Transcripts For BLOOMBERG Bloomberg Best 20170204

Global trade debate. And exclusive interview. An exclusive interview. People who see globalization from 30,000 feet dont know a thing about how globalization works. Alix the drumbeats stayed loud and strong with a slew of quarterly reports. We never rule out any instruments, and our toolbox is rich. The revenue is the story and this is driven by new product introductions. You will see that our strategy is starting to pay off. Alix it is all straight ahead on bloomberg best. Alix hello and welcome. I am alix steel. This is bloomberg best. Your weekly review of the most important Business News, analysis and interviews around the world. This was a critical week for global monetary policy. The decision coming from the fed and the bank of england. On monday, u. S. Immigration policy dominated discussion. President trumps immigration clampdown continues to spark a global backlash. Allies from the u. K. To germany condemned the move, and Major International Companies Said it threatens to strangle the free flow of workers and commerce. Executives from apple, general electric, tesla, and starbucks all expressed concerns. Shortterm, we see impact on the dollar and equities. It is a hard one for traders because it is hard to work out a plan over the next week, but longerterm, this undermines u. S. Assets. There is a structural blow that is slightly less attractive than it was just before this weekend. Major companies weighed in on the order, including the ge ceo who said we have many employees from the named countries and do business all over the region. We will continue to make our voice heard in the new administration and congress and reiterate the importance of this issue. What we saw over the weekend was a pretty stridently negative response towards this ban on certain migrants. Definitely from silicon valley. We are beginning to see cracks in this very brief embrace between big business and the Trump Administration. If donald trump goes ahead with some of his pledges around trade, that could turn into a full on rupture. Alix Goldman Sachs Lloyd Blankfein has broken with the Trump Administration over its controversial attempts to crack down on some immigration. Blankfein sent a Voicemail Message to all Goldman Sachs employees over the weekend emphasizing that the order is not the policy supported by the bank. The notable thing about lloyd blankfines voicemail was how directly he said he and the firm , Goldman Sachs, did not support the policy. Bill ford and mark fields spoke out against trumps travel ban. They said we do not support this policy or any other that goes against our values as a company. You cant fight everybody all the time, so if every ceo spoke up and said that the socalled muslim ban was antithetical to what we stand for, he wouldnt fight all of them. This is a time for people to be courageous. Whatever side you happen to be on. Straight to some breaking news out of the boj. Out of japan. It came early, the boj fullyear core cpi forecast of 1. 5 . That is left unchanged. We saw that earlier. Boj maintained their 10year jgb yield target at around 0 . No change. Also, maintaining their balance rate at. 1 . The bank of japan still miles away from its inflation target. The question is why didnt it do more . Because it is doing so much already, and waiting for the impact for everything it has done over the last couple of years to bear fruit. In a very small way, it is bearing a little bit of fruit. The bank of japan did not stop its 2017 forecast up from 1. 3 to 1. 5 . We had positive signals from the japanese economy lately. Today, we found production slowing with retail sales weaker. There is a hope that the weak yen is going to boost exports that will feed through to demand, corporate profits, and maybe even to higher wages. I think mr. Kuroda is satisfied with the current state of the japanese economy. We are growing at 1 , which is reasonable for a mature economy. The deflationary stages over, so it is a good time for governor kuroda to become somewhat optimistic. We are getting our bloomberg terminal set up for what will be an interesting decision. We have the right guy in washington with decades of perspective on the fed. Here is our michael mckee. They came, they voted, they went home and made no news, about as boring as you can get. No change in policy and no change to the economic assessment. By unanimous vote, the fed policymakers left their target rate at the range between one half and three quarters percent. They said they will continue reinvesting payments from returning securities on their Balance Sheet and that rates will rise only gradually in the future. I think that the powerful component of this statement was what didnt appear. The power of what was not said. The fed did not push back against the markets sanguine view regarding interest rates. The dot plot saying three rate hikes. The market was saying two hikes , and the next is coming in june. If the fed was not happy with that schedule they would have , leaned mildly against that notion. They didnt do that and they were ambivalent to the market rate view. That means they are tolerating , if not validating, that view. Maybe the fed is also thinking june is a prime opportunity. We will know more about fiscal policy, and have a better sense of how the economy is performing, and they will move at that meeting. That bank of englands decision drops now. Rates unchanged. 