We will be tuesday or wednesday of next week. That is an uncertainty the markets dislike. Francine no one likes risk in this kind of environment. October manufacturing, pmi rising that are then estimated. We will have pound and euro check shortly. Lets get to the bloomberg first word news. Bankersmost british really that london will remain the Financial Center even after the country leaves the European Union. 72 of banker say london will maintain his role as the Financial Hub for at least five years. The eu and u. K. Will be hurt by brexit. Forecast is that mark carney will not change Interest Rates while he is governor of the bank of england. Mark carney says he will stay in the job until june of 2019, one year longer than planned. Will keep the benchmark unchanged while the u. K. Is negotiating brexit. South korea government shakeup over a peddling scandal. The president fired her premier and finance minister. Neither was directly linked to the investigation, but she appears to be trying to shore up support. Some conclusions about the final moments of the missing Malaysia Airlines flight. Australia says the boeing 777 may have fallen 25,000 feet a minute at the end. Investigators say the airplane was in configure to lan whend it hit the water two years ago. That speculates that someone was at the controls until the end. Electing donald trump president would he a mistake. Advisers says top global news 24hours a day powered by journalists and analysts in 120 countries, i am taylor riggs. Tom jobs data out of the election, futures, negative six. We are lessyield, rowdy in the bond market than yesterday. Euro strength, dollar weakness, improved and continues. The next screen, the vix was the headline yesterday, 19. 1. Mexico, well show you that chart. 19. 28. Rent under 48 brent under 48. Francine Global Equities selling off. That was significant. The peso. Yen gaining. Gold gaining as investors favor haven assets. Race for the u. S. President ial election is growing tighter. Tom you cannot do it all. I missed this. Francine lacqua nailed it. She said, hey stupid, look at the swiss franc. The history of a strong swiss franc, there we go down with the recovery. Let me delete and bring this o ver. You can see the new leg down. Strong swiss franc. I would suggest that is the clintontrump mine. It is a major deal to see the swiss franc down like that. Francine this is basically another way of looking at the u. S. Elections. The polls are tightening. This is a cool chart. The blue line is the clinton ask it of stocks, the red line is the trump basket of stocks. We went back and the deutsche identified 15t stocks that would benefit if on and 15 that would benefit if trump won. You can see the 15 different stocks, clinton goes back to stocks going down as polls nar stock. Edge up for trump this is all about election anxiety. We are joined by bloomberg Senior Executive editor for government. At the global economist hsbc. Hillary clinton heading back to michigan. The race is growing tighter. Six days until the u. S. Of votes. What can we expect . A lot of volatility and headline risk. Will be coming out almost daily. The trend is clearly to a tightening race, which is not that much of a surprise. Except, three weeks ago Hillary Clinton was talking about extend expanding. She is realizing that she needs to get her base out right away. What is the fbi doing . They are releasing papers linking back 1516 years ago. Marty we are just as confused as you are. They posted this on what is called the fbi vault. This was a freedom of information act fulfillment. It just went up. We dont know if a human being had a role in deciding. They tweeted it in an account they have not used for years. A lot of questions about the timing. Obviously one of the most red stories on the terminal most read stories on the terminal. Trump is less visible. Is he less visible because everyone is covering secretary clinton, or because he wants to be less visible . Arty i think it is combination. The email scandal is front and center on the news networks. Interestingly, donald trump is staying on message. He is not making outrageous statements to overtake that storyline. It is obviously pretty effective. Tom francines question on turnout, help me with the trump turnout. How does he accentuate his core audience over to a new marginal audience that will put him in a better electoral vote position . Republicans who were on the fence, traditional republicans on the fence about donald trump, might be moving back into the trump camp. It is not turning out the core trumps, it is getting disaffected republicans to sign on to his candidacy. That is where the numbers are. Toncine marty, let me go janet henry from hsbc. This is the eurodollar and blue. In yellow, you have gold. In white, the mexican peso. Will we have more volatility . This brings us back to the week before brexit. See this times 10 in the next six days . Janet it is likely. Markets and economies hate uncertainty. That is the risk. Yes, until we know the results of the election, markets are going to be on the side of yenion, bringing back the the swiss franc and gold. The correlation of those three series is remarkable. Here is a chart we have been showing. The mexican peso is proxy. The idea of three debates, and e. We go with the trump surg what does this say about florida . Marty i would say what it says is that florida is basically up in the air. Tom up in the air . Marty truly up in the air. Anything could happen. Tom janet henry, from a looked. I help me with the uncertainty and the correlations in the market. I have been talking down the bond rout. The charts tell me it is not a route here and what about the equity markets in the last 12 hours . Janet i think the equity markets have favored pretty well. When you have signs of uncertainty, there is always the attendance see to take profits. It is easy to say these stocks than if it under a Trump Presidency and a clinton presidency, but we have to take those bets on the assumption that we know what they will be able to do. A view on where congress will fall, how much they will get theugh, if trump delivers more populous measures or resorts to a mainstream conservative policy. Beyond next of tuesday or wednesday, we dont know with the mediumterm outlook will be. If you have been in equity markets recently, it is a good time to wait for a little more clarity until the middle of next week to at least know the more likely direction. Francine they are saying the effect of the trump policy proposals would range from modest slowdown to a recession in the first 18 months. How much of the debate in the u. S. Is about economics . It feels like it is only scandal. Marty i must say that the economic arguments are not really riveting on either side. This election will be about what the electorate thinks about the character of the candidates. Ultimately, it will be a decision based on character and temperament. Onwill see what happens tuesday. I agree that what happens down ballot, a senate that stays republican is a recipe for gridlock if Hillary Clinton wins. We have to watch that carefully. Om we appreciate it we will continue with janet henry of hsbc. What a busy day and busy week to get us to the early wednesday