It is the draghi induced bounce in the equity market. 39 crude once again. Tom nine days away from the fed dating, and commodities are the back story that could become a atnt story very quickly look what iron or did over the jonathan tom keene with us for the next two hours. Obama says the San Bernardino massacre enters a new phase in the terrorism fight. To these fears cause by the randomness of the california in paris attacks, and declared allies,reased help from we will defeat the Islamic State. Our military will continue to hunt down terrorist plotters. Have rampedallies up their contributions to our military campaign, which will help us accelerate our effort to destroy isil. California, government offices that have been closed since the incident will reopen. The man accused of stabbing two people at a subway stop your the incident prompted stepped up security, and police described it as an act of terrorism. The 29yearold is charged with attempted murder. Wellan threatened others shouting this is for syria. Analysts think the paris attacks are giving a boost to the countrys far right political party. President Francois Hollande was among those voting and the they are pushing an antiimmigration and antieuropean agenda. A second round of balloting will be held next week. Venezuelans are demanding a dramatic reversal for their country. The Opposition Party took control of the legislature for the first time in 16 years. The news sparked celebrations in the capital. A big economicin crisis, stricken with product shortages and the highest inflation. It is december 7, what Franklin Roosevelt called the date that will forever live in infamy. Japan attacked pearl harbor and brought the United States into world war ii. You can get more on these and other breaking stories 24 hours a day. Tom somebody told me the other day that movies have never done it justice. I just watched a couple with the kids, and the basic idea, the movies have never captured the terror. Remy it is such a somber, tragic moment in our history but we are still looking forward to that, as it leads oil. Tom if you have never been hawaii for a trip the site of the arizona. It is a quiet week always after american jobs. Futures up six, and a lot of challenges on the screen. Nymex, 39. 48 and brent crude comes in as well. The vix, 14. 81 showing good equity. Brent crude well under 42, that is a huge deal. The dialogue would change in two year yield cannot get to 1 . Jon ferro demanded i do this chart. Ruble andle, a weaker mr. Putin wakes up through the 70 level. Credit squeeze demanding this is a richly priced ruble and the ruble has got to get up here somewhere. One of the thermometers if you will of the hydrocarbon market. Jonathan i think the fascinating thing about that chart is if you overlay brent with dollar ruble, it has just been basically trading what happens with the brent crews price brent crude price. I am looking at the fx market this morning. The mario draghi on friday in new york a little bit different from the mario draghi on thursday. Of friday draghi punching, talking about doing more, no limits to action. Reconcile that with the mario draghi of thursday. Very much the mario draghi that we saw of 2012 when he said, i will do whatever it takes. The real challenge of European Central banking is it recognizes that ultralow interest rates, negative rates in terms of the ecb lending to the corresponding banks and the euro land, is not sufficient to get the economy moving. We need to see structural reforms. Elsewhere in europe, we just do not have enough growth. Jonathan trying to work out what on earth when on in the governing council on thursday, and this may be at. 2016, theinto epicenter of almost every single investment pieces is a weak euro, long european at cuties. Equities. James i am looking for eurodollar parity so that is a big move. I believe that is in part Dollar Strength as opposed to euro weakness. It is very hard to see where these people want to be long the euro but if someone were to say what is going on, a lot of the lead indicators are much more optimistic. Tom we are going to talk to other people about these Regional Elections. I was under a concrete bridge in paris yesterday and you see all the political signs and democracy in action. What does that democratic process mean for the market . I refuse to believe they are two separate issues. James we have never had democracy cloaked with a level of structural change required in the eurozone. I am very surprised the great people have been putting up with the amount of pain that has been meted out. I would also expect the people of spain to become much more aggressive than i have in terms of political passion and conviction. It has been a relatively supportive Political Climate for slow change. Tom if the public asks for the thats to clear markets, the Balance Sheet adjustments, debt restructuring, or both . James i have to believe that ultimately we need to have debt restructuring. It has just been put off and put off because of the capacity to roll the debt over. It is extraordinarily low, onceinalifetime. And france, it would be disingenuous to put down the National Front victory solely from the tragic events of november 13. What i would say is it has been a sea change in politics across europe, not just on the periphery but in the core. You,i want to know from going into 2016 and 2017, when do i start to see the flames, the bite of the political . James democracy has been at risk in europe because of the ultimate challenge that the single currency means for the electorates of europe. I think it can move in one of two ways. We can end up with a splintering of europe as people become less and less prepared to put up with the constraints of the eurozone, where there is a move toward a different agenda. The single Fiscal Authority is ultimately the regal legal currency. Tom a stronger dollar versus a weaker euro, tell me about the russian ruble. It is about the third time up for mr. Putin. What will be those ramifications . James russia is an economy in trouble but equally the russian people have demonstrated an extraordinary capacity to put up with pain, and have been able to do so for years. I am not sure the ramifications are terribly significant, since especially for western markets. I think the challenge of the low price, which is part in parcel of the ruble weakness, is a huge challenge. 2016ieve some point in they will try to get the oil price to move up honestly. A breachtalking about of 45 a barrel, but a move to 45 a barrel is likely to be in the agenda. Tom jon ferro with us this morning. Shepherdson. Ll ian not only about the u. S. Economy but on the linkages of the International Economy as we move to december 16. Stay with us in new york and. Ndon, surveillance tom good morning, everyone. Surveillance. Lets get to our business flash. General electric is abandoning plans to sell its appliance business to electrolux. The deal was estimated at 3. 