Transcripts For BLOOMBERG Bloomberg Surveillance 20171128

Let us quickly check on the markets. Quite a lot going on. I am looking at the stoxx 600 in europe which is gaining a touch on the backs of gains in Energy Companies and a bullish outlook from one of the sectors bellwether. Looking at the dollar. And the fed and what we will hear from powell. Therude oil including impact of the opec meeting. We need to wait a little more to see how long we will cut production. A lineup our lineup today is looking pretty good. We feature some of the top names in banking and economics including Tidjane Thiam. We speak strategy and outlook on the Global Economy. And jim oneill. He speaks u. K. And emerging markets. Later, we will also speak with John Studzinski from blackstone. Let us get straight to the bloomberg first word news. Nejra in the u. S. , the Senate Tax Bill is headed for a debate. Should it pass, Republican Leaders will have to hammer out a compromise. Two republican members of the senate what your say they may not agree to vote the measure out of committee today. Delaying progress. And putting plans for a full senate vote in jeopardy. Nominee for the Federal Reserve says he will not shake up the fed if confirmed. Broad powell signals support for how the fed operates, regulates, and guides the economy and is in line with the strategy set up by janet yellen. We will bring you all of the breaking news out of the confirmation hearing from 3 00 p. M. U. K. Time. Japan has reportedly received radio sickness radio signals suggesting that north korea may be preparing for a Missile Launch test. The type of missile was not specified and the radio signals could be from winter training by the north korean military. The bank of japans governors says asian economies are more resilient against economic shock. He was speaking at an event that marks the 20th anniversary of the Asian Financial crisis. Capitalization of asian local bond markets is trillion, to 3. 7 more than 100 times bigger than before the crisis. We have certainly made progress. Economies have become more in the Financial Sector has developed significantly. Ireland, the controversy threatening the government and the brexit talks has escalated. The deputy Prime Minister, Frances Fitzgerald, aces a cop a noconfidence vote. It could pull down the minority government. Says theof england uks biggest lenders emerged from the latest stress test with the strength to keep lending even with a disorderly brexit. Barclays and rbs fell below the systemic reference point. But the boe says actions taken by the banks since the end of 2016 means that neither need to bolster their capital. Global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you. Credit suisse is entering the final phase of its threeyear turnaround plan. The focus on Wealth Management is paying off with the bank saying provisions in the Third Quarter has have been good. How confident is the ceo, Tidjane Thiam as they head into the new year . As always, thank you so much for joining us. Mr. Thiam thank you for having me. Francine you are slowly progressing towards your goals. What happens next . Mr. Thiam the final year of our restructuring shows our strategy is working. We are focused on Wealth Management. Our personal Financial Assets have grown by 26 trillion. That focus is justified and paying off. We believe in our integrated strategy. Happy with our current side. Should never be too happy, but as far as we are concerned, after a year and a half of work, we have had good progress. You are targeting 17 billion in 2018. What happens after that . Mr. Thiam it is a bit tricky. We started with 1. 9 billion in net savings in 2016. We believe that is competitive in the industry compared to our peers. Fundamentally, i believe that any organization should improve its productivity by 2 or 3 . I have always said the big restructuring was to reach a plateau to which we could reach the Global Economy. Fundamentally, when you have to do a big Cost Reduction program it is because you have not kept pace with the industry and the paring by pairing by your costs. Francine in terms where do you see the growth coming from . Wealth management. Productivity. Growth for revenue. Mr. Thiam we are very positive about the World Economy and the u. S. And about the emerging markets. Including china. Europe. With the election of the french and germany, the synchronicity of europe. For once, we had the three Major Economic zones doing well at the same time. Quebecs. Capex. It can create a scenario where growth with high low inflation. In capital and productivity grows, you can get into a healthy growth scenario. Theme i wasg was liquidity. Francine and it is slow. Mr. Thiam and communication around it is very good. Asset valuations are as high as they are and it is important to take the investor by the hand and not surprise him or her. So far, the Central Banks have done a really good job with that. We think that emerging markets will be ok. And emerging markets, we think they will be ok. In the background, you have industry. The lack of the ability of credit put a damper on growth since the financial crisis and that is starting to shift. We can support our currency in their m a ambitions. Francine are you not worried about china . Governor will have a lot to deal with and a huge debt. Chinaiam you can look at in a number of ways. What we elect to look at is the gdp and capital. It is about where the u. S. Was in 1950. 25 years ago, it was where the u. S. Was in 1825. That is a piece of a transformation that we are witnessing. There is plenty of growth still isilable but the good news the focus on stability of the currency. If the currency is stable come it reduces the likelihood of a trade war. Andgs are correctly priced lowers that the likelihood of trade issues. And it increases capital outflows. In the the main thing current mix in china is the focus on the stability of the currency. We areprise you quite focused on millennials. We think it is one of the largest generations in history. Our Investment Outlook in 2018 is very well covered. They are trending on the World Economy. Initiative inthe investing. That is a major theme for me, they are behaving differently. ,he emphasis on green energy they are fully digital these they are fully digital these trends are here to stay. Francine some believe that your targets are so are too ambitious. Mr. Thiam all i can say is we have a Wealth Management target and a consensus for 2018. Consensus for 2017 is above our 2018 target. 91 of aat the target. Are you happy with the structure of Credit Suisse at the moment . One of the things people may wonder is to see you handle a Wealth Management unit as a whole. Mr. Thiam i always read closely what peers say. Markets are very different and it is important to be agile and to decentralize and to create local accounts. We have adopted geographic colonization. What you want to do is have a disenfranchisation. We are showing that we can grow and be efficient. Francine thank you so much. We will be back with surveillance. We continue our conversation with Tidjane Thiam. Later, we will talk about uber with jim bylund, the founder jim mellon, the founder of the Burnbrae Group. Is bloomberg surveillance. Good morning everyone. I am at our new European Headquarters in london. Let us get straight to the Bloomberg Business flash. Generale expects tax changes. And to cut additional jobs in france. As many as 900 job cuts may take place. Resulting in a charge of 400 million euros. Positions top of the they already announced they would eliminate. A surge in a business after one International Client agreed to use its technology. It will use the u. K. Online growth system first on its website. They will spend at least two years building a customer performance center. 20 shares rose as much as in early london trading. 3 ing gained seven point yesterday. Softbank and a group of investors are trying to purchase a stake in uber at a sizable discount. The Technology Giant and general including atlantic are offering to pay more than 6 billion for a state that would value uber at 48 billion according to people familiar with the deal. And who were spokesperson declined to comment. That is the Bloomberg Business flash. Francine europes economy is improving with the block enjoying the greatest growth in decades. Growth picks up, centralbank policy is on track to be normalized. The ecb will extend qe at a diminished pace. Pledging to do more if the inflation outlook fails to improve. What does that mean as we head into the new year . I am very pleased to welcome back the ceo of Credit Suisse, Tidjane Thiam. About howlking before banks are going through a difficult phase. The about consolidation in industry. We understand that ubs may be looking at commerzbank. There was a change at the top. What does that mean to your competitors . First, the strategy label has been to grow and generate capital organically. We are very focused on organic growth. We had 33 billion of mma in the first few months. Make should be seen within that. It is not a secret that some of the bestperforming banks have been a product of significant consolidation. Scale is positive in our industry. And it is quite easy to make a case that the industry in europe is too fragmented. I am not the first to say this and i wont be the last. After that, it is a question of feasibility. Francine are you gearing up for a phase of consolidation . Is 2018 the right time . Mr. Thiam my fundamental beliefs in the industry to be a Successful Bank, you need a profitable and strong domestic market. You will be hardpressed to find a Successful Bank that does not have that. American banks have that in profusion. Having a solid, profitable domestic market to back you is very important. After that, you grow outside. We have a choice we are lucky to be in two of the wealthiest markets in the world, the u. S. And switzerland. And after that, we project to across the emerging markets. Two of the largest free banks in , two of the swiss banks, and in the rest of the world, we are following the same strategy. Feel a pressure from shareholders to give back . Once it you are extremely or even medium happy, will you give back to the shareholders after the overhaul . Mr. Thiam we want to rebuild shareholders. I am painfully aware that i had to dilute my shareholders significantly, but there was no way to solve the Credit Suisse problem without a massive dilution of shareholders. Once we did that and solve the capital question, i am grateful to the shareholders for the support that we got for that. We raised 4 billion and now our market cap is 7 billion which shows a belief in the market. Profit andate more the bank does better in 2018, we at the end of november, we will show our first profitable year. Going forward, the plan is to return capital to the shareholders. It will be out of my hands. My job is to run the bank and generate capital and then it is the board to decide that will decide what to return to the shareholders. There are things on the table whether it is special dividends or other options. But, that is still down the road. We still need to execute well to get to that point. Francine how many questions do you get about compensation . Mr. Thiam not