Transcripts For BLOOMBERG Bloomberg Surveillance 20151021

This is bloomberg surveillance. I am Jonathan Ferro in london. Attention, brazil and japan. Roubini was right. Everybody laughed when professor 5, as youid qe 3, 4, know from your conversation with the bank of england yesterday, more qe seems to be the order at the end of the year. Jonathan more from tom in a moment. Vonnie quinn standing by with news. U. S. And russia have signed a deal to avoid aerial accidents over syria. Aircraftment regulates and drone flights. The Usled Coalition has been bombing targets in syria for over a year. Russia launched airstrikes three weeks ago. Paul ryan says hes willing to run for speaker of the house but conservative republicans are balking at some of his demands. Ryan, chairman of the ways and means committee, spoke to reporters. Everis is not a job i have wanted. Im at the job i have always wanted. This is a dire moment not just for congress but for our country. I think our country is in need of leadership. Vonnie one of ryans demands, he wants aouchy procedural change to the procedure used to remove john boehner. Antonin scalia says he would not the deathed to see penalty struck down. He was speaking at the university of minnesota. Deal in the Semiconductor Industry. Kla 10 car valued at 24 . Hugs and tears for curry and loved ones after decades apart. Hundreds of couples and families reuniting at a north korean resort. First timeg for the since they were divided them 60 years ago. The meetings are organized by the north but infrequently. David its to certainly a global feel the news. A data check, very quiet out there. Futures churn up three. Dow closing 17,217. Nymexcrude a little soft. 59, a 44 print would be a big deal. Vix says it all as equity markets do better. We saw that in japan with a prospect of qe to be more beneficial with the vix 15. 75. Theclosed not far from 18,000 level. Conversation. Ur i did not realize how Credit Suisse has under performed versus j. P. Morgan. A lot of people are saying Credit Suisse is late to party with equity raising and the change of plans. At least theyre getting to it now. Tom one of the things were hearing is the cash call, the way to control leverage is to simply have more cash. That gets us started with our important guest in london. Jonathan and the markets the one thing i look at is doll aryen. Asset strategist at Morgan Stanley. You get some weight data out of japan, export you get some weight data out of japan, export numbers lowest in years. Does Morgan Stanley get excited . Andrew we are cautious on boj action. We do not think they will act because core inflation and japan is starting to pick up. We dont think it is bad enough to change their attack. If they simply by more government bonds, will the market see that as credible . We think the most likely policy action and japan is on the physical side. Potentially changing the Corporate Tax rate. That is the catalyst we would look for in japan. Jonathan that i look to the markets and wonder what it is in. I wonder whether the market is going to get caught wrongfooted. What is your view in the short term for japanese assets . Andrew our view on the yen is different from investors that we speak to appear to wait believe the yen will remain at current levels. Many investors disagree and believe that japan wants to weaken the currency. We believe that importers and exporters and japan are happy. It is already the cheapest currency in the world on a purchasing power parity basis and trading at extreme levels. Our view on Japan Equities is that it is going to be a market more likely saw in the first half of this year driven by micro factors more than a market that is a currency trade. Tom i love the idea of micro versus macro. Decisiontcome of the that all markets and particularly equity markets just churn into the end of the year . Andrew our view is that we think the equity markets can continue to move higher. I do not think they will just tread water. Our view is based on a couple factors. The market will become increasingly comfortable that data and china is stabilizing. The developed market is seeing resilience based on a strong consumer. What were seeing in oil and the dollar is very important. These are measures that have had extreme moves on a yearoveryear basis. If they can be a little bit more stable, we think some of the market signals could be a little better. An london, ias survived going to a pub with Jonathan Ferro. I did not understand the culture. We discussed which way oil breaks. What does the Morgan Stanley, . Can we visit under 40 a barrel west takes it west texas intermediate . Andrew we think it is more likely that Oil Moves Higher profit and breaks lower. The demand side of oil remains very strong. I think that is one of the more surprising pieces of data highlighted by Morgan Stanleys commodity team. If you look at oil demand out of china, india, korea and the u. S. , demand has been running at high levels. The demand side is already there. On the supply side we will see cutbacks or squaring of production from producers given the level of oil. Likelye is it is more that Oil Breaks Higher as the market starts to think oversupply might not be with us by the middle of next year and the markets have to move before that. Jonathan critical to the markets as the price of oil. We go towards the end of the year and the consensus view is ecb. Qe from the you are saying oil goes higher. What does that mean for the consensus view that we get more qe from the ecb . Andrew i think what we seeing in oil is the simplest of math. It is down a significant amount yearoveryear, almost 50 . That drags down the headline inflation number. In november it does comps look different. The jog on inflation becomes less. It is easy to expect centralbank easing when headline cpi is zero. If oil stays stable, the number should move up. Does the real economy mps, monetary thinking . Gdp, does thatr get in the way of the discussion on the lm curve . It certainly could. I think the challenge the markets have to think about into next year is where is potential growth. If potential growth is very low, even moderate levels of growth, the top of growth we are seeing, will produce pressure and force Central Banks to tie in even if it feels like that is too early. If potential growth is better and there is more space for hold off. That is still an unresolved debate. In our view as we look over the you will seehs very accommodated centralbank policy and a lot of em countries continuing to cut rates as the fed moves towards an exit. Tom andrew will join us on a single digit world coming up later in the hour. Every edition of bloomberg surveillance is special. Another special edition. A conversation with the new onel prize winner inequality. We dive in to the wonderful new book on Henry Kissinger with Neil Ferguson. Talking toward to Neil Ferguson. We will talk about dr. Kissingers oped in the wall street journal this week on syria. 