3 billion, and it comes amid a legal ballot. Battle. German Industrial Production rose less than economists predicted in october amid a slump in energy output. Adjusted output create increased 2 10 of 1 . Economists expected a gain of 8 10 of 1 . It has been a record year for mergers and acquisitions that europe has been slow to join the parade. European targets accounted for the smallest share of global acquisitions in 17 years. Suitors agreed to spend more than 763 billion for european of the threet 22 and a half trillion dollars total. Ofy have been the subject about 57 of takeovers. That is the Bloomberg Business flash. On thank you very much it was friday, december 4. Was it the moment that hotel opec ceased to be a cartel . Hobby air blasts inhouse javier blas inhouse. We have talked about the differences, the chaotic nature from friday. Javier i have never seen opec coming out on a press conference and not saying how much the cartel is going to produce. There was not a single number and it was a big to bait a big debate inside. Iraqi oil minister said we are going to produce whatever we want. That is not really an organization that is restricting production. We really enjoyed december in vienna but they are not really doing much. Jon going into next year javier they do not even like each other. Jon going into next year you wonder what is going to happen because even if they had a target, have exceeded their target over the past 10. Iran is the variable to have to think about, how does that influence the thinking . Javier they are refusing to cut production. They are going to put into the market next year so you have the two more actors most important actors of opec. We will see how that hands out into next year. That the barrels are piling up, not being consumed, and just accumulating in inventory. We are going to start to worry, can we run out of inventory . Jon Storage Capacity is a huge issue. B. P. Trading lower throughout the morning. You go into 2016. Any chances production cuts are out the window. These are Companies Whose incremental return for new projects is distinctly poor. This is a bad place to be consigning capital. The number that gets everybodys attention is 20 crude. You have reached Storage Capacity and you make this move down to what a lot of people consider the marginal cost of production. Did that thesis just get some fuel on friday . Likely it makes it more at some point in 2016 we may see oil prices, can we go to 20 . I do not know. We can see the oil industry having to go to levels of pain that force production being curtailed. And russia,tates but it is not going to be in opec for sure tom . Of what is the distinction the state of opec great now, particularly with regard to saudi arabia . What did you learn in vienna . Javier clearly, the saudis are not willing to cut. They think that over the long term they will win so certainly what we have not seen is that saudi arabia is more committed that through low prices they will at the end when the war. Tom is there anyone within the cartel that can push back against three odd . Javier the only one that can push back is the wrong and tehran wouldn, and be trying to draft down the iran is talking about bringing more production in 2016 so there is no one that can really force saudi arabia to do anything. The two traditional enemies within opec next year ironically are going to be working together. Tom thank you so much. Bloomberg, terry duffy, cme Group Chairman in the 8 00 hour. Futures up for. , 39. 49 on crude. Printest texas give a 38 sometime today . Stay with us. Jon hello and welcome back. This is bloomberg surveillance, tom keene in new york. Tom keene has the morning mustread. Tom driving in from Newark Airport last night, the Empire State Building in new york jets green as the jets beat the giants. Let me look at a morning mustread from michael r bloomberg. Principal founder and majority owner of bloomberg lp, this is mike writing on the meeting that i attended in paris. Not effectively allocate capital without whichle information about and to what extent companies are exposed to the shifts in what we do about Climate Change. I was really taken aback at the paris meetings over the granularity, the micro economics and to do it this of these principles. It was much less than i expected and much more like robert effort about what can we do. Jon what interests me is this is not just on the politicians radar. It is an economic reality for investors and for some of you with james, he manages money on behalf of the church of england. Want to be out the arctic and what i really want to emphasize the economic reality is not something five or 10 years down the road, it is now for investors. James Climate Change is a huge issue and if we cannot get temperature change back two degrees to the limit of temperature increase we have a very material problem. We should expect regulation and carbon pricing. Challenge thee rest of the hydrocarbons industry, which is a really important one, a tense in terms of market and economies. Tom i was in paris yesterday ,nd hearing we send alert speak is that a permanent position of institutional money . James i would say there is quite an interesting life occasion in those that worry about Climate Change into the campaign. She is all about coming out of hydrocarbons and investing in sustainable new technology. A second stress is equally important, maintaining exposure to companies that have a reasonably longterm future and engaging with them to make sure they will be able to do a better job to increase longterm value to the global economy. Tom james bevan, thank you so much. Coming up, we will look at the european elections. Stay with us. Tom good morning, everyone, from london. We welcome all of you. Its bloomberg surveillance. Lets get our first word here is raini. Sticking to reassure americans in quiet critics, president obama made a speech to discuss terrorism on sunday. He did not offer a new strategies to defeat the islamic slow domestic terrorists, but he mentioned that they must target the radicals are not muslims. They do not speak for islam. They are part of a cult of death. They account for a tiny fraction of more than a billion muslims around the world. If were to succeed in defeating terrorism, we must enlist muslim communities as our strongest allies. Rather than push them away through suspicion and hate. That speech was only the third he has delivered from the oval office. The far right party in france scores its biggest election gains ever. Francois hollande was among those voting in the first round of regional balloting. Was leadingtionale and is pushing antiimmigration policy. Analysts think it is winning new support because the paris attacks. Although voters in venezuela called for a powershift, the opposition scored a landslide victory until took control of the legislature for the first time in 16 years. It signals a lack of faith in the ruling socialist abilities to solve the economic crisis. And the startling enough so from jimmy carter. During Church Services yesterday in georgia, he told parishioners he is cancer free. He revealed four months ago that melanoma had spread to his brain. Since then, he has received radiation and chemotherapy. The treatment did little to slow the activities. More at bloomberg. Com. Over to you. Tomguy thank you. One of the top headlines this morning, terror, dominating the headlines. President obama described shootings in california as an act of terrorism. Joining us now is bloombergs International Correspondent hans nichols. You cover the white house for a number ofover to you. Tomguy thank you. Years. I want to point out the significance of the oval office from significant lack of news. Can you put together for me . Hans it could have just been circumstance. He doesnt like using the oval office. Most of the other rooms at this time of year are decked out in christmas decorations, seleka have been their only option. If you look at what he said, he did warn of the continuing threat, a threat that is a more complex, but because it is a more complex, it may be difficult to detect. The threat from terrorism is real, but we will overcome it. And