tv Bloomberg Daybreak Americas Bloomberg October 26, 2016 7:00am-10:01am EDT
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a warm welcome on this wednesday. i'm alongside david westin and alix steel. we are counting you down to the cash open. negativeutures are eight points. yields up on the tenure today. handle ons over a $49 wti. alix: sour apple. shares of the company fell after sliding smartphone prices. and a brand-new poll out of the sunshine state show donald trump with a two-point lead ahead of hillary clinton in florida. bonds,stocks, metals, all slowing to a crawl ahead of the u.s. election.
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deutsche bank is looking for alternatives. capital and shoring up investor confidence according to people familiar with the matter. digging deeper into the top story of the hour, it is apple earnings. we break it down for you today. the story is about revenue versus shipment. by 5%. is off shipments are the white. if we see another quarter of declining revenue it will be the first time since 2001. the december quarter is supposed to be the killer quarter and it is falling a touch light. news, the average selling price. at 600 and $19 a phone, up from a quarter before that expectations were up to
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$621. question is, is this true weakness in the margins? or is this just a supply constraint? and the third wrong of what they are facing is chinese revenue is off 33%, declining for two consecutive quarters. china now makes up a quarter of iphone sales and the question is, will we see the growth that we saw in previous quarters? david: more detail on the apple earnings now. we are joined by adam satcher jan oh. welcome. to say, looking at this, estimatesy much met but what do people react badly to? adam: apple is in the position that they were in a year ago where they have stagnant growth.
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iphone makes up the biggest chunk of the business and the smart phone market is increasingly saturated. so the question is, where does the growth come from? and this points to problems in areas where people were hoping to see more. the new phones came out and those results have -- although promising -- not pointed to as big of a holiday quarter as would have been anticipated. talk about the iphone 7. only one week in this quarter was the iphone 7 sales so we have not seen the big numbers. this result, everyone is looking at the outlook, projections for the coming quarter. and while they came in slightly above what analysts anticipated, there is some softening there. average asking price, directionally, where that is going.
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the other is, where there -- whether they should be benefiting more with what has happened with samsung. so there is criticism around apple right now and on the flipside, the company stock has been up so to have it down a few percentage points is not and take a vacant as we have seen in past quarters. david: thank you so much. that was adam satariano. now, it is 7:0s 4 -- we have listed all the negatives. what was your take? >> what investors have been asking for with tim cook is to make apple grow again. and that is what we finally saw. terms of revenue for this quarter is excellent. and the company will return to
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growth. and that is really what will get the stock moving again. so the big issue was the growth margin outlook. we did see a couple of things. the iphone 7 with the dual camera is a little more expensive. and there are new products that we will hear about tomorrow with a new cost structure. and i think also they are being a little conservative. jonathan: defining the trading report, up 30% from the may low. the question we ask this morning is, how do i value this company? back to 14 now. how do you value the company? what is it? >> i look at the s&p 500. i look at the sugar water companies that are cubic to us
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in our life, coca-cola or pepsi or the staple companies and they traded about 21 times. if you look at what apple has for thee to deliver companies over the s&p 500, i think they're probably good for double-digit growth. and so i think they should trade at a premium to those companies. we use the 17 times x cash number. isn't theso why market buying? why do we have a test 10? >> i want to remind everyone, the summer of 2013, we had gloom and doom. and it finally dissipated. stocks started to take off and it doubles. we are not saying it will do that now but i feel it we are in a similar setup. a --tock has always had
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has always held off, so i think the one thing to focus on is apple is returning to growth, a huge concern. it is just anr if inflection point or two coming up. one is price. they are facing increasing price pressure as they go international to india. do they have to turn into a low price phone company? and the other services, which tim cook has emphasized, that has a lot of scramble so is the market not sure where apple is going? >> the iphone 7 plus they raised the price by $20. and by the way, this launch, as a percentage, this is more popular than we saw last year with the six plus. toy did launch earlier address a certain part of the market but apple is raising
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prices on iphones and that is good. services, they have a huge system to sell services increasingly. jonathan: they have to try to leverage that. but one of the things we picks was pushinge call back against tim cook. what is the strategy? they have one but they will not talk about it. is it tim cook's job to come out and communicate with the strategy is? because market and analysts don't seem to get it. >> a great point. apple has always been secretive. it is a part of the culture. maybe overtime that can change. media have seen a lot of leaks that point investors into new product areas. and so they while may not -- and so they way mile not come out
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and say it -- it is there. david: let's get an update on what is happening outside the business world with the first world news. >> a new bloomberg politics poll shows donald trump has a lead in a state that is a must win for him, florida. 43% in a racever where third party candidates are included. he is getting support in florida from the independent voters. states mittll the florida,e in 2012 and he still needs 35 more electoral college votes to win the election. the philippine president wants all foreign troops out of his country in the next two years. speaking in turkey -- speaking in tokyo, they said they will survive without help from the u.s. but they'd knowledge that without u.s. help, quality of life will fall. holding up an --
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trade agreement with canada. the european commission manager says he expects the french-speaking region to sign on to the agreement today. that would allow the belgian government to endorse the treaty and to go ahead. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. alix: thank you. we have breaking news in terms of earnings. comcast out being the top and bottom line. the company adding 330,000 internet customers. the best in seven years. editions coming in at 32,000. the best in 10 years. also, coca-cola breaking in the last 10 minutes. also beat on the top and bottom and it reaffirmed its forecast. the full year comp earnings will be down by about or percent-7%
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at reaffirming that forecast. we will be speaking with the president later in the hour. and to pulse they getting hit in free earnings after the closing bell yesterday. they missed on the top and bottom line but this number stood out -- comps sales stores down 21.9%. to pulse late was trying to give away a lot of food to regain customers after a food care but it didn't seem to work. marginsnt operating have been cut in half. coming up, mark carney gives the pound a boost. but there are limits on how far they are willing to let it fall. -- gives his forecast next. this is bloomberg. ♪
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jonathan: attention to the city of london where theresa may is answering questions in parliament. you can follow the action on the bloomberg terminal. thisuestion, what does mean for trade between the united kingdom and the european union. the exchange is with jeremy corbyn on the other side of the argument. follow that on the bloomberg terminal. the market, and an easy call on. all asset creeping into currency trading. the volatility index falling to the lowest level since december. joining us now is the global
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head of rates and fx strategy. welcome to new york. we have been trying to figure this out. the dollar is stronger and yet counterintuitively, commodities are holding up. you have the high-yield fx outperforming. to me, something needs to break but i'm trying to work out what. >> it is an uneasy calm. you have factors behind each of these factors. the dollar strong because we are getting closer to a fed high. improvementa small -- talked about cuts in prediction. what is maybe more bizarre to me is that volatility is very low. and effectively, we are in a transition time. -- supported by central-bank policy. central banks are now moving
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away from deeper rate cuts and larger qe and when that happens, especially on the ecb side, i would expect global markets to be more shaky. jonathan: what is the driver here? what is the driver? >> it is really the chicken and the egg. we are in a transition time. the markets aren't quite sure where to go. so real life volatility is quite low and that is driving volatility low. moveseve that the policy will create volatility. in december and the ecb meeting and the fed meeting -- all of that should bring some volatility. jonathan: we expect the dollar
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to remain stronger off the back of that. what is the risk? >> it is the condition that the u.s. dollar will stay west through the fed hike. shift in the boj strategy should imply some larger moves in the dollar-yen. in an environment where global growth seems to be better, and it may get even better after the u.s. election, with support on the u.s. economy, that could keep the dollar strong, i think we will see that. the tricky thing is the euro-dollar. because you will have them discussing matt. david: i want to go to exactly that point. so one of the things is that they are balanced. and there has been a lot of balance into the vote. does the balance require a delta
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that is further and further? or if they pull back, does it keep the sailboat at the bound? vincent: the flow that matters -- i don't think that we have the answer to that. what i believe is that we have had markets this year because you had the stock and the flow. the boj and the ecb are doing any -- doing evermore. already we have had a big change in strategy from the boj. clearly, they are moving away from quality and more towards targeted gdp and that means you will see more qe. if anything, you will see less as a move away from the target. next is the ecb and i believe for there were signals december or whether they will wait for march, they might be waiting, which would keep the market truce going forward for
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longer, but the answer is that they will yield. and the yields are pushing in that direction. to that should be enough break the goldilocks environment market that we have had. so the no-brainer over here is to go short sterling which is a lot of people, what they have done. listen to what governor carney had to say yesterday. judgment is a judgment about the optimal trade-off. a judgment we have to make on the basis of -- and there are limits to the mpc's willingness and overshooth inflation. jonathan: so there are limits to their willingness to look through inflation.
