Transcripts For BLOOMBERG Countdown 20140407

I am mark barton. I am anna edwards. A warm welcome to the program this monday morning. Bloomberg reporters are standing by across the world. Manus cranny is here with details of this unfolding murder story surrounding the Worlds Largest cement makers. Carolyn is in paris following the altus deal. India sees a 4 billion deal in its direct drug sector. We will get the story from john dawson in hong kong. David tweed is focused on the future of industry. Tell you what is coming up this morning. A special Asset Allocation edition of on the move. Alex friedman and philip hilderbrand will join Francine Lacqua for an exclusive conversation on the market. Andhe big one, Holcim Lafarge have anonymously approved a merger that will create the worlds biggest cement maker. The new company will be led by the lafarge chief executive. Here to tell us every detail, i hope, manus cranny. Lets do it the bloomberg way. It is indeed a merger. Seven for seven. Seven members of holcim, Seven Members of lafarge on a new company which will be called lafargeholcim. How much money was spent to come up with that one . Or was it just a battle of who went first . Do you get this deal done . Do you need to get rid of quite a few units . You do. Somewhere between 10 to 15 of overall earnings. Serious investigation by the u. S. , european authorities, some pretty dominant positions. We think we are going to have to sell assets in brazil, india and china. A tour detting quite force in place. That is going to face regulatory hurdles. Here in europe, two thirds of their divestment are probably going to come where the greatest overlaps exist. If you think about political challenges in the likes of france, spain, etc. Where there is some substantive positions. They say job cuts will be limited. 39 billion swiss francs worth of combined you wonder if because of the overlaps in europe and the outstanding competition issues that you mentioned, you wonder if that is why the companies are guiding that the deal might not be gone until the first half of 2015. That is quite a long period of time. If you have got to go through all these various divestitures to get through the regulatory hurdles, the risk is you create a feeding frenzy that destroys value. You have to make concessions. You have to make asset sales. They may well be pushed through. That is the risk. France, it is all happening when it comes to m a this year. 60 billion euros worth of deals have been done. It certainly looks as if mr. Hollande is facing an industry which is jumping ahead of him. He has promised a great deal of change. Etc. Eaks on employment, they have not been delivered. French industry, look abroad. Peugeot looking for sales in china. Vivendi focusing on the United States of america. The telecoms business being left behind. , acrossare with lafarge borders. This is very much an International Global deal, not just a european deal. That is the shape of things to come. Afargeholcim thank you very much. We have another french deal. Altus, one of the bidding contests for vivendis french unit sfr. The deal is valued at more than 7 billion euros. Carolyn is in paris. Carolyn, why did out this jews this offer over the offer that was on the table from bouygues . There is a lot of official reasons. Vivendi will get less cash from altus, only 13. 5 billion euros. Bouygues offered 15. 5 billion euros. The First Official region is promised nothas to fire any sfr employees in the next 36 months. The chairman of vivendi said that the bouygues offer would have put 6000 sfr jobs at risk. That is the First Official reason. More importantly, the offer has less risk to be rejected by competition. A much smaller operator than bouygues. It wasnt clear whether the bouygues offer would have passed the regulatory test. The chairman this morning said it probably wouldnt have passed because it would control 47 of the market. 20 andwill keep about 20 will be publicly traded. Vivendi also wants to keep their shareholders happy. To chairman has promised return cash to shareholders either in a special dividend or share buyback. What does this mean for bouygues . What is the future for this divestment five business . Bouygues isem for that it will be left over in this deal. Orange control about 80 of the market in france, meaning that bouygues and the fourth operator will have to share just about 20 of the market. There is a lot of investments that need to be made for highspeed internet, for fiber. It is unclear whether bouygues will be able to keep that investment. That is why the bouygues offer was backed officially, openly by the french government and by the former industry minister. There is even speculation that bouygues could become in time a target because of the situation another possibly company could attempt to take over bouygues. Thank you very much. Elections kickoff in india. What better way than to launch a big deal . A 4 billion one in the generic drug sector. John dawson joins us with details. Good morning. This happened back in 2008 when you saw bought by a japanese company. Japan tried to use that company to break into india. It didnt quite work out as planned. They have given their vote in favor of some buybacks. They have become the biggest Pharmaceutical Company in india, the fifth biggest generics drug company specializing in urology, gas stroke him a cardiovascular. 4 billion in the deal. The one cloud here is the u. S. Regulatory authorities. They failed to meet standards a generic personal drug was recalled. Overall, the shares have been rising. Garcon pharma also seeing gains today. Gainer also in japan on the nikkei. Thanks, john. See you later. Just getting german industrial output up in february, four consecutive months. Another sign that growth in europes biggest economy is continuing to a salary. Economists to accelerate. Economists predicted a rise of. 3 . The Worlds Largest industrial fair is taking place in hanover. David tweed is getting a firsthand look at the latest technology trends. Two key european leaders will be attending the event. I am afraid there are no prizes for guessing that Angela Merkel will be one of them. Who is the other . Angela merkel is one of them. The other is mark which are from the netherlands. The dutch are partners in this event. Having two leaders here really underlines the importance of the sort of advance for the economy. This is the biggest industrial fair in the world. It is the Biggest Convention center in the world. It is difficult to give you a sense of the scale of this place. Millionalking about one square meters of exhibition coverage. I havent been able to count them all. Exhibitors here at this show. More than a quarter of a Million People will come through here. Quite a few ofy them coming through. This has always been a fair that has been about innovation. What is the theme this year . The theme is a theme with is pushed forward by the german government. Industry 4. 