many. What is the question . Francine what will compensation look like in terms of bonuses . In 2016, it was in terms of numbers. Issue. Ed the doj we think it was key to lay the foundation for the future. But we had some very unattractive numbers and in the end, we protected the franchise by paying our staff. This year, with the improvement in results, there will be a balance. You should not expect anything spectacular, but something fair. Not a big increase compared to the previous year. More than weaid should have in terms of numbers but fundamentally, our number one objective is to operate profitably. Compensation comes after that. The conversation should not focus on that. Our objective is to perform well. Francine i also want to talk about brexit. We have some figures about the big banks here in the u k here in the u. K. How banksu make of are preparing and dealing with brexit . I think we have refrained from spectacular announcements or pronouncements on brexit. Francine you are one of the more cautious. Mr. Thiam i once had the life of a government minister and i have only respect and appreciation for government officials. They are doing an incredibly difficult job. Having been involved in international negotiations, these are tricky and sensitive matters that engage the future of millions of the of millions of europeans. We do not take that duty lightly. We communicate with the staff as well as we can but there is still a lot of uncertainty. Francine have you invested less in u. K. Assets, for example . Do you need to take bets that move you away from the u. K. . Mr. Thiam we had a starting point that had nothing to do with brexit. In 2015, it was clear that we were going to build up in the u. S. , switzerland, asia, and the emerging markets. London had a number of difficulties. We reduced the Balance Sheet in the u. K. And our portfolio was reduced significantly. Took we wanted to take our business that to a profitable position in the u. K. Back to my central point. The main goal is to be profitable everywhere. We have sadly eliminated more than 3000 positions in the u. K. But this is all to get the business in a healthy position for the future. Hadcine and you have never and you have never said much as to where in the eu you might move operations was that because you were being respect ful . Mr. Thiam we have been clear about the options we have been looking at. But this is not a major issue in terms of the profitability of the business. We have dublin. We set up in dublin two or three years ago. That has always been a hub for our european operations. We have paris. We have madrid. Unlike many other banks, we do not have any operations in frankfurt. This is all between london and dublin, paris and madrid. You can expect the ultimate answer to be some combination of those cities. Francine we have to talk bitcoin. What exactly is a bitcoin . Mr. Thiam a brief answer. Water byet into hot answering this. This is an Interesting Technology that has a lot of potential. The point i would like to make is that between Digital Currencies and cryptocurrencies. Digital currencies are interesting and have potential. Central banks are looking at this to try to give it the characteristics of a currency. Cryptocurrencies are a different matter. What i have said is that there are transparency and compliance issues around the cryptocurrency. Everyone knows the meaning of crypto associated with currency. Consortiumloping a to look at this. We are cautious about bitcoin because we think it has a number of unattractive characteristics. Francine can it become attractive if it becomes regulated . Mr. Thiam of course, if it is regulated properly. I know Central Banks are actively looking at it to regulated. At that point, it will become another asset or asset class that can be treated. Francine with the central bank ever adopt it . Talk to me about regulation and basel. Mr. Thiam things are moving in the right direction. An announcement regarding a number of changes. I think, as banks have revealed fsbr Balance Sheet, and the that Credit Suisse down was for me and the team a big day because it is an external valuation of the hard work we have done. This was a big day. Have deliberated to reduce their Balance Sheet. Francine i know we talked a little less time when i came over for the results and the pricing structure but who will ultimately be the winners and the losers . Mr. Thiam i wish i knew the answer. Francine i think a lot of people wish they did. Mr. Thiam these are some questions that i dont know the answer to. I spoke with some people at Credit Suisse and we do not know. Is a complex situation. It will depend on what the different players do. We will have to come back to this in the coming months. ,rancine mr. Tidjane thiam thank you for joining us on bloomberg surveillance. Coming mr. Thiam nejra lets get straight to the Bloomberg News. The tax bill is headed for a marathon debate are in a Republican Leaders will have to hammer up compromise between different religions provisions in the house and senate. They may not agree to vote out of committee today, delaying it and putting plans for a senate vote in jeopardy. Donald trump stomach to have the Federal Reserve said he does not plan to shake up the bank if confirmed. Signaled run support for how the fed operates , regulates, and guides economy. That keeps him in line with he islen who is on on track to succeed in january. We will bring you news from that confirmation hearing. Japan has received signals suggesting north korea may be preparing for a Missile Launch test. Setting multiple sources, the messages did not specify the type of missile and radio signals could be from training. The bank of japans governor says asian economies are more resilient against economic shock and the area is the biggest contributor to global growth. It he was marking the 20th anniversary of the Asian Financial crisis. Capitalization of the asian bond market is u. S. Alent to 3. 7 trillion dollars, 100 times bigger than before the crisis. We have certainly made progress. Economies have become more resilient to shocks and the Financial Sector has developed significant. Nejra global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. The irish deputy Prime Minister faces a noconfidence vote over her handling of a whistleblower controversy which could pull down the government and trigger a snap election. It could cause problems for theresa may. They are convincing Northern Ireland which props up her government to accept u. K. Position on the irish border. Our dublin chief joins us. Thank you so much for joining us. What happened over the past 24 hours . They say its a long time in politics and yesterday proved that. People were very optimistic that there would be an agreement on the controversy and it would be avoided. 90 minutes later, they released emails it said the Prime Minister knew more than originally thought about the strategy to possibly discredit the police whistleblower. Andopposition return owned they step down. Very bad it quickly. Francine what are the chances the noconfidence vote succeeds . At the moment, we are in a situation where two parties are holding guns at each other, to see who blinks first. There is pressure internally with the ruling party to step down. The Prime Minister continues to back her. There is no sign she is going to step down. If it gets to an 00, its all over. It will go to the park and call an election in december. There is a long time between now and then. This is something that could be avoided. Its getting really tight now. Forcine what does it mean brexit talks . Conventional wisdom we talked about yesterday is if there is a campaign, they will be going to those talks as a lame donkey doc doc. Duck. They will try to do it for february. This probably reduces the december meeting and its a mess. Francine thank you so much. This is the Dublin Bureau chief. What does this mean for investment. Is one of the most recognized names. The predicted the credit crunch. He joins us now. Its always great to have you on the program. What is the next turmoil . Are we focusing too much on brexit and missing the underlying risks . Jim i said there was going to be a deal by christmas. There is so much attention on the irish order issue probably means the other factors have been more or less agreed. The transitional deal will be read. I think the irish situation is a distraction because the u. K. Has had common travel area since 1920, way before the European Union. Im sure the deal will be done. There will be no hard order, but they will be satisfied i think this is may is a strong position at the moment. Shes not in a very strong position, she is in a relatively strong position. The political turmoil is coming to the fore and she looked quite stable. Francine compared to who . Jim the situation in germany is a good example. Of the situation in ireland, those are bubbling up in a ferocious way. Theresne said earlier, going to be an early election. I think Jeremy Corbyn is going to have to sit out for a few years. Francine nobody thinks it would be in their interest to have an early election given what happened in june. Jim there are some rebels. I think its a two thirds majority to overturn the fiveyear rule. It has been overturned in recent past. I doubt that, she is in for the next two or three years and she might end up in a stronger position today as a result in we will go through an economic downturn and in three or four years time, their economy will look good. Francine there is no doubt that exit will happen, is there with what. Jim i think it will be a soft brexit . Francine what would that look like . Ways, it will be a transition. What the u. K. Will be able to do is to free trade deals elsewhere in the world, which we cant do the moment during fundamentally, when we go to your, we will still show a passport, which we do today and very little will change in terms of our travel or opportunities in europe. Francine i know you focus on biotech and the business of youth. What does brexit mean for that . Jim we just saw they are opening a center here in the u. K. I think the u. K. Is the second most orton Biotech Center in the world after the United States. There is so much talent here. Its going to remain a big business. Francine what is the one thing you would like to know about bribes it brexit right now . Is there a question you want to know for your investment, the way the pound goes . Is there a starting point that if you get that right, all of your investments accents . Make sense . Jim i dont think its going to make much difference. The broad stock market, the pound is resilient. That is indicating the markets are sanguine about brexit. If i were in the u. K. Government position, i would take a leaf out of labors playbook and borrow more money. The cost of borrowing is low and its going to go up. I feel bond markets have peaked around the world and yields will start rising. The early indication is what has happened in china. Its going to happen across the world. At. 2 sale of bonds marks the maximum folly in the bond market. Francine when you worry about china, the repercussions of something going ugly in china, as compared to the italian market . Italianhave the election next year