1 00:00:03,440 --> 00:00:07,400 Speaker 1: This is Bloomberg Surveillance. Some massive flows out of active 2 00:00:07,440 --> 00:00:10,480 Speaker 1: and enter passive have I think created more irrational pricing 3 00:00:10,600 --> 00:00:12,480 Speaker 1: at the stock level than we've seen in Sometimes it's 4 00:00:12,480 --> 00:00:15,360 Speaker 1: gonna be awfully difficult to convince markets that you should 5 00:00:15,440 --> 00:00:18,000 Speaker 1: raise rad when inflation is moving in the wrong direction. 6 00:00:18,160 --> 00:00:20,599 Speaker 1: The inability to deal with us for policy is the 7 00:00:20,640 --> 00:00:23,120 Speaker 1: reflection of our political gridlock, and I just don't see 8 00:00:23,160 --> 00:00:25,360 Speaker 1: at the moment how to change that anytime. So Bloomberg 9 00:00:25,440 --> 00:00:29,880 Speaker 1: Surveillance your link to the world of economics, finance, and investment. 10 00:00:30,120 --> 00:00:33,280 Speaker 1: On Bloomberg Radio, Good morning everyone, Michael McKee and Tom 11 00:00:33,400 --> 00:00:36,280 Speaker 1: Keene Coast to coast Serious and next m Good morning 12 00:00:36,320 --> 00:00:40,040 Speaker 1: Florida and Ohio as you vote today, and covers across 13 00:00:40,120 --> 00:00:43,360 Speaker 1: all of Bloomberg Tonight with all due respect with their 14 00:00:43,600 --> 00:00:47,800 Speaker 1: special coverage Mark Helper and and John Heilman is well 15 00:00:47,920 --> 00:00:49,959 Speaker 1: right now. We do look at the politics, but more 16 00:00:50,080 --> 00:00:54,520 Speaker 1: the markets. Futures of negative eleven jown futures negative seventy nine. 17 00:00:54,960 --> 00:00:58,120 Speaker 1: Foreign Exchange Moves, the Forex Brief. It's brought to you 18 00:00:58,160 --> 00:01:01,480 Speaker 1: by Interactive Broker's Winner how f X Weeks two thousand 19 00:01:01,480 --> 00:01:04,480 Speaker 1: and fifteen award for the best retail for X trading 20 00:01:04,560 --> 00:01:08,520 Speaker 1: platform visit ib at I b k R dot com 21 00:01:08,840 --> 00:01:14,479 Speaker 1: slash for X Stronger yen abruptly stronger one twelve seventy nine. 22 00:01:14,760 --> 00:01:18,399 Speaker 1: That's a full stick one point oh four yen figures 23 00:01:18,440 --> 00:01:23,120 Speaker 1: one twelve seventy nine stronger yen, slightly stronger yuro and 24 00:01:23,160 --> 00:01:25,560 Speaker 1: the dollar, which was stronger earlier, gives it up for 25 00:01:25,600 --> 00:01:31,800 Speaker 1: actually of challenging retail news. Dalla Canada Weeker, all the 26 00:01:31,800 --> 00:01:35,720 Speaker 1: commodity occurrencies give it up as commodities take a pause. 27 00:01:36,280 --> 00:01:41,399 Speaker 1: West Texas thirty forty down seventy nine cents. Even Ruble 28 00:01:41,440 --> 00:01:44,840 Speaker 1: gives it back after a huge strong ruble move over 29 00:01:44,880 --> 00:01:49,120 Speaker 1: the last few weeks. So there we are. Aren't Hogan 30 00:01:49,200 --> 00:01:53,000 Speaker 1: coming up here in a moment right now? With a plethora, 31 00:01:53,440 --> 00:01:58,080 Speaker 1: a plethora of news? Do you start? Where do you start? 32 00:01:58,200 --> 00:02:01,040 Speaker 1: I mean Valiant, They're in a call right now. Where 33 00:02:01,080 --> 00:02:03,600 Speaker 1: you go with X on Mobile? Well you can go 34 00:02:03,640 --> 00:02:06,120 Speaker 1: with X on mobile and the oil companies more generally, 35 00:02:06,160 --> 00:02:09,079 Speaker 1: because you're seeing Crewe oil down for a second day 36 00:02:09,080 --> 00:02:11,320 Speaker 1: in New York. There hasn't been a back to back 37 00:02:11,360 --> 00:02:13,919 Speaker 1: decline like that in oil in more than a month, 38 00:02:14,400 --> 00:02:17,080 Speaker 1: So you're seeing losses across a fairly broad range of 39 00:02:17,160 --> 00:02:20,639 Speaker 1: energy stocks. X On Mobiles down one percent, Conical Phillips 40 00:02:20,639 --> 00:02:23,560 Speaker 1: down one and a half percent, Marathon Oil down two 41 00:02:24,560 --> 00:02:28,040 Speaker 1: You want to talk Valiant, that's fine value. Pharmaceuticals well 42 00:02:28,040 --> 00:02:30,800 Speaker 1: that stocks down eighteen and a half percent. The drug 43 00:02:30,840 --> 00:02:33,920 Speaker 1: maker gave sales and earnings forecast for this year. There 44 00:02:33,919 --> 00:02:37,160 Speaker 1: were lower than projections in December. Now Valiant withdrew the 45 00:02:37,160 --> 00:02:41,120 Speaker 1: earlierst this last month after chief executive Michael Pearson returned 46 00:02:41,160 --> 00:02:43,040 Speaker 1: from medical league. Can I put that chart on on 47 00:02:43,080 --> 00:02:46,440 Speaker 1: Bluement Radio Plus, go for it? We did it absolutely. 48 00:02:47,200 --> 00:02:50,280 Speaker 1: Another drug stock lower, Eli Lily It's down two and 49 00:02:50,280 --> 00:02:54,400 Speaker 1: a half percent. The drug maker revised the final stage 50 00:02:54,520 --> 00:02:58,560 Speaker 1: trial of a proposed Alzheimer's treatment to remove one of 51 00:02:58,600 --> 00:03:02,840 Speaker 1: the primary goals of the research, so a less ambitious 52 00:03:02,840 --> 00:03:05,680 Speaker 1: study being done on that drug. On the other hand, 53 00:03:05,680 --> 00:03:08,079 Speaker 1: you got Met Johnson Nutrition up ten percent. The maker 54 00:03:08,120 --> 00:03:11,519 Speaker 1: of infant formula received expressions of interest in the takeover 55 00:03:11,680 --> 00:03:15,520 Speaker 1: from Nestley and Anne. That's according to the UK financial 56 00:03:15,520 --> 00:03:19,240 Speaker 1: block Betaville. Signing unnamed sources, the report said Met Johnson 57 00:03:19,320 --> 00:03:22,400 Speaker 1: is working with bankers at Lazard and all three companies 58 00:03:22,639 --> 00:03:27,040 Speaker 1: declined to comment. UH also Healthcare A Leer down six 59 00:03:27,040 --> 00:03:29,440 Speaker 1: and air percent. This a company that Abbott Labs agreed 60 00:03:29,480 --> 00:03:33,520 Speaker 1: to buy for five point eight billion dollars. Well. As 61 00:03:33,520 --> 00:03:36,320 Speaker 1: it turns out, A Leer received a subpoena Friday from 62 00:03:36,360 --> 00:03:39,840 Speaker 1: the US Justice Department for documents related to sales practices. 63 00:03:40,120 --> 00:03:43,480 Speaker 1: A Leer also disclosed that accounting issues will delay the 64 00:03:43,560 --> 00:03:48,800 Speaker 1: filing of its annual report to regulators. Some earnings of 65 00:03:48,840 --> 00:03:52,320 Speaker 1: note in retail HD supply of five and a percent. 66 00:03:52,520 --> 00:03:55,640 Speaker 1: The building material suppliers fistical fourth quarter earnings and first 67 00:03:55,720 --> 00:03:58,920 Speaker 1: quarter profit forecast beat analysts average estimates in the Bloomberg 68 00:03:58,960 --> 00:04:02,960 Speaker 1: Survey ds W up ten percent. The shoe retailers earnings 69 00:04:02,960 --> 00:04:05,600 Speaker 1: and sales for the fiscal fourth quarterbeat projections. D s 70 00:04:05,760 --> 00:04:07,760 Speaker 1: W expects sales growth that stores open more than a 71 00:04:07,840 --> 00:04:11,880 Speaker 1: year to accelerate this fiscal year. Children's Place up six percent. 72 00:04:12,120 --> 00:04:15,480 Speaker 1: The power retailer's profit for the fiscal fourth quarter surpassed estimates. 73 00:04:15,480 --> 00:04:17,960 Speaker 1: Some of the Children's Places earnings forecast for the current year, 74 00:04:17,960 --> 00:04:20,680 Speaker 1: and the company increas it's quarterly dividend by thirty to 75 00:04:20,760 --> 00:04:25,040 Speaker 1: twenties cents of share. Gotta mentioned salutory one zp x 76 00:04:25,200 --> 00:04:27,880 Speaker 1: X as a ticker. The stock has risen more than 77 00:04:28,000 --> 00:04:31,000 Speaker 1: fivefold in today's training. I mean company was valued atless 78 00:04:31,000 --> 00:04:33,599 Speaker 1: than a hundred million before today. It's all about a 79 00:04:33,680 --> 00:04:38,240 Speaker 1: proposed leukemia treatment called Vixios that had favorable results in 80 00:04:38,279 --> 00:04:40,520 Speaker 1: a final stage trial. Company expects to file for US 81 00:04:40,560 --> 00:04:43,720 Speaker 1: approval of the strugg later in the year. Very good, 82 00:04:43,760 --> 00:04:47,400 Speaker 1: David Wilson, thank you so much. Art Hogan joins us 83 00:04:48,160 --> 00:04:51,480 Speaker 1: with wonder like he has. He has done this for years, 84 00:04:51,640 --> 00:04:53,680 Speaker 1: and I like Art, how you say we swing from 85 00:04:53,800 --> 00:04:58,320 Speaker 1: data light to data overload. What does the data tell 86 00:04:58,360 --> 00:05:01,880 Speaker 1: you of the equity markets right now? Fun tight time 87 00:05:01,920 --> 00:05:03,840 Speaker 1: And it's interesting. You know, last week we probably had 88 00:05:03,839 --> 00:05:05,880 Speaker 1: the latest week of the year so far in terms 89 00:05:05,920 --> 00:05:08,279 Speaker 1: of data, and then the only key input we out 90 00:05:08,320 --> 00:05:12,239 Speaker 1: was the ecb UM and they actually outperformed UH and 91 00:05:12,240 --> 00:05:14,000 Speaker 1: and the only other piece of data that we looked 92 00:05:14,000 --> 00:05:15,919 Speaker 1: at are the only canalysts we looked at was energy 93 00:05:15,920 --> 00:05:19,640 Speaker 1: and unfortunately remained pretty correlated to what energy is doing 94 00:05:19,720 --> 00:05:22,479 Speaker 1: for being a good battery and indifference. So as we 95 00:05:22,520 --> 00:05:25,120 Speaker 1: head into this week, you know, the calendar is very full, 96 00:05:25,160 --> 00:05:27,280 Speaker 1: and I think that's important. It's interesting. It will take 97 00:05:27,320 --> 00:05:29,720 Speaker 1: a back seat for a bit like the PP and 98 00:05:29,760 --> 00:05:32,159 Speaker 1: the retail sales seemed to be today as we anticipate 99 00:05:32,279 --> 00:05:33,760 Speaker 1: what the Fed has to say to us, and they've 100 00:05:33,760 --> 00:05:36,080 Speaker 1: got a tricky job in front of them tomorrow to 101 00:05:36,160 --> 00:05:38,520 Speaker 1: deliver a message that sounds a bit better than the 102 00:05:38,560 --> 00:05:40,359 Speaker 1: last time we heard from them in January, but not 103 00:05:40,480 --> 00:05:43,279 Speaker 1: so much that we think there's an imminent hike and 104 00:05:43,279 --> 00:05:47,240 Speaker 1: and probably you know, not one until June. Is the 105 00:05:47,520 --> 00:05:50,720 Speaker 1: U said that much of a driver at this point 106 00:05:50,960 --> 00:05:56,960 Speaker 1: for the equity markets, given um everything else that's going on, Well, 107 00:05:56,960 --> 00:05:59,520 Speaker 1: I think it is. I think that, you know, I 108 00:05:59,560 --> 00:06:02,120 Speaker 1: think the mike that the job that they've got front 109 00:06:02,160 --> 00:06:05,320 Speaker 1: of them is to work down some of the the 110 00:06:05,440 --> 00:06:07,840 Speaker 1: news that was delivered, you know in the last statement, 111 00:06:07,880 --> 00:06:10,400 Speaker 1: so you know, balance of risk was removed in January. 