tv Bloomberg Daybreak Americas Bloomberg November 5, 2018 7:00am-9:00am EST
7:00 am
back, mary kudlow says that anything has to be america's interest. plus, bracing for midterms, the most expensive midterm congress in history countdown to its final hours. talks tough onl iranian oil sanctions while preparing for waivers on certain buyers. volatility picks up. >> welcome to "bloomberg daybreak." a big week all over the place. treasury options, midterms, you think that market might be holding back a little bit. it's all about midterms for you. you will be on air tomorrow until midnight and then be back with us for the morning. it's going to be crazy. david: while television. [laughter] alix: here's where we are, s&p futures are up. i don't feel like a lot of
7:01 am
positions will be taken on in the s&p, 276460, that's what i'll be watching. euro-dollar a little weaker, the eu prep finance ministers are discussing sanctions and the italian budget standoff. yields are lower, as david pointed out. what's the takedown going to be with the fed this week? brent, taking in oil sanctions in stride. david: time for the morning brief, at midnight last night u.s. tensions on iranian oil went back into effect and secretary of state mike pompeo and steve mnuchin will to close which countries got the waiters. tuesday, voters must the country elect congressmen and one third of senators. and also on tuesday, the bloomberg new economy forum gets underway in singapore. thursday, the federal reserve announces a rate decision in the
7:02 am
u.s. treasuries will be auctioning $83 billion. we are joined today by gina martin adams, our bloomberg intelligence chief, and marty schecter. let's start with china. there was this exchange over the weekend, things were looking pretty good. and in fact, larry kudlow was the winner on tv, saying that there would be a deal with china , and that any deal would take a lot to put together. he was pretty tough. was. we had our own scoop earlier last week saying that donald trump wanted to cut a deal, but that looks like it will be more the beginning of a deal of dealmaking rather than the end of it. by all means, the intractable intellectual properties are a key stumbling block. trying to i'm understand is, do we need just a stop of things getting work for
7:03 am
equity markets to get a good footing, or do we need to get better? >> i think you need a stop for things getting worse. especially with wrist act to trade. we think that tariffs on chinese goods and chinese tariffs on u.s. goods are largely priced into the stoxx at this link. if you look at the stocks that are actually exposed to chinese trade, they have dramatically sold off relative to the rest of the market. you are already seeing the margin adjustment that would account for the risk of trade and terrace. suggesting to me that as long as things don't get worse, we arty have priced in. issuesre a host of other impacting the equity market. friday is a good example. wages are still rising, but how our operating margins going to contend with the wage increase? there are other things to consider, but with respect to trade, as long as things don't
7:04 am
get worse, we have largely accounted for it. midterms are coming up, our second story, give us a sense of where we are right now very a this is where the house of representatives are right now. you can see the democrats have about 23 seats to be gained. to give you a sense, marty, if you look at the solid democrats, solid republicans and leaning, it's got 50 in the middle. it's really debt even. of the 50, 47 of them are republican seats right now. marty: that's right. i think that the level of enthusiasm on both sides may turn this race into a nailbiter. with deference to your work schedule, i think it may be well into the evening and maybe even wednesday before we even know specifically if the democrats have taken the house. especially with a lot of the california races too close to call. david: do we know what the markets are going to do with and -- with either
7:05 am
result? gina: the working presumption seems to be that the democrats will take the house and republicans will hold the senate . that's been priced into the market for the last six months. but if that doesn't happen, i would expect it to be a shotgun on either end. alix: what rhetoric gets nicer in the next way for hours? will we get clarity on trade? what's he going to say about other issues? marty: i doubt you will get any change in a narrative. even with a shocking result of the republicans keeping the house and maintaining the senate, i think you will get even more strident rhetoric in either situation. so, if you are looking for calming down, you aren't going to get one. alix: think it will get revved up? marty: absolutely. alix: what do we have to look out for? marty: the democrats, and there
7:06 am
was a cnn poll out this morning showing a large gap between democrats and republicans, if there is a blue wave, i think you are going to get a lot of democrats energized. and while they didn't want to talk about impeachment, i think that would become more likely and that would raise the rhetoric. of course whether it affects the real world is the big question. gina: and then there's the senate in texas, i say watch that for a big surprise. david: stay tuned to bloomberg for complete coverage of the elections. alix: i am looking forward to that and i will watch it until i fall asleep. [laughter] david: one of us needs to sleep tomorrow night. [laughter] alix: it's true. today's story, iran, the resumption of oil sanctions, here is what secretary of state mike pompeo had to say. already taken more
7:07 am
crude oil off the market than any time in previous history. watch the efforts that trump's policies have achieved. we have done this all for making sure american consumers don't suffer. what part do you think she'll politics plays in that? gina: i think it's a portion of it. don't accounts for the rise or the decline, they have underperformed. they have tried over the worst of the year two performed relatively well, they look incredibly attractive, but it's not enough to draw the investor in. the reason they have underperformed is not necessarily geopolitical concerns, but simply because investors were burned so heavily on this trade in 2014, 2015, and they are just very, very suspicious of any increase in oil price. they think that supplies will flood the market from producers and there is a major sentiment
7:08 am
wall against energy stocks that doesn't seem to be going away. alix: you can see it's been a really bad string. waivers, how will they be interpreted? gina: it depends on the actual terms of the waivers and what happens to the cash that is derived from those trades. i will say that in terms of the energy sector, one thing we have been looking at with bloomberg is the debt levels and the energy sector. another factor is rising interest rates in a heavily indebted in this he that could create real problems for the energy sector. the same time, gina, i wonder, with the pattern we have seen from the president, it seems like really brave talk in the new pullback. i really wonder, all the markets are trying to accommodate essentially a real estate developer. an excellent point,
7:09 am
it's creating volatility, a market that overreacts and then similar to the policy rhetoric. it's an extreme initial suggestion, the market has an extreme initial response and then it pulls back. all the trade rhetoric is having a lower and lower and lower impact on price. i think you will see that with all policies proposed by the president. is a booml statement and it creates a big source of volatility but over time it starts to slow. all i knows that iran is happy to get the spotlight from saudi arabia. guys, thank you so much. a reminder that you can find out the charts we just used and more, check out the tv -- g tv . up, how are the midterm election results affecting the bond market? we will break at all down from smith. this is bloomberg.
7:12 am
"bloomberg daybreak -- >> this is "bloomberg daybreak." barclays, having enough capital to withstand the horses outcome, but it may be a setback or the ceo's plans to boost returns to shareholders. apple apparently won't boost productions for the iphone xr. contractors were told to halt plans for additional production lines for the device. apple received weaker than expected demands for the new iphone.
