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tv   Bloomberg Markets  Bloomberg  September 30, 2016 2:00pm-4:01pm EDT

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vonnie: where live at bloomberg world headquarters in new york over the next hour covering stories out of san francisco, houston, and frankfurt. which might shares recovering after reports it is nearing a $5 billion settlement with the u.s. department of justice. pressure sinceer it opened a probe type 2 mortgage-backed securities. opec in a price war with u.s. producers. whether that translates into a victory for the u.s. remains to be seen. we head to houston to find out. with a few weeks until the election, both campaigns are facing criticism. donald trump getting hammered for early-morning tweets while questions are being raised again over hillary clinton's speeches to wall street.
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markets close in about two hours. let's check on where things stand. it is the end of the month, final trading day of the quarter. to dow is up 190 points finish friday close to where we began september. it is the same for the s&p 500. that brings us right around to the beginning of the month. day,asdaq having a nice .9% higher. there is speculation of deals. to go through some of the individual sectors, the banking index and major banks is what we have been concentrating on most of the day. deutsche bank has rallied up 15%. at one point, we saw a down 9% in german trading. this is on speculation the department of justice may fine deutsche bank like $.4 billion.
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citigroup rallying and bank of america. next is notbanks include deutsche bank but there is a follow-on effect. let's move on to other movers making highs today. amazon.com up 1%. qualcomm up 1.9%. check on the bloomberg first word news. david: mark? mark: hillary clinton wants to enlist 5 million millennials in the national service reserve. pierce, florida, sector a clinton said members could be called up to serve in emergency relief and national disasters. she also discussed one of the top issues facing millennials, student loan debt. hillary clinton: my plan to help you refinance and pay back your student loans includes loan forgiveness if you want a social
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enterprise or start a business in an underserved community. struggled to has attract overwhelming support among young people. this week, she turned to bernie sanders in an effort to connect with millennials drawn to third-party candidates. new york's attorney general says the trump foundation is not registered as a charity to solicit donations. eric schneiderman is not saying it donald trump's foundation violated any laws. the organization is a charity. but new york state law requires a different registration to solicit more than $25,000 a year. the issue was first reported by the "washington post." the trump campaign has not commented. in south carolina, a 14-year-old boy accused of killing his father and wounding three people during a school shooting has been charged as a juvenile. the unidentified suspect is accused of murder and three counts of attempt to murder.
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one of the victims, a six-year-old, is hospitalized in critical condition. italian police have found two gogh painting stolen in 2002. they were hidden in a farmhouse. the paintings are in relatively good condition. art experts determined they are authentic. 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. vonnie: thanks, mark. u.s. consumer confidence rose in september, the first gain in four months according to the university of michigan index. consumer spending was little changed in august. about this as well as the outlook for the federal reserve and central banks around the world. we have the cofounder and partner at cornerstone macro.
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very happy to have you in these interesting times. we have 14 federal reserve speakers this week. did we take away anything from what any of them had to say? >> i don't think we learned a lot new. the important information we 14 out ofst week was 17 suggested a rate hike this year. there were three dissents, which was interesting from people in the middle. i think the best case is december probably we will see a rate hike. i think the speeches this week confirmed that on balance. david: let's talk about the data we got this morning that the fed will be looking at closely i am sure. the spending numbers were stronger. >> the spending number, i think the totality of the data points,
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pointsing we got today to the u.s. economy being more or less on the same trend it has been for the past six years. it has been growing at a 2% annual rate for a number of years. i don't think there is much evidence it is better or worse. this is more or less in line with the fed's forecast. i don't think this comes with any surprises for the fed and leaves december on the table. vonnie: we still have the argument over productivity and whether the fed may have waited too long. where do you stand? did the fed wait too long? do we get a pickup in productivity and when does it come? >> it is hard to look at the data and save the pickup in productivity is around the corner unfortunately. the fed talks a lot about the neutral rate the low. productivity being low is the main reason that is the case.
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low productivity does not argue for not raising rates. it argues for going very slow, which is what the fed has done. just two rate hikes as a best case came down a year ago. the fed is beginning to recognize this. david: donald trump has levied an allegation the fed is acting politically. i wonder the degree to which the policymakers take politics into consideration. we hear that the fed is a neutral body. would you say that is completely true? >> it is hard to believe for people that have not been inside the institution, but it is true. i have never, ever saw the word politics, elections, or anything come up in official deliberations.
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unfortunately for the fed, what matters most of the time is perception more than reality. clearly, the perception among fed iscans is that the acting somewhat politically. it is not. but i think what is helping these perceptions is the fact that fed communications, the rationale the fed has offered, has not been clear and has been shifting from meeting to meeting. i think casual observers can be forgiven for thinking maybe there is some politics, but there really is not. vonnie: people forget ben bernanke was a bush appointee who serve happily under president obama. different administrations come in at different times. talk about japan and yields. helicopter money we thought was
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on the way. it is not but we are getting this new idea of abandoning the 2% target of inflation and trying to control the curve. will that work in japan? could it be exported somewhere else? >> i think the communication that the bank of japan is trying to achieve in excess of 2% inflation was a weight to communicate to the world -- a way to communicate to the world they are committed to the policies they are pursuing them. it is not that they think it will be easy to get there, but they want to communicate we are continuing this policy for a long time. i would also say the fact that the balance sheet is already 86% 100% ais going to exceed year from now and will continue to grow. it is going to remain constant after eventually it stops growing. i would say that is a form of helicopter money. the central bank holds
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on its balance sheet indefinitely, the government does not have to worry about it. it does not have to sell it to anybody else. the interest is paid back to the government. it is as if that debt was canceled. reinforced the boj last week is an open invitation for fiscal policy to come into the fold. i think that is good news because we have heard a lot of observers saying monetary policy is not enough. here we are. this is a big incentive for fiscal policy to come into play. david: larry summers is in japan. in a speech last night, he suggested the fed might consider buying equities. what is your sense of how good a policy that might be for central banks to pursue purchasing of equities going forward? >> aside from the merits of the policy, the federal reserve act i don't think allows the fed to buy equities.
