Transcripts For BLOOMBERG Bloomberg Surveillance 20150121

Thirds, a stock market that has doubled. [applause] the president pledged to work with lawmakers, but many proposals are unattractive to republicans. Turning to japan, the countrys central bank has cut its inflation forecast and cap to record stimulus in place kept record stimulus in place. The boj has been trying to reinflate the economy, but has not been able to hit its 2 inflation target. The price of gold has gone over 1300 per ounce. Investors are returning to gold after shunning it for two years. Capital is flowing into safe assets. Gold is up 10 this year. Peace talks over the fighting in ukraine begin today. Foreign ministers will all attend from germany, ukraine and russia. Todays talks are focused on pulling back heavy weapons from the front lines. A new development in the case of the underinflated footballs. The nfl has found that 11 of the 12 balls that the new England Patriots used on sunday against indianapolis were not properly inflated. In theory, underinflated balls might be easier to throw. The investigation is still underway. The nbc will stream the super bowl and halftime show online for free. They are trying to showcase the online products of comcast. Easier to throw and easier to catch. That is the real key. You can get your hands around it. Bloomberg has been on top of this story. Rob gronkowski posted a picture on twitter about it. We will see have if it has any impact on the super bowl. Lets get back to tom keene in davos. It is a Beautiful Day here. The bells at 12 noon in the valley are ringing behind us. We begin with nouriel rabbini. As we do every year in davos. With america divergent, we face a stunning and continued distortion. The Economic Policy is simply not in the textbooks. This is not in the textbooks. What book are the elites reading from . It is not in the books because we have tried zero policy rates, quantitative easing, credit easing, Forward Guidance forex intervention. The 10 year treasury yields in switzerland were negative last week. They said this would lead to the collapse of the dollar hyperinflation. The dollar is up, gold is down. We have deflation. In spite of the monetary stimulus out is still below trend. Output is still below trend. Would you suggest that mr. Draghi will be bold tomorrow . He wants to be. He needs the support of the council. To have a Larger Program they will say, lets have less of a sharing of the Central Bank Buying the bonds. It is not going to be as effective with less sharing. Most of our viewers do not have the sophistication you have on this. When there is a negative fiveyear rate in japan and a negative 10 year rate in switzerland, we understand that is not normal. We need not just the right Monetary Policy but qe worked in the United States because you had backloaded consolidation. You had Structural Reforms that need to occur in japan. At that the chart of i pitut up the cart andhart and we are still growing our assets. Do you buy that they are going to put out . If the rest of the world surprises on the downside and the dollar shifts further Economic Growth could slow down and we could go into deflation and they could postpone this type of a hike or start hiking and hurt themselves or they could go back to quantitative easing. You look good in your Bloomberg Businessweek coat. We are all linked to currencies when we travel or when we are in the United States. Are we in a currency war . Everyone wants stronger growth with more net export. It is a currency war. It is. The latest round was started by japan. Another round is going to start in europe. We are in a world where not everybody can have a weaker currency. It is a zerosum game in currencies and in trade balance. I want to switch to america. A couple of nights ago, i was in zurich and i stood outside the Swiss National bank after a beverage of my choice, which i needed after what they did this week. Is this a butterfly flapping . Are they going to feel it in illinois . Maybe not in illinois, but many Central Banks are trying to avoid inflation. The danish have done it. The czechs are doing it. The last line of defense against inflation may fail deflation may fail. There is a global impact. We will come back with nourie l roubini. After the state of the union and from what we see up here in davos, we have to come back and talk about some of the issues in the United States. This is bloomberg surveillance. Good morning. Good morning across america, everyone. We are live from davos switzerland. With us, Nouriel Roubini. I thought we would turn to any quality. One of your great mentors is jeffrey sachs. There is this intractable issue. Americas inequality. Is it a legitimate topic or has it always been there . It is worsening. You have to ask yourself why . Trade and globalization reduces income and jobs. [indiscernible] the superstar professions get the benefits of the millions. The power of the economic elite is great. It is leading to social instability and it negatively affects Economic Growth. Over time, the fall in the shareable income will have a negative impact. That sounded like roubini 302. That was a great clinic. How bad is the plutocracy right now . There is a behavioral constructs of elites like in this valley. How big is the plutocracy effect in 2015 . It is big. We are in a democracy where it is supposed to be one man, one vote. But billionaires can affect Capital Gains through political power. We have a system of legalized corruption. Those with Financial Resources have a greater impact on the political system than those who have less. What is your policy prescription for republicans dominant on the hill . Who knows who will be in the seat in 2016. You have been in the white house with the intractable politics of this american nation. President obama said we should correctly said we should slightly tax more the richest. Republicans did not applaud. No, they did not. The middle class is worried about rising inequality. Their chances of winning in 2016, the republicans, is going to be affected. The attitude of the gop is not going to be good for them in 2016. Median Household Income adjusted for inflation. We know we have not gone anywhere in two decades. Ed phelps is waiting for a new technology. Do you see it . Technology makes things worse because we are losing jobs. Service jobs are going to emerging markets. In mumbai, they can do the same job in new york for one quarter the salary. Initially, there is off shoring of service jobs to asia and emerging markets. Eventually technology will replace these jobs altogether. We are facing a longterm problem. Nouriel roubini on the first and second order effects of oil. There are distributional effects. Exporters lose. Producers lose. The net impact for the Global Economy the increase in disposable income will be a net positive. To wrap this up quickly, we sat at the Belvedere Hotel years ago we talked about the crisis to come. Is the crisis over . It is not over. Look at the world. Europe is in deflation. It is driven by lack of aggregate demand. Look at japan. Many other parts of the world. There is a lack