Transcripts For BLOOMBERG Bloomberg Surveillance 20171113

Dropping as the british Prime Minister found herself under renewed pressure as brexit talks also in a very crucial moment. What also i am looking at is a little bit of subdued ftse. The overall european indices moving sideways, a little bit on the lower side. I dont often look at bitcoin, but slumping significantly after the cancellation of a Technology Upgrade, prompting some users to switch. First, lets get to the bloomberg first word news. Nejra u. S. President donald trump has said he has a great little restaurant just a great relationship with the president of the philippines as he ignored questions about narcotics. In saudi arabia, a senior official has said king salman is not looking to abdicate in favor of his son. Wasaid abdication unthinkable, especially because the king enjoys perfect health. Haslebanese Prime Minister dismissed speculation he is being held against his will in saudi arabia and plans to return home within days. He made his first Public Comments since his surprise resignation. We will be talking to Christine Lagarde described the china move as a positive development. The fact that it is considering to remove at least partially those barriers and then gradually eliminate those threshold, that is an indication of two things, openness and also strengthen confidence in their own system. South koreas foreign has said pyongyang must show signs it is moving away from ofvocation for any talks denuclearization can start. The sanctions are working. That may because in them to recalculate. It could mean they are finetuning some technical aspect of what further provocation that might have up their sleeve. They may have up their sleeve. It is good. Nejra global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am nejra cehic. This is bloomberg. Francine lets start in the u. K. The pound has dropped as recent may faces challenges to her leadership. Mpsany as 40 conservative have a great to sign a letter of noconfidence in theresa may. Does that is just short of the 48 that would be needed. Our reporter joined us. Also joins us is peter kinsella. He is our guest host for the next 30 minutes. David, thank you as well for joining us. 40 sounds like it is very close. 48 can be difficult to reach. Consider where the conservative party finds itself. Very difficult negotiations going on with brussels. Does anyone really want to trigger that . There has to be another election. In that constant and that context, maybe that eight is a bigger hurdle than it might sound. Francine does it weaken her position in her negotiating deals with brussels . Reporter all of this stuff, whether letters calling for her all of it weakens her hand. The question about the bill is hanging over the u. K. And she is in an increasing weakness. I cant think of something that strengthened her hand. Francine as three think she can do to regain authority . There was quite a lot of talk about the labor from the labour party. Reporter it is about day when you have to rely on the labour party to shore up your position for a conservative Prime Minister. That highlights her weakness. What can she do . There was talks about doing a reshuffle. She has had a reshuffle forced on her by some of these scandals, and she hasnt been able to change the deck. We have a budget next week. It is on the 22nd. That historically is the time the government sets out its agenda, puts out eyecatching policies, rechange the game. Does she have any leeway to do this this time do that this time . Probably not. Francine how do you trade pound on this . What do you look at . I think boe is pricing at this stage. The optics surrounding sterling are horrific at the moment. There is no good news coming from the political side. At least so far. One thing to note is the u. K. Has a history of playing this card, the domestic political uncertainty. There is a bit of that involved as well. The problem for brussels is, if we get another general election down the line, who do they want to be negotiating with . The prospect of the labor government doesnt give the markets a lot of faith in sterling. Francine where does sterling trade from here . Peter if you look at sterling, it has trended ok. Itnt been awful hasnt done an awful lot. I think we are likely to get a deal done in december between the u. K. Antie. U. A lot of between the u. K. And you e. U. Tween the u. K. And if you have ever been to an auction, you wait until the last second before you put in a bid. Francine if she does get a concession in december, does it mean her position is safe . Happens, thereat is an important point there, which is what is your point out of this. They dont want to be negotiating with the hard brexiteers. Merkel may come to her aid and try to move these talks forward next month. There has got to be some concessions on the british side. This isnt going to happen unless british britain changes its position. Francine is it just a transition to . Is it just a transition do . Is it just a transition deal . Peter it will give us the Building Blocks of something done. Francine what happens to the pound . Peter sterling would lift, a two percent or 3 move. We still have this uncertainty. We dont know what the trade situation is going to look like. That will be priced in. Francine david, thank you so much. Peter kinsella stays with us. Up next, we hear from Patrick Harker about the shape of the yield curve and the timing of the next hike. We also talked opportunities in activist investing. This is bloomberg. Francine this is bloomberg surveillance. Nejra Emirates Airlines has committed to buying Boeings Dreamliners at a point of 51 billion. That came as a blow to airbus, which was to announce its own deal with the carrier. Emirates said it would buy 43 liners. It is not dissimilar to the 359. Perhaps it has better economics. Uber has approved softbanks offer to buy a multibilliondollar stake in the company for one of the largest private startup deals ever. Would proceed with the tender offer and the coming weeks to buy up to 9 billion in shares from existing investors. The deal could fall through if theyre not enough interested sellers. Alibaba generated a Record Record sales as the ecommerce giant worked with more traditional retailers. The Chinese Company also hosted Goldman Nicole Nicole Kidman and pharrell williams. Says he Patrick Harker doesnt want to see an inversion in the u. S. Yield curve. Speaking to bloomberg, he said he expects to be supportive of the u. S. Rate hike next month. There are a lot of likely suspects here. One is simply that other banks continue to be highly accommodative, and that is one of the reasons we are seeing the long and flatten. The long and fun. I am concerned about that. The pace has to be gradual. If it is gradual, do you think we will not see any inversion of the curve . Avoid any like to inversion of the curve. My goal is to remove accommodations in a way we dont run the risk of inverting the yield curve. Does it concern you to see the yield curve this flat . Ically that is it fine that is a sign the economy is slowing down. The expansion has grown long in the tooth. We are starting to see tight labor markets, unemployment at 4. 1 . Our forecast is we will dip below 4 before coming back up. We are seeing a lot of tightness in labor markets, a lot of other growth. This expansion has been quite remarkable for how long it has gone on, and a continued steady pace of job growth. It is it has also possibly been remarkable for what we have seen in the stock market during this expansion. As the Balance Sheet has increased, we have seen stocks go up. You confident we wont thing that we wont see that correlation maintained . For our Balance Sheet normalization, we are trying to do this in a way that is as boring as watching paint dry. We want to make this slow, steady. Put that on autopilot and use changes in the fed funds rate as the control variables. The thing we will either increase or decrease. I dont see us playing with sheetdoing the balance normalization. Easy, clear, concise, and communicate clearly what we are doing. Harkere that is patrick. How should investors be positioning themselves ahead of the meeting . How do you explain the flattening yield curve . Traditionally, it gave an idea of impending recession. I found his comments interesting when he said we are not going to have an inverted yield curve. Markets should not discount what he said. They would go at a slower rate. You will struggle to get higher u. S. 10year yields. We have a low inflationary outlook. We are at low growth. We have Central Banks continuing to be very highly accommodative. There is pressure to get yields dumping into treasuries. Are jumping. Which means . Peter it can continue for a while. The worry at this stage for the if they continue to lift the front end of the curve, the backend doesnt do a lot. Skepticism regarding the extent of rate hikes they can do next year. I think the market is still underpricing the extent of rate hikes next year. We are likely to get at least two. The reduce in the trade would be the front end rather than the back. This chart is a spread between the twoyear and 10 year in the u. S. The red that is the recessionary environment in the u. S. The slope continues . Peter it could for a while. The curve wont have a signal thing a signaling effect as it did in the past. The problem for investors will be looking at the actual underlying data. That has been reasonably good. If it is, we can be confident things will continue as it has been. Cant youyou cant read too much into the yield curve. Francine thank you so much. Peter stays with us. The pound dropping a little bit further as the british Prime Minister finds herself under renewed pressure as brexit talks are getting underway. 