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they would have to change the law. in general, i would say central banks have been reluctant to buy equities. the bank of japan is doing it in a very small measure. i don't think many others are doing it. i don't think it will be considered. vonnie: roberto perli, comebacks in. david: coming up, harvard is in someone whog has done it before for another ivy league institution. this is bloomberg. ♪
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vonnie: this is bloomberg markets. i am vonnie quinn. david: deutsche bank shares are
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jumping the most in six months on a report the bank is nearing a $5.4 billion settlement with the u.s. justice department, less than half the amount initially requested. is a reporter. i want to ask about the timing. we had the $14 billion number. it was said this would be a long process of back-and-forth. it seems it may be accelerated. >> i don't have any indication they are days away. there is a process going on. the first number is a starting point for a conversation. it can be used to send a message. it may not be anywhere near the amount sought. before the number came out, there was a $2 billion number in the german press. it might have been a response to that. we don't really know at this point. it is moving along. vonnie: anyone can put a number out and it becomes an official
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number, whether it comes from the justice department or a lobbying office. we don't know until the justice department officially comes out and says this is the fine we are putting on deutsche bank. >> this is a negotiation. there was a task force created under obama. one of their jobs is to deal with the mortgage related security issues. i think they are motivated. many would like to wrap this up this year under his administration. this.re moving along with credit suisse and barclays are in this batch. i think they would like to expedite them. i don't have any sense they are moving on political grounds. the reason it is different for deutsche bank is because there are so many other things going on. will it raise capital? there are other questions floating in the market. this is one of several investigations and negotiations deutsche bank has to walk through. david: thank you, winnie o'kelly
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with bloomberg news. vonnie: it is time for our look at some of the biggest business stories in the news. subaru recalling nearly 593,000 vehicles for a second time. the reason, windshield wiper motors can overheat increasing the risk of fire. the recall affects models from 2010 to 2014. dealers will replace the motor cover at no cost. qualcomm has held calls for several potential acquisition targets. acquisitionseeking to strengthen its position in a rapidly consolidating industry. the deal could be valued at about $35 billion. david: harvard has named a new c.e.o. for its endowment, the biggest in higher education. he has led the endowment at columbia university the past 14 years.
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joining us is michael mcdonald who covers the harvard endowment and academic endowments closely. what can you tell us about him? what strategy did he employ at columbia? can we expect him to bring that strategy to harvard? >> the man of mystery, the reluctant candidate. this was his second go around. he was in the running the last time they were looking for a c.e.o. in 2014. they pulled his name out toward at end and kept added columbia where he is known for putting together a great team and probably best known for guiding the endowment at columbia three difficult time 2008-9 coming out with among the best returns among its peers and delivering top returns throughout. not only matching yale but beating and matching its peers through some difficult times as
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well. vonnie: the return in the last year is -2%. in fairness over 10 years, it is not performing badly in comparison to peers. up 5.7%. >> that is harvard. we don't know what columbia's returns are yet. they have not given it to us. we are waiting. the story about him is here is a guy who comes from j.p. morgan. he was an equity/derivatives specialist there for 14 years. he is a wall street veteran. he went to work at penn and was recruited by columbia to overhaul their portfolio in 2002, take it from something old and dusty and not doing well to something that was modern and could match places like gail and harvard. he has done that. harvard needs someone to come in and overhaul its organization. harvardhe president of
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sat down with the student newspaper and said we want to look at what yale has been doing and try to emulate some things that institution has been able to do successfully. describe the difference in how the endowments operate. yale mostly runs things in-house. >> this is part of the issue. i think one of the things people is ao me is that narv brilliant guy and if you let him do what he needs to do, he can be successful. board meddling and telling him what to do, you have to look at the problem harvard has had. it has had seven c.e.o.'s in the last 10 years. that is clearly the issue. there's something wrong with the operation over there. turn things around, according to people i have talked to. he is a brilliant guy. whether they need to be more
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like yale, that is up to narv to figure out. what yale does is similar to columbia. but he has his own expertise. he is known for doing things a little differently than yale, even though he does focus on outside managers like you and other endowments. david: thank you, michael mcdonald from boston. vonnie: for investors are promised green cards if they put $500,000 into vermont's poorest regions. now they are wondering where the money went. we bring you that story. this is bloomberg. ♪
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david: the government program
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allows immigrants to get their green cards. the faster weight to become an american would be to marry one. aephen barfield shines spotlight on what could be visa fraud in northern vermont. >> he was the c.e.o. we will get into that later. spoiler alert. he was the c.e.o. of a ski resort in northern vermont. >> a big one. >> just a few miles from the canadian border. gets a ton of snow every year. it was kind of a downtrodden place until he figured out a way to expand it. that involved a government program. 5 program is designed to help rural areas like northern vermont create jobs. it also gives foreign investors a way to potentially get a green card. they invest in these areas.
