1 00:00:03,160 --> 00:00:07,440 Speaker 1: Broadcasting live to New York Cloomberg eleventh Rio to Washington, 2 00:00:07,520 --> 00:00:11,280 Speaker 1: d C, Bloomberg ninety nine one to Boston, Bloomberg wellmane 3 00:00:11,560 --> 00:00:15,400 Speaker 1: to San Francisco Bloomberg nine sixty to the Country Series 4 00:00:15,440 --> 00:00:18,479 Speaker 1: at seven Channel one nineteen and around the globe the 5 00:00:18,520 --> 00:00:23,120 Speaker 1: Bloomberg Radio plus Appen Bloomberg dot com. This is Bloomberg Surveillance, 6 00:00:23,960 --> 00:00:26,200 Speaker 1: and that is the sound of the opening bell. Good morning, 7 00:00:26,200 --> 00:00:28,880 Speaker 1: I'm Karen Moscow along with Tom Keene and Michael McKee 8 00:00:28,880 --> 00:00:31,680 Speaker 1: and the opening bell brought to you by SEI. Today's 9 00:00:31,720 --> 00:00:35,519 Speaker 1: competitive market place requires asset managers to become more operationally 10 00:00:35,560 --> 00:00:39,559 Speaker 1: adept Imagine transforming your business with sei's global platform at 11 00:00:39,600 --> 00:00:43,000 Speaker 1: se i C dot com slash imagine songs lower at 12 00:00:43,040 --> 00:00:44,960 Speaker 1: the open. The s and P five hundred down three 13 00:00:44,960 --> 00:00:47,479 Speaker 1: tenths per cent or six points to twenty twelve. Don 14 00:00:47,560 --> 00:00:49,760 Speaker 1: Joe's Industrial average down a third of a per cent 15 00:00:49,880 --> 00:00:52,920 Speaker 1: or sixty points to seventeen thousand, one hundred sixty nine 16 00:00:53,159 --> 00:00:55,520 Speaker 1: nasdacs sound four tenths per cent or eighteen points to 17 00:00:55,600 --> 00:00:58,920 Speaker 1: forty seven thirty two ten. Your treasury up seven thirty seconds. 18 00:00:58,960 --> 00:01:01,120 Speaker 1: The yeld one point nine three percent yield don a 19 00:01:01,160 --> 00:01:04,160 Speaker 1: two year point nine four percent nin max screwed oil 20 00:01:04,240 --> 00:01:06,679 Speaker 1: down one point seven percent or sixty two cents at 21 00:01:06,720 --> 00:01:09,600 Speaker 1: thirty six fifty six of barrel comex goal down to 22 00:01:09,680 --> 00:01:12,240 Speaker 1: one point one percent or thirteen dollars twenty cents at 23 00:01:12,240 --> 00:01:16,120 Speaker 1: twelve announce the euro a dollar eleven oh six, the 24 00:01:16,280 --> 00:01:21,080 Speaker 1: N one twelve point nine five. Tom and Mike Caramaco, 25 00:01:21,200 --> 00:01:22,880 Speaker 1: thank you very much. Well, if we're going to talk 26 00:01:22,880 --> 00:01:26,679 Speaker 1: about debt, debt covenants and problems with debt um, we 27 00:01:26,720 --> 00:01:30,520 Speaker 1: need to talk to our problem child. Lisas from Bloomberg gadfly, 28 00:01:30,720 --> 00:01:33,800 Speaker 1: did you just go along Valiant yesterday's seventy one? That? 29 00:01:34,720 --> 00:01:38,600 Speaker 1: That was me? I was she would never buy equity. 30 00:01:38,800 --> 00:01:41,920 Speaker 1: She's a bond like a screen bird. She walks around 31 00:01:41,920 --> 00:01:43,959 Speaker 1: with a vest and the flora Bloomberg does with buy 32 00:01:44,040 --> 00:01:46,800 Speaker 1: tickets on one side and cell tickets on the other 33 00:01:47,480 --> 00:01:52,320 Speaker 1: and popcorn. Is this just straight to it? How bad 34 00:01:52,360 --> 00:01:55,960 Speaker 1: is shaping? Well? You know what, the bonds are tanking 35 00:01:56,120 --> 00:01:58,920 Speaker 1: as you would expect um. One thing that I find 36 00:01:58,960 --> 00:02:02,040 Speaker 1: really compelling is that the on are not going even 37 00:02:02,080 --> 00:02:04,480 Speaker 1: further lower. I mean they were lower at the end 38 00:02:04,600 --> 00:02:09,280 Speaker 1: of February and they're going back to that level um. 39 00:02:09,320 --> 00:02:11,720 Speaker 1: But there I mean, this is this is terrible. A 40 00:02:11,760 --> 00:02:13,880 Speaker 1: company is coming out and saying that they might not 41 00:02:14,400 --> 00:02:17,920 Speaker 1: meet their debt covenants and that they missed their projected 42 00:02:17,919 --> 00:02:20,520 Speaker 1: earnings by by more than a billion dollars. And this 43 00:02:20,560 --> 00:02:23,480 Speaker 1: is this is a company that's struggling on so many 44 00:02:23,560 --> 00:02:26,080 Speaker 1: up fronts and will continue to struggle. But you know 45 00:02:26,160 --> 00:02:29,080 Speaker 1: what's interesting, this company has almost twenty billion dollars of 46 00:02:29,120 --> 00:02:32,040 Speaker 1: debt and it's held by all the biggest investors. I 47 00:02:32,160 --> 00:02:36,080 Speaker 1: just looked at who the biggest holders debt all. It's 48 00:02:36,120 --> 00:02:38,520 Speaker 1: Black Rock Fidelity, JP Morgan. If you look at the 49 00:02:38,520 --> 00:02:42,160 Speaker 1: biggest titled bond e t F, Valiant is you know 50 00:02:42,240 --> 00:02:47,280 Speaker 1: this eleventh and thirteen biggest holding of this particular fund. 51 00:02:47,440 --> 00:02:51,440 Speaker 1: So you know the problem with companies that run into 52 00:02:51,440 --> 00:02:53,640 Speaker 1: trouble that have a lot of debt is that you 53 00:02:53,720 --> 00:02:57,320 Speaker 1: have so many investors with such invested interest in keeping 54 00:02:57,480 --> 00:02:59,959 Speaker 1: the debt prices up and that these are the bonds 55 00:03:00,000 --> 00:03:02,560 Speaker 1: they're most frequently traded, that that you're not going to 56 00:03:02,680 --> 00:03:05,480 Speaker 1: really see the massive decline until it's too late. And Maxinisson, 57 00:03:05,560 --> 00:03:07,840 Speaker 1: we should be clear as carrying the water on Valiant 58 00:03:08,680 --> 00:03:13,120 Speaker 1: is carrying the water on Valiant. Uh for Bloomberg gad fly, 59 00:03:13,200 --> 00:03:15,160 Speaker 1: But at Leasta you've seen this so much. The red 60 00:03:15,480 --> 00:03:19,880 Speaker 1: headline from Bloomberg Valiant plunges as much as in early 61 00:03:20,040 --> 00:03:24,239 Speaker 1: U S trading. It's another cautionary tale, whatever the soap 62 00:03:24,280 --> 00:03:30,480 Speaker 1: opera on accounting. My experience is the bond people always 63 00:03:30,520 --> 00:03:35,040 Speaker 1: get disaster before the equity people always in every case, 64 00:03:35,480 --> 00:03:38,800 Speaker 1: did you off the bond desk at Bloomberg see the 65 00:03:38,920 --> 00:03:43,119 Speaker 1: Valiant challenges earlier? Did you feel like you guys saw 66 00:03:43,160 --> 00:03:46,720 Speaker 1: it coming when you look at bond prices of valiant Um? 67 00:03:46,800 --> 00:03:51,680 Speaker 1: Not necessarily, I'm down right, I mean, but there was 68 00:03:51,720 --> 00:03:55,040 Speaker 1: a pretty precipitous fall um and it was in September, 69 00:03:55,120 --> 00:03:57,400 Speaker 1: but that was really I mean, it kind of came 70 00:03:57,440 --> 00:04:01,880 Speaker 1: along with equities at a point. And I would say that, 71 00:04:02,160 --> 00:04:06,360 Speaker 1: you know, increasingly debt markets have had trouble figuring out 72 00:04:06,400 --> 00:04:08,800 Speaker 1: the accounting to such a degree and being a leading 73 00:04:08,840 --> 00:04:17,640 Speaker 1: indicators right now. Yeah, this is a situation where they 74 00:04:17,680 --> 00:04:20,360 Speaker 1: are their own worst enemy in the sense that the 75 00:04:20,520 --> 00:04:24,880 Speaker 1: lower um the stock price goes, the more the bonds 76 00:04:24,880 --> 00:04:27,880 Speaker 1: are affected, the higher prices they're gonna pay on the 77 00:04:27,920 --> 00:04:30,600 Speaker 1: debt that they owe. Well, think about what their model was. 78 00:04:30,760 --> 00:04:33,040 Speaker 1: It was to borrow a ton of money to go 79 00:04:33,120 --> 00:04:36,920 Speaker 1: out and acquire competitors and then jack up the prices 80 00:04:36,960 --> 00:04:40,480 Speaker 1: of the drugs UH in order to increase the profits. 