Transcripts For BLOOMBERG Bloomberg Best 20240714

Rosalind protesters keep pushing for concessions in hong kong. The u. K. Parliament takes a stand against a nodeal brexit. Parliament saying clearly we will not take kindly if you try and bypass us. Rosalind ibm and red hat seal one of the biggest tech deals ever. We will help extend their reach into 175 countries. Rosalind plus, kkrs henry mcvey says recession may be coming, but investors should not fear the worst. If i were to quote shakespeare, it is sound and fury signifying nothing. Rosalind it is all straight ahead on bloomberg best. Hello and welcome. I am rosalind chin, and this is bloomberg best, your weekly review of the most important Business News, analysis, and interviews from Bloomberg Television around the world. Lets start with a daybyday look at the top headlines. Deutsche bank announced a dramatic overhaul of its Global Operations in the struggling lenders latest attempt at a turnaround. David a banking bombshell. Deutsche bank announced a fundamental change in its business model, planning to cut 20 of its workforce 18,000 people and taking restructuring costs to 3 billion euros in the Second Quarter, shutting down its equity sales and trading business. Guy the losses are already starting. The ceo was in london to brief reporters and start this process. I suspect that many of the cuts will come in london. Many of them will come in the United States as well. The focus is about bringing this business to refocus it back on the german side of what is happening to become a corporate bank, less of an investment bank. So a focus on the c rather than the ib in the cib. Vonnie is this enough . What is the reaction now that it is out there . The reaction initially was positive. It is quite dramatic 18,000 jobs, the biggest restructuring weve seen, even after 4 other restructurings. The problem is there is a lot of risk in this restructuring. It is not only going to be a costly restructuring, how is Deutsche Bank going to find enough Revenue Growth to offset the restructuring . They want to keep fixed income business, they want to keep private wealth, they want to keep asset management. All those areas are very competitive businesses. So turning around all of this while still balancing cuts is something that is still a question mark. Rishaad Deutsche Bank american deposits tumbling in new york, 6. 1 down, a fall of 5. 9 in the primary market in frankfurt. Chief executive Christian Sewings move falling flat. Some investors are celebrating the move, like douglas brownstein, who owns 3 of the lender. What christian is taking the bank back to is its 150yearold history of being one of the worlds best commercial banks. It is consistent, its stable. It is a little boring. But as an investor, that is an exciting place to be. Alix Deutsche Banks Restructuring Plan so far looking like a bust to the markets. Execution risk seems higherthanexpected according to this analyst, leaving little room for error. What do markets need to see for them to actually are respond well to this plan . I think the issue is capital. It continues to be capital. It will be 2020 before things start to turn on that front. So i think patience is required for investors involved in the stock. I think, for new investors, perhaps taking a waitandsee approach. Vonnie day one of the Humphrey Hawkins testimony today before the House Financial Services committee. Fed chair jay powell has entered answered questions for about three hours. This as they will solidify a rate cut later this month. The bottom line for me is that the uncertainties around Global Growth and trade continue to weigh on the outlook. In addition, inflation continues to be muted. And so those things are still in place. He went into this hearing with the markets pricing in a rate cut at the end of the month, and he did nothing to disabuse them of that notion. Although, many times during the hearing, he talked about how well the economy has been doing. He talked about crosscurrents that could depress growth in the future, including trade, which he said was the responsibility of the administration, not the fed. He was not going to say whether it was good or bad, the trade wars, just that it would have an effect on the economy. So he leaves here with while she with wall street believing we will get a rate cut. He did not give any clues on the timing or the amount. The market is 100 priced for a 25 point basis cut. Even pricing in like it was before the payrolls report some chance of a 50, that is a chance that the fed has. Not that they will pause at all. I think the big surprise at this point would really be if they did nothing. I think the market is entirely driven right now by what is happening in policy. We are just kicking the can down the road on when the earnings trough is going to come. There is a lot of earnings confusion. There is no earnings component to this most recent market advance. Instead, it is all a bit about policy elevating valuations. How long it will keep valuations elevated depends upon an ultimate recovery stream showing up. After two days of testimony to congress, fed chair jay powells message is clear the old laws governing inflation appear to have been broken, with big implications for policymakers as they consider a rate cut as soon as this month. An unexpected jump in Consumer Prices caused something of a stir in the bond market. What is your reading . It is just interesting, for starters, to see that 30year bond auction. In the midst of a bond rally, you might have thought that it went off without a hitch. In fact, the gap between what