WEBVTT - Swanson: I don't think Fed rate hike changes landscape

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<v Speaker 1>Broadcasting live to New York, Bloomberg through Washington, d C,

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<v Speaker 1>Bloomberg to Boston, Bloomberg twelve hundreds to San Francisco, Bloomberg

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<v Speaker 1>to the country see a Channel one and around the

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<v Speaker 1>globe the Bloomberg Radio plus Bloomberg dot Com. This is

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<v Speaker 1>Bloomberg Surveillance. Good morning. In his seven thirty on Wall Street,

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<v Speaker 1>I Michael McKee along with Tom Keene allgan in the

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<v Speaker 1>news this morning. Of course, they're failed union with Fiser

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<v Speaker 1>left them looking for ways to try to boost share prices.

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<v Speaker 1>Are going to do that by buying back up to

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<v Speaker 1>ten billion dollars in shares four to five billion, and

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<v Speaker 1>open market researches repurchases over four to six months, they say,

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<v Speaker 1>and then they will see how it's going. Credit Sweet

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<v Speaker 1>CEO T jn Dam telling us today he's confident in

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<v Speaker 1>delivering planned cost cuts this year, which is important because

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<v Speaker 1>they had a second quarterly lost in the first quarter,

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<v Speaker 1>this time three two million Swiss francs, which translates to

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<v Speaker 1>three d eleven million dollars. They made a profit of

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<v Speaker 1>a billion francs a year earlier. Volks, so I can

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<v Speaker 1>apparently close again on a fix for those diesel powered

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<v Speaker 1>vehicles in the US. Affix. A software upgrade might reduce

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<v Speaker 1>the risk of an expensive buy back, according to people

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<v Speaker 1>familiar with the matter. You might also get a new

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<v Speaker 1>catalytic converter. Today's big earnings report. Disney analysts watching ESPN

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<v Speaker 1>and theme park revenues, but much of their attention will

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<v Speaker 1>be on what, if anything, the company says about succession

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<v Speaker 1>after that Thomas Staggs resignation forced out as CEO. That

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<v Speaker 1>is after the belt today. Now a second with Michael

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<v Speaker 1>R and get the latest world of national headlines. Mine,

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<v Speaker 1>thank you very much, Mike. It his primary day for

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<v Speaker 1>Democrats and Republicans. And in West Virginia and in Nebraska

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<v Speaker 1>you will hold Republican primaries there. Meanwhile, the new poll

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<v Speaker 1>shows a tight race between Hillary Clinton and Donald trumpet

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<v Speaker 1>three battleground states. According to a Quinnipiac poll taken in

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<v Speaker 1>Florida and Pennsylvania, Clinton has Trump has In Ohio, Trump

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<v Speaker 1>leads Clinton to The port Authority in New York and

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<v Speaker 1>New Jersey is threatening to kick t Say out of

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<v Speaker 1>the Guardia, JFK and Newark Liberty Airports. The port authority

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<v Speaker 1>is demanding that passengers get through security faster, or they

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<v Speaker 1>will bring in a private security company to do the job.

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<v Speaker 1>Former FBI agent now security expert Manny Gomez privatizing it

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<v Speaker 1>would make it more efficient and effective and infinitely less

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<v Speaker 1>costly to the taxpayer. Global News twenty four hours a day,

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<v Speaker 1>powered by our two hundred journalists and more than a

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<v Speaker 1>hundred fifty news bureaus from around the world. Down Michael Bart, Mike,

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<v Speaker 1>thank you, Michael. Time now for the land Over Parsippany Bloomberg.

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<v Speaker 1>NBC Sports Update with John Stasha, don't stay Warriors of

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<v Speaker 1>games this season. They still have not lost two in

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<v Speaker 1>a row. There eightieth win overall one thirty two to

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<v Speaker 1>one five overtime in Portland and they come home up

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<v Speaker 1>three games they won. The story was Steph Curry, who

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<v Speaker 1>they said was doubtful with the knee injury that forced

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<v Speaker 1>him out of the first three games, but he did

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<v Speaker 1>play and he scored forty points seventeen in overtime, which

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<v Speaker 1>has never been done before regular or postseason. Speaking of overtime,

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<v Speaker 1>Miami needed it to beat Toronto seven to tie that

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<v Speaker 1>series at two, three and four games of Toronto OT overtime.

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<v Speaker 1>Again in Nashville, they played three OT s the previous

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<v Speaker 1>game there again, the Predators won four three over San Jose,

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<v Speaker 1>so they'll play game seven tomorrow, so will Dallas and St.

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<v Speaker 1>Louis at the Stars won Game six three two. Good

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<v Speaker 1>start to the Mets four game series in l A.

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<v Speaker 1>Curtis Grandison led off the game of the home run.

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<v Speaker 1>Mets beat the Dodgers four to two, Stephen Matt's No.