1 asn see it is sliding sentiment seems to be selling on u. K. Political outlook. Up next, bitcoin. The cryptocurrency tumbles. We will explain the move next. This is bloomberg. Francine you are watching bloomberg surveillance. Lets look at the coin. It has been on a tear this year, however it has plunged since late friday with the cancellation of a Technology Upgrade. Has jumped nearly 40 since friday bitcoin cash has jumped nearly 40 since friday. What exactly happened . This was an upgrade we were expecting that never happened. Reporter the issue with good going over the last the issue with bitcoin has been scalability. How can it process all the demand that has that is being put into it . August in august there was a split in there was a new form of bitcoin that can handle the volume in a different way. That was supposed to happen again last week. By not happening, it freaked out a lot of investors who were worried that traditional bitcoin wouldnt be able to scale the weight was promising. That prompted a flood into bitcoin cash, which is a new 1 which is the new one from august. You saw the spike over. You saw spike over period of hours. In july, there has been a debate in the Bitcoin Community on how you can scale the process. It takes more than 10 minutes to process a single transaction on bitcoin. In 2017, that is not feasible. Scientistse computer , but the different way to do that. Thatame know and became known as bitcoin cash. This debate becomes arcane in computer science, but it is roiling the community right now and they are trying to figure out the best way to create scalability. They thought this new fork that as coming was going to be leap forward, but there was disagreement in the community. That is why decided that is why they decided to cancel. Francine peter, how does this affect your world . You need to look at it . Peter i definitely need to look at it. Have been. When coco crisp came out, when cryptocurrency came out, the success would depend on how quickly people used it to transact. People have done that. It is definitely a game changer. I dont think you can call it a store of values yet. For me, the Bitcoin Technology block chain has a value. Whether you can say bitcoin itself has a value, i am not sure. Francine how long do you give it, 2, 3 years . Peter two or three years is reasonable. The point of scalability is key. What you will see as more and more people using it. That is where the ultimate value will go. A small investment in bitcoin would make sense. Because it is transformative technology. Francine peter, thank you for joining us. Up next, we talk opportunities on the periphery and activist investing. Joseph marie oughourlians fund was voted the most active in europe. We will keep an eye on what happened with the brexit. Quite a lot of concern is being priced into sterling. Sterling under pressure. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. This is bloomberg surveillance. Lets get straight to the bloomberg first word news. Nejra u. S. President donald trump has said he has a great relationship with the president of the philippines as he ignored questions about narcotics. Dinner, Rodrigo Duterte think love songs. Speaking to bloomberg, he expects to be supportive of a rate hike next month. There are a lot of likely suck specs there. One is likely suspects there. Continue to beks accommodative, and that is one of the reasons we are seeing the long and platinum. I am concerned about that. That is where the pace of removal accommodation has to be gradual. Nejra in saudi arabia, a senior official has said king salman is not looking to advocate looking to abdicate in favor of his son. Unaid abdicate and was becausee, especially the king enjoys perfect health. Says hes Prime Minister is not being held against his will in saudi arabia and plans to return home. The pound has weakened after 40 conservative members of parliament has a good have agreed to sign a letter of noconfidence in theresa may. She is struggling to maintain her grip on power after the resignation of two cabinet ministers, calls to sack boris johnson, and as the e. U. Races the prospect raises these prospect of talks feeling. Raises the prospect of talks feeling. Christine lagarde described the china move as a positive event. The fact it is considering to remove at least partially those barriers and then gradually eliminate those threshold, that is an indication of openness and better strengthen confidence in their own system. Nejra global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im nejra cehic. This is bloomberg. Francine lets talk Political Risk in europe. Italy has an election coming up. The latest polling shows the Populace Party getting support, currently leading the polls. It is also not over in catalonia. The plan to restore stability and is on preventing separatists from winning the majority in the election. On Prime Minister called for december 21. Polls suggest that vote could be a knife edge. How do you position your portfolio have those risks . Joseph marie oughourlian is the and is with us. They do so much for coming on. Opportunity or not in your . Joseph opportunity or not in europe. . Joseph we think about questions are attractive. Earnings are depressed and now you are seeing the recovery coming through, so you see earnings upgrades this year, first time in 7, 8 years. We still like the area. Francine three or four years ago, you are positive on europe. You were positive on europe. Is it now too crowded . Joseph it is not as valued as it was three or four years ago. When we were talking about it at the time, there was skepticism and the risk was not completely off the table. E have made progress at the time, a lot of the economy as we were talking about were still in recession. Even italy is going. Greece is growing. The Political Risk was all over europe. The macron election was a bit of turning point for the e. U. I am less worried about the rest of the elections and the risk you mentioned. Francine are we to complacent . Came in and people said this is the resurgence of youth and hope. Actually, it is going to be difficult for the president of france to do stuff in his country. Joseph it will be. France is not an easy country to reform. None of these countries are easy to reform, but he is actually doing more in a couple of months and probably most of the french governments happened last 30 years. French governments have in the last 30 years. As far as catalonia is concerned, i think that story is quickly fading. Crashed against the reality of the economy. You see more than 1500 copies moved headquarters 1500 companies moved headquarters away. About how rhetorical great it was going to be to have a free catalonia, i think that has crashed. I think it is difficult to predict elections, but i think in december we should have a clear majority of people voting partiesthe separatist that have lied to people for a long time. Italy is a concern. The sicilian elections showed the candidate seen as the reformist in the italian politics got slaughtered. We have to see. It is early days. Elections probably wont happen until february, march. Italian elections have never been really big market movers. Day, to usef the the famous words, everything must change so that the in changes. So that nothing changes. Francine you can say that about u. K. Politics. Joseph i am more worried about u. K. Or u. S. Politics, to be honest. Everyone has been focused on Southern Europe and the populist , spain, italy. What you have seen as those risks have receded. Democracythis young has done very well to whether through all of these crises. U. K. U. S. , we are struggling more. Francine when you look at greece, and i know you were invested in greece, are you concerned we still dont have a it isment in germany and crucial to know who the next finance minister is to find out their stance with some of the periphery is something ugly were to happen . Joseph yes. The turning point with germany happened last year. Me that last year, with brexit come up with the election of trump, the germans realized they have to stop inting up on the greeks Southern Europeans and europe needs to stand together to face their threats of russia, to face the threats of russia, middle east, brexit challenge. It reflects on the e. U. That you used to reform itself. The e. U. Needs to reform itself, and i think the germans realized that. The election of macron is a chance for germany to reach out and work out something. Francine they do so much. Up next, we continue the conversation and top activist investing. And top activist investing. And top activist investing. This is bloomberg. This is bloomberg surveillance pickle lets check on your markets. Sterling dropping as much as 1 . Theresa may facing fresh challenges to her leadership. The e. U. Casting further doubts over the prospect of a deal by the december summit. 