Transcripts For BLOOMBERG Bloomberg Surveillance 20151221

Is not there. That will be something to watch through the week. Guy it is a story we will have to watch longer than that. Themegoing to be a big throughout the show. Good guest lined up for that story. Lets get the first word news. Spanish government bonds tumbling after an election that raises questions about the countrys political direction. Voters chose a fragmented party. Negotiations will be needed to form a coalition. The conservative party cell short of the seats needed to go it alone. Socialists gain the Parliament Seats. They are expected to join with groups to form a voting block. Rescuers in china searching for missing people after a landslide. A mountain of dirt and construction waste very nearly three doubt three dozen buildings. At least 91 people may have been trapped. The city is a major Manufacturing Center not far from hong kong. A fakequestioned about bomb found in the bathroom of an air france jet. The flight was diverted to kenya after the device was found. Was madeno danger but to look like an explosive device. Security has been tightened worldwide since paris attacks last month. World soccers most powerful leaders are kicked out. Blatter and the man who hoped to ceed him to secede him were banned for eight years. Blatter is going to appeal the panel j. K. Rowling. Wars movie the disney movie had broken ticket sales records. For these and other stories, bloomberg. Com. Star wars to our movie review with vonnie quinn. Vonnie the next installment is in two years. Said it is as good jedi. Urn of the futures up 18. A good start to the week. The yield have done not much. Oil, front and center. This has global ramifications. On to the next screen. Vix over 20. Brent crude under 37 a barrel. I did not notice this until i walk in, brazilian real all had a moldy friday. Guy johnson, what do you have . Are on the front foot. The spanish market is down on the inconclusive outcome to the story. A decent pickup in yields across the spanish curve. The other one i wanted to show you was the azerbaijan. With the problems in the russian economy. It has to do with what is happening in crude. This is it against the u. S. Dollar. The u. S. Dollar is up by 47 versus azerbaijans currency. Tom this is america. I knew this was bad. I did not realize it. Guess the chart. Macys. Wow. Adjusted for inflation. Was inis back to where 1997, 1998. Vonnie it comes at a time where analysts have been praising macys when it comes to doing a lot. This may be a larger story of the mall and the department store, having difficult times. Tom this is the retail reality. The credit stories surrounding that is going to be fascinating to watch. A number of guys saying watch what is happening in retail credit. Lets talk about the story with crude. Tumbling to its lowest level in 11 years. Speculation that a global glut will persist. In our guests. Onre is not that much to go in terms of new news. It is a continuation of the theme we have been talking about. Will there is nothing for people to latch onto. One thing key now is the weather. It is warm here. It is warm in new york. It is warm in northeast asia. Stockpiles are building. Markets have nothing to latch onto to turn it around. Debra i was going to say oil is on a slippery slope. At thece is not with oil moment. Pressure on both sides of the equation. Not just the demand side. Also on the production side. You will protect price and volume. There is a slight nugget of good news. Produces are becoming more streamlined and focused on cutting costs. We do see a rebound. Not for the oil price. Oil prices with the you will see a fallout in the highyield market. A lot of junk bond issuance was done by companies. How far we have come down, how quickly. If you would. A chart of west texas intermediate. Down we go. Down to new levels of 34. For kennedy, do they wait next year to adjust their Balance Sheets or do they squeeze it in in the last two weeks of the year . Will theres not much that can be done this year. A, you have to think at these prices, there are people feeling the pain who will need to sell businesses and assets and become less fussy about the price they get. I think we can expect to see more deals next year. One thing that will be key is players in the u. S. Were hedged. You will see people relatively insulated from lower prices feel much more pain and you will see the structure you have been asking about these last few weeks. Vonnie barclays is saying there has not been a need for extra off stores forage all stored offshore storage. Will there is a danger as winter bills, we run out of places to put this stuff. There is a potential for a crash down to 20 a barrel. We get more than a Million Barrels a day into the market that the world does not need. A key difference between now and the financial crisis is tankers were cheap in the crisis. Tankers now, because there is so much oil, they are earning really good money. The trade is not there. You must get to a point where that stops people who were buying oil, putting it into storage. That could come back onto the market. If that were to happen, how low cut the price go . Will it is anyones guess. We have any idea how easy is it to gauge . To gauge. S hard there are hundreds of millions of barrels in storage right now. It will take a long time to work through that. Coming oute barrels of the market, but that is not going to have an impact on price and so we work through the stock pile. Tom will kennedy, thank you so much. We are going to watch this carefully. Down . 26, down . 27 on brent. Worth watching. Will join usw sec with jones day. We will get a view on free money out there. Bloomberg surveillance. Tom commodities this monday. In hong kong, focused on iron ore, oil. Statistic of the morning, whether you are in new york, london, or hong kong. Here is vonnie quinn. Yeare brent crude and 11 low is not going away anytime soon. Since july level 2004. Suppliers fight for market share. Oversupply could get worse. Limitsandon output earlier this month. Toshiba sees red ink on the horizon. A 4. 