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vincent: i suppose it is between 115 and 120. i'm not sure if they have a number in mind. but what he is doing is saying that he doesn't want this sterling to steer out. he doesn't want to have a setup of sterling and a setup in yields and a setup in the u.k. equity market. that would be closer to a monetaryprices -- crisis and we don't want that. so they want that to be a controlled process. jonathan: that is what we had. vincent chaigneau, fantastic to have you with us. coming up, considering not paying bonuses in cash. but will it make retaining costs more challenging? and later, it gary kelly and james quincey join us to discuss quarterly results. this is bloomberg. ♪
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david: bloomberg is reporting when deutsche bank meets later today, it may discuss giving out some or all of the bonuses this year in stocks rather than cash. joining us now is nicholas comfort. what does this game if they take this route? well, it would save them a bunch of costs if they end up doing this. and that would then save capital as well. but the intriguing thing we heard is that they are also considering taking some of the assets out of the non-core units. anding down soured assets capital assets and potentially, these could be packaged in some way that they would be paid down in bonuses, something similar to what credit suisse did.
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taking bonds and putting them to some staff and it actually turned out to be a good investment for those bankers. they had to pull back because later on, they said no, it doesn't work for us but for a while, it was a great bonus. david: a great idea. does this tell us something about how desperate they are to conserve capital, to project the fines that the doj are looking at? nicholas: every penny counts. and the goal of the ceo is to avoid a share sale. so if you can scrimp and save across the bank, it is something he will be looking at. as to whether they actually end up selling shares or not, we will see how much the litigation is. stage, then we hear about a capital increase but
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until then, it savings across the board. we are anticipatinghat will be saying something to investors about how they can caught -- they can cut costs further. and earnings coming out tomorrow. in terms of the meeting today, anything else on the agenda considering earnings that will come out? nicholas: yes. so one other point which is interesting is that they will be talking about today is the potential reintegration of the postbank. that is one of their consumer they haven't which had much luck with in terms of a trade sale. and if you look at bank valuations out there for the does notrkets, and ipo seem like an attractive solution. some thought -- some people think well, maybe we need to reenter great with the bank.
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and that would require a realignment with the bank but it is one thing that we are hearing them talk about today. will he end up doing it or not, that is a different matter. david: nicholas comfort, thank you so much. are lower andres equities are down. crude is rolling over to a $49 handle. and briefly, a $49 on brent crude. the first time since october 3. this time, it is russia. russia saying they will not cut so what will any kind of deal wind up being? coca-cola on pace for the biggest decline since 2008 but will today turn the tide? this is bloomberg. ♪
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valuable company falling after a disappointing holiday forecast. and a brand-new bloomberg politics poll showing donald trump with a two-point lead ahead of hillary clinton in florida. when it comes to the markets, the sound of silence. and deutsche bank drama. looking for alternatives to cash bonuses as the ceo seeks to boost capital and shore up investor confidence. that is what you need to know. the markethis is how captors those stories. anything but silent. a bearish tone at the moment. looking at europe, a soft session throughout. 19 trading in negative territory. basic producers are getting hammered. on wti.a $49 handle
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$49.17 is how we trade. now to the morning must listen. toes gorman will be forced move employees out of london as a result of brexit. he spoke to john mikel plate at the summit in new york. >> from our perspective, just narrowly from the financial sector, there is nothing good about brexit, right? we love the rule of law in england. we love working in london. we have all the ecosystems and the pipes and the plumbing -- everything. it is headquartered there. we will have to have a headquarters in europe, in addition. we will probably have to have more liquidity trapped in the news -- in those entities.
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we have to move employeesd their families from london and we are trying to minimize the mount of people we do this for and totally we can transition that. another concern is that it causes a global firm to look out and say, of all the businesses you have, particularly trading businesses, do you need to have them in london, frankfurt, paris or new york? or hong kong or tokyo? so i think it will open the door of people looking at exactly why they geographically are placed where they are placed. >> which places do you think will gain from that? zone, new the time york is the one. and infrastructure time zone. if there is a move out of europe it will head towards the u.s.. not saying this will be large-scale, you won't see a large-scale deterioration but on the margin, the assumption that
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everything will now move to another european country is not necessarily the case. james gorman, ceo of morgan stanley. boeing reporting earnings blowing away estimates. shares coming in at $3.51. the real story is the company boosting its full-year revenue end, $95.5 the high billion. crushing estimates and boosting the full-year revenue forecast. jonathan: you are looking at futures at the moment. thatmputer is informing me we are seeing a bounce of the back of the premarket move. boeing is coming in strong with that. coca-cola.o now to coca-cola shares are climbing after reporting earnings that the analyst estimates. the third quarter was reportedly helped by sales of smaller, more profitable package sizes.
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is the president and coo, james quincey from coca-cola headquarters. i took a look at your earnings emphasizes it organic growth and profit margins. are those the things that strike you the most? james: absolutely. the important thing there is that we are undergoing a huge transformation and the company future continues to pose strong organic revenue. growing revenue in sparkling and other categories and across the board. a solid quarter. david: you mentioned the re-franchising because it is important to the company. you did beat estimates. year-over-year comparisons, you are actually off. is that because it is not apples to apples because of re-franchising? james: exactly. the biggest factor is the structural readjustment because germanyelling out in and united states but we are on
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track with the accelerated re-franchising to create a company more focused on helping onate customer value and creating a franchise system with higher margins and profits on growth into the future. it means less capital investment and potentially higher profit margins. is that what is driving the refranchising effort? james: it is about galvanizing the system. we are focused on what we do best -- building brands and customer value and leading a franchise system. we can create faster and stronger top-of-the-line growth for the whole system and profitably for everyone. david: let's talk about topline growth. where are you looking for topline growth now? overseas, some headwinds in china and argentina and latin america countries. where do you see the best opportunities and best challenges? james: the strongest growth and places doing well are places
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like the u.s. strong, organic growth in the north america operation. markets and developing markets are more of a mixed bag. china, we struggled a little in the first half. we focused and took action and it is paying off in the third quarter so we are seeing china improve. it may continue to be volatile but a better result. other countries like venezuela and argentina, we continue to be tough operating environments. we focus on affordability. we think we will do better but the macros are way more on those countries. david: do you expect in china for the furl year to be flat? james: we are not making a forecast on the fourth quarter. with a double problem or triple problem. we have taken action leveraging e-commerce and launching premium
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brands and going to affordability for the disposable income where it was under pressure and sorting out some of the supply chain for the industry. and that paid off in q3. we are cautious on the outlook, it is a bit volatile. howd: and staying overseas, does a strong dollar affect your business? james: that is the other thing that weighed on the topline revenue. dollar,x, with a strong we have done most of our revenue overseas. in the end, that will be up and down over time. when we are focused on is, can we grow the organic business, gain shares and establish a stronger system in each country? that will deliver value over the long-term. david: north america, including mexico and canada -- does this
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include all products that we love or is it new products coming online? james: actually both. good revenue growth by focusing on smaller packs of marketing. innovation, new marketing. and we are being innovative. we are looking across north america and we haven't run folio. new innovations. big into theto go ready to drink coffee brands. so we see the opportunity to grow revenue in sparkling and across a broad range of categories. david: let's talk about sugar. a big issue on people's minds. is coca-cola consciously trying to reduce the percentage of its business tied to sugar? beverages with sugar? james: absolutely. our position is that we can grow
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the revenue of this business and reduce the amount of sugar and help to bring that under control. so it is almost like we see revenue with transactions growing fast and the volume and we see calories go down. so we have a lot of innovation there. reformulation around the world to bring down the added sugar levels in a number of our famous rands and innovating in new zero sugar versions. we have a number of new launches in the u.k. in latin america sugar new coca-cola zero formula. we are focusing on helping to drive that with less sugar through innovation and smaller packaging. david: james quincey, thank you much for being with us.
