Transcripts For BLOOMBERG Bloomberg Surveillance 20151012

Now. The question of the day should be harrods . Is in considering any major changes in syria. Has become an Major Military player in the conflict. H sees the move as a sign of desperation. Running your economy into the ground and having to send troops and in order to prop up, the only ally is leadership then we have a different definition of leadership. Julie meanwhile, putin discussed the attacks with saudi Arabia Defense minister, the officials signaled that they would be willing to let assad stay in power. A report today from iran says a Washington Post converter reporter has been convicted. A judiciary condition offered no details. The u. S. Has criticized iran for trying him in secret. In turkey, no one has claimed attacks. Ility for the the attacks happened at a rally. Alling for Peaceful Solutions glencore has been hammered by the summit Commodity Prices, shares are down 55 this year. Those are your top headlines. Back to you in london. Tom lets do a data check. There is nothing going on in the equity markets as we wait for a busier week. I purposely caught up to the twoyear yields. You always do. The fascination with the german it has beent there for a long time. They do expect to be paid to the floor for a while longer. Harrods thised weekend, we do have an important guest year with the spirit of europe. The battle for britains future is heating up today. Jonathan lets welcome johnson. We go back to the unknown. Got toy in a camp acknowledge the uncertainty that goes with that. How do leverage . Luke we have a fair debate. We put the facts of the table. Saysthe stay in a campaign , where are the details . A great many people are concerned about things like control of our borders. Thated as a nation to know we can control who comes in and out of our country. These things are very important. Of the Common Agricultural policy is essential. This is the largest single budget item in the eu. It is written for french farmers and it needs addressing. The city itself needs to be friendly to brussels and strasburg. They are not trying to destroy what a key the british economy. Tom they went after donald trump. How many people do you employ . Do you employe their new citizens to the u. K. . What is the distinction between brexit and the way london is totern mark luke we want control migration as opposed to having it dictated across 28 countries. In intention, there is a great lack of democracy across europe or i think the heart of this lack of democracy is the eu. Energize how do you the left to vote with you . Luke if you look at what mr. Corbin said, he is more concerned at the impact of immigration than those on the right. Immigration is a left right issue. Massabout ceasing uncontrolled immigration and talking about intelligent immigration that is a net benefit for the economy and does not lead to a society that is less cohesive. Muchhan remind me, how exports do we have with the eu . Does that change . Luke we were on a big trade deficit with the eu. If we cease to trade with them, they will be losers. Tom whats the biggest thing the United Kingdom would lose with brexit . I think there is a degree of uncertainty. I think we should be confident with being an independent, successful nation electeddepend on officials in brussels to decide our laws for us. Today, my headquarter is based in the eu and tomorrow it might be based in england. Germany or switzerland or norway, they have high gdps. Both are in europe. They are outside the eu. If we left the eu, we would enjoy very attractive trading terms within the eu. We would be perfectly successful. I see lucy fisher writing in the times of london. I am fascinated if you were to sit down with tony blair. There is a great divide, where is the Common Ground to get to compromise over brexit . Luke i think there is a big division. I think that the Prime Minister is limbering up for a failed renegotiation. I would love to think there is a possibility that we could change our terms of engagement with the eu and we could stay within it. Jonathan what does he want . He wants. T sure what i think he wants a cosmetic set of changes that would satisfy a sufficient number of people. Tom americans are baffled by this. They had a referendum years ago. It, we are on baffled by this polarity and why there is a debate. What would happen the next day . Luke there would be a time of renegotiation. Who knows how that would end up. One would hope that it was a sensible, practical set of discussions. It is in everyones interest that we would continue to trade. Is it sensible to sell at the bottom of the market . Glencore is selling its mines. We will picked out the deal next. Tom good morning, everyone. We are worldwide of from london and new york. That is a pitiful new york early morning. Beautiful new york early morning. No starbucks. Its somehow different in london. We need to go back to vonnie quinn. Connie vonnie quinn dell will announce today its acquiring emc. Raising 40 billion to finance the deal. Leadershipmbine emcs in digital storage. Anheuserbusch may raise its take over bid for miller. It has been considering what a boost it would do for its offer. Makers are pure hoping for a deal by friday. Glencore is making moves to reduce some of the 10 billion worth of debt. Plans to sellr copper mines in australia and chile. The price has battered this year. The stock is down 65 . Jonathan lets get more on glencore. Jesse, these guys are traitors. They are some of the best traders on the planet. What does this say about the predicament a are in. Is they areonsensus at or near the bottom. Copper is one of the metals that people still look at over the longterm. There is an appetite for copper assets. This should be quite a decent time for that. Tom are you surprised about the servitude of the bounce in commodities. Clearly, glencore is banking everything on that commodity rebound. Surprisedas particularly on a friday. Wouldvent think we seen that coming. Jonathan we spoke to rio. He is not talking about fundamentals. He is talking about short status. As we come down from 10,000 to what is fair by you in copper . Jesse higher than what it is. Echoed last week. Lets be clear. If the scenario plays out, thats not great news for glencore. Tom you have done great reporting on this. The ceo knows the market. You keep producing with sunk capital costs. Glencore wants to play by a different book. How