25 basis points from 25 basis points previously. We remain at 0. 25 . The boe Asset Purchase Program staying on hold at 435 billion pounds. In the Corporate Bond buying program, both of which are set to end by the end of this month , remains at 10 billion on target. How many ways can you say neutral without actually saying neutral . Mark carney said that the next move in rates could either be up or down. That is something in line with what the boe was saying back in november. If you look at any signal on where the bank of england will go next, mark carney was very reticent. What surprised you the most out of this mornings meeting . I think it was the extent of the growth rate from 1. 4 to 2 this year. Then the shift of the goal posts, because given the growth upgrade and that inflation is going to be above target for a long time, they should be thinking about moving rates. The way they avoided that was the sustainable level of on employment much lower than what we thought before. What has changed that they changed that judgment in three months . It is a puzzle. They just dont want to hike. At the same time, on the other side of london, towards westminster, the houses of parliament, has been the brexit secretary david davis presenting the brexit white paper. The takeaway of that, 75 pages long, financial services, the United Kingdom seeking trade with the European Union. Of eu citizensts to remain within the u. K. , the u. K. Is looking for a reciprocal deal with its european partner. It pretty much follows the 12 points that theresa may set out in her brexit speech last month. There are a couple that provide more detail and also reiterate that slightly threatening tone she had towards the end of her speech. The key point, the key issue , is that we have four freedoms in europe. One is freedom of labor movement. Freedom of capital movement. Freedom of goods movement. Freedom of services movement. You can have all four or none. I have the feeling they want to have some kind of cherry picking. Cherry picking will not work. 10 seconds away from the payroll report, 180,000 the median estimate in a bloomberg survey. 200,000 versus 800,000. 200,000 versus 180,000. That was the number of jobs added last month. It looked great at 4. 8 . They are ticking up at 4. 7 . The real shocker is average Hourly Earnings at only 0. 1 . 2 worse than estimates. Not only that, a december average Hourly Earnings growth was down to 0. 2 from 0. 4 . This is a final jobs report for president obama. I would suggest you want to step forward. This is a constructive jobs report for President Trump as well. Yes, and a little schizophrenic as you pointed out in the last minute or so. Job growth was strong, but wages revised down by. 2 . I suppose that is good for corporate profits to keep wages down, but ultimately we know that consumers and consumption drive the economy. If they dont earn enough money or their money is only growing at 2. 5 , that is a slow growth economy. A schizophrenic report. I can see how markets might interpret it one way or another. The upside to payrolls kind of expected. The market leading towards it after the blowout adp report. What did you make of the softer wages . It is disappointing. The cyclical factors are being overwhelmed by structural issues. I think two messages here from this report. One is that this will make the fed less likely to hike in march. So reducing the probability of a march hike. Secondly, it puts more focus on structural measures to enhance wage growth in the economy. Alix still to come as we review the week on bloomberg best, exclusive interviews with the ge ceo and San Francisco fed president John Williams. Apple, facebook, sony, deutsche bank, just a few of the weeks biggest earnings reports. Next, more top business headlines. A new leader in global car sales. It is a brand that just suffered through the worst year ever. The key reason here is definitely china. Alix this is bloomberg. Alix this is bloomberg best. I am alix steel. Lets continue our global tour of the weeks top stories. In washington, d. C. , President Trump announced his First Supreme Court nominee. Last night during primetime , President Trump introduced the nation to his new Supreme Court nominee. That is federal court of appeals judge neil gorsuch from colorado. Tell us what we should know about judge gorsuch . Well, he is going to be an awful lot like the man who he is going to succeed if confirmed by the senate. Justice scalia. He is very conservative and believes in interpreting the constitution in accordance with its original word and the intent of the founders. As you say, he is parallel to the man he would be replacing, that is Justice Scalia, but there is one in respect to our there is one important respect to our audience that might be important. His deference to agencies. This is what is known as chevron deference. There is a statute like the Clean Air Act and some words are quite clear. The courts have been saying for the past 25 years or so we will defer to the agency in terms of how it reads the statute. Judge gorsuch said that doctrine should go. We should look at the words of the statute and decide for ourselves. Justice gorsuch would be more limiting on what agencies have the power to do than Justice Scalia was. Volkswagen has taken the crown as the worlds bestselling automaker, ending toyotas fouryear reign. The carmaker bounced back from a scandal in which it admitted to cheating diesel omissions tests in california to sell a record 10. 