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emma: this is "bloomberg daybreak." hour, up in the next david kostin. ♪ southwest shares getting hammered this morning after earnings. here is the story. third-quarter profits beat estimates. lower fuel costs. the bad news is that fourth-quarter revenue per seat mile was worse than expected. about 4%-5%. we are now joined by gary kelly,
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the company's president and ceo. you had solid profit and traffic picked up but that is what investors are focusing on. what happened? gary: actually we are having a very solid quarter in the third quarter. we had a technology outage which hampered reduction a little bit. trends coming into the fourth quarter look pretty solid to us. we have holiday shifts going on in december. but trends are pretty consistent with what we are seeing in the third quarter. we are looking for improvement, especially in the first part of next year. ad our goal is to have positive year over year unit revenue comparison. everything looks pretty normal to us, except for the shift in the holiday timing. agree, they are focusing on the revenue from each seat mile flown, down sequentially.
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on the low-end end, down 5%. what will wind up turning that around? the: we have outperformed industry for close to two years. so some of our comparisons are different to our competitors. we are slowing our growth which is the main thing we are focused on. we are not growing as fast as the rest of the industry and we will be slowing our growth next year to 3.5% total. and about 2% domestically. we have a reduced number of markets under development. so most of the pressure that we are seeing with the revenues are from increases by our competitors in terms of the seats offered in our markets. that overall, again, revenue trends are solid. they are a little soft year-over-year but nothing different from the third quarter. we are expecting that we will be
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seeing improvement in the early part of next year. david: -- cutting capacity will help you raise fares down the road. so how'd do you continue to increase revenue? up do you get the key metric if you can't raise fares yet? affairs are down about eight dollars on average, year over year, so it is a great bargain for consumers. when we will try to do is continue to manage our route network. cut underperforming routes and rotate capacity over to routes that were spilling demand. we are not adding as many new markets and we are not expanding as fast as we happen over the past couple of years. and all of those are positive contributors. if you look at the percentage of markets that are under development with southwest right now, they are as low as they have been in several years.
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so energy prices are rising. and i think that will naturally haverage us to try to increased revenue to cover cost increases. we are set up well. alix: that sounds like a fair increase is coming. gary: we never talk about what we are going to do with our fares. the point here is that we have opportunities to continue to manage our route network. to cut underperforming routes. to have capacity into areas that will perform better. to continue to look for ways to boost the low factors as a way to avoid increasing fares. with respect to future pricing, we never give any forecasts as to what prices might do in the future. alix: on the flipside, looking at right -- looking at rising costs. you are in negotiations with
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pilots and flight attendants. how do you model next year when you are not sure what wage increases will be? that is not accurate. we have tentative agreements with all of the work groups except for the mechanics union. there are four workgroups that we have tentative agreements that are out for ratification. and we will see how that goes. but in the press release, we indicated what's the cost pressure would be as a result of these new agreements. again, is that, factored into our thinking about our future growth. about our profits and what markets we would choose. returns onr record capital with very strong profit margins. we are containing -- we are continuing to inve ithe business and we look to improve the efficiency of the airline as a means to offset the rising labor rates.
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alix: does that mean for pilots around a 30% increase for wages? are you confident it stays at 30? gary: a tentative agreement that is out for a vote and the ratification time ends next week. so we will know soon whether we have a deal or whether we need to continue to negotiate. alix: gary kelly, thank you so much for your time today. stock down 7% in premarket. time for the other stories making headlines. here is the bloomberg business flash. emma: third-quarter profit fell -- with the french-based company. making up for delays. plus sales of helicopters have declined. they are expected to cut jobs. pokemon go wasn't enough for nintendo. the popularity of the summer gaming hit didn't offset sliding
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sales so they have cut its sales of operating profit forecasts for the year. the first game for iphone debuts in december. target is holding off on holiday ads on network tv and till after the election. instead, they will focus on social median sites and on channels such as the food network. target wants to avoid channels where a negative political advertisement may pop up. david: it is time for bloomberg trends. we are looking at top stories on the terminals that users are viewing right now. my top pick was goldman sachs. the headline is, the goldman way to fire, bit by bit. it seems particularly evident right now given what is going on with deutsche bank.
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43 people in february and another 109 six weeks later and another hundred 46 and then 98. and the new york state has a requirement that if you lay off 250 people at a time the -- then you have to give notice. jonathan: the other question i would ask is, let's look at the earnings report. big was fixed income trading. revenue from that. if you listen to the ceos on the call, they were proud of that. they were generating revenue off the back of this. is that the future? the other thing i would say is to go inside deutsche bank and see how many people are talking about a cash bonus turning into something else. -- a lot of their staff all at once and goldman saying that they are doing this incrementally because they may need those people. alix: the question is, where does everyone end up going?
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jonathan: from new york city, this is "bloomberg daybreak." tune into bloomberg television for episode two of the david rubenstein show tonight at 8:00 p.m. in new york. tonight's guest is lloyd blankfein. you can lose a lot of money quickly. so you are always worried about the people under you making a big mistake. 99% of my time is spent worrying about the 1% of things that could go wrong. leveraged to things that
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mike addis context, and my paranoia. is at 8:00 p.m. eastern only on bloomberg television. from it hours away deutsche bank earnings reports. i wanted to dig into what you can expect. kicking off her with legal settlements for european banks. the white bar is darkly's. the white bar is rbs. and as you can see, the green bar has been relatively small. in fact, but he low in paris and to its peers over here in the last quarter. but the question is, how much will this rise? waiting on a potential $14 billion fine. morgan stanley says this could be a hit of 2.3 billion euros in the back half of this year. which raises the question, how
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much money has deutsche bank been able to set aside for legal provisions? this chart is legal provisions year on year. it only goes up to 2015 but look at how much more money deutsche bank has been setting aside if credit squeeze can lower provisions. 2018 capitalr requirements could be a .5 billion eurogiven the kind of litigation and provision headwinds. that is also according to morgan stanley. and the third prong of the earnings will be six income. were they eating deutsche bank? deutsche bank released its fixed income and that is why you don't see any growth. nonetheless, they have been increasing. so how much of a shortfall will we see? jonathan: looking forward to tomorrow's numbers from deutsche
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bank. coming up on this program, the calm potentially before the storm ahead of the u.s. election? , weighing in on the impacts in the markets as we count you down, one hour and 34 minutes away from the session. s&p 500 futures are negative eight. the story in the commodity markets is that the and wti roll over. down 1.6%. this is bloomberg. ♪
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good morning and welcome to daybreak. the tone of the markets, a soft one with futures lower across the board. classes,her asset crude dives offer, down to 49. alix: apple's troubles, shares of the world's most viable company falling after reporting smartphone prices falling with a disappointing. holiday forecast a poll shows republican donald trump with a two point lead over democrat how the recurrent -- over democrat hillary clinton in florida. bonds slowing to a crawl ahead of the u.s. election. europe's biggest investment bank is looking for alternatives to cash bonuses.
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the ceo speaks -- seeks to boost capital. digging deeper into our top story, it is apple. three issues with apple's earnings. we will take a look at them. the first up is slowing revenue and iphone shipments. this is year on year growth. you can see revenue is off by 13%. we have seen three straight quarterly divide -- declines. the other issue has to do with average selling price of the iphone. take a look at what has happened. they are higher from the previous quarter, but the estimate was for an increase, to $625. the company seemed confident that in the first quarter, the asp would grow to 670, but there are still doubts about the company margins.
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the third prong issue for apple was the revenue growth from trying a -- from china, now down for two consecutive quarters. what happens if china continues to slow? david: as we have said, the market did not react very well to those apple earnings. to talk about why, we are joined by gene munster, a senior research analyst at piper jaffray. welcome back to the program. i will assume you think the market is wrong in its reaction, last night, so what is the market missing? gene: the iphone is down 5% in the september quarter, but the guidance says it will be up 3% in december. it is the first time in over a
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year that the iphone will grow and that is important. it should have been boosted, last night. is down isthe stock expectations ran out over the last two weeks. -- they got it above the street at 78, but below some of those whisper numbers. our perspective is to look at the big picture. the iphone franchise is intact. it should return to growth and stay in growth mode for the next several quarters. jonathan: the store you have painted is backed up by the stock price performance, a 30% rally off the may lows. the question is what is this your -- what is the strategy of >>s company, going forward? does apple have a grand strategy for what you want it to do?