of aggregate demand. Nouriel roubini thank you so much. Wonderful to have you here. Professor Nouriel Roubini getting us started. We will continue this discussion. We will talk about what is going on in europe and the profound effect on the United States of america. It is bloomberg surveillance. Good morning. Middle class economics work. Middle class economics. Middle class economics. It is about building the most competitive economy anywhere. Middle class economics, the catchphrase from the state of the union last night. Gary, middle class economics. That is the message that should sell well across the country. But he is speaking to a smaller portion of that room. There are not a lot of democrats in that room and not as much applause as the may have been earlier. The president spent a lot of time talking about what he wants to do. He recognizes that this is a Republicancontrolled Senate and house. He now has to deal with that. He talked about coming together and cooperation, bipartisanship. He did not lay out a very clear plan of how that works. There is always a tension in these sorts of presentations. What he can do is much more severely limited now. He has some wind in his sails and that is about the economy. He cannot get too far out in front because there is still a lot of economic concern, but it is much better today. 4 in 10 americans say the economy is in better shape. Before the elections, it was 27 . The president needs to use in that use that wind in his sales. Did you get the sense that he was no longer speaking to the Democratic Party Reelection Committee . He is positioning his party for the next election and thinking about his legacy. It is an interesting effort he is trying to make two thread the needle. He cannot get too far ahead of himself. Even today, nearly 60 of americans are hurting economically. 62 of americans are concerned about maintaining their standard of living and that is nearly as high as it was during the depth of the recession. Economic recession is still a risk for americans. Income inequality continues to disturb Many Americans. I have a Little Something called middle class it economics for you. What are we going to do . Raise taxes on the wealthy . Provide tax breaks for the middle class . These are lines that are going to work in terms of catching the year of the public. How does that work with the republicans in congress . It brings me to my morning mustread. It comes from Bloomberg View. The Capital Gains tax rate boosted the aftertax income of the top 1 . I am reading the wall street journal this morning. They are calling it the gaslight presidency. They say targeting the rich is not going to work. They say you are going to get a lot of upper, affluent americans hit hard. According to the congressional budget office, it does not look that way. That is a challenge. The president still faces a population with a lot of skepticism on some of his policies and most fundamentally about the economy. A majority of americans say that the country is headed seriously on the wrong track. That is a challenge and that is what he cannot get too far out in front of. That is the best wrong track number so far since his reelection in 2012. It still means that most people are not sure about his direction and about the countrys. Americans seem to be against taxing the rich for the sake of taxing the rich. When you pull people about Capital Gains, what do they say . Most people are buy and hold investors. They are not realizing gains and are disconnected from the concept. To the extent that the public recognizes the need for greater government revenue, for relief for middle and lower income americans, there is support for increasing taxes on the wealthy. 6 in 10 americans supported higher taxes on 250,000 or more last time we polled. While we are getting into the weeds about Capital Gains taxes most americans are not processing that. They see taxing the wealthy, taxing the rest of us. It is important to keep in mind that among people who say the economy is in good shape right now, barack obama has a 75 Approval Rating. 75 . Amongst the people who say the economy is in good shape. His Approval Rating among those who say the economy is not in good shape is 20 . That gap is still confronting him. Thank you so much. Tweet us what you think. What did you think of the state of the union . Good morning. This is bloomberg surveillance. We will get back to tom in just a minute. Here are your top headlines. Shazam raises 30 million in a new round of fundraising. It plans to use the cash to expand into new markets and broaden technologies. Orbitz is said to be exploring a sale. It is reaching out to potential buyers. Orbitz jumped 15 in new york trading and closed 8 higher. Toyota holds off volkswagen to stay the worlds topselling automaker for the Third Straight year. Worldwide sales rose 3 . Last week, volkswagen reported a 4. 2 gain to 10. 1 million vehicles. Those are your top headlines. Tome keene is sitting on a rooftop in switzerland. I have never seen him looking cooler. Take your shades off and start your interview. Im too cool for school. I have to have my shades on because of the sun glare and all of that. It is also time to go techie. I have the clearest recollection of davos men and women keeping social media distant. That is what the kids do. That is so over. It is profound the changes we have seen in social media over the last three years. Lets call it the social media affect. There is no one better to speak to then david kirkpatrick. He is the author of the facebook effect. The social media effect is profound. You are right. It took business a while to digest, the landscape has shifted because of social. Every company has to engage in social. In order to be successful. The word you use is instrumentation. They were trying to synthesize but you and others have written about. What you and others have written about. What we are really moving towards is a society where people are connected to each other, but things, the internet of things, the intelligence is shifting to the edge of all parts of our world. Everything is getting connected. The world is a world in which we have signals coming from all sorts of sensors all over the world and people and we have to integrated together. There are two stars in this discussion now. Andrew keane with his theories. Which i dont agree with, but i respect him. Are we getting dumber because of David Kirkpatricks world . If i thought that, i would probably be ashamed to sit here. So, no, i dont think that. I dont think the internet is making us dumber. I think it is inclusive. It brings more people in. It is an empowerment tool. It is true for individuals companies, governments. We are making stupid mistakes. The nsa made a stupid mistake in the snowden deal. Banks make stupid mistakes the way they use social media. One of the chief lieutenants for jeffrey aimmelt will be with us. What are the best practices that ge is doing . When i talk about this instrumented society ge has been talking about the industrial internet for years. That is their phrase for what is coming next and how they want to use