Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

The next governor of the bank of england. He is no stranger, 30 years of experience in a range of positions. Francine lacqua joining me now to take over hosting bloomberg surveillance. About his experience of Monetary Policy, the economics of the u. K. , and on the regulatory side, and reflecting on the brexit experience, even if many people point out a lack of Monetary Policy setting experience. In terms of market reaction, we do not expect a lot of reaction. Our colleague was pointing out he was widely expected to be the next governor of the bank of england. Move on the ftse 100, equity markets not moving far. We do have confirmation on who the next governor of the bank of england will be, and mark carney has extended his term to the middle of march. Francine thank you so much. Welcome to bloomberg surveillance. Governor of the bank of england will stay until march 15. Andrew bailey is to succeed mark carney. Bailey spent three decades at the bank of england as Deputy Governor. Lets welcome our guests, jari stehn, director chief european economist, Goldman Sachs. Mber, Global Market strategist for j. P. Morgan. He was front runner, and there liquidity that the problems why was he picked . He is the safe pair of hands and knows the moving parts to help us through brexit and keep the city in the ability to conduct itself. Clear what needs to be done with brexit. His experience is unparalleled. The fact he does not have Monetary Policy setting is not relevant. He has been around a long while, everyone knows him and respects him. The most important thing is not where Interest Rates are. Think the bank of england want to do too much for the next few quarters depending on how the economy does. It is all about how we handle the European Union and are regulatory role are handled. Expect fromat we the bank of england governor . What is his first job next year . Mark carney is thing until march 15, then he goes back to setting Monetary Policy . That is the beauty of andrew he is not known for his economic views or cutting Interest Rates. It is more about how he handles banks and insurance companies, and Pension Funds and the regulatory requirements that we need with the European Union. Itt is the boring bit, but will be more important for the next eight years. This is onceinalifetime breaking news. What does it mean for the u. K. Economy . He has a lot of experience, three decades of experience in the bank of england. Headed the fca for three sors and is widely respected i think the experience he brings will be a great asset for the bank of england and the u. K. Manages aconomy number of challenges as we go into 2020. The key challenges that growth currently is very weak. We assume momentum into the fourth quarter. The bank of england lowered their assessment of growth. Quite a lot of that has to do with brexit uncertainty and the effects on investment. At the same time, inflation pressures are not that far away from 2 . That will be the key balancing act that angie bailey faces. Francine the question is if he works through it or not . See ife are waiting to that will bounce into next year. We have had data the last couple of days which is not reflecting the election result. We want to see the extent the Political Uncertainty helps the u. K. Economy bounceback, or if the shift in focus is toward a cliff edge exit toward the end of 2020 is the main driver for the u. K. Economy. His first job in march will be to assess the extent to which of those forces are winning. Francine how difficult will it to be to set Monetary Policy when we do not know what the trade relationship between the u. K. And the eu will be . We are seeing across Central Banks, they are happy now to be on the sidelines as long as they can. We heard it from the fed and the ecb, they would like to look at six months of no changes in policy if they can get away with it. The hope is business surveys and pmis bounce back and allow them to do that. For next year, it is an asymmetric relationship. If economies weaken, monetary stimulus will come back quickly. On the flipside, the barrier is higher for Central Banks in 2020. Youcine i do not know how model the u. K. Economy, the Boris Johnson will be able to negotiate with brussels. Is it a range, or could it be widely different . I think this wide range of possibilities, we expect that ultimately the u. K. Will be further away from where it has been in the past. At the same time we also see some positives for the u. K. Economy as we head into 2020. One factor is the Global Economy is starting to look a little somewhat better data here recently. Some trade risks have diminished. Ofn we look for an expansion fiscal policy in the u. K. In 2020 and beyond. Finally, uncertainty remains around the Brexit Process from here, but we think the passage of the Withdrawal Agreement will take away some of that uncertainty and help investment to come back. Optimisticelatively view on the u. K. Economy ofrting in the second half 20 20. Then into 2021 and 2022. Look at theen you front runner for a couple of weeks, was it a brexit view that went against her . Marcus i have no idea. Have an excellent time at the bank of england when she was there as Deputy Governor. I think her relationship with mark carney was excellent. Andrew bailey is a far more experienced person on the wider range of things. He was head and shoulders above the rest of the others, and i think going back on the economy, we have the potential for one insurance rate cut in the First Quarter or second quarter, but the bank of england will hope to avoid that. Isbe what bailey could do like christine lagarde, a nice long review for a year. Francine on brexit . Columnist. Pinion jari stehn, director chief european economist, Goldman Sachs and hugh gimber, Global Market strategist, emea, jp morgan Asset Management stay with us. Coming up, european stocks are ending on a high note with their biggest gains. Can the rally continue . This is bloomberg. Francine breaking news from the bank of england. The head of the Financial Conduct Authority, Andrew Bailey will succeed mark carney. Mark carney will remain until march 15, 83month extension. A threemonth extension the pound has moved a touch but not much. We begin first word with the leadership standoff in the u. S. Congress over the impeachment process. Speaker nancy pelosi is holding off sending the articles of impeachment to the senate after Senate Majority leader Mitch Mcconnell indicated he wanted a would trial, the outcome determine possible removal of office, and that includes arguments from both sides. Those waiting for heathrows third runway will have to wait 12 more months. They expect to complete the project in 2028 or 2029. Heathrow says the conservative election victory is good for its runway plans. In Spain Coalition talks are on court ruledou top the separatist leader was immune from prosecution and should be freed from jail. The Prime Minister has been trying to persuade the party to support him in government. The latest government could derail talks entirely. A ban on public protests in anger over a controversial citizenship law that has been criticized for discriminating against muslims. Protesters have died and a thousand people have been detained. Curfews have been imposed. The work of the hong kong protest may be over according to city officials, as xi jinping is in neighboring macau. He is praising the colony and bring attention to the differences tween the two cities. It to diversify is economy. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Lets look ahead to 2020 despite poor economic data, trade headwinds and brexit worries, european stocks are ending on a high note with its biggest gain in 10 years. Can the rally continue and should investors be position for the new year . Jari stehn, director chief european economist, Goldman Sachs and hugh gimber, Global Market strategist, emea, jp morgan Asset Management are sticking around. When you look at europe from an economic point of view, 2019 was not great. Will 2020 be better . We think so. We are looking at a pickup in growth of 1. 1 which points to a significant pickup from the current pace in growth across europe. I think the reasons are foreign and domestic. On the foreign side we have seen some reduction in risks, we talked about brexit and we have. Een progress on the trade war also some indications that some of the global data points are beginning to get better here. More domestically we are seeing some encouraging signs. On the fiscal side budgets are turning a bit more expansionary. We see wage growth that remains dynamic. That has room to run into 2020. It is a more gradual turnaround and more limited pickup, but a better 2020 than 2019. What makes you worry . Is it negative rates . The familiar it is risks. On the trade war we have seen progress, but those issues have not been resolved. On brexit, we have seen progress, but there are issues to work through. Politically when we look across europe, i would highlight italy is one of the risks we focus on in 2020. The political situation there is ,ore stable than in the summer but we have Regional Elections coming up, and we need to be focused on that as a potential risk for 2020. Hugh it is potentially a tricky year for assets. , in january things were cheap across the board. If you are willing to say we were not heading into a global recession, it was a great time to buy risk assets. The king forward one year on, the way in which equity markets drivenved are entirely by the pickup in valuations. It has not been an earnings story for europe, it has been buybacks. The starting point is a lot tougher for European Assets despite a relatively optimistic outlook on the economy. Francine where do you see the best value in 2020 . About looking for quality stocks. This is the stage of the cycle we would be focused on companies with the strongest Balance Sheet, the highest levels of Free Cash Flow. That tends to lead you towards a u. S. And a more cautious economic scenario. If we see Political Uncertainty clearing, emerging markets in asia look like they have the most upside. A meltup, that stocks will surge into the start of next year, and if that is right, asia will have the most value. Francine what kind of consumer are we having in europe . Are they strong and ready to spend . Jari i think the manger ivers our consumption, wage growth and thanately in the long run important driver. And the signs have been encouraging. The nominal wage growth is between 2 and 2. 5 . That is lower than before the crisis. Given that inflation is 1 , the real income gain is sizable. The other component is the savings rate, and what we saw here in the first half of 2019, the sitting rate moved up rapidly in the euro area. We see some room for that to reverse as we go into 2020. The outlook for the consumer is a reasonably outlook opportunity. Francine thank you both for joining us. Jari stehn, director chief european economist, Goldman Sachs and hugh gimber, Global Market strategist, emea, jp morgan Asset Management we will focus on the rates debate, and prospects for europes economy. That is coming up next. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua in london. Bankerday, swedens riks ended its fiveyear experiment with negative rates. It could be looked back on as the beginning of the end of a historic policy experiment that worked initially but was undermined by the failure of politicians to follow up with a progrowth policy response. Jari stehn, director chief european economist, Goldman Sachs and hugh gimber, Global Market strategist, emea, jp morgan Asset Management are still with us. How distorted our markets because of negative yields . Hugh very distorted but that is here to stay. It is hard to see the ecb being able to normalize policy anytime soon. People are suggesting the move could beriksbank followed by others. They are looking at their inflation target and feeling they are pretty much there, and extraordinary levels of accommodation are no longer required. The ecb are different, projecting to be missing their targets a couple of years down the line. That distortion in bond markets is here to stay. Francine do you agree with that . Expect negative rates for quite some time. We have the ecb on hold in 2020. Inflation is low but growth is expected to pick up, so that takes away the urge to cut more, but we have them on hold until then a gradual, exit from negative rates all conditioned on the idea that inflation over the nearterm will be low and rise gradually. Francine what do you worry about with the ecb . If you change the inflation and how you measure it, or your target, you do not have continuity that we have had for decades. Jari the review will be wide, and it will look at the target and the tools, the side effects. President lagarde has indicated she will spend a year on that review. The key of the review will be about the objectives, and i expect the ecb leadership to push for symmetric 2 target to clarify with the aim is, to move away from the fuzzy formulation at the moment. That should help the Government Counsel to coordinate behind a clear objective, and contribute to an improvement in Monetary Policy at the ecb. Francine thank you so much, jari stehn, director chief european economist, Goldman Sachs and hugh gimber, Global Market strategist, emea, jp morgan Asset Management stays with us. Coming up, chinas Economic Growth will come in. We will talk more about the worlds secondlargest economy. We will talk about trade and Steven Mnuchin yesterday saying the phase one deal should be ready to sign in january. This is bloomberg. Francine a new boss for the bank of england. Andrew bailey takes over. Goes to theill house of commons today. Eu inre set to leave the six weeks time. Giant says itil will keep a lid on investments. This is bloomberg surveillance. Uk getting some eu thirdquarter gdp readings. We will have plenty more on your markets. We will have plenty more on your pound checks just over 1. 5 hours into the european trading day. I want to start with renew. It is up more than 22 . Who knew garbage could be so valuable . It is a Waste Management company. Nmc health down 10 , having a tough day. Responded to the report overnight saying it was false information. They are said to be raison datre to fund. Adidas down. 4 this morning. Nike and do with aftermarket trading. Adidas is one of their peers. I want to see what nike is doing and free market trading. Cap of mackey, the stock value was the highest on record yesterday. It just was not enough. Francine lets get straight to the bloomberg first word news. Viviana we begin with breaking news at the top of the show, Andrew Bailey will be the bank of englands next governor. He spent three decades at the central bank. , heuncing the appointment was described as the clear frontrunner. He will take up the post when mark carney leaves in march. Andrew baileys salary will be nearly 500,000 pounds. Four people have been arrested with the group to help bail protesters out of jail. Held fore being suspected money laundering. It is connected to a group known as spark alliance. Million u. S. Dollars associated with the fund. Malaysia wants to bring Top Executive to court and is hoping to recoup up to 9 billion. The two sides are still a long way apart. They have not there is still a Pacific Ocean gulf between malaysia and Goldman Sachs. Viviana Goldman Sachs declined to comment. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. I am viviana hurtado. This is bloomberg. Francine lets take a look at what you should be watching out for today. The chinese president is commemorating the citys 20th anniversary of the return to chinese rule. There is a call to diversify the economy. Brexit Takes Center Stage in the u. K. With the government introducing the Withdrawal Agreement bill to the house of commons. We will get gdp figures, expected to show growth. It makes people think of halloween. Lets talk about the worlds secondlargest economy, chinas Economic Growth. Easing trade tensions is the prospect of lower Bank Borrowing costs are among the factors in the boost. Chinese economy depend entirely on trade . Hugh i dont think it does. We have seen a shift since the financial crisis of china moving away from purely manufacturing and industrial driven economy more toward a consumer driven economy. On boosting a focus domestic demand. Looking across the globe, europe is feeling the bulk of the trade pension rather than china. I know it is different for markets to model. Could we have phase one and then go back to nothing . Hugh i think that would be quite it could result if we get to the phase one deal and then tensions slide away. I think that would be good news for 2020. The issues within phase two will be much more difficult, those negotiations will be quite challenging. Youenario for 2020 where get through january and you get the phase one deal done and then simply get kicked further down the road, i think that would be a good scenario for growth. Francine what does it mean for world growth . If you dont have anything more than the phase one deal, i guess sectors and supply chains still get moved around, right . Hugh you are looking at a scenario of Pretty Healthy growth. As good as is about we can expect in the next year. I dont think we are looking at a return to 2017 style boom because i think frankly these headline risks around trade, around brexit will linger for next year. For me, the most positive scenario is one where growth is grinding along but looking ok. Francine there was still a downturn, does Central Banks have the right tools to deal with this . A one milliondollar question, right . Hugh i think they can look toward government to do more of the work. Banksl we hear central have collapsed foreign costs around the world and now it is about freeing up governments to spend. That is the hope that if we see a downturn it is government that will do more of the work rather than Central Banks. I think we will continue to see Central Banks exploring more unusual policy. Today we are talking about negative rates being a standard part, easing being a standard part. I think well see Central Banks try new ideas, look at what the bank of japan is doing, simply saying our government will spend and we will anchor the foreign costs regardless of what they could do. Francine thank you so much. Hugh gimber from j. P. Morgan Asset Management. We speak to the executive Vice President of the company. That is coming up next. This is bloomberg. Francine this is bloomberg surveillance, i am Francine Lacqua. Paris,usive interview in the company is accelerating its push into clean energy. Over the past few years, the company has been pursuing investments on assets. Gwenaelle huet, engie Vice President. Why is angie spending so much money into oldfashioned hydropower . Gwenaelle it is the second largest portfolio of hydro in portugal. It is 1. 7 gigawatts of capacity and it is flexible. Of assets,bination very flexible and we need that in the Energy Position to compensate when there is no wind, no solar. It is verily complement tree to make sure we can provide and supply clean energy to customers. Ambition to provide electricity for our clients. Francine let me jump in because i think Boris Johnson is opening up a Brexit Debate in the house of commons. Lets listen in. Actow is the time to together. As one reinvigorated nation, one United Kingdom filled with renewed confidence in our National Destiny and determined to take advantage of the opportunities that lie before us. The whole purpose of our Withdrawal Agreement is to put this in motion and avoid any further delays in the hope that the honorable gentlemen, i give way to end give way to him. It does not endanger strengthening the hand of the u. K. In negotiations. P. M. Johnson i think most people would say it strengthens. If we have learned anything from the experience of the last three years, is it means more acronym and anguish. There would be nothing more dangerous than the new future that we want to build that allowing the permanent possibility of extension. Extending the implementation period. It came to roof it came to resemble lucy snatching away Charlie Browns football. Expecting a are vote on the withdrawal bill, which could be difficult. We had the appointment of a new bank of england governor. Hydropowering about with Gwenaelle Huet of engie. Make anyoing to acquisitions in renewables . Basically our strategy is to concentrate on Renewable Energy to our clients. Renewable is a key component. Green supply. Green project. Have some very specific acquisitions. Involves 2. 2 billion euros and 1. 7 gigawatts. It will increase our portfolio in spain and portugal and deliver a combination of Renewable Technology for our clients. Angies what will be front what will be engies priorities with renewables . Offshore, hydro, geothermal and clean hydrogen. There is not just one solution but a combination of solutions. Basically our main growth is in europe, and in america and the asiapacific. Andave a number of areas multiple solutions for our clients. Francine what is happening in north america . , youelle in north america said it correctly, we concentrate now on renewable and energy efficiency. We are building one gigawatt per year. We are accelerating with renewables. There was not enough at the federal level. It would support a tax incentive, there is still momentum. That is why we are positioning ,heir and we are concentrating providing supply to our clients. , thanke Gwenaelle Huet you so much for joining us, head of the renewable unit at engie. Johnson just starting off a debate. As we had to break, parliament debating brexit with a conservative majority. The u. K. Looks set up to leave the eu next month. The Prime Minister is answering some questions. This is not the place in this bill to do so. There are advantages to this deal and one is that we will be able to sign free trade deals. Economics, finance, politics, this is bloomberg surveillance. I am Francine Lacqua. Andrew bailey will take over at the bank of england. He will receive 495,000 pounds per year but that does not include pension that mark carneys salary involved. The first meeting will be on march 26. Lets take a look at other corporate stories. A big stock we are watching, shell. Discuss the company. We saw the news breaking this morning. What are the reasons they are citing . They are not doing a huge amount of detail. Announcement is part of our response to criticism. There was volatility in the earnings and not enough information. They are releasing a few weeks before earnings some details so investors can better prepare. There was a big impairment by chevron last week of more than 10 billion. That is a large amount of natural gas. It might be something