Transcripts For BLOOMBERG The Pulse 20150217

Bailout talks broke down. Both sides refuse to blink greece is rushing toward the cash crunch that threatens to drive it out of the eurozone. We are joined by hans nichols. And without the bureau chief in joins us from greece. Hans, lets start with you. Lets talk about the greek finance minister, Yanis Varoufakis. And his reasoning about what he is doing. According to him, it is simple and illogical for Yanis Varoufakis to excel at a deal, a program his party was elected to repeal, it is simply a nonstarter. He said they went backwards last night and not forwards. He said. The last weeks meeting, they had a few setbacks and then they made progress. He held out the prospect for additional talks is that he is willing to negotiate. We have been saying steadfastly for the beginning we want an honorable settlement. We want to wedge together these principles, the principles of the program have to be respected and the government that challenges the logical problem and find Common Ground between the two. That is what we said from the beginning. It is not enough because its the only option we have. It is plan a and we have no plan b. By brussels standards, it was a short meeting and a dramatic one. Earlier, Yanis Varoufakis claiming that he was offered a plan he was prepared to sign on the spot. That plan, that offer was withdrawn was that eurogroup finance ministers saw what was in it. What do they ended up offering something that will keep them in the Current Program some flexibility. And those two words are too reckless in Yanis Varoufakiss review for him to sign off. Talking to the ministers, not a lot of optimism. I asked one about what the mood was like. There was no progress from last week. Compared to last week. And no Data Available and no numbers. It was very difficult to make progress. Was their frustration with mr. Yanis varoufakis . And no, i would not call the frustration. There were expectations in a very for very short time. Guy both sides are saying they are looking to the other side to make an offer. Otherwise there would not be enough time for the parliament and all of the nations to ratify. Hans, how did the deal that Yanis Varoufakis thought he had fall apart. It is sort of a fascinating story and could reveals blitz whipped between the eu and the commission and the finance groups being led mr. Dyson will. Heres what we know. We know theres an offer on the table and that was change. The question is how did it get altered . They do looks like he did not think it was appropriate and got yanked back. A report in a greek newspaper citing a Greek Economy minister in saying the initial offer from ecb has support from 2 very important people, mrs. Lagarde and mr. Draghi. The question is are these splits , if there is a split between the eu and finance ministers, will this drive negotiations and allow the greeks to sort of play the europeans off each other and find some sort of way to have a bidding war and more favorable terms . Hans nichols with the very latest from berlin. We are trying to get to the bottom of what was in the document and if it was split. It will be interesting to see how it is played out. Holland is playing an interesting part. The greek bailout, the company itself faces a credit crunch. It could see him run out of money by the end of march. Lets get more of that angle and to our Athens Bureau chief. Walk us through where we are. The timeline is becoming increasingly tight. Talk to us about what is happening on liquidity and equity front. Well after last year, the banks and the state have obviously lost market access. There only such party, the bailout as well as assistants from extended by the bank of greece. And that the Central Banks. If the bailout funds disbursement cease, the greeks will be as early as nest [indiscernible] it would have to default on shortterm debt that is in the banks valults. What do this mean is the brains will be in a solvent immediately. Destin softened immediately. Are we looking at a possible credit crunch . You wrote a nice piece on bloomberg. Com and if the stalemate continues, this is what we are looking at, right . Credit and crash crunch . One have enough to pay salaries and debt. And it would [indiscernible] its own banks vault. Thanks would be i the banks would be insolvent. No economy can survive without any kind of cash. They will have to stop using some sort of currency. Yeah maybe we could use the monopoly money that mr. Varoufakis was talking about. I am joking of course, sorry. We will leave it there. Nikos chrysoloras joining us from athens. Coming up, it is not holger nor monopoly so what is game theory exactly . Stay with us. That brings us to the twitter question of the day greece versus the worst of the eurogroup. What game are they playing . It is not game theory or monopoly said mr. Varoufakis. Let us know what game you think they are playing in greece. Welcome back to the pulse. Bailout talks in brussels collapse and the greek finance minister, Yanis Varoufakis insisted he was not playing games. Hans nichols called his bluff. Quick search, if you are not playing game theory and you are not playing poker and not bluffing, was a game are you playing . What game can you ensure voters you are not playing . Ive not played monopoly with fake money but genuine money. [laughter] let me answer your question. Unfortunately, ive had a pass as an academic of studying game theory. One of the things i have written in a recent article that i have told my students is that game theory is based on unrealistic assumption that players are fixed and are all selfish. I do not believe that anyones version is fixed and is selfish. I think we are perfectly capable of rising above our narrow perspective and rising above the perspective of your. What does a bluff amine . Poker you have a seven and you pretend like you have an ace. What web been saying steadfastly is we want an honorable settlement we want to watch together these principles the principles of the program that have to be respected and principles of a government that challenge the logical problem and lets find Common Ground between the two. It is not a bluff because it is the only option we have. It is plan a and theres no plan b. Therefore, no games. Eurogroup finance ministers failed to reach a deal yesterday but mr. Varoufakis said he remains confident they can meet half way and the next couple of days. Eastern ukraines economy plunge the most. Lets talk about volatility. Care to talk about what it all means for market volatility is a global allocation strategy. When you look at the greece, it seems that no two sides have been further apart in reaching an agreement. Does it mean youre really worry about something that accidentally happens . A big run on the banks . The deposit slide in greece will be the key thing to watch. February 26, will see the latest numbers and that will be interesting. We hear they are very large. Politicians can talk but what will decide the fate of greece will be if the banks for conflict with, the ecb can thats contingent upon