dare they. Jesse they have created a great deal of tension. They have the lowest costs in the market. Tom did they not take microeconomics . Jesse they are higher cost producers. They will take some of these assets off the target. Unprofitablen as by some analysts. May be the same way that opec is trying to drive things at the moment, where does that get tested . They are looking at 20 iron ore. At what point does that start to get tested . if chinese demand falls off a cliff. That has boosted sediment around the commodity. Tom can you guys help me out . This is the biggest deal. This is the american paper with is theve the big this wall street journal. You guys do it right. Print is still alive here. How is the print business . Jesse i enjoyed reading the paper every day. York, they get little or and little or. It just doesnt work. We will continue as well. We need to talk to somebody about the overview. Aboutl talk to her negative Interest Rates. London, this is bloomberg surveillance. Good morning. Jonathan this is bloomberg surveillance. Tom is in london. If he is obsessed with the size of the newspaper. Tom nobody apologizes for shrinking print industry. They just do it and they do it right. Let me go to the morning mustread. This is smart. How do you say it . If its key or topic. This is classic nielsen that. Back to the heart of it. He has been a very bullish on in europe. He stated that throughout the summer. Where others questioned the fundamentals, he has stayed bullish. I would go to luke johnson and ask the question. Are you bearish on the european economy . Luke its a recovery story. They have had a long recession. I think optimism is returning. Investment is rising. In many countries, unemployment is falling. Youve got Capital Expenditure going on. Lendanks are starting to again. A lot of them did not capitalize. Its the classic cyclical way that the world works. Tom you have such a granule track record of innovation. What is your biggest impediment to the optimism . What is the biggest headache . Its theould say encroaching regulation and bureaucracy. Its happening everywhere. I dont quite understand it. Society gets more sophisticated and richer, there is more bureaucracy. You have to fight it tooth and nail. It in its risktaking. It diminishes investment. Longterm, it doesnt help. Tom what would sterling do . Think the euro and the intractablewn by problems in places like greece. Look at how many hundreds of billions have been sunk into greece. Jonathan its a place of highend political risk. You think thats going to happen . Luke i remember people saying that if we did not join the year of that we would be doomed. Sterling has strengthened against the euro over the years. I think we have a track record of showing that we are probusiness and the generate abs we do attract disproportionate amount of the direct investment into the u. K. Tom the germans speak about keeping europe together. The you look at the responsibility of avoiding the tragedies of the past on Continental Europe as separate from the debate over the United Kingdom western mark do we need to attention to what he is saying about cohesion . Luke nato is a more important factor and the u. N. In terms of keeping it peace in europe rather than the eu. The rise ofed to extremist parties across europe. There is a fundamental vacuum in a democratic terms. Is research at the stamford hotel. I dont know what to say to that. Researched heavily this weekend. Luke there will be a case study in how to get it right. Tom we will come back with luke johnson. Coming up, a conversation with eric nielsen. John taught jonathan this is Bloomberg Live from new york. Vonnie president obama plans to stay the course in syria. Last night he said he is not considering major changes in strategy. Russia has unexpectedly become a major player in the fighting. Republican president ial frontrunner donald trump says germany has gone too far when comes to taking and refugees. Angela merkel has agreed to take in about 800,000 this year. Trump criticized her on cbss face the nation. I love the safe zone, i do not love the people coming. I always thought merkel was a great leader. Vonnie trump still leads carson in the republican race. Iran says it has successfully tested a new long range missile. The missile can be guided until it hits its target. Opponents are likely to see this as a sign the country will see the Nuclear Agreement as a way. O build military power the House Committee investigating benghazi has shifted its focus to the email server while clinton was secretary of state. The republicans deny the investigation is motivated politically. Stanley fischer says the economy may be Strong Enough to withstand a rate increase by the end of the year. He said a rate hike timetable would be determined in part by job growth and international development. Those are your top headlines. Tom thank you. In new york at 2 00 a. M. , everybody is wondering. Puts outed jeffrey yu a short love note to wall street into his customers. Everybody goes, ive got to read this. We do this with dxy. Jonathan this is the pvf file. Good morning. The dollarok at dynamics and a story weve been talking about, weve been talking about emerging markets. Weve had a retracement fueled by the Commodity Markets. How much should i believe in that . Jeff clients do believe it. I just ran off a report as i was coming here. The best performers in g10, the best performers in em is the South African rand. Tom what are the underpinning that will decide whether it is a rebound in commodities prices a weakness in Foreign Exchange . Geoffrey three things. Tom we only have time for two. Geoffrey valuations. There. Ument is it brings us to the second issue. You need a demand side. The man said, is china going to grow at previous rates that justify valuations. Tom did you hear recalibration in lima, peru. Are you any wiser on when the demand side clicks in . Geoffrey i dont think anyone is wiser as to china. If anything, why are they still so optimistic on chinaz 6. 