had jack lew followed by madame lagarde. we had the eu council president
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and it seems like the creditors are trying to gang up on germany to try to convince them they need restructuring. germany will want to exact something in return. the question is, what price will they have to pay for that and will they be prepared to pay it? erik: is it possible we could see greece but a package of reforms on the table this week before sunday, that the creditors find acceptable, and the creditors gift sippers what he would need, which would be exactly what you mentioned debt restructuring? hans: that is the best case scenario. they will have to figure out if it makes sense. saturday they meet in brussels.
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we will get a sense of how close they are to agreement. on sunday, we have the eurozone meeting. 19 countries, the leaders of government that use the euro they will be followed by the 28th. the meeting only happens if things go really bad and you're talking about humanitarian aid. erik: good seeing you as always. stephanie: when i talked to traders across asset classes, they are saying, focus on china. stocks are rebounding in china did after the government battled to restore confidence foreign investors are just not happy banning stockholders from selling stakes in companies. it was called an act of
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desperation. wells fargo fund management said it just put -- postponed the inevitable. others are saying they do not feel comfortable investigating the market where any moment, the rules could change. erik: you have got to feel the same way the greek depositors feel. how comfortable will they be putting the money back into the banking system? stephanie: greek depositors have got to do business with their banks. investors can say go fish. erik: i had a chance to speak with bill gross about all the intervention the government has been making and whether that makes the chinese stock market more of a short.
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>> probably more to the extent there is not fresh open air sunshine. the chinese are doing this in order to support their market you know, it is not constructive. there are massive government supports for global markets everywhere in china, japan, as well as here in the united states. erik: let's not forget, until overnight, all of those chinese government efforts to extend that was not working. stephanie: i got to spend time yesterday afternoon at the new york stock exchange. we have got it covered. you remember the glitch that have been yesterday. a software update is now said to be the cause which resulted in trading on the exchange to be halted for 3.5 hours that did not stop investors from trading on other exchanges like the nass. -- nasdaq.
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down due to concerns about china and greece. the new york stock exchange group president, here is what he had to say. >> it is hippocratic oath. my first concern was, those stocks continue to trade elsewhere, get the problems fixed and up and running for the close. stephanie: who better to ask about this, michael regan. i hate to blame the media for over dramatizing anything, but i made my way down to the exchange yesterday. there were tv trucks as far as the eye could see. it seems like a panic situation. the exchange looks like an average wednesday. the market was intact. everything was business as usual. how big a deal is this really especially because the market was not effective? >> the sound but you just played
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, i think they achieved no harm. we think of some of the biggest glitches we have seen in markets, a lot of capital going under and facebook's ipo not going off properly, as far as this one goes, a lot of people will look at this and say, this is a success story as far as electronic markets being spread out over so many menus. the new york stock exchange is still one of the leaders as far as market share. investors really did not even notice. stephanie: how about the fact that because the beat went on it does not support the argument we sometimes make. what is the real value of the exchange? >> the exchange itself, i think the question is more appropriately how much of the
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floor -- >> a lot of people believe it is just there as a tv set, as a prop. erik: i got a view this morning with joe yesterday and they have a blog posting arguing the prevailing view is that maybe fragmentation is not a bad thing. what if the outing extended and, while long-term investors may have suffered no losses, what about high-frequency traders? >> right. so many mutual funds like to share -- like to trade and make the prices and price their own funds based on those. there were index trades. it could have been a much bigger deal they had not gotten that closing auction done. erik: now we have got to go out
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to julie hyman. julie: let's not forget about earnings. earnings season is now underway. pepsi reported its second-quarter earnings and boosted its forecast for the year. the ceo has been under pressure from the stronger dollar and stag and soda sales. snack sales are actually going well. we will monitor that and bring you any updates from it. kicking off in earnest yesterday after the close, profit trailed estimates on these plunging price of aluminum. a gain of 1% he estimates and it might be why the stock is not doing worse this morning. erik: thank you. ibm is making working versions of today's most powerful chips. it is still in a research phase.