11 00 a. M. In new york. In london, 4 00 p. M. Late in hong kong, stay up for Neil Ferguson and angus deaton. From new york and london, it is bloomberg surveillance. tom we welcome you worldwide. Bloomberg surveillance, a lovely day in new york after a frigid weekend. Jonathan ferro in london. Lets get to a business flash. Vonnie shares of ferrari begin trading on the New York Stock Exchange under the Ticker Symbol race. Raised 900 million in its ipo, pricing at the top end of the range. Majority shareholder field chrysler is selling a 9 stake. A federal prosecutor in new york is investigating the daily Fantasy Sports business. The wall street journal says prete behar prit bahara wants to know whether Companies Like draftkings violate federal law. A shift for credit squeeze a shift for credit squeeze, Credit Suisse will increase its focus on switzerland and Wealth Management in asia. The Security Unit will be scaledback. Credit squeeze plans and ipl of its Swiss Banking unit by the end of 2017 Credit Suisse its swisspo of banking unit by the end of 2017. Francine lacqua spoke with ceo tidjane thiam. Francine and a lot of things ahead of the strategy were leaked. We know the amount is 6 billion. We knew they would cut costs, 3. 5 billion. He has refocused on the asian wealthy clients. To grill him on was confident that 6 billion in Capital Raising was enough to be a substantial safety cushion. on way to take that is to do what we did last week is to take a number of investors and try to do a nonpreemptive crunch. That has been successful because we have 1. 3 billion dollars of Firm Commitments signed from a bunch of very good names. Francine 6 billion in Capital Raising is a lot. They had some pretty poor earnings from the investment bank. He did say he would cut into the unit. Jonathan good morning, it is jonathan in london. There were not surprises in terms of strategy. For there was a surprise was the performance of underlying earnings. And then comments about switzerland. I do not think people expected swiss unit and for him to comment so much on the Untapped Potential of the country. Francine i asked is this really a surprise . He said it is one of the only things that did not get leaked. Ipo,he talked about the the swiss bank, it is an ipo for will unlocks it value. I dont know if it will dramatically change. Hes trying to think of everything. Tidjane thiam we need to do more. Creating a swiss universal bank. We are number one in equity for 20 years in switzerland. We are number one in ultrahigh net worth with 50 market share. In business it is always easier to do more where you are strong when you want to grow. The notion that we need to put more capital in switzerland is vital. Francine when you look at the share price, it is down. Theres massive Capital Raising. At the same time there are questions about how they will grow asia and not enough about the unwinding of the investment bank. Fromwhat is the pressure the board . The stock underperformed. It is a bank of america equivalent without all the governance battles. What is the mandate from the board to get the stock price going . It is make those profits. This is why the ceo was chosen. If you look at his predecessor, investors put pressure on him because he did not do enough for the investment bank. , they speak to analysts say the strategy has to do with the investment bank. This is a bank that has been laid at implementing changes. Wealth management three years ago and that is why they are being published in terms punished in terms of share price. Tom francia makua, we may see it in new york and asia. Lacqua will continue with us from zurich. Rick will be with us in the next hour. A conversation on company news and technology, particularly yahoo . Heitrific our with rick zmann and Scott Galloway from New York University. This is bloomberg surveillance. Jonathan good morning, this is bloomberg surveillance. Jonathan ferro joining you from london. I will cheer you up with your morning mustread. Vonnie i took one from project syndicate. Russia and syria. Asking what happened to glasnost . Saying russian liberalism contributed to its own demise, the west failed to put money behind economic reforms. Russiansputin allows to dream of greatness without getting them into serious trouble. That the liberalism of era is there under the surface but will take time to rise again. I cannotjonathan question professor si delsky, hes a professor at my old school. Is this on your radar . Itrew it is notable that it has not come up more. The market has a limited Attention Span and a limited ability to focus. Geopolitics has been a little bit too hard to read. What you do not see is market of riskin much premium in energy prices. Investors have not focused on this. Anathan are we heading to place where i wake up one morning and the market wakes up to it . What is interesting as it relates to oil and energy prices, where the market is obsessed with the idea that we are awash with oil and there is too much oil floating around, our energy team believes those estimates are probably too high. Might be closer to 700,000 barrels a day. It starts to look like less of a cushion. I think that is where the market focus could change. Francine tom, you have an interview later on with ferguson, who wrote the book on kissinger. Political liberalism can disappear. The op edoes to on syria, do you detect in the u. S. A strategy on the middle east . Complicated is a issue. The u. S. And you k have been dealing with the fallout from moving potentially too quickly into the middle east. Countrieshink in both theres a level of skepticism. Think that is read by some as a lack of strategy. If i look at the political debate it is more driven by prior experience. Tom to the point of coverage zakaria, of fareed maybe it is a postamerican world. I speak with angus deaton on his nobel prize and Neil Ferguson will join us on his book on kissinger. 11 00 a. M. I just had a horrible nightmare. My companys entire network went down, and i was home in bed, unaware. But that would never happen. Comcast business monitors my Companys Network 24 hours a day and calls and emails me if something, like this scary storm, takes it offline. So i can rest easy. What. You dont have a desk bed . Dont be left in the dark. Get proactive alerts 24 7. Comcast business. Built for business. Tom it is a local issue and it has been too frequent. A Police Officer shot dead overnight. We need to inform our new york audience that the fdr up north, 96th to 125th is shut down as the Police Department continues its investigation. A Police Officer shot dead in new york, i believe it is the fourth next year. A sad statistic. We say good morning to all of you and good morning worldwide. On economics,s finance and investment heres a vonnie quinn. Vonnie the u. S. And russia have signed a deal to minimize risk of incidents in syrian airspace. Both the u. S. Coalition and russia are carrying out bombing raids in syria. The deal covers only technical issues, there is no cooperation on targets. Syrianow, the president Bashar Alassad met with Vladimir Putin. Assads first known foreign trip since the war broke out in 2011. Said without Russian Military help, terrorists would have taken control of more territory. The year in union is cracking down on taxes. Starbucks and fear chrysler