Transcripts For BLOOMBERG Bloomberg Surveillance 20170315

Markets and rates. First word news here is emma chandra. The white house is firing back at msnbc for releasing details of President Trumps tax returns. He paid 38 million in tax rates of 150 million. The white house said you know you are desperate for ratings when you are willing to violate the law to publish two pages of tax returns. At the whitemp met house with the saudi deputy afterwards, and saudi adviser says there is a significant shift in relationships. In europe, the netherlands is voting today on the measure of the first spread of populism. The antiislam candidate, Geert Wilders, once the netherlands to pull out of the European Union and to hold immigration. The Prime Minister, mark rutte, says he will not enter an alliance with Geert Wilders. China says they will keep opening its doors and they notice that bilateral trade and investment created a million jobs in the u. S. Last year. Global news, 24 hours a day. Powered by our more than 2600 journalists and analysts, in more than 120 countries. I am emma chandra. This is bloomberg. Thank you. Let me lay data check to get through this to get to our guests this morning. Futures up a little bit. The spread comes in at 124 basis points. The 47. 90il after print we saw yesterday. A little bit of a rebound. Francine this is what im looking at. Im looking at the pound and crude oil. Crude oil at the british pound rebounded. The most significant story yesterday. Oileneral it is because jumped above 48 a barrel. But it is about the Federal Reserve policymakers. And the vote in the netherlands. Lets bring up the bloomberg. I want to go back on the twoyear u. S. Yield to give you a perspective. I will be showing this at the 1 00 p. M. Show. Here is where we were before the crisis. That is 5 , 4. 5 to year yield. And to say the least, exchanged. You can see all of the fed rate rises, where we are now at the mystery of where we will be a year from now. The recent leg up that we see, that is right here in the twoyear. 1. 28 . We have a long way to go to get 2007. O 4. 5 , from francine i love your charts. The eurodollar. This is simple because of the election. We are looking at the link of politics and how it plays out in the market. This is a volatility with the currency pairing. So it is up. You can see the spike up, that was yesterday. The other spikes, we try to trace them back and these are some of the things we saw in the French Election. How do markets look at Political Risk . Joining us now for the hour is our guest host, andreas utermann. Toays a pleasure to speak you. Thank you for coming in. We have a million things to ask you. How do you look at Political Risk . Our markets jumping at shadows . Andreas i think theyre not pricing in enough risk. The risk is the topic and it has been for a while ever since the brexit vote. The reason why that is the case is because the markets today are still behaving as if we are in the sort of prebrexit environment which was pretty progrowth and pretrade and procorporate profits. If the populist wave takes hold and becomes the new norm, then tot is swept away and we go a lot of bilateral trade deals and that is not good for growth or corporate profits. Francine what we keep being told is that donald trump will be good for business and as men. So he will never hurt america. Is that fair . Andreas im not sure thats true and im not sure he is that successful as a businessman. We might be in trouble. Tom looking at the battle between janet yellen, mario draghi and the others, one of the strengths that the Central Banks have right now . Do they have free room to raise rates . Andreas i think they should. I think janet is pretty unconstrained. I dont thing she has eyes on consecutive terms. I think the fed and other banks need to do what is necessary. Our view is to follow the fed guidance. We do fully expect a rate hike given the strong connections. Pimco, scottre at mathur, i think the work he does on the equity markets do you have an optimism about equity markets . I dont want you to do a market called but do you have an optimism about the stability of markets, given what Central Banks are doing . Andreas i think we are supported by central policy and long rates. If you take the view which we dont, necessarily which long bond yields are fairly priced, equities have further room to run. Bond yieldss when at the long and will start to adjust . The fed policy is trying to prevent that. But if you take the view that, at some point, long rates need to be one i just 50, 200 basis points higher, then equity prices are challenged. On this momentous day with the politics, it is ratesrdinary to me that are priced up with no pain. It doesnt make sense to me. Francine we have to find out the catalyst. Lets say there is a correction. Because the market realize there is trouble with trade, what is the catalyst, if you are ignoring Political Risk at the moment . Andreas it is difficult to say. It could be a weakening of the growth globally. It could be another political event. The noise coming out of turkey is not encouraging. We see the assumption of the significant outflow of refugees into europe. There are plenty of horror scenarios out there. Think thatt mediumterm volatility unless the policy environment changes significantly, is going to be for the increase that shortterm, it could be the case. And those could be buying opportunities. Equities and bonds, depending on which way. Francine do you go by country . Reas spots of the thick spot specific. We are favoring less trade coordination and we are looking for companies that have sustainable earnings that are diversified globally. Ones that are not easily harmed by a particular countrys tell aion policies or we tory policies. So we stay away from a mystic stocks in economies that may be vulnerable to unfavorable trade deals and the like. Tom do you need to hedge currency right now . Are you hedging Currency Exposure . Andreas we are. Big Investment Opportunities Going Forward, we think the currency stability we have seen for near 20 years ago is a thing of the past and we are going into a time where currencies will have to do a lot of the adjustment of the market imbalances. Depending on where you invest from, this is a huge opportunity. Utermann is with us and we will talk about the state of assets coming up. From what i can tell, total chaos. 1 00 p. M. New york time, francine will be gone but i wont be gone. I will be here with scarlet fu the fed decides. Richard claret with pimco. A set of good guests. And a guy called William Gross will stop by. The fed decides. With the yellen press conference. Emma this is bloomberg surveillance. U. S. Officials are planning indictments related to the attacks against yahoo according to a person briefed on the matter. The justice by michael accuse four people from taking part. The hacks threatened to derail the cell of yahoo web operations. Was hurt by competition from chinese carriers and losses from fuel hedging. Sales of asias Largest International airline fell more than 9 . The Worlds Largest clothing retailer reported a decline in profitability. They said that higher garment costs and more discounts seized earnings. They put more emphasis on online sales last year and cut the brickandmortar stores. That is the Bloomberg Business flash. Francine dutch voters are heading to the polls today in a key election that will provide a key gauge into how far populism has reached. Against geertutte wilders, whose platform includes pulling the netherlands out of the eu. What if we heard as the latest . It seems that the antiislam far right has been slipping . Slipped to have number five in the latest polls. A rise for mark rutte. This is a test on immigration and integration. The generation needs to integrate. And immigration. Geertch trump played into wilders rise and fall, he was defensive. Once again, we are our own people. I amnot donald trump, Geert Wilders from the netherlands. I believe that what is happening in america can happen