Transcripts For BLOOMBERG Bloomberg Surveillance 20171201

A little bit of euro area pmi figure. Little more than expected that is getting a little bit of a list to europe. The stoxx 600, little bit down. Maybe a little bit of angst about what is happening in the u. S. Tax reform. We were expected to have news yesterday. The vote has been delayed to this morning. Im looking at dollar index. That is a tax reform story. Any moves on the asset classes. Coming up, i am excited about talking markets. , he is at Goldman Sachs. Durlacher is the international ceo of julius baer. We will speak to Woody Johnson. Lets get to Bloomberg Business flash with nejra cehic. Nejra in the u. S. , the white house is weighing a plan to replace Rex Tillerson with mike pompeo. That is according to three of ministers and officials amid frustrations with the top diplomats so place just slow pace of hiring. Slow pace of hiring. U. S. Diplomats have trapped plans for donald trump to make a trip to britain in january. The president had been penciled in for a working visit to open the new American Embassy in london. According to daily telegraph, the trip will no longer take place and no new date has been identified. That comes amid a public spat with theresa may. Oil has extended gains after opec and its allies agreed to prolong production cuts in an effort to drain a global glut. The extension was beefed up to the inclusion of nigeria. Keeping the 1. 8 Million Barrels a day oil cut in place. The stockpileeep at average. We have agreed to handle this into old another meeting in june which will give us another chance to get together and a large group of countries, ssd market situation and give us an opportunity assess the market situation and give us an opportunity to get things done based on the market. Nejra negotiators have been working to seven company said the board of question is a big stumble and block that means negotiations are not where they need to be to make progress. Northern irish Northern Irelands threatened to withdraw their support for our government if she fails to back the position. Shaking up the hedge fund which is been battered by investors. To the investments is closing its Discretionary Macro Fund and letting investors shift assets to the main fund. The letter said which will be the first only multitrader funds next year. A spokesman declined to comment. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. I am nejra cehic. This is bloomberg. Francine rally on. It was a positive november that pushed the dow over 24,000 for the first time. Tech stocks were responsible for most of the gains. The optimism may have been a little premature. The republicans tax bill has hit a roadblock over deficit concerns. Mitch mcconnell has said voting will resume at 11 00 a. M. Local time in the bill have been gaining momentum but some senators rejected to passing the bill. The dow at 24,000. How confident should investors be feeling around the u. S. As we enter the last month of 2017 . Welcome for the first half hour, richard gnodde, the vice chairman of Goldman Sachs. He joins us for an exclusive conversation. You have an eagleview of how the markets are doing. Does it feel ok as we prepare for 2018 . Richard we have come through when asset prices have been very positive. That is been wanted. Global growth has been warranted. Global growth has gone on either side of 4 . Looking into 2019, the same is true. That is reflective in asset prices. There is a huge amount of optimism. Relative to expectations, where are these asset prices. Although the overall market is stirring up, you will see this credit explosion. Is outare a company that there, the expectations are high and youre missing earnings by some small amount, you will forecast you look just your outlook, your outlook. Markets are optimistic but priced that way. Meeting expectations are more challenging. Francine when you spit to ceos, are they optimistic . You speak to ceos, are they optimistic . The investments, the ipos, the m a, how do you explain the gluttony . Richard we are at a point of infection. We have seen rates starting to move. I would point out that there is a great explosion at the speed of rate hikes and the u. S. Some people expected the fed to move. There is a range of views for the first time in some time, but the u. S. Rates will continue to see that. Europe is lagging. Clear that wee it shouldnt be expecting anything. Nto the backend of 2019 he left the door open that if things change, he could move more quickly. Hat is on the right side from a ceo perspective, companies are doing well. Earnings, margins are growing. It has been a good year from a performance perspective. That is reflected in the stock prices. Francine are they reinvesting . Richard they are reinvesting. Different parts over the world at different times. If you come to europe at the start of year, if we go back to january, we would be talking about the desolation, the french election, we would assume that the german election wouldve been more straightforward. The issues around tax reform and health care, some of the issues they have been do with. As he got through the summer, the ceos said lets but that aside and get going. , a realogue with ceos pickup in terms of intent to acquire, to build and grow their businesses. Liveave this year as we as we leave this year, i am positive on the ama on the them on the m a side. We feel good. Our corporate facing businesses, we feel very good about it. The underwriting businesses have been terrific. It is important at this time in the cycle to keep reminding yourself of what you are. We have seen some listening of underwriting standards across the credit markets. It is something you have got to watch. Equity prices are high but if you want to refinance yourself any the market, it is a terrific opportunity. From an m a perspective which is an important business for us, that feels good. The investing businesses, they have had a good year. We would like a bit more volatility in our fixed income businesses. Francine as think start normalizing. A number of your competitors, what does compensation look like a Goldman Sachs . Richard i will tell you generally first. We havent tilly on january 1. I will tell you on january 1. We havent finished out the year. Hopefully we can have a good december. When we think about compensation , it is a pretty straightforward approach. Weve got to reward our shareholders, and we have been focused on delivering. That is really what comes first. Then we can look at compensation for our people. Francine richard, thank you so much. He stays with us. We will be talking about brexit next. The irish border question. Can the u. K. And the eu reach a deal and what does it mean for brexit talks if they fail . Still to come, we speak to the u. S. Ambassador to the u. K. , he is what he johnson. He is Woody Johnson. Diplomacy through twitter and anything in between. This is bloomberg. Francine good morning, everyone. This is bloomberg surveillance. I am Francine Lacqua in london. Lets get to Bloomberg Business flash with nejra cehic. Nejra broadcom is not increasing the offer for qualcomm head of a proposal next week to replace directors. According to people familiar, qualcomm doesnt anticipate increasing its offer until closer to this indigobased companies were meeting in march. Closer to the san diegobased companys meeting in march. Life insurance is to buy a Minority Stake in carlisle backed transactions were not disclosed. According to people with knowledge of the matter, the deal is valued at 490 million. His hedge fund has been battered by withdrawals. Tudor investments is closing its macro funds and letting investors shift assets to the main fund after the first of january. Jones will manage tutors flagship fun which is be the firms only multitrader fund next year. The japanese is automakers plans. Shares jumped the most in the year while exalted slumped tests x off the slumped that is the Bloomberg Business flash. Francine in the u. K. , the breakthrough brexit talks that negotiators have been working is at risk. The Irish Foreign minister has said the border question is a big stumble in black that means tests tumbling block that means progress is not where it should be. Block that means progress is not where it should be. They have threatened to withdraw their support she fails to back their position. How does all this uncertainty play into investment in the u. K. Echo the u. K. . Richard gnodde is still with us. Some of the speculation, how much time do you spend in frankfurt . Richard im spending time with clients and trying to drive and build our business. Weve got contingency plans which we are working through an running out stepbystep. Have a greater presence in front for it. We still have a very significant presence in london. It is a terrific facility in a look forward to being in our new building in london in 2019. Francine does it does the fact that you are investing in this new building how many employees do you have . Richard 6000. It makes financial sense. It is the right thing to do. If we had to make the decision today in light of brexit, although it would be the right decision to make. That is one of the issues raising the british economy. ,he face of this of uncertainty do you hold back on your investment . Our basic plans our brexit plans, we are implementing in moving forward stepbystep. Francine what is the contingency plan . Do you have to make a decision at some point regardless of what the outcome of brexit is . Can you make a decision in the dark because they are taking too long. Richard one of the things we hope comes about in the next couple weeks is we move into face to. Into phase two. For someone is spends his life negotiating transactions, until they are done, they are not done. Until the final moments, things will remain pretty tense. Hopefully we get agreement on transitional and that will give us the time. What is important is we are ready to service our clients when brexit happens. That is what this is all about. If transitionals are there, we are going to have longer time to get ready for that. Francine does it bring volatility back to the market . Richard lets you what happens over the next couple of weeks. The expectation is clearly growing. You see that in the pound. If we didnt get to the agreement, the answer would be yes. Francine richard, thank you so much. He stays with us. It has been a wild week for bitcoin. We get to view from richard gnodde. Ill to talk about in tech about fin tech. This is bloomberg. Francine this is bloomberg surveillance. We focus on economic, finance and politics. Francine lacqua in london. It is been a big week for bitcoin hitting 11,000 for the first time. It has been a big week for us. That is a beautiful shot of our new building. Richard gnodde demanded we show that. They are moving into a new building in 2019. Over the last few days, weve been asking if there is a real future for cryptocurrency, or if were looking at a bubble that is about to burst. There is no currency in the , the zimbabwe dollar that is at the level of volatility we are seeing in bitcoin. It is undoubtedly a bubble. The problem with a bubble, you have no idea whether it is good to double before dobbs just es. Ore it before it halv polish authorities of the global level have not focused on the dangers of the developments of these scam. When they will, i think some people will get hurt. Bitcoin is successful only because of its potential for circumvention, lack of oversight. It seems to me it ought to be outlawed. Cooks a lot of potential, it may lead to a Digital Currency. Because we think it has a number of unattractive characteristics. It feels frothy but the real issue isnt bitcoin. The issue is the disruptive nature of technology. X anyway, it is fascinating. It will make Central Banks lose control and