agreements. Then, we are talking about a situation where the government is going to have to issue ious. And affect the alternative currency which will be massively devalued. And so i think it is very unlikely to happen. But i think well see volatility on the way to an agreement. What we had two weeks ago was to cut all of the equity exposure to europe to neutral. A very big move for us. We were overweight equity. We showed a great rally in january. At that without it getting too risky. At this point, we are reaching to a level of the stoxx 600 and thats irony year in target. The upside versus downside, not worth it. I hear what you are saying. Really interesting since i started covering the greek financial crisis and everybody does to the point, it is going to lose badly. Everybody was talking about the fact that they greek was insolvent. We are still here x number of years. The instinct, the most investors have is to believe that the euro finds a way of muddling through. Why is this time going to be different . I think we will muddle through. We will not have a grexit. We have 2 big redemptions coming up. There is no argument. In july and august, 3. 6 billion euros in bonds maturing. And 3. 2 billion in august. You have to have the cash to pay it. The only way they will have is to a great the program. At some point, there will be a hit in the summer. February 28 a deadline which will probably get fudged and thats a real hard while we will hit. If we do not have an agreement by then, it will be a massive problem. Thats will be the key for the kind of crisis that is looming now. You are expecting a little bit more volatility. The markets are complacent. Is it because it is so low you are not getting returns so you will riskier assets and by question mark are there is a believe they will muddle through and often it does . The ecb is providing the backstop and a huge amount of debt every month and they will start doing that. None of them, believe me. Every customer has spoken to have set we are keeping our long position. We are not going to sell at this point. It happens in the past. You reach a certain breaking point where greece is record related and we start to see that. What is the once the noise starts to build at all of the capital flows and we are seeing. I think a lot of this rally we saw is because of the u. S. Of money. Well track flows and web seen a lot of investors. A it is a story we believe in. The euro is weaker. In lending has finally stopped. And it looks fantastic. We completely by the longterm strategic story. Tactically, we think theyre too many risks. We look for the entry point later on. And the upside over the next three months to avoid that 50 downside that could happen. And the ecb, a buyer of last resort. They are going to buy. If the guy sitting next to you sales, theres a buyer there and inside so that will keep a lid on yields. If someone else panics then there is an easy transaction in no rush for a narrow exit. Mario is there and what does he buying, the bronze. There may be a stop to the yields but the backdrop is not there for the equity market. That is the key thing. If the Risk Appetite disappears, that is what keeps the euro stoxx at a very high level. It might happen very quickly if the japanese investors have a little bit of money that goes into european stocks and that the is going into european stocks. It would take a few bad headlines to reverse that. I am still trying to figure out in everybody seems to have a different opinion. If we have a bank run in greece and capital cap stops, what exactly is the impact on banks in europe . Are we still connected or can we survive . Would germans be willing to fund capital flight in greece . That is effectively what happened in cyberspace a lot of people inside first what happened in cyprus and a lot of people in cyprus. At some point, you have to draw the line. I think i would not be surprised if there was in greece at this time. How nervous should i be how nervous would i be about the buildup because it greece were to exit, it will feel the pressure and that effectively its where the losses are going to come. And the past, people got very excited and the germans started talking about it. Do you think this time around that is what the officials are watching . A physical loss. They would have to recapitalize. And the ecb took a loss and will have to recapitalize the system. If it means the germans will have to physically put more money into the system and that will be immensely unpopular. Thats something we have to consider and target to and a very large inflows into germany and chances are it is coming from greece. That is the money and you put it into a german one. If the system breaks down and that has to be recalibrated and the number is huge. Yes, yes. You see the strings of zeros and really astonishing. In the target to the system. I think it will be a very risky thing politically. And the target 2 balance. Thank you. How did the french luxury giant on the way down. Well have that story. Welcome back to the pulse. The french luxury giant and Caroline Hyde joins us with more details. Previously, gucci had been the stand out. Now we have a new jewel of the crown. 25 increase in sales in the last quarter. Is that its returning to the forefront of the industry. It was a standout quarter for Yves Saint Laurent. A very strong part of their brand, slowing slightly. Almost 7 growth. Revenue has doubled since 2010. Still a very strong brand. Even though the shelf price are reflecting, gucci is doing better. Gucci decreased a little bit. Many felt it would fall more. This of a noticeable improvement in the final three months of the year. Clearly china really did hit gucci quite hard as the fact that cannot have consistent rollouts of what it was doing in terms of bags and looks and a\ esthetics. Of problem is we are seeing growth elsewhere but gucci is the cash cow, 40 of revenue. If they do not get it right, they will not make money. That is why they are imposing so much change for you across all of their friends, they are making big changes. Guccis new ceo, a fresh new transfer this was a they are looking at. We will hear from the chief executive and saying organic growth is the goal and not m a and buying independent brands both focused on what they own and what did they have in making gucci better. They have promoted from within to take to the helm of crater overall. Clearly, they have a new player. They also have a new chief executive who they moved. They rearranged and changed their chess pieces and now they need to start a winning. Lets hope from them. Caroline hyde with the latest. We are talking by insulin run Yves Saint Laurent and were looking for to that interview. Well be back in a couple of minutes. Welcome back to the pulse. And we are getting breaking with u. K. Inflation slowing. The governor of england said it could go further below of where we are now. We are at a 0. 