8 and guiding lower. This does not change the structural story. China needs to rebalance. Tom , we always talk about investors and we take a binary view of giant. Either stay away or dive in. You changed your review of china as the market gyrate in the last two months . Dijsselbloem luke no. Investors deploy capital and are talking about investments in five. , 10 or 20 years is. If they are influenced by the daily moves in Exchange Rates they cannot make longterm bets. , many otherse oil are saying Jonathan Goldman sachs was ng the same thing geoffrey we are in the go back in camp. That does not mean we are looking at a secular boom back towards the triple digit spirit we are looking at 80 a barrel on a secular basis. That requires a repricing. The pivot between dollar dynamics versus the commodity currency is a roulette wheel where you make all your money versus the big asian nation, like asian dxy. How does dollar play out in the ambiguity of a commodity bid . Geoffrey we have to bring up the fed. Perhaps the dollar index is it that indicator. That, they doee not do that in new york. Geoffrey when eurodollar was tanking, do not look at those cad, theat dollar ones that influence the u. S. Supply chain. If dollarchina goes up 10 , what is that due to u. S. Inflation . That will feature more. To turkey. To get do you have a quantified amount of deflation that will be imported into the United States . 3 , 2 10 of a percent, what is it . Geoffrey we look at what are the risks of the u. S. Missing inflation targets. 1. 5 , back to your target level, chances rise to that being hit. Speedou are better up to on the turkey shock, a horrific bombing. Jonathan a tragedy and what is front and center is the politics. Dollartri, that is so much jargon. This is the capital of the fx market,. Talk about turkey, and election in november and you wonder how the tragedy plays into that. Can you read the political tea leaves . Geoffrey hard to do. Local instability has been an issue. Does this affect financing . With all these questioned turkeys balance sheet, can it cover its effects denominated debt. Jonathan luke, when you make an investment, politics matter. Is that a place you would want to invest . Luke we do. We have 4 holiday resorts in and around bodrum. Stability in turkey is important to us and i hope the election is peaceful and that this terrorist outrage does not presage a series of attacks and more conflicts with the kurds and isil and so forth. Who knows who is behind the bombing. I hope it is not exacerbate problems. Tom we are going to continue this further with luke johnson and geoffrey yu. We have wonderful people on bloomberg surveillance this week, france in the quad joining this week. The laureate of the London School of economics will talk about british economics. And more importantly, lagardes new mediocre. From london and new york, this is bloomberg surveillance. Tom there was a marathon of some kind in london. Here is the breaksclusive, i did not run it. I walked along the river. A beautiful london. The weather is spectacular. Copper is a mover. Jonathan i sat down for the the week with the head hes questioning whether hedge funds are playing a dangerous game with copper. We are not trading on fundamentals. One good example is theres a lot of shorts in copper. Weve seen the pickup on shortselling copper. To changement decided the rule where people are no longer authorized to short sell. What we have experienced is a series of players that use er as if you want to look at prices, we are giving you guidelines for the price. There is something that does not stack up on the price curve. Jonathan weve had a rebound in the commodity market. In the enteredk a move, looking at the. 8 . 2011, 10,000, right down to 5000. People have to adjust to that. Tom ive seen this so many times. The stresses of leverage. Geoffrey it is double or quick triple it is double or china. Le leveraged in tom it is amazing how it is not the fever that i recall. Geoffrey looking at the stage of the cycle, the policy cycle, wheres the demand side coming from . Even if we push back from fed expectations, there is most likely not going to be more normalization. Jonathan i want to talk about proxies. When i talk to people, they tell me this is the proxy to short china. In the fx market, what is the llar . , is it the aussiedo geoffrey the australian dollar, some em currencies, the taiwan dollar. Tom is there a currency war . We toss the name around like it is nothing. Geoffrey no. It is normal economics and i bet if the boj does another round of stimulus, people are going to bring this up. Pboc are going to throw a fit that it is ultimately tom we had shinzo abe visit our headquarters a couple weeks ago. An abefriendly call by ubs to 127 on yen. Did we get enough jargon in there for you . Jonathan a lot of jargon this week. Tom a lot of jargon this week. That is our surveillance silence. John from jp morgan will join us thursday to continue our discussion on commodities and Foreign Exchange. Really looking forward to that. Eric nelson of unicredit later this week. Jonathan ferro and tom keene in london and vonnie quinn in new york. This is bloomberg surveillance. Jonathan this is bloomberg surveillance. I am Jonathan Ferro with tom keene in london. Is it morning or night . Tom when you are working bloomberg surveillance, it is always the morning. People are staggering home when i am going in. Quinn withonnie your business flash. Vonnie expecting a recordbreaking takeover today. Dell will announce it is acquiring davis Storage Company emc. Dell is in talks to raise at least 40 billion to play for the deal. Emc is a leader in digital storage. Dell has been increasing its server business. Hundreds of southwest Airline Flights delayed by a technology glitch. The problem forced the airline to manually process travelers. Southwest urged pastors to get the airport 2 hours in advance. The opening of pan brought in about 50 million over the weekend at north american theaters. It cost . 