After bitcoins wild week, Randy Quarles says cryptocurrency regulation is worth thinking about. It is 8 00 a. M. This is Bloomberg Markets middle east. There was plenty going on in United States markets on friday. Take a look at the fix. The volatility index. It jumped almost 30 on news that Michael Flynn pled guilty of lying to the fbi. By the end of the day, it was up only. 33 . A lot of like to save havens. Wells fargo reckoning that Political Risk is he getting to see into United States stock. Seep intong to United States stock. Take a look at the semiconductor index. This is one of the hottest trades out there. Down 1 on friday. That is after all and percent on wednesday. Nasdaq down 127 points on friday. Now, let us talk about u. S. Taxes. That was a big story over the weekend as well. The tax bill really coming down to the wire. The senate barely passing among senate republicans. They were scribbling in the margins on the legislative proposal. They managed to get it done. ,e have not yet seen reaction but take a look at this stock. It shows high tech stocks performing, but that began to change on wednesday when we saw the rotation output Growth Stocks. We will wait and see whether it continues into the new trading week. Just a reminder, lawmakers to have to resolve the differences. That is a process. We expected to begin on monday. Let us check in on headlines around the world. Greece and International Creditors agreed on a overhaul. It comes after one week of talks in athens, or both sides reached Common Ground on reforms and energy, public administration, and fiscal performance. It will help greece to build a cache buffer as it looks toward a bailout exit. Jeremy corbyn has hinted that he may have another referendum on brexit. This after meeting with the portuguese Prime Minister in lisbon. The Federal Reserve vice chair of supervision says the bank has no policy toward bitcoin regulation, but he thinks it is something worth inking about. Randy quarles comments came after a fluctuation of between 9,000 and 11 and a half thousand dollars. Is too early for a Bitcoin Strategy. He says not consider it to be a store of value. Something that moves up and not 20 and one day does feel like a store of value. Well see. If it trades like a store of value, you know, we will get to it. The u. S. Secretary of state is increasingly alarmed i what he sees as secret talks between Jared Kushner and mohammed didnt solman. Bin salman. He feels that the talks could tip the region into chaos. Financially backed by a number of countries including saudi arabia. President trump has declared himself an eatable for reelection. Unbeatable for reelection. The president told reporters that the Corporate Tax rate could be at one to 2. 5 . 22. 5 . He also claims there is nothing to hide, after Michael Flynn entered a plea deal. In a tweet, he says he fired flynn for lying to the federal bureau of investigation. Flynns actions were lawful. Wondering, we have these two things happening in u. S. Markets at the moment. You have nervousness around the russia probe on one hand. On the other hand you have trump approaching something that looks like a legislative victory. How are you thinking about those two things on a net net aces . Ryan it was an interesting weekend. The events seemed to balance each other. We will probably see on monday, tomorrow. However, i think the tax cuts will win because it is a big positive for the markets. Especially talk about deregulation. It is obviously very much welcomed by markets. Couple that with Corporate Tax cuts, that is a big positive. I am curious. If you think about the trump trade when he nabbed his victory, the upward move in the United States dollar look at the charts behind me, some of the wind has been taken out of the trump trade sales. Do you expect a recovery with the tax proposal, or is it doomed to fall apart . Ryan it is hard to say now. I expect stock to go up. The u. S. Dollar i have a . Mark. On it is hard to say, but expect prices to go up in general. This is why i hate the currency market. It is all relative. You reckon it is softening against a strengthening euro. Will that continue . Ryan up to a certain point. 120, 122. 125i doubt very much. Too early to say. Remaint that euro to strong. The other event last week was the rotation out of Growth Stocks in the u. S. How do you view that . What does that say about how people are inking about the future economy . Are thinking about the future economy . Ryan it will take quite a bit of time to get into the economics and finance as of these companies. However, looking at the cycle, it is happening right now. This is why people are pulling out of these Growth Stocks for shortterm. Focusing on u. S. Stocks, there is another issue ruing. Issue brewing. According to the joint committee on taxation. Will we see the return of bond digital antes in the treasury market . Vigilantes in the treasury market . Ryan we continue to see the slack and in. We need to see where this will go over the coming until the end of the year. It is too early to say. Sure. Final question. Not many trading days left in the year. We have fewer than four weeks. . Hat are your key risks tax reform bill . GeoPolitical Risk . Ryan in the United States, how the Michael Flynn story will play out. They are getting into the inner circle of president trump. How it will play out is quite tricky. , ifver, the Corporate Tax it goes through and there is an agreement before the end of the year, that will be a big positive. It could win over the political side of things. We will not have too long to wait. Ryan lamont from 80 securities, you are staying with us. One month until markets race or new rules. New rules. R hedge funds getting bullish on oil as opec and russia continue output. This is bloomberg. Bloomberg markets middle east. A latest check of business headlines. A volkswagen manager told a judge he was coached i executives to lie about diesel admissions. Emissions. In 2015, the w admitted that 11 million diesel vehicles were fitted with cheap admission tests. Fiat chrysler is in talks with highend day about a technical partnership. It will be a strong one according to fiat chryslers ceo. Wants torchionne develop High Energy Propulsion as part of a fiveyear Business Plan before retiring in 2019. Rexall is considering a partial or full sail of its sale in gas natural out. Raise 4. 