must pay back taxes. The eu rules they were given illegal tax deals by the netherlands and luxembourg. Paul ryan says he will run for speaker of the house, only if republicans unify and agree to other demands. Conservatives who forced john boehner from the job might balk at what ryan wants, hes seeking a change to the procedure they used to remove john boehner as speaker. The bank of englands in mccafferty says the next move for Interest Rates is likely to be up. He told bloomberg tv that there is tightening and uncertainty. Be an guidance has to expectation and not a promise on the basis that the economy y that wen a wa cannot foresee and we are having to look at the data month by month and quarter by quarter to judge what is the appropriate moment to change Interest Rates. Vonnie mccafferty is the only boe rate setter to support it at the last three meetings. Very quickly on the bank of england. Into next year, what is that in the u. K. Right now . Jonathan that is the fascinating thing. That is the lone dissenter that wants a rate hike now. Governor carney says it comes into sharper relief at the end of the year. The market does not expect a rate hike from the u. K. At the cash until the end of 2016. That is a huge disconnect. Tom extraordinary. This is going to be a lot of fun. Business schools of america study not yahoo , not study a Semiconductor Industry, they will discover what to do about brands in one year, five years or 10 years. That is playing out right now with ferrari. We are fortunate to have tommaso in our studio. I want to go to the corner of 57th street and 5th avenue where others have tried to manage becoming bigger and exclusive. How is ferrari not going to destroy the brand . There is a plan to boost sales by 25 in the next five years. That is just because there is a long waiting list. For Sergio Marchionne, that is a way to boost revenue tom are they going to bring the price of the car down so vonnie can afford one. Tommaso no. From at least 200,000. Tom i can get in a ferrari for 242,000. Why dont i see more in the streets . Tommaso they want to keep the exclusivity. Vonnie on the streets of manhattan, they would stall out. Iposs environment where are being delayed, why do we see ferrari have so much success, it is priced at the high end of the range . Tommaso every investor wants a piece of ferrari and that is what Sergio Marchionne knew. Ipo wentri straightaway to the highest price and the price range. We reported last week that they had, the ipo was multiple times oversubscribed. Vonnie why only 10 . Mmaso they are going to, the family will take the biggest percentage after the spinoff. Jonathan i wonder if vw has one eye on this and looks at ducati and wonders if they can do the same thing. Is considering what to do with its 12 brands. , there was so much expectation on the market. Sergio marchionne waited years before going public and managed to get what he wanted, ferrari as a luxury good and not a carmaker. It is not easy to replicate with other brands. Jonathan this is going to trade like a luxury goods maker. Rading at 1213 times earnings as Bloomberg Intelligence points out, that is the same as prada, ferragamo. Andrew, do i forget its an automaker and think it makes handbags . Andrew its business seems more like luxury brand you mentioned. I think the Auto Industry has a a cyclicaly of being industry. Even Luxury Brands have proven to be cyclical overlong periods of time. We forget that given that em strength has made them look more robust. I think you cannot get away from the fact that even if you are a sellingbrand, youre an item that is not essential that people buy when they feel confident and good about their situation. Jonathan whenever there is an ipo, we want the big story. What does this mean for the market . Is there a story or is this just a ferrari story . Andrew it is dangerous to read too much into things. Where this can be drawn out. Ontalked last time i was this program about how you are seeing businesses go from the everything under one roof model to specialize and focus on businesses and let investors value those. This seems like a situation where there is a desire to let the market value of fiat and ferrari, im assuming the market would see greater value from some of the partners. With almost 900 million that are going to be raised, plus an overallotment to shareholders, a total of 4 billion will be raised. What will Sergio Marchionne do . He will not put it all into formula one . Tommaso the real winner is to chrysler. Sergio marchionne can concentrate on the next deal. Hes looking for a big deal. Gm is his target. We are going to ask him if he will move again on mary barra. Vonnie that is a no go . Tommaso we will see. Marchionne in ten years revamped fear chrysler, he got the ferrari ipo. Hes a man who wants to do a deal. Vonnie tommaso at heart will beat at the new york stock Tommaso Ebhardt will be at the New York Stock Exchange went ferrari starts to trade. Tom coming up later, american capitalism. Possibly we get into the state o f italian football. A nationalws its disgrace bloomberg surveillance from london and new york, good morning. Jonathan welcome back to bloomberg surveillance. Jonathan ferro in london. Tom keene in new york. 50 crude, the saudis risk draining Financial Assets in five years, the headline from an imf report. Massoud ahmad joins us from thei, imf director for middle east and central asia. How serious is this . Prices are low and will remain low for the next couple years. All the Oil Exporting Countries in the region will adjust Spending Plans for it. The fact that they are running a budget deficit this year is sensible and normal, that is what you would expect. Over the coming years, those numbers have to go down. Jonathan you have raised the alarm, tell me what should they do . Masood they need to act on two fronts, they need to find ways and which they can bear back their Spending Plans. Those are not easy options. It means pushing back Capital Projects or looking at very low energy prices, which are still below oil prices. At the otherooking ways in which they spend money on the sides of the public wage bill. The other side they can act on his try to look at ways to raise money outside the energy sector. Thats probably the most promising line of action, moving forward and implementing some kind of a low rate value added tax across the countrys. Jonathan saudi arabia is going to generate the headlines but there are a number of gulf countries mentioned. I wonder which one is going to fill the most pain . Masood i think saudi arabia, havein and oman probably the more longlasting issues they need to address and that is why they have to start acting on it. The other countries like qatar e running a surplus even today at below oil prices. And the uae is somewhere in the middle. A little bit of a deficit this year, 5 , they will run a deficit for another 2 years but on the current plan they come back to surplus in 3 years. Ahmed, managing director at the imf for the middle east. Andrew, brent crude at 48 a barrel. Are we near capitulation to the saudi arabia and strategy . Andrew difficult to say. The