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do you know what you want to do over the next five years or is it more of a read the market and quickly react? >> we have the strongest pipeline we have ever had, and we are confident about the things in it, but we are not going to talk about it. jonathan: we are not going to talk about it. this is a fundamental question for those that look at apple and tim cook just keep saying trust us, but they will not talk about it. if it is the know surly a problem for the business, but investors want to hear more and occasionally, they do give us more. tim cook talked about augmented he has been talking more about that. obviously, they have a master plan. it would be absurd to think that they don't. some of these big pieces are
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just taking longer than what investors want. if apple one of the stock to go up, all they would need to do is hint to what the strategy is, and based on our research, i think that would have a meaningful, positive impact. david: bloomberg has reports that they have been cutting back on their auto initiative. they are investing $10 billion a year in rmb. what are they getting at this point? the iphone 7 is not a revolutionary device. gene: they still have a group, our best guest -- best guess is around 1000 people. on, still have r&d going and the question is one of the spending $10 billion on. is, adouble what facebook little bit less than what google is at. these are world leading spendings in r&d.
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the answer is we don't know and i think that is part of the issue that you talked about, we don't have a clear point. i trust that tim cook is a good leader. i feel that even though we don't have clarity over the next few years, we will get more clarity and investors will be rewarded. was pushedarrative that services was going to be strong. do you see a point but we start talking about services more than iphones? think ifhink so, and i you fast forward five years from now, i think investors are going to look at apple as a platform business driven by services. it is just under 25% of earnings, 15% of revenue and as you say, it has grown nicely. some of that came from pokemon, but it is still up 20 -- 20%.
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there is not going to be a switch that will turn on for investors. they gete gradual as more comfortable with the iphone number. this is a process over the next couple of years. jonathan: you have a bullish price target. struggle as to how to value this company. we have seen it close to the range of 20. we had a guest earlier that said it should be valued in a similar way to coca-cola. is your view? how do you value this company? look at fiscal 18, it will be close to $10 in earnings and i think it is safe to say that a 15 multiple is a reasonable multiple on that. the core issue is that there are disco forces working.
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intensenvestors' focus. there may be smaller groups that think they should be a platform with a 25 multiple, so they end up where we are at, right now. over time, the multiple does go higher in the reason is getting a greater multiple that should move the multiple up. david: thank you, so much, gene munster. we have some news coming out of south africa. jonathan: south africa planning 43 billion rand in extra taxes. tightening up the budget in south africa, what you see on the screen is a south african rand that is paring some of today's losses. dollar is unchanged on the session. let's get to and love for the out -- headlines outside the world of business. ; phone trump has a narrow lead
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donaldabout: -- emma: trump has a narrow lead over hillary clinton in florida. the own trump is getting support in florida from independent voters. if donald trump wins all the states mitt romney won in 2012 and florida, he still needs 35 more electoral votes to win the election. fire ine, migrants set a camp that is being torn down. french authorities are tearing camp, noticed the jungle, as it is seen as a sign of european -- the european migrant crisis. billionaire is suing those two of his former girlfriends. the 93-year-old mogul claims the women committed elder abuse. the lawsuit says the women manipulated and emotionally abused him. a lawyer for one of the women
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calls it fictional, revisionist history. alix: u.s. equity futures a touch softer, this morning. earnings continue to trickle out. monfils coming out, not treating out, but this is down by over 5%. earnings did beat, but revenue came in light. they are blaming currency movements. boeing seems to have a great quarter. full-yearraised its delivery by as much as 15 planes , also rates -- raising its earnings view by 11%. a pretty big backlog in orders of about 462. billion dollars a different story when it comes to southwest airlines -- $462 billion.
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here is the action in the other asset classes. treasury yields up two basis points. crude with a 49 handle with some doubts emerging around the agreement over at opec. calm before the storm? fx, bonds, commodities basically stalling out. green line is where we were, just a month ago. the idea is we do not have a lot of volatility or movement in the markets ahead of the election. joining us is goldman sachs chief u.s. equity strategist. such a pleasure to have you here. david: good to see you. alix: where is the volatility? david: the economy is growing at 2%. earnings for most corporations
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relatively modest in terms of the growth rate. not thorough that markets should be trading differently from where it is, now. almost 17 or 18 times forward earnings. money flow is basically corporate repurchases, which has been modest. ownership categories have basically been sellers. question,bout your well what is there that is disrupting? there is a risk on the horizon, with the election. the market is already expecting the most probable outcome, that hillary clinton will be the next president. they suggest that they will move into the democratic category in the senate and the republican geordie will narrow. -- majority will narrow. the hsty of the market
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suggests there is a relatively narrow band until the election, and then there is more separation and i think that is where some of the policy risks calm, as political uncertainty falls, and a sense has moved in one direction, the policy risk actually increases and the question is what will happen. come -- country -- companies and countries overseas choosing to repatriate some of that money. -- those are some of the variables as we look out past the election, where the market way -- may end up. why shouldn't the market be trading at a flat level? jonathan: let's talk about the consequences of low volatility. is, it creates -- leverage builds up and when
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people want to go to the exit, you have gappy markets and things happen. david: the leverage you are referencing -- the way i think about it is the low bond yields and the fact that corporate balance sheet cap weekend. from a risk perspective, i would agree that there is more financial leverage in the system. on the other hand, interest rates are low and companies have pushed out there get majority schedules. relatively lower risk from that perspective. the market trades at a high level of valuation. if you think about historical distributions, we are trading somewhere around the eatery -- 83rd percentile. price-to-book, cash for -- cash flow yield, all of these things -- the median stock, which is a typical stock in the market,
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trades at the 97th percentile. we are expensive on any historical basement -- basis. the stock market still trades at a pretty elevated level. from a risk perspective, it is really about valuation but that is not a reason for the market to go lower. the question is does the market have room to go higher? alix: we will talk about that. thank you for sticking with us. he will reveal who will steal the pension from low interest rates and those speaking margins. deutsche bank is said to be looking at alternatives for cash incentives. will other banks follow suit? this is bloomberg. ♪
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sachs cutting its earnings estimates for the next couple of years, but maintaining price targets. want through all of that, the goldman sachs chief u.s. equity strategist. earning estimates cut, price targets maintained. cutting was really a modest reduction. looking at $105 of earnings for the s&p 500, rather than $116, next year. that is your progression of earnings. the one increase for the next year, about a 10% increase. energy companies will go from a loss to a slight gain. you are looking at core earnings growth around 6%. the marketon of still around the low 80th percentile of historical valuation, so a modest upside. how does the margin
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story fit the broader index from here? david: the issue on margins is one of the key issues for 2016 to 2017. margins for the s&p 500 have been flat for the better part of five years. the key reason for margins that have increased over the last five years has been technology and apple in particular. it has been responsible for one third of all the margin increase in the u.s. equity market. that is an extraordinary contribution, tremendous growth in sales and growth in margins. that is looking through the rearview muir. margins are elected to come down. different sectors at different points in time, but we have broadly been at a high level of margins and profitability, and that will likely slow. your trajectory of profit growth over the next several years will be modest. ed's -- u.s. gdp
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environment is what drives your sales, and a modest margin meaning you have modest growth in earnings. that is the story. equity market that starts valuation very extreme. david: how do you separate out what they call the company's organic growth? selling more stuff, making more money as opposed to say janet yellen who is giving you a lot of money for cheap prices. how do you separate out what is real and what is really phantom? we think about how to invest in tackling market at this level of valuation and modest growth. it is really a barbell strategy and on the one hand, we are looking for income, and i emphasize not yield, but growth in the dividends. on the other extreme, we look at secular growth. basically, those are your two strategies for outperform in a market that has been difficult.
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side, theidend growth market is totally mispriced. look at the dividend swap market. over the last 50 years, the growth in dividends over a 10 year has never been below 2.5%. slot market prices the growth in dividends over the next 10 years at about 2.2%. we start with a for statement that dividend growth is mispriced in the market. i say it will be about 4% over the next 10 years. companies.ome we have a long track record of outperformance taste on better growth in the dividends. , tohe secular growth side your point, which is where are you getting your topline -- revenue growth, and there is a dramatic -- there is a dramatic change.