all over the world. Manus the question i have been asked is whether the liberal dutch will draw fire . To that end there is a global the between the dutch and turks. And in the tv debates we have extent,he past, to what mark rutte came out as being a Prime Minister as somebody who is trying to run politics. We have seen anger in brexit. We have seen disbelief. Hiddenstion is, how many are there out there for Geert Wilders . Francine if he wins, can he actually govern . Manus most unlikely, given what we have heard from the liberals and labor. Pasted in this election. Most parties say they will not do a deal with Geert Wilders. Given what ive just said to you, he has slipped to number five. If you are hoping we will have a quick resolution, 72 days is the average time spent to form a coalition. The possibilities are endless in this one but we think five parties. But there is a lot of haggling to be done. Mark rutte is a much compromised Prime Minister. Thati love the fact there it takes 72 days to get this done and you mentioned the heart of the matter the generational shift from the ghost of world war ii. Is that shift happening this wednesday . Tom it is going to be a very fascinating moment. The reality seen is of what has happened in your country the distance between exceeding power and delivering. I used the word integration. That is the debate at the heart of france, netherlands and at the heart of germany for the next generation. Ie immigrants that have, ash am one, i am an immigrant to integrated into the United Kingdom many decades ago and that is at the heart. You come, you integrate. You play by your hosts rules. Francine thank you so much. Lets get back to andreas utermann. Im looking at some of the volatility that we saw in the eurodollar. Is it surprising that the markets are not playing . Is that because they are rational or because you dont have the tools in the market to play these . Andreas more the latter. What we get taught at university, the best forecast for a currency is yesterdays price. The market doesnt really know. Firewall inbout the holland, im not sure i agree with that. What will be relevant for europe is france, germany, italy. And whether they can find an answer to the justified concerns that europe has. Into the French Elections, and tom and i will be covering that from paris, do you trust the polls . I dont think you can really trust the polls. At all. I think that is what we have learned over the past few elections. Even with the u. K. Election two years ago, which did not predict a conservative outright majority. What you do is you talk to as many people as you possibly can and that is what we are doing. You do grassroots research. And watch we are hearing is that the French Elections seems less likely than brexit or the u. K. Or the u. S. Election to be a surprise. Tom is europe of value . Do younvestment have to go abroad to find better value. Think europe is an attractive region. There is a lot of stretch in many of the markets, as in others. The one thing that makes it attractive, and you mentioned it, is that european chairs have high dividend yields and therefore they should be able weve been talking about this for a long time now in the press dynamic people are interested in the outcome and what it produces for them. Tom we will come back here with andreas utermann. I notice in the wall street journal today, talking about cambridge at associates in boston. So Asset Management is front and center. They are someone we dont see layoffs from and there we are. Here in a bit. In the next hour, alan ruskin from Deutsche Bank. What a perfect time to speak to him. The linkage of Foreign Exchange in the janet yellen dollar and the bond market. This is bloomberg. Francine this is a bloomberg surveillance. Dock about oil. We are so coordinated. Happy wednesday. Oil has had a volatile couple of days. It slipped after an opec report. Back above 10 Million Barrels a day in february. There was a rebound in the price after reports of a decline in u. S. Stockpiles. Opec says the moves are cleaning up the market. Lets get back to andreas utermann. When you look at the oil market yesterday was significant that the current prince met with donald trump and they seem to find an agreement on how to deal assume that do you it will be more volatile than a couple months ago . Andreas i think that is probably right. The supplydemand dynamics are not clear. The price has gone back up after falling precipitously. The impact that has on shale producers in the u. S. Is not clear. The demand picture is not so wellestablished at the moment. So i think that means a lot of volatility. About Oil Producing dividends in europe . 12 ite paying 6 , 8 , seems. High dividends. What do you do if you dont want a big dividend . Andreas you can obviously go downstream that is risky. Dividendok at the payers, they are attractive. I own some in my personal portfolios. But, of course, how long and sustainable are those dividends and how long the onslaught is producinge of the industries . So there is a risk attached and im not sure if it is priced in yet. Francine do you believe that as earnings go up, there will be more and more pressure . If the fundamentals are not there because of trade, for companies to give back in dividends . Andreas the pressure is there. That is what shareholders are asking for. We are giving back special dividends. Utermann,andreas thank you so much. He will stay with us for another 30 minutes. Is and we spoke to him a couple of weeks ago. An american citizen. He talk to us about brexit but we really want to find out about regulation. Look for that at 8 00 a. M. In new york. This is bloomberg. Francine another treasury select committee. Parliament,he answering questions. Not quantify the fallout of the no brexit deal. They have two years to negotiate. A lot of people that come on the show say a their First Priority is to negotiate with the eu the extension of how long they can negotiate for. That would give the u. K. A lot more breathing room. Davis saying there could be upside to the no brexit deal. A lot of people we heard on the brexit side have been saying that if have no deal than a bad deal. Davis saying no deal. U. K. Ata out of the we saw a softening of the data in the last couple days in terms of services and construction. Unemployment rate falling to 4. 7 . I dont know if we have a pound chart, but i will bring it to you on the terminal shortly. Now is get to bloomberg first word news. Emma staying with the brexit deal, the eu is ready to ratchet up the pressure on theresa may. The stock of stall more brexit talked until june. That would cut into the time theresa may has to make the deal. Once triggers the exit, the powershift to the European Union. In asia, u. S. Secretary of state Rex Tillerson begins a three country tour today. Reason tests show that north korea have developed missiles edging closer and closer to the continental u. S. Rex tillerson will have meetings in tokyo, seoul. The early frontrunner in the mexican president ial election is blasting donald trump. In an interview with bloomberg, he made it clear he will not take a conscious tone if he is elected. If donald trump continues with his hate campaign against , when thosemigrants things happen, we will go to the u. N. , and we will report the United States government for violation of human rights and racial determination. Emma he is a former mayor of mexico city who failed in his first two attempts to win the presidency. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Francine thank you so much. French president ial candidate has been charged with misuse of funds. Polls. Nt third in for more, we are joined by the chief economist of allianz. Joined by a allianc first, let me get to you before we ask andreas, that i have always been told that turnout is crucial. There is a large chunk of people that do not show up for one reason or another and the polls are completely wrong. In general, the French Election turnout is always high. The problem with this election is that it is a double trigger election. There is the president ial election and another election. They are pricing in minority governance. Turnout is key maybe because the second round is opening up in may and we have a tendency to take longer weekends in may. May be the voters will not show up like we have seen in the u. S. Seenher elections, we have them quite crucial for france. People are worried about this, but i am more worried about the fact that it will be an uncertainty for france anyhow in terms of governing. Francine i think it is a point that one of our other guests made. If he becomes president , he may not do so well because he does not have the funding power. Of s the reaction andreas that would spell chaos. Made it clear what she wants. With the germans do as a response . Will be very challenging for regular negotiations because we are not sure that the u. K. Government is even negotiating for the u. K. Or england or wales. We dont know. If you do not know you negotiating for and who is on the other side of the you, this could take years or decades. Francine what are the chances of her becoming president . There is ms. Content in france misontent in france. You look at jobs and investment, we are back at the level we were in 2007. Roots for social discontent, but you said Something Interesting that indeed affected will be the euro. What i think is very interesting is that the french like the euro. Three out of four. One of the things that is interesting compared to the u. S. Or u. K. Is the lack of socalled monetary sovereignty will be in our favor because they do not want more. I dont think you vote based on economic conditions. You vote with your heart more than your brain most of the time, but one would see like the netherlands, the antihero rhetoric does not fly antie uro rhetoric does not fly. In franceild plant and everyone going back to be a factory worker works because people think that because we have not had productivity, people would be great at automotive. The actual exit of the eu, i do not think the french want it today. One of the things that will change his she will get representation in the parliament so she could become the first opposition party. We had a traditional position between the left and the right. Now, the spectrum of the Political Landscape has changed. , we will not consider her on the back burner. Tom help me with the rest of france. For most of the americans including myself, going south is crossing the river. Outside of paris, what is the mood . Ludovic i come from the middle of nowhere in france. Tom good. Ludovic i usually take the temperature when i come to paris every weekend. Populismtually means antisystem, antimainstream, so what is interesting is that people, i think they are worried that france is not going in the right direction. They think we need a breakthrough, a regime switch. Are they ready to lose all the endowments and opportunities . No. Yes, there will be a contest about, but will they vote for the second round . Will they go again . I am convinced no, that we have had surprises. I would say again that the uro is notntie flying with france including the lower class and middle class. Tom with your wonderful and granular perspective of france, is the anger trumplike . Are the elements of a trump anger within your friends . Ludovic yes. When you have 25 unemployment among the youth, when you have people believing a model that france is still running large deficits and people thought it is fine because our objective is the quality of endowments, opportunities. It is costly but making. When you break this social contract, which has happened in the past 10 years under the left and the right, people have reasons to be angry. The problem is the project and the foresight of this election is not like the foresight of the election in the u. S. The massive plan the President Trump promised and is trying to implement is something that would be extremely hard to do because we dont have the room to maneuver in france today. The idea of recreating somehow a train platform in france, we have lost some of the basic elements for trade. With you to look at new ways of delivering, especially in the service industry. Will transform into the vote . I am not sure. Francine tom and i will be in paris so i can hear him speak french on air. Do you worry more about france or italy . Andreas more about italy frankly. Italy is the groundswell of popular opinion is much more divided on the european project. I think italy has had longer periods an economic underperformance than france. It has performed much worse. I think the prospect of italy potentially going works in the eurozone is higher than in france. Francine what are the chances of survival in the eurozone over the next five years . Andreas i think it depends how you define the eurozone . To me, the euro is there to stay. The question becomes, what sort of euro is it . A euro built around the deutsche mark, around germany and those countries that commit to the physical discipline that the germans will . Or will it be a larger euro like we are seeing it today . Something has to give. Onher the eurozone agrees the german model of economic management, or it will be a much smaller euro. Tom quickly then here, if i have reports of a better euro and business doing better in europe, is that it anyway filtering down to the people of europe, or is it the same gilded age as the u. S. . Andreas well, i think it is filtering through. We have seen very encouraging signs of wage growth, real wage growth, in the last few quarters, which is not the case in the u. K. Which i think is going to cause some significant strain in the u. K. We have seen real wage growth. We expect that to continue because inflation is under control and wages are going up. How muchleague said, that filters through in terms of people feeling better, that is a whole different question. Tom lets come back. The argument of the day for global wall street. Ludovic, thank you so much. I hope i pronounced that and did not butcher that. Francine like your ties. Oiler. E hair is [laughter] jump . Ow about this it is not a joke. That serious dead serious. William gross, richard clarida, the fed decides, 1 00 p. M. This is bloomberg. Francine this is bloomberg surveillance. Actually, we look at france. We have a little bit of an update on what the various candidates stand for and what difference is pro or against the euro. Breaking news from la pen. The polls,teauing in but she is 35 or 38 . She is in the center of france. What we are hearing from her is that one of her first jobs would be to get france out of the schengen agreement. That is one thing that she has been talking about. Trying to read through the headlines, but i am looking at them, and she is saying french workers should have priority for jobs. This feels a lot like donald trump. She is saying she plans a levy on imports to protect french products. The main difference between the leadand france is it could france to get out of the eurozone where u. S. Is already in control of its Monetary Policy. France, then elections in amsterdam. The Federal Reserve meetings in washington. With all that said, this is the interview of the day if you are on global wall street. Andreas lives in the investment industry at allianz. He has seen an industry blowup. You see it in the wall street journal today with the layoffs at cambridge. Fidelityston at blowing up fidelity. What is going on in active management . Can active management compete with the giants of passive management like vanguard . Andreas what is going on is that the active Management Industry in the traditional sense and lazy over the past got fat a lazy over the past 30 years. Equities and bonds were going up and a lot of savings flowed into the product that the Asset Management industry delivered to the marketplace. The trouble of course is that the competition has ramp ed up significantly. Beta has become inexpensive or which means the industry as it is today will continue to shrink unless it reforms