3 million cars in 2016 globally. How is it possible that volkswagen, and audi and porsche , bounces back from this scandal with such a strong amount of global sales . The key reason is china. The chinese markets, in china , the amount of diesel cars on sale are very tiny. It is almost nonexistent. In terms of market volumes. The impact in china from the Diesel Scandal has been very, very small. Where we saw demand declining in be u. S. , china has proved to very stable. Solid growth. Another sign that the chinese economy is holding up well. Manufacturer pmi coming up slightly strongerthanexpected. If you look at the uncertainty in the volatility in the market, especially for chinese exporters, the volatility of the yuan has stabilized. Then of course, all the uncertainty with donald trump as president. Keep in mind this is the Lunar New Year holiday. So you have aberrations in these numbers. Dont read too much into this other than that this is a good set of numbers, the sixth consecutive month we have been in positive territory above 50. Keep in mind they are working off excess capacity in coal and also steel, which is a longer process. So there are some improving signs in manufacturing. Apple is designing a new chip for future mac laptops that would take one more of the functionality currently handled by intel processors. The chip went into Development Last year and is said to be similar to the one already used in macbook pro to power the touch bar. Basically they will be doing more with this arm chip than they are doing already. Right now it already does some security and payments functionality with touch id. Now they will expand this, which is a lowpower mode which saves battery life on mac laptops. As we mentioned, arm holdings is the Technology Supplier that supplies the chips, but tell us about the inroads that intel is making. Intel is the commonplace chip supplier from apple to dell since other laptop and desktop computer makers. They failed in mobile years ago with the transition to mobile chips which apple and samsung have been building for phones and tablets for half a decade. The first iphone came out seven years ago with the iphone 4 and the first ipad. So now apple is looking to do a little more in intels turf with its own mac components. Indias finance minister has delivered a budget aimed at boosting consumption and investment. The biggest winners this year appear to be the rural and real estate sectors. Really trying hard to strike a balance between fiscal prudence and spending. What were the Key Takeaways . You are right. It was a balancing act presented in the fourth budget yesterday. A few quick highlights. One, on a macroeconomic level, the budget deficit has been weekend about 3 . The only difference is he has moved this towards 2019. Most importantly, this focuses on farmers and small businesses. The objective of the exercise is to get more money in the hands of the consumer that can offset the negative impact of demonetization. The overall tone of the budget has been positive, and most people have reacted positively. As i heard someone say yesterday, no negative news can be deemed as good news. Ralph lauren off over 7 as the ceo calling it quits. Stefan larsson will be leaving the company after a clash with the founder. He is expected to depart may 1 after less than two years on the job. What happened . That is to be determined. They were open after saying we need to turn around this company. We just disagree on how. The most specificity we got was that they agreed on the operations changes, but they didnt agree on the consumer facing stuff. We are not sure what that means, but to me, it means ralph lauren, the founder, wasnt ready to part ways yet. He was not ready to hand over all control of the company to somebody else who he did not agree with on the Creative Direction that it was going. In one of the tech worlds most highly anticipated initial public offerings, snapchat parent companys offering an initial size of 3 billion, but that could well grow. What does snapchat financials look like . It is surprising to see how unhealthy the financials look. In 2016, their cost of revenue exceeded their revenue, and they have yet to turn a profit since they started operating in 2011. It is very expensive for them to run all the servers. They have to pay hefty fees to google cloud. What are some of the biggest risk factors in all of this . There are a lot of risk factors. They rely on millennials coming back to their app, and they say user growth rate will slow down over time. Another big risk factor is their data. Their metrics are not verified by third parties, and critics and advertisers say that their data metrics go into this black box. Alix welcome back to bloomberg best. I am alix steel. General electrics chairman and ceo has spent his career riding a wave of globalization. A recent political trend around the world appears to be reversing that current. This week, we sat down for an interview with bloombergs editor and chief, John Micklethwait. He shared his perspective on the state of global trade. We believe in trade. We believe in the free flow of goods. Inherently we dont think things like walls are good. So, that is maybe the macro answer. At the same time, what i would say is there is nothing wrong with President Trump wanting to add manufacturing