Transcripts For BLOOMBERG Bloomberg Surveillance 20180202

This is the stoxx 600. We see a little bit of pressure, down from 0. 6 . We saw a mixed session in asia trading. And we have this pressure on bond yields. Around the world. This served the boj into action to keep rates from getting out of whack. We have a good interview from our tim ross yesterday. 223. E, 1. 4 coming up on bloomberg surveillance, the speakers to the chief Financial Officer as the danish lender unveils a 1. 7 billion buyback plan. A little later, its the brexit show. We areb ack on were back on track and we discussed trade. We also discuss jobs and growth with roubini. The bank of japan has announced the first unlimited fixedrate bond purchase operation since july, seeking to assert control over the nations yield. The central bank offered to purchase 10 year notes over a fixed rate of 0. 1 and expanded purchases at the regular operation for the second time this week. The boj target for the 10 year yield is around 0 . Lester they offered to purchase an unlimited amount of debt. German chancellor Angela Merkels block. Antisocial democrats have secured after four hours of top level talks, the sister party of merkels sdu, said they are willing to compromise. The parties are closing in on a deadline to complete talks by sunday, though they have given themselves two more days of outstanding issues arise. Donald trump has decided to allow publication of a republican memo arguing the fbi that the surveillance powers in the russia pro and is unlikely to redact any of the contents of the document. That is according to a white house official. The move is likely to ratchet up the Robert Mueller investigation. Britains International Trade secretary has said the u. K. Must not enter into a new Customs Union with the eu. Liam foxs comments to bloomberg for new brexit red line theresa maysf negotiations. Fox also announced his support for the embattled Prime Minister. I wish more people could see the commitment she is showing to Britains National interest on this trip to china. Nejra bitcoin slumped to the lowest levels this year among mounting concerns over the viability of the biggest cryptocurrency. After reaching a record high of more than 19,500 in middecember, bitcoin has lost more than half its value. It has been weighed down to more expectations of government oversight globally as the acceptability of and the e susceptibility to hacking. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im nejra cehic. This is bloomberg. Francine lets kick it off with the markets. Global bond yields are under increasing pressure, sending the u. S. 10 year treasury to the highest level in four years. Investors will turn their attention to the u. S. Jobs report. The consensus among economists expect an increase of 180,000 in payroll. Joining us ahead of those payrolls, james foley. Great to speak to you this morning. What are you expecting from u. S. Jobs . Jane we did have the adp data earlier in the week. It raised market expectation above the printed market medium. But i think it is fair to say a lot of that focus will be taken by the average Earnings Data and fx. When we look at the hold of the g10 we have a situation where Wage Inflation remains the nine. Benign Wage Inflation has graded great gains for consumer spending. There has been relatively subdued cpi. Theme, not just for the u. S. Markets, but for the u. K. , australia and japan, etc. Francine what do you see treasuries doing within the next two to three weeks . We thought the boj and to adapt and adjust. Will others follow suit . Jane for months, you could say the bank of japan governor kuroda has been protesting against the perception in the market that the bank of japan could also be backing out of its huge quantitative easing program. It is asserted that that is not the case. This week we have seen the bank of japan put its money where its mouth is. Weve seen it 10 year yields drift higher. They wanted to put a lid on that. They are suggesting they want to carry on. Ecb officials suggest they need to maintain an accommodative policy stance. Inflation is still quite low. The market is really quite concerned. We can see this effect on yields and a lot of that concern is related to the u. S. , and the strength of the economy, part ly. The political situation is also playing at hand in the u. S. Market. The market is concerned that the tax bill was not properly funded, the infrastructure bill trump wants to promote this year might not be properly funded. We have a budget deficit, which was rising already in the u. S. On the back of demographics alone. You put this underfunded fiscal spending on top of it and it changes the dynamic and potentially that is not good for the dollar. Francine jane, what does it mean therefore, Going Forward . Does this mean more dollar weakness and if it does, what does that mean for fed policy . Jane well, again, if we do get dollar weakness, that will affect the inflation rates. We can see the fed wanting to engage in those Interest Rate hikes. We are not still convinced the fed will hike three times this year. I think if we try to work out the idea of the dollar and how far it can go this year. I think it is necessary to look at that in terms of looking at the euro as well. The euro is pretty strong. Fundamentals appear to have really strengthened over the last 12 months. But there is also political risk. With the euro being strong, in the way that is exacerbating the weakness of u. S. Fundamentals right now. Francine what is your favorite currency pairing right now . Is there something we should be watching out for that always will get top attention from investors . Jane well, the norwegian krone ticks that box. We have a central bank that became hawkish quite recently. That was quite interesting, too. Sweden, similar reasoning. Right now it is very interesting for foreign exchange. Perhaps, is surprised many of us this year. In the end, the bank of japan, will it maintain this accommodative policy stance . And will that undermine the yen . Its a very interesting picture throughout the g10 and other Currency Pairs this year. Francine jane foley there from Rabobank Group from the u. S. To china, the country is drafting a proposal to allow gambling on Hainan Island. This is an unprecedented move that could reshape gaming in chinas territories. The proposal comes as part of a wider plan to draw more hainan,tourists to which is facing a fiscal deficit. Joining us now is the head of bloombergs asia consumer coverage. Good morning. Just how unprecedented is this . Reporter good morning. This is really a very rare move. We saw the stock reaction because of that. This is so rare. Right now in china, they are only a couple territories, hong kong and macao, that actually allow gaming right now. Its only macao that we see physical casinos. So, any move to legalize gambling, as our sources say, could be very transformative for this region. I think right now we are hearing that things are in the early stages of planning at this point. They are considering Online Gaming, which would include sports betting, perhaps a lottery, but there is a roadmap that paves the way for casinos to open on Hainan Island. The is a big shocker and big news a lot of the stocks are reacting to. Francine how much damage would it do to macao . Reporter you know, huge i thek the key there is, if plan leads to the physical opening of a casino on hainan, you will see macao be directly threatened. Macaos industry is a 33 billion dollars industry, much larger than las vegas and use the american operators, like sands and mgm, really fueling that. All of these big players have increasingly shifted to attract the same kinds of demographics that hainan wants to attract, which is mainly families, holiday visitors, and tourists. You will see intense competition if this leads to casinos on the island. Francine oanh, i was reading up on hainan. It is roughly the size of switzerland. With a relaxed the rules on visas . Oanh that is right. This is part of a wholesale plan to really help the island with development and really encourage tourism on the island. Its a really Beautiful Island with sandy beaches. Currently, there are a lot of tourists. Most of them are chinese. It is really hard to get foreign touristss there. This plan would be to attract those kinds of tourists to the island. You know, whats interesting already is the island, of course, the provinces home to hna, which is the embattled chinese conglomerate which is under pressure because of the mounting debt woes. We sell one of the infrastructure units, the stock shot up because of the news today. Winnerd actually be a because it does have the infrastructure unitt there. There are plans to expand the airports. It is yet to be seen, some of this impact. Francine thank you so much, oanh ha, head of the Bloomberg Consumer asia coverage. We will have an interview with john cryan a little bit later on. At the moment, he is talking to reporters and analysts on a call actually, it is a televised call. You can follow it here. We have seen some of the takeaways, the 2018 cross target misses. You can see this morning, the shares dropping as much as 6 . Thats the most since july. Cryan thinks the bank is still too complex for some regulators, but the january performance was followed across the businesses. That is the latest from john cryan, but we will keep a close eye ahead of our interview later on. Now, sharing is caring. Does the bank unveiled the 1. 7 billion by back plan . Buyback plan . Andersen joins us for his first interview of the day. Francine economics, finance and politics. This is bloomberg surveillance , and im Francine Lacqua in london. Nejra Deutsche Bank has reported full year net revenue missing the lower analyst estimates. Fourthquarter net revenue was the lowest since 2010, driven down by a 27 slump in sales and trading revenue. He will bring you our interview with john cryan later. China is launching a proposal to allow gambling on Hainan Island in an unprecedented move that could reshape gaming in the chinese territories. According to people familiar with the talks, Government Agencies headed by president xi jinping are considering allowing Online Gaming and sports betting. China currently bans gambling and casinos on the mainland. Reasults reassured investors that investments were paying off. Includedid the profit a 789 billion benefit as a result of the new u. S. Tax law. Thats the Bloomberg Business flash. Francine thank you, nejra. Lets take it to the tech space. It was a massive day for the tech space, led by alphabet. bloomberg technologys emily chang follow the results from california. Emily im cupertino, california on apple parkway with tim cook, selling 77. 3 million iphones in a quarter with the average selling price at 800. That is below estimates, but the Company Brought in 88. 3 billion in revenues altogether. There to remain concerns over how well the iphone x is selling. Tim cook told me the iphone x is the most popular fun we have launched and every week it has been the most popular iphone in the world. Apple is about to bring back tens of billions of dollars in cash from overseas due to tax reform. I asked if that would impact the m a strategy at all, if they would consider buying bigger companies, like tesla or netflix. He told me, we acquired 19 companies in 2017, a Company Every two weeks. We look at companies, tiny to big. The key question is, would it improve the life of a customer, would it help us build better products . That is how we decide. Take away from that what you will. Also breaking now, alphabet earnings. I spoke with the alphabet cfo. Shares were down after hours, after fourthquarter profit missed estimates in part because of expenses and troubles at youtube. When i asked her about the share declines, porat told me, we are staying focused on longterm investments. Bets part of the business, we see growth and the cloud continues to power the growth forward. I am emily chang in cupertino, california. This is bloomberg. Francine lets talk banking in the subzero rate environment. Denmark unveiled a Buyback Program that generated extra cash. Denmark has had negative rates since 2012. Joining us now live from the chief is Financial Officer. Thank you for joining us. First of all, congratulations on your buyback. You also raised your dividend target. What are you most worried about for 2018 . Good morning and thank you for those kind words. Are 2018, Interest Rates the big unknowns in terms of the speed of change that we will see. We are also cognizant of the fact that some of our markets have seen very rapid price increases in the property markets were a number of years. Inhave seen operations grow norway and sweden and that is what we are monitoring closely. Especially vigilant around property markets. If i had to single