anydestroy isil other organization that t ries to harm us. They wont involve abandoning our values are giving in to fear. That is what they are hoping for. Hans but there was very little new in terms of substance, but it is, an effort to review the strategy announced to the public that he is concerned about this an act of terrorism. But there was never any signaling or telegraphing that president obama would fundamentally alter his approach to the Islamic State. In some ways, im surprised by the criticism. There have been no hinting leading up to this that there would be any sort of shift. The elephant in the room couple weeks ago was russia. A significant lack of conversation about russia and the role they play with any coalition in the middle east. Where are we in terms of the u. S. s stance on that . Hans it seems like the most definitive we have is the last time they got together, early last week on the sidelines of the Climate Change summit. We had these diverging tales. The russian said they made quite a bit of progress, and u. S. Officials saying they were quite far away. Until we see russia focus their bombing on Islamic State, that is the key distinction. Tom hans, i found it quite sobering that three soldiers yesterday guns is america going to become like europe, where we have a lot of security 20 47 marching around with machine guns in hand . Hans well if you look at the domestic threat, the is or would probably be no. Numbers very, but there are potentially 5000 homegrown terrorists in france. The state has this new report out, a big Counterterrorism Center there, were numbers are considerably lower. You dont have the same domestic threat but you have to take president obama at his word, that it will be much were difficult to detect these threats. I cant answer that question in part because i am not in a situation looking at the threat in aces, nor iam i position to look at all the intelligence across his desk. This one would not have come through because there simply wasnt any indication other than a pledge of loyalty. Jonathan on stickles, thank you very much. Olfangoto bring in w piccolo. One of your roles is to manage Political Risk. You wake up this morning, the National Front in france. A determined president obama in the middle east. What do you take . Mr. Piccolo that not much has changed. Shock to the system in france. We knew it was coming, but not with the numbers that we have seen. In terms of the impact on policy of the impact on policy at the national level, it will be limited. Even if the front nationale wins, the regions power is limited. It is something to monitor. It is a change in the political landscape. Have three established parties but no Immediate Repercussions of the shortterm. Jonathan help me as an investor look at the bloomberg terminal and manage the risk. Which headline matters as far as my portfolio is concerned . What should i be looking for in that Headline News flow . Mr. Piccolo it is still very much about the Central Banks. It goes against my interest if you look over the last 12 months, it has been very idiosyncratic, there a regionalbased. That has mitigated the spillover. Two elections in greece, a referendum. We had ukraine defaulting in september, nobody even noticed. The french stock market after the paris attack was higher than before. The banks here are helping, the Central Banks are helping to soften the impact. Tom when i look at the political economics of europe, can you translate it across the landscape to the election coming up in november . Can you extrapolate rightwing or leftwing polarity in england, in france, in Eastern Europe . Can you bring those over to the race in the United States . Mr. Piccoloi i somewhat doubt that. I dont think it is an easy extrapolation to make. Be looking for and what we have seen on both sides of the atlantic is the leader coming out with more populist initiatives, focusing on the emotional appeal on issues like immigration, like security, like terrorism, whereas we dont hear much about the fiscal policy, infrastructure, jobs, unemployment. That is a common trend, but that is i think where it stops. Tom if you look at the populism of the moment, how does an establishment in london, in paris, or in washington, how did they push back against the legitimate fear of populism . Mr. Piccoli it is a struggle. It has been coming for some time. I think the mainstream parties will struggle. There is no strategy for that. The ability of the populace so far if you look at the french example, it is striking. The front nationale has done very well. Votersly they went after who felt the trade by the mainstream parties. The strategy for the mainstream is to gain back those voters without alienating why they left. As of now, they are struggling. My suggestion would be for them to keep the course, not to be tempted to embark into populism. This will be a longterm process. The front nationale has been coming for very long time in france. Trying to stop them will take a very long time. Jonathan i want to backtrack and wrap this all up. The consequences to the markets have been minimal. Beyond,to 2016, 2017, when does it start to matter foreign investor . James ; matters is the policy response. If we saw order control, changing the overall management of the economy, that is when markets will take notice. Tomjonathan are we close . James i would say no. As long as we dont get further outraged, the aging population of europe at large will welcome immigration. Jonathan james bevan will stay with us. Tom i was looking at the twitter feed and i think it is amazing given the climate talks in paris, jon, that we see beijing with the riddler pollution this monday morning. That is exceptional maybe we will get photos coming up here, of beijing enveloped in pollution this morning. Ts linkage to i those important critical fedmber 156 meetings, stay with us. Tom bloombergs surveillance, worldwide in london. What a great week in london and paris. Thanks to all the 13, particularly our london desk, for their assistance with some great programming last week. So many worldwide events. James bevan is with us, and wolfgango piccoli. We do it with a backdrop of lower commodity prices, the ruble on a tear, and wolfgango, we have to visit something we havent talked on in ages, ukraine. Give us an update on the nowraction that ukraine is that the russians have troops and aircrafts to floyd in syria. Mr. Piccoli they dont need the aircrafts in soldiers to keep the pressure on ukraine, which they are still doing. Over the last two weeks, we have seen escalation of the conflict in ukraine. They just need to support the militia. I think Vice President biden is now in ukraine, mainly to reassure ukrainians about two things. That the u. S. Still cares about ukraine, and that there will be no tradeoff concerning russia and syria as some sort of cost for ukraine. The issue there is becoming more and more of a frozen conflict, and the russians are hoping that with the syria card they will get the sanctions lifted. Tom what is the effect on mr. Ifin of the lower oil price, we break through 39 west texas level and saw what are the ramifications for his political calculus . Mr. Piccoli i think the temptation there in that scenario, and there is more pressure on the fiscal, attempt tatian will be to play the nationalist card, of russia being the big power abroad in the middle east, in ukraine, in Eastern Europe. That will be the immediate reaction, in my view, to keep the popularity high. It will put pressure on the fiscal but politically i dont think it will