along those lines. Francine is there worry they are giving so much back to shareholders because they have to because their peers are doing it. There is a competing cause on the catch flows, we can see it across the industry. Investors want cash, returns, dividends. Shell is already the biggest dividend payer in the ftse 100. They have a 25 billion Buyback Program which is incredibly ambitious. Of calls on the cash flow. It is a definite balance for the company. Was will kennedy. I dont know if there is a concern because there is so much pressure to give back that this could create problems for five to 10 years. I think one of the major policies for Energy Companies from an investment perspective is the better discipline on cutbacks, companies being more looking to reward shareholders appropriately. They are looking to move away from just oil. There is a shift toward more Renewable Energy sources. From investment perspective, the investing will have a look toward Companies Shifting away from more traditional forms of energy. There is a balance to be struck about trying to get back well shifting focus and energy. Francine what are you looking in, and uptick or a downturn the World Economy . Hugh i think margins are the key question. We have seen that margin pressures are starting to eat away at Earnings Growth quite significantly. With wages picking up across the world, it is a major concern for the next year, that wage growth pressure will not translate into a better consumer and better sales, but actually just eat away at Earnings Growth. Signs of rising wage pressures and companies not seeing the topline growth would be a warning signal for q4. Francine where would you see the industries doing better than others . Hugh the consumer is the bedrock of the expansion. The consumer Oriented Companies look to be in pretty good shape at this stage and rolling out into next year that is where will be focusing most of our attention. Francine what you do with u. K. Assets . Boris johnson is speaking over in parliament and we expect the vote on the withdrawal bill. We dont know what kind of relationship he intends to have with the eu at this point. Hugh the best news possible would be for brexit to fall out of the headlines. There will be time to pass this withdrawal bill through parliament. What investors need is to focus on the fiscal picture for the u. K. And a potential boost to the economy. If brexit negotiations can find their way back into the shadows and people can focus on positive moves for the u. K. Economy, that is where you could get an investment u. K. Assets. Francine what needs to happen . A hard deal between the u. K. And the eu for longer term . Hugh it is looking like that wont be the case. Thenew bill would take away option of a transition period. We have seen politicians looking over the edge of the cliff and talking about a orderly exit. Companies in the u. K. Will be looking for any kind of reassurance that projects that toward terms of next year, that is not something the government wants to entertain. Frankly at the moment, we are going to see some noise over the next few weeks of the government try to set up negotiations on the strongest starting point possible. The bond market is the biggest bubble. These bubbles can last for a long time. Provided that central bank remain at the table for next year, you can still see evaluations being supported at these levels and still see bond deals under such pressure. Equitiests need income to get this going on into next year. Francine thank you so much. Strategist at j. P. Morgan Asset Management. You are looking at live pictures of the house of commons. Boris johnson with a big which already and house of commons opening the debate on the withdrawal bill. It is expected to be a formality. The majority is so big that we have not seen anything that could possibly stop that. This is what the market is doing. Treasures are declining. Underlie how it has receded. Will become the new bank of england governor in march. Bloomberg surveillance continues in the next hour. This is bloomberg. Francine a new boss for the bank of england. Andrew bailey takes over for mark carney. Boris Johnsons Brexit bill goes to the house of commons. The majority means the u. K. Looks set to leave the eu in six weeks time. A european oil giant said it will keep a lid on investment. Good morning, good afternoon, good evening depending on where you are in the world. This is bloomberg surveillance. I am Francine Lacqua. A lot going on in the markets. If you look at Andrew Bailey, the fact we have a new bank of england governor and everything going on with treasuries. Bfeorter you have a new head. It will be fascinating to see how everyone approaches 2020. Francine we will have plenty more on negative rates. Lets take a closer look at the big breaking news out of the bank of england about one hour ago. The head of the Financial Conduct Authority Andrew Bailey will follow mark carney as the head of the bank of england. Andrew bailey it spent three decades at the bank of england. Here is what we know so far. He will take over for mark carney on march 16. He will receive 495,000 pounds per year but that does not include pensions and benefits that but that brought mark carneys compensation up around 900,000. Lets get straight to the bloomberg first word news in new york city. With a we begin political impact over impeachment on capitol hill between u. S. House Speaker Nancy Pelosi and Senate Majority leader Mitch Mcconnell. Nancy pelosi that she wont transmit articles of impeachment until the senate lays out procedures. Mitch mcconnell is digging in and says the house has no leverage to determine terms. Seven democratic president ial candidates squared off. Joe biden had his strongest debate yet. He did not ramble or trip over his words. He made the case for why President Donald Trump should be defeated. Trumps response suggests only half of the American People want to see him thrown out of office. We need to restore the integrity of the office of the presidency and is about time to get that underway. Viviana mr. Biden argues he has the best chance to beat the president and has a record of delivering results. In india, thousands of people defying a ban on public protests. Migrants from other religions are eligible. People were killed and 1200 were detained. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. I am viviana hurtado, this is bloomberg. What yourthis is markets are doing. Been in shares have subdued in europe over the last few days. Is treasury yield curve steep. Looking at news in india, some itl banks saying it is may spur credit growth. I am looking at what is happening with the pound simply because Boris Johnson is saying almost every day he would allow a hard brexit if they dont agree to a trade deal. About an hour ago, we had news of a new bank of england governor and mark carney is staying on for another two months. Carol a big store in europe. Lets take a look at what the u. S. Markets are set up as. As for the s p 500 futures, no surprise. Anticipate trading will be quiet as everyone gets ready for the holidays. A couplees down about points. Lets take a look at the treasury curve. You can see the 10 and to spread. The yield curve is the steepest in a year. Recession worries have receded bigtime. At 61 perwn. 3 barrel. Francine we are pretty lucky because every couple of months david herro drops by the bloomberg surveillance set and we talk about a number of investments, banks, what will happen in 2020. Herro,ou so much david of harris associates. Lets start with banks. Negative rates have been a real worry for european banks. Is this the first one that will influence the ecb in stopping the great experiment . Or will this continue but the bank just got to its inflation target . Inid i dont know if that itself will end the experiment. I think more importantly is the result of this project and i think the results have not been quite with they wanted. They thought maybe these negative rates would lead to more money filtering into the system, more money multiplying into the system. We have not really seen that and that is what can be called a liquidity trap. Is really necessary to get the credit flowing is more confidence in weather it be supplyside economic policies or more loose fiscal policies, Monetary Policy cannot do it alone and i think perhaps this is the lesson that the ecb should be paying attention to. They need help from fiscal policy and supplyside policy, which has been lacking. Francine where does the confidence come from . A neutrality in geopolitics . Does the trade deal help . David that is one of the factors that helps. Situation, the lopsided one in the u. K. Helps. We have had so much teeter tottering on the edge and no one was afraid to assert any kind of policy because there was such a row split between the hopefully decisiveness brings more confidence to the system. The trade policy, the brexit situation and some better trade relief globally would be better for confidence. Francine you talk about confidence a lot in the market would benefit from that. Whatention fiscal policy, kind of fiscal policy would bring the most confidence at this point . David in germany, where you have a structural surplus in a way and a very somewhat tight fiscal policy considering the economic situation, i think anything that aids in productivity is investment and infrastructure, investments in infrastructure as well as any kind of tax policy. Youconomic argument that dont have to make so pervasively is money in peoples hands is probably better than money in governments hands. That would help stimulus the economy, especially in some slow growth places. It, a lot likely is of conversations in the u. S. About trying to get fiscal policy done by lawmakers is nonexistent. Hood of thatikely happening in europe . We have trillion dollar deficits. The strength of the u. S. Economy i would argue is not needed. Germanytion is really, is the economic engine that is kind of slowing down. I think the u. K. Will do better as a result of some of this election uncertainty and france and italy, the other big european economies, have some of their own issues. The big signal would be a change in germany. Are you buying more bank shares in europe . David we are fairly overweight banks today. We are the area that represents some of the best value around the world today. Why . We spoke about negative Interest Rates and the negative impact it has on banks. It is true on blending spreads in particular the thinks are hurt but banks have been able to cut costs and other Noninterest Income such that the earnings have been protected. This is the big anomaly. This is what investors have missed. They thought because of the low negative Interest Rate that big earnings would collapse. In most instances, they continue to grow, albeit slowly, but Bank Earnings are still growing and meanwhile you are being paid with yields and high single digits. When you compare this to Government Bond yields at negative rates, to me it is almost a nobrainer. The Business Model seems to be cutting costs and cutting jobs that they almost overcompensate for negative rates. David if we look at certain banks, they are trying to do more things in branches. Investment management products, trying to generate more feebased income how they can. Increasesompany is its exposure to credit card lending. These are the types