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very few companies can maintain very high, double-digit topline revenue growth. that is a scarce commodity. you are looking at two sides of a strategy. one barbell is dividend growth and the other is sales growth. of riskng you a lot reward. david: on the dividend -- jonathan: on the dividend growth story, how does the rate story in for my view of the on proxies. where is the dividend growth story being underestimated? in which sectors? david: you want to go along dividend growth and short the market and have that as no basis risk. you can find it in every sector. we talk about some of the companies. the fourt h, dig dividend growth. priced in the
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market is about 6% growth, specifically in the next year. 2% over the next decade. the stocks have 12% dividend growth and that is an area you want in a yield market. jonathan: a pleasure to have you on the program. thank you so much for joining us. program, on this glaxo-smith-kline ceo plus bank of america's bond market joins us to reveal the -- as we count you down to the cache open, we are one hour and four minutes away. futures off the low. this is bloomberg. ♪
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after falling smartphone prices and it is supporting holiday forecast. donald trump has a two-point lead ahead of hillary clinton in florida. when it comes to the markets, it is a sound of silence. will slowing to a crawl, ahead of the u.s. election. butch a bank is looking for alternatives to cash bonuses. to boost capital and shore up investor confidence. here is how the market is capturing some of those stories. off the lows on futures, the dow up by about eight points. an upside surprise on boeing helping to lift the dow. europe down by one full percentage point on the ftse. globally on offer, yields up to basis points. as more doubtsr
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emerge over the opec agreement on whether they can actually executed. -- execute it. a lot of earnings coming through on both sides of the atlantic. third-quarter earnings beat estimates, -- shares are down in london. for more, we are joined by the ceo. we begin with the hiv division, and the outperformance that we continue to see. are you confident you have a pipeline and developments in the process that can carry on boosting the performance we have seen? andrew: absolutely. thank you for the opportunity. we have seen a strong performance of hiv over the last few years ever since we have launched our treatment. we have seen that rocksolid trend in terms of our
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prescription market. even as new competition comes we aree marketplace, seeing it globally, we just became the number one hiv company in japan. we are seeing continual -- continued extraordinarily strong growth. we now have our therapy regimens in development. long-acting treatments and following the acquisition of the hiv research -- research programs from bristol-myers, we have a number of new chemical entities coming through the pipelines. the performance of that business has been phenomenal. it is one of the new key areas of our business -- new medicine became bigger than advair which is historic, and just shows you how quickly that business has grown, and it represents a key part of our new product performance, 1.2 billion pounds of sales coming from the six or
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so products we have launched in the last three or four years. up 79% in the quarter, just that portfolio and they now represent 25% of our pharma business. it comes from products which were not on the market, four years ago. jonathan: let's talk about some of the negative stuff or the questions being asked. the stack -- the stock is lower in london trading. where does the growth come from and where do you say to people saying you will struggle to find it? all three divisions grew substantially. pharma group 6%, the consumer business -- business grew 5%. the vaccine business grew 20%. 20% business delivering almost 2 billion pounds of sales is a bit -- fantastic performance. you see leverage in the
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business, so you have topline group growth. , giving currency tail us 39% in terms of core earnings per share. i see outstandingly strong growth. brands with consumers, our vaccines. moreew meningitis business than doubled year on year in this quarter. if you look at the pharma business, it is not just hiv, it is respiratory and across a long range of medicines generating substantial replacement energy for the aging respiratory products. 100,000 americans a week have been treated with our new medicines which were not on the market just three years ago. think when, and i you look at the growth, when you look at the leverage, and the
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earnings delivery, i think a very strong performance. jonathan: you hand things off to, and i wonder when you get asked -- hand things off to emma -- you don't need to go shopping. andrew: at this point, we are confident with the pipeline. we have a batch of products that are already in the marketplace generating at a rate of 4.8 billion pounds a year. a lot of life left in those products. we just filed our shingles vaccine. between now and christmas, we will file our new triple treatment for copd. we have a new listed product for lupus and rheumatoid arthritis. more and more products coming into the pipeline including two potentially huge ones.
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in our presstoday release that over the next two years, we will get data readouts between 20 and 30 more new medicines and that will represent the next wave. as we stand today, we have a really current, content free rollout going on. we have two or three big things going into regulated review, and or 30 opportunities from across our core therapy areas of research, to be excited about. we will learn which of those are going to be runners in which of them don't make it. david: you have another big pipeline and it is the cable rate. this incredibly weak pound is flattering your numbers. can you walk me through how you had these kinds of events? do you swim naked in the fx market and let things,? me?let things co
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andrew: in europe, we have an active cash management program where we sleep cash out of the european region. you can imagine going back to the crisis. generally, we operate in the free currency market. we hedge in big transactions. if we are making a disposal, we try to lock in the currency, accordingly while those transactions go through, but we are not active hedger portrayed in activity. what we tend to report is essentially the average for the quarter as we guide it, today. if you pick that last day of the quarter, that would give a full year tailwind for earnings of 21 percentage points. jonathan: you and i have talked about brexit tons of times. with theee things evil conservative party and the push to control immigration and a
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potential sacrifice of closer trade relations, what are you saying to the government when they ask for your advice? andrew: the first thing is, i think we have two intelligent government is open to input. talking to business, to try to understand, we have to accept this is a complex question. what we are saying is we have to find a pragmatic pathway through these different pressures. you are looking at somebody who has been an immigrant to three other countries in the world and benefited enormously from that. our company benefited from it. we off -- we all offer many others benefit. it is important to us that we can bring in strong talent to help diversify the talent base of the company, but we also recognize the political reality that the government has to address. we are looking for a pragmatic
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solution which balances some of those pressures against what is important to companies. i am confident that it will become result. people would love to see this resolved quickly, but i think we have to accept it is a big problem and we have to be ready to be a little bit patient. jonathan: thank you very much. always great to catch up with you. alix: now to morning meeting where we look at what key banks are looking at. european corporate bonds. verizon is marketing the first sterling bond sale in recent months. this is wpp, british american tobacco. they lost about 10% despite the boe jumping in with their bond buying program. joining us now from london is barnaby martin, head of bank of america and european banks credit strategy.
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barnaby: the corporate bonds has not been that impressive compared to what mario draghi has been doing with his program, and think the challenge for mark carney is he is buying a lot of sterling corporate bonds. he is also fighting an uphill battle because at the same time, there is a bit of an aversion coming -- happening to u.k. assets because of the strong decline in the currency. willxpectation that it pick up, that makes it difficult for retail investors to feel comfortable. carney's corporate program bonds is not as successful as what mario draghi is doing. it remains to be seen how some of these deals can go. alix: it seems like overall, if you do fight the central bank, it seems like investors prefer non-eligible corporate bonds in europe and the u.k., rather than going with the bank. why are we seeing this phenomenon? to forcede is meant
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aa portfolio effect. carney and the bank of england said one of the aims of buying corporate bonds is they want to frustrate investors. they want to present them with a lack of yields of the invest it into something else. one of the alternatives for u.k. fund managers as they move out of uk corporate bonds and go to the u.s. market. another example is the move more into high-yield and bank markets. it is the portfolio effect and mark carney has said if we get this right, it will create a wealth affected the u.k.. alix: depending on how verizon does, what is your forecast? barnaby: we revised it about 10 to 15% -- 10% to 15%. part of the aim of corporate bond buying was to revitalize the sterling corporate bond market. but we have seen in the u.k. is
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that u.k. companies now have access to dollar financing, europe financing, etc. part of an issuance and globalization of the global bond market. anyway, mark carney said we cannot have u.k. companies unable to tap their own domestic bond market. we had to reverse that trend and one way to do that is to announce corporate bond buying in the u.k. it is meant to rejuvenate domestic corporate bond issuance. alix: in theory. the other topic we have been tackling throughout the three hours of this program is where the -- where does the volatility go. this is european credit default swap. it is an aggregate on a 30 day volatility basis. volatility has come down so much. why is that? barnaby: it is happening in other places. currency volatility, the move index.