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<v Speaker 1>Five and won the bullpen with three hitless and into Believe.

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<v Speaker 1>Yankees had five solo home runs, all off the Royals

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<v Speaker 1>Chris Young, all in the first three getings. They beat

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<v Speaker 1>Kansas City six to three. With the Bloomberg NBC Sports

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<v Speaker 1>up team, I'm John Station. All right, thank you John.

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<v Speaker 1>Right now we're looking at stucks. They lost all all altitude.

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<v Speaker 1>They're gaining it back now. SMP futures were down to

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<v Speaker 1>a four point game. Now they're up to a six

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<v Speaker 1>point gain. As we get ready for training day, we'll

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<v Speaker 1>talk about that in a moment with Jim Swanson. This

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<v Speaker 1>is Bloomberg Radio Worldwide, and this of course is Bloomberg Surveillance.

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<v Speaker 1>I'm Michael McKee along with Tom Keene on a day

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<v Speaker 1>where we're seeing a global rally, not just SNP futures.

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<v Speaker 1>But the stock six hundred in Europe is up by

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<v Speaker 1>two points seven tenths of eight percent, so we're seeing

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<v Speaker 1>some some gains around the world. The Shanghai come even

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<v Speaker 1>in Shanghai, the Chinese stock market finished higher, not much

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<v Speaker 1>but up a little bit. Uh. The dollars stronger today.

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<v Speaker 1>Point of it one for your d x Y. The

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<v Speaker 1>end is weaker, the euro is weaker as well. Time

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<v Speaker 1>now for the Bloomberg n j I T STEM Report,

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<v Speaker 1>broughtly by New Jersey Institute of Technology invest more than

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<v Speaker 1>a hundred and ten million dollars a year. It applied

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<v Speaker 1>research to solve problems and improved life. Learn more at

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<v Speaker 1>Stories of Innovation dot in j I T dot E DU.

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<v Speaker 1>Here's Bob, Good morning, Michael. Here's what's making news in science, Technology,

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<v Speaker 1>engineering and math. Potentially nine point three billion dollars is

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<v Speaker 1>on the line as Oracle and Google make their cases

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<v Speaker 1>to a jury on who owns parts of the Android system,

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<v Speaker 1>in legal fights that could profoundly change how software is

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<v Speaker 1>protected and licensed. They were left at a stalemate four

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<v Speaker 1>years ago, with Google's Android trophy untarnished. The central question

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<v Speaker 1>of the trial now underway in San Francisco Federal Court

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<v Speaker 1>is the same as in the last one. Did Google

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<v Speaker 1>cheap by using part of Oracle's Java programming language to

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<v Speaker 1>develop Android without a license? If Oracle wins, Google will

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<v Speaker 1>have to pay fees for the operating system used in

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<v Speaker 1>eighty percent of the world's mobile devices. Yahoo may owe

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<v Speaker 1>more than a hundred sixty million dollars in damages if

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<v Speaker 1>a class action lawsuit over text messages reaches a final decision.

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<v Speaker 1>The suit claims Yahoo Messenger service improperly sent welcome messages

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<v Speaker 1>to more than three hundred thousand Sprint users in March

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<v Speaker 1>of The law allows damages of as much as five

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<v Speaker 1>hundred dollars per message. Who's likely to settle the case

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<v Speaker 1>for less if it can undo a ruling that the

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<v Speaker 1>case may proceed as a class action. The company could

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<v Speaker 1>face suits for texts to other carriers if this litigation

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<v Speaker 1>succeeds and a report build as the first comprehensive look

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<v Speaker 1>at the world's plants finds a plant solely being ravaged

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<v Speaker 1>by changing land use, mostly conversion of forests to agriculture

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<v Speaker 1>and to feed a growing population, and climate change. The

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<v Speaker 1>States of the World's Plants is designed to provide a

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<v Speaker 1>baseline for annual reports that it will measure how many

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<v Speaker 1>plants species are being discovered and how many are being

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<v Speaker 1>lost forever. That's this morning's Bloomberg j I T Stem Report, Michael,

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<v Speaker 1>thank you. Revert. James Swanson had an interesting college experience,

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<v Speaker 1>earning an m b A with classmates George W. Bush

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<v Speaker 1>and Jim Cuts, the founder of Sam Adams Beer. That

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<v Speaker 1>must have been an interesting group of people to hang

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<v Speaker 1>out with. Uh, James, he's the chief investment strategist of

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<v Speaker 1>MFS Investment Management. What did you guys talk about? Well,

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<v Speaker 1>it's interesting also Mitt Romney as well, So it was

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<v Speaker 1>funny from the very first day we thought Mitt Romney

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<v Speaker 1>was running for president. This is the age of twenty six.

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<v Speaker 1>He shows up in a suit and we're in sweatshirts.