and the eurosceptics might win. That could be a full line. The u. K. Government has been offering free money over the longterm, why not take it and reinvestment . Not in the labour party way, but in infrastructure, which is needed. The u. K. Is a leader in automated technology. The gdp ratio is not high in this country relative to italy. Francine thank you so much. Up next, steady as she goes. He does not want to shake up the fed. Is this what investors are looking for . We will discuss that next. This is bloomberg. Francine youre watching bloomberg surveillance. Donald trumps nominee to head the Federal Reserve says he does not want to shake up the central bank if he is confirmed. He said he has rods of work for how that operates and guides the economy. It keeps him in line with the trajectory for Monetary Policy set up by janet yellen. The comments came in a statement to the Senate Taking committee ahead of his confirmation hearing today. Is jim mellon from Burnbrae Group. What does the world need in Central Banks today . Jim we need higher Interest Rates to normalize economies and we are getting that. Goldman sachs is there will be four in the United States next year and i concur with that. I think we will get rate rises in the u. K. We need them in the european context, and the germans will push for that. There will be further tapering in the European Union. Francine this is what the world needs. Jim the world once more of the same, chief money. The party is coming to an end. The u. S. Dollar has been under pressure lately, it will turn asked year and go up because there will be a shortage of dollars. I would be a buyer of the u. S. Dollar. In particularly against the euro. The tightening effect will be, you will have less dollars around. Its the most important currency in the world. I have a feeling we are going to have a resurgence in the dollar. Now is the time to sell the japanese yen and to sell the euro and so forth. Do it cautiously. One reflection is the mania of excessive money at bitcoin. Its a reflection of excess liquidity as well as the money laundering. Francine i want to get back to bitcoin in a second. You are expecting the dollar trend to go up, this is regardless of if we get tax reform or not. Jim its much more to do with the raising of Interest Rates in the tightening by the, which will boost the dollar. Francine talk to me about bitcoin. Jim im amazed. I had a friend who thought it would go to the moon. Even the is trying to work out a way in which he can realizes substantial profits. The mania has gone too far. Context,lationary inflation is insidious, people will turn their attention away from that going to gold and silver. It crashes every week. Then it goes up to new heights. It reached 10,000 last night. Youve got the that cash that was added on top of that. Its probably 13,000. Francine is that psychology . Are investors fearing missing out . Year 2000 and the internet. When everybody was talking about it, including people on the street who knew nothing about money. Thats the time to get out. Francine this could go to 30,000. Jim it could go back to 5,000. I say stay away from it did it. Francine we are going to give you Jerome Powells confirmation. Softbanks uber discount, they look to take a state in the ride hailing. They dont want to play pay prices. This is bloomberg. Francine this is bloomberg surveillance. Lets get straight to the business flash. The head of airspace will join airbus as an executive vice resident of sales and marketing. This shows the plane maker take a Top Executive from its partners to replace a manager who ratcheted up 1. 7 trillion in deals over 23 years. 517 are booking charges of ilya and euros related to tax changes at a plan to cut jobs in france. 900 job cuts may take lace at its retail taking business, resulting in a charge of 400 million euros. Eliminatedlready positions. There will be another expense related to free tax changes here at they set an International Client and the french supermarket. They will use the u. K. Online grocery system on its website. They will spend two years building a Customer Fulfillment Center serving the region. 28 , the most to since may 2013. Thats the bloomberg is the . Francine softbank and a group of investors are trying to buy a stake in uber at a discount to the valuation. The Technology Giant and partners including investment firms are offering to pay more than 6 billion for a state that would value the right hailing company at 48. We are added by joined by our global reporter. Thank you so much for joining us. Adam this is going on two tracks. Softbank is making a direct investment into uber at a higher you asian, and on the other track, they are offering this lower number, which is going out to existing shareholders, employees, early investors who slewseen the company in a of controversies. This could be a time in which they want to sell. There are a lot of early employees who are excited for the opportunity to exercise some of the shares they have had, i homes, cars. Francine who are they trying to buy from . Adam early investors, employees. Uber has gone through a number theredraising rounds, so table is large. There is a big pool of people for softbank to pull from. If they decide they dont reach a level of the stake in want to get into uber, the deal potentially could have some problems and they would have to go back to negotiating. Francine i have a million questions about uber. I have some breaking news out of opec. We have the price of oil somewhere. Opec is backing a ninemonth extension, they are awaiting russias commitment. Opec means opec and nonopec. Russia has been involved since the beginning. They are meeting in vienna wednesday and thursday. We know from sources and other reporting on the ground, opec is now willing to back and nine months extension of the as long as and russia does the same. I think its a similar move for oil, american oil. Lets get back to uber. Im sure there is a link between gasoline and uber. What are we expecting this to end . Adam this is going to be negotiated over the next 20 days, when they go out to try a roadshow and get the deal together to make these acquisitions of the shares. They either get to the size they want or they dont. Francine you look at Technology Companies . I can see the upside uber if they can get rid of all the drivers and everything is autonomous. The property profitability go through the roof rid ruth. Roof. H that will be the case with the Tech Knowledge he companies. They are going to have misconduct charges for eternity. It will be like regulating utilities. Francine as long as they keep their license. When will find it they keep their license u. K. . Adam its in the appeal process right now. It feels like the two sides are trying to negotiate some sort of agreement. Uber has so many issues. The most recent one is the hack they did not disclose, there are a lot of lawmakers around the world who are looking to get a wall been investigating involved in investigating. Francine did you look at the stress test closely . Jim the banks are fine. I think the stress test accomplished. The problem is so much capital is being accumulated now. The return on equity is impaired and you cant see them being great performers in the future. I think the dividends are safe. He bank is a goodbye i dont see a problem with the Banking System in the u. K. Francine thank you so much. Thank you for joining us for half an hour, jim mellon. Bloomberg surveillance continues in the next hour. Tom keene joins us out of new york. We will talk to the commerce secretary. This is bloomberg. Francine stability of a shakeup. Ahead of his confirmation hearing today. Uber discount. Softbank plays hardball. Cut amid a 30 price all the news. A brexit but does have to raise capital. Good morning, everyone. This is bloomberg surveillance. From ourcine lacqua new world headquarters. They look pretty new. I am looking at the stress test in the u. K. Tom the powell testimony will be fascinating. Richard clarida will join us. A perfect guest to discuss economics and the policy that will face governor powell today. Francine there have been breaking news out of opec, saying they will support it. Lets get to taylor riggs. Taylor Jerome Powell is on a mission to shake things up at the Federal Reserve. Trumps appointment will be questioned today. It signals raw support for how ed operates. He is not expected to have any problems being concerned. Bank of england is concerned of a recession, and a disorderly brexit could cut the brakes on lending. Safety measures for a cyclical counter buffer. The boe past the stress test for the First Time Since it began. The u. K. Once a trade deal with the eu could live without one, says fox. Ox we want an open, liberal, comprehensive agreement. So we want to work toward that agreement, and we think it is in the interest of the prosperity and the wealthy and of equal in europe, but were not afraid not to get it. On terms with the eu as we do with the United States, for example. Taylor , trade talks can begin. Airport has, the been closed for a second day acause of a threat by volcano. Bali is one of asias most popular tourist explanations destinations. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. I am taylor riggs. This is bloomberg. Francine, tom . Tom thank you so much. Equities, bonds, currencies, commodities. High on off to a record the dow. Sitting nicely at 2600. Curve flattened this morning. Well speak to jim oneill. Next screen, please come onto vix. There is the dow just below the intraday highs. To italiantwoyear, thanks a viewer in germany for pointing this out, you have got to pay italy for twoyear paper for these things. What is that about. I spoke to jim mellon of a group about that, and he said it is of Burnbrae Group about that, and he said it was the most insane his words, not mine thing he had ever seen. The one failing to mention, tom, a little sotloff in europe a selloff in europe we understand from opec. They are happy with production cuts as long as russia plays ball. So i am looking at oil. Tom a quick charge today, new home average prices. Here is the average price, which is skewed because of the prosperity of the haves in america. At the crisis, we come down, we level out. Up, up we go. Here is the trump election. A quick snapshot of new home above average price is 400,000. Francine i like that a lot. Jim oneill, it is nothing to do with football, i am sorry. This is basically a percentage of manufacturing, and you can see the Different Countries and how much they manufacture. Which one do you think for the u. K. . At the bottom . The white one . Jim it is hard for me to see. Francine the u. K. Is the low one, and the European Union as a whole and yellow, the middle one. The top. Any is we will put it on social media for those who either cannot see it on our screen or are listening on radio. It is a good way to look at the u. K. And the northsouth divide. Jim soon, you have the 60page document of yesterday that will explain why the change. Francine i read the 20page summary. Donald trumps choice to head the Federal Reserve, Jerome Powell, you might have met him, he said in a statement that he t, and thatuppor came in a statement ahead of powells confirmation