out one area. On the other hand, we are confident in our positioning. Francine talk to me about, what do you see in the world that is making you so confident you can raise the dividend. You raise to the dividend policy, to higher than what you previously had. Does it mean you are confident in growth worldwide . Jacob well, when we look at the bank story, we also have to look internally, and not just at the outside world. We have been building a lot of capital for many years. That is also why we are doing the buyback, returning 93 of our earnings in 2017, which is obviously a very high pay out ratio in the context of what we are seeing elsewhere. Raising the dividend guidance for us is natural, reflecting the strong opposition we have had and giving us more flexible it in the future on dividends. We have tried to find a balance for stakeholders and obviously, raising the dividend policy shows some confidence in our earnings generation. Francine whats your i guess, how confident are you about your 2018 outlook . Last year you raise twice your full year outlook. Is 2018 going to be even better . Jacob we are obviously confident in our outlook. The 20 billion, we think that is a fair reflection going into the year. We also note that consensus is around that range. At the high end of that range. We think it reflects on balance the momentum of the business that we have seen in 2017. We are seeing a continued pickup in activity, expected here in 2018. Our core economies are doing well. We are a nordic bank with some exposure outside of the nordic region. Generally, we see a good macroeconomic environment, which feeds through to the way they guide us. There are small question marks around, what a property markets go, and where do rates go . Etc. Generally, it is a confident mood. Days in thely year. Francine how confident are you about the impact on your bank . It has been agreed, but has not been implement it within european rules. What impact are you expecting . Jacob it is one of the big unknowns. I will agree with that. When we look at the process from here, we are looking at an eu process that would last for a couple years, probably until 2021 and that will probably last until 2027. We are looking at a number of years out here with a final proposal that will probably be modified within the eu process. Given the excess Capital Position we have, which is more than 500 basis points at this stage, we are confident we can deal with any scenario that we finding a good balance with the shareholders as well. Quite confident in that. We are a very wellcapitalized bank. You see part of having that is making us very comfortable. Francine markets have been quite good for the banks during the last couple of months. What does that mean for danske, and is the trend stable . Jacob they are strong and they have been strong for a while, as you point out. Weve found levels that are historically lower. Keats not just a dans situation, generally a European Banking situation. We continue to fund ourselves as necessary through these levels and we are constantly looking to where we need to move on some issues to take advantage of the strong markets. Our funding needs are not what they have been in previous years. We have been thing Strong Deposit growth as well, which you see from our numbers. For us, its finding a mix of good local funding and also in the bond markets. Like other banks in previous years, when our level, it is becoming less of a deal went. Less of a tailwind. Francine when you look at your statement, talk to me about the job shifts. It would create more jobs, different jobs . Will this give new opportunities for customers . Jacob that is a good question. We are not very absolute around what happens to the number of people working for danske in the future because we believe that in the end, it is about the right capabilities and at the moment, you are seeing a major shift. As an example, we hired almost 3000 new people next year. And a lot of that is i. T. And Digital Skills being added. We see a shift in the work ski lls. And some of the more traditional banking experiences much becoming out. Theres a shift in the workforce in the coming years, as we have seen in previous years as well. For me, we worry less about the number and it is more about making the right conversation for the workforce. Francine are you involved in bitcoin . Will you be involved in bitcoin . Jacob no, we are not involved in bitcoin, as such. We know some banks have given an outright answer around bitcoin. We are advising our employees to refrain from it. But danske as such is not involved in the coin, no. Francine thank you so much for joining us, jacob aarupandersen , the chief Financial Officer of danske. Another red line. The u. K. Trade secretary says britain must enter a Customs Union with the eu after brexit. We bring you that interview next. We also talk about pound levels. Francine welcome to our weekly brexit show. Lets get a roundup of the brexit news. Heres nejra cehic. Nejra u. K. Prime minister theresa may start of week fighting on multiple fronts as critics in her party threatened to amend her plans for brexit and her premiership. Proponents of retaining e. U. Trade rules want her to fire chancellor of the exchequer philip hammond, who they believe is planning to deny them the quick break they want. Even donald trump is critical, saying he would have taken a tougher stand with e. U. As theresa may headed to china, she had a message to rebels back home, she wont quit. She faced questioning about her leadership from reporters on her Royal Air Force plane. , may dismissed the idea as a hypothetical situation. The Prime Minister vowed to fight the European Unions attempts to extend protections for access. Theresa may said the bloc should stick to its original cutoff date of march 2019. She also argued there should be different rights for european nationals who arrive before brexit day compared with those who go during the transition. The leader of the u. K. Opposition labor party told Business Executives he would rule nothing out on brexit accept a second referendum. Jeremy corbyn held the private meeting at his offices on monday evening. Plc were five. K. People from business lobbies. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im nejra cehic. This is bloomberg. Francine the u. K. Prime minister has been in china over the last couple days. Weve been talking about what shes been saying over there. She has welcomed a golden era of Chinese Investment in trade. Chinese president xi jinping yesterday, with the chinese leader calling for closer ties. Our politics reporter spoke to u. K. Trade secretary liam fox, who has accompanied may. He spoke about building britain and chinas relationship and financial services, and the timeline for the stock connect. Sec. Fox we want to see it up and running as soon as we can. We also want to see some gradual opening up of the Chinese Market and services in general. This is an area where the u. K. Excels and we have a lot of skills that china is keen to capture. Everything from design, and also then we look at areas like. Ducation educational exports from the u. K. Topped 17 billion. When you look across our service you can see the tremendous opportunity for both of us because of our ability to bring in some of the services to help the chinese sectors mature quickly. In order to do formal Free Trade Agreements, you need to leave the Customs Union. Could you see a reality in which the u. K. Decides to stay inside and focus on extending services in the future . Sec. Fox it is difficult to see how being in a Customs Union is compatible with independent trade policy. We would be dependent on what the e. U. Negotiated. Tohave to be outside of that take advantage of those growing markets. If you look at the imf, theyve been telling us 90 of Global Growth will occur outside continental europe. That is where we need to be focusing our attention. China is a huge market. By 2030, china will have 220 cities of more than one million people. Europe will have 35. You get an idea of the scale. A Customs Union arrangement, you think, would be really hard for your vision of Global Britain after brexit . Sec. Fox we have to have an independent trade policy. One of the reasons to leave the European Union is taking control. You spoke of the grassroots brexit campaign. You send then that a pro e u establishment in britain was peddling fear to the british people. Do you fear some of that tendency is still around, perhaps among those who leaked that draft . Sec. Fox we were told that voting to leave the European Union would push our economy into recession. We would see a rise in unemployment, a flocking of investment out of the u. K. Weve actually seen more foreign direct investment. A Record Number of people in employment, continued economic growth, and weve got a 14 rise in our exports. Remember, if you said this would be a trigger for a much more optimistic britain. I think they are recognizing just that. Are you concerned theres an element that wont accept brexit . Sec. Fox there will always be an element that will be not reconciled to the democratic wish of the british people. I think weve been given an instruction. It is our duty to carry that out to the best of our ability. I hope that once we do leave, that people will then decide to pull together for the sake of our national interest. The british cabinet is finalizing its aims. Are you close to getting that agreement . Sec. Fox we are close to agreeing what our next steps will be. Thatill not be surprised im not going to be discussing that onair. Quick question on theresa may. What would you say her best qualities are . Sec. Fox i would say that her middle name is resilient. That is what she is showing. Thesh more people could see commitment she is showing to Britains National interest. I think it was inspiring. Francine that was the u. K. Trade secretary, liam fox, speaking to tim roth. Lets keep it on brexit and trade. Our next guest is a member of the u. K. House of lords and started a company that operates in 22 countries. He is the founder of cobra beer. Thank you for joining us. Has the debate shifted in the house of lords on what people should be discussing when looking at brexit and how we can make this a success . It is very much shifting. We had this week a twoday debate, the biggest debate in the history of house of lords, on the e. U. Withdrawal bill. Nows becoming very clear that when we had the referendum, which was nearly two years ago s month when it was called the house of lords in the house of commons, the majority of members wanted to remain. In the past, whenever theres been a referendum, the referendum has reflected the will of parliament. This is the first time it has gone the other way. Francine does it tell us that parliamentarians are out of touch or people dont know what they voted for . Karan people were given for months to make that decision two years ago. They made the decision on a narrow basis. A lot has happened in the meantime. The government has drawn these red lines that we have to be out of the Customs Union, the Single Market, and that is causing hughes issues. When you want a transition period and you dont say clearly what you want afterwards, the canada deal took eight years. The canada deal is basically trade only. Youve got to put this in perspective. What is the European Union to canada . 10 of their trade. The biggest portion of canadas trade is the united states. We heard liam fox saying 90 of the growth is coming from countries outside europe. Even if european trade is declining, it is still 50 of our trade. This is a very important point. On top of the 50 we have through the European Union, we have another 20 through Free Trade Agreements with countries like japan, canada. 70 of our trade is with and through the European Union. 30 whiche up 70 for i may never get . Percent, you have commonwealth countries. Countries like india have Free Trade Agreements with only nine countries. Francine are you telling me that brexit can be stopped, should be stopped . Karan i was the first parliamentarian to say i think britain will end up remaining. Europe is not perfect by any means. I dont like the european parliament. Im glad we are not in the euro. But on balance, i think we are better off remaining in the European Union. More and more, you are hearing the public, they much rather stay in the European Union. Francine how would that happen . Is it a second referendum, elections, or an agreement that waters down brexit to the point where it is not brexit at all . Karan the british people have to come to an understanding that this was rushed through, a lot has changed, and if they know all the facts, would you rather leave or remain they know what it is. When they said, we want to leave, it wasnt a blank check to the government. Francine do people are . I care. You care. But do people care if they are up north . Karan heres the irony of all this. Two years ago, if you listed the priorities of people, the you was very low down. Much more important was health, taxation, prosperity, living standards. Suddenly this has been made the most important issue. Weve got a National Health service in crisis. Fewer companies have opened up last year than the year before. Francine the nhs was in crisis before. Karan it seems to have gotten much worse. The terrorist threat is getting worse. Weve got all these issues, and all our time is taken up in dealing with brexit. Heres another point. They say it is undemocratic to have a second referendum. It is undemocratic not to. It is two years out of date for a start. Now people have the facts. What about the youngsters . 