81 00:04:40,600 --> 00:04:44,080 Speaker 1: That's what their plan was. On both fronts, it's been stymied. 82 00:04:44,240 --> 00:04:47,159 Speaker 1: They aren't able to jack up prices because of congressional pressure, 83 00:04:47,440 --> 00:04:49,200 Speaker 1: and they can't borrow the way that they used to. 84 00:04:49,440 --> 00:04:51,840 Speaker 1: And the and the other idea here is just simple 85 00:04:52,000 --> 00:04:54,440 Speaker 1: accounting one on one, which folks, for those of you 86 00:04:54,520 --> 00:04:56,320 Speaker 1: are the Bloomberg terminal in your car, you can do 87 00:04:56,360 --> 00:04:58,680 Speaker 1: off the way to the average cost the capital w 88 00:04:58,920 --> 00:05:02,599 Speaker 1: A c C chart on on any of these things. 89 00:05:03,040 --> 00:05:08,320 Speaker 1: Is all of a sudden, debt becomes debt becomes right now, 90 00:05:08,360 --> 00:05:12,919 Speaker 1: thirty three point six debt just because the equity moves lower. 91 00:05:13,320 --> 00:05:16,880 Speaker 1: I mean, I'm sorry, they're they're they're you know, Madigliani 92 00:05:16,880 --> 00:05:19,800 Speaker 1: and Miller, Merton, Miller there there there linked to say 93 00:05:19,839 --> 00:05:22,039 Speaker 1: the least. But this also, I mean, it brings us 94 00:05:22,080 --> 00:05:24,080 Speaker 1: back to the point that people were making that the 95 00:05:24,160 --> 00:05:26,560 Speaker 1: problems in the in the economy right now and in 96 00:05:26,600 --> 00:05:29,360 Speaker 1: the in the bond market in particular, but but broadly 97 00:05:29,880 --> 00:05:34,240 Speaker 1: go way beyond just energy. You have exactly that equation. 98 00:05:34,320 --> 00:05:36,840 Speaker 1: After you have companies that have levered up so much, 99 00:05:37,160 --> 00:05:39,799 Speaker 1: even if they say their earnings are a certain level, 100 00:05:40,160 --> 00:05:42,920 Speaker 1: those earnings can drop significantly and then you can see 101 00:05:42,960 --> 00:05:46,360 Speaker 1: that leverage ratio go up pretty dramatically. I will say 102 00:05:46,400 --> 00:05:48,719 Speaker 1: Max Neison sits next to me, and this morning he 103 00:05:48,720 --> 00:05:51,520 Speaker 1: said he was he was he was running at the 104 00:05:51,560 --> 00:05:53,800 Speaker 1: gym at six am and he saw, you know that 105 00:05:53,960 --> 00:05:56,880 Speaker 1: Valiant came out and he was like, I gotta get 106 00:05:56,880 --> 00:05:58,520 Speaker 1: to work. And you know, sure enough, he is at 107 00:05:58,520 --> 00:06:01,160 Speaker 1: work by six typing wine. It's running at the gym 108 00:06:01,200 --> 00:06:09,000 Speaker 1: early this morning, one more time, letting us know we 109 00:06:09,040 --> 00:06:15,880 Speaker 1: have no life Valiant. Mike has yet to find a bid. 110 00:06:16,520 --> 00:06:19,560 Speaker 1: Let's move on from Valiant, if you could and talk 111 00:06:19,680 --> 00:06:24,520 Speaker 1: to miss A about tomorrow's f E d UM, the 112 00:06:24,560 --> 00:06:29,359 Speaker 1: Federal Reserve meeting, and how bond investors are looking at this. 113 00:06:29,400 --> 00:06:32,120 Speaker 1: Town has been showing it charts suggesting two year note 114 00:06:32,200 --> 00:06:35,520 Speaker 1: yields might be reflecting bond vigilante's. I don't know if 115 00:06:35,839 --> 00:06:39,200 Speaker 1: ten basis point move over six months to two years 116 00:06:39,240 --> 00:06:41,760 Speaker 1: is a vigilante or not. I mean, does the bond 117 00:06:41,839 --> 00:06:44,479 Speaker 1: market have a firm opinion at this point or Is 118 00:06:44,480 --> 00:06:47,279 Speaker 1: it just being blown about by the headlines. No. I 119 00:06:47,320 --> 00:06:50,360 Speaker 1: think that the biggest bond investors who I speak with, 120 00:06:50,400 --> 00:06:53,440 Speaker 1: the black Rocks, the JP Morgan's, the Goldman's accesset managers, 121 00:06:53,720 --> 00:06:56,000 Speaker 1: they think that the market has been too sanguine about 122 00:06:56,000 --> 00:07:00,240 Speaker 1: the idea of of the Federal hiking rates again this year. 123 00:07:00,320 --> 00:07:02,440 Speaker 1: And even though you know, our w I r P 124 00:07:02,560 --> 00:07:05,200 Speaker 1: function shows a two percent chance of the Fed hiking 125 00:07:05,240 --> 00:07:06,640 Speaker 1: this week, in other words, that they're not going to 126 00:07:06,720 --> 00:07:09,960 Speaker 1: do it. Um you know, there is showing it is 127 00:07:09,960 --> 00:07:12,320 Speaker 1: showing an increased chance that there is going to be 128 00:07:12,400 --> 00:07:16,040 Speaker 1: a hike later in the year. I think what the 129 00:07:16,080 --> 00:07:19,040 Speaker 1: big question among the people who I speak to now 130 00:07:19,240 --> 00:07:22,240 Speaker 1: is what can the Fed do to to change the 131 00:07:22,280 --> 00:07:24,760 Speaker 1: conversation and bring it back to them, because in some 132 00:07:24,800 --> 00:07:28,080 Speaker 1: ways they've really ceded control to what's going on in 133 00:07:28,160 --> 00:07:32,480 Speaker 1: Japan and in Europe. And you know, at this point, 134 00:07:32,560 --> 00:07:34,960 Speaker 1: the dot plot is less meaningful because it's been wrong 135 00:07:35,000 --> 00:07:37,720 Speaker 1: so many times. You know, whether they hike a little 136 00:07:37,720 --> 00:07:40,560 Speaker 1: bit now doesn't really speak too longer term rates, which 137 00:07:40,560 --> 00:07:43,960 Speaker 1: are being pushed down by lower inflation expectations as well 138 00:07:44,000 --> 00:07:47,040 Speaker 1: as some of the easiest unconventional monetary policy. So I 139 00:07:47,080 --> 00:07:49,200 Speaker 1: think that, you know, there's a big question of what 140 00:07:49,240 --> 00:07:51,760 Speaker 1: can the FEDS say to show that they do have 141 00:07:51,840 --> 00:07:55,560 Speaker 1: some control. What can the FED say? I mean, what 142 00:07:55,880 --> 00:07:58,760 Speaker 1: are people thinking, Well, they can talk about what's going 143 00:07:58,800 --> 00:08:01,880 Speaker 1: on overseas and assess the efficacy of him. I mean, 144 00:08:01,880 --> 00:08:03,320 Speaker 1: what if they came out and they said, you know, 145 00:08:03,640 --> 00:08:06,000 Speaker 1: we think that so far negative interest rates are not 146 00:08:06,080 --> 00:08:09,880 Speaker 1: proving effective in Japan. What if they said that, well, 147 00:08:09,880 --> 00:08:14,960 Speaker 1: but they're not going How's the issue is? How slow 148 00:08:15,040 --> 00:08:18,680 Speaker 1: is Wall streets? Uh? Well, Investment CRAD is actually really 149 00:08:18,680 --> 00:08:20,560 Speaker 1: picking up speed, but high Field is still really kind 150 00:08:20,560 --> 00:08:22,840 Speaker 1: of struggling. Okay, Lisa Bramwans, thank you so much. Great 151 00:08:22,840 --> 00:08:25,720 Speaker 1: briefing on Valiant, spur the moment, and of course her 152 00:08:25,760 --> 00:08:30,760 Speaker 1: expertise on negatives can't say enough about Bloomberg gad flight. Somehow, 153 00:08:31,280 --> 00:08:34,400 Speaker 1: if she can drag Mr Neison out of the gym, 154 00:08:34,440 --> 00:08:37,280 Speaker 1: possibly he could find a little bit of time to 155 00:08:37,320 --> 00:08:42,160 Speaker 1: write something intelligent on Valiant. This morning, will drag sorry, 156 00:08:42,280 --> 00:08:45,400 Speaker 1: worked out, but onto the show tomorrow. Fed Day to 157 00:08:45,440 --> 00:08:47,560 Speaker 1: talk to us about Valiant. We do not have a 158 00:08:47,600 --> 00:08:50,120 Speaker 1: forty nine print on Valiant, but I'm not