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it is the biggest phenomenon that the market is feeling at ease with the longevity of quantitive easing policies. what strikes me as very uneasy is to look at the increase in inflation rates. what are the increasing breakeven's and yields. the market believes whether it is fiscal spending, currency weakness or the rising commodities, we are going to get some inflation path through. you can't have low levels of volatility and a rise in inflation and talk about tapering of qe policies at the same time. alix: does that mean you expect volatility to pick up? barnaby: we definitely think that the debate about mario draghi tapering qe will rumble in the background, next year. sixhink he gets a extension, next year, but then it becomes a more difficult --
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more difficult for him to extend qe to get that inflation near the target of 2%. i think next year, the kind of uneasy, low volatility we have will not be around. alix: thank you so much. coming up, contrary to what most manageray, hedge fund paul jones says expect more volatility after the election. this is bloomberg. ♪
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david: this is bloomberg. we have been talking about how calm markets have been and how expected they are to be during this election. what can we expect after november 8? jones about tudor whether that is likely to change. paul: that it is very challenging when rates are zero. in a macro fun, 70% of the income you earn is typically through fixed income and already exchange and when rates are at zero and there is no movement and no interest rate differentiation between countries, that creates a low volatility period. i think that is going to change. so much has been held back by the election.
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david: more volatility and more opportunity. paul: i think so. david: when he was saying was whether it is hillary clinton or donald trump, he expects more volatility because when someone comes in as president, they will do something and we don't know quite what it is. jonathan: even if they want to do something, they won't be able to do anything. david: go back to the ancient days and that is when they said with jimmy carer and ronald reagan. it depends on the leadership. alix: it depends on the correlations in the market. the correlation you want to watch is the 10 year yield versus the s&p. if you have a fixed income market and equities moving together, you have the wrist parity funds that have to buy both. what happens if volatility picks up and the election changes that? you could see that shakeout. says inaul tudor jones
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a macro market, that is good for him. he thinks good days are coming, next year. equities down, bonds performing. david: exactly. alix: alix: volatility is coming -- alix: volatility is coming. david: time for other stories making headlines. we will turn to emma chandra. emma: a quick earnings roundup. comcast keeps beating industry trends. the largest cable tv provider list a third-quarter profit that beat estimates. 32,000 cable tv customers. coca-cola posted third-quarter earnings that beat estimates. they were helped by sales of smaller, more profitable package sizes. revenue fell 7%, but the ceo has
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changed the court measure of the business. lloyds banking group said third-quarter profits fell 15%. the uk's largest mortgage lender took a $1.2 billion charge to pay customers who were wrongly sold mortgage insurance. over the past five years, they have taken more than $20 billion in charges for the scandal. coming up, less than two weeks away until the u.s. election and a new bloomberg poll reveals surprising numbers on the battleground state of florida. ♪
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$35 billion in notes. a kind of supply came in to the market. the second weakest demand on as we approach08 the key fed meeting in december. tesla earnings coming up after the bell. david: we also want to talk about politics. 13 days until the election and according to a brand-new poll, donald trump has a two-point lead over hillary clinton in florida. he pulls at 45% to clinton's 43%. at 45% to clinton's 43%. we go to our senior executive editor of government and economics. i was surprised that this and i must say we keep hearing from the media, it is over, it in ohio, maybe mr. trump is ahead and in florida, he may be ahead. polls thate state
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show a tightening race. his numbers in florida are a bit surprising. some of the more recent polls had hillary clinton ahead. it is essentially a deadlock race. even if he were to take florida and ohio, he would still be short of the total he needs if he carries all the states romney took in 2012. david: he has a way to go. this is a ground game issue, a question of getting out the people to vote. does mr. trump have a ground game? >> in some gates -- kick -- some states, he has zero field offices where hillary clinton has 30 or 40. in this sense, the election is no different than any other. who aretify the people going to vote for you and get them to come out or election
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day. this: up until now, election has been unlike, certainly more than any other election i have seen. are we seeing a ground game offense -- against an air offensive? donald trump gets really flamboyant on television where hillary clinton has a infantry going up against his air force. have we seen that kind of contest before? >> this is quite an unusual campaign. it is very unusual that donald trump is within shouting distance of some of these ballot run states where he spent virtually no money. where he is getting the airways to talk about him and is going is theter, and that approach he is taking and it seems to be working for him and it will be interesting, tuesday night to see how it plays out. david: and you will have him in washington, d.c. to cut the ribbon on his new hotel which is
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on pennsylvania avenue. >> just a few blocks down from our offices and they are expecting a big crowd and maybe even some protesters. that is the real estate guy he is, and he will not miss this opening. david: thank you very much. senior executive editor of government and -- jonathan: where is the volatility? coming up, and a roskam weighs in, deutsche bank's global head of fx research. lower. futures from new york, this is bloomberg. ♪
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good morning to from new york c, good morning to you. counting you down to the open in new york, we are 30 minutes away and you jurors are down b -- and futures are down. we are talking about apple. global bonds on offer, yields up two basis points. crude is down to $49. shares of apple fell after reporting sliding smartphone prices and a disappointing holiday forecast. showsd-new politics poll donald trump with a two-point lead ahead of hillary clinton in florida. when it comes to the markets, it is the sound of silence. fx, bonds,in stocks, slowing to a crawl ahead of the u.s. election. u.s. -- europe's biggest
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investment bank is looking for a new incentive instead of cash bonuses. the ceo is trying to seek capital and shore up confidence. let's take a look at the three problems that came out of apple's earnings report. the first hit is really about revenue versus shipment. this white bar is iphone shipments, down 5%. the blue is revenue, down 13%. down for three consecutive quarters. if it is down again next quarter, it is the first time it has been down four quarters in a row since 2001. the next issue with apple came from asp, the average selling price of an iphone. it came in at $619. it was up from the previous quarter, but estimates were about $625. the company said the first
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quarter is going to be better, you looking at 670 five dollars, but the market seems to be skeptical. approach has to do with revenue growth from china, or lack thereof. revenue down 33%. up roughly 25% of apple's business. this aspect of it also a risk for the company. david: we continue talking about apple. you were raising this point to throw out the program. what is the future strategy -- what isut the program, the future strategy of apple? jonathan: -- hardware business, maybe atis -- single-digit pe is appropriate, but if you believe in the software growth story, and we are looking at 20 and that is a
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different story. and youe apple ticker see this range of forecasts, from 180 on the top side to the 60's at the bottom and we have seen this story play out with wele stocks so many times, have the pe drop to 10, and then bounceback and i think a lot of people are still struggling to work out what is this company run, now and what is the strategy. david: we have somebody who can help us with that, and we are the securities analyst. he is the top-rated bloomberg analyst on apple. he rated it at a buy. i don't know how much of that you heard, but give us some help -- help about what we should be valuing appalachia in your view and what the strategy is. clear, that is apple is no longer a growth
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company. we look at it as a value company and you look at it, at the intrinsic value of apple and it has a very loyal customer base which is growing, not at the base -- pace we would like, but they will remain loyal and spend money on a bunch of different products. that, if we can out billion the company -- we think as we are going into this product cycle and is you look into the cycle, next year, the stock will move toward the upper end, getting closer to the standard of $130. the thing is, -- it is not a growth company and we should be satisfied with the
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market at this range, but we think it has value around 115. david: there is no question this is a successful company, but let me question whether it sees itself as a value company or a growth company. it is investing $10 billion a year in r&d. that does not seem like a value company. spent? money being well we will have to -- >> we will have to see. yesterday, tim cook was not open about it, which is how they are playing it, but they seem to be doing something on television, in the car space. we don't know how it will play that, ituntil we see is hard to say whether the r&d dollars those guys are spending are being well spent or if it is experimentation.