25 billion to make and market. That is your latest business flash. Telegraph,of the the duchess of cambridge. They took this photo from like 14 miles away. Jonathan what are you trying to say . In wales cost to australia rugby. Jonathan tom keene is on shaky ground in london. We talk about brexit, it is not worth the risk. We are back with luke johnson, who thinks it is time for a brexit. Youve written about animal spirits. I wondered what the brexit risk would do to that. Luke we have a growing economy, followingestment and unemployment. An exit from the eu is not going. O derail growth those who are in favor of renegotiation of the eu will point out the benefits. We will no longer have to be a net contributor in terms of cash every year. We will control our own borders and not be subject to red tape. I think the argument is in favor of a stronger britain. Have a framework in the u. S. , 4 topline gdp is ugly, 6 is normal. Luke they are still going to hold the 34 range. Tom is that euro sclerosis. Geoffrey it will be waged sclerosis and term of the output gap. If theres an exit, but it makes things worse, with the u. K. Economy be permanently brated . Jonathan i want an opinion on the fx market. Luke johnson made the call that sterling what strengthen. Whetherthe u. K. Exits, that is the beginning of the demise of europe. What does happen . Geoffrey immediately, sterling will weaken. Volatility will pick up. Ukse my peace with the current account deficit long ago. Given the linkages of people putting money into the u. K. To get access to europe, perhaps we have to revisit the current account deficit story. We saw this with the scotland issue. In the longer term, we shall see. Fx markets look at the short term. Jonathan a ubs analyst saying wake up. I do not have a date for the referendum. When do i start to care if im in the fx market . Geoffrey care now and as soon as we have a date you want to own options heading to that. Tom when i look at the idea of brexit, what does it mean for inequality of wealth in the u. K. Geoffrey if outside the eu, we are a more prosperous nation. Probably inequality will narrow. Jonathan tom the gains will not distribute into the plutocracy . Luke if anything, it would lead to a broad improvement in living standards. Ofont see why the benefits exit will be captured. Tom do you buy that . Geoff, for the people in the city, what does an exit mean . Build our shiny new office, what does it mean . Euffrey what is the eu says bonds can only be traded in the eu . What does that do to the Worlds Largest bond market. I just saweard that, on article that london has taken over for global capital. Geoffrey they said we would not be allowed to trade eurobonds. Tom what is the state of the city . As i start my week here, what is the vibrancy. What is the vibrancy of the city right now . Doing veryity is well. If you look at rentals, a reflection of demand the city is booming. Historic strength as a center of trade, language, rule of law, professional services tom by his International Money not going to come to the city . They are going to come to london. Jonathan International Money looking for the u. K. As a safe haven will come. There is significant International Money that uses london as a gateway to the rest of europe. That will be at risk. Tom why cant paris get its act together . ,eoffrey if there is a brexit its a want in a millennia opportunity for paris. Tom the reason you bring up paris is so we can do a week in paris. The argument about regulation, if you leave, you have to abide by the rules but you no longer get a seat around the table, do you buy that . Do not. If you look at how people do business outside the eu and continue to trade successfully, they are not suffering from some of the burdens and regulatory difficulties that the eu seems at its heart. The problem is that the culture eliteilosophy within the in strasburg and brussels is socialist minded. They are not profree market. Tom or they are capitalism embarrassed. Uke quite we embrace free markets more regularly. Theres a philosophical divide. Tom can they move to an anglosaxon model . Luke anything is possible. Even france is embracing enterprise and entrepreneurship. Otherwise theyre looking at a stagnant future. As Angela Merkel says, the eu represents 7 of the worlds, 25 of gdp but over 50 of welfare spending. That is unsustainable and the eu must reform it will be doomed to stagnancy. Tom we will do this in a couple months, i hope you can come back. Jonathan this is operation paris. Tom lets talk to francine. My iphone babbel on to learn all the languages. Jonathan hes getting jargon as well. Bloomberg surveillance continues on bloomberg television. This is bloomberg surveillance on bloomberg tv, on your phone and bloomberg. Com. Tom money for nothing. Dell paidy, michael 40 million to acquire emc. Ling continues, margin calls fate as commodities advance. Jonathan ferro bought gold at 900, it is 1163 an ounce. An era of negative Interest Rates. Good morning, mr. Draghi. Its bloomberg surveillance. Live from london. Im tom keene with Jonathan Ferro. Francine lacqua will be back tomorrow, traveling back from lima. Wonderful to be here on the markets. I see a churn. More data to get things going. Jonathan you disclosed my position in the gold market. The commodity market is the center of the rebound. Feeds to stronger em and fed across the Higher Energy markets and is driven by the minors. Tom equities, bonds, currencies and commodities. Through the week and right now desk,he news from our heres donna quint vonnie quinn. Vonnie president obama says hes not considering changes in syria despite russians role. He called russian involvement a desperation move by vladimir putin. Obama if you think running your economy into the ground and having to send troops in to prop up your only ally is leadership, then we have a different definition of leadership. Vonnie the u. S. Announced last week that the training of moderate Syrian Rebels will be stopped. The president says he does not think American Force will help resolve the crisis. Putin is defending russias attacks in syria. Putin discuss the attacks with saudi arabias defense minister. Saudi Officials Say they will be willing to let Bashar Alassad stay in power longer. A report from iran says that Washington Post reporter has been convicted. An has been convicted. The u. S. And press Rights Groups have criticized iran for secret toaian in turkeys investigation of suicide bombings that killed nearly 100 people is focusing on islamic state. There have been no claims of responsibility. The explosions happened saturday during a rally calling for peace between the government and kurdish rebels. Glencore is selling assets as part of its plan to cut debt by 10 billion. The commodity and trading firm will sell compromise in australia and chile. Down 55 this year. Back to you in london. Tom thank you. Lets get a data check. Quiet week last week after the jobs report. Futures were unchanged a bit ago and fractionally flat right now. Youredollar with a nice advance as dxy pulls back at 1. 