Transcripts For BLOOMBERG Bloomberg Surveillance 20160922

Tom you see a bunch of headlines and it shows disparity in yields. Us dehn is going to join where you have a 14 yield. There is what we observed yesterday. Francine the dissent, i do you had there is relief on a lot of our markets today. When you look again, the reversal, right . After the initial encouraging news. Reversal. Tle well get this to the data check, 108. 2 p a little weaker yen today 108. 2. A little weaker yen today. The confusion i heard about yesterday. We have guests that will maybe explain this. Francine lets get to bloomberg first word news. Taylor, the governor of North Carolina has declared a state of emergency after he second night of violence. Police firingthe tear gas at demonstrators. In tuesdays shootings, a black man refused the demand to drop his gun. Some residents say he was unarmed. There is a report that yahoo is poised to confirm a massive data breach. Several hundred million yahoo User Accounts have been exposed. Word of the breach comes as yahoo is getting ready to complete its sale to verizon. So far, no comment from the right no comment from yahoo . The u. S. And russia sparred over the failed ceasefire. The u. S. Has accused russia or syria of attacking its aid convoy did russia blames the u. S. Saying it has failed to ensure the Syrian Opposition forces confide with the troops. The u. K. Plans to hire 1000 more spies which is up 40 . It says the new intelligence recruits are needed because of the development of technology on the internet. They would work for mi six. There is a new topranked university in the world and it is not in the u. S. It is put Oxford University at number one. The school replaces caltech is at the top for five years. It is the first time that a u. S. University has not been the topranked school in the 12 years 12 year history of the survey. Global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. I am taylor riggs, this is bloomberg. Currencies, commodities, francine mentioned a weaker yen. Equities still bounce off of yesterdays excitement. 10 year yield comes in. Nymex turning higher within its range. Would, the big 13. 12 showing the remarkable essence out there. Yen, 100. 82. Francine corroded does convinced traders kuroda does convinced traders. We may touch below 100. I want to show you overall pound versus concern about brexit. There is talk about banks and euro clearing. This is a huge you know we look at global trade this is a huge and old europe and company that has oil facilities, trade containers, split today. They are going to split into two separate divisions. I know the share prices muted. I know the share price is muted. Tom lets go to the bloomberg here. They dissented for Different Reasons. Here is the optimism chart for america. These are claims employments employment adjusted, the nirvana before that big recession. There is the nirvana over on the right before the financial crisis. We are doing better than nirvana. We are nirvana squared. Awfully good. Lets go, lets raise rates. Interestingly for Different Reasons yesterday, i cannot convey enough how interesting yellens struggle was. Francine you look at the boj and governor kuroda scuttling governor kuroda struggling. We are at 108. A rowthe fifth time in that the boj announced something in the day after yen is stronger. Tom what is the blue up top . Francine the one we are watching his 100. The problem is yesterday, we were talking about the tweaks and the markets are interpreting for hours afterwards that the aks means that he is whatever he has done, the markets feel like yeah, you cannot do it. Tom the trend is your yen. Francine the yen is your trend. Chief for ubs w the deputy chief for ubs. Didgeridoo did through did drew yesterday . Statement they said they shouldve gone and yet they did not and she had to figure out a reason to justify it. It was the first time we saw her having to justify a decision that clearly did not match Everything Else that was going on. Francine why is she doing this . Her i think she has it in mind that if they make a mistake, they cannot recover. I think she is the missing the thoughts that williams and rosen brand have put out there that there is just that many risk that if you wait too long, we cannot move as quickly that we would need to as quickly as we would new to. We would need to. Pattern thatial dates back to bernanke whereby yellen also decides to air on the side of if there is any incremental. Tom the two of you with ubs with economics and equities and derivatives, hopefully can synthesize the optimistic view of the american economy. What was fascinating yesterday, drew, where this word evidence came up and there would be a three minute space where she would take two different opposing directions on whatever the theme was. It was out of body how she was struggling. Is there a theory underneath all of this . Or are they or are they flying as blind as it appears . Drew one of them was optimal control. You can minimize the loss in the theomy this is where williams in rosenberg piece have been so important because they leaned against that idea that we would be up to go faster when we need to. Tom we have optimal control and a choice out in front of us. You cannotthat convince me that negative rates are a normal environment. Is it ultimately because the markets are the financial the Financial Markets are distorted . Drew i think she is paying attention to foreign Central Banks. She is taking the wrong message from foreign Central Banks. The reason they seem to be in such a bind and unable to get anything done is because everyone is trying to maintain a differential to the u. S. , and if the u. S. Is too low for too long, what we are doing is pushing everyone else into very awkward positions. We are creating some of the instability on our own. Then we are saying the markets are too unstable for us to move. Francine we risk a significant higher dollar if the rest of the worlds easing and governor tweak governor orroded tweaks drew i think there is no difference between the fed hiking and everyone else using. The only question we end up with is and everyone else easing. The only question is windup everyone else goes negative, it still makes the currency move to this is something where the fed should stop focusing on that and focus on where they think rates should be for the american economy. The dollar will go with it the dollar will go where it is. Julian the overriding issue and the challenge in Financial Markets in 2016 is that the if you told five drew that is a dirty word. Julian if you told me the yen was going to depreciate by 20 since the time that negative Interest Rates were first unveiled in january, i think almost anyone would say you are wrong. Francine i am not sure what governor kuroda could do to try and weaken yen. This would be a fair question. Tom i think the system we observed yesterday is broken. Drews point as an optimist, were looking for centralbank leadership. There was that moment in a press conference where she says here is the distinction of our dissent which is tiny. Julian, your world, this counts discount dramatic system world, what do you observe . Are they discounting sanity to prevail in december . Julian it is not a bubble. The markets are going to be pleased when and if the fed hikes