7:13 am
and reaping the benefits of an enormous investment in technology, fourth-quarter profits exceeding the highest analysts estimates. making the company from a primarily telecom operator into a technology investment firm. that is your bloomberg is this flash. .lix: thank you so much, m here's the breakdown of where the house gop and democrats are vying for control. joining us now is gibson smith, investor in cio. looking at tomorrow, what's the single most important thing you will be watching in terms of the issues going forward? gibson: the markets have probably priced in that the democrats will take the house and it will be interesting to see how the bond market react, as well as the equity market. to bebut what's going
7:14 am
issue behind it? deficits? what is it? tatts cutsowing the to stay in place, seeing if there is gridlock, those are the issues that stand pat in the elections. are the bond markets happier or sadder if the republicans keep the house? gibson: probably one of the most important issues for the bond market is if they keep the house we will see greater deficits and tax cuts in the market and that's definitely a concern. if we look at $21 trillion in debt owing by the year, this is an issue for bond markets. i know the you are a bond guy, but a mixed congress, a split congress has been the worst for total return for the dow after an election. is that a good thing, though, then? is that like a safe haven trade? where does that layout? great question.
7:15 am
with the bond market when there's a split you have less gridlock, good for credit, good for other assets. it could be a good thing for the markets. david: the bond market likes it if washington doesn't do very much. gibson: so on and so forth with the debt financing. we talk about the treasury this week, record after record, has the bond market really reacted? it doesn't feel like it has very much. gibson: i think that we are watching closely is foreign participation. that will be in aria of focus going forward for the next six to 12. in the corporate bond market, it was a terrible october. issues in the high-yield market. what will be your prediction if we get a slim congress that
7:16 am
helps the bond market? gibson: companies have been issuing debt for share buyback and dividend activity, very accretive to the market. i don't know if it will have much impact on the corporate bond market in terms of what happens with the midterms right now unless it decreases volatility in the treasury market. i think that would be in the positive. david: but if you want to maintain -- alix: if you want to maintain that sugar high as we have been calling it, doesn't that an asset -- essence make it harder to want to get triple c or triple d? gibson: it's very sensitive to growth and any turnover or wear off of tax cuts would have an impact on the market, but overall the investment grade and higher-quality segment of high-yield with sustainable growth are probably in ok shape right now. we are a little concerned about valuations, they are a little
7:17 am
bit stretched. we saw the volatility last week and that could be for shadowing of more volatility ahead. david: looking at the fed, december meeting, they could be addressing balance sheet issues. what are you looking at for the fed? gibson: that's always been my concern. not that they are raising rates, powell has taken the bernanke yellen playbook, being transparent, but any change in the direction of the balance sheet or shrinking of the balance sheet would be concerning. if they were to move or change anything, it would definitely signal to the markets that quantitative easing will be more aggressively removed in this unconventional monetary policy. feel like we learned on friday that the philip curve isn't dead. that if the fed rate hike passes as such,
7:18 am
without factoring in like neutral policy from their models , if one of the models actually starts to work, what does that mean? for the fed they have to closely watch input costs and wages. we are seeing it in the data and effect continues to be the case, inflation will be a concern. fortunately the treasury market is reflecting concerns around future inflation with positive real rates. in a positive position. we have to watch that closely on the wage front. what about the ecb? the news coming out of europe is andincreasingly positive there may be divergence of the fed stays on its path. david: that's another big -- gibson: that's another big concern, the ecb in the bank of japan continuing to stay pat with bigger infinite -- interest rate if rentals with volatility
7:19 am
7:21 am
president trump raised hopes of a u.s. china trade deal late last week, but then over the weekend larry kudlow said that any deal would have to be in u.s. interests and take a wild but together. law ofnt xi decried at the jungle trade actions last night, clearly referring to the united states. now we welcome our bloomberg colleague, stephen engle. stephen, welcome, thank you for staying up to talk with us. from the chinese point of view, give us a sense of the chinese reaction to this back and forth on trade. mr. kudlow now saying don't be in a big hurry.
7:22 am
>> at the opening of the chinese international import expo he was saying that china is in it for the long run. he mentioned that this is a 5000 year economy country and that they are here now and that they are here to stay. again, he did not mention the united states or donald trump by ore, but he did criticize the lack of globalization, from some members of the global economy and their protectionist nature. you mentioned those quotes from xi jinping, but we also heard from the head of alibaba, who said it is the most stupidest thing in this world, a trade war, that is. they are in it for the long-term and they are also going to not give any fire to the electorate
7:23 am
ahead of the midterm elections coming up in a few hours starting in the united states and your time. right now china is standing firm, xi jinping not offering any new promises, click just cliches about opening up the economy and being a champion of globalization, but they are standing firm for sure. david: stephen, thank you for that great report. alix: also with us, gibson smith. what's your base case? gibson: i think there will be a deal cut, but it will be long and drawn out, a lot of back and forth, it will be very interesting to see the kind of commentary we get from trump .fter the midterms it feels as though there is a lot of gamesmanship playing out right now and i think it will take some time to play out. do you just need things to not get worse? or do you need things to actually improve?
7:24 am
i think there is a balance here where we have to find where the united states and china are working more closely together, call it fair terms of trade going forward. how sensitive is global growth overall to this? questiont's a great and there are a whole bunch of inputs into that. the foundations of growth are strong, the foundations of inflation are building, as we have been talking about. i think that this will play out over time. i don't think there will be a shock to the system or anything of that nature. looking at pmi and europe, they had been going in the real wrong direction. should we be worrying about those numbers? watching,ey are worth but the overall foundations of growth continue to be strong. thinking about the liquidity in
7:25 am
the system and what's happening with the global economy, i think that in's will be ok. the united states is really rolling right now and doing quite well related to the fiscal as overall well positive sentiment in the economy, so i think that things are very strong. on the live blog we have the question, what is the best way to measure sentiment? gibson: we are watching equities rate closely, but other than that you just have to watch that dialogue back and forth. talking about global growth, goldman sachs had a note that this was the peak of growth , organize papers here, finding it, that's a different thing, yes, they expect a similar contribution in 2018 thousand 18, but it shifts from being u.s. centric to being more broadly based. and they see a softer outlook
7:26 am
than four 2019. what do you think about that? gibson: global growth forecasts are very dependent on market doing well and there is a view that china could come in with a stimulus package similar to what we are seeing in the united states. we are watching emerging-market economies closely, they are the marginal growth pattern in the global economy. i actually think that the global economy is going to perform much better than the consensus and i think we will realize, nine to 12 months from now the global growth is actually stronger than expected. thank you very much, gibson smith. this is bloomberg. ♪
7:28 am
comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers.