election. Ter the and the next hour, steve iceman. Listair darling Willem Buiter. Stay with us. Francine washington, d. C. , where the action will happen. Where we will have the new president come january 21. That is spooking the markets. The polls are narrowing. I am Francine Lacqua in london. Tom keene is in new york. Taylor the owner of the Worlds Largest container shipping line reported a 43 drop in thirdquarter profits. They say the result was driven by low prices. The shipping industry was hurt right overcapacity. English housing prices rising in october for the first time in 16 months according to nationwide holding society. Price growth is below 5 . Sales have fallen 10 from a year ago. Lufthansa will slow down expansion because of what they call a difficult market. They will increase seating about 9 . Lufthansas swiss unit will take possession of some jets. Theyre being squeezed by low Cost Carriers in europe and middle Eastern Airlines on longer routes. Francine thank you. Taylor riggs. Lets focus on the fed. The latest decision is 6 00 p. M. In london. Janet henry, the global chief economist at hsbc is with us. It is unlikely they will do anything. I want to bring you to my terminal. 68 of the chance of a rate hike is december. Agreed . Janet it seems reasonable. They will have to tread carefully in terms of communication that they send after the meeting. The last meeting there were three people that wanted to raise immediately. Three people that dont think they they need to raise all this year. They dont want to precontract to december preconnect. Precommit. They want to keep things where they are. Francine bill get to unemployment. I want to focus on the dollar. How much do they worry about dollar strength, and depending on which candidate wins, will the dollar go up significantly . Janet on the outcome of the election there will be a kneejerk reaction, as with brexit. The kneejerk reaction will likely be that markets love reassurance we are in the status quo. You will get a strengthening in the dollar. Uncertainty,ve there will be a selloff in the dollar. What happens beyond that will depend on the policies that come through and how markets react. Does the fed to care . They care about the data. They keep telling us they care about the data. For will go further out inflation and growth. The impact on december . Only if you get a big move. Tom we would get to jobs in a minute, jobs day on friday. , help melp janet with the Balance Sheet for the fed. It is remarkable the different paths. The white line is the immediate sheet. N the u. S. Balance up we go to a permanence in americas Balance Sheet. Japan, late to the party. Then, they come up right by the u. S. Way. Arelagged the whole these Balance Sheets in perpetuity when hsbc figure strategy . Do they stay there forever . Janet we dont forecast out for 50 years. Tom im sorry, go 100. Janet im not going to pr ecommit 100. We do not have it for any foreseeable time horizon. Remarkable theis number of interviews we are doing where people are modeling 4 al for percent or low p for unemployment in the United States. 4 forle 4 or low unemployment in the United States. Why is that . Seen a relative job rich recovery. Even in the euro area where growth has been a little better this year. In the u. S. It has been pretty weak. The job creation on the back of the week growth has been surprising. That is a reflection of weak productivity, which raises the question why a company is employing so many workers that are not that productive. It could be the reason they are employing people is they are cheap. We have not seen wage growth. There is uncertainty. Companies are perhaps nervous to invest. They are uncertain about the true demands. Employing fewer workers if you dont have to give them pay rises to see where the demand, outlook, and Pricing Power improves. Tom said day, here is the job start. This is extraordinary, down to 4 . I call this the mackie chart. That is remarkably low unemployment. Bank of england on thursday. We do that on friday. Scarlet fu and Joe Weisenthal will be there. Michael mckee in washington. The fed decide that 2 00 p. M. This afternoon. Stay with us, this is bloomberg surveillance. Francine this is bloomberg surveillance. I am Francine Lacqua in london. Tom keene in new york. The morning must read, parallels between brexit in the u. S. Election. A trump wouldte, have a bigger Global Impact than brexit. It would spur the biggest change ,n ranges from taxation, trade immigration, and geopolitics. He would likely enjoy a republican majority in house and senate. Back to janet henry. Fears. Ls in terms of what they are feeding on between the Trump Campaign and brexit are quite similar. Janet it would have bigger implications for the rest of the world. Absolutely. Similar concerns about , etc. ,obalization fears that Field Support for brexit and a Trump Presidency. What brexit is is that the u. K. Is a smaller economy than the u. S. And that makes is a slow burn situation where the Immediate Impact is on the u. K. Depending on what happens in the u. K. With the economy, if it will well or badly, it have a impact on the political process in europe that could spread elsewhere. Presidency, if he were to immediately follow through on policy commitments, particularly on trade protectionism measures, it will immediately move in trench met from the trade liberalization process. Tom a massive slowdown on the 10 year moving average back to the late 1980s. We mentioned earlier, here is the 20 and 10year moving average of the vix. Remarkably the same. It is good mathematics. Living up to 19 near the moving up to 19 near the 20 average. Francine he also put it on a shorter time frame. It is close to what we saw three months ago. Saying, all of the volatility we saw after brexit was shortlived. It is now a longer haul. Janet henry staying with us for the hour. Tomorrow, the bank of england releases its Rate Decision at 12 00 p. M. In london. Focusing on what mark carney will say on inflation. This might be the boe and even bigger for the following pound here falling pound. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Economics, finances, international relations, american politics. Francine lacqua in london. I am tom keene in new york. Taylor the new fbi review of emails is prompting the Hillary Clinton campaign to pour money into states that were once considered safe here at you will return to michigan on friday and the campaign will spend money advertising there. We are talking about colorado, virginia, and new mexico. The race has grown tighter in those states. Trump says if he is elected resident he will call a special session of congress to appeal the Affordable Care act and that if nothing is done obamacare will destroy an American Health care for ever. Iraqi troops have entered mosul. Couldry Officials Say it take months to recapture iraqs secondlargest city. Iraqi special forces are in the eastern part of mosul a little over two weeks after iraq and launched antions offensive. A congressional trial of the toiator from the vatican dispute an ongoing political crisis. Venezuela has been hammered by triple digit inflation and shortage of food and medicine. Brazil collected 16 billion in taxes as part