17yearoldse 16, who werent old enough to vote . It is their future. Francine what about the prebrexit . I would tell you, we are going to get the money we give to karan what money . 8 billion pounds net is what we will save. That is 1 of our annual government expenditure. Lets get realistic about it. That is not going to shift the needle. The nuclear issues, the security issues, there are so many issues, and it is about taking back control. Francine you really tell me that if there was a referendum in the next six months, it would go the other way . Karan definitely. E have to have a chance the people must have a say. If the facts change, i change my mind. Dont you . Francine do you think theresa may should call for the second referendum . Do we need to go to general elections . Who would get the top job . Karan heres the conundrum. Is she going to last . Are situation is looking more precarious day by day. We dont know who the leader is going to be. Will they still have support . Will it trigger a general election . Heres whats really frustrating. If only the labour party came out clearly and said, we are for a second referendum, remaining in the Single Market, remaining in the Customs Union, that is best for business. Francine why are they not . Karan they are in disarray as well. If they would, we would almost definitely have a second referendum and remain. All the other European Countries would love us to remain. Ive heard this from the horses mouth. Francine thank you so much. Member of the house of lords and founder of cobra beer stays with us. We also continue the brexit conversation with the deputy leader of the proeurope liberal democrats. That conversation is coming up and this is bloomberg. Francine welcome back to our weekly brexit show. Lets focus on the u. K. My next guest was the u. K. s youngest lawmaker when elected in 2005. She served as a minister in the business department. Party, the liberal democrats, have been solid in their opposition to brexit. Jo swinson, deputy leader of the liberal democrats, welcome to surveillance. Jo swinson, we were talking with ilimoria. How would you sell a second referendum to the british people . When people voted in 2016, it was on the general principle, and lots of Different Things were said, but nobody really knew what it would look like to have the u. K. Leaving the e. U. The negotiations are proceeding. At that point, we will take a proper look and say, this is the deal which the government has negotiated. Do people want to accept this deal, or do you say it is better to stay in the you in the e. U. The timeline would be pretty tricky. Negotiated the deal, then have a referendum, and if they say no, what do you do . Jo in terms of the timeline, very straightforward to pass the legislation. Timeyou would still have before the end of march. Ive spoken to ambassadors from other countries. There is a strong feeling in the e. U. States that if britain did decide to change its mind, i think the words were people would be very happy that was the case. I think we would say, youve written your article 50, put that in a drawer and say it never happened. That would be a situation we could get to. We should have that option. People shouldnt feel that it is constrained. Informationw set of , when the facts change, people have an absolute right to change their mind. Francine is there not a danger that by pushing for a second referendum, you we can the Prime Ministers position . Jo i dont think that is the case. Our e. U. Partners do not have the view that everybody in the u. K. Is on the same page on brexit. It is pretty clear that theres this Division Within the country. I dont think it weakens the Prime Ministers hand. Actuallyng, then it makes the Prime Minister have to consider, will this be something , and that strengthens her hand. Francine the Prime Minister is fighting to placate various leadership bills within her own cabinet. Karan what is very clear is that this whole brexit is being driven by one part of the conservative party, and one fact that has changed, at the time of the referendum, ukip had 12. 5 of that vote. Today, what is ukips share . 1. 8 . That in itself changes the whole picture. The youngsters being allowed to vote changes the picture. When you hear liam fox saying, weve done so well, actually we havent. We are the slowest growing economy in the g7. Europe is growing faster than we are. The lowest ever projection in history. This is before weve even left. I think it is going to be disastrous to leave the European Union on a hard brexit term. On a soft brexit, what is the point . Francine isnt this what remainers have always said . And i havent met one person karan ive heard so many stories of people who voted for brexit who now regret it. Every day i hear stories and i meet people. Jo absolutely. I think the polls have shown a slight shift towards remain. I think we need to see that happen more. We need to have this proper debate about what is possible. The government is trying to tell the public that a particular vision of brexit is possible that is just not on the table, that we can have access to the Single Market without having to abide the rules. We can get all the benefits without having to pay anything in. Europeanno way neighbors are going to let us have that. Honest to have a more debate some people understand what we might actually get. Karan another point is, we have lost our standing in the world. Not only have we lost our seat in europe already, but countries like india, where the Prime Minister had a meeting, and the message is very clear that they unanimously would rather we remain in the European Union. The india Free Trade Agreement is far more important to them than any u. K. Free trade agreement. They say, please remain. Francine the other concern is that the forecasts just havent been proven right. Jo the pound is still significantly lower than it was before the referendum. The impact that has had on markets, on jobs, we recognize that companies are telling us this part of their hq or their business is going to go elsewhere. Theres people say uncertainty about how the Regulatory Regime is going to work, how they are going to move operations out of the u. K. Certainly much more concern about what is to come. We have huge amounts of European Union students. Francine but the visa will be fixed, right . Karan not necessarily. Saying youve got to play by the rules. People again being used as bargaining chips. I think that is so wrong. What i hear from European Union citizens is how badly they feel theyve been treated. We should be grateful to them. Francine jo swinson, you have a book out. Congratulations. It came out, i believe, yesterday. This is basically about some of the gender issues. What do you say to the people that think brexit can reset the northsouth divide . Actually get benefits from brexit on that kind of thing . I think the way to drive more equality is by working with other countries. What brexit does is it makes us more inward looking as a country. It makes it harder on the world stage. Have of the rights that we would potentially be under threat despite theresa mays promises about things like workers rights. Francine how can the liberal democrats game that youth vote at the next election . You were very popular with the youth, then you lost a lot. In politics, you have to do what you think is right. You are in politics to achieve and change things. We brought in gender pay gap reporting. We achieved a lot of good things. In terms of young people, many young people are looking at brexit in despair. Some still labor under the false premise that labour as a party is antibrexit. That is not the case at all. That is a big problem in our politics at the moment. A lot of people recognize that is the case, then the liberal democrats will be more attractive. Karan this is what i feel most upset about brexit, it has divided the country. Theres soliament, many people that would have been on the same issue. It is so unnecessary. Weve got important things to get on with. Francine a second referendum would divide it even more, would it not . Karan it would bring everyone back together. A harvard professor told me, looking at brexit, if you look at the buildup to the first world war, theres a book about it, reading that book was like watching a train crash in slow motion. Here, it is like watching a train crash in slow motion. I think we can stop that train crash. Francine thank you. ,aran bilimoria and jo swinson author of this new book that just came out yesterday. Im sending it over to tom keene. On next weeks show, we have the former leader of the conservative party, iain duncan. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. We will bring you that interview with john cryan. We will also talk about treasuries and jobs day. This is bloomberg. Francine treasuries tumbled. The u. S. 10 year yield hits the highest level in years. Jobs figures are out today. Pressure building. Shares of Deutsche Bank suffered their biggest drop since july. We will be speaking to the Ceo John Cryan in a few hours. And rolling the dice. Macao shares tumble. This is bloomberg surveillance , and im Francine Lacqua in london with tom keene in new york. Tom it is jobs day, but there is an extraordinary news day. Whether it is the ballet or the tech earnings. Yes, jobs day is a big deal. I like what you said about treasuries tumble, which just captures this lower pricelower yield a dynamic. Well touch on china in a moment. Francine it is amazing that you saw for the first time the boj reacting to treasuries. For now, lets get to the bloomberg first word news with taylor riggs. Trump decidedent to allow the release of the fbi refused the memo in the russian investigation. The president is unlikely to reject any of the contents. Democrats say it is an attempt to undermine the investigation. The socalled friendly fire is a growing risk in syria, where american troops are embedded with Kurdish Forces that could come under attack by turkey. Turkey and the u. S said the are talking to each other to minimize the danger. A Turkish Military offensive has avoided Kurdish Forces. British trade secretaryl ia liam set a new red line. Fox tells bloomberg the u. K. Must not enter a new Customs Union with the eu. The Customs Union binds all member countries to the same external tarrifs. Grew sixs fortune point 5 billion after amazon reported strong holiday sales. If the after hours stock holds up today, we will see a record of 123 billion. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im taylor riggs. This is bloomberg. Tom taylor, thank you. Right to the data here today. We will you charts across surveillance this morning. That is right, that is not a typo. Dow futures, 232. We see curve steepening. The 10 and 30 years really go higher. Oil, not part of the story. 14. 5. Ay up theres the dow. Bitcoin, we will have a huge hourin show in the 6 00 with Nouriel Roubini. Again, the 30 year bonds hit 3 . Francine i think that is significant. Im looking at treasuries. Stocks in europe are declining following a little recession in asia. But there is more pressure on bond yields around the world and that stirred the boj into action. I think that is the First Movement we will see. There may be others. You can see the 10 year yields top 2. 