5 billion loss for the current fiscal year in the aftermath of an accounting scandal. Some 5800 workers will be let go. A Television Factory in indonesia will be sold. Panasonic bolstering Housing Operations and moving away from consumer electronics. It is requiring it is acquiring a refrigeration maker. Into a whollyt owned subsidiary. The deal is expected to close in april. Guy thank you. Entering uncharted political ground, Prime Minister rajoy lost his bid over the weekend. His party lost ground in the election. An end tove seen the twoparty system. Absolutely. The spanish have ripped up the political rulebook. Doing well ints this election. Party formed in 2014. We are looking at an ugly alliance of Political Parties not well matched. The Prime Minister, he has the most seats. He does not have the majority. His future is uncertain. It is looking to the alliances that can be formed to the parties and whether or not we can see a socialist or conservative government in the building behind me. Guy that uncertainty seems to be rocking the markets. When do we think we might see this happen . How long do we have to wait . Is it easier for one side or the other to form a government . Pretty much everyone we have been speaking to today has been very cautious about hedging their bets. It is difficult to call. Investors are looking for the with af rajoy teamed up promarket party. That looks difficult to achieve. How thingsthis is are shaping up. The parties have to get together by january 13. They will have two months to form an elected government. If they fail to do that, the standing Prime Minister will have to call fresh elections, adding more uncertainty to the picture here in spain. Tom, thank you very much, indeed. Tom mackenzie in madrid for us. Godfrey. Ng in gemma big trades is everyone to be long europe. Is going towhat happen imager it in spain, you have seen it in portugal, are we underpricing Political Risk . Not particularly. What is moving markets mores monetary policy. The ecb has left the door open to stimulus. Is apeople were hoping for decisive election outcome. You would see a spanish rally revival. Is confidencere in the markets, the markets have been punished. Spanish stocks fall to a two year low. Will benefit from lower oil prices. The economy is recovering. The government may not push through too much. With that, except people are getting to the stage where they are exhausted with qe. They need fiscal stimulus. If you have inconclusive government, lyrical risk, maybe that story doesnt happen. What we have seen his corporate investment, falling 20 lower than before the crisis. As long as you see ecb stimulus trickle down and allow them to invest, that will provide a quiet boost to returns. European equities cheap . Which way do i go . What is interesting is not classifying them all together. If you look as anna should equities, they are trading at a discount. Europe, you can understand where the economy is going to be going and the election outcome. There will be opportunities to get Blue Chip Companies international, that are steady and stable. Looking at it on a casebycase basis. Where are they selling into . A u. S. Company, look at the ones that stayed the mastic. European companies, the ones selling to america. The euro, 1. 0856. Later, we will be joined by an expert in the middle east. , looking forward to talking to him about egypt. From new york and london, bloomberg surveillance, stay with us. Vonnie welcome back. You are watching a live press conference. Blatter, the fifa head, he has been banned for eight years. Blatter is appealing the a tear year ban. Ight guy bank of japan lays an egg. The Japanese Central bank beginning to run out of road. Theyre are beginning to suffer disappointment. Face restse economic with the Prime Minister, not the central bank. An egg. Of japan lays they are talking about qe exhaustion, monetary he running a canaryad. Boj maybe in the coal mine. The patient is becoming too reliant on the medicine. It is not quite working. What they were doing was because the japanese stock market had rallied as far as it had, they had to buy more to have the same impact. Technical change as opposed to coming out with more stimulus. Proportion. N out of if you look at the Japanese Corporate sector, they are looking good. They have streamlined the process is. They are going to be benefiting from the lower yen. The japanese stock market is looking like a good place to be. Guy do you think that is something we could expect if we were to read across into the ecb . Gemma there is a lot of well behind continuing this monetary stimulus. Theyrms of the options have available, this is something that will get Investor Sentiment supported. Guy thank you. Coming up next on surveillance, we are going to be joined by angus blair. He will join us and talk about what is happening in the region. A relationship back to oil front and center in this story. This is bloomberg surveillance. We are streaming on your tablet, your phone, and we are on bloomberg. Com. Angus blair up here shortly on surveillance. When youre on hold, your business is on hold. Thats why comcast business doesnt leave you there. When you call, a Small Business expert will answer you in about 30 seconds. No annoying hold music. Just a real person, real fast. Whenever you need them. So your business can get back to business. Sounds like my rides ready. Dont get stuck on hold. Reach an expert fast. Comcast business. Built for business. Tom good monday morning, everyone. Little chilly this weekend but overall, warm, a lot to do with no bid on oil. Lets get your first word. Vonnie uncertainty about spains political futures are sending government bonds tumbling today. The Fragmented Parliament ended the dominating twoparty structure. Negotiations will be needed to form a coalition. The Ruling Conservative Party fell far short of the votes needed to get a majority. The opposing socialists gained Parliament Seats and are expected to join with other leftist groups. The man suspected of buying the rifles in the california massacre is going to trial. He is facing terrorism counts in convictions could mean 35 years in prison. Authorities say he illegally bought the assault weapons used by his friend and the friends to kill 14 people in san bernardino. Police in nevada say a woman who rammed her car into a crowd did it intentionally. One person was killed and 37 others were hurt when the pedestrians were mowed down on the las vegas strip. Officials say the driver was in her 20s. She was tested for drugs and alcohol. A threeyearold was in her car and was unharmed. Dhinas capital is shroude in a smoky gloom for the second time this month. The population is being kept indoors. Those going out risk watery eyes and irritated throats. Their coalfired power plants are being blamed. Get more 24hour the day at bloomberg. Com. Guy thanks very much. Oil prices, we can talk about them all morning, plummeting, as arab leaders meet in cairo. With us to discuss all this is signa institutes founder. To see you, agnes. And you. Guy walk me through the ripple effects. At what point does this get crunchy . It is really hurting in the last few months, in government contracts. Most,arabia will hurt the although it has liquid assets in terms of or in exchange reserves. Guy and yet they are carrying on. Think in the last few weeks there has been a major change. They have been more alert to what has been happening. They found a number of asset sales from a few weeks ago. I think they will have to look at that, too. Look at asset sales. There was an emergency meeting of the deputy crown prince of what to be done, but it is late in the day. They are discussing privatization, asset sales. Its good for the capital market, but it is being done at a bad time. Tom angus, why is there no panic . I think there is panic. They dont want to display it. Is reallyprince running the show economically. Ae number of hats there is kind of panic that is controlled, because they are running on a number of fronts, not just economic but also regionally and politically. All of that means