in december. When you have a 10 year yield in and around 150 like we have had for most of the year, the multiples should be higher. There are risks out there. Francine you wonder there is not leadership and politicians, so it is unfair from Central Banks. Tom we have had such a great series of guests. Francine coming up a little bit chair of multiexit investment. This is bloomberg. Francine welcome to bloomberg surveillance from new york. I am Francine Lacqua with tom keene. Heres taylor riggs. Tillich of the danish conglomerate taylor the danish krone garment merck will split up. Merck fired its ceo in june and considered the company says its energy unit will focus on strengthening position in the north sea. His chiefplaced financial officer. Smith who isavid leaving rollsroyce. The company has been cutting costs because of the falling demand for engines powering jets. That is your Bloomberg Business flash. Francine lets take a look at brexit and the battle over londons role and euro clearing. London could be stripped of its ability to clear euro done nominated slumps after britain leaves the eu. The clearing of 570 billion of euro. Lets get more from john the tree John Detrixhe from berlin. What does it mean for the rest of the health of the city of london . John that is the key question. The way people seem to be looking at this, our colleague gavin was talking to an executive about this. People are looking closely at what changes after brexit. What happens after that starting gun goes off and brexit is triggered . It looks like this business could be one of the first things to move outside of london, at least that is the way some of the top executives are looking at that. They are making contingency plans, they are figuring out what to do. People are trying to figure out what other businesses will drag with it. How many personal staff, other parts of trading are clearing backoff to places like amsterdam, frankfurt. Francine what are people saying . This is not an easy process. It is not like you scoop it up and move it. John it is a big, difficult thing to move. It does seem like the people who are making these decisions, they are expecting it to happen. There are people say it is not an easy thing to move. There is a lot of technology that would have to change it now are contracts have to change. There are contracts. People look at it and say if the ecb wants this to change, there this. Oot a route to do if you are a bank, the top 1 are saying we have to the plan we have to prepare for this to happen. Tom why are we surprised . Written voted britain decided to leave the eu. John i think we are surprised in two ways. Where looking for the first mover. We are looking for the first mover. People are wondering, there is a certain amount of momentum certainly, jobs are being done, businesses are here. Is it possible . Can a laws be changed . Can the laws be changed . There is a route to doing this. Tom you really followed the story. Francine it is not as simple as we voted out. There were a lot of people who wanted to remain in the you in the eu. Two, if you think about it, the european union, if they make it tough for the city of london, thingsion loses, because may move temporarily to frankfurt. In the longer term, you could decide singapore is a better place. I dont think it is as clear cut as we voted out. Also, language difference. Tom doing a how many jobs are involved . Do we know how many jobs are involved . John we talked to people about we looking upwards of several thousands we are looking upward of several thousand jobs. At the Clearing House and the banks, there is also i. T. Jobs, legal jobs. There could be a certain amount of trading jobs connected. That is a great point that hammond pointed out, maybe new york ends up being the winner. Maybe some other jurisdiction. Tom john, thank you so much. Reporting here on the first jobs to move out of the city. We will continue with the drew matus. Coming up, what an extraordinary day yesterday. International perspective from william lee from citigroup. From new york, this is bloomberg. Tom bloomberg surveillance. Eight hours yesterday. Feddne was fed it out ed out yesterday. Thank you to Michael Mckean for the afternoon. Soiree a morning mustread. Politics and bush senior, this is something. Jonathan bernstein writing it up , three to five living former gop president ial nominees have opted not to support the nominee. In other words, mr. Trump is a different. He is not a normal candidate. His candidacy is untenable according to those who have the strongest incentives to get it right. I would suggest there has been a shift in the last week. I dont know what the shift is but what i want to know is is a going to fold and equity performance . Julian there has been a shift. The outcome is more uncertain. I would suggest to you that after monday night, we are going to get a great show. The shift is going to be more pronounced. It will be more uncertain and the market is not quite reflecting that. Tom if im institutional manager, do i use it derivatives to hedge my gains in the market . Do you hedge derivatives to get past november . Julian we think you do. The upside is limited through november. The other issue is europe has political uncertainty. Francine no. Julian people have forgotten that. As we have seen over the last 24 hours, you get to these uncertainty times, it gets cleared up. The market moves on. This president ial election francine this president ial election, if you look at europe as a benchmark, take a bet on it . Julian in a low Interest Rate and low volatility world, that is normal response. You can see the market did not get concerned about the u. K. Referendum until the week before. Francine and then they bet wrong. You wonder what you do with it dollar derivative of the mexican peso. Do you color it . Do you hedge it . Before november, weve got to get to monday on u. S. Politics. There is special coverage. Mr. Trump, mr. Mrs. Clinton, their first televised debate. Look for that at 8 30 monday. Francine from new york, this is bloomberg surveillance. I am Francine Lacqua with tom keene. Taylor, there carolina over a police shooting. One man was shot and wounded but Authorities Say he was not shot by police. The governor has declared a state of emergency. In tuesdays shooting, police say a black man denied the demand to drop his gun but some residents say he was not armed. Donald trump was to reduce black on black crime in america. Trump said in a fox news town hall that the program of stopping minority youth on the street worked well in new york. Hillary clinton still leading trump nationwide. This survey by nbc news and the wall street journal has clinton ahead 43 to 37 in a threeway race. Majority of voters view clinton negatively. In venezuela, the Election Authority could be held early next year. Opposition leaders are not happy with the condition. Opponents must collected 20 of the electorate signature at the state level next month. Dennis will has been crippled by high inflation and a lack of basic goods venezuela has been crippled by a high inflation and a lack of basic goods. Global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. I am taylor raikes, this is bloomberg. Francine peter 11 joins us. Well talk about maersk. This is huge because it is a historic checkup. Peter, tell