112 00:06:10,400 --> 00:06:13,320 Speaker 1: That hasn't been out of there, uh in the entire cycle. 113 00:06:13,360 --> 00:06:16,160 Speaker 1: That probably comes back in tomorrow. I think that the 114 00:06:16,200 --> 00:06:18,919 Speaker 1: dots right now currently stand at one and three for sixteen, 115 00:06:19,080 --> 00:06:21,840 Speaker 1: exiting seventeen at two and three eighth and exiting eighteen 116 00:06:21,920 --> 00:06:24,200 Speaker 1: at three and three eights and a terminal rate of 117 00:06:24,279 --> 00:06:26,960 Speaker 1: three and a half. I think those numbers have to 118 00:06:27,000 --> 00:06:28,720 Speaker 1: come down a bit. They've got a lot of wood job. 119 00:06:28,760 --> 00:06:30,320 Speaker 1: If they're gonna get to one in three eight before 120 00:06:30,360 --> 00:06:31,920 Speaker 1: the end of this year, I think that's gonna look 121 00:06:31,920 --> 00:06:35,440 Speaker 1: closer to one percent exiting. So that gives them the 122 00:06:35,440 --> 00:06:38,000 Speaker 1: optionality of two or three hikes this year as opposed 123 00:06:38,080 --> 00:06:40,920 Speaker 1: to four, which is kind of priced in. I certainly 124 00:06:40,960 --> 00:06:43,839 Speaker 1: think they need to speak to financial markets, you know, 125 00:06:43,880 --> 00:06:46,720 Speaker 1: having done better since the last time they were together. Um, 126 00:06:46,800 --> 00:06:48,920 Speaker 1: they'd like to keep us dated dependent, So I think 127 00:06:48,960 --> 00:06:51,680 Speaker 1: that's important. But yeah, that's that's gonna play a key role. 128 00:06:51,960 --> 00:06:54,240 Speaker 1: What's interesting that mikeet is and I think that sins 129 00:06:54,320 --> 00:06:57,240 Speaker 1: the market has priced in sort of two hikes for 130 00:06:57,279 --> 00:07:00,599 Speaker 1: this year, and the FED funds futures that's been infested itself. 131 00:07:00,640 --> 00:07:03,080 Speaker 1: It's some interesting action and which has been constructive in 132 00:07:03,120 --> 00:07:05,320 Speaker 1: the dollar at the dollar cross. You know whether firstus 133 00:07:05,360 --> 00:07:08,240 Speaker 1: the ear or the end and you know, whether that's 134 00:07:08,240 --> 00:07:11,040 Speaker 1: a combination of things we haven't seen that you know, 135 00:07:11,120 --> 00:07:14,000 Speaker 1: that pursuing strength that we're all nervous about that was 136 00:07:14,000 --> 00:07:17,360 Speaker 1: going to reach havoc with our emerging markets and our multinationals. 137 00:07:17,400 --> 00:07:19,360 Speaker 1: So that's probably the good news, and I think that's 138 00:07:19,360 --> 00:07:21,640 Speaker 1: where the FED needs to walk the fine line today, 139 00:07:21,720 --> 00:07:24,760 Speaker 1: what is the character of the blended income statement of 140 00:07:24,800 --> 00:07:28,440 Speaker 1: the equity markets? We know nominal GDP SAGGY. I'm going 141 00:07:28,520 --> 00:07:31,680 Speaker 1: to assume revenue growth the SAGY. How do you perceive 142 00:07:32,000 --> 00:07:35,840 Speaker 1: income statements with that dynamic? That's a great question. And 143 00:07:35,880 --> 00:07:37,800 Speaker 1: as we look at this, one of the things that 144 00:07:37,840 --> 00:07:40,280 Speaker 1: we've you know, line up and saying, you know, what 145 00:07:40,440 --> 00:07:42,480 Speaker 1: the what what would be a fair valuation and how 146 00:07:42,480 --> 00:07:45,440 Speaker 1: our you know, and how our equities priced in this environment. 147 00:07:45,480 --> 00:07:48,320 Speaker 1: So you know, when we suit of bottomed out February 148 00:07:48,400 --> 00:07:51,600 Speaker 1: levels of this year, you had a relatively reasonable multiple, right, 149 00:07:51,680 --> 00:07:53,760 Speaker 1: and you can look at this with a fifteen handle 150 00:07:53,800 --> 00:07:56,560 Speaker 1: and say fifteen times one twenty if that's our estimates 151 00:07:56,600 --> 00:07:59,240 Speaker 1: for two thousand and sixteen earnings on the SP if 152 00:07:59,280 --> 00:08:02,920 Speaker 1: I foundered, you know, we're relatively as for actively valued. Well, 153 00:08:03,080 --> 00:08:06,280 Speaker 1: the flash forward four weeks and you look at you know, 154 00:08:06,320 --> 00:08:08,520 Speaker 1: what markets have done since then, and I think it's 155 00:08:08,640 --> 00:08:11,119 Speaker 1: it's interesting that we're closer to sixteen point eight times, 156 00:08:11,160 --> 00:08:13,320 Speaker 1: which gets you up into the sort of fully valued 157 00:08:13,720 --> 00:08:16,120 Speaker 1: even with the tenure that's fielding something less than two. 158 00:08:16,560 --> 00:08:18,680 Speaker 1: So to me, I think you've got a you know, 159 00:08:18,720 --> 00:08:21,160 Speaker 1: a condition where you know, a lot of a lot 160 00:08:21,200 --> 00:08:25,160 Speaker 1: of our objectives for the year have been reached in 161 00:08:25,200 --> 00:08:27,760 Speaker 1: the first couple of weeks in March. So you know 162 00:08:27,840 --> 00:08:29,760 Speaker 1: that says we may be taking a pause here and 163 00:08:30,200 --> 00:08:32,800 Speaker 1: you know, rallies maybe you know, back in in a 164 00:08:33,000 --> 00:08:34,440 Speaker 1: in a place where they need to be sold for 165 00:08:34,480 --> 00:08:38,360 Speaker 1: a time bank. But I think that the the perception 166 00:08:38,520 --> 00:08:41,040 Speaker 1: of this market is that, you know, we are no 167 00:08:41,080 --> 00:08:44,160 Speaker 1: longer looking at economic data that's pointing towards every session 168 00:08:44,160 --> 00:08:45,840 Speaker 1: in the United States, and I think we were pricing 169 00:08:45,840 --> 00:08:48,520 Speaker 1: that in January and the first part of February, whereas 170 00:08:48,520 --> 00:08:50,320 Speaker 1: we're going back to what is going to be that 171 00:08:50,440 --> 00:08:52,960 Speaker 1: sort of sluggist two to two an epis growth, right, 172 00:08:52,960 --> 00:08:55,080 Speaker 1: that we've done through the whole cycle. Hogan, thank you 173 00:08:55,160 --> 00:08:56,679 Speaker 1: so much for the wonder like we catch up this 174 00:08:56,720 --> 00:09:00,679 Speaker 1: morning there chief market strategies. Might we forget ut at 175 00:09:00,679 --> 00:09:04,800 Speaker 1: the markets are discounting h mechanism out into the future, 176 00:09:05,280 --> 00:09:08,439 Speaker 1: something that Mr Hogan's dealt with for decades, and I 177 00:09:08,440 --> 00:09:12,120 Speaker 1: I really wonder how you're supposed to discount out uh, 178 00:09:13,040 --> 00:09:15,560 Speaker 1: the back and forth that we see within economics and 179 00:09:15,679 --> 00:09:19,959 Speaker 1: certainly the confusion of central banks. To me, it's a 180 00:09:20,080 --> 00:09:23,640 Speaker 1: dragging market where the punch bowl got recrimed. Yeah, well, 181 00:09:23,679 --> 00:09:25,920 Speaker 1: the punch bowl will keeps going back and forth. But 182 00:09:26,080 --> 00:09:28,920 Speaker 1: what's interesting to me is the fact that the markets 183 00:09:28,920 --> 00:09:33,040 Speaker 1: are so volatile based on central banks rather than based 184 00:09:33,080 --> 00:09:36,040 Speaker 1: on what the fundamentals of the economy are. It's all 185 00:09:36,080 --> 00:09:39,679 Speaker 1: about what Janet says. Yeah, Well, what we're gonna do here, folks, 186 00:09:39,720 --> 00:09:41,839 Speaker 1: and this is important. What we try to do is 187 00:09:41,880 --> 00:09:45,640 Speaker 1: get away from the by holed sales hysteria. Cynthia Coon's 188 00:09:45,720 --> 00:09:47,640 Speaker 1: is out of Penn State. She's gonna join us in 189 00:09:47,720 --> 00:09:52,120 Speaker 1: a moment. She has been kneat deep in the Valiant story. 190 00:09:52,200 --> 00:09:55,160 Speaker 1: She's been on a call this morning. I'll be blunt, folks, 191 00:09:55,240 --> 00:09:58,600 Speaker 1: it is not a pretty call based on the stock action. 