they are not going to let that happen. Time, maybet in 25,000, 30,000, somebody will say stop. I cannot call these assets currencies. Afraidor later i am there will be a price to be paid for having excessive speculation. It is up, it is down, it is head spinning. Richard it is all been said. It is interesting to see how the authorities and that the Central Banks of Central Banks react to it. This attention will draw some people into it who might regret being drawn into it. Perspective,cy such a banks spend all their time trying to make sure that currencies are relatively stable. Can restore a value can be used in intermediate transactions. This would of volatility doesnt lend itself to a currency. We have a lot to learn. The response from the authorities will be interesting. Francine the investors ask you about it . Of move on to other stuff . Richard there are a lot of other things to invest in what he can do some proper work, some fundamental analysis. That is where people should be focused. Predecessors there will be a lot of regret around the pricing yet. Francine when you look at fintech, i want to get your thoughts and how the banking landscape will change. I dont know that is m a in europe or fintech and a lot of people are not realizing it yet. Richard the banking landscape broadly in europe could have consolidation. There is a lot of discussion out of the european banks taking opportunity from the europeans. Europe is going to want to have significant Global Banking institutions which they can call their own. When we to get there is through some consolidation. I would not be surprised i dont think the markets are ready. I would not be surprised to see some meaningful bank consolidation. Francine right now you dont think regulators want it. Richard i think the ecb would be leaning into it. The institutions themselves and the paneuropean is not yet complete. When it is complete, we will start to move down that path. Technology is a different thing. How do we disrupt this industry . We at the firm starting to move down that path with a broad look at consumer banking. Markets just ast Consumer Credit business, taking deposits. That is relying on big data, artificial intelligence. It is a fintech project. We are looking broadly across space. We get to the middle of next year, we will be watching a deposit platform. The u. K. It creates real opportunities for existing players new interest to expand the horizons. And really take advantage and disrupt some of the existing players. Francine how fast with this will iton take place . Take longer . Richard i think it takes longer. Expense shows to build a solid business, it takes a longer people of time. I would not underestimate but i wouldnt overestimate the speed beginning. When we look at it from our perspective, we will do this step by step. Our business will continue to be significant. Francine how do you deal with fintech . Do you have inhouse developments . Richard we do it inhouse. We recruit people from the outside. We have an Enormous Technology platform it all of our businesses, you rely on technology to deliver the product to the client. There is a huge amount of technology. We employ 7000 technologists around the world. Overlaying the business skills, we are recruiting people from the outside and building this stepbystep. Started talking about the markets. Ai much will a i will change the way the markets operate . Is that a part of something we dont talk about very often . It could be a real game changer. Richard it is happening across every asset class. The important thing is control, risk management, make a short youre on top of those developments. Making sure you are on top of those developments. Francine richard, the hes a much. That was fun just thank you so much. That was thank you so much that was fun. Updateet straight to an of the brexit news for the last five days. Nejra this week brexit news was dominated at the u. K. Wrangling with problems with nick with moving the negotiations forward. Theresa may has to find a way of wording the commitment. When the 300 mile line dividing them becomes uks new frontier with a bloc. They are talking to belfast to find a solution by monday. On monday theresa may meets Jeanclaude Juncker in brussels. To allow a twoyear transitional period. However relations with what has been promised to be a key postbrexit trading partner took a turn for the worse. U. S. President donald trump lashed out at theresa may after her Office Review tim for tweeted,g he theresa, dont focus on me, focus on the radical islamist terrorism didnt place in the net the kingdom. Meanwhile, she said london is extremely wellplaced to win aramcos plan listing. She competes against donald trump for the initial share sales of the Worlds Largest crude producer. Trump earlier this month tweeted his hope that the saudis would hope the u. S. Exchange for lobbying king salman on a phone call. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. I am nejra cehic. This is bloomberg. Francine we are getting some figures out of manufacturing here in the u. K. This is the month of november and it is much better than expected. Looking at the breakdown but the pmi rising to 58. 2. We were expecting 56. 5 figures. It is a most two points higher. If you look at some of the swings on the pound, i think how does up a touch. Thent to go back one of charts we have been using and this is euro pound. This is the one that is most interesting on the term. We were on a trend with such parity. We havent been there yet. I havent talked about parity for quite some time. Politicianss and have been more a beat about the chances of a breakthrough in next weeks brexit talks. The difficult issue of the irish border has continued to be a thorn in the side of negotiators. I was for minister says based on the block but the Democratic Unionists have threatened to withdraw their support for theresa mays government if she fails to back their position. Dara, i know you are caught phone is very closely. Youre at a working breakfast where the minister is also there. What can you tell us about the next up forward . Isa what we would see fairly intensive work going on between the two sides. [indiscernible] wording wills, any not be acceptable to the belfast, that was the impression yesterday. Would called out theresa mays government. We did see significant intervention last night. Nigel said, just come down here. Everybody just is to calm down. Everybody just needs to calm down. What happens if there is no agreement . Dara dublin is not focusing so much a monday but there might be a deal by the end of next week. They dont see monday is a hard deadline. By the end of next week, we need to see a kind of deal. [indiscernible] more likely they come back in january february and have another go. Right now, we are at an uncertain point. Francine thank you so much. Bloombergs editor joins us here. Also joining us is david durlacher. Thank you so much for joining us. Dup is doing what over the weekend . Are they putting more pressure on theresa may . How much pressure are they putting on the u. K. Government . Of their said very clearly that it theresa may caves in to dublin, they will withdraw their support. She needs those lawmakers to legislate in london. At the beginning of this week, we were all quite upbeat that the choreography was falling into place for some kind of deal to be reached. Lunch. Younger having u. K. Officials saying that is where the hope to have some side of just some kind of joint statement. The irish dont consider monday a deadline. That is a part of the problem isause the eu that monday the deadline. The disagreement has to go through the european bureaucratic process all the traps to be ready to the declaration to be made in december. Francine theresa may need to deal. If she doesnt have a deal but she has significant press, will that be enough . Emma whether that can be an agreement on the irish issues that the eu would consider progress. The irish are very clear that there hasnt been six progress just hasnt been significant progress. Both sides have rejected the dup said that was redline. Their raison detre is to keep Northern Ireland as an integral part of the u. K. Mainland britain is a total redline. It is interesting that the proposal that was thrown out there is not enough. Francine david, you have been briefed. D look at this closely . You look at the minutia of the politics to figure out what it means for julius baer. David we look at the politics. The Political Landscape determines how the economic landscape will ultimately play. Brexit is not an issue for us. In an age where banks are talking about restructuring or, we are talking about investment in the u. K. From thenefiting strength of the Irish Economy in seeing our commitments to dublin and opportunity to go forward. Francine you have done quite a lot of what you are hiring it as well in the u. K. But what if it all goes wrong daca does it matter to you all goes wrong . Does it matter to you . David we are not hiring here because it is cheaper. A good headcount around the world provides better value. What we can say is the domestic opportunity in the u. K. Is robust. That robust opportunity last through the brexit process. We have seen in the north more millionaires being created than anywhere else within the u. K. That 10 increase is something that we have to note and say that we should longterm invest in. Francine does the Prime Minister always get a little bit stressed when she is in brussels . She is having lunch with Jeanclaude Juncker on monday. How is she going to worry about leaks . Emma particularly when she is dealing with younger dealing with younger juncker. Very embarrassing. It has an impact on the left. The second time, there was another leak but a prime suspect which is junckers righthand man denied it was him. We will see. The questioners whether lunch it is as and whether constructive if both sides were hoping for. Francine how much is your hope that Angela Merkel will come back strong . Emma that is always been u. K. s hope that germany will write to the rescue. Ride to the rescue. The eu 27 has been incredibly united. They are going to follow barniers lead. He is the one who decides who puts the case whether they should be syndicate progress significant progress. The lunch is monday and the key meeting on wednesday when the ambassadors will sit down and start you dropped what the summit just start to draft with the summit should say. The u. K. Has always try to go around the commission, but the eu has been clear on that that barney is the man. Francine david, you were mentioning the north. Is brexit and opportunity to bridge the north and south divide . We saw a glimpse of it in the budget. Can Society Start from scratch and decide what kind of fabric they want . David the weakness of sterling means the excellent factor is benefiting. We have seen a booming of those businesses. A lot of that business accounts for about 25 or so of the case output. Or so of the uks output. Exitis not a shortterm consideration. Investment is drawn into trying to drive up entrepreneur him. Entrepreneurism. Most of our clients are to be nor people set up dont businesses. Fintech are it things we dont cover on a daytoday basis . David we see a lot of fintech and also daytoday materials. We also see growth in the professional services industry. Cheshire is now the second successive placed on a home outside of london. Francine amaq, what is Jeremy Corbyn doing right now . Emma, what is Jeremy Corbyn doing right now . Suggest that it is not a faroff possibility. Conservative lawmakers have it in mind that they think about what is good to happen in their body, they have in mind that Jeremy Corbyn could be the next Prime Minister. The thing about Morgan Stanley that is interesting, it is made his fans love the fact that hes