0. It is about automation. Automating the manufacturing process. We are talking about becoming more efficient, increased productivity, better use of energy and also being able to customize automation. Many of the exhibitors here will be showing off the latest in what they can do. The secondary theme here is energy use. Always one of the themes here in germany. Course is such an important industry for germany. Many of the product you are standing in front of will be exported to markets such as china. Some people raise concerns about how strong the economy in china is going to be. Which types of companies show up at this type of event . You have got the big heavyweight Companies Like siemens, but you also got what i am at the back off stand here. I will be speaking to the owner of backoff later today. This is an automation company. It was established in 1980. It is family owned. It has 2500 employees. It is typical of these companies , they havent necessarily heard of them because they are family owned. They represent 52 of germanys industrial output and represent and employ 15. 5 Million People. They are incredibly important. That is why it is so important to see exactly what they are doing. I will be back with more as we go through the day. Angela merkel will be walking past this stand where we are with. With mark rutte. David tweed reporting from hanover. Coming up, can clean energy pay off . We will talk to the ceo of a Clean Energy Company which just reported earnings. Stay with us. Time for todays company news. Indias largest drugmaker drugmaker agreed to by ranbaxy laboratories. They make generic drugs. Expect 250 million in revenue and reduced cost by the third year after completion of the deal. Microsoft is going hollywood with a cast of comedians including Sarah Silverman and seth green. At are involved in shows microsofts new television studio. , the superhero sequel to the 2011 movie, generated 96 million in its weekend debut. For walt disney, the figure is a record. Welcome back. This is countdown. Time in london is 17 minutes past seven. We just had earnings from good energy group, an alternative to the big six as they are known. Joining us now to talk about those numbers is the chief executive officer. Thank you very much for coming in. As ank about your sector alternative to the Big Six Energy suppliers. How big can this oh . We have seen our own growth go up more than double in the last year. I think we can see this sector we are now producing around 30 of the uks renewable electricity. We are seeing significant growth. I think this can continue. Could britain be powered by 100 Renewable Energy by 2015 . Is it possible . Theoretically it is possible. We have done research in terms of what power you could get. We are trying to prove it from a market point of view. You do it, what are the issues, how can you spread that out across how are you doing it . We buy power from four different sources of power. Wind, solar, biomass and small hydro. We balance that through the grid. What we are working on is how we balance that longterm. Whether Battery Storage technology is going to play a part. Our customers generate a lot of the power themselves. How small do the generators get . We look after around 60,000 small generators. Most of those are generating power in their own homes, producing about 50 of their power requirements. This is a really interesting innovation. You have your own wind farm, dont you . You have all sorts of investments across the u. K. How much are you spending on these projects . We have just switched on a new wind farm. That project was in the order of 60 million. We developed 100 megawatts of largescale solar assets that we will be building out hopefully this year. Those sites are in the order of 100 million that will be required to build. We will do that in partnership with others or through funding. U. K. Energy consumers have had to pay a renewables levy in recent years. That proved to be a little bit controversial. Many of the bigger Energy Suppliers blamed it at least in part for driving price rises to customers. Therefore that had to be rolled back. Talk us through your thoughts on that. Were you in favor of the levee . What was interesting about directly involved with energy efficiency. Energy efficiency is really important. We havent cracked it. Whether the Energy Sector should deliver that or not. We need to do some more work about how we pay for that going forward. Our houses need to be more energyefficient. The important thing is whether we should put it on the bills or do it through general taxation. The energyome off bills but now it is back in the tax code. This is something we need to work on. The quality of our houses and how we develop sustainable lives going forward. Are the tariffs cheaper than the big six . They are at the moment. One of the key things we have been doing, looking at driving improvement in profitability, and margins, but also trying to make sure we become more competitive. That is by putting the customer at the center of what we do. Thank you very much, juliett davenport. Up, the biggest election in world history. Or on the staggering numbers behind indias vote. Welcome back to countdown. Todayia goes to the polls in an election that will determine who will lead the country with a population of 1. 2 billion. That is set to last for five weeks. Ryan chilcote looks at the staggering numbers behind the voting process. The Worlds Largest democracy and this is the Worlds Largest election. Voters, more than every man, woman and child in all of north america and europe. They will be casting their ballots in nine rounds of voting over the next five weeks at a million polling stations equipped with almost 2 million electronic voting machines. 500r job, choose more than lawmakers and the party that will run the worlds 10th largest economy. Whoever wins will rule the country that is home to almost 1 5 of the worlds people. Anxious about an economy in its worst shape in a decade even as prices rise by 10 a year. Country and asal colossal challenge. Who the frontut runner is and what it means for business. It looks like indians one change. Mode he and the bjp party is the front runner. They look poised to not get a majority of the seats in the parliament, but a big chunk. Perhaps enough to form a stable coalition. Generally speaking that is seen as good for business. If you look at the province that he has been running for the last 13 years, generally speaking, the economy there has gone better than it has nationally. The only thing is, he is seen as probusiness. The interesting thing is, not in the retail space. You look at a retailer like tesco, they are the first to tiptoe into the supermarket area in india. They are working together the current government has been trying to open up that space. They have a handful of shops but not in the gujarat province. They are not allowed to do it because of this opposition by the bjp against investment in retail. That is the issue. They reiterated that they dont think it is a good idea for the entire nation. Thank you very much. Of the uks Biggest Companies have a high appetite for risk. E will see why when countdown returns. Welcome back to countdown. Lets get to Jonathan Ferro for the fx check. Lets start with euro dollar. 1. 