jobs in the United States. The president of china wants to add manufacturing jobs. The president of mexico wants to add manufacturing jobs. The chancellor of germany wants to add manufacturing jobs. So how do we find ways to help exporters . That is a good thing. What about the relationship with china . Is the prospect of any trade dispute with china worry you . It does. In the economic context, there is no good case to be made with the two biggest economies on earth in a trade war. That relationship, a bilateral relationship, is significantly important for the whole world. You have brexit and the possibilities of le pen. Are you confident about the future of europe . You have invested heavily there. We have never look at europe as europe. We know the difference between france and germany. In 2014, we were stopped in paris by a set of positions that violated rustles roles. Brussels rules. We were sitting there has an American Company sucking our thumb in paris, and we had to fight our way out of paris, and we had to fight our way out of brussels, and feel like the European Union at that time so we have learned to manage the paradox. We have learned to manage subtlety as a company. Globalization, people that see globalization from 30,000 feet at a resort or at a townhouse or a think tank dont know a thing about the way globalization really works. It is country by country, deal by deal. I wish it was all free trade and that other stuff, but it is not where we are. Alix you can see more of John Micklethwait exclusive interview on bloomberg. Com. Coming up on bloomberg best, more on this weeks controversy over immigration. Diverging views on Donald Trumps executive orders from Larry Summers and tom barrett. Plus, blackstones joe baratta sees more changes coming in a trump economy, and it is already shaping his investment strategies. The government is trying to engineer a reward system for people investing in this country. This is bloomberg. Alix this is bloomberg best. I am alix steel. Donald trumps executive order on immigration provoked responses from Business Leaders around the world with some of the strongest pushback coming from ceos of tech companies. Critics and supporters of the president s plan had their say on Bloomberg Television this week. I have been gratified by what we heard out of the tech sector. We have heard rather less so far out of the mainstream business community, and i am going to be watching, in particular the , members of the Advisory Board that President Trump has appointed to help him make America Great again. Because this action is an important test of that. We will see whether they will go along with it or whether they will speak out. I think what john mccain and Lindsey Graham did is really a very good example of principled leadership, and at moments like this, everyone is tested about whether they speak out on what they believe or whether they decide to accommodate. To what extent are ceos really influenced by the threat of that trump tweet . It is an extraordinary thing , david if Business Leaders in , the United States are being intimidated by a president s threats of calling them out when the president has been in office for one week. That is an extraordinary change in what the United States is about. It is not all new. Richard nixon had an enemies list. There are other instances historically, but if that is happening and it is working, it seems to me that every american ought to be deeply concerned. Are you taken aback a little bit by the Lloyd Blankfeins of the world and the reaction to that order . No, business relies on predictability and transparency. At the moment, people are confused as to what that means. The reason that man was elected is because that segment of america is fed up with the consistency and transparency of the elitists, including the business elitists, with business as normal. So, i dont know why anybody expects anything different. This man is doing what he said. He is communicating in a harsh way, but he was communicating that message to get elected in a more harsh way. We expected Something Different because people tell us to expect Something Different, so why shouldnt people have expected anything different . What is it that is upsetting at the moment . In other words, the policy of immigration if you talk to the arabs themselves, of course it is a ban but saying we will , have a timeout and go to our country counterparts and allies in that part of the world and say you have to help us. It is not refugees themselves are causing the problem. It is the exporting of what people consider radicalism, but the only way to end radicalism is to help goodism. Right . It is the imams and good mosques preaching and teaching and helping us to curate the refugees who come here. All they are saying is lets have a timeout and figure out what is going on. Alix immigration and security was a major focus this week, investors wait for President Trump to turn his attention to tax reform and infrastructure spending. Blackstone global head of private equity joe barada told Bloomberg Television how these expectations are influencing his companys plans. Joe we have done a lot of thinking, and it is beginning to creep into our investment decisionmaking in the investment community. Businesses that stand to benefit are those exportled, capital intensive in some way. Where the capital intensity is in projects that can generate a high