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<v Speaker 1>But Jim Cook would always talk about being a corporate

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<v Speaker 1>lawyer on Wall Street, and it's interesting to see how

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<v Speaker 1>his career evolved with beer and Uh, it's actually been

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<v Speaker 1>great funds and that George W. Bush guy, nobody ever

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<v Speaker 1>heard from him again? Right, yeah, you know, no one.

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<v Speaker 1>It's kind of interesting the characters into school, but definitely

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<v Speaker 1>all right, let me ask you this after the Job's report.

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<v Speaker 1>Everybody is out there with their opinion on what the

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<v Speaker 1>Fed's going to do. You think keeps them on hold.

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<v Speaker 1>But how important is the FED to somebody's investment strategy

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<v Speaker 1>right now, whether they raised rates basis points in June

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<v Speaker 1>or not. Look, I don't think they matter at all.

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<v Speaker 1>And I'm wondering about all this print and rhetoric about

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<v Speaker 1>FED when I'm looking at the US consumer balance sheet

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<v Speaker 1>and they're basically de leveraging, their amount of debt still

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<v Speaker 1>coming down during this whole cycle to their disposed by income,

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<v Speaker 1>and you know, basis points I don't think matters to them.

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<v Speaker 1>They have been spending not great, but not poorly during

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<v Speaker 1>this whole six and three quarter year cycle added you know,

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<v Speaker 1>a nominal rate of four or four and a half

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<v Speaker 1>percent without the use of debt. I think that means

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<v Speaker 1>it's a sustainable cycle. And basis point increase doesn't change

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<v Speaker 1>any of the real economic landscape here. Well, what did

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<v Speaker 1>seem to change the stock market landscape is when the

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<v Speaker 1>FED stopped adding to its balance sheet. We were doing

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<v Speaker 1>a chart on Bloomberg Survalance TV this morning. The minute

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<v Speaker 1>they stopped, the S ANDP flattened out. Can the market's

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<v Speaker 1>trade higher without the FED. I think they can because

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<v Speaker 1>I hear what you're saying, and I've seen those charts.

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<v Speaker 1>But the omitted variable here during this cycle might be earnings,

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<v Speaker 1>and over the arc of long history, it is prices

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<v Speaker 1>on the SMP do line up with earnings and free

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<v Speaker 1>cash flow. And I agree there are a lot of

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<v Speaker 1>players out there who are looking at liquidity what the

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<v Speaker 1>FED is gonna do quarter to quarter, months and months,

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<v Speaker 1>but year to year it's going to be a story

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<v Speaker 1>of earnings and free cash flow from these companies. And

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<v Speaker 1>that's what I'm disappointed about in this quarters earnings and

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<v Speaker 1>why I've said, let's stand back, because all the ingredients

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<v Speaker 1>I thought we're working for us, low cost of capital, capital,

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<v Speaker 1>light unit, labor costs, all these things have been working

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<v Speaker 1>for us for six and a half years have kind

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<v Speaker 1>of petered out. So I personally don't think and not

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<v Speaker 1>reliant on the FED one way or the other. I'm

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<v Speaker 1>reliant on the ability these companies that generate earnings, which

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<v Speaker 1>you have to remember are up higher than the market

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<v Speaker 1>going back to March of oh nine. Yeah, but we've

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<v Speaker 1>had this earnings recession for the last four quarters. Is

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<v Speaker 1>that coming to an end or does it get worse. Yeah,

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<v Speaker 1>well that's where I come in here. I was thinking

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<v Speaker 1>this was an earnings recession, and typically, and we've had

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<v Speaker 1>we've had a few of these in history, two or

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<v Speaker 1>three they last two quarters maybe three. Now it's four quarters.

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<v Speaker 1>And now it's spread to other sectors. And this is

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<v Speaker 1>where I have said, I write this blog, and I said,

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<v Speaker 1>let's step back. The market usually doesn't go anywhere in

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<v Speaker 1>the summer, usually does not go anywhere before in the

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<v Speaker 1>summer prior to a presidential election. And now we're getting

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<v Speaker 1>this sort of creepy news that margins are deteriorating and

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<v Speaker 1>everywhere except consumer discretionary telecom. Let's talk about that more

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<v Speaker 1>when we come back. And Tom Keen's gonna definitely want

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<v Speaker 1>to talk about free cash flow with you. He loves

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<v Speaker 1>free cash flow. Jim Swanson, chief investment strategist of MFS

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<v Speaker 1>Investment Management, here on Bloomberg Surveillance stocks are higher at

0:10:54.920 --> 0:11:01.840
<v Speaker 1>least futures are heading into trading today. Bloomberg surrounds brought

0:11:01.880 --> 0:11:04.079
<v Speaker 1>to by National Realty thirty percent returns on cash and

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<v Speaker 1>rented real estate. Find them at n r IA dot net.