statement today. Oneill, former chairman of Goldman Sachs asset management. We will come back to the white paper. Worry . I mean, you never really worry about the markets, but do you worry that we are somehow misinterpreting what this Monetary Policy will do in two years, three years . Jim i could not sleep all night. Francine because you cannot wait for the hearing. [laughter] jim is that the bigger question deputygoing to be the now . Francine did you get a call . Jim bill dudley is not there anymore. I am waiting for the call. Francine if you were in charge as number two, what direction would you take it . Fed,listen, i think the by and large, has done a good job. It does look from the cyclical strength of the economy, though, they are running out of reasons more than the markets have perhaps got priced in, even if wage growth is not picking up sharply. Generalbe i guess in terminology right this minute slightly hawkish in terms of what the markets think. Francine i know the president looks at us very often. Mean . Oes it we are expecting inflation to pick up quite significantly. Jim i think the u. S. Economy, by any sort of standards, is through full employment. I would imagine, therefore, if we carry on in the momentum we have got, which is the strongest it has been in a while, it would not be a complete size. Tom jim oneill with us. Legendaryjim oneill at Goldman Sachs, particularly on Foreign Exchange. Jim those were the days. Tom it was a few days ago. I want to show you a chart here, thatgoing into the shop everyone has over little person. This is tradeweighted sterling. I want to bring in a banner in honor of james oneill, and we go back to 1992. I cannot pronounce it, jim. Whatever. He is a Manchester United whatever united giant from 1992. The fact of the matter is, jim Philip Wheeler back to it. Jim, we are back to it. Wind is wealth destruction kick in . Jim jim first of all, i am very impressed that you identified that period. Tom i read the thing today on it. I dont think enough has been made jim you should get eric cantona in here. Francine i would love it. Tom as well. O it with you the fact is we back to a weakness on sterling, we are back to a 1992 weakness on sterling. What does that signal to you . Jim obviously the markets have already priced in a big discount, what economists would call a decline in the equilibrium value of the pound, sort of negative volatility shop because of brexit. What is also interesting is the margin, most of that weakness of trade weighted sterling has shown in the past year or so was in the early part, and in the past few months was up and down, not doing a great deal of nothing. That foreresting whatever reason, the markets adjust the price of the pound and now decided lets wait and see what comes next. I find that fact, despite the apparent chaotic nature of our ongoing brexit discussions, the pound itself has been actually pretty stable. Tom we will talk about brexit, i believe, in our next session. This is a year and a half on prebrexit. What do you see is the state of the city in london . Jim i think we will come back to this later, but i want to emphasize ahead of it, it has been my head against the day. If the shock of brexit, which was so counter to the consensus expectations not of markets, but the whole british leadership across the board if that doult is doing a lot more to the british economy for 50 years, like weak volatility, then maybe it is not all about. Said, obviously for the city, at the margin, if we cannot replicate the free market, it is not a good thing. You cannot avoid that conclusion. It is just a matter of how big a negative shock it is in terms of aspects of the city. Overall for the u. K. Economy, going back to francines manufacturing chart, maybe in a 50year period, maybe that is not a disaster if the u. K. Could begin to rebalance itself in some way. Maybe. Tom lets go back to jim oneill, David Merrick what join us with his expertise in the latest news that we see out of ireland. , our London Bureau chief with us, we like that idea as well. Real simple, we will have coverage on television and radio. Never the less, the questioning will be interesting. The powell hearings to 00 a. M. This morning. This is bloomberg. This is bloomberg. Taylor this is bloomberg surveillance. I am taylor riggs. Francine lets get to the lets get to the Bloomberg Business flash. Shell will stop the scrip dividend, which gives part of the payout in shares. Fourthquarter charge as much hundred 78 million that has to do with tax seizures at the bank and the plan to cut 900 jobs. Almosthas a plan to cut 600 other positions. That is your Bloomberg Business flash. Much,ne thank you so taylor. Irishs fitzgerald, the deputy Prime Minister, could pulled on a vote today. That could cause complications for theresa mays chances. Still with us, jim oneill, commercial secretary formally to the u. K. Treasury. Jim that is a handful, isnt it . Francine it is a handful. Ireland, what happens to politics . What is the chance for the deputy to get a noconfidence vote . I understand it is going ahead. Prototypeme under a for the scandal of how they dealt with come under an attack for how they dealt with a wa whistleblower. If she does not allow the as youed vote to happen, heard, the only thing you can do in that scenario is to call a reelection. Ireland has become the most important factor, in fact, seemingly out of nowhere and ahead of this deadline, which is next monday. The timing really could not be worse. Francine what does this mean . Is this a preelection . Is this a deal on the irish border . David it is a kick to start the talks. That is several more months swallowed up with not much happening. Not know about this until you just mentioned this. I wonder if they say you cannot use that as an excuse. David i think there is a lot of lobbying going on. They see our chance is about 60 , to use the magic fairies of sufficient progress. Of sufficient progress. My reaction is maybe not convenient for the ok u. K. On eitherone here side wants to bring down the may government. The alternative of who they could be facing could be worse. How can jim oneill, who went to sheffield, where all he did was listen to def leppard records, i might point out jim [laughs] it may not be that bad, but the truth is, nobody knows. This morning, we were talking about the stress tests, the banks, but there is a huge uncertainty around the outcome. Jim why dont you go to you the fancy pants office in sheffield . Tom i will see if we can do that. Jim, david goes to the heart of the matter, which is uncertainty. There is a Political Uncertainty does it affect market and it appears to, doesnt it . Jim what is really intriguing is the pound has not actually moved since the general election. There something about the markets, and my goodness, you look at some of the stuff Michael Corbin and his crowd say, you could easily think it would be resolved by a election. So there is something new going on in the markets, and this sounds on one level ridiculously optimistic, and i have not generally been like that. Said, and having looked at the initial strategy thing yesterday, if this madness forces us to really give the true priority and ascension to the longterm dilemmas of prison the last 50 years, particularly of britain the last 50 years, particularly regional equality, prosperity, the education challenges in the north and the midlands, then actually that will be way more important for the future of the u. K. Than brexit, although brexit itself is obviously a negative shock. Francine all right, jim, thank you so much, and david, we will get back to the white paper on the extensive strategy. We will be back with jim. David merritt, thank you for joining us. Later this hour, we will speak vicechairman. s that interview is 10 minutes from now. This is bloomberg. From now. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. Tom, we have to talk about one of the governors of the u. K. Publishing this extensive strategy, focusing on artificial intelligence, construction. Still with us, jim oneill, former treasury secretary to the u. K. Jim, what have you made of this . Jim i have not missed my chance to have a go, but i think it is citigroup in terms of Industrial Water in the u. K. It has got everything in there. Francine will it work . Jim if they are really going to deliver and prioritize things in that document, then i think it is good, and if they succeed, i think it would be quite a game changer for the u. K. Now that is easy for me to say. Doing all of those things requires them to stay in power. It requires them to have very focused objectives on transport, skills, education, support, and some of the Industries Including those you mentioned, etc. , etc. Francine really quickly, is it brexit . O do it with me findtrange part of myself thinking that it the shock of what brexit might do to the u. K. Might be forcing more attention on this than otherwise would be the case. Nonemotional person, but the fact that it in the eu did not do anything for our productivity. We need to deal with our productivity problem, and this document has a lot of stuff, which is exactly what i would do if i was elected. Francine jim, thank you so much fear to jim oneill stays with us. We are talking uber. This is bloomberg. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. Tom, i wish you were in london. We are having a fun time in the news studio. To matters of corporate and softbanks overinvestment uber investment is still on. According to people familiar with the deal, the Technology Giant and partners are offering to pay more than 6 billion in a stake that would value the Ride Hailing Company at 48 billion, well below the 69 billion valuation. Joining us is adam still with us, jim oneill former commercial secretary to the u. S. Treasury and John Studzinski. Thank you for joining us or for sticking around. Adam, what can you tell us about uber and this investment . Adam softbank is making one direct investment of 1 billion second and then the investment where they will be buying shares from existing uber shareholders. That is what they are offering a lower discount of. This sort of bakes in all the onslaught of controversy and bad news that has faced the company over the past year. I think what softbank is hoping is this will be the floor in the a lot of controversies out there, whether it is this hack that happened recently that they did not disclose and now a lot of regulators are investigating will further crimp the company. Francine who are they trying to buy it from . Anyone who will sell . Adam pretty much. They will go around and its kind of a roadshow to convince investors to sell. Early employees will probably be among those who will be anxious to sell. And other investors. Tom nowhere including the classic textbook is theirs is there a really silly extrapolation. Are we about done with this game of extrapolation of value as we ion unicorns . A zill shows the sort of silliness. They are paying on the one hand at one lu asian and then add another valuation for others. Billion in which they are trying to buy from existing investors does create more of a market than you see from a direct vc investment or Something Like that where the