of an amnesty law to close the budget deficit in the middle of the countrys worst recession. They may stop legislation allowing another chance to declare assets held outside the country. Global news, 24 hours a day, powered by 2600 journalists in more than 120 countries, i am taylor riggs. Francine thank you. Construction, stagnating for the first time in 16months. This is important because of brexit. We saw the figures. It is amazing. Remember, they came from a high basic. Beforet will inflation the u. K. House prices. Lets move on. To treasuries. Predicting the yield on 10 year treasuries will be around the same level in five years. , theve Laurence Mutkin global head of g 10 rates bnp paribas and janet henry from hsbc. Laurence we see the shallow projector he upwards in terms of bond yields. We know they have the slowest ever tightening cycle. The market believes the cycle will continue. That will limit how quickly bond yields can go up. I would say that the fears that we had last year and the year before that we might slip into deflation are receding. The projector he seems more of four. Francine what were seeing today, theyre racing because of the fear surrounding the u. S. That marketsning investors are going to safety. Are you concerned we get back to a binary market from now until middle 2017 . The truthi guess that is that every u. S. President ial is a riskn event. You have some move away from risk assets and back to quality assets. That is especially true given the recent news we have had in stocks and bonds. It is inevitable. Tom i want to congratulate you on a fabulous research note. You go back to the 1890s and deflation of another time. Your summary is on the Gold Standard it took South African Gold Production to shock us out of the inflation and deflation. What is the shock to get us out of the low rate world that dan fisher talked about two weeks ago . Laurence im pleased you enjoyed the note. What do we have to learn from the 1890s . In reality, you might say that in a Gold Standard regime, it is like increasing the Monetary Base. The equivalent of finding more gold is doing qe. Central banks have been doing qe since the financial crisis. The best part of six to seven years. The interesting thing is in the 1890s it wasnt like they found gold and prices went up again. It took a long time. There were other factors as well. At least with the Monetary Base being there, higher confidence would eventually express in higher prices. I would suggest that a b we have the same thing. That qe, even though it didnt look like it did a lot at the time, it laid the groundwork for an eventual return to higher inflation. Showed this track with janet henry. This is the qe. Well. B trying to help as you assume at bnp paribas that these bond expansions are in perpetuity . Laurence you left off the bank of england, by the way. I think the answer is if they are not in perpetuity, they well beyond the horizon that we can see in terms of return to normalization. The Central Banks are not going to sell bonds back. In anything like the current economic relations. Francine your take . Urence madeink law a good point. Getting back to the question. Fromnk we have had qe Central Banks. It is like we need a regime shift. A shock. It has to be a positive shock that Something Different is happening. The past, governance have dabbled with helicopter money, it has to vaguely ended in tears. When it is associated with a big regime shift, like off of the in 1930s japan, that is when it changed things. It is more likely that we stay in the weak structural period for the foreseeable future. Francine you talk about regime shift. Chinaould have to involve on a global level. Also, because Central Banks realize what they are doing is not working, they hike. The in europe, to shock system into play. The likelihood of that happening is 0. 05 . Janet theyre both very unlikely. We need to get away from the perception that Central Banks have caused all of these problems, having negative rates caused these problems. We have an unwillingness to invest savings in something productive. Theyre sitting on Balance Sheets, and at some point if there is a rise in expectations on future prices and the speed with which the money spreads around the economy, we could get a pickup in inflation, but we need to alter those expectations. What we make it is smaller measures, not policy cooperation, but big surplus economies like europe, japan, and china, if we saw nuanced measures adjusting their own internal imbalances, that might do more to support mobile demand than everyone thinking that as long as the u. S. Economy grows we can export our way out of it. Tom help me with the news this week and the next two or three quarters. Are you worried about a bond rout . Laurence i wish that i were more worried. The big thing that has to change , i would like to see a return of term premiums. If you think about the speech a year ago, the Central Banks are puzzled by how low premiums are. Just central not banks that drive markets. It is ultimately the decision economyn the real driving markets. In the u. K. , because of brexit, the u. S. , because elections, upcomingecause of elections, there are lots of reasons to put off decisions. As long as they can put off decisions, it will remain sluggish. If there is a new dynamic, term rise and you will have your route to the bond market and it will be good news. Tom thank you so much. Congratulations on your clinic on the 1890s. He studied the 1890s during a grim time for Financial Markets in United Kingdom and scotland. In the next hour a conversation with lord darling. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua. Tom keene in new york. Lets get to the Bloomberg Business flash. Their in talks to sell gastrointestinal drug business. That is according to a person familiar with the matter. Valeant could get 10 million for the unit. They have their biggest oneday gain ever. Uber teaming up with General Motors to help drivers get access to vehicles. Gms Ride Sharing Service will cars. Ivers lease the test will run for 90days. Gm is a major backer of lyft. The car will eventually be made in china not europe. Upgraded versions of the s90 sedan with a builtin refrigerator and handmade crystal glassware. Volvo became the first to export a premium chinesemade car to the u. S. Pleaded guilty to insider trading. He managed to . 4 billion for the largest asset manager here charges have to do with equity trades. That is your Bloomberg Business flash. Francine thank you. Onto to south korea. There has been a shakeup over and influence the spending scandal. President park fired her premier and finance minister. This will be the countrys fifth finance minister in four years. Neither were links to the investigation but park appears get support from her core supporters. Lets bring in the executive editor for International Government for bloomberg news. Janet henry is also still with us. With ahow we started bloomberg story, a bazaar scandal involving south koreas President Park. She is trying to make sure she does not get involved in it. We saw a pretty large protest in the streets of soeul for President Park, calling for her resignation. It involves an old friend of hers. The opposition. Say she is involved in a religious cold and trying to win influence for her and her soap world and her circle of friends. The opposition do not seem ready to wield the knife. Until the next president ial elections. The opposition is biding time and jostling for a position in what might be the final year of President Parks administration. How damaging is it to the economy to keep changing finance ministers if they have not necessarily done anything. 