3706. A bit higher than expected. One that could potentially get more interesting over the next couple of months is dollar yen. Concludespan tomorrow, nobody expecting a change tomorrow. Going forward, after that consumption tax hike, will the bank of japan do more . It is not even a debate, it is a matter of when. Here is a poll for you. 72 of respondents think they will ease, the bank of japan will do more easing by july or earlier. Expectations on that are pretty high. Thank you very much. These are the Bloomberg Top headlines. A british warship has reached the area where signals were heard from what may be a black box of the most sink the missing malaysian airliner. A black a vessel picked up the pings in the indian ocean. The batteries typically have a life of 30 days. A banking regulator in the state of new york is investigating Credit Suisse. The u. S. Justice department has been probing the banks role in possible client tax evasion for three years. New york is seeking documents from federal authorities. Prokremlin demonstrators have seized official buildings in ukraines eastern region. The protesters have called for a boycott of the president ial elections and a referendum to join russia. Ukraines government is blaming russia for stoking the unrest. Risk appetite among cfos of the uks Biggest Companies is at the highest in 6. 5 years according to deloitte. For the First Quarter of 2014. Joining us with some of the takeaways is one of the reports authors and deloittes chief economist. Risk appetite at a 6. 5 year high. Explain what that means for our viewers. Cfos whether now is a good time to take risk onto their balance sheets. What that means is, is now a good time to do investment, and a, tohey, to expand m expand overseas . The risksistent with appetite you are seeing in financial markets, relatively Strong Performance by equities versus bonds. Are we in safe hands . You see cfos feeling so prorisk. If you think of it from a policy makers point of view, what they have been trying to do is stimulate the animal spirits of the corporate sector. They are doing it by running very loose Monetary Policy. We see the capitalists become very available. Going tot in terms of the market, initial Public Offerings or secondary offerings , or is that going to the banks . A lot of the anecdotal evidence has been about the difficulty in getting access to capital for smaller businesses. We saw an absolute collapse in Credit Availability even for very Large Businesses in 2008 and 2009. In the last year, there has been a dramatic improvement in capital availability both in relation to equity and bank borrowing. Quite a change in the last year. This is an environment where corporate have got good access to capital and where the external economic influence of uncertainty has fallen dramatically. Cfossiness investment, feeling pretty buoyant arent they . They are. They are quite bullish. The hope for the u. K. Recovery is that it will be driven less by the consumer. These readings are consistent with that. That theynteresting are fairly confident about inflation being kept under control. Buts something of a sweet sweet spot the u. K. Economy. It is quite interesting. We asked them three months ago how they felt about inflation quite negative. As inflation has fallen, they have become much more positive. Now the overwhelming majority think inflation will stay on target. From the bank of englands point of view, they must be quite chuffed. They are confident in inflation. They expect rates to only rise gradually. Which shouldnt be troublesome. Hike consistent with what markets are predicting. What about emerging markets . The default position has been bullish emerging markets and cautious developed markets. That is reversing somewhat. We worry were very struck by this. A lot of the ceos we have been talking to were very focused on growth outside europe. In the latest survey, we have seen quite a switch. Quite a drop in optimism about emerging markets. Greater positivity about the u. K. And europe. You may have just made monday for a number of investment bankers. , you talko you say about the access to credit and record 95 of cfos expect merger and acquisition activity to rise. That is a lot of business. I would put that slightly in context. Given how depressed volumes have been in the u. K. , youre starting from a low base. It is symptomatic of the feeling about the world, what greater , less uncertainty and greater availability of capital. What are the priorities among cfos . What is top of their to do list . The big focus is on expansion. The top priority they are also quite focused on cash flow. One of the lasting legacies of the financial crisis may be the corporates run a tighter ship in terms of balance sheet. Turnat is what makes this toward risk even more interesting. We should say that we are talking about merger or acquisition activity, just showing you live pictures of the holcim and lafarge executives speaking about this merger between these two titans of the global cement world. Survey, the cfos are talking about corporate spending. They have appetite for it in all forms. Any clues as to anything to do with wages . Are they going to the loosening the Purse Strings on that front . Cost control has been one of the huge themes over the last few years. The way the corporate sector saved itself is by bearing down on cost. I dont thing that is going to go away. Given the tightness of the labor market and the momentum of the recovery, my guess is what you see is a recovery and productivity which help strive nominal wages up. With inflation remaining night, that gives the first rise in real wages. It is in your report, isnt it . Is there any dark cloud or risk or where he within it . We have been running this for seven years. Ift i have seen is that ,conomic circumstances change then sentiment can change very quickly. How changeable sentiment is. Have not given up on cost control and cash flow. Those still rank as relatively high priorities. There is a degree of underlying caution. Overall this is a positive survey. Thank you very much for joining us. Are going to, we take a look at some of the billionaires who own stake in holcim and lafarge. Welcome back. , a lookme for hotshots at some of the most compelling images of the day. If you own any piece of technology from a tablet to a smart watch, odds are you can download tetris. The popular puzzle game celebrated its 30th anniversary with a playable version on the side of a 29 story building. The event was part of tech week. French tightrope walker completed a walk over a river in paris. Hundreds of people looked on during the 30 minute walk. He was 25 meters above the river and walked more than 150 meters. Pillow fights arent just for children anymore. Dozens of people participated in a mass pillow fight on sunday in vienna. Welcome back to countdown. Mark, i did not know there was such a thing as world pillow fight day. I hope you celebrated it in style. I will be there next year. Holcim and lafarge have unanimously approved a merger that would create the worlds biggest cement maker. The new company will be led by the lafarge ceo. Manus cranny, you have been speaking to some industry insiders. Deal lookse of this as if there