itself. I am very optimistic about that. Very strongly committed to active management. Tom within that is taking the fees off of equities and bonds. Can you get fees off of fixedincome investments in this great distortion . Is there any profit to be had for Asset Managers in the bond business . Andreas absolutely. I think there is a number of ways to do this. The first and most important realization has been that active managers have been too close to the indices of the past. You can understand while they continue to produce near doubledigit returns over a 20 year period, that was good and potentially different clients. That has changed. Nominal returns are very low now, and they are willing to take much more risk. If you produce an active return, you will get paid for that. One of the changes the industry will have to face and clients as well, if you want to be passive, you will have to align your fee model closer to the outcome. Francine how will the Fee Structure change . Andreas the bases are going down. Ther the base fees are going down. That is obviously tricky and the definition of that, you make it symmetrical. Asymmetrical, these are questions individual managers with their clients will have to associate. Francine how much consolidation will we see . Andreas a lot. We have a talking about it for 20 years. It is finally happening. We have seen pioneer being merged the way away. I dont think today there is a single significant asset manager out there that is not in some sort of m a discussion. Tom you see the urgency now. Ways to go ont this baloney switch to the battle on london and how you will pay for securities research. This is the raging battle about people like allianz or fidelity or Capital Group of los angeles, how they are going to pay for research. How are you going to do that . Andreas we are in the process of negotiating that with the research providers. One thing that is certain, if you look at the Research Budgets and the payment for research in the past 30 years, they have gone down every year. This is nothing new. The sell side is very realistic about that and have adapted to that. The change that method is proposing for Research Means we have to make it much more transparent as an industry. We have to be very clear about what we pay for and how we pay for it. That i think ultimately will lead to a further compression of Research Budget and w will need to lead to an adjustment. Francine thank you for that. Stay with us. If you are a bloomberg customer going to tv , you can ask us to ask questions to andreas. You do that by looking at the video screen and asking the guests a question. Thats right. This is bloomberg. M bloomberg surveillance we say good morning to you. In our next hour, alan ruskin will join us from Deutsche Bank and speak on the markets linking into that important fed meeting. Look for it this afternoon. Scarlet fu and i will join you at 1 00 p. M. With a terrific set of guests. Right now in london with francine, andreas . I91 to make 2 plus 20 of the game. I know you want to make 2 plus 20 of the game. You dont have that luxury at allianz. Is the 2 and the 20 of the gain, is that game over . Andreas i think that is in the past. But let me be very clear about hedge funds. I am a fan of hedge funds because the hedge funds ultimately basically for saw this onslaught. In my opinion, in many ways, they love the way for potentially how you save the active Asset Management industry because hedge funds are anything if not active, right . The premise that you need to generate, big returns, and need to take a line of risk, which is what the hedge funds are doing. Something the traditional industry will have to do in a much broader sense. Tom lets go normal here. I think it is a good day to talk long normal distributions. Francine it is. Tom always a good day to talk log normal. Andreas, you know you go down faster than you go up. We have not enjoyed a correction or a bear market since time began. Is the active Management Industry ready for the next legit bear market . Andreas i dont know if the active Management Industry as a whole is ready, but certainly, our investment professionals are holding much higher levels of liquid assets in their portfolios in anticipation of such a correction because you dont want to be against yourself. But also in realization of the fact that holding cash or shortterm liquidity today carries much lower opportunity costs than in the past. Francine thank you so much. We have to leave it there for now. The longawaited provision of basel Bank Valuations have seen measures repeatedly delayed. The eu says it is in contrast of regulators. Matt miller is at the g20 conference in frankfurt and is joined by a regulator. Matt yes, i have here at the Deutsche Bundesbank symposium right now felix. Thanks so much for your time. When we think about basel iii, what is the sense of urgency to get that negotiation wrapped up and get the regulation rolling . Felix absolutely key. We are very committed to find a new global standard and find a new compromise on the basel level. Happene where that will in the next weeks or months. If it takes months, that is fine. That is fine. There is no doubt about the need to create a new standard. Matt there is a concern i hear from german bank ceos that the Playing Field will not be leveled. They will be at a disadvantage. What can you do to level the Playing Field . Felix we have done a lot already. Some are having profound impact on the Balance Sheet and the assets of banks in europe, not just germany. We are well underway. There is one key issue on the table, which now needs to be sorted out. Matt the output floor. The germans have to make sure that i have to use the output floor that will befall them default them to the standardized risk model. Felix we dont like it in general. I say we, that means quite a number of the key european countries. Not just a german issue. We are willing to compromise. We are willing to enter a deal which does include an output floor if it does not compromise the principal, which we believe is absolutely fundamental for regulations and supervision. Matt you are willing to sign a deal that has output floors . Felix yes we are, if it is not compromising. Matt lenny quickly ask you about brexit because one person you aboutquickly ask brexit because one person said the queen will look at the deal and quickly get it into action. How is this continue as far as where banking headquarters are located . How does this concern you as far as where banking headquarters are located . Felix banks using london as their main hub currently within the eu are likely to lose the socalled passporting privilege going ahead. One way or the other, there has t they have to do something about that. We are not trying to lower any standards to come to d any particular country. Matt are you worried other countries will do that . Felix there may be a little bit of that going on. I am more concerned about the Security Side of things, about the potential danger of the race to the bottom. We are quite close on the ecb level. We supervise 126 large banks anyway. There is a strong consensus among our supervisors do not let this turn to a race to the bottom scenario. Are you concerned the donald trump regulation will roll back regulations too far . Felix he issued a request to scrutinize doddfrank. That is fine, but we do not yet know what that means. Lets just see when the facts are out. We will have regulatory dialogue on that. Settings, what have you. Matt thank you for your time. You so much. Coming up in our hour, alan ruskin of Deutsche Bank. We will speak to him about linkage of the markets. It is the litmus paper for janet yellen. This is bloomberg. Tom is the eyes of march. Ides of march. This afternoon, chair yellen will provide measured comments on the measured path to neutrality. The dutch vote in a large part of the netherlands that is undecided. Hollen belongs to the dutch, one says. The president gets his taxes done at h r. Good morning, everyone. This is bloomberg