1. 4 today. The huge problem is the industrial sector, the woes of samsung are well known. The show Holding Industry is not great. The ship building industry. Fror the shadow of a tax from north korea, i would not underestimate the pressure. Even though it is going through a disappointing time we are expecting growth of 3 next year. Tom help me with the stereotype of south korea is the most asia. An capitalism in that is baloney. Bordering onst a regime. Is it generationally changing to something new . That is something that President Park pledged to tackle which he became president. O get her hands around that there is an accusation the governor was too close to big business. Problems that have afflicted the big korean industries, she has not had the time or space to do that. A distractionof is north korea . I meet people in korea, and you would think it was an activity for november to deal with. As north korea distanced from the daytoday government and politics of south korea . , you cannotvel spend your entire life thinking about a nuclear attack. , you goame time, seoul into a hotel room and there are in the major hotels. That is a sign of how clear and present the threat of danger is. Economists have to learn to be resilient and block it out to a certain extent. It is in the public consciousness, but is not something the government can afford to think about every day. Francine on top of that, you are telling me about trade in a world where globalization is more elusive than two years ago putting pressure on countries like south korea. For thehat is broadly asian countries, a lot of them are dependent on exports and the industrial cycle. Some better numbers in global production, export remains weak. What we need across asia is more in the way of reform. A completely capitalist country. They need reform as well as other asian economies to come through. I would sympathize with any constant changes in government, particularly the finance minister, it is not good news. Francine thank you for that. The executive editor for International Governments in london. You have a great fed decision show later . Tom Michael Mckee will be giving you perspective on the fed. Conversationa live as we migrate to december. 2 00 p. M. This afternoon. This is bloomberg. Tom bloomberg surveillance. London and new york. Francine lacqua and tom keene. Lets get to janet henry from hsbc. Strategistseal with on the outlier. Very weak sterling. Higher. Old chart onre is the steve meijers call on the 10 year yeild. Major was a year and a half ago. How do you respond to your strategists taking an outlier view . Janet the bond yield call is the strategists call. Were talking about an economy where structural factors will keep rates low. We have weak demographics, high debt levels, low inflation expectations. I agree with the idea of rates staying lower for the future. If steve was here, he has the 1. 35 call, he sees yields were they are today five years from now, he will still point to within one year you can get a 100 trading range of around those points. I would not focus too much on one point 35. The fundamental story is in line with our economic thinking. 1. 10what does the sterling mean for your United Kingdom . 115. Come down to hsbc, im sorry. It is a weak sterling. Will that mean to the people of the United Kingdom . Janet it is a serious adjustment in living status. They came out with that call after the brexit vote. 110 by the end of next year in response to the deficit, which was sustainable in a world when the u. K. Was in the eu outside the eu, those deficits are not sustainable. It means higher inflation, and adjustment in real wages, that means weaker Consumer Spending and gdp growth. Tom to me it is the biggest call. Hsbcs weak sterling call is remarkable. Rightne major has been in the past. I want to move away from this specific call and ask more broadly what the market is getting wrong. If you look at the move to safety, yen strength makes it impossible for economics to work. Janet it is not part of abenomics. The yen is not significantly overvalued. You have to remember where it has come from. The japanese economy does not have a massive trade surplus or massive trade deficit. It is in rough balance. Japans problem is a nominal problem. Structural. The only way out for japan is probably to pursue policies to actively target higher wages. Only that will alter the deflationary mindset, not devaluing your currency against week global demand. Francine thank you so much. Janet henry from hsbc, global chief economist. I have to go do an interview. We will talk about the commodity cycle. This is the group that a couple of weeks ago had a Third Quarter that was better than expected, but they want to cut production and work in iron ore. You are looking at brexit tom . Well see what he says about a presumed commodity turnaround. In the next hour, he was in a movie that won and academy award. On the fixed income and distortions of the market. Darlington will join us on the brexit and his scotland, the United Kingdom, and a perfect time to speak with Willem Buiter of citigroup. Swiss franc is stronger. Stay with us, another hour of bloomberg surveillance. A tom surveillance is a live show. This afternoon, a dead fed meeting. We cover the fed. Bank of england jobs day, and an election on tuesday. Talk of trump wins shakes markets. The search for equities for a bid, defending the mexican peso. It is an unusual election, and unusually quiet market. Stephen eiseman joins us from newberger berman. This is bloomberg surveillance keene in newom york. Guy johnson is in for Francine Lacqua. Guy, extraordinary news flow, particularly on trump and clinton. We have a new poll as well. Guy lets go to first word news with taylor riggs. Taylor the new Bloomberg Politics poll shows Hillary Clinton with a narrow edge among independent voters in a race involving thirdparty candidates, ahead of donald trump 30 to 20 27 . Voters more than half of those surveyed say they expect clinton be the next president. A new forecast says mark carney probably will not change Interest Rates again while he is the governor of the bank of england. That production comes from the National Institute of economic and social research. Carney says he will stay in the job until june of 2019, a year longer than he had planned. The institute of the boe will keep its benchmark unchanged while the uks negotiating brexit. There has been a breakup in a scandal in south korea. Park appears to be trying to shore up support from her core supporters with a housecleaning. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. This is bloomberg. Tom lets go to this important and nuanced poll. Marty schencker joins us again. Marty, it is a purple slice poll, and there are a lot of moving parts. What is the take away for mr. Trump . Marty the take away for mr. Trump is that he is still struggling to convince independent voters that he is the choice over Hillary Clinton. He is not even matching the performance of mitt romney of 2012. There is not a lot of ground he needs to catch up with, but he is still behind in the key voting block. Tom when you look at the turnout of independent voters, what does our research say . Show up nextents tuesday . Marty this is a group that oftentimes is difficult to energize. It represented 29 of the electorate last time, so it is a Significant Group of people, and these headlines and all the controversy over the next six days will say a lot about whether the independents get out and vote. Many of them may have already done that in early voting. Tom help me with the date calendar for secretary clinton. Does she try to move on from the orils and attack mr. Trump, is she up to her eyeballs in mr. Comey in the latest scandal . Marty well, she is up to her eyeballs, but she has changed to a fullscale attack on donald trump. And all these are gets, including president obama, are taking the same tack. Against donaldde trump in the last six days, and that is what i think you are going to see. Has secretary clinton been seen spending money in the wrong place, then . Marty they are not necessarily in the wrong places. Advantage inuge the campaign over donald trump. Do not leave that money on the table, you might as well spend it. She is going back into areas like michigan with big ad campaigns, wisconsin. There is talk of panic. I do not think that is what is happening, but they are doubling down to make sure these last six days they leave nothing on the table. Guy what is the story with the popular vote and the Electoral College situation . Is it possible that Hillary Clinton could win the popular vote and lose the election . Seen that before. It is very possible. In this election cycle, i would not discount anything. There is even the chance for them being tied with electoral votes and neither having 270. If utah goes to the independent, that could happen. It is a remote possibility, but we could wake up wednesday morning and not have a president. Tom marty schencker, thanks so much. The polls are quite nuanced. We recommend a careful read of it, just a terrific poll on independent voters. We have an exceptional hour for you. Lord darling will join us shortly on scotland and the United Kingdom. Of course, Willem Buiters thoughts on global recession. And he was not in the big short, but something somebody pretending to be Stephen Eiseman was in the big short. Help me with the idea of a dampened market. Is that true, or is there something waiting to happen . We have to step back and asked why has the market gone up over the last several years . Two things number one, corporate profits. Number two, quantitative easing. Corporate profits for the last year and a half have been puckish. People are losing confidence in quantitative easing. That is why the markets are lethargic. Tom we saw leverage in the the the big up buildup in housing leverage. Do you see the buildup and leverages leading to the kind of shocks that we saw 10 years ago . Steve definitely not in the u. S. Have done a good job of deleveraging the system. Levered 35sed to be to one, it is now livered 10 to one, it is now levered 10 to one, a world of difference. Tom there is a stark contrast between the clearing of Financial Risks in europe versus the clearing of Financial Risks in america. You wrote about this presciently years ago. Least europe, at continental europe, is a bank intermediated system. It is a bank system. Much less leveraged than it used to be, but there is a lot less leverage outside the bank. Aboutd not be too relaxed Financial Stability in the u. S. Sector,the financial the financial corporate sector, i think leverage is high. In europe, they never cleaned up the banks. This is a process of not doing much year after year and pretending to do a lot. Extend and pretend is not really a strategy for intermediation going in. Willem a question from london, good morning. What affected the rolling back of doddfrank have in the united the n doddfranking back would be a disaster. It has done a good job of deleveraging the system. It is not perfect. I could say honestly for the first time in my wall street career, i am not worried about the u. S. Financial system. I was worried about it my entire life. People who advocate rolling back doddfrank do not know what they are talking about. It from thee just hear republican candidate. Phil about her, what effect would it have Willem Buiter, what effect would it have . Willem rolling back doddfrank going back to the predoddfrank situation, it is big financialr a kerfuffle. It is not going to happen. Ok, picking up on that, when you look at the financial regulations that donald trump is talking about, changing the nature of the financial regulations, how do you think that would happen . The stocks have been performing of late. Is that down with what is happening in the yield curve or with the fact that trumps chances look a little bit better . Steve i do not think it has anything to do with candidate trump at all. I do not think it is complicated. Tom help me with the dampening reality of lower for longer. A lot of academics on wall street are taking it out on the 2021. , going out even to do you have a believe in that . What does it do for wall street . Steve i think rates stay low for a long time. The biggest risks in the market is that the markets lose confidence in quantitative easing. I get a question all the time, when do i think that is going to happen, and i am the last person in the world to answer that question because i lost confidence four years ago. Tom congratulations on being way out front on tepid global gdp. Do you stay that way this morning . Willem this years growth is likely to be lower globally than last years growth. That it is Something Like what came out. It is clearly, you know, a q2,istical blip up statistical blip up q3. With a bit of luck, twoplus next year. Tom very good. Willem buiter is with us from citigroup, and steve iceman as well. Steve eiseman as well. Alistair darling on a weaker poundsterling. From london and new york, this is bloomberg. Tom good morning, everyone. What one from london and new york, guy johnson and tom keene. This is bloomberg surveillance. Someone i have been wanting to speak to, the former chancellor of the exchequer and from england and his scotland, lord alastair darling. Wonderful to have you with us. Where will sterling head i want a point estimate to you on pound sterling. There was sterling stability under alastair darling. We do not have that now, do we . Lord darling the problem is that we do not yet know what the negotiating position will be, either from the u. K. Government or indeed from the 27 other Member States of the European Union. What you are going to see over the next few months, and maybe a long toe after that, a long period of uncertainty i think at the moment, we are likely to uncertainty because we simply do not know what the position is. Tom do you need to see a more cogent message from the new government in the United Kingdom . Darling i think we do. We have had