is some pretty big billionaire holdings. There are some billionaires on the boards of each company. The business driver for this deal is clear. Lafarge needs to get off its junk rating. This is going to help them do that. They missed their target for the end of december last year. Holcim has heavy commitments and Capital Expenditure in india. This is about making sure they are able to commit to those. Power, about billionaire possibly going against management. Billionaire and albert, they have between them a Significant Holding and lafarge, about 30 . , you have a billionaire with a 20 holding. These three billionaires are pushing this deal, which is quite interesting in terms of what management are up to. There is one other protagonist in the mix. Alchev, the ukrainian. Slightly outside of these three. Albert is a traitor of stock. He had a holding in vivendi. He has been in here a a long time. This is about the three of them potentially having an exit ready. The driver for the deal is rewriting from junk for lafarge, commitments and terms of Capital Expenditure and three billionaires. Stay with us. Hold those billionaire thoughts. We are going to bring in another voice who knows a thing or two about these billionaires. That is robert who joins us from the billionaires team. There are a number of billionaires involved in these deals. Set out the store for us. They have done fairly well on this. Normally we talk about billionaires intact and finance. This is a boring cement business. Each of them had about 1 billion on the day the deal was announced. They are all close to 20 on the year. Whoe is a third billionaire owns heidelberg cement, the thirdlargest cement dealer. Is also about 1 billion this year. They are getting swept up in this craze for cement. Another interesting fact of this is that all three of these men have inherited their companies. The second richest swiss man inherited it from his grandfather. Merkel inherited it run his father. There is another billionaire involved, bill gates who invested another billiondollar deal. At the time, so we race sawiris had said this was a jump for investors interested in egypt. This was Something Else which came through clearly. 2008,eal they did back in a 10 billion euro deal, was almost a killer. They did it just at the wrong time. In terms of where we are as an industry, it is interesting that you mention bill gates. This is a game changer from my source. He thought megamergers in this space would be about five years out. These guys have got to get to grips with capacity. It is the most fascinating element, these billionaires that are driving the deal. That is what my sources are saying. Why bring it forward . Why is it happening now . It happened in autos, it happened in pharma. We are seeing a turnaround in their fortunes. Maybe where there is going to be some pretty hard hurdles to get over in terms of regulation in the u. K. , in brazil. There are some big issues in terms of getting this deal done. There are two brothers out of 10 onwho own i believe the lafarge side. Another interesting billionaire, the man from nigeria. How expensive will this get . His fortune declines by about 80 million. I was curious as to why. Hours, we have made cement sexy. Who knew there was so much money . I am takingmessage away from this discussion. Basically there is a lot of money in cement. The new thing is cement. Kilns are sexy arent they . I dont think you are taking us down a sexy direction. Minas, thank you very much. Robert, thank you as well. Coming up, we run you through the market data. Some big guests. Stay with us. Welcome back. This is countdown. Jonathan ferro joins us on set with a look ahead to the top macro scenes of the day. We have some big guests coming up. We have Alex Friedman from , viced philip hilderbrand chairman over at black rock right now. Better known for his role at the Swiss National bank. We pull up a five year chart of the euro against the swiss franc. Many people would say he is the man that made this trade boring. 2011, itember flatlined. I am sure boring is ok with him. That is what they wanted. Sincent reached september, 2011. The euro found a parody with the swiss franc back in 2011. They were very aggressive. Some think the ecb have not been. But will they be . Have simulated a qb program we program qe program. This is something that everybody has been talking about over the weekend. It has come from within the ecb. It could add as much as 0. 8 to inflation. The big debate is whether this was leaked deliberately to star up support against quantitative easing at the ecb. The other debate is whether this that theytive measure could implement over the coming months or a reactive measure that they are only going to use as a last resort. Why would this put people off . If it generates too much inflation, if they think it is going to move back, you have 0. 8 , that makes you breach the target. When you look at the range, it d added 0. 8 or 0. 2 . What are they actually going to buy . There is not one trillion worth of euros worth of private assets out there. It just so happens that the ecb speakers today im going you have list got a whole host. There are plenty of speakers. You are going to get more suggestions from there. Takepeople say this could the form of another unlimited bond buying plan. But never actually use it. If they come out with a plan, this one trillion euro plan for qe, what would that do to the euro . Are they credible enough to push that . One central bank has been doing a lot. Bank of japan. That is very much in focus for this week. I think the survey we have conducted is pretty indicative of how high the expectations are. No change expected tomorrow. Think therendents will be more easing for the bank of japan by july. July or before. For a lot of people this is just about timing. If they look at this Current Quarter where we had this consumption tax hike, you are not going to get the gdp reading until september. So if you are looking for any clues, you might not be able to wait. The end of may is when you get the cpi readings for april and a whole host of other data points as well. That is going to be our first indication. This is the meeting when janet yellen implied we could have rate hikes six months after the end it is even more important because they were much more aggressive in their trajectory. You have to look at that debate for rate hikes. How aggressive was that debate . Jonathan ferro, thank you very much. That is all the macro news or macro data points for the week ahead. On the move is up next. Stay tuned for a special Asset Allocation edition. Alex friedman and philip hilderbrand formerly head of the Swiss National bank, both of them will be with francine. That is in on the move after just a short break. Welcome to on the move. I am Francine Lacqua at Bloomberg European headquarters in london. Today, a special Asset Allocation edition of the program. We are joined by the blackrock vice chairman and ubs chief Investment Officer for the next 40 minutes. First, our markets editor thomas manus cranny, joins our markets editor, manus cranny, joins us. Nothing ever lasts in a straight line. We