people thought the price would be at auction for the bonds, the yield coming in much higher, the price much lower and it is no coincidence, perhaps, that this messiness in the auction comes after the core cpi came in much stronger than expected. And powell was fairly dovish in two days of testimony. This jump in the cpi is not going to stop the fed from hiking there rate in the month. They are looking for a second cut later in the year, but it is definitely giving investors perhaps a little pause to wonder if the level of yields right now is appropriate, given the fact that the fed is so dovish, and maybe inflation could be getting a little more wide. President trump is renewing his attack on china just as talks get back on track and as beijing prepares to release trade figures. He is complaining that china has not lifted purchases of American Farm products, a promise he says was secured in his g20 meeting with president xi jinping. Out of this trumpxi meeting, we didnt really get a lot of details. One of the things we got out that was good for the u. S. Side was that china apparently agreed to buy more u. S. Agricultural goods. But the data shows that chinese agricultural purchases from the u. S. Have actually dipped since that meeting. And we have trump himself questioning whether china is really committed to increasing those purchases. David trade war effects on china were visible in trade data out overnight, with both imports and exports from china down yearoveryear. No great surprise, i guess. Exports fell 1. 3 in june. Remember, that is the month when mr. Trump put through the higher tariffs on chinese goods. So it was likely always going to be an impact. Perhaps the bigger takeaway was on the import side. They fell by 7. 3 . Of course, that points to slowing domestic demand. Over the half year we have just had, imports from the u. S. Have fallen by double digits going to china. I think it all adds up to the picture that the export and manufacturing side of china continues to be under pressure, and that is why there is so much focus on whether or not these trade talks can reach some kind of resolution. Rosalind still ahead, as we review the week on bloomberg best, more fed speak. An exclusive conversation with richmond fed president thomas barkan. Plus, insight on why Christine Lagarde should succeed at the ecb. And up next, more of the weeks top business headlines. Greece electing a new Prime Minister, who takes office with a set of ambitious economic goals. He talks about 4 annual gdp growth. Essentially, that is double the current rate. Rosalind this is bloomberg. Rosalind this is bloomberg best. I am rosalind chin. Now lets continue our global tour of the weeks top business stories. In turkey, president erdogan shocked Global Financial markets by suddenly ousting the head of the central bank. Francine the turkish lira weakened after president erdogan removed the nations central bank governor. He has reported that policymakers support his view that higher Interest Rates cause inflation. With this removal out of the blue, where does it leave the central bank and where does it leave the new person in charge . It leaves the central bank in a tough position, francine. The previous head was probably on the cusp of starting an easing cycle. But with the decision by president erdogan to suddenly remove or hold management at the central bank, it has caused some volatility in the lira. It is possible that the lira might weaken to a level that it might be more difficult for the new governor to cut rates, as president erdogan would probably like him to do. Guy greeces centerright democracy leader has taken over as Prime Minister. That is after yesterdays election. It handed Kyriakos Mitsotakis a mandate to tackle the nations chronic woes. I feel i have a strong mandate to deliver on my agenda, which is an agenda to grow the economy, to create more jobs, but also to make sure that the greek people feel safe again. Maria he will tell you, i want to grow this economy aggressively. He talks about 4 annual gdp growth. Essentially, that is double the current rate. He wants to cut red tape. He wants to attract foreign money. But more crucially, he wants to slash taxes for corporations and households here in greece. That was his main election promise. Do that, quite frankly, he needs fiscal space, fiscal leeway, and the only way you can do that is convince the creditors that they need to lower the surplus targets, which currently stand at 3. 5 of gdp. Of course he is hoping that he will get that leeway, but it is not clear by any means. It is interesting, however, that, for the time being, the market currently really likes the story. They buy into the rally. Of course, the question is how long can the rally go on . Anne u. K. Mps have voted in favor of a plan preventing the next Prime Minister from forcing through a nodeal brexit. The result was dramatic as the amendment passed by just one vote. It is telling us that whoever comes after theresa may will have just as rough a time with parliament as theresa may did. Parliament saying clearly we will not take kindly if you try to bypass us and suspend us to get brexit done. Boris johnson, who is the front runner at this time, is saying he is keeping that option on the table that he would suspend parliament, if need be, to get brexit done by october 31. He is not started by saying, i went to talk to other parties, talk to parliament to get a deal done. He is saying this is my deal, and i will get it done. And the way to do that is to get brexit done. Parliament is dead set against no deal. And the European Union has not changed. The position of the European Union remains exactly the same. So the challenge for the new Prime Minister is to try to work with the same cards that the previous Prime Minister had, but to play them in a different way. David the European Commission issued its most recent projections for European Growth and inflation earlier this morning, and the news, fair to say, was not good. We have downgrades across the the board. They expect the european economy to grow 1 in 2020, a downgrade. I have to say it was a minor one, because the prior expectation was 1. 