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it is that moore's law still has at least three more years to run. i want to give you some perspective. the chip has circuits, seven nanometers wide. a red blood cell is 7500 nanometers wide. just two underscore how big a change this is, when i started covering semiconductors in 1998 the industry-standard technology was 250 nanometers. here we go. stephanie is impressed. it is amazing. stephanie: we got exciting right there. seriously it is an i'm just messing with the up and i'm glad to have you back from greece. those are your top five. i said it before and i will say it again. for me, that was very valuable. when we return, when the going gets tough, the greece go shopping. we will tell you why greece are
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stephanie: coming up later today, one of my favorites, we'll see what the latest news is making in the wireless industry. for now, it is time for us to deliver you the top stories of the hour. the wall street journal says apple is planning a run of 85 to 90 million. timely and more when the iphone 6 came out the new iphone would go on sale later this year. a few changes dan the last model. that hack attack on federal personnel records apparently was
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a lot worse than anyone thought. changes dan thecongress was told the white house would soon announce millions and millions of background investigation records were stolen. the u.s. has blamed chinese hackers. those are your top headlines. erik: we have breaking news. vonnie quinn has more. vonnie: another spinoff we have been seeing in recent months. accepting an offer, $12.5 billion to merge 43 and as you can see, it is up 1.2% in the premarket. it looks like it is going through now. the statement is out paying dividends worth $70 billion in
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the next four years. a hair care unit, 43 brands. erik: thank you. greece has instead capital controls through monday. people are increasingly looking to buy hard goods rather than keep money in the bank. guy johnson is with us now. you are in front of a retail store in the main square in athens. what are people doing? are we truly taking democrats and going to these stores and cashing out bank deposits? there are allowed to do that in the form of hard goods? >> yes. that is exactly what they're doing right now. they are worried they will disappear very soon so if you say, they are restricted to the euros per day they can spend as much as they like on their credit card and democrat so they
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say, why not buy that playstation and that macbook pro? nisei, one of the most famous books in greece and splurge that cash, that is exactly what they're doing. what is interesting is some retailers are refusing to sell because they are worried about taking the money and putting in the bank what they might suffer as well. when it comes to things like macbooks, yes, they are splurging. erik: it is crushed time in greece once again. what is it like on the ground? what are people saying now? >> people are looking forward to tonight, the deadline for greece to deliver a concrete proposal. they can be scored over the next day or so and then handed to the eurogroup feynman's -- finance
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ministers. they are expecting a harsh steel to be put on the table whether or not we ultimately end up with a deal. greece tonight put his cards on the table. erik: you believe the new finance minister dropped some hints in its most recent application to the european stability mechanism for what greece is prepared to do with its reform spirit of thousands as though the sippers government might actually cross some of its redline. >> he was interesting listening early on saying he thinks we could see concrete proposals from both sides. to generate a deal. it is still 50-50. erik: great stuff from athens. stephanie: i have got to tell you what is coming up next. we are speaking to carmen reinhart about her must-read
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erik: what happens if greece leaves the eurozone, the grexit? now we have the answer pair the co-author of, "this time it is different" joins today. a meaningful debt reduction agreement and the assistance of european central bank support for the banking system could still avoid that result but if in a fit happens, a forcible conversion follows, the setback of greece passes economy is likely to be large and long-lived. carmen reinhart is on the phone
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with us from cambridge massachusetts. thank you. carmen: thank you for having me. erik: you and can made yourselves famous by taking a close look at history of financial crises. at greece you have effectively done the same with exits and currency regimes. talk about the work you did to put this piece together. carmen: this is an issue that we do not have countries leaving currency unions every week. it is not like exchange rate changes that occur a the time. but we have seen economy is highly dollarized tried to return to the currency. it is those examples that i pull out because once you and the public at large is accustomed to
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using the foreign currency, i.e. the euro in greece, or the u.s. dollar in argentina undoing that is not trivial. far from it. erik: you looked at argentina is 2002, bolivia in 1982, and what did you discover? what happens when you unwind a currency linkage like that? carmen: first of all, these are measures done in the midst of crises. the setting is already one of severe economic distress. the measures themselves are associated, what use the right around the measures, the year the conversions is a weaker economy, significantly lower growth. you continue to see the
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shrinkage of the banking system, bank deposits continue to leave the system. you also see the emergence of a parallel market for foreign exchange. parallel market premia something we have not seen in europe since the end of world war ii. stephanie: since you have got five examples that parallel the situation greece is in illustrative method does not have to be a grexit, why do you think so many people tend to think, that is the only option? carmen: it will happen or not we do not know but i think there is a significant underestimation of the adverse impacts. of forcible currency
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conversions, closures, and all the uncertainty that creates for your average person. this is what i tried to summarize on the basis of the other episodes. erik: i tweeted out your column earlier today and it is getting a lot of attention. people are questioning some of the data you chose to use, saying that you cherry picked examples. i am not endorsing that point of view but i want to give you an opportunity to defend yourself. carmen: i do not have to defend myself. if they could find other episodes of forcible conversions, please come forward. there are not many. stephanie: do you think alexis tsipras at this point is acting
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in good faith? when you look at the way alexis tsipras is managing the situation in greece, is he doing right by the greek people? does he know what he is doing? carmen: it has been a roller coaster. i think that good faith question is a valid one. but i think the situation has been very charged and the negotiations have taken on a personal tone that cannot be denied. i do not view that as a positive development. i think all my work on debt relief really highlights that from the debt standpoint and the creditors, there are gains to be had from reaching an agreement. but i think right now the
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issues have also been polarized to the degree where that agreement sees elusive. erik: we thank you so much carmen. stephanie: before you move on for viewers, if you have not read it yet, go to bloomberg.com and read this piece. it is extraordinary. erik: in the meantime, breaking economic data. you saw them on your screen. vonnie: 15,000 from the week through july 4, higher than even the highest in the economists estimate. a little bit higher than forecast. nevertheless the average under the 280,000 markets it was a risk kind of a day anyway. futures trading and treasuries trading. we are not seeing much
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movement but they did disappoint , up by 15,000 through july 4. it is time now for the auto manufacturers doing retooling of plans. there will be more layoffs in the next few weeks. erik: still under what many people see as a key threshold of 300,000. vonnie quinn with the latest. time for some top headlines. greece passes prime minister has to decide. alexis tsipras has -- european leaders want his plan to include spending cuts and are skeptical he will pull through. there should be two parts to any greek proposal. >> one is about significant reforms as in the case of ireland, portugal, and cyprus.