40 conservative members of parliament, nearly enough to prompt a leadership challenge. Michel barnier said friday he raised the prospect of brexit talks feeling to reach a breakthrough talks failing to reach a breakthrough by the end of december. Traders are bracing themselves. As well. Data this week inflation, labor market. This is the chinese 10year. The yields rising to a threeyear high. The pressure from declining overseas bonds adding to stress for a chinese debt market already reeling from its official deleveraging campaign. The pboc also cutting sentiment further also clouding sentiment further. That is the chinese bond market. This is bitcoin, lunging. This is bitcoin plunging. Some users switch set of the userscurrency some switched out of the cryptocurrency. These are the three big declines we have witnessed in the last six months. We had that 39 decline in september and the 29 decline since the record high. Finishing off with the brent crude. Prices hitting a record high. Tensions in the middle east reaching a new level, sending prices to their highest level in more than two years. Hedge funds raising their long position by 2. 4 to a record 543,000 contracts. Francine mark, thank you so much. Investing. Activist a rare victory for activist investors europes periphery. The board is backing a Capital Increase i would improve its Balance Sheet. Is Southern Europe becoming a little bit more like the u. S. In regards to Shareholder Activism . Joseph marie oughourlian is still with us. Ember capital was voted the most activist investor in europe. That must be something you have always thought strongly about, why invest in somewhere if you dont have a say give them a hand in understanding how to create value. Joseph yes. There is a lot of upside potential in europe. There are too Many Companies with stuffy boards. There is no alignment of interest with of interest with shareholders. Maximizing shareholder value is not the right thing. Onple should focus stakeholders at large which is often an excuse not to do much for management teams. Francine what is the best way of going about this . Some are so well known and sometimes it is confrontational. Is that how you get the best results . Joseph no. There are differences with the u. S. You cant start you cant have the same starting point is some of the hedge funds in the u. S. Have. You cant show up on the shareholder register of the European Company is a you have destroyed value for the last 20 years, get lost. You need to be in the shareholder register for a bit, engage, give them enough time to respond and to have tried as much as you could to engage in a dont like in a dialogue before you step up and become more on the compelling sign compelling side. Francine is it cultural . It is tough, because you need to do a lot of research. It is much harder trying to be an activist shareholder than just a shareholder. Joseph it is very difficult. It is more the cultural barriers than the two quote than the toolkit that is provided. The laws and rules are there. You can put people on boards easily. Resistancecultural it is more the cultural resistance. It is strongest in countries and a country like italy is actually quite open to activism. Francine how do you do it . How do you choose your companies . Joseph we dont necessarily choose companies to be activists. We will invest in companies. We will choose companies that look interesting from a risk perspective. That is the philosophy of our fun. If we find a lot of resistance on the other side, we may consider additional matters. Withine you dont meet managers before. When you choose a company, do you just look at the Balance Sheet, meet with managers to see if they have a ship on the road . Joseph you meet with managers, but it is a different perception if you are on the but it is a different conversation if you are on the shareholder register. Francine fair enough. Where do you see value in italy . Are there specific industries you find value . Joseph we like anything that is domestic earnings related. We like some of the consumer names, some of the Smaller Banks. Anything that will see gdpfull benefit of recuperation. Francine think you so much. Joseph marie oughourlian stays with us. N uber. K hails an we break down the details of the deal next. This is bloomberg. This is bloomberg surveillance. You can see the cheese grater next to the walking hockey. Next to the walkietalkie. One of the strangest views. A lot of us like it. The pound dropped significantly because the british Prime Minister is under renewed pressure. We will keep an eye on that. Uber has approved softbanks offer to buy a multibilliondollar stake in the right hailing company. In the ride hailing company. The agreement will allow softbank and other firms to invest up to 1 billion in uber and proceed with a tender offer to buy 9 billion in shares from existing investors. The deal could fall through if there arent in if there arent enough interested investors. Joseph, thank you for sticking around. Why does this take so long to achieve . Reporter it becomes a soap Travis Kalanick in the background. As they try to negotiate the deal, some of the tensions ,nvolving his involving him there was a lawsuit, which they agreed to sideline in terms of the steel. After it goes through, they agreed to drop it. That is one of the big holdups. Francine what is it mean for leadership . What does it mean for leadership . Reporter it allows the new ceo to clear the decks a little bit. Here in london, they threatened to be banned. There is labor disputes. There are government investigations. We could go on. This is just one issue they have to deal with, but it is a big one. They will get a big infusion of cash as a result. Francine what does it mean for the future ipo . Theyter they have said have laid out a timeline for when they will do it, around 2019. In the meantime, the offer is massive. 9 billion offer. Real estate prices in france of San Francisco already the highest in the world. Some employees will have the opportunity to cash out. Francine i dont know how this translates into your world. A lot of the companies you invest in, is it also in a view of possibly ipoing them . Joseph we dont do much private, but what i see more is more m a. Europe has been lighting behind the u. S. For number of years now. Behind the lagging u. S. For a number of years now. Francine is this acrosstheboard m a . Joseph across the board. 30 to be more consolidation there needs to be more consolidation in europe. They need skill to compete against them. The americans are ahead of the game. Francine if you look at beverages, we had a huge wave. Are you thinking of the banks or anything else that would merge . Joseph the banks is an interesting one, because it is regulated. It depends on what the ecb wants to do, but it feels that the ecb , the regulators have sent a thatge for number of years they would put all sorts of impediments to banks getting bigger coming out of the crisis. Some of these bigger banks have better governments, Better Capital ratios, contact markets easier than the smaller guys. There is a push now to force the Smaller Banks to consolidate. You are seeing that in italy. Sectors pretty much need to consolidate. There are too many Telecom Companies in europe. Hundreds of them. There is less than a dozen in the u. S. It is the same size market. That is a sector were skill matters for investors. Where scale matters for investors. Francine thank you for joining us. Joseph marie oughourlian joining us as guest host. Bloomberg surveillance continues. We will be talking about politics. This is bloomberg. Francine Patrick Harker tells us he is supportive of a rate rise next month. We hear from fred president in an interview. Is raisingning gains. Revolt. Sterling slides. Lawmakers have no confidence in theresa may. Good morning. This is bloomberg surveillance. Look at brexit, politics your focus is on the ge. Tom this will be fascinating. In American Financial history, there has never been a meeting as this. Any as focused it will be fascinating to see what flattery does. It is front page on every business publication today. It will be the most interesting meeting. There have to be some surprises. I am looking at sterling under pressure. Lets go to bloomberg first word news. Taylor in the philippines, trump is deflecting questions about abuses by the countrys leader. He says he has a Good Relationship with roderigo deuterte. Republicans have major differences over tax reform. The house will not accept the Senate Proposal to eliminate deductions for state and local taxes. Has struckrthquake the region near the iraniraq border. A magnitude of 7. 3. It hit a mountainous area where people rely on farming to make a living. A senior official is rejecting speculation that king salman will abdicate in favor of his son. The crown prince has been behind an anticorruption drive. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Tom i will let fran talk about sterling. I have one board this morning. Not much going on. 57 level. Holds at the francine pounds, left, right, and center. Under more pressure than she was last friday. The pound is dropping. Atcoin, i wanted to look ftse, but bitcoin is weakening a lot after cancellation of the someology upgrade caused to switch out of the cryptocurrency. I dont think General Electric is in bitcoin. Lets do the history. Mr. Flannery greets wall street today. Log chart, the curvature here is the wonderment of jack welsh and the expansion of ge. There is a one month, eight months thing here. We go with the crash. Clear, expanded out, you can see the recent ny of general election General Electric rolling down. That is an ugly chart. That is mr. Flannerys number one task today, get confidence in the market. He also says he expects to be supportive of a u. S. Rate hike next month. I have to look at all of the data. If we saw the continued weakness, that is why we penciled it in. If we saw the weakness, i would be ok waiting a little bit. I dont think i would be supportive of an increase in december. Joining us now, nan nand garage mattel dini and viraj. The 10year has not responded in the way you would expect. We expect a december rate hike, to three. Two it has not been coming through for the curve. Francine how much is this the feds fault . Notj shorts in policy have said through in support of financial conditions. Looking at the flat yield high. For there is something bigger in the u. S. Economy the fed cannot control. The flattening curve as it continues. Tom this is a great discussion to get monday going. When is there going to be a regime change in Central Banks . Wait. T and we why is this different . Nandini we are dealing with a fed that is acknowledging and thinking of the u. S. As late cycle. We are on a quicker path than we were two or three years ago. Pastent getting to cycles, but we expect the fed to continue doing two to three in the next year. It is going to be a lower terminal rate because we have never seen eight years of such low or zero interest rates. Tom there is the consensus line. Dont see the data. I dont see the hard data which multiple ratea of rises. Do you see the hard data that gets us to the set of rises in the next year . Viraj markets have seen the hard data. Inflation expectations are less than 2 . That is unorthodox given the fed is targeting 2 over a tenyear horizon. That tells us more about the state of the u. S. Economy. I dont think people are buying into tax reforms. This suggests the fed will be pushed to slow rate hikes. Inncine if no one believes tax reform, it is not priced in. If we get a tax reform, how much does it move dollar . How much does it move yield . Viraj that is a big game change for the dollar. We are not sure tax reforms will quickly as the markets expect, especially when it comes to looking at the political by and. Political buy in. If we get tax reform coming through, it will probably be watered down. Benefits are not worth chasing. We need to see what happens, whether it lands on the president s desk, and what format it does. Nandini when you look at earnings shares expectations trump, itelection of did not spike upwards based on a dramatic tax or any other trump policy reform. If the tax rate is reduced for s p 500 companies is a boost that allows us to be positive on the u. S. Equity market, particularly sectors that may benefit from a reduction in the headline rate. News. E have lots of u. K. Francine will do that. In the next hour, thrilled to bring yousef masters. Masters. You seth london, new york, good morning. This is bloomberg surveillance. Taylor this is bloomberg surveillance. At ts fight over the time for a deal is heading thanksgiving showdown. Officials have told at t to about theeir concerns merger before the november 23 holiday. The governor could the government could file suit to block the deal. Uber has set the stage for. Firms will bether allowed to invest up to 1 billion in uber and by up to 9 billion in shares from existing investors. Emirates has agreed to buy 40 boeing 787s. The deal is a blow to airbus, which had been counting on an emirates order. It is not dissimilar to the 359. Over the shorter range, and has better economics. Airbus may argue the opposite of that. They pulled out of the deal in 2014. That is your Bloomberg Business flash. Francine thank you. The pound continuing its slump this morning. Theresa may faces fresh challenges to her leadership. As many as 40 conservative mps have agreed to file a letter of no confidence in theresa may. David and Nandini Ramakrishnan. We will get onto pound dynamics in a second. David, how much weaker is theresa may today than last week . To remember hard the last piece of good news. All the things happening around her cabinet, she lost two ministers in the space of a week. There is a twoweek deadline being set in order to break the deadlock on the talks. Reform billgreat coming back in this week. 300 amendments. Thisve 40 mps signing letter, calling for her to go. The threshold is 48. That may sound like a small gap, but considering the parlor state of the governments popularity, that is a big hurdle to overcome, to find enough mps that will bring down her Prime Minister shership. There anything she can do to make sure she survives christmas . David there was a shuffle for a while. She has investigations going on cabinet member, damien green. She does not seem to be able to stamp her authority on the cabinet. It is normally the government policy chance to lay out its agenda. We will have to see if that is possible. Tom by some total of the moment, i went to the theater and saw the house. Everyone is Walking Around with a scotch and there is a woman named thatcher no one respects. I get it. It was the 1970s. Is this a redux of the house . The endt is more like of the 1990s. The end of the major government. Over thea question Sexual Harassment scandals, having echoes of that, and a minority government. A Prime Minister with the authority seeping away. You have deleted opposition with tony blair. You have a much more broader view than with german court in. Tom i understand the Prime Minister can spell philippines. And thepolitics tabloids going after it, or is this for real, she may exit, stage right . Risk of that. S a you see that reflected in the markets. The pound is down. There is a risk the government could fall apart. There is no strong contender. It is very unstable, very uncertain, and very hard to predict where things are going to end up from here. Some point, we are expecting parity. Where does pound go from here . It makes it hard to sell the pound. Thee domestic politics test assumptions over brexit talks. Right now, in the absence of further news, this is taking risk off the table rather than the active setting of the pound. If we dont get a toppling of the government, we have to head 135, 136 two years and to years end. The big play is the large cap ftse 100, versus the small cap ftse 200. We are a bit nervous on u. K. Growth. Ofpullback that exposure liking the u. K. Economy and sticking closer to the benchmark and 80 in the Equity Stocks to navigate through this time where we have political uncertainty, bringing things more benchmark aware. Francine thank you. David merritt and nandini and viraj patel. Atwill have riad salameh 5 30 in new york. This is bloomberg. Francine this is bloomberg surveillance. Talking about brexit. Lets talk about boe. Inflation is likely to be more than a percentage point above target. The good news, it looks like it is peaking. , when you look at inflation, is it a trend or one and done . Not one and done. There is possibility they can do one or two more, but this is a sensitive time for the u. K. Economy. Thinking abouty, the consumer. 60 of the u. K. Consumer gdp is based on the consumption is shrinking wages. This is a time when you see retail sales falling. It is expected to be lower than trend and the past. Watching that will be fortunate for the bank of england deciding if the economy can handle one more. Can they handle one more . Is about timing. Banks dont want to give or show their policy hand over the coming weeks. We are at a crucial stage in the brexit talks. If the assumption does prevail, expect that front and to press in another rate hike. The sterling call for ing . Viraj we are constructive. 