Transcripts For BLOOMBERG Bloomberg Surveillance 20171204

Lets check the markets. The europe 600 on a tear. Higher because of expectations of tax reform in the u. S. And what that can do not only to the dollar but to the world economy. It could make the spirits of the u. S. Move up a touch. Lunch in brussels. Will they are will they not . To severalspeak groups interested in brexit. Lets get to the first world news. Sebastian in the u. S. A Senate Investigation of the russian meddling in the trump case a instruction of justice case is coming. This is from Dianne Feinstein after Michael Flynn pleaded guilty to line to the fbi. I think we are beginning to see the putting together of a case of objection the case of obstruction of justice. I think we see this in the indictment please that take place in some of the comments being a. I see it in the hyper frenetic attitude of the white house, the comments, the continual suites. U. S. House republicans are drafting a contempt of Congress Resolution against members of the fbi. They claim that the removal of an fbi official is evidence that the entire investigation is likely motivated. The tax bill passed by republicans may boost profits for industries from banking to resell. It will put the squeeze on hospitals and avoid injury energy. It has a provision that allows some countries take back britain bring back hundreds of billions of dollars in roberts at a lower rate. Barkin has been tapped to become the next president. It was unclear if this has been discussed by the board of governors. According to the telegraph, bitcoin will be regulated to force traders to reveal their identities. Previously all who did so would be able to do anomalously. Anonymously. This is bloomberg. Lets get to our top story. Its a big day for brexit and a big day for theresa may. The Prime Minister is heading to brussels where she will have lunch. After a weekend of intense negotiations, the role of the European Court of justice and the irish order remain sticking point. Nejra cehic is in brussels ahead of those meetings. That focus will be on the deadline or how much will the eu feeling it if they has access . Nejra thats an interesting weston. Interesting question. This was initially the deadline. If he wasas that happy with the you a proposal they can move talks on to trade. What weve been hearing from the u. K. Side, there have been many ingles that the u. K. Does not see today is a hard deadline but they are rather working towards that 14th summit. Conay not see a breakthrough. A concrete breakthrough. It does not mean no progress has been made. Simon khomeini saying that he was hoping for a way forward. He wanted to work with theresa may, not against her. Progress onen some the irish border. According to u. K. And eu officials, the issue of the order justice has come forward as one of the most difficult humbly blocks. ,hatever theresa may offers on or offer that these of report voluntarily refers some cases to the court of justice, might not be enough. If they manage to make an agreement by december 14, thats all good. Both would like talks to go to trade but theres a risk negotiations could collapse and you could the u. K. Could crash out of the eu. How is all of the uncertainty playing on the market . Joining me are Burkhard Varnholt devin. Will the markets tank . Oryza price then . Or is it priced in . Think a lot of it is priced in. We have several clients looking to save this rally. Lets be clear on what sterling is rising out. It has been pricing out the acrimonious with a brexit that is come from failing to agreed failing to agree. If back comes back onto the table,s ruling will be very indeed. Francine do you care about brexit . Claim playit into the widers team . Wider scheme. David i do care about it. These talks are anyones guess how they will include. They create a sense of urgency for the rest of the European Union to make sure this doesnt appear itself. It is that sense of urgency that is precisely with the European Union needs at this point given that it hasnt done the homework it should have. Withs the time, especially are back on and france especially with mr. Macron in france. That will be the important story around brexit. Francine you are talking about more integration. We havent talked about a bank union for a while. What does that look like in the market . David if youre looking at the teacher of the eurozone used the that the institutional outpatient of the currency are not as solid as the need to be. Stronger banks of a part of that. The European Union is self, arguably with for expansion more than integration. In see that the policy of institutions suffered a bit from that. Problems still remain. Be able to trust the greeks . A document the county of the deficits of that like that . Unfortunately you have a deficit of trust between some of the northern and year in southern countries. To live within the straitjacket of the euro. Its not some ibo. It does get a emphasis with the macron victory. Francine please stay with us. Coming up we will talk about trump. He lashes out at the fyi fbi. We will discuss the implications and what the tax by means of the market. This is bloomberg. Bloomberghis is surveillane. The u. S. Senate approved its longawaited tax will by a vote of the 129. Investors focus now shifting away from the russian investigation. However, Dianne Feinsteins that there is a growing case of obstruction of justice developing against the president. I think what we are beginning to see is the putting together of a case of obstruction of justice. I think we see this in the indictments, before indictment and some of pleas the comments that are being made. I see it in the hyper frenetic attitude of the white house, the comments, the tweets. President was active on twitter over the weekend mostly on saturday when he tweeted, i had to fire general flynn because he lied to the Vice President and the fbi. He has pled guilty. It is a shame because he was lawful. There was nothing to hide. Joining us for the latest in the molar investigation is stephanie baker. I dont know her to start this white a lot going on. Talk to me about tweeting. The tweeting made it worse. Yes it did but apparently the tweet was written by his lawyer but it took him into more complicate legal territory because it indicates that he knew flynn had lied to the fbi when he went to call me, the former fbi director, and afton to drop the investigation. I think the indictment of flynn on friday does seem to indicate that hes got senior trump figures in his sight. Worried,hner may be others may be worried. I think that the question people are asking is why did flynn lied to the fbi if he did not have something to hide . That will be the enduring question here. I think its clear that he would not have been able to do a deal with mueller unless he was able to offer terminating evidence against more senior figures in the trump circle. Francine donald trump is in the offensive, what happened next . Flynn is cooperating. That he some indication may have been wearing a wire. Mueller probably has more that he has held act. I think trump is going to fight this tooth and nail. He is backed into a corner. There is not much he do. He has made noises about how the fbi has an partisan buddy dance do anything. Trying to fire mueller would be a nonstarter. Reports of president also said that a republican fundraiser that the rise in the means he will be unbeatable in excellent. Its a very unpopular bill and i think thats one of the reasons why i have tried to russian. However plays out in the midterms is unclear because people want see the full affected at that point. For many people, it will be a win because they will say look, we achieved something. For others it will be a liability because some people wind up paying higher taxes. Democrats have been successful at positioning this bill as a tax cut for the wealthy and thats why it has not played well for the public. Trump was elected on the platform of raining the swamp and in the bill the majority of tax cuts go to the wealthy. Francine what does that mean for the market . Bill doesnt really impact gdp or inflation. Shortterm it looks like it will add seven dollars a share to the 500. Windfalln full for stocks but we can debate about the longterm implications. Expectation is this will cost more than it will yield. American narrative is that god created republicans to cut taxes. This is the most important demonstration of being in charge of not only the white house the congress and the that it. And the senate. If donald trump get this through a would weaken him much or than any of the other top with we have been does is. He had to give this through to demonstrate power and he will, i believe. If we had the tax bill passed, companies will get her to get active their holders. You can find measures where the market looks more reasonable. It to the average the last 25 years, they dont look egregious the overvalued. Suggestsongterm work one has to have dampened expectations about the average annual compound return you get that can is market over the next five to 10 years. When we are looking at a tax bill, i think theres an interesting provision here is the reinvestment. It maintains the ability of interest. That allows and negative tax rate on a lot of investment. Back it up quite significant sector ratification. Itthe short term, i think have a powerful effect on parts isjudy the but the problem it creates some fragility. You are encouraging people to leverage up and buy stuff they would not have bought you did not give them the incentive to. Francine thank you so much. Stay with us. Up next, a healthy merger. Aetna. Hes to more on that next. Cvs health is buying billion. 67. 