have major consequences. Jon, i think this is a profound idea. You dont know where clicks in. This is the true exogenous shock. You dont know where Lower Oil Prices affect the dialogue. Jonathan and the truly fascinating thing, you have this natural pressure that will offset some of the same. The question i would have is if you look at the gearing of the economy in russia right now, to the sanction story, to the oil story, what is more important now . What happens in the next 3, 4 years . Mr. Piccoli it depends who you ask. If you invest investors, if you ask investors, with the European Council meeting in december, if you ask the russians, it is about the oil. It really depends on which side you want to look at the story. Jonathan for anyone looking at russian equities, the story i am told is look at the valuations. They always have great yields, and it is because they are nervous. They want that Political Risk premium. James bevan, how do you view russian equities . James i am sitting on the sidelines. I would regard the risk is way too high in terms of what we have. Jonathan wolfgango . Mr. Piccoli i would agree. The outlook is dark. Its clear that they have many moving parts. We might see more spending from the Central Government if it is needed. Clinton remains in power so we know who will win the election but we dont know where they will use the political capital. Is it for reforms are for more of the same . Tom wolfgango, let me start with you. I should start that i was wrong on brexit. I need to hear about brexit will more time. I was wrong about this impact. For americans, brexit is a whatever. But it actually is a huge deal. Give us an update on the likelihood of britain exiting. Mr. Piccoli let me take a step back here. The only thing we know so far is this question. Everything else is unclear. We dont even know when the referendum will take place. We know that the numbers are very close, but we dont know if we can trust the pollsters. We dont do the referendum very often. Our baseline at this point is that, yes will prevail. But it will be by a narrow margin. Posted portly, i dont think it will settle the debate on the u. K. In the European Union and so one. So on. Tom wolfgango, thank you so much. Piccoli. James bevan continuing with us. Futures up. Jon ferro is noting west texas intermediate off the bloomberg terminal, nicely under 43 a barrel. Pg e ceo on utilities. Stay with us. Jonathan good morning, this is bloomberg surveillance. Good morning to wall street, good afternoon to hong kong. Im over in new york. Lets get to the Bloomberg Business flash. Good morning, everyone. Fedex says it is unable to contact two of its securities, as the turmoil in a brokerage investigation over possible links to chinas stock market ralout in august. The media reports suggest that they may have been taken away by authorities to assist with an inquiry. Foreign investors are pulling money out of turkey, and the record outflows are expected to continue. Billion, estimate 7. 6 including 1. 4 billion last month alone. Among the factors threatening turkey 720 billion economy include war in syria and russian sanctions. The new ceo of barclays is considering deeper cuts to the banks security unit. They say he is considering eliminating another 20 of the bankers, in addition to an existing program to reduce staff at the Investment Bank by 7000 through 2016. That is a Bloomberg Business flash. Tom this has permeated every discussion, the future of banking in london, and the difference between a 3 personnel reduction in 17 personal reduction for standard chartered. Seems bevan has spent years looking at the european and American Banking systems. Whether the european Banking System can compete with jamie dimon . Ames if i were to look at the winners i would say many of them are still in the states. Banking,m wells fargo, goldman sachs. Benefited their employees at the expense of their shareholders after extensive investment in technology. I think goldman is ready to come good. Jonathan within that argument, u. S. Versus europe seems to be a strength. Almost everyone asks that question, size with the u. S. What is happening with the u. K. Banks right now . Barclays is getting investment has what james if i were to look at barclays, what is happening with the Investment Banking numbers, looking at the italian business. If we think about where barclays went wrong, it was try to get the global footprint, which is both in retreat. This as a lot of value to and i think it is a much trickier situation. If i wanted exposure to emerging markets, i would be looking at that. Be looking at what asia does best. Jonathan when you look at the Banking Sector and in the u. K. , job cuts, job cuts, job cuts, you prefer the u. S. , because they have done all this. In that respects, who was ahead on the restructuring curve . James if you talk about global numbers, morgan stanley, jpmorgan. F you wante to say i to take a bet in europe, i would say the italian banks and french banks looked cheap in the context of cheap cash flow. Tom one more question, then. Why cant parents be a Financial Capital . What does it take for paris to get thunder from london . James i would say there are two challenges for paris. First of all, we need to see a rattling of the labor laws. There needs to be some freedom in the economy. And i think Francois Hollande needs to step up and be counted on how he will pay future pension liabilities to the french people. That is a shadow that hangs over any entity that wants to be big in europe, particularly in paris. Tom james, think you so much. One quick look here. Give me the jpmorgan chart, just to show. Its a deeply troubled bank. You would kill for that stock chart after what we have seen this year. We have an important guest this Ian Shepherdson will join to get youeconomics briefed and started on your fiveday working week. Its bloomberg surveillance. Just that t terror. The president says terror is a cancer that has no immediate to her. Obama states we will reject no religious tests for who we will admit to america. Commodities catch a bid before Janet Yellens janet 16 . Janet yellens december 16 . Just consider a stronger euro. Good morning, everyone. This is bloomberg surveillance, live from our World Headquarters in new york. Im tom. Jon ferro is in london today. You look at the elections, the Regional Elections in france. They speak volumes about the strength of an angry public. Jon it would be disingenuous to say us is all about the tragic on november 13. It is a big concern going into president ial elections in just over a years time. You see the transfer of it. The polarity over to the United States. Right now without bloomberg first word news, starting with the president , here is ramy inocencio. Ramy lets get the bloomberg first word news. President obama says the San Bernardino massacre signals a new phase in the terror fight. In a nationally televised speech, he tried to ease fears prompted by the california as well as paris attacks. He did not offer any new policies, but he asserted that the latest mass shooting shows the need for tougher gun laws. President obama i know there are some who reject any government safety any gun safety measures, but the fact is, no matter how effective our Law Enforcement agencies are, cannot identify every would be mass shooter, whether the individual is motivated by isil or some other hateful ideology. What we can and must do is make it harder for them to kill. Ramy that was only the third time president obama has delivered a speech from the oval office. Analysts