one thing we can say with greater confidence is this does not look like a stable equilibrium. Theres a debate in markets, is the new price going to be 40 50 or higher . In our view, it is going to be higher. Maybe that does not happen for another 18 months but if we look at the u. S. And the middle east and a number of oilproducing places, the current status quo does not seem like a status quo that can persist over a long period of time. Jonathan the question for the Saudi Arabians is whether they can continue the strategy and what it means elsewhere. The saudis are in pain, he mentioned gulf countries, what about south americans . The pain more acute. Andrew there is a lot of pain elsewhere one thing that has helped mitigate that is the weakness in the currencies of many oilproducing countries like russia, colombia. They are still earning hard dollars from their oil exports. Are cheapersalaries to pay because they are in a weaker currency and that has helped offset some factors. Thats not a sustainable solution even though it mitigates nearterm pain. Tom do you have indication of longterm planning within the middle east . I dont see it. No, i dont think there is it i think it is safe to say been effective in maintaining its cartel status and driving the oil price to the extent we would like to. If we look at longterm demand trends, which continue to be at what we look think the marginal cost of production is in the u. S. And other types of markets where you expand production to balance the expect thoseuld prices to go higher, even if coordination among the opec producers is still somewhat suboptimal. Tom what is the Morgan Stanley call on u. S. Hydrocarbon producers, both upstream and downstream . What is adam parker saying today . Andrew from a portfolio perspective in u. S. Equities, we have u. S. Energy at an equal weight. We had it at overweight earlier this year and recently cut that back on a few it might take longer for oil prices to rally. About thiswe think longterm, this is a challenge investors always have, if we could close our eyes and own a sector for 18 months, it is a sector we feel confident would be higher given valuations and our current forecast. From Morgan Stanley in london with Jonathan Ferro. At 11 00 a. M. , the recent Nobel Prize Winner angus deaton of princeton will join sp from harvard, Neil Ferguson on kissenger. Whether you love or detest kissinger, Neil Ferguson is a must listen. 11 00 a. M. This morning. Tom good morning, bloomberg surveillance. New york city on an october morning. What we hope will be a productive wednesday, october 21. Quinnash, . Vonnie vonnie lan research has agreed to buy kla tencor. Both Companies Make machinery used in chip production. The industry has been consulting because of slowing demand. Uber is almost as big in china as it is in the u. S. Ceo Travis Kalanick says he plans to spend 1 billion in expansion. A has lost its consumeration from reports. Still, 97 of tesla owners say they would buy the car again. Tom i was surprised by the analysis. It was pretty scathing. Consumer reports so unbiased. They spend money on the products. Have aither vonnie or i drivers license. Vonnie is thinking of getting a ferrari. Andrew is in london with Jonathan Ferro. Andrew has to talk about the reality, a singledigit world. I just want 20 a year. Then the new 20 was 12 . Then it was 9 . Now its not funny, it is a lower number. Whats our actuarial assumption . Andrew you can approach this in a number of ways. The caveat is how we think about longterm returns, the sustainable and out the market can deliver, the has to be based on valuation. Valuations take time. Valuations are great predictors longterm and often unhelpful short term. If we look at the s p 500, we think it is a market that over the next 10 years will deliver euro five percent total return. That is lower than what investors expect. That is still about average relative to government bonds and looking more normal relative to inflation but it is a lower return a world that we have to adjust to over the longer horizon. To it, will adjust be adjust to it with glide paths or are you worried about exhaustion us are you worried about exogenous conditions that could make things more volatile . Andrew market history is it is merely a rarely a glidepath. Even if 5 is the trend over the next 10 years, the next 1218 months could run above that. As investors become more confident, Monetary Policy is still more accommodative. Our expectation would be that you jump around the path. Word of the old investing, clients wanted 20 . Clients still come along and what 20 . Bill gross makes headlines as he wants to be in burgers and bonds. Do you have to reconsider Asset Allocation off the back of that . Andrew it is about trying to be realistic off of returns paid as much as we would like 20 , in most environments it was not possible. Even if you could get 20 in 1982, inflation was running at 6 or 8 . That same 20 was not worth what it might have seemed. We are focusing on Asset Classes we think can deliver good returns relative to their volatility and inflation. I think two things that stand out are in the credit market in the u. S. If you look at the u. S. Highyield market it is turning out valuations similar to november 2012. That is different from where the equity market is. If you look at the elongated part of the Corporate Bond markets, 30 year Corporate Bonds are yelling around 5 . Are yielding around 5 . Jonathan you hit the nail on the head. This is not just about singledigit returns, this is about consequences of financial repression. It does not just push us into other Asset Classes, it pushes us to make risky decisions we would not have made 10 years ago. What are the consequences . Markets,hen we look at we have to think carefully about how much do we value liquidity . How much are we stretching . How much do we value volatility . Despite the german rates being where they are, you can take a step back and look at the European Equity market and say its valuations versus its own history are more average than extreme. I do not think youve seen an unusual rageful valuations and equities given what has been happening in fixed income. I think there are other areas that look more egregious. Tom what an industry conversation on the broader markets. We are going to go narrow in the next market. In the next hour. How bloombergat intelligence was out front on the challenges Marissa Mayer has. What are your thoughts on yahoo from london . Jonathan weve all heard the alibaba story. If i ask andrew does he use yahoo , hes going to say no. Tom that is where we are. Jonathan ferro and i look at yahoo . Rick heitzmann and Scott Galloway will join us. This morning at 11 00 a. M. , my conversation with angus deaton, the new new low prize laureate. And moving on to the book kissinger. Stay with us for another hour of bloomberg surveillance. Tom honeymoon was over months ago. This morning the marriage is on the rocks. Yahoo stumbles. Marissa mayer must reset. She must realign. The cash call is 6. 