4uld billion for investment in renewables. Talks are in the preliminary stage, according to people in late with the matter. That is your Bloomberg Business flash. Let us turn over to oil. Opec and its partners are extending cuts to the end of 2018, continuing the campaign to take back from american shale producers. The Unprecedented Alliance between saudi arabia and russia confounded skeptics. Much matter very what we have done, and we see an increasing level of compliance from opec countries. The numbers from october are encouraging. We expect november to reflect this as well. Agreed to another meeting in june, which will give us another chance to get together and assess the market situation. Also to assess what needs to be done. In ed l from bring emirates. Also with this is ryan lamotte. Ed, i start with you. Russia and saudi arabia putting their strategic middle east differences aside in the name of continuing this cut. Is that a testament to the efficacy of the Production Cut as it continues over the past year . Ed partly. The oil prices have recovered strongly. You have had a sizable drawdown in transparent though ced inventory. That opec cans point to to say that it is working. And oilhat, opec policy policy has been able to be a little bit separate from politics. If you look at opec members, there are disparate economies and lyrical systems. Political systems. Oil policy can be one agreement point. Tracy libya and nigeria had been exempted from the last deal. They agreed not to lift production above peak levels. How fundamental is that . Ed if you look at the socalled cutters that were part of the deal, they had a pretty good level of compliance in taking over 1. 5 Million Barrels from the market throughout 2017. Afterward, it was pretty much halved. Live upey are able to to their terms of the arrangement and not increase production beyond maximum 2017 levels, that would go a long way toward not making the opec train run off the rails. Libya, Oil Production is volatile. Seems kind of notional at best. Tracy turning to one of the major issues that opec faces, the return of u. S. Shale. This is the wti calendar for 2018. It is the benchmark against which shale operators execute. Thes at 58 a barrel, highest since the start of 2017. These shale producers can all but guarantee availability. Ryan, how worried are you about the return of u. S. Shale . Ryan i am absolutely not worried. Opec is not worried about shale producers. Tracy should they be . Ryan no. It is a cartel. A cartel is very strong. It has been operating for decades and decades. They are holding back the reins on things. This is complex beyond just the increase in prices. Volatility hurt a lot. 56 to 60 . And later on, 65 . It dropped 18 . That is important to consumers of oil. I think this is where opec shows it is holding the reins back. It is controlling the markets and volatility and price levels. Shale producers do not have that luxury. It is not a cartel. Tracy but they presumably piggybacked on top of opec. Do you agree . Some producers should be a little bit worried about some of the shale plans for 2018 and going forward. An outlookal for beyond United States, nonopec supply will increase by the smallest one Million Barrels a day. Widest, 1. 5 million. That is significant. It goes into the traditional opec export markets. The fact that you have u. S. Oil producers now exporting into chinese, indian, and south korean refineries, that will take some effort for opec to win those customers back. That will come in the form of cheaper, weaker pricing. There is not much to really worry about for most of the opec countries. It will be pretty profitable at these prices. When you think about the amount of revenue coming into these countries as contracting to growth, yes, the volatility has gone out of the market. But you are not getting an influx of cash. Over the long term, it is going to be a race as to how fast they can successfully diversify their economies, get new resources for the government, and promote growth against a total recovery in the markets. Added, ryan, i could listen to you both talk hours. But thank you both. We are not do with you yet, ryan. Up next, the new rules are two months away. Is the finance industry ready . This is bloomberg. Preparinges are still the change. The Eu Commission says there is no delaying the launch. Spoketa is come boss gus with bloomberg. Preparationscal are in place. The industry has done its part during the time when we already extended the deadline once. I would still emphasize that there was sufficient time for preparations. Of course, we are ready to work closely with the industry to ensure a smooth introduction. Outside ofegard to the eu, we are preparing necessary decisions. you had some European Union officials warning against granting equivalency to alternative Trading Systems here in the United States, for instance. What is your stance on that . You have had several colleagues write in, saying warning against the equivalency. Certain there are trading venues granted that equivalency by january 3. In any case, we are currently