5 . But it feeds into the story we talked about weakness, and the Commission Said the strength of this recovery is being put to the test by geopolitics, by trade, and brexit. The timing is interesting, because we are expecting to hear from mario draghi in two weeks, and the market has already priced in a rate cut to stimulate this economy. Basf has become the latest chemical maker to sound the alarm on economic weakness. The stock is slumping after cutting its 2019 sales and profit forecasts. Really interesting to see the factors basf is blaming, and mainly due to trade conflicts is one phrase that stands out to me. A very bleak update from basf last night. Widely seen as a bellwether of the global economy, basf was actually fairly optimistic about its opportunities for this year, as it was, up until now, forecasting and increase in sales, expecting profits to be slightly better. Now, it is saying sales will decrease this year, operating profits will be down as much as 30 . That is a much bigger downgrade of expectations than analysts were expecting. A noted weakness in industrial production, particularly in autos as well, and also difficulties in the american agricultural sector, so really being hit across the board. European powers are urging iran to reverse its decision to breach the levels of uranium enrichment under the 2015 nuclear accords. Still, the u. K. And the e. U. Are stopping short of threatening sanctions. Since the sanctions seem to be off the table for now from the european side, what actions can brussels take . Well, tom, there are two ways to go the diplomatic front at this point. They really are trying to lower the tensions. Obviously, things have become more tense with the u. S. So it is really the e. U. And the u. K. Are saying, lets take a breather here. Lets all try to get people to diplomatic talks at this point. Of course, that is somewhat difficult given the u. S. Position, but france and iran this past weekend said they want to try to schedule some talks by the end of july, which could open up a diplomatic front there. So it really is, at this point, lets try to talk rather than going further with sanctions. Hong kong police have arrested five people while dispersing a protest in one of the citys busiest tourist districts. A small group of protesters clashed with riot police late sunday night after tens of thousands had marched against the governments controversial extradition bill. This was a bit different than what we have seen in weeks past. The protesters yesterday wanted to take their message to mainland tourists, so they marched through one of the busiest tourist and shopping areas in hong kong over on the kowloon side. Tens of thousands came out. It was a bit bigger than we expected, and it really shows the nature of these protests and the momentum that they have, how they have gone on much longer than people thought they would go. Hong kong chief executive carrie lam said that the controversial legislation that prompted millions of people to take to the streets in protest is, quote, dead. Despite that, lam stopped short of saying she would formally withdraw the bill. Critics have been quick to jump on that. But one opposition lawmaker saying, it is too little too late. What would be enough then . She would have to withdraw the bill, and she has not done that. Protesters want the bill to be withdrawn, because it is only safeguard to stop carrie or another minister of her government from reintroducing that bill. That is why the protesters are digging in, saying we want to see that bill withdrawn. And it looks like carrie is trying to use a bit of semantics to explain, once again, her position to the public, but it is a position that the public finds untenable. Yvonne chinas car industry is showing signs of recovery with the latest data showing retail sales advancing for the first time in a year. Now dealers had been offering deep discounts to clear inventory before new, stricter emissions rules kick in, and that is stoking concern that it will not be easy for the market to sustain. Do you see signs that this is the end of the slump . I do not think that it is the end of the slump. I see some growth probably a better second half than the first half. Because we saw doubledigit negative growth in the first half. I think that is the consequence of the tax cut in 2015 to 2017. So i think the second half is getting back to normal. Probably, we will see, like, 5 growth in the second half. Francine the account of the ecbs june meeting was marked by a dovish turn, with a broad consensus that policymakers were ready to return to monetary easing policy. That follows a recent toughening of language by mario draghi, with the ecb president saying that, if the outlook does not improve, that would be enough to warrant action. Some economists forecast rate cuts as soon as this month. Do you think Christine Lagarde changes anything . Is she going to push for a different kind of monetary policy, issue going to push for is she going to push for fiscal spending, and if