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if the project they invest in creates 10 jobs, more or less, they get a green card. >> let's bring in pedro. this is an individual in caracas, wanted a better way of life for he and his family. >> they suffered a lot of violence, as so many people there have. they were looking for a quick way out. through an immigration attorney, heard about these projects. by the time he got involved, stanger and his partner decided and take into biotech over and renovate this entire city of newport, which is about 20 miles from jay peak. >> pedro and his family leave caracas and invest how much into the resort? >> they invest $500,000. >> they sell everything
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they've got. >> they sell their home, empty the retirement account, uproot themselves, take their daughter, and moved to florida. $500,000 ind the what is supposed to be this biotech project which is going to revitalize newport. that was in september of 2015. he does not exactly work out like pedro hoped. and youdid not know, could argue maybe you should have or his immigration attorneys should have known, that there were a lot of suspicions swirling around jay peak and his new biotech center by 2015. sec got involved and it was revealed they had been investigating the resort for almost two years at the point brito invested. david: you can read more about
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his story in this weeks edition of " bloomberg businessweek." thecan your more from reporters every saturday and sunday on bloomberg television. vonnie: we will take a look at where crude will and the week a day after opec countries reached a deal. weighs in on the opec production agreement and what it means for his future investments. you are looking at the dow jones industrial average up 1% and the s&p 500 up 1% as well. this is bloomberg. ♪
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vonnie: from bloomberg world headquarters in new york, this is bloomberg markets. let's have a look at where
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things stand starting with agriculture. headed for the biggest gain in two weeks after stockpiles trailed estimates. bad weather hampered crops in south america. up more than 2%. sugar is retreating from a 4.5 year high. a report from brazil saying sugarcane declined in the first half of september. down 1.5%. lead on the london metals exchange, it is extending gains pacing a rally in industrial metals. improving demand in china helping. china is the world's biggest consumer of lead. wti has been fluctuating today ,ut we are above $40 a barrel .6% of again after opec
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countries reached a deal to cut output. we saw that major gain yesterday. , 3926.g the bloomberg this is what you will see. the chart shows the relationship between oil production and oil prices. you can see they are going in opposite directions. that is production over there. since west few days have had the agreement, prices are moving higher and production is continuing to move higher. shale producers perhaps responsible for that. i think we will investigate that next. david: let's focus on how the opec agreement can affect companies. let me ask you about this agreement from opec. there are a lot of days until november 30. how sure are you that this will come through? >> good question. we don't have an answer from opec. the headlines are that they have
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agreed to cut. the reality of the announcement is it looks like the brother has gotten his other brothers and sisters to agree to something in the future. basically, they have agreed to work together in the future. there is a lot that will happen between now and november 30 before we have an actual agreement. is it a production cut? how does it get implemented? we are several steps away from seeing supply come out of the market. one thing we do know is u.s. producers benefit from higher prices. there is a lot of resource that can be captured for every dollar oil prices go up and stability. one thing they did say in the press release that we think is good for u.s. producers is they are committing to a stable market. that means they will emit to doing things to lower volatility in the market. that means u.s. producers can invest with more certainty going forward. vonnie: what do you do with that kind of bump when you are making plans for the future? do you spend? do you try to get in early? >> it goes back to the stability
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comment i made and what confidence you have an oil prices. the reality is the worst is probably behind us and now we have opec stepping up to act to support prices on the lower side. from a u.s. perspective, it means you can have more confidence in the future. what does that mean if i am a u.s. producer? the first movers are putting money to work. you will continue to see that. we saw that today with the rig count up seven. over 100 in the last two or three months. if you think about that annually, that is between 10 and $20 billion depending on where we end this year going into 2017. we will be spending more than we were at the bottom. that is a lot of money put back to work. companies cut more than they wanted to in a $30 environment. and you are seeing them snap
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back fast as we see stronger prices and have confidence. what we need to see is a breakthrough above $50. then it is everybody has more to do. you will see all companies begin talking about where they are going from here. it is in the 50-60 range we go back off to the races around $60. david: you mentioned a big variable is helping the opec production cuts could be. i have seen 7000 bandied about. what difference would a number like that make? >> we were expecting higher prices in the fourth quarter. we were expecting around $50 oil. we were expecting a tight market into the second half of next year. all that does is pull us forward. where we were expecting a 55-60 environment next year, this could add about $5 per barrel to that handle. when we think about $5 movement, what does that mean from a u.s. cash flow perspective? that is $10 to $50 billion in
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additional cash flow. that is a lot more money to put back to work. not many are cash positive. for some of them, it helps them get back. it supports the reasoning into why you will spend more going into 2017. vonnie: thinkers will be happy. what about the permian basin? do they spend more now? and spendabilize elsewhere? >> will and gays is a real estate business. has withstoodsin this downturn the best in the capital markets have been the most supportive for permian producers. most people see a growth story out of the permian. you see things that look relatively strange where a company can make an acquisition with equity and see equity appreciation in the same day. there is an asset class world. there are some percentage that wants to be in energy. there is some percentage that
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was to be in energy growth. if you are looking for growth, it is in the permian basin. the markets have been supportive. we will seal more deals in the permian -- we will see more deals in the permian. there are about a dozen producers that matter. there are 22 dozen that matter. thatve about 300 companies have done well in the permian the last four or five years. there are 100 companies that matter from a supply perspective. it is a lot more diverse. you will see companies compete for resources and services. we expect costs to move faster in the permian. you will see service companies clock more to the permian. we will see continued supply growth out of the permian. it is what is turning it around for the u.s. permian with the activity increases has a most flattened the decreases out. we will go back to growth in the u.s. david: thank you.
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vonnie: david foley is sitting on a $5.5 billion he has to spend on energy in the next four years. he deployed nothing in 2015. this year, he has committed more than $1 billion in the permian basin and is buying power plants from american electric power. earlier today he was asked what the recent opec agreement means for his future investments. it was an agreement to study it and come back in november. also notable for what was not included, the carveouts of libya and nigeria were important. libya can bring a lot of incremental production, over one million barrels a day. russia was not involved. i think there is a lot of potential barrels excluded. it is easier to talk about a freeze after you have raised production to its max. one reason they could not do this in november 2014 was because they had a lot of spare
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capacity. the gulf states have increased production by 3 million barrels a day. it is easier to negotiate a freeze when you don't have to hold at a level that is much below your effective maximum. >> you are skeptical. for your investment, does that change what you are able to buy? >> it may. hope wins out over fear, and it is a constant battle in the energy business. valuationse expectations and cause some holders of existing assets to delay or perhaps not get a deal done. we are not a hedge fund. we are investing long-term. we are building assets. we are trying to mitigate risk. we have management teams. we usually have a friend of -- affirmative control of the business. we are playing long ball. this does not really change our long-term view of oil prices. i think the discussion was not
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from a position of strength. u.s. shale production was more resilient. we have had huge cost deflation and productivity improvements and permian basin production up 140%. how was a surprise to opec, resilient u.s. shale is. the part that is getting hit the hardest by low oil prices which are conventional and offshore, those take four or five years to come online. we have not even seen the impact. there are things coming on next year that were conceived in a higher oil price environment. i think the saudis realized it will take longer for the rest of the world to blank. they are looking at freezing or cutting a little bit. if they can cut, let's say they cut or freeze one million barrels, they will lose $40 a barrel on that. if they raise the price by $5,
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that is $160 million incremental. net, they are making $120 million a day. vonnie: that was david foley. let's check the headlines. mark crumpton has more from the newsroom. mark: officials say the investigation into thursday's deadly train crash at the hoboken station could take at least seven to 10 days. national transportation safety board investigators have recovered the event recorder. they are hoping it will tell them how fast the transit commuter train was going when it smashed through a concrete and steel bumper and landed on the train platform. one person was killed. more than 100 others injured. the commission on presidential debates now says there issues with donald trump's audio during the first presidential debate on monday night.