3. Search trend is moving in a southerly direction. The pound is it. We will get reaction. Nevertheless you listen to the language being generated by the governor and the mpc still feel as if they are trying to manage on a more hawkish direction. Maybe a little dovish. Lets bring in our reporter with the latest. The comments we had over the weekend from certain members, did the markets it missed pricing . We should expect Interest Rates rising quicker than the markets are suggesting . Always twoway on expectation. One way, a safe bet. Some of the comments on what it would be on monetary policy. In the scenarios we see was the inflation and it is not rising. We have had at that for a while and then disinflation. Prices starting to come down. You want to avoid deflation. All Central Banks are worried about this. The bank of england hasnt in the back of his mind. What it wants the markets to think our race and what ever stay where they are now. Psychologically, you are a central banker, you are really uncomfortable. A lot of the comments would say for the bank of england and the Federal Reserve suggests we want to stay there and see how it goes but we want to make the first move. Rates can also go up because theres a lot of leverage in the system. But also we want to move down again if we have to. If this backdrop continues and the Oil Price Plummets again, we want to have something. Talking of the oil price, a policy made for two years further down the road if oil price they where they are now will unwind. As a result of which 912 months we will end with the opposite effect is to start with recalculating our numbers. Yes it is being generated by one the biggest drops in oil prices we have ever seen. As a result of which policy that on this. Given the economic backdrop and what is happening in the eurozone and what we have seen and given what we are seeing with the Growth Outlook globally, if you see members change their minds. It is very hard to raise Interest Rates given everything that is going on at the moment. Yes, you want to look to the oil price and go through a twoyear horizon, but it will be hard in this climate. And in terms of what we are looking at and we had the inflation figures and will talk about wage growth and they u. K. And the benchmark. And that is exactly what the mp mpc is saying. Unreliable. Unreliable. They have mounted it on wage growth. You are going to see some headline wage growth and because inflation is lower you get real wage growth. Even that chart, out this morning, people are not getting back their purchasing power yet. And the former mpc member has been adamant that you can raise Interest Rates when people do not have more money in their pockets and certainly do not feel like there is more money in their pockets and that is a matins. That could be a real risk. You thats a very difficult scenario as well. Your 2 euros since a worth on what is going on. I did in december, i do not think we would be here. I did not think we would get to this point. I have not read or spoken to him really what is going on. This is open really and the danger zone. Were in the danger zone. We can carve out and remove that issue from the euro project and make it more solid. But such a scary thing to me. Lets hope they know what to they are doing. Bloomberg view columnist mark gilbert. Right, the top headlines. The ecb program may be in trouble before it begins. A shortage of new supply from governors and a lack of sellers will create a scarcity and hinder the efforts to buy 19 months and the same proportion of the bonds as the Federal Reserve. Fairfax holdings of agreement to buy britt four 8 billion and the insurer is looking to expand sales and coverage in the london market. A bit of restructuring. Pandora beat profit estimates for the fourth quarter. The maker also said sales will rise to 40 billion products this year. The companys strategy is to introduce new charms more frequently. Finance takes a step forward. Investors are seeking higher returns wherever they can find it down. The first. 2. Lender in the u. K. To offer a secure bond and that is interesting. The first perrer to peer lender. How hard was it to get approval . Is the entire industry the entire industry has been interested. At through the investigations we discovered that by issuing a list of all bonds we complied with isa requirements and were able to be the first to offer this product to the evergrowing and quite straightforward. Very straightforward and i am very pleased that we were able to really make a revolutionary step forward in the peertopeer industry. In terms of returns, what are we looking at . On the threeyear isa, where offering four percent and on the fiveyear, 5. 25 . The highest cash isa i believe it will. 4 1. 4 percent or 2. 5 percent. A dramatic increase and the types of returns that the investors are seeing. You have got to remember that 54 of u. K. Households have an isa. They are not really beating inflation right now. It is one of the largest cash spots and the u. K. Economy today. We are really, very please. How much demand do you expect . The rates you are talking about, you would expect a man to be fairly strong. You get higher returns with more risk and the 2 tends to go headtohead. In terms of demand, we did not think of it hope demand would calm. We have and hope demand would come. In terms of the amount of money in the isa market, there are 950 billion panels available that is earning on average less than 1. 5 . We are reacting to demand. In terms of rates we offer rates are indicative of risk. We are one of the lowest rates in the market. Where we only do secure lending unlike most of our largest competitors and unlike all of the competitors, the only want to put our own money at risk before our investors. We lose first. Our primary concern is preservation and protection of capital. In essence, you back as an investor and wolseley backs you. Commission is neither here nor there. We lose before our investors. If you cant take a step back for me. The fact there are such a low rate at the moment is driven by very low inflation qe will of seen and the u. K. And elsewhere. Your sense is that you are a big beneficiary of that. We were the largest growing peertopeer and the United Kingdom last and we are one of the newest entrants. And the industry is self is growing as such a dramatic speed. Because investor demand and we are not creating contact. And use an incredibly low returns. And you can go to the bank and have a guaranteed return but unfortunately, those returns are less than inflation. A really not that interesting. Do you think that markets will still be there when official rates start to rise . When Interest Rates are more to a normal area, i do not know what that is. 2 4 what will he do in how will they change the Business Model you operate with . Firstly, Savings Rates at these historical lows are not reflected a borrowing rates. The rays we achieve from very high quality borrowers today, and access of debt pot amn excess of the dead positive rate. Unless a mix of geometric sales forward, our market is here to stay. Think of peertopeer as the kind of modern day building society. What are you expecting Interest Rates to do . If they rise, do expect them to stay rising or goal of very quickly . The popular debate is what happens if Interest Rates go to zero . I think you will be pressed to see rates exceed 2 . Graham wellesley ceo and founder of wellesley and col. We will check into the whole till sector. We will check into the hotel sector. Welcome back to the pulse live from london headquarters. A good month for car sales area car sales. Thats according to the european automobile manufacturers association. Daimler chrysler makes mercedesbenz and posted the biggest gains. French Telecom Carrier orange , profit metric will fall further due to a price war that his sales. Orange forecast it will fall as much as 2. 