192 00:10:00,120 --> 00:10:03,719 Speaker 1: Forty three down to sixty nine I think was the 193 00:10:03,760 --> 00:10:07,240 Speaker 1: stock price, and we've moved from six sixty nine down 194 00:10:07,280 --> 00:10:10,760 Speaker 1: to fifty six right now, and of moments ago bounced 195 00:10:10,760 --> 00:10:15,240 Speaker 1: off loads seven minutes ago at fifty five point eight zero. 196 00:10:15,360 --> 00:10:18,360 Speaker 1: I'll be direct to call as not going well, and 197 00:10:18,400 --> 00:10:23,000 Speaker 1: we'll get an interesting briefing on this from uh from 198 00:10:23,320 --> 00:10:25,880 Speaker 1: Cynthia Coons will do that. She's with Bloomberg News and 199 00:10:26,600 --> 00:10:31,520 Speaker 1: really is a legit authority on their income statement and 200 00:10:31,559 --> 00:10:35,360 Speaker 1: the challenges UH taking futures of negative ten down futures 201 00:10:35,760 --> 00:10:38,360 Speaker 1: negative seventy nine. There is a risk off field, but 202 00:10:38,440 --> 00:10:41,400 Speaker 1: a stasis to the market. I think that's what you 203 00:10:41,480 --> 00:10:45,119 Speaker 1: suggest with Bank of Japan with our FED coverage tomorrow 204 00:10:45,480 --> 00:10:52,120 Speaker 1: and then onto the Bank of England a tenure one 205 00:10:53,080 --> 00:10:54,600 Speaker 1: time now to check in with Michael bar and get 206 00:10:54,640 --> 00:10:57,360 Speaker 1: the latest world and national handline. Mike Tom, thank you 207 00:10:57,480 --> 00:10:59,920 Speaker 1: very much. Five more states we'll get a chance today 208 00:11:00,040 --> 00:11:04,880 Speaker 1: pick presidential candidates in primaries today Today is huge for 209 00:11:05,080 --> 00:11:08,920 Speaker 1: Florida's Marco Rubio and Ohio's John Kasik. They need to 210 00:11:08,920 --> 00:11:10,800 Speaker 1: win in their home states to close the gap on 211 00:11:10,880 --> 00:11:14,680 Speaker 1: Donald Trump's lead. Democrat Hillary Clinton is out to stretch 212 00:11:14,679 --> 00:11:18,040 Speaker 1: her lead on Bernie Sanders. Primaries will be held today 213 00:11:18,160 --> 00:11:23,120 Speaker 1: in Illinois, Ohio, Missouri, North Carolina, and Florida. Syria's main 214 00:11:23,160 --> 00:11:27,160 Speaker 1: opposition group says Russia's withdrawal of forces from the country 215 00:11:27,280 --> 00:11:30,440 Speaker 1: will help peace talks in Geneva. A spokesman for the 216 00:11:30,480 --> 00:11:34,480 Speaker 1: Saladi backed High Negotiations Committee says the surprise pull out 217 00:11:34,600 --> 00:11:38,080 Speaker 1: ordered by Russian President Vladimir Putin is a positive step 218 00:11:38,480 --> 00:11:41,360 Speaker 1: bombers have left the Russian air base in Syria as 219 00:11:41,400 --> 00:11:44,960 Speaker 1: troops are loading equipment. Dallas c V has one his fourth. 220 00:11:44,960 --> 00:11:47,600 Speaker 1: I did a rat sled dog race. Global News twenty 221 00:11:47,600 --> 00:11:50,720 Speaker 1: four hours a day, powered by our two hundred journalists 222 00:11:50,960 --> 00:11:53,199 Speaker 1: and more than one hundred fifty news bureaus from around 223 00:11:53,200 --> 00:11:55,679 Speaker 1: the world. I'm Michael Barr. To Michael, thanks so much. 224 00:11:55,800 --> 00:11:59,920 Speaker 1: Brutal headlines unvalue of their chief executive officer says Earn. 225 00:12:00,080 --> 00:12:07,240 Speaker 1: Incredibility starts with me. That will be next Marcot Drivers. 226 00:12:07,280 --> 00:12:09,240 Speaker 1: Brought to you by Mercedes Benz. This month you Mercedes 227 00:12:09,280 --> 00:12:11,480 Speaker 1: Ben's Tri State dealers Welcome Spring with limited time offers 228 00:12:11,480 --> 00:12:13,240 Speaker 1: on select models like the Sporty c L A and 229 00:12:13,320 --> 00:12:15,800 Speaker 1: Versutle g l A, each engineered in price to move. 230 00:12:15,880 --> 00:12:23,880 Speaker 1: Visit m B USA dot com Today, Global Business News 231 00:12:23,920 --> 00:12:26,840 Speaker 1: twenty four hours a day. If Bloomberg dot com, the 232 00:12:26,960 --> 00:12:30,040 Speaker 1: Radio plus mobile app and on your radio. This is 233 00:12:30,080 --> 00:12:33,880 Speaker 1: a Bloomberg Business Flash and I'm Karin Moscow. The Bloomberg 234 00:12:33,880 --> 00:12:37,240 Speaker 1: Future's Report. Brought to you by Interactive Brokers and CME Group. 235 00:12:37,280 --> 00:12:40,400 Speaker 1: If you're looking for global futures contracts with low trading costs, 236 00:12:40,640 --> 00:12:44,040 Speaker 1: look no further Interactive Brokers as the industry leader. Learn 237 00:12:44,120 --> 00:12:46,959 Speaker 1: more at interactive Brokers dot com. Slash c m A 238 00:12:47,160 --> 00:12:49,920 Speaker 1: Group u S Dock Index futures lower this morning, with 239 00:12:50,000 --> 00:12:52,040 Speaker 1: stock still near their highest levels of the year as 240 00:12:52,080 --> 00:12:55,400 Speaker 1: investors consider the capacity of central banks to boost global growth. 241 00:12:55,600 --> 00:12:57,960 Speaker 1: But checked the markets every fifteen minutes throughout the trading 242 00:12:58,040 --> 00:13:00,560 Speaker 1: day on bloomberg S and p Emity future is down 243 00:13:00,559 --> 00:13:03,000 Speaker 1: eleven and a half points DOWNI Many futures down eighty 244 00:13:03,080 --> 00:13:06,640 Speaker 1: seven and Nazdaci mini futures down fourteen decks. In Germany's 245 00:13:06,640 --> 00:13:09,319 Speaker 1: down eight tenths percent, and your treasury at nine thirty 246 00:13:09,360 --> 00:13:12,079 Speaker 1: seconds the yield one point nine two percent. Nimex screwed 247 00:13:12,120 --> 00:13:14,360 Speaker 1: oil down one point three percent or forty eight cents 248 00:13:14,400 --> 00:13:17,000 Speaker 1: to thirty six seventy of barrel call mix goal down 249 00:13:17,040 --> 00:13:19,559 Speaker 1: one percent or twelve dollars thirty cents to twelve thirty 250 00:13:19,559 --> 00:13:22,000 Speaker 1: three and ounce the euro a dollar eleven eleven, the 251 00:13:22,160 --> 00:13:25,160 Speaker 1: n one twelve point eight zero. That's a Bloomberg business flash. 252 00:13:25,200 --> 00:13:27,800 Speaker 1: Tom and Mike Karen, thanks so much. It is a 253 00:13:27,840 --> 00:13:31,400 Speaker 1: house of cards. We've avoided the hype and the hysteria 254 00:13:31,400 --> 00:13:34,920 Speaker 1: about Valiant, but unfortunately this morning it's nothing but an implosion. 255 00:13:35,559 --> 00:13:39,040 Speaker 1: The stock is down nineteen point five percent. The call 256 00:13:39,160 --> 00:13:42,559 Speaker 1: has just occurred. Joining us now Cynthia Coons, who has 257 00:13:42,600 --> 00:13:45,520 Speaker 1: followed this soap opera for Bloomberg and knows she has 258 00:13:45,559 --> 00:13:49,640 Speaker 1: her training from Penn State, where she was really a 259 00:13:49,679 --> 00:13:53,480 Speaker 1: major grizzled re reporter for the Daily Collegian, and she 260 00:13:53,600 --> 00:13:56,360 Speaker 1: joins us right now. Cynthia, what did you learn in 261 00:13:56,400 --> 00:14:01,439 Speaker 1: the call about the immediate desperation of Valiant? Well, I 262 00:14:01,480 --> 00:14:03,640 Speaker 1: think what was most interesting about the call was how 263 00:14:03,720 --> 00:14:05,480 Speaker 1: much they had to focus on debt and what they 264 00:14:05,520 --> 00:14:08,720 Speaker 1: took exactly, and this was something totally different. They've always 265 00:14:08,720 --> 00:14:10,880 Speaker 1: said weren't compliance with our covenants and they've moved on. 266 00:14:10,920 --> 00:14:13,480 Speaker 1: It hasn't been a call where in this instance they 267 00:14:13,520 --> 00:14:17,640 Speaker 1: talked about debt probably thirty percent of the time, and 268 00:14:17,640 --> 00:14:19,720 Speaker 1: they came back to it. And one of the main 269 00:14:19,760 --> 00:14:22,200 Speaker 1: issues is they talked about they're going to pay down 270 00:14:22,240 --> 00:14:24,800 Speaker 1: more than one point seven billion of debt. In December, 271 00:14:24,840 --> 00:14:26,600 Speaker 1: they had said they were going to pay down more 272 00:14:26,640 --> 00:14:30,000 Speaker 1: than two point two five billions, so they've reduced them. Okay, okay, 273 00:14:30,040 --> 00:14:32,000 Speaker 1: but with the basic idea is there's a trip point 274 00:14:32,040 --> 00:14:35,320 Speaker 1: on equity price where debt becomes immediate. Are they anywhere 275 00:14:35,360 --> 00:14:38,320 Speaker 1: near at fifty six dollars a share the Cell sides 276 00:14:38,400 --> 00:14:42,240 Speaker 1: trip point where equity the equity debt blend doesn't mix. 277 00:14:43,560 --> 00:14:45,840 Speaker 1: I'm not sure about that metric precisely, but I do 278 00:14:45,920 --> 00:14:47,840 Speaker 1: know that they are running into trouble in terms of 279 00:14:47,880 --> 00:14:50,320 Speaker 1: when they file their ten K and what that means 280 00:14:50,320 --> 00:14:54,040 Speaker 1: in terms of whether or not bond. Now what we 281 00:14:54,160 --> 00:14:56,920 Speaker 1: know from having actually canvass the market on this issue. 282 00:14:56,960 --> 00:14:59,480 Speaker 1: We've been looking into this for quite some times. It's 283 00:14:59,560 --> 00:15:02,840 Speaker 1: unlike glee to be a major problem for them. Usually 284 00:15:02,880 --> 00:15:04,840 Speaker 1: bond holders will give you a waiver and you can 285 00:15:04,840 --> 00:15:07,640 Speaker 1: just keep going. You pay, sort of working out. They're 286 00:15:07,680 --> 00:15:10,000 Speaker 1: a huge debt holders, so it's in the debt market's 287 00:15:10,080 --> 00:15:12,720 Speaker 1: interest to not let them default on that issue. Within 288 00:15:12,760 --> 00:15:15,720 Speaker 1: your reporting of Mr Ackman and the Cell Side and 289 00:15:15,760 --> 00:15:20,080 Speaker 1: the believers and the disbelievers, is this a story about 290 00:15:20,200 --> 00:15:24,960 Speaker 1: revenue dynamics, no pricing in real mystery about unit growth 291 00:15:24,960 --> 00:15:27,880 Speaker 1: at the top line of the income statement, or is 292 00:15:27,920 --> 00:15:32,400 Speaker 1: this a balance sheet soap opera about investment deals gone 293 00:15:32,400 --> 00:15:36,800 Speaker 1: bad and some plays. It's both. I think right now 294 00:15:36,960 --> 00:15:39,360 Speaker 1: everyone's trying to get their head around where the earning 295 00:15:39,440 --> 00:15:42,800 Speaker 1: shortfalls are and why the numbers have changed. So draft 296 00:15:42,960 --> 00:15:46,000 Speaker 1: is that on the income statement or on the balance sheet? 