have the bank of japan today, the minutes from the fed, a whole host of issues for the market. Not the least of which, geopolitics in the equation. Word is used what for ukraine, whether it is protests, organized protests, but politics are back on the agenda. We have a lot of m a. Make a link between the m a and the strength that ceos see in the economy. Mostly in france, very heavy industries. This is about two beasts, one weighed down by debt and the other by Capital Expenditure. You put them together and the theory is that you get a stronger entity out the other side. We will talk about that later. France, you promised us a great deal and delivered. Little. You delivered very little. This is also what i am watching. It looks like we finally have resolution aftershocks selling after selling the sfr to alt ice. This is a classic story we have been covering the last two weeks. Vivendi now putting that behind them. We have a cracking panel on for the next 40 minutes. We are going to keep an eye on german industrial production. You will get the fed minutes. Here in europe, it is all about can they talkann, the eurodollar down . Lets check in on equity markets. We have declines, but coming off highs from 2008 in european equities. Geopolitical tensions in ukraine. Saysrgan Asset Management to stay overweight equities. The earnings season is about to begin and they begin they believe it will be a handsome reward in terms of the earnings season. Cash generation is going to be key. Lets look at some of the companies, the scorecard. Holcim up. I have never worked in a country a company where there is a merger of equals. These people say that there will be. Take onnd lafarge will 1. 5 billion euros worth of synergies. It is about Capital Expenditure int holcim has committed india. Here is one of the competitors in the middle, crh. Large exposure in the United States of america. These guys have some big regulatory hurdles to get over. Lets talk currency. This is the dollar index, down on the day. Lets show you this over the past week. Traders are boosting their bearish bets to the highest in four years on the dollar. You are seeing 34,000 short positions. Traders are going that short on the dollar index net short on the dollar index. In terms of the euro, you can wait and see what the rhetoric is from some of the councils today, but euro traders are reducing their net loss on that position. Thank you so much. Exclusive, ae 6. 5 trillion conversation. That is the combined amount of assets that are guests oversee. Philipp hildebrand is vice chairman of the Worlds Largest fund manager, black rock. Also with us is Alex Friedman, chief Investment Officer at ubs wealth management. Fink you for joining us on on the move. How telling is it that we see these massive megamergers . We have the Worlds Largest cement maker. A year ago, it was the Worlds Largest advertising company. Is it a proxy for the recession being over . It has been a very good period. You cannot go on forever just paying dividends and share buybacks. They have chosen this profitable period. It is a fairly normal consequence. Not had to do much for their share prices to go up for a long time. Now they are on a hunt for earnings and they will not find it purely from the central bank. They need to put some money to work. Is it uniform in terms of the motivation or is it more say in tech because of the valuations are so high . What does this mean for investors . If i am an investor, should i be happy with this . More confidentre and they are going to diversify and get some real growth. Or do i find some companies that may be taking over . Would beplify it, i overweight equities and i think there will be earnings acceleration and the story is x story is the cape the big story this year. Willest rates rising, ceos think it is better to act now rather than a few years ago. Rather than in a few years. I think alex is basically right. As we lookcapex, towards higher Interest Rates, the economy could get a boost from ceos deciding this is the right time to invest and also more m a on the table. The central banking has created the risk premium. It is hard to see Interest Rates going much lower. That makes sense. I think the natural onto quince, the natural consequence, the problem is prices are not cheap. It is a challenge to not overpay. When you look at the world, is there a danger that we are having too many megamergers . 10 years ago, there was a race to be bigger and better and globalized. It is companies that maybe do not fit the fit. There are always periods of time where people think they see a bubble in mergers. So much of what ceos have done in the past is share buybacks. I am not sure that is a Sustainable Growth strategy. I suppose the question is a competent one. You have to look in different parts of the world to assess that. I think the u. S. Is a little bit different than europe. What iswe look at ceos, your main concern when you speak to them . Are they concerned about their future . They a little bit more one of the concerns you have had is the shorttermism that is creeping into the whole world. We have been trying to engage them in a dialogue to try to focus on the longerterm investment horizon and not just a focus on share buybacks or paying dividends, but actually doing something productive with the earnings, productive for the economy and the shareholders in a longterm sense. That is the emphasis we have taken the last couple of years. That is a great conversation about Corporate Governance. Is this also a concern of yours, that we are a little bit too short term . The question is, are you a er oror or a trad investor . Are tryingstors and to think over a number of years. The recovery is what drives how we look at things. We will come back shortly and talk about Central Banks and how to navigate this divergence between Central Banks, policy, and ratesetting around the world. Alex friedman and Philipp Hildebrand. I am Francine Lacqua here in london. This is on the move on bloomberg television, radio, and streaming on your phone, your tablet, and bloomberg. Com. Still with us for an exclusive conversation is philipp. Ildebrand and Alex Friedman thank you so much for sticking around as a guest. We are keeping you around for 40 minutes. We start the conversation by talking about m a. Alex, you are overweight on equities. Talk to me about central bank policy. This is what has been driving everything as we see average and surround the world, what does it mean for investors . Good question. We are struggling. More thank philipp me. The assumptions are that the u. S. Is tightening and it will do so slowly. Janet yellen came forth and said she is an inflation hawk but she has a lot of indicators and they are all red right now so it will not be for a long time. In europe, they have some tools and an inflation target around 2 . As long as they get the euro down, there is some way out of this. That is the question with which we struggle. It is very difficult. On top of the framework alex just gave, you have the risk that, in the u. S. , interest. Ates move more rapidly perhaps not the fed itself, but the market tries to preempt this normalization. So