that they will have to broaden the decisionmaking beyond a few heads, trying to, i think, plan better for the future. I think colleagues have discussed this in the past, that the whole region is very slow in making necessary changes. Tom i know there is a mathematical breakeven on oil. Where is the emotional breakeven price for the saudis . Probably passed already, tom. Probably about 70, 80. Right now there is panic behind the scenes because they are realizing this could be longerterm. The answer isnt just releasing the foreignexchange reserves, it is fundamentally looking at the structure of the economy, about how to totally transform the economy. When you look at kuwait, 93 of kuwaitis work for the government. That is absolutely unsustainable. A much lower level in saudi arabia but still too high. There will have to be fundamental changes to hold whole broad to areas. Vonnie tell us what you think the saudis are planning for. They can continue as they are for another two to three years maximum, and unless Oil Prices Recover greatly they will have to make changes. What are the blueprints they are drawing up do you think . Increase jobs for saudis. At somer is looking taxation. Its early days. Other gcc states are looking at th the ate. I have to say, we just had elections in saudi arabia, is looking at asset sales, looking at privatization, looking at selling of government stakes, this would be good for the capital markets, and i assume it will happen, because quite frankly there is a much choice. Looking at how education has to be a part of that, i think the private sector has been arguing for a much improved Education System so the saudis are better prepared for increased competition, to work for the private sector rather than the government. Perhaps disincentive for the private market to employ foreigners. Perhaps cutting subsidies in fuel, electricity, looking at those issues and cutting subsidies back if not to zero then quickly as possible. Guy these guys are pegged to the dollar. You wonder how many taboos we will be talking about. How far down the road to these changes go . Listed that wholose changes how far do you think the impact of oil is going to reach . Its funny, because something we havent mentioned that is quite crucial is that there was a landmark deal that was struck between abu dhabi in china. Closer investment ties, different currency to allow china to persuade their currency and other states to diversify their holdings. They are acutely aware of the fact that having so much of their wealth tied to the oil price is a big risk and they are looking at other ways. Whatsnvestor, interesting is to look at the way this will impact our own market in terms of trade. Coming back to the oil price, its like catching a falling knife. We are looking at an environment where the fed is starting to raise rates, and with an asset that is an yielding anything, it will cost people to store it. It makes it very hard to pay. Peg has beenar pivotal to these economies for quite some time. They are heavily aligned to the oil price. But with china we are starting to see shifts in the way global baskets are being managed. With be sensible for them to look at it and what impact it would have . That, thearing importance of increasing trade ,ith asia, late in the day i increased cooperation, joint ventures, joint bidding for assets, rather than taking all the risks. A number of the countries, looking at increasing relations with china. China is increasing its relations with all of africa. I think it will become more qualitative than just reaching out across africa. I think those relationships will be increasingly important. , think at some stage they will but not in the short term. Tom angus, was a special treat to have been in london. We will come back and talk to mr. Blair about his expertise on egypt as a linchpin for middle east stability. Coming up, a bombshell. Disney what a surprise after the success of the movie this weekend. Stay with us in london, in new york, in a galaxy far away. Vonnie welcome back. This is bloomberg surveillance. Movers. T some morning we have to start with disney. By all accounts, it was a blow away weekend, absolute record set for star wars the force awakens. 238ently it took in million in the u. S. , higher than the 208 million for jurassic world. Tom i love the idea, that they are resetting a 4 billion bogey. Theyre really trying to reach out for a whole new revenue stream. Vonnie this is setting the stage for theme parks and merchandise. In the movie theaters there are theaters set up around, difficult to avoid. Tom did you avoid them . Vonnie i managed to. There is a dark spot on the horizon. Bob iger is coming up later, but e on greenfield at btig wrot friday that disney management made a fundamental mistake by overpaying for sports rights, based on subscriber projections. As a result, he believes that the Cable Network profitability will meaningfully underperform investor expectations. It accounts for more than 40 tom mr. Greenfield is correct. Every effort is made every step of the way not to look at commercials. Vonnie vonnie exactly. If you think about the idea of buying a 16package, sports package in football that is all you need. You need to watch the game. Tom i think greenfield is onto something. That doesnt negate what they are doing with the movie. You saw it and i did not see it. I no it is opening on january 9 in china. Guy yet to see it. I cant take my kids, which will be the biggest impediment, but i think this christmas is going to be dominated. You name it, it will be star warsthemed. There will be light sabers and im looking forward to it. There are a few extra things i wont spoil anything no spoilers vonnie they are positioning storm troopers on the great wall of china for a marketing event. January 9. You can only imagine the excitement. Tom it is going to be great. A celebration for copyright and content as well. Vonnie and bringing in women audiences. There is a major effort in this movie to included women and a whole new audience. Tom bob iger takes a victory lap. Bloombergm today on. Looking at oil, 30 per barrel. Stay with us. Tom best ever. Have review of new york city, looking at the holiday windows. Hey have absolutely topped it they are truly spectacular this year. If you can get to fifth avenue, check out their industryleading windows this christmas. This is bloomberg surveillance. Good morning. Lets get to a business flash. Heres vonnie quinn. Vonnie chairs of syngenta are climbing in the premarket after there are talks to take over. People familiar with the matter they will buy 70 of syngenta with an option to require the remaining 30 . The board is expected to vote on the deal. 1 billion for roughly 40 stake in the u. S. Money manager, according to a person familiar with the matter. They could happen early next year. Eyeing the stake would be their biggest overhead investment since 2007. Is planning to raise as much as 1 billion in new funds, this is according to a delaware state filing. Lyfts filing didnt indicate how much money has been raised. This the value to its 2. 