gonna kid you. 159 00:08:50,720 --> 00:08:54,000 Speaker 1: We look like We're getting there rapidly, valiant uh down. 160 00:08:55,880 --> 00:08:58,040 Speaker 1: We will follow this story through the day. It's become 161 00:08:58,040 --> 00:09:01,480 Speaker 1: more than just a pharmaceutic gold train records become now 162 00:09:01,559 --> 00:09:06,640 Speaker 1: of almost forensic and accounting interest for Global Wall Street 163 00:09:07,040 --> 00:09:11,440 Speaker 1: as well. The town negative vis seventeen point four or 164 00:09:11,480 --> 00:09:17,520 Speaker 1: five h down down a hundred points. All right, let's 165 00:09:17,559 --> 00:09:19,480 Speaker 1: check it out with Michael Barr. Get the latest world 166 00:09:19,480 --> 00:09:22,439 Speaker 1: in National HIDLFE. Mike Tom, thank you very much. Republican 167 00:09:22,520 --> 00:09:26,880 Speaker 1: presidential candidates Marco Rubio and John Kasik are hoping they 168 00:09:26,880 --> 00:09:30,120 Speaker 1: can still hang on following today's primaries in five states. 169 00:09:30,480 --> 00:09:34,520 Speaker 1: Voters will be casting ballots and Rubio state Florida and Kasis, Ohio, 170 00:09:34,960 --> 00:09:38,400 Speaker 1: as well as in Missouri, Illinois, and North Carolina. Democrat 171 00:09:38,520 --> 00:09:41,320 Speaker 1: Hillary Clinton is hoping to keep rival Bernie Sanders from 172 00:09:41,360 --> 00:09:45,520 Speaker 1: building new momentum following his surprise win in Michigan last night. 173 00:09:45,559 --> 00:09:49,080 Speaker 1: In Charlotte, North Carolina, Clinton says she has a debt 174 00:09:49,200 --> 00:09:53,240 Speaker 1: free college stuition plan that is more affordable than Sanders 175 00:09:53,240 --> 00:09:56,800 Speaker 1: plan for tuition free college to get the cost down. 176 00:09:56,960 --> 00:10:01,200 Speaker 1: They have been rising too much. And if you say 177 00:10:01,280 --> 00:10:04,840 Speaker 1: something's gonna be free, there is no incentive to control 178 00:10:04,880 --> 00:10:08,400 Speaker 1: the costs. Iron State TV says to Run has retrieved 179 00:10:08,600 --> 00:10:12,720 Speaker 1: thousands of pages of information from devices used by tenuous 180 00:10:12,800 --> 00:10:16,880 Speaker 1: navy sailors briefly detained by around in January. Today's report 181 00:10:16,960 --> 00:10:19,920 Speaker 1: from an Iranian naval commanders says the information was retrieved 182 00:10:19,960 --> 00:10:24,400 Speaker 1: from laptops, GPS devices, and maps. In a policy reversal, 183 00:10:24,400 --> 00:10:27,880 Speaker 1: the Obama administration is set to bar Atlantic Coast oil drilling. 184 00:10:28,440 --> 00:10:32,000 Speaker 1: Environmentalists and coastal communities have the activity with threatened marine 185 00:10:32,040 --> 00:10:35,679 Speaker 1: life and tourism along the US East Coast. Global News 186 00:10:35,679 --> 00:10:39,439 Speaker 1: twenty four hours a day, powered by our journalists and 187 00:10:39,520 --> 00:10:42,079 Speaker 1: more than one DFTs bureaus from around the world. Not 188 00:10:42,200 --> 00:10:45,400 Speaker 1: Michael Barr to Michael bar thank you so much. Moments 189 00:10:45,440 --> 00:10:49,079 Speaker 1: ago a forty nine print on Valiant forty nine point 190 00:10:49,520 --> 00:10:53,360 Speaker 1: three nine twenty nine percent will continue to follow this 191 00:10:53,440 --> 00:10:57,080 Speaker 1: story Tomorrow Fed Day, Scarlet Food Michael McKee, Tom Keene 192 00:10:57,080 --> 00:11:03,440 Speaker 1: at one pm. Bloomberg Surveillance Brought to by the Jewish 193 00:11:03,480 --> 00:11:05,760 Speaker 1: Communal Fund j c F Donor Advice Fund is the 194 00:11:05,800 --> 00:11:08,720 Speaker 1: smart and efficient choice to manage your philanthropy called two 195 00:11:08,760 --> 00:11:11,680 Speaker 1: one two seven five two eight two seven seven