the internet of things to make business more efficient. They are one of those companies that has been around for 100 years or more because they are willing to move and they know how to evolve as the world evolves. That is true of a small number of legacy companies. Companies that know how to move to the next thing. Ge has antennae that have been out there for a long time. They are changing along with the world. Right now, i want you to write the book the twitter effect on surveillance for us. The benefits of twitter versus the Business Model of twitter. A serious analysis of how they are doing. I have never been a huge believer that a longterm opportunity for twitter is anywhere comparable to facebooks. In my view, even though twitter has a large capability, it is still fundamentally a broadcast source. The nonbroadcast portions of twitter are very unwieldy. Facebook is designed for interaction. Twitter was designed for broadcast. From a Business Model and Product Design point of view that is a fundamental weakness. That is why they have a problem growing into the value that they want. The other debate that is out there is the power of the newsfeed on facebook. It is extraordinary how they are testing it and working it. Where will the newsfeed be in 24 months or 60 months . They wanted to be as a conduit for video. The biggest play they are making is competing with youtube. They showed this amazing data about youtube house dollar revenue youtubes dollar revenue it is astonishing. But facebook is proving to be effective as a place for video producers to put their video. They are very methodical, very deliberate. That will be a place for them to grow. How much of your world is due to the technological process of toys . The apple this, the samsung that. I have my fitbit as usual. My world is highly influenced by the toys. As i think more and more about this issue of the instrumented world, the toys become just a component of what is really exciting me. The one exception is that the smart phone itself is not just a toy, but it is a controller for the world. It is a controller for the world for business and as individuals. Have that control tool gives us this amazing set of capabilities. I dont think of it as a toy at all. Apple is pretty much invisible here. If you were going to have a conversation with tim cook why would you explain to him that he should come to davos . I think the reason apple is not here and ces, they dont feel they need to be. I would say, at this point, perhaps they dont need to be here in terms of their nearterm business success. That is compellingly high momentum. I would say that the reason people come here is to pick up the signals for the future. Apple risks air against. Arrogance. You cannot be successful forever doing what you always did. They are extraordinarily good at what they do. But they have to understand the way the world is changing and with a little more humility and integration with the rest of business than they historically practice. David kirkpatrick, thank you so much. Still fresh as the day with the facebook effect. It is the one book that is actually readable on all of this tech mumbojumbo. Coming up, the most important interview of the day. Francine is in conversation with ukraines president. That is coming up later on bloomberg surveillance. This is bloomberg surveillance. Good morning everyone we are in davos. It is davos unpegged and it is the World Economic forum. Thoughtful discussion ripped apart by the geopolitics of the morning. The conversation with the ukraine president is coming up. Jonathan ferro is working on london. He is with us in davos. We will talk about what is happening in switzerland. Jon, wonderful to catch up with you here in davos. I want to bring up a chart of deflation in europe. This is not a chart we see in the United States of america. Is this good or bad deflation . When you strip out energy and food prices, we still have inflation in the eurozone. Is it good or bad deflation . The problem is that the move predates the oil price move. It is a lack of demand. With the lack of demand it is a dominant germany. How dominant is it versus one year ago or four years ago . Even more dominant, when it comes to Monetary Policy. Isnt it amazing that some of the stories we have read over the last couple of days in the german press the ecb has briefed officials in germany . You would not have heard of this in the United States at the federal reserve. When they conduct Monetary Policy, they do it. The ecb almost need the german defense. How is this affecting london . I have not talked to one Single Person about that. What is londons effect . Huge. The eurozone is our biggest trade partner. We were talking about the bank give england bank of england putting up Interest Rates. The game has completely changed. We are going to put a video on facebook on the most important guy in the valley. The guy who plays the piano at the piano bar. He plays he is paid in swiss francs and lives in nova scotia. He just got a 15 pay raise. I gave him a high five last night. Thank you very much. That is what he should say to thomas jordan. Down it goes. That is a stronger swiss franc. If you are from canada, the Swiss National bank just made your day. They are buying the ipads on 20 discount. How critical is the meeting tomorrow . It is little. Even i have been back and forth about this for years. I think the important discussion is, now you pulled the trigger is it going to work . Will it be effective . Jonathan ferro thank you so much. Tomorrow, we will have full coverage on the European Central bank. Coming up, ukraines president Petro Poroshenko in conversation with francine lacqua. Good morning. Stay tuned. Good morning. This is bloomberg surveillance. Francine is standing by with the president of ukraine. Probably one of the most anticipated interviews of the day. Im so glad to welcome the president of ukraine to the bloomberg studio. Thank you for granting us this interview. You are heading back to ukraine because of escalating violence. How bad has it become . It is getting worse. We have information about more than 2000 additional Russian Troops crossing a border together with the 201th tunnel carrier personnel carrier. This will create an escalation of the situation. That is why we have a very important meeting today with Christine Lagarde. We should coordinate our assistance. This is vitally and crucially important for us. What do you make of this escalating violence . What are the russians trying to achieve . Again, i am a president of peace. I have told him that many times. We are proposing a ceasefire. That is a basic condition for peace. [indiscernible] ceasefire, closing the border releasing the hostages starting the political process. The fighting today is almost as bad as august of last year. We know have several points from the Russian Troops and russian backed rebels, where they are activating their armed operation against our troops. We are keeping the assault operations fresh. We are taking into account Additional Forces that come into my country. Especially now we need three things. We need unity