surveillance live from our World Headquarters in new york, i am tom keene. In london, francine lacqua. We have the taxes of the president. He paid a good amount of taxes. Francine he did. We will dive into that deeper. You forgot the headline because the netherlands might vote for someone that will freak the markets out. Tom it is a really interesting vote. Very nuanced. A good strong to be an interesting in amsterdam today. Emma staying with president white houses, the is firing back at msnbc for releasing details of President Trumps 2005 tax returns. He paid 38 million in taxes on the income of 153 million, a tax rate of 25 . The white house said you know you are desperate for ratings when you are willing to violate the laws. Calling it ais historic turning point in relations with the u. S. President trump met at the white house with the Saudi Crown Prince after an adviser said to have been a significant shift in relations. In europe, the netherlands is voting today in an election that will be the first measure of the spread of populism on the continent. Antiislam candidate has called for the super bowl out of the European Union and to halt immigration. Mainstream politicians say they will not enter an alliance. A french president ial candidate tol said he was the victim of a plot. In a radio interview, he said he is innocent and that justice is being manipulated against him to keep him from running for president. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Tom thanks so much. How about a quick data check . One screen today. Not much going on with the fed meeting at 2 00 p. M. Bill gross will join us. Oil bounces 48. 55. Francine this is what i have. Very similar data. It has to do with the fed. Little bit of movement on crude oil. Below 49. Tom very good. When you to go to washington where Kevin Cirilli gets his taxes done at h r block. Let me cut to the chase. Those were the taxes of 12 years ago i guess it is. Kevin, what is a likelihood that the president like all other president s before will release his taxes for 2016 . Kevin not much. This is a president who campaigned on the idea that he does not have to do that, that he does not have to release his tax returns. Unless there is a leak, i highly doubt that President Trump or this Administration Officials feel it is necessary for him to do that. Tom within this is the destruction of the taxes and are we going to play golf this weekend in florida. Yesterday, i saw that shift where we began much more to talk about senators and health care. Can they block the efforts of speaker ryan . Kevin they can. Here is where it gets interesting. When you take a look at the whip count, senator rand paul, senator ted cruz, senator cotton, the list goes on and on. The republicans in the senate only have a so regardless of the fact that the administration and House Speaker paul ryan can ever a filibuster with a list as large as it is of republicans who are criticizing this Current Health care legislation, it is either going to get blocked or has to significantly change. Republicans who are opposing this oppose it for different reasons. This is where it gets incredibly interesting. Outrage this is why it matters. So . Cine when will this be when will we have a better idea of what the endgame is . Weeks, months, longer . Kevin it will take several weeks. It could get past as long as it dramatically changes, but the reasons for changes are very different. You have all caps conservatives ultra conservatives who think this institutionalized as several of the Affordable Care act laws, but you have more moderate republicans who feel 14 million americans can Lose Health Care in the first year. A lot of governors like the medicare expansion. Francine talk to me about saudi arabia. I thought this was going to be a short affair. The deputy crown prince showing up at the white house. I thought it would be over in 20 minutes, but this was almost a recent of relations with President Trump. Kevin that is the type of relationship this administers shall isis a President Trump is good at. Is able to have positive interactions. Everyone in washington still buzzing about what specifically this is going to mean in terms of immigration policy, the administration having put out their executive orders, as well as immigration policy. The big meeting is still friday with angela merkel. Tom thank you so much. I hope you lost carry for of 300 million or 400 million. I hope that helps you today. Taxes, but theon state of the markets into the imported it historic fed meeting today. No one better to speak to than alan ruskin. A storied career on global wall street. He is with Deutsche Bank. How linked are the markets going into the fed meeting . Alan foreignexchange, we always look at other markets. We are looking at the bond market, equity markets, the oil market, and at each other. Yes, we are very much interlinked. Tom is the dollar moving, stable moving out . Are we going to get the trump dollar that mr. Trump does not want . Alan right now, the dollar is not really moving. Trends, and of particularly tried as it relates eurodollar. Trade around 1. 06 for the whole of this year. A lot of noise and frustration. Francine what our markets actually looking at away from the fed and Central Banks . They are not pricing risk. Are they pricing in fundamentals, the animal spirit that will come back . Alan i think they certainly are looking at the usual things. They are looking at anything that relates to Central Banks. It has not just been oneway traffic. It has something to do with the Federal Reserve. Also more recently perhaps a little more surprising, the ecb has come back into play. People are looking at potential qe related activities that are going on from the boj as well. Central banks very much the focus. It is all the Political Risk. Political risk is something that is very tough to price in. You have the small probability events that have very large market events. That is exactly what the market is not like to trade. Options markets very accurate, but the spot markets on the foreignexchange site is not nearly. Tweets, do they track what the new secretary of treasury will say at g20 . Alan absolutely. The g20 meeting will be interesting so much as we do not know the u. S. s stance. Everything we have seen from other officials that these specific have made remarks suggesting they are looking in waiting to see what the u. S. Will actually say in terms of their focus on currencies and currency manipulation in particular. At this point, the encouraging orect is that now we have very likely will have a meeting ping and President Trump in april. That will supersede anything that will go on in g20. The u. S. And china relationship will be smoothed out for the time being. Tom there we are. Alan ruskin to get a started this hour. We will go to Michael Mckee in a moment in germany. 