a new Prime Minister now for four months. When you think about it, our membership with the European Union and the referendum decision to leave the European Union is the biggest single challenge facing the United Kingdom, arguably since the end of the second world war. So we do need to know and have clarity. I will give you an example. Last week the government apparently gave assurances to a car manufacturing a car manufacturer, which enabled it to develop a new range of cars in the northeast of england. But they wanted assurances with relation to the customers union. The government would like to be in the Single Market and wants to remain part of the customs union. What about the Financial Services industry, where the chancellor has said that he wants the Financial Services industry to have access . I think we need to spell it out so we can debate it in this country. Accept the result, but we have got to salvage as much as we can so we do not disrupt trade and we do not damage the longterm Growth Prospects of the country. That point, up on can i deduce from last week that is more important in jpmorgan . That nissan is more important than jpmorgan . Lord darling they had to make a decision related to investment. Other manufacturers are saying, what about us . The big thing here is that even if the u. K. Government believes it is important to stay in the Single Market and the customs union, which i agree with, you have to face the fact that we are up against 27 other Member States, and they do not mention that position either. Ought to be debated in the house of commons and parliament in the u. K. The second thing we need to have is, i know there is ill feeling and people were taken aback by the decision, but we need to have a grownup conversation between the United Kingdom and with the European Union commission and other Member States as to how we resolve this. How do we take account of what the british people voted for but at the same time, there is a knauf a lot in our relationship there is an awful lot in our relationship. Millions of jobs depend on it. If you were playing your cards come if you were jamie dimon, you would look at this threaten toed to leave, to walk away, to take my job somewhere else. Do you think that is what jamie dimon is thinking right now . I do not know what he is thinking, and he can think for himself. I think the government is aware that if you take the Financial Services industry, never mind a particular bank, a lot of what they do relies upon the passporting system, whereby it can sell its services throughout the year pain union. If that were to be curtailed or ended, that would have an impact. Thated the differences people have been saying that for months even before the referendum, where is nissan did not say very much during the referendum but now has a major decision to take. My view is you cannot possibly say that when matters today, that one can wait for a couple of years. It is all important because the one thing businesses do not like and it does not load it does not matter whether they are a bank or a car manufacturer is uncertainty. I think we need to have a grownup conversation with the rest of the European Union, which will not be easy. As you know, there are major elections in france and germany in 2017. Tom lets come back with lord darling and talk about the new federalism in europe. Joining us as well, Willem Buiter from citigroup, and steve eisman from newman we will continue from london and new york. This is bloomberg. Tom we welcome all of you in london and in new york. With us, alistair darling, the former chancellor of the exchequer. Only with the new federalism of europe help me with the new federalism of europe. You talked about the fractious European Union. Do you have any faith in brussels or in a federalist union, or is it every nation for itself . Lord darling i think the European Union will be remain. You cannot underestimate the determination of leaders throughout the European Union to maintain the institution. I do think it needs to be nimble in responding to Public Opinion. It needs to respond the way the u. K. Needs to respond to the postbrexit situation, and deal with it as grownups and try and benefit both sides. Tom help me with the nimble footedness of your scotland. What do you need to see in scotland in dealing with a new brexit and a new london . Lord darling Public Opinion has barely changed. We voted to stay in the United Kingdom at that has not moved. Scotland voted heavily to stay in the European Union, but it did not vote to join the euro, which it would have to do if we went our own separate way. And their points of view we have a lot going for us. London will remain one of the major world Financial Centers. We are one of the biggest economies in the world. Both sides have to recognize a new reality and get on with it. That applies to both us in the European Union, and i am confident we can do that if there is goodwill. We need to do it. The process may be quite a long one. Darling, are you surprised at how close the u. S. Election is, given the lessons from brexit . Lord darling i am not. One of the reasons britain voted to leave is that a large number of people in our country felt this in gauged, disillusioned. You can find that in the United States, you can find that throughout the European Union. I think anyone in government, any policymaker, needs to be very aware of the fact that whilst they have talked about it, there is an awful lot of our of thes on both sides atlantic who feel fed up. It is a wakeup call for people. You cannot ignore large sections of the population. You have got to react and deal with the legitimate concerns. Guy you would not be surprised if donald trump wins this election . Lord darling i am not going to call the election in a week because you would be daft to. It is tight. Thank you so much. Lord darling, the former chancellor of the exchequer. Willem buiter continues with us, and steve eisman, a spirited conversation coming up in the next half hour. Let me look at the data. Swiss franc stronger gets my attention, but a lot more going on. Surpriseesterday, a 19. 08. Be with us for fed day. This is bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Tom good morning, everyone. Word newso first on politics with taylor riggs. Hillarya new poll says clinton has the narrow edge among independent voters in a race involving thirdparty candidates. She is ahead of donald trump 30 to 27. Libertarian gary johnson gets 19 of the independent vote. The green partys jill stein gets 8 . Voters can cast ballots early to have gone for clinton 35 21. Iraqi troops have entered mosul for the first time in more than two years, but u. S. Military Officials Say it could take months to recapture iraqs largest city from islamic state. Special forces are in the eastern part of mosul. It happened a little over two an iraqi and u. S. Led coalition launched an offensive. Tom keene, this one is for you. Adams and russell hit grand slams to lead the chicago cubs to a 93 win over cleveland. That ties the series at three games each. Game seven is in cleveland. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. This is bloomberg. Tom this is wonderful. On behalf of all of the surveillance team, i beg them to start the thing earlier tonight for the kids, and for us who have to get up so early in the morning. This is wonderful, the cubs and the indians. Who knows who will win . We have to get back on track. Lord darling, as we look at britain. The idea of what do you do in crisis part of that is the movie the big short. Willem buiter is with us from citigroup. Thewith us, steve eisman, big short, which did well at the movies. I want to talk not so much about the movie. You and i have done that before. I want to talk about the oneoffedness. Do you look back and say that was a oneoff financial event, or is it something that can be replicated or renewed in the future . I would say at this point the probability of Something Like the big short happening again is very low, because so leveraging has been taken out of the financial system. You cannot say the same thing about europe, unfortunately. But i do not think there is the same Systemic Risks that there were back then. Not even close. , thethe Systemic Risk opportunity that we witness every day at bloomberg in the struggle of wall street is the risk now, the epsilon at the back of the equation, are they opportunistic for you, or do you say i just cannot deal with it . The problem with talking about the Systemic Risks now is, systemichen risks now are more nebulous. When will people lose confidence in quantitative easing . Is china going to roll over . You are talking about massive issues. It is much more difficult to make fictions. Tom this goes back to the dampened global gdp that you have been out front on. Is nominal gdp going to stay dampened, bringing down terminal values, bringing down opportunities on wall street . Willem the global Growth Prospects are mediocre. Pickup next year relative to this year, but still Global Growth below potential. Globally, disinflationary pressures are not diminishing. There is an excellent pick up in underlying inflation. Lowink no i think nominal income growth, low Interest Rates, Interest Rates are there to stay for years and years to come. Tom steve eisman, this is critical. Is it good for guys like you if you have a Willem Buiter worldview . Steve i have a very similar worldview. I do not think it is good for anybody. If you take a step back and ask why is u. S. Growth so slow, it goes more to the distribution of income. Begin income in the United States has not grown in 30 years. 70 of the u. S. Economy is consumer related. Economy has a. Knife around his neck around its neck. That will not change with what is going on in washington. Guy we have been talking about the low growth world for quite some time. I read in your notes that you are looking at the Hedge Fund Industry. How do i short term twice a year a low growth world . Steve you do not shorten it. Performance has not been great. There will be relentless pressure on fees for probably a very long time. Guy how does that manifest itself . Is going passive. I am curious to know how you see the amount of money flooding certain people are becoming increasingly concerned about that model, too. Steve they might have similar types of concerns. The issue with the etf nobody tells you when to sell, so it is not a hedge product. As long as the markets go up, buying etfs is fine. But one day there will be a market correction, and you will wish you had a hedged product. Guy how has the change in the carried interest regulations change the Financial Sector right now . Steve what do you mean by carried interest regulations . Guy the change in tax laws. Tom specifically referring the pe industry than the Hedge Fund Industry. If we start to change the way that you can hide tax or avoid tax, does that change the way decisions are made . Steve i do not think it would change the industry one iota. The private why if it istry is taxed like everybody else, why they would stop investing. Guy do you think the tax situation should be changed . Steve 100 . I find the debate unfathomable. Tom one thing we have seen, Willem Buiter, is that in the dampened economy not being the way it was 10 years ago, is finance changes. Our combinations, the 1930 solution willem there is an and or miss increase in concentration in many Key Industries come in monopoly power. It is not a pretty picture in terms of efficiency innovation. But it seems to be the trend at least in advanced economies. There is a bit of luck you will get more competition from emerging markets. That is a hope, not an expectation. Tom steve eisman, you grew up on entrepreneurial wall street your whole life with your parents. Where is your wall street and 5, 10 years . Steve smaller. The industry is going through massive changes. The industry is much less profitable because of less leverage. It is going to shrink some more. Boutiquey . To the big firms lose the brainpower . Steve it is not clear that that is the case. I think you are seeing young people going to wall street less. The industry is not as exciting as it was, because of the regulatory environment. Ism not sure if boutiquey the way to go. Tom how hedged are the hedge funds . Are hedge funds mostly now unhedged or less hedged than they should be . Steve most hedge funds are disguised long only. Tom thank you. Julian robertson agrees with you. You are in good company. Run hedget people who funds are extremely net long, and they use hedges to dampen volatility. That is not what i have done, but i think i am more the exception than the rule. People most people do not focus that much time on their shorts. Guy is that true of all strategies . Where do you get a proper hedge in the Hedge Fund Industry . Steve if you go with people who run neutral, obviously you are getting a hedged product. But that is a minority in the Hedge Fund Industry. Hedge funds that are longshort equity always have a long orientation. Tom steve eisman, thank you so much, with neuberger berman. We greatly appreciate your attendance today. We will continue with Willem Buiter. Allergan what do you do with the money . Distribute as you will. Come out with earnings, a plan. Is like a bluechip equivalent. They had a dividend and they toss 15 billion back to shareholders. At least that is the plan. We will continue with Willem Buiter. Our fed coverage this afternoon will be at 2 00 p. M. Stay with us. Next, Willem Buiter. This is bloomberg. Guy 10 42 in london. Why am i here and francine is not . Well, she is downstairs. She is talking to a great guest here at bloomberg. Talking about how he is confident with what is happening with iron ore. What is the right direction for china . They will carry on the conversation and we will bring you the headlines. Heres taylor with bloomberg first word news. Taylor the maker of botox, allergan, will begin a Quarterly Dividend of . 70 a share. 