working on those decisions. It is still a work in progress, so i cannot comment in detail on each decision. The aim is of course to finalize the work during december. I am just curious. You mentioned moving the deadline once, already. If push comes to shove, will they move the deadline again . Not any are currently plans to move the deadline, since it is set in eu legislation. We are working to ensure a smooth transaction transition. We are able to react if some difficulties arise. There are plenty of other Political Considerations for the European Union at the moment. Can you comment on a deal of the exit . Indeed. As you know, brexit negotiations are now reaching very intense stage. The aim is to achieve what is called sufficient progress in the first three issues. Meaning citizens rights, financial settlement, and the irish border. Hopefully we will be able to report more progress. I would say what really matters is the substance of the agreements. As a commission, we will only be able to report sufficient progress as counsel if there is substantial agreement. States isted concerned about regulatory developments in the eu after brexit. Similar concerns for asian trade partners as well . Exactly form here whichapacific dialogue, is about to start. This would be a good occasion to discuss how we can are there our cooperation how we can further our cooperation. We are open to discussing does issues with our International Partners to rely on equivalence. Eu has beenthat quite open in recognizing certain country rules. This is over an approach we will continue. Tracy is secretary of state Rex Tillerson getting sidelined over saudi arabia . Next on bloomberg. Tracy you are watching Bloomberg Markets middle east. I am tracy alford. President trump declares himself unbeatable. Reporters thatd the Corporate Tax rate could end thet 22 , rather than percent he originally campaign for. Meanwhile, trump insists that there is nothing to hide, after michael lynn entered Michael Flynn entered a plea deal. Trump said he fired flynn because he lied to the Vice President and the fbi, insisting that flynns were actually lawful. Creditors have come to an agreement. It comes after one week of talks in athens which saw the two sides reach Common Ground on politically sensitive issues. It paves the way for a payment that will help greece build a buffer. The u. K. Labour Party Leader Jeremy Corbyn hinted he may be open to holding a second referendum on brexit. This after meeting with the portuguese Prime Minister in lisbon. The Federal Reserve spice chair for supervision says the central bank has no policy toward regulation of bitcoin, but he thinks it is something worth inking about, Randy Quarles come after a wild fluctuation in bitcoin. Meanwhile, the ceo of Goldman Sachs says it is too early to talk about a Bitcoin Strategy, and he does not consider it to be a store of value. It does not feel like a store of value. We will see. If that works out and gets more established and trades like a store of alleyoop and does not , we will get to it. Tracy Rex Tillerson is hereasingly alarmed by what sees as talks between saudi arabia and Jared Kushner. Officials say tillerson is concerned that the region will tip into chaos. Joining us now is so rhonda partner in the middle east. I tried. I always try. I apologize. This is the pattern weve seen repeatedly with Rex Tillerson. He is either contradicted or kept in the dark by some of the rest of the Trump Administration. What does that mean for the efficacy of United StatesForeign Policy in the middle east . For the duration of the Trump Administration we have seen a mismatch between tillersons position and the u. S. They department and other actors within the administration. Not just president trump, but other actors as well. It sends a message to the region and other international players, which is that there is enough disagreement within the administration on key policy issues that gives license to other actors to do things they might not have done. Not have they thought to do so. Subtext there that they are taking advantage of dysfunction . We have seen moves in syria and across the middle east. Iran is another one, of course. But even players within the middle east. There seems to be more countries among local in the region to take form policy in their own hands, yes. Tracy we expect Jared Kushner to speak up quickly the first time about the Trump Administrations approach to the middle east sometime today. This is a 36yearold with no political experience or expertise in the middle east and its complex politics. What do we expect to appear from him . It is hard to tell. It goes back to the link that he is talking about the administrations policies rather than the u. S. State department talking about it. Admissionlearly an around this. Kushner has been in the middle of this, trying to facilitate it behind closed doors. There are arguments that there is a lot more that needs to be resolved between israel and palestine to get that solution. The recent announcement or leak that they would recognize jerusalem as the capital of israel is not suggesting that it would help in finding that solution. Ryan, i want to bring you in. Families curious about how investors be this. Can see that since the saudi crackdown on corruption on november 4, there has been selling by gcc investors of dubai securities. This is the index by which we have the most data. What are you seeing in terms of investor response to the drama that weve seen in recent months . You have the fast money manager at hedge funds and longterm ones like ourselves. Fast Money Managers are nervous. They cannot hedge their positions. You cannot short sell with gcc markets. As a portfolio manager, the only action