1383 on eurodollar. I mentioned the negative twoyear german yellow, thats a headline as a benchmark of the challenges mr. Draghi and ca rney. Face gold, separate from the industrials. The bid continues. Jonathan something you and i need to discuss, the repositioning into the commodity market. T i do not see is this is higher yields in the german bond. Arket the five year yield is still negative. If we are going to repress the commodity market and the forecast of inflation, shouldnt we be repressing bonds . Tom i agree on the noncorrelation between you have said this many times what evidence did you see in the research over the weekend that this was a trade gone wrong . Everybody exits their shorts and the commodities bounce up. Was it more . Jonathan glencore versus goldman. Look at the fundamentals of the company, they are Cutting Supply and that is going to push prices higher. Goldman sachs has been out front on the commodity rout and is still calling for another rollover and oil. Theyve been right, will they be right again . Of citigroups talking about that as well. We wanted to get started with something that is cross economics it Lena Komileva is chief economist at g economics. She writes smart, dense it is like a twopage Long Research note that takes a month to read. Theres so much information. Good to see you. You wore black in mourning for lima. Did anything happen at the imf meetings . Lena it is actually blue. Did anything happen in peru to change the dialogue that you write about . Lena the comment point between the imf, the g30, and the Financial Stability report published last week, what we seeing is the structural flipside of lagardes new mediocre. In a sense that the cyclical implications of growth risks by this are backed reincarnation of the older global imbalances. What we had before was over saving in emerging markets led by china. Overconsumption and over leveraging of developed markets led by the u. S. Consumer. The last five years, weve seen emerging markets over leveraging. While developed markets are deleveraging and not supporting global growth. Weve changed the direction from the current account, the capital account from emerging markets to developed markets. If there is no instability, Central Banks can continue with confidence. Jonathan do you think that is a false sense of security. Should we still worry about Financial Insecurity . W im worried because of the correlations. Seven years ago we were watching the vix. Tight, yous are so think the Central Banks are not driving this. It is the market setting this correlation, which is a derivative of central bank liquidity. It is not creating a new normal. Tom what do you watch between Interest Rates and commodities . Indexit is the bloomberg that we need here. One note that as important as the dollarcommodity story. The relationship shows how financial the Commodity Markets has become. It used to be the current account story and it is now a capital account story. Jonathan we used to bring up analyze the markets, is there Something Else we should be looking at. . O me look at highyield is it in the junk bond space . Lena the junk bond space is important. Story,s a currency Global Financial economies , you haveinterrelated economists concerned about what theyre going to do. Is concerned that the yuan not coming in the right direction. Tom where should i go . We saw the violation and depreciation. Where is renminbi this morning . Screen is blue as well as black. 32, that is an appreciation. Lena looks like the Chinese Markets would like market. Tability this devaluation of august was a oneoff thing. The talk us the they talk ups of depreciation look like a pipe dream. This is going back on the necessary rebalancing that has to happen. You said or worried a lot. The world needs to wake up as a crisis looms. It is doom and gloom. In the 1920s you used to talk about the guy who shine your shoes. London cab the drivers that you talk to. Up andn i have to wake say everyone is bearish and that is the time to go along . Lena the ghost of the last crisis has become the shadow of the next crisis. What we have not learned globally this is the one thing i took a way from the weekend, we have not learned how to create Global Income without blowing a debt bubble. Englandlained to me how can beat uruguay in rugby. Jonathan the majority that play for uruguay are not professional. Guys that have every day jobs and play rugby on the weekend. Tom this is like religion o ver here. The duchess of cambridge was distraught. I am learning as much as i can. Lena i wish i was there. It was my first rugby match, i loved it. Tom this is a breaksclusive. Lena old south wales is playing for New South Wales, the new g uys were beating them. An amazing event, the emotion that comes into it, rock concerts are nothing compared to this. Tom Lena Komileva, did you think we would talk red the . Rugby . Tomorrow, christopher from the ondon school of economics the global economy. Jonathan ferro and tom keene with Lena Komileva on rugby, its bloomberg surveillance from london. And vonnie quinn in new york. Jonathan this is bloomberg surveillance, i am Jonathan Ferro with tom keene in london. Vonnie it has been called the latest technology merger. Bloomberg news reports dell will announce the acquisition of emc, dell trying to borrow 40 billion in financing. The deal would combine storage with servers. Ab inbevnd of considering whether to boost its offer. Beer makers west agree the beer makers must agree to a deal by wednesday. Glencore making moves to cut its 30 billion debt load by a third. The mining and trading firm plans to sell compromise in australia and chile. The slump in Commodity Prices is hurting glencore. Its shares have lost half their values this year. Back to you in london. Tom thank you. The deal of the day is michael dell with this idea of a private company acquiring emc. Is withg intelligence us. You followed this for a year. I know there is a back story. Tell me this. We like this deal for a host of reasons, given the troubles that large cap, particularly on the hardware side, is going through. We like this because of the transformation that emc needs to undergo. It is major surgery that is better done in private than in public markets. Tom with the major server a, fold in the cloud. Backlk about emc and we go to the Rolling Stones get off of my cloud. Anand what is happening is the way that corporate i. T. And public cloud makers are buying hardware is dramatically different now than it was five or 10 years ago. What that is doing is the way emc sells its product is in a withe hard Ware Software and a network fashion and that is how emc