80 . Tom that is up a basis point in should be green on the screen. Get outbitcoin, to front with our really anticipated conversation with Nouriel Roubini. He cannot stand bitcoin and right now he looks like a genius. This is the chart, 19,004 bitcoin. I think i have already put this on twitter for radio london. This is an exceptionally elegant chart here. I cannot say enough about it. We are about ready to print a 7000 handle. What is important is it looks a lot like a bond price chart as well. Im not saying bitcoin is linked to bonds. The fact is, they look a little bit attracticeve. Us andbini will be with we will talk bitcoin at the top of the 6 00 hour. Francine he cannot wait to talk to Nouriel Roubini. We also had a conversation with Rupert Harrison. He talked about treasuries. Just to do something a little bit different, banks. Im looking at the u. S. Ve rsus European Bank valuations. I picked that because john cryan is having a little bit of a tough time. Revenue keeps on declining. It closes out another year in the red with revenue declining. Tom we could go six hours today, no question about that here, francine. Usday, tim fox will join later on bloomberg radio. Managingngt black rock, multimanagement strategies. Rupert, hows the week been . Bond price down. Yield up. How has the week been . Rupert the week has been ok. We have been underweight on treasuries and duration for some time. I think that is still the place you want to be, but we are in an environment where there is a gradual increase in yield. There is still a lot of money out there, looking for safe assets and with these kinds of yields, as an multiasset investor, you have to think, do they want to hedge back into treasuries . I think they will still provide the protection if we get into more growthoff and risk off environments. Underweight duration, but edging back in. Tom this is the 10 year. We show this to bill gross yesterday and he agrees with mr. Harrison, this is a slow and gradual move down. Can you hvave good Economic Data with challenging markets . If we get a jobs number today that is better than good, with that surprise you . Rupert i think the jobs number will be solid. There is no indication of any weakness in the u. S. Economy. It is a Strong Economy that is enducements from tax cuts. At theue in markets, beginning of the year we were talking about a melt up, and that is what we have seen. We are seeing some consolidation. With equities, you have not seen the protection in treasuries because that growth remains strong. You get a bit of protection from volatility, which has been creeping up. Longerterm, still constructive. Strong macro earnings and currencies is a really tricky area for investors to manage. Tom we will talk about that. Francine, i want to show this now because rupert demands euclidian. Bring up the 10 year. To prose, that is an exhilaration, which hits francines perfect word earlier of tumbles. Thats a tumbling 10 year yield. Francine i do like the tum bling. Youre the only one that can go against everyone else. How long can they fight it for . Am i think the boj are in unique position where they can fight it indefinitely. The ecb has been sounding frustrated about the strength of the euro. They know they are not making the progress they want to. The boj does not have any of those constraints and that is the last anchor for global one yields. The boj is still a long way from their targets and they can carry on fighting yen strength. Francine so is it basically that they could not sit tight any longer because eventually, the market stops believing them . Rupert they have a lot of credibility. I think this is just a little reminder that actually, you do not want to be a better against the boj for the time being. At some point in the next year to 18 months, japan will reprise because the boj will have to start moving. Francine are you concerned about the u. S. Economy overheating . You could argue that at the margin we should stop worrying about the pick up not being st rong, and worry about it being too story. Rupert i worry on a multiyear dimension. You have fiscal policy adding to the deficit, getting to the high single figure deficit. That is a high concern longerterm. This year, you combine the tax and what we are likely to get on spending, you could get an additional 0. 8 gdp growth. I do not think overheating is the right word now. We still relatively sluggish wage growth. We still see this steeping pattern of the last few years, shocking inflation expectations. So, not overheating. But i do worry on a multiyear horizon, yes. Tom we are short here now. This is the dow, and this is the 50 and 200 day moving average, which i am not a big fan of, but the convention marks. Rupert, we forget how extended we are in this great bull market. We are nowhere near support on the dow. Isas a multiasset guy, how do you play that when you get a pullback like this . You are so, so, so extended off trend. Rupert yeah, so, we have been overweight on Global Equities for a year now. Weve become a bit more cautious shortterm because of what you are pointing to. Things do look overdone. The place we have found the most reliable protection is in the vix. Environmentre in an where volatility is likely creeping up. You get the spikes in volatility that cannot protect the portfolio. Treasuries has not been doing that recently. I do think you still want it decent allocation for treasuries longerterm because the real risk is we get reevaluation of this Global Growth. That is not happening now. But if and when it does happen, i think treasuries will be different. Francine will this push the fed to hike more than the market expects . Rupert i would think it is a factor. Argument is they keep tightening and nothing is happening. Dudley has been very concerned about that for some time. Ke is mys four hi best case this year. For the fed to go above that will be difficult to handle, even a 50 point hike. I think they would be worried about the signal that would send. I think four hikes is likely. Above that, pretty tough. Tom great to start with you, Rupert Harrison. Much to talk about, including his United Kingdom. Again at 6 00 this morning, for the entire hour, Nouriel Roubini will join us. He was fiery in davos this year. Dr. Roubini will lead with bitcoin. We will address that at 6 02 a. M. Stay with us. This is bloomberg. Taylor this is bloomberg surveillance, and im taylor riggs. Germanys largest lender posted the Second Quarter of losses. John cryannks ceo said the bank is on the path to producing growth at higher returns. We will be talking to john cryan in a couple hours from now on daybreak america. Shares of apple are rising. The Company Posted results showing solid demand for the flagship iphone x. Apple promised to put the cash war to work to buyback dividends and acquisitions. Bitcoin has hit a low for th e year. Since hitting 19,000 on december 19, the cryptocurrency has fallen by more than half, hurt by expectations of more than government oversight, fear of price manipulation and concerns it is another asset bubble. That is your Bloomberg Business flash. Francine thank you, taylor. Let me bring you over to my stocks chart. It is a simple s p 500h here in europe, tom. Thats my chart. It turned flat on the year. I dont know what that means, whether it is time to buy, it is a correction, or a little bit of a correction in a bull market. We are back with Rupert Harrison. A similar question could before u. S. You could see smaller corrections, or this could turn into a bear market. Tom i do not see the conditions for a longterm bear market. I think theres a short transition. As with the u. K. And europe, a lot of money has flown in to Global Equities. Interesting an situation for these short terms. But we still see strong earnings growth. You still want to be overweight on equities relative to bonds in that environment. Tom to get us to our discussion on brexit, what does the rally in sterling mean for Prime Minister may . What does a stronger sterling mean for discoverment . Rupert it could point to confidence in the u. K. Economy. The strong sterling has been mainly a weak dollar story. We did see a little idiosyncratic strength against the euro, but a lot of that has faded. I still think that there is probably more upside than dow nside. Fastforward to nine months time, we will have made some progress. The noise during the last few weeks, there are more symmetric risks for u. K. Assets than there has been for a long time. Francine let me bring you over to my chart, which looks at cable. So, this is pounddollar, back to 1993. You see it going up, since, iw early 2017. Say we also spoke to liam fox in china and he said britain must not enter the Customs Union. Why is there so much confusion . Is it theresa mays future or the deal they are trying to agree on . Tom rupert fundamental you have a weak Prime Minister that is not able to keep a lid on this chaos. This is fascinating, looking into what the red lines are. A few days ago, he was quoted as speaking to other brexiteers, that they have to get real with the transition. Ahe u. K. Will be eight rulemaker. But his red line is, you have got to leave the Customs Union. That is where we are. The current disagreements are noise around the u. K. Becoming a vassal state. In the end, that deal will get done because Everybody Needs it to get done. The brexiteers will grumble. The red line is they do not want to leave the Customs Union. That is where, if theresa may tries to reverse either of those red lines, that is where sheila run into trouble. That is where she will run into trouble. Francine meaning what . A new election . Rupert the customs area is the area of interest. There is not much support for staying in the Single Market. There is support from the labour party for remaining in the Customs Union. That, ieally goes with think the brexit part of her party that has been content to let her continue as long as they were getting their end point, t hey will kick up. Francine Rupert Harrison from blackrock stays with us. Coming up on daybreak, a conversation with john cryan, Deutsche Banks chief executive officer. I think the share price is falling significantly, down 5 to 6 . We have plenty more on that. This is bloomberg. Francine good morning, this is bloomberg surveillance, with tom and francine from london and new york. There are big changes afoot in china. The country is drafting a proposal to allow gambling on Hainan Island. This would be an unprecedented move that could reshape gaming in the chinese territory and change the economy of a southern province. Rupert harrison is still with us. We are trying to dig deeper into hainlan. It is like the hawaii of china. Is this part of china trying to distribute wealth more evenly across the provinces . Or, is this just kind of like a pure gambling story . Rupert my instincts are idiosyncratic. But if you want to look at the bigger picture, it is that they are trying to create a more diversified economy, trying to build an economy that is less dependent on the traditional stimulus and housing infrastructure and because they have really internalized the Financial Stability risks to the top, they have seen that is the principle risk to the communist party, a serious Financial Stability and this is part of the diversification story. I think they are having limited success. We will still see these many cycles. If the economy slows in china, well go back to more traditional levers. Francine do you trust the chinese numbers . Bloomberg stated yesterday that some of the bigger provinces could have overstated their growth. Some of the other provinces could have understated it to get subsidies. Can you trust them . Rupert to get a real picture of what is happening in china you cannot just rely on the headline gdp numbers. Clearly, there is some smoothing that goes on. There is good data. The ppi data we think is pretty reliable. Theres ways to get information out of some of the underlying indicators, but if you think you have insight from china with just adding the main data headlines, you will find that challenging. Tom at blackrock during your meetings on renminbi, canada china managed a weak dollar policy . Rupert the pboc is clearly trying to lean against the price on the currency, but they have limited capacity to do that when dollar is weak. The story at the moment is a weak dollar partially driven by this risk on environment. A lot of that money went into the dollar and is now being used to Fund Investments elsewhere in the world. They have a limited ability to do that. I would expect them to continue to lean against that and there will be an impact on the economy over the next 18 months. If it stays as strong as it is. It is not appreciating as much against the trade weighted assets. Francine Rupert Harrison from blackrock stays with us. Pick up the latest edition of Bloomberg Business week. Good morning, everyone. Tom and francine from london and new york. It is bloomberg surveillance. With lets talk about Deutsche Bank shares. Fourthquarter revenue tumbles to the lowest level in seven years. 