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and it has worked. the other leg is debt restructuring. erik: there will be a summit on sunday so they can respond to proposals on the table. deposits are frozen in the bank the on that 60 euro per day withdrawal limit. stephanie: fair working overtime. erik: less than a 50-50 chance there will be a deal on the nuclear program. talks have been extended again until tomorrow. i ran's president says the company is preparing. they say they will ease those sanctions if iran agrees to lose those. stephanie: recalling 200,000
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hummers. the cooling system could overheat and cause fire in the dashboard. gm says at least two homers or destroyed and there were three minor injuries. in a military exercise that spawned conspiracy. gets underway next week and the pentagon will not allow any media to observe it. 15 involved bestial operations forces in texas among other states. some protesters say the exercise is setting the stage for martial law. the texas governor has called for the state guard to monitor it. those are your top headlines for the hour. i'm not especially comfortable with it. you? let's see how it plays out. erik: china reverses course after sharp declines these past few days. a rally overnight.
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erik: finally an update for stock markets. their biggest rebound since 2009 at 213 straight days of decline. the question now are the skies clearing for investors in china stocks? let's check in with the cohead of macro. nick. when you see chinese regulators limiting stock sales by mega shareholders, by corporate directors how do we take that
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action, which came a couple of days ago, and the overnight rebound in chinese stocks, and make some sense of it all? >> you have got to look at the market today. you're getting the biggest gains since 2009. when you look at it, you see 1260 stocks were suspended from trading anyway. you look at the confines that have been brought in the 260 billion given to 21 brokers you have done everything at this market. >> we have seen retailers get involved with investing. what happens? >> that is a good question. we do not know so much. the broader ramifications it is
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the fact a lot of those, one of the things we're seeing and you can see the dax has been up for a couple of days, this has been a relatively isolated phenomenon within china. we are ramifications with what happened with iron -- iron ore. the hang seng it has been a function of the search to try and fund -- erik: i was sent a chart that i found useful. chinese stocks traded in lockstep with adjusted price earnings ratio for a long time, and all of a sudden in 2014,
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there was a massive diversions suggesting a bubble had begun to build and perhaps continued to build until last month when stocks started to sell off really hard. do you agree with that analysis? i want to give full credit to the guy who sent it to me. it was unsolicited, a guy who had done the research on chinese stocks as part of his dissertation. >> we have seen things like that. i think what happened, facing another bubble with what we're trying to do in greece at the moment things like the liberalization of the chinese market fueled it. i think at some point in time maybe too late should have forced an intervention a lot sooner than it had been, it was allowed to feel, like all bubbles historically have done in the past. i think it just got caught up
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with itself to we all hear the stories of the crowds of retail investors getting heavy levered to be able to invest into the market. we have seen weaker cells for people to invest into the stock market and the liberalization of and the provision of greater and less stringent margin facilities to retail investors. we have seen banks provide their own stock as collateral. it has had classic bubble characteristics of feeding itself. that is the situation we are in now. stephanie: how are macro hedge funds faring this week? >> remember we have socialized a lot of risk in euro. in singapore at our access asia conference a couple months ago it was quite localized, interest there was in hong kong connect.
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a lot of the macro guys they have not participated to the extent one would imagine they would have done. when you look at the market so for this week, it shows you how much they have socialized a lot of the risk. i think it is a relatively specific risk and china and puerto rico as well. i think jen was pretty brutal. i think july is even better. stephanie: do you know why it is especially exciting you and i are talking about china today? it is where we met. i spent two weeks in china with that guy. i mean, hello? i want you to know it was all business. that guy come he spent a couple of weeks in beijing. >> i did not want to mention it, but i am blushing. if you could see me here in london, i am blushing. stephanie: great to see you.
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stephanie: welcome back. big fast food chains are struggling. according to a research consulting firm for food industry, four out of five restaurant chains lost market share last year. the most surprising, subway touted as a healthier alternative to a burger joint. david joins us now from chicago. what happened to subway? if you years ago, they were that -- the alternative. armed with campaign, e fresh. >> absolutely. subway is a true american success story. it does its business on the e fresh position a edit was really
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the pioneer in the villager own sandwich, which received most upscale fast casual players doing. it is a victim of its own success. it has saturated the market with over 27,000 locations now. unit economics are tough. while it has been doing that competitors have been coming in with other sandwich chains, or the bakery cafe segment, p are bred in those cut -- those types of places, have come in and provided an alternative to consumers that caused subway to suffer some sales. erik: how much of it has to do with the economics of being a franchisee in the subway network? i remember speaking to fred a few years ago where she said it would get to an hundred thousand franchise locations, which is mind-boggling. i also talked about complaints i have read that they were getting to be not so polite
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about it screwed by subway. >> subway is 100 percent franchised. the challenge is the average subway does $475,000 a year. if you are going to be a subway owner or franchisee, you need to own a lot of subways to make it work. as the chain grew and there are now 27,000 plus locations there has been a lot of encroachment on territory and it has become very difficult to grow the number beyond 500,000 and when you look at some of their competitors that do 700 or 800,000 per store, the economics get very challenging for a front -- for a subway franchisee. stephanie: as far as marketing or menu changes expansion, focus has been in terms of number of stores. it fresh has to be a five-year-old campaign.