got to take the bankers. That was a very astute thing to do. Francine how do you react to that . David we do not have lobbyists. We have noted those comments and clearly it is one of the larger areas that our clients raise for us. It is worth remembering and context. Context, the economy grew. While there will always be a concern around things like capital controls, inevitably, we still see that to be the longterm investment. Francine david and amaq, thank you so much. David and emma, thank you so much. Up next, as hurdles continue to be drawn up in brexit negotiations, how are businesses coping with the uncertainty echo we will just uncertainty . We will discuss that. This is bloomberg. Francine welcome to our weekly brexit show. I am Francine Lacqua. Uncertainty, that is what britons vote to leave the European Union has brought. They have been fighting amongst itself. Negotiations have it constant stumbling blocks. That is before talks had moved on to key issue of trade. Julius baer is a Swiss Private Bank which seems to be shrugging belfast. Small team in how do they feel about the future when the u. K. Leaves the bloc . David durlacher is still with us. Thank you for sticking around. The hope that you have that there is a divide between the south and north will be breached. This is a simple pound index chart. My question to you, if you service a lot of clients come are they seeing a lot of investments coming from abroad because of the cheaper pound . David certainly the pound is cheaper. Most of our clients are globally exposed. They dont just look to the key market, they are looking at where there is global opportunity. That is the competition we are more talking about. Just that is the conversation we are more talking about. That is the conversation we are more talking about. Francine in the cities we were mentioning . Mikio to have a global up david do have a global understanding of the markets, clients to talk to us about whether they are expensive. Full valuations are high in some markets like the u. S. , we still see opportunity on a relative basis. On an absolute basis, it is less so. We see the strong growth of u. S. Economy. Toward those midterm elections next year, we do expect there to be a continuing easing of u. S. Fiscal policy. Thats a be beneficial for investments going into the u. S. We see upper we see other opportunities like the Global Energy sector. Francine what is going on with energy you go it seems like they are what is going on with energy . Seems like they are disrupted. David it is on the expiration side. The sector as a whole is cheap. On a net basis test on an absolute races, if you compare that with the price of oil, the still remains an opportunity for investors. Francine what are the common questions that go how many in that what are the common questions . How many investors do you meet a day . David our clients are ultraHigh Net Worth. We do business with people with more than 3 billion just 3 million 3 million investable assets. People who run businesses around the u. K. Francine what did they ask of you . David they are interested in Political Landscape in the rise in some of these cryptocurrencies like bitcoin and whether there is a bubble. Francine year that changes at the top you have had changed at the top. They dont ask about your see you leaving . David i havent had a zynga client who is asked. I havent had a single client who has asked. Knows this business and he knows the drivers. Hafer is more than one individual. Executive management has been in place for long time. David when you look at a lot of your hide net worth individuals, High Net Worth individuals, is your bridge to help them with liquid assets . A lot of it is tied up in real estate. David a lot of our work is looking at investment deals, but an individual is more than just a clear balance sheet. They need to look at a broader planning. Whether that is inheritance or property purposes of providing liquidity for specific fees or expectations for the future. Francine david, thank you so much. Ofid durlacher, the ceo julius baer international. Next we will hear from the former give the governor of the bank of england about how the future brings to the welfare state after brexit. This is bloomberg. Francine welcome to our weekly exit show. I am Francine Lacqua. Its bs book to be former Deputy Governor of the bank of england about the welfare state in the u. K. First of all, what is your premise that inequality is bad for society and that we need to bring it back closer if were going to have better cohesion . Absolutely. Many of the divisions we see in society are driven by the fact that the welfare state that we have today isnt fit for the modern economy. It is under huge pressure because aging, technology, globalization and modernization and what it is doing to people to contribute to the buffer state and the buffer states ability to help people and just. Francine what does automation bring . Vary but most people think automation will affect about 50 of jobs in the next decade. The big difference about this new wave of automation is that it is not going to affect manufacturing or truck drivers, it is going to affect the professions. Things like lawyers, doctors, accountants. We have to think about the future in a different way. That which is repetitive will be in the jobs that will remain will require complementry human skills. Everything is repetitive and mechanical is likely to be automated. Francine in the next 10 to 15 years echo how do you train next 10 to 15 years . Have you train how do you train the people to go into the jobs that go to going to the jobs . Arent really we have done a very poor job of dealing with the special consequences of . Lobalization in recent decades we know this change is coming . There are things we can do. Countries like denmark and the netherlands have a way of organizing the labor market that they call flex security whereby ands easy for firms to hire fire workers, but if they lose their jobs, they get very generous social insurance. As the invest serious money and helping workers retrain. There is an interesting model francine we are getting some breaking news, this is on ireland. This is what i am seeing. First of all, our personal the ground, dara doyle is following this closely. What they are saying, theyre not expecting it will be an election anytime soon. We need to keep a very close eye on this and see whether this will spill over into the brexit talks and whether theresa may can come out clinching a deal. Bloomberg surveillance continue to the next hour. Tom keene joins me. Francine another is snared in the u. S. In tax reform. Do republicans have enough senators on board . Theresa may seal the deal on brexit . And the white house could replace the secretary of state Rex Tillerson with mike pompeo. That is ahead this hour. Good morning. This is bloomberg surveillance. I am Francine Lacqua in london. Tom keene is in new york. A lot of talk is about tax reform, but i am also talking about lots about u. K. Manufacturing growing up the fastest pace. Stillhe underlying story the good economies. The president in the United States taking a lot of credit for that. This friday. Docket francine lets get straight to the bloomberg first word news. An onyxthere has been like a turn in the Senate Debate over tax cuts. Republican leaders are scrambling to save the bill. Mitch mcconnell sent to lawmakers home last night. He and his colleagues are looking for ways to offset the cost of the measure. A small group of republicans is demanding the tax cuts not drive up the nations debt. A final vote is still expected today. And casualty in the war of words between donald trump and british Prime Minister theresa may. U. S. Officials have dropped plans for the president s visit to the u. K. There were tentative plans for the president to go to london next month for the opening of the new u. S. Embassy. President fore retreating videos for the far right. Elevated stock prices are more for a more of a worry then a flattening yield curve says the feds nester. The gap between twoyear and 10 year yields may be assigned the economies growing weaker. The price of oil is rising today after opec agreed keep production curves in place until the end of next year. Libya and nigeria have joined the agreement. They have been exempted from the cutbacks so far. Opec and allies, like russia, are trying to reduce global stockpiles to their fiveyear average. We have also agreed, although this is a scheduled event, to hold another mysterious meeting, which will give us another chance ministerial meeting, which will give us another chance to assess the market situation. It will also give us the opportunity to assess what needs to be done, based on the Market Conditions, faced on based on the progress. Taylor oil prices are up more than 20 since september. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thanks. Lets get to the data. It is actually a quiet friday. Importantncine has corporate news. A little pullback with a weaker dollar. A stronger euro. And i are gasping this morning. There is the record dow. The president taking full credit. 272. To 24 we are distant from the bond. Sterling was up when i walked in the door. Francine was there a Christmas Party i was not invited to . Tom there was. Francine i am extremely jealous. We will have to do the same here in the u. K. The stocks is dropping. I do not know if it follows the lackluster movement in asia. Looking at the euro, gaining. We did have manufacturing gator out in the u. K. And the eurozone, underscore the regions economic resilience. And i had to put oil. Ex gaining a touchback on on the back of the opecrussia agreement. Pleasure to talk yesterday with here is the chart we talk about. Here is the ugly deficits. Some 30, 40 years ago. The idea of deficit to gdp. The glimmer of United Kingdomlike surplus on their president clinton under president clinton. All that matters here in washington with the tax cuts is the idea of further deficits and deficits to gdp. This is a clear, present, and truly unknown danger. Francine i want to show my chart. It is a mirror of your chart. Just a lot more colors. We will move on to brexit. Getting quite a lot of news from ireland. We know the foreign minister is talking at the moment. Tom it is the colors of barcelona, right . The Barcelona Football Team chart. Francine yeah, a little bit. We need to talk about ireland. The Irish Foreign minister has said that the order is something that cannot be fudged. This is what the latest he says there is no use for veto. We will not be steamrolled on the border. This will be grandstanding from some people. What is happening is the dup want one thing, and they say you cannot give in to what the irish want through the iris is also pushing back against theresa may. Plus, there is this deadline on monday. , Anne Richards, M G Investments, and Robin Niblett, chatham house. A very simple question what do you worry most, robin . Brexit and how it is going or the tax and how those negotiations are going . Robin i am concerned about somet. If you do not get immediate breakthroughs in december, the december 14, 15 summit, there is not enough time for the rest of the year to complete negotiations, not just on the withdrawal agreement, and a lot of allow a framework for a future deal. All to be done by october of for year, to leave time ratification by european parliament, the British Parliament. You have to get through december. The Irish Government knows that this is their moment of maximum influence. They managed to get the irish border, one of the three requirements before the next stage. The first two, money, and you e. U. Citizens rights. He is doing the most he can. Francine the concern is ireland is saying we are not treating monday as the deadline. E. U. Is treating monday as the deadline. Robin