29 d income trading slowed following the numbers. The chief executive repeated a pledge that the bank is on a path to growth. This is what he said during the press conference in frankfurt. There is some tailwind behind us and we see more client activity. Not sure if that is seasonal for january, cyclical because were coming out of a downturn, or whether there are structural elements, but generally, january normally starts well and january has started well again this year. Yes, we see Revenue Growth and yes, we see profitability in 2018. Francine we also have an interview with john cryan shortly. Us, joins us also with Rupert Harrison, blackrock chief macro strategist. Bank,ou look at deutsche i think theres a lot of angst from investors that they dont really see the light at the end of the tunnel. Would that be fair . That is absolutely correct. There is no Silver Lining tos toays two todays todays numbers. The revenue line came well below expectations and cost, the cost control suddenly isnt as much in hand as it was as much in hand as it was. Francine does that mean john cryan has to go . What weertainly that is have been picking up for several months, but there is that there is pressure from investors to see Revenue Growth coming through as they promised initially for 2017 and now moderately for 2018. That said, its difficult to see with the business lines Deutsche Bank has, what other manager could do differently. Tom lets bring up the chart. Let me ask you the question Rupert Harrison is not going to answer. Where do these banks fit in . I do not understand where the midlevel nonmajor banks fit in in the future of European Banking. Is anybody asking these questions at Credit Suisse at Deutsche Bank, and that takes smaller than them . Elisa as we have recently reported, i think this conversation those conversations of placental potential consummate it ential consolidation looking at the possibility of putting together weaker banks. Deutsche bank is one of those potentially being seen as a good commerce bank, for example. Tom you are expert in board representation and governors at these banks. Our shareholders representative represented or is it just within the german two managing boards 25 people up top running the thing for themselves . Elisa i think its really hard to generalize because the banks clearly have extremely Diverse Shareholder bases and Deutsche Bank has a concentrated Shareholder Base among a couple of shareholders. That is not the same at other big European Banks. I think you would have to look at each case individual individually. Francine i want to ask you something about cost and then go to rupert. Why is it so difficult to keep an eye on these costs . Elisa theyve got a large investor bank, so they have to keep employees happy. They are talking about the oneoff bonus payment, otherwise the staff is going to leave. Obviously that is a factor at play. Francine is 2018 a turning point for healthier banks because Interest Rates will make it easier to play the markets right . As long as you play the right side of the bank . Rupert in europe i am not sure that is the case. We have seen very strong growth, you want exposure to this economy and we have also seen market three pricing repricing the front end. I think we are repricing 50 basis points. I think that is thoroughly unrealistic. I think that support is probably as good as it gets from these banks because i think they are going to have a much longer environment of low rates in europe. That headwind will remain there and in deed maybe even get priced in more Going Forward. Tom can you acquire European Banks and its show if so, which flavor of European Banks . Rupert i think what we want to have exposure to is the domestic demand story in europe and there have been beneficiaries to that in italy, for example. I think the banks story depends on the earnings there are the idiosyncratic issues for individual banks to be more to be more optimistic, youve got to have a more optimistic vision for where rates are going. One exposure to i want exposure to european domestic strength and i do not want to overweight that with banking. Lets get straight to new york and the bloomberg first word news. Here is taylor riggs. Taylor the white house reportedly wants more options for an attack on north korea. White house officials are frustrated by what they see as the pentagons reluctance to offer more plans for a strike on kim jonguns regime. The pentagon is concerned giving President Trump more options increases the chances he will act. In germany, large policy differences remain between Angela Merkels block besides have a selfimposed sunday deadline. Yesterday they reached an agreement on education spending and day care. The bank of japan has taken action to back claims it is not following the fed and the European Central bank. They ramped up bond buyings to damp investor speculation they may roll back stimulus. Its making it harder for the boj to reach of the inflation target. Head the woman to Federal Reserve received an emotional farewell. Hundreds of central bank staffers gather to stay get say goodbye to janet yellen. Jerome powell will be sworn in on monday. Global news global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. I am taylor riggs, this is bloomberg. He is frozen. Tom it is my yellow look. Everybody had their collar. That is the way chair yellen always wore it. There were tributes all over wall street yesterday. Francine it is very stylish. Its almost italian. Alix wants me to do it again. Francine you look a little like humphrey bogart. Wall street gained strikes back in commodities. Goldman sachs is the latest bank to hike their forecast for brent saying it is likely balanced. Raising j. P. Morgan chases outlook. Will this rosy view continue through 2018 . Joining us is Sanford Bernstein Senior Research analyst and still with us, Rupert Harrison of black rock. When you look at some of the biggest banks on wall street, they seem to be backing opec and seeing you will saying you will be able to clear for production cuts. Are they right . Next 24 months, yes. Shortterm maybe there is some volatility. Last year oil was 50. This time last year, 50. Ins incrementally rising. Why, supply is not coming through because we are not investing . Investments have fallen to alltime lows and ultimately opec are being extremely disciplined. Classical drivers would bring the price up. I think its a real price increase that actually is sustainable. Francine are we underestimating shale producers . Oswald potentially. This time last year we had electric vehicle risk, renewable risk, chinese demand risk and shale risk. I think this time, shale risk remains an outlier that people cannot quite cant to find. Thispect a lot of growth year, but do not find it disruptive to the overall oil price for 2018. We are expecting a lot of this year, but do not find it disruptive to the growth comparable to last year, but the price should grind higher later in the year. Francine the Biggest Surprise for me was this bromance or friendship between saudi and russia. Will that continue . Ald really continue um in the cards come everything they are saying, yes. You are seeing 100 compliance. That is better than anyone expected. The data we are looking at and exports in barrels, which is much more important, suggests they are still being compliant as we enter 2018. All the signals suggest at least this year, they should be curtailing supplies. 2019, this question becomes more valid when the countries come back to the market. Tom wonderful to have you with us today. Your degree is in geophysics, which goes to peak oil. Now everyone was wrong. What are we wrong about now in the geology and geophysics of oil . What is the thing that drives you nuts Like Peak Oil drove you nuts 8 or nine years ago . Oswald as you say, rocks are not homogeneous. Geology gets tougher and tougher each year. Discovery sizes are falling and rock complexity is increasing and they there is that marginal cost required and it will rise over time. I anchor myself to that viewpoint. I am bullish on longterm oil prices as a consequence of underlying drivers. The new debate versus 10 years ago is Peak Oil Demand and that is something we are looking at for the next 10 years. Some point in the 20 30s, 20 40s, does demand peak and start does demand, peak and start to decline . Tom do you have confidence we know the elasticity or responsiveness of shale . With Technology Improvements in america, nobody saw it coming, there it is. Elasticitystand the of how they move around given the price of oil . Oswald we do. I think when you dig into the topics you are bringing up, its about drilling longer, trailing tighter, tighter drilling tighter, tighter spacing. Rather than your Technology Pure technology, these are industrial processes. They do not go on forever. In some of the basins in shale, they are reaching those limits. There are three big shale basins and one offers continuous growth from here is the one in west texas. That still has probably a decade of growth or so, but i think the other two basins may start to slow down somewhat and thats where this supplydemand balance can remain positive. Tom do you but francine do you believe in this balance or is there five or six years it will push the price of oil to 120 . Rupert in an environment where Global Demand is strong, opec will sustain this effort. I think particularly, the key point will be for the saudis, aramco ipo. That is really driving their conviction. I personally do not want to bet against the ability of the u. S. Shale industry on a oneyear, 18 months horizon to ramp up supply. I think we have seen it again and again. The level of innovation is extraordinary. On a oneyear horizon, that provides a powerful cap. Tom very good, Rupert Harrison, thank you very much. Oswald clint, great to see you again. I want to show you a chart. This is bitcoin, which looks like a 747 going into jfk or heathrow. It is gradually going down on a linear basis. We will get in the this entity in a 7,000 handle in a bit. Bitcoin with us later. Withjobs day, karen moskow a terrific news flow, expert conversation. Bloomberg daybreak do not leave home without it. This is bloomberg. Francine bloomberg surveillance. Tom and francine from london and new york. We welcome all of you, including our radio listeners. A heavy hitter reported earnings yesterday and apple at amazon, gave theirpping Fourth Quarter of time to shine. Apple showed solid demand for iphone x while amazons jeff bezos took a lift took a victory lap as it ate off big for the company and its most profitable quarter ever. Joining us now, the investment director and Rupert Harrison is still with us. , tech. Ech facebook didnt do so great because less people are on their platform carried can platform. Can amazon continue this trend . I think so. I would look at google and facebook as the world of Digital Advertising and amazon as a development to the cloud. Interesting that Amazons Web Services business, that Cloud Business generates all their profit at the moment. The Retail Business is almost a sideline. Francine i am looking at apple valuations and amazon. They just look expensive, am i right . Mark i think there is something you are not seeing. Evil tend to focus on shortterm people tend to focus on shortterm valuation metrics. We have to make an attempt to do that because they maintain growth rates for very long periods of time. Amazon is growing at 25 , 35 for 10, 15 years. The i want to bring in here bloomberg functions on amazon and that i want to touch where we are going. Flow forree cash amazon, 2 billion, 2 billion, 7 billion, 9 million come and two years from now, they explode to 17 million 17 billion. The great conceit of everyone else is they will adapt and adjust to amazon. Within your research notes, i dont see that. You dont believe people will adapt or adjust, these people will simply reign supreme, wont they . Mark i think this is very true. We are in a world where Network Winner takes most. In the world of cloud infrastructure, that is amazon through amazon web services, microsoft through their platform, and perhaps google as a smaller third player. Its hard to see some but he competing with amazon and taking their crowd. About thisl wrote years ago, i love the phrase winner takes most. Case, do youe predict intrusive government regulation if we do not go to a duopoly or monopoly or single Unit Technology . Mark i think this is one of the biggest questions surrounding mega Cap Tech Companies at the moment. Its very hard for governments to legislate against them in theythey can get unless can get global agreement. If one government in one country legislatechooses to the Digital Economy is so big they cannot afford to do that. Francine what is facebook going to become in five or 10 years . Do they know what they want to become and what does apple become . Do they go into software instead of only focusing on hardware . Mark apple is definitely putting their Services Business at the forefront. Theres only so long they can grow from selling highpriced phone units. The success will depend on the ability of themselves to develop an ecosystem with services. Of all the five Big Companies that reported, facebook is the only one that doesnt have paid for content. They have to keep their users happy and that will be the most important thing. Can they continue to retain engagement amongst their user base . Francine do we underestimate the chinese . This is kind of the new arms race 2. 