297 00:15:46,000 --> 00:15:49,880 Speaker 1: That's income statement, But obviously everyone always knew that the 298 00:15:49,920 --> 00:15:52,360 Speaker 1: balance sheet was heavily levered, so it's just to flow through. 299 00:15:52,560 --> 00:15:55,240 Speaker 1: The balance sheet has always been secondary because the expectation 300 00:15:55,280 --> 00:15:57,960 Speaker 1: has been that they've had these revenue levers that now 301 00:15:58,360 --> 00:16:00,880 Speaker 1: it's unclear why they are able to pull them and 302 00:16:00,920 --> 00:16:04,240 Speaker 1: why so much has changed from January to now. And 303 00:16:04,280 --> 00:16:06,800 Speaker 1: so I think there's a lot of there's a lot 304 00:16:06,840 --> 00:16:10,520 Speaker 1: of concern that they had numbers in December, reiterated in January. 305 00:16:10,960 --> 00:16:14,200 Speaker 1: Mike was gone. It was only two months, and he's 306 00:16:14,240 --> 00:16:17,600 Speaker 1: come back and changed these numbers dramatically. Now a lot 307 00:16:17,640 --> 00:16:19,840 Speaker 1: has happened since he's been gone, but I think the 308 00:16:19,920 --> 00:16:22,240 Speaker 1: magnitude of what they're doing here with the numbers has 309 00:16:22,320 --> 00:16:25,920 Speaker 1: just really shocked investors. An analyst, and it's just much 310 00:16:25,920 --> 00:16:28,200 Speaker 1: worse than anyone had to come like three years out, 311 00:16:28,320 --> 00:16:32,840 Speaker 1: fourteen billion to one billion on debt. It Uh, it 312 00:16:32,880 --> 00:16:35,200 Speaker 1: seems to be shocking to a lot of these analysts 313 00:16:35,280 --> 00:16:39,960 Speaker 1: because Mike person had some private calls with them, some 314 00:16:40,120 --> 00:16:43,640 Speaker 1: of them, Uh, just a week or so and now 315 00:16:43,680 --> 00:16:48,560 Speaker 1: they have gotten a completely different story. What's up with that? Yeah, 316 00:16:48,640 --> 00:16:51,240 Speaker 1: you can hear the incredility in their voice voices. It 317 00:16:51,280 --> 00:16:53,840 Speaker 1: sounds like when analysts get on there almost saying, hey, 318 00:16:53,880 --> 00:16:56,280 Speaker 1: wait a minute. Some of them their questions in the 319 00:16:56,280 --> 00:16:58,560 Speaker 1: way they're phrasing them, what are you gonna do about 320 00:16:58,560 --> 00:17:01,080 Speaker 1: your credibility now? And what happened with thy faccin? And 321 00:17:01,120 --> 00:17:03,320 Speaker 1: we thought those sales were going through Walgreens, and with 322 00:17:03,440 --> 00:17:05,359 Speaker 1: thy faccine is one of their is actually their biggest 323 00:17:05,400 --> 00:17:07,760 Speaker 1: drig at the moment. It's um it's a g I 324 00:17:07,880 --> 00:17:10,560 Speaker 1: drug that they acquired through SALEX last year. And and 325 00:17:10,600 --> 00:17:13,120 Speaker 1: so there's a lot of questions in terms of hey, waitit, 326 00:17:13,160 --> 00:17:15,040 Speaker 1: hey wait, what you've been telling us up to now, 327 00:17:15,080 --> 00:17:17,080 Speaker 1: it just doesn't feel like it's stepping up. So you 328 00:17:17,080 --> 00:17:18,800 Speaker 1: can just feel the tone and I think we'll see 329 00:17:18,800 --> 00:17:21,720 Speaker 1: it and we probably will see that in reflection reflected 330 00:17:21,760 --> 00:17:23,679 Speaker 1: in their notes and perhaps their price targets. I mean, 331 00:17:23,760 --> 00:17:26,359 Speaker 1: some analysts still have two hundred dollar price targets on 332 00:17:26,400 --> 00:17:29,480 Speaker 1: this stock. Good luck with that, Cynthia. When you look 333 00:17:29,560 --> 00:17:32,800 Speaker 1: at the ownership of this Mr Ackman is the number 334 00:17:32,800 --> 00:17:36,480 Speaker 1: two ownership. We're kind of uh, you know the usual victims. 335 00:17:36,920 --> 00:17:40,679 Speaker 1: Is this a four old one K institutional holding or 336 00:17:40,760 --> 00:17:43,959 Speaker 1: is it all a set of holders who are in 337 00:17:44,040 --> 00:17:47,040 Speaker 1: the game and understand it's a game and speculation. No, 338 00:17:47,280 --> 00:17:49,760 Speaker 1: I think this is a widely held both stock and bond. 339 00:17:49,800 --> 00:17:52,800 Speaker 1: I think where this this company becomes a major factor 340 00:17:52,960 --> 00:17:56,400 Speaker 1: in in perhaps every anyone's throwing k is that if 341 00:17:56,400 --> 00:17:59,640 Speaker 1: you're someone's in a bond fund, those bonds that's gonna 342 00:17:59,640 --> 00:18:01,000 Speaker 1: there's got to be a proportion of that that's in 343 00:18:01,080 --> 00:18:03,639 Speaker 1: valiant because it's such a big debt issuer. So I 344 00:18:03,680 --> 00:18:06,879 Speaker 1: think this stuck and also just the sheer size of it. 345 00:18:06,920 --> 00:18:09,320 Speaker 1: I think there are a lot of everyday investors who 346 00:18:09,320 --> 00:18:12,320 Speaker 1: would get really significantly hurt if this company doesn't pull 347 00:18:12,359 --> 00:18:14,720 Speaker 1: it off. And you know, they sort of hinted at 348 00:18:14,720 --> 00:18:18,080 Speaker 1: certain endgames and someone asked the question, would you consider 349 00:18:18,080 --> 00:18:20,520 Speaker 1: breaking it up? And Mike Pearson said, Look, if things 350 00:18:20,520 --> 00:18:23,840 Speaker 1: don't work out, we will have to consider other options. 351 00:18:23,880 --> 00:18:25,920 Speaker 1: But you know, we're not thinking about that yet. So 352 00:18:26,000 --> 00:18:27,919 Speaker 1: I mean they're they're they're not thinking about it, but 353 00:18:27,960 --> 00:18:30,880 Speaker 1: they're not avoiding it or dismissing it out of hand 354 00:18:30,880 --> 00:18:32,679 Speaker 1: as though they're not looking at the future as a 355 00:18:32,720 --> 00:18:35,080 Speaker 1: potential breakups there, but that does still feel like a 356 00:18:35,160 --> 00:18:38,080 Speaker 1: ways off in terms of what they're talking about today. Well, 357 00:18:38,480 --> 00:18:41,200 Speaker 1: break up or sell part of the company. They issued 358 00:18:41,200 --> 00:18:43,159 Speaker 1: a lot of debt to pay for a lot of acquisitions. 359 00:18:43,280 --> 00:18:46,240 Speaker 1: Could they sell some of those acquisitions to raise money 360 00:18:46,280 --> 00:18:48,679 Speaker 1: to pay the debt? Sure, they're already flagging that. They 361 00:18:48,680 --> 00:18:51,399 Speaker 1: said there and talks to divest the non core assets. 362 00:18:51,440 --> 00:18:53,480 Speaker 1: They wouldn't really give enough clarity for us to know 363 00:18:53,560 --> 00:18:56,880 Speaker 1: what exactly those assets are. Perhaps as the calls still 364 00:18:56,880 --> 00:18:59,719 Speaker 1: going on, so perhaps there'll be more detail on that. 365 00:18:59,760 --> 00:19:02,600 Speaker 1: But that's the that's the real question. What do they sell? 366 00:19:02,800 --> 00:19:04,760 Speaker 1: I mean, Cynthia, good luck with us. I love the 367 00:19:04,800 --> 00:19:10,280 Speaker 1: headline Valiant taking Walgreen's cost of good sold through the 368 00:19:10,520 --> 00:19:15,120 Speaker 1: s G and A line. There's a cardinal rule in 369 00:19:15,119 --> 00:19:18,560 Speaker 1: in cf A investment. When you get the headlines like that, 370 00:19:19,320 --> 00:19:21,879 Speaker 1: you're in trouble. Who are their auditors? Are they telling 371 00:19:21,920 --> 00:19:25,719 Speaker 1: these guys what to do? PC? I believe is there auditors? 372 00:19:25,720 --> 00:19:28,080 Speaker 1: But these numbers are not audited right now? That's the 373 00:19:28,119 --> 00:19:30,600 Speaker 1: other big question mark is there are releasing on audited 374 00:19:30,760 --> 00:19:33,040 Speaker 1: numbers for they think of giving the market update because 375 00:19:33,040 --> 00:19:36,040 Speaker 1: it has been a while that word wants it. But um. 376 00:19:36,080 --> 00:19:38,439 Speaker 1: But then if you read the risk factors and the 377 00:19:38,480 --> 00:19:41,280 Speaker 1: release and these are on audited numbers, they could be 378 00:19:41,320 --> 00:19:44,160 Speaker 1: subject to change. So we've got to get you off 379 00:19:44,200 --> 00:19:46,840 Speaker 1: the radio, Cynthia, because the stocks down two points since 380 00:19:46,920 --> 00:19:49,720 Speaker 1: you open your mouth. That's a bad thing. Cynthia Coach, 381 00:19:49,800 --> 00:19:52,720 Speaker 1: thank you so much, greatly appreciate it, really appreciate her 382 00:19:52,760 --> 00:19:55,600 Speaker 1: coming off the call. She is with Bloomberg News with 383 00:19:56,040 --> 00:20:00,200 Speaker 1: just terrific service us studying, uh the soap O. We're 384 00:20:00,200 --> 00:20:04,000 Speaker 1: called valiant when you get the markets open, Bloomberg Surveillance, 385 00:20:06,520 --> 00:20:08,000 Speaker 1: we're kind of you out of the opening bell. Brought 386 00:20:08,000 --> 00:20:10,040 Speaker 1: to you by the Jeep Grand Cherokee, the most awarded 387 00:20:10,119 --> 00:20:12,280 Speaker 1: suv ever. The Grand Cherokee continues to raise the bar 388 00:20:12,320 --> 00:20:15,480 Speaker 1: with its luxurious interior and legendary four by four capability. 