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>> it is. the growth strategy has been expansion. when you look at opportunities going forward, they have been promotional driven. the five dollars foot-long still resonates with consumers know it has been several years since they use that. there are very susceptible to cost increases. that is part of what happened the costs have gone up, they have cut back a bit, and perceptions of quality among consumers in our research has suffered. seems they have cut back on ingredient quality and as a result, the overall experience has suffered from a consumer perspective. erik: is there a point at which a company like subway franchises out? that you have too many franchise locations and there is no longer marginal benefit from each additional location that you are able to open? stephanie: you think the subways across from subways are not a
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good idea? erik: and they exist, just like starbucks across from a starbucks. stephanie: you are not eating six turkey subs, i hope. >> the challenge for them i think is that unit growth, even last year, they grew 3% in terms of units even as total sales declined. i think the growth strategies need to focus more on making units healthy. a couple years ago, they tried -- they are lunch driven right now. a huge part of their sales are lunch and they're not doing anything at breakfast and the dinner daypart is underdeveloped as well. part of the growth strategy has got to be not necessarily continuing to open more units but making the units healthy enough that they can grow same-store sales as opposed to just adding units every year. stephanie: david, thank you so much for joining us. do you like subway? you must eat at all of them to review cover the food service industry. do you like it?
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>> my kids are big fan of the turkey sandwich so we go quite a bit. stephanie: there you go. thank you, david. erik: do ide at subway --do i eat at subway? stephanie: erik: do you like it? not particularly. i want to point out there is a great story about subway in business week. check it out, on the newsstands or bloomberg.com, you will find that subway has more problems than jared. stephanie: i will not go there. time for a commercial. we will be back in just a few minutes. you're watching us at our new time at 8:00 a.m. you do not want to go outside. look how great and gloomy it is. stick around. ♪
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back. i am julie hyman. you have got another fast food chain to talk about, shake shack. shares are down .3 per -- .75%. the price target is $37. analysts are saying this is one of the stocks that has the biggest gap between current price and price target. like many analysts who downgraded shake shack in recent days like morgan stanley, there is a fundamental optimism about the business. it is a matter of valuation. also pointing out the stock lockup ends soon. and expiration on july 29 and then it will fall after we see the expiration. erik: thank you very much. still to come, the view from sun valley. in the next hour, we will hear from a ceo, sir martin sorrow. also, tim armstrong p or i have
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>> live from bloomberg headquarters, this is "market makers." stephanie: this is the second hour. i am stephanie ruhle. my partner erik, had a severe reaction from sitting at the anchor desk and putting on the program days in a row. >> had to get a woman to do what a man couldn't. scarlet fu is in the house.
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>> the opening bell is coming up in just under 30 minutes. stephanie: we have got to talk about greece. china and puerto rico. we will do it with an amazing lineup of guests. we will take you back to the sun valley to the sun valley. martin sorrow joins us. aol ceo tim armstrong, and steve ratner all us within the hour. for now, i have to give you the top stories of the morning. the labor market in the u.s. hit a speed bump last week. more americans than forecast filed for unemployment benefits. the data can be volatile this time of year because of the fourth of july holiday. the new york stock exchange as mentioned earlier, they may note soon what exactly caused a computer malfunction that knocked out trading for 3.5
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hours yesterday. investigators are looking at a faulty software update. nike will try to verify the cause. i was told trading was suspended because he simply did not trust that the exchanging systems were working properly. >> we chose the least disruptive option for customers, which was, root of the problem, put a plan in place to fix it and there was no work for customers to do to connect to the new york stock exchange. >> shares listed on that exchange still traded on other venues such as the nasdaq, and many people are saying from a nike management active, it was a big success. scarlet: we do have breaking news p or we want to vonnie quinn at the news desk. vonnie: at the imf, global growth forecast. it is downgrading its forecast
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for the year. the u.s. to blame for the downgrade. the economy will go 3.3%, less than 3.5% that had been the previous outlook. the ims has downgraded its view for u.s. growth from 3.1% to 2.5%. going at 2.5% this year. it is also seeing more of a scare from the likes of china and the euro area, though it is leaving those growth outlooks untouched. scarlet? scarlet: thank you for the imf growth reduction forecast here there is so much going on. let's that into the conversation. stephanie: we need to take you overseas. i want to start out with greece. who better to eat with than steve ratner? i should mention it is the investment arm for bloomberg's personal and filled -- philanthropic aspect or this guy
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surely knows what he is talking about. scarlet: let's start off with greece? how do you see things now? >> it is a minute to minute situation. as you can see in the european stock market, there is optimism creeping in that the greeks might actually make a proposal that is even more robust than what they had talked about at the end of june. it seems a little bit surprising, but that is how the markets are seeing it. it is very hard with this one. it is touch and go. stephanie: these numbers are worse than the great depression. >> there are a few facts. greek secession is worse than the great succession. if you look at the track at greece's recession, and you compare it, you can see it is very similar, but the u.s. started to turn up after four years. greece is still bumping along at the bottom. unemployment is also higher in
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greece today than it was in the u.s. in the great depression. that is the first fact. stephanie: unemployment is higher in greece than it was in the united states during the great depression? >> yes. i do not think it got quite that high and the u.s. stephanie: how many years do you take in the u.s. to reverse that? >> world war ii if you want to go back into the history. there was another dip down because we tightened to quickly and then there was world war ii. it will be a long fight for greece, just as it is for spain and other european companies. scarlet: i want to get back with the imf headlines because of increasing risk from china to greece. are they just playing catch-up at this point? click yes. i think the markets and most of us who invest and things like that have been pretty pessimistic or concerned about the global growth rate for some time.