1 00 p. M. This afternoon, what a great lineup we got. The team has done a great job of packaging for you many hours of the fed decides. The press conference and conversations with al, rick growth, richard clarida. Adr city modified to Train Service between new york and boston . This is bloomberg. How about is bloomberg surveillance. Lets get to the Bloomberg Business flash. Another highprofile International Twitter account has been hacked, and it is linked to turkey. Of account posted content president are and the netherlands. Netherlands. D the among those targeted, bbc north america and the parliament. Twitter says it is investigating. Germany central bank is signaling it is ready to strike a deal. Europe and the u. S. Have been divided on key elements of the plan. Bloombergs matt miller spoke with the head of international finance. Gathering the worlds financial official together is important. Financial regulation is an important part of our dna. Wrapping up this basel iii process is important part of our work stream. Emma he also said he thinks there will be a mass exit is a banks from london when the u. K. Formally leaves the European Union. That is the Bloomberg Business flash. Francine thank you so much. The fed is todays headline. Attention will quickly turned to fridays g20 meeting and the International Debut of Steve Mnuchin. On the ground in frankfurt ahead of the event is Michael Mckee. We also have alan ruskin in new york of Deutsche Bank. What are you most looking forward to . Watch as of as the g20 gets the fed what should be aware of as the g20 gets underway . Michael how high does the dollar go and how does that affect decisionmaking within the Trump Administration as they go forward . There is a lot of frustration and concern about what may happen with the u. S. , whether the u. S. Remains as committed to bank reform and open and free trade as it has been. Nobody really knows because the president has said a lot of things, but Steve Mnuchin has been much more circumspect. A lot of people are anxious to meet with him and find out where hes in. Francine will they talk about current simulation . And what does that mean for Dollar Strength . Michael there is something in the draft communique that refers manipulation. That countries will not manipulate their currencies for trade advantage. That has been there for a long time. While everybody sort of does it when you lower Interest Rates,you affect your currencys value, nobody will admit it is manipulation. Rates, you affect your currencys value, know he will admit it is manipulation. Tom you will go from tim adamss soiree in frankfurt 100 miles south for the g20 meeting. Is anybody talking about the transatlantic divergence in yields . Michael definitely. Iaffpoke to the this morning and said that is a difference in where banks are doing business these days. He suggested new york will benefit because you will get higher yields. That will drive pricing around the continent when the u. K. Leaves. People are following that. And another where they see more convergence by the end of the year. We might see other Central Banks heire rates or stop there ir qe. Tom i put that under the chapter of hope. Any image or illusion that we will see convergence . I dont buy it for a minute. We have major divergences in Interest Rates between chair yellen and everybody else. Alan we do. The u. S. Is pretty much alone. The u. S. Is the only g10 central bank that will be tightening this year, certainly in any meaningful fashion. Tom is there a history to this, a previous timer we have seen chair yellen so alone . Alan almost no history. It is amazing going back, when the fed tightens, almost all of the other g10 banks are tightening. None are tightening. That is part of the big strong dollar story. The good news from the g20 side of things is the dollar is not all that strong. It is not placing a huge amount of pressure. Em currencies holding up nicely. Em debt really and Credit Holding up well. Not creating the stresses that we would normally be worrying about. Francine where do you see the dollar from here . If you save the dollar t for the moment is notoo strong, can it get too strong quickly . Alan we will see a bit of a positive here pause here. We will be going nowhere for the next quarter or so. We are relying on the u. S. Policy. Some sort of fiscal stimulus. , it is not have to be a brought adjusted tax but we need some stimulus kicking into the end of the year. That is in competition with the Monetary Policy tightening that is already under works. At least three rate hikes this year and another three next year. That would combine to secure further Dollar Strength. It is not coming in at the levels and the absolute person of changes we normally expect. Tom i believe there are two if not the white house is right now. Which message will secretary mnuchin carry . Does he carry the message of the Treasury Department . Does he carry the message of president been in . Does he carry the message of preibus . T previou rights circumspectuch more and historically in line with the g20 message. That is what he said during his confirmation hearings and what he has said so far in the little time he has spoken publicly that the u. S. Does not want to get into any kind of currency wars. Well see if he can deliver that message and if the rest of the g20 believes him. Francine thank you so much. We will be back with alan ruskin. Coming up later today on bloomberg daybreak americas, a conversation with mohamed elerian. Yields, treasuries, and regulation. Coming up next, dutch voters heading to the polls in a general election that will provide the first gauge of the spread of populism in the core of europe. This is bloomberg. Francine bloomberg surveillance. From london and new york. Lets go to amsterdam. Netherlands. He dutch voters are heading to the polls this morning in an election that will provide a key gauge of how far populism has reached into europes core. He contest polls . Se are the there has been a shift. There has been a definite shift in the past 48 hours. Slumpeddom party has really. Now number five in the polls. There has been this stepping back from the populace to the right. Will that translate at the ballots tonight and throughout the day because still front and center in the debate is immigration, integration of those immigrants, and thi is lam . The spat withe turkey, with statesmanship, with leadership, and is looking through the debates. Tom help me with when we will know. Do we know tonight at 9 00 , 6 00, two weeks from now . When is the outcome known . Manus the very initial rush will be at 9 00 p. M. Tonight. We will be right there for those exit polls as they come in. Be careful because it could be quite a shift. This is so close. Toy will hand ballot papers avoid any possibility of the acquisition of manipulation. It is close. It is in that in the. Neck and neck. Tom the beautiful shot of amsterdam there. Scarlett johansson was in a movie about it. There is no nominal gdp. The common feature is flatness of Economic Growth of europe. Alan it is to some extent. I think it can be exaggerated. There is certain are three countries where we say, ok, there is consistent underperformance. Places like portugal in particular. The dutch economy has done well over the years. They tended to keep up with germany. One of the few places what you could say if there was a deutsche mark, they would be in pace. Tom maybe that is holy will get out of this, an independent netherlands currency. We have not heard that. Coming up on bloomberg daybreak, a discussion with andreas. This is bloomberg. Tom lets get to our news. In europe, the e. U. Is ready to ratchet up the pressure on british Prime Minister teresa may. According to two e. U. Officials, they may stall brexit talks until june which will cut into the time they have for a deal. One may trigger the brexit and the power shifts to the European Union. In asia, u. S. Secretary of state Rex Tillerson begins a three country tour and tillerson is looking for a solution to the problem the u. S. Has been working on 25 years, north korea and its nuclear ambitions. Recent tests shows north korea has developed missiles whose range is closer and closer to the u. S. Tillerson will have meetings in tokyo, seoul and beijing. Lee says china will keep opening its door and noted bilateral trade and investment created almost a million jobs in the u. S. Last year. South korea will hold an election may 9 to choose a successor to the ousted president. The countrys acting president says he wont run. Ohn has been considered a candidate. The early front runner in the mexican elections is blasting donald trump. In an interview with bloomberg, he made clear he wont take a cautious tone if elected. If donald trump continues with his hate campaign against the mexican migrants, when those things happen, we will go to the u. N. And we will report the United States government for violation of human rights and racial discrimination. Former obrador is mayor of mexico city. Bloomberg, powered by 2,600 journalists and analysts in more than 120 countries. This is bloomberg. Tom thanks so much. Its march and theres snow on the ground but how about we get out front