389 00:20:15,560 --> 00:20:24,480 Speaker 1: Drive one at your local Jeep dealer. Today broadcasting live 390 00:20:24,600 --> 00:20:27,920 Speaker 1: to New York Kloomberg eleventh Rio, through Washington, d C, 391 00:20:28,160 --> 00:20:31,800 Speaker 1: Bloomberg ninety nine one to Boston, Bloomberg twelve Line to 392 00:20:31,960 --> 00:20:35,800 Speaker 1: San Francisco, Bloomberg nine Section to the country sous at 393 00:20:35,800 --> 00:20:39,240 Speaker 1: SAM Channel one ninet and around the globe. The Bloomberg 394 00:20:39,320 --> 00:20:43,360 Speaker 1: Radio plus Appen Bloomberg dot com. This is Bloomberg Surveillance 395 00:20:44,200 --> 00:20:46,399 Speaker 1: and that is the sound of the opening bell. Good morning. 396 00:20:46,400 --> 00:20:49,120 Speaker 1: I'm kerin Moscow along with Tom Keene and Michael McKee 397 00:20:49,119 --> 00:20:51,920 Speaker 1: and the opening bell brought to you by SEI. Today's 398 00:20:51,920 --> 00:20:56,200 Speaker 1: competitive market place requires asset managers to become more operationally adept. 399 00:20:56,400 --> 00:20:59,879 Speaker 1: Imagine transforming your business with sei's global platform at se 400 00:21:00,080 --> 00:21:03,600 Speaker 1: i C dot com slash Imagine stocks lower at the open. 401 00:21:03,640 --> 00:21:05,919 Speaker 1: The SNP five hundred down three tenths per cent or 402 00:21:05,960 --> 00:21:09,080 Speaker 1: six points to twenty twelve down. John's Industrial Average down 403 00:21:09,080 --> 00:21:11,879 Speaker 1: a third of a percent or sixty points to seventeen thousand, 404 00:21:11,960 --> 00:21:15,040 Speaker 1: one hundred sixty nine. Nasdacs down four ten percent or 405 00:21:15,040 --> 00:21:18,080 Speaker 1: eighteen points to forty seven thirty two ten. Your treasury 406 00:21:18,119 --> 00:21:20,320 Speaker 1: up seven thirty seconds. The yield one point nine three 407 00:21:20,359 --> 00:21:23,000 Speaker 1: percent yield on a two year point nine four percent 408 00:21:23,440 --> 00:21:26,320 Speaker 1: nimex screwed oil down one point seven percent or sixty 409 00:21:26,320 --> 00:21:29,280 Speaker 1: two cents at thirty six fifty six of barrel comes 410 00:21:29,320 --> 00:21:31,719 Speaker 1: goal down to one point one percent or thirteen dollars 411 00:21:31,720 --> 00:21:34,840 Speaker 1: twenty cents at twelve thirty one ninety. Announce the euro 412 00:21:34,920 --> 00:21:37,600 Speaker 1: a dollar eleven oh six, the N one twelve point 413 00:21:37,760 --> 00:21:42,439 Speaker 1: nine five. Tom and Mike Caramasco, thank you very much. Well, 414 00:21:42,520 --> 00:21:45,080 Speaker 1: we're going to talk about debt, debt covenants and problems 415 00:21:45,080 --> 00:21:48,399 Speaker 1: with debt. Um. We need to talk to our problem child, 416 00:21:48,480 --> 00:21:51,960 Speaker 1: Lisas from Bloomberg gadfly, did you did you go along? 417 00:21:52,119 --> 00:21:57,320 Speaker 1: Villian yesterday's seventy? That was me? I was which she 418 00:21:57,320 --> 00:22:01,280 Speaker 1: would never buy equities. She's a bond. She's like a screenbird. 419 00:22:01,400 --> 00:22:03,720 Speaker 1: She walks around with a vest on the flora Bloomberg 420 00:22:03,720 --> 00:22:06,520 Speaker 1: dos with by tickets on one side and cell tickets 421 00:22:06,520 --> 00:22:11,960 Speaker 1: on the other and popcorn. Is this just straight to it? 422 00:22:12,040 --> 00:22:15,280 Speaker 1: How bad is shape? And well, you know, the bonds 423 00:22:15,280 --> 00:22:18,639 Speaker 1: are tanking as you would expect. Um. One thing that 424 00:22:18,680 --> 00:22:20,719 Speaker 1: I find really compelling is that the bonds are not 425 00:22:21,440 --> 00:22:24,320 Speaker 1: going even further lower. I mean they were lower at 426 00:22:24,359 --> 00:22:29,080 Speaker 1: the end of February and they're going back to that level. Um. 427 00:22:29,560 --> 00:22:31,959 Speaker 1: But there. I mean, this is this is terrible. A 428 00:22:31,960 --> 00:22:34,000 Speaker 1: company is coming out and saying that they might not 429 00:22:34,600 --> 00:22:38,119 Speaker 1: meet their debt covenants and that they missed their projected 430 00:22:38,160 --> 00:22:40,719 Speaker 1: earnings by by more than a billion dollars. And this 431 00:22:40,800 --> 00:22:43,520 Speaker 1: is this is a company that's struggling on so many 432 00:22:43,800 --> 00:22:46,320 Speaker 1: up fronts and will continue to struggle. But you know 433 00:22:46,359 --> 00:22:49,320 Speaker 1: what's interesting. This company has almost twenty billion dollars of 434 00:22:49,359 --> 00:22:52,280 Speaker 1: debt and it's held by all the biggest investors. I 435 00:22:52,359 --> 00:22:56,800 Speaker 1: just looked at who the biggest all it's black Rock 436 00:22:56,800 --> 00:22:59,439 Speaker 1: Fidelity JP Morgan. If you look at the biggest titled 437 00:22:59,440 --> 00:23:02,800 Speaker 1: bond to eat TF, Valiant is you know this the 438 00:23:02,840 --> 00:23:07,880 Speaker 1: eleventh and thirteen biggest holding of this particular fund. So 439 00:23:08,160 --> 00:23:11,920 Speaker 1: you know the problem with companies that run into trouble 440 00:23:11,920 --> 00:23:14,080 Speaker 1: that have a lot of debt is that you have 441 00:23:14,200 --> 00:23:17,760 Speaker 1: so many investors with such invested interest in keeping the 442 00:23:17,840 --> 00:23:20,200 Speaker 1: debt prices up, and that these are the bonds that 443 00:23:20,240 --> 00:23:22,800 Speaker 1: are most frequently traded, that that you're not going to 444 00:23:22,880 --> 00:23:25,719 Speaker 1: really see the massive decline until it's too late. And Maxinisson, 445 00:23:25,800 --> 00:23:28,080 Speaker 1: we should be clear as carrying the water on Valiant 446 00:23:28,920 --> 00:23:33,320 Speaker 1: is carrying the water on Valiant. Uh for Bloomberg gad fly. 447 00:23:33,440 --> 00:23:36,120 Speaker 1: But Lisa, you've seen this so much that read headline 448 00:23:36,160 --> 00:23:40,320 Speaker 1: from Bloomberg. Valiant plunges as much as in early U 449 00:23:40,440 --> 00:23:44,880 Speaker 1: S trading. It's another cautionary tale. Whatever the soap opera 450 00:23:45,480 --> 00:23:50,960 Speaker 1: on accounting my experience is the bond people always get 451 00:23:51,040 --> 00:23:55,840 Speaker 1: disaster before the equity people always in every case, did 452 00:23:55,920 --> 00:23:59,640 Speaker 1: you off the bond desk at Bloomberg see the valiant 453 00:23:59,720 --> 00:24:03,360 Speaker 1: chan oleunges earlier? Did you feel like you guys saw 454 00:24:03,359 --> 00:24:06,840 Speaker 1: it coming when you look at bond prices of valiant Um? 455 00:24:07,040 --> 00:24:11,919 Speaker 1: Not necessarily, I'm just right. I mean, but there was 456 00:24:11,920 --> 00:24:15,280 Speaker 1: a pretty precipitous fall um and it was in September, 457 00:24:15,359 --> 00:24:17,640 Speaker 1: but that was really I mean, it kind of came 458 00:24:17,680 --> 00:24:22,080 Speaker 1: along with equities at that point. And I would say that, 459 00:24:22,359 --> 00:24:26,520 Speaker 1: you know, increasingly debt markets have had trouble figuring out 460 00:24:26,600 --> 00:24:29,000 Speaker 1: the accounting to such a degree and being a leading 461 00:24:29,040 --> 00:24:37,880 Speaker 1: indicators right now. Yeah, this is a situation where they 462 00:24:37,880 --> 00:24:40,399 Speaker 1: are their own worst enemy in the sense that the 463 00:24:40,760 --> 00:24:45,080 Speaker 1: lower um the stock price goes, the more the bonds 464 00:24:45,119 --> 00:24:48,080 Speaker 1: are affected, the higher price they're gonna pay on the 465 00:24:48,119 --> 00:24:50,800 Speaker 1: debt that they owe. Well, think about what their model was. 466 00:24:51,000 --> 00:24:53,280 Speaker 1: It was to borrow a ton of money to go 467 00:24:53,320 --> 00:24:57,120 Speaker 1: out and acquire competitors and then jack up the prices 468 00:24:57,160 --> 00:25:00,720 Speaker 1: of the drugs uh in order to increase the profits. 469 00:25:00,840 --> 00:25:04,240 Speaker 1: That's what their plan was. On both fronts, it's been stymied. 470 00:25:04,440 --> 00:25:07,400 Speaker 1: They aren't able to jack at prices because of congressional pressure, 471 00:25:07,680 --> 00:25:09,399 Speaker 1: and they can't borrow the way that they used to. 472 00:25:09,640 --> 00:25:12,160 Speaker 1: And the and the other idea here is just simple 473 00:25:12,200 --> 00:25:14,679 Speaker 1: accounting one on one, which, folks, for those of you 474 00:25:14,720 --> 00:25:16,520 Speaker 1: are the Bloomberg terminal in your car, you can do 475 00:25:16,600 --> 00:25:18,919 Speaker 1: off the way to the average cost of capital w 476 00:25:19,160 --> 00:25:22,800 Speaker 1: a c C chart on on any of these things. 477 00:25:23,280 --> 00:25:26,440 Speaker 1: Is all of a sudden, thirty percent debt becomes thirty 478 00:25:26,480 --> 00:25:30,359 Speaker 1: one debt becomes right now thirty three point six percent 479 00:25:30,520 --> 00:25:34,280 Speaker 1: debt just because the equity moves lower. I mean, I'm sorry, 480 00:25:34,320 --> 00:25:38,760 Speaker 1: they're they're they're you know, Madigliani and Miller, Merton, Miller 481 00:25:38,800 --> 00:25:41,440 Speaker 1: there there there linked to say the least. But this also, 482 00:25:41,480 --> 00:25:43,000 Speaker 1: I mean it brings us back to the point that 483 00:25:43,000 --> 00:25:45,879 Speaker 1: people were making that the problems in the in the 484 00:25:45,920 --> 00:25:47,840 Speaker 1: economy right now, and in the in the bond market 485 00:25:47,840 --> 00:25:52,360 Speaker 1: in particular, but but broadly go way beyond just energy. 