return because the tax depreciation will be better. The government is trying to engineer a rewards system for people investing in this country. Most of the businesses we buy, we buy because they have been underinvested, and we do engage in significant Capital Expenditure programs. It will be of benefit to those companies. It will be a benefit to exportled companies. The Energy Complex will be a beneficiary with rolled back regulations, so the ability to have more favorable deductibility of the Capital Expenditure is positive for that. Energy represents about a quarter of what we do with our investment business. And so, i think for the types of things we invest in, it is a real positive. Things that would be under more thread or where there is , uncertainty would be retailers that sell goods imported from abroad or professional services or Business Services firms that offshore and outsource to other countries. There is going to be more uncertainty and volatility around the prospects of those companies. There is a lot of interest and infrastructure. Blackstone doesnt do anything unless it can be relevant. How big do you need to be in infrastructure to be relevant . Jill joe infrastructure is at an inflection moment in the United States where both parties agree on that one thing, which is we need more fixed investment in infrastructure in the u. S. Increasingly, they will need to rely on private capital because the leverage levels at the federal and state and local levels are quite high. It would be the first time that i think at really large scale, Government Entities engage with private capital to do major infrastructure projects. To be relevant in that end of the market, i think you need to be deploying billions of dollars at a time, not hundreds of millions, so you are probably talking about a vehicle that is 20 billion, 30 billion, 40 billion of equity. In other words, the largest vehicle ever raised . Joe correct. That would be the ambition if this comes to fruition, which we think it will in terms of the Public Sector aligning with the private sector to invest in the fabric of this country, which is necessary. Alix markets we are also closely watching Central Banks this week, and as the fomc stood pat on rates, bloomberg caught up with San Francisco fed president John Williams for the story behind the story. The consensus view on wall street is the jobs report, the weak wage growth makes march a nonfactor. That june would be the earliest you would move. Do you agree . I dont agree. All of our meetings are live. We have to analyze all the data coming out between now and then and learn more about the trajectory the economy is on. Let me just say i never overreact to any data point. Data changes month to month and it gets revised. My own view is the employment report was consistent with good job growth and steady growth in the economy. The other argument is you cant move in march because you dont know enough about the fiscal policies coming out of washington. I disagree with that, too. There is a lot of uncertainty about what policies will be, but i look at where we are today, unemployment is 4. 3 , essentially full employment, inflation moving back to 2 , so given where we are today, we expect to make decisions based on that without knowing what happens in terms of fiscal and other policies later in the year. The current median forecast is for three rate increases. There is a school on wall street and elsewhere that says you should not raise rates because the economy still needs additional stimulus. And they look at the phillips curve model that the fed uses that says you kept rates at zero for seven years and got no inflation, high inflation and unemployment also coexisted in the 1970s, basically the phillips curve does not work. Well, you know the phillips , curve has died many times, and arisen other times. My view of this is that if we push the economy too hard for too long, inflation pressures will build up. We are seeing some of those pressures building up in parts of the economy. I think we are in a good place there. But we know from history that , the economy again runs too hot for too long, you will see imbalances and inflation pickup. We know from the past that high inflation is damaging, so we want to avoid that. Alix you are watching bloomberg best. I am alix steel. It was another busy week for corporate earnings reports. Lets look back at the most interesting results, starting with apple. Apple shares popping in after hours trading, reporting its firstquarter revenue of just under 78. 5 billion, 3 year over year. Also encouraging investors, the beat on iphone unit sales, selling almost 78 Million Units due to Strong Demand for the iphone 7 plus, and its services, well, that includes apple pay for example, saw 18 revenue growth. Im speaking to the cfo, and what was coming across was they are doubling down on the Services Area in particular. They say they will double the size of this unit, which is as big as a fortune 100 company. How much do you think services is the right bet . I think it is absolutely the right bet. You know, certainly until they , start selling other appliances, there are only so many smartphones and apple tvs you can sell, so there is upside in services, like areas like apple pay where there is relatively low consumer adoption in the u. S. , so there is a lot of upside. Revenue was up 3. 