136 forooking for 135, cable. Dollar that is a week store in the repressing of bank of england expectations. The next couple of weeks will be a make or break moment for the pound. It is deal or no deal. If you get no deal, the pound sinks. Francine what is the percentage of a no deal . We are ating, 75 25 . It gives us a constructive sterling view. That is the probability that may rise slightly this week. Going to givenot you a percentage. The base case is we get a transitional agreement and a deal comes through. There are parts of industry that may not be protected that derail outcomes for u. K. Companies. Francine thank you. Stay with us. You can read more of bloomberg stories by picking up the latest issue of Bloomberg Businessweek. The latest story, the prince and his revolution. Has he gone too far . This is bloomberg. Tom good morning. Thrilled you are with us. Bitcoin, loaded to the boat on bitcoin. U. N. Matt miller got together and bought it. Is none they say there volatility. Look at bitcoin. Volatility is there if you have the appetite for a. Mr. Trump he has a great relationship with the countrys leader. He offered to resolve disputes with china over the south china sea. Trump ignored questions about his alleged Human Rights Violations involving a deadly war against drugs. Those accusations of impropriety appeared to be having an Impact Senate candidate roy moore. He has fallen behind in polling for the special election. Shows dougished jones shows more trailing doug jones. We have heard from lebanons Prime Minister for the first time. His surprise since resignation. He denied speculation he is being held against his will. He will resign when he returns to beirut in a few days. Heleft open the possibility will return to office. The head of the imf calls plan. E plan a positive the fact that it is least,ring to remove at itlly, those barriers is an indication of two things. Better strengthen confidence in their own system. Taylor chinas policymakers are calls to control growth spurred by credit. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Thank you. Lets look at bitcoin. It has plunged since friday after the cancellation of a Technology Upgrade caused some users to split to competitors. We are joined by ed robinson. Also with us, Nandini Ramakrishnan and viraj patel. Talk to me about this volatility move. Crashed somewhat, like 1000. Upheaval overbeen the weekend as a planned upgrade last week was canceled. This shows the debate that is roiling the Bitcoin Community. There are questions about how bitcoin can scale to meet the streetcoming from wall to consumers to china, etc. Tryingr scientists are to expand Processing Power of bitcoin. It takes 10 minutes or more to process a transaction, which is ill suited to scale. Scientists are trying to develop upgrades. When those fall, you can see investors freak out and pullback. Thisine we talked about last hour. It is not a currency. Ed is it a commodity, and asset, a security, a store of value . Store of value seems to work now. Things that dont seem rooted in fundamentals. As a currency, it does not work. Why would i spend bitcoin for a cup of coffee or pizza, when i held for 72 hours, i would make another thousand dollars. Go jamie going to dimon on you. Here is the chart. A log of bitcoin back to 2010. Log curvature,s ia. Ch is the enthusiasm stere we are up to at 700,000. 600,000. Wn under this is the hysterics over the weekend. Of a tactical reality, 10 minutes to do a transaction, versus what it is supposed to be, versus the underlying theory of bitcoin, i suggest they need of theory to get to the idea equivalent of retail. Faith thishowing entity that remains undefinable is here to stay. It is here for real and will deliver on its utility. That is the fascinating thing. Technical computer program, but it has become a vessel for investor faith. Whether it fulfills a game of reorienting or the way we manage money or the way money is created, or whether it becomes an exotic asset that makes up part of our portfolio, no one knows at this point. The market is telling us it is here to stay in some way, shape, or form. Tom the idea jpmorgan is working on what you talked about, we have to make it faster , dont you have to have the horse before the cart of an underlying theory of value . Do you observe in your reporting it is there . Initially, with bitcoin, that is that it is a new currency. Tom i am going to make up a currency tomorrow. It is going to be called the lacqua. It will replace the lira. Ed it has utility. I can send you a lacqua and when you accept it, you can use it in some way, shape, or form. This is about market consensus. Ignoree can you cryptocurrency and a portfolio . Theini there are parts of cryptocurrency space that are speculative. There is a lot of unknowns. It is not something we are speaking to, by any means. 2018 will tell us more about it, especially when it has Global Financial market implications. At the moment, it is trading like an asset commodity rather than a currency. Francine we have a viewer question. How much time do you look at bitcoin and the other forms . Ed some of them, a lot of time. Ium is the number two cryptocurrency. It is a kit for forming different computer programs on a ledger like block chain. One of those is ether. This kit enables these startups to create their own currency, to tokenize. Signed is designed for crossborder payments. Ripple is designed for friday nights when you could not afford logan david 2020. Ed robinson, thank you for a discussion on bitcoin. We will continue here with Nandini Ramakrishnan and viraj patel. Stay with us. That was fascinating on bitcoin. Bloomberg daybreak on radio. Briefing. Ng very newsheavy. What happened overnight that kind of thing. Stay with us. This is bloomberg. Francine this is bloomberg surveillance. About lebanon and the Prime Minister. He has dismissed speculation he was held against his will and plans to return home within days. He resigned on november 4, accusing iran and proxies of destabilizing his country. Is riad salameh, thank you for joining us. You said the crisis is political. What are the risks of it impacting the banks if the crisis becomes much bigger . Riad lebanon and the central bank took preemptive measures, is high. Iquidity whether in the Banking Sector or ral bank. Nt positiveave political elements that have played in the sense that the president of the. Epublic statements coming from the United States and from europe. I believe given the strong technical position we have in terms of liquidity and the backing, we can look forward to having stability in the country. Francine a lot of people are saying this is a financial operation, you take from the banks and put them in reserves. Can you explain what is going on . Bank has, forral the past two years, engaged in Financial Operations with the banks, whereby, effectively, our has grown to record levels in terms of dollar reserves and the banks increases had a strong in deposits. It increased by 11 billion last year. On anre higher by 6 annual basis for this year. Is backing theet stability of the lebanese pound and the stability in the interest rates. For coming on with us. I want to ask you the delicate political question are you in touch with the leader of lebanon in saudi arabia and his see being detained because of the saudis . Did they forced him to stay in saudi arabia . Riad i dont have accurate that, except what we heard on the Television Last night. He is promising to come back in the next few days, so by doing so, we will have a clear answer. What do you need from the Global Financial community. Let me bring up the lebanese bond. Down we go with a 12 price decline to 88. Congratulations on stabilizing this poor trend. What do you need from Christine Lagarde, the international community, and trump . Their backing. We do not need their financial need it in terms of her laying our message to the financial community. The central bank has the capacity to maintain stability in the markets and on another level, we do believe our euro at these undervalued levels. Movement, it was very central. The crisis normalizes, we will see better levels on the of the republic of lebanon. Francine how much does the government depend on the remittances . Is going to be around a billion dollars. Around 8e billion. Around 1 billion comes from the gcc countries. These amounts it used to be higher. In oil prices, the amounts coming from the gcc country is less to lebanon. Does lebanon have a Prime Minister at the moment . November 4. On the president is asking questions to saudi arabia. According to our constitution, the resignation has to be presented physically in lebanon. That is why the president did not consider the Prime Minister resigned. He has toes that, asain as a Prime Minister, head of a caretaker government. Francine why has the Prime Minister not returned home yet . Said,according to what he he was preparing things so his return was safe. Francine thank you. That is riad salameh. Lets get back to Nandini Ramakrishnan and viraj patel. When you look at the concerns surrounding the gulf states, what is a safe haven now . There is no specific safe haven you can run two. Can run to. When you see the oil markets play out in a Way Investors are nervous about the heightening tensions in the region, we have seen a rise in brent and wti over the course of the month. It is not going away from the market reaction. We have seen that in the oil price. Whether there is a safe haven out there, we suggest diversifying, not having all of your exposure in the region or certain countries. Is it still yen, or also the concerns about the carillion kanaan scylla, yen does not jump out as a the peninsula, yen does not jump out as a safe haven. You have these geopolitical concerns, currencies have lost their oiliness here. That goes to show no longer can you use these currencies as a on oil. Retain. Swissie francine thank you. Thepound dropping as british Prime Minister found herself under more pressure at a when crucial brexit