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i agree the amount of money they are spending is not what a value company does. they are really working on something they believe can come out and make a new category. the iphone is such a strong category, it is hard to beat that. there was a lot of focus on services which is an opportunity for them. jonathan: they seem to be doing something, we are just not sure what it is. take a listen to this exchange. >> does apple have a grand strategy for what you want to do? do you know what you want to do over the next three to five years, or is it more a read the market and react? >> we have the strongest pipeline that we ever had and we are really confident about the things in it, but as usual, we are not going to talk about it. as usual, we are not
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going to talk about it. how much longer can he get away with saying we are not going to talk about it, without delivering something new, without outlining something to tell us ok, to believe in it. >> you are right. at some point, they will either have to deliver or talk about their strategy and it -- this type of strategy cannot continue. i appreciated steve's notion of asking about a long-term strategy. job that timind of will at some point have to deliver on and it has been quite a few years since we saw -- almost a decade since the iphone came out and we have not seen another category come out of apple. we may not have much time to deliver on the next category. alix: is it possible that we are hearing the strategy but the market is just not buying it,
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yet? they talk more about services and how they are more profitable. is there a point where this becomes a services company and not a product company? >> that is what they are trying to position it as. they have about a billion devices out there and the commodities -- they can monetize that pipe. that is what makes it hard to move the needle. it has become a victim of its own success. as we see a lot of these new categories that are growing pretty rapidly. it is nothing to sneeze at, but in the grand scheme of things, it is just 10% to 12% of total revenue. jonathan: you have this massive cash cow, we should discount the fact that they borrowed against
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it. i go back to david's question. they are spending a lot of money trying to innovate, but we are .ot seeing things, the back end is one of those things. i think they kicked the tires on a lot of these acquisitions. they have done some small acquisitions. the thing is, they can be pretty risky. apple has never done that and for them to go out and spend 50 would be a big move and introduce a lot of risk. showns definitely willingness to a value way things. he admitted to it on the call. we will have to see if they take a step in that direction. jonathan: we appreciate your time.
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apple, the big story for the corporate world, the big story tomorrow is going to be deutsche bank, earnings coming down and the bank is debating alternatives to cash bonuses. capitalseeks to boost and shore up investor confidence. walk us through it. the store you guys have been doing is that they are looking for alternatives to cash bonuses. what alternatives? as the team has found in formaliscussion is talks, but the possibilities are that more of the cash bonuses -- some staff will be paid in stock company'ses in the non-core operations unit. it is a wind down division which handles solid assets.
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that is intriguing because it would help them to wind down the rest of that unit, which is supposed to be complete by the end of the year, and also potentially give them a capital lift. presidentaff, the said -- did something similar and it turned out to be pretty exciting stuff. there were some high returns from the first partner sf facility, so if this is something which the bank decides , what will the stock except in what will the regulators except. jonathan: i am calling of my friends i credit sweet -- credit swiss. what are we expecting from the numbers and how can we manage the situation up until we do find out how big the fine is from the doj?
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>> it is a tough one. numbers will be to see whether -- especially in that big field of debt trading, if they manage to keep pace with the americans or at least be in the same ballpark. we saw some pretty big rises in that business, or if the pulling back from businesses and also the issue of motivation among staff really hurts them. if they can do ok in that business, where they are bringing in money and setting aide capital, in order to pay big fine, eventually, but until then, it is a question of telling the team to pull together. it is a tall order for the ceo. speed on you're up to some of the corporate stories, let's give you updates on the headlines outside of the business world. emma: a new bloomberg politics
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poll shows donald trump has a narrow lead in a must win state, florida. the republican candidate leads hillary clinton 45% to 43%. trump is getting support in florida from independent voters. a showing is stronger than in other recent surveys in the state. if you wins all the states mitt romney won in 2012 and also florida, he still needs 35 more electoral votes to win the presidency. signalingan union is a breakthrough is imminent in holding a trade agreement with canada. he expects belgium's french-speaking region to sign on to the agreement later, today. that would allow the belgian government to endorse the treaty and the deal to go ahead. willhilippine president pull foreign -- wants all foreign troops out of his country in the next two years. he said the philippines will
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survive without assistance from the u.s. the knowledge that without u.s. help, his country's policy will be reduced. this is bloomberg. alix: future is slightly lower this morning, the s&p awfully low, health and parts -- off the boeingsped in part by better-than-expected earnings. names,s of individual took a cola had a good quarter. sales were down about 6.9%. however, that did beat estimates. north america revenue was up. latin america revenue fell. coca-cola stocks are up, free market. gipe only up by over 4%. margins were cut in half. they were trying to draw customers in after their food scare, but same-store sales did not hold up.
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comcast slightly higher, up six cents of 1% -- 6/10 of 1%. best internet subscriber growth in seven years. that is a quick look at your roundup. 20 minutes until the bell. david: one of the things that did not help to pull lays margins were avocados. -- did notces are help chipotle's margins were avocados. avocado prices are spiking. we will talk about that and an uneasy calm to the global markets. we will talk about how low volatility is affecting currency markets. ♪
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alix: a commodity in focus, avocados. chipotle says cases are now $80 a ton versus $30 a year earlier. this chart shows the story. these lines are standard deviations. we have seen standard deviation move from the normal price. to pull a is paying even more then this figure of $60 a ton. you had a labor strike -- chipotle is paying even more than this figure of $60 a ton. not increase prices to the consumer, but this was interesting. let's turn to the other commodity moving in the market and that is oil, off by over 1%, below $50 a barrel.
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russia now saying a cut is not going to happen. >> it began sunday night. iraq wants to join the exemption list along with iran, nigeria and libya. so hard to keep this successful and it is now in doubt. this is still over 30 days away. as we get closer to that deal, we are looking at the strong dollar. the dollar has rallied quite a bit over the last month and that is putting pressure on commodity prices. alix: of late, we have seen that correlation breakdown. higher dollar, lower commodity prices, but we have not seen that in the last. -- last few weeks. the dollar is finding a path
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the dollar is finding a path of least resistance. it is also some weakness in the euro. as "a to the fed meeting and we can -- they confirm we will see a rate hike in 2016, the dollar is going to hold ground and we will see further pressure on commodity prices. inventory report and we have production data. as opec nears their meeting, and cutting production, if u.s. production picks up with oil hanging at this $50 mark, i could put further doubt on this meeting. a big fluctuation of imports over the last month in the eia reports and i think we are seeing a big drop in imports because we are going to see production come back online. if that happens, this is going to put further doubt on opec. coming up, boeing erasing anish -- raising initial gains. find out what investors are concerned about. ♪
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day of earnings, one of the companies reporting was going. the company reported profit that beat expectations -- reporting was going -- boeing. the company reported profits that the expectations. >> a lot of it does center around that guidance. we were looking at some data from bank of america that does a good job tracking what is happening during earnings season. if you points they brought up is one, you are seeing smaller moves for beats and losses. the overall magnitude of earnings related moves is shrinking little bit. it means people -- markets all of a sudden are more efficient or more likely is that people
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are not willing to put so much on the table and make of that based on earnings, or they just have not really impressed too much. you have a guidance that is pretty solid, which is what is going to get these stocks moving. the fact that they are even putting something out there -- a lot of companies have been hesitant to do that. the quarterly ones for fourth quarter and onward have been a little bit scant in terms of a lack of guidance. alix: which brings us to the overall valuation of the market. are expensive on any historical basis, and even when you think about interest rates, the market, the stock market still trades at a pretty elevated level, so from a ricketts -- a risk perspective, it is really in a valuation. it is just a question of does the market have a lot more room go higher and in my opinion, it is a modest upset.
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alix: a more conservative look on valuation. >> there are two points to that. first is the point about valuation, not necessarily being a harbinger of doom. that is a sort of misconception that valuations or the length of a bull market are reason -- that is not the case. i would wager on the other side of the market to play devil's advocate and say it is hard to use previous models of the or, really any market to try to make assessments or predictions about what is going to happen. what we have seen over the past 18 months is a very unique experience within the u.s. equity market. well we never went through a bear market, we had two major corrections of 10%. we had a substantial amount of volatility and we had more than half of the s&p 500 index go through individual bear markets is what we saw in 2011, even more so when we saw a bear market of 19%.
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there is something to say about the sort of earnings rebound that could even out those valuations. i can see the case for pushing higher, once we get those valuations down. jonathan: great to have you with us. we are counting you down to the opening bell on bloomberg daybreak. off set. dow futures down 83 points. europe has been down all day. the story of the other asset classes as follows. crude with a $49 handle. bond yields up three basis points. the cash open is next. this is bloomberg. ♪
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futures lower and we grind a little bit lower going to the open. to the open. doubt futures up i-91 points. s&p 500 points of i almost 10. the story is as follows. a softer dollar story, 122 handle. check out the bond market. we had a ton of supply coming yesterday. demandond weakest ratio that we have seen since 2008. today, 34 billion, five-year notes coming to the market. the signal comes from crude. commoditieson for and a softer one coming up for equities as well. it is weakness across the board for equities. .4% opening below its 100 day at 2143, despite the fact earnings overall have
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been better. earnings growth coming in at 3.2%. sales growth has grown by 2.2%. 42 companies have already reported. those are not necessarily enough to move the needle and it comes to the index. apple d oil will be the draggers here in the u.s. market. accelerating its losses to the downside off i 11%. the number to focus on is the by 4%. average -- down sequentially lower than the third quarter. american jetblue, some weaker numbers as well. talking the airline trends, making defense contractors, it had a good quarter and boosted its full-year out. up by about 3%.