of the whole world against a terrorism attack. Please, you should believe in ukraine. We are defending democracy, we are defending freedom, we are going to defend not only our territory but we will defend the european continental and global security. Going back to the fighting are you really know concerned about a full on russian invasion or are we going to have a truce before that is a potential . I think that the Bloomberg Viewers can do find themselves of 2000 troops additional to the 8000 troops if the tanks in addition to the tanks that are already there is an invasion or not. This is a very grave danger to the escalation of the situation. Again, we have very good armed forces. We are for peace. This needs a well courtney did a for of the whole world to stop the aggression well coordinated effort from the whole world to stop the aggression and the invasion. This is very important. This invasion the escalation of the situation started with a terrorist attack by missiles who hit the civilians that killed people including children. Why is the escalation happening now . I think it is better to ask russia. You mentioned that your meeting with the imf president is very important. What are you going to ask her . Let me answer the previous question. Ukraine did not do anything to provoke this escalation. We have kept the agreement. The meeting with the imf i think that we have already been in very close cooperation with the imf team. It will be in new memorandum, a new program. Maybe if we finish up today, we will have a statement together with the imf and that would be pending our cooperation. It would be explaining the level of reform we will agree to. We already agree with the imf. That is because the Previous Program was just calculating on the short term. Unfortunately, the situation is getting worse. How much more money do you need from the imf . We definitely need more money. This is not just the money. This is just a financial pillow for the reform. We want to create an attractive investment environment. We want to create an independent system. These are very important steps in the creation of a system against corruption. We are all for a new ukraine. We are in a position to do that. You met yesterday with george sorros. Apart from money, what would you be asking european delegates . Today, we formed a very Important Team from the world from the states of the world who are ready to support us financially. I am absolutely sure that they are ready. From canada to japan, from the European Union to the United States. From different countries, including the middle east. We have created a very Strong Coalition to demonstrate financial, military, and political solidarity with ukraine and we are very pleased with that. Have you spoken to russian officials . During the last week . No. We are open for discussion. Today, in a couple of hours, we have a meeting. Most probably it will be preparation for the phone conversation. When i you meeting Christine Lagarde . 5 00 and then i fly back. Good luck with everything. Thank you for the support. This is a very testing time and we will hear from a lot of the russian delegation. It is a very difficult situation. The imf, some of the support thatan be ven in doubles davos is that you have a lot of people with deep pockets. Surveillance continues in a couple of minutes. It is day one at the World Economic forum in davos. We have plenty more coming your way. Critics this is bloomberg surveillance. Collects good morning, everyone from jobless, switzerland. D avos, switzerland. In new york, our Brendan Greeley and Olivia Sterns and olivia with all of the market news. The ecb tomorrow it is ripping up the script. It is. First, the state of the union. The president said the economy is healed and now is the time to deal with income inequality. He told the Republican Controlled Congress that the evidence was in that his economic policies are working. At every step, we were told our goals were misguided, too ambitious, that we would crush jobs and explode deficits. Instead, we have seen the fastest Economic Growth in over a decade, our deficits cut by two thirds, a stock market that has doubled, and Health Care Inflation at its lowest rate in 50 years. The president pledged to work with lawmakers but many of his proposals are unattractive to republicans, to put it lightly. Free Community College access and providing basic are among his proposals. The Japan Central Bank has cut its inflation forecast again and kept its records that the numerous its record stimulus in place. Earlier forecast called for 1. 7 increase. The doj has been trying the boj has been trying to raise inflation. And for the first time, the price of gold has gone over 1300 per ounce. Central banks around the world are estimated to boost stimulus. Gold prices are only up by 10 this year. Meanwhile in berlin, peace talks over the fighting ukraine. In recent days, fighting has broken out between Ukrainian Forces and rebels backed by russia. We just heard poroshenko speaking to frank dane ukrainian president poroshenko speaking to francine. And finally, new developments on the underinflated footballs. 11 of the 12 balls that the new England Patriots used sunday were not properly inflated. In theory, they might be easier to throw and catch. The investigation is still underway. Meanwhile, for the First Time Ever nbc will stream the show with Parent Company comcast. Lets be honest, its not a great line. You are either cheating or taking and taking the air out of the ball, or you are playing fair. Two pounds per square inch. I just looked it up. How do they do that . Do they do it in the huddle . Do they do it with a pin . The principle behind it, very dishonest. Yes. Also about deflation, but obviously not on the field, but the european economy. We will have full coverage of the ecb meeting tomorrow from frankfurt germany. Its the pace and cadence of Touching Base with the proverbial visit. Just in the just in mold jeff immelt has turned to what multinationals are doing in 2015. It is always fascinating. What is the lead focal point for ge right now given the geopolitics that you confront every day . I think about infrastructure. At the end of all of this, you have governments that transition out of this orderly or not sorely not so orderly. They need to put basic Building Blocks in base in place. Matter who is in power, they know thats important. Thats where a company like ours and many others come in. That is our job. We are focusing our industries around infrastructure. What is your differentiator between the good competitors in europe there are some really good competitors for you in europe. How do you differentiate since then in china where you live . You have to marry what you do globally with what you do locally. We develop technology around the world, including in china, and we make and service around the world. And increasingly, the third dimension is the industrial internet. That takes us into a whole new set of capabilities we were not thinking about 10 years ago. David kirkpatrick joined us earlier on surveillance. He gave us some information about digital