as far as the e. U. , you do not want to let one of your members look like they are being crunched in a bilateral negotiation, even though ireland is not one of the biggest economies. Each individual country has its moment of maximum leverage now. There may be a way of fudging it, to say there has been enough progress made on the money and substance to start the decisions on the importation period. But the free trade deal gets pushed off until march. Have you every time we on, it is talking about brexit. It reminds me of the day there the word came, where we did not know what would happen next did we have come a long way. Markets have are chill at the moment. How do they deal with the irish question . Anne this is not a new question. It is just a new form of what is a very old historical challenge. For theation we are in u. K. Government is about the most difficult it could be. The u. K. Government, after the general election, is deeply reliant on the dup, the Northern Irish party, which is the most sensitive about what compromise can be. It is very difficult right now to see, as a black and white decision, is there is anything that can satisfy both the dup and the Irish Government. One hopes common sense prevails, and we either are able to push this into the next phase or someone can see compromise. Thatnot believe negotiations will founder on this one key issue, given how much progress has been made. I think there will be some sort of fudge or creating a different space for this discussion, but i think what has been impressive from the e. U. 27 side is how tightly the e. U. Has managed to maintain a common front in all of these issues. It has not allowed itself to be picked off by anyone country to date. Tom this is wonderful, having both of you with us. A gentleman with a degree in modern linkages, and Anne Richards with a degree in electrical engineering, which is twisted enough to make a good hour of entertainment. Help Robin Niblett with the slew globalization. In electrical engineering, does not only getting from point a to point b, but how fast and how you get there. And Robin Nibletts world, do we understand the slew rates, the speed of information, to get transference of data like years ago . Anne it is interesting. In some ways, i think we got a means of data. There is almost a volume of data out there the extent of the political noise out there it feels to me sometimes markets do not worry so much about it anymore, because frankly, it changes so quickly. This volume and flow is so extreme. I kind of thing the markets are reacting less and less to news, sibley because the volume of it is so great. Tom robin, lets go to your side, the language of control. Elites and institutions like to be in control. Moment,acophony of the the commons going against the president of the United States, the president of china going after former president s as well, how are we doing in the Language Department . Robin i am glad you got me on my french and german. That was my undergraduate degree, though. Degrees later on. One quick point the irony is maybe markets spend less and less time, the loaded with information. But politics, they are getting gummed up in the data. They are paralyzed by this bead of information that comes to them. Because they tried to address it occasion. It is ironic that the brexit campaign, and a lot of campaigns around the world, have been control. Ing back america first, and the big pushes in france and elsewhere, but what we are discovering his sovereignty is something that does not really reside at home to any great degree. The governments, having said fed the idea of control back to their publics, will be in for a rude shock when the publics realize they do not have it. A 10 chance,ar tom sometimes a 20 chance that brexit will not have it. Is it a possibly the that we fudge it so much that we have the same deal right now with the e. U. . Robin the possibility of a it has increased after the snap election. You have a parliament that, in a way, is not authorized and does not fully believe in the kind of deal that will be given to it. That is still a 20 . My view is britain is out. It will not go back on this, not least because the e. U. Has moved on. They spend the whole time knocking us back, and we would still be a 5050 country. Francine cant go back. We will be back with Anne Richards M G Investments and Robin Niblett of chatham house. Coming up later this hour on bloomberg surveillance, we speak with the u. S. Ambassador to the u. K. , Woody Johnson. 5 40 a. M. In new york. This is bloomberg. Francine this is bloomberg surveillance. Getting ready for the weekend, thejusting his bowtie, tom, republican tax bill has hit a roadblock. The senate has suspended voting on the bill, though it is set to restart at 11 00 a. M. Local time. To replaces a plan Rex Tillerson with mike pompeo, according to three of ministration officials. What is priced in when you look at markets . Are they expecting the tax bill or, if we get something substantive, will it be a surprise . Anne i think the tax bill is pretty priced in. I think the broader thing driving market is simply we have anden close to growth, companies are generally finding that as a Good Environment to do business in. The fundamentals underpinning the market have continued to follow through and looks pretty fair. Is a political catalyst of this, and i would say it is a must Democracy Worldwide we are seeing it in the tax legislation. Are the elites still in charge . Inis all we are seeing washington the fear of the ballot box in 2018 and 2020 . Elitesi think political are on the back foot, but clinical elites have to remain political elites. To do that, they have to get reelected. Standpoint,ublican my reading is if you do not get this done, what are you going to get done, to give you a runup to the midterms . Even i, as a political analyst, price in some type of deal. That said, this debt level is boring. I can see the tailwinds that are positive in european growth. Even china, stabilizing at a very gradual correct dropped off. The United States, we are relying on the u. S. Market staying strong. Tom lets circle back to where we were with joe stiglitz earlier this week. Are we in a gilded age, weather in new york, london, or dubai whether in new york, london, or dubai . Robin i think plutocracys exist outside the west. Whether in turkey, the middle east, china, you have an effort to post strong unified leadership in countries going through rocky periods. Thereof us who already that 50 or 100 years ago and are in this developed economy phase, who benefit so much from globalization, but now realize we do not get ourselves fit in the next phase when all the other countries came into the system, our political structures are struggling. It will take five to 10 years. Francine if Rex Tillerson is pushed out, what does it tell us . Us that, atlls least on the executive branch, the u. S. Feels like a plutocracy. Because you have a person in and changes his leadership and away we have not seen in western leadership in a very long time. What it tells us is form policy in washington is still run from the white house, rather than the state department. I do not think it would mark any particular big france. Difference. There is a sense that there is a much tighter line of convergence andeen the nfc, john kelly, the defense department. So i think it would be healthy. Tom next week, john adams will join us on his recent visit with king george the third, and well see about the idea of the u. S. Traveling to london to get royal and Prime Minister ariel ministerial elcome. Welcome. Oil, stay with us. This is bloomberg. In bloomberg surveillance london, in new york. Let me show you an equity chart. The Dow Jones Industrial market the depression on the left side. That line is spurious, as Anne Richards would say. Lets get a closeup of 2000. We are doing logarithms for Anne Richards. Someone medicaid robin, someone medicate robin, please. You can see we are nowhere near the average. Anne richards, are you managing for exuberance . Thing is bizarre despite the fact when you put up charts like that, you think exuberance is there. The chart you show does not adjust for inflation, does not adjust for all of the things going on. When you actually look at equities relative to, for example, the real yield on bonds , and look at those charts over along time period, you get very different view of how exuberant the market looks. We know in the last 10 years, we have been in this extraordinary period, where money has been remarkably cheap because of quantitative easing. Nobodys really sure how that will end, when it does and. It end. It probably does not end with a cliff edge. Against the that drop of generalized, synchronized Global Growth with lots of attraction coming, not exuberantly but at a steady level in japan, europe, and lots of policy mechanisms that can support that, it does not feel to me we are in the state of absolute exuberance. The u. S. Perhaps a little more so than other areas, but globally, we had a decent underpinning. Francine thank you. You need to adjust for inflation, otherwise we get a our charts. For more information, we will be speaking with the u. S. Ambassador to the u. K. , talking about the tax good also, take of Bloomberg Businessweek. we look at the people who defined Global Business in 2017. Tom and i were talking to the editor yesterday. We have quite a few people we talked about but you may not know enough about. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. We have been talking a lot about bitcoin. I know you have a great chart, but it has been a wild week for bitcoin, slicing through 11,000 but war plunging 1000. Plunging 1000. Blankfein remain skeptical on bitcoin. He told alix steel he does consider the Digital Currency to be a sore value. Something that moves up and down 24 hours a day does not feel like a currency. Francine lets get back to Anne Richards, ceo of M G Investments of Robin Niblett, director chatham house. First of all, can you afford to speed spit out the coin . Anne there are people who use the coin for all bitcoin for all sorts of different reasons. You cannot say this is a store value when the value moves around as much as it does. It is clear there are some reasons while some People Choose to use peertopeer currency, or exchange, which is effectively what you may be talking about in bitcoin. There may be legitimate reasons. There may be illegitimate reasons to keep transactions away from prying tax authorities. What it is not is something you can use in replace of a dollar or sterling or euro, because it does not have the underpinning and the backing of government oversight issuance. Some of that, certainly on the oversight, will come, because it has to. Block Chain Technology that sits underneath it is a very powerful technology. People have started to develop that technology for other purposes. What is going on in the pricing of bitcoin is definitely mania. Francine do you think it will get regulated . And if it does, will there be an asset you look back at . Anne it is possible way down the line it could be something you trade, but it is an instrument, not an asset. That is the way to look at it. It is an instrument in the way another under but you can trade in volatility. There is not an underlying asset in volatility itself. We are years away from that. What is clear is regulation, at some stage, must come to this market. People need to be protected, people playing in this market that have no idea what they are doing. Tom this is the intraday chart. Up we go with the search surge. You do not get the moonshot feel. Huge volatility. What i suggest is you get a vector like of this. I love what Dennis Gartman said, taking a direct shot at bloomberg surveillance bitcoin this, and bitcoin that. Yes, we are doing more bitcoin