5 billion. Francine lacqua speaks with john tee up of Credit Suisse. Ryan demands a united gop. This is bloomberg surveillance , live from our World Headquarters in new york. It is wednesday, october 21. Im tom keene from london. Lacqua this is really about the huge cash call we see at Credit Suisse. Jon isnt it remarkable how far behind the european Banking System is in terms of getting it together and responding to the legacy of the financial crisis. I spoke to andrew sheets in the break. He said about three or four years behind u. S. Banks. Tom Credit Suisse, about 46,000 235,000, topmorgan, give you scope and scale. We need to get to our first word news from the first word desk. Here is vonnie quinn. Vonnie syrias president ventures out of the country for the First Time Since the civil war started four years ago. Bashar alassad met with Vladimir Putin in moscow. He terms as terrorists would have taken more territory if it were not for russia. The u. S. And russia are agreeing on a plan to prevent aerial accidents. The Usled Coalition started sites a year ago. Russia started three weeks ago. Paul ryan is willing to be House Speaker on his terms. Ryan this is not a job i have ever wanted. I came to the conclusion that this is a very dire moment not just for congress, not for the republican party, but for our country. I think our country is in desperate need of leadership. Vonnie at least one house caucus sees him as not conservative enough. Hewants to know by friday if has their support. As Antonin Scalia says he would not be surprised if the scream if the Supreme Court strikes down the death penalty. Recent decisions make it impossible to impose it. Decisions. D in those theres a huge deal in the Semiconductor Industry. In 10. 5 is one billion in cash and stock. Bothues klatencor Companies Make chipmaking equipment. Date the time travelers zooms to in back to the future. Michael j fox is shown wearing nikes and thinking pepsi. Theve how doc says companys win. Tom they are not doing it now. Let me do a quick data check. Equities, bonds, currencies, commodities. Eight, dell futures up 56. Eurodollar nowhere. ,on ferro mentioning earlier 45. 65 on nymex crude. Give me the dow close yesterday. Extraordinary, 17. 217, better then good given the marking glue the market gloom. Jpmorgan back to 2007, Credit Suisse lagging behind. This is the bank of america chart, except it is over in zurich. What do you see . Francine lacqua has been speaking to him in zurich. Tom we will have comments on that for you in this hour. We will switch gears. We do economics, finance, investment, and international relations. This goes under finance. It is an interesting time to speak to rick heitzman. He dabbles in things like interest in this. He hangs out with 10 sent. He is cool. What is it like hanging out with ten cent . you just have to hang back and absorb the coolness that they are doing. Tom it is like panic. Rick there is a little bit of panic, a little bit of i am going to sit here on my deck chair of the titanic. Tom exactly. Every six or seven years like a clock turns on or a watch turns off, all these companies are there and they are working. We are there right now. The clock went off there about five or six years ago. The only way we will manage our cyclist through consolidation. I dont understand how the challenges of cloud and Semi Conductor do not go over into smaller cap adventure Cap Companies at some point. Rick they do. Companies break and fail probably more than you know when they are smaller. The companies that do the breaking emerge. With lame saw the deal research and klatencor. Rick there are only a few guys left. 1990s,ook at the late there was a lot more out there. It will take out some volatility, some build cycles. Is a steady growing, nonproprietary business now. Tom do i look like a uniform . Where the hell did this phrase come from . I want to know from a pro like you, not some media yap yap. What does unicorn mean . Rick any Company Valued at a billion dollars in the private markets. Peopled they employ 12 and everybody drives a ferrari. Dekacornsw many are there . Rick there are about a dozen. Vonnie jon in london. In thee consolidation chipmakers industry i wonder if it just screams weak Global Growth and companies struggling to find Global Growth. That it actually screams this is a mature industry that is struggling for growth. Chips are no longer a competitive and vantage a competitive advantage. No one really cares about that industry anymore. Jon do you see demand for the product still . Rick the amount of smart phones and mobile computers will increase as the developing world gets more power in the pocket. But the competitive advantage will no longer be driven by chips. It will be driven by the iphone and android devices. Tom what are you focused on now . We talked about ibm and the chip business. In your smaller world, what is the focus of Rick Heitzmann . Rick the unbundling of finance. Banks do not want to lend to the individual anymore. They want to write bigger checks that are more secure. Talking about what happened with Credit Suisse or jpmorgan, nobody wants to do that. So we are investing in companies that provide the under 10,000 loans to individuals in a variety of ways. Tom we will continue later. Rick heitzmann. Coming up, a special edition of bloomberg surveillance. My conversation with angus deaton of princeton university. And Neil Ferguson with his important book on the early years of Henry Kissinger. Stay with us, worldwide, bloomberg surveillance. Tom we welcome all of you worldwide, in new york city this morning. Another Police Officer this morning. December 20 of last year, may 2 of this year, and now another officer gunned down last night. The fdr on the east side of the island of manhattan is closed from 96th to 125th street as commissioner bratton and the police force continues their investigation. I believe this is the fourth officer killed in recent months. A sad new york city this morning. News, lets other get to our business flash. Here is vonnie quinn. Vonnie ferrari makes its debut on the New York Stock Exchange. Shares begin trading once the market opens. It is raising nearly 900 million. A federal prosecutor in new york the wall street journal says rick for aro wants to know why draft kings violates federal law. A strategy shift by Credit Suisse. The swiss bank will raise 6 billion of capital as part of reorganization. It will increase its focus on switzerland and Wealth Management in asia, according to the bank. The Securities Unit will be scaled back. We want to get more on this now, going straight to zurich, switzerland. Francine lacqua sat down with the ceo of Credit Suisse to talk about his plan for the bank. What is the Clear Strategy for Credit Suisse . Francine beautiful and cold in zurich. He was telling me today that actually they want to have three clear divisions and this is mainly because of regional preferences. There is the swiss universal bank. In 2017. Be ipoed and Wealth Management. Capitalr big news is raising. 6 billion is the number he gave to me. There were leaks beforehand. It could be up to 10 billion. He is countering this with massive cost cuts, 3. 