negotiations start again. This is bloomberg. Abu Dhabi National oil company will sell shares in their retail oil unit. Ceoy sat down with their for an exclusive interview. Shares we plan to float. We might go a little higher. It will depend on how we converse with the market. Is there evaluation you are targeting . Not really. We want to demonstrate floating the ipo and what we are trying thathieve here are numbers show an unprecedented commitment from the International Market as well as other investors to work alongside us in one of the important facility companies. There are rumors you might look to float other businesses. We will be looking and at the whole value chain. You roll out a listing. Why is that . You have a neighbor across the border that is listing happy holdingcompany level. In theave had incidents past where people have thought it would benuating the market, which is incorrect. We are considering exploring subsidiaries. Could you get Strategic Investors in a corner stone for the listing of the distribution business . We always look for strategic partners. Those bring value and help us grow. The Partnership Process how are those discussions with potential partners going and who would be your ideal partner . Adnoc has a sound track ability to attract strategic partners. We apply the same methodology. Shareract partners who the same vision, who are looking at the market in a positive manner. That will bring value to the in at and help us grow smarter way, as well as provide a platform to upscale. That was an exclusive conversation. This is a huge deal. They are sitting on so much oil. We will look at how. This is bloomberg. Tom quiet as central bankers await inflation data. Interestity of higher rates to come. In london, pound sterling shifts and weaker. Mps show no confidence in their leader. There is no place like home. Trump tweets calm from vietnam. Good morning, everyone. This is bloomberg surveillance. Here. Ne is in all do General Electric minute. It will you explain 40 mps are going after Prime Minister may . Need 48 mps. The question is, does she last until christmas. What does it mean for brexit negotiations . Tom here is taylor riggs. Mr. Trump he has a great relationship with him and their formal meeting was successful. On capitol hill, another sign the house and Senate Republicans have differences over tax reform. The house would not accept the Senate Proposal to eliminate deductions for state and local taxes. That would be opposed by house members in high tax states. The earthquake had a magnitude of 7. 3. It hit an area where people rely on farming to make a living. An official is, rejecting the speculation that king salman will abdicate in favor of his sln. His son. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Tom how about a quick data check. The curve is flattening back to where we were. 77. Ith a bid, 56 not that much going on. Francine sterling is a big one. That coin is also relevant because of a correction. As the primepping minister found herself under pressure as brexit talks enter a crucial phase. This is after a report as many conservative lawmakers have agreed to. Tom today is the day for General Electric, making the cover of many of the business newspapers. We will have analysis on this. Here is the chart. This shows the emotion from tom us edison forward and the huge curve year of excellence through the 90s. Jeff stepsn desks in. Here we go with lethargy. If i bring that up and show the last number of months with his exit, you can see the movement to 20. Om 32 that is remarkable. Looking for a dividend cut and maybe an announcement about headcount. That will be interesting. Stay tuned to bloomberg. Right now, the coverage for the has been on the president of the United States, on what has been an exhausting asia trip. With us now, regina lay joins us. Has been overcome by the photographs of the president duterte. How has he been received . Very warmly. Andtrip has been cordial friendly. They had a bilateral meeting earlier today, where trump said we have a great relationship. This summit has been successful and that duterte handled the meetings beautifully. At the gala dinner last night, as trump encouraged to get up and saying. Up and sing. We heard from a spokesperson today who said the closeddoor dealings were warm, friendly, and candid, he also said trump the the time to emphasize strong and close alliance between the philippines and the u. S. Tom i looked at this and it is almost country to country where critics of the president say he is not at least formally addressing and making visible human white human rights abuses. Is there discussion of that and what was the response of mr. Duterte . There has not been, at this stage, any discussion. Spokesperson says during bilateral meetings, there the warention at all of on drugs or Human Rights Violations. He says trump was mostly sitting there, nodding, listening to duterte explain the reason he means to as we rage this war on Illegal Drugs and why it has been detrimental to society, which runs counter to what Sarah Sanders has said about the meeting. She has said it was briefly mentioned. That is being countered now. Says norte spokesperson mention at all on the war on drugs or Human Rights Violations. The only thing trump focused on was trade, trying to send a message about trade reciprocity. He wanted countries to treat the u. S. The way they would like to be treated. Tom thank you. Cirilli is in washington. You know the president is engaged. The president respond to the issue of the moment . What will be his response . Major differences have emerged between the senate and house version of the bill. They are on a timetable to get something done by the end of the year. Whether the house of representatives can advance it out of the house and onto the senate, the markups in the senate set to begin. Washingtonchatter in is going to be on the weekend and the president overseas. Particularly with his meeting with vladimir putin. I like how you put it. Chatter. Is it chatter or substance . Kevin it is chatter. We have seen republicans criticize this president before. Have, i leverage they was talking with one republican general over the weekend. He said the level of frustration for this president suggesting there was no meddling in the 2016 is palpable. Every National Intelligence agency is saying without question russia meddled in Political Institutions on both sides, but also business institutions, like out in San Francisco. Update us on the investigation into russia. What is the next step . Kevin this is ongoing. Continued frustration from trump about his insistence to not come out forcefully and say russia meddled. We have the cia director, hours meetinge president s with vladimir putin, the cia director, mike pompeo says he meddle. Russia does tom that gets the chaos and confusion going for monday. On our economic politics, Greg Valliere. I want to update what you said. Thedemocrats could take house. Do you stand by that . Greg i do. That important. You look at suburban women across the board, something broken virginia. That means the something broke in virginia. That means the house is a tossup. Francine why is it difficult . Greg the way the districts are gerrymandered make it difficult to get done, but i sense momentum. I sense people who do not like trump are motivated. I do not see trump voters as motivated. Tom greg, thank you very much. Forward thee discussion of economics. He served under Vice President biden, on Bloomberg Radio today, jared bernstein. Taxare you going to pay for cuts . From london, new york, this is bloomberg. Taylor this is bloomberg surveillance. Fight with the Justice Department is heading for a thanksgiving showdown. Told at t toe address their concerns about the 85 billion dollar merger before the november 23 holiday. The government could file suit to block the deal. Uber has set the stage for a private startup deal. Offer approved softbanks to buy a multibilliondollar staying. They will be able to invest and by up to 9 billion in shares from existing investors. Tom with us now, Greg Valliere with horizon investments. Masters joins us, the former cio of a be bernstein. Ab bernstein. This is a nice primer from the gentleman from harvard law. Trade is not a zero sum game. He goes on to the president s politics, a populist who complains about unfairness, while saying that it is reasonable for all countries to pursue only their own interests is best putting all countries on a collision course to trade war. The big story of this trip was trade. His reputed ration his repudiation of Multi Lateral trade deals makes me believe nafta is going down. Tom can the legislative branch block the president . And the Judicial Branch block the president . Will he act alone . Greg probably alone. It is in real trouble. Francine what happens next . If this is real trouble, wasnt that with the president ran on for his Election Campaign . Comes next . Greg he ran on it, but the big losers are in the midwest. Will be hurttates by this. China is going to move on steel and aluminum. This could start to unravel. I dont think the markets would enjoy the prospect of trade protectionism. The trumphow can