2 , and the stock is up 6 . Is that justified . We can start with what did not go that well, and it is a lot. The ipad sales were down. The company did not do that well in china. The other category, the apple tv did not do all that well. They said watch sales were ok, but other segments shrink, and yet the iphone, it did great, partly because the competition went up in flames with the samsung note. But yes, 78 million iphones, an incredible quarter for apple. Facebook shares surging in after hours. Check it out. We are at alltime highs if we hold onto these gains. The Company Reported a 51 jump in sales to 8. 8 billion, topping analysts projections. The biggest driver, advertisers push to reach consumers on mobile phones. The social Networks User base is continuing to grow. I it reported just under 2 billion monthly active users. Were there any clouds amidst Silver Linings here . Clouds, i cant really think of any. Im sure there are some people who would be upset that the numbers arent better than they are, but i mean, come on. I think analysts were expecting some incredible results, and pretty much everything beat it. I cant see any clouds there. When i look at Growth Drivers and i think of where the real prospects are going forward, it is the truly Global Nature of their business. Asian revenue was up 59 . That is really impressive. In the rest of the world, that revenue was up 52 . So, you know even though the , numbers are small compared to europe and the u. S. , this is where the opportunity is longterm. Amazon shares dipping in extended trading. The Company Reported fourthquarter revenue over 43 but that missed analysts 43 billion, estimates, and the ecommerce giant missed forecasts for net sales. There is a bright spot for amazon. Its cloud business, amazon web services, a 47 jump in revenue growth. Investment is heavy, 42 billion being plowed in. Is he spending more easily . I think so. I think this is the difficulty of being a Public Company that innovates so much. You get measured on the stuff you worked on 10 years ago that is bringing in the mainstream of your revenue, but the real work and innovation is happening for things that wont cash flow for 510 years. The stuff they are doing with alexa, the more advanced research in ai, has the potential to be world changing, but you wont see that in mainstream numbers for a few years. Sonys latest results missed expectations, and the company cut its outlook. Still, we are seeing shares soaring in tokyo. Where is the optimism coming from . We were talking about all these headwinds. Its all about semiconductors. Chips, chips, chips when it comes to sony right now. Analyst showing that they are very happy at the turnaround in the semiconductor business. This Company Makes camera chips for phones. Sony basically upgraded the fullyear operating profit outlook for its Semiconductor Division by the most out of all divisions, up by 300 million. There have been headwinds, the Movie Division had revealed that expected to see a 1 billion writedown. That gave investors are little bit of a taste of what to expect when it announced yesterday. And it also did have some not so good news in terms of quarter net income 174 million versus more than 1 billion a year ago. Deutsche bank has missed estimates with fourthquarter trade revenue rising 11 . The ceo also said he expects the bank to be profitable in 2017. This is a big step forward. He expects the outflows to be a little bit less. They said the flows have turned around, from investment banking, retail, Asset Management in january. Of course, we have not seen the numbers. We still have to take their word for it. Deutsche bank still has legal issues on its plate it still has to resolve. Capital increase by a share sale you did not announce today that you want to tell us about, or maybe some asset disposals . Yeah, so, i guess my answer is similar to the past. We never rule out any instruments, and our toolbox is rich. The primary tool we want to use is organically generate profit and without capital. Aetna fourthquarter earnings today beating analysts estimates after the deal to buy humana was blocked by a federal judge. Operating eps of 1. 63 billion. Let me ask you about this deal. You are taking stock here and deciding what to do next. What is the calculus . hat you think about the judges decision . Number one, we cant keep going on for a long time. We have been doing this together for 19 months, and for both organizations, we need to come to a conclusion relatively soon, so we are looking at the opportunities to do that. If we cant come up with the conclusion that allows us to get on with business, then we will consider terminating the deal. We have until february 15 to figure that out. It is your first earnings in your new job as ceo, and you are up year over year in revenue and earnings per share, and you beat a lot of expectations and had a lot of sales. We reported a Strong Quarter in q4, global revenue up 7 , costs flat, and that creates tremendous leverage to the bottom line, 22 eps growth year over year in q4. The revenue is the story, and this is driven by new product introductions in our pharmaceutical business. Oncology,n diabetes, and psoriasis. So that is really our strategy as we came out of a difficult patent expiry window and get back to growth on the back of new product introductions. Shares trimmed a little bit, this as the company trims its outlook for the year, saying prices for insulin will continue