in france think the paris attacks are giving a boost to the countrys farright political party. The Regional Election yesterday was a setback for Francois Hollande. Candidates are pushing antiimmigration as well as antieuropean agenda, a second round of balloting to be held next week. Department police will reportedly be targeted in a new federal investigation. The Associated Press says the Justice Department will launch a wideranging civil rights probe this week. The killing of a black teenager by an officer last year has prompted large protests. Critics say the Police Department was slow to investigate the case and withheld video that shows the shooting. Nasa finally sent groceries to the International Space station. The rocket carrying supplies lifted off from Cape Canaveral and should reach the astronauts in orbit on wednesday. This capsule was built by orbital a pk by orbital apk. Tom one of the groceries . Is it like fresh direct . Ramy they definitely need it. Tom i do not want tomato paste. Groceries . Vonnie or they have the ramy or they have the free dried ice cream. Markets move, futures continue up with the vicks closing, 39. 440. Move on to the Second Screen. We need a Second Screen on this monday. Decisively moved and a twogh 18,000, year yield migrate somewhere in the vicinity of 1 . On hydrocarbons. Lets go over to the ruble. Biden inVice President the ukraine. 35, ruble. Toward 70 ruble. As jon ferro mentioned, it it is to reallybriefing peace in all of this together. We do all of this on this pearl harbor day, december 7. Basic stupid question some up or thumbs down on the American Economy . Ian definitely, way up. Tom then why are we having angst ahead of december 16. Ian it is an odd thing. Unemployment at a longterm sustainable rate third we are probably creating three quarters of a million jobs in the fourth quarter, wage growth picking up, and we have one or two hits that tom why are we ultra is amodative . Ian that good question because i do nothing we should be. We have Monetary Policy sill still set to do with the impending world. For the rest of the economy, the stronger dollar is boosting Consumer Spending power. The week gas prices are reducing spending power. The week gas prices are boosting Consumer Spending power. Tom do you anticipate a market adjustment december 16 . Will debris a market adjustment december will there be a market adjustment december 17 or 18 . Ian that is more likely. How long do we wait for the next one . I think the data in the first quarter, straight back into the new year, we will see those numbers pointing to the fed having to move again pretty quickly. Then the market will have a collective rethink. Tom we have to recalibrate, exactly. Ian not only because of the Market Expectations being low, but they are not even line with line they are not even in with the fed. Tom i agree that it is a twomarket move, everybody focused on the 16th. But it is after that, after we really calibrate after we recalibrate. Jon going into 2016, consensus call, no argument almost. What is the risk, as you see it, of an inflation overshoot in 2016 in the u. S. . Ian i think it is very hard. All the fed cares about is what the wage numbers say for the period ahead. They believe the inflation story, in their view, and every indicator i look at suggests the risk is all to the upside. I look at where the market is in terms of his forecast, and im struggling to make sense that there is any downside risk. Tom i am struck by the new terminal value. Where are all rationing down to some new low rate like my grandfathers low rate. I do not know what that means. Ramy i want to in terms of the deep dives, what sector will benefit . You say it is all on the upside. Ian we have a transfer of resources globally, not just in the u. S. The u. S. Roughly consumes twice as much oil as it produces. In the oil sector, if youre supplying services, making equipment, it is a disaster, no doubt about it. That is a teeny bit of the economy, so the danes easily out so the gains easily outweigh the losses. Nete probably looking at a boost of gdp come something on the order of. 7,. 8,. 9. Tom that big . Do you just assume that the fed, when they pauserates in december, to recalibrate or readjust . Go they will not immediately after december. There is a residual fear that maybe there is some sort of hidden fracture in the economy that will be revealed when we raise rates. My guess is there will not be any, but there will be a period of reflection. It is three months after, and we have a whole three months before the quarter. The market isin that it will be the fed that capitulates. How does that story develop in 2016 . In i think the market gives , because the Market Forecast is predicated on this gentle pattern of inflation. The risk is all to the upside, so i think probably the spring is the peak danger period. We will see a collective lightbulb moment where people at the wages and where theyre going and how the fed has reacted to them in the past, then our forecast, our market implied forecast does not make any sense. I am quite nervous about a significance a significant springl shock during the period, which leads to eventually a steeper profile than where people think the fed is going to go. Thank you very much for joining us to he will stay with us on bloomberg surveillance. Oming up later, terry duffy do not miss that conversation. This is bloomberg surveillance. Good morning. Tom good morning, everyone. Bloomberg surveillance. We have been expecting this. We are iron ore, there is a number with ways there is a number of ways to measure it. Orerate of change of iron has ramifications on confidence across all of asia. It absolutely does, and for the producers as well. Strategy of the producers. The guys who extract iron ore from the ground. It is the same strategy as opec. It is about volume, keeping market share, and flushing out the high cost producers. That is exactly what bhp billiton, rio are doing. You are seeing it in the price. The question is, when does that price start to see capacity come out of the production market . You are not seeing that in the same way that people thought you would, tom. Tom i want to make clear, every commodity runs differently and with its own pace and character. Jon, i knower you do not care about that. 2. 06 95 is still not through lows. Look at brent crude, 42. 70 three. Jon i think the supply story, whether it is copper or iron ore or crude, what we are doing now lows. Continue to test new almost every morning at the terminal, whether it is 39 wti, hitting the lows for 2015, whether it is iron ore, or copper. Tom lets bring in our guest, Ian Shepherdson of pantheon. Thementioned this before, good effect, the secondorder effect of the american consumer. But you have to clear Balance Sheets. My spirits is it takes forever in commodities. My experience is it takes forever and commodities. Ian shale is a very different model to the huge oil cap oil companies. There has to be a big shakeout, which is a dynamic jump tom but, bring up the chart of oil. This is a random 30 price target. Someone say i am wrong on that. But the basic idea, we have come down. This is the iron ore chart. It is a very elegant chart, breaking through 40, down at the bottom. When you look at iron ore or oil breaking down, 30, it has government ramifications as well. A hugely important sector. In the resource producing economies, outside the developed world, commodities are a bigger share of gdp than in the u. S. , so these have huge implications for national income, inflation, growth, everything, and