me about the rationale. How badly were they doing . Peter maersk has been having to depend on being a conglomerate for almost a decade with investors asking would it be possible to generate more value from splitting the company . This is something that is been invading for a long time. In terms of the things in this part of the world, it is one of the Biggest Companies in denmark. It is a big deal. Francine there was a Goldman Sachs they said this was unlocked value because it enabled maersk to put capital and refocus Asset Management potential. They are talking about execution. Was this really where it was lagging . The transport business was trailing about 10 years ago. Bettere performing much than the rest of the industry. They are not making asthma money as they used to, but they are doing better than hydrogen then hanjin. What has been it has been sort of like they have been struggling to allocate the whethernt attention to to develop the transport division or the oil business. In the past, the oil business was just tagging along, generating a solid profit because prices were going up. That has a suddenly stopped and forces them to reconsider the whole thing. Francine peter, thank you so much for the update. Tom, we have to focus on Central Banks again. It has to go back to global trade. We will get policy decisions from south africa later. I was counting a lot of Central Banks, seven of them came out with reviews today. Tom i think they are as confused as anybody else. What we are done with the janet yellen. Francine janet yellen policy tweaking or originality with what is going on in yen. Again strengthening today. Lets look at the possible fallout. Dehn. Get more from jan what will the fallout be . Is she concerned of a temper tantrum . Yellender why janet really doesnt want to hike yet . I think the problem is not the 25 basis points is that much. The fed is raising rates at a speed of 25 basis points a year. This is not really a problem. The problem is the conditions into which these rate hikes potentially take place. We are hiking rates into the economies that have not achieved exit velocity and have low volatility. Financial markets where valuations are are out of line with fundamentals. It is that condition, the effect that party five basis points in itself is not a lot, but it can really affect economy if the markets, given what conditions are like. Tom i want to go back to what mentioned yesterday, the idea of original sin. Is it janet yellen so screwed up Central Banks credibility that we are at the point that em bonds issued by em governments are going to have the dollar denominated because they cannot work in their own currency . Jan this is a misrepresentation of the facts. It is a view that a quarter of a century out of date. Local currency bonds are owned by local Pension Funds and ems. The original sin argument applied to a time many years ago, decades ago by emerging markets. Did not have Institutional Investors in their own market. They do now. There is always a buyout last resort. Tom i am going to still that phrase. Reflexivity. You are going to see currency readjustment of what markets are doing. Jan we have to watch japan carefully at what japan has done by targeting a low yield is given license. This intro bank has to buy every bond that is issued by the authority. That is a green light to a return to fiscal policy. If you force yields down at a time when you are building up debt and increasing time and increasing matus, you are looking at International Economics as well. For exchange has a new quality to being the litmus paper versus what it was five years ago, the crisis. It is amazing precrisis. It is amazing what we can see here. Drew one of the most interesting things is whenever we get asked questions about our thoughts on the fed, it comes back to jan. We have a lot of people who push back and say emerging markets and i take it if the fed hikes and it has a currency impact. My thought is we have to worry about the u. S. , first and foremost. Deal with the fallout as it comes. Francine jan, on this point, this is one of the main concerns. The conversation has moved on to a lot of people are saying if defaults need to be had in emerging markets, then lets do it, lets clear it and lets move on. Jan with had the sum of all peers. We had a we had the sum of all peers. We had the beginning of the fed hike cycle. Throughout that period, the highyield corporate and em have remained at or below the average of 4 . The highyield bonds and emerging markets are lower an emerging markets are lower. In emerging markets are lower. Francine you dont see it as a problem . Jan i dont see it as a problem. If there was a huge problem, we wouldve seen it over the last four years. What is likely to happen is em currencies are appreciating, and people like to have money investigated and currencies that go up. That means capital is going to move back to em. That eases financial conditions and eases the probability of default for corporate in the em. Us. Julian emanuel is with it is not ready for surveillance prime time, julian, that is the nigerian currency. They have a few select problems. Lets not bundle the sin. When you see these little moves of massively weaker em currencies, whether it is oil, civil unrest or whatever, there is a comfort to going to yen, going to dollar, going to euro. Is that going to be Janet Yellens salvation . Julian when you look at equity markets, that is a good reason why multiples have ended has they have. We are on the precipice of the next hike. We think there will be two more next year. The fact is, that is traditionally the time of challenge to em currency markets. We are seeing it mexico, south africa a few weeks ago. It is an ongoing we are seeing it in mexico, south africa a few weeks ago. It is ongoing. Tom jan, think is a much. We look forward to seeing you jan, thank you so much. We look for to seeing you in a few weeks. A discussion with mr. Schatzker. Larry fink. This is bloomberg. Francine this is bloomberg surveillance from new york. I am Francine Lacqua with tom keene. Are we not in new york . Amite dissenting . And i dissenting . Tom. Is a problem, policy impotence. It is the fifth meeting in a row where governor kuroda does something, yen weakens for five hours. Then it strengthens yet again. Yesterday, become at all of the losses since the day higher. Losses sends the day higher. Growth. Tors forward in the drew matus world. She mentioned productivity and the yen went just like this. Bring this up. The yen went just like this, stronger yen. Francine the best performer amongst the 10 major developed peers. This get to london, richard jones. He judges. Us. Ake this he joins you made is an Julian Emanuel are still with us. This test e drew there are two parts to the store richard there are two parts to the story. The bank of japan is being creative in dealing with some of the challenges they are facing domestically. Part of the problem is with all of the yens we have had a fed throughout this year that is been less hawkish than we expected them to be after they hiked rates last year. Think withward, i the dots coming lower, you look at dollar yen and they are not going to get a lot of help from the fomc to get that cross trading higher. It has been a persistent problem , something that