5 million when it announced the previous round in march. Tom very good, thank you. Angus blair owns the analysis of International Relations in egypt. He has 30 years of experience working through the Investment Business for egypt, and is the linchpin of the middle east, a Huge Population and the population in excessive turmoil right now. With the terror and the reality blair, howngus stable is the government in cairo . Well, tom, we just had parliamentary elections. It will be starting from the first week of january. There is an induction process in parliament. Basically, they will then have to vote on all the laws since the beginning of 2014. Then try to support the government and the president to have political stability and economic stability and hopefully economic growth. We talked about this again, the fact that population growth 20 years ago was 1. 2 per annum, now it is growing. 98 of its water comes from outside the borders. Still, there are subsidies on and a whole variety of other issues. Tom there was an economic summit in march of this year. It has been collapsed because of terror bombings and airplanes down. What is the economic update of investment in egypt . Its not that bad, actually. There are 6 billion in the last year, which is a too bad. It still have tos of what it was in 2007, but the fact is that amongst other companies, i still believe that there is very low household debt, very low private sector debt. Full of debtat is it is a tremendous strength it gets very little publicity. Other companies, pharmaceuticals, and a number of other areas. If not altogether bad news, but the fact is with that population growth, it puts tremendous pressure on the government to perform better. Frankly, at the moment, i would say they could do better. They have to do far, far more to get growth up to about 8 or 9 . Inflation is high, at 11 . That is politically toxic for country that has had a revolution. Viewing egypt from the telescope of europe and looking at whats going on, clearly the tourism story for the employment that angus is raising when you talk to european carriers, the tourism sector, egypt is off the map now. You also have that problem in europe. For example in france. Paris has been under a lot of pressure. Funnily enough, it has been a broader trend. What we think is that in this type of environment we are pushing companies to look at their bottom line and become more costefficient, become more streamlined as a company. You will have shortterm pain, but it will set itself up longerterm. Guy how serious is the tourist issue for the country . Andlked to michael oleary, he said you will not see people flying to egypt or north africa. You will see them taking vacation destinations in europe, and not just the coming season, but for a while. Direct cost is 300 million per month in egypt. The nile valley, which is normally key season now, is incredibly quiet. Tourists are still going to have da, and the plan is to get people backpacking for february next year. But people still go to dubai. Whether it is on the way somewhere else or for holidays through the year. Tom guy, pick up on dubai again. I dont understand the relationship. Is abu dhabi going to bail out bdubai . O guy the relationship has only become stronger. Angus, what is the sense in dubai . We saw the crash, we know what happened. My sense is that the company got itself back up to speed, and therefore probably isnt as ready as it once was for a crash. The relationship with abu dhabi is much lower different. In theourse, dubai, the area that made the most change over 25 years in the nonoil economy has been dubai. Inc. Has made a very expensive acquisition of the top of the market. Clearly there is weakness, some weakness in the Real Estate Market that we can see. If they need help, if there are other squeezes, i can see asset sales there are big hotels businesses. They could sell chunks of those businesses. Guy its going to the market . I would love to see it, but yes. Abu dhabi would help, they would come with significant conditions. Angus, your prediction for 2016 for egypt . I think the government will be under increased stress, to create a new visibility in terms of politics, domestically and regionally, and so that has been pushed into it by saudi arabia and yemen and syria. Tom and finally gemma what is your, enthusiasm for equities next year . We think there a lot of opportunity still in the equity market. If you look at where you will in return, were looking at europe, focusing europe on international benefit. We think financials are still looking good and they are benefiting from cheap credit. A good place to pay out for next year. Tom nice to hear your optimism. Angus blair, thank you so much for an update on International Relations in the middle east. We will get you briefed further. Robert will join us, an attorney, but that barely describes his knowledge and perspective on mergers and acquisitions in a time of very inexpensive money. Futures are up 19, dow up 145. Stay with us for another hour of bloomberg surveillance. Tom Oil Continues its dissent as emerging markets reel. Cheap money well, cheap money fuels big deals. The m a continues into next year. A long time ago in against you the box office this weekend. Star wars, mega millions. This is bloomberg surveillance , live from our World Headquarters in new york. Im tom keene me, guy johnson. Oil again takes the headlines. Guy absolutely dominating the story, and it continues to slide. What were talking about now is the idea that we are getting close to the level that the people that had or the people who have that oil in storage will be selling to the stock market. It is getting quite crunchy now. A lot of people getting quite nervous, tom. Tom you wonder if we see the announcement this year or dregs in the next year. That will be one of our tones this morning with robert profusek. Its get to first word news with vonnie quinn. Governmentanish bonds are Spanish Government bonds are tumbling today. The Fragmented Parliament ending the dominated parliament. Tough negotiations will be new to form a ruling coalition. The Ruling Conservative Party fell far short of what was needed. Socialists led by sanchez they are expected to join with other leftist groups. An afghan official says the television is making major gains in the Southern Parliament in the Southern Region of helmand. The Deputy Governor says Government Troops overran a key district. World soccers two more powerful leaders kicked out. They were banned for eight leers by the organizations ethics committee. Fifa is facing corruption investigations. Sepp blatter says he will appeal. Tim cook says apple pays every dollar it does in texas, and he refutes those who say the country should pay more. The apple ceo spoke with charlie rose an interview last night on 60 minutes. Rose apple here is what they concluded. Apple is totalok that is political krapp. There is no truth behind it. Vonnie he thinks the u. S. Tax code needs to be fixed and says charging apple 40 to bring the money home would be unreasonable. You can get these and other stories Tour De Force four was they at the new bloomberg. Com. Tom i do not see any end to this. It is damaging in every way to ,very part of American Society and you have to tell me whether resolution is with a new president and the new congress. Vonnie part of that resolution has to include discussions with those corporate leaders. It is difficult to know where it will end up. Tom let me do a data check right now, equities, bonds, currencies, commodities. Nymex crude down at the bottom. It will be interesting to see where that is in one hour, 34. 