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you do have a whole secular stagnation feeling around the world, whether you look at europe the u.s. is what i call the best couch in a bad neighborhood. we are doing ok but only because everyone else is not doing well. then you have the 800 pound gorilla, china, showing all the problems it is showing. stephanie: the u.s. may be the best house that block, but we have got problems with children, i.e. puerto rico. quite a little bit like greece they have more debt that -- then they could possibly sustained. they got there by series of bad management decisions. all the pharmaceutical companies it will have to be something that looks like a bankruptcy or restructuring of puerto rico, just as we have the same thing in greece, just as what will happen to happen again in greece. stephanie: does puerto rico me days are, like we saw in the auto bailout?
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>> i do not know if you need a czar. that peace would be relevant if there were possibility of help from washington. that would become a conditionality situation like when the imf goes through a troubled country. in the current political environment, i do not think there is a possibility of real help. i think they will have to do this through a more conventional restructuring. stephanie: if they made progress of washington, would you want to be the czar? >> no. i would rather spend time right here than in puerto rico. scarlet: as the puerto rico government gets ready to meet with bondholders on monday, what should the governor not do? what should he avoid? steve: he should know what to avoid. hubris is the perfect word. and basically denying reality.
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what puerto rico has to realize is they will have to take a lot of pain here in order for the bondholders to agree to some kind of restructuring that guess the debt down to a certain level. scarlet: what is your view on china? steve: i am more optimistic than most people. the stock market's down. you all talk about how much it is down. the chinese have handled this terribly and allowed the bubble to occur by allowing more debt by opening the soap called shanghai and hong kong connect. they are making mistakes on the other side by having the government buying stocks. they are handling it terribly. i was struck by a comment jack williams made in a speech which very much paralleled my own thinking, where he said, i went to china recently thinking export led economy, all of these problems, and i left after talking to a lot of people thinking, this economy is still doing pretty well, relative to
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any other place in the world. that is how i feel about china. scarlet: a lot of people would say china is in a whatever it takes moment. there is a sense of panic and rushing through to get whatever reform out on the table every night to stem the stock market collapse. walk us through how preventing the stock market collapse prevents unrest? steve: the shanghai market is dominated by individuals. it is only 10% institutional, mostly individuals are they have gone out and bought a lot of margin debt. what the chinese government does not want for social and economic reasons, they do not want the market to collapse. it would cause social unrest that have a wealth affected at a time when the government is trying to get them to spend more. to compare china to mario draghi is not totally fair. china is still growing. if it is not 7%, it is 6%.
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there is no risk of deflation and no risk of china going into recession. it is a question of trying to sustain a high growth rate for political reasons in china, but also for the sake of the rest of the world economy. stephanie: that is different from mario draghi because in europe, there is no growth. steve: mario draghi is trying to save an economy that is more robust in danger of going into deflation and in danger of sinking in the mud. china is, i think, and incredibly vibrant place on the move, going to succeed. people who want to better themselves. it is just a question of how fast and whether they can deal with things like corruption and environmental problems come all the other problems china has. but it is still an incredibly vibrant economy. stephanie: there is corruption, there is data that you might not be able to trust, and there is government prevention you cannot predict. >> he factor into your thinking. until this big bubble, the
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chinese stock market was the cheapest stock market in the developed world and that was because people were factoring in all the things you are talking about. you have to be mindful as an investor that china is not the u.s. and there has to be a discount for all those risks. scarlet: when you overall the restructuring of the auto industry debt, you had no sense of discord among the players here. how do greek and european officials get past the distrust told up over the last couple of months, and negotiate in good faith over the course of a couple hours over the weekend? >> it will be hard. part of the problem is even if the greeks go to europe with a reasonable proposal there will be a high degree of skepticism about whether greece will actually implement it. any other -- promise they have made, they have fallen short of it. things like privatizations. they committed to a huge number of privatizations and did almost none of them.
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because they were not on a set the start when they entered the euro. steve: and then they also made a mess of it appeared greece has the highest percentage of the economy paid out in public pensions of anybody in europe. the lowest percentage of tax collections of anybody in europe, and you cannot make the numbers work. it will be cheaper. you could buy an island. there are some smaller islands you could probably buy. stephanie: a world tour with the one and only steve ratner. the global growth forecast, the imf cutting global growth gdp. that will happen with olivia and tom keene will speak with him at 10:30 eastern time. i want to get the view on a global economy now from sun valley in idaho. olivia sterns joins us live in sun valley.
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olivia. class so much. -- olivia: thanks so much. you look terrific in the hiking outfit and i want to start with the news in greece. half a dozen businesses in athens, are they operating? >> with difficulties. it has stifled. it is only .1% if we include associates in the 2249%. it is not important in the context but it is important psychologically. that plus china. the imf has just take -- taken down the forecast marginally from real growth to the world economy. that is what we're seeing. over the last six months of last year the first six months of this year, slowing down despite commodity prices going down and despite western europe starting
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to pick up. the fast-growing markets, slower growth, still faster where we have been looking for growth ironically in western europe. we have seen a turnaround in spain and italy getting a little better. germany very strong. the ukrainian situation and the crisis in russia really massed the strength and the u.k. has been strong. the u.k. budget is probably deflationary. planning the strategy for the next five years as he brilliantly did for the first five years of the coalition government. you have got the potential grexit with a hangover, and then you have got the british possibility as well. there are elements of uncertainty which make clients more cautious and we have seen that and we are seeing that.