you can do is sell that position instead of hedging it. And that is precisely what happens. Us as longterm investors, we are positive about what is happening in saudi arabia. Fighting corruption is something good, it is not bad. In saudi arabia who paid large amounts for wrongdoings. This is precisely what is doing in saudi arabia. We should not be shocked if some princes are settling with cash. That is a positive. The saudi people are very vocal about this change. They are demanding it. Asking for it. This is positive. Eventually, this will encourage consumption. It will encourage investment. From the medium to long term, this is in positive. As an investor, how do you square saudi arabias domestic policy which seems focused on economic reform which would be good in the long front for people like you with its more activist Foreign Policy tendencies . When you think about what happened with the lebanese Prime Minister, that kind of uncertainty cannot be good for investors, right . Ryan it is not. That is why we are selective. We are investing in subsidizing nonoil cyclicals. These are over the longer term. Sectors that have remained rather well. They are doing well. Will continue to invest in them. As the image becomes more clear in saudi arabia, we look at other sectors that are oil related, subsidy related, and prone to geopolitical fluctuations. Ryan lamotte, thank you so much for joining us. Rhonda, you are staying with us. Tomorrow is the divorce bill deadline the European Union gave the u. K. In brexit talks. Were going to discuss that. This is bloomberg. Tracy this is Bloomberg Markets middle east. A latest check of business headlines. The volkswagen manager told a u. S. Judge that he was coached by executives to lie about diesel emissions. Jail time after pleading guilty to conspiracy and violating the clean air act. That 11 million vehicles were fitted with cheap devices to help them pass emissions tests. The chrysler is in talks with hyundai about a technical partnership. It might become a strong partnership, but there is no likelihood of a merger between the two companies. Sergio marchionne wants to develop Hydrogen Propulsion as part of a fiveyear Business Plan he is preparing before retiring in 2019. Rexall is considering a partial or full sale of its stake in gas natural al. Raise 4. 4ould billion. Are reportedly in the preliminary stage, with no final decisions made according to people familiar with the matter. That is your Bloomberg Business flash. Tomorrow is the deadline the eu gave britain to make a better offer on its divorce terms. Theresa may will go to brussels for a lunch meeting that was billed as the moment when she will set up her offer to break the deadlock. Despite earlier suggestions that it would work to meet the eus demand, britain is now pushing back against the timetable, saying it is targeting a European Council on december 14. Na. Ll joined by serra that was slightly better. Still a perfect. Let us start with brexit. The timeline seems to be growing more extended. What is the likelihood that they reach some sort of agreement allowing them to begin negotiations on a trade deal before it is too late . There is a chance that they will. That is because mainly to save ace. The torycause conservative party wants to see it happen. Theyre showing more willingness to give in to demands run the European Union, to get the ball moving. The big Sticking Point remains the question of an irish border. Tracy talk to me about this issue. When i view it from here in dubai, it seems fairly intractable. How will the u. K. Push fast that . On tradeepends negotiations that will start after this issue is agreed upon. Do question is really where you draw the line between the and northerns ireland, which is part of the United Kingdom . There is a big question there, and the political stakes of dividing the island or not. Option would be to have a sort of agreement of sorts right now in the wording around how they might be getting ,reland the option to veto this or actually negotiate on trade. They had agreed on what the trade regime will be for a u. K. Outside of the eu, it is hard to decide how you manage the border with the eu. Tracy take a look at options activity in the vix. Been picking up supposedly because of geoPolitical Risk. Specifically last week, we had north korea saying it had fired a missile with the longest range yet. What does that mean for the u. S. And its allies . A longerrange missile then we have seen until now, indeed. The fact that it can reach United States territory is considerably worrisome for the u. S. There are other things that admittedly the north korean government has to achieve in terms of reentry for its missiles and fitting a nuclear head to become a real threat to the u. S. , we still think that worry is unlikely. So his resolution or any sort of probablyl north korea becomes a full nuclear power. Tracy definitely makes you wonder about the future. Thank you. Up next, blankfein on bitcoin. The Goldman Sachs chief is not convinced the currency is ready to take wing. This is bloomberg. It was a wild week for bitcoin as it fluctuated between 9000 and 11 point 5,000. Lloyd blankfein remains skeptical about the cryptocurrency. He told Mike Bloomberg and alix steel it is to certain too soon. 20 years told me forward and it worked out, i can tell you why. Aced on everything i know, i am not guessing it will work out. But i cannot say. I will not stand there and say it is a fraud. It might work. Confuse it with block chain. There is a technology where you to have different access different data, people can control it, you can see whos doing what. There are places where that is useful. In fact, the bloomberg system is a block chain. Instead of