of areas that despite the low rates, you can still try to make up some ground or make some traction. David herro will stay with us. Coming up later on today, we speak to the bank of america ceo. Catch that conversation at 4 00 p. M. In new york. This is bloombergs violence. This is bloomberg. Viviana this is bloomberg surveillance. It takes a lot to keep nike investors happy. Shares are hitting a record high. The stock is slightly lower. Nike rising 10 . Is ceo said the brand connecting deeply with consumers everywhere. Next month, he is stepping down. The top prosecutor in malaysia said he is ready to ratchet up a criminal case against Goldman Sachs. He wants to take current and former Board Members to state. Ignoring redsed of flags while billions were looted from an investment fund. Shell is trying to keep a lid on spending. Expectsgy company expenditures to be in the 24 billion to 29 billion range. There was a warning that buybacks could be slow. Francine we were talking about the banks, we were setting up for 2020 with david herro. If you look at the next decade, what is your biggest concern . Is it liquidity . You asked me this question a month or two ago in one of those bloomberg magazine interviews and i still think it is the biggest risk heading into the next decade, we are investors and businesses and we take peoples savings and invested in companies and our expectation that the management and boards will be actively working to build shareholder value. Look for a return. You have macroeconomics, but the real thing that could upset the apple cart is what deals with and takes away private Property Rights. Tocapitalists are not able own capital, if free markets are not able to work, free, wellregulated markets, regulation is important. Transparent regulation is what keeps markets working. But if this does not happen, you get distortions and a lot of soup leaving the spoon. It is important that the world continues to draft more toward freemarket capitalism and less toward command economic structures. Any sort of command economic structures or the forces of supply and demand dont make decisions is a risk. Francine what do you do with displaced workers . It is retraining people. David it is very important. These are things that lead to social infrastructure. Earlier i spoke about physical infrastructure, something government to do. One of the few good roles of government is to provide social infrastructure, that is the ability the equal ability for people to learn job skills, to be educated. I think this is a public good and something government should be involved with. Fascinating. This it has been a big topic in 2019, what you are saying about social responsibility. Shape yourd that Investment Decisions . Strongultimately, i am a believer that the main object of social responsibility to business and management is legally earn money for the shareholders. Companies do have responsibilities to their society and to their other stakeholders. Companies to be lawabiding. We dont want them to be discriminators or polluters, we want clean governance. Governance and the ecological all of these things are important. Ignorest never responsibility to create value legally for the owners of the business. Carol we will could to get the conversation with david herro staying with us on bloomberg surveillance. We will look at what you should be watching on this friday. The chinese president is commemorating the citys 20th anniversary of a return to chinese role. He is calling for a diversification of the economy. Figures are gdp expected to show growth in the third quarter. It is quadruple watching. Values onvated trade this last trading day of the week. This is bloomberg. Havee way i see it, we seen the impact of corruption and that is what is on the stage for 2020, how we will run against the most corrupt president in living history. Trumps response suggests only half of the American People want to see him thrown out of office. Integrity restore the of the office of the presidency and it is about time to get that underway. Carol joe biden and Elizabeth Warren, some of the Democratic Candidates speaking about President Trump at the debate in los angeles. Ofll with us is David Herro Harris associates. I wonder about the impeachment battle. Here we are covering everything going on on a daily basis. The impeachment proceedings are great theater for politicians, how do you factor it in . David i dont think anyone cares. It does and seen the democrats care because they have passed the impeachment resolution. They were in a big hurry to impeach the president but now they dont want to impeach him. This is going to turn the public into cynics and the public is already quite cynical of politicians in washington. You can just throw this on the pile. Lipson, a charles great professor of political ifence, he wrote recently there is such a clear and present danger, why arent they submitting their impeachment bill to the senate . This is all theater and why the markets are ignoring it. I think most americans are tuning out because they see this as an exercise. There is a president ial election in 10 or 11 months and we have a democracy, let the people decide if they want him for another four years. Carol i wonder if you specifically are starting to think about that november outcome. Is it too early yet . Big investors were at dinner and many said it is about the economy and if the American Public feels good, that will bode well for President Trump. David that will help him but i think what will impact the markets is who he is running against, assuming he is the nominee. A left wing,o be more to the democraticsocialist side of the party . Then i think the markets have something to worry about. That means there is a chance the economy could be turned upside down. If it is someone that is more of a centrist, like a mayor bloomberg or Vice President biden, then i think the markets would be less concerned. The risk of free markets and capitalism would be nonexistent if a centrist from the Democratic Party runs. I think biden and bloomberg are the two centrists. Is theael bloomberg isnder of bloomberg lp, who running for the democratic nomination. If you look at the composition of american society, if you look at the u. S. Consumer, are they still strong . David the consumer is strong. Person in the any United States, any businessman, the single biggest problem seems to be getting labor. If you are a contractor who is doing any kind of a project, it is really difficult. We are at or above full employment. This is why the immigration policy, for instance, would be stimulative to the u. S. Economy. We have a sound immigration policy who lets skilled people in because we need them. Is a real problem in the u. S. Economy and it is driving real wages up, which makes the consumer strong, which allows them to spend, spending is over two thirds of the u. S. Gdp. That is why i was never a big believer in the u. S. Recession scenario. Next, we coming up , aak to Randall Kroszner professor. This is bloomberg. Francine this is bloomberg surveillance, carol and francine from london and new york. We are back with david herro and i wanted to ask about glencore. Sfoou look at the recent investigation, are you still bullish . David we are still bullish. Is ans this investigation extension of the department of justice extension investigation, going back well over a decade, and they may have to pay a fine but we have that factored in. So many positive things are happening at glencore that overbalance this negative investigation. Considering where they are in the cycle of productivity and production of the key metals and minerals they mind, what is happening in the trading operation, what is happening with the focus on the businesses , they may be selling some of the businesses, so many positive things happening. Carol francine what about the departure of ivan . Who would you want in his place . David i am not in a position to cheerlead for a successor, but they have a few good choices. Ivan has been a good steward for the shareholders and he is the biggest glencore shareholder. He owns somewhere around 10 of the company. Ivan has been there a long time and he deserves a break. He is an extremely high intellect and high Energy Person , and he has some good successors. It will be different, but different is not necessarily bad. Glencore has evolved and will continue to evolve. You will continue to see glencore evolve in a positive way for shareholders and owners. Carol i would love to broaden it out into the wider commodities space. What are you anticipating for 2020 . A lot of it plays into the economic environment. How do you see it . David some of the commodities, i like to stay away from the ones with the shallow cost curve on supply. Appealing. Not so as the price goes up, you can increase the supply. Nickel,nd cobalt and which will fuel the 21st century, fueled the whole, as we get a pickup in electrification of motive Motor Vehicles, if we need battery storage, this is exactly what is needed, these commodities. These commodities have extremely ep cost curves, and these this is one of the good arguments to invest in glencore. If you believe we will move to more of Motor Vehicles and battery storage, you would need these commodities which have been soft last year based on the trade fears. I would expect in the next few years, these commodity prices, given the steepness of the cost curve to rise significantly in the decade as the world will demand more cobalt and copper and nickel. Carol i do want to point out, hsbc agrees with you and thanks miner. Re is the only lets get the bloomberg first word news. Viviana we begin with the standoff over impeachment. Noty pelosi says she is sending the senate the articles of impeachment yet. She wants to make sure the republican controlled chamber will give the case of fair hearing. Mitch mcconnell says he will closely coordinate the trial with the white house counsel. In the u. K. , Boris Johnsons brexit bill faces its first test in parliament, but the vote is largely a formality because all conservative lawmakers promised to back it. It would take the u. K. Out of the e. U. By january 31. In hong kong, arrests waiting to protesters. Police have frozen about 9 million suspected in money laundering. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Of thee the head Financial Conduct Authority Andrew Bailey is to succeed mark carney. Bailey spent three decades at the bank of england, including as Deputy Governor and chief cashier. The chancellor of the exchequer made the announcement today. When we launched this process, we said we were looking for a leader of international standing, with expertise across monetary, economic, and regulatory policy, and in Andrew Bailey we have found just that. He was a standout candidate in a competitive field. Without question, he is the right person to lead the bank, as we forge a new future outside the e. U. , and level up across our great country. Francine for more on the bank of england governor, we are joined by Randall Kroszner, and he is governor familiar with Andrew Bailey. Times a regular for a long on bloomberg surveillance. The question markets are still asking is was he chosen because he was not proremain, or did not give a sense he would weigh in on brexit . Isdall as you said, andrew someone who is unbelievably competent. He has in normas amounts of experience, a phd enormous inunts of experience, a phd economics, and hasnt taken a position on brexit. He as bank of england governor, stuff happens, whether it is brexit, a cyberattack, trade war, and he will deal with it. He will not try to change the way the world is, he will deal with the world and use Monetary Policy to make it better. Francine what is the most difficult thing in the postbrexit transition . We dont understand where Prime Minister johnson is negotiating the future relationship. Thinkl a lot of people january 31 everything will be settled, and it is the opposite. It is the starting point for the transition on everything, trade, Financial Services, and such. There will be a lot of uncertainty over the next year and it will be a key thing he will have to deal with. Negotiation the financial agreement is important. Francine the fact that we have more uncertainty that the u. K. Will have this pushed through, does it make you more likely to invest in u. K. Stocks . David the result of the election makes one more likely because there was a huge risk factor. You dont want to own anything where Jeremy Corbyn is in control. They were going to nationalize everything from highspeed internet, you name it. You would not have want to of been an owner of assets and companies in that scenario. That scenario has been put aside quite strongly, and eventually in the next year or two, this brexit stuff gets solved. What would have been detrimental would have been a corbyn government so i think u. K. Assets are more attractive. Frankly, they will be leading the e. U. Over the medium to long term probably makes it more attractive. In the short term, there will be some ripples but in the mediumterm, the u. K. Is the best place to invest from a macro perspective. Value investors have to look at prices they are paying for assets. That is a critical factor for our investment process and procedure. Randall if you think about the macro approach, having someone like Andrew Bailey, a very steady pair of hands, is something you want, because there will be shortterm uncertainty and volatility. He will be an excellent person to deal with that. Carol he has 40 days to prepare for the role, which is less than half the time some of his predecessors have had. He is well versed with what is going on in the u. K. Economy and brexit, but it is different when you are in the seat. What does he have to do and be careful about from day one . Randall since he has such experience and has been working at the bank of england or the regulatory sector in the u. K. For decades, it will be relatively easy because he is familiar with the organization and how it works. I do think the issues of what is going to happen with all the various negotiations that will start at the end of october, and try to understand what kind of shocks those will mean for the u. K. Economy as well as europe and the rest of the world. I think he also has to be very mindful of what will happen with the Financial Services sector, which is crucial for london. London is still the Financial Center of europe and he will want to maintain that. Carol in our reporting, there is some concerns he might not have gotten the position because of questionable things about his oversight of the financial industry. There has been some scandals. How does that factor in . What needs to be his responsibility in that role . Randall one needs to be responsible for all of the issues going on, but you can never anticipate all of those. Being head of the Financial Conduct Authority, if anything goes wrong anywhere, it is the responsibility of the fca to investigate. The challenge is you cannot know everything. There will always be some frauds and issues that occur, so it is unfair to say it was a challenge of his leadership. He has been very responsive and proactive, but he is not on mission. Something will always go wrong that a leader will not be able to see, and he is a man of incredible integrity and hard work. Francine he was the top of the leaderboard and then fell off over concerns of how the watchdog dealt with that. There was also a story saying the fca was asked to invest to be a way boe about audio broadcasts. Make sure no do to one gets an unfair Competitive Exam advantage . Randall the bank of england had this backup to make sure there was no asymmetry of information, that if the video went out, everyone who was listening and watching would have access. It was trying to do that due turned out to have the unintended consequence of audio going faster than video. Francine david herro and Randall Kroszner, both stay with us. As we head to more stories, lets take a look at shell. It expects Capital Expenditures to be at the lowend end of its range as the Energy Company keeps a lid on spending, down a touch but still focusing on dividends. This is bloomberg. We are back on bloomberg surveillance, carol massar in new york, Francine Lacqua in london. Trade is a story that keeps on giving. Beijing expected to send its trade negotiator to washington to sign a phase one deal in early january. Is this enough to bring confidence back to the Financial Market . Still with this is david herro, Randall Kroszner. The trade story is fascinating. Some days, investors shrugged it off and some days they do not. This phase one deal, an important first step in your deal . David it is, and a step in the right direction, but i would not think we can solve the fundamental issues. They have to do with intellectual Property Rights and theft, and a bigger question about the regime. I cannot really see that being resolved anytime soon. The good part is despite all the partisanship in congress, there is bipartisan support for the new version of nafta that was passed. We are on a good path. Carol come in on this conversation. In terms of trade, how do you play that in terms of your Investment Decisions . Where is that stacking up on some of the macro issues . David it is very important because it is one of these factors that is getting in the way of efficient allocation of resources. If you have trade bottlenecks and are not allowed to Exchange Goods and services across international boundaries, this is a bad thing. Certainly you want trade to be on as most level Playing Field terms as possible, but generally speaking, the more trade the better. Competitive advantage, both sides win when you have a sound frayed trade framework. Randall mentioned the new nafta. It is better than not having anything, and moving in the right direction, better than not having anything. The u. S. Still has some issues with europe. At least they are being approached and attacked, and we are seeking to get resolution, so any movement in this direction will be good for markets and the global Economic Growth which is good for corporate profits. Francine have we reached peak globalization . Randall we have seen a little bit of a pullback, but my guess is over time will be more interconnections. There are connections in different ways that traditionally had been purely trade of physical goods. Now Services Play an extraordinarily important role, and the issues in brexit and the e. U. Illustrate that here. The next stage is data. That will be interesting to see how that evolves. There will be a globalization in the use of data, but the regulations in europe versus u. S. Versus china play a big role. That is something we have not thought through carefully, what will be the rules. Francine thank you so much, Randall Kroszner and david herro. Hour, up in the next gideon rose, the editor of Foreign Affairs magazine. We will be talking about the future of capitalism. We will also talk about the u. S. And china and where that goes in 2020. This is bloomberg. This is bloomberg surveillance, Francine Lacqua in london, carol massar in new york. Lets get back to david herro. We talked a lot about how you view 2020, the biggest risks. I dont know whether when you stock pick, you look for value that could be part of an m a story. If margins are under pressure, investment is under pressure, some investments will have to merge. Stock,if it is a value it is not just a value to me. It might be a value to a private equity firm or competitor, so buying quality, low price is this is should be something that ,ttracts not just passive active investors like ourselves, but should also attract some m a activity. Ithave seen a little bit of in our smallcap funds and largecap funds, not as much. It is always a bonus when you have some m a involving one of your companies. Senkrupp is selling their elevator business and this is something that will enhance the value of the old economy. They have a very valuable Elevator Company which will probably be bought by someone in 2020. Carol i love when you bring up names, because even with the wall of worry and some of the concerns, whether it is manufacturing or election volatility, Morgan Stanley has a note. Geneare worried about editing and chinas political and economic land these. Yet, there are still opportunities, so when you look at the wall of worry, what opportunity do you see because of it . Worry, youwall of are exactly right, causes opportunity for medium and longterm investors. Investors must use this volatility in the political and economic environment to buy businesses that have been adversely impacted from a shareprice perspective, but have not been impacted from a value perspective. We mentioned glencore is a perfect example. Glencore is down some 20 year to date, and this is a company that will really thrive in the next half decade. It has felt the negative impact of the trade wars and china slowing and these types of things. Extremely wellpositioned, strong Balance Sheet, and it is proactively building shareholder value. Carol david herro, thank you. Coming up in the next hour, Dennis Gartman. He is a publisher and editor of the gartman letter. This is bloomberg. Francine a new boss for the bank of england. Andrew bailey takes over for mark carney. Johnsons brexit bill goes to the house of commons. The u. K. Is set to leave the e. U. In six weeks. Shell warns impairments could be as high as 2. 3 billion as they say they keep a lid on investment. Carol massar in new york in tom keene, Francine Lacqua in london. I think that is a bloomberg scoop. There is u. S. Gdp a little bit later. Arel it is a holiday, we getting into the Holiday Season and things are winding down in terms of trading activity, but you see companies continuing to make news. Apple shares are up 2 10 of 1 . Talking about apple and conductivity and what they are looking to do with their devices as we get increasingly more interconnected. A pretty big story. Francine in premarket, apple not moving much. We will see whether that ties into 5g. The next governor of the bank of england has been the financial watchdog the last three years. Andrew bailey will come to the central bank in march and will replace mark carney. Bailey spent three decades at the boe, but he was never on the Interest Rate setting committee, so his views on Monetary Policy are largely unknown. Nancy pelosi and Mitch Mcconnell are on an impasse over impeachment. Pelosi will not transmit the articles of impeachment until the senate lays out the procedures for the president s trial. Mcconnell says the house has no leverage to dictate terms in his chamber. In l. A. Last night, seven president ial Democratic Candidates squaring off. Vice President Joe Biden had his best debate yet and made his case. It was a constitutional necessity for the house to act as it did, and trumps response to suggest only half of the American People want to see him thrown out of the office, we need to write restore the integrity of the office. Viviana mr. Biden arguing he has the best chance of beating the president and has a record of delivering results. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Carol thank you so much. Lets take a markets that appear in the u. S. , u. S. Equity futures pretty flat. No surprise, as we get ready for the Holiday Season. A runup in equities continuing this week and for the year overall. S p futures flat. , ther the 210 spread yield curve has been sweeping steepening throughout the week. Today,f Economic News including Economic Growth and also a check on personal income and spending. That will be key in terms of market direction. Futures down for tenths of 1 1 . The dollar in 4 10 of francine if you look at the logjam in u. K. Politics, it is over, but the prospect of the break from the e. U. Is back on the agenda, which is why we are seeing big volatility when it comes to pound. Pound, 1. 3045. We will have more throughout the day on what that means for pound , and as we wait for u. S. Gdp, it could have an impact. Andrew bailey is to succeed mark carney as the governor of the uks central bank. Bailey spent three decades at the boe. We are joined by dan hasson. Andrew we know about how bailey will navigate the post brexit transition . Things. Know couple of Monetary Policy, he is a bit of a blank check. He has not been on the committee and we do not know his views. What we do know that you highlighted in your question, is that bailey had experience on the regulatory side and the banking side of the bank of england, and that will be important in the u. K. Transitions in the brexit deal on the new relationship with the European Union. That has probably given him a nod ahead of the other candidates, that knowledge of the technical side. Francine there is a number of press reports saying they wanted someone that wasnt against brexit. Would that taint the bank of englands view, if he was a remainer or brexiteer . Dan mark carney has dipped his towing into the Brexit Debate on several occasions and sometimes it has done him justice, sometimes not. Aat the government wanted was safe pair of hands, someone that will not go either way and rock the boat. He is highly respected in the city to clear out the regulatory side of the job. That is what has given him the nod over the other candidates. Carol as we talked about earlier, he is well known to the bank of england. Anybody who officially takes the seat becomes that position. What does he need to watch out for . Jay powell has made some mistakes when he took over at the u. S. Century bank, so what will you be watching out for . , everybody will be watching his views on Monetary Policy. At the bank of england, there is a split. The majority think policy should stay on hold, but two policymakers think Interest Rates should be cut. Talking about jay powell, the focus will be on bailey steering the ship in an economy that is looking quite weak. Callnk the first port of will be to make sure the economy stays in a relatively robust shape in the near term. As we approach the second half of 2020, we will be looking at what is happening with the brexit negotiations, is the u. K. Facing another cliff edge, and what is the shape of that relationship in terms of Financial Services . Senior u. K. Ansen, economist. Lets bring in gideon rose, Foreign Affairs magazine editor. We want to start with what is going on in europe, the u. K. Picking Andrew Bailey as their next boe governor. I wonder your thoughts as he comes into this position. Gideon the big question is now that brexit is going to happen, what will happen next . A dog often chases a car but they do not usually catch it. How this will play out will be very interesting for everybody to watch. The idea of a safe and on Monetary Policy make sense. Carol do you feel like in terms of the brexit saga which has been going on longer than everybody anticipated, we have gone through the election and we have a lot more certainty, or is there still the risk of a hard brexit . Gideon there is certainty that we are Going Forward with brexit but that is an uncertain question, because there was never a good economic or political longterm logic and no one knows what is coming next. We have launched onto a new course but that will be one of very choppy seas with no port any soon. Carol so the uncertainty continues. Francine if you look at the future of capitalism, is the u. K. A blueprint of what capitalism could become . We have a very different conservative party, big majority, probrexit, but socially generous. Gideon if the future of capitalism is Boris Johnson or Jeremy Corbyn, i hope u. K. Does not become a model. I think everybody is trying to figure out what to do, how to carve his harvest capitalisms benefits. It gives freedoms and growth and progress, but it takes away community and stability and tradition. The real question is, how do you deal with the turmoil that is generated by the unequal distribution of all the goods capitalism brings . There in a system in which benefits of capitalism are accruing evermore to small slices at the top, and there is political backlash against that, as there has been when that pattern has repeated itself in the past. We do not know where it will go. Rich cannot take a sacred separate country and play golf, but there will not be a revolution stopping modern energy. This will work out politically like the 1930s and other errors did in which a new understanding did in which a new understanding of how to make capitalism and society, but there is no idea insight. No form of what that compromise should be. Francine a great essay to talk about taxation. Later today, we speak to the bank of america chief executive brian moran a hand at 4 00 Brian Moynahan at 4 00 p. M. New york, 9 00 p. M. London. Carol i am carol massar in new york with Francine Lacqua in london. Gartmanus now, dennis of the gartman letter, and still with us is gideon rose. Have you joino our conversation, and i cannot believe you are ending your newsletter after so many years. Dennis 35 years and missing three days in the interim. I have tried to convince the british july 4 is a holiday and they do not believe me. Carol shocking. Dennis it is disconcerting. It is what i have done for 35 years before being a floor trader. Giving it up is disconcerting. Thel i am privy to some of conversations you did with tom on Bloomberg Radio. The market has changed dramatically. Saids i euphemistically years ago that i used to get the china peoples mail a week later than everybody else. Now everybody gets it online. Carol it is instantaneous. Dennis it is disconcerting, confusing, and elevating, because the information is there for you to handle. My job has always been, i am the sieve. I look at information and say, this is what you do with it. I am not a giver of news, i am an analyzer. Carol what do you make of that . So much move news moves through the market instantaneously and creates a level of transparency, but also a level of uncertainty. Gideon he put it beautifully, disconcerting, confusing, and elevating. It is the potential for knowledge and wisdom come all of this data, but it makes it evermore impossible, choice. Kind of services that the gatekeepers like you provide is evermore crucial and that is why in this round of evermore sources of information, in some ways people narrow their focus down to a few and smaller number of outlets because it is a way of processing the rest and relying on aggregators. The aggregators have importance and the platforms have importance because they sift through all the information. Carol you have to be smart about the aggregators you pick. Dennis my job has been to say, i have seen this before and here is what happened afterwards. Francine what you give is great perspective. Is it more difficult now to have that perspective and analyze the markets than five or six years ago, or just as difficult and people get confused with all the noise . Dennis yes. [laughter] carol to which one . Dennis all three of them. Because of the abundance of information, you are being bombarded by information you do not know how to deal with. Even when i have been able to say i have seen this before, sometimes it still looks different. Isstatement that it interesting and exhilarating and elevating is probably a good statement. Francine what is the most difficult thing at the moment to see in markets . Where Central Banks gone next, geopolitics, or Something Else . Dennis i think it is geopolitics. Central bank policy is so much more transparent. In the early 1970s, we did not even know when the fed was meeting and you had no idea who the voters were. That was an alien concept. Now we know who the voters are, when the meeting will be, what they will say. Central bank policy is far easier to understand than it used to be. It is geopolitics and the concern, confusion that abounds that makes things more difficult. Gideon i actually think that domestic politics is the hardest to predict of all. That days, you are right the professionalism to Monetary Policy around the world, the technocrats, once they get control, the whole point is to reduce it to a managerial control system where you can predict what happens, and geopolitics is coming back and confusing things in a big way. The biggest variation in my perspective has been the upheavals domestically in various countries around the globe that have essentially overturned longstanding assumptions about political order everywhere. That is driving a lot of the policy changes. Geopolitics is a product of domestic politics and that comes back to the markets and distribution of where things are going. Everything is ultimately tied together, unfortunately. Francine we will be back with more of this everything tied together and what that means for Global Markets. Gideon rose, Dennis Gartman both stay with us. Lets take a look at what you should be watching out for today. Xi jinping is in macau to commemorate the citys 20th china. Sary of rule of witching, it is not about halloween, something that happens in the market every couple of quarters. Expect elevated trading volumes. This is bloomberg. This is bloomberg surveillance, carolyn francine from london and new york. We are back with gideon rose and Dennis Gartman. We had an interesting conversation about the future of capitalism, what needs to change. Through all of your essays, and this is something that Foreign Affairs has been at the forefront, is there a country or region that gets it better than others . Gideon what i think you are seeing and there is a wonderful piece, the lead hes in the issue that essentially the world is sorting itself into two forms of capitalism. Almost everybody is capitalist, but there are two flavors, a liberal meritocratic one in the west and a state led political directed one in the east. China is the exemplar of the eastern form and the United States with some of western europe is an exemplar of the western kind. Interestingly enough, they are ,oth facing a similar problem concentration of power and resources and benefit at the top of the system. Capitalism is working well to generate new innovations and growth and all sorts of positive benefits, but those are