she does, will government actually hear her out . She does not change anything, from our perception, visavis the draghi era. However, if you are starting to price in a potentially more hawkish ecb, in the case of someone else being selected, if that was your baseline, then clearly it is a dovish pivot against that. Rosalind youre watching blumberg best. I am rosalind chin. This week, investors closely monitored federal chair Jerome Powells testimony on capitol hill. But powell was not the only fed official offering perspective on monetary policy. In his First Television interview since joining the bank, richmonds fed president spoke exclusively with michael mckee. We are watching very carefully what is happening in that data. And we are looking very much at upside risk and downside risk. At this point, they are a little more tilted to the downside. Michael the market has priced in a pretty much 100 chance of a rate cut. Do you go against the markets . We have a lot of time left before the meeting. We will see what happens. We will have a lot of data that comes in. Well get retail sales, we will get consumer spending. And markets are smart. If the data ends up with a different kind of outcome, the markets, i am sure, will adjust. Michael what is your view of the economy . Markets have priced a fed reaction to almost a recession. Tom i actually still feel pretty good about the economy. On the consumer side, spending is great, on the labor side, markets are still quite tight. Those are very healthy signs in our economy. What the chairman mentioned yesterday and what clearly is a concern on my mind is Business Confidence and Business Investment. The First Quarter was fine, but the indicators we see for the Second Quarter are less strong. So i have been out with my contacts in my district, asking questions about how do you feel about the climate for Business Investment . I would say that folks havent pulled back yet. I dont see folks laying people off, i do not see people cutting back existing plans. But they are also not leaning forward in the way you might as strong as numbers have shown in our economy. Michael lets talk a bit about that. You have a little bit different background than the phd economists on the fed. You were a Business Consultant at mckinsey for five years. You are the guy that talks to the ceos. What is the general feeling about the economy, and where is it going . Do they think we are headed down or are they just unsure . Tom confidence is fragile. Most everyone i talked to says this is the longest upturn in my memory and actually, it has been in u. S. Recorded history. It has to change at some point. So there is that concern in their mind that things are close to changing. That said, when you talk to them about their own businesses, with very few exceptions, their own business are doing quite well. So the day is good, but they are nervous about tomorrow. Rosalind much more to come on bloomberg best, including Sir Richard Branson on Virgin Galactics upcoming public listing. And Deutsche Banks cfo explains how the lenders sweeping plan aims to revive profit growth. Plus, bini smaghi is confident Christine Lagarde is the right leader at the right time for the ecb. She has the experience of having also discussed and dealt with politicians. In europe, it is important, because europe is not completed yet. Rosalind this is bloomberg. Xfinity mobile is a Wireless Network designed to save you money. Whether you use your phone to get fit or to find the perfect gift, youll use less data with a network that automatically connects to millions of wifi hotspots and the best lte everywhere else. So you save hundreds of dollars a year on your wireless bill. Xfinity mobile has the best network. Best devices. Best value. Simple. Easy. Awesome. Click, call or visit a store today. In general the economy in brazil is poised to start going faster. We are very optimistic about Going Forward. I think the aca we have grown every year. 80 of people continue to renew. What i hope the politicians think about moving from politics Going Forward. I think the aca we have to policy. The only thing that is not changing is where we can make a difference his creative ideas. Rosalind those are highlights from the annual allen and Company Conference in sun valley, idaho, they gathering that has been called billionaires summer camp. Visit bloomberg. Com to find more conversations. The atmosphere was much more somber at Deutsche Bank headquarters in frankfurt as the bank unveiled a radical overhaul. Bloombergs guy johnson spoke with the chief Financial Officer who explained how deutsches plans to maintain growth while implementing deep cuts. We probably will be the greatest growth driver in the franchise as we see it Going Forward, especially in todays Interest Rate environments. That may change in the future as Interest Rates change. For now we see great Growth Opportunities that have existed for several years and we have not been able to participate as much as we should or could have. We see growth in the private bank. The german Consumer Banking franchise we have, as well as italy and spain. Asset management has recovered after a difficult year in 2018 and is back on a growth trajectory. We see underlying growth. We are taking the decision to retrench a step back from elements of our Global Markets franchise, in particular equity sales and trading. That is a significant step. If i were a german client, the question i might ask is, are you going to be able to serve my needs . Thats part of the core question for us. Many clients, a significant portion of the revenues earned far international revenues. 