42. Maybe exxon mobil and chevron are calling bob profusek. Is showing a concern. The brazilian real careful scrutiny. Guy, you are all azerbaijani guy they have gone for a free throat for a free flow. They cannot support the currency, so they are going for a free float. The other thing to note, spanish assets under pressure following the elections. Onnie residence tom we will talk about that in a moment. Over to the terminal, bob profusek, do you know this chart . , macys. Erry lundgren i had no idea. This is macys collapsing in retail. This is inflationadjusted back to 19971998. Vonnie you are not going to blame all of this on the weather. Tom it is industrywide as well. We have a wonderful set of guests to get your monday started. Jalinoos is with Credit Suisse. We are going to have fun bouncing off the two of you. Let me start with you. I think we have seen more devaluations in the last number of days and weeks than i have seen in ages. Is this a freely freeloading is this a freely floating in route or a fixed Exchange Rate environment . Shahab what we are seeing with the pressures coming through from the oil price right now is really a sea change coming through in terms of funding pressures for some of his currencies. Ive had probably more questions on the saudi real then any other currency. Tom will they revalue the saudi real . Shahab i dont think so. They have room to grow that areas before they devalue. They are driving this kind of strategy. Unlike azerbaijan, which is a victim of what is going on. Tom there has never been a loss of face for jones day. Bob profusek, the tensions in the foreign extent market and oil do they go over to an urgency of chief Financial Officers to get deals done . Urgency. Not think an it is mostly a continuation of what has been. Tom which is cheap money and everybody makes out like bandits. Bob but at some point if the 10year goes up to 300, that will have an effect on multiples. When that happens, dollars might say i will wait. A bad guym cook because he will not move dollars away for the Internal Revenue service . Bob i read part of his testimony, and they had a tax code that was part of the thestrial revolution of 19th century. Not for today. Tom guy johnson, jump in here. Guy we have all been waiting for the deal to get done. If quickly do they get done we continue to see the oil price collapsing at the start of 2016 . Bob i do not think it will affect things too much. One of the things is the sheer size of this deal. The regulatory entities are overwhelmed. Many are sensitive Sectors Health care and the rest of that. That has been extending things. Plus, 10 years ago there were 10 premerger regimes in the whole world. Now there are 115 and now we are globalized. So when you do a deal, you have all sorts of stuff. Have you any concerns about particular sectors for the consumer in this environment . Are we reducing the number of copies that can the in competition out there bank yet out there . Bob there is no question there has been a push on the regulatory side thinking about that, but we are in the big areas this year one of the big areas there has been so much m a this year is the consumer side of things. You think about food, consumer products, health and beauty, the rest of it the government cares about things more not that they should or should not that are direct to consumer businesses. Those cohorts three companies that do not know what they are doing, not so much. Tom give me a dollar call of Credit Suisse. A churning to the dollar, a leveling to the dollar, that we will not get a strong dollar. Shahab we think it will strengthen. Tom into 2002 strengthening, or the elements of the 1985 plaza accord here . Shahab remember, currencies at the end of the day are relative price. You have to look at what is going on on the other side of the coin as well. In europe, more money printing is happening going ahead. In japan we saw an extension of securities to allow for more money in japan as well. When you put that together with the fact that the fed is hiking, it seems reasonable to expect the dollar to continue gaining in 2016. Guy i was fascinated that you have more questions on the saudi riel than anything else. The first hike seems to have come and gone relatively easy. Does that surprise you . Walk us through the impact that the next hike has, in terms of the order of magnitude. Shahab the first tyke was well telegraphed to the market. The next tyke is going to be interesting because there is still a the next hike is going to be interesting because there is still a clear discrepancy between them market and what it thinks the fed will hike and what the fed itself thinks. If we see a hike in march, which is the Credit Suisse view, that whereng to be the point these divisions have to come together in some form or other and the market has to decide whether it believes the fed or some projection. That could lead to important quote important volatility. The resolution will be one of the drivers of further Dollar Strength. If we are wrong on that, the main reason would actually be Dollar Strength first driving monetary conditions tied to the u. S. Anyway. Then we will have to look at it again. Tom lets continue. Shahab jalinoos with us from Credit Suisse. Bob profusek with us as well p will today, robert eiger take a victory lap between 202 jillion dollars may think 2 00 and 4 00 p. M. On sunday. Stay with us. Bloomberg surveillance. Guy welcome back. This is bloomberg surveillance. Im guy johnson come along with tom keene. Still stunningly warm here in the british capital right now. That is relating back to the stories where watching so carefully. Here is vonnie quinn. Vonnie to sheba drops almost 10 in the japanese session. It has forecast a record 4. 5 billion lost for the current 4. 5 billion dollar loss for the current fiscal year. Some 6800 workers will be let go, and a Television Factory in indonesia will be reduced 50 this year. Panasonic is bolstering its operations and moving further away from consumer electronics. Purchase says it will the Parent Company hussman. A Court Hearing set for today in los angeles will consider whether Sumner Redstone should undergo a mental evaluation. Exgirlfriendls says his signature was forged on a recent document. His lawyer says that is not true. He controls cbs and viacom. That is our latest Bloomberg Business flash. Crude oil tumbling to its lowest level in 11 years. Branch now at 36. 48. Wti at 35. 