7:29 am
7:30 am
taking your on the futures market, s&p futures are up by two on the s&p with european stocks also flat. i wanted to point out the ftse 100, at one point today you had stellar outperform or in the cable rate and still the british pound lost a lot of steam and the strongest performer in the space. what was the sunday times thing, saying that maybe hey there was a deal? i'm saying i will believe it when i see it. david: that's right, a break on ireland. alix: sure. eggs also fly. the dollar, getting a little bit of steam here, the euro dollar is down, and i want to point out italy bond yields rising, talking about other things -- among other things the italian whole week the coming online. nevertheless, a bit on the long crude ate curve, with a six-month low. david? time to find out with
7:31 am
going on outside the business world with emma chandra. set for ohio, and missouri, polls show that democrats are poised to regain control of the house of areesentatives, but there no guarantees and the edge of the party has narrowed in recent weeks thanks to the president us campaigning and a blizzard of television ads. in indonesia, investigators are looking into a crash that had malfunctions on its last four flights. those problems reportedly involved the airspeed indicator. boeing and u.s. safety officials have been asked to take corrective steps. brusselshiefs meet in to discuss the escalating budget standoff with italy. the european union has essentially rejected the italian budget because of the size of the deficit. the italian prime minister has a college that there is no plan b for the budget, indicating that
7:32 am
they have no intention to comply with eu demands. powered by more than 2700 journalists and analysts in more than 120 countries, i'm emma chandra. b.x: always have a plan i have one just for living life. u.s. sanctions coming back into effect today, president trump wants increased pressure over what he calls malign iranian behavior in the u.s. -- in the middle east. waivers may be granted within the next hour to allow for continued import of iranian oil. joining us for more is ashley peterson, senior oil market analyst. stratus is maintaining its forecast, as well as tom petri, joining us on the phone. the rhetoric into the sanctions was that the u.s. would take a
7:33 am
much harder stance, in it to win it, brutal. do the waivers change the conversation? and how? tom: i don't think so. they show a degree of flexibility but they are very serious about expecting a path to significant reductions. that theyey realize want to, they have a brutal effect on the market in the near term. are definitely serious in terms of how they are proceeding to turn the screws. david: this is a zero-sum game in the sense that the price has to go up substantially for the president to get what he wants out of a run. tom: from here we had a sharp reduction. kenny go up from here, yes, but they are concerned about what 2019 looks like.
7:34 am
and saudi most increasing along with the u.s. could put us in a more fully supplied position next year. significant -- alix: significant reduction under obama was every 20 days with a waiver. what can we expect? ashley: about the same level. this is where i disagree, i don't think that trump has been as hard of a line as he could have been in terms of what does and doesn't get a waiver, by saying who is and who isn't getting them immediately. trying to be secretive makes it seem like they didn't have much of a plan and now they are just responding to the fact that some countries kept importing through november 4 so i guess the will get waivers. i don't know if they have a very firm line in mind. it seems to be a country by country basis. so the slide in oil is justified? yes, with aashley:
7:35 am
lot more speculative trading, it was the paper markets that drove the recent price. like you said, i'm keeping my call for the quarter, we are heading into the lower winter demand season, still the trade tensions and demand concerns into next year and like tom said, we have the u.s., russia, saudi increasing supply right now. what about the demand side? there is some concern now the global growth is slowing. what does that do to demand? tom: you are right on with that question. the goldman sachs comments about softer next year are things we need to pay attention to. it wouldn't take much of a softening or a slowdown in global demand, perhaps triggered by the chaos of these tariff with thethat, along
7:36 am
restrictions on opec having been lifted. do it isin opec to can going to be producing what they can. the twoa and libya are that are basket cases in terms of what's going on internally there. but beyond that, most of the others are going to see increasing volumes of being ok and they will be there alongside the big ones, which are really saudi arabia and russia is a nonmember, but certainly a supplier to the export market. with sounds like you agree ashley, and is 75 something the ashley target? or does this go lower from here? again, she is talking about a brent, i assume. alix: yes, yes, yes. [laughter] tom: i was a that the $10 gap we have between wti and brent is
7:37 am
such that i could see wti coming up because of the gap in roaming, but i think the 75 is not a bad number to be working with. it's ironic. think about the month of october, we started the month of october hearing about fears of $100 oil. and against that we penetrated, we came off for the sharply. it would take an unusual set of real surprises to see anything like that. what we have reaffirmed is that demand is a function of rice. demand growth is a function. if you come inside of dame dash david's terminal here, if we take out 1.5 million barrels of oil per day, the market can handle it, like we don't need a price spike to compensate for that?
7:38 am
tom: yeah -- ashley: yeah, the recent price spikes have actually kind of guaranteed even more production for next year, more hedges are in place and i think that is going to be the for the first and second quarter of next year as we wait on these pipelines and what that this location will really look like. but we can handle one million, 1.5 million right now. so, if this is all right, doesn't that put the increased pressure on the iranians, more than what president obama could ever bring to bear, indicating that the iranians will have to move towards president trump? -- tom:hat's certainly that's certainly began plan -- the game plan that john bolton has outlined.
7:39 am
they want to make this a better currency for doing trade and one willo get around the u.s. be for china and iran to cooperate on how they settle those oil shipments that china may well want to take on. whether they will do it or we end up seeing or we end up seeing how they fashion this six months to nine months from now is probably the weston, but i do think that this is a powerful incentive or china and iran to figure out some ways to make some of that iranian oil move in a way that the u.s. cannot curtail it. -- alix: ashley, you are nodding? ashley: i completely agree. china is more than willing to jump in and say -- we will let you do deals and our currency. we will help you with some sort of trade arrangement. keep in mind that the eu is
7:40 am
still saying that we have this special purpose vehicle and it's really only going to be small middle sized companies taking advantage, but there were still a lot of opportunities for iran to export oil, so i just don't see it staying that low for that long to 2019. wakinghank you both for up early for us. always great to see you. a programming note, much more on oil starting tuesday when we are live from the bloomberg new economy forum from singapore. i'm so jealous, i can't even discuss it. do not miss that, david. david: coming up here, the big exit, the man who predicted the subprime mortgage will at, not in a -- mortgage collapse, not in a good way. this is bloomberg. ♪
7:43 am
7:44 am
mix and the number of fidelity investment account holders fell 41% in the last year, fidelity saying that 180,000 have balances of at least seven figures, 10 times as many as a decade ago. a movie about freddie mercury was the big winner at the box office this weekend. "became ian rapsody" easily build -- beat the new walt "nutcracker."le, alix: covering three things that wall street is doesn't about this morning, first is the big exit. he predicted this subprime mortgage collapse, now he has beaten brexit. taking shape with a firm naming its fewest partners in 20 years with a global tech forecast predicting the next egg place for technology is europe. david: how about that? jason kelly joins us.
7:45 am
we know where it is but not quite what it is? jason: the most of -- important question for everyone out there is that this is the character played by steve carell in "the big short." [laughter] [applause] alix: if you didn't know from looking at the picture. jason: exactly. shorting two banks in the u.k., but what's even more interesting is that if politics continue down this one path, he says he will short 50. alix: and he's very -- david: and he's very mild about saying that he's a trotskyite. it's really interesting it's really interesting to see investors lining this up. it's obviously going to be a big week for brexit. we are all occupied with midterms tomorrow but we do expect news out of the u.k.