in my book of the summer. Here it is. I hate this book, the death of expertise, tom nichols, you need to know the following. Hes one of our leading soviet expert and is our leader on analysis. Ian bremmer love this guy and hes done better at jeopardy than i am. Lets do a jeopardy question, who is toms worst nightmare. Its tom nichols and joins us w with allen ruskin of deutsch bank. Way too early, short brief, gorgeous. How do we bluse our belief of experts like all the people we have on surveillance. We didnt lose as much as we rejected it and decided as a society we didnt need it. Tom we dont need allen . We dont need our centers or doctors or diplomats or anybody who knows anything more than the average person because the average person thinks they know more than enough to manage all of those complicated questions. A inat make its confusing to us. Are we talking those that believe in expertise or those that have given up . Tom n. if you cut your leg youll go to a doctor and if you get sued youll go to a lawyer. The problem is taking the advice of experts beyond simply Technical Advice and what is dying. This notion somehow people who know things about a lot of issues as opposed to the average lay person, thats the thing. Its more like the death of the ideal of expertise among lay people in the United States, europe, canada, seems to me becoming a global phenomenon, unfortunately. Francine is this linked to populism and when did this start happening . Is it because people are confusing experts or academics with the elite . Tom n. when people hear the word expert they think elite even though those two groups arent always the same. The people who advise the elites are not always the elites themselves. I think part of the problem is that theres a resentment in the information economy between people who have done well in an information economy and people who feel left behind by it and are somewhat resentful about that even if that information economy really in the end ends up benefiting them and still nonetheless is a certain amount of social resentment that leads to was matic or reflexive to expertise and is dangerous to your health and the fundinging of an effective democracy. Francine when youre an expert its the best in your field or what it was meant to be. What needs to happen . Is it a cycle . What needs to happen to go back to trusting experts . Tom n. im hoping we can do that and return to trusting to experts without the kind of event that usually requires it, which is some kind of disaster, a war, a recession, a depression, a pandemic. As i often say, people are very willing to question their doctors and reject medical expertise until their fever hits 102 and suddenly doctors are ok again. Im hoping we can get back to a better relationship between experts and lay people before Something Like that has to happen. Tom k. you frame this between the distribution and certitude of a Google Search and i can search allen ruskins deal and pretend i know more than allen and you nail it in your book from the spy that came in from the cold. I reserve the right to be ignorant. Thats a surveillance way of life. No, im kidding. I reserve the right to be ignorant, thats the western way of life. That really sums it up from another time and place. Allen it does and came back from 1965 and yet its something people adhere to almost now as a virtue. Tom k. do you see this on wall street everything david has built at Deutsche Bank seems to be crumbling because we dont need allen ruskin anymore . Allen in the political sphere id say that but if in the currency world people are not forecasting. But to the point expressed earlier, the big question s this a cycle and do we have a sense here this eventually will come full circle . Tom k. youve been an arch critic of trump economics and political theory and such, what do you observe in seven weeks . Are you confirmed or is it advantageous to have the uproar in washington that we have . Tom n. its not advantageous at all and i started writing the book long before donald trump came on the scene. I think the president and his campaign caught this wave rather than creating it. They surfed it rather than generating it. But theyve certainly encouraged it just as the brexiteers did in britain and other parts of the world. Francine well be back with tom nichols and allan ruskin. The company sees lower profits as prices for the products remain under pressure and low Interest Rates weigh on investment earnings. The worlds biggest insurer plans to buy back a million youresos in share before the Shareholder Meeting and im joined by the c. E. O. On the phone from munich. Sir, thank you for joining us on bloomberg surveillance. How happy and relieved are you that the fed may hike rates today . Does it mean your life will get a lot easier as you search for yields across the world . Knick laws first of all, thank you for having us and me on your surveillance. And we think that there may be a turn now on the Interest Rate side. Of course today well have to see what the fed will do. Everybody i guess expects a slight increase of Interest Rates and will have a repercussion on europe, too. We may have seen the bottom of the Interest Rate development, however, the euro will be much slower and of course will have a repercussion on our business. In the business we are pretty much in the same situation. We think that markets are well supplied with a lot of capital but Interest Rates take away some of that capital and then the mindset probably would change, too and why we think Going Forward rates probably start to go up again on the insurance side. Rancine what does it mean for how much do you look at the german yield and in negative territory it means the last couple quarters it makes more sense for munich to store cash in vaults . Is it Political Risks that will continue weighing on those yields . Nikolaus things are very different than in the u. S. And the treasury spread for 10 years is enormous and we have 19 billion with negative Interest Rates in our book which is 8 . However, the good news, the german 10year treasury bond is up compared to the last month, we are now in a territory of around 40 to 45 basis points and makes our life a little better. However, youre right on the shorter durations were in negative territory so we have to hold on to it. It depends what business is affected here in our case the reinsurance side of the business is very much in the u. S. Or u. S. Dollar or nongerman business. Less than far less than 10 is german business and since we normally try to invest in the same kind of environment, this is not real challenge for the reinsurance side. Its much more a challenge for our primary book but again here, things are starting to get better. We see a Silver Lining on the horizon. Ancine will we see a lot of m and a. Nikolaus were very rich and look at targets but in view of the relatively challenging situation its amazing what prices are being paid and why you havent seen us a lot on he buying front yet. Tom k. thank you. Well come back with tom nichols and allan ruskin. Dont forget, 1 00 p. M. This afternoon, the fed decides. This is bloomberg. Tom k. at 1 00 p. M. Ill be with schoolette. Sam sister dam is where were looking. Amsterdam, is where were looking. Ill be on with scarlet at 1 00 p. M. Tracy more exciting in the hague. Thats where the politicians are is in the hague. Francine the netherlands, the vote tests the appetite for populism at the center of europe. Again, were six weeks away from the first round of the president ial votes in france. Everything is linked. Tom k. the experts will weigh in tonight. Allan ruskin from Deutsche Bank and tom nichols working with the United States navy. The death of expertise is way out front is my book of the summer for a couple reasons. One, everybody cares about this. Its how surveillance was invented, talking to experts like allan ruskin. Bonus round. Its the perfect size. What did annapolis think when you came up with this book or newport or the war college at newport. Do