of course for the copper sector, they are dominated by these businesses. Tom the idea of the idea of a Second Derivative and rate of change, not every commodities like that, but some of them are decidedly, as Jeanclaude Juncker shea would say, as chet would say,sh it is brutal. Jon it is brutal. The pressure on them to strip out assets, tighten up the Balance Sheet when do i start to see the good news . It iswes already already there in the u. S. It is just a reflection of falling oil prices. It makes people much better off. They do not spend all the money immediately, but they spend quite a bit of it, and my guess is by the end of the holiday season, we will see them spend a fair share of it. As a result, i am bullish on growth getting into 2016. We turn to washington. The president s import and speechless night. Bloomberg surveillance welcomes megan murphy, our Washington Bureau chief. We are working with Marty Shanker in washington. It was a different speech, megan. Image speaks volumes. We have a lectern in the oval office. I have never seen that before. Would you please explain what the white house is trying to a comp with the folksiness, the immediacy of the oval office, and yet we are getting a lecture from a lectern . Megan that was the third Office Speech the president has given. I think with the president was trying to achieve leslie was a real reset interim to achieve last night was a real reset. To articulate a more forceful strategy on what the u. S. Is doing to come back Islamic State to combat Islamic State. What the president did not do last night was actually perhaps more important than he did do. He gave us know new point somewhat strategy we are taking to combat Islamic State, nv provided no information on the california shootings. What he did do was try to thread a difficult nido a difficult needle. He talked about his firm belief that we need to make more progress on gun control and limit access to high powered like you saw in california. And really trying to bridge that gap between combating extremism and the gun control is a big part of that. Tom i do not mean to cut you off, but it is important to talk about profiling. The only time i have ever been profiled in my life was standing in line outside the capital outside the capitol. I cannot remember it. Where was your washington on the idea that we give up a little bit about democratic processes and institutions to get toward a little more safety . Where is that debate . President ,ink the the most surprising thing about last nights speech, was how lengthy and forceful he was on that point and how america, his america, that is exactly what we do not do. He really called out a few republican president ial candidates, not by name but as a party, and saying even profiling, looking at any of your muslim brother in muslim brethren differently is something america does not stand for. It is surprising the amount of time that he devoted that much of the speech to it in the climate that we are in. The president was quite forceful on the point and saying that to go down that road would be to go against everything we stand for as a country. I am not sure that part of his speech will sell well today. I think it was the one that people step back and sort of thought, that is interesting given the climate that we are in right now. Tom is he a lameduck president . Megan i think there is no way you can look at his record over the past 18 months and say he is a lame duck president. The things he had achieved the things he has achieved on cuba, iran, legislation on social issues like gay marriage has been extraordinary for a second term president , and there is no question on terror in particular, he has failed to strike the rhetorical high note that he is known for. ,ast nights speech was flat give us no new information, and to give the republicans a real opening to strike. Tom where is the agenda for mrs. Clinton to rebound off of the president s speech, to reengage a dialogue with disaffected republicans . Does that discussion exist in the coming months . Megan she had made some very interesting comments over the weekend about the role of Technology Companies and dealing with this, and how technology countries are going to have to step up and have more cooperation in terms of the information they share. She, too, faces the same situation the president does, conflating the guncontrol argument with the terror argument. At the end of the day, secretary clinton knows as well as president obama that what they are being told is to effectively combat Islamic State, they will need an international coalition, that this is a long road am an expensive road. I do americans really believe , wanting are saying substantial number of boots on the ground, that will drag on for years, with scores of injuries . Tom thank you so much. Megan murphy with a briefing off the president was speechless she is our Washington Bureau chief. Coming up next, a conversation on oil. Paribas, from bnp looking at new lows for brent. Bloomberg radio, new york, boston, San Francisco worldwide. Stay with us. Tom good morning, everyone. Bloomberg surveillance. Mustread, Lawrence Summers writing today on anything to do with economics. Ian shepherdson is with us from pantheon. How many tools are in the toolbox right now . Ian not many in the u. S. Case, but we do not really need them anymore. The economy is Strong Enough to new licy away from the from the current emergency setting. Larry summers has been very bearish on growth, and argues that we should not be raising rates until we see the whites of the eyes of inflation, which i think it is too late. I am not surprised hes coming in with this tack. He is raising the question that, what if we raise rates and everything goes wrong . My guess is that i think i have a lot more faith in the economys underlying strength than he does. I do not think we need to be asking the question over the course of the cycle that is about to start. Futures up three. Im looking at the ruble, 68. 88. We are really on a 70 watch on the russian ruble. Brent, 42s. 70. Some real weight on oil and iron welker toew lows as well continue the discussion on economics, finance, investment, and international relations. Jon ferro and tom keene. Bloomberg surveillance. Jon good morning from the city of london. Up 200 points. At the time of the morning, lets get to ramy. Made a nationally televised speech to discuss terrorism sunday. He defended his current strategies in the battle against Islamic State as well as domestic attacks. He called the San Bernardino shootings a new face in the fight against terrorism. While he offered no new policies, he repeated his call for tougher gun laws. Last night i speech is only the oval office. Is chicago Police Department the focus of a new federal investigation. The department of justice will launch a wideranging civil rights probe this week. The killing of a black teenager by a white Police Officer last year has sparked new protests. Worst inflation called for a new order yesterday. The Opposition Party took control of the legislature for the first time in 16 years. Voters turned their backs on the ruling socialists and president nicolas maduro. Shiftshe first major since hugo chavez became president in 1999. And a startling announcement by jimmy carter. He told parishioners at a Church Service yesterday that he is cancer free. He revealed four nonce ago melanomahs ago that had spread to his brain. It has not slowed him down. Tom just wonderful, and we will rip up the script right now. Ut is with us. We are going to talk equity markets and hedge funds right now. Just, i want to rip up the script on president carter. You are with raymond james. What does jimmy carter mean . Jeff i worked with jimmy carter back in the 1970s. Ef hutton in atlanta. Governor,s a georgia thought off the plane in rochester, new york, and people said, who is this guy . No one knew who he was. What did he mean to the south and to georgia before we knew about him . Moverse was one of the and shakers. He was revered in atlanta. There were a number of celebrities in the forward Atlanta Program back in 1971, 1972, 1973. Tom lets move on to our discussions of economics, finance, and investment. , i thought your note today was uncommonly strong. Queen, the british rock band, and you look at the hedge fund industry. Here is some carnage out there. Why are hedge fund struggling so much . 