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according to a one-sentence statement on its website, the commission writes that there were issues with donald trump's audio that affected the sound level in the debate hall. trump said his microphone during the event was faulty. a homeland security department official tells the associated press hackers have targeted the voter registration systems of more than 20 states in recent months. in august, the f.b.i. warned state officials to improve their election security after hackers targeted systems in illinois and arizona. u.s. officials say election systems are generally not connected to the internet making it harder for hackers to alter election outcomes. a woman whose husband was killed at the pentagon on 911 is suing saudi arabia. the lawsuit comes two days after the u.s. congress enacted legislation allowing the filing of such cases against foreign governments, overriding a veto by president obama. actionan who filed the
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alleges the kingdom provided material support to al qaeda and its leader. saudi arabia denies any connection to 9/11. news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. vonnie: thanks. coming up, the latest on the race for the white house including controversial early morning tweets from donald trump attacking a former miss universe. this is bloomberg. ♪
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david: welcome back.
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a lot to talk about in the presidential race. donald trump making headlines with a flurry early morning tweets attacking hillary clinton and former miss universe. tweetsask you about the fired off in the early morning today. i should ask about the role she's playing in the election. she was invoked by hillary clinton the first debate. there is a lot of longevity in the story. >> she has become a surrogate for the clinton campaign since clinton mentioned her name at the debate on monday. there have been several interviews that have kept her name in the news headlines. really, it is donald trump that has kept her in the headlines because for the last three days we've seen him making statements about her weight. overnight, he was tweeting about her past, referencing some things she has done in the past that he believes are "disgusting." he is taking her on an attacking her.
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it shows when donald trump has someone in his sights, no matter who the person is or how much it takes them off his message, he is going to counterpunch and go after that person. that is what we saw in the tweets overnight. it has taken control of his campaign for the last four days. the cannot get back on message as long as you talking about the former miss universe from 20 years ago. vonnie: he is already smarting from having lost the debate, at least in polling after the debate. you have to wonder if this is not a very good tactic on the part of somebody who wants to bring trump down. himhis campaign calm down enough to start ignoring this again? >> if you look at the timestamps on the tweets, it is clear this is when he was alone, away from his campaign managers who have tried to mitigate some of his tweeting and keep him from saying things that are incendiary. in the middle of the night, he clearly was able to get away from his handlers and tweak what was on his mind.
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it is difficult with someone well-known for making very harsh comments on twitter, it is difficult for his campaign staff to rein him in. i think that is something they are trying to do leading up to the next debate where they want him to be more focused and not get baited the way he was by hillary clinton on monday. david: after the first debate, donald trump did complain about his microphone. the commission on presidential debates issuing a statement this afternoon saying there were issues regarding donald trump's audio that affected the sound level in the debate hall. that last part seems significant to me. i did not notice anything wrong with the microphone. how big an issue is this for the trump campaign? >> this is going to be in opportunity for trump to say i told you so. he went further and said he was wondering whether there was tampering going on. for all of the millions of people who watched the debate on tv, they could hear trump and
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there was no sign of audio issues. he did say in the hall he was having trouble. with maybe one way for him to shift the focus from the miss universe issue to talk about the microphone and push that conspiracy theory that maybe someone tampered with his microphone and that impacted his debate performance. theas been saying he won debate and has no reason to feel he had any trouble or problems. he has been pushing some online polls that have him leading, unscientific polls. most of the scientific polls show hillary clinton won by a wide margin. vonnie: can i ask about the reaction to the decision can [indiscernible] we saw the first civil suit filed on the part of a widow, a 9/11 widow. >> congress, shortly after
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overwriting the president's veto, they are starting to backtrack. they are having some buyer's remorse looking at ways to mitigate this bill and fix some of the unintended consequences. obviously, the white house vetoed the bill and are saying i told you so because now congress is seeing unintended consequences with our relationship with saudi arabia and other countries. the white house is saying you should have never passed this bill. you should not have overridden the veto. now that congress is on recess, there's not much that can be done. we will see if after congress comes back whether they can work something out with the white house. right now, it seems the lawsuits will go forward. congress will have to deal with the unintended consequences of the bill they passed. david: thank you very much. vonnie: it is time for our latest bloomberg business flash. -- the technology lets
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online shoppers pay using the internet bank. that cuts out middlemen for buyers. it follows the company's expansion to 21 it's -- new markets. it is close to selling its nonperforming loans platform. the bank will transfer management of almost 10 boeing dollars worth of loans as part of the deal -- $10 billion worth of loans as part of the deal. that is our latest bloomberg business flash. david: apple and island are getting ready to fight back. there is a possible court case. we will look at the argument the tech giant plans to make. this is bloomberg. ♪
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vonnie: this is bloomberg markets. i am vonnie quinn. david: apple and ireland are preparing to argue the eu kept them in the dark over an investigation. bloomberg has learned they will contend investigators made a u-turn during the probe and never communicated the change. we are joined by alex webb in san francisco. explain what apple and ireland are alleging. what kind of change in course to the european commission make? >> without going too deep, essentially the nature is such the complaint initially for the commission as it was laid out in the first decision, saying there were irregularities with apple's tax payments. they characterized it as one kind of irregularity. isspers behind the scenes there is a belief in the apple and ireland parties they changed
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the nature of the irregularity because they felt it would be easier to attack. that is the words my colleagues in europe are gleaning from people. i guess it is being played out in the courts. it is going to take years. one of the officials mentioned four years at one point. >> we have heard as much as six from some people. as anything in europe on a regulatory level, stuff moves slowly. it has been a number of years since the initial decision was made in 2014. the next thing will take weeks until the file an appeal to the decision. that is just for ireland to file an appeal. there is a long way to go in the process. david: a bit of déjà vu for the general counsel at apple. he formally was the general counsel at intel. he waged similar fights back
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then. >> they do have an experience to fight her in the ring. he was at intel as the general counsel before joining apple in 2009. he made a similar defense when he was at intel, that intel was kept in the dark about the european commission's proceedings with that company. there is a strong sense of déjà vu for him and perhaps people on the commission side. vonnie: are apple and ireland working together on this? are they melting completely separate defenses? >> they are fighting in the same corner. ireland want to take a $14 billion tax payment? argumenta more complex that ireland does not want to dissuade other companies from investing in the country. they are working together as far as we know.