10 billionadding to a buy back program previously announced in may. The Company Posted thirdquarter earnings that missed estimates. In london, a former Blackrock Fund manager has pleaded guilty to two counts of insider trading. Littletonsys trades were carried out for his own personal gain p he will be sentenced december 21. Tom every time the lumbar is with us from citigroup, there are many single best every time Willem Buiter is with us some citigroup, there are many single best charts. Marvin good friend of Carnegie Mellon this is off of Marvin Goodfriend and his controversial jackson hole paper. The 10year yield is positive, the white line. Down below, under great duress, is where professor goodfriend suggests negative rates should be. This is a subscription by academics of the courage it will take to do negative rates right. You have been out front on this debate with rogue off with ken rogoff and others. He we have the courage to begin to approach Marvin Goodfriends level . Not in the u. S. Or any of the advanced larger economies, but some of the smaller economies that use their own currencies they could go cashless and therefore remove the remove it. There is no technical obstacle to going cash. It is the easiest way to remove it. More than certain citigroup executives would look at you and say professor, really . What does a greater negative rate under recession duress mean for banking executives in europe, in america . If you remove zero level down, you can pass on the negative rates to your source. Tom no commercial bank can pass that on. It is a cultural taboo in a world in which the norm was to have positive nominal rates, and indeed, sometimes positive rates in double digits. But once we are getting used to a world where nominal rates are zero, or slightly negative tom this is the heart of the matter. Willem buiter nails it in cultural taboo. Guy look at the way the political narrative is changing. You look at what theresa may said in birmingham, there are concerns about qe. Professor, which is the most politically palatable Monetary Policy right now . Willem there really is not one. Politically palatable is sort of anything that stimulates demand, rate cuts are dim in us are dim minimus. Balance sheet expansion does not get to the real economy anymore. Really out policy is of oomph. And we have to raise the fiscal policy for the discovery of animal spirits, which is not too likely. Forget Monetary Policy. It has had its day. Guy so donald trump is on the right track when he talked about some sort of a new deal . Willem i do not know about donald trump. I do think we need fiscal stimulus, preferably one that is monetized because that could not impair the future stability of the country, engaging and fiscal stimulus. Real rates being as low as they are, even nonmonetized fiscal stimulus would be desirable. Tom professor, we were growing to do the single best chart. We are going to do the single best chart. Normalized Balance Sheets, the fed, the ecb in blue. Do you assume their Balance Sheets expanded in perpetuity . Is that the only way out . Willem most likely. Tom that is a right answer, most likely. Willem they are not going to shrink because it would be too disruptive to shrink with any speed. From as no problem technical perspective with Central Banks on that Balance Sheet. Tom you mentioned the i. S. Curve. Image is the dynamics of the i. S. Curve. Can we amend the i. S. Curve, are monetary economics, given such distortion in the bond market . Conventionalnk analysis gets it right. , evenof all, the lm curve the effect of Balance Sheet isansion and rate cuts becoming less robust. And there is virtually no transmission of whatever it impact i. S. Is near vertical. Lest aw do we get it city or responsiveness from our politicians . Willem we need discourse. Taking it vertical does not matter as long as you can shift it. Tom was that enough academics, guy . Was that cool or what . That was a john hicks moment. Think we are probably going to go down that road, and it is lovely to go down that road. Talking of doctors what do we hear from dr. Carney . Bank of england releases its Rate Decision. Back at 8 00 a. M. In new york, 12 00 p. M. In london. All of that is coming up. This is bloomberg. Tom bloomberg surveillance. It is gorgeous. Guy, i dont get the architecture in london. Im sorry, im like prince charles. I dont get it. Sure thatnot entirely one should consider the london skyline as representatives. Tom how about the forex report right now. The clarity there, dollarpeso, the trump indicator, a weak peso this morning. That important bloomberg poll is out an hour ago. Guy . Americas isk coming up shortly. David, what are you excited about . Electionally, the u. S. Is dwarfing everything in terms of the markets. We have david cote talk from cumberland we have david kotok from cumberland. Levkovich from citibank talking about how the equity markets are reacting to the polls that just came out. And the u. S. Steel ceo they had earnings coming out. But really it is all about chinese steel. We will talk about that and what a Trump Presidency might mean for him. That is all coming up soon. Tom final thoughts of Willem Buiter as we go to fed coverage this afternoon. Bring up the chart, anthony. This is a chart that we never, ever expected. A duration of low rates in the 1990s, a duration of low rates, 2003, and what we have seen out of this crisis. Explain what it means at the zero bound, given a Global Economy. Slm. Ust talked i what does the zero bound mean in todays Global Economy . An advanceds only economy problem at this stage. Emerging markets from brazil to india, even china, are well away from zero bound. The riskfree real rate, the neutral real rate, is zeronegative input to do a in perpetuity from here to tomorrow. And relative to investment, this driving down and keeping low of the neutral real rate is keeping inflation down. Tom a of savings. Paradox of savings. And it is naive not even a paradox. Planned investment, the result is still globally, i think, a negative output gap. Energysistent low real nominal riskfree rates. That is with us for years to come. Do not be a saver in this world. Guy professor, one of the differences between the developed and the developing world is we have a Social Security net in the developing world. How much is that responsible for what we are seeing now . Willem clearly, unfunded Social Security, to the extent people believe it will be around when they retire, discourages savings actually. Discourages saving, actually. Unfunded security is a good thing because it boosts consumption. The long sermon there are longterm sustainability problems, of course, with the graphics being horrible. We that is not the problem are seeing here. It is too much saving, not too little saving. Tom phil about her, thank you so much. He will continue with Willem Buiter, thank you so much. He will continue with us on bloomberg radio. Fed coverage at 2 00 p. M. This afternoon. Michael mckee in washington. David welcome to bloomberg daybreak on this wednesday, november 2. I am here alongside alix steel. The markets are basically based on the tightening polls in the United States. ,he dow futures down 41 pounds s p 500 futures down three points. We are starting off with the mexican peso. It is falling against the dollar and this is a surrogate indicator of the likelihood of donald trump becoming president. We have to japanese yen strengthening as we have a flight to security. Bonds for rushing to safety, and gold is up, a safety move. Alix centralbank watch, the fomc is expected to hold rates steady at the conclusion of its two day meeting at 2 00 p. M. Eastern. Alibaba and time warner both reporting in just moments. After th