this and bitcoin that. The focus seems to be on the excesses of bitcoin in china. Financiale a set of instability for the chinese leadership . Robin youre going little bit beyond my ken. My instinct would be to say part of this rise in bitcoin is to do with the fact that we have some large anticorruption drives in key markets across the world. China has been going on for a a while. You have saudi arabia as well. Could knows what may come who in theset may come tightly controlled government. So some people may be looking to hide money, to be frank. So i am wondering how much of my world is spilling over into the bitcoin space. If it is, from the chinese standpoint, having impost control on the shadow banking side, it will worry them that a new risk has come a long that they will also have to tame. Tom this goes to my book of the year last year, the idea of sweden leading the way, and india as well. Do you assume that if it is a new cash alternative, at some point, bitcoin collapses . Is it almost a barter medium . Feels for my taste, it like a barter media. I am a believer that they are the best thing you got in terms of preserving order. Whether that order is to alliances or markets or money, people are looking for some orities authority, which tom right now, your friday first yard first word news. Taylor a surprising setback in republicans plans to pass the tax bill. Mitch mcconnell sent lawmakers home last night after the collapse of a key compromise. Several senators are demanding that the tax bill not drive up the nations debt. A final vote is still expected today. The Senate Ethics committee has opened up an inquiry into the allegations of Sexual Misconduct from al franken. He asked for the inquiry himself. He has given no signs he plans to resign. There will be a changing of the guard in japan. Ember akihito will advocate in 2019 and turned the throne over to his son. Akihito will be 85 years old then. He is the son of emperor hirohito, who guided japan through world war ii. Japans monarchy has no political power. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you. It is an issue which was an issue before. And then there was after, the sort of, kind of, almost termination of the secretary of state. Truly a historic day for tebow messi. There was a set of speculations that secretary tillerson is out and perhaps preparations for vista pompeo to mr. Pompeo to take over the state and negotiations with north korea. We are here with Anne Richards and Robin Niblett, leading mission at chatham house. In an open question to you, robin, every article tells me the ballistics of this latest missile are totally different than before. Will leadicks ballistics of the Deval Patrick response be different this time . Ballistics of the diplomatic response be different . How much will be given they netflix is under threat, allies thelistics Trump Administration the Trump Administration was warned by barack obama that this was your iran. I think for the Trump Administration, this is their iran they cannot allow the flow and ballistics of diplomacy to continue in their area. Phrase very good some people tell us we should accept and deter. I think that is an except double. That leads you to what can the United States do . To rely is the u. S. Has on china for economic and sherman instruments. Will lem is china francine are you worried that north korea will become a Nuclear Power house . Robin i do not know about powerhouse, but i think china could live with a nuclear north korea. What it worries about is what america will do about it. The big worry about north korea as a Nuclear Power is the risk that sanctions get tighter. The risk of proliferation rise. Then america would have to act. Francine 1wood markets take notice of this . Do they not know how to trade the risk of something turning ugly in this conflict, or do they stay cool because it is difficult to see what kind of the promise he comes next . Is really interesting. I was in asia a couple weeks ago. One of the topics is how are people reacting to what is going on in north korea. There is a certain sense we have been here so many times. One thing changing as there is less and less confidence that the u. S. Will be the driver of the solution. There is a real sense that asia itself is taking much more leadership on the global stage now. That is china. It is also japan. It is also south korea. Solutionultimately, a to north korea, whatever that may be, is more likely to be led by and let out of an asian political environment then saying, actually, it is up to the u. S. To sort this out. Under mr. Trump the u. S. Has been stepping back from its traditional role as global policeman. Has made comments that it is ready to step up to that role. Francine that brings us to our important interview with ambassador johnson in the next hour, which is how would the president be greeted within the United Kingdom right now . We know that Woodrow Wilson was greeted with a certain diffidence near world war i. How would the president be greeted by the queen, by Prime Minister may, and by the people of the United Kingdom right now . Robin you have three categories of groups there. The president will be greeted very politely by the queen, would be greeted soberly but politely by the Prime Minister, and would be eggs and tomatoes thrown by the british people. Thats where were at now. The politics, ministers have tried to play this down, and saying the special relationship goes beyond the president. The president of presents the presidency of the United States, and therefore, we must not over personalize it, no matter how much he personalizes it. That is the mood in london. I do not think it is the mood beyond london. I feel london is an outlier. The racial mix here is more diverse. I think london is particularly hot about it. I do not think he would necessarily get as much of a negative part in other parts of the net kingdom, where people are more skeptical of politicians in general. This is not good. If reports out, out that the u. S. Admission asian has decided to push off the visit a little longer, which has been the second time this is done, i think the president will not come here until he thinks it is safer. He needs a macrontype visit. Francine we will ask president macron if he will have him in the next few months. Coming up next on bloomberg surveillance, we speak with the u. S. Ambassador to the u. K. He is Woody Johnson. This is bloomberg. Francine good morning. This is bloomberg surveillance. In august of this year, the United States president appointed Woody Johnson u. S. Ambassador to the United Kingdom. Uses firstjohnson speech to highlight the longstanding ties between the u. S. And written. He emphasized they would not be affected by brexit. He is an owner of the new york jets. I am joined by John Micklethwait in welcoming ambassador johnson. The digs are good. Quite fun. Have you had a couple of awkward last days because of tweets . I do not know how the entente between the u. S. And the u. K. Is right now. Really. Nson not the mission is clear for me. The president sent me over for security and prosperity. Security you cannot really have prosperity unless you have security. Security is very important to the president , and it is very important to me, attacking americans both in the embassy and in and around the u. K. Protecting americans both in the embassy and in and around the u. K. Is my mission. Francine do you like it here . Amb. Johnson yes. The u. K. Is great. The weather has been malign, irrationally. The weather is actually must better than where i come from. It even snowed yesterday. John to push you back on the spans watching the u. S. , it is very rare to get so say mps all lining up to this is a terrible thing to do on the tweet. You have Prime Minister may coming out as well. What is the way to repair that . And how much damage do you think has been done . Amb. Johnson i know the president the Prime Minister thethe first visitor to u. S. After the inauguration of the president. The president and Prime Minister have a very good relationship. I know the president admires and respects the Prime Minister greatly. If i look down the road, my job and the president s job is project americans. Protect americans. He will do that the best he can. Absolutely there will be things that happen. But the intent is genuine. John and in terms of the next days, will there be any kind of diplomatic side to this at all . Amb. Johnson i think, if we concentrate on the job at hand, and really focus on that, take our special relationship with it is centuries old. It is based on trust. Trust is something you earn over a long period of time. I think trust is 100 there. We will pass these things and get onto our main job, and leadership in the world. John one of the main areas is brexit. Attendingf those complications, there is a lot of talk about may be a u. S. U. K. Trade deal. Has that begun as part of your brief at all . , butjohnson not a deal discussions. There are groups coming over that i have met in washington, met over here, looking at their parameters, trying to way out out, looking at the environment, what it will look like to put a deal in place, if and when that occurs. Francine have you spoken to the president in the last couple of days . Has he given any indication what he will do when he will come to the u. K. . Amb. Johnson not in the last couple of days. The clean in the queen invited him. There has been no date set. Francine it has been a kind of couple of days in parliament, talking about the president. Amb. Johnson i think the president is excited to come over here and to do couple of dn parliament, talking about the that. He would be very excited to do it. We would obviously coordinate with them. It is a big move. When we get the details, we will pass it on to bloomberg. Francine thank you. When you talk about security, how is the intelligence sharing . We had a little bit of it blip , brussels, nato have things gone back on track . Amb. Johnson intelligence sharing and cooperation is the highest our relationship here is the best in the world. Our relationship, our capability , both in defense and security, all of your organizations and ours, are coordinating. In each ofs embedded hours, and we work extremely well together, once again based on trust. Intelligence and counterintelligence people really respect what you are doing over here. John do you worry about the cuts people on the side of the atlantic are talking about . Heard from several american generals, worries about that . Amb. Johnson i am not worried about it. We are worried about the u. S. , and we have increased our budget substantially. Because we recognize the capacity, and it is an ever more dangerous world now. You havecapability capability, and you have the job at hand. I always think it is better to be over prepared than underprepared carrier that is my general rule, going through life. The British Parliament will have to sort through those and those priorities. It will be difficult has so far, the president left out the british he has criticized the e. U. And nato for not spending enough. If the british join that list, without the, problem . ,mb. Johnson i do not know hypothetically, what would be the outcome of that. Is part of a deal with nato there was an agreement to spend a certain amount. I think the president is just you need colleagues to sign on and do their job. We will try to do our job. Francine can Rex Tillerson continue to do his job . I know it is a little unfair to ask you, but you are the closest we have to understanding what is going on. [laughter] amb. Johnson thats ok. It difficult for the secretary of state to do his job right now . Amb. Johnson Rex Tillerson, the secretary of state, was over here. We had a lot of meetings with him. I thought he handled himself extremely well. That the Prime Minister, met Boris Johnson and others. Impressed with how he handled himself. The information he had, the opinions he shared. You one let me ask generic question. Tom briefed me on the nfl and things like that. I am not familiar with sports. John i am more familiar than you. Francine that is not very difficult. What is the most surprising thing you have had once you got this job . You had brexit, dealing with the president you are really in these big in the thick of it. Amb. Johnson the most interesting aspect of the people in the embassy itself. I did not really know what to expect, because i did not bring anybody over with me. I came in, met them all for the first time. Meeting state department people, people who have worked their lives doing this kind of thing, it is very impressive. We have both americans and we hire local people. The local people have this long memory. 