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the first stage coming up is that ireland will file its appeal. it has until november 10 to do so. when the final decision is published, some things will have to be redacted before that happens for competitive reasons. apple has a set time to file its appeal. there are separate appeals for the country and company they can make independent of one another. vonnie: alex webb, thank you. you can get all of the top headlines on "bloomberg west." david: coming up, the third quarter is drawing to a close. u.s. stocks are on track to post gains. this is bloomberg. ♪
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quick since 3 p.m. in new york, 12 in san francisco and a p.m. in -- 8 p.m. >> this is bloomberg markets.
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you life from new york -- are live from new york headquarters. this is the final hour of trading and the end of the third quarter is inside. u.s. stocks are on track. posting gains despite losses in september. questions of a capital alarmed investors while shares of deutsche bank are rebounding. we explore the impact across all assets. deutsche bank is not the only shop struggling. shaun matthews on the new normal for wall street. let's get a check of the markets. >> and want to show you what has been happening in this last hour of trading of this last month. of 1% across the board and this is a turnaround from yesterday 1%n we saw stocks fall by
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across the board as well. we are seeing a recap and recoup of what has been happening over the past day or so of trading. i want to show you what has been happening in terms of the sector health of the s&p 11 sectors. function is here. energy stocks were up 1.1%. and goldman sachs up. let's see what is happening with deutsche bank. promise 15%. we have been reporting what is happening according to afp talking about a potential settlement with the boj. much more than the $14 billion that had been reported. also doing well, consumer stocks on the move and on the move higher. costco beat fourth-quarter estimates, up today and kroger
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and walmart. consumer sentiment data came out better than expected. 91.2 instead of the expected 90. let's do a quick september summary. the dow is down by one third. the s&p 500 is flirting with the negative/positive range. nasdaq doing well, 2%. we are talking about record levels for some tech darlings including amazon, google, and facebook. let's show you what has been happening in terms of the function for the s&p. you can see the past two septembers, it had been in the negative. this would be the first and the best s&p performance for september in the past three years. back to you. is time to check the
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headlines. mark: hillary clinton's electoral college fortunes appeared to be improving following the first debate with donald trump. she is up six pence -- six points in nevada. leading trump 44% to 38%. nevada has six electoral votes. the poll indicates clinton won the first presidential debate 57% to 23%. another endorsement for gary johnson. this time from the chicago tribune. the newspaper says that donald trump is "not fit to be president of the united states" and says hillary clinton is" undeniably capable of leading the u.s. but it can't endorser due to serious questions about honesty and trust." endorsed byto -- the detroit news on thursday.
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leaders went to general some for the funeral of prime minister shimon peres. bill clinton was the u.s. president during that time. off asnton: he started israel's brightest student and became its best teacher and and it up its biggest dreamer. years in a state of constant wonder. over the unbelievable potential of all the rest of us. spokepresident obama saying that hope is at the heart of the zionist ideal. two van gogh paintings were stolen from an answer to dam museum in 2002 and were hidden in a farmhouse near an organized stronghold ine naples. the paintings are said to be in
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relatively good condition. art experts determined they are authentic. global news 24 hours a day, powered by more than 2600 journalists and analysts in over 120 come -- countries. i am mark crumpton. this is bloomberg. vonnie: shares of deutsche bank around this time yesterday, some hedge fund clients had reduced their exposure to the bank and that said shares to a record low. today they are recouping some of those losses with the ceo, calling concerns in alleged -- a letter to employees. for more on the whole thing we are joined by mike regan. it is one of those purity stock market stories. somebody says something, investors overreact or get out of positions that they have been waiting to get out of and then something else happens.
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mike: obviously when you take the news at face value yesterday , 10 hedge funds are pulling back, access collateral may be pulling some derivatives. it makes you think what is this the -- what is the big do with that? stuff and rhymed with the that happened in the financial crisis when collateral was being pulled all over wall street and the liquidity was -- this was not at that level but you are seeing collateral in the headline in reference to deutsche bank spooked people completely. deutsche bank to some degree is a bit of a black box to most investors. it did not help when the imf said they pose the biggest systematic risk to the banking sector. without really going into much detail about what they meant
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other than $50 trillion in derivatives which i think a lot of people cannot wrap their head around what that means. the settlement today, the news that the settlement would be about 5.5 billion dollars compared to $14 billion allowed everyone to exhale. was debunked quickly. this one was not. david: talk about the timing. the announcement of the $14 billion number is more than a week old. why did this come to a head yesterday? mark: deutsche bank has not had a huge impact on the u.s. market but it was that worry about collateral being pulled. it makes you wonder, what will that cause, will there be a chain reaction where other funds will hold collateral, will regular depositors get nervous a cell first, think about it later movement. juste: you're not talking
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any names, it was millennium. let's have a look at the charts. -- [indiscernible] of an seeing a little bit improvement. not that much of an improvement. we are not seeing much of an improvement there. people still do not want to own the debt or equity, do they? mark: they are fascinating. they are the convertible bonds. this was europe solution to the thats, so the securities are dead but in real time of crisis if the capital levels fall too low they convert to equities. i think all year there has been a rethinking about whether or not these were a good idea. i think they were under stress earlier in the year. -- some of the plant sales are put off.