486 00:25:52,560 --> 00:25:55,760 Speaker 1: You have exactly that equation. After you have companies that 487 00:25:55,800 --> 00:25:58,560 Speaker 1: have levered up so much, even if they say their 488 00:25:58,560 --> 00:26:02,280 Speaker 1: earnings are a certain level, those earnings can drop significantly 489 00:26:02,400 --> 00:26:04,720 Speaker 1: and then you can see that leverage ratio go up 490 00:26:04,840 --> 00:26:07,919 Speaker 1: pretty dramatically. I will say Max Nison sits next to me, 491 00:26:08,240 --> 00:26:11,040 Speaker 1: and this morning he said he was he was he 492 00:26:11,080 --> 00:26:13,480 Speaker 1: was running at the gym at six am and he saw, 493 00:26:13,720 --> 00:26:16,359 Speaker 1: you know that Valiant came out and he was like, 494 00:26:16,560 --> 00:26:18,320 Speaker 1: I gotta get to work, and you know, sure enough 495 00:26:18,359 --> 00:26:21,080 Speaker 1: he was at work by six I was running at 496 00:26:21,080 --> 00:26:28,399 Speaker 1: the gym early this morning. I watch one more time, 497 00:26:28,480 --> 00:26:35,000 Speaker 1: letting us know we have no life Valiant. Mike has 498 00:26:35,119 --> 00:26:37,919 Speaker 1: yet to find a bid. Let's move on from Valiant, 499 00:26:37,920 --> 00:26:42,680 Speaker 1: if you good and talk to mss A about tomorrow's 500 00:26:43,280 --> 00:26:47,760 Speaker 1: f E d UM, the Federal Reserve meeting, and how 501 00:26:48,119 --> 00:26:50,280 Speaker 1: bond investors are looking at this. Town has been showing 502 00:26:50,320 --> 00:26:54,080 Speaker 1: a chart suggesting two year note yields might be reflecting 503 00:26:54,080 --> 00:26:57,240 Speaker 1: bond vigilante's. I don't know if ten basis point move 504 00:26:57,359 --> 00:27:00,720 Speaker 1: over six months to two years is is the vigilante 505 00:27:00,920 --> 00:27:02,800 Speaker 1: or not? I mean, does the bond market have a 506 00:27:02,840 --> 00:27:05,160 Speaker 1: firm opinion at this point or is it just being 507 00:27:05,200 --> 00:27:08,399 Speaker 1: blown about by the headlines. No. I think that that's 508 00:27:08,520 --> 00:27:11,320 Speaker 1: the biggest bond investors who I speak with, the black Rocks, 509 00:27:11,320 --> 00:27:14,439 Speaker 1: the JP Morgan's, the Goldman's accesset managers. They think that 510 00:27:14,520 --> 00:27:17,960 Speaker 1: the market has been too sanguine about the idea of 511 00:27:17,960 --> 00:27:21,000 Speaker 1: of the FED hiking rates again this year. And even 512 00:27:21,040 --> 00:27:23,680 Speaker 1: though you know our w I RP function shows two 513 00:27:23,680 --> 00:27:26,320 Speaker 1: percent chance of the Fed hiking this week. In other words, 514 00:27:26,400 --> 00:27:29,000 Speaker 1: they're not going to do it. Um you know, there 515 00:27:29,119 --> 00:27:31,880 Speaker 1: is showing it is showing an increased chance that there 516 00:27:31,960 --> 00:27:34,440 Speaker 1: is going to be a hike later in the year. 517 00:27:34,520 --> 00:27:38,520 Speaker 1: I think what the big question among the people who 518 00:27:38,560 --> 00:27:40,679 Speaker 1: I speak to now is what can the FED do 519 00:27:41,320 --> 00:27:44,040 Speaker 1: to to change the conversation and bring it back to them, 520 00:27:44,440 --> 00:27:47,280 Speaker 1: because in some ways they've really ceded control to what's 521 00:27:47,280 --> 00:27:51,239 Speaker 1: going on in Japan and in Europe. And you know, 522 00:27:52,200 --> 00:27:54,600 Speaker 1: at this point the dot plot is less meaningful because 523 00:27:54,600 --> 00:27:57,159 Speaker 1: it's been wrong so many times. You know, whether they 524 00:27:57,240 --> 00:27:59,960 Speaker 1: hike a little bit now doesn't really speak too long 525 00:28:00,000 --> 00:28:02,840 Speaker 1: the term rates, which are being pushed down by lower 526 00:28:02,880 --> 00:28:05,879 Speaker 1: inflation expectations as well as some of the easy unconventional 527 00:28:05,920 --> 00:28:08,359 Speaker 1: monetary policy. So I think that you know, there is 528 00:28:08,359 --> 00:28:10,840 Speaker 1: a big question of what can the Feds say to 529 00:28:10,920 --> 00:28:14,800 Speaker 1: show that they do have some control. What can the 530 00:28:14,840 --> 00:28:17,959 Speaker 1: FED say, I mean, what are people thinking, well, they 531 00:28:17,960 --> 00:28:20,480 Speaker 1: can talk about what's going on overseas and assess the 532 00:28:20,600 --> 00:28:22,760 Speaker 1: efficacy of him. I mean What if they came out 533 00:28:22,800 --> 00:28:24,840 Speaker 1: and they said, you know, we think that so far 534 00:28:25,000 --> 00:28:28,720 Speaker 1: negative interest rates are not proving effective in Japan. What 535 00:28:28,800 --> 00:28:32,520 Speaker 1: if they said that, well, but they're not. They're not 536 00:28:32,520 --> 00:28:35,280 Speaker 1: going to How's how's the issue once? How slow as 537 00:28:35,320 --> 00:28:39,520 Speaker 1: Wall streetcondsh well Investment CRAD is actually really picking up speed, 538 00:28:39,600 --> 00:28:41,560 Speaker 1: but high Yield is still really kind of struggling. Okay, 539 00:28:41,600 --> 00:28:44,120 Speaker 1: Lisa Brawmans, thank you so much. Great briefing on Valiant, 540 00:28:44,520 --> 00:28:47,120 Speaker 1: spur the moment, and of course or expertise of negatives 541 00:28:47,160 --> 00:28:51,760 Speaker 1: can't say enough about Bloomberg gad flights. Somehow, if she 542 00:28:51,840 --> 00:28:55,440 Speaker 1: can drag Mr Neison out of the gym, possibly he 543 00:28:55,440 --> 00:28:58,080 Speaker 1: could find a little bit of time to write something 544 00:28:58,120 --> 00:29:02,360 Speaker 1: intelligent on Veil. They'll in this morning. You will drag us. Sorry, 545 00:29:02,480 --> 00:29:05,600 Speaker 1: worked out, but onto the show tomorrow fed day to 546 00:29:05,680 --> 00:29:07,760 Speaker 1: talk to us about Valiant. We do not have a 547 00:29:07,800 --> 00:29:10,320 Speaker 1: forty nine print on Valiant, but I'm not gonna kid you. 548 00:29:10,960 --> 00:29:14,600 Speaker 1: We look like we're getting there rapidly. Valiant uh down twenty. 549 00:29:16,120 --> 00:29:18,240 Speaker 1: We will follow this story through the day. It's become 550 00:29:18,280 --> 00:29:21,720 Speaker 1: more than just a pharmaceutical train record has become now 551 00:29:21,760 --> 00:29:26,880 Speaker 1: of almost forensic and accounting interest for Global Wall Street 552 00:29:27,240 --> 00:29:31,680 Speaker 1: as well the down negative vis seventeen point four or 553 00:29:31,680 --> 00:29:37,920 Speaker 1: five down down a hundred points. All right, let's check 554 00:29:37,920 --> 00:29:39,720 Speaker 1: it down with Michael Barr. Get the latest world in 555 00:29:39,880 --> 00:29:43,400 Speaker 1: National HIDLFE. Mike Tom, thank you very much. Republican presidential 556 00:29:43,440 --> 00:29:47,239 Speaker 1: candidates Marco Rubio and John Kasik are hoping they can 557 00:29:47,280 --> 00:29:51,040 Speaker 1: still hang on following today's primaries in five states. Voters 558 00:29:51,080 --> 00:29:54,720 Speaker 1: will be casting ballots in Rubio state, Florida and Kasis, Ohio, 559 00:29:55,160 --> 00:29:58,640 Speaker 1: as well as in Missouri, Illinois, and North Carolina. Democrat 560 00:29:58,720 --> 00:30:01,560 Speaker 1: Hillary Clinton is hoping to keep rival Bernie Sanders from 561 00:30:01,600 --> 00:30:05,720 Speaker 1: building new momentum following his surprise when in Michigan last night. 562 00:30:05,760 --> 00:30:09,360 Speaker 1: In Charlotte, North Carolina, Clinton says she has a debt 563 00:30:09,400 --> 00:30:13,440 Speaker 1: free college tuition plan that is more affordable than Sanders 564 00:30:13,440 --> 00:30:16,120 Speaker 1: planned for tuition free college. We got to get the 565 00:30:16,200 --> 00:30:20,960 Speaker 1: cost down. They have been rising too much, and if 566 00:30:20,960 --> 00:30:24,480 Speaker 1: you say something's gonna be free, there is no incentive 567 00:30:24,520 --> 00:30:27,640 Speaker 1: to control the costs. Around State TV says to Run 568 00:30:27,720 --> 00:30:32,240 Speaker 1: has retrieved thousands of pages of information from devices used 569 00:30:32,280 --> 00:30:36,240 Speaker 1: by tenuous Navy sailors briefly detained by AROUND in January. 570 00:30:36,320 --> 00:30:39,480 Speaker 1: Today's report from an Iranian naval commanders says the information 571 00:30:39,600 --> 00:30:43,640 Speaker 1: was retrieved from laptops, GPS devices, and maps. In a 572 00:30:43,720 --> 00:30:46,880 Speaker 1: policy reversal, the Obama administration is set to bar Atlantic 573 00:30:46,920 --> 00:30:51,360 Speaker 1: Coast oil drilling. Environmentalists and coastal communities said the activity 574 00:30:51,360 --> 00:30:54,120 Speaker 1: with threatened marine life and tourism along the U. S. 575 00:30:54,120 --> 00:30:57,520 Speaker 1: East Coast. Global News twenty four hours a day, powered 576 00:30:57,560 --> 00:31:01,600 Speaker 1: by our journalists and we're in one hundreds bureaus from 577 00:31:01,600 --> 00:31:05,160 Speaker 1: around the world. Michael Barr, Michael Bar, thank you so much. 578 00:31:05,280 --> 00:31:08,960 Speaker 1: Moments ago a forty nine print on Valiant forty nine 579 00:31:09,040 --> 00:31:12,719 Speaker 1: point three nine twenty nine percent. Will continue to follow 580 00:31:13,440 --> 00:31:17,000 Speaker 1: this story Tomorrow Fed Days Scarlet Food Michael McKee, Tom 581 00:31:17,080 --> 00:31:23,240 Speaker 1: Keene At one pm, Clone Mark Surveillance brought to you 582 00:31:23,240 --> 00:31:25,479 Speaker 1: by the Jewish Communal found j c F Donor Advice 583 00:31:25,560 --> 00:31:27,640 Speaker 1: Fund is the smart and efficient choice to manage your 584 00:31:27,640 --> 00:31:38,520 Speaker 1: philanthropy called two one, two to seven seven. Global Business 585 00:31:38,560 --> 00:31:41,520 Speaker 1: News twenty four