40 pluse been here years. Very impressive in terms of what the visasee , doing and passports and all of that area that long institutional memory is a very important. Francine i think tom keene wants to join in with a sports question. Tom i will get to the sports question in a moment. You are johnson of johnson johnson. We are all aware of your products. You are a cardcarrying member of the donor class. From what you observe, with the tax bill in washington, is that legislation nothing more than a bill for the donor class, with the hope of trickledown economics . Amb. Johnson [laughter] no. Absolutely not. I havel, i think not talked to my tax accountant lately but it looks like my taxes will go up ready dramatically. Go up pretty dramatically. I think of this bill will get the economy going and competitive, probably faster than anything else we could do. Lowering taxes and putting us on equal footing for the rest of the world means that jobs and investment will come back to the u. S. In huge amounts. That will stimulate the economy with better jobs, more jobs, and greater prosperity for everybody. John did you expect, on the tax there to beme, for more of this . Infrastructureof , other things. Are you happy with the program so far . Amb. Johnson i am. What i gather, on a legislative houses, is you have to focus. The more things you put in, it makes it more difficult. Infrastructure, i know, the president will get to. Step linear it in a fashion. Hopefully, we will get through this bill. It will go through. It will stimulate the economy dramatically. Then, we will get the infrastructure. Francine ambassador, thank you so much. We never spoke about sports. We have to make sure the investment comes back. By the time you come back, i will know everything there is to know about the nfl. Our residentwait, sports expert which we also did not get to talk about sports. It was a fun hour. Coming up, eli manning will join us. Will eli manning wear new york jets green . 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. Tom this morning, a debate resumes. We thought it would be a vote, it is not a vote. 11 00 a. M. , Senate Republicans go in search of a plan, and a plan. Senator mccain climbs aboard the tax cut bandwagon, the tires fall off. This hour, on the marginal opec player, the United States of america, we have Edward Morris of citigroup. It will be an original secretary of state, we consider tillerson and pompeo. This is bloomberg surveillance , live from our headquarters in new york and london. Francine lacqua is with us. Did you survive the first week in the new building . Francine we survived and we also thrived. It has been a fun week looking at bitcoin. Thinkhe new studio, i after the first week we have a clearer picture of what comes for 2018. Tom giants of economic and finance with us. In this hour, Simon Kennedy of bloomberg news. Here is taylor riggs. Taylor there has been an unexpected turn in the Senate Debate over tax cuts, and Republican Leaders are scrambling to save the bill. Mitch mcconnell sent lawmakers home last night. They are looking for ways to offset the cost of the measure. A small group of republicans is demanding it not drive up the nations tax debt. There appears to be a casualty in the war of words between President Trump and theresa may. Droppedicials have plans for the president s visit to the u. K. There were tentative plans for him to go to london next month for the opening of the new london embassy. Trump reach weeding videos from a controversial group. Loretta mester says she tells bloomberg that both are reasons for continued Interest Rate hikes. Analysts have said the narrowing gap between the twoyear and 10 year yield may be assigned the economy is growing weaker. The price of oil is rising today after opec kept production curbs in place until the end of next year. Libya and nigeria have joined the agreement. They have been exempted from the cutbacks. Russia are trying to reduce global stockpiles to their fiveyear average. We have also agreed, although this is a scheduled event, to hold another ministerial meeting in june this year, which will give us another chance to get together in a large group of countries and assess the market situation, and also give us an elsetunity to assess what needs to be done, if anything, based on the Market Conditions and the progress to rebalancing. Taylor oil prices are up more than 20 since september. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you so much. Lets get to the data. Spit spot, as mary poppins would say. Dow 96. 14, the the euro churn, and there is the opec price of american oil. The vix elevated, 11. 63. How can you have a vix at 11. 63 and the dow at 24,272 . Francine we have some pretty Strong Manufacturing data that seems to be underscoring the e. U. s economic resilience. If you look at european stocks, they are dropping. It is the first day of december. Dollars steady, treasuries gaining. A lot of focus is on the tax reform effort in the u. S. This is my data, my chart. I feel like i am cheating tom keene because it is a very similar chart. It is a fabulous chart, the difference between u. S. Gdp u. S. Debt to gdp, and the corporate taxes. This goes back to the angst we have been seeing. The white line, i will push it out for our radio listeners. Theal debt and this effect for gdp. Tom it is a deficit, but a much longer span going back to the 1970s. This is what it is about in washington. There is an understanding we are going in this direction. As douglas will seek and said, do we get to 5, 6, 7 of gdp . Ist we know in washington washington is totally focused on tax reform and tax cuts until they get to eagle seahawks 8 30 sunday night, and they are attention will change. Kevin cirilli joins us this morning. He talks about the level of religion of the deficit hawks. How much is going on among deficit hawks right now . Kevin not much. It was a dramatic display in the senate when Senate Majority leader mcconnell spoke with the senate parliamentarian, who ruled that senator bob corker from tennessee who made the compromise with republicans leadership over the socalled trigger point that would trigger a source of revenue if the tax plan does not ultimately provide cost too much money. That was against the rules. Votes have been suspended until 10 00 or 11 00 this morning. Leader mcconnell sent everybody home. That means that the vote did not happen last night, and lawmakers are waking up this morning with the chance to pass this today or early next week. The trigger point has really picked people like senator corker against senator ted cruz, who feel this would be ultimately a tax increase, the socalled trigger proposal. How this deficit will really matter is coming down to whether or not you believe the tax plan will ultimately spur enough Economic Growth to offset any deficit. Tom you are in insider on this. What are you focused on between now and 11 00 a. M. . The breakfast at the adams hotel . Dropping the kids off at sidwell . Where are the discussions going to happen . Kevin leader mcconnells office and senator bob corker. Here is where the smart observations are going to be. Who are the house of representatives going to pick to put on the Conference Committee . This will ultimately get out of the senate and the question becomes, how will they reconcile it with the house version . Yesterday i interviewed Jeb Hensarling and he said the trigger idea is bad policy. This is going to be a lot of backandforth between the tea party and the likes of senator bob corker. Francine talk to me about Rex Tillerson, what is going on . Kevin there could be a lot of shakeups. Talk about the drama. Yesterday, President Trump standing by secretary of state Rex Tillerson despite a New York Times report he was on his way out to be replaced by mike pompeo. This president values personal relationships and loyalty. Cia director mike pompeo has both to President Trump, and deep ties to capitol hill. He is a former congressman, so he has that relationship working in his favor. The former exxon mobil ceo Rex Tillerson has struggled with this transition inside the swamp. Tom from the swamp, kevin cirilli, our chief swamp correspondent. A student of all of this is eli lake who has written for bloomberg news, particularly on the idea of our policy diplomacy and foreign policy. He joins us by telephone. It is an extraordinary moment. I looked at the drama of the house of commons. How much have we destroyed foggy bottom . How much is the state department a shadow of what it used to be . Eli that is a very good question. Sometimes it can be a bit overstated, but the failure of Rex Tillerson to appoint the midlevel and even very senior diplomat, the assistant secretary level people in the state department, it ultimately i think undermines trumps foreignpolicy agenda, because this stuff is then kind of left to the career bureaucrats in the building, and the Career Foreign Service people who we already know are very much at odds with whatever you can say you think trumps agenda is, which is quite mercurial. Tom are we going to have secretary of state mattis . Will he be running everything . Will we have a secretary of defense and esteemed general, and maybe he can take over treasury as well . Eli no, first of all, these rumors about tillerson leaving early and pompeo leaving cia to come in to take over the state department have been flying around washington since the summer. That is when i began to hear this stuff. I would just say that, i think the New York Times is some of the best reporters in the business and i trust their reporting, so i think there is a white house plan, but none of this happens until the president decides. The president likes to play these kinds of games where he sends message to his cabinet by floating that they may be fired and things like that. I am just saying that, trump still is the one who will decide and he has done this kind of thing before. Francine does that actually make the state department more effective, or does it focus the . Ind is it completely counterproductive . Eli it is extraordinary that in the middle of north korea crisis , that basically the chief diplomat of the United States would be on the cut. Tillerson has been undercut for at least a few months. This kind of stuff is not new. We had a bunch of stories about two months ago when you were hearing that trump is furious with tillerson and feels he is not on the same page, and i would just say that the feeling goes both ways. Rex tillerson has been negotiating a deal with qatar, at a moment when the white house, when they talk about the crisis in the gulf, they say they are in solidarity with saudi arabia and the other gulf kingdoms. There has been a disconnect for some time, so it is not surprising it looks like it is coming to a head. It is ultimately trumps decision to make. I think until he makes that decision, it will still be a maybe instead of a definite. Tom a maybe and a definite. Eli