internet. What is the main topic here . In the past we would be spending billions to squeeze another point of efficiency out of a jet engine or gas turbine. Those days are over. Its critical, folks, what you will hear here. Its not about managed micromanaging the mba process of 30 years ago. Now you have these enormous data flows from our sensing jet engines taking off every day and all sorts of ambient conditions, processing that information, and helping airlines and our customers run more efficiently and effectively. That opens up a whole new world of opportunity. A big part of it is that you have to listen a lot more, maybe, then 10 years ago. I want to switch gears to this raging debate about financial engineering. Ibm is the poster child of this right now, but there are many other companies were there is argument. The plan is not working. Raise the dividend share buyback. How does ge protect against the bad side of manipulating the Balance Sheet . You invest for the long term. The software we are doing in the industrial internet, that started several years ago. It will run for a long time. When we develop new jet engine technology, its a 10 year journey to be cash positive. How does ge use the cloud . If you were to speak to the ideal management now, struggles you had this year, what would you give as a managerial focus . And not in position to give advice to other companies. Im not in a position to give advice to other companies. We look at our ability to cut horizontally. That means you cut across the enterprise and then go deep. Because we design jet engines manufacture them, service them we can do more with that information than other companies can just play in the horizontal space. I want to rip up the script. What an ugly year for commercial aviation. I dont know the statistics offhand, but the emotion all of us faced this year with the horrific malaysia air tragedy, and we just heard from the ukrainian president. How does ge reveals confidence in commercial aviation . And in particular in asia . If you look at the facts over a long time frame, commercial aviation is it is an extremely safe form of travel. Agreed. But every parent watching the show and listening to its program is saying, i got to put my kids on an aircraft and they are a little less confident than they were eight months ago. With we have to look at all of these tragedies and make sure we are learning on them. We have to look at all of these tragedies and make sure we are learning from them will stop from them. Everybody wants to make it safer. One of the safest modes of transportation will become safer. Are you adding to capex . How are you working to create the end jobs, which is what its all about yet the particularly here in europe which is what its all about, particularly here in europe. We invest in higher cost places when we know we can find good workers and they will do good work and be productive. We dont shy away from the u. S. Or western europe. But we are also looking at our global platform, places like india, indonesia, china. They are important to us today and will be. Do you see a change in india with the new capital . Or is it all the service . I hope so. The new government comes in with them in with some encouraging positions. We need to get some stuff in there. How important is the president s trip . Very important. It sends a signal in terms of u. S. Foreignpolicy that in the important. That never hurts. It will allow the teams to focus on stuff that will allow india to keep moving forward. Do you like the new lightbulbs . I love the new led technology. I love it. Weve been investing in that for six or seven years. Because it really will be transformational. Ok, john rice. I dont like the new iphone. Im getting used to them. I dont like the new lightbulbs. Im getting used to them. John rice. Coming up, never been a better time to speak to Kenneth Rogoff. Of course, tomorrow, at a meeting at the European Central bank. It is davos switzerland. Stay with us. Middle class economics. Middle class economics. That was president obamas best effort to coin a new phrase , middle class economics. Joni ernst in her republican rebuttal said many families like they are learning working harder and harder with less to show for it. We see our neighbors agonize over stagnant wages and lost jobs. Gary stagner, you know more about what americans think that americans themselves, this idea of americans worrying over stagnant wages is a new rebuttal right . The number of americans that rate the economy in Good Condition is a from 27 in the midterms to 41 , but that still says the majority says we are hurting. We are concerned about income and the ability to maintain a standard of living and the wage and income gap in this country. Economic discontent does continue. It has lessons, and that is wind at the present sales, and its still an issue and that is wind at the president s sales sails,. And what about her response . That there was no threat of castration. [laughter] what about the argument that we have not come back as strongly enough and as fast as we needed to . The president a month ago had a 41 percent Approval Rating. Today, 50 . Of 9 up nine points in a month. The last time that happened was when we got osama bin laden. How does the president actually pull now on the Affordable Care act that it has been in place for a year . Quick it is probably the greatest piece of social engineering in the last generation. It is not a popular piece of legislation, nor is it unpopular. He is a large split. It gets a large split. There are elements that people like and there are other elements, the managed coverage that people dont like a lot. The issue is, as with many other issues, the country still divided. The twitter question of the day, we want to know what you think of the state of the union address. If the president laying the groundwork for 2016 . Tweet us. Good morning. Im Olivia Sterns you with Brendan Greeley. Tom keene is on this with slopes. Japan has reached out with International Effort in an effort to free a pair of hostages. Shinzo abe vowed to use all efforts necessary. The amount of the ransom is 2 million 200 million, the amount that japan promised two countries fighting isis. 17 people died during three days of violence that began on january 7. New details on the doomed air asia flight 8501. The jets appears to have stalled after climbing and excessive speeds to an unusually high altitude. The official also said the cockpit voice recorder provided no evidence of terrorism. Meanwhile, a team in the java sea hopes to bring the fuselage back to the service. The crash killed all 162 people aboard. Those are your top headlines. Yesterday, the president walked down the well of a house, shook some hands, and gave a speech. There was a small town in switzerland where people were also talking about Economic Policy and shaking hands. Here is what davos is worried about number one this year. Number one, terrorism. Number two, oil prices. Number three, Vladimir Putins stance on ukraine. An economist with bloomberg carl, is this what you are worried about, to . I think geopolitics