is going to intensify. How do you weaken yen other than intervention . Richard i think it is difficult for them to arrest the yen strength do intervention. It needs to be something that is collaborative. I think that is not something that is on the cards. It is a problem in many ways for the boj. It is something they have to deal with. Tom thank you so much, richard jones. Two worlds of ubs, two different worlds. This idea of what Central Banks can or cannot do. Help me here on the bank of japan. They are working into time continuums. They are moving out the yield curves, they are out to the joy of moving 10 year yields. I get that. Theyve got his word chronic which i would use mathematically, shortterm, mediumterm and longterm impact. D. C. Any evidence a central bank d. C. Any evidence a sense do you see any evidence a central bank that it could work and eight bernanke went over there and everyone focused on helicopter money. Doing the crisis, bernankes other idea was to phone in the new yorker. Tom is there evidence they can do that . Drew i think you can if youre willing to put firepower behind it. Enough courage. I thought what the bank of japan did was interesting. What japan did was yelling yesterday. This is part of the problem. We get back to all you needed from the fed for the bank of japan was the fed to look like they were going to move, and they were itching to move and they would follow through. Not move their dots lower for the next couple of years. That is what the bank of japan needed from the fed and that is what they did not get. Not that they were exchanging what each other was going to do, but you would have a good sense of what you thought the other player was going to do. Now we are getting into game theory. Francine you think there was also the shanghai with china. Would go test would governor kuroda gone in made the decision . Quips yellens has come to us yellens press comes is 10 to be disconnected from the statement in the way the fed tries to maneuver the press conference after the fact. They always seem to get the tone wrong. It would not surprise me if the tone was wrong. Tom im trying to get off the chart here for julian for you. Tokyo inflation. There is abenomics in the states. What we saw yesterday was remarkable. Abenomics is the green. We need to invent inflation. Drew and julian, the politics and the economy of japan working in the shortterm space. They are using shortterm yield curve effects. They get their inflation pop. Then ejected away. It just then it just drifted away. It even for it. It is the demographic wall. The japanese issue in total. You are going to have a draft after the initial impetus peter the problem here is when you draw lines in the sand the way the bank of japan did in regards to the tenure rate. There comes a time that line is going to be challenged, whether it is the swiss franc a yearandahalf ago. Or putting price caps on lumber in the 1970s. Tom and you stay invested in equities . Can you stay invested in equities . Julian the fact that we are going to have more volatility but staying low, we can sustain that. Tom Julian Emanuel and drew matus with us. Shock if you will theres the yen, 100 points. A weaker yen. It will be interesting to see where that is going into the weekend. We are alive. This is bloomberg we are live. This is bloomberg. Francine bloomberg surveillance from new york. I am Francine Lacqua with tom keene. We have been talking about the fed. Massive divergence calls. Lets get drew matus. Emanuel at ubs securities. Treasuries, treasuries, treasuries. I dont know where you fit in on this. There are many ways on looking at it. The markets are in a binary bind on the call on treasuries. Drew treasuries drifting lower over the course of the year. 10 year yields falling from these levels. Even in the face of a rate hike. In the past when the fed is hiked rates, inflation is not moving higher, you have seen moves lower in yield. This is what theyre expecting. Francine what can change that . The base scenario is one hike in the next six months . Go, if the fed were not to that would change it. We need evidence for dissension. Tom maybe a coup. [laughter] is if you lookt at the last month, there is volatility that has been injected into the treasury market. It was not their earlier. That has manifested by the third dissent yesterday. Tom lets go to the credibility chart. This is the first look at the lollipop chart. One i would notice is we are three standard deviations off the belief of a year ago. There is a year ago with all of the mumbojumbo. The three circles in a row that we have had in the last three meetings, and this goes to craig torress question yesterday to chair yellen, just as you have said, we have set getting lower level of trend on where this nation is going. I think it might be overdone. People are overestimating the impact. The lower term or the longterm Interest Rate is lower it will lower publishing growth. Tom i know drew, your team has written on it. The dissenters yesterday. This is like sesame street as well. There they are. George of kansas city and this other guy, it is like sesame street. The arcs dove is worried about financial instability. The arch dove is worried about the financial instability. I dont know if i agree with his rationale for dissenting. Thengren in williams gave same speech about it rosengren and williams gave the same speech a week ago. The fed hikes rates in 02 prolonged the economic cycle. Rates in order to prolong the economic cycle. Williamsiams could have been a fourth dissenter yesterday and he opted out . Drew he is not a voter. Tom one question to you, julian. Microsoft, 40 could julian dollars. Dollars. D jillion julian cache ranged supreme in the strategy world cash Reigns Supreme in the strategy world. Tom here is what i know, sterling is 129. 30. Francine has not knocked on the door of the bergdorf yet. Really viable, followup really valuable followup. We are thrilled to bring in John Studzinski of blackstone. We will look at the unknown as mergers and acquisitions. This is bloomberg. We have a problem on the edge the fed f england as staggers until december. Ig gross suggests, quote, a confused federal market committee. The yen strengthens over the few days. Evidence. They are in rehearsal. The first president ial debate. Narrows the race. Good morning, everyone. This is bloomberg surveillance ive from our continuous World Headquarters in new york. Keene. Confused tom never confused. Boring, boring yesterday. We were wrong. It is not boring. Audience, who ever wins that first debate out of three begins president . Not. , absolutely theres a series of debating, including the vp debate. Say, the uld anticipation for this debate is maybe as i have never seen. Really dont remember the 60 debates. Have no recollection of the debates. Big politic by person monday is the debate to watch. A lot of coverage on this. And theres special coverage into it. Day night to go i would totally take your point that the anticipation is extraordinary. Extraordinary. Huge, huge. But its only thursday. Just until monday. To our w lets get bloomberg first news. Francine. The governor of North Carolina state of ed a emergency. Police fired tear gas at demonstrators. Shot. Rotester was city Officials Say police werent responsible. Tuesdays shooting