1 from the previous year. They had a cutback on marketing costs and sold assets in markets including switzerland and the dominican republic. A south korean firm the electronics company, has been charged with violating high end samsung washing machines. That happened last year. It occurred before a trade show in berlin and the charges one week after the daughter of the korean was jailed after an incident on a flight from new york. Intercontinental hotels group posted a profit that beat analysts estimates. The ceo spoke to bloomberg and talked about the changing landscape of the hospitality industry. He said he does not see airbnb as a correct. Threat and as a big opportunity. We have opened up more hotels in 2014 than weve done for many years and we are seeing considerable growth. If airbnb and that many other Companies Like a deal primarily with the business at the lower end and in general 50 of americans are said to stay in a hotel. Theyre looking for alternatives that staying with their parents or somebodys floor. The airbnb business can be complementary. The important thing is when the new interest to market that they are well regulated for safety. More importantly, zoning or planning. I think they need to be managed properly and subject to the same rules we are. Frankly, if that braces growth is that business grows to revenue and not just rooms from a revenue perspective, if it grows and consumers want, it is something we shall look that says we are good at Running Hotels and behind it. Certainly, it is certainly in the margin. Lets bring in Caroline Hyde. It sounds like the intercontinental ceo is pretty optimistic. A is not afraid of disruptors. He doesnt seem to be. Speaking to him earlier. You have 700,000 rooms. Much cheaper offerings and margin players and their revenue is nowhere near where intercontinental is. What they are having to react is is we want a more alternative unique experience. But, we feel it could be anywhere in the world. The way they are responding is getting into Boutique Hotels and as while we saw the 340 million splash where they bought up a u. S. Boutique company in terms of quirky properties. You can go a long canal leopardprint rooms you can go a long and have leopardprint in your rooms. I wonder how it interacts. That is neither here nor there are it is interesting what he said yes, the houseboat i can stay on that. I cannot guarantee the safety when i do it. When i them in a hotel, i know the structure is safe and they have a fire escape and watercourses and these sorts of things. And he is pushing the trust line. You can trust what you are getting. All of the little bits of pieces you do not think about are there there is a fires skate and we practice and do those things. Airbnb, it is very different. Trying to keep up with it and you are seeing airbnb and responding and trying to improve. Businesses where the traveler business travelers are still very much focused on the big hotel groups. Intercontinental hotels and crown plaza which a day on. They know what to they are going to be getting. And what did they can expect. And a company that is doing well despite in an era of disruption. He said the americans were they get 2 3 of profit is excellent. have not focused a lot in the past. He said we do not own structures, we manage it down. A most of their sales are online. Most of their sales are online. Thank you. The latest on intercontinental. Chinas billionaire boom. The ipo frenzy. Creating billionaires, 2 a week. The new china rich list. Chinas billionaire boom the 2015 ipo frenzy has minted 24 new billionaires this year. Not a bad. Especially with how many weeks there been such far. Lets bring in rob, just a crystallization story. Now we know. It is a wealth of being created, a lot of private equity money that has flown into the china market. Since october 2012, the floodgates have opened and we had 20 ipos ionn january alone in six weeks. It is billionaires. Billionaires with a capital b. it should be stressed. He is the billionaires editor. There is a phenomenal transformation happening in asia and wealth markets. You look at the region even a year ago, it was dominated by hong kong real estate billionaires and there were about eight 10 of them. Now, you look at the Situation Analysis shows how quickly the chinese wealth machine has surpassed the others. It is that people are recognizing the value. In tech and finance and everywhere . Across the board. Tech is lady. Alibaba is the wealth creating machine with 13 new billionaires. Tech is leading. We have a drugstore chain and casual wear, a bunch of the. It is a Broad Spectrum of the chinese market. Can i extrapolate . We have had this and why carry on through the rest of the year . You look at a company like a beijing Technology Company and arnie four times earnings which is lower than the shanghai Stock Exchange. Some are saying these companies are not overvalued. Some have said that good money is gone. The chinese economy is slowing down. Less than 1 in europe and 3 in the u. S. Some are saying it is over and some saying there is more to go. Place your bets where you will. Place your bets. We have to get you back on. Glad to have you. Robert franco from our billionaires team. On bloomberg radio, first word is up next. For viewers, the second hour of the the pulse. The conversation around greece. Yanis varoufakis and hans nichols talking about monopoly money. It was a chess again. Hans nichols versus Yanis Varoufakis. A pretty funny exchange. And our question of the day are they playing poker or chess . Or Something Else. Bailout breakdown. Talks between greece and the euro group collapse. Varoufakis wants an honorable settlement and there is no plan b. The banks are definitely taking a hit. The ukraine conflict continues with the first deaths since the ceasefire went into effect. Good morning to our viewers in europe, good evening to those in asia good morning to those just waking up in the United States. We are just getting some breaking news out of germany. German zew investment expectations are a little bit below expectations. It has come through a little on the light side. The number is better than last time. Relative to the previous number better. Relative to the estimate number, worse. That is eurodollar. Not moving a great deal on the back of this. This is only a survey. This is investor sentiment. It is a survey of investors. Athens rejected the