accruing to small numbers of people in ever larger amounts at the top in both systems. It is starting to lose its democratic legitimacy. Which countries because nobody seems to have a good answer. We thought the nordic model was a good one but that is having problems. How do you reap the benefits of markets and growth and dynamism from a free and open society while still protecting your society and the masses of people in your society from the change in inequality and turbulence and destruction of community and capitals does capitalism brings. Capitalism brings. Francine that is why it is so difficult for markets to model it. Dennis i am a believer and continue to be a believer in the freest form of capitalism ever because it has elevated more people out of poverty than socialism shall ever dream of doing. It is disconcerting to find out the Public School systems, especially at universities, are embracing socialism. What are they thinking . If you are not a socialist at 20, you have no money. You have no brains and if you are not a capitalist by 45 you have no money. In thethis we are seeing Popular Movement around the world and playing out in elections. The toptier have generated a lot of wealth for themselves. I am pro capitalism. It is why we all have jobs, but in terms of equality . Dennis a lot of answers are on offer and more have costs than others. Everything from the wealth taxes being forward put forward. Gideon a socialist idea. Dennis i think it skewered the wealth factor. You can be in favor of a more progressive tax system, elimination of loopholes and ways of taking the thumb off the economy to benefit rich people and corporations in the way that it is now. The recent tax cuts could have been much more towards reform than simply giving away a lot of stuff to certain kinds of interest groups. Carol we are going to get dennis to weigh in after the break. We will continue with gideon rose and Dennis Gartman. We want to look at apple shares. We broke the story about apple working on satellite related Wireless Technology. That is a bloomberg exclusive. Apple shares have had quite a run. What are you doing back there, junior . Since were obviously lost, im rescheduling my Xfinity Customer Service appointment. Ah, relax. I got this. Which gps are you using anyway . A Little Something called instinct. Been using it for years. Yeah, thats what im afraid of. He knows exactly where were going. My whole body is a compass. Oh boy. The my account app makes todays Xfinity Customer Service simple, easy, awesome. Not my thing. Good morning, everybody, carol massar in new york, Francine Lacqua in london. The impeachment was the focus that last nights democratic debate. It was a constitutional necessity for the house to act as it did, and trumps response to suggest only half of the American People want to see him thrown out of the office, we need to restore the integrity of the office of the presidency and it is time we get it underway. We have now seen the impact of corruption, and that is what is clearly on the stage in 2020, is how we are going to run against the most corrupt president in living history. Carol Elizabeth Warren and joe biden, some of the Democratic Candidates standing their ground on impeachment. For more, lets bring in Kevin Cirilli from los angeles. He is our chief washington correspondent. Pretty early in l. A. Talk about the mood and the feeling, because they certainly had the candidates on the stage, have more time to talk about the issues. Any resto didnt get was pete buttigieg, who took it from Elizabeth Warren and senator amy klobuchar. It was a battle at the mid tier gaglower tier level, but a taking it aggressively. At the top we had Vice President joe biden drying a contrast with bernie sent drawing a contrast with bernie sanders. Tom steyer and andrew yang trying to make their points. After the debate i caught up with the dnc chairman, who noted the next debate will be midjanuary in des moines, iowa. We are entering into postholidays, the sprint towards the caucus season. I am not sure anything was done differently last night to change the dynamic of the race, but it will be interesting to see how pete buttigieg, warren, and klobuchar fair fare. Carol it felt like a while it was all about President Trump and beating President Trump and now it feels like they are going after each other a little bit more. Kevin i couldnt agree more. It did feel for the first time, there was the six democratic debates but the first time there was more contrast drawn against the candidates amongst the candidates than trump bashing. That is because they all agreed that President Trump should be impeached. It was interesting to see that come to freshen. Other areas of policy that came out, the usmca, how would they use tariffs, how would a more Progressive Administration like a warrant or Sanders Administration negotiate with president xi, versus the centrist candidates . Another area that came up, something that didnt come up much was the issue of foreign policy. I am told that will likely happen early next year. Francine how much is impeachment a problem for the democrats . Will there be a backlash like nancy pelosi feared . Kevin that is such a great question. Polls indicate americans are divided amongst party lines and it has rallied the support of democrats and republicans to their respective bases. Arguably, usmca could be even more of a driving factor and according to some pollsters and republicans in battleground states like ohio where the usmca really does matter in terms of it is ground zero of the trade debate. Moderates on down ballot races in terms of Speaker Pelosi trying to hold onto the majority , it might help them too because they can go home and say they have a major policy win. It is too early to tell, but the polls next week will be very closely watched. , thank you so much, Kevin Cirilli, washington correspondent. It is time for the single best chart. Ofll with us is gideon rose Foreign Affairs magazine, and Dennis Gartman. I wonder about the 2020 election and how this factors in. Talking about capitalism, some of the Democratic Candidates are very vocal and critical of capitalism. How do you think that might play against them . I am curious the folks you are talking to on both sides of the aisle, what they are saying. Gideon survivor always gets more interesting as the field narrows and you start to see who the real contenders are, and they make their final pitch to the jury. In the early parts of the primary, candidates are talking to various segments of the Democratic Base and some of those are very lefty policies. As the field narrows and the candidates have to go beyond their small bases and reach for a broader majority, versus the democratic electorate and the entire country, they have to tailor their appeal to larger audiences. The interesting question to watch will be what if any softening there is in some of the more extreme positions that lefty Democratic Candidates are taking as this goes on, because you will not win the general election with a medicare for all policy. What will happen between now and then, if they want to remain majority candidates, it is an interesting question. Much,ne thank you so gideon rose and Dennis Gartman. This is the moment we have been waiting for, boeing preparing to launch an astronaut capsule for the first time. We are about 60 seconds away from the blastoff, america taking another step to launching people in orbit. Testis the boeing cst launcher from Cape Canaveral in florida. We have to look at whether there will be any incidents. We have an expert who is kind of nodding to make sure i do not say anything that is crazy. The vehicle will be flying ifrewed on this occasion and this is without incident, then astronauts will start using the crafts next year. Carol interesting to watch this, and we have seen over the last year or so the private sector being involved in terms of space launches. This is another big step in terms of opening up travel, if you will. 4, 3, 2, 1, and lift off. The rise of star liner, a new era in human spaceflight. Now 10 seconds into flight. It has begun to pitch. Audio reception good. 15 seconds in. Everything looks good. 26 seconds in flight. Down to partial thrust as expected. Pitch looks good. 38 seconds in. Francine every time we look at this live, i feel like a wideeyed fiveyearold, thinking this is live. The mission will last about a week. The capsule will come out to new mexico using parachutes. It is incredible to see what has happened since 2011 with many capsules being launched off on u. S. Soil. Carol i am a daughter of an electrical engineer. My father was involved in the Early Space Program so this always gets me excited. This is a key effort for nasa because they have relied on the russians in terms of getting american astronauts into space. This is a big step in nasa being able to do it on the round. Do it on their own. Francine i think the endpoint is for this to be approved for human use. Carol dennis just saying how nervous boeing was. Imagine the last couple of weeks and months for boeing, how it has been nerveracking about concerns for the 737 max. Dennis gartman, thank you so much. Francine lets get straight to Matthew Bloxham. Days andere on launch gives us perspective and knowledge. This is pretty incredible, once again looking at this capsule. It is not manned. If this goes well, what is next . Matthew they are connecting it with spacex. This is a catch up mission with boeing. There is a dummy on board called rosie, and this basics capsule had a dummy called ripley. If they get this right, the next one is to send astronauts up, and it will be a test flight, the first manned test mission. Spacex and boeing are looking to do that in 2020 and if that goes well, they will send astronauts. Francine how will they drive down the costs . Matthew i think it is totally about money, because it is an asset thing, a National Security a nasa thing, and National Security independence issue. Spacex has made every part of the launch vehicle and capsule reusable. It will cost about 50 million boeingt with spacex or compared to 80 million with the russian contract that runs out next year. They are coming to the end of that contract and need to start to deliver themselves. This particular rocket, only the capsule is reusable and they can reuse it about 10 times. The atlas fire rocket is a onetime situation atlas five rocket is a onetime situation. I think you make a good point that we have been talking so much about the 737 max, we take for granted some of these launches and for boeing, this is a big test. Dennis you have to imagine their senior manager was all saying, god, please let this thing work. Never just there is one cockroach. When there is one problem, there is another problem and thankfully for boeing, this might signal the end of their problems. 