valuations are a bit more putting your like putting your finger in the air. Francine thank you so much. It jim was here with a good question, why would they take up 30 . Jim why would everybody want to when they knowk they are putting in 6 billion . Adam i think they are banking on a pool of early investors that are ready to get out. If they cant do that, then softbank and uber will have to get back to the negotiating table because it will show that softbank set a floor on what their investment will be. John they really have to be careful. I assume this is being handled in a much more sort of structured market sensitive way. The way you described it, it sounds rather chaotic. Jim it comes with the territory. These days is a lot of chaos. That is going to make sellers much more anxious about whether they are selling at the right or wrong price. Francine which is why maybe they go for the 30 discount. Adam right. Uber has a very large cap table at this point. Over the years, they have taken investments from large investors and small investors and i think they are trying to get some of those who got in earlier who are going to see a lot of upside that now is maybe a good time to get out. Theres no requirement that they have to. John is there any evidence they have disgruntled investors that will be part of this . Adam they have disgruntled investors, but its unclear how much of their stake they want to sell. Tom i want to get to taylor and the news because we have a huge news flow. Does uber make money . Is this the modern aol where there is no chance . I am serious. Do they make money . Adam they do not make money. They havent been profitable. They say in some key markets they are and that shows they can be, but they have a long way to prove they can do it at scale. Tom fabulous. Great discussion on uber. Look now, we need to towards the news. With our first word news in new york am here is taylor riggs. Taylor the Consumer Financial Protection Bureau says he will freeze regulations for 30 days. Mick mulvaney is locked in a struggle for control of the agency. He says he will spend three days a week there and three days a week as white house budget chief. A judge may decide who will end up in charge. Transcanada regulators for a chance to amend the pipeline project. They said keystone could go ahead with the project only if they change the route of the pipeline. Transcanada once regulators to let it address the questions raised in the ruling. Saudi arabias Energy Minister says its too early to talk about how long Oil Output Cuts will be extended. Opec and the allies meet thursday in the and vienna. I still havent arrived. Its too early to talk about this agreement, but studies very in terms of the period needed. The question is what is a normal level of inventory is a technical issue that needs to be studied and discussed with other parties. Taylor a new deal can be reached. Global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. Tom thanks so much. Joining us, John Studzinski, Blackstone Group vice chair for Investor Relations and Business Development and jim oneill with us. , for years with Goldman Sachs. Bow you should kind of down. Tom i just want an invite to the wedding. Francine wants to go. Quiet in the market. This is the Merrill Lynch move index, the quiet in the fixed income market and down here in the lower righthand corner we rolled over again. Are we setting ourselves up for the mother of all covers, somewhat like 1987 with this game of shorting the quiet in the market . Shorting volatility . Does it give you pause . [laughter] francine no comment. John i have no idea. Shorting volatility in the market. For how long has this been going on for . The markets are going to get even more volatile than less and thats probably the source of this. Going beyond that its not my thing. Tom ok. I know its not your thing. Jim am i allowed to say i have no idea . Tom Goldman Sachs is minting millions off the short volatility trade. It sounds like the other 6 things you and i have seen before. Are you worried theres a oneway bet on permanent quiet in the market . John are you being rude jim are you being rude about my whole tom no, everybody is in trade right now. On oneo really knows level, i got two contradictory views. The World Economy is the strongest it has been since 10 years ago with numeral eight of the 10 largest economies in the world all accelerating at the same time and we got no inflation anywhere. If you think about it from that perspective, why not lowball . The opposite i think john was handing at is that in consequence of front banks being friendly forever. To the day where everybody is going in the same direction, my guess is that is when it starts to rise vol starts to rise. Francine what is the biggest risk out there . When you look at the markets in growth, is there something you worry about we are not paying enough attention to . John i think the things i am wearing about one of the things i am really starting to worry about is a lot of regulation starting to creep into the Technology Sector and a number of other Large Industries that we have not seen before. While you have a laissezfaire on a more global level, you have the technology industry, which is very much a target for regulation and i think that is obviously be led by brussels and that will be a hard time to avoid and i worry about that because that could cause sort of a series of dysfunctional decisions on the investment and technology industries, which are very important right now in terms of where the future lies for the world. Perspective,arket if we had a situation where the ecb, the chinese bank of cash at the same time with the fed, i would not be want to be waiting in equity markets or the bond markets. It doesnt look like that is around the corner, but it will happen at some point, particularly if the World Economy carries on with the momentum it is. The second thing in those because i have to say. Its something finally really went wrong with china the way all these ridiculous have been worried about for 10 years, that would be a big problem for the World Economy. I do not see any signs of that myself, but one of these moons, that might happen. Tom very good. We will come back with jim oneill and John Studzinski. Thrilled they are with us in london today. Coming up, its business as usual in november for catherine ecd. Of the o Catherine Mann on International Trade and the dysfunctions of america and china. This is bloomberg. This is Taylor Bloomberg surveillance. Morerice of bitcoin is up than 800 this year and racing toward the 10,000 mark. There are a lot of skeptics. Spoke toisse ceo bloomberg in an exclusive interview. Transparency and compare the issues. We are completely open. Of implications. Are cautious because we think it has a number of impressive characteristics. Taylor bit point bitcoin has risen 45 in the past weeks. Francine bitcoin is getting a lot of copy here on Bloomberg News and a lot of guests on to weigh in. We are black with John Studzinski and jim oneill, former commercial secretary to the u. K. Treasury and a formal chairman of Goldman Sachs asset management. It bitcoin, what is it . For the guystastic on the right side of this ride, but i dont see in terms of the requirements of what a new currency needs to be. Particularly, a means of exchange. What does it bring that we dont have already . And as the ceo just said about the regulatory issues and compliance, i dont understand or really get it. I am too much of a traditional economist i guess. I just dont get it. Jim i think the Technology Space john i think the Technology Space, whether its apple, google, paypal, they will be able to quickly sort of eclipse anything bitcoin is trying to accomplish and youve got to regard it as a shortterm fad. Tom this is too important of a conversation. Within the shortterm fad is the parsing i will take jpmorgan as an example of worrying about technology in the process is a bitcoin. Has mentioned, worrying about the underlying value of whatever this beast is. Does it have a value . John i have a hard time understanding what the value is and i wonder on what basis does jpmorgan do they have a vested interest in bitcoin . I dont know. I wonder why those types of comments are being made. I have a broader concerned that todaylogy is so robust and people are so impatient with the notion of currency that technology is quickly going to simple if i currencies and which currencies prevail i think will be a difference, whether it is the dollar or the chinese. There is going to be something other than bitcoin that prevails. Francine this could be store value, but the Underlying Technology block chain, how will that kind of change i am sure there are all sorts of great applications, but they have to compete in the same space john said with the likes of google and apple and others trying to do that have quite incredible technological applications. I have started thinking about one of my trusts which now owns all of my investments includes something i did years ago on a sort of nigerian version of paypal. I can see for people who want to remain anonymous, including illegal ones, and people who are speculating. In terms of it becoming a major part of our lives, i just dont see how its going to get over the core problems about what a credible currency for widespread geouse. Tom i think people respect your view on this. If we look at the math of the chart and we assume it is log hyperbolic. That is screen 1637. Can you link bitcoin to previous manias that were wrote about a century ago . Jim it smells like one of those. I wasnt around. I am getting on a bit, but i wasnt around that long ago. I have lived through smaller versions of that. The whole nasdaq bubble in 1999 to 2001 where it burst had some idiotic things with more individual businesses, of course. Gold has gone through over the time since gold floated more. Occasional crazy moments. Its not unusual even though it 45 the next last fortnight, that is scary. Francine we have a great chart looking at it. We will get to it shortly. Jim oneill will be staying with us for almost the hour. If you have questions for John Studzinski, log on to tv and ask questions underneath the video screen and tom and i, it would be our pleasure to want ask those questions on your behalf. Om bloomberg surveillance from new york and london. We need to get to the politics of the moment. Tiffany baker has been patient as we discussed bitcoin. She joined us now. Stephanie, this Budget Committee vote today is a huge deal to me in that it is not one or two senators on the fence. Numeral 2, 3, 4, and you can count higher than i can count. Stephanie absolutely. They can only lose 2 votes because of a slim majority in the senate. It looks like there are as many as 10 republican senators opposed to the bill for one reason or another and not all the same reason, so they come at it from competing points of view. You have deficit hawks worried the growth projections will not pan out and they are worried about it adding to the National Debt and want to add automatic tax height in their tax tax height in tax hike in there. Then you have some that want Small Business partnerships so they are equal to corporations and big businesses. And then