is at the forefront of the discussion with russia and the uncertainty in the year ahead. It depends are you are talking to in terms of the concern over oil prices because Petroleum Importers are arty benefiting. We see that in the u. S. , for instance. Other places are having more problems. What do you think about that list about what the billionaires in davos are afraid of . Is that what the president is concerned about . It seems like americans have a different list of concerns. Terrorism is always a concern and concerns about terrorism are up a bit post paris. There is room for improvement there. Even with the economy improving the public is split on so many issues. We ask, whose leadership do you prefer . It is split down the middle. Who is taking a strong leadership role, the president or congress . It is split down the middle. There are some goals that go in the president s direction; the republicans direction, but fundamentally we are back in a split in politics, but it makes for gridlock and thats the last thing people want to see. Very true. Worrying about the public and the American Public and the billionaires in davos it brings us to this chart. The black swan. , you cannot see it, but lets forget that for a second. Heres what they are most worried about, ukraine spilling over into energy prices. The thing that is less likely but seems to be more catastrophic, according to socgen, is a further deterioration in the eurozone. Carl riccadonna, is your known unknown further deterioration in the eurozone . There is a lot of risk of the eurozone slipping into further deflation is here. There is dismissive commentary about, well, it will be just one year and they can move on and things will improve. And i tend to believe in that optimistic outlook, because a stronger u. S. Will help to lift the eurozone as well. And there is a risk in the insurgency in the instant but there is a risk any uncertainty as well. Trying to way that in the balance over tomorrows ecb meeting. There was a big empty space in the middle of the chart that shows the catastrophic risks that are potentially the worst and those are the ones we dont know about. That is the problem with the black swan, you dont see it. In terms of the things that americans are most worried about, you work with languor associate linger Research Associate understanding the American Public. We have a deep sense that you just cant get ahead in this country unless you are in the elite. It has been a serious concern and has dragged down the country politically and socially for nearly a decade eight years. We are coming out of that, but there is still a lot of concern about longterm structural issues in this country. The ability of most people to get ahead, to maintain their standard of living, six in 10 americans are skeptical about it. We are not back to where we were prerecession. 80 or so of americans call it a problem. Half the country calls of a major called it a major problem. These are longterm issues that have not been addressed. Even as we come out of the recession and people starting to feel it there are lingering concerns and they are at the forefront. Economic sentiment is proving to be a lagging indicator, which is different from a lot of other cycles. Its taking a much longer time for good news to go from wall street or for the Economic Indicators to go to main street. The leading indicator is two dollars gas. Gary langer, thank you so much for your time morning. Carl riccadonna will be with us for the hour. We will be right back here on bloomberg surveillance. We will be back with tom keene who is having the time of his life in davos. Good morning. Im Olivia Sterns here with Brendan Greeley. Tom keene is sledging, as they say, in britain. We will get back to him in a moment. Here are your top headlines. United health in the Fourth Quarter rose 20s percent 20 . Analysts surveyed by bloomberg expected an average race of one dollar 50 1. 50. Fifth third bank posted fourthquarter earnings beating analysts estimates. Net income came in at 385 million on revenues of 1. 5 early in dollars. The third shares at declined 11 since the start of the year and they are down 16 in the last 12 months. Investors sent shares of netflix soaring after it said it will reach all 200 of the countries that have Broadband Internet Service Within two years. That helped shares right rise 50 it also showed better than predicted subscriber growth. Those are your top headlines. President obama laid out plenty of things that republicans hate in the state of the union address. Midair actually be some room for compromise . May there actually be some room for compromise . He also redefined his relationship with the Republican Party. Phil mattingly, i want you to take another listen to the president dropping the mike last night dropping the mic last night. I have no more campaigns to run. [applause] my only agenda i know because i won both of them. [applause] i feel like all that was missing at the end of that was the president saying, yeah, that just happened. You dont often think of the termsic burn during state of the state addresses, but you often hear those closest advisers to him since his earliest campaign is that hes cocky hes got a swagger about them that will occasionally come out. Before his famous 2004 Democratic National committee speech when all of his aides were very worried about what he was going to say, he said at one point, im like lebron james. I got this. It drives republicans nuts. Its the thing i got more email emails about last night and anything else. But it also says something that the folks at the white house really like it and wish he would do more of it. It doesnt it does really look like hes got that. How likely is anything that the president proposed is actually going to happen . Gary langer pointed out he is talking to a smaller and smaller proportion of that room. No question about it. The topline stuff that has been getting all of the headlines, the tax proposals, tax credits for the lower cross for the lower class and middle class, we knew from the beginning that was not going to go anywhere. That was more about latest in setting down a marker that anything else. If you just to the speech last night, there are pieces that have relevance to a congress that is currently in session run by republicans. The first one and we have talked about this a bunch in the last couple of weeks, trade is real. When the president talked about trade last night, the entire republican side stood up. Very few democrats did. That is something he can move forward with republicans and he will. Paul ryan will start moving forward on that as soon as next week. And the other is small, but it matters. Criminal Justice Reform something that we are group of democrats and republicans have gotten together to agree on, to reduce sent a, particularly on drug charges. To reduce sentencing particularly on job charges. Drug charges. Previously this was something you can only say you could be tough on crime. There is not a lot you can be optimistic about, particularly after the last six or seven years, but there are issues that could move forward if the timing meshes. Great stuff. Thank you so much, phil mattingly. Lets get to a quick data check. S p futures pointing to a negative open for the u. S. Stock market stuff the 10 year yield slightly stronger, up one basis point to a whopping 1. 