5 for more on this deal, jackie joins us. When you look at this massive takeover, you need to see the antitrust approach to it. Will it gough . Through . Is similar to the at t merger. Does it go to the doj . Does it go to the ftc . Its not a foregone illusion. Conclusion. Francine if it does go through, what is the impact for the sector . Could see some stocks go up in the sector, humana one of them, prescription companies that work with at not. Work with aetna. Francine thank you so much. Us. With trudeau risks of setting allies as he tries to boost trade with china. We will talk about that next. Francine this is Bloomberg Francine Lacqua in london. Lets get straight to the bloomberg first word news. Sebastian the investigation between donalds Trump Campaign and russian meddling in the election obstructionase of of justice is developing. That is according to Dianne Feinstein. Her comments come after Michael Flynn treated guilty to lying to the fbi. I think what we are beginning to see is the putting together a case of obstruction of justice. I think we see this in the indictments and pleas just taken place and some of the comments that are being made. I see it in the hyper frenetic attitude of the white house. Republicans are drafting a resolution against Rod Rosenstein and fbi director rest of her rape. They claim they ar and christopher wray. Republicans have pointed to the as evidence the entire investigation has been politically automated. Exit docs risk being torpedoed. While a deal on what happens to the irish border is still to be the role of the ecj has emerged as the greatest obstacle after a weekend of intense talks. Theresa may heads to brussels today to meet jeanclaude juncker. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im Sebastian Salek and this is bloomberg. Francine thank you so much. Were getting construction pmi out of the u. K. Let me see if it has an impact on pound. A little bit that are than expected. 53. 1. Expectedve better than construction figures for november. Justin trudeau is in china. The canadian Prime Minister is to talk about a freetrade agreement. It is a highrisk move for trudeau that could alienate japan. Amid tensions over the transpacific partnership, can trudeau keep everyone happy . If it stops and Burkhard Varnholt are still with us. When you look at china, is it one of the biggest risks for 2018 . It is because of its size and importance in driving so many other markets. It doesnt mean that risk manifests itself, but you have to continue to watch where china is going. We will be focused on the housing market. Sales dropped lower than they last year. Ime i think we know the pattern here. Saying, they will get congress out of the way and then deal with some average. Were seeing china taking actions which we think are positive in the mediumterm. Theres a risk the markets start to worry. Francine we keep on hearing warning,pboc governor, im worried about deleveraging. He can actually talk openly because hes stepping down. Should we worry . Burkhard we should be realistic. This is the number one priority for xi jinping. He has just recently strengthened his political capital. Dealing with other areas, such as ecologic development. Now he wants to step up on some of the local governments spending freely. Can he balance that with the reserves the pboc has, with the needs the country still faces . He can. It is going to be the outcome of political debate. Whatever deleveraging materializes in china, it will be a domestic problem. Francine so theres no financial Crisis Brewing . David theres financial vulnerabilities. What weve been saying on this program and other places in the last couple years. From an investors point of view, you have to distinguish between old china and china. Lendingwhere the of the was probably not profitable has gone into. That has been the part of the economy that has created the volatility in chinas numbers. That has been a very steady and rapid growth in china. The stock market has already moved in terms of its capitalization. We absolutely want to keep exposed to the themes of the china of tomorrow. Francine let me bring you to my chart of the day. This goes handinhand with china. Financial conditions have continued to ease in the u. S. Dublin he blue line is teh the u. S. 10 year yield. David we expect the fed is going to continue to tighten conditions. December is pretty much a done deal. The absolute minimum next year is two rate hikes. R. U could get fou what has caused this loosening . One, a lower dollar. Two, credit spreads. Doesnt control. The fed doesnt control the things. Francine let me bring a chart. This is the u. S. 10 year. Of the over the average spread between the 10 year yield in the u. S. And the rest of the g7. What does that tell us about what the fed into next . Burkhard it can certainly try to strengthen the dollar if it wanted to. That is typically not what the fed wants to do. They have a vested interest in the weak dollar that supports u. S. Growth. We will continue to see a year where the difference between the dollar and the euro can be persistent without lifting the dollar. When we markets, this is a liquidity driven market. And were markets driven by valuations . Valuations only help you at extremes. When the market is in complete bubble territory or has been oversold. This market is about liquidity. Even as the fed in the central bank might be stepping back, our Pension Funds are Still Holding record low equity quotas. Francine when do we go back to normal . When it is actually driven on fundamentals . Burkhard only in extremes. Valuations are most useful in market extremes. When you compare today against 2000, 2000 looks like a different world. Markets are by no means as excessively valued as they were back then. Be the liquidity pushing this market higher and ignoring bad news like the flynn political saga . Francine thank you both. Keep it right here on surveillance. We will talk to the latvian financial minister. This is bloomberg. Francine this is bloomberg surveillance. Im francine lacqua. Lets get to the Bloomberg Business flash. Sebastian cvs is buying aetna, creating a giant that will have interest in everything from insurance to local pharmacies. Cvs will pay two thirds in cash and the rest in stocks. The day before the two were reported to be in negotiations. Has agreed to by general cable in a deal that expands the italians precedence in north and south america. They will pay 30 a share in cash. That represents a premium of 81 to the closing place of july 14. Rio tinto has named a german, reinforcing a drive for higher returns. Director andhe previously director at anglo american. Is stepping down after taking a the same position at bb group. Walt disney has renewed forussions over a path 20th century fox. Disney joins Companies Looking to buy a piece of them are not family empire. Facebook is to 800 new staff in london, expanding its headquarters. The jobs to be recorded over the the numberill bring of staff working for the social network in the u. K. To 2300. Companiesf large doubling down on their presence in london. Francine thank you so much. As 2017 enters its final month, the value of companies on stock touching 100 trillion dollars. Central banks are looking towards pulling back from stimulus programs. In the u. S. , senators pass tax cuts with President Trump saying he wants the measures connected by the end of the year. In europe, exit hangs over everything. Lets get some final thoughts from david stubbs and Burkhard Varnholt. We seem to have the clearest from then yet f bank of japan governor that he will stay the course. What is your take on japan . It could be looked at as a value play. Trailblazerda is a for most other central bankers. The japanese been keeping the floodgates open of monetary liquidity. They inflation, but they grew used to it. Japan also stands for the rest of the world in demographic aging. Japan is at the front in terms of providing robotics. Japan is more than just a value market. It is intriguing when you look at the composition of japan. It is the leader in robotics, technology, and as seen a lot of value reform. When you put it all together, good Monetary Policy, an sectors, itset of is just standing out and making it attractive to global investors. That is why the market has more room to go higher. Francine governor kuroda is nowhere near his targets on inflation. David that is the background which reassures investors. Keepprobably going to kuroda. Alongside the comments we just had, if you look at japans sensitivity to global growth, it is the highest of any developed market. You should be like japanese stocks. Reformsorate governance are central as well. What i find fascinating about japan is what it tells us about where the world is going. Look at the labor market. Unemployment rate 2. 