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it sort of starts high and the business council is always dead right actually. it maintains the position. olivia: the forecasts do have a tendency to come down. to forecast to greece, -- >> they're trying. we had been in a position to put contingency plans. as you said yourself, you were sitting outside in 2000 -- 2010. we have had five years to plan this to her from a liquidity point of view and everything else, we are in a reasonable position. but it is very difficult for our people to operate in the circumstances. the banks are closed again until monday. you are going to greece tonight and you will see it firsthand i think it is very difficult. the greek economy has been going on, it has gone down even further and cause more problems. i think the greek time mr. is in a difficult position. half a dozen in the other.
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whichever way the party reaches an agreement or he braces cut tree, he has to go through a grexit from the euro. it is really a very tough call. olivia: it certainly is. >> the new york times dredged up that photo and somebody has to remind them that we have been talking about that in the u.k. for the last month or so. the new york times suddenly came out with the black and white photograph. there are lessons from history. olivia: only about 10%. and it was the first one. asia, a big correction. have you noticed in china have you noticed a deterioration in the business in china? >> the stock market follows.
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i saw an item on cnbc. i was out in asia. i think out in china at the time, in shanghai. there was a piece about the farmers. about the farmers investing. this woman being expert in a commune on investment. it reminded me of the pancake clippers p ryan trying to get balance into the world. but what it was was an interesting lesson. an interesting signal that there was an extreme amount of speculation in the chinese market. we have seen valuations in china in terms of acquisitions hit high points in the tech area and we resisted that. we see multinational companies come under pressure in china, more so than local companies. a bit of a differentiation. we see extreme volatility of the chinese market. very strong in q1 and not so strong in q2.
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the third-largest market is $1.6 billion against the u.s.. and the u.k. come about 3.3. our forecast for the year will probably be up about four or four and a half percent or what is interesting is i spoke with people who really know what is going on in china or claim they do. if you look at statistics in japan, they're up about 2%. these people aa to calculate gdp growth. they think the chinese economy is growing at 4.5%, which mirrors what we see, as opposed to the official rate. we will see. we are unabashed chinese bowls. somebody asked me this morning weather we changed were not, if we got the opportunity to double up, we would double up. and be careful what you wish for because worldwide growth, the imf forecast, the two big drivers, u.s. and china, that is
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the big delta in our industry. olivia: we are here in sun valley where everyone is talking about dealmaking. >> you are talking about dealmaking. olivia: what are the consequences of that for your industry? do you lose leverage? >> verizon and aol is a new model. we're all trying to figure out what that means for us and what the heart of it was. basically, you have got gdp growth and little or no pricing. that means consolidation amongst clients, consolidation amongst the old variety or the legacy variety or the new, and consolidation amongst our industry. there are six in our industry. i doubt in six years time there will be more than four. it is a sign of the times. it is interesting. the forecast just reinforces what we see going on. tepid growth, no prices.
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who better than tracy alloway who joins us now. we have craig with us through the open. kick us off, 10. >> it has got to be commodities. it has been a terrible week for commodities. some things but not everything. i want you to take a look at this chart in particular. this index shows futures prices. the index has had its worst four day run now since 2011. you can see a dramatic blip on the chart. the other interesting thing here is the cost of buying downside protection on commodities is at extreme levels now, which suggests the route might have further to run. scarlet: we are not at an inflection point. >> i'm guessing not.