you have ones like Susan Collins of maine worried about adding the adding obamacare in there. Its hard to see how they reconcile all those. Tom what is the rush . I havent seen a good treatment essay, article about the god awful rush to get this thing done. Why is that . Stephanie i think it is because trump really needs a legislative victory for his first year in office and they havent had one yet. They failed to repeal obamacare and i think he wants that one goth on his record that he a major tax cut through in his first year in office and if this drags on to 2018, it looks like he has not been terribly successful. Francine thank you so much. Bloomberg Stephanie Baker there. Lets get back to John Studzinski. How may questions do you get about tax reform or what the Trump Administrations end game is . John we get a lot of questions and i think stephanies point about the Trump Administration not just the Trump Administration but congress wanting to put something on the scorecard before the year end. It is as much in the senates interest on the houses interest to demonstrate to the American People that washington is actually open for business and not it is that it is not just one big stagnating group of people fanning to get things done. In the obama period there was a dysfunction between the administration and the people in congress and trump has demonstrated an number of examples where he is trying to compromise and is trying to be much more balanced and toathetic about both sides try to make progress and move ahead. Tom thank you so much. We look forward to speaking with you again on mergers and acquisitions and the state of europe. John studzinski is with Blackstone Group where he is vice chair of Investor Relations. Coming up, a very important interview where the governor speaks to congress. Testimony of rome powell Jerome Powell. Richard clarida will join us, a perfect time to speak to him. From london, from new york, stay with us. This is bloomberg. This morning all of washington including the president will budget time for the Budget Committee. We heard from johnson of wisconsin and corker of tennessee. So johnson says we are still negotiating. As a minority government of ireland may fall, not so the government government in london, for now. Richard clarida of pimco on dynamic testimony processes. Good morning, everyone. This is bloomberg surveillance. Headquarters in new york. Our headquarters in london, francine lacqua. Day 2 in london, how is the coffee . Francine the coffee is good and the pantry is even better. I am looking at oil. Opec is meeting. Look at opec and the impact it has on oil and we have a couple of earnings little bit below estimates having a little bit of an income impact on european stocks. Tom your first word news come here is taylor riggs. Taylor Jerome Powell isnt on a mission to shake things up at the Federal Reserve. President trumps choice will be questioned today by the Senate Banking committee. He signaled a broad support for how the fed operates, regulates, and guides the economy. He is not expected to have problems being confirmed. The bank of england is concerned a recession and disorderly that could put the brakes on lending. So far for the third time, the central bank may increase the key financial safety measure, the countercyclical buffer. They also revealed british banks past stress tests for the First Time Since the annual test began. Far enough for brexit negotiation to move to trade. Fox spoke to bloomberg in sydney and said the u. K. Want to trade deal with that you, but could live without one. We want an open, liberal, copperheads of agreement to maintain Market Access and make sure we dont have impediments to trade and investment. We think that agreement is the interest of prosperity and the people of europe. We are not afraid not to get an agreement. We could trade on terms with the e. U. As we do with the United States, for example. Taylor the u. K. And e. U. Want to reach an agreement on out byting outstanding issues next month so trade talks can begin. The airport on the island of bali has been closed a second day because of the threat from eruptinging from an volcano. Almost 60,000 passengers were stranded yesterday. Global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you so much great equities, bonds, currencies, commodities. I will let francine do oil. Equities lift, a record intraday high. The curve flattening and the 210 spread. The vix, 9. 68 showing the goodness in the market. 2year to aled negative yield. That is extraordinary. Francine it is extraordinary. I shouldve put it as part of my data check. Stocks in europe advancing. Energy companies gaining. We had a bullish outlook from one of the sectors bellwethers, shell, and looking at dollarsteady treasuries edging lower ahead of the Federal Reserve confirmation hearing and they are looking to find out more about the u. S. Tax reforms. A lot to do with what we are seeing in the u. S. And oil, i like oil because opec is meeting and its given a bit of a list to the concerns lift to concerns that they wont extend the production cut. Tom very good. What have you got on the bloomberg . Francine this is a simple u. K. Manufacturing as percentage of gdp and we charted. This is the same as the last hour. We charted u. K. , germany, and the European Union and we had jim oneill talking about how to make this u. K. Growth better and more fair society and the u. K. All the way at the bottom they need to manufacture more if they are going to bridge the northernsouth divide. Tom on my bloomberg to get us into a conversation with richard realda, the idea of the fed funds target rate, here is the stance of a former vice chairman, stanley fischer. We are still not back to zero. It means its a good time to speak to Richard Clarida. Ate would say he herded cats columbia. Richard clarida at columbia and working at pimco as the global strategic advisor. What makes this appearance important is professor clarida with his economics and dynamic general equilibrium theory, but his Public Service over under secretary oneill and snow at the treasury. First, do no harm is clearly what you do when you go for congress. Where could chairman powell trip up today . Theres got to be a theme or something where you are saying i hope he says the right thing. Fiveyeare has a track record and has been through confirmation twice. In some ways, hes a pro at confirmation hearings. Is and willll present himself as the continuity candidate. I think chair yellen. The process in motion shrinking the sheet, with an infosys on gradual. If there is a place he would trip up, and i do not expect it, would be if he tries to get hard commitments from a senator, when will you stop . , more detail than i think you will want to give. Tom the giant was William Mcchesney martin who pushed against truman on fed independence. Are we so fractious in washington that that has to be a Mcchesney Martin moment for Jerome Powell . Think it is,nt but at some point, there will be another recession. Because of concerns about fed activity during the last crisis qe and other programs, we could have a mcchesney moment, but probably not at this hearing. Francine good morning. Curve has been flattening. The u. S. Yield curve during normally does flatten during rate hike yield cycles. Its more or less where you would expect it to be. I think there will continue to be some tendency toward flattening. The wildcard is where we are with regard to inflation. We have had surprisingly low inflation this year. I think the bond and the stock market is very relaxed about that. The wildcard for the yield curve and markets is where inflation is going next year. If it surprises us on the upside, that creates interesting dynamics. The fed can hike more and gets a more flattening. Your viewers need to know that would you when you really care about the yield curve is when it gets inverted. When it falls below the twoyear bond, thats when you get worried. Happens lets say it and you say its a long way from that, what does it actually show us . In the past it almost showed or hinted that a recession was looming. Is it different this time around . Richard im not going to say this time is different. I have been following markets in different capacities and one of over one of the reliable rules of thumb is when it inverts, a recession happens in the next 12 months and that is an infallible signal. Tom i dont have a banner for this chart, but i guess i would call it select few agree with professor clarida. Here is the 210 spread. The joy of a steeper curve, everything is going to boom and down we go. Im only doing this to impress the professor. This is a long chart log chart with massive complexity and acceleration of curve flatness. Which way does this cut . Good or bad . Richard the rate of flattening is noticeable. The level of the curve is comparable to where we were in previous cycles. What happened with trump is there is a trump reflation trade that went on and given that reflation surprised on the downside, that contributes to the flattening we have seen. December 13 is the fed meeting. Does that change or get altered by the Economic Data we have seen and does Jerome Powell have to tiptoe around december 13 . Richard i dont think so. I think fed speak and the minutes of broadly support the idea that they are going to go in december. The markets have priced that in. This fed and the bernanke fed did a good job, typically when you are a couple weeks out, the fed speak will let the markets know if they are pricing in the wrong outcome and it essentially fully priced in now. I think they go in december. Tom we continue with Richard Clarida. We want to speak about Public Policy and the tax ballet of this week. The vote scheduled, i believe, for thursday. Let me tell you about Bloomberg Television and bloomberg radio. Confirmation hearings today for governor powell. These are important and a bit of pageantry to it. Thislondon, from new york, is bloomberg. Taylor this is bloomberg surveillance. Royal dutch shell is showing it left the worst slump of the oil slumped behind. Europes Biggest Oil Company will pay the entire dividend since the First Time Since in the First Time Since 2015. Softbank and a group of investors want a big discount of money in uber. According to people familiar with the matter, softbank and others are offering to spend 6 million for a stake that would valuable at 48 billion. Of that valuation is about is lower take fourthquarter charge of the 678 million that has to do with tax changes that the bank and the plan to cut 900 jobs. They already announced plans to cut 2600 other positions. That is your Bloomberg Business flash. Tom our White House Correspondent is in washington. You know what it will going it is going to say from paul krugman the laureate from princeton, but he was particularly scathing today. Whats happening in the senate deserves trumpiam superlatives. Superlatives prate of the 42 ideologically diverse economists surveyed by the university of chicago on the impact of the plan, only one agreed that they would lead to substantial economic growth. Theres the bigger picture. The smaller picture, the tactical picture is the Budget Committee today. They dont care about 42 economists, do