8 . People are wondering, weve got this lower unemployment, are we going to get inflation, higher participation . Theres evidence you get rising participation and productivity growth before inflation. If that is the case, the world can grow and the positivity in the post crisis era is a temporary aberration. That should make you think very positively. Francine let me bring you to my chart. This is a onemonth volatility chart. It is volatility between dollar and yen. Is a proxy for anything that goes ugly geopolitics. Is it still a haven . David unless it is a specifically korean issue, it is a haven and it will react positively if theres anything that reflects instability in the Global Economy or geopolitical risks. He cheapest asset class in the world, volatility, investors need to work out the best way to hedge a negative scenario that will manifest itself. Will government bonds and safe havens like the yen protect you, or do you need to look at other things . Structuring, that is what we are doing, giving them some participation, but also turning on to protecting should markets turn. Francine thank you for joining us. Avid stubbs, Burkhard Varnholt joining us for the hour. It right here on bloomberg surveillance. Financed to the latvian minister. This is bloomberg. Francine good morning. Finance ministers are buying to become the successor to the euro group president. The minister from latvia and portugal will be in the frame later today. Latvias finance minister joins nejra cehic in brussels. Nejra thank you. You mentioned the finance ministers that have emerged as the front runners. Is going to vote later today. Im joined by one of them. Thank you so much for joining us. Welcome to bloomberg tv. To be elected, and if not, would you support . Ms. Reiznieceozola there are four excellent candidates from myselfl, slovakia, coming from latvia. I had a ofe for potential candidates with different political candidates. On of us have the experience necessary to hold this post. Nejra do you think the fact that your party voted against adopting the euro might stand against you . It wasznieceozola against the timing and the way the government was implementing the process. Weve it experienced a lot of policies carried out by the government not consulting with the society. The support was at a critical low. In our view, it was a lot of homework to be done. But since then, the government has taken active steps in the implementation of the eurozone. Nejra now theres talk of deeper eurozone integration. This would be something you would need to deal with. What is needed to achieve Banking Union . Ms. Reiznieceozola the same as the capital union. Befores to be finalized the economic and Monetary Union. The system should be introduced while at the same time taking steps in reduction before the risk is shared among the member states. Nejra what about the european stability mechanism . Basically increasing its powers. Would you be for that . Ms. Reiznieceozola i do like the idea of strengthening and turning it into the European Monetary Fund while keeping its ownership held by the member it it, not making institutionalized instrument, giving more decisionmaking high importance to stability. Nejra one else would be your priority . Ms. Reiznieceozola a lot of ideas have been point on the table. What are the implements to foster Structural Reforms . Eb Monetary Union would not stable be stable if we do not strengthen the fiscal union and the economic and Monetary Union. They will be the topics on the table. Nejra would you be in favor of a common eurozone budget . Ms. Reiznieceozola it has to be understood what would be the role of the finance minister. There are other priorities to be discussed, like the eurozone budget. Would it be a separate line for this outstanding eurozone budget all these aspects would be amount the top rarities on my agenda. Question on brexit. As the finance ministers are meeting today, we have this lunch between juncker and theresa may. Ms. Reiznieceozola i would believe that the talks will be finalized. Lets hope that notable progress will be taken. This situation does cause some injuring. Nejra latvias finance minister joining me in brussels. Francine thank you so much. Surveillance continues with tom keene. 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. Trump the dax the fbi after Michael Flynns guilty plea. A top democrat says obstruction of justice case is developing. The u. K. Prime minister heads to brussels for what could be a deal with a juncker. Andy haldane merger. In agrees to buy aetna deal that could reshape the sector. This is bloomberg surveillance. Tom, we have a busy week ahead of us. We need to look at politics. Not only for russia investigation, but the tax, brexit, and brussels. Tom what is lunch in brussels . It is in three hours . Francine two hours. There were a lot of tilts about indigestion. Is a litmus test on whether that e. U. Is more lenient on theresa may. Tom over the weekend, we got the american diet. Macs, two filet of fish, and a malted chocolate. Only when the investigation is going on. Lets get straight to the bloomberg first word news. Could aetna could cvs remake the u. S. Health Care Industry with its proposed takeover of aetna. The chain would a hand in everything from drug prices to insurance. Cvs operates more than 1000 walkin clinics. The takeover will test the trump administrations approach to antitrust issues. Republicans will try to shout the differences between house of the taxversions bill. Each calls for the Corporate Tax rate to be slasged shed to 20 . Of the tax bill. The u. S. And south korea are defying north korea with wargames. The fiveday exercise began today. North korea is warning it will take merciless revenge. Theresa may takes her best offer to lunch today in brussels. Is offered all she can in a rejection now would risk a breakdown in talks. The role of the European Court of justice in enforcing the rights of citizens. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Tom thanks so much. Lets take a look at equities. A great set of guests in politics and markets to frame this. 185. Utures while not part of the story. Youve got to look at. With futures up 185 points, are we talking now 25,000 already . There. t put bitcoin the kids are setting up bitcoin over the weekend. Francine know they cant. Invest in bitcoin at the age of three and five. Stock futures on the back of progress for Donald Trumps tax overall plan. Looking at pound, that depends on whether theresa may can convince her counterparts in europe that shes done significant progress. About curve flattening, steepening. Ggregate the spread. Lets go long. Tracy alloway told me over the weekend that this matters. Heres yeartoyear yield. Notice how flat the yield is. The difference in that spread gets narrower. 2018 . Looking across francine i like that chart. I like your beautiful writing on it. This is financial conditions by the fed. I will push it out for those listening on radio. Bloomberg financial conditions in white. That financial conditions have continued to ease even in the u. S. Investor, you are struggling to judge how rates will drive prices. It kind of encapsulates the concerns we had overall. Movingght now, what is Global Markets . It has to do with the historic vote lead friday night. Got three hours of sleep and were honored that he joins us on set. Lets cut to the most important thing of the day. Have you ever seen big macs, filet of fish, on air force one . I have not seen the famous mcdonalds meal. I think the president has changed his eating habits and little bit. They have special chefs. Tom kale and rice cakes . If he is eating mcdonalds, he keeps it away from the press. His new book gives a look at the campaign. Tom this is mr. Lewandowski. The trump diehards win over the weekend . We know the elites won. They tell us the middle class won. The core constituency . This tax cut bill polls poorly among the base. They may get some tax relief, but not the record size tax cut the president talks about. The idea is that some of that money will trickle down into the economy. They dont necessarily see that. It will be a couple years. Francine i guess the concern from a lot of the press is that all this money will not trickle down to the economy. Ages. Nt increase w the president ing can do to make sure that the ceos are on his message . Theres not much he can do. He can tellim them to stop saying publicly what they are going to do. Many are very public about saying they are going to use this money for dividends, share buybacks. The president doesnt have a power to tell the private sector what to do. He can encourage them to build more plants, trade rules to get them to put more money in the u. S. , but hes really powerless to direct these companies to make sure they are giving money to members of his base, rather than shareholders who he was whining and dining with over the weekend. Francine thank you so much. With us in london, leslie vinjamuri. They manage 12 billion in assets. Lastly, let me start with the president s tweet. Flynne tweets about lying, does that make it messy . It does. Everyone is wondering if he did know flynn was lying before he flyn. Comey to leave n alone. Edre hearing lots of mix things. Nonetheless, this investigation is pushing for now with flynn cooperating. Clearly, mueller is moving ahead. Link the tax you plans . Leslie of course there is a push regardless. But what were seeing is that hes trying to deflect attention away from the investigation and , andharge against flynn towrds the success hes feeling with the tax plan. This is what he wanted. This has been the legislative victory hes looking for. Tom is the defense of the president ultimately, we are not part of the washington establishment, we didnt know what we were doing, we are sorry . Is that where this is heading . Leslie on flynn . We didnt know what we were doing when we had the soontobe National Security adviser tell russians to react against sanctions for messing with the u. S. President ial election . Doesnt seem like a plausible defense to me. I think even donald trump had some awareness that you have to be on board when it comes to a major foreign power trying to undermine the integrity of the election. The question now is why. Was aware of this conversation with russia not responding to the sanctions, what was being promised, and why . Was it just about recasting the relationship, or is there a connection to this broader Disinformation Campaign . Clearly mueller is moving toward. Francine abdullah markets view this . Do they ignore it for the moment, or do they start pricing in something to do with the president . Shortterm, they wont price price theack will cash back. U. S. Financials are the ones that pay the highest bill in the u. S. They are that the key beneficiary of this tax cut. Betweenet right now, the 100 billion being printed every month out of the central banks, plus increasing earnings by back, market in a fight back. Even though everyone is aware how unsustainable situation is, it will only become truly unsustainable when cash stops. Tom we will be speaking on the european banks in our next half hour. Much going on in international relations, including a lunch in brussels. Price, yield down. He is perfect. Look for that. This is bloomberg. Taylor this is bloomberg surveillance. Theres a big takeover in the industrial cable business. Buymian has agreed to general did all. It is an 81 premium to generals