5 billion on Capital Raising. Beis counting on this to enough to appease regulators. One thing we need to do is basically take a number of investors and to do a nonpreemptive crunch. That has been successful because 1. 3 billion, a firm. Ommitment sign francine that was the ceo of dit suisse, saying that saying the operation that he were will be earnings disappointing, and that is weighing on the share price. We have a huge Capital Raising, lack of details, and what we saw in earnings in the investment bank, which is adding pressure to shareholders and therefore the shares are down. Jon the overall surprises that the capital rates are not much of one. Speaking to bank analysts, the one big surprise, the ipo for this Swiss Banking unit, what is the message there . Francine it was a surprise to everyone. The Capital Raising is somebody that investors said must be done. An important issue because to jane find them switzerland has a lot of wealthy clients and can make more money, and can can value it better. What i like about the ipo is au will put a price on domestically focused universal bank in europe that has to be on the high multiple. To way to get there is recover market pricing. Benefits, it is an incentive for management to deliver on the objectives because it is driven by the market. Francine on top of that, iam says he will shrink the investment bank, which a lot of people say his predecessor should have done. Tom we do not understand the dominance of Credit Suisse in zurich. With this cash call, do they become ever more dominant to the zurich economy . Francine we struggle to understand the dominance when we struggle to understand the dominance of broad, but when youre here you understand. In london ucb presence of Credit Suisse. The dominance, possibly, is he will significantly put more effort into the swiss bank, but he also talks about job cuts. Possible job cuts were at least transfers from the london office. He is also trying to streamline. He is trying to get more value out of it. Zurich,ncine lacqua in with the river behind her at low tide. That was a joke. Rick heitzmann is with us as well as we look at banking. You nailed this earlier. You said it was like dinosaurs mating or dinosaurs adjusting. Rick you consolidation, some deck chairs moving around, shrinking of areas, but it is all going to change. Also largely, due to regulatory issues. If you think about the Small Companies that are able to provide small loans without a regulatory overhang tom can they collect deposits . Rick they can. Most surprisingly do not want to. 30 in the over year, you show up on their regulatory vonnie an ice bucket kind of thing . So are there different Business Models . Rick there is the direct consumer business model. There is the vonnie you are putting money into both . Rick i have invested in both. Tom Rick Heitzmann. Here is an interview for you. Bloomberg west anchor emily chang will speak to, i am public, i am private, i want to be public, michael dell. He of austin, texas, on emc. Stay with us. Worldwide, bloomberg surveillance. Good morning. Tom good morning, everyone. Bloomberg surveillance. Morgan stanley votes this morning. Andrew sheets with us earlier this morning. Mr. Dorsey not getting the endorsement this morning from Morgan Stanley. Down 3. 9 . There it is, Morgan Stanley. We will keep you uptodate on an underweight. Underweights are a little different. Vonnie he is not getting an endorsement from Rick Heitzmann, either, even on square. Rick i think you will see the stock come down a little bit because everyone was expecting maybe in m a maybe an m a event. Now they have to share a ceo. Tom it is like sharing speaker of the house. How about a morning mustread right now from hallen from outer hunt. Gekko jamesrt hunt k. Polk, who many historians raises a great president , only served one term, with speaker for four years. First two when his mentor, andrew jackson, was president. His later tenure as governor of tennessee went was a failure. We need to bring in Phil Mattingly. The cubs are toast. Phil i predicted weeks ago when vonnie quinn asked me that the dodgers would smoke the mets. So my predictions are irrelevant. Tom i love the single phrase on mr. Ryan from wisconsin agree to certain conditions. What are the gop and conservatives going to agree to . Phil this is all about 40 republicans. Caucus. E House Freedom paul ryan wants to be able to go home on the weekends. The speakers job is to raise money. John boehner every weekend was raising money. The other thing, he wants to take off the table the ability for lawmakers to put forth a motion to remove him from speaker. He told members last night that basically this is a weapon and it needs to be taken out from over my head or else i am never going to agree to this. Tom what is your background as we move forward this week. What is the likelihood and service will act on this . Phil right now they are for it. Saying he needs unified support from the three major caucasus, including that group of 40. That means 80 of those 40 have to agree for paul ryan, to backend. As of last night, he does not have them. Vonnie what does he have to offer them . Phil 40 of them are not quite there yet. Vonnie unity is not what they want. What else do they have . He has got, i have shown it. We have budget agreements. I have been the blueprint for how we work on these issues right now. How can i not be conservative enough for you . I am the unifier of the party. Tom i want to go back to baseball. Curtis grandersons crutch is bat. When he goes up to he shrinks the strike zone. Why dont more people do that . Phil it will set you back in terms of flicking your wrist and getting the swing. Tom but his strike zone is so small compared to everybody elses. He is crunched down like that. Phil he restricts his ability to extend his arm. Tom is he m. V. P. So far . Phil no, it is murphy. Tom there is your baseball update and years be grow the house update from Phil Mattingly and your speaker of the house update from Phil Mattingly current coming up, Scott Galloway of New York University on yahoo professor galloway was scathing about yahoo in the last 24 months. We will get an update from him. Rick heitzmann getting us perspective as well on yahoo after alibaba, if there is anything left. Futures up 10, dell futures up 73. Stay with us. Go mets. I just had a horrible nightmare. My companys entire network went down, and i was home in bed, unaware. But that would never happen. Comcast business monitors my Companys Network 24 hours a day and calls and emails me if something, like this scary storm, takes it offline. So i can rest easy. What. You dont have a desk bed . Dont be left in the dark. Get proactive alerts 24 7. Comcast business. Built for business. Tom good morning, everyone. Bloomberg surveillance. Im tom keene in new york. Heres vonnie quinn. Vonnie the president of the European Commission is calling for an emergency meeting on the refugee crisis. Leaders will meet in brussels. A major topic, slovenias request for help with the refugees. The European Union is cracking down on Corporate Taxes. Andt on the list, starbucks Fiat Chrysler. Each company will pay 34 million in back taxes. Syrias president