2 , 20 ofnk the profits, the Business Model is broken because most of the hedge funds are no longer outperforming anything. So you have mass redemptions between october and the end of this year in the hedge fund industry, and i think there is a whole new model that will emerge out of that. Tom that whole model away from fees is about performance. How can anyone perform when the Systemic Risk on the righthand side of the equation we all have now . Changed world, 2015 has been a very difficult year to outperform. You have these massive, 1000 point up and down moves in the Dow Jones Industrial average, but it is like sitting in a rocking chair. There is a lot of movement and we have gone nowhere. Tom Ian Shepherdson, when you investment, sauts his world and investment, it is a whole new set of lower rates. Is that a structural change and a permanence . Ian permanent is a big word. The jury is still out on this. We do not know what the terminal rate is going to be. We have this cozy consensus that it will be threesomething instead of fivesomething in the last cycle. It may be that what we think of as being structural change and the secular stagnation story that Larry Summers talks about, they be what we are seeing instead is a long unwind of a gigantic boom followed by a gigantic crash. It may be that when the unwind is complete, the economy does not look as different and sluggish relative to previous norms as we think at the moment. If that is the case, the terminal rate will not be 2 or 3 lower than in previous cycles. It is easy to get swept up in the idea that this is a certainty, that we will definitely have lower rates forever. I want to throw in a note of caution that maybe we do not know the answer to the question yet. Jeff, to your point about another hedge point biting the dust, i could not help but notice the it did not speak to what does it tell you about how crowded some of these traits are and how the consensus is for some of the strategies . Jeff a lot of the hedge funds are piled into the same 30 stocks. The major averages have stayed around the alltime highs, if you look at the top 4000 largecap stocks traded on the exchanges in this country, there is 56 of them that are down 20 or more, and 28 of them that are down 48 or more. So you have this internal correction going on while the averages have stayed up around the highs, basically dominated by the 20 or 30 stocks that all the hedge funds are crowded into. So i think that unwind happens. That said, i think the averages are ready to make a major breakout to the upside and get a pretty good santa claus rally yearend. Jon i want to touch up on that point. The kravitz rate that everyone seems to be in, what does that tell you . When the full market ends, it will end with the big bang. How big . Not see it that way. We are almost seven years into this. It passes prelude. We compound 16 year on average, and we should have another seven or eight years left in this thing. If you compound forward to 16 , you are looking at over 5000 on 2023 or 2024. Gary shilling is below that, jeff currie and others may be in that area for a short time. Come on over here to the bloomberg terminal. Here is a spike down early morning. Call this australia. Then we migrate up there this is. Olling over in new lows in the last two hours, down 1. 7 . West texas, 39. 20 nine as well. I believe that is called a value how doree jeff scott, you avoid a value trap . I think you have to do your homework. You have to look at what the revenues are doing and what the bottomline earnings are doing, and i think a lot of the old tech stocks are value traps. Tom ibm, we have seen the challenges, but in hydrocarbon and mining, these things are getting dirt cheap. Is there value there as we see oil jeff i think the midstreams, Master Limited partnerships, are a stone cold buy. They are throwing out the babys with the bathwater. Tom in shepherdson, this is shortterm, longterm. And then there is this medium term in the way. You have downstream refining, upstream which is exploratory. I do not have a clue what midstream is. What is medium term . We used to say that nothing keeps oil in the ground other than a low price. So the price drops a long way, we see huge cuts in production. That has not happened yet. Opec has thrown another caught in the wheel over the weekend with the idea that we will pump and see what happens in an attempt to take out the nonopec producers. I have thought previously that 40 was going to be 1000 floor. But we could be down at 35 at the end of the year. I do not think they will stay the longer term, but it is risky for the oil business right now. Tom jon ferro, i know you agree with maker to we have see rationalization of the price of oil from 100 down to it 80. 60 and we wonder where we will be here in a week. Look at russian ruble. That is something. Jon i think it is fascinating, not just the ruble but what happens with the whole market. One question i have asked, the thesis that we have bridged Storage Capacity and we have to move down the marginal cost of production, whether that has a little bit of fuel on friday after opec effectively is throwing in the towel for now. Tom jon ferro in london. We will continue with jeffrey saut. And terry duffy, look for that in the 8 00 hour. With futures up 2, it is bloomberg surveillance. Good morning. Tom good morning, everyone. Bloomberg surveillance. Bloombergo our business flash. He is ramy inocencio. Ramy the new ceo of barclays is considering deeper cuts at the banks securities unit. Jeff bailey is considering reductions that would mean the elimination of another 12 of the units bankers. Those cuts would be in addition toaid in existing program an existing program. Moodys is moving closer to lifting rush out of junk, but derivatives traders are delivering a different point of view. By credit implied default swaps suggest russia should be four steps lower than one pointne score, short of investment grade. Mockingay part ii 2 and the horror feature was second. Tom thank you so much. Futures up 3, which barely describes what we are seeing in commodities. We got lucky on a sing the best chart. I made this a week and said we had to do this on monday for jeff saut. Iron ore you say so what . Shanghai iron ore all i have moving you is, with the average, jeff saut, that is the ugliest technical chart known to mankind. When are we going to see a catharsis in iron ore and commodities that signals a blowout where you can get some interesting commodities . I have not seen it yet. Jeff i do not think you have seen it yet either. I do think you will see it now between between now and yearend. I think the gdp is going to pick up next year. The world gdp is going to pick up. I