Closing Price before the company said it was reviewing options. Forhina, the stars came out a gathering the government uses to promote censoring the internet. The gave a surprise keynote address. He called for future technologies. The google ceo was also there. Rio tinto as named a veteran mining executive to be its new chairman. The industry is under pressure to keep a tight grip on Capital Spending and boosting shareholder returns. Stockholders had rejected the plan to name davis as chairman. That is your Bloomberg Business flash. Tom for our global audience, what you need to know over the weekend is there was a tweetfest with the great assumption that perhaps on monday it will continue. We need some analysis. Leslie vinjamuri with us. As well. Th us lets get back to First Principles of this trump administration. We clearly solve over the weekend, general kelly cant control the president ial tweet flow. Where do mcmaster, tillerson, and general kelly fit in . Leslie these are very serious people who are trying to do what they can on matters of National Security. It is very difficult because the president is clearly continuing to send his messages directly to the people. This is his style of politics, direct engagement, unedited. Said some we know, fairly open disagreements with the president. Nonetheless hes hitting to brussels. Were veryds tweets distressing for multiple reasons. Theres the comment that perhaps lawyerthe president s who constructed some of those tweets, and tried to distance himself from them, saying we are not verifying that the president knew that flynn had lied to the fbi before he asked erector call me to abandon his pursuit director comey to abandon his pursuit. Late inot of confusion the game. All of italy is focused on mi lan. They let locally of the other team score. How does this trump stuff lay in europe . Is europe just exhausted i at all . Davide it is. It is so complex to follow, unclear what is happening. To us, what looks very weird is why the largest corporations should get the biggest tax advantage. Theres no numbers that can justify these tax cuts. We see it as a massive kickback to the key republican donors. Ultimately theyve been funding the party for many years and this is their way to get paid back. Easing the quantitative the fed has engaged. More than 80 of it has been invested in share buybacks, increasing the value the key shareholders. What we dont understand is why a president that comes with a message to reduce inequality will increase in. This is modern times and we follow the data. Francine isnt it a matter of, never gets would penalized for voting for a tax cut, no matter how unequal it is . Leslie this could be more explosive. This was pushed through with tremendous speed, with a lack of transparency. Manyu follow the tweets of endocrine etc. , they were saying, we havent seen the plan. We expected to vote very soon. Tremendously small amount of debate for something so significant and consequential. Things have tof be reconciled, but it does look like a big cut for corporate and limited lifetime cuts for individuals. Like that will expire. A number of items that are going to the middle class. It is a question of whether willest rate reductions stay in place, and a number of medical exemptions are being removed. A number of those are going to hurt trumps base. Tom we wait for the first real analysis. Marcusup, karen, neiman president and chief executive officer, on this state of Luxury Retail in department stores. In the 12 00 hour. This is bloomberg. Francine bloomberg surveillance with tom and francine from london and new york. Lets talk about bitcoin. Francesman of regulator has denounced bitcoin. Davide says bitcoin is a moneylaundering tool for criminals and tax cheaters, the scheme of ally time. I kissed a concern for investors is it may be something ugly, but can we afford to ignore it . Davide absolutely. Fcc didnt spot it for 20 years. The reality is, people are making a big stake between the Underlying Technology, which is great, and bitcoin, which is nothing but a scheme. Developments are great, of course. Nuclear power plant, fantastic. Nuclear bomb, not so much. It is the Underlying Technology that really matters. As an investor, you should ow thatit, or at least kn it is a scheme. Can you use blog chain in other applications . If you think block chain is the investment of the future, how do you get into it . Davide it is a game changer in the technological world when it comes to reducing cost of existing financial infrastructure. We have made investments in a company which has been approved. Francine thank you so much. Stay with us. We will be talking about exit. For more stories, the latest edition of Bloomberg Businessweek. This is bloomberg. Monday, we welcome all of you. Lets get right to first word news. Launchedresident trump a weekend tweet storm attacking the fbi. The president questioned the direction of the fbi and said its reputation was in tatters. He said the new director needs to clean house. The tweets began a day after the president s former National Security adviser Michael Flynn pleaded guilty to lying to the fbi. A new survey says republican backed tax cuts will give a modest boost to the u. S. Economy in the next two years. Economists are named with the National Association for business economics. Forecasters most likely to cite trade protectionism of the top risk to expansion. At the Richmond Federal Reserve Bank have chosen a new president. He is a Senior Executive at the Global Consulting firm mckinsey. Sources familiar with the situation, he will succeed jeffrey lacher. He was forced to quit after admitting his role in leaking sensitive information. In hop hollywood is calling singapore a haven for pirating copywritten entertainment programs. According to the coalition against piracy, the authorities in singapore allow on up the group wants singapores government to block piracy inside the boxes. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs, this is bloomberg. Francine thank you so much. It is a big day for brexit and theresa may. She is in brussels today where she will have lunch with the European Commission president. Negotiationsnd of and the future of the irish border. Ceo ofet back to the algebra i dont know what this means if the eu says we dont have an exact agreement, but youve made progress to make trade talks. Whether we dont get that it means it will all unravel during unravel. Davide i think the commission in a duty to keep going negotiating. Ultimately, any deal will have to go through the European Parliament and that is where shower will be a cold because youre 26 members and just one is enough ultimately to lead to it. Francine what kind of deal will he get . Do markets need to take a look at that. Davide markets right now are in a way because if you have the , from theganda european perspective is the opposite. They say we are the adults in rome and you guys are screaming it decide to leave and change course. I see no reason why now we should suddenly behave like adults where you havent. The fact that you of the full freedoms inside the markets, i cant see anyone breaking that full freedom. When you cant break that, the key question is can they buy an exception. There must be an amount of money of that can buy it at least for a while. Tom what is the incentive for europe to do anything . Im baffled by this. I have no understanding of why europe should have a constructive launch, get the desert and do something in december. Why does europe have to do december instead of later in 2018 . Davide it has to do with the parliamentary proceedings. If we dont have a clear view of whats going to happen this month, it is impossible then to strike a deal and be able to vote on it by june or september throughout the parliament. So then it gets active by march of 19. If you keep on delaying, there will not be enough time to get down to the nittygritty. T now were tom you nailed it. You said if we keep on delaying. Am i right that the ones delaying or the british are the british . Davide they have delayed so far because they need to keep this deal that brags it will not Impact Investment and jobs. The only market that has reacted so far has been sterling. Thought extending is to keep because that will not have an impact on the shortterm economy so they can say that it is great. Francine what does it mean for the future . Is it only the pound but still going to move . Think for the u. K. , you need to open the gq this morning. The latest poll, corbyn is eight or 9 at of the conservatives. The young voters have realize theyve been cheated in a way with all these brags it claims. Brexit claims. The young generation in this country will see the future ,eing changed and as a result next time voters will show up and vote for change. Francine it is unlikely the conservative party will actually call for an election before the fiveyear mandate because it didnt go to plan in june. What does it mean where brexit will be . What are the chances of a second referendum . Davide the chances a summing going wrong the next three or four years are extremely high. ,hey had to buy the majority that is not a strong majority. Secondly, the probability of an accident remains high because the fundamental reason is that people are realizing it costs people brexit. They were told it would give them more money and everything will be fine. Now they said we want to take back control and this is the price you need to pay for it. The propaganda was very different. Now lots of people are realizing the propaganda and numbers dont add up which is why some u. K. It is in the u. K. Government interest to put as much money on the table so they can keep extending and pretending. Tom what is the dynamic right now of bodies moving to other european cities . Do you buy it or is it a lot of talk . Davide it is reality. After a to consider , you will have a legal document and it will say what you are allowed to do and not to do. At that point you will