50 million for a seat on space tourism, another sign of inequality we are talking about. Carol we want to bring in ivan feinseth. , ans talk about boeing interesting couple of weeks, grounding the 737 max until january. We will see what happens Going Forward, but this is a big launch. Ivan absolutely. Is their best selling commercial aircraft, but they have so many other businesses. They continue to get defense contracts and have a robust cybersecurity business, so other parts of boeing are doing well. It is unfortunate that the max has taken so long, and i think mondays decision to halt production is a way of saying that the boeing 737 max grounding is not a boeing problem, it is an American Economic problem. They are saying the halt in production is going to reverberate throughout its whole supply chain, which is massive, and could affect a lot of companies. When they made the announcement, economists reduced their q1 gdp outlook significantly, so safety is first and there is no real motivation for the faa to move fast because god forbid there was another crash, they can say there is a problem. They have got to get this plane up in the air because it affects travel. Luckily, the consumer is so flush and travel demand has been so strong, airlines have made up over charging more in tickets. What happened is it caused a huge increase in ticket prices. Francine we will get back to that in a second about the boeing 737 max, but we want to focus on the boeing rocket. Lets get back to Matthew Bloxham. Who are the big competitors . You mentioned elon musk. Anyone else . Matthew you have the amazon backed blue origin, the other of these various space projects in the same camp. They are some way behind. They are getting more ambitious now. They talked earlier this year about sending missions to the moon, so they are the other ones who might come. Francine what does that mean for nasa . There have been delays in the commercial crew program, so what this be a step in saying nasa and the u. S. Is back . Matthew this is a big step forward, and they are only back when they send their first crew to the iss. That is when they are really back. You cannot underestimate how important it is for them not to rely on a third country a foreign country to get astronauts up. Focus of attention on spacex and boeing is huge. They want to be the first to take those astronauts. Carol so much for a quiet friday. Sweeney, roll in paul former head of research at bloomberg intelligence. Apple,ly a company like he knows really well. We got a bloomberg exclusive about apple having a seed Team Secret Team working with Wireless Technology, and what does that mean and how does it roll into what we are hearing about space . Paul it is great timing about apple thinking about getting into the satellite business. They have hired engineers to look into that business. If they are thinking about it as a business, they are thinking, how can we connect all the devices we have, phones, ipads, ipods, watches, can we bring a network that brings those together . We think about apple Going Forward, it will not be as much a phone story as it has for the last 10 to 15 years, but more about their service business. They rely on wireless carriers to link their devices. Carol there has been clamoring among investors that they need to expand their revenue line. With this potentially squeeze out wireless providers . Paul they are thinking about a scenario in the future where they are not exclusively reliant on wireless carriers on a global basis. They want to create a satellitebased network. What we heard from Matthew Bloxham and others, it is very expensive and capitalintensive. It is hard to see a business case. The atmosphere is littered with failed satellite companies. Carol they have deep pockets. Francine where is china on this . Is this a space race with china . Matthew china has been focused on the moon. They had an Important Mission this year. Alongside boeing and spacex, nasa has its own state backed program that competes with china , a space race between nations and commercial companies. , spacex, a big part of their Funding Program for the mars mission is creating 40,000 network of satellites that work for broadband around the world. Interesting how it is all coming together. Francine if you look at the apple story saying that they have a secret team working to try to figure out how satellites and related Wireless Technology could do a massive broadband, does that have any impact on something as this they try to get away from the 737 scandal would look at as well . Boeing is one of the largest manufacturers of satellites so this could be a great opportunity for them. Francine when do we know whether boeing can put the 737 scandal behind it . Do we need a new chief executive . Non so far, there has been discussion of replacing the ceo, i dont believe it has been handled correctly from the beginning. I believe when there is a crisis, you have to address it headon. It is going on a year. The greatest thing for boeing is the stock has not been impacted that negatively because they have gotten no cancellations, because the Airline Industry is so capacity constrained that they desperately need these planes. Carol i am looking at some of the players in the satellite business in the premarket, whether it is Northrop Grumman or lockheed martin. I am not seeing movement, but this is not something that will happen by apple tomorrow. What do you think about apple expanding into the satellite business, if this is what they are doing . Ivan they need new avenues of growth to support their massive, over one billion iphone user base. Everyone says, it is just the Hardware Company and demand for iphones is slowing. It is not really, and they continue to expand into other services such as the launch of tv plus,ice with apple apple arcade, the new credit card. They are continuing to expand their ecosystem, so having a Communication Network that they own and can develop, can make it better, are integral in supporting this iphone user base , as well as the lost connectivity and things like that. A 205 i am looking at billion dollar, 200 6 billion on the Balance Sheet so they have a lot to spend. This is what we wanted to see apple do, spending, whether it is apple tv or other avenues. Paul they have 200 billion in Free Cash Flow each year. There is only so much you can return to shareholders so investors are looking for them to expand. They are looking for content, does apple need to buy content to connect their system . Do they buy a content company, it may be a foam studio or Something Like that . Film studio or Something Like that . Also, we are hearing about the communications side of the business. Francine full Team Coverage of all things business, Matthew Bloxham, ivan feinseth, and paul sweeney. Turn into Bloomberg Radio live on your mobile device and on sirius xm. We have plenty more on space and on our apple story. Here is viviana hurtado. Viviana it takes a lot to keep nike investors happy, Quarterly Earnings beating estimates and the stock is slightly lower. Nike sales rising 10 . The ceo says the brand is connected deeply with consumers. Next month he is stepping down. Royal dutch shell is trying to keep a lid on spending. The Energy Company expects capital and spend it schuurs to be near the low end expenditures to be near the low range a 24 to 29 million and worn the pace of buybacks could slow. That is the Bloomberg Business flash. Carol still with us is gideon rose and Dennis Gartman. It is amazing that we are wrapping up another year. In terms of how the markets played out, no one would have anticipated the runup. The future of capitalism, i wonder how capitalism may evolve and how it needs to evolve. Dennis we can make things simple. Lets make a simpler tax regime. Historically we think about 17 to 18 of gdp as federal taxes. Why dont we make a flat tax and exempt anybody under 50,000 . You make 100 million 100,000, you should pay this much. Carol is there the policy will to do this . Dennis probably not. Too many others will argue they need the loopholes. Is there a policy purpose for it . Policy probably not. Gideon i am not sure about a straight flat tax, but the notion of making the rules of the game for economic and Political Economic life simpler and clearer and more transparent, so that people understand what the consequences are, what the rules are, and therefore feel the products of the system are justified, that would be a major help. If tax reform was actually tax reform and cleared up loopholes, you would have more money. His special interests were not able to game the system, if special interests were not able to game the system, things would be better for others. A simpler system is a way to make it more democratic and legitimate, which will save capitalism over the long term. Francine how much will you be writing about china in 2020 . Is it the biggest unknown . Gideon the u. S. Is the biggest unknown. China is the biggest external challenge, but there is no question the big story in the world over the last two years is the Trump Organization and the change in policy. The question of what will happen in the election will be the largest factor in 2020, the u. S. Election determining the future of the world. Dennis the thing that keeps me up is did pakistan and india fire missiles at one another . Gideon i use to hear that 30 years ago and i continued not to do it. That one does not worry me as much. Dennis it still worries me. Francine nasa is saying the boeing star liner has separated from the rocket, and there is quite a lot of a motion. We have pictures of the orbital center, a lot of emotional engineers, as there was a lot of anticipation and this is a big deal if it is successful. We will know in about a week, but this is a good start as they have separated. The rocket can continue its journey. Carol just think about the pressure going into this. It has been so much pressure on boeing in general as a company, but to see something go off so well, and whenever you are dealing with space and the environment, a lot of moving parts, to so to see this go off well, it is another piece for an asset to get their own astronauts on air. We want to thank gideon rose and Dennis Gartman. I wonder, dennis, parting thoughts when you think about 2020, what is one of the main stories . Dennis commodities. It is astonishing no one is paying attention to them and they are unbelievable relative to equity prices. Nobody is talking about and will year. King about next carol which commodities . Dennis wheat and cotton. Gideon i think the continuation of the populist surge and whether it will go forward or be beaten back in major elections, and domestic politics will be the major issue. Francine it was fun. Gideon rose, Dennis Gartman, and carol, thank you was well. This is what the picture is looking like in the markets. The u. S. Gdp may move markets later on. They are fluctuating a little bit as investors try to count down to the Holiday Season. They are concerned about liquidity but at the same time they are also trading in pretty volatile environment that is not that oversubscribed. The house of parliament and Boris Johnson, the withdrawal bill will be voted on shortly. This is bloomberg. Out with the old, in with the same. Andrew bailey will be governor of the bank and shepherding the u. K. Through brexit. And pound pounded. U. K. Currency in its worse week since 2017 as they prepare to vote on the brexit deal. Yields pushing their way higher. Welcome to bloomberg daybreak, im alyx steele. Around the open and close youll see a lot of options expiring at the same time. For now youre seeing futures calm, 3212 after closing with another record high yesterday and seeing small caps catch up to their own record since 2018. The pound losing steam having a stronger dollar as the year reverses to the early gains. It appears the e. U. Signed up to the december 31 time table for a trade deal according to the