administration backed away from it . What do they need to do so they dont lose face with their base . Back byey can walk bilateral deals. Maybe we can deal with canada or the u. K. Gone. Big deals are it creates a vacuum. If we abdicate china and japan, they will become more powerful from a trade standpoint. On tax begin the week reform. Does anybody care in the analysis, the world you live in, does anyone care about paying for it, of deficits and rising debt . Greg no one cares about it. The big issue is not state and local taxes. The big issue is waiting a year to phase in the Corporate Tax cut. It is one of the few stumbling blocks. The big view this week is the house will pass the deal. Tom how do they pass it with conservative republicans . Do democrats support leader brady . Will bethink there defections from high tax states. There. Es are ryan is not lobbying hard for it. Holes the road for the senate. This thursday or friday, it is a big deal. Tom we are going to come back to seth masters. We are going to dive into the markets and some of the ramifications. Cantwell. Senator look for that in the 1 00 hour. Driving the debate on tax reform. A few select other issues, as well. From london, new york, this is bloomberg. Tom bloomberg surveillance on a monday. Sterling a little weaker. , an important idea is to get to seth masters. He is one of our most popular guests. From abretired bernstein. Are you golfing . I am spending more time doing things i have wanted to. Lets look at a chart. This is the dow. Your monday. Or here is 2000. You can take this red line and migrated. We are nowhere near the exuberance. Are we exuberant now . Economy continues to grow. Companies tend to grow with the economy. They are beginning to take on more leverage buying back stock. Faster than that outside the u. S. You . Ine what worries is it a Monetary Policy mistake . The problems that could surprise us and that being the things people are not talking about and worrying about. Thereis the possibility will be something that comes from left field and hurts us. Is some issue, including the ones you talk about the four , including the u. S. Tax debates, trade talks in asia. There are policy mistakes brewing that might cost us. Those things dont tend to happen overnight. To develop slowly. Francine i am looking at the flattening yield curve. How do you explain that . Is the way the yield curve behaves. The fed is moving the short end of the yield curve up. Aey need to get it towards normal level as the economy is strong. Growthg end is longterm expectations. Bonds. Am going to go to the idea of a new terminal rate and fixed income area, is that mean a new terminal rate for earnings . If we bring our rate down for the bond yield, do you bring your equity return down in tandem . Yes, but the longterm equity return is a function of the riskfree rate and how the stocks are valued today based on earnings. If you look at that, in the u. S. , earnings are fully priced already. Outside the u. S. , there are places where markets are reasonably more valued. To go back tont the flattening yield curve. The longer this loss, what does it mean for banks, the real economy . It seems to be a signal traders cannot ignore. Longterm, you expect the yield curve will have a normal shape. A huge tax cut, which , but might happen, what you expect to see if the deficit will rise and that will put pressure on the long indie of the yield curve. On the long end of the yield curve. We will see taxes go up again. Bloomberg markets, a conversation with dr. Roche of yale university. We welcome all of you worldwide and across america. It is the president s washington, and he is rumored to return tomorrow, early the next day i am not quite sure when. Washington. His there is a lot of complexities, as our Kevin Cirilli said. His comments on mr. Putin over shining tax reform. Mr. Trump scheduled for a once they return good right now, he is in the philippines. With our first word news, here is taylor riggs. Taylor starting in the philippines, trump says he has a great relationship with the countrys leader, and he offered to resolve territorial disputes with china over the south china sea, but he avoided questions about Rodrigo Duterte as Rodrigo Dutertes Human Rights Violations. , royor the first time moore has fallen behind in pulling for next months special elections. A poll shows moore trailing 46 to 42. We heard from lebanons Prime Minister for the First Time Since his surprise resignation. He denies speculation he is being held against his will in saudi arabia. He says he will resign officially when he returns to beirut in a few days, but he left open the possibility he will return to office. Of imf spoke to bloomberg tv in vietnam. It isfind that considering to remove, at least possibly partially, those areas. Remove all those threshold below 50 . That is an indication of two things openness and also better strength and confidence in their own system. Alsor Christine Lagarde said that chinas policymakers are responding to calls to slow growth fueled by credit. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Tom thanks. Press release from General Electric. They will cut dividend by 50 . This is an Iconic American Company with great changes over the last decade. Only one of the announcements we will see at 9 00 a. M. I know we will go to the United Kingdom, but there really is a historic component for the dow component. Francine it is interesting, because they have just come out saying they will cut Quarterly Dividend to . 12 a share. This is huge, because there is more appetite for these dividends. But if you look at the new ceo, john flannery, he needed to commit to something radical to turn the 105yearold manufacturer. But now, onto brexit. The pound one of the biggest movers, continuing its slump eyes Prime Minister theresa may faces fresh challenges to her leadership. A report in the sunday times claimed as many as 40 conservative mps agreed to sign a letter of no confidence. That is just short to trigger a leadership challenge. Lets get over to set masters. When you look at the concerns regarding the leadership of theresa may, how do we know we do not, but so far, so good. Every time we write a story, she is one crisis away from having to step down. She has weathered quite a few. 40 mps is not enough. You need 48. The more pressing issue is the brexit bill going through arliament did she only has majority with another party propping her up. She has a huge amount of internal problems. To them senior cabinet resignations. Two senior cabinet resignations. The question is what happens. If she loses one, she has to cave in. Francine if he were to tell the Prime Minister if there was anything she can do to get ahead of it . I do not know to regain popularity, to get people behind her, is there a huge Cabinet Reshuffle she should do . They are saying she should do a huge Cabinet Reshuffle in january, but this is not a Prime Minister known for taking risks. Even in the last two , itgnations we have seen took a quite a few days to make a decision on something most Prime Ministers would have acted swiftly on. This is not her style. Again, it is her lack of alternatives in the conservative party that is keeping her clinging on by her thing ernie els. Tom what do the people want . I get the political chitchat. What does the United Kingdom want . Are they riveted by this debate in the conservative party or not . Everyone isnk caught by the brexit and infighting. At the moment, theres t itfortat gameplaying, namecalling. It is almost tempting to forget the bigger issue, negotiating brexit. Which is a big you for the country. When you look at the polls, it is interesting. Yes, we saw this mass is mas labour, butor Jeremy Corbyn seems to have peaked. Isre is not a huge lead he getting from this. I think they are just exasperated with this. thank you, spaniard svenja odonnell. To masters, my map is down 2. 37 in the european siemens, with a little higher dividend than ge. I get the dividend change, but that is not what people wanted here they wanted a restructure and a body count going down. But on the other hand, it is an opportunity to reset. And it is certainly better to make those decisions early. As aescribed ge manufacturer. That is its heritage. But it is increasingly becoming a service company. Providing everything is a Service Requires a fundamental rethink of the way they do business. Tom how does mr. Flannery avoid the missteps of ibm. It was a train wreck as ibm, in the digital space, had to reinvent who they are. Are there elements of an ibm disappointment and reorg . Analogy of a good the problems in turning around Companies Like this. If you look back over history, you have give both Companies Credit for lasting as long as they have. Basically the only company from the original dow list still in the dow. The more tardily the mortality rate is high. To continue to reinvent yourself is amazing. Well said. Seth masters, honored to have him with us today. We will look at General Electric within our next section. We have people in the trenches of analysis on ge. Research, jeff will join us on Bloomberg Radio later. 99. 