police say a refused demands to drop his gun. Some say he was unarmed. Theres a report yahoo is poised to confirm a massive data brief. According to the code, several ahoo User Accounts have been exposed. Yahoo is preparing to complete business toits core verizon. So far no comment from yahoo . At the united nations, the u. S. Over the sparred failing syrian cease fire. John kerry called for aircraft over areas where humanitarian aid would be delivered. He u. S. Has accused russia or syria of attacking an aid convoy. Russia blames the u. S. , saying failed to ensure that Syrian Opposition forces complied with the truce. Uk plans to hire 1,000 a e spies by 2020 which is 40 increase. Recruits are ce needed because of the developments of technology and the internet. British d work for the secret Intelligence Service known as mi6. New university ranked in the world. Its not in the u. S. The Times Higher Education u. K. Has put Oxford University at number one. The school replaces cal tech top for five he years. Its the first time a u. S. Top rsity hasnt been the ranked school in the 12year history of survey. Lobal news 24 hours a day powered by more than 2600 journalists and analysts and countries. 20 this is bloomberg. Francine, tom . Thank you very much. The bloomberg and our two esteemed guests this morning. He yield comes in, the euro higher, dollar stronger. Oil with a bit of a range but a lift this morning. Next screen, please. Equities buoyant yesterday. Some yen push back after two, yen strengthening. Francine . , thank you. They will remain uncommenting. The historic split because the believes its a conglomerate. By splitting it, it kre kwraeuts value. Let me go to the bloomberg optimism chart. Maybe this is ab the three yesterday at the fed. I have shown this before. Left. On the were going to talk about the 70s. Hen on the right the red circles before the crisis. Wonderful e at a nirvana. Trick of dissent. Yen. m looking at were waiting or watching for it possibly to go below 100. At the bottom is the 100 mark. Withan see 100. 7, flirting that. Five straight times. Yen strengthened a touch more in the immediate after math of what said. Weakest touch the immediate after math and then strengthened. Forwonder what it will take him to get a control on yen. It was extraordinary yesterday. Im gonna set up a dot chart here which well play through in moment. I can convey enough, thanks to ur wonderful guests yesterday, not the surprise, but just the awe of watching credibility out of the press conference yesterday. William lee is with us with imf, working with International Economics. One Michael Mckee who sat with yesterday, just in awe, michael, of what we observed. Is the evidence that we are evidently looking for, mike . Tom, w, there is the rub, because theyre calling it a hawkish hold. Ost analysts saying its tanamount to a promise to ray raises. 61 chance. Youre right. Its a very bad bet right now. Not because it wont necessarily its a very ecause long way away. 2016 with an 81 chance of a move in september. Yeah. You can see over the month how that continued to change. Up down, up down. Look at what we have coming up before we get to 2 december meeting. Months of ee more jobs data. Three more months of manufacturing data. Three more months of spending data. Three more months of the markets going up and down and the esults of the president ial election which could be huge for the markets. A data dependent fed. Theres no guarantee. Thanks to our team for doing this. Here are the dots. Away the red line drift from the green line over two soiree. F this fed look at it plunge in march of this year. Theres june. Guess a little bit of adjustment here in september. Let me start with the general question. Ever see the confusion . Its amazing. Drift t have a data there. The fed driven without a frame work. Rudderless. Historyreading economic is simple. Bernanke, schwartz, all of them say feds react. They do not get out front. Said yesterday we get out front. Especially in this kind of environment, right, different to any other year weve had. If you look at the inflation problem. Just different. I dont know what we need. At an index book . Objectives. Ong on that is always supposed to trump policy. E have never really allowed markets to run the ship in the fashion we have now. Yes, you can say things are different, but theyre always different. Its always something. Hat this fed specialized in is to pit those special somethings to do one thing, to delay. Noticed any e srepb that causes them to accelerate . Not at all. Not give them too hard a time . To be fair. They have the hardest job in the world. To navigate. G when politicians are really not there to help with fiscal. Doing this on their own. You hit it right on the head. There is that missing ingredient. Right now when you start people to spend and theyre not doing that, you have to recognize we need something else. Have something else. You nailed it yesterday. Mentioned the collective memory, the ability studied. Rs have the idea of 1994. Audience what is it about the japan mistake of 02 03 and the u. S. Mistake of 1994, why does that affect her thinking . Dont have this fed proactive history, but we do. 1994. Was Alan Greenspan saw inflation starting to develop and wanted get in front of it but did not. So he started raising rates. E raised rates once, everybody said okay. He did it four times that year. The markets werent positioned for it and there was a blood bath on wall street. Bond traders lost a fortune. Hat was a fed vietnam moment, where they decided, we dont surprise the markets any more because the consequences are too bad. Were still living with that. You had the same thing happen in where they raised Interest Rates and the country went back into recession. Got scared ofkers preemptive. They do not want the fed to raise, not just because of what they see in terms of the economy developing, but because they like the free money. Theyre never really gonna say, rates. You to raise on have never seen anyone the Trading Floor say raise rates on me. They may be able to position for it, but dont surprise me. Its not about the markets. About the real economy. Hold that thought. Well get back to you very shortly. Mike, thank you very much. Michael mckee. John is coming up next. Is bloomberg. Look at that. Looking at pound getting an respite. There you go. Cmbing from wednesday. Im happy here in new york. Tom keene. Were doing surveillance. Not boring. Extraordinary. It hasnt been boring. Well talk more on everything the world. Ed in we knew it wasnt going to be boring. To taylor. Split up into separate transportation and energy companies. Maersk fired its ceo in june and split. Was considering a they will focus on strengthening heir position in the north sea oil business. Hedge Fund Billionaire cooperman said he plans to fight charges insider trading. Omega said i will them to destroy my status. Complaint alleges cooperman took steps to cover up atlas uct by calling pipeline executives to try to assurances they would not reveal his misconduct. In addition to the insider claim, today the commission charged cooperman was violating the reporting federal of a securities laws. Cooperman said he was offered but e to settle the case refused. Thats your Bloomberg Business flash. Thank you very much. I