80 are earned outside of germany. 40 of german organizations have activities outside of germany. These clients expect us to be present around the world and to be able to service their needs. Those needs may be cash management, risk management, fx. Its around those strengths we are. How will the retrenchment and equity affect that . One concern weve had about retrenching away from equity sales and trading was the franchise impact and the potential it would have in other businesses. In making the decision we had to grasp and we will manage through that. We are retaining a target Equity Capital market franchise, as well as research and limited distribution. In order to continue to serve our clients need to write equity financing. The sales and trading decision has been a difficult one for us, recognizing there are likely to be some knock franchise applications from the decision. In brussels, eu finance ministers approved the nomination to replace mario draghi as European Central bank president. We sat down with bini smaghi. He says despite the lack of a banking background, lagarde is a fine choice to lead the ecb. I think she has the experience of the financial crisis. She has the experience of having managed a big institution. She has the experiencing of also dealing with politicians. In europe thats important because europe is not completed yet. We need to continue the Capital Market union, the monetary union. Its important for someone who is pragmatic to discuss and have a dialogue with the authorities. Economists do not expect more ecb stimulus in july but they do expected in september. Expect it in september. Are they being realistic . Are we going to see more of this stimulus . It depends on the Economic Situation and the fed. If the fed starts loosening strongly, there is a risk of the euro appreciating with the dollar and thats on exactly what you want at this time of the cycle. I think we have to wait and see how these factors will evolve, in particular with the fed will decide in july. The Worlds Largest supplier of consumer goods became the latest to sound the alarm on the damage the trade war is doing. They of flight and transport goods for walmart in nike and gets roughly two thirds of its revenue in the u. S. Yvonne man spoke with the ceo who said trade uncertainty is affecting how his customers do business. A lot of our customers are not u. S. Based trying to davos of our diversified outside of china. Putting less eggs in one basket to spread the risk. This has become a big opportunity for us. When you have to diversify out of china, you go into Different Countries and we have the Biggest Network in the world. Actually more than 50 countries where we have deep knowledge and history and relationships with local vendors and government. We get help our customers move quickly. Its a big opportunity for us now that things the world is changing more and more. Getting morere pressure from your clients now to shift out of china . Is it more u. S. Customers . What about european customers . Spencer i would say it is mostly u. S. Customers because of tariffs. It is the threat of the tariffs. European customers are seeing a buying opportunity inside china. In china many factories are not operating at full capacity. They are more eager for business. When there when they are more eager for business, there is a pricing opportunity to lower prices. Its an opportunity for any nonus retailer. Europeans, japanese, Southeast Asia or even domestic. Rosalind wall street kept its eye on washington. In particular, watching the federal reserves widely expected rate cuts. In a conversation with erik schatzker, Henry Mcveigh said the markets may have let expectations get the better of them. I think the market got too dovish on the fed. The idea they would do 50 basis points in terms of easing in july is too optimistic. Ultimately the fed sees lowinflation. I think they see slowing growth. The prudent thing to do is to do 25 basis points. When we were talking ahead of the jobs report that is where we stood. I doubt the market will come around. There are very few times, three or four times in the history where the fed funds more than 50 basis points about the twoyear. Every time that happened, the fed eases. It happened in 1989, in 1998, 2000 and 2006. You had very slow growth over the next 12 months. The fed was trying to get ahead of the curve. 1989, 2000, 2006 it got bumpy. In 1998 the market ripped to the upside. We will not have a nasty recession but we dont buy off that we will have a 1998 to 2000 runup. That is the big question. Does this look like 1989 . Does it look like 1998 . Does it look like 2000 when equity markets are substantially higher . Lets walk through those. To me, the case that it is 2007 and companies are over earning, i dont see that. 2000, you had a valuation issue. 