lake, thank you so much, writing for bloomberg view. You can look for the work of Edward Morris not only at all over thet read world. Edward morris will be with us later in the hour, on picking up the pieces after opec in vienna. Stay with us, from london and new york, this is bloomberg. Taylor this is bloomberg surveillance. Lets get the Bloomberg Business flash. The dispute between toshiba and Western Digital may be ending. Would dropital efforts to block toshibas 18 billion sale of its flash memory business. In return, toshiba would agree to continue the two companys joint venture. It would be the biggest acquisition in the tech sector, and broadcom will let be increasing its 105 billion offer to buy qualcomm. The company is waiting until closer to qualcomms Board Meeting in march. Broadcom plans to nominate directors to qualcomms board. Billion air Paul Tudor Jones shaking up his hedge fund after a wave of withdrawals. Are closing their Discretionary Macro Fund and letting investors shift to the main fund, where jones himself will take a larger role. Since june 2015, tudor Center Management has fallen by roughly half to 7 billion. That is your Bloomberg Business flash. Francine senator john mccain gave a boost to markets yesterday by throwing his support behind the senate tax bill. Stocks soared with the dow jones rising more than 1 in more than 72 days. Economists published their 2018 outlooks, proving Global Growth will reach 4 next year. Joining us is Simon Kennedy and Michael Mckee. Thank you for joining us. What does 2018 going to bring . A little bit of the same. The trend is picking up but still concern . Simon everyone is talking about a good 2018. When the past couple of years the forecast where graham, we are looking at strong growth, 4 if you believe goldman and barclays. Starting to see a little pickup in inflation and allowing Central Banks to nurture the recovery and expansion as policy is slightly tightening. Inflation could pick up to the upside, Central Banks could tighten too much, and inflation might not materialized, so there are risks but we enter a new year much more upbeat. Tom Michael Mckee joining us. After his conversation on the council on foreign relations, the whole question is does the emerging markets, International Economics, do they really care about u. S. Economic growth . We are not the u. S. Of 1952. Low we be the u. S. Of 2022 . Michael that is a good question. That list of worries Simon Kennedy just outlined, you could add the words donald trump. For emerging markets and markets around the world, what happens with the u. S. Economy is very important. We are the worlds biggest economy and the biggest trading partner with just about everybody, so if we continue to expand and buy more stuff, it is good for the globe. If we shut off our borders and withdraw from trade agreements, that could hurt some of those countries. Tom from where you sit and i want to make clear, we have our two most experienced bloomberg aneporters on the set arcade at our new building is rumored to be the Simon Kennedy arcade. When i look at what happened yesterday in the house of , isons, from where you sit the United States withdrawing from the International Economy . Simon certainly that is one of the topics of discussion as we end to the new year. Donald trump and the chinese engaged, it was the chinese talking about globalization and economic leadership, and the u. S. Sending the message of america first, which you see coming from the white house thomas suggests that someone loses an america is not and america is not quite the leader it was it once was. Tom you spoke with Loretta Mester. He spoke to the president of the Cleveland Federal Reserve Bank yesterday. Is the fed changing their behavior based on this International Economic cacophony of our president . Michael not at this point. The tax bill has been marking up their growth forecast, at least hers, a tiny bit. They are not expecting a whole lot because it is not particularly a stimulative bill. The u. S. Is at full employment so even if you get tax stimulus, we do not add a lot of jobs because there are not the workers. They are not putting a lot on washington to boost the economy. Tom i want to show you the doublets holt eakin chart Douglas Holtz eakin chart. These hole circles are the holt eakin circles. He was the first one to tell me that the deficit to gdp was going to widen, to say the least. May be most important conversation of the day, except for simon penalty Simon Kennedy and Michael Mckee, Douglas Holtz eakin in the 10 00 hour. Good morning, everyone, this is bloomberg surveillance. Tom and francine from new york and london. Ets talk about bitcoin we have been asking if there is a real future for the cryptocurrency or if we are looking at a bubble that will burst. Included there would be some bill that got passed, but it was not the driver of my argument for why it makes sense for Interest Rates to move up gradually. It was based on the momentum in the underlying economy. Francine joining us now is Edward Robinson, bloombergs fintech correspondent. What is going on . That was Loretta Mester not talking about bitcoin. A lot of people saying it should be out log outlawed. What is your take overall . Is the market just more of the same, which is more volatility . Will increasingly be more questions about transparency in bitcoin, especially when it comes to the big exchanges. The thing that moved bitcoin this week were a currency and a big exchange. Investors want to know, is their money safe in this . How much can they really guarantee that if you trade in and out of these exchanges it is going to work . Infrastructure questions will become increasingly important. Francine that can be resolved by who . Who can answer these questions . Edward the exchanges themselves, because these particular ones are not regulated. Many exchanges choose to be regulated in the United States and europe, but there is a whole number of them offshore. It is up to them to decide. Francine do they talk with one voice . Is there a lobby . Edward no, there is no lobby. Everyone is on their own. We saw bit synnex come out with their statement. Startingrding to to share some information because questions are mounting, but that will be interesting to see develop. Francine do you think they should be talking with one voice . Is it better to be stronger . On the other side, who is the right person to regulate . Edward i think by its nature, the Bitcoin Community cannot. It is decentralized so it is going to be a bit cacophonous. As far as anyone regulating them , that has to be done on a jurisdiction by jurisdiction basis and would fall ultimately to Central Banks. Francine Edward Robinson from bloomberg news. For more bloomberg stories, pick up a special issue of Bloomberg Businessweek. Today we look at the bloomberg 50, the people who defined Global Business in 2017. It is a diverse group. There are people you may have heard about and others, a little bit more unknown. It is a fun read. This is bloomberg. Francine good morning, this is bloomberg surveillance. You can see live pictures that we will put out, from the new building of bloomberg news. Lets get straight to the bloomberg first word news. Setbackthere has been a and the Republican Senate plans to pass the tax bill. The majority leader sent lawmakers home last night after they clashed on a key compromise. They will have to find ways to raise several hundred billion dollars. Senators are demanding the tax bill not drive up the nations debt. A final boat vote is expected. The Senate Ethics committee has opened an investigation into conduct by al franken. He asked for the investigation himself. He has given no signs he plans to resign. There will be a changing of the guard in japan. The emperor will abdicate in 20 and turnover the throne to his son, the crown prince. Oldemperor will be 85 years , and was the son of emperor hero peto. The mono market the monarchy has now political power. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Francine thank you so much. Just getting breaking news out of Martin Schulz, the leader of the spd party in germany. Mr. Schulz saying he told Angela Merkel they cannot promise a grand coalition. This is significant because last friday, it seemed Angela Merkel appeared to have staged one of the greatest political escapes by saying she was ready to talk with Martin Schulz and amongst each other, they would form a coalition. Martin schulz seems to be, i do not know if it is backtracking, but saying there are options to be discussed but he cannot guarantee a grand coalition. Tom as we look at oil in the view forward for 2018, edward job is tomorses day provide help to the american theater. In his spare time, he does some investments. Wonderful to have you with us. What did you learn about the ballet in vienna . Edward it was not playing, so there is not much to learn. Tom there was not much going on . Edward there was not much going on. Tom i want to bring up the chart of the many opecs, because i want you to tell us what this was compared to previous ones. Oil adjusted for inflation and rising incomes worldwide. You and i remember the hatred of opec, the collapse of opec in 1986, persian gulf. A china boom, and down we go, in 1960s equivalencies. Which opec showed up . Edward it is a different opec and cycle. This opec is in a defensive mode and will lose in the long run, because the world has changed are medically since those opecs at other points in time. Tom the cartel is one price. Does saudi set the price . Edward the u. S. Has a much bigger role now than they have done before. The higher the price goes now, and i know it is an old adage, the more there will be oil in the market, and not just u. S. Oil. It is oil coming out of unconventional resources. Costs of producing these are well below the fiscal breakevens of these opec countries. Francine talk to me about demand. Can demand rise significantly to absorb all of the supply that is coming in from the shale producers . Edward there is a hope that Oil Demand Growth will be brisk, but there is a problem on the demand side. Oil effectively is just a Transportation Fuel. Oil demand growth over the last five years is coming from jet fuel, gasoline, and petrochemicals. The lower end of the barrel used by industries is no longer there. It has got a kind of monopoly in the Transportation Fuel mix, and the transportation senator is changing dramatically, not just because of efficiency that because of demographics and preferences of drivers, and they are facing competition from natural gas and electricity. I do not think we will see the man responding the way a lot of opec countries are responding. The intensity of oil demand relative to gdp growth is falling, and it is not falling at a slower rate. It is falling at a much faster rate than anyone thought. Francine will the u. S. Shale producers ever speak with one voice, and do they have an interest in speaking with one voice . Will you ever see an agreement between russia, opec, and the u. S. Shale producers . Edward i doubt it. Shale producers are leading Major Companies that are fearful of Competition Among them will ruin the Profit Margins they generate. These are cockroach companies. They multiply and cannot be killed off and keep coming back with new dna in them. But we are seeing now is the u. S. Playing a much dramatically greater role in price determination than has ever been the case. The u. S. Is the major exporter and importer of oil in the world. The u. S. Is the largest exporter of natural gas liquids and Petroleum Products like gasoline and diesel. It overtook russia a couple years ago. The margin, the u. S. Is also exporting an incremental barrel of oil, so it has become a competitor of opec. Tom take your microeconomics and diplomacy that you learned, and give me a window