went back and forth with mr. Cooperman yesterday, just him on the show, etc. Course he doesnt want to make that kind of appearance right now. Will be extraordinary, francine. Stallwarts off the history. He is a feisty man. It will be interesting to see. I haven talked to him directly. I would suggest anyone that knows mr. Cooperman would he will be feisty. Im not sure what i mean by that. That means it will be great tv. It will be great tv. Talking go, weve been about the markets, the fed, the yen. To understand what it takes for ceos to deploy sittingthe cash theyre on. Of ing us is vice chairman asset investment, of city research. Thank you very much for coming on, john. Bill, for sticking around. Gentlemen, you look at the world were living in. Mulling. An underlying there is something going on where people are okay but nothings great. Does it mean for ceo spending . I think there are two or three things. Getting a lot of commentary. I think and tom have been this in the alk ab last couple of weeks, which is boards having to pay a little more attention not just to the they bought back, not just to their dividends, course, we now have dividends in behaving more like fixed income. Oming into the u. S. Stock market because its a fixed income market as opposed to the bond market. Skrut es are now being tphaoeuzed. This is the fact that theyre not spending enough money on r d. Question of m a which i know youre interested in, but i think companies will theirto be scrutinized by investors, by the regulators and by the market, by the government, so theyre not money on r d and growth. Ent for jobs and this goes back to preparing for worse times. Confident enough to spend on r d. There needs to be an instruction point. Or is this good news that they latch on to and say, do you know what . Im feeling better about the we can start spending in r d or investing . Its a wakeup call. Share holders big big Share Holders are now being told have to be much less quarter by quarter oriented. See on the m a front what i call an end game. Is increasingly the attractive market. Terms of ing that in the retail investor, wanting to go into north america in terms stocks and bonds, commercial real estate. You also see that in terms of a. Game m and buyer month san to is a good example. And the he chinese germans, you know, two very looking at conomies north america. And the ability to establish certain end game options, either energy or in ag cap or in two or three other sections. I think one of the critical ssues, the slow growth, can they find r d projects to invest trapped they forever in dividend buy backs. A sell buy back. How can these guys find these projects . I think its important to say what time frame youre looking at. If you want to look at or two yearser one you will always be in the camp youve described. If you want to look at things five, ten, 15 years. When you talk to people in northern california, you talk to alphabet or amazon or facebook, theyll tell you that of 100 projects, one or two will actually be very profitable. Confusion we saw yesterday, of finance, all of business has to confront. Our great themes here has been daunting awareness that there may be financial instability because of the artificial construct and almost he nonorthodox desperation to negative rates. Youre living this much more in london than we are in the United States. Concerned about inancial instability next year off of Economic Uncertainty . What do you mean by financial instability . Banks. Lets start with Deutsche Bank. I dont want to get in the of knitting here but financial instability that ability toks and the do transactions and combinations. Going on in ats the world in terms of interest ates,less a broader issue of Monetary Policy. I think we all agree that has ps Monetary Policy gotten taken a little too far. I think every time we talk about a little like s ground hog day. Youve been there, you know what the options are. Hog day, ground something happens and then you move on to the next ground hog day. Tom, to pect to europe, your question, youve got omething very different going on. Uk banks are much stronger. Youve got pweurg concern about europe. This is why brexit is so interesting. Banks are in london whether hsbc, barclays. For now . For now and they probably will con. Will they stay . The concern about deutsche its difficult to comment where that goes. Lets come back and advance with francine on here. Were going to come back and banking rexit and within the United Kingdom and europe. Also john with us studzinski. Very good. About that were talking the fed today. Bill lee with us. Studzinski. S john he was back with lake tudor england. At the back end of that. Thats not nice. It was nice enough. Hes been there a long time. Youre chairman of create london, is that right . Yes. How are you going to recreate london with brexit . Prediction for where london is five and ten years from now . London, tom, is using rehabilitate the six or seven porous borrows in the u which all happen to be in east london. So thats very much focused on the arts, n, rehabilitating museums, rehabilitating whole series of things. What will the city do that philanthropies . I think the june 23rd vote, f we just pause and have a quiet moment here, brexit will win win. Ly be a really . Yes. cause im getting tired of this shortterm drama. I think if you listen to teresa very clear its that britain sees itself as being a player in the world not just a player in europe. Shes very focused on that. Econdly, shes gonna take her time. Shes gonna understand who shes dealing with in germany with the in france with the election. Those are two key players. His notion of triggering article 50 before those two elections are over is zero. This. s talk about studzinski with us. Your optimism on the united is his london. Bill lee from us as well from citi group. Interesting set of issues this thursday. This is bloomberg. Confusion. The library of congress in the distance. The ebbingles ra building. Little confusion yesterday. A new day in washington. Good morning, everyone. Francine and tom in new york. To london today. Today. I will be doing the program from london tomorrow. Very good. Will be on the surveillance call stream on her way over. Right now lets get to our first news. Erg heres taylor riggs. Central bank of norway said the key Interest Rate is likely stay at one half of 1 in the next few years. Governor spoke in oslo. Uncertainties ays around any forecast involving forward, ates looking but if you can refer to the relatively , its flat. A long time. There was a second night of charlotte, North Carolina North Carolina over a police shooting. Ne man was shot and critically wounded but was not shot by police. The governor of North Carolina as now declared a state of emergency. Tuesday, police say a black man gnored calls to drop his gun but some say he wassen armed. Republican president ial andidate donald trump wants to reduce black on black crime in america. Stoplan, the controversial and frisk program. Trump said in a fox news town the program of stopping minorities on the street worked well in new york. Meanwhile a new poll Shows Hillary clinton still leading trump nationwide. By nbc news and the wall street journal has clinton ahead 43 37 in a three way race. A majority of voters view negatively, but