1989 would not be a bad test case. You bumble through and made it through the Central Banks got dovish. You had some corporate profitability issues. If i was to quote shakespeare, it signifies nothing, which we think the market has capped on the upside. You will not get more multiple expansion from here but on the downside, you have a protective fed, as well lets sum of his peers in the Central Banks. Some of its peers in the Central Banks. Rosalind welcome back to bloomberg best. Im rosalind chin. Lets resume the roundabout the weeks top stories. Trade tensions in asia escalated as japan and south korea sparred over tech exports. Another trade war by might be coming to the boil, citing longstanding and unresolved tensions. Japan is restricting exports to korea for semiconductors and smartphone screens. This dispute has its roots dating back to before world war ii. How difficult is it going to be some sort of resolution . The real issue for both sides is they need to ask what theyre going to get out of it. There is a lot of pride and patriotism involved and old wounds are being opened again. But at the end of the day they have bigger things to worry about and thats a global trade and macroeconomic environment we have been talking about for the last few months. And the fact that both sides, the South Koreans and the japanese have companies under threat from china because they are in areas that the Chinese Companies want to get into. If they are going to squabble, that opens up the opportunity for beijing and companies in china to get part of the hardware supply chain. Germanys biggest bank is facing trouble. Deutsche bank is likely to face an investigation from the Justice Department as part of a probe on their investment fund. Investigators are looking to a former Goldman Sachs executive who later worked at deutsche. Authorities have not made accusations of what they are doing. From what we understand it appears Deutsche Bank was misled in when it handed out this loan in 2014 and called some of that back when it realized it could not be seized. That is different position for the one Goldman Sachs finds itself and when one of its own bankers was doing the misleading. Just 10 days ago, they passed a u. S. Stress test. Deutsche bank getting a vote of confidence in its controls after a myriad of misconduct that made the regulator quite uneasy. I think a few things to balance out. Houston, we have a listing. Billionaire Richard Bransons Virgin Galactic will be the first tourism venture to hit Public Markets after receiving 800 million from social capital. Can you walk us through the logistics of how this ipo was is happening . Thats right. They are taking the route of an already listed company. That means they can bypass the traditional ipo route of having a prospectus. Virgin galactic has only done a couple of test spaceflights and has not really started on the business proper of sending space tourists up into the sky. The operating modal shows next year is when we see the ramping up of customer flights. We expect profitability in mid 2021. We have had two successful flights into space recently. The first five astronauts to be made in america since 2009. After 14 years of hard work getting this far, we feel we are on the verge of something very special. Ibm has closed finalizing the worldss secondlargest Technology Deal ever. Setting the company up for a path to compete with Software Suppliers in cloud. What red hat has done is built ecosystem and opensource with its term and conditions and its ecosystem. On one hand when we say preserve it, that is what we are preserving. We will help them extend the reach into 175 countries. We are working to build the best hybrid platform. Nobody buys a platform allowed to look at it. You buy it to build applications or move applications. Coming together allows us to certainly and dramatically accelerate our business. Dramatically accelerate our clients businesses. Which creates value throughout that change. Off a bullish Sales Forecast for the quarter, cisco is standing still. Their equipment makes of the backbone of the internet and Corporate Networks and they will buy a company that mix products that makes products for Cloud Service providers. What is the motivation behind the deal . Cisco, you dont want to be in the same box everyone else has. They are getting some of the fundamental technology, the chips, the basic optical Translation Technology to put in their boxes and hopefully that will differentiate what they are offering and make the likes of google come back and say we need cisco technology. Two of the Worlds Largest automakers are teaming up on self driving cars. Argo had a valuation of about 7 billion. Vw sold its Audi Division selfdriving unit into argo. Argo is a challenger to know motors and alphabets waymo. We have been investing heavily in china. They would be very competitive in europe. It will make us more competitive as we celebrate the condition of self driving cars. M a heating up so much that the ones advising of those deals are starting to merge themselves. Boutique investment banks are bundling up with Piper Jaffray buying sandler oneill. Price tag, 485 million. The price is low. I think they got a very good deal. I will do everything in my power to make sure they did, and everything we do to be helpful with them. I think over time we will make a real contribution and we will be large shareholders and i intend to be a large shareholder. There are a lot of ways to get paid in this deal. The grinding of the 737 max is heading home at boeing. Last quarter, overall shipments fell 54 from a year earlier after its bestselling plane was barred from flying after two fatal crashes. How do things look going into the second half . They are still actually building these things. We have seen bad numbers for the first half so far. The second half could be worse given we have just seen the First Airline to cancel the 737 max commitments. We could see more in the second half as this unravels further. The other factor that is causing concern is the trade war, not just between china and the u. S. But other trade disputes going on with eu and the u. S. I foresee probably there will be more challenges Going Forward for boeing in the second half. The federal prosecutors are charging Jeffrey Epstein with sex trafficking as well as conspiracy