conditions for further financial assistance. Both sides reduced refused to blink. For more, were joined by hans and i calls in brussels hans nichols in brussels. You have been talking to the greek finance minister varoufakis. What is he saying . His logic is that it is illogical for greece to accept and stay in this program in any way because they were elected on a mandate to leave that very program. That is why they call that absurd, illogical. Even with that talk, he did seem more confident than his counterparts on the other side of the negotiation. Mr. Varoufakis made it very clear he is going to continue to negotiate. We have been saying steadfastly from the very beginning that we want an honorable settlement. We want to wed together these principles. The principle that we need to be respected and the principle that we has a government want to challenge this program. It is not a bluff. It is the only option you have. It is plan a. There is no plan b. What mr. Varoufakis said was that he was presented at a document at the beginnings of these meetings and he could have signed that on the spot but then that was withdrawn after the dutch finance minister got wind of it. It was at that point that they changed the document and handed him Something Else and said you can stay in the current Bailout Program with some limited flexibility and it is that language that tripped up mr. Varoufakis. That is why the meeting ended early. We were really trying to get a sense of what the mood was. That is when i asked the luxembourggian finance minister. The mood was that there was no progress compared to last week and there was no Data Available and no numbers. It was difficult to make progress. I would not call it frustration. There was expectations that have not been met in the short time and for the rest, i think i have said everything. All the finance leaders, in addition to some other ones, are in there for a separate meeting. Greece is not on the agenda. Both sides are saying it is up to the other side to make the initial offer. Greece wants clarity on what additional flexibility means. The other countries say that greece needs to apply for a bailout extension and abide by the terms. They put the document on the table and they said, it is not the document. Do we know why this document is withdrawn or what was in the document . It appears that this document was not shared with the dutch finance minister. It appears they did not bring in all the euro finance ministers. We see a split between the finance ministers and eu. If that split widens, you could see a difficult negotiation Going Forward and you could see the split spilling over into the finance ministers. We dont quite know where all the finance ministers are. We do have a sense that there is a pretty solid block saying that greece has to stay in the Current Program. We dont know who is going to blink first to get the negotiations started. We have more meetings, we have an ecb meeting. It is not a leap year. We have a short february. Friday is the deadline and that is the cutoff. It has to go back to the National Legislatures if they do amend the deal. Brussels deadlines tend to be a little bit pliable and a little bit movable. We will see if this one is for real. These guys need money. [laughter] that is not immovable deadline. Or at least not unless the ecb is behind it. Hans nichols will be there to cover it all. These fudgeable deadlines. [laughter] another word for deadlines . Gas stops . It is great to have you on the program. Give us a sense of what the markets are looking at right now. There is greece, there is russia they are complacent they are not worried. They should worry more about this, should they not . To be fair, it does not seem like the greeks of a very strong hand to play and we should have lots of sympathy for them. They are an elected government and they did receive a mandate but it is hard for them to really play out this to the end. They will eventually have to compromise. Probably much more than they promised during the election period. To a certain extent, it does seem like russia is looking at this and is somewhat happy to see the disunion and how that would reflect on negotiations with moscow. To be fair, the European Union had it in the beginning to put a lot of pressure on russia in some sort of concern about a feedback loop. The European Union is much more comfortable with both scenarios now. We saw a drop in exports from germany to russia. It did not really impact the European Union economy to a significant degree. While we saw doomsday scenarios early on when greece was going into this severe crunch, at this point it seems like the worstcase scenario of an exhibit is something that the European Union is something European Union will be able to accept and contain. Thank you so much. We will talk about russia next. We will go into the details of that. What is the right game to play here . If you are to think of a game and think about what is happening with greece and the eurogroup what is it . Poker, chess. Hans nichols was talking about monopoly. Is it jenga . Or is it the game patients. Or operation. The patient is on the table and you are trying to remove things. Is that the credit crunch . That is the end of the game. Coming up, we also talk russia. Battles around the transport hub threatening to undermine the peace accord signed this weekend. We will take a look at the fragile truce next. We just had some breaking news from the bank of indonesia, unexpectedly cutting rates. Economists were expecting a hold. This is significant because we are seeing centralbank easing around the world. As an economist, you are thinking, what has happened since the beginning of the year . Have any of these Central Banks actually delivered rate cuts . You have not got enough fingers on your hand. I am pretty surprised. It has been days since we had the last rate cut from a central bank. We are surprised that i wonder when we spoke to these guys. That is the latest from the central bank. We are on centralbank watch. There is definitely a trend emerging. Here are bloombergs other top stories. Newhome prices rising only in one of the 70 cities tracked by the government last month. It is the biggest drop on record. Chinese stocks jumped ahead of the Lunar New Year Holiday Benchmark gauge. It is the best sevenday gain since 2007. One standup company was china eastern airlines, which jumped 10 demand on demand for flights during the holidays. The ceasefire in ukraine is under strains amidst claims of fighting on both sides. Both sides have missed the deadline to put their heavy weapons pull the heavy weapons away from the front lines. For more on what this means for both russia and europe were joined by joseph. Thank you so much for sticking around. We had questions about the federalization. That is something russia wants for ukraine. We also had questions about the buffer zone and the osce moderators. Were these too lax . The point of decentralization is really secondary. This was supposed to be done by yearend. This goes much more to the substance of the