7:46 am
tomorrow from theresa may, this northern ireland report is a big deal. partly because it has gone quiet and we think maybe it has gone quiet because they are getting a deal done. jason in could play the movie question right maybe a younger, alive paul newman? -- movie? maybe a younger, live paul newman? [laughter] jason: how about alan alda. alix: i could see that. goldman partners in about 20 people, thencing 65 people, the smallest since 1998. will it he selective for a lot of people? i genuinely wonder. it's interesting, it's a story that we can't get enough of. this is the david solomon goldman. we get very few chances that a bank like this, only every 10 or 12 years, for some of the
7:47 am
compass their stamp on it. he's been in the chair for about a month now saying to be more selective and the other question will be david solomon being very vocal about having a more diverse partnership. will they end up naming more women? this is the first time we have seen this. you also wonder if you saying we should take a breather , we may redirect our decisions about the market. alix: i'm not saying that there are like no partners, but that's also part of the story. the other thing to keep in mind is that a global partners -- a partnership is not what it was back in the day. this is a publicly traded firm. it's not the lavish partnership
7:48 am
that maybe it was back in the day. milner, an investor in facebook and alibaba, speaking with emily chang, here's what he had to say about the next region that would be super hot or tech. >> looking at the previous 10 years, adding the u.s. and china , that would be 10%. europe is around 3%. the rest of the world is around 7%. logically speaking you would think that europe should be doing much better in the future, sort of catching up with the u.s. and china. i think that china can increase their share is chinese companies go global. -- alix: iought
7:49 am
thought that was really interesting, europe had done well at the not as bad because of the technology? jason: we do spend so much time talking about the u.s. and china that europe mike it left behind, but it is kind of a mess. [laughter] david: there's nothing left to say. bloomberg's jason kelly, you can the original day on bloomberg radio from 2:00 to 5:00 eastern time in the afternoons. alix: spotify announcing a $1 billion buyback. in, like apple, for example, ibm, buying back all this stock, does it support the market? david: it certainly supports the market, but usually it's underpriced.
7:50 am
7:52 am
david: as you know so well, we are watching the midterms coming specifically we are talking or concerns over cyberattacks. we have an expert here now, britt ruin, the white house director of engagement of president obama, accuray much for being with us. >> did to be back with you. david: we have certain categories we have talked about, things ranging from misinformation coming a distance of the from campaigns themselves to misinformation about where you should go to vote to misinformation about the vote titles. what are the things that were you the most?
7:53 am
>> for hack information to drop or for misinformation to start circulating on social media. russia, iran, other adversaries have the capacity to get that information out there quickly and make it go viral. david: we have heard from the department of security -- him and security that they will let us know. thesoon -- quickly can united states government react? >> here's the problem, dhs doesn't focus on misinformation, they are strict they focused on the integrity of the election systems. they aren't going to worry about rumors circulating on social media. that responsibility was given to the state department by congress. unfortunately, the state department has done next to nothing to stand up the task force that was supposed to deal with this. shouldn't we rely on the
7:54 am
companies to police this? goodness knows we have put a lot of pressure on them to do that. >> we have, and we have seen some efforts in the last few weeks and even days, facebook and twitter taking down these accounts, but it's very much a whack-a-mole process where facebook takes down one account, it reappears on twitter, reappears with a youtube account . this has to be much more coordinated. alix: is there anything that we can do as voters? >> the first rule is to do no harm. if you see information that looks inflammatory, don't share it, verify it. it's surprising, but even the process of saying -- hey, i found fake information or rumors draws more attention to it. so do nothing is better than trying to share the information on networks. finally, i spoke to a
7:55 am
former special agent in charge said that he is most worried about misdirection of polls. how concerned are you about that? not only that, but misinformation about what you need to bring. there are very complicated rules when it comes to identification, when it comes to information about the process and that is where i think it could be easily manipulated by foreign actors. great to have you back with us. stay with us for coverage of the midterm elections, 12:00 a.m. in london that london. alix: you took a very specific lens on which races you are going to focus on and why and the economic angle. this will just the like blanket political coverage. david: we will be focusing on the house in particular and looking at what it means for the markets and businesses, through
7:56 am
an economic lens. alix: coming up in the next hour, but will the markets make of that midterms? we will break it down with the ubs head of equity strategies and what support will buyback be in the blackout and is it a good use of company capital? and here you are looking at the s&p trying to grind its way a little bit higher, coming down to the futures and negative territory, taken into that midterm elections. other asset classes, the dollar getting a little bit of strength throughout the day with yields being a touch lower. this is bloomberg.
8:00 am
america's america first prost -- policy. bracing for the midterms, investors identify the potential split in congress as the most expensive contest in history. iran oil sanctions snapback. preparing to offer waivers to certain buyers. oil hits a six-month low and volatility picks up. david: welcome to bloomberg daybreak. a lot going on this week. i am focused on the midterms for the next 24 hours. alix: let me date you for a section -- for a second. you covered nine elections. what is different about this one? david: you know the answer to that is donald trump. alix: in what way? david: every single election is about the turnout and certainly this time as well but it is so much more volatile. emotions are so much higher. the polling what you do not know
8:01 am
whether you can believe it or not but it indicates people are in greater numbers turning out, both republican and democrat. how many showing up, from which party and what are they motivated by. alix: and the most expensive in history. that is the political front. in the markets, not a lot of positioning being taken. s&p futures barely geeking out a gain.- barely eking out a euro-dollar down by 2/10 of 1%. you have an eu meeting in brussels and they are breaking down what is going on with the italian budget. 3.21 is how we are breaking down the 10 year. iranian sanctions will be running front and center with steve mnuchin at 8:30.
8:02 am
david: time for the morning brief. at midnight last night, those u.s. sanctions on iran oil went into effect. mike pompeo and steven mnuchin are going to talk about which countries got waivers in the end. on tuesday, voters will be electing congressman and a third of their senators depending on -- determining which party will control congress for the next two years. also on tuesday, the bloomberg new economy forum gets underway in singapore. over the course of the week, the u.s. treasury is going to auction off $83 billion in notes and bonds, another record. let's get an update on what is making up -- what is making news outside the business world. emma chandra is here with "first word news." emma: president trump has rallies in ohio, pennsylvania and missouri. thee are no guarantees and
8:03 am
party gap has narrowed in recent weeks. those u.s. sanctions on iranian oil sales lifted in 2015 as part of the nuclear agreement are now back in place. president trump is a filling his promise to increase pressure on iran over what he calls its maligned behavior in the middle east. themiddle east will -- united states will provide waivers to certain countries to allow them to keep importing iranian oil. is hittingi jinping back against president trump's protectionist trade policies. he also promised to further cut tariffs on imports and open china's market. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: candidates and party leaders at the weekend across the country trying to motivate their rating -- they're voting
8:04 am
bases including president trump and former president barack obama. >> if crowds mean anything, we are to have a great tuesday. this is one of the most important elections of our entire lives. this election will decide whether we build on the extraordinary prosperity that we have achieved or whether we let the radical democrats take control of congress and take a giant wrecking ball to our economy and the future of our nation. >> the consequences of any of us profound.me our in the closing weeks of the repeated, we have seen nonstop incessant attempts to divide us. david: we welcome now keith parker, ubs head of u.s.