and are pushing for him to remain behind bars. The indictment was unsealed earlier today in a Manhattan Federal Court after the wellconnected financier was arrested on saturday. He pleaded not guilty. U. S. Attorney Jeffrey Berman called him a significant flight risk. When you have two planes live planes, and you live much of the year abroad, we think that is a real risk. This is a guy who works in bipartisan circles politically, financially, socially. And he got away with overthetop behavior for quite a long time. I think a lot of people are probably sweating this one out, wondering what Law Enforcement will come up with when they start going through his files. They broke through his front door over the weekend and collected photos from the house. I think that is the least of it. Labor secretary alex acosta is resigning effective a week from today. This is one of the first concrete pieces of fallout from the epstein scandal that does not have to do with epstein himself. Yes. Because it is a sex scandal, so much attention has been focused on him and his conduct, but this shows the first real repercussion in government at a very high level. The secretarial labor is out as a direct result of this. Depending on what comes out from the federal investigation in manhattan, this could have repercussions elsewhere. Well beyond epstein and into the world of wall street or business. This is the gd function. A great way to get a quick snapshot of whats going on. Tesla is in rally mode. An internal memo suggested the company may increase its production at a california plant. Rosalind there are about 30,000 functions on the bloomberg. We always enjoy showing you our favorites. Maybe they will become your favorites. Here is another function you will find useful. Quic. It will take you to our quick takes where you can get important contacts and context and a look into timely topics. Here is a quick take from this week. In a tweet Threat Exchange with jetblue, begin see fagan had a few ideas about the airlines new boarding procedure. No boarding pass, no i. D. Instead, a camera and screen verified her identity. Then, let her on the plane. Some passengers may consider the increasing use of facial recognition convenient, some might think it is orwellian, but its everywhere. The question is, how far will it go . Even some of those developing the technology are scared of what the answer might be. This is your bloomberg quick take on facial recognition. In may, San Francisco became the First American city to block police and other agencies from using facial recognition software. The concern is around Civil Liberties and whether you are enabling a totalitarian state. Which seems to be the direction things are heading. How did we get here . Like other Artificial Intelligence applications, facial recognition developed slowly beginning in the 1960s. With the help of newly available high death cameras, Machine Learning and giant databases of photos to increase accuracy, it advanced in a hurry. Facial recognition is basically a technology that takes images from cameras and tries to identify faces of people. It does so by taking key points on the face and doing measurements of the distance between all those various points. 2018, londonr police made their first arrest based on facial recognition after crosschecking photos of pedestrians against a database of known criminals. In new delhi, a police trial identified 3000 missing children were identified in three days. Involves catching criminals and finding missing children, why would anyone be against that . For that, one might look at the most developed facial Recognition Network in the world in china. Cctv and facial recognition are used in combination to create a vast surveillance apparatus that has been applied against certain ethnic minority groups. Even in western democracies, there is concern about Police Department using this technology to find suspects or people who might be involved in legitimate protests so they can be tracked. Those are just concerns about the technology when it works as intended. A study from the m. I. T. Media lab found white men were correctly identified 99 of the time, while error rates of up to 35 were found when it came to darker skinned women. Microsoft came out last year. It was the first Major Tech Company to say they feel uncomfortable with deploying this technology until there is clear regulation. They were then joined by amazon which seconded those calls. It seems like other companies are going ahead without such qualms at all. To stake out some guidelines, the algorithmic Justice Center at Georgetown University law center unveiled a safe face pledge which asks companies not to provide ai for autonomous weapons, or sell to Law Enforcement unless laws were debated and passed. A few companies have signed on, but notably not microsoft or amazon have signed on. What is preventing your image from saying more about you than it used to . Face it. Not much. Rosalind that was just one of the many quick takes you can find of the bloomberg, you can find them at bloomberg. Com along with all the latest Business News and analysis 24 hours a day. That is a wrap for bloomberg best this week. Thanks for watching. Im rosalind chin. This is bloomberg. Carol welcome to bloomberg businessweek. I am carol massar. Jason i am jason kelly. Bloomberg headquarters in new york. Carol this week, the new workers of the world try to make a living in an era of unprecedented change. Jason Deutsche Bank one back to basics. Carol we sit down with ups ceo to talk about the evergrowing need for speed. Jason lets begin with