the divergence could be quite extreme, particularly if europe were to go towards qualitative easing quantitative easing at some point to get Inflation Higher and the u. S. Were to more rapidly go to this adjustment. That could then generate considerable divergence in central banking, which would be something new. What has marked the crisis and post crisis is this extraordinary synchronized Monetary Policy, which has had an effect on asset prices. How do you read the strength of the euro . This is something that has baffled many economists. If you look at the scenario, textbook is the euro should be weaker and the dollar should be going up. It has not been so far. Is there any indication that it will come . I look at two factors. I look at the current account. Partly because of the starting position and the adjustment in the periphery, the current account is increasing and we are heading into a surplus in europe. That does not bode well if you want a weaker currency. Secondly, Monetary Policy, in relative terms, has been less expansionary in europe than the u. S. And japan. We will see to what extent that will change. One of these factors could change. I think the current account position is unlikely to change. It will probably move higher into a surplus position. You have these two forces that are counteracting. Much will depend on the timing and the extent of the normalization in the u. S. For you to understand earnings and future market expectations, because their currencies play a bigger role than they did two years ago . There are not many currency trader billionaires anymore because it has gotten so difficult. Here is what we are investing on. We think the dollar will strengthen and the euro will weaken. We have a 12month target at about 1. 24. In favor of a stronger dollar. A tighter Monetary Policy in a recovering u. S. Economy, and it is recovering more than europe. We have been wrong on the euro for a while. I cannot get a great answer from central bankers as to why the euro is so strong. I am not sure anybody knows. That is the trillion dollar question. Give us a sense that had difficult, as a central banker, you are in charge of the safe haven, a little bit like the yen. It is tough. In some ways, it was easier during the crisis and in the immediate aftermath. We were all effectively doing the same thing, in different ways. We did not have qe, so we did Something Else. Everybody knew that they needed to be all out to stop this. Now it is getting more difficult. You have these variations in conditions. The u. S. Economy is ahead in the cycle. That demand different Monetary Policy than europe and japan. Things are going to become more difficult. One of the reasons we have not seen the kind of currency moves that alex talked about is because of the synchronicity of Monetary Policy. As that begins to change, i would expect that we are going to see some movement in the major currencies. Certainly, there is a lot to be said for the forecast that the dollar should rise in light of this change in policy in the u. S. That will be different than europe and japan. You asked about shorttermism before. Synchronized global Monetary Policy and now it is more divergent. For five years or so, we have all been in the same boat. Five years is a long time in the Investment Community in these days. You have to remember one thing. One of the key elements of what Central Banks have done, and it was deliberate, this was not an accident, is to take out the safe assets and pushed up Risk Appetite and risky assets in the hope that that would lead to a recovering economy. The First Business happen. The central bank would say they achieved exactly what they wanted to. What has not happened as they had hoped is the impact on the economy. We are stuck with relatively weak growth. The question is, what is the next leg . How do we boost growth to a level that is similar to what we had before . That is a question for you i have. Cant central bankers drive employment . No. The traditional no. The traditional central banker, that would be a dangerous assumption. One of the things that is happening in central banking and expectations, there is a sense that only if you stimulate enough, you can create employment. They create at stable environment which is conducive to creating employment. Employment has to be created by the real economy. It would be a dangerous conclusion to think that you can use Monetary Policy as a permanent tool to stimulate employment. The bank ofk at japan, the fed, the ecb, who is going to have the hardest job over the next couple of years . I think they are all tough. What worries me in the bank of japan and in the case of the ecb willat the Central Banks not be able to fix the growth and employment problem. The political side, they need Structural Reforms to kick in. In the u. S. , it is different. Is, how doallenge you orchestrate this coming back to a new normality that will be difficult as well, but they are less dependent on political action, at least on the structural side, then what you have in europe and japan. From both of those places is that the central bank gets left holding the bag and you do not get the support, the followthrough from the political side. We will get back to that. That was on purpose, i know. You look ats, if the different scenarios, how much do you look at equities and how much do you look at centralbank policy . For the last five years, we have looked at centralbank policy and decided how we are going to invest. For the next 12 months or so, we are in a little bit of a goldilocks scenario. We have relatively loose Monetary Policy and a recovery underway. It is not a great recovery, but it is a recovery. That means equities and credits will still do ok. Your question got me thinking. I think the bank of japan is being viewed as the one that can solve everything. The only thing they can basically do is weaken the yen. All three arrows of abenomics need to be recharged in some way. It might be a little easier in japan than in europe, where they are trying to do labor market reform at large. It is almost impossible. So japan, because of its culture, it may be difficult to change the immigration policy. On the switch National Bank Swiss National bank, how difficult is it to hold on and what happens if you cannot hold on anymore . There is no reason to believe that there is a problem of credibility. The market has clearly understood what the central bank is doing and as long as it does not change its position, i do not see a risk. For the time being, the question is, is the Swiss National bank still as committed to the minimum rate . I see no evidence that that is not the case. We are going to take a short break and we will talk about geopolitics and get back to the situation with ukraine and russia. More to come with Alex Friedman and Philipp Hildebrand. We are back in two minutes. Welcome back to on the move. I am Francine Lacqua here in london. Our special edition of on the move continues. We are joined by Philipp Hildebrand and Alex Friedman. Thank you so much for sticking around. We spoke about centralbank policy, the divergence, what it means for investors, and