into weight late next year. What is the determinant, the distinction you are studying now to get you to the end of 2018 . Edward i am looking at two things, u. S. Production growth. The higher the price, the higher the rig count will be because more hedging. Are we at a point where u. S. Production is not going to grow but Million Barrels a day, by 1,400,000 barrels a day . What else is happening on the lng side . We could have in gls turning into propane and butane. In addition to that, i look at russia because i think we are at a major turning point where the commonality of russia and saudi arabia, which has been in the neighborhood of the middle east and the oil market, that colin analogy of interest is starting to the verge. Commonality of interest is starting to diverge. Opec wants to grow output because they can make more money , and there is a lot of reserves in the country. We are seeing a backlash coming from the central bank, which is worried the ruble will appreciate. The rubleoil price correlation is still there, and worrisome for the russian economy, particularly for an economy that is barely seeing positive Economic Growth. Tom we will come back with ed morse. Do not forget, your briefing in the morning coasttocoast and across canada. Bloomberg daybreak, look for that in our new york, boston, san francisco, and washington areas, and also sirius xm. This is bloomberg. London,m new york, from bloomberg surveillance. Good morning, worldwide. Our single best chart with edward morse. I am going to replay this chart on the many opecs that are out there. I want to go to the idea of china, is this boom ascribed to the china boom . That is what everybody says, but in your research, is that true. Edward that is exaggerating and misleading. Like the other big wave of oil price change was opec in its nature, and it is a failure of the petro state. You look at four major participants in opec iran, venezuela,ia, and and go to the wave of the beginning of the oil increase. They were thinking of increasing production by 10 there is 10 Million Barrels a day 10 Million Barrels a day. And they arehet producing half as much. The first failure of the petro state, triggering something remarkable. The unconventional revolution with shale and oil sands and deepwater. Tom mr. Tillerson is working on his resume this morning. That is the news flow. Are there still Rex Tillersons out in big oil, or will there be a new big oil . Edward if you look at mr. Tillersons former firm, they just started producing offshore in deepwater. They are making big waves in brazil. Look at the offshore, and that is where big oil is, and look at the prices. Statoil has a major play in the arctic. 2014 whened it in they thought the breakeven clause would be 65 a barrel. Now the breakeven is 25, and the economic change is dramatic. Francine if you look at what opec announced with russia yesterday, and given what you were telling us about where demand will be in 2018, do you believe opec and russia have to continue cutting production for as long as they go, at an item into infinity . Edward they may have a political reason. I do not think there is an economic reason. More they keep prices above the level it currently is at, the more there will be production that is able to satisfy Global Demand growth. Someday they will have to adjust to a lower price environment, and the longer they put off that day of reckoning, the deeper the price drop will be and the worse off they will be. It is kicking the can down the road to a significant degree, in the hopes that something will happen. The writing on the wall is that what will happen will bite them more than it will bite the producers outside of opec. Francine what is the reality . What is the price they need to adjust to . Are we talking 40 or lower . Edward there is no regulator in the market. Where is the price going to go . I think it will be in a range of 40 to 65, as long as we have this Quick Reaction mechanism of shale production as it extends beyond the United States to other parts of the world, and we have got in the deepwater, a fiveyear lead time. That means the higher the price goes, the bigger and faster the rebound will be. It will be a wavy future. There is no magic number. Good for wavy future saudi arabia with all the political turmoil . Do you have confidence the royal family can move forward . Edward the great thing that is happening is there is a plan to diversify. Tom you like the generational shift . Edward i think it had to come and it came just in time. Tom edward morse, thank you so much for the briefing. Head of commodities at citigroup. Right now, we need to go to new york city to our business flash. Taylor a swiss activist investor is targeting the largest area processor in the u. S. He owns 8 of dean foods. And mayk is undervalued target other shareholders about its operations and strategies. The company is not commenting. Purdue pharma is in state talks with officials over the drug crisis. The maker of oxycontin was accused of creating a Public Health crisis by mr. Handling mishandling the crisis. , casino revenue grew in november at the fastest pace in four months. Gambling receipts beat estimates. Are returninge after the anticorruption drive led to a slowdown. That is your Bloomberg Business flash. Tom taylor riggs, thank you so much. Richard yammer on was a first rate economist. Nobody knows more than Michael Mckee, it is tough. Michael it is tough. This is the traders guide to key economic indicators. This is one of richs books. Tom the book on economic indicators. Michael what is funny about this book, it has got gdp and jobs and spending, all the traditional things we look at, but he did not really look at those to tell what is going on in the economy. What he did the best was figure out what to real people do . He loved to look at indicators like restaurants. If we are feeling good, we go out to restaurants. His favorite indicator he told me over and over again womens dresses. The woman is the ceo of the household. She knows what her family needs and knows what they can afford, so when she spends more, times will be better. When she cuts back, we have problems. Tom he was a terrific listener, tv economics. Rich listened like no one. In this orange book he invented, what struck me was that it was successful like four minutes after it came out. Immediately taken up. Michael everybody wants to know what countries will do companies will do. He would mine all of their calls with analysts and reporters, and look for about the economy and publish it regularly, so it became an invaluable resource. Tom within this, it is gloomy. We used to kid him, what will gdp be . 8 . And yet he was a hugely optimistic guy. Michael he was in person. Always friendly, always smiling, always had a joke. He would always be laughing when you talk to him. Member how he used to come and talk about how we are going into a doubledip recession and things will be terrible, and i started saying, you are on the dark side. He came in for the interview wearing a darth vader costume. Tom that is Richard Yamarone. Lets look at Richard Yamarone. Now joining us, Bloomberg Economist richard yen around yamarone. Orange is a powerful color i have to wear orange every day. We are channeling Bloomberg Economists here. Analyst,as a gifted author, and lecturer, and as an economist he was a contrarian and often on the money. Bloomberg intelligence senior economist Richard Yamarone with his orange book. Francine good morning, everyone, this is bloomberg surveillance. Lets turn to brexit. The Irish Foreign minister said a breakthrough as possible in the next few days after Northern Irelands Democratic Union compares to have more clout than ever as they allowed theresa may to cover in london, threatened to withdraw her support if they fail to back their position if she fails to back their position. I know you were at the News Conference where we heard from the foreign minister. Or are theyrstand willing to accept that there needs to be a deadline on monday and theresa may needs to go to brussels with an agreement in hand . I do not think they have monday as a deadline at all. There was some talk this could go on until the end of next week, so nobody is really. Ocusing it is varying from wild pessimism to some optimism. The foreign minister said today a breakthrough is doable over the next few days. That is the most optimistic i have seen him. The political will to do a deal, there will not be an election. I think we are edging toward some kind of deal, but the weekend will tell a lot. Francine when we hear ireland saying that a brexit order breakthrough is doable border breakthrough is doable, what kind of template are they looking at . Dara that is still the billion dollar question, isnt it . The irish want a very clear commitment there will not be a border following brexit. The difficulty is trying to find something the cu p can live with. Forcally, you are looking means words that are meaningful enough for dublin to live with. The government is talking to the dup. It is the first time we have seen that confirmed, which suggests they are looking for Common Ground and we are in a better place today than yesterday. Come up the dup is threatening theresa may at this point . Pull the said, we will plug if you do not do it our way . Exactly what they said, threatening to bring down mrs. Mays government. If you have done anything to weaken the union, is the phrase they used, putting a border in the north irishs and having different rules between the two areas, it brings Northern Ireland closer to the republic of ireland, and that is a strong redline. Francine how does theresa may handle this . She is still having lunch with Jean Claude Juncker on monday. Apparently it is still on. She wants an agreement, but if she comes back with significant progress, will it be enough to cker outside . She wants to go along with the resolution to all the three areas that the European Union has said need to be overcome, and come home and say we are moving on to trade. That is the big prize, if you like. The Council Summit is not until the following week, so it is possible that lunch could pass without anything being formally agreed. There is a meeting on wednesday between the ambassadors and mr. Barnier. These talks will go on late into the night. There has to be an agreement reached between the rest of the e. U. Heads, so something needs to happen next week. If not, it will be a huge blow. Francine who is meeting who this week . Dara today we have got task tusk coming to dublin, and we will have a press conference at 5 00. What we will see is e. U. , anding fast with ireland ireland will not be steamrolled into a deal it does not want. I think we will see strong words but possibly nothing new. It will be interesting to see if ireland comes under pressure from the other e. U. Countries to move if we have an agreement on the bill and citizens rights. Lets watch it over the weekend and see if there is any sense the e. U. Is giving to pressure. Ourcine darragh doyle, beer chief. Begin. Up, Douglas Holtz Douglas Holtz eakin. That is at 10 00 in new york, 3 00 in london. It is all about the tech selloff. 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. Voting on the tax bill until later today, the gop scrambling to reassure deficit hawks. Over 24 k. Gone its the largest 20 streak since 2007. Island is demanding an open border. From new york city, morning, good morning. This is bloomberg daybreak. I am jonathan ferro. Risk aversion is starting to creep in. Futures are softer i 12 points. The eurodollar is doing nothing. The yen strength is coming through over the last couple of minutes. Yields are up three basis points. At them taking a look reaction of the u. K. Of the nonbreakthrough with brexit talks. Yields are down five basis points after a month or so up