8 . The euro strictly the euro slightly stronger against the dollar. And oil is 46 per barrel. This is bloomberg surveillance. Im Olivia Sterns. Im here with Brendan Greeley. Lets get back to tom keene, who is in davos. Good morning to you, and of course, afternoon here it. House. Here in davos. In this valley with us is Kenneth Rogoff of harvard university. There are 12 people in the valley that have read the classic text of robots of rogoff. They are talking growth, mediocre growth, investment, and Central Banks. Lets start with europe and your world of International Economics and then moved to the u. S. Citigroup and pimco, they both suggest a move to parity. What happens to our system is we see such a currency depreciation . First, hours our steady Exchange Rate has declined and one thing we are sure of is that we are not sure of anything. It could go to parity but it could also go back up. A euro depreciation would have been great if it happened a few years ago. It is a healthy development. The u. S. Is growing and europe is not. I would not over estimate the impact on the two economies. We both can handle it. I read every word of, maybe twice, about the imf, a great team, the 14 flavors of current these of currencies. Explain to our audience rogoff 101. What happened in zurich . This is remarkable, not that they broke the peg. Thats normal. What surprised me is that they were able to keep it as long as they did. When you have open markets and switzerland does come its very hard to sit on a pay for more than a year or two. In fact, virtually all of the peg fall falling in the late 90s and early 2000s they had a capital exchange. The difference about switzerland, they were preventing the franc from going up too much, but and people were skeptical, but it inevitably broke. It was inevitable. Will it change the culture of the bundesbank . Is it a game changer . I hear that, but i dont think it is relevant. This was not about quantitative easing. It is unfair to say people should lose faith in the central bank. They did something that was really incredible. I think remarkable that they were able to hold it so long. And ultimately, they cried uncle. You are doing research about how Interest Rate have come down. Here we are at negative Interest Rates. What does a negative Interest Rate actually mean for people who are putting cash and a mattress, goldin ewald . Gold in ewald . A vault . The idea of this zero Interest Rate is to push money out. But as long as Interest Rates are at zero and bonds are at zero, people dont care. The Central Banks are printing money, but they really are just printing by. If the Interest Rates move more negative, then he would not sit there. It would not sit there. This is a rather esoteric topic, but they are constrained by paper money. Thats the problem many to be tackled in the long run. Everybody goes to cash, essentially, because its better than financial instruments. There are a lot of ways to do it, but the swiss banks could push a lot of cash into its vault and make for better Interest Rates. We will talk to Kenneth Rogoff for the next three hours here in davos. The fiercely, we will come back and talk to professor obama about the American Economic experiment and seriously, we will come back and talk to professor rogoff about the American Economic experiment. Perfect weather in davos. Frankly, the most interesting davos since at least 2009. Coming up, more with Kenneth Rogoff from harvard in davos. You are looking at italy. My colleague, rachel, here with me in davos. She picked the short straw. Hers is just beyond those trees and over that bridge. She walks about seven miles each day. Its about a 2. 5 to three hours train ride. It is so gorgeous. The virgins divergence is the word of the moment. This time is different, the distance thing is not working out so well here at the World Economic forum meeting. We speak to kenneth throw off rogoff on the amazing challenges that we see in asia and europe will start we were just talking about the complexities of the moment. What is the american distinction right now . The fact that we have such a diverse economy. We have a diverse Financial Sector and across regions. It can be of the joe courtney and at times, particularly with respect to people being unemployed it can be particularly jerked tony and at times with respect to people being unemployed draconian at times with respect to people being unemployed come especially compared to france. What can we do better in america without a lot of impact on society . Inevitably, over time we will move to greater distribution and more transfers. The political winds are very strong over the next 20 to 30 years. Its a challenge to try to stay vibrant. One of the great kenneth robots stories Kenneth Rogoff stories is your father decided you would grow up in a pretty interesting neighborhood in eastern europe, not far from where i grew up. We grew up a world apart. How do we bring together what you experienced as a kid, or what so Many Americans experience now . The level that is easiest to address and yet we dont is education. At every level. Its not just about preschool. That is a darling topic, but its all along all along. Do you support the president s proposal on Trinity College . Community college . Yes, but it is all along the way. The whole system i think its holding kids back. Is this time different than what we have seen in the last 12 months . Certainly, what is going on with longterm Inflation Expectations forget about the shortterm, but since the summer where expectations of future inflation are coming down, its like people dont believe Central Banks can create inflation anymore. My guess is they will be wrong about that. The Central Banks may take time, but they will figure it out. With kenneth robots, thank you so much. Coming up tomorrow on bloomberg surveillance, Daniel Juergen on oil. Stay with us. Good morning. Im Olivia Sterns he was Brendan Greeley. We will get back to tom keene in davos in a moment. Here are your top headlines. Shazam raises a new round of financing of more than 1 million. Londonbased shazam says it plans to expand into new markets and broaden its technology. It helps users by tracks or see what is training in their area. Online travel agent orbit says its exploring a sale. It is working with a Financial Advisor and reaching out to potential buyers. Orbitz jumped as much as 15 in new york trading and closed it. 6 higher. 8. 6 higher. Toyota holds off buyers and stays top automaker for the third world in a row. Lastly, volkswagen last week volkswagen gained 210. 