resolution in the longer term. What we need to see now is the fighting stopping and that is basically it. Even that very small accomplishment that we want to see is not playing out on the ground. When you look at how this works it looks like it is going to end up being a conflict assuming that the ceasefire comes into force. What i have heard talking to people is that there is an expectation that there will continue to be skirmishes. The critical thing is that you have a withdrawal to either side of the buffer zone of the heavy weapons. What is still in the process of making that happen is what we are seeing at the moment is it noise . Or is it part and parcel of that withdrawal process that we are going to see . Or is this the ceasefire not taking place . It is very difficult to decipher decisionmaking on the kremlin side in particular. In days like this, it is really impossible. Investors should not bet on an outcome here. The skirmishes were contained around the donetsk airport around the beginning of the year, but that has spilled very quickly into other areas. Now we have moved over to other areas and there seem to be other flashpoints. Even if it is contained around the new areas, it spills over very quickly. That is why investors have missed this rally. It was not really a tradable rally. It was more of the reversal, some of the fx forwarding from corporate scum a Financial Institutions of a Retail Investors corporates Financial Investors Retail Investors. When you look at russia, they are struggling very significantly. You have a ceasefire that is not being held. That may be broken anytime soon. At the same time, you have 19 extra people being put sanctions on just when they signed the ceasefire. Where do we go from here . We are not very positive on how we go from here. We do see opportunities in a highquality, lowcost exporters. What we need to be clear on is the idea that russia can be brought on its knees financially just does not work out. The math does not add up, at least for the next two years. Russia has a natural source of hard currency that can support itself even in rough times. Current account surplus even in russia in russia, even considering the depression, should still be positive for the next two years. We look at rosneft, as an example, they had a debt payment of 7 billion recently. They generate around 12 billion of export revenue. They can service their debt. Russia corporate and russia government can survive. What about russia citizens . True. This is the problem. The financials are fine. The people on the street are paying the price. Absolutely. We are not very optimistic. Inflation will hit 17 toward april. It is a crushing position for Retail Investors. You are seeing opinion poll shifting a bit. But still, putin came out of this mince agreement minsk agreement as a tactical genius. We need to put the parameters here. On the consumer side, it is going to be difficult. In terms of the idea that the Obama Administration or brussels can bring russia to its knees and make them act as they want due to sanctions, that is just out of the question. Russian assets. Break it down for me. Are there any opportunities within this . What is mispriced right now . Something has to be mispriced. I dont want to dump this down too much, but the reality is that we talk about geopolitical situations and sanctions and Consumer Trends but the external factor of oil price is just the overriding parameter that we need to discuss. 55 of the governments revenue is from oil prices. The volatility there is huge. I was speaking to our derivative trading desk and the volatility on Brent Oil Prices is around 50 that implies north of 3 daily moving. As an investor, how do you take a view . You cannot price russia when applied volatility is doing what it is doing implied volatility is doing what it is doing on oil. The competing themes within the oil universe are very difficult for us to see. We are seeing rigs being cut very quickly on one hand. We saw spending coming down. Cap ex spending coming down. On the flipside, production is still increasing. The u. S. Is even still seeing production increase. The saudis and opec are not letting down. They just reduced prices for march in asia to a 14 year low. It is just a very random outlook for investors. Thank you so much. Joseph dayan. Still to come on the pulse, french luxury giants beat estimates. We will have that story next. Lets check on the Athens Stock Exchange after we had that breakdown in communication between the eurozone and the greek cabinet. It is down from 0. 9 . Markets may be a little bit complacent. The bank stocks certainly have come back and little bit. Come back a little bit. If you want to see volatility, check out assets. Follow us on twitter. Welcome back. Caroline hyde joins us. If you look at the breakdown gucci has been down. Some of their browns brands are doing well. Yves Saint Laurent is killing it for them. That was a real ray of light. They are still cooling slightly. Gucci is not quite as stellar as it has been in the pass. Gucci is the cash cow. It is where the bulk of revenue comes from. It has been hurt in china and has been losing the consistency of products, losing its sexiness in terms of what tom ford has brought to the name. The performance has been down. There was a notable improvement in the final three months. We are suddenly seeing freshness being injected. A new chief executive. He is going to be taking the helm and trying to drive gucci forward trying to continue to improve. They have a new creative director as well. They promoted him from within. They need to inject the newness and consistency that analysts want to see. It is interesting to see where they are doing well and where they are trying to distance themselves. They are doing well in the United States doing well in japan. They are trying to shave the risk Going Forward. They want to grow organically. It is a fascinating story. The very latest on kering. We have the boss on tomorrow. Welcome back to the pulse. Im francine lacqua. Im guy johnson. The ecb is 1. 1 trillion euro qe program may be in trouble. A shortage of new supply from governments and a lack of moving sellers will create a scarcity hindering the ecb efforts to buy up to 1. 1 trillion euros in 19 months. Looking to expand sales, fairfax will pay cash for each share of brit. Pandora beat profit estimates for the fourth quarter. The charm bracelets maker says that sales will rise more than 14 billion kroner this year. The companys strategy is to introduce new terms more frequently. New charms more frequently. That sounds like a good strategy. [laughter] give the people more of what they want. Speaking of charms, jonathan ferro. [laughter] the probability of a grexit has been lifted to 50 . The dax was off by about 150 points by about one point, but is now down by 0. 