has made margins in its top line. The way facebook, google and amazon are buying hardware is just buying disk drives and connecting it in a nonnetwork fashion, which is dramatically reducing the price of the systems. Tois taking them directly the component makers rather than the system makers. Bypassing emc in the process. Tom emc up 9 this morning. Thethan from the equity to debt story, talk about how they are financing this deal. To the wider m a picture and we look at ab inbev. Does it speak to a scene, these guys are trying to frontload and lock in lower rates . Anand absolutely. The cost of capital is a big factor in the size of yields and potential return that it could bring about four holders. So the fact that the cost of capital is low and access to capital is likely easier now than it will be a year from now is definitely part of the story. Tom were you surprised by the announcement of the transaction . You are a veteran, were you surprised . Anand not really. Emc has been in play for a while now. Theyve been trying to shop. Was rumored to be and acquirer, cisco has been rumored. To think that this is happening. Dell is a little bit of a surprise but not the fact that emc is being acquired. Tom thank you so much. Anand with bloomberg. Ntelligence they are launching company by company analysis. Is a legend in securities research. We are thrilled to have someone. U do not hear from enough tom good morning. Fromberg surveillance london and new york. Jonathan ferro with me. Francine lacqua traveling back from peru. In morning must read, vonnie in new york. Vonnie a serious topic. You heard donald trump calling Angela Merkels migrant policy insane. A German Government spokesperson saying they have no comment. My morning must read is in financial times, germany wasting the benefits offered by refugees. The ears is no force is hitting the and removable the Irresistible Force of the refugees is hitting the immovable force of a high minimum wage. There is a serious point here. U is saying that the influx of migrants and refugees is going to put pressure on those just above the minimum wage and that is going to chuckle through the rest of the market in germany and have a negative impact. Jonathan the problem i have with this story is that we turn the refugees and asylumseekers into some kind of commodity. It is not about them looking from a silent from a wartorn country, it is not about them looking for asylum from a wartorn country. Do you feel that that is insensitive to the point of the crisis . Economichere is a big debate and this editorial lays out both sides. Munchau is coming down on the side that is going to be deflationary but there could be benefits if handled correctly in terms of fiscal policy. If germany puts the refugees to work in Public Infrastructure projects and programs, then there would be a much better they are left to their own devices in the private sector in these countries. Inathan i want to bring Lena Komileva. There are huge demographic problems. Graphic is the demo issue in germany . Lena the refugee crisis of today is tomorrows salvation. Europe has had a problem of aging and shrinking populations. Countries like norway that have never had a had an with savings have open immigration policy for a long time. If we take into account the fact that a large share of refugees 1935, europe and the world has a great history of migrating communities becoming a source of innovation, entrepreneurship and productivity. This is a positive for european growth. Forgive me, on the public spending side, the reason why we have high youth unemployment in europe is because Public Sector spending collapsed without any reform to support private sector demand. This is where the reform has to come. Of the latememories 1950s from the hungarian the refugees that came into the United States. That was a shadow of the scale now. To me, the entire debate, which i read about here this weekend, it is all about scale. Are we having a dialogue appropriate for the scale of the refugees and the economic migrants . Lena probably not. A general ignorance about the longterm structural effects of strong population growth and strong productivity growth when you have the entrepreneurial, young labor force. In the shortterm, it is increasing political pressure. In a way, that is probably not helping. At a time when fiscal deficits are still felt to be too high for the level of growth in europe. Discussed thee economics, the political fragmentation. The idea, as we sit from 30,000 feet, and saying theres a one size fits all approach. To take theroach is refugees from the camps. The germany approach is to say come to us. The approach has caused significant problems for germany themselves. Tom Jonathan Ferro and Lena Komileva will keep this discussion going. Throughout the week, we will speak on europe and the historic refugee issue. Him, davided to meet will join us tomorrow from deutsche bank. He is legendary in securities research. Really looking forward to that. A must watch. Bloomberg the quest from london and new york. Are going nowhere. They will go somewhere tomorrow. Tom good morning, everyone. Bloomberg surveillance from london and new york. In hong kong, good evening. Francine lacqua all with us tomorrow. Right now, from our first word desk, here is vonnie quinn. Wants toresident obama stay the course in syria. The president told 60 minutes hes not considering strategy changes even though russia is in the fight. The administration said the u. S. Will stop training moderate Syrian Rebels. Donald trump says he thinks germany is going to far to help refugees. Angela merkel plans to admit about 800,000 a to germany this year. The republican candidate says the plan could mean trouble. Not love a safe zone, i do like the people coming. Europe is going to have to handle this. They are going to have riots in germany. I always thought merkel was this great leader. What she has done in germany is insane. German government spokesman declined comment on that remark. A cbs poll shows trump is still leading the republican candidates. He is at 27 , six points ahead of ben carson. Says it is testfiring a longrange missile with success. Chief sayss defense the rocket can be precision guided to a target. The test could replicate the implementation of Irans Nuclear deal. Panel investigating the benghazi attacks is shifting its focus. The New York Times reports the committee will look into Hillary Clintons