hours a day. If Bloomberg dot Com 586 00:31:41,760 --> 00:31:44,600 Speaker 1: the radio plus mobile lap and on your radio. This 587 00:31:45,000 --> 00:31:48,560 Speaker 1: is a Bloomberg Business Flash and I'm Karon. Moscow stocks 588 00:31:48,560 --> 00:31:50,680 Speaker 1: are lower, with the S and P five hundred index 589 00:31:50,720 --> 00:31:53,720 Speaker 1: slipping for a second day. As investors consider the capacity 590 00:31:53,760 --> 00:31:56,360 Speaker 1: of central banks to boost global growth. We checked the 591 00:31:56,360 --> 00:31:59,480 Speaker 1: markets every fifteen minutes throughout the trading day. On Bloomberg 592 00:31:59,760 --> 00:32:01,680 Speaker 1: that's in P five hundred down half per cent or 593 00:32:01,760 --> 00:32:04,480 Speaker 1: nine points to twenty ten. The Dow Jones Industrial average 594 00:32:04,480 --> 00:32:06,800 Speaker 1: down four tenths per cent or sixty one points to 595 00:32:06,880 --> 00:32:10,760 Speaker 1: seventeen thousand, one hundred sixty seven, and the NASDAC is 596 00:32:10,800 --> 00:32:13,160 Speaker 1: down four tenths percent or twenty points to forty seven 597 00:32:13,200 --> 00:32:15,720 Speaker 1: twenty nine. Ten year treasury of five thirty seconds the 598 00:32:15,760 --> 00:32:18,200 Speaker 1: yield one point nine three percent yield on the two 599 00:32:18,280 --> 00:32:21,320 Speaker 1: year point nine five percent. Nimex screwed oil down two 600 00:32:21,320 --> 00:32:24,000 Speaker 1: percent or seventy three cents to thirty six forty seven 601 00:32:24,000 --> 00:32:26,560 Speaker 1: A barrel comics goal down one point two percent or 602 00:32:26,600 --> 00:32:29,640 Speaker 1: fifteen dollars fifty cents at twelve twenty nine fifty and ounce. 603 00:32:30,000 --> 00:32:32,560 Speaker 1: The euro and dollar eleven oh five. The yen is 604 00:32:32,600 --> 00:32:35,880 Speaker 1: at one twelve point eight eight. Faraoh Corporation, a maker 605 00:32:35,920 --> 00:32:39,360 Speaker 1: of chemicals for the manufacturing industry, recently receiving a takeover 606 00:32:39,400 --> 00:32:42,240 Speaker 1: approach from Apollo Global Management. That's according to people with 607 00:32:42,360 --> 00:32:45,680 Speaker 1: knowledge of the matter, Faraoh rebuffing the initial approach, which 608 00:32:45,720 --> 00:32:48,680 Speaker 1: was made without or within rather recent weeks, the people said, 609 00:32:48,720 --> 00:32:52,200 Speaker 1: asking not to be identified as the matter is in public. 610 00:32:53,720 --> 00:32:56,760 Speaker 1: And Valiant Pharmaceuticals plunging in early twining as much as 611 00:32:56,800 --> 00:32:59,760 Speaker 1: twenty five percent this morning after it corrected its ibada 612 00:32:59,800 --> 00:33:02,080 Speaker 1: ga it and slower to six billion dollars. And that's 613 00:33:02,080 --> 00:33:05,040 Speaker 1: a Bloomberg business flash Tomic night, Karen, thanks so much. 614 00:33:05,120 --> 00:33:10,960 Speaker 1: Bloomberg Surveillance brounched by Interactive Brokers Traders University. Even experienced 615 00:33:10,960 --> 00:33:14,560 Speaker 1: traders need to keep learning. Traders University will get you 616 00:33:14,640 --> 00:33:19,840 Speaker 1: up to speed quickly with short videos, webinars, courses and more. 617 00:33:19,960 --> 00:33:26,000 Speaker 1: Visit I B k R B dot, Come slash, stay Ahead. 618 00:33:26,080 --> 00:33:29,800 Speaker 1: And Valiant continues to not find a bid. Mike down 619 00:33:30,400 --> 00:33:32,960 Speaker 1: right now, we have a forty handle. Take your money. 620 00:33:33,240 --> 00:33:35,600 Speaker 1: It appears out of value, put it into Faraoh and 621 00:33:35,640 --> 00:33:38,560 Speaker 1: the hope that maybe they'll restart those talks with Apolloglobal 622 00:33:38,800 --> 00:33:43,760 Speaker 1: faroll up about ten right now. Um, here's some interesting 623 00:33:43,800 --> 00:33:47,120 Speaker 1: and exciting news. The Canadian Prime Minister Justin Trudeau back 624 00:33:47,120 --> 00:33:48,920 Speaker 1: in the United States. He's gonna be in New York 625 00:33:49,040 --> 00:33:52,160 Speaker 1: next couple of days. He wants to well, he's visiting 626 00:33:52,160 --> 00:33:54,520 Speaker 1: some folks at the United Nations wants to run for 627 00:33:54,560 --> 00:33:57,680 Speaker 1: a seat on the United Nations Security Council. Canada, that is, 628 00:33:58,120 --> 00:34:02,440 Speaker 1: but we've already given here a seat. We we are 629 00:34:02,600 --> 00:34:06,080 Speaker 1: very excited that Justin Trudeau will be our guest at 630 00:34:06,160 --> 00:34:10,520 Speaker 1: nine o'clock on Thursday Bloomberg Surveillance Bloomberg Go on television, 631 00:34:10,719 --> 00:34:14,800 Speaker 1: John Michael Fwaite will interview the new Prime Minister of Canada. 632 00:34:16,080 --> 00:34:19,400 Speaker 1: Good so you will not want to miss that on Thursday. 633 00:34:19,800 --> 00:34:24,360 Speaker 1: David Blancheward joining us now from Dirtmouth on austerity. Is 634 00:34:24,360 --> 00:34:28,760 Speaker 1: there still austerity out there? Danny certainly is. I'm afraid 635 00:34:28,840 --> 00:34:31,759 Speaker 1: And in the UK we've had talked that the UK 636 00:34:31,920 --> 00:34:34,560 Speaker 1: chuncellor tomorrow is going to impose a big new round 637 00:34:34,560 --> 00:34:39,480 Speaker 1: of austerity as the economy flows. Well, they've got to 638 00:34:39,480 --> 00:34:42,399 Speaker 1: make no sense, makes no sense to me. They've got 639 00:34:42,400 --> 00:34:47,600 Speaker 1: a pledge to balance the budget by what So he's 640 00:34:47,600 --> 00:34:51,319 Speaker 1: going to have to do something, you know, right, Well, 641 00:34:51,320 --> 00:34:53,800 Speaker 1: he certainly has a pledge to do it with no economists, 642 00:34:53,800 --> 00:34:55,320 Speaker 1: as far as I can tell, in the world, a 643 00:34:55,400 --> 00:34:58,279 Speaker 1: good idea. But he has a problem in the sense 644 00:34:58,320 --> 00:35:00,600 Speaker 1: that there is a Brexit vote that's coming. So he 645 00:35:00,640 --> 00:35:04,680 Speaker 1: has to balance that trying to make people feel good 646 00:35:04,719 --> 00:35:07,880 Speaker 1: about where they are now against the rather foolish pledge 647 00:35:07,920 --> 00:35:10,200 Speaker 1: that he made to balance the budget. And the big 648 00:35:10,239 --> 00:35:12,839 Speaker 1: problem he's had is that the forecast he made in 649 00:35:12,880 --> 00:35:17,080 Speaker 1: November looked far too optimistic. They had a set of scenarios, 650 00:35:17,400 --> 00:35:19,520 Speaker 1: and I argued at the time their work case scenario 651 00:35:19,680 --> 00:35:23,080 Speaker 1: was my best case scenario. And essentially that's what's happened. 652 00:35:23,280 --> 00:35:26,840 Speaker 1: Nominal GDP got revised down with a lot and the 653 00:35:27,400 --> 00:35:30,000 Speaker 1: good news, if you like, the kind of bubbly news 654 00:35:30,000 --> 00:35:32,799 Speaker 1: that he produced in November three months ago, has now 655 00:35:32,880 --> 00:35:35,040 Speaker 1: just gone up in his smoke, and he has this 656 00:35:35,440 --> 00:35:38,960 Speaker 1: delicate balancing act to do. And my suspicion is, and 657 00:35:39,040 --> 00:35:41,839 Speaker 1: that it's well trotted out, he's going to cut one 658 00:35:41,840 --> 00:35:45,320 Speaker 1: point two billion dollars from the disabled to fund tax cuts, 659 00:35:45,320 --> 00:35:48,800 Speaker 1: which is probably not very popular. David had the privilege 660 00:35:48,840 --> 00:35:51,279 Speaker 1: of sitting in your lecture at Dartmouth. You and I 661 00:35:51,320 --> 00:35:53,880 Speaker 1: did something once for your good students in a Hanover 662 00:35:53,920 --> 00:35:58,520 Speaker 1: community ages ago. I believe then some of what we 663 00:35:58,600 --> 00:36:01,239 Speaker 1: talked about was in the text books. Most of what 664 00:36:01,320 --> 00:36:04,840 Speaker 1: Mike can I talk about now isn't in the textbooks. 665 00:36:04,840 --> 00:36:09,000 Speaker 1: How seat of the pants are our central banks at 666 00:36:09,000 --> 00:36:12,560 Speaker 1: this moment. I think that's a great question, Tom. I 667 00:36:12,560 --> 00:36:14,400 Speaker 1: think I said to you on a few occasions that 668 00:36:14,960 --> 00:36:16,960 Speaker 1: if we look back at what we did when we 669 00:36:16,960 --> 00:36:19,480 Speaker 1: went in I started the Monetary Policy Committee, and we 670 00:36:19,600 --> 00:36:22,040 Speaker 1: thought about what we do and what we did to 671 00:36:23,120 --> 00:36:25,720 Speaker 1: how we went to non conventional policy and what it meant, 672 00:36:26,040 --> 00:36:28,000 Speaker 1: and we were literally they're flying by the seat of 673 00:36:28,040 --> 00:36:30,759 Speaker 1: our plants, and we always thought, well, when we have 674 00:36:30,920 --> 00:36:33,920 Speaker 1: to do exit, that's going to be very difficult. We're 675 00:36:33,960 --> 00:36:36,520 Speaker 1: going to have to look at the data. And that's 676 00:36:36,600 --> 00:36:38,719 Speaker 1: really a problem. And people say things that they have 677 00:36:38,800 --> 00:36:40,680 Speaker 1: a plan, that said has to plan, the MPC has 678 00:36:40,719 --> 00:36:42,759 Speaker 1: a plan, Well, they actually really the plan is to 679 00:36:42,840 --> 00:36:47,080 Speaker 1: follow the data. And I have a sneaking feeling that 680 00:36:47,239 --> 00:36:50,840 Speaker 1: right now looks a lot like the turning points in 681 00:36:50,920 --> 00:36:53,560 Speaker 1: two thousand and eight. We've had very bad p m 682 00:36:53,600 --> 00:36:56,560 Speaker 1: I for the UK and the US, bad retail sales 683 00:36:56,680 --> 00:37:01,520 Speaker 1: numbers this morning, bad wholesale data which suggest that potentially 684 00:37:02,560 --> 00:37:05,080 Speaker 1: we are seeing a turning point. And of course what 685 00:37:05,200 --> 00:37:08,640 Speaker 1: happens today is that central banks can't cut rates by 686 00:37:08,680 --> 00:37:12,840 Speaker 1: five basis points as they did in I'm not suggesting 687 00:37:12,840 --> 00:37:15,719 Speaker 1: the scale of the shock it is high, but it 688 00:37:15,800 --> 00:37:19,440 Speaker 1: certainly looks that UM there are turning points going on, 689 00:37:19,840 --> 00:37:24,680 Speaker 1: especially driven by the slowing of the world's second largest economy. 