42. Futures are being sent lower, obviously. Thank you so much for joining us. Next hard deadline . Refinancing . Ks what is it . One some huge Company Declares itself no longer able to produce . Various factors will impact this. Number one, hedging. The e ps are less hedged heading into 2016 versus 2015. That is an important factor. As you mentioned, debt has been the fuel, the lifeblood of this industry over the last several years. It remains to be seen if that liquidity remains available, if those debt and equity markets are available to the industry heading into 2016. Vonnie and its banks are going to decide that . Vincent absolutely. Consequence is the of being less hedged . Vincent there is less protection, less definitive ness for the Drilling Operations for 2016. They need that cash flow to give them that transparency and visibility. This is a chart of bob profuseks billable minutes excuse me, this is oil. Is a chart of west texas intermediate, and this is in the language of mathematics, and elegant chart. All you need to know, for those these are called kleiman moving averages. We bounce off the nineunit moving average. This is contained. This goes to the sweat. Why isnt this happening . Vincent the markets remain open. ,nvestors remain out there willing and able to lend and allow these companies to remain raising capital. That remains unchanged for 2016 as these commodities come on down. The Bank Borrowing bases, and that, as it resets lower, the challenges persist. Guy how much does it cost to rent out a bl cc these days, and how much more expensive does it have to get before some of that crude stops coming back on the stock market Gekko Vincent i will tell you this. There is a lot of crude out there in storage that perpetuates the imbalances that are out there that have to come on, that have to come online. As we move into 2016, these imbalances will persist. Vonnie the highyield debt of some of these companies, it is offering at much better return now than it had been, but it is still something around 25 for a lot of them. It is well below levels of the financial crisis. Do you see that rising further . Vincent i think for several of these companies, the challenges are quite obvious for 2016. It is about hedging, it is about liquidity, it is about access to the capital markets. Difficult 2016ry for a select few. But in general, the industry is better positioned today than they were tom lets do horse before the cart. Horse before the the cart or the other way around . . Oil is the horse . Shahab bil is the cart . At the end of the day, so many countries in the commodities space have really invested a huge amount of money in producing oil over the last 10 years or so. So their currencies reflect that investment. If you look at the canadian mover, it is in a normas for its closest it is an enormous move for its closest trading partner, the u. S. Those crises themselves are a function of the fiscal problems. Going into the mergers area. Everybody wants to save face and it is elegant. Where is the brazilian money into oil, like the Warren Buffett deal . Bob it is coming. It is called e p. The p is a surplus right now. Exploration budgets have been totally . That will take a couple of years to have an impact. There are less than half as many rigs operating in north america as a year ago today. That will have a time dimension to it. Naturally, the market is bringing that forward, but this is not some permanent collapse. Demand in this country, first time ever, is going up. Tom Vincent Piazza, you called for that months ago. End of the year do we get a 29 handle on west texas by the end of the year . Vincent think of it this way. Cash costs around average are around sub 30 cash costs. Tom vince p oz a Vincent Piazza with a briefing this morning. Bob profusek can crank up the that he drives around manhattan. Coming up, john silvio joins us, the wells fargo chief economist. We will talk to him about the American Economy and the boston red sox. Stay with us, worldwide. Bloomberg surveillance. In aquickly, lets cram morning mustread per matthew living is the best, best in finance on wall street. Here he is on the latest blowup with mr. Skelly he was down 99. 9 . Tom bob profusek with us. That is just classic, about the desperation of moving from busted transaction to busted transaction on to busted transaction. Bob it sure is. Do not represent anyone involved here. Everybody has their day in court and is innocent until proven guilty. What will you look for within this Legal Process . Bob it is going to be drawn out, no question about it. A is very unique and almost backpay kind of story with all the dimensions to it. The court of Public Opinion always makes its judgment taste on what, not much. Lets see what happens. Tom i like it. That is diplomatic. Shahab, i will not call on you. Credit suisse compliance will have my head. Vonnie it is hilarious. A mythical agreement between skreli. Tom David Rosenberg will join us on his new inflation call. Stay with us. Bring your family and friends together to discover the best shows and movies with xfinitys winter watchlist. Later on, well conspire as we dream by the fire a beautiful sight, were happy tonight watching in a winter watchlist land, watching in a winter watchlist land xfinitys winter watchlist. Watch now with xfinity on demand your home for the best entertainment this holiday season. Guy welcome back. This is bloomberg surveillance. Im guy johnson, with tom keene. Some would say if you want to predict where the oil prices going, stick your head out the window. If it is warmer than you think right that is the story now, and you should probably sell. Lets get to first word news with vonnie quinn. Vonnie four people are being questioned about a fake bomb planted in the bathroom of an airline jet. Authorities say opposed no danger but was made to look like an explosive device. Frances ceo says security has been tightened worldwide since the paris attacks last month. Are lookingin china for dozens of people missing after a landslide. It very nearly three dozen buildings in the Southern City of shenzhen. The city is a major Manufacturing Center near hong kong. Tim cook is not backing away from his support for unbreakable encryption on apple products, even though crimefighters want to crack the code. He spoke with charlie rose for an interview which aired last night on 60 minutes. We cook people suggest should have a back door but the reality is if you put a backdoor in, you should have it is for everybody, the guys and bad guys. If it is evidence of criminal conduct or National Security behavior . Tim cook if the governor lays a proper warrant on us today, we will give specific information that is requested because we have to by law. In the case of encrypted communication, we do not have it to give. Vonnie he also called the suggestion that apple is hoarding cash overseas to avoid income taxes, total political crap. Little riled by that suggestion, i think. Tom there is a lot of substance there, and you can see it in its entirety at the cbs news website. Tos is the one guy we talked whose bio, his resume, his brag sheet gets adjusted about every week. Jarden is the latest