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there is a big rethink going on about what a great idea these were. mike reagan, gadfly columnist, thank you. we will talk to you soon. david: bond markets are rebounding. the s&p index working at its decline for the week. a global market strategist. ceo was not concerned for what this means for u.s. banks. what is the broader effect on the financial sector? support for financials is not there. there were hopes that rates would increase, we have seen the episode. central banks continuing to ease and european financials have in weaker than u.s. financials. a little bit of a quality play between this two sectors. speaking for the sector broadly it is hard to see where the support will come from going
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forward. except they are a lot deeper. if you believe that the sale, there is a restructuring plan underway almost all of them as far as i can tell. at some point they will function again where are they? t-rex i agree. if you believe in the strength of the u.s. business cycle continuing to trenton along, it is cyclicals and financials especially since the have been in love today. david: it seems like there is a clarion wringing out about fiscal policy. what is your sense of the likelihood of that happening domestically and abroad? just: with respect to central banks they are not out of tools, they are out of the zip is. they have been out of those tools that push market into euphoria. we're looking to see -- to fiscal stimulus to fill that gap. very high. are
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the scope of fiscal stimulus, it would come under question. i do not they will be able to pack the one to pinch -- the one-two punch that central banks have. stimulus isk guaranteed to be taken well by the markets unless it is the right type. vonnie: where are your clients inclined to go now, when they ?ome to >> we believe in diversification. the fixed income equities we would say it is on balance. we like core, we do not see rates going up anytime soon. i also think you have to look at components of your fixed income portfolio. a search for you can be done in a responsible way and whether that be emerging-market debt or european high-yield, there is ways to do that and i would say a diverse way so it is not so concentrated. not just in dividend payers. write about the
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restoration of fundamentals, we're looking ahead to the fourth quarter. what do you expect to see in the equity space is to mark guest: you might see a change in market leadership. dividend payers have outperformed. when we are very young we are talking -- we're taught to not run with scissors. investors are running around doing that. at some point that has to unwind. we like cyclicals from that sense especially since they are cheaper. vonnie: what about other things like real estate, how much of a portfolio, what looks attractive to you for anyone's portfolio? >> a thing from an equity perspective you want to go to the places where there is undervalued in the market and that is not in the defensive, not in utilities. we're looking at dividend growers. clients we talked to everywhere are looking for you, everyone is. dividend growers do not behave like bond properties, they are -- i amand companies
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thinking of sectors that are more tilted to cyclical, more tilted to growth. going forward we are expecting growth. any company that can provide that topline growth will be rewarded. ahead theye look might raise rates in november and december. how much does that way on you, how much are you thinking about and terms of what you are picking and keeping? fed hasur focus on the to do with the dollar. the fed is at the center of the equation because dollar strength leads to foot -- tighter financial conditions which does not bode well for markets. if you're looking at emerging markets which we are because a strong come cheap dollar through the fed trying to raise rates does not bode well for e.m. so that is unstable. david: what countries are you looking at?
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>> emerging-market asia is exciting. it has held up well with china slowing down and stabilizing. latin america is maybe too soon especially since the growth we saw and a lot of the outperformance of that market came from multiple expansion. thank you very much. coming up we will hear what they had of the largest public a traded fund thinks of deutsche bank. and the ceo of mangrove. this is bloomberg. ♪
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vonnie: welcome back to
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bloomberg markets. the markets.ck to concerns about lenders securely in germany. we sat down for game -- an interview with the mangrove ceo. aboutnks the concerns europe's banks may be overblown. >> a think the next big shot for markets is the one big shock. i think the world is looking at the european banks and wondering if there is a crisis. capital to look at the banks have today, you have to look at the way they change the line germany such as the senior debt becomes equity if there's any sort of banking crisis. there is not a banking problem actually. there is a lot of noise about it. in a similar way we have an in november.ng up everyone is looking for volatility around that.
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i suspect it most likely is it is business as usual in one form or another. bankoking at deutsche you're not so concerned about is -- about capital or the contagion effect it may have. >> it is an interesting question of whether it is or is not a good time to buy the equity. it is difficult given the number make ang parts to sensible forward assessment. which is why most of the stock practice.y index if you look at it as a credit risk, is it about to go bust? not at all. they change the line germany. comes befored debt any of the this is -- they dismiss or creditors. that is more than enough for deutsche bank to be healthy.
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>> what about italian banks? >> there are individual banks where there are some reasonably existential crises. the world needs less banks on average. germany needs a lot less angst. the challenge for deutsche bank is not a capital one. it is a revenue one. the fact that there are all of the state banks that continue to lend at rates which you would not do as a commercial lender. way in italy. there are a number of banks which need to be put out of their misery. if you look at the overall banking crisis, the amount of capital we are talking about is a few percent of gdp. somewhereck a number like that. that is not very much in the scheme of things. europe has to get out of its own way and let them do what they need to do. that is a third of the amount of money the u.k. put into banks in 2008. it is not that big a thing.
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as long as politicians do not mess it up too much. look atmangrove ceo ellis in an exclusive interview. david: now a look at the biggest business stories in the news starting with bmw recalling 4000 problem.ix a new the front end slater can separate from a plate, shooting out metal. the problem is traced to incorrect welding at a factory in mexico. it is different from the other prone that set off largest recall in history. almost 9000 patients could be affected by this hard count. the lender has
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close to a settlement with the justice department. this is bloomberg. ♪
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david: this is bloomberg markets. vonnie: i am vonnie quinn. the -- joining me from the cboe in chicago. happy friday to you. it is a pretty happy friday on the markets as well. up about 1% turning from losses of about 1% yesterday, a little bit has to do with deutsche bank and oil. with such a bike i am curious, you think we are out of the 14% 6 -- ais with a 14% pop right now? >> a could be the beginning of the bottom. you have after the stock has dropped 50%, it has been straight down and we were at $15 just a few weeks ago.
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it is important to see how things react. >> this is a one time, one day play. what could derail this, are we on the up and up here? >> a think this was overdone and fighting the last war. we had that with lehman brothers so with that is lingering in people's mind but from a financial standpoint their exposure and danger is tiny. mathematically. it is very small. anything can happen in the markets but people got overly concerned, that was reflected in the market action. >> definitely over the past week, we have seen the spread between the financial sector as well as db, we do see that bounceback. let's head to your plate.
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you want to exercise caution. >> this is a speculative strategy. this is something i can do on a regular basis. what we are doing here is selling a cash and secure flight. we have the money in our account. instance eight dollars is significantly below where we are right now to sell that option for $.35, it is all about probability. to break even on this. if the stock did go down, the longest stock prepared, they had the money in their account to do so. that is a 40% in discount. the strategy gains if the stock moves up or down, as long as it is not 40% lower at expiration. >> looking ahead to the fourth quarter. what milestones are you looking forward to destroy quickly? >> i am encouraged by the market
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reaction. they come back within striking distance. down to theback lower level. earnings can be a catalyst as we go in the next couple of weeks. david: thanks and happy friday. u.s. election is expected to impact the market. we will discuss the best moves for investors. this is bloomberg. ♪
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vonnie: you are watching bloomberg markets. julie: i am julie hyman.