ventures out of the country for the First Time Since the civil war started four years ago. Bashar alassad met with Vladimir Putin in moscow. Thank rusheras to for airstrikes against rebels trying to overthrow him. He says terrorists would have taken even more territory if not for russia. Now the u. S. And russia are agreeing on a plan to prevent aerial accidents. Usled collision started bombing Islamic State targets more than a year ago. Russias strikes began three weeks ago. Paul ryan says he will be a candidate for speaker of the house, but only if republicans unify to unify behind him and meet his demands. At least one group views him as not conservative enough. He wants an answer by friday. The royals and mets are one win away from the world series. The mets have a three a 30 lead over the longsuffering cubs. Phil mattingly says m. V. P. Tom it is a lot of fun and obviously good for baseball. Rick heitzmann, can you get us tickets . That is the only reason you are on the set. That ifhad no him i had known that, i would not have been here. Tom it is like being a red sox fan as well. Speaking of the Boston Red Sox, it is the Boston Red Sox of Technology Yahoo Scott Galloway made big news with New York University last time when he was on the show, talking about yahoo and the challenges. If you look at the stock price, he has been right recently, as we look back down to premarissa levels. What is left after alibaba . Scott yahoo is the most trafficked site in the world. But the revenue has gone from 5 billion to 4. 9 billion. We are in the same tenure over the last five years. Aol andthe success of the suppose it or hopedfor success of yahoo in actuality . Something there, or is it a hope and a dream . Scott first of all, you have to give Tim Armstrong a ton of credit. ,e made some great divestitures double down on program media, and then sold. This was a shareholder driven ceo who dance between the raindrops and figured out a way to turn it around. Only accounts for about 10 of search. It gets a tremendous amount of traffic. This is a fantastic asset. The question is, would it be better off in the hands of someone else . Rick you are never going to be able to create the reach that yahoo has in the next 20 years. It is hard to do it unless you have facebook. The way you advertise by going to problematic to buy buy going to programmatic. Vonnie does it matter at the end of the day what happens in terms of the irs division when it comes to spinning off alibaba . And you have a small personal stake in yahoo does matter because everybody is looking at the sum of parts. There a Media Company willing to buy that . Had a smallitzmann piece of yahoo which has become smaller, i think is where we are here. Where are we going to be in six months . Davos . Issa make it to scott i think she will survive. Mayer think mercer Marissa Mayer will be there for a host of reasons. This is a soap opera that has gone on too long. Tom who is the likely buyer . Scott verizon, aol, one of the cable companies. Tom Dominion Resources of virginia. Rick at t or comcast. Tom why does Brian Roberts want what is really a noncompany . Rick if you are looking for reach, if you have content assets, how do you get reach on the front end . Tom jon ferro, i love the jargon that these guys throw. Lets reach over to london for a question from jon ferro. Jon i imagine they feel the same when we talk about the bond markets. We talk about Tech Companies and what they are doing wrong. When you look at the Advertising Market share issue, who has it right . Facebook, whoand continue to more than anybody, facebook. Facebook is eating into google market share. Saw mobile coming, but facebook was the one that really took the opportunity. Tom the reason to stay with us worldwide on bloomberg seeing ance i am massive shift in the wind this october within the Digital Print divide. I would say it is 100 about facebook. May be more about instagram. That could go down as one of the better acquisitions. Scott i think facebook is an undeniable juggernaut right now. It is the most successful thing in the history of mankind. What has been more successful than Facebooks Newsfeed right now . , they have Rick Facebook is 24 of all the internet in the world. It . How big a unicorn is like a whole ticonderoga pack of pencils. Will they have the ads on instagram . Are they going to work . Scott facebook poll off one of the ultimate cons and corporate history, convincing people to spend tens of billions of dollars to increase their facebook community. So you would own them, and organic reaches down now to 4 is nike sends a message out to the community that they built, they will only get 4 of the message. It is the juggernaut in the world of digital right now. Rick the way they put together that family of apps is amazing. Vonnie could i suggest this is partially due to one of the areas where yahoo excels . Rick it is not meaningful. Some of it is finance. Vonnie moving on to number five, amazon. We get amazon earnings tomorrow. Future, will there finally be a profit at some point . Scott there is no denying that amazon has unbelievable momentum. It now has more revenue than walmart had in 1990. Its value has surpassed walmart. It has more media revenue than twitter has. Amazon web services looks like a juggernaut. This company is executing like crazy and they have incredible momentum. You do not want to bet against amazon right now. Rick i agree, and you will see them launching new products. The rumor is they will launch a fedex ups competitor. Tom you two guys have apple watches. Does anyone use the apple watch, or do you just where it or do you just wear it . I never see anybody use them. Rick you can voice chat, do Text Messages from here. It makes you look terrible, but it is kind of fun. Tom plus it is a growing product. 10second update. Scott galloway is apple filing is apple firing on all cylinders . Scott the most Successful Company in history. Best retailer, best computer manufacturer, best Software Company in the world. Tom what a pleasure Rick Heitzmann, Scott Galloway with us. Emily chang in a conversation with the man from austin, michael dell. He is public, private, public again. Inbe he will be private 2017. This is bloomberg surveillance. Good morning. Tom good morning, everyone. Bloomberg surveillance. I know you are brazilled out, but this was is important. Bring up the chart right away. It is the brazilian real. The line is moving down in the middle of the chart. It is the strength of the brazilian real, and we have given all that up. Anyro, it is now Peace Process may begin in brazil. What do you see in london . It could trigger a monthlong protest if bruce f useff takes the request. The economy is not doing ok. They need to do something about the budget. It could paralyze the government if it carries on. Tom Alberto Ramos from Goldman Sachs suggesting a fast process is really needed here. How fragile is brazil, given what oil could do . Is oil breaks south, that directly affects their economy, doesnt it . Jon it could. More than that, over the last few years, over the last decade, they made a big push to chase high levels of growth. India says that is a bad example because they have not reformed. It is clearly a lot to do with at the same time, and you see the fragility not just in politics but in the brazilian market as well. Tom are single best chart on dollarreal. We have a special edition of bloomberg surveillance this morning. I am working by the syllable this morning. A conversation with angus deaton of princeton university. And then Neil Ferguson will join us. He is out in support of consider. Really looking forward to speaking with dr. Ferguson about a younger Henry Kissinger. We will do that at 11 00 a. M. This morning. Tom what a fun day for bloomberg surveillance peter we talked technology, and we will talk Henry Kissinger with Neil Ferguson later this morning. Vanillaen lets do a , Howard Johnsons report. A weaker yen over the last 24 hours. Eurodollar, 1. 