8:05 am
strategy -- equity strategy. this chart takes us through different possible results. whether there is a divided congress or unified congress. the one time really does not work well is when the president is republican and there is a split congress. that is when the dow has done the worst. keith: interesting. we looked back to the post-world war ii period and despite whether a president loses both , fromuse or the senate october to december of average has beenr point, there one or two incident -- instances of decline and you point to one of those out but what is interesting is if you fast-forward further to march, you're not seeing one instance of negative returns for the s&p, so we have seen midterm elections with strong returns around midterms. david: that is on average over
8:06 am
history but not necessarily definitive. look at this election. what difference will it make to equity markets if the house flips the democrats or it remains republican? keith: in terms of if the house flips two democrat, that is largely what is expected by markets and the question becomes is it priced in? it contract multiple times over the course it contract multiple times over the course of october, worrying about rates and china but also some reason about midterm elections. i think the setup if you look back at history, we have seen that discount priced in between midterms in this car -- in this regard. worrying about the house flipping is less of a risk. if republicans retain the house, that is a positive for markets. where is the asymmetric move? keith: in terms of where the markets are today, if you do
8:07 am
have a house and senate that flips both two democrat where that is unexpected in this environment of volatility, that could be another potential pressure on the market but we would probably buy that dip. david: that is the downside if they both went democrat but you think it is only modest if we help -- if republicans help the house. two years ago, we underestimated the amount -- the effect on the market of donald trump getting elected. keith: quite a lot is priced in, if you think about what the key drivers of the market have been. it is more about interest rates, china policy, worries about trade and tara impact -- tariff impact. does it pull back some of the expectations around the fed? that is doubtful. alix: this is the function grr
8:08 am
from the last presidential election. tech blew it out of the park. consumer discretionary, 38%, health care, 33%. can that sector breakdown sustain after the midterms? past: what we have seen in cycles around the point where the economy is slowing, that momentum tends to persist and what we have seen from past cycles, what was ever leaving going into that transition from mid to late cycle tends to keep outperforming. it was energy last cycle, technology before that, so we do think tech can continue to be that leader. side, defensive growth health care is our preferred long and we would still stick with that. david: one of the democrats take the house and the president does not deal with infrastructure? how does that change some of the sectors? keith: on one hand, that is
8:09 am
traditionally what works in this environment. on the other hand, you have seen in a lotcant de-rating of the sectors like industrials and materials. we have still been positive on materials, a lot has been priced out of that sector since january 2017, but that could be a catalyst for a comeback. alix: i like that david brought up infrastructure because you will also have more insurance because you will have more debt -- issuance the visual have more debt. what is the drag from the higher dollar and higher yields we have seen when companies try to work out their budgets and for 2019? keith: in terms of more issuance and then you have -- strongern you have a dollar and higher yields, what is going to be the impact for companies in 2019? keith: we wrote about this a couple weeks ago, that that has been a headwind for markets in
8:10 am
terms of the treasury draw and liquidity. in terms of corporate's and their decisions around capex, but we have seen is capex tends to follow profit growth with a two to four quarter lag. that should mean that capital spending next year is still solid, even in an environment of higher rates, because they are doing it out of cash flow, not necessarily borrowing. david: keith parker of ubs is staying with us. i had a viewer genome he saying are you going to be doing anything tomorrow night? we are coming on the air at 7:00 tomorrow night and we will be on the air until midnight, covering the elections. really focusing on the house and what does it mean for the business community and financial markets. that is tomorrow night right here on bloomberg. alix: do not miss it. how awake will david be? coming up, china stands its ground in the press -- in the
8:11 am
8:13 am
emma: this is bloomberg daybreak. the world's biggest paid music service will buy back up to $1 billion of stock. week, company shares fell after the fourth-quarter forecast fell short of estimates. spotify stock is down 25% since hitting its peak in july. barclays was the worst performer in the stress test yet. the results may be a setback for the ceo's plans to boost returns to shareholders. japan, -- is running to reap
8:14 am
benefits of his enormous investment in technology. companyeen remaking the from a telecom operator to a technology investment firm with his $100 billion vision fund. that is your bloomberg business flash. david: hopes for an early resolution of u.s.-china trade frictions dimmed over the weekend as president xi and president trump's economic advisor traded barbs. larry kudlow saying there will not be a deal unless china addresses u.s. concerns and it will take some time in any event. we welcome michael mckee and still with us is keith parker, ubs head of equity strategies -- u.s. equity strategies. you have to take a step back and wait and see what happens going forward.
8:15 am
because low comment about it taking time is humbly the truest thing. even if xi and trump got together and when us at us -- in when us heiress -- in buenos and said they are going to negotiate a deal, they have made no progress at all. there are going to be some false dogs along the way. alix: companies dealing with supply chain issues, higher pricing cost and whether or not they can pass that cost along, do you feel like the margin issue has been factored into where we are? a growth perspective in terms of earnings, we estimate what is currently 1%posed and implemented is a to 2% hit to earnings with effects from the dollar and oil which have been relatively stable potentially providing an incremental 2%. if you think from a margin perspective, what is price, the market is down almost mid to high single digits since
8:16 am
october, a lot is priced in. what we will see underneath the surface is relative moves. those companies with low margins that will have more difficulty passing it along, that could be left with volume hits at the other end versus higher-margin companies that have better pricing power and underneath the surface will see some of that rotation. tohael: do we see the shift away from the u.s. as we go into 2019, the idea that u.s. growth is going to slow and emerging markets might pick up, or is there going to be a wall of worry and everybody is going to step back and wait? keith: that is a key question going into 2019. we have seen significant outperformance in the u.s.. relative valuations are such that a lot is priced in on a relative bases for the u.s. a big part of that is the growth backdrop. do we get a catch-up in the rest of the world and us china
8:17 am
stimulus helped offset some of the tariff pressures? secondly, does europe growth recover a bit where from a pricing perspective i would argue yes, there is potential if growth does continue at a solid clip. david: we may not know what ,resident xi would agree with but the one thing you know is president trump is not going to sit around and see growth diminish and diminish. he got a big surge in growth because of the tax cut. what is next in his quiver? michael: can i come back in 48 hours and tell you? david: sure. michael: if the democrats take control of the house of representatives, then he has nothing left. david: what about infrastructure? michael: there is not going to be in infrastructure bill. the democrats want a federally paid for deal and we have a republicanscit and
8:18 am
want these public and private partnerships that will work in some cases and not in others. it is not seen the two sides are close together at all. as a remedy likes to say, the 2020 president election starts on wednesday morning, and do the democrats want to give the president anything, even a bipartisan deal? it does not look like they are going to get something done. that leaves us with the economy operating on what it's got right now. alix: which raises the point of 2019 and goldman sachs noting over the weekend that increasing the oil price could present a downside risk and on the upside, continued slack along productivity could leave economies with more room to grow. growth in 2019ts should be somewhat softer if we do get some kind of china deal or even if things are not warped. does that conversation start to change now that global synchronized growth is now a
8:19 am
global non-secret eyes growth story? michael: the problem is we don't know what is going to happen. if the trade war continues and the president ups the tariffs to 25%, that hurts the entire world. we have already seen other asian nations fall off and china growth slows. some kind of deal and hold off, then maybe china grows faster and that helps everybody, but it is going to be outside the u.s. this year. david: when i listen to all of that, i don't hear much to get new impetus to the equity markets. we should be looking for more headwinds. to mike's impetus point, you saw the fiscal stimulus push out that cycle peak for the u.s. as the rest of the world grew slower. that is an interesting thing to get more pace synchronized and if we catch up from the rest of the world as u.s. growth might be slowing, that is positive but
8:20 am
in terms of impetus from potential markets for next year, there is no correlation between earnings growth and market returns for a given year. it is usually about the multiple and financial conditions and this year has been about the rise in rates, the strength in the dollar and a pullback in liquidity from markets, so we think that has been more than priced in an growth should remain solid and equities and the rest of the world catch-up. michael: we talked about what is going to happen to the world and we did not even mention the federal reserve. david: we should have been paying attention to the fed, it turns out. bloomberg's, thank you for being with us. keith parker is staying with us -- bloomberg's mike mckee, thank you for being with us. keith parker is staying with us. alix: the u.s. is fully re-imposing sanctions on iran. you are looking at the briefing room in d.c. under iranianl be
8:21 am
sanctions. we are still trying to find out the countries that will be issued waivers and what the terms of those waivers will be. they point out 700 people and banks like iran air have been sanctioned and they are releasing a full list of companies that will be covered by those sanctions, but we are waiting for the list of the waivers. an interesting point hopefully coming up. david: we will bring you that as soon as it comes up. coming up here, questioning people about their ties with saudi arabia. surge.k, profits we're going to talk about that right now. it is not coming up at all. it turns out they had great earnings but they spend most of the time of the earnings calls saying they are concerned with saudi arabia and they told them they don't like what happened there very much and at the same time, they made a commitment to the country. alix: this goes into all of the banks.