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>> we have got to wait to see what they're coming up with tonight. >> a have not thrown everything they possibly can at it yet. stopping executives from selling their shares for six months people are still holding out hope. >> they're making it so as a company, you cannot even trade right now. companies are saying, let's call it trading. >> a lot of it has to do with the fact that companies have loans secured against their own share prices. you hear about individual chinese retail investors companies did the same thing. >> from my perspective in fixed income, everything is looked at how we affect treasuries. the way i look at it is i tried to figure out what the commodity move means to up the fed's thinking. the classic commodity argument of do low commodities like oil
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help the u.s. economy or does it make it more difficult for the fed with inflation? all of that affects treasuries, which is what i look at. >> number two, again talking a lot about chinese stocks today. i want to talk about chinese bonds for a second. all these companies have been issuing usually junk related debt. the chinese high-yield on index fell wednesday about $797 million worth of value has been wiped out of the index in under a week. a lot of these show up in the u.s. industries, which means that could have a knock on effect in the u.s. market as well. there is death the interesting thing here is people are liquidating the stuff that they can. they can sell stocks. let's sell bonds. stephanie: i want you to comment
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but i do not have time to arrive got to go to number three. classy heard a little thing about the new york stock exchange. stephanie: the bell is ringing and i'm hearing it. at 9:30, they were also clapping. >> it is clearly back up. there was a three-hour outage yesterday. just one of 11 stock markets in the u.s. and a bunch of other private trading's. this is bad dude -- do not get a-rod wrong, but there were a lot of alternatives for investors to go through. the complexity of the stock market actually and that up being a silver lining yesterday because we had all these alternative places to trade. >> was not even down compared to the 10 day average. >> it was not down at all. yes, outside where all the tv cameras were there was a lot of commotion. but inside, it was business as usual. >> right. yesterday was a good day to be
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over-the-counter traded. it seems to have all worked out well and did not have much of an impact from our perspective. >> you have a chart that shows how fragmented it is. >> you can see that things are fairly evenly split. everyone has about 11% market share. there is the chart. we are not completely reliant on one exchange. that said, i do not want to downplay the outage because it is a big deal and not good. >> it is terrible pr or it isn't. hold on. problems happen. things occur. what was different about this outage than we have seen in the past, the market was not really affected. they made quick decisions. they handled the situation very well, one could say. >> the other thing to remember is they got it back up through the close. the close is important. that is when we might have
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gotten a bit more of an issue because a lot of indexes are based on the closing prices. luckily for them, they fix it before then. but again, it could be a big deal. the problem with the glitches is you never know the cascading effects that will occur across the market. scarlet: i was reading it was because of a software upgrade. i think about this every time you have to do a little pinwheel moving and moving. the same thing happened to goldman sachs a year or two ago. he went up getting fined $7 million because of that. stephanie: thank you, tracy. he has got to turn to your own julie hyman, senior markets correspondent. moving at the open. one of the reasons it was very sad. >> i have not noticed this
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correlation. right now, you're seeing green. it looks like pretty much wiping out yesterday's's losses that china related selloff we had in the major averages that took down, as you just heard tracy talking about, a lot of commodity trading stocks in particular. we will see as many of the underlying commodities are rebounding today. the s&p in the dow and nasdaq are all well and the green as we get out of the gate. i also want to talk about individual stocks. cody will be buying 43 brands for $12.5 billion. the way this will be structured. about a week ago, we have already seen stock reaction.
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then of course, it is earnings time. from our business, it is earnings time. pepsi reported earnings that beat estimates and also raised its sales forecast for the year if you exclude the effects of currency. pepsi, like so many internationally focused companies, has been feeling the effects of the dollar. cutting costs to make up for that and for stagnant soda sales as well. the snack business is doing well. speaking of commodities we have got to look at alcoa. the shares are actually higher even though earnings missed estimates for alcoa. the sales rose just by 1%. i was enough for it to beat estimates put alcoa has been suffering from falling aluminum
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sales. there have been a lot of aluminum exports from china to all of it has not been good news from the company. this is a snap back from what we have seen as of late. scarlet: thank you so much julie. the s&p 500 posting their best days so far. it is still early. a big snap back. >> you think about how investors act, they want consistency. they want a firm idea of which direction they are going. they seem to get right left and center. stephanie: craig, you are closely watching specifically what happens with the bond insurer there. you have minimal exposure right now. craig: right. we have very minimal exposure to the uninsured part of the market.
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i think this is the first step of the process. they will discuss what is called the cougar -- the kruger report a former imf executive who a study and published a report and economy and budget. to cut debt across the board and renegotiate across-the-board. i think monday will be the first look. we have seen her view of the report and how we put that together. >> i know technically puerto rico cannot default, but assuming there is regulatory changes unless say they could. canned the market insurers withstand this? craig: we believe they could.
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puerto rico is not talking about not paying maturities. there talking about renegotiating debt. remember the bond insurers only have to pay principal and interest when do it if puerto rico for example stops making payments for two or three years, the insurers are not on the hook for the full $13 billion or so that they shared. they have more than enough capital adequacy and resources to handle that. scarlet: that is months down the road and we are not there yet because of the deadline. what does that do? craig: so far, the fund flows had been muted. it was one point $2 billion of negative fund flows, larger than what we have seen in a while. historically, it was that big a deal. this has been well telegraphed. i know we were in pretty regular
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contact with shareholders to try to give them as much information as we have on what is going on puerto rico. a lot of other companies are doing the same thing. this is well telegraphed. stephanie: for the most part are the mom-and-pop investors as you said, it is well telegraphed, have they rotated out so they do not face this exposure, or are things going to get worse and puerto rico and suddenly we will say, retirees and people on fixed income lost their money because puerto rico? greg: i think a lot of mutual funds like ourselves do not have a lot of exposure to the puerto rico market right now. i think over time, you have seen a lot of individuals moving out of individual puerto rico bonds. you see a lot of various -- very small trade in a market, probably retail people getting out to you have seen that in the last year to two ears.
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i think a lot of retail has got out and a lot of mutual funds are at least out of the way right now. scarlet: our stress investors more or less readable then? greg: i think they are a little less editable. i think they will probably be at the meeting on monday. it is open to all creditors across-the-board the board. it will be interesting to see that dynamic of traditional investors with stress investors all of the same room with different agendas at the end of the day. and the governor. >> that will be a stressful morning for the governor. stephanie: craig brandon, codirector of municipal investments. scarlet: coming up, olivier blanchard will be's began with tom keene at 10:30 a.m. eastern time this morning. the imf is reducing its global growth forecast because of headwinds like greece.