idea appeared we have pringles in here, any number of other transactions, including broken Hill Properties and their defense. With Shahab Jalinoos of Credit Suisse. Bob, the most important thing is the power the bob we have been talking a lot about e p this morning because there will be a lot of loantoown situations. There will be a lot of assets scooped up by the big guys. They still have unbelievably powerful Balance Sheets, so they will come in, no question about it. There is just so much money available for investment. And deal investment is very possible is very profitable, unlike for cars and other stuff. Two people sitd at this desk and say it has elements of the late 1930s merger combination, a la andrew mellon. Where there is consolidation in this industry and that industry. Do you see elements of another time . I do not see anything like that going back to the 1930s, but are there going to be destination mergers . Of course there are. This did not work out too well in the 1970s. Vonnie is it going to start in retail . Bob that is an area i want to stay away from a little bit. This is not about shortterm issues with retail. The Balance Sheets for most of the big guys are very strong, unlike the early 1990s where they had a lot of lbos. I do not really see that. Uy, did you see how bob profusek answered that . Did you see how he wanted to stay . I am going down a list of names here. Guy it is a man who knows what he is doing when it comes to smoothly sidestepping that particular question. Let me ask him one that he may be able to get to. Equity here sitting on huge amounts of money. That money is getting charged a fee, and i wonder how lps feel about that. 2016 looks think like to the big guys . What does it look like in 2016 . Is it going to be easier . Businesses are sold off, it is almost always in an auction. There are very few oneoff deals. They are competing against strategics to bring in synergies and other things. The highyield market is not helpful. But again, it goes back to the oceans of capital. Many firms have funds that they provide their own equivalent of highyield financing, and if they do not, there are plenty of other hedge funds willing to do it. One thing that is very interesting about the last year or so is that family offices, which really stand for people who run money for hugely rich are gettingey involved with deals and providing what used to be the highyield opponent of that. Private equities people are willing it out because of the highyield thing, plus the synergy point. Tom what is the Credit Suisse call on the terminal value of all of these rates . I do not see any angst i cfos. I do not see any angst by cfos. Within your matrix of Foreign Exchange stock, do you see a lower rate environment which keeps the oil going for mr. Profusek . Shahab it is difficult when you have such low rates in Major Economies like europe and japan, to avoid that. The simple fact is, if you try highergh rates rates than what you think the others are doing, your currency will go much higher. Capital will flow freely across the borders at well capital will flow freely across the borders as well. The market is doing the job for all of us at this point, as long as there are Major Economies out there who believe the answer to their current problems is to basically print money. That is something that is not going to change. Tom it is like the desert tinder thing. Vonnie we did not see a whole lot of euros coming this direction when it was stronger than the pound, stronger relative to the u. S. Dollar. Are we going to see u. S. Dollars headed toward europe . Shahab at the moment, there is on a leaving europe portfolio level. It started with foreigners who owned european portfolio assets, selling those assets and leaving. We are seeing Central Banks having to reduce their reserves, under pressure from particularly emerging markets. Bottom line, there is not much demand for euros right now on the portfolio level. Next one in my view will be when european investors start setting their own assets. Very busy selling in europe, but the europeans themselves can also be the next factor. Europeansxt big drop, selling euros. Tom i agree with you, to be perfectly honest. The fuel of cheap, cheap money, and lots of dry powder as well. You wonder what disney will do. They will have a little bit of cash flow to deal with next year. Robert eiger is the disney ceo. He will be on bloomberg in the next hour. Bloomberg surveillance. Guy welcome back. You are watching surveillance. One day closer to christmas for them in hong kong. Here is vonnie quinn with the Bloomberg Business flash. Vonnie thank you so much. People familiar say the stateowned company is offering to buy bank 70 of shenzhen with syngenta. Lyft isling Company Planning to raise 1 million in funds that could sharply boost evaluation of ubers biggest rival. It was valued at 2. 5 billion when it was announced at a previous round in march. Cap will be records are no match for the force. Top movie records are no match for the force. Market jurassic at 30at last summer million. That is the opening weekend. It has not even started. Tom this is a triumph, going saying Harrison Ford take the stupid stuff out of the movie. Number one thing. I have not seen it yet. I remember walking out of Empire Strikes back a million years ago and saying they did it right. They had the courage to make this an adult movie. Vonnie there is nothing like movie theaterwded and Harrison Ford walks in and there is a collective recognition, a collective memory. Tom the single best chart is not on the force awakening. Shahab jalinoos is with us. This is the renminbi, the chinese currency against the abenomics of japan. Japan wants a weaker yen. They got it, and then it moved down three standard deviations. Massive weakening in japan. Where is this tension going to be in the next year . Boss of the Financial Dynamics of asia for the next year . Aahab it certainly sets standard for the others to follow, if that is what they want to do now. What japan has done is set if you have enough signs of deflation, disinflation, you can do whatever you like, as long as you get the green light. Tom can it continue another year . Shahab it can. It is important to watch the april wage rounds. If it is weak, it can come in with more easing. Dealing from the u. S. Dollar, after many years of having a firm income, more or less being linked indirectly with the dollar. What this opens up for us now is the possibility of the renminbi weakening on a sequential basis. We just had 10 consecutive days of the renminbi fixed, staying lower, until today. But it is telling us that something be has changed. In the past, the Chinese Renminbi tended to be flat or strengthening, even when the dollar was strong against everyone else. In the future, we might see the renminbi actually weaken. That adds another tailwind to the Dollar Strength. Tom guy johnson, jump in on the currency war. Guy where corona goes, does draghi have to follow . Shahab ultimately, yes. That is the way things have panned out so far. If only just to send the signal that