a bit about and then day as well. Now to understand a bit about m a as well. Now to understand geopolitics. Russia was a reminder that it matters again. We have all gotten used to Central Banks putting enough sugar water on things that we did not have to worry about the as the water withdraws, we are starting to focus more on geopolitics, especially in the emerging markets, which have had a lot of scary stories. How worried are you about china . If you look at the world, a very big picture. Marketsd about emerging , it is kind of up and down a little bit. China is the one thing that sometimes seems that investors are not fully pricing in. I just got back from a big trip in china and meeting with the leadership. On the one hand, you could say this is a perhaps historically unique challenge in terms of the reform agenda. If you think about what they have to do, it is extraordinary. And saybe pessimistic this just cannot be done. On the other hand, this government is clearly very much committed to changing the model. That is going to be good news in the long term. Shifting to a domestic demandlet economy, these are the kinds of things the world needs. The path is heading in the right direction. The reforms are exactly what they need to be. Is complexity and the risk in the implementation. That is an enormous challenge. In termst helps that, of capital markets, china is not fully integrated yet. It would be a lot easier to find tune and deal with temporary problems than if they were fully integrated at this stage. I think the world should be grateful that we have not moved to full convertibility to quickly. It easier toe manage this transition process. Interesting perspective and quite optimistic. We should be lucky that they have not fully integrated. I think his last point is really key. One area folks are worried about is the Banking Sector in china. Lets assume there has to to be some sort of recapitalization of banks. To they have enough resources and what will be the effect on the broader financial world . Because they are somewhat isolated, it would be somewhat limited in terms of ripple effects. They do have the capacity to do that. We are confident that they can hit their numbers. We project about 7. 5 growth this year. Facingocial contract is job creation. They have got to create enough jobs in other words, they cannot afford a hard landing right now. Lex i suspect you will see slower growth. That is part of the adjustment. , at some point, a little over the net. What we should not forget is that as they moved to a servicebased economy, the job creation goes up. You could create the same amount of jobs for significantly less growth as you change to structure the economy. See slowereven as we growth, it is not all bad. Thank you so much. We will take a short break and we are back in two minutes. On theme back to move. Manus cranny is at the touchscreen with an asset check. We are coming off of highs on the equity markets. England the bank of meeting. Some of the deals are being done. Deal. E the the stocks have rallied quite briskly. You go into the french market, you begin to see a bit more of a differential. This is taking out 1. 5 billion euros in synergies. There are a variety of countries. The United States, china, russia , to name a few. Is down on that. I want to get to the interesting positioning going into the minutes. The dollar index is down slightly. What caught my eye is the data. Institutions are positioning themselves. They are boosting their bets on the dollar. We have to see what comes out from the minutes. Back to you. Thank you so much. These are the Bloomberg Top headlines. An area the chinese vessel picked up the pings. The black boxes have a 30 day life. We are investigating if Credit Suisse had clients. U. S. Justice department has been probing them for three years now. Is sending documents to support the investigation. Hundreds of demonstrators have seized the things in the eastern regions and have called for boycotts of elections and a referendum to join. The ukraine government is blaming russia. N exclusive conversation on asset out location. We have been around the world in 20 minutes and we have talked about japan and the fed. Surprised about how you were about what happened in russia. The Russian Foreign minister and the u. S. Secretary of state are meeting. Remember some problems not being easy to solve. This is a complex problem and cannot be characterized in 30 seconds. All sides have grievances. Crisis. During the the question is how to move forward. They have to stabilize economically and politically. Europe has a big role to play in the United States. They do not want to repeat with crimea. They want a sustainable problem solving approach going forward. The United States has so many economic ties. It is difficult to talk about real sanctions. That is true. There are a couple of ways to think about this and none of them may be right. It is bad for russia and the Global Recovery this year. That should not happen. However, it is hard to know what Vladimir Putin may or may not do in his approach towards his influence. It is worse for russia and the eu if things escalate. Russia is in a recession with less than one percent growth this year. That would be terrible for russia. We first heard about sanctions and investors are happy about the way things are being handled. The shortterm has a lot of uncertainty. The longerterm valuations are compelling. As long as you think that rational forces will prevail, it is not necessarily rational. Sense that the more we do to help the ukraine stabilize politically and economically, the more of a there is. Investors can see that and realize that there is a complicated path that has to begin by making sure that we help as much as we can. Russianceptable for the part of the east and that part of the country. Risk and isseeing that priced in . It is a bit like what is seen in the emerging markets world. Gradually and generally travel towards a new normal, differentiation is the name of the game. With the riskhis that is there and it is covered in liquidity. It is becoming more complex and volatility will increase. That is the safest prediction as we move into the normalization. Underscore the correlations that are coming down and that is a good thing to move beyond this bank policy. That will determine the earnings. The world is slowly healing a highclass problem. That is a good point. You sometimes forget that. Some people in the media. To talk about blackrock. You are a huge investor. You talk about Corporate Governance and what the rule should be for Companies Like blackrock. Is not just a blackrock story. It is not just a blackrock story. A heavyseen them pay price during the financial crisis and the whole system behaved like a bunch of traitors. The idea was that they own a company. We have seen them increase a tendency towards trading stocks rather than owning those stocks. That is probably for regulatory and other regions other reasons. The message we are trying to bring to our investors is focusing on the longterm and being owners. Have you ever reconciled longterm growth and Quarterly Earnings . Is difficult and it