having the users control it, we control. It has all of the attributes of that. Bitcoin is different. Bitcoin and other cryptocurrencies are very different. Whether or not the governments of the world you lose control of monetary policy, i am skeptical. They will just not let it happen. They should not. Something that moves up 20 in a day does not feel like the safe haven. Jeff curry told me it was a commodity. Because to your expertise, lloyd. Talk about what are the unreleased unregulated trade of bitcoin. Where does the broad come from . Lloyd first of all is a buyer cut . Seller . Loyd it is used as a vehicle to perpetrate fraud. So is cash, sometimes. Lloyd it is. Go look in china, where they are getting rid of cash. Everybody is paying with smartphones. People who are begging in the. Treets have a little sign instead, they begged for money. They have assigned with the code on it. A qr code. Thepoint your cell phone at qr code, at a button, and they have a bank account. That is where they get their money. China is heading in that direction, and theyre going along way. The reasons is that you can then stop the black market and stop drug dealers and track were all currencies go. We will not going to different direction. America may not be ready to go there. We will be left behind if we do not. This is a much more efficient way of paying for goods and services. But then you will know people are doing the money. But google knows exactly what youre doing. And amazon by the way. But lloyd, you have to be thinking about Investment Banking strategies with bitcoin. No i do not happy. Are not talking to any of your guys . It is just, we will see. If it works out and gets more established and trades like a store of the value and does not move up and down 20 and there is liquidity in it, you know, we will get to it. The original question was, when do Small Business people have to think about their Bitcoin Strategy . I would worry about opening the doors, producing for people who want to buy. Dealing with them. Tracy let us get mores perspective from matt. Matt, let me start with the chart. 4303, showing the bitcoin rise. When you compare it to the rally that we had between 2012 in 2014 in white, you see that actually even though we are all talking about it, it is been more sedated in previous years. Are hacker. Ou programmer. A coder. How many of your family and friends are coming up to asking questions about the going . Matt too many people. People. The growth of bitcoin and the price rate is increasing really rapidly. What weve seen over the past weeks and days. But very few people real understand it. Very few people understand the risk. Understand how to use it. Is it like a speculation product rather than a currency . It is a very legitimate question, because bitcoin is the main cryptocurrency of the moment. Theyre doing it because they expect to be rich at some point. Tracy you mentioned risks. Hacks and lost wallets have become embedded in the history of bitcoin. We have seen a couple of recent examples. We saw a 61 million hack of tether recently. Some thing happened recently to bitcoin gold. How much is security an issue for cricket currency . Way it started when people started pitching out of Production Technology is misleading representing the accurate. It is not secure. It creates a longterm problem, and we know it is not true. So far, more than 40 incidents have been recorded to date. And there is a lot of risk compared to Traditional Bank notes. Newerhard to replicate bills. It is easy to subvert the software. Initially, they reported that for 36 hours, if you looked a few days later it would say five days. Companies out to track the modification. Tracy the consensus that seems to be forming that we heard from bloomberg and lloyd blankfein, is that if you think bitcoin is in a bubble, the Underlying Technology is something that has value. Even there, i see people trying to apply the block chain two things right now. It makes me wonder whether or not that is eating overhyped. What is your take . Matt people talk about blocks for cryptocurrency. Distribution leisure technologies are getting a lot of traction and attention from enterprise. It mainly due to the fact that , like you, otherwise said there are many ideas that are not very valuable. Tomorrow, you will get pitched random ideas. Tracy or if you are a journalist at bloomberg. Pretty much. Tracy one more issue. We know that that coin and other cryptocurrencies have become the currency of choice for hackers and cyber criminals. How long until we see a real regulatory response to this . Matt regarding response from whom . Tracy anyone, really. China has not made a lot of noise. What is in someone from the u. S. Say we will come out and ban this . Matt it is complicated for them to maintain. It still has to market value, right . For values like with seen over the past couple of years, they are moving towards the blocks and encryption currency wars. For instance, what we saw. You dont get very much money out of it. Perhaps explore new Business Model where they tackle the exchange directly. Many exchanges have been targeted. As you can imagine, it may be groups or even nations like we have seen in the past. It is a more reliable way to get a lot of money. , i am matsui should afraid we have to leave the block chain discussion can. This is it for Bloomberg Markets middle east. Live from this region at the same time tomorrow. Until then, goodbye. From new york city this is bloomberg real yield. Coming up, no real change in the fed, why the new boss looks like the old loss. And a of tax cuts wall of demands meets a flood of supply. It attracts 46 billion in orders. We begin with a big issue. Why it sounds a whole lot like the old one