8:22 am
jpmorgan and blackrock say they are still going to do business with the country, they might not go to this saudi investment conference for we are still going to do business with them unless the u.s. government says you are not allowed to. david: there was a terrific piece on the bloomberg. it is measured in basis points. rest of the world is moving on because it is just too important. alix: although the saudi's are pushing back and are calling for an amazon boycott because they are upset at the washington post. remember that is all about jeff bezos sharing ownership of the washington post. now they are saying they're going to boycott it. amazon does not get a ton of money from saudi arabia, but nonetheless. david: i was in washington yesterday and i read the washington post hard copy. a big full-page ad in the front page saying saudi arabia has done wrong and some of the should hold them accountable.
8:23 am
alix: even if we affected portion of their business, they are satisfied. david: third company they are watching is tribune publishing -- we are going -- we are joined by brooke sutherland. this cannot stay out of the -- out of the news but not in a good way. brooke: there are three companies that sort of put in for for tribune publishing a brief minute and then they realized that was not the best choice. those bidders that are out there ,nclude donna rail -- donerail mcclatchy, what is interesting about this to me is mcclatchy already has a lot of debt, about $500 million in
8:24 am
pensions. they are already having to come up with creative structures to make this work. it is helpful that tribune publishing does not have any debt to speak of, but the who boughtreholder the l.a. times earlier this year is in talks to roll over his stake to ease that deal along. apollo is coming in as a potential lender. if this go through -- if this goes through, it is going to be a bit of a monstrosity. you are taking two legacy newspaper companies and putting them together and typically when you take two wooded companies and put them together, you don't come out with a strong company. mcclatchy does have a strong tradition but not lately. you have to think in terms of figuring out where to go for the future, is this the best path for these newspaper companies?
8:25 am
they are not investing in a new way forward. you are mostly talking about cost cuts. alix: where is the value in tribune? brooke: i don't really know at this point. when michael ferro came in and 2016, he had a grand plan about video and artificial intelligence. david: all-digital and all video. who was actually executing that? brooke: and i think you see that. they spun a really nice narrative but in terms of what they accomplished, i will say he did a lot on the -- he did do a lot on the cost confront -- cost cut front. paving a new forward for journalism, that is not exactly what we have seen. i do want to mention that the media is the aim owner of daily newspapers throughout texas. the new york post is reporting that that bid may be backed by
8:26 am
the dallas cowboys owner. cast of characters coming into what is already a very interesting story. brooke sutherland of bloomberg opinion, iq for joining us. coming up -- thank you for joining us. back stocks to buy -- buyify's plans to back stock. you are looking at a live shot there, 700 individuals and banks will be sanctioned. we are watching for the waivers and countries. this is bloomberg. ♪
8:28 am
8:29 am
my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. [ready forngs ] christmas? no, it's way too early to be annoyed by christmas. you just need some holiday spirit! that's it! this feud just went mobile. with xfinity xfi you get the best wifi experience at home. and with xfinity mobile, you get the best wireless coverage for your phone. ...you're about to find out! you don't even know where i live... hello! see the grinch in theaters by saying "get grinch tickets" into your xfinity x1 voice remote. a guy just dropped this off. he-he-he-he. alix: this is bloomberg daybreak. a very busy week lined up for you. s&p futures pretty much flat.
8:30 am
not a lot of positions will be taken ahead of those midterms. european stocks also flat. the ftse 100 up by 3/10 of 1%. part of the story earlier was the monster rally we saw in the cable rate that has come down a little bit. reports in the sunday times report that we will wind up seeing some sort of deal moving between brussels and the u.k.. in now or other asset classes we are looking at a relatively stronger dollar. continues in italy by about four basis points as the eu considers the italian budget deficit. bonds bid on the backend and crude of 3/10 of 1%. part of that story is the iranian sanctions and the specifics we will get from mr. pompeo and mr. mnuchin in just a few minutes time. david: we are in washington looking at a live shot. there are headlines crossing saying they are fully imposing their sanctions now, 700 companies, irani and banks have
8:31 am
been sanctioned -- iranian banks have been sanctioned. there are reports that as many as eight countries may have received waivers, but we do not have that as of yet. alix: let's be clear about the waivers. under president obama, you had to reduce or imports by 20% and then you are allowed to keep buying and they had to be renewed every 180 days. even if we get waivers, we don't know what that will be. those are some of the questions percolating and also how do you even measure that? the data is very unclear coming out of iran. it is unknown if they even have tankers with gps anymore. david: one of the interesting questions is will they automatically renew because under president obama, they more or less automatically renewed but the language coming out of secondary pompeo is this is a
8:32 am
temporary transition period. they may be more reluctant to give those automatic renewals. alix: we will give you an update on those headlines as they cross. in other news over the weekend, we learned that berkshire has -- berkshire hathaway repurchased company stock in the third quarter and we received news that spotify also plans to refer -- repurchase $30 billion of its own stock. joining us now is someone who knows buybacks really well. , a university of massachusetts professor and academy research. still with us, key parker -- keith parker of ubs. how important are the blackout periods for buybacks? keith: we have seen since 2010 in periods when buybacks plus , when they are
8:33 am
increasing as they are now as blackout. returnsp futures -- s&p tend to be much higher and that liquidity has been important to what we have seen in this latest selloff in october, that corporate flow has been at a trough as investors have tried to -- triedtrying to derisk. it could be cointreau for what it was in october, providing a key support for equities. david: professor, is this a good thing or a bad thing? you have a decided opinion of what it does overall for the marketplace. i think buybacks that are done as open market repurchases should be banned. we have a perfectly good way of giving yield to shareholders. households trying to save their money and get a yield and that is dividends. don't pay dividends, you
8:34 am
want companies paying all the earnings -- david: i'm very sorry to interrupt you, but we have secretary pompeo coming to the podium with secretary mnuchin. hold on and we will be right back with you. >> it is very great to be at the foreign press center. great to see you all. after may of this year, the trump administration adopted a new strategy to alter the behavior of the islamic republic of iran ticket leadership. at the -- of iran jakey leadership -- iran's leadership. our objective is to starve the regime of the revenue it uses to fund violent activities throughout the middle east and around the world. our ultimate goal is to convince the regime to abandon its current revolutionary course. look at what happened last week. denmark uncovered an assassination plot on its own soil.