75 . The sentiment was very negative this morning. We are coming off those lows. Investors relaxed a little bit about the prospect of greece exiting the eurozone. Markets of stayed very resilient. What is even more remarkable is how resilient the greek Stock Exchange has been. The Athens Stock Exchange has been down, but it did move to positive territory, and at one point it was down by 4 . In the bond market, the expected reaction. Bond yields in greece go much higher. We go back through 10 , up by 58 basis points. Dont let these moves will you. The point from last night was very clear. Euro zone finance ministers are on the hook for 62 of greek debt. They are going to dig valor their heels in. As a look beyond greece, i see a much bigger story and it is centralbank easing, easing, easing. The central bank of indonesia is no different. They joined the central easing party. I bring it to the u. K. Here is euros sterling. Eurosterling. Inflation average is averages the weakest since the 1930s. While we are seeing a much weaker pound off the back of the number you saw we could see a stronger euro, then we can back. You strip out food, you strip out energy core was 1. 4 . The bank of englands line, they will look through this some of the price effects from oil will be transitory. With the rest of the world easing because of low inflation why should the bank of england be any different . That is a note for the rest of the year. Why should the bank of england be any different . They are certainly in a better position and have gone to pains to pointed out. 25 minutes from now, it is surveillance with tom keene. He joins us for a preview. You will be looking at ukraine, greece, the central bank world. The United Kingdom Inflation Report was a stunner with that low inflation. We have Carl Weinberg with us this morning. This is a timely meeting with dr. Weinberg with his experience on debt we structuring restructuring. For americans, maybe this is not that big of a deal, but it is a big deal for markets. The challenges that are faced going into this tuesday morning. Halima croft will join us. Gary shilling is out with a report. We will talk her expertise about nigeria. We have not spent a lot of time on that on surveillance. Frank keating will stop by. We will talk to him about the challenges for american banking. Thank you so much, tom. Im looking forward to the conversation on nigeria. It seems that we are not focused on it enough. Absolutely. And the currency there has just plunged, plunged, plunged. That is something that we definitely need to keep an eye on. Chinas billionaire boom. 24 new billionaires this year. We will talk to the bloomberg billionaires editor. This is about billionaires and exits. Lets call it 25. Oh, 25 . Yes. It is an incredible run. It is coming from the secondbiggest economy. It is growing by 7. 5 . That by far surpasses any of the other economies on the planet. Private equity money that has funded these companies are now coming out in a market that is very hot. What happens now . Is this all compressed into the front end of the year . Or does this carryon at the rate we are seeing . The scary thing is that there is the volatility in there. The shanghai index was up 49 . It has been up just a little bit, maybe flat this year. The shenzhen index is up by 12 this year. The markets are on a volatility level with saudi arabia and russia not exactly the most transparent or stable markets to be associated with. Some experts are saying this is done. That price to earnings ratios are two great. Others are saying that the ratios are still somewhat low or equal and there is still room to go and the economies are still strong. The areas the the of the economy where we are seeing billionaires created. Overall, it is across the board. A drugstore chain, a budget airline, a casual wear maker, an led machine maker, a video gamer. Once you get down to and led product maker, you are going down into the tech space, but tech is not the only thing that is happening. People are recognizing the value of the Chinese Consumer now. Wow. It is pretty impressive. How much do we know about these guys . Are they still flashy . Not a lot. The owner of one of the airlines is pretty public. The eat instant noodles on the road. He is very tight with his money. Most of these guys are very quiet. You have a receptionist who started as a receptionist 12 years ago who is now a billionaire. You have a former Police Detective who is a french of friend of jack mas. You have people who did not qualify to get into Architecture School who are now billionaires. It is a phenomenal story. [laughter] i have a picture of a billionaire eating a pot of noodles and sharing a hotel room with executives. The frugal billionaire. That is the money picture. Rob lafranco from the bloomberg billionaires team. It is the Lunar New Year. That is good news. Check out bloomberg business. Thanksgiving celebrations have nothing on Chinese New Year great stats including the 100 billion spent on food and presencts. Be sure not to miss it on bloomberg. Com. Bloomberg business. Coming up, we talk about the obstacles to the u. K. Bid for the shale gas revolution. Welcome back to the pulse. U. K. s push for a u. S. Style shale revolution may be hitting a speed bump before it begins. Scotland and wales have temporarily banned fracking until they study environmental safeguards. Good morning to you. Good morning. How big of a surprise was that that we have seen this program taking place . We called it a speed bump. What is it . We are still Going Forward where we are. We have had planning applications in the council. There is no moratorium in england. There are a lot of resources in england. We are pretty confident that it will happen. What are you doing to overcome these environmental rejections objections . Is it lobbying . If you look at where we are, we have all of the permits we need. Lancaster county council have said there are two issues, one is traffic and the other is fairly standard planning issues. All Environmental Concerns have been satisfied. So it is working . Yes. There is a lot of publicity and scaremongering out there. But the regulators have all given us a positive check. Do you think the fact that other parts of the United Kingdom are taking a more circumspect look for this will make it harder to gain the kind of approvals you are looking for in the future . In the mediumterm, it may actually help. The fundamentals are that the u. K. Is going to need the gas. The supply situation is poor. We are really faced with a choice of making our own or importing it. Every house in the country uses gas for heating. The fundamental supply and demand will dictate that it does get developed. To guys point, when you have scotland to is so dependent on oil and gas and you have a moratorium, it does not bode well. You are saying, it is going to be good. It means that scotland, despite the fact that they are losing revenue is against it and this may spill over to the rest of the kingdom. You said the right word. Moratorium does not mean they are against it. They want to spend more time and it is not disconnected to politics and elections. I would be very surprised that if they decide not to explore it at the end of the moratorium. Gas prices stay lower, how does that change the Business Case . Then