use of a private email server as secretary of state. Republicans denied the investigation is politically motivated. These vicechairman of the Federal Reserve says the u. S. Economy could be Strong Enough rate increase by years end. Stanley fischer said the timing will be determined in part by job growth in the u. S. And by international development. Those are the latest headlines. Back to you. Tom thank you. What a smart book. Martin sits across the thames writing for financial times. Europes orphan is the new book. We said we need to do this book in london. Lena komileva is with us from g economics. I want to go to the end of your buck. It is the theme Jonathan Ferro has had. I think of the great comedy show, little britain. Little you think about england . Where could the potential be five years from now . Martin there a huge debate as Everybody Knows about writtens relationship with the eu, with europe. There will be a referendum. Tom when is it going to be . Martin were not sure. By 2017, looks like they will want to have it a bit early. When we had the election, the day after, people thought it would be brought forward. We do not even know what is on the agenda. Martin nor does the rest of europe. Jonathan until we get that, how can he set a date . Martin that is right. Theres a very deep issue, how do you, as british Prime Minister, deal with the European Union when most people are trying to integrate more ma rather than less. There is a big question mark hanging over britains role in europe. It is going to face more and more of a whole. Tom what do you mean . Martin there a very widely shared conception that the euro was a structural mistake. Everything that has happened is because it was badly designed. We think we have to fix it so we need to force people to integrate or we need the germans to pay more money to the greeks and we need the greeks to accept berlin. I think what has gone wrong in the eurozone is policy mistakes. They could not restructure the debts early. Do not blame the euro for that. Footnote 16. , jonathan he read this, clearly. Lse will be on the show. He has written about the courage and it the courage needed to clear the debt. Jonathan the debt mattered when the ecb was doing qe, why does it matter now . High, when debt is too private as well as public, when there is too much debt around so people do not think it will all be paid back, you have the uncertainty of who is going to take the loss. Praise politics is about determining where the losses going to fall. As long as you postponed the choice atathan the spanish 10 year one point 8 , no one is concerned about spanish debt. I can bring up the italian 10 year with a yield of 1. 675 . No one is concerned about me thirdbiggest that load. Debt load. Why is that an issue . Martin if you think the ecb will forever pump money in tom will they . Qe has beennk so, good for one source of leveraging. It has done nothing to do with the growth gap, the unemployment and productivity gap. These are things that cannot be fixed in one term. The impact of inflation jonathan the problem with the debt load is ideally you want fiscal policy to run countercyclically. The debt load in europe has been an excuse for austerity. Dijsselbloem qe, i i would like more would like negative Interest Rates. A lot of Central Banks think we cannot do that. There is too little demand on the fiscal and. There was the wrong conclusion drawn from debt saying we need to stop borrowing. What they should have done to cut the stock, restructure the debt. Tom europes orphan it almost defines turkey. Where will turkey be in five years . Martin i and more pessimistic on turkey than i would have been three or five years ago. Tom why . Martin politically there has been a choice to turn away from europe. That ismuch partly turkeys fault. Europe did not respond to that very well. Turkey turned away. A wonderful book. It is a surprise and a really thoughtful book on some of the dynamics. Us as well. A with coming up, a chart on india. It is our single best chart, coming up next on the world of growth. The search for this i bloomberg surveillance. Tom good morning, everyone. Fromberg surveillance london and new york. Will be hereua tomorrow. We travel to our single best chart. Swiss,rt was swiss, swiss. This is the emerging markets shift personified in india. Theirs is not part of the currency war. Isn talk what i think remarkable, 50 oil bailed out, never mind hurt an em, if it bailed out an em, it was india. Lena yes. Does have the advantage of a differently structured economy. Which means it can accommodate less painfully global trade shocks, in a sense because of the demand story. This that thisn is not a currency war as a liquidity glut. India is not immune to the growth cycle, to the impact of the stronger dollar on Commodity Prices. It is not immune to the fact that much of the world is heading for recession this year. The other 60 is struggling with demand. Tom im going to start tearing up. Wheres a semi log chart sloped matters. It is remarkable to see the ofwth dynamic over 20 years currency depreciation. Do you assume that we are going to have a depreciated currency matrix five and 10 years from now against the dollar . , ia just by definition think so. What is quite worrying is that it is a secular feedback loop of risk in the global market. The dollar, it is hard to imagine a strong dollar world. The dollar is in the middle of the global deflationary. Through the renminbis extra to the dollar through the fixture to the dollar, a stronger dollar means a stronger chinese currency. Spending inonger industrial sectors, that has a knock on on commodities. Im worried about that world. Martin is writing the china gloom on a daily basis. Orphan, europes the china axis is something we ignore all the time. Tell us about the eurochina dynamic. Story over thena last 10 or 15 years has played out differently in different european countries. And a lot of people credit germanys domestic reforms with how well they have done. Tom do you . Martin chinas a big part of the story. Germany happens to be good at producing the sort of thing that china needs or has needed at this stage of Development Capital goods come machine tools. Tom conference be part of that . Ontin france is good infrastructure goods, trains and nuclear reactors. Inc. About printing. If china does not slow down or collapse, eventually it will be a more developed economy and it will have a