1 fm, washington. Taylor this is bloomberg surveillance. Lets get the Bloomberg Business flash. Corn is funding the cancellation of a Technology Upgrade that has prompted some users to opt out of the cryptocurrency. Bitcoin fell 29 from last weeks high. Meanwhile, the coin cash is up 40 from writer. Alibaba is going back into the bond market after an absence of two years. A coating to people familiar with the matter, the chinese hirederce giant has credit suisse, jpmorgan, and others for the bond sale. Alibaba singles day promotion had a record 50 billion in sales. And general election General Electrics ceo unveiled the companys new strategy today. First, it cut its Quarterly Dividend to . 12 per share. Exit most of to its operations. It is not clear how many jobs would be affected. That is your Bloomberg Business flash. Tom thank you so much. It is decades, years, and three ceos even more than that from 570 lexington avenue. Buildingimed art deco to 30 rock, their association with nbc, and on to their meeting today. Us, masters is with formally with av bernstein. Brooke sutherland is with us for her terrific articles bloomberg gadfly. Ubelhart with all of the nittygritty. What will you listen for today between the lines for mr. Flannery . First, we have the first one, which was the dividend cut. I do not know if it was 50 tom 5, 0, yeah. Karen that was expected. What will they sell . There are four big ones that do not really drive earnings. Aviation, health care, and power are there big earnings. There are four other businesses they could sell without materially affecting things. And he gave us a Little Signal on 20 billion asset sales. I do not think that is enough. I expect significant cost cuts. It is really what are they selling and cutting . The dividend was one of them. Taylor extrapolate the number of employees at the door the next three years . Karen gosh, i really do not have a feel for that data do not have the employees by business. But it will be a material number. Francine what can they divest . If they have to sell more assets, what should they selloff . Karen they have the transportation business. A good is this. Cyclical. A good business. Cyclical. They have oil and gas, which it is arms length now. They could wind that down gradually. Energy assets are not worth very much. They have a grid business that is very low margin. Those could go first. Tom thank you. Hart will be at the meeting in new york. Brooke sutherland is here with us. Ge whenload the vote on the tank has when the stock as tank . Seth we are waiting to find out exactly what they will do. It seems premature to buy them just because they are down. But i would certainly think carefully about whether or not they can actually turn the boat around. Tom they have to sell these divisions to somebody. Within your reporting, are there people anxious to buy the garbage from mr. Flannery . Brooke you do not necessarily have to sell everything. You can look at spinoffs, joint answers. As are as transportation, i think that is what everyone is saying will go. From that, you could see interest from chinese buyers. Have an engine maker could an interest in doing something, whether a deal or a joint venture. They do have options. But it is never good when you are in fire sale mode. It is not quite that far, but they are certainly having this issue where they have to divest these. Francine how much will change . Top, therson at the new ceo, the right man to deliver what investors want . Brooke that is the right question. He is saying all of the right things at this point. Investors and analysts are happy with what they have seen, but he is a 30 year plus veteran of the company. That was the big question. Is he going to go far enough . Is he willing to sell off these businesses he is in charge of running . Or in the power business, he bought outcome, which has exposed ge to the weakening power market. Is he willing to admit fault . How well will he be able to change ge culture, given he is a product of that culture . So far, he is doing the right things. That is a good sign to investors. But time will tell. Francine when you talk about ge culture, how would you change it . What is wrong and broken in that culture . Brooke when you talk to employees, it goes back to the culture jack welch created. Where perfection is expected. If you are not delivering your numbers, you might be fired, you might be at risk. Create a great environment, where you have employees being pressured to meet numbers. Tom i think you are dead on. Seth masters, so much of this is legacy and historical look back for any given company, whether iconic companies. We saw this in banking in 2007, 2008. Victim of its a own romance, the art deco building, everything jeff immelt loved. Jeff immelt never came on with us, what was that about . Francine heated, once. Tom he did, and i did some things with him at ge. There is a legacy thing, and management is not there. Seth and you are seeing a transition from a business where you basically sell pieces of equipment, and then it is someone elses problem, the tribes of a, a service company, where you have an ongoing relationship you have to continue really manage. Where you are selling hours of operation on an aircraft engine. Tom what is the model you say they have to copy . Is there a company where you say do it like utx . Seth i do not think it is a magic formula, but it ends up southwestern service businesses, aiming for Customer Satisfaction that is ongoing rather than a sales target. Brooke but there is risk, because you can be too good at your job. From some of the issues in power is that they are down, because they are good at it, because they did not need to fixing the turbines. Tom did you get enough information . Brooke he was helpful. Tom brooke sutherland, writing in bloomberg gadfly. We will continue with mr. Masters. A discussion in radio. Who nailed the call on ge . Look no further than jeff sprague. Killed with his doubt on the ge business model. We will get an update. David gura and myself, Bloomberg Radio. This is bloomberg. Tom bloomberg surveillance. Look to bloomberg all day for analysis. We go beneath the headlines of what we will see with General Electric, beginning at 9 00 a. M. Talking to some great voices about General Electric for the day. Right now, we look at the markets. Seth masters with us. I cannot remember if i have shown this chart before. Value. Line is the white line is s p growth. Normalized back to niemann lows. Is the growth surge just because of 5 or 6 stocks . It is actually more than five or six stocks. It is companies that have shown the ability to deliver persistent growth and have some kind of remote that protects their franchise. The other thing is that you had a huge catch up in the Previous Year and a half, taking a bit of a breather, and you will notice the value is still going up, just not as fast. Tom rvalue and growth the same kind of stocks as they were 10 years or 20 years ago . Seth break point. No. Companies rotate through different styles based on their lifecycle and how they are managed. Whenever there is a problem, a company tens of two tends to end up in the value camp. Tom so ge is a value stock. Francine i am not sure if they are a value stock. What happens when they cut dividend . Seth the nature of that you is is a company cheap more than its fundamentals would warrant . See as something we will they execute their new strategy. Francine but how much do people want to cut dividends . Regardless of fundamentals, regardless of value, will shareholders be breaked out . Seth dividends are one to mention no value, but they are not the only one. There are Value Companies that do not pay high dividends. There are companies that pay high dividends that most value holders would shun. Francine breaking news out of opec. Opec raising its estimate demand for crude next year. Of thelook at the health world economy, it is actually leading to more demand for world oil. The 2018u look at demand, it is around 300,000 barrels per day. If you look at supply demand, opec, with production cuts, has managed to rebalance a touch. You have to look at shale producers. Tom and brent up to 64 a barrel. Thank you to seth masters. Let me do a Foreign Exchange report. Quiet markets. Sterling really front and center, with some turmoil within the politics of the right in the United Kingdom. Euroyen. The philippine peso. 51. 182 on a weaker peso. Radio. Rague joins us on and further coverage of General Electric. General electric cuts the dividend 50 . From london and new york, this is bloomberg. Jonathan regional stability dominated the final leg of trumps tour. Prime minister mays leadership is questioned. Another painful session for sterling. Ges new ceo cut its dividend for the second time since the great depression. From new york city, good morning. This is bloomberg daybreak. I am jonathan ferro, alongside david westin. Alix steel is off today. Features just a little softer after the first week of losses on the s p 500 in some two months. Against theker dollar. The pound is a whole lot weaker against the dollar this morning as well. 1. 1651 on eurodollar. Treasury yields continuing the flattening theme. Get some want to headlines now from outside the businessd