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a seam in the market in bonds and equities and commodities despite the lower oil prices you see today, now we are focusing on that market. fx volatility index the last year down 7%. look at how the volatility has , early in january of next year. we see volatilities nowhere, when does it pick up? jonathan: a fascinating story. i want to continue, deutsche bank global head of fx research. great to have you on the program. have got the strong dollar that developed in the last couple of months. i asked a question earlier, something has got to break in that environment. what does make?
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not sure it has to break. you have an unusual set of circumstances. you are handed a situation where high-yield is doing well, and at the same time, back in 1995 through 2002, it is a long stretch of that. you could have an environment here where some of the funding currencies have a particular negative story, whether it be the euro, the pound, or the yen. , high-yield,de which as you mentioned, commodities on their side, some sense that in the case of russia and say resume, of course, they have got yield, this global hunt for yield. this sounds like a delicate dance to me. i hesitate to call it a changing regime. are we seeing a regime change?
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say would be hesitant to that this would last for 12 months. but it is the only game in town. few things in the currency market where there is real -- the yen was a big story earlier. we see the euro-dollar bobbing around. it has had legs for most of the year to some extent. >> what was going on in the economy back then? it was great. well are thereso lessons to be learned? fact we are in a much better place in a couple of fronts.
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the current account is unusually well behaved at this point in the business cycle. the bigger dollar story has got longevity. >> what is the most successful trade you are seeing? >> 2020 hindsight, wonderful stuff. if you wanted to match the pound the pound or the but youot that as well, have had a fantastic run there. >> i will talk about it across we are used to talking about.
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on the politics and the structural issues, the assumption that the bank of england will just sit back. take a listen. judgment is about the optimal trade-off, which we have to make on the basis of the letter. there are limits to the willingness to look through an overshoot. jonathan: so there are limits. is there a line in the sand and how do you interpret what he said yesterday? >> it is a little vague. you do not want to let the pound go into freefall. the last thing you want to do to the markets, this is ok kind of thing. at the same time, it is hard to reverse a currency particularly
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with high interest rates. this may be a small shot across the brow to say we do not want the pound to weaken more. jonathan: we typically associate easing with lower yields and hires reds. used tooff we are not talking about, a weak currency that will affect the other asset classes. it could mean wider spreads and higher yields. how does the proach that when these guys meet? i say real judgment call. the first thing you want to do this try and get more data. you do not have a sense of whether the u.k. economy is really at with the brexit. the uk's at the top of the list and that will probably not last. economy proving resilient?
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if it is, then of course you can feel more comfortable and perhaps bolstering the economist -- the economy through an interest rate hike. we are more at the stage of not cutting interest rates. your job is all about central banks right now. >> interest rates spread and essentially it really has been you have the qb praise just following the central banks. is central banking might ease, might do unorthodox policies. you see some circumstances like
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the yen, spreading in the other direction. it has become trickier. we have gone back to other balance of payments in detail. thank you so much for being here, alan. coming up, a bright spot for the trump campaign. a new poll says the gop nominee may be leaving in florida. we will tell you how he is doing it next. this is bloomberg. ♪
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>> i'm here in the green room. chairman and ceo joining bloomberg technology anchor emily chang. jonathan: this is bloomberg daybreak. let me get you up to speed. by .4%, the s&p 500 as well. apple is the dominant story. , thefor percentage points most since april 2016. withn head over there now abigail doolittle. abigail: shares of the biotech giant are nicely higher with a strong fiscal third quarter.
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earnings by 4.5%. it looks like the strength is driven by the top-selling drug. of thell the replacement current ceo process look like and what will the priority review -- when will that come through? winner, garmins shares are up nicely after the gps company put up if -- a strong third quarter. they boosted the full-year view. stock is up to more than 40% per year. a price to earnings mobile basis . a good stock there. david: thanks so much. let's turn to politics. 13 days before the election. donald trump has a two-point
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lead in florida. help right now. we go to the senior executive editor of international government and economics. >> frankly, he could not win. perfectly in place for him to take the presidency on tuesday. there is a path. >> we had a poll in ohio that said he might be ahead. would youther votes get, the electoral votes. >> all the states mitt romney took in 2012, utah is up in the winnables might the a
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state for the democrats. in ank it will result interesting might on tuesday night election night. i think a lot of people thought hillary clinton would have a -- an advantage because of spanish voters with donald .rump's views on immigration >> she has a substantial among hispanic and black voters as well. the panhandle and the rural areas. him -- he continues to do very well with that group. turnout is essential for both sides. a big senate rate with
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marco rubio. how critical is he to switching the senate the democrats in your point of view? lead in the later poll. was narrower. he has had a couple of strong debates. rubio defeated florida would be bad news for republicans and could have a which in the senate, would be for the gop a disaster. a lot of money has been spent down ballot as leaders are concerned. david: thank you, marti. over to you, jonathan. jonathan: coming up in the next hour, it is vonnie quinn time. vonnie: we will be speaking with anthony just on that very
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subject you are talking about. he is sticking by trump even as many in the republican leadership clear. we will speak a little bit about politics. -- that is ceo will join us jonathan: i'm reminded of the moment in billiards on showtime when they sit around the table for the investment conference and all have got to pitch stock ideas and one guys having a bad do you like apple? you think there is more upside? our investorsll 3% and profits to invest in apple?
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in the market today, the big weight is apple. it was not just the numbers that are disappointing. is apple being too conservative, or is the pie really shrinking for their smart own sales? david: they project sales will be up for the season but not as much as hoped. >> many analysts focusing on how you value apple sucks.
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he weighed in. >> investors have been asking for tim cook to make apple grow again. estimates for the december quarter. it is excellent. what will get the stock moving again. the big issue, that was a little lower than expected. with the new camera, more expensive. that hurt. with a cost structure that will hurt your margin. >> we are up 30% and the question is how do i value the
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company? we bounced around earlier this year back to 14 now. how do you value the company? what is it? >> trading it 10 times cash right now. now is over 16 times. sugar water, coca-cola or pepsi or some of these staple companies, they traded about 21 times. you look at what apple has been apple is probably good for double-digit growth. that is how we get that price target. think they should trade in line with sugar water, wiley trading at working times earnings? i will remind everyone the
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summer of 2013, we had a gloom and doom around applelike we saw this summer here in the stock started to go off. i feel it we are at a similar set up. i think the one thing to focus to -- is returning to growth and that is a huge concern. >> there is uncertainty whether it is gloom or doom or not. typically as they go two they have to turn into a low-price phone company? tim cook is really emphasize in the services. this is in reference to the fact that they are not sure where the
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markets are going? launch, as a, this percentage, it is more popular than what we saw last year. earlier thisch year to address certain parts of the market. but apple is raising prices on iphones and that is good. you have one billion ios device users and a huge ecosystem to sell complete -- increasingly overtime. jonathan: he is the most bullish analysts on wall street, trading on 114. it depends what story you believe. it is appropriate, 14 times and maybe even 10. software story, then you move it
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up to 20. >> echoing the same thing, saying they will not move the needle further and apple, a huge company to begin with. >> he thinks it is a value stock and not a growth stock. rmb is a little much to pay for a value stock. products.f the stock is down weighing on the broader industry. down and the dow, by zero. bonds taking a beating. this is bloomberg daybreak. ♪
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vonnie: we will you from san francisco to london. breaking economic data on the u.s. housingbreaking economic de u.s. housing front. julie hyman has the latest. julie: home sales. september sales following, .oming in less than estimated analysts had been anticipating a pace of 600,000. gain in new month home sales of 3.1%. that is close to almost nine-year highs. a 593,000 annualized rate.
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