0 and its going to be for ai and these big trends we are talking about. Rupert as an investor, you want to own these Business Models whether in u. S. Or china. I agree Business Models with Sustainable Growth rates, with moats around them that are really kind of defensible against all comers i think the Regulatory Risk israel and i think its true to its difficult true it is difficult to act individually. These are jurisdictions they can have to take action. I think it will be marginal in the end. I think we will look at things recline meant the climates around investment or data sharing. I dont think for the most part the see more if we were to regulation, who would be the company hardest hit by that . The most likely candidates to be hit hard would be the Digital Advertising businesses. It is facebook and google and that is what we are seeing already. Mark i agree with that. Tom when i look at technology. When i look at the bill that, we are in a continuing where we ought continue him where we where we areuum learning every day. With all the cash they have, do we start to see tangible somebody buys twitter just as one example . Mark i think we do. I dont think it necessarily shows up in the public equities world and i am not sure who is a natural candidate. We already see facebook, apple, google, they are buying every private ai Service Worth buying. Through that huge cash flow generation, they will become the generators of the nextwave of technology and they are just going to get bigger. Tom this is a key question then. If they do that and i agree with you they do. How do they do it where they dont make the mistake of industrials past . Ank that will be interesting question and i think you could argue that apple has already fallen into that trap with some with some of their newer innovations like the apple watch. Asy are not as successful the iphone. We have to watch that carefully and see how much money is being spent. Think 850 9 million in the last quarter on their other bets category. I think we need to keep a close eye on that and see whether they will be wasting money or they will be great opportunities. Hawtinrk barton and and Rupert Harrison with us. Is it a fully employed america and for that matter, can we go to concede its a fully employed United Kingdom . For all intents and purposes, i think both countries are at a stage where the free slack is very small. I think we are at that point, particularly in the u. S. Where people are talk about is the phillips curve dead . I think the reality is its very its a very nonlinear phillips curve and you expect to see wage growth coming through. You see it in all the surveys and forwardlooking indicators. I think the entrenched low Expectation Inflation expectation should be coming through. There is this particular thing about brexit uncertainty. I cannot see companies in the u. K. Agreeing to big wage increases when they literally do not know what the trade arrangements will be in the coming years. Tom what does that do to the real wage . The Real Health Care . The real rent across the developed world . Rupert i think we are in a phase of the cycle where we should see labor share growing. That is a normal late cycle dynamic. It should not be a concern. I think we will see wages growing at the extent of margins. For equities in the asset class, the net impact is positive because of topline growth from strong aggregate demand. I think the risk is more on the credit side as you see wage risk eating into margins. Thats the normal late cycle dynamic and thats what we are looking for. Francine does the tax overhaul in the u. S. Actually push whether pushing happenings to pay more or asking workers to ask for a pay rise . Rupert these kind of headline grabbing around spencer announcements around bonuses are good pr. That is not what is going to drive the kind of sustainable pickup in wages. Its good old labor shortages. Youve got to pay out if you want the workers and thats a slower process. Francine when are we going to see that in europe . This is Mario Draghis biggest headache . Rupert the striking thing is how different europe looks prayed three or four years ago in the u. S. , we were saying we were going to get wage growth and we have been consistently disappointed. I think that is where we are in europe. There is an enormous amount of slack because of reforms. Spain, italy, portugal, even france we have seen labor market reforms and i think there is a lot more slack and we are several years behind. Tom all this talk is great. Should i buy shares of amazon this morning . Temptedthink i would be to hold back a little and see how the overall market situation is going to play out with rising bond yields. The technology often takes the first hit in that environment. If you are doing it on anything beyond a three or six months the you, most of these companies would be my two major picks. Hawtin, the sell side analyst here. That was a great hour, the news flow to remind all is extraordinary. Rupert harrison, thank you for joining us as well. There are at least 8 seems for the next hour and we will try to cram them all in, but we must leave the huge response on twitter last night, the controversy of bitcoin and crypto worlds. Roubini, we do that next. Tom this morning, the bond run continues. The u. S. 30 year bond at 3. 04 . Bonds and stocks linked. Futures a 21 right now. Nouriel roubini says bitcoin is the mother of all bubbles, down 28 this week. 20s 7,000 handle beckons. Amazon, they kill it. Apple moves higherpriced units and john cryan does not kill it. He sees revenue fall back at levels. Bank to 2010 good morning, everyone. This is bloomberg surveillance. An incredible news flow. I am tom keene. With me, Francine Lacqua in london. What are you watching within the wall of information we are digesting on friday . Francine i am looking at the memo. The memo, not to memo from the white house. I am also looking at brexit. We had a fantastic interview in stay inying they cannot the Customs Union after they leave and it puts theresa may in an even more difficult position. Tom jobs day front and center, but much more going on. Kevin cirilli will join us later on that memo that mr. Trump is launching. Lets begin, taylor riggs is in new york. Taylor President Trump has decided to allow the release of the controversial republican memo arguing the fbi abused its power in the russia investigation. A white house official says the president is unlikely to redact any of the memos content. Democrats say releasing the memo is an attempt to undermine the investigation. Is alled friendly fire growing risk in syria where american troops are and that it with Kurdish Forces. Both turkey and the u. S. Say they are talking to each other to minimize danger. A Turkish Military offensive has avoided Kurdish Forces to have who have american troops attached. M fox set a new bread deadline for Theresa Mays Brexit negotiations. Binds alls union Union Countries to the same all countries to the same xunit tariffs. Centralbank staffers gather to say goodbye to janet yellen. Jerome powell will be sworn in on monday. He called yellen the most qualified person to hold the position in the feds history. Global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thanks so much. We must touch on the markets as they deteriorated in the last two hours. Futures, 21. Dow futures, negative 2. 8 0 280. Next screen. You see in the yield space, there is the vix, 14. 74. The yield below 3. 74. Atcoin really begins to test 7000 handle, it is not there yet. Francine this is what i am looking at, stocks in europe declining. Dollar rebounding from three days of losses and treasuries seem to be studying after afterday steadying yesterday. We have an important interview coming up with john cryan. A lot of investors now searching for news after the banks Third Straight in a loss found little to give them optimism, which is why i did my bloomberg for the day, which is a very easy u. S. Versus European Bank valuations. Thank you to hillary clark, it puts everything right on the spot. You can see the ratio and the difference between u. S. Versus European Banks. Tom let me look at bitcoin right now to bring in our next guest. I will introduce Nouriel Roubini off of this important chart. This is bitcoin from 19,000 now 19,000 now testing a 7,000 handle. I have already put this out on twitter for radio london and we will do it. On a month unit this is daily. On a month chart, its in the vicinity of 6500 as well. Lets go to the article, creative firestorm, Nouriel Roubini writing for project syndicate. Bitcoin and other cryptocurrencies represent the mother of all bubbles come a which explains why every human being i met between thanksgiving asked iftmas up 2017 they should buy them. Swindlers, charlatans, carnival barkers have tapped into clueless Retail Investors and taken them for a ride. Nouriel roubini was way out front on 2007 at 2008. We are thrilled he could join us today. If you were to write the book crisis bitcoin today, how would you open the book . I say its the mother of all bubbles and the biggest bubble in Human History. If you compare it to the mississippi bubble or if you look at the peak in tulip, was higher than maine, and now it crashed by 60 compared to the peak of middecember. 10 today. Its all the way down to zero, the fundamental value of bitcoin tom how do they get this handle on twitter. The money question today is the crypto people say they can industry,he crypto blockchain, all the rest of it. We saw at davos from the value of bitcoin, can you separate crypto from the price decay of bitcoin . Noriel no. First of all, there are already Something Like 1300 plus cryptocurrencies or ipos and most of them are even worse and dont have any Intrinsic Value like bitcoin. Bitcoin is a bubble to the power of two or three. There is all this hype about blockchain. Only application is bitcoin or cryptocurrencies. In the early days of the html, email, had lots of other things, news applications, and hundreds of millions using them. After 10 years, what they can offer in the blockchain space, nothing. Just a bunch of cryptocurrencies that ra scam. Scam. A francine whether they are a scam or not is not for me to say. At someng to point they are going to use this in transaction. Rome was not built in a day. You could see it becoming something else. The Blockchain Technology could follow goods, services, transactions. Noriel every ceo of a bank is being told by their shareholders, why are you looking into blockchain, so they go to their chief Information Officer and say lets spend half 1 billion and they realize the transaction costs are huge, much higher than traditional intermediaries and playing a little bit of games to pretend they are doing something about it. Everything is a proof of concept, nobody is using it. They are talking about using it. Take, for example, bitcoin. The cost of every transaction is huge read with visa, you can do 25,000 Transactions Per Second and with bitcoin, they can do five transactions. The energy to produce bitcoin is huge and to make one transaction, you pay 50. You cannot buy your coffee for two dollars with a 50 transaction fee. The sub charges you visa charges you 4 cents. Proof of work and proof of stake will be different, it is not secure. It is total vaporware and the banks know it and nobody is doing anything serious about it. Francine to make sure i understand you completely. You think blockchain and cryptocurrencies cannot be separated . Noriel first of all, bitcoin and other cryptocurrencies cannot be separated. They are all essentially a bubble going back right now. People say blockchain is technology as promised, but its the older hyped technology ever. , big data, internet of things changing radically. You have things like paypal, beingl being venmo used by millions of people as opposed to blockchain and cryptocurrencies being used by nobody. Francine what about kodak . Coin,o have kind of kodak but they are using Blockchain Technology to track images. If i am a freelancer and put an image on a post and i can get royalties from that. Is that a useful way we should look at it or you think that is also rubbish . Noriel every other day there is a corner of the world that attaches the name blockchain and their value goes up through or four times based on nothing. Nothing. You are first to show the technology of blockchain works, the transaction costs are low. If you make a transaction to sell one photograph or license, you have to pay 50, it will not be viable. These things are not scalable. It interesting you want to change her name to getel bit roubini to