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>> welcome back to her will check in with julie hyman. so far, it is off to the races we go. julie: yes indeed. it was looking like the best day since may 8. despite all that went on yesterday with the closure, it was a pretty steady trading day after an initial drop. it pretty much held to the declines of the day and we're seeing a rebound here. a pretty incredible rebound in terms of breath. take a look at my bloomberg terminal. i think it is notable. it is all green.
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all of this is the group in the s&p 500, the sectors in the s&p. last time i checked before i cannot here only seven stocks in the s&p 500 were down. three were unchanged. in other words, remarkable up volume and up ref in today's session. what was lacking yesterday energy and materials with commodities come the underlying commodities rebounding today and the stocks are as well. gold was down yesterday even though copper was rebounding yesterday up today finally by about were percent. dow chemical is rising by 2% and the energy stocks are higher as well. we saw a five-day slide in oil prices finally rebounding today and the energy stocks are as well. chesapeake has been hammered recently. it has got a number of cell recommendations by analysts and did not perform well. southwestern energy we are
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really seeing a role reversal in today's session and we will see if it will last. we are only a few minutes into it. >> what i love about this market, it is not, markets are going in one direction. i hate the phrase separating men from the boys. you have got to be a real investor. these are treacherous waters and you're in the deep end. if you're going to buy it, i like this. if you are, that is trickier. >> that phrase, the men from the boys. >> the women from the girls. >> i would like a better one, help me. >> faulty airbags prompted honda to bring back -- none in north
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america. almost 25 has killed eight people and hurt 100. yahoo! brings to mainstream. the website offers betting on sports, illegal outside vegas. it gets a pass in pro league skill. to be us. speaking of battles, videos go head-to-head for summer dominance and there are two clear winner's far. universal and disney. $4 billion in domestic growth to the question is, can it continue with the box office momentum? for universal, 1.1 billion for disney. this is a temporary thing? far from it. what is the next big event for
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universal? what does it have to hit the ball out of the park with? daniel: it is doing's extremely well it is a franchise that has done well the past. >> people really like them. i have three children. do i know the minions? i felix they are my other children. when they come to these types of films when it comes to films like this, the movie ticket price is one of the many ways they could cash in. daniel: it is it we are having different levels of pricing then you would have on an airplane or at a sports stadium. they charge a little bit more
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there are different premiums in play. stephanie: how many things are people going to buy? you know the answer to that. >> do not go there. >> is there another one i can choose? a movie like minions you're going to have people by the t-shirts and buy the products and buy the dvds. i cannot believe i chose the 50 shades. daniel: the merchandising is a great opportunity. the world keeps films in the minds of the public even when they are not at the theater. scarlet: i think about the franchises that disney purchased pair marvel, movie films, pixar, these are cemented in moviegoers heads. minions aside, they cannot go up against the spider-man, can they?
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daniel: we are looking at how marvel has grown its rand. spiderman is prime real estate for sony. the films really have not worked with audiences. something like guardians of the galaxy a talking tree and a talking raccoon. we expect "ant man" to do well. i didn't know what that was. >> does a bad review matter? you talk about movies like the minions. >> there is no one in my house is says let me check out the review of minions before i buy my tickets. as opposed to midnight in paris. >> you have films like american sniper and abuse views are strong and people are responding to it. it made just as much money as
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furious seven has. an r-rated movie that has a lot of different opinions riding on it it has proved to be just as successful here at home as something like fast and the furious seven. scarlet: thank you so much. stephanie: i will let scarlet take us out. all i have done is hurt myself. scarlet: we will be back. ♪
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stephanie: let's look at some of this morning's's most compelling images. picture this. they're so good, we had to bring julie hyman back to get in on this 30 better get ready. these perfect pictures come out in print tomorrow. i've enjoyed seeing some of them already. the body issue comes out tomorrow.
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>> the washington nationals outfielder may be the best baseball player in the league right now. bryce harper is covered in dirt. we got old dell junior right here and you remember him doing that back then for the giants last year. that right there if my body could look anything look -- like sean k, i would try. >> you are working toward that goal. >> bloomberg tv is working on some row boosting and teambuilding. we may be inspired con -- come september and october when we are done here the body issue. scarlet: the cheerleader and
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architect of the challenge. she is sitting on set. >> for anyone, and you know you are, who has not been getting your workout in, just wait. public shaming on life tv. >> that will be a future picture at the end of the challenge. we will bring in all the hot rods. take a look at this. this is totally not's. -- one of the most technically challenging base jumps ever. he flew through the swiss alps with a go pro on his helmet. he hiked 45 hours to get to the launch spot it i would say he had one chance to get on it. [indiscernible] >> it was very dangerous. there was a great story that was really interesting about two jumpers who died jumping.
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the girlfriend was watching from far away and could not entirely tell what happened. it took hours to piece it all together. >> if you are a base jumper by hobby, you are clearly a junkie. you know the risks you face and probably cannot get life insurance as well. >> it makes me think of go pro. if go pro owns the contact, i would pay for it. stephanie: scarlet, thanks for being here. julie. we will see tomorrow. -- see you tomorrow. ♪
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u.s. equities climbing after one of the worst days of the year yesterday. investors have a close eye on athens and shanghai. >> the imf cutting its citations for growth. we will hear from the chief economist, olivier blanchard:. >> and ducati sales have doubled in america. we will ask the ceo what is next,. . scarlet: did morning. matt: a big drop yesterday and a lot of news.
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