you are as serious as the other central bankers when it comes to doing Everything Possible to fight deflation, or at least the risk of deflation. In europe, there are high hopes that what we are seeing next year is a recovery in inflation. Some of the year on year in effects of week oil prices washout, but the fact is we have them still lower. In my view, there is a risk that economists are still disappointed by the out turns that we settle from europe. I am looking at inflation breakeven rates that the market gives us. In my view, that is what is going to put the pressure on the ecb in 2016, to have to ease again. That is the risk that the market is still underpricing at this point. Guy what do you think the current account looks like next year . Shahab it probably shows a healthy surplus, 3 or 4 of gdp, which is fine. The fact is that does not necessarily mean it has to go up. As long as there is more money leaving than current accounts are bringing in, the euro can still be on the downward pressure. I think when you have negative rates the way you do in europe, the incentive for capital to leave is very strong. Tom this is great. Credit suisse tells you what to do. Where theonepage Foreign Exchange market is going. To bob profusek what this means, the currency war. On theat this means strong dollar for multinationals. He needs a briefing before his first meeting this morning. Shahab it is difficult for anybody running a business in the u. S. To avoid the fact that the dollar is going to be very strong. Reason has not given us to doubt that. The fed had an opportunity last week to hike rates. To dwell significantly on the dollar and guide the market into believing it will not go up. Tom does hedging work for multinational corporations . If he gains the dollar, does it work, or is it a waste of bob profuseks clients time . The rate differentials work in your favor. I think that is definitely a strategy that u. S. Corporate should follow at this point. Tom we will send you the bill. Vonnie i noticed the onshore and offshore rates will be pretty much the same. We protect the copyrights of all of our wall street houses. We will come back and talk much to do with the corporate landscape this year. Futures up 18, dow futures up one. 37. Stay with us. Loomberg surveillance tom good morning to you. Good monday morning. 1. 2438. X report, yen, quietly come on friday, the brazilian real trading out near 4 level, and Credit Suisse looks for the brazilian real weakening. Shahab jalinoos with us. Bob profusek. Mr. Profusek, let me start with you on what globalization means for multinationals right now. There have been different eras of going out to emerging markets. What is the appetite for emerging markets of american multinationals this year . Bob business is premature old allies already. Most businesses business is pretty much globalized already. Most businesses. For lawyers it is terrific. Tom it keeps you employed. it is long it is times it is long gates times for whether it will close. Jeff immelt has a boring job at ge, which is industrial stuff, is mostly what he is exporting. Multinationalnew strategy for emerging markets . Bob it could well be it when you think about it from my point of view as an m a guy, think about what they did this year. It is really transformational. It is not the ge that our parents knew. It is something difficult it is Something Different and moving in that direction. Everybody says everybody is struggling for revenue growth. A big slice of that its currency. How do you factor that out . Vonnie what is your outlook when it comes to jobs for the next year . You see it across all industries, from banqueting from banking to private equities. Do you see more jobs going . Bob in the u. S. . Vonnie yes. Bob i would not see the jobs list the jobless rate next year close to 4 . What is really the job market . Peoplemparative basis, are hiring. People have needs. Certainly in the services business, in the Tech Industry and the rest of it, it is not auctions of players in baseball, but some sectors, putting energy aside again for a minute this was all true two years ago in energy now theyre a bonus is being offered to kids coming right out of college. In my business, we are hiring as aggressively as we can. Guy can i ask you a question about the media landscape . Some buzz some of the deals that we were promised in 2015 came through. Some did not. Will we see more in 2016 . There is talk this morning of plenty of other rumors floating around as well. Bob there has to be. What is media today . It is the convergence of all these different technologies and things like that. That is what creates this stuff. When you are not really certain and you can bundle and do all these other things, you probably will see it. You may see the unbundling of some things. I thought the deal of the year last year last week was the dowdupont deal. It is just fabulous. Combine these two companies and say we are not just going to get bigger. Really an amazing deal. I look at emerging markets and globalization in the broader theme, i think of the bundling of the Miss Universe eant between columbia between colombia and the philippines. Shahab certainly what we are trying to do is find out which countries have another game to play other than just oil. Tom which are they . India is an obvious one. India imports oil but is not exported. It needs commodities, so it benefits from cheap commodity prices. Mexico is another one to look at. Although mexico is known as an oil producer, oil is a small part of its exports. If you look at mexican exports outside oil, they are going up at a tremendous rate. Tom how do you know whether to go long mexico . Has a good story for when it goes outside of commodities. While all the emerging markets are in trouble and the dollar is a general strength in trends, the mexican peso is not going to beat the u. S. Dollar. If you can do trades within emergingmarket currencies tom this has been great. Thank you so much. We have to come back and talk about dowdupont. That was really something. The deal of our year, really the deal of our lifetime. These two iconic american companies. Economist john silvia we will do that tomorrow, looking forward on the American Economy. Something we did not touch on today, the americans consumer. A nice list to the a nice to the markets this morning. It is warm and loving, warm in new york. We say good morning. Stephanie Global Oil Prices continue to tumble. Rent reaches and 11year low. And 11 yearhes an low. Can we willa monday take a look at some of the best and worst deals of 2015. Stephanie welcome to bloomberg. We are having a very big monday. Im stephanie ruhle. David i am david westin. Bloomberg intelligence covering oil, and we have bob eiger coming up at 8 00. Did you see it . I saw it. Stephanie there is no one better. Bob eiger running a victory lap around star wars. I will tell you how big star wars is. It is bigger than santa. I was online with my children yesterday to see santa claus, and they said forget about it. They left the line and they went to the movie. That is et