attention. You saw twitter blowup last night. Theres a lot of believers out there and this is what francine alludes to. What do you want from secretary mnuchin to get in here before we see these huge writedowns . Are gettingcymakers worried. Pretty much every g20 policymaker is talking about cracking down. They want to crack down on exchanges in china and so on and saying these are scams. Tom who eats the losses . Just the suckers in the market . Insiderses because bought cheap early on and saw the 20,000 and now they have lost 60 in the of their shares in 6 weeks. This is the biggest ponzi scheme in Human History and its going bust. Tom i interviewed with i believe it was jon ferro, the winkle boss single boss the twins at did you teach them at harvard . Inventedhey say they facebook and they did not, either. All these people are charlatans, swindlers, there is manipulation occurring. It is a bubble, but it is going bust. Every day its down 10 . The proof is in the facts. Francine do you legitimized bitcoin or cryptocurrencies by regulating them . Noriel i dont think so. I think a lot of what has been done so far is they only they are only used in payments by bitcoin and it was not anything legitimate because as i said, to buy a coffee, you have to pay 50. Regulators have been saying we cannot accept it. Even Steve Mnuchin said we cannot allow bitcoin and cryptocurrencies to become the next Swiss Bank Account where every criminal in the world or everyone trying to avoid taxes will do it. The fall of bitcoin is directly correlated with regulators saying enough of this scam. Francine not everyone is criminal you could argue in a country with capital controls, you could get money out using cryptocurrencies and not necessarily criminal money. Noriel china there was speculation it would lead to a collapse of that they intervened and stop this capital flight so the reasons for doing that, the reason of avoiding soes and capital control and on. Regulators are saying we cannot be in a world in which every transaction will be anonymous, so your not going to declare income, declare your wealth, declare capital gains. Going toly what is happen is already happening. Every transaction is going to be allowing and therefore a criminal or tax appraiser to use bitcoin tax evaders to use bitcoin will be gone. Then this bubble is bursting. Tom i want to circle back to the curse of cash. Is all of this we see nothing more than the reaction to the se wedens of the world of saying enough of the corruption with cash . Noriel i dont think that is the main reason for it. That ple believe currencies were being debased by Central Banks and its true with quantitative easing, but that was to avoid deflation. It was successful. The argument against higher inflation is nonsense. All those people a few years ago that said it would lead to bond yields going through the roof, the stock market crashing, the dollar crashing, bitcoin going through the roof has been proven false. Tom sounds like an echo from 2006. We will be we will continue with noriel roubini. We got a terrific our coming up. Julia will join us. Later this morning, john cryan of a very beleaguered deutsche 2010 revenues back to a level. Matthew miller with that interview. This is bloomberg. At negativeures 227. Francine lacqua in london and tom keene in new york, and exceptionally busy morning. Last night from 4 00 p. M. On, the frenzy in washington was truly historic. Kevin cirilli is with us in the cold of washington. I want to get right to the reaction of the idea of fbi agents and even the director of the direct the fbi resigning if this memo is released. Is that even possible . Question and great it is one that lawmakers were asked yesterday, including one of the Top Republicans here at the republican retreat in West Virginia. Senator langford was asked about this. It is on everyones mind, but right now we just do not know. It is too much unknown. Mostly every republican yesterday including House Speaker paul ryan saying they hope this memo does get release despite democrats saying they do not want it released. We should note there have been some republicans, including senator jeff flake, who said maybe we should take our time with the release of this. The fallout continuing and its likely release could come today. Tom let me bring up sean history lesson. He talked to seven or nine historians. Brands the acclaimed hw out of texas. The death of J Edgar Hoover but the fbi had its own interest and secrets and in the entangled that ensued, it was the president brought down. This is a scathing essay on the assumption of the executive branch with their fbi. How is the fbi pushing back right now, kevin . Sayingthey are really they absolutely do not want this released. Their own reporting supports that on bloomberg. They have been adamant they do not want this release. Yesterday the backandforth was remarkable with Chuck Schumer going as far to tell speaker ryan he thinks congressman nunez who is really the one driving this, the House Committee chairman ought to be removed from the committee as a result of that. Democrats suggesting the memo has been modified. I spoke with chairman mark meadows of the House Freedom caucus who said of those modifications just amounted to grammar. Speaker ryan telling reporters at the retreat that it was out of security concerns they had to be edited and likely, the memo if it gets released today, will likely be unredacted. Francine i am also reading a Bloomberg News story saying tillersons state department, seven out of nine top jobs are empty. We talked about in the past how is that still possible . Kevin that has been a frustration of virtually every level inhe legislative washington, d. C. It is quite remarkable to see these jobs go unfulfilled. On the flip side, there are some within the administration who make the case that it is a regulation andng trying to remove power from the agencies. You are absolutely right it does stand out as remarkable that many of these jobs are unfulfilled. We should note this is a global issue as well. A global story as well simply because many diplomatic posts have also not been filled. Tom kevin cirilli, thank you so much in West Virginia with the republican meetings. Nyu. L roubini with us of we just did a huge block on bitcoin. Now to the other markets. There are two rationalizations of lower price and higher yield. One is gradual we will get there and stop and the other is once this gets moving can there be an inertial force to bonds where they get moving and keep moving . Noriel there is some movement that has been rapid in the last few weeks, but then you ask yourself what are the fundamentals driving it noriel if bonds are going to go fundamentals driving it . There is evidence is strengthening, but there is no massive acceleration in wage growth. Veryhillips curve is still flat. Profit margins are relatively high and therefore there could be some squeeze in profit margins. I think bond yields had to go slightly higher given global inflation, but this adjustment seems to be a bit too rapid and excessive in my view. Tom if we see a brutal move in other markets, my mathematics is we have not seen a brutal move yet in currencies, but could we . Noriel we could see that. In 2013 day tapered down from the bond yields in a matter of a sharpnd there is slowdown of the economy, a sharp correction of the stock market and the fed wanted to taper and was forced not to do something until december. If the movements are going to be significant, you will have a fax on the dollar. You will have effects on the dollar. In spite of running down the Balance Sheet and normalizing rates, in spite of stronger growth. It means this bond yields movement up now could affect the dollar, yes. Francine we were listening to Steve Mnuchin in davos last week. Do you believe the u. S. Now has a weak dollar policy and is that currency minute relation . Noriel first of all, there have been mixed signals from mnuchin and the president and others. Fundamentally, this administration once a weak dollar. Wants a weak dollar. Jobs and incomes are being affected by the value of the dollar. Regardless of what they say, this administration wants a weak dollar. People are going to be dovish than yellen and the fed. They have been talking down the dollar. Its not currency manipulation, but the g7 rules for just you cannot even do open mouth operation rather than talking down your currency. What mnuchin has been doing is talking down the dollar. Its the beginning of at least the verbal currency war between on one side, the fed, and the other side, ecb and boj. Forcine and the boj today the first time actually reacting to the moves in treasury because they have to defend their land. How can the far can the boj continue in basically defending all the outside of the box thinking they have done so far . Noriel for the time being, i think they will take their 10 yearf taking their at zero because they are not out of inflation. Its an improving economy, there has been an improvement, but thats the right policy for the time being. If they give up right now, then the yen will strengthen and the risk of inflation again. They are committing to this policy of negative policy rates and buying bonds as necessary and keeping the 10 year at zero. The the next few months, until there is a stronger signal for the next few months, they will continue with the same policy. Elerian, good morning. He sends his kind regards to you. What is the first tea decision Jerome Powell is going to have . Noriel he is going to have to ask himself whether the strengthening of the economy is so much that theres a kink in the phillips curve and the flattening was only temporary rather than permanent and therefore whether the hike in three years as opposed to two or four is the thing to do. Tom we will expand on that. , thank you for emailing in. Gary cohn the white house later today. This is bloomberg. Tom and exceptionally busy jobs day this morning, the news flow overwhelming. Francine lacqua in london, i am tom keene in new york. Here is taylor riggs. Taylor the white house reportedly wants more options for an attack on north korea. White house officials are frustrated by what they see as reluctance to offer more plans for a strike on kim jonguns regime. They are said to be concerned that giving President Trump more options gives him the ability to act. Blocellor Angela Merkels tried to form a coalition government. Reached anthey agreement on education spending and daycare. Takennk of japan has action to back its claim it is not following the fed and ecb. They ramped up on buying to control yields and to dampen expectations it may roll back on stimulus. A stronger yen is making it hard for boj to reach its target. Britains International Trade secretary says they must not said into the comment set a new brexit redline for negotiations with brussels. Fox voiced his support for the embattled Prime Minister. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Francine thank you so much. Hitters reported earnings yesterday. As for amazon and apple, Holiday Shoppers made it a quarter to shine. Results showing solid demand for the iphone x, while jeff bezos took a victory lap as the year paid off big for the company, the most profitable quarter ever. Joining us is gene munster. Always great to have you. Can amazon go from strength to strength . The they can, and part of reason is this massive infrastructure they are building in. To put this in perspective, amazon has spent 10 years tilting these fulfillment centers. They have about 600 of them. Were toxisting retailer go out and try to build this network, it could be difficult. It is a defensible moat for investors, and it comes through in their Revenue Growth. They grew revenue over the last two quarters at 33 . They guided the midpoint at 35 . This is a steady grower because of the massive infrastructure they built. Francine do you worry about regulation . If there was one downer on amazon and their trajectory, regulators in the u. S. Or europe may say you are monopolizing too much of the market. Gene in the ecommerce space, they have a lot of market share, but that is not how regulators in the u. S. Look at it. It is total Retail Market share. They have about 5 or 6 of total market share. Walmart has 23 . There is a much bigger player out there and until they get close, they are in good shape. In the u. S. , they look at the standard of care on this monopoly. Is the consumer better off . I think most amazon users would say they are better off. Tom over to apple, the money question, 285 billion in cash flow, going from 51 billion to 64 billion, if you imputed what they do with all that cash into a share price one year out . Gene we do think about what they are going to do with the cash. They will probably make some announcements that they will make announcements in three months in march. The majority of that will go through some threeyear plan for a buyback. Think of this, about 70s percent will go back to a buyback or dividend. Even though we would love it if apple would do some big acquisition, like by tesla, that will never happen. That is just not in their dna to do big m a. They will probably do smaller m a stuff. To bring it back to the question, what does this mean for shares . We do not have price targets, but i can say investors we have talked to generally think this Share Buyback and growth in the iphone will power somewhere around 14 in earnings next year. You can pick the multiple. 