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merkel and a woman whose husband was killed at the pentagon on 9/11 is suing saudi arabia. the lawsuit comes after congress allowed such cases against foreign governments overrating a veto by president obama. the woman who filed the action alleges the kingdom provided material support to al qaeda and its leader. saudi arabia denies any connection to 9/11. the u.n. human rights council has voted to convene on -- a high-level panel to discuss human might -- human rights in syria. it calls for panel to address this appearances, arbitrary detention and the need for accountability for violations and abuses. ville, a boy who killed
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student hasnd two been charged with murder. one of the victims, a six-year-old boy is hospitalized in critical condition. a first look at u.s. teens and children infected with zika suggests the virus causes only mild illness. zika infection during nancy can cause severe brain related birth defects. to confirmems believes that infections that occur in children are similar to adults. some develop only mild symptoms. mobile news 20 for hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. back to you. julie: it's closed in under 30 minutes. let's look at where the major averages stand. they are at the highs of the
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session as we close in on the end of the day and the end of the week. with a close today depending on where the close we could see a little bit of a gain for the month for the s&p 500. it tends to be an -- a negative must for the major averages. abigail: it has been a wild week for the nasdaq area and we started down in a big way. the nasdaq was down and tuesday of .9. we are up about 1%. a wildly -- a wild week. even on the week but slightly higher. where the real performances, the nasdaq is slightly higher but where the real performances on the quarter, we have the nasdaq up 10% in the third quarter ports best quarterly performance in about three years. so very impressive there. as for the wild week the big percentage gainers are in the chips based.
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those are the stocks that are up nicely on the week and up by more than 20%. couldport that qualcomm acquire next the semiconductors. the street should be bullish on this possibility. and analyst told our team that this is a defensive move for qualcomm, when the make sense for the company and the company is clean. the ceo will probably fight for a higher multiple. perhaps the acquisition talks will go on for a bit more. we're looking at amazon shares are higher by about 4% on the weak hitting a record high for the last four days, very impressive. the street bullish this week earlier. there is a $1000 price target. positioning in the
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cloud. something interesting here, amazon earlier this year was down 30% on the year after they put up a sloppy december quarter last year. up now more than 20%. is the bar set pretty high for this company going into its third quarter report month? time will tell. something to keep in mind. >> biotech, one of the groups and has done well today is having its best daily gain in two weeks. how has this week been, has it been wild? >> it has been. biotech is having its worst week since pre-brexit brexit. the stands out considered we have the nasdaq higher and the biotech sector is down and this is important to pay attention to. some investors considered to a game ear stock.
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stock.ier you have to wonder what our investor selling, is this some sort of a signal of uncertainty or maybe even a period of risk off ahead. time will tell. julie: thank you. oliver: investors are bracing for storm. volatility markets have been trading. almost 270,000 vix futures traded on average hosting the mean. they are using them for protecting stock holdings. guest joins us. you have been publishing a lot about that future trading and what it means in terms of investors betting on the presidential election. let's jump into that. when you look at futures
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activity, what does it say about where investors are breaking for volatility? guest: right. we can see option markets are pricing in for the week of election. we took a look at s&p 500 options and the market is pricing in. it may not seem too much given what is at stake. the market has not moved too much so we look back to 1968. 1.5% sincehas moved 1968 on election days. the second point is that you might say that this election is pretty different from what we have had historically. i would agree with you there. 1.5%, what with the market do if clinton one versus if trump one? the clinton victory is not a surprise to the market. if you look at prediction markets, she is in the lead.
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that is not too much of a surprise for markets. you might not get a 1.5% move if clinton would win. it brings so much uncertainty, it could be a much larger move. both the outcomes are waiting together to get that 1.5%. scarlet: are we talking to the upside or the downside? you thereket tells will be a move of 1.5%. julie: people have been waiting they have been disappointed so far. , this is looking at vxx. people are insuring themselves against the jump in volatility. you have the price going down because volatility has dropped. even as the shares have been
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going up and at a record. call options showing the big increase in call options on the an increasewe got in august on volatility. people have been disappointed waiting for that volatility. do think it will materialize here whether it is the election of the fed them a whatever it may be? just: we do see a seasonal pickup in volatility. vxxpoint you made about the is an interesting one. we have seen movement into long flow volatility products. you might look at the vix at 13. vixhe same time the measures volatility. if you look at longer-term
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volatility you can see the markets pricing in a much greater risk from them the further out we go. we have to price in the november elections and the probability that the fed may hike in december. and also unrest -- unknown risks. reflects the inflow into volatility products. oliver: that was something i found interesting, looking at the vix curve. the orange line on the bottom shows where we are now. that is the status your speaking of. when i am curious about what we talk about all the money coming does it figure out what is going on with the futures curve? this is when we were selling off quite a bit couple weeks ago. the curve remained pretty normal. how do you price that out?
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>> the thing that we have to keep in mind is that they are not going to attract directly. these products are going to attract the futures curve which tends not to move one-for-one. the front of the curve is the most reactive and the back is -- moves much more slowly. julie: we have been talking inut the s&p 500 but we have tracking the mexican peso because the has become the priority, the barometer. amex and --around mxn? >> we are seeing this huge bump from one to two months and that is capturing the elections and we can back it out at 14%.
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we took a look at -- and we see a similar 4% room -- move. people are betting on a large move. another interesting point is looking at the positioning data and looking at the speculative position and mexican peso futures. this is the shortest in history right now. oliver: if you want to put money on the table to make some kind of a bet, maybe not on the outcome but the fact it right now it does not seem like there's a whole lot of volatility or maybe there is. biggest you see the this location surrounding volatility in the future? guest: if you feel like this risk is overpriced right now you could look at selling that volatility premium. one place where think the markets may be underpriced is canada. if we are saying we think mexico could be a risk because maybe trump gets the white house and
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that affects nafta. presumably the candidate would be at risk. we are not seeing much of an premium priced into the etf's or the american -- canadian dollar. scarlet: sean matthews tells us what the deutsche bank story sells about systemic risk right now. his insight coming up. this is bloomberg. ♪
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scarlet: it is time for the bloomberg business flash, a look at some of the biggest stories right now. king $20 million to settle claims that its chinese unit bribed foreign officials.