to decline in the United States. The worlds biggest maker of insulin says revenue may drop 1 this year. Or grow as much as 4 in local currencies. The guidance we have provided for 2017 is a reconfirmed guidance compared to what we did after q3. But we felt it was prudent to broaden the range to a five percentage point range because of the Oil Volatility in the u. S. One stock we are watching, exxon, edging slightly higher after reporting earnings that missed estimates after a 2 billion writedown in its u. S. Natural gas fields. The expectations were high for big oil. A proenergy white house, oil rallying 18 since the election. Then you get chevron, exxon missing. What is happening here . A couple of things are very important. It is not who is in the white house, it is where oil prices are and where oil prices are going . It is the key driver for the industry. It is not the company. It is not the government. At the end of the day, it is a commodity price they have no control over, but let me correct one thing actually adjusted for the 2 billion writeoff, exxon exceeded analysts expectations and we are looking , at 2017 to be significantly higher for the whole industry, and for exxon, so exxon is expected to double its earnings in 2017 from 2016 levels. Shell, europes biggest oil company, missed estimates and estimates in the fourth quarter. Earnings numbers, adjusted profit, 1. 8 billion, below analyst expectations. We want to be a worldclass Investment Case for investors, and that basically means strong returns, a strong Free Cash Flow per share, and a resilient financial framework. And we are right in the middle of the transformation of the company to that end point. You say you are right in the middle. Are you on target . I think we are. Was an important year for us, a transition year where we completed the bg acquisition, where we had to of course combined two large accounts. Where we had to deliver the synergies. And as i look back on the year, first of all, a worldclass delivery of the deal. A worldclass integration that is right behind us now with synergy delivery well ahead of plan. And if i look at the last two quarters, our strategy is starting to pay off. Alix if you are a bloomberg customer, you can always watch the show using your terminal and tv. You can follow all of our charts, all of our functions, and message us directly by using the function at the bottom of your screen. There are about 30,000 functions on the bloomberg, and we always enjoy showing you our favorites on Bloomberg Television, and maybe they become your favorites. Well, here is another function you will find useful quic. It will take you to our quick takes, where you can get context and insight into topics. The debate on drug pricing has been front and center this week. Here is a quick take that adds perspective. Americans spend an average of 1100 per person, per year on prescription drugs. That is more than anyone else in the world. It is true americans take a lot of pills, but the real difference for the u. S. Is the price of those drugs which many , are warning are becoming unaffordable. President trump promise to bring down drug prices, but after meeting with pharma executives, he focused instead on reducing regulations on their industry, while still complaining about their astronomical drug prices. Pres. Trump we have more people working on regulations than working in the companies. So, it is very unfair. We have to lower drug prices. Here is the situation. The pharmaceutical industry has come under fire for what critics label as price gouging. Everyone is doing it. In capitalism, you try to get the highest price you can for a product. Martin shkreli became the poster child for greed when his Company Raised the price of a drug. In 2016, Mylan Pharmaceuticals ceo was grilled by congress when her Company Raised the price of an epipen more than twofold since 2012. So how do drug prices work in , the u. S. Versus the rest of the world . In europe, governments negotiate directly with drugmakers to limit what their state Health Systems pay. In the u. S. , company set whatever price the market will bear. While medicare legally cant negotiate drug prices, private insurers can. Private payers typically rely on pbms to negotiate discounts. Pbms often make deals with insurance makers. In the end, americans wind up paying about 17 outofpocket. So, here is the argument pharmaceutical Companies Say that high profits are necessary to Fund Research and development, and that regulating drug prices might slow medical advances. Advocates of regulation say lower prices would not stop animation and point out some , Drug Companies spend more on marketing than research and development. Alix that was just one of the many quick takes you can find on the bloomberg. You can also find them at bloomberg. Com with the latest Business News and analysis 24 hours a day. That will be all for bloomberg best this week. Thank you so much for watching. Im alix steel. This is bloomberg. One of americas most admired companies moved its headquarters to boston last year. A bold step by chief executive officer jeff immelt. Now, donald trump is taken office. Already introducing a slew of executive orders from immigration to trade, and raising fresh challenges for immelt and ceos everywhere. I sat down with Jeffrey Immelt about the prospects of a new era of global protectionism. Jeff the two biggest economies are in a trade war