takes a strong ceo to resist the temptation to maximize Quarterly Earnings. Make a that we can ceosibution to encourage to be courageous enough to try to do that, knowing that it is difficult. There is no panacea for this. We have a responsibility, as an this management, to drive message home. What can you tell us about the reshuffle of blackrock and the anticipation . I can be clear on this. I spent a lot of time on the road traveling. I have never seen an executive as committed, as intense, as larry. He is not going anywhere. Andou look at pimco succession is difficult to maneuver. How much do you have to start thinking about it . Isnt 500 and 10 years . There are extraordinary Leadership Teams behind it and we are moving these people into new positions and exposing them to new environments and geographic regions to make sure that they are ready when they need to be ready. This is not about a change at the top. This is about strengthening the leadership collectively. Give me thoughts on the piece of advice that you would give to investors now. Liquidity and these kind of like its that have been put. What is your best piece of advice . They are telling us to Different Stores right now. The equity story is a return to growth, as opposed to more certainty. Is there something you would stay away from . I would stay away from government bonds in the United States and europe. The one piece of advice you would give to investors right now . Of anould be mindful increase in volatility and the big question is if we are in 2004 or 2007. 2007 van 2004 . O you are well advised to start thinking about what happens. Thank you so much. I enjoyed the conversation. Philip hildebrand. Coming up, we focus on the biggest collections of history. The indianfine future for decades to calm define this is on the move. We are streaming on any windows phone. Is the east election in world history. Vote over the next five weeks. Lets start off by understanding the challenges are. Slowest growth rate and inflation is approaching 10 . You have corruption and two thirds of the population earning a dollar a day. It is pretty big. It looks like you may a change in this election. The Opposition Nationalist Party it isious for being not that they would get a majority. But, they could get enough votes in the parliament to get a stable majority. That would allow them to introduce the same sort of progrowth policies that he has implemented and that is to speak Economic Growth has been greater than it has been nationally. Incredible. Retty how do they put the elections together . Polling station within two kilometers of every voter. Today, there will be one polling station that it takes three days to get to and the elections. Tart today he end, five weeks . Do it in nine faces because of the logistical challenges. They have to do it in nine ases because of the logistical challenges. These elections are inspected to cost the parties 5 billion and be the second most expensive elections ever. I cannot wait to hear more about it. We will follow the stories. For the next five weeks, we will have a man who is very busy. Up. The pulse is coming we will continue the conversation on the indian elections. We have great guests on the program will are talking to us about what it is like to do business in this country and how election will affect doing business in this country and what are the key priorities to help business in this country. Business is the center of the story. We have the founder of he will give us his take on india and he is pretty influential in the country. We will get that conversation coming up. , we willcote yes take you to a robotics fair and we will have a futurologist to talk to us about what will happen with all of our jobs. And, we have the press conference coming through. We will have the latest out of malaysia. Im looking forward to it. Back to you. I am looking forward to it, as well. Guy johnson has the pulse. Coming up, call it merger monday. It is coming after the break. It has been a good. Shows that it is fossil to get those yield and corporate activity. That was the former Swiss National bank chief speaking to us exclusively. It is busy on monday. Reporter. Ny and our let us take it up with you. I would not say that yet. We are getting there. 23 weekstting here ago and saying that the deal was over and it was not. There was another eating war dding warcome bi that has come to an end. It was on the order of 23 billion and it is a lot more than it. Bidder put out a statement over the weekend that said that they thought their offer was better. We do not see any other choice. We have the largest cement maker. The make. N two different drivers. One is the debt levels. You have a junk rated company and you have a company that is committed. You have hurdle upon hurdle. You have the billionaire shareholders driving it. Arebillionaire shareholders a bit of a player. He is stuck here. Again, the billionaires are driving this. Is it really a merger of equals . I have never worked in a company where there is a merger of equals. The companies will get together and fight to the bone with regulators to get the deal done. Is this good for growth . This is a philosophical question a. Ut m cement is interesting. I have had to learn about it. Sloweding landscape has down a lot since the financial crisis. If you buy the companies, they can consolidate and close some of the kilbns. They will have to do with government where they operate. You hope that the economy rebounds. Idea. S the the execution is going to be a challenge, of course. This is where you are going to see it. They are already deep. They are already under investigation for pricefixing. Exactly talking them at the moment. Virtually introl morocco and the philippines. Interesting for me is the other billionaire who owns it. There and mayting eventually sell it to them. What is causing the biggest hurdles . They still have not signed off on it . China takes a long time. Whether they approved or not, it is slow. Challengel be the big. That is where the combined market shares are the greatest and is a potential opportunity for competitors. Players ine largest the american and very weak in europe. If you take the view that four five this is the other point that his story made. It is the linchpin of this deal. Because, if youre forced to sell assets, the feeding frenzy is the word that is used. You are forced to sell the assets. Are you fire selling . Do you get good value . Does the deal probable on that . There is a lot of issues that play. What is going to experience the most consolidation . It is my bias. I have to go with telecoms. I think it is fairly objective. We have seen some gigantic deals and there are more to come. Great. We will have more on that. Thank you so much. Guy johnson and i are back next. Black box breakthrough. Ships searching for the missing malaysia and jet heres signals for from what might be the missing data recorder. Cementing recovery. Europes Business Leaders take initiative as politicians failed to deliver. And will robots steal your job in the factories of the future . Good morning, everybody. You are watching the pulse. We are live from