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the drug company failed to keep in -- internal controls. it is not denying or admitting the findings but it will put anticorruption measures and place. workforce inthe two to four years. the company possible technology let's shoppers pay through an internet account. subaru is recalling nearly 600,000 vehicles, some for second time because windshield wiper motors can overheat and increase the risk of a fire. the recall effect the legacy. dealers will replace the parts it note cost but the schedule for the recall not yet finished. that is your business flash update. julie: deutsche bank shares a revisedebounded on
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settlement figure. it is down from the initial request of 14 nine dollars to settle an investigation into residential mortgage-backed security's. david gura and scarlet asked sean matthews how the market is taking these concerns over deutsche bank. >> the market is in pretty good shape generally. the balance sheets are in credibly healthy. both into jelly. i think we are living in an environment of zero interest rates. banks are in good shape. earnings power is pretty good. deutsche bank was a liquidity concern that is being alleviated because of the potential sentiment. >> that is different than what we saw in 2008. give us a distinction between liquidity and solvency. >> when you look at the bank liquidity is how banks run so there is leveraged characteristics. leverage is significantly lower
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than last time we were talking about this in 2007, 2008. bank balance sheets were not as big as they were. aserage characteristics are drastic. drying a distinction here, how worried should we be about u.s. financial institutions in light of what we have seen in europe certainly with deutsche bank but with the slope growth at the way business is going in europe? >> u.s. banks are in good shape. i do not see any issues. it is about leverage characteristics in the institutions and right now the banks are in good shape. it is a question of earnings power but that is much different than talking about solvency issues. point to the new normal, whether you are in europe or the u.s., it is difficult to grow profits in this slow growth, low rate environment. what can banks do beyond cutting costs and improving their
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efficiencies, is there a new business line that they can go into where they have not read -- that they have not explored already? >> banks are trying to become much more efficient petitions and they have to use their capital more logically. they are in a long-term contraction phase of the market. banks are not going to get bigger, they will get smaller as regulatory capital and pressures continue so they are going to get more efficient as they run their business model. concerns,t clearly there has been a big drag on risk assets this week. there are other more macro concerns that are pleading investors, valuations among them. what the fed does next. rank the biggest concerns after we set aside the deutsche bank issue. >> the fed will potentially go in december and what kind of pressure will that cause? we're
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high-p environment. that makes everyone a little concerned certainly and that is why you are seeing pressure on the hedge funds because it is hard to make money in this environment. leverage characteristics are not the used to be. everyone has a feeling of concern about the marketplace and assets and we have not talked about one thing. cashews to be considered a real asset class at one point in time. in 2017 we will start talking about cash being a reasonable asset class that people have to think about. >> i just got back from a trip to south america with e-commerce and -- secretary. clearly does that call resound with you, are you interested in emerging markets right now? >> absolutely. we are a global capital markets player so we are all -- you know parts of the world and we like the emerging markets face.
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is think about -- that growing as the banks get smaller. we're moving aggressive -- aggressively into emerging markets. >> u.s. companies have a bit of cash, perhaps they are reluctant to employ it in terms of making investments and putting it into r&d. what we have seen is the company return cash to shareholders. will that be the theme in the fourth quarter in 2017 as we remain mired in the slope rate environment? >> is honestly believe they can continue to roll debt at low levels, you will see companies continue to take cash off their balance sheets and give it back to investors. the issue will be if there is pressure in the high-yield market at some point in time, what will they do then? he will try to hoard cash so depends on what is the health of the fixed income cycle and where do they fit in and you will see
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pressures on credit, it may not come next year but when that happens you will see companies continue to keep cash. >> that was cantor fitzgerald ceo sean matthews. it --ll take a look at the week of turmoil for germany's against lender. this is bloomberg. ♪
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>> this is bloomberg markets. it has been a hectic end of the week for financial markets exacerbates by deutsche bank's spookeds that have investors. deutsche bank faces a conflict of long-term and short-term problems. here what deutsche bank look like in november of last year -- september of last year. it did that are than the s&p 500
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financial index before tumbling to a record low in for. back then there was fear that it could not pay the coupon on it ricky -- riskiest debt. testingsee that it kept that low out it finally broke below that in june or so. short interest continued to rise in this is a sentiment gauge. it is the amount of stuff that investors have sold short but not covered are closed and you can see investors believe the stock will continue to decline. we have been talking about the contagion or lack thereof and even if there is exposure to deutsche bank there is the issue of sentiment and what effect it has not just on how the stocks performed but how much it cost them tomorrow. banks borrowing dollars in europe are paying the most since the height of the sovereign debt
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crisis. this is looking at the three-month euro dollar. this is when countries are borrowing dollars. funding -- this indicates funding stress. it is the -- worse than it was going back to 2012. inalso saw it quite wide 2008. this is one of the ways that we affecting this sentiment some of the other banks. >> i like that. what i am looking at is two different indicators of sentiment that are diverting in some sense. we're looking on the top panel, the white lines show credit default swaps on deutsche bank. the blue line shows volatility. for the euro stocks bank index. there is a lot of green. the two usually move together. deutsche bank is obviously a very big deal.
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when deutsche bank goes up people have doubts about it and start to question the longevity in some sense of the company, they are betting against it and that will increase volatility. what we're seeing is this two lines divert, -- something has got to give because they are signaling to different things. to the correlation has gone down. that is something will continue to watch. that does it for bloomberg markets. the market closes next. we look at the major averages. gains across the board. the dow up 184 points. this is bloomberg. ♪
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we are moments away from the
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closing bell. stocks climb with the euro on speculation deutsche bank may -- .ith the boj across markets i'm all of her manic. >> and julie hyman. >> equities headed towards their longest monthly advance since june 2014. >> the question is, what you miss? calmter a relatively summer, volatility increases at the end of the third quarter. we look to let -- look ahead to the final months of 2016. >> deutsche bank rebounds for a record low on speculation it may reach a lower settlement with the u.s. department of justice. ofcitigroup's global head commodities research ed morse tells us why he's not changing his forecast after this week's opec deal. >>

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