trumps negatives are higher. Global news 24 hours a day journalists and analysts in more than 120 countries, im taylor riggs. Francine, tom . Interesting, were going to atch up on brexit and the United Kingdom in a bit. Right now though back to the fed. Studzinski with us and william lee with us from citi group. The twoyear p yield and where we are. Eve shown the chart a million times. I have just put up the september 21st circle. And we are decidedly, bill lee, off trend. Within that is a dissent. Ike mckee went back and looked at the last dissent towards rate and it was 26 years ago. Here are names from the past. Always always was interesting. One of the main reasons i got act was wayne angel. Dissenting there. Dissenters are saying this kind of move because of the we put in place on the Financial Markets. Along at 2 g barely. Because of the source of we have to rkets move it. To a hawk. Eing above the rosengreen shift is key. Ombined impact of bank of studzinskiso john world. Would you suggiest if they attitude or this confusion, that it will lead to instability . Instability the bank that i worry about its the yield instability. The markets hink are confused. On how to allocate resources is confused. Black stone confused . Black stone is never confused. There we go. Get. s the answer i want to there is a confusion between the distinction of the Financial Markets as a the entity. E well, youre talking about the regulators, youre talking bout the monetary people and the markets. Im talking about the banks. N i see Deutsche Bank migrating to ten euros a share it has to have an influence on confidence. Talking ab re Deutsche Bank, there are a whole eries of issues there, its capital structure, the current debate theyre having right now issue of their fines and the role Deutsche Bank in the German Economy and europian economy. A bigger question. Youve got to look at the whole, separate the strategy of the banks. An europian banks are inherently not as strong as the american banks. Weve had all that discussion before on this show. At know with need to look financials and treasuries every minute of the day, but we need to grow, right . And if you have growth worldwide, then everything comes a little easier. This is the problem, that were not growing. The Central Banks cant really growth. Th bill lee, are we in the global recession you predicted . Were not there yet. Edge of it because of the stalling growth and very slow growth. Hard for ceos to say where are these Growth Opportunities . Year, but the next five years. You cant identify where the seeds are going to take place. Even evolution. Even inflation. Central banks dont have the to put inflation up, right . So are we expecting too much . Point that johns this is ground hog day. Are we expecting too much of Central Banks . Absolutely. We need to get productivity up. Get fiscal policy up. These are two things that take a in place. To put a quick start and stop fiscal policy is the worst thing in the world. To worry ab ple where the fiscal policy is going next. We need is a longer plan of Infrastructure Spending and fiveture reforms that take to ten years to put in place and another five to ten years to see the results. Do you fix productivity . Just the end game of the more globalized world that our very n economies arent productive . Theres a whole debate about productivity. Tell you, e will productivity hasnt improved markedly since the internet came on in terms of economic worker productivity. Its gonna youre not gonna like this answer. It starts with reassessing how educate our kindergarten to 12. Starts with education. Dealing with basic problems in the educational system. I think its interesting this were seeing that we pride ourselves on our universities, but now oxford is leading ked as the university in the world, which is the first time in nonu. S. They not vote . 1 that what happened . I think they knocked out cal tech by by a vote. K12 education. But also training and retraining, in terms of job creation. To do with the issue of hope in this country, too. Productivity will be improved by more people. We dont have a few years. E dont even have like 50 seconds. Francine, there are 500,000 tech jobs in this country that are in demand right now. A job in which you can train people. Can train people. It takes signals to show you where the opportunities are. You have to see high wages. People go to the high wages. Wages. The high when the policy squashes everything so the market stables are not there, thats where the of resources takes place and thats adding to the low points of the issue. Arent you going to just get of this by increasing rates aggressively . There will be a period of shock. Banks will start lending to middle Market Companies again . First thing you learn is market policy doesnt create growth. It on moves it around. It takes it from the future to buy you time. Orst of all world, it takes it from your neighbor. Allen touched upon debate in your world. He wants to set up a trend of vector of higher rate. It guy says lets go get done. Bill lee, would you explain to our global audience why wouldnt she just say one and done . What we need to do is show if wethe markets would be didnt have this distortion. One and done means we will stay distorted forever. Worst thing we could possibly say. The leadership. Leadership. To leadership. Well talk a little about brexit. Mario the same problem dragi has. I agree. Its some really important points. Different than a dragi press conference yesterday. It was very different. Studzinski and bill lee, american f north economics research, stay with us. Coming up on bloomberg surveillance, well spoke with former Labour Party Leader in the uk, now president of the International Rescue committee. Be talking about world order and brexit. This is bloomberg. This is bloomberg surveillance from new york. Straight to the bloomberg news. Executives at global banks xpect that london will end losing its ability to clear 570 billion of euro tker reufrb teufrbs. In the wake of the brexit vote, germany and france will prevail clearing. Over it may take years but is most likely result in Bank Employees out of london. Africas richest man plans to arsenals soccer team within four years. He said he wants his investments play out gas to his move. Makes arsenal. L is to buy right now, i cannot afford that. Bloomberg g to the billionaires index, he is worth 10. 