have a european regulator looking at any european transaction and anyone needs to be fully compliant about regulator. All clients are aware of it. They are starting to move people because they need decisionmaking inside the continent. You up about 40 that is europe to europe business in london. Will not be 40 dealt in london, but on shore on the continent. The key places or paris and frankfurt. These are large countries with a aa or aaa banking with the regulatory where the Regulatory Infrastructure is superb. People move to that area. Tom we will continue. Let me tell you about radio. Gethave been briefed by us, a rebrief in a good look at the news. Bloomberg daybreak americas was in therapy all weekend, im ferro. D for jon a wonderful new surveillance on bloomberg radio. This morning. Francine good morning. Tom and francine from london in new york. We want to talk about banks. European banks have had a strong morning after republicans narrowly approved the sweeping rewrite of the tax code in decades. President of the nations Banking Association set consolidation of the industry in italy will continue next year with lenders falling to about 110. Serra. Et back to davide italian look at banking, bob diamond said there needs to be Challenger Bank. Do you think there is room . Davide there is room for a Challenger Bank if you are in the activity which are altra regulated by the ecb. Theou are investing, in u. K. You would be subprime. Today it is hard for the Banking System to lend you money. The space to be a Challenger Bank in the less regulated parts simply because it is altra regulated by the ecb. Francine will we see a lot more consolidation with regulators . Davide i think it is inevitable. If you consider how many branches there are in italy per capita. You want to the highest numbers on the globe. You need to cut branches. When you cut branches, you cut people and you have to make significant economies of scale because you cannot survive with all these regional banks, each one with cybersecurity and digitalization and brands, it is unsustainable. What you will see is lots of consolidation by people merging and impacting both corporate costs and network. Am be very heavy on the employee sector for three to five years. Tom where you see the shares to the greater macroeconomy with spread equity so on. Longterm rates are flat. Even the idea of moving from negative yield across europe up to the zero bounds, how will that affect european banking . In awayeuropean banking from the last seven or eight years has to suffer almost negative margins and the reason is similar symbol. Your security, people speak to clients. When they collect cash and put it into central banks, they lose money. Losing money when customers and trust you with their province. Over the next three to four years, the policy gets more a resultd, i think as european banks will start having some positive margins back. The key difference with the u. S. Fed funds rate which is positive. Tom im bringing up the chart , im sorry for the black screen, there we go. Name that charge. What stock is that . Know the it is the ugly chart of Deutsche Bank. That is a beyond elegant chart. If you want to come up here and do something family fancy, im sorry. It works. How does john cryan break out of this tenure train wreck . Wreck . Ear train davide john inherited a train wreck. If you look over 20 years of bankche bank, deutsche made 100 the off operational payment. Less than 25 went to shareholders to reinforce the capital base. So it was mainly ran for insiders. The good news is john cryan said this wont be the case. He is the backing of the regulators and they will reinforce the capital base. I think the short term, what he needs to do once you find the base, i think there will be a role. And are two reasons they might be able to get that side. Improve margins will as it equals the normal policy rate. Secondly, the german Banking System has been optimal because so many banks were lending at the very same margins. They are all regulated by the same regulators. They need some capital to do that and they dont have access to it. I think margins of the german Banking System in the next three or four years mainly in the less competition because people are willing to price for it. And second there are rumors swelling about who wants a piece of commerzbank. Who do you think will get it . Davide i think because it is a good franchise ultimately will either merge with Deutsche Bank or hgb. Nobody knows. It will make sense to have less banks, more profitable. The only solution is how you merge with a Mortgage Bank or with a more commercial international bank. Francine they seem pretty strong, are they going to be playing a big part in m a in the coming years . Davide from a french , it is to enter the German Market where i think there is an Inflection Point in the three to four years. Besides the Balance Sheet in germany is so high that if take a german Balance Sheet and add to a friend Balance Sheet, these of global rules bigger you get, the more capital you need. They will be extremely penalized. I doubt they will be able to complete compete effectively. Francine in the meantime if you want to put some questions to davide, log onto tv and tom and i will ask them on be your. This is bloomberg. Lets get to the Bloomberg Business flash. The bank for international sediments is joining the question that stocks have become too expensive. ,evaluations look especially in the u. S. Asset prices are being by Monetary Policy very Goldman Sachs is measure of average valuation was at its highest since 1900. Facebook will increase the size of its staff in the u. K. By 50 . 600company is hiring employees in london, predominantly in engineering roles. Facebook is under scrutiny from british lawmakers. They are concerned about russian interference in u. K. Politics the is social network. It is a blockbuster deal that could reshape the health Care Industry. At nevergreed to buy about 67. 5 billion. It would combine the largest u. S. Drugstore change with the third drugstore chain with the thirdlargest insurer. Cvs and at no for our global audience is a gender or dealing with a quarter trillion dollars of revenue per year. Is our global editor for mergers and Acquisitions Team and davide serra is also familiar with this. Aaron, this stinks and the reason it stinks is price. Can what constraints can be put in so that this juggernaut combined with United Health care wont rig the system and reprice across many Health Industries . Askingi think you are the key question which is antitrust. We look at this deal and there is this question about a vertical horizontal merger. Pat in the past, people say you could get through because there are different companies. Time warner might make a different view and ask is this giving one powerful player too much power whether its health insurance, drug prices, medicare benefits. Thats the key question of whether this deal will get through or not. When you look at this, is there an asterisk around our bloomberg analysis because it is health care, because it is medicine, because it is the cvs drugstore, is it a different treatment because it is about our doctors and medicine . This ishis will argue great for grandma because she can pick up her drugs, get her insurance, medicare benefits, they will argue it will give the client a onestop shop. But critics will say this will give them way too much power across the value chain and so it needs to be scrutinized. Francine we dont know who will do the scrutiny. We dont know what agency will do it. Is exactly right. Will it look as a health care or retail deal . It crosses so many sectors. What is really interesting is the political angle because just like weve seen with at t and time warner, everyone thought it would be waived through and now we are seeing a giant legal battle between the doj and those companies. Francine is this an industry story or political story . Davide i think it sends one message which says financials undervalued. He is the bitter, the physical store and the insurance company. I never heard about that and i think the only reason is the value being sure the Financial Assets are specifically undervalued in relative terms. Thats one of the key points i see. Tom very quickly on a financial basis, this goes back to morgan stanley, when you get an xo spreadsheets, you can do this forever and there will be 10 to 15 , it is still about price at the time and they have every incentive not to show that, dont they . There is no reason for them in this process to explain how they will save people money. Is if here the key issue they were to get generic drugs, which they say are cheap and power willusing the be a massive benefit to the bottom line. Youve taken some the generic that made its money betting generic and cheap and be able to cross that into your distribution network. Tom thank you so much. Greatly appreciated. Aaron, im sure we will be speaking to you after this gentleness merger. Jon ferro will be joining a 7 00 to 9 00 on the radio. That will be on the economy and investment. At 9 00 i will take a look at bloomberg surveillance. Ferro, bloomberg surveillance. Lets market check. Markets on the move. 16, dow futures up 210 points with a little bit of curve flattening. It is pretty stable. Crude oil trading a little bit lower as well. It is a Beautiful Day in new york. Even better in london. Review from the thames. Is this a phone . Or a little internet machine . [ phone rings ] it makes you wonder. Shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And ask how to get a 200 prepaid card when you buy any new samsung device with Xfinity Mobile. A new kind of network designed to save you money. Click, call or visit today. Tom this morning, margaret sir ls a tax melt up and down many fed hikes to come in this hour. Tax cuts, are they about making the donors great again . Our bond markets priced to near perfection . There will be a lunch in brussels. Be rather civil on brexit. This is bloomberg surveillance live from our World Headquarters in new york. Im tom keene, with me as francine lacqua. Elevated lunch what will be at lunch in brussels . Francine i think it will be at least a two to three course meal to make sure they get onto the nittygritty. I dont think there will be a deal yet, but if theresa may does make sufficient progress, the may be enough. Whats more point to the british, the irish border question or the European Parliament justice question . Francine depends on who you ask. If you ask those living in the country or whether you are in irish citizen. I would say for the eu, both are equally as important. Tom one of our debate, a big day in brussels for europe and the united kingdom. First word news, here is taylor riggs. Taylor republicans will try to hash out the differences between the house and Senate Versions of the tax cut bill. Each for the tax cut rates. Ratedent trump says the could be drops to 22 in the final bill. The u. S. And south korea are defined north korea with four games involving 230 aircrafts and 12,000 troops. The exercise began today, north korea is warning it will take a close look british Prime Minister theresa may takes her backs best brexit offered to lunch today in brussels. She is offered all she can and a rejection could risk a breakdown in talks. A new stumbling block has risen in the role of the European Court of justice in enforcing the rights of citizens. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs, this is bloomberg. More data checks today on television and radio. Equities, bonds, currencies and commodities. Curve flattening early. Right onto the next. I want to review europe to year yield. Francine,oin in for 8000 to 11,000 in two cups of coffee. Francine this is what im looking at, dollar rising yield on the tax plan. European equities rebounding after friday slumps. It was a little bit of a fixture across gauges and looking at oil. Say thek to basics, we spread market, too sent spread two sent spread. , theeparate yields twoyear down here, here is a big spread in 2014. When we say it narrows, that is what we are talking about. That is a spread narrowing with acceleration. Tom this is what im looking at. It is a very simple chart looking at financial conditions. Bloomberg financial conditions in white. The 10 year in blue. You can see the yearround in red. What it means is financial conditions have continued to ease even in the u. S. Tom we need to begin our coverage with our white house correspondent. His coverage across the nation with print the president has been valuable. Again, come great on, it is make the donor class great again. Who else got great again friday night . Definitely the donors and billionaire class did benefit. You got rid of the estate tax, the corporate rate down to 20 . There are some things in there that benefit other people, you have the doubling of the standard deduction and increasing of the child exemption. There are things that could help some of trump hospira as. If you look at who got the most out of the tax bill, it is very clear the 1 did very well. A remarkables tweet storm. How are the adults doing bouncing off his original president . Toluse it is very difficult for people like general kelly who want to have a sense of order in the white house and control the president. Especially when you have these News Headlines about general flynn, the former National Security adviser, pleading guilty and cooperating with the fbi. That has sent the president off into a rage. He tweeted against the fbi. He is tweeting things that could be selfincriminating and it is clear it is making it difficult for people want a normalized structured white house to be able to control the president when he gets in this sort of fits of rage antitrust start tweeting whats on his mind. There were reports that look a lawyer wrote that tweet. Is that true . Toluse the white house got damage control quickly after the president tweeted that he knew the general flynn lied to the fbi. That is basically would be admission of obstruction of justice if he cap general flynn on and then fire the fbi director and try to get them to move off the investigation. Now we are hearing that the lawyer actually drafted the tweet. Him saying i did this, it was badly written and i wont do it again. Trying to protect the president and that is what you see in this white house, people around him trying to protect him, keep them out of trouble, trouble from his own making. Do we have an idea of what the investigation will focus on or who . Toluse the big question is who is general flynn cooperating with in terms of how use going to cooperate with mueller and who he is going to potentially turn in, whether it is the president or Jared Kushner or other senior advisers. General flynn was one of the top advisers during the campaign. If he is going after a bigger shark, it has to be one of the people in the inner circle and that is what people are working to find out. What is going to happen once general flynn starts talking to the fbi. Know who youre going to bump into on the sidewalk. I bumped into a major republican donor on the sidewalk this weekend and he brought up Vice President pence. What is the relationship of the Vice President in the white house and all these different players . Is he a typical Vice President removed or is he involved in the daytoday grind of this administration. Toluse what we know from reporting about Vice President pence is he is very involved in a most every meeting. He is close to the president , they speak regularly. We havent seen the president break from the Vice President in any case. You normally find the Vice President sticking up for him, trying to translate his antics into more normal conservative politics. For the most part, the Vice President and president on the same page. Specifically when you talk about these investigations, the Vice President has said he came onto the campaign late. Tom you are known for your granular reporting. Toluse we havent heard much about the Vice President pence diet, but i can assure you we dont expect the Vice President to be eating 2000 calories in a meal. Tom we agree on the Health Message for the day, the president needs to migrate up to the u street mens chili bowl. Very good. Thank you so much. He is in washington with the brookings institution, john rood at joins us now with a focus on governments. How is the governance going at the white house . It is an original ministration administration, can survive the antics . John this is a white house in charge of governing the entire United States government and they cannot even govern the one man in one room with a twitter account. The president has shown is not just an unwillingness to do it needs to be done in washington, but an unwillingness to do it he needs to do in his own shop to start getting things on track. This goes back to brookings and a responsible society. Peter years ago saying we have to fix the 401 k program. What is responsible in the taxcut legislation. John there are certain aspects that will are intended to help businesses to begin investing more, to begin hiring people, but the reality is that is not a real mandate, that is not something that will drive most employers in the United States to start doing what republicans claim will be done. What it will be doing is create a real wealth transfer of continued wealth transfer in a time where corporate profits are high and jobs, unemployment is pretty low. Meanine what does that for why the republicans are voting for the tax cut . Is it just as they dont want to be penalized that the election . What good can come of this . John i think republicans firmly believe this will be something that will help them come election time in 2018. The president campaigned by saying he was there for the little guy, that he did not like big bankers and big Business Owners and that he would help coal miners and School Teachers and firefighters, the reality is this tax bill does not. This tax bill does affect those wealthy bankers and Business Owners who he claims to be fighting against for a year of running for president. Francine one final question. Is there anything the president can do to try and convince corporations not to give back to shareholders, but reinvest in the economy . John he can try, but it dont many Corporate Executives are looking at donald trump and listening to what he believes, what he thinks and what advice he is willing to give. I think a lot of people look at this president and put their hands over their years and dont want to hear anything he has to say. Tom we will continue. He is the congressman from michigan, look for in this afternoon in the 3 00 p. M. At our. Hour. 0 p. M. This is bloomberg. Taylor lets get to Bloomberg Business flash. A big takeover in the industrial cable business. Italys praise me a has agreed to buy general cable. The places 3 billion. That is an that is a premium. The company said it was reviewing strategic options. Simon thompson has been named as the new chairman. The industry is under pressure to keep a tight grip on Capital Spending. Rio tintos stockholm stockholders reject a previous plan. In china, the stars gather to promote censoring the internet. Apple ceo tim cook gave a surprise keynote address at the Opening Ceremony of the world internet conference. He called for a future technologies to be fused with privacy, security and humanity. Google ceo also was there. That is your Bloomberg Business flash. Tom what we are going to do is talk about cvs and aetna in a bit. On the bond market will do a big thing in the next half hour. Ofcontinue with john, senior governing studies at the talks as institution, lot about power in washington. After what we witnessed this weekend, how do you define executive power in this original white house . Is it just about the whims of this president . John i think executive power particularly with what the president has been doing unilaterally has been one of the most underreported parts of his