clearly the economics or worse, but i dont think that anybody believes that for the medium to long term that the Oil Prices Going to stay where it is today. You can already see the impact on production curtailment. Capital spending curtailment. Supply and demand will come back into balance probably quicker than people think. Give us a sense of where you think they will prices going to go. People are saying 10 at the moment. [laughter] i have worked at this business long enough to know when it was 10 and we thought it would never go up. [laughter] you think that is realistic . If you look at the way that the prices moved, it got too high. It swung all the way down to where we are now. Closer to 100 means 70, 80, 90 . Or in the 90s . Im curious to pin you down a little bit. Im not talking about economics of shale at all. Im just talking about the oil price and the u. K. Gas price is not directly correlated to the oil price. The oil price will depend on the cost of new production and new production is getting more expensive. As they get more costly to develop, than the price will have to respond and it will respond. That is inevitable. You are pretty optimistic that you will be able to explore shale gas fracking a lot more. There was a Parliament Bill passed in january saying that you cant do fracking and National Parks and Debt Collection points. Does that help your industry and saying, if you dont touch this at least you can touch the rest . Does that have an impact in the way that you are perceived or Environmental Concerns . Yes and no. It is always good for any industry to understand what the rules are. Once there is clarity around the rules, you can operate through that. I think there has been a little bit of a moving of the goal posts here. In terms of perception from our perspective, drilling and 18 inch hole below a National Park nobody is going to cs. There wont be Big Development and National Parks. We have comprehensively shown that the environmental risks can be very wellmanaged. Thank you so much. Coming up, he says it is not poker, nor is it monopoly. What is game theory expert varoufakis playing at . He is also the greek finance minister. What is the next movie is going to make . We are going to talk greece after the brace break. Will come back. You are watching pulse bank. The pulse. The greek finance minister varoufakis insisted he was not playing games. Hans nichols called his bluff. If you are not playing game theory or poker, what game are you playing . What can you do to ensure voters that you are not playing monopoly with fake money . I have always played monopoly with genuine monopoly money. [laughter] but let me answer your question. Unfortunately, i have had a past as an academic of studying game theory. One of the things that i taught my students is that game theory is based on a very unrealistic assumption, that the motives of players are fixed and they are also selfish. I dont believe that anyones motives and the eurogroup are fixed and i do not believe that anybody is selfish. I believe we are perfectly capable of rising above are narrow perspective and embracing the perspective of europe. On the question of blood, what does a bluff mean . It means that you have a seven and you pretend you have an ace. We dont do that. What we have been saying steadfastly is that we want an honorable settlement. We want to wed together the principles, the principle that there was a problem and has to be respected and the principle that there is a government that challenges the logic of this problem and lets find Common Ground between them. This is what we have been saying from the beginning. It is not a bluff be cut is is because it is the only option we have. It is plan a and there is no plan b. Therefore, no games. We are not bluffing. Do they have real money or monopoly money . And is it fake monopoly money or real monopoly money. [laughter] if greece is playing a game, which is it . Poker or chess or Something Else . Michael houston give us a fun response. Jenga. Each side hoping the whole lot does not come crashing down. That game tends to end with things coming crashing down. That is kind of the point of the game. It makes you wonder where it is going to end. You pulled a little bit out and then boom. Hans nichols joins us. It was a little bit like a battle of the wits. [laughter] this is going to be a remarkable 2448 hours. We are going to have to see who blinks first. There are timing deadlines. The greeks are saying that the europeans need to come forward with more specificity on what they actually are calling for when they talk about additional flexibility inside this program. You call it a game, you call a negotiation, right now, we are not aware of any negotiations. Finance ministers are meeting in this building, but greece is not on the agenda, but that can change pretty quickly. How critical is this ecb meeting that is about to happen right now . People are concerned about the greek banks and the funding story for them. The liquidity that exists is still open to question or greases use of it greeces use of it. Is that what we need to watch . It seems like the ecb has been very careful not to get ahead of the eu. It seems to me that it is unlikely that you would have a cut off. You would likely see the eoa continue to stay open one negotiations take place year. It was two weeks ago when they cut off the collateral and that forced greeces hand a little bit. We will have to see what we get out of the ecb potentially late tomorrow night. Think you some a. Hans nichols is staying in brussels tomorrow. Thank you so much. Hans nichols is staying in brussels tomorrow. That is it for the pulse. Surveillance is up next. They will be talking about greece, they will be talking about ukraine, as we monitor the ceasefire or lack of it. You can follow us on twitter. We have been talking about this war of words, turning into a game. The eu with greece, are they playing poker, are they playing jango, are they playing chess . Call my bluff was another one that came through. Level nine tetris. Trying to build a eurozone block with awkward pieces. That is it for us. We will see you bright and early tomorrow. In the meantime, let me hand you over to tom keene and the team at surveillance. Time is running out as just say no, backfires. Greece to mans ultimatums be withdrawn demands m ms be withdrawn. Some 8000 troops are trapped by rebel forces. The u. S. Is gravely concerned. Drones, they are approved to five black six feet off the ground at 89 miles per hour, reddy said ,dock. Good morning, this is bloomberg surveillance. It is tuesday, february 17, i am tom keene. Lets get to our top headlines. Eastern ukraine, hes remains elusive at this hour. A ceasefire is being ignored were up to 5000 ukrainian troops are centrally surrounded fighting between Government Troops and progression separatists continues. Germany says concrete steps have been agreed on but rebels say that plan is not within the parameters of the truce agreement. The violence to end a fragile peace accord seal last week after marathon talks in minsk