8:35 am
the iranian regime has a choice. they can do a 180 degree turn and act like a normal country or a can see its economy crumble -- or it can see its economy crumble. makes changes in the 12 ways i mentioned in may, we will be relentless in exerting pressure on the regime. as a reflection of that result, we are imposing all sanctions that were previously listed under the nuclear deal. this includes energy, shipping and shipbuilding industries. since the trump administration came into office we have done 19 rounds of sanctions targeting 168 iranian entities. today, sanctions will accelerate the rapid decline of international economic activity in iran since the implementation of our strategy in may. since that time, over 100 economies -- companies have -- if an from iran or
8:36 am
company of aids our sanctions regime and securely continues business in the islamic republic, united states will levy severe and swift punishments on it, including potential sanctions. doing business with iran in defiance of our sanctions will be a much more painful business republic, united statesdecisionf of iranthan pulling out . more than 20 importing nations have zeroed out there imports of crude oil already, taking more than one million barrels of crude oil per day off the market. the regime today has lost over two and a half billion dollars -- $2.5 billion in oil revenue. the u.s. will be granting these exemptions to china, india, italy, greece, japan, south korea, taiwan in turkey. each of those countries has already demonstrated significant
8:37 am
reductions of the purchase of iranian crude over the past six months and two of those eight have or to completely ended of -- completed and did that haveetely ended -- eight completely ended imports. receivedhe revenue sales around oil will be held in foreign accounts. iran can only use this money for humanity and -- humanitarian trade or bilateral nonsanctioned goods. speaking of iran's nuclear program, we have granted temporary waivers to allow the continuation of three nonproliferation projects currently underway. allowing these activities to continue will improve ongoing oversight and make these facilities less susceptible to illegal nuclear uses. iran will never come close to getting a nuclear weapon on president trump's watch.
8:38 am
i want now turn it over to secretary mnuchin. -- i will now turn it over to secretary mnuchin. >> today the united states is executing on the final actions to withdraw on the obama administration's fatally flawed iran deal. this morning we will fully impose sanctions on the iranian regime. this is part of a maximum unprecedented economic pressure hasaign the united states -- is waging against the world's largest state sponsor of terror. today we sanctioned more than 700 individuals, entities, aircraft and vessels as part of treasuries -- treasury's largest ever single day action targeting iran. over 300 of those sanctions are new targets. in addition, we are listing hundreds of individuals and entities that were previously sanctioned.
8:39 am
these powerful sanctions directly target iran's banking, energy and shipping sectors. the iranian regime has funneled billions of dollars through the islamic revolutionary guard force through the banking sector. today's designation includes 50 iranian banks and their foreign and domestic subsidiaries in connection with iran's regime support for international terrorism, proliferation of mass destruction, or their means of delivery and human rights abuses. our actions include the identification of more than 400 targets including over 200 persons and vessels in iran's shipping energy sector, the national airline of iran and more than 65 aircraft, the placement of nearly 250 persons and associate block properties on the specially designated nationals list, the atomic energy organization of iran. months, last five
8:40 am
treasury has implement did some of the most impactful sanctions ever seen. combined with the previous actions of more than 900 iran a related -- with the previous actions, more than 900 iran related targets -- marking the highest ever level of u.s. economic pressure on iran. we are making it abundantly clear to the iranian regime that they will face mounting financial isolation until they fundamentally change their destabilizing behavior. iran's leaders must cease support for terrorism and destructive regional activities immediately. they must stop ballistic missiles and abandon their nuclear ambitions if they seek a path to sanctions relief. we are watching the iranian regime with laser focus. if they try to evade our sanctions, we will take actions to disrupt their activity time and time again. the maximum pressure exerted by the united states is only going to mount from here.
8:41 am
companies around the world need to know we will be strictly enforcing our sanctions, thank you. time forill allow for questions. question or secretary pompeo. the present -- the president invoked game of thrones when he discussed sanctions. do you think that was appropriate? administration has been consistent from the campaign to the first day he was inaugurated about our intention. we understand that the islamic republic of iran presents a threat to the united states and we are determined to stop it. i have not seen any of you comment on the response. this man has american blood on his hands. he has killed american soldiers. that is not funny.
8:42 am
the actions that the islamic republic of iran are taking are not about little silly things that people get wrapped up here in washington, d.c. but about very serious matters that impact all of europe, the middle east and the world. you were just listening to secretary of state mike pompeo and secretary of the treasury -- and treasury secretary steve mnuchin speaking about the sanctions on iran. words, 700 entities, companies and vessels will be under sanctions. some companies will receive temporary waivers, china included, that was a surprise. 20 countries have ended all imports of oil from iran and they will continue to not import anything going forward. joining us now from london is stuart wallace, bloomberg a.k.a. ticket editor for commodities. was this announcement more dovish or hawkish than you expected? editor forg's
8:43 am
commodities. was this announcement more dovish or hawkish than you expected? >> i did not really here an answer to those questions and the old markets ticked available a little -- the oil market --ked up a little it bit. alix: a fair point. they did not mention how to get those waivers. there are also some workarounds byt iran can look to, discounting their oil so much that they cannot refuse to buy it. this time around for those things to be used or is this rhetoric enough to really stymie those activities in iran? >> there is a good chance it will be used. view,he iranian point of there is very little risk. they are already sanctioned up the hill.
8:44 am
private companies or maybe not so worried about access. we saw it the last time around. iran is very good about hiding these enormous tankers in the ocean. they are very adept at turning up the transponders on the ship and then turning them back on when they are close to shore. issue formajor safety the shipping labels but it makes it really hard to track where this stuff is going. you then put it on to another ship and another ship and you lose track of it. and: or one country buys it ships it to another country, etc. we want to turn back to the markets and what will support the equity markets through the end of the year. some say it is going to be buybacks. we are back with bill lazonick, university of massachusetts professor of academic research. also with us in the studio is keith parker of ubs.