admirals and commanders want to read this stuff or do they tell you to get out of the room . Tom n. its important to point out i dont speak for the navy and i wrote this out of i didnt write it for the navy or anyone else but wrote it out of my own frustration with how many people, particularly National Security affairs and Business Affairs and medical affairs felt perfectly comfortable arguing with experts about things they obviously knew nothing about. I assume that i did speak with people who are in the National Security field as well as in other fields and the response has been very positive. Tom k. i see these kids with superficial knowledge and the key word is ringer, the way you get to be allan ruskin is rigor and nailed this stuff and in your case in cape town. Where did the rigor go . Tom n. the universities, what theyre marketing to them is a College Experience of four or five or six years. Was. what they taut at brutal, right . Allan it told you about data and dont man up rate the data. Thats what i see is the biggest problem, at least in my field is just what you can do with the data and dont distort the data, be honest. Francine right. But allan, again, when do people realize what is the truth, what are real facts and what isnt . Because it all goes back to the same thing, people dont believe experts and so they dont really know the distinction between the truth, facts and something which is fictitious. Alan youre absolutely right. We were talking earlier, sometimes you get thrown out outrageous facts. The Unemployment Rate is whatever it is, about 40 . And you look at the official statistics and you can point to the fact, really and people still dont believe it necessarily. At least i think in my world where we talk to a professional audience, i think the data does count and theres really a lot of different people and the professionals make up their mind to what really does make a lot of sense. And so i think theres less problems in the marketplace, per se. But occasionally you get news wires, stories that come across that are potentially realistic and you just dont know and you need a correction. Francine so tom, what will be we said how do you reverse this and you say well, lets hope its not something ugly like a war or recession. Who do people believe . Is it all social media, is this how you influence with real facts . Tom n. they cherry pick who they believe. They believe a particular outlet that they happen to like. They believe their Favorite Television pundit or personality. Or they believe theyre aunt or uncle who sent them a facebook meme which they think is far more important than anything they may have seen on a reputable television program. Tom k. lets bring it back to the present time. He quotes from the x files and we do that often here on surveillance. I dont want to see the Buffalo Bills winning the super bowl, the chief villain in the x files says 20 some years ago, as long as im alive, that doesnt happen. This whole conspiracy thing were drowning in, everybody can admit on a daytoday basis in washington. Theyre out to get us. Deutsche bank is out to get us on the dollar, right . Tom n. yes, and its a way to explain things people find frightening. Tom k. like the Buffalo Bills. When the bills werent winning they invented a villain. People approach conspiracy theories the same way. Its a way for them to shift blame away from kind of an uncaring universe or angry god or simply Market Forces they cant control and it gives them some sense that theres purposesful behavior behind this. Om k. is that where i saw focus first, is that one of the bad guys . David did wonderful Deutsche Bank research. Francine . Francine do you believe people lost respect for academics and experts because they did not see 2008 coming . Tom n. it predates that. A lot of the experiences i had that made it into the book predated 2008. I think one thing ive said all along that isnt very popular is that one reason people are eager to blame the experts for things like 2008 or for the iraq war or for other major events is that in part the public doesnt want to accept their own role in these moments. They dont want to think it might be because they made bad purchases or because they supported a war, the idea that somehow the iraq war was terribly unpopular in the United States is really something that has only emerged as new methodology and its a way of saying it wasnt really us. The experts talked us into this. Of course the experts are a class of people far away you dont know. Its easy to offload that responsibility. Tom k. thank you so much. Way out front, the death of expertise. Tom nichols. Let me tell you about tv go right now. The idea you can go into the bloomberg terminal and watch us live. What you can really do is go back to a previous segment and you can download the actual charts we use on the bloomberg. Thanks for the many responses on this that weve had. People love even the lollipop chart here of the twoyear yield. Russ is going to steal that from me. Tv go. Stay with us on fed day. This is bloomberg. Tom fed day. Weve been showing this. A red line is an approximation of the taylor rule and is all over the place. We thank john taylor of Stanford University for retweeting out our use of this chart last week, really honored professor taylor would do that. The right line is the fed Fund Target Rate and the red line is the taylor role, whatever you want to choose and the green circles are overlaid the dots, one year, two years, long term and alan ruskin, all this chart shows is the white line, janet yellen is way behind where we ought to be. How many rate rises do we need to see to get to neutrality . Alan it depends how you get to slash. I think ive seen different estimates now of taylor rules. Janet yellen has put out. Some recent talk, actually, expressed some darts in terms of can we come up with one number for a taylor rule. D the range of stements in the taylor rule is Something Like 1 to 3 and is a big range. The mid point, 2 seems reasonable to me. You dont have to put in an exceptional number to come up with 2 which suggests the feds may be a hundred basis points behind after this rate hike, 100 basis rates behind in terms of what the taylor rule suggests. Acom t moderately dating. Francine i thought the market didnt care about the dots. Maybe after the dots you go back to the dot plot here. Alan probably the most important thing well watch for, i think the markets are looking at median dots, 2017, all the talk youre getting even from the hawks, three hikes is enough. I think the median dots for 2017 probably doesnt change and then people are looking at the 2018 dots, the 2019 dot and the median there doesnt can easily change, really. You dont need that many people changing their forecast. And that could go up maybe by 25 beads, both in 2018 and 2019. I dont know if thats that important, because the market doesnt trust forecasts that far out, 2008 and 2019 but thats what were looking at. Tom k. thank you so much, alan ruskin, particularly this conversation today on the fed. Dr. Ruskin, well continue with this on Bloomberg Radio and surveillance as well. The Foreign Exchange report, francine mentioning sterling again, 122. 92. Rick michigan of columbia and we have many worthies joining us. If the fed decides 1 00 p. M. This is bloomberg. Note alix march looks like a done deal but Falling Oil Prices could cast a cloud on the future of rate hikes. The u. S. Debt ceiling suspension is set to expire. Treasury secretary mnuchin raises the alarm. And the dutch go to vote. With the antieuropean party slipping in the polls it is a test of populisms force in europe. Happy wednesday everybody. Im alix steel alongside david westin in detroit. Jonathan ferro is off today. I cannot believe you made it from a storm here in new york all the way to detroit in less than 12 hours. David i cant quite believe it either. I had to take several modes of transportation. The president will be meeting with auto executives. They are hoping for deregulatory talk. Your