greater need for the sophisticated things that the eu produces that the u. K. Produces. In america look at a prism of u. S. China, there is a world we are ignoring. Tom it is chinagermany, chinau. K. As they search for high added value goods, the point is critical that a Service Sector economy like the one that will leverage the china story. Tom did you like how i used a semi log chart . Vonnie quinn knows how to use those. What do we have. Starting in north korea. In the country this weekend, a massive military parade took place in honor of the 70th anniversary of the ruling workers party. Kim jongun watched the parade and gave a rare televised speech. Told the crowds, our party can state that our revolutionary armament can deal with any kind u. S. Imperialists ask for and we are fully ready to defend the countrys blue skies and the people. G of the not quite a declaration of war but fighting words. Number two, baseballs most watched moment, chase utley of colliding with ruben tejada, breaking his leg. Umpires deemed the play legal during the game. Major League Baseball has suspended chase utley for games three and four. Tom totally right. Outrageous. Outraged. This is not rugby, this is baseball. Vonnie i want to show you the back page of the new york post. Matt harvey is going to come to the rescue. He says out for he says as far as sticking up for your teammates tom this is normal baseball. The mets pitchers are going to go inside. My camera is over here. This is the dorchester camera. It is going to be something to. Ee Jonathan Ferro demanded this. Innie talking about pool a rugby. Against wales. Duchess kate and Prince William made an appearance and shield on and cheered wales. Pool z is where its at. Irelands going to win. Jonathan Lena Komileva was there and took that photo. 80,000 people just on the streets, what was it like in the stadium . Lena it was incredible. , old southaraderie wales and New South Wales shouting. Jonathan it is a sport for thugs played by gentlemen. Afterwards, they shake hands. Best top photos we have ever done. With the horrific baseball industry and the spirit of rugby. Tomorrow, david will join us. Foundational in the development of securities and economic research. We are thrilled to have him tomorrow in london. Francine lacqua all with me tomorrow. Vonnie quinn in new york. This is bloomberg surveillance, good morning. Tom bloomberg surveillance from london and new york. Good evening in hong kong. Jonathan ferro with us today. A forex report. Dollaryen is the global litmus 1. 20. Turning to a weaker yen call out of ubs to 1. 27 127. Today. Weakness eurosterling, Jonathan Ferro is going to figure out what it means. Sterling as well. I cannot afford to go to herod this trip. The first word desk, vonnie quinn. Vonnie details could emerge about the Biggest Technology merger ever. Will acquire the data storage provider emc. Dell is looking for 40 billion in financing. Combined storage with servers. Southwest airlines is urging passengers arrive two hours before their flights today because of a computer glitch. The problem delayed hundreds of flights yesterday. The carrier is advising flyers to print their boarding passes before coming to airports. The opening of the film pan was far from magical, the spinoff brought in about 15 million over the weekend but cost . 25 billion to make and market. That is the latest business flash, back to you. Tom we look at International Economics and international relations. We saw that with Lena Komileva of g plus economics. Martin, author of europes orphan, is with us. This is an extremely pointed and book about a new mediocre. Jonathan the author is in our company. Tom we get about 70 bucks a day and 300 in the week. Most of them end up, what do you call a trash basket . The bin. Martin there are so many books, it might only justification to adding want to the pile is that i tried to say Something Else. I said actually the euro remains a good idea. If it is not broken, dont fix it. Tom let me take something you said and bring it to lena, the polarized politics. Did he not show up to shake hands with the queen . Jonathan theres so much noise around your guy at the moment. Tom is it noise or a statement on polarization . Whether it is mr. Trump going after mrs. Merkel, there is polarization. Lena absolutely. Theres a sense that we probably political riskst in a generation. That is negative at a time when the Monetary Union really does in termster momentum of support for capital markets. A lot of liquidity the ecb is generating is being exported abroad. It is not helping when youve got underemployment and demand at home. Jonathan take it to the politics. When people talk about corbyn, they tried to paint the sky as a joke. Do we underestimate circumstance . Lets say, we are near 2020 and we have a recession. Hes up against george osborne. Do we underestimate the circumstances when we look to the next elections . Martin it goes deeper than that. Yes, that is polarization but it is not the sort between left and right. What is happening is that center and centerright have sung from the same time sheet the same hymn sheet. Thepolarization is between extremes on one side or the other. You see it in the u. S. And you see it in britain, corbyn has been on the french for 30 years and managed to win 60 . Tom martin works for this rag, top european bankers warn the u. S. Threat to their future. The idea that jamie dimon is so big, is there a fear that european banks will not be able chinas giantss or north american banks . Vonnie it is. It goes to the problem that there are imbalances reading political fragmentation. Problems of europe sound one way in german and another way in greek. It is all about growth on one side or lack of it on the other side. You have the political devolution, the forces sort of pulling apart. That is not good for european banks at a time when youve got regulatory repression and too much monetary liquidity. Can you come back . Your dress is still black. Thank you so much, Lena Komileva. Jamesomberg go next, chambers is still short the world. Bloomberg television and radio, stay with us. It is the biggest tech deal ever. Welcome to bloomberg go. You are joining us in new york city. Im stephanie ruhle. Im david westin. Here with us is jim chanos. He is a shrewd skeptic and will share his skepticism. This guy knew enron was coming. He has warned us all about china. Matt miller, you have something for us