9 billion. Thats your Bloomberg Business watch. Tom, francine. Thank you very much. Heres John Studzinski. Hes looking at our interview dangote saying, is he going to buy chelsea . By a very is owned prominent russian. Theres so much money in futbol clubs. The chinese playing liverpool. Businesses . Like welsh not all the clubs are run like businesses. Started have well, three, four, five are run more and more like businesses. Model for futness bo l or as one says soccer in the United States which is in which people want to invest in in the uk because they want to take the model globally. This is pay back for all of the yankee comments that tom keane has made. Im only going to talk about the red sox though. Please dont. Lets move on to brexit. Its been just three months to leave the voted eu. There are still many, many uestions on what the relationship between the uk and the eu will look like. The Commission Said the uk must Single Market or immigration control. By re joined on the phone miliband. Ave, great to have you on the phone. What would you say at the moment . Morning. Think the great convulsion of july, the government is getting its feet under the table. Minister. Little clarityry from the government ab how brexit is going to play out, means, and how they will manage the tradeoffs that youve rightly highlighted to access market and control immigration on the other, europian immigration. The third thing is obviously the government is in a strong position relative to the which has got its own trouble. What does that mean Going Forward . Brexit playing out, especially with an almost, said, labournd have leader unlikable and undesirable. I think the Current Situation is one that will play much people realize. I was in brussels and berlin its clear ago and that the Europian Union are waiting for the british to negotiating position. But its also clear that there are a lot of open questions europe will negotiate this. A although people talk of twoyear window, that is all that has provided for in the lisbon treaty of 2008, that would be finished. Danger for the uk and europe as triggers the uk negotiating process, which people expect next year, there finishing bility of it within the two years. That creates market uncertainty. Would create real economic risk for the uk. We know the risk, but will we hard exit and what does that mean for the city of london . I think that the dynamics the government give the upper hand at the moment to the brexit supporters. And its also possible that the youre seeingthat also opian politics will push towards a hard brexit. Great see much room for compromise on the europian side. See the political pressures rising in france, germany, with elections next year. Chances of a brexit have risen over the last four to six weeks. I will also say Prime Minister was pragmatic and shes alert to the ry economic dangers that are contained in that. You mention hard brexit which is an interesting concept. If we get sterling adjusted to a weaker sterling, 120 or even to here hsbc is, at a 110 sterling, does that make london trophy asset . Is whats really coming down the ike, hard brexit, whatever the politics is, do we come down the on to the idea of london sale . I dont think that its a question of on sale. Question of what london will be for and how is it maintain a strong europian base which many of us believe is going to finish off global position. And the dynamics within london i think are obviously not just economic. Global, about the quality of life. And the fears i think were overdone that the position of london would be undermined in a matter of weeks after the referendum. That was never any real danger. The real danger for london is four, six, eight, ten years down the track when a series of micro decisions, hundreds of thousands little decisions can spiral out. Thats the great danger. Right. Studzinski is the american london. N what is the action that the Prime Minister needs to do to get tows a better brexit, a United Kingdom for four, years out . I think as i said earlier, i think shes going to spend a making period of time sure she understands what the different heads of state in about. Think what about in domestic United Kingdom politics, David Milibands world . This is a negotiation that has to take place between london and 27 other countries. We remember that. To agree, all ve 27 have to agree and ratify this negotiation. This is from that. On view unprecedented. So theres going to be a period i call asimulation politics where her and her team will have to understand what is doable. Whats not right. Then theres going to have to e a clear view to develop what i think will remain in all but name on certain elements of high Quality Movement of certain restriction on immigration. Thats going to come at a cost. Thats part of the realization countries like norway and denmark have encountered. Your id miliband, from time as foreign secretary, few country or friendly leader in the euro zone or e. U. Towards the u. K. . Actually, the ultimate pragmatist not a matter of friendly or not friendly. Britains allies in northern europe, sweden, allies, many traditional czechtern europe, poland, republic. Many of those supporters are by the brexit decision. They see a loss in the those who position, stand for a more open europe. Its not a that question of friends or lack of friends. Huge amount of distress after the british decision. Out of fear that it means that Europian Union is weakened s well as britain being weakened. You will see people with the fter shock of what theyve seen. David, thank you very much. David miliband this morning here united t and his kingdom. Dont forget, all of our to tical coverage moving monday. Our special coverage, mr. Trump, secretary clinton, their first president ial debate. Of course, we will have that for you 8 30. This is bloomberg. Yen, yen, yen is what at. Yone is looking little bit of a bounce off the conference strength yesterday of the japanese yen. 131. 51. G that will be by 130 by the time to london. Ts back time for my must read. This is what we picked. Abouts nothing surprising Donald Trumps admiration for utin, the would be u. S. President and russian leader authoritative vent. John, you spend a lot roff time talking ability politics, policy. When do we go back to more moderate politicians that maybe boring, but more actually maybe have more the greater good . Me, john. Ce worries how does what you just said about putin and trump have to do with the greater good . I mean, you could argue if youre a more moderate politician, then you put policies in place that help more people. Their egos. What k what donald trump, putin and trump are talking about is more cultivation of the europe. Ht in right. Which youve seen in austria, recently germany, the first type of world war ii. The fact that putin is actively funding the emergence of the far in these six countries shows that he not only wants the politics the future of in western europe, but hes also influence politics in north america with his link to donald trump. Politics has become srul cannized and polarized. There is no right or href. Polarized right and left. Those old alliances just dont work any more. Youre right. No. Look forward to seeing you in london, john. Bill lee, thank you very much with citi group. Ell continue with dr. Leon radio in a bit. I believe well talk a little about that press conference yesterday. Francine, safe travels. Thank you. Getting to the airport right now. From morgan ns stanley. Ell talk to him about the lit tus paper. From new york, this is bloomberg. The reserved fed, mounting opposition and delays a rate hike for the sixth straight meeting. Differing in their outlook for treasuries. They will be buying securities. David a moment of truth after the eighth sec accuses him of insider trading. Im am here live from bloombergs headquarters. We heard from the fed final yesterday. Alix it was an unbelievable meeting. They managed to execute that hawkish hold it seemed like december is on the table but longerterm those doubts continue to come down. David it wasnt just talk, there were three dissenters first of that was a big shift. As you say, longerterm not so much. Alix theyre going to three times since 1992 will we