690 00:37:25,160 --> 00:37:29,160 Speaker 1: The to go from the what you were talking about 691 00:37:29,200 --> 00:37:34,480 Speaker 1: with the UK government into the political campaign here. Pretty 692 00:37:34,520 --> 00:37:37,799 Speaker 1: much any economists will tell you that it is not 693 00:37:38,000 --> 00:37:41,279 Speaker 1: the case that countries have to balance their budget in 694 00:37:41,280 --> 00:37:46,080 Speaker 1: the same way that families do. But on the converse side, 695 00:37:46,520 --> 00:37:54,200 Speaker 1: is there an economic advantage to having a balanced budget? Well, 696 00:37:54,280 --> 00:38:00,200 Speaker 1: certainly having credible fiscal plan makes sense, but the question first, well, 697 00:38:00,239 --> 00:38:04,400 Speaker 1: it's over what time period should you balance that budget. Countries, 698 00:38:04,440 --> 00:38:07,359 Speaker 1: as you say, aren't like households. And I remember one 699 00:38:07,400 --> 00:38:08,880 Speaker 1: final work and I won't tell you who it was, 700 00:38:08,920 --> 00:38:11,160 Speaker 1: but I always having a conversation with a famous central 701 00:38:11,160 --> 00:38:14,000 Speaker 1: banker who said that that he thought that the balance 702 00:38:14,040 --> 00:38:16,440 Speaker 1: in the budget over about a fifteen year period was 703 00:38:16,480 --> 00:38:19,080 Speaker 1: a pretty good idea. In the UK, there's a debate 704 00:38:19,160 --> 00:38:23,040 Speaker 1: between the two parties about what you'd you balance, and 705 00:38:23,080 --> 00:38:25,120 Speaker 1: the Labor Party this week came out and said, let's 706 00:38:25,160 --> 00:38:28,960 Speaker 1: think about balancing the UM if you like the current 707 00:38:29,040 --> 00:38:32,520 Speaker 1: part of the budget over a reasonably short period, but 708 00:38:32,719 --> 00:38:36,640 Speaker 1: exclude from that spending on investments. You don't have to 709 00:38:36,680 --> 00:38:39,480 Speaker 1: balance that. You can borrow money at such low rates 710 00:38:39,480 --> 00:38:42,480 Speaker 1: that potentially this will be self snouncing. So it's so 711 00:38:42,880 --> 00:38:45,480 Speaker 1: there are obvious issues in the economics about over what 712 00:38:45,560 --> 00:38:48,759 Speaker 1: time period do you try and balance budgets when when 713 00:38:48,760 --> 00:38:51,480 Speaker 1: you're at the zero lower bound? And do you include 714 00:38:51,560 --> 00:38:54,360 Speaker 1: investment spending? In my view is that you shouldn't include 715 00:38:54,400 --> 00:38:57,759 Speaker 1: investment spending and fifteen years is probably a reasonable time 716 00:38:57,800 --> 00:39:01,200 Speaker 1: across a cycle or so time talent and obviously the 717 00:39:01,280 --> 00:39:03,520 Speaker 1: Champs in the UK has found out the error of 718 00:39:03,600 --> 00:39:06,560 Speaker 1: his way. He he basically compound the budget that he 719 00:39:06,640 --> 00:39:09,040 Speaker 1: removed the deputy in a parliament and he hasn't even 720 00:39:09,120 --> 00:39:12,200 Speaker 1: moved half of it. So plans written down the fine. 721 00:39:12,480 --> 00:39:14,959 Speaker 1: But the practicalities in this world that Tom just told 722 00:39:15,000 --> 00:39:18,720 Speaker 1: about the world we've not seen. You shouldn't have silly 723 00:39:18,800 --> 00:39:22,480 Speaker 1: rules when these rules don't apply. Now, um, I was 724 00:39:22,560 --> 00:39:26,720 Speaker 1: just telling someone to read Skidelski's monograph The Return of Keynes, 725 00:39:26,840 --> 00:39:31,560 Speaker 1: which I urge every conservative and obviously liberal to read, 726 00:39:32,040 --> 00:39:35,680 Speaker 1: and it is so informative about when we get in 727 00:39:35,680 --> 00:39:39,799 Speaker 1: the foxholes. I would suggest professor did a large part 728 00:39:39,840 --> 00:39:43,640 Speaker 1: of the Western civilization public feels like they're in a foxhole. 729 00:39:43,920 --> 00:39:46,879 Speaker 1: Mike McKee mentioned the other day the exit polling out 730 00:39:46,880 --> 00:39:49,760 Speaker 1: of Michigan, eight percent or so of the people felt 731 00:39:49,760 --> 00:39:53,279 Speaker 1: that we're getting ahead eight zero. So a lot of 732 00:39:53,280 --> 00:39:57,799 Speaker 1: people are in the foxhole. What is your Keynesian prescription 733 00:39:58,400 --> 00:40:02,919 Speaker 1: that the establishment can affect to help the people who 734 00:40:02,960 --> 00:40:08,560 Speaker 1: feel like they're in a foxhold? Well, well, and you 735 00:40:08,640 --> 00:40:14,439 Speaker 1: got thirty seconds more monetary stimulus if you think people 736 00:40:14,440 --> 00:40:16,799 Speaker 1: have done badly in the US. In the UK real 737 00:40:16,840 --> 00:40:20,400 Speaker 1: wages about eight percent compared to the start of the recession. 738 00:40:20,680 --> 00:40:23,280 Speaker 1: So essentially what we've seen is I mean, on this program, 739 00:40:23,280 --> 00:40:25,759 Speaker 1: we've taught endlessly about this. My view is affected two 740 00:40:25,800 --> 00:40:29,480 Speaker 1: little stimulants and the fiscal Afar bailed out of kandidism 741 00:40:29,560 --> 00:40:32,000 Speaker 1: too soon, and that's why we have the descent in 742 00:40:32,000 --> 00:40:36,399 Speaker 1: the UK about breakfit. In the US, Trump and another group. Well, 743 00:40:36,440 --> 00:40:38,640 Speaker 1: I know when Dartmouth gets to the final four, you'll 744 00:40:38,640 --> 00:40:41,880 Speaker 1: be at Houston. But h Professor Blanchard, thank you. So 745 00:40:42,000 --> 00:40:44,520 Speaker 1: are you marrying any daughters this summer? Are you? Are 746 00:40:44,560 --> 00:40:47,520 Speaker 1: you going to help the UK GDP again as you 747 00:40:47,600 --> 00:40:51,359 Speaker 1: always do? I know I always do, but not this 748 00:40:52,600 --> 00:40:56,320 Speaker 1: on their own David Blanchard's single handedly turning the United 749 00:40:56,400 --> 00:41:00,200 Speaker 1: Kingdom from recession to globally to economic growth with a 750 00:41:00,200 --> 00:41:02,719 Speaker 1: wedding or two a few years ago. He is at 751 00:41:03,040 --> 00:41:06,759 Speaker 1: dartmouths Mike, we've got to look at Valiant down three three, 752 00:41:06,880 --> 00:41:10,120 Speaker 1: that's not a you're not missed hearing me. Well, here's 753 00:41:10,120 --> 00:41:12,600 Speaker 1: the thing, and you talked about stock price going up 754 00:41:12,600 --> 00:41:14,719 Speaker 1: and down. Here's a great way to think about it. 755 00:41:15,160 --> 00:41:19,439 Speaker 1: In by as of June of two thousand fifteen, last year, 756 00:41:19,760 --> 00:41:24,000 Speaker 1: nine months ago, this was a seventy six billion dollar company. 757 00:41:24,280 --> 00:41:29,719 Speaker 1: It is now a fifteen billion dollar company. Some sort 758 00:41:29,719 --> 00:41:32,920 Speaker 1: of scale on the massive shout out to Cynthia Coons 759 00:41:33,080 --> 00:41:37,120 Speaker 1: was buried personally, came off the call to inform our 760 00:41:37,239 --> 00:41:39,680 Speaker 1: show of what you heard in the call, and Lisa 761 00:41:39,719 --> 00:41:43,080 Speaker 1: Brahma Withson gut Flood really looking forward to what Max 762 00:41:43,160 --> 00:41:46,120 Speaker 1: Neeson we'll do with this. Mike and I don't do 763 00:41:46,239 --> 00:41:48,160 Speaker 1: bi hold cell. You know, I know there's a bole 764 00:41:48,200 --> 00:41:51,600 Speaker 1: industry for that, and other people do that, but this 765 00:41:51,680 --> 00:41:55,839 Speaker 1: has now gone over to the realm of corporate governance, 766 00:41:56,200 --> 00:41:59,760 Speaker 1: corporate finance, and almost I I got to be careful. 767 00:41:59,800 --> 00:42:03,080 Speaker 1: You're like, I don't want to say forensic accounting, but 768 00:42:03,160 --> 00:42:07,400 Speaker 1: at least academic accounting, to say to yourself what happened 769 00:42:07,880 --> 00:42:09,440 Speaker 1: and still no bid. I don't want to say we 770 00:42:09,480 --> 00:42:12,759 Speaker 1: found a bid here at seven point zero two does 771 00:42:12,800 --> 00:42:14,800 Speaker 1: seem to have put in a bottom for the moment, 772 00:42:14,840 --> 00:42:19,879 Speaker 1: But throughout the day tomorrow we'll be with you, Mike 773 00:42:19,920 --> 00:42:22,880 Speaker 1: and I haven't extended what is the hour day tomorrow? 774 00:42:23,760 --> 00:42:25,920 Speaker 1: Something like that. Me and Janet Yellen, we will be 775 00:42:25,920 --> 00:42:31,279 Speaker 1: here early, early, early, with perspective and conversation on these 776 00:42:31,360 --> 00:42:34,600 Speaker 1: unusual times. And then we'll move one PM with Scarlet 777 00:42:34,600 --> 00:42:38,920 Speaker 1: fou on television or radio worldwide for our special informed 778 00:42:38,960 --> 00:42:43,200 Speaker 1: coverage of York Fellow Reserve System. We are produced by 779 00:42:43,320 --> 00:42:46,600 Speaker 1: y U n Can Fellow, You our global technical director 780 00:42:46,600 --> 00:42:47,759 Speaker 1: of Bloomberg Surveillance.