they . Not really. For the most part, they are looking specifically at this bill and trying to get it in the Budget Committee. Democratscans, limit and you have one republican who ass ron johnson, who says of this moment, they do not have his vote. If you were to vote no, that would delay it and they would have to amass more support. You dont really expect ron johnson to put up stick in the ground and kill this bill, he is get he is just trying to leverage. Its more the economic side. They are basically seeing the end of the year and realizing they havent put any major points on the board and they are looking at this as the one opportunity they have to do that. Tom do you agree with Stephanie Baker in london that there are up to 10 senators in play . It slightly because so many it is likely because so many senators have not specifically come out in support of the bill. We saw steve daines, normally a reliable republican, come out and say he is a no on the boat because of the differences between Small Businesses and big businesses and small passthroughs. You could have surprises in there, people who havent spoken out in favor of the bill, but normally would be a republican lockdown vote coming out against it. The leadership in the senate have a lot of work to do to make sure they get enough votes by that yeti of the week and acknowledge it will be a difficult task to get by the end of the week ended knowledge it will be a difficult task. Likeine it seems republicans are putting their principles before their party. Is this a game changer . , for some of the republicans these are longstanding concerns, issues about fiscal conservativism, the debt, and the deficit. This is a bill that could add 1. 5 trillion to the National Debt so they are trying to trying to stick to the morals they put forward in their campaigns for years and this bill is a tough pill for many of them to swallow and thats why they have so much difficulty getting enough support for this bill. Pb. Ncine the cf what do we find out in the last 24 hours . We found out mick mulvaney, the acting director chosen by President Trump is right now sort of ascendant unless the court step in. He has taken charge, he went to their yesterday and took donuts and met with senior staff and try to identify himself as the new sheriff in town. Theres a court battle that will play out to determine whether leander english will have any sway. If she has receded from the headlines and it looks like director mulvaney has all the cachet at that agency until the courts step in and say otherwise. Tom thank you so much. Richard clarida with us from pimco. Were you one of the economists the university of chicago called . Richard they did not call me. Tom but you lived this. You are one of the few people like peter fisher that have true treasury fiscal experience in reality. Would you have agreed with whatever the math is . The 41 or the 42 economists that growth is difficult to find with tax reduction . Richard i think i am more optimistic than the 42. As i said on air, i think our Corporate Tax codes and raises very little money and distorts the economy. Multinationals have aggressively used transfer pricing and the like. I have spoken to Kevin Hassett known forho i have years and respect and i think i am more optimistic than a lot of those folks in terms of the growth we may see. Theres a lot of important details to be worked out, differences in the house and senate will. I will reserve judgment until it passes. I think there is room for improvement in the economy. We will get more investment and im a little more optimistic than that group, i guess. Francine if you get the tax reforms, what does that help with . Its not inflation, does it help with animal spirit or gdp at the margin . Richard our current tax code essentially discourages Global Companies from investing in the u. S. We subsidize to outsource and invest abroad. I think we cant and should correct that and theres a lot of apple elements of this bill that would do this. He will not do you will not get an instantaneous boom, but i think a better mix of Capital Spending will follow unless its spent on transfer pricing. Tom i have to figure a chart out for you for the end of this show where we can talk about this link as a linkage of treasury and economics and maybe what it means for all of us watching and listening worldwide. Richard clarida is with pimco. Coming up later on Bloomberg Bloomberg technology, a conversation with meg whitman. Doing hpe, the gubernatorial candidate in california. Look for that in the new york our today, 5 00 p. M. This is bloomberg. Francine good morning, everyone. This is bloomberg surveillance. We must talk about brexit and irish border. The irish deputy Prime Minister faces a noconfidence vote today over her handling of a whistleblower controversy which could pull down the minority government and trigger a snap election. That could cause applications for theresa mays chances of a breakthrough in brexit talks. The Dublin Bureau chief joins us. Thank you so much for joining us. A lot has happened in the last 24 hours. Absolutely. It proves that 24 is a very long time in politics. We spoke over the confidence in the election would be averted and theres a compromise on the table. About 7 30, the Justice Minister released a cash of emails what that were released a cache of emails. The opposition immediately dropped the records hillary tone and demanded reckons hillary reconcilliary tony. E. It reminds me of the scene in reservoir dogs. We have no sign of who is going to blink first. Francine what are the chances deputy prime the minister gets a noconfidence vote and what would happen if elections were held tomorrow . I think we are beginning to see some government lawmakers break ranks. We have seen relatively low profile people say they be its time to reconsider her position. Some of the independent lawmakers which prop up the government saying she might need to consider resignation. Its important to note that at this time the Prime Minister and the deputy Prime Minister are united saying she is not going to step down. Either at this point she either resigns or we get an election within a month or so. Tom with us is Richard Clarida britain asd great really is really a dampened gdp. 1. 9 u. S. Call. Is your analysis of the Global Economy a bit of a dampened tone or not . Richard we have had a pretty good run for 15 months now. The Global Economy has been surprising on the upside. Europe, china, emerging markets up and the second half, the u. S. As we move into 2018, i think a lot of good news is priced in. If we get a replication of this year, it will not have quite the pop to markets because it is discounted. Tom he can do it all, Richard Clarida, market economist. We will have time to talk to Richard Clarida about the nations debt as well. This is bloomberg. Is this a phone . Or a little internet machine . [ phone rings ] it makes you wonder. Shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And ask how to get a 200 prepaid card when you buy any new samsung device with Xfinity Mobile. A new kind of network designed to save you money. Click, call or visit today. Tom our team in washington ready for an eventful tuesday. We just got briefed by our White House Correspondent. The Budget Committee has an important tuesday and then we go to thursday in the senate. Is speaking at 10 00. Look for special bloomberg coverage across television and radio. Heres taylor riggs. Are sticking with capitol hill. Two republican senators are ing to hold back passage of the bill. That would jeopardize plans for a full senate vote this week. Johnson and corker have cited different concerns about the bill. Choice to heads the Consumer Financial Protection Bureau says he will freeze regulations for 30 days. Is locked in a struggle with an obama era hold out for control of the agency. A judge may decide who will end up in charge. Asked regulators in nebraska for a chance to amend its controversial Keystone Pipeline project. Last week they said it could go ahead with the project only if they changed the root of the pipeline through the state. It wants regulators to let it address questions raised in the rulings. Saudi arabias Energy Minister says its too early to talk about how long Oil Output Cuts will be extended. Opec met thursday to consider production curve. I still havent arrived in vienna. Its too early to talk about disagreement but studies vary in toms of the period needed reach normal levels of inventory. That is a technical issue that needs to be studied and discussed with other parties. The cutbacks expire in march unless the new deal can be reached. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im taylor riggs. This is bloomberg. Francine tom . Paris, Catherine Mann. Her work on International Trade is definitive. She owns the concept of dysfunction of america and chinese trade relationships. Sitting with me in new york Richard Clarida of columbia and of course of pimco. I went into the minutia of the chart. A brilliant chart on the hurdle rate of Corporate Investment needed versus the cost of capital. To me that is the arch issue for American Investment right now. Explain why Corporate Investment is so messed up. There are a couple of Different Reasons why Corporate Investment hasnt been as strong as we would hope at this point in the cycle. One factor was the Global Economy. It wasnt synchronized. Was Monetary Policy. Thats pretty much in place. The gap between the corporate hurdle rate and the cost of real puzzle still. It suggests the corporations dont really believe that the Business Environment is conducive to what they want to do and so we focus on the structural policies to create a more favorable Business Environment. Tom within your outlook you have this phrase and it is something i never hear inclusive growth. What is inclusive growth . There are a couple different ways to think about inclusive growth. One is that people within a population middleaged workers more equal have distribution of their wages. What we know is that the bottom half of the distribution hasnt seen any increase in their wages at all over the last decade where is the top has done really quite well. Theres another focus of inclusive growth which i also think is important. Thats intergenerational. Chart in the outlook that shows the generation born in the 1970s actually has had a decline in their prime earning years. No other generation since the Second World War has had that kind of experience of a decline in their real household disposable income. That puts at risk the whole prosperity of the Global Economy. Francine i just want to go back to the point you made that ceos arent ready to invest or they feel they are not in the environment they want it to be. Were kind of in a goldilocks environment. Ceos that they are too scared of what comes next because of the memory of 20072008 . Memories in some Financial Markets are very short. The issue is that we have to put into place enough of the policy enhance theer to Business Environment. Weve got fiscal policy underway. We are talking about structural stuff which is different for Different Countries but business doesnt believe thats going to happen and so they are lacking. They are on their backfields. Back heels. Francine lets have a listen. We are very positive about the World Economy. We are very positive about the and and emerging markets very positive about europe which is new because of the election turnmanuel macron and the of things in france. We have the synchronicity for once. The three Major Economic zones doing well at the same time. Happene what needs to for mediumterm growth to be secured . Yourwould agree with speaker in the near term. 2017 is going to be great. 