administration in terms of regulatory rollback and abusing executive using executive orders to change the manner in which the executive branch is structured. He is a president was at a commitment to using his pen rather than working with congress to achieve goals. The president has been successful in that context. Tom here is the money question for someone like you. Is this a oneoff or does this new executive methodology have staying power into other presidencies . John i think every president builds on president ial power and does everything that he can to keep that power in the white house. I think there is a lot about this white house that is very much a oneoff in terms of communications and organization, in terms of lack of discipline. I do think you are not going to see that much of a slow back in executive power, even as canada trump criticized president obama for his use of executive authority. Tom will francine will the present continue tweaking or will someone take that tweeting machine away from him . John the best thing the president could do is stop tweeting and listen to these socalled adults in the room were working in the white house. The president seems to have no interest and no incentive to stop tweeting, because he has a really interesting way of disrupting the conversation and distracting from the things he doesnt want people to see or least he believes even though sometimes it laser focuses the public attention on what the president shouldnt want them to see. I dont youcine take a tweet. Is it policy or not policy. Theyre so much on if you take it at face value or whether language just gets condensed. Everybody says donald trump should stop tweeting, but the reality is it has worked for him. In terms of playing to his base, he carries the message. Get people on board. While all of us in the pond and class can criticize him, it is working. Quickly here and we will do this in the next half hour, can you leverage make America Great again and the melt up 16 in futures and the down futures, can you leverage that enthusiasm into next year. Business friendly wall street friendly. Tom what does that mean to your world . Other than the fact we live in a blue state and wont be able to deduct as many state and city taxes, i think it will give andost to business enthusiasm in the equity and bond markets. I think we have some doubts on the issues surrounding Interest Rates and other deductions. At ait is time to look policy schumer poppet Pelosi Schumer poppet. Puppet. You guys are just killing it. Democrats refusals to give even one vote for massive tax cuts. It is our first week of the day. Why we need republican roy moore to win of alabama. Etc. Etc. Note to jones. John, you are the first ones to weigh in on the tweet should he be doing this . John this is certainly something to connect well with the president space, but it is important to remember on election day, about 40 of americans supported President Trump and that number is now in the mid30s, so i think the tweaking is not working for him, even if it allows them to connect with his base. He keeps losing moderates very quickly. Tweets like that dont help. Tom there we are with what i assume is not the last tweet of the day. Thank you so much. Bloomberg daybreak asia, a conversation with must watch. 6 00 p. M. Tonight, the man with wonderful new book out. This is bloomberg. The cvs chart for francine lacqua. Cvs on merger talks. Aetna with the moonshot as well. Of the university of pennsylvania can be ready for the we are in this merger. This thing is gigantic. A smokescreen and almost about Cartel Economics with United Health care. There will only be two employers left on the planet . If you look at the Health Care Space with providers and medical services on the other end. In between that, you have Health Insurers, pharmaceutical just to readers. A massively complex supply chain with a ton of players. Weve seen this effort to go along and how do we condense that or bring it under one roof . There are people on that all along. United health has a lot of that. Everybody is trying to figure out how this middle section will collapse one way or another and this feels like an effort to address that. Lets call this the Health Industrial complex. Is this an industrial reaction to the future nationalization of our medical programs . I think you are looking at this as basically all of these things are doing with the specter of this problem and mentioned with a very inefficient health care system. That is going to get disrupted by an amazon, some the big enough to have enough money to do something. Until government says this is problematic. Those are two ways a market or demand coming in addressing this problem. Studying and you writing about today . We are looking at the antitrust questions about this and if the trump administrations take on amt at t time warner reaches over to another issue. Tom a quarter trillion dollars of revenue per year ought to get your attention. We are going to continue, we will look at the also the opportunities for 2018. Stay with us, from london and a beautiful new york, this is bloomberg. Tom good morning. Bloomberg surveillance. A very busy morning in brussels and washington. In london. Cqua im tom keene in london. Heres taylor riggs. President trump launched a weekend tweeps storm attacking attacking thetorm fbi. He said the agencys director needs to clean house. The tweeps began a day after tweets began a day after Michael Flynn was arrested for lying to the fbi. Republican backed tax cuts will give a modest news boost to the u. S. Economy. Forecasters are most likely to cite trade protectionism as a risk. President for the Federal Reserve bank is thomas barkan according to a person familiar with the situation. Lacquer was forced to quit after admitting his role in leaking sensitive information. Hollywood is calling singapore copyrighted programming. It allows unauthorized streaming of tvs and movies. The group wants singapores government to block the parting software inside the boxes. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im taylor riggs. This is bloomberg. Francine cryptocurrency such as bitcoin are skyrocketing. Its a different story for assets in some developing economies. Venezuelas currency continues its freefall and the president sees a way out of his countrys economic ills by creating its backed by currency reserves in oil, gas and diamonds. Lets get more with hans hughes. What does this tell you . Are you running for the hills or is there something that could change the way you restructure debt . There are a lot of levels to this. I think the biggest one we should all Pay Attention to is one of the ways the u. S. Has controlled the narrative with countries like venezuela and iran has been by imposing opec sanctions. If you can establish another Payment System via cryptocurrencies that gives us politically less control over putting sanctions on their economy. This is kind of early in the game for venezuela and they have legitimate reasons to try to come up with an alternative Payment System. Their technical defaults occurred because with the sanctions the payment agents on a lot of their bonds were too scared to pass on the money the country had paid to service the bonds. I think in terms of u. S. Security something we really need to Pay Attention to. There has been talk about iran doing this. Obviously china, russia might start getting involved. This is one complication. Perhaps part of the solution to the eventual restructuring of venezuela. It does sort of complicate the narrative and this first step is something that not only new york but d. C. Should be paying attention to. Francine i love this story. Let me bring you to my terminal. This is a very simple to year yield on venezuelan two year yield on venezuelan bonds. You believe this did not have the intended consequences of actually agreeing restructuring debt. What does it mean for venezuelan bondholders . Number ofave been a meetings of bondholders and its a difficult situation. How do we organize when the country is still paying . The venezuelan called the meeting in caracas. We didnt understand if we were supposed to go there and if we want what we were supposed to say. Who we can meet with and what we can say based on u. S. Sanctions. There have an various meetings and there is definitely an effort to organize to ask for information. We need some clarity from the u. S. Side. And we certainly need to have some kind of clarity coming from the payment agents. Whats going on. We hear you got paid a week ago. Nobody is seeing the money. Why arent you dispersing. Chart. Res the same heres the twoyear paper. Down we go with some stability. A nice price recovery. This is just absolutely stunning. The recent crisis down to new lows in the last week. When you look at this chart and the acceleration of it its about getting paid and is providing the money to venezuela so the bonds keep going . Is it china . Venezuela has been an incredibly wealthy country and in terms of oil reserves they certainly got a lot of payment capacity. Its a question of production and getting the money into the country. In terms of future inflows they are getting investment interest from russia, china. When the u. S. Backs up these days the chinese and the russians move in. In terms of the price chart you saw just in terms of standard recovery on the sovereign venezuela is trading at 23, 20 four cents on the dollar. Generally restructurings get done at 40 to 50. You aree servicing and already quite below recovery values for restructuring. Let me bring this up again. Heres hans humes. You are saying we come up to the 40 level. Are the rules here the same . What we saw is forestalling. This is more like a capitulation trade tom who is selling . Youve got a lot of Asset Managers who arent allowed to hold debt thats in default. The weird thing on venezuela is there was a credit event. Paid. E country still by the rules you got etfs, some mutual funds who arent allowed to be holding