1 million vehicles. Those are your top headlines. The first u. S. Envoy arrives in you buy today. When she touches down, she will be the highest ranking of american official to visit cuba since the carter administration. They will work to restore diplomatic ties after five decades of sanctions. Willem marx is also in havana. You have already disappointed me by saying its too soon for me to book my trip on kayak. In the meantime, what is Roberta Jacobs hoping to a, which on this trip . Good morning, olivia. This is the first visit by such a senior u. S. Envoy in 35 years. After 50 years of embargo, that is a big deal. She is part of a delegation that is visiting. They have a series of talks about migration issues, but this trip she will be talked talking about turning the embassy into a fullfledged embassy and reestablishing diplomatic protocols between the two countries. Last night in the state of the union address, president obama addressed it quite forcefully. Our shift in cuba policy has the potential to end a legacy of mistrust in our hemisphere. It removes the phony excuse for restrictions in cuba, stands up for democratic values, and dans band of extends the hand of friendship to the cuban people. We should be working on ending the embargo. That will be a bit of a challenge, obviously. A lot of people in the Republican Party in particular are opposed to lifting the embargo. We spent some time speaking to american tourists. All of them are on peertopeer visits. They said they feel very at home here. When you talk to cubans, is their response to all of this diplomatic shift by the u. S. , finally . Or am a we will see when we see . Or, we will see when we see . Those that ive spoken with prefer the former. They hope this is opportunity for private business. A lot of them are not able to make a great deal of money using the state system, so they are hoping there will be investment which will now be legitimized because of restrictions being lifted on import of, technical expertise, equipment. That seems to be the major focus of the people weve been speaking to. Willem marx, we will be checking in with him on surveillance. Carl riccadonna, Bloomberg Economist and amazing cookie maker, i might add, i want to read you something called wire from college wire from Bloomberg View p aula dwyer that the president could have said this one is for the ladies. We talked about good Economic News reaching americans. Republicans seize on whatever the week angle is, and the week angle weak angle has been low wages and participation. The offer of a paycheck will eventually entice those marginal dissidents to come back to the labor force. This is something that happens mid to late cycle, those marginal participants to come back to the labor force. This is something that happens mid to late cycle. We are not there yet. This year is the test for slumping Labor Force Participation. One of the things the president was saying was longterm secular trends. Hes talking about affordable highquality childcare. Its not nice to have, but it must have. Its time to stop treating it as a side issue or a womens issue. Its an economic priority. That is a longterm trend. Its a longterm structural trend and a big problem for Labor Force Participation because childcare is so expensive. You see anecdotal evidence with the woman sitting next to the first lady and the issue of how impossible it is to afford childcare on very low wages. Its all tied together with this compensation issue, raising the minimum wage, making Childcare Costs more affordable, all of this ties into the labor force. And obviously, im all for this. Theres a great cover story on Bloomberg Businessweek talking about this, call the labor crisis. It is a bit of a chicken and egg there with the Labor Participation rate and wage increases. It gets to whether or not you think wages have started to rise because of structural reasons or cyclical reasons. Is one of the reasons we have not seen a pick up in wages because there are fewer people in the workforce . Quicktime im in the janet yellen cap that things the larger im in the janet yellen came that things the larger cyclical movement is that you dont see prices rising to the flack has drawn. We are not there yet. We are close. It is time to answer the twitter question of the day. I hope you watched the state of the union last night. What did you think . That is our question. Our first answer, there was a certain forcefulness to his tone and speech that was new. He was laying the groundwork for 2016. I heard that, too. He is framing what Hillary Clinton will have to do in two years. People say this is what he does best, basically election speech. The second answer of the day president obama president obamas stone will be partnership killer for remaining years in office. I dont know what you can feel that has not already been killed. That has done killed. And a very inspiring one, president obama spoke about hope. Lets go to davos. I assume you were not watching the state of the union. I assume you were at the piano bar. What are you excited about coming up today . We were at the piano bar last night. A good hosted party was had by all. This is by far and away the most intellectually stimulating davos i have ever attended. We will continue that conversation. What i thought was going to be the lead topic oil, you will join us tomorrow. We will continue the conversation with all of that backdrop, including the ecb meeting. Time, this is not your first rodeo. You have been to a couple of these at davos. If you could describe one song from the songbook that would have been played at the piano bar to sum everything up, which one would it be . I dont know where i would go with that, other than everybody here is bewildered. They are away from the script of davos and much more toward the outside news. The fun center is this was national the Swiss National bank announcement. All in all, a very different tone in the first day of meetings. Cracked i also want to ask you about what we have all been waiting for, perhaps i also want to ask you about what we have all the waiting for perhaps, for years. What are people in davos saying about qe . I think what we will see from mario draghi will be a measured approach stretch out over time. I would not look for one grand announcement tomorrow, but we will see. I like your charge that you put up jon ferro. That actually translates in two the elephant in space. Oh, thank you. And apparently, the patriots are not properly inflating their footballs. Tom, thank you. Bloomberg surveillance continues on video. Radio. Collect a very good morning everyone. It is wednesday, january 21. We are alive. You are in the loop. I am betty liu. We have a jampacked show for you this morning. Digesting a president s state of the union speech last night and what it means for business. Billionaire investor sam is in the house parrot how he feels about the president s push for middleclass tax cuts. Live interviews with heavy hitters. The ceo of j. P. Morgans Asset Management division hair and also, Larry Summers will be with us and many more. Plus tom a look at our top stories president obama says it is time to turn the page from the financial crisis. And last night in a state of the union address, the president said there is proof the policies are working. Ever at every step, we were told our goals were misguided and to envisage that we would crush jobs and