13. Euroyen is what the pros look at. 1. 3626, so relative euro strength over the past two days. Jon ferro is in london. Sterling, 1. 5454 as well. Here is vonnie quinn. Deal to chiler you about in the Semiconductor Industry today. Lam research is buying klatencor for 10 points if billion dollars. Ubers ceo says nearly one third of the rise are in china. Reports is dropping its endorsement of the tesla model s. Owners are complaining about the electric motor and other problems. A squeaky sunroof and so forth. Tom we have to rip up the script. Scott galloway is with us, from New York University. Do you drive a tesla . Scott i do not. Tom all of a sudden elon musk is worried about Consumer Reports . Does he really care . Scott sure, thirdparty validation is key. It meant a lot to the company. Tom but all of a sudden scott they have come out against it. When you talk to someone about the tesla, it gets of noxious. They cannot stop talking about the tesla. Rick i am on the list for the new suv. Tom are we breathing the same air as Rick Heitzmann . Scott, i want to ask you about farah rate. About faraerrari. Louis vuitton and chanel have been able to do this thing where they do the pixie dust. Can you do this thing with autos . Has been able to do it. What signals success and the joy of art and the cressman ship and the craftsmanship like ferrari . The company, their mission is to support the middle class. The kids in high school can take auto classes. It is a fantastic company. When Fiat Chrysler bought it, they checked it out. They said they cannot get near it, we will screw this up. Tom what is the pressure on fiat as a publicly traded company to take this thing down from 7000 units to 20 or 50 or 100,000 units yeah kelly has got to be tangible. Scott a lot of people say that it is when things get ugly, they can take earnings down and do what is right for the brand. Is aest brand in the world public company, apple, so farah rate should be able to figure it out. Vonnie it has been great for the Car Companies and the companies it has run. What makes you think he is going to mess this up . Scott i do not. I do not care who you are, and i cannot even fit in a for rory in a ferrari. It is the benchmark for a certain lifestyle. Tom i have been selling vonnie on this, touring Hells Kitchen in a faraerrari. It is the concept that everybody is running into, having to do with the cloud. Give us an update on the cloud, rick. Is anybody going to make any real money on this . Rick amazon in the next couple of days we will see that they are making money at it. I think it is a fundamental shift as how people are doing computing. If you do not, whether you are sap or ibm, you will miss out. Tom to people like ibm really need to go over to it, or is it a distraction . Scott you have no choice. It is a business model. Rather than making a large investment in adobes suite of 19. 95 a you make month. Be the big will winner out of this . Scott i think the most underrated technology rick, i would love to get your opinion on this because the world is moving to a mobile phone, there is this incredible consumer trend. Anple are more apt to open email on a mobile phone. When you think email, you have to think salesforce. The most underinvested roy technology. Translate what he just said. I have no idea. Rick people are opening email email is back. Tom email is back . It is the bomb. Scott you did not get that . Take a chart. When kids come to my office and say how what industry should i go into the sexiest technologies have the lowest roi. Tom this is fascinating. Rick there are a couple of large companies, salesforce making big acquisitions. A bunch of other people are trying to get into the corporate space. Tom we need to have a surveillance correction. Bring the chart backup galloway email is the bomb print not back in fashion. Bomb. Is the come on, it is the bomb. Rick up 50 billion. It fits nicely there. Vonnie why hasnt it ok. Rick 50 billion is a big check to write. There is this long recurring revenue model, less on earnings. Vonnie can they keep away competitors . Rick i think they can. Tom Scott Galloway, lets go back to this idea voicemail is next. Email is coming back. Explain again why. I hate it with a passion. Scott it is very simple. You are now spending more time on your mobile phone, and you are more apt to open your email on a mobile phone. You are better deleting it from a desktop than a mobile phone. I run a small business. Email for us is by far the most effective roi. It is not leaving. Every year we spend more money on it. Were spending a lot of money and time trying to produce video. But the sales force has a big mode around it, and every year they get better. Tom i want to rip up the script on video. Why will this finally be the year of video, professor . Scott in china, the bomb of economies, right . I mean that in a good way. There is more video watch on a mobile phone than on televisions. We had all these televisions there are more mini televisions in the world now in terms of smart phones than people. And motion and the art of video is really compelling for marketing and branding and getting information. People want to see, you have the best information website in the world because you have the best video. In terms of slicing and dicing. Video the broadband is there, the devices are there. Vonnie, this hour has been the bomb. Vonnie we have to blame you, scott, for hearing that word all day today. Tom let me have a ride in your tesla when you finally get the vehicle as well. Is next. I am back on at 11 00 this morning with Neil Ferguson. Good morning. eeeeohmumohweh hush my darling. dont fear my darling. the lion sleeps tonight. hush my darling. man snoring dont fear my darling. the lion sleeps tonight. woman snoring take the roar out of snore. Yet another innovation only at a sleep number store. David another bank shifts its strategy. We will talk with the ceo. Thirdquarter report cards, we will get reports. Pocket, will air that mean more stimulus . David welcome to bloomberg. 8 stephanie we have a big banking morning, were been talking about banks all morning. We are brought in an allstar cast. The one and only christine harper. Ahead, a big show including an exclusive interview with the ceo of the dell with our own emily chang. David lo