debt you are selling. The question if you are a distressed investor is will there be more of a bottom when there is more selling. Tom price down yield up is hans humes steeled for a bear market or are you going into january saying we are going to make some money . We have been dealing with the markets bifurcated for a while. Highnk if you just look at yield emerging market with a large Interest Rate environment it is supposed to be kind of bearish. We have been dealing with a lot of orphan assets. Increasesrest rate doesnt matter when youre talking about yields 20, 30, 40, 50 yields. It doesnt move the needle. Venezuela, the macro environment wont really matter at these prices. Its a story unto itself. Tom hans humes with a terrific briefing you can only get here on venezuela. Let me tell you about the new calendar at bloomberg radio. Fox willferro and pimm join me on the radio. Ferro, fox. Thats like a branding guy made that up. I love that. Today Scott Galloway will join us with our book of the year. Francine breaking news out of the Eu Commission spokesman. He is with the right hand man of mr. Uecker. Meeting theresa may will have with the Commission President is actually quite significant may be more than we thought. He says the eu will be pushing to come as close as possible to a brexit deal. We will have more next. This is bloomberg. This is bloomberg surveillance. Im taylor riggs. The bank for International Settlements is running those who western of stocks have come too expensive. Its as valuations look frothy especially in the u. S. Beings asset prices are driven by loose Monetary Policy. Last week Goldman Sachs says its measure of average valuation was at its highest 1900. Facebook will increase the size of its staff and the u. K. By 50 . The company is hiring 800 employees in london predominantly in engineering roles. Facebook is under increasing scrutiny from british lawmakers. They are concerned about russian influence in u. S. Politics. U. K. Politics. Forhas agreed to buy edna 67. 5 alien dollars. It would combine the Third Largest Health Insurer with the largest drugstore chain. Of 17. Tures out with us is hans humes. This is the major banks. Just not down here getting it done. Maybe this is the year they finally get up. Wells fargo flat and jpmorgan up. Shocked that combines their world with your word of distress . Outside shock that could upset the financial applecart for 2018 . If we get any kind of replays of 2008 if you have an exogenous shock of the selloff one of the things that people dont how much the behavior of large institutions can influence markets. In terms of counterparty risk if there is a shock thats big enough that spooks these large institutions and it can just be an equity selloff then they can overreact with the customers. Francine is too young to remember put fully or insurance in 1987. Is the vix and the shorting of the vix the roulette game waiting . Is that the portfolio insurance of 2018 . It has been a tricky one. For any of us who has been involved in the markets as long the vix has looked like a good way to hedge yourself for quite a while. Hard. s very the traditional measures of volatility have kind of fallen by the wayside. I think it will work when we have all given up. When you talk about large institutions changing the markets are you talking about hedge funds and how can you be sure that hedge funds when aret stirring the markets at the exact time when there is so much passion investment. Big things that has changed in the market, the liquidity providers used to be the cell side. The sell side can provide enough of a buffer with large moves in the market. They cant read the bid so hedge funds have become larger. If they need to exit their positions the sell side can take in the selling. What we have seen in our world with diminished liquidity is quite a bit of pickup in volatility. You have seen that in other markets as well. The large institutions at some level are a reflection of confidence or fear in the market. In terms of their behavior they are not going to be able to inflate the moves if a big institutions like hedge funds come in and out. Francine what does that tell us . Bout market functioning is volatility the name of the game and 2018 . Who knows. There has been a lot of fear in the markets all this year but the markets have done quite well. Next year in terms of geopolitical risk we were kind of amused at the beginning of 2016. There was a lot of fear and loathing and it turned out to be quite good year. Thereear at our sense was is a bit more optimism that the potential headline shock was even higher. Markets have018 had a very strong run and i think we are subject to headline shock as you can get. Internationally as well. To those not as sophisticated as you that arent going to do venezuela is it going to be a bond bear market . We have forgotten what price down yield up does the portfolio. I think the answer is yes. We have been waiting for a while. Chance that we are looking at a somewhat controlled market going into it. Its tough for me to believe given where equity valuations are the people might get a bit defensive. While signs are of passive activity in the market yields are picking up and i think the might be what picks up Economic Activity so there is a little bit more inflation. Tom thank you so much. We will continue this morning with greylock capital. Francine your heading off to radio. Of greylock capital stays with us. For more stories logon to bloombergs this week. We take a look at the 50 best. Its good. It is nearest to you. Pick it up. This is bloomberg. Francine this is bloomberg surveillance. Coming up shortly, bloomberg daybreak americas with david westin and alix steel. David one of the things we are excited about is the cbs aetna cvs aetna merger. Jim barnes is the vicechairman of ubs investment bank. Were going to talk to him about that and we will talk about the tax overhaul and what its going to mean for his business and m a. The tax that striving markets higher. Thank you, david westin with daybreak americas coming up shortly. Brexit andday for theresa may. She will have lunch with European Commission president jeanclaude euchre jeanclaude euchre john claude juncker. Lets get straight to nejra in brussels. They still havent agreed on the irish border on or eu nationals. Thats right. We did see the pound actually rise when that headline broke. Barneys Office Actually declined to comment on that. Heard that today it is seen more of a staging post from the eu summit. With the aim of moving the talks on to trade at the summit on december 14. Big questions over whether that is actually going to happen. There are still challenges particularly the irish border and the European Court of justice and the rights of eu citizens. That actually came up as more of an issue over the weekend. We were hearing from officials that it could become one of the most important stumbling blocks at this stage of the game. Francine thank you so much. Joining us now is emaar ross thomas. Thomas. S summit andou have a in this case its going to be the 14th of december there is always a huge amount of drafting that goes in a couple of weeks beforehand. Let the u. K. Would like to do is not make any decisions until the very last minute. The eu has always said that today is the deadline and they have to come up with clear concessions on the three stumbling blocks if they want to make sure that at the summit they will get the green light for talks to move on to trade. Significants very that they Start Talking about trade before the end of the year. We could get a breakthrough today, the u. K. And the Prime Minister are working quite fast. U. K. Officials were pretty negative last night. Todaythey have always pushed bak against this deadline of today. Momentt the key crunch over lunch today. There is still as far as we know no deal on the irish border. What barnier told them in his meeting the deal on would set outer the rules in the north and south would be the same. We have to see what the dup says. They have said anything that would separate Northern Ireland from the rest of britain is a deal breaker. Haveine theresa may would discussed it with the dup we assume or not necessarily . You would assume. In this whole thing there is spin and counter spin. Its very hard to gauge threeway talks. It sort of surprising that it came back onto the agenda and the eu was saying this has got to be sorted before they move on to trade. Do you look at this day in and day out about how this has taken place . It is certainly something we Pay Attention to. Europe has always had the possibility of being an exogenous sure shock to the markets. My takeaway has been three years ago five years ago there was a the anglosaxon model being superior and brexit has been a painful process for the u. K. And we are dealing with a fair bit of turmoil over here. What is been interesting for us to watch is how the exit negotiations have really pushed some of their trades such as greece into positive territory because europe is now the center of gravity and the island of stability globally. Francine thank you, Emma Ross Thomas and hans humes of Greylock Capital Management for joining us today. This is what im looking at. A little bit of movement on treasuries and the back of tax reform. This is bloomberg. Alix house and Senate Leaders hammer out different is to a tax overhaul package. At least one gop leader vows the bill will be on trumps desk by the end of next week. Theresa may puts her best foot forward in brussels. A breakthrough is near. And the Health Sector transforms. Cvs is set to buy aetna. To bloomberg. Im david westin with alix steel. Alix happy monday. David have a good weekend . Alix i did. About two and half hours before the cash open in the u. S. Risk on rally. S p futures up by. 6 . Dow futures up by triple digits. Its generally a stronger dollar story except when it comes to sterling. 10 year yield stronger by three basis points. Crude also a little softer down by 1