15 multiple gets you over 200 stock. Tom gene munster, when i look at apple, i look at the cash generation. The first number i went to was 18 Revenue Growth in services. Is that sustainable . Can they do better . Gene it is sustainable, and they can do even better. Heart of the reason the stock had a reversal, it ended up being 3 in the aftermarket, because they gave a couple of points about the Services Business. First, they have a massive base of 1. 3 billion active devices. They have never given out that number. It has been at least two years. Second is back to the services more specifically, the growth and paid subscribers, people buying stuff on apple devices, was up 58 year over year to 240 million. That growth in the number of users was faster than the growth and that delta , is important because that is a leading indicator that Services Growth can continue. We have 20 growth for the next four years. Francine how do you view Chinese Technology . If you look at it as a two way street with the chinese going after some of our big names in the western world, what is the company you follow that is most vulnerable to chinese disruption . Gene apple is at the top of the list. Over the last two quarters, they have done well in china. They have had doubledigit growth. For a year, their China Business was declining. The other big u. S. Companies, a lot of them have not even gotten to china. Google has not pulled it off, amazon has not pulled it off, netflix hasnt. Apple is the one with probably the most exposure. They are fighting day in and day out. Good to know, part of the strength of apple in the december quarter in china is the iphone x. This ultrahigh end Chinese Consumer is still dedicated to the apple products. Tom gene munster, thank you so much, with perspective on amazon and apple. The president has just tweeted out. He talks about the rank and file of the federal bureau of investigation. Bitcoin, 8,024. It is the nouriel bit roubini chart as bitcoin moves south. Stay with us worldwide. Jobs day. This is bloomberg. Taylor this is bloomberg surveillance. Lets get the Bloomberg Business flash. Alphabet weighed down by rising costs at google, reporting fourthquarter that missed estimates. The cloud competing business appears ready to challenge amazon and microsoft, but it is hobbled by googles rising payments for searches and add distribution. Les moonves is looking at whether the company should combine with viacom, pushed by redstones national amusements, which owns both companies. Sony has named a new chief executive officer. The finance chief will replace the ceo, who will become chairman. Fors being rewarded improving the Balance Sheet as electronice iconic company. Francine the bank of japan has taken action to back its claim it is not following the fed and the European Central bank. The central bank wrapped up bond buying and dampened investor usculation that joining Nouriel Roubini is still with us. How much more can the boj actually do . Are they the only bank left with the fire power to continue descending what it a correct level for them . Julia the boj has gone from being the timid bank that never wanted to do enough, to the bank that is more willing than any other to put its money where its mouth is. How far can they go . They are sort of defying the trend and challenging the market. They are standing there ground. They seem to have quite a bit of resolve for now. Francine they certainly do. Depending one whether governor kuroda stays or not . Julia yes, obviously right now there is a very special situation in japan that looks like it will continue, and the sense that the fiscal and Monetary Policy authorities are very much aligned. We will see if there is a transition and what it brings, but i do not see that changing in the near term. Tom it is spectacular to have both of you on the set. Elegantlynado speaks about the japanese, desperate to do something. We have a quantitative easing experiment. David rubenstein calls it a science fair. Ben bernanke says the science fair will end security and control. You you by his believe that we can come out of all of this smoothly . Nouriel i agree that we needed unconventional Monetary Policy to avoid becoming another depression. This thing has worked in the u. S. , in europe, in japan, and other economies. Question is how you exit these unconventional monetary policies, and so far the exit has been smooth. Reduce sing essentially their purchases, and there are some wobbles in the bond market. Tom bitcoin has just gone under 8000 to a 7,000 handle, and this is because of julia coronado. Julia i will take credit for that. That is me. Tom i look at all of this, and the backdrop is your huge history at bnp paribas of being right on score, subdued economic growth. Do you look at the effervescence or du have to fold and the international attribute which folds it down under 3 . Julia if you look at the pickup between 2016 and 2017, that has global roots. Saw a surge in china, a surge in emerging markets. The destiny of the u. S. This year will be tied to how long this bull and Global Manufacturing last, and i expected to cool off. The u. S. Consumer has been quite a bit more subdued. They have been reacting a little bit to the wealth, but they are not leveraging it. It really is a global phenomenon. You have to look abroad to the outlook and i expect some moderation this year. Francine does the tax overhaul change that a little bit . Will it push americans to spend . Julia i think actually when we put in such a fiscal stimulus at full employment, one thing is that most of it goes to corporations, and they will thennd more through capex through hiring and wage increases, despite the headline we will see a decent capex outlook, but that depends on how much the globe drop the backdrop globally rantings this movement. You are investing for final demand. Tailwind thatly a offsets any cooling in the global backdrop, and sort of keeps the Global Economy growing above trend. There is a lot of unknowns as to how the consumer will react, because it may take a year or two for consumers to understand what their tax bill is and how much it changed. Wherene is 2018 the year there will be a revival of the phillips curve, or is it dead . Nouriel that is a totally open question. Even Central Banks are doing a lot of research. They dont know whether the flattening is temporary or permanent. There are very extreme views. One scenario, this is all temporary and where there is growth in the u. S. And globally, somewhere there is a kink in the phillips curve, and paradoxically, the best of all times with Global Growth at 4 becomes the worst of all worlds because they will have a rate tantrum. The 10 year is already at 3 . Then you have a crash in the stock market, credit spreads widen, and then there is this economic growth. If there is a rate tantrum, it is the worst of all worlds. Tom i have got to rip up the script. Bitcoin falling below 8,000. Nouriel roubini, i want to recapitulate what we talked to earlier in the hour. If it is a scam, can you put an Intrinsic Value on bitcoin . Nouriel the tech stocks have Intrinsic Value. There are earnings behind them. Tom is there an Intrinsic Value . Nouriel no, the Intrinsic Value is close to zero. Tom so a benchmark of going to 8,000 is no big deal . Nouriel 99 to go down before it reaches. Tom Nouriel Roubini will continue this discussion. Is like, why are we here . It is jobs day. Kevin cirilli in West Virginia with the republicans, an amazing day in washington as well. Bring it up. You have tv. Usually i have it all up and ready. You click on the puppy and bring it up at your desk, and you get sort of smart with me. You can come down here, find a chart, and go right out and get smarter with a Francine Lacqua chart for your morning. This is bloomberg. Punxsutawney, pennsylvania, we blame this on the germans. The germans came with their badgers from europe and brought a wonderful european tradition, which has changed over the years. It is groundhog day. For those in america, it will always be a fabulous rewatchable bill murray movie. The sun will rise in february. We will look at our shadow and decide whether to go to miami or fort lauderdale. It is an interesting tradition. I believe a mayor of new york was actually bitten by the beast. Is a dangerous job, picking up the groundhog and showing it to the people. I am going down in flames. It is jobs day. Francine lets talk jobs. Tom everyone is employed in punxsutawney, pennsylvania on jobs day. We do this with Nouriel Roubini and julia coronado. 10 of 4 , john hermann and others are down way below 3. 5 . Would you explain to america how on theat 4. 1 percent, way to three point 6 unemployment and people do not feel that good . Julia we have not seen the wage growth we might expect. We still are stuck at around 2. 5 . That will probably not change today and part of that has to do with the shadow labor force. That was Janet Yellens tom slack. Julia people that left the labor market are coming back, and that creates a downward pressure on wages. We probably have a little bit more of that left to absorb before we see wages pick up. Tom we have by all conventions a stock market that goes by fed and Monetary Policy. Gooseednemployment rate to a lower level because of Monetary Policy . Can janet yellen take credit . Nouriel absolutely. Itll complain about qe and Monetary Policy people complain about qe and Monetary Policy. When the unemployment drops from 10 to 4 , we avoided another great depression. There was a pickup of the economy overall, so Monetary Policy at the time that Central Banks were the only game in town. You have to give credit to Central Banks for leading to this Global Economic recording. Francine talk to me a little bit about the markets. What we see a correction . Do they look to bring expensive . Nouriel if you are looking at the measures of the stocking stock market, there are issues about the norm. For a correction, you need a macro shock like in august and september of 2015 and february of 2016. In those cases, there were the u. S. Bout china, dollar growth, the fed hiking too fast. This time around, the trigger could be this bond market drought. That would be a repeat of what happened with the taper tantrum in 2017, a rate tantrum, and that could be the trigger for that correction. That might lead to a widening of credit spreads and will lead to the slowdown of capex. And then slow down the economy. That is the risk ahead. Francine do you worry more about a repricing of treasuries or german bunds . Nouriel the repricing of treasuries might be driving the repricing of booms, rather than bunds rather than the other way around. Markets are worried about the ecb and boj changing course. I do not think that is the case. Until recently, the fed was holding the short end of the yield curve and there are concerns about domestic overheating, the tax cut is unsustainable, and so on, and that is driving it. Weak dollarave a policy in this nation now . Julia i think we heard it from the treasury secretary, and although the measures messages were modeled, the trade Trump Administration favors the weak dollar. It has been one of the true ideals of this administration from the getgo. Tom julia coronado, Nouriel Roubini, thank you. In the next hour, a conversation with john cryan of Deutsche Bank. Stay with us. Much going on in the markets today. Futures 21. 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. Alix stock selloff, equities hit, dragged down by europe and u. S. Yields reaching 3 with jobs day on deck. Deutsche bank revenue falls to the lowest in seven years. Amazon crushing it. Jeff bezos delivering amazons most profitable quarter ever, and he makes 6. 5 billion. David welcome to bloomberg daybreak on this jobs day. It is also groundhog day. Equities saw their shadow. Alix now they want to go back to monday again. Can we talk about the 6. 5 billion dollars jeff bezos made overnight . I cannot even quantify that. Amazon is no help for the equity market, down triple digits for the dow. This could be the biggest weekly drop in the dow and s p in more than two years. If we get an upside surprise on Wage Inflation, look for the equity mar