2018 pretty good. 2019 is where we start to have problems because the Capital Stock that has been eroded over the last decade really needs to be brought up to speed. Weve got digital, weve got cloud. Companies that do that kind of investment are going to be the leaders that we have to see more of them doing it in order to create productivity growth and to have real wages rise which is important for those generational issues. Tom let me go to Richard Clarida. Heres the chart next to it fewer a viewer in germany. We are grinding down through a negative yield on the twoyear in italy. What this comes down to is the riskfree rate. I put the banner here to dazzle francine. I tried to do it in italian. Do we know what the riskfree rate is Richard Clarida . Thats one of the few things we do now because Central Banks are pegging it. In the u. S. It is north of 1 . In the eurozone as negative because of the negative rates so all of the rates are going to be relative to the riskfree rate. We are in a very low trade environment and have been so for 10 years. Tom you are living this in europe across all of the eu. Do we simply say negative rates are because of mr. Draghi or can we say it is separate from ecb action . I think negative rates are really driven by the central that is what powering the Monetary Policy side of the economy which continues to be accommodative. Italyslso has fiscal right now fiscal ease right now. Youve got those instruments working great in europe. You dont have a Capital Markets union. You dont have a digital single market. Were of scott a lot of stuff to do in order to maintain this momentum through 2019. Tom thank you so much. Challenge to catalyze stronger and inclusive growth. Catherine mann from paris. We will continue with Richard Clarida. Dont forget bloomberg daybreak on radio. You kept them in your car. Bloomberg daybreak europe coasttocoast. New york, boston, San Francisco and washington. This is bloomberg. This is bloomberg surveillance. Im taylor riggs. Theres a report that wells fargo overcharged companies on some Foreign Exchange deals. The bank reviewed about 300 currency free agreements and found only 35 companies were charged crisis offered in the document. Wells fargo has reorganized the unit andxchange changed compensation practice. The price of bitcoin is of more than 800 this year. There are a lot of skeptics. Bloomberg spoke to Credit Suisse ceo Tidjane Thiam. Issuese is transparency around crypto. So we are completely open. It has a lot of potential. It may need some day another currency. We are cautious with bitcoin because we believe it has a number of unattractive characteristics. Bitcoin has risen 45 in the last two weeks. Francine we are getting some breaking news out of ireland. Is a local broadcaster. According to a report of the deputy Prime Minister Frances Fitzgerald will step down. There is a confidence vote on some of the things we heard about over the last couple of days. That vote was meant to happen at 8 00. We understand the deputy Prime Minister will step down. Rt has cited an unnamed minister. We have no confirmation of this at this point. Lets get back to Catherine Mann still with us. When you look at breaking news out of ireland how difficult is it to actually see a smooth process in the brexit negotiations . It seems like its a difficult process. Wrong . Assume it will go is a deadline and something will happen at the deadline. The notion that it was going to be calm waters before the cliffs we havent seen that. There is an awful lot of jockeying for position and there are lots of positions under different areas. Youve got to expect theres going to be a tremendous amount of turbulence. Francine the u. K. Government came out with a white paper almost redesigning the u. K. As an economy. What kind of society do you think the u. K. Will produce . Hes got to talk about policy setting the basic framework for a society. And theres an awful lot of private sector activity that operates to run the economy. The private sector does the work. Thats how your economy grows. There is lagging effects of previous policies put into place. You can design a white paper and change expectations. It really matters what the is on the ground. Tom do you believe in potential gdp . We are getting these gloomy numbers. Where do you put potential gdp for the g7 and for america . Do i believe in potential gdp, i believe there are ingredients that go into the long run capacity of economies to deliver on promises to their citizens and their bondholders. Forlieve there is a concept that mediumterm and longerterm. Adding it up and doing the calculations i think thats not really the exercise that useful. I think its very important to look at each element separately cancall he sees policies affect it. Pension policies and policies with regard to women and the labor force can dramatically affect the labor component of potential out put. I put policy as playing a really Important Role to what potential out what might be. Clarida, i dont think policy fits in. Fit Catherine Manns policy analysis into the mathematics and the modeling . Its just a tool to help answer certain questions. Its not a complete framework. Its a starting point. Any serious economist who would want to think about these issues would want to focus on exactly the elements catherine mentioned. The typical application over the next six to 12 months is going to take that as given and look at adjustments to policy. Longerterm you definitely have to focus on what catherine indicated. Francine if theres one thing you would like an answer to what is one thing that really bugs you about the western economies right now . I think based on her career catherine would agree. Probably the single most important factor in Living Standards over 10, 15 or 20 years is multifactor productivity. Its all of the elements that arent directly connected to particular machines and unfortunately multifactor productivity is the thing we understand the least. Year. S. Has had a 10 period where productivity has been slow and its human nature to extrapolate that for the next 10 or 20 years. To gett important thing right is where is it going to be over the next 10 or 20 years. Thats probably the one thing that if i could answer with a crystal ball i would want to answer. To come backoing and link economics and fiscal policy. Thank you for joining us today with the oecd outlook as well. It was great to have you with us. Let me tell you about tv. This is where you get briefed for the morning. Out tv you get to go to whatever you are worried about, bring it up. Theres the chart and we are doing it again. This is bloomberg. Tv. Francine breaking news over the last five minutes. The irish broadcaster rt reporting that the day today deputy Prime Minister will step down. It is citing an unnamed minister. We have no confirmation at this point. We know that the leaders of irelands main Political Parties are holding crisis talks to to a snap generald election. We also knew there was a confidence vote for the deputy Prime Minister little bit later on. Step down i imagine now its a talk about replacement. We will bring you any breaking news on that. Coming up shortly its bloomberg daybreak americas with david westin, Jonathan Ferro and alix steel. David joins us now. What are you most looking forward to today. Valerie jarrett. She was the Senior Adviser to president obama. She then went on the board of life lyft. We have to talk about women in the workplace including on capitol hill. Something she was very active on. About taxesto talk because she has some views about what we could do with tax overhaul. We will get to all of that. Let me get to the single best chart. You have seen it many times before. A service atough treasury. This is the deficit of the nation. Significant challenges in the 1980s. I will put this up for radio on twitter as well. The presumed vectors down to a greater deficit. Do the senators care about the deficit . Do they have a valid worry . Longerterm they do. That has not been the focus for a long time because rates are low. Debt Service Costs are going to become it porton. The debt has doubled. The government spends fewer absolute dollars on debt service than it did before the crisis. The u. S. Hasrterm significant fiscal challenges but its not on washingtons radar right now. Tom you have dealt with the smart people. Theres two groups of senators. Some care about this and some dont care. Who is right . I think ultimately the u. S. Needs to have a fiscal strategy that both fixes short and longterm concerns and the pendulum swings back and forth. Longerterm factors dominating, more recently shortterm factors. When do the shortterm factors get tempered down . I think typically the focus on the longerterm tends to be emerging at this stage in the cycle and you move into more short run thinking in recessions. Thing that is noteworthy about the current fiscal discussion in washington is that its a very ambitious plan of occurring at a fairly late stage in the business cycle. I think the intent is to focus on the supply side of the economy in which case this would be warranted. The details are going to be important and theres a lot of difference that has to get worked out. To be determined i would summarize it right now. Francine an impossible question. Recession stemming from the u. S. Look like . It is not our nearterm outlook. You look at an economy where potentially you could see inflation. You also look at a situation in which you begin to get a abroad asn economies they reach full employment. Block forhe biggest the economic call longerterm is what is the inflation outlook. It has been below 2 for five or six years. If it moves above that will trigger a centralbank response. Tom Richard Clarida, thank you for being here. Let me do a foreignexchange look right now. Breaking news out of emerson. They withdraw their proposal to buy rock well automation. 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. Jonathan the new fed chair sounds a lot like the old fed chair. Jay powell speaks from the yellen script ahead of his confirmation hearing. 30 discount and Goldman Sachs and barclays predict the fastest Global Economic expansion since 2011. The oecd warns next year could be as good as it gets. From new york city, good morning. This is bloomberg daybreak. Im Jonathan Ferro alongside david westin and alex deal. A very small pullback from alltime highs in yesterdays session. Futures a little bit firmer today. In the treasury markets yields grinding higher by a single basis point and the euro just a little bit softer. Broadbased Dollar Strength coming through. Alix european stocks continue to grind higher. Part of that is energy stocks. Despite the fact that brent is lower at 63 as some pessimism and do