think the u. S. Economy is stronger than the Service Figures suggest. Tom that is why we booked the with in shepherdson. You agree with jeff saut very much so. Commodities in china, is that expressed through currency adjustment . Ian if you are a producing economy cut especially if you are a nondiversified producing economy, this is herbal. It will get worse. We talked to this is horrible. It will get worse. It is very hard to see a good way out in the shortterm, but that story applies to a bunch of asian economies as well. Tom these guys should keep talking. Jon by the time the market will e market i am looking at iron or. The headlines more, dropping 40 below the metric since 2009 it is not 2009 because the supply stories so much more dominant. The question that will be asked this morning is whether there is a demand story, whether there is a little red flashing light going off in asia. His there . Jeff there is a compositional change in the u. S. Economy. , butquit buying iron ore if you look at what iphone sales are doing in china, they are up 80 yearoveryear. Nikes business in china is up 30 year over year. The importation of higherquality foods is up 26 year over year. So i think the chinese are changing to internal domestic thatd, but i think commodities tend to track their incremental costs of production, and i think you are pretty close to that died i do not buy that crude oil is 20 a barrel i think crude oil is in the process of bottoming. I think the Master Limited partnerships in the midstream going into buy yearend. And i think the commodities are in the process of bottoming. Jon this pivots from the industrialization of china, they are two solid plates running against each other. They are like two tectonic plates rubbing against each other. The ian the question is when . I have no confidence that the earthquake happens next year or the year after. It is very hard to find an emerging economy that is fully emerged without hitting a big something in the road at some point. What is the mechanism to make it happen immediately . I do not really see it. As jeff was talking earlier, we see a clear signs of a transition. I am sure it cannot be managed perfectly smoothly, but i would not bet against the right now. Mlps. E i just looked at one with a 19 yield. Their yields have to adjust at some point, right . Jeff i agree with that. More money has been lost per yield than at the point of the gun. Mlps, a lot of the especially the upstream mlps, which have Price Sensitivity to crude oil, are going to cut. And the natural gas has to come through those pipes, and they stand there and collect tolls. Warren buffett has said the streams and downstreams have hard assets and good cash flows, so i think the baby is being thrown out with the bathwater. A newhe midstream, it is phrase. It is a massive jargon alert for bloomberg surveillance. With in the medium today, Ian Shepherdson and jeff saut. A conversation with olivia blanche hard. This is with olivia with olivier blanchard. Stay with us. From new york, from london, we get your morning started at bloomberg surveillance. Tom you wonder where currencies will be, on the commodity moves we see this morning after a. Eaker yen russian ruble, we have a 69 print. That is a huge deal, indicative of the hydrocarbon pressure. Right now, to look forward to bloomberg , here is stephanie ruhle. Stephanie thank you, mr. Tom keene. On friday we saw the markets close up, so we are monitoring, and we also are monitoring oil, which continues to slide following the opec meeting. We will break that down with terry duffy, who has talked about real estate in the experienced economy. What isest will tell us driving people into shopping malls. It is not just sale prices. An schrager will be joining us it is about the experience, tom. Are you enjoying yourself . Are you experiencing something . I experienced a very big weekend in miami. An art boat h we sat down and talked about an art bubble. Tom right now we need to prepare ourselves for nine days out on the fed meeting, and Ian Shepherdson is with us from pantheon, and jeff saut with raymond james. Ian, let me start with you. Have you changed the vector that you will establish on december 16 . Out into next year, or into 2017 . Ian we are going to get a small move on the low language that it is gradual and we will take things easy. We remain accommodative. That is going to be a very clear message. We are doing something, but do not panic. My fear about this through next year is that the narrative coming out of the data, which i think will be much stronger than the fed things, will change, will force change on that language. Tom jeff, i know what you are forward tell me, the guidance with a marketer it what is the market telling janet yellen . Jeff that we should move 25 basis points this month. I do think that she is true to her word. I think she will be very gradualist, that she will raise rates and wait to or three months wait two or three months. In the longer term scheme of things, i think that rates going up are indicative of a stronger economy going forward, and i think gdp is going to strengthen in 2016. Jon everyone, even my mom who turns eshoo tunes in every now and then, thanks the fed will hike rates. Is there anything that stops them between now and then . Jeff i think you will have to have some kind of horrible economic report between now and then, to prevent the rate ratchet that i think is coming. I think the employment of a that came out on friday is indicative of where the economy is going moving forward. Think thatscary to jon ferro is part of the dot plots. What do they tell us now . Ian the data ultimately tells us what to do. Four guns is a wonderful thing if you can see clearly and nothing goes on. The danger is that something goes on. If you look at the feds record, they rarely achieve what they want, stable strong growth and stable inflation. Theres always Something Else going on that is in the way. I am more nervous about statements that markets take as the gospel about how things will pan out. I do not think this will be any different. Jon the city of london calls it a dovish hike. The market trades higher, what happens next . Tom what happens next . Revenue growth for next year do we get nominal gdp and better Revenue Growth . Get betternk you do Revenue Growth. There is pentup demand. The tax cut because of the drop in the price of gasoline will finally feed through into the economy. Again, i think things will strengthen in 2016. Tom Ian Shepherdson, thank you so much. Jeff saut will continue on Bloomberg Radio with us. Futures up three, dow futures up 19 or jon ferro, i am not sure what that means it what i do know is you have commodities on the move and they have deteriorated in this hour. That will be front and center. Will joinlinguirian us on the radio as well. Stay with us through the morning on bloomberg television, on Bloomberg Radio. This is bloomberg surveillance. Brent crude, 42. 55. Good morning. Stephanie president obama lays out his plan for combating Islamic State, but his critics say he does not go far enough. Oil in free paul oil in free fall. And paying for experience. Stephanie welcome. You are watching bloomberg. It is monday morning. We are in new york city. Im stephanie ruhle. David im david westin. It is also pearl harbor day. Stephanie it was an important day for new yorkers yesterday. Thejets beat the giants, in david you are not happy with the jets win, are you . Happy to be am also here. I spent the weekend in miami. It was a pretty good time, but i am back at home. David