8:45 am
professor, we were talking about whether or not it was a good thing that companies used a lot of money for buybacks. you are saying it is not. walk us through your thesis. prof. lazonick: we have people who own shares, people trying to save some money and get a yield on that money and we can pay them dividends. if you are holding the shares, you want some of that money left in companies and you want that money to be retained to be invested and not just in capital equipment but in people and to be well-managed and that is what we want companies to do. topanies that start trying use their earnings on top of to boost their stock prices are not managing the company's properly. i argue that those senior executives are not doing their jobs. we allow them to do that and i have argued that stock buybacks
8:46 am
are basically a manipulation of the market that has been allowed rules -- it isec at the expense of the american worker. one person manipulate -- one person's manipulation might be another person's allocation of capital. prof. lazonick: a financial flow is not a allocation of capital. apple calls its capital return program, that is a misnomer. it is not returning anything because the people to whom it is giving buybacks, even dividends are not people investing in the company's. they are people who buy and sell shares.
8:47 am
billiton the public markets ever gave money to apple was when its ipo in 1980. the ceone of the things does is decide what assets to buy and at what price. if the ceo looks around and decides what are the best buys he can make is his own stock because it is underpriced, why is that a bad decision? can i finish one question? prof. lazonick: buybacks are done when prices are high. that is quite clear now. it is not the companies are buying undervalued stock for the sake of the company. that is not what is going on. alix: keith, the final word for you. if you have a company, how do you want them to spend their money? keith: i think it depends on what is the value of the company. when you are doing buybacks in 2010, 2011 and 2012 when your shares are trading at a deep discount, it is a great use capital. i think you are returning that to shareholders, that value, at a higher price.
8:48 am
when you're a bank buying back your stock at 3.5 times book, that may be questionable but it is a reallocation of apple's returning money to some shareholders that may either return it to their investors or invest in something else that may have greater growth or return on investment. i do think it is important to financial markets and the fact that the tax plan lowers the foreign tax wall 20 so that money can come back in the form you havends because sustained cash flow and that is an important factor. david: william lazonick of massachusetts law and keith parker of ubs, thank you both for being with us. now it is time for our monday feature we take a look at different aspects of how the digital world will affect money. today we look at the growing electronic payments business and how it is replacing cash but also how it is dealing with a range of security concerns. ,e welcome linda kirkpatrick
8:49 am
mastercard executive vice president of merchants and acceptance and jennifer surane. give us some insight into this business. and what are the problems with fraud or allocations -- allegations of fraud. the e-commerce business is growing at a rapid clip in the u.s. and around the world. increasingly we have growth across all channels of business in the physical world and the digital world. what we are doing it mastercard is helping to secure all those channels across any divides -- any device the consumer wants to use to conduct business. what we have done is we have been on a journey for the past several years. we started in the physical world and several years ago, as of october, we implemented a chip liability shift and this is something that took place with
8:50 am
merchants and issuing banks where as you may have seen on your card, check was put on most cards and you insert it into that of sliding. david: we are behind on that. linda: we are. the u.s. went with it mostly because of infrastructure and it took a while for the merchant community to really replace their terminals and to get them into a place for they could expect -- except these cards and then you have of issuing side, you needed time to actually issues these -- issue these products as well. most transactions are conducted using chip technology in the physical world, over 60% of transactions are chip enabled. the: walk us through broader lens because that brings security issues. how much money to companies have to spend on security to keep things safe? it is a huge concern.
8:51 am
payment networks like mastercard and the competitors, cybersecurity is one of the top -- it is definitely top of mind for management teams and everyone involved in terms of trying to keep the system as safe and secure as possible. alix: what do you do at mastercard for that? linda: we take a multitiered approach. we make sure we're protecting the system first and foremost and is the digital world, increasingly we are implementing new solutions and products like tokenization. you take a 16 digit on the card and convert it into a dynamic token so it renders that card useless. it takes the number that you would insert on a website and it turns it into a dynamic token.
8:52 am
every time that card is used, it will change the number and it will render it useless to a fraudster who takes that card and attempts it -- attempts to use it in another capacity. that is securing the digital world to make it as secure and safe as the physical environment. david: it used to be we thought signatures helped with that thing. they don't ask for a signature below a certain level. is that less secure because we don't have the signatures? linda: not at all. the signature in of itself is not an adequate means of stopping fraud, that is why we have the chip technology. that is why we retired the signature and more and more merchants will tell you you don't need to sign the back of the card or the receipt at the point-of-sale. this is what we have undertaken to streamline the experience and make it as for can free as
8:53 am
possible. we won't talk about how old we were respectively in the 80's. alix: jenny, when linda was talking about the steps, you were nodding. what do you see? to linda's point with chip cards, we saw a lot of stores get resolved and addressed but i think what have talked about it in the past, we talk about it like whack-a-mole. it just pops up somewhere else. it is very interesting to see now how the networks and the banks and merchants are having to work together and come up with a new solution for that online world. alix: linda kirkpatrick of mastercard and bloomberg's jennifer surane, thank you very much. the economicm you forum in singapore. let's get a check on
8:54 am
business stories making news this morning. for that we will go to emma chandra. -- : apple reportedly the company told subcontractors to halt plans for additional production lines designated to the device. last week, apple suggested weaker than suggested demand for its new iphones. tillman saxe reportedly lowering its number of new partners in 20 years. they're likely to announce that fewer than 65 people will be promoted. the new ceo told managers to be extra selective this year. a movie about the late rock star freddie mercury and the band queen was a big winner at the box office this weekend. bohemian rhapsody took in $50 million in north america. it easily beat the new walt disney fairytale, the nutcracker. alix: here is what i am watching. iranian sanctions reimposed by the u.s.
8:55 am
>> we are watching the iranian regime with laser focus. evade oury to sanctions, we will take actions to disrupt their activity time and time again. the maximum pressure exerted by the united states is only going to mount from here. companies around the world need to know we will be strictly enforcing our sanctions. alix: very hawkish and precise but the question is to what end? they mention 100 million barrels of -- one million barrels of oil taken off the market, that iran has already lost $1.5 billion. how much do they have to reduce to get that waiver? david: how long can they keep it going until people adjust their patterns? does iran find other ways of getting value if not cash? alix: the money has to be used
8:56 am
or specific goods. money for the oil, they cannot just blow it on whatever they want. the question becomes what can they do around that? if you offer a steep enough , how can that happen? david: russia said they will figure out a different way to pay for oil and get around the u.s. system, so we have to be careful about not using moving -- about not moving away from u.s. dollars. alix: that does it for bloomberg daybreak. coming up, bloomberg markets: the open. chris harvey, the wells fargo head of the u.s. equity strategy. this is bloomberg. ♪
9:00 am
xi heading back at u.s. policy. investors looking for a split decision on u.s. oil sanctions lifted as part of a 2015 iran nuclear deal in -- we impose from today. the market is 30 minutes away. good morning to you. features barely positive on the s&p 500. some of that move back from friday, yields are lower at 320 on the u.s. 10 